The Next Phase In The Market

Yesterday Deutche Bank lowered their price target on General Motors' stock to zero. It is not surprising as the stock is worth zero whether the government provides a new loan or not. Earnings disappointments will continue to push stocks down until positive surprises arise. Most analysts will now start to lower their earnings estimates to a point where they will be very conservative. The goal is to make sure the earnings prediction is lower than the actual reported numbers. If every research analyst follows this line of thinking, the stock market will adjust prices to much lower expectations and the markets will be set to rise again. Expect to see these adjustments to occur frequently for the rest of the year.

Last night Starbucks reported ugly numbers. The quality of the coffee is inconsistent and in times of recession, how many people want to spend $4 for a cup of coffee? McDonald's is also a thorn in Starbuck's side as consumers appear to be buying their coffee at this growing value oriented food chain. Starbuck's could be in big trouble.

The market was down yesterday but it never had large volume. Most investors took the drop as just another day in the market. Google and Goldman Sachs were two key losers. These are two well respected companies that seem to be struggling lately in the market. We are very focused on Apple and RIMM. Both stocks have been weak lately. Everybody loves Apple and we wrote a couple of weeks ago that Apple would be very vulnerable if some negative news came out. Perhaps the company has a slight slowdown for the holiday season. If this happened, the stock might take a dive. That would be the day to buy it for the long-term.

The markets will open down today as were overseas exchanges. We need to see some good news to turn the trend. We are getting close to hitting some October 10 levels on individual stocks and great value is starting to appear again in large liquid stocks. Let's fight through the trauma and hope to be smiling when the markets turn around.