Hitting A Brick Wall

Ulli Uncategorized Contact

Last week’s feel-good rally came to an abrupt end yesterday when the major indexes ran into a brick wall in form of further weak economic news.

I’m sure that profit taking had some effect on the sell-off and, as I mentioned before, hopefully, many investors used that opportunity to get out of their long positions.

Contributing to the market’s malaise was a report by the National Bureau of Economic Research announcing the U.S. economy fell into a recession in December 07. Just in case you did not know it, it has now become official. Another report on manufacturing came in worse than expected, as was news on construction spending.

This week will be loaded with market moving news with the service sector index being on the menu on Wednesday followed by Friday’s jobs report, which is expected to show that the economy lost 300,000 jobs last month.

While bad news is already factored in the market, anything worse than expected can send the major indexes heading further south. Watching this carnage safely from the sidelines is the best course of action, unless you like living on the edge watching your portfolio bounce around like a super ball in a trampoline factory.

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Comments 2

  1. I ran across this on Bloomberg:

    http://www.bloomberg.com/apps/news?pid=20601213&sid;=a1CGyL6BGEqc&refer;=home

    Here's a snippet:


    Dec. 1 (Bloomberg) — Investors in the $4 billion Templeton Foreign Fund already have lost more than 50 percent of their money this year and now they’ll be forced to pay taxes on as much as $1 billion of gains from the sales of investments.

    …

    Money managers have had to sell profitable holdings this year as customer redemptions increased, resulting in short- and long-term capital gains. The result means tax bills for investors in the worst year for financial markets since the 1930s.

    “It feels like a sucker punch for investors to pay taxes on gains when you’ve lost so much money,” said Christopher Davis, an analyst at financial researcher Morningstar Inc. in Chicago.

    How’s that for kicking a buy-and-hold investor while he’s down.

    G.H.

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