CHESSNOID

The Nasdaq broke its 8 day losing streak after being below the break even line twice throughout the day. Based on the news coming out I would guess the strong trend on the 10 day, 50 day, and 200 day moving average are all still pointing down. I think many investors see these low stock prices as an opportunity to buy, and normally I would agree but not in the state of economy that we are in.

We have some major negative news on the horizon as far as earnings are concerned about banks, mortgage companies, builders, and many more other companies that will either announce losses, lower earnings, and softer demand for their goods and services. Most companies will follow up with a reduction in staff or company wide layoffs. That is what I am expecting. I would rather buy stocks after those announcements than before, so I am still just on the sidelines.

One observation I picked up the other day watching our governor Arnold Swarchenegger mentioning he does not want to raise taxes but instead make budget spending cuts. He said the state takes enough money in but we are just spending way too much. I think that is the way most California residents live their lives financially. I do believe that all the equity that built up over the last 5 years gave many of us a false sense of security that was money in the bank we could pull out at any time and that the market would never go up. With these record foreclosures skyrocketing, that means many property taxes will not get paid. I think our state government is forgetting that revenues won’t be there as normal this year as in previous years. Also, many homeowners realize that the value of their homes have gone down in value and do not want to pay property taxes on bloated and outdated property valuations. I wouldn’t be surprised if the state is slow in re-assessing true lower property values since it doesn’t benefit them. I think that will be another factor in the overall recession.