CHESSNOID

The market closed lower again as expected. I know we closed up yesterday because IBM had better results than expected, but I was surprised that every index closed up. Today, Citigroup announced more debt charge offs, layoffs, dividend cut, and money infusion from foreign investors. This had been expected for a couple of days, but investors got scared and ran for the doors again. Of course, there was some more negative news from other companies but that was the big story of the day.

After the close today, Intel came out with its earnings and after hours traded much lower. I am guessing tomorrow will open up down, but we may get a bounce tomorrow from investors looking for bargains. I think many of these companies are oversold but it is still too early to buy for me. I went all cash last November and liquidated all my stocks because of the stress that comes in this market. I am normally a long term dollar cost averaging type of investor, but the volatility shook me out of the market. I am now on the sidelines waiting again for a better time to jump back in.

Most of the news from the different companies are all forecasting in their respective industries. This is just another sign of the recession. I think the federal reserve will act even faster to reassure investors that rates will be cut at the end of the month. Even though they announced it earlier, the question still in the air is by how much. I personally don’t think these methods will help us out of the recession we are entering but it is better than nothing.

Many of the headlines I read today in the business section are all signs of an economic slowdown:

IndyMac Laying Off 2,403 Employees

Consumer Spending Drop Raises New Fears

MoneyGram Lines Up Cash; Shares Dive

Stocks Fall Sharply on Economic Woes

BofA to gut investment unit

Intel Net Gains 51% on PC Demand; Shares Fall as Forecast Misses Estimates

Citi’s $10B loss worst ever

There are 3 more banks to make earnings announcements this week, so let’s see what happens. Most of the major banks who lend any money in mortgages will probably see more losses from last quarter, but the market already expects this so I am not sure if there will be a reaction when they announce the news. I still think the best time to buy stocks is when everyone is selling it for cheap. Trying to figure out what cheap is just hard.

I think that is why the housing market has stalled because as prices continue to drop here, buyers on the sideline wait trying to figure out when the bottom is actually here. That is one of the reasons why I don’t think the interest rate drops are not having the same effect they had 6 years ago. That is when the housing market began its upward trend and went through the roof and created an unsustainable bubble. Unfortunately, the prices of houses have not come back to those same values. There were many houses that were selling for only $200,000 back then that shot up to $700,000+ up until a year ago. Even though the prices have retreated back to the $400,000-$500,000 range, the monthly payments on those loans are just too much for most average income families.

The overall indexes are close to being down 10% just for the month of January. This is one of the worst starts in a long time.