Can This Week Be Any Worse Than Last

Investors seem to be losing patience with the volatility in the markets and the losses that follow right behind. The market seems to swing hundreds of points up and down every day. Friday easily could have ended on a positive note but the fear of what might happen over the weekend brought many sellers into the market at the end of the day. The DOW and the S&P ended the day down around 3.5%

This week many more companies will report third quarter numbers. There will be some good reports and some bad ones but most likely the majority of the companies will forecast a bleak future. The market focus will continue to be "All About the Economy". There are high expectations that the Federal Reserve Bank will cut interest rates again. This may happen and we may get a rally in the stock market but we doubt it will have a long lasting effect.

Great companies such as Walmart, McDonald's, Google, DOW and Oracle have become cheap in this market but it doesn't mean they won't get cheaper. Fear is here and it probably will be around for a while. Many individuals with equity portfolios have lost 30%-50% this year. It is easy to say my broker is horrible and I don't know what to do. In these uncertain times, as we have been writing, one needs to have safe liquid assets to be ready to take advantage of the opportunities that will present themselves in the market. Most people don't want to recognize the losses they have. That is a bad strategy. Take the losses if you don't have high quality investments. The sale of losing positions creates a tax loss carry forward. Use the cash for safe fixed income liquid positions (i.e. Treasuries) or high quality stocks with few debt maturities in the next couple of years. This repositioning will maximize your opportunity to grow the portfolio and rid yourself of low quality stocks with much higher risk in an economy which is heading into a deep recession.

This week might be just as volatile as last. Friday, before the market opened, it looked like we were heading into the Abyss. The Dow could easily have dropped 1000 points but the heavy selling never appeared and the day was much smoother than expected. Any day now, we could have that calamity and one should not be surprised if it happens. The VIX fear index reached new heights again at the end of the week and until we get a huge wipe out in the market, we may not see a new positive trend. Buckle up and wait to see the excitement this week promises to bring.