Every so often, I like to look at the market pulse and try to determine where I would invest new money. I do this even when I don’t have money to invest. I find that it’s not only a fun game to play, but I learn a lot in the process. In the past, I’ve found that I’m better off buying securities at a bargain than going for the current hot sector. I look at the market now and this is what I’m seeing:
- The price for a barrel of oil is at or close to an all-time high.
- The Dow Jones index is very close to being at an all-time high.
- Gold is the highest it’s been in 20+ years.
- The hot sector play seems to be emerging markets which is also extremely high.
- China indexes are extremely high relative to where they were 6 months ago.
There are a lot of good reasons why the above is true. I can’t see a reason why all the above can’t go even higher than they already are. However, I’m not sure I can make a case that they are bargains. In looking for bargains, I find myself liking regional banks. Specifically if I had a little play money in a Zecco account, I might buy this regional bank ETF. Would you buy the bargains or ride the some of the highs higher? What specifics investments would you buy?
I would avoid investing in the financial sector until the full extent of the subprime/CDO contagion has been revealed. I think we’ve only seen the tip of the iceberg thus far.
Although at a 28-year high, gold is by no means expensive. It would be in the four figures now if it were not for Central Bank selling. In addition to precious metals, I would also invest in oil, uranium, timberland, basic industry, and infrastructure.
I do the same thing. I keep a “Watching” portfolio on Google Finance to track stocks that look interesting to me. Man, if I only had a little money in each one of those for the months I’ve been watching…
If I had a little play money in something like a Zecco account, I would probably try to catch some of the momentum on the tech stocks that have been growing like mad–VMWare, Baidu, Google, Apple, etc. Those look good to me in the short-term. To me, timberland looks good for the long term right now, but I’m no expert.
The Div Guy says
I have been buying financials on the market dips such as USB, BAC, BCS and DB. I also have been buying GSK. I like buying stocks with a nice dividend that are down but will make it out of a big downturn. I would be careful on some regional banks, stocks like CORS have exposure to Florida condo loans that look like they could default.
I told you Wakefield makes me nervous. I think the Sox can win the next 3.
Stock – VMW is a good choice, Microsoft is trying to copy their technology and it will be another 2 years minimum before they catch up.
Sector – Solar sector has been on fire all year, look to buy JASO on a dip. You can almost never go wrong with FSLR either. I would avoid the small names right now.
Commodity – Gold is still cheap like rstlne said.
Would also stay away from all banks/financials for the time being.
These are just my opinions, I really have no idea what I am talking about.
Indianapolis Lawyer says
I’m getting that calm before the storm type feeling. Any minute now the bottom could drop out on this thing.
I’m continuing to DCA in index funds with my 401(k). I like reading some of the investing sites like (Dividend Guy & Sun’s Financial Diary) but right now I don’t know enough about single stocks to go out and make any purchases. I have a few books on the backburner and as I learn more about the principles of investing in single companies, I may slowly edge into it. I do like the concept of DRIPs and dividends though. :)
The Financial Blogger says
I like Gold and CDN banks (they are not really affected by the subprime crisis). If the US dollar keeps going down, you would make some money with both of them too!
I think right now I would follow the David Sweensen model that JD talked about. It’s an unsure time financially and I think I’m not quite knowledgable to see where the ‘safe bets’ are.
I’ve been trying to guess the bottom of the bank sector for awhile; Several trade orders has been triggered by falling regional (WM, FITB) but they seen to be still dropping. Oh well, I’ll have to satisfy myself with dividends for another 6 months.
Just read the post about your job; chances are if you were not kicking bootie at your last job, it wasn’t a great fit. Good luck in your quest for something better. Feel free to drop me an email if you want to chat.
If I could figure out a way to do it without having to use the Pink Sheets or overseas brokers, I’d buy into the Japanese real estate market via a fund. The JREM has gone steadily down for the past 16 or so years with only a minor uptick in the last year or so. Downside is minimal and the upside is huge… at least that’s what I think.
Then again, maybe I’d invest in gumballs. I hear the kids love them.
I’d definitely stray towards the foreign investments. I mean in some ways all these highs we’re seeing is because of the decline of the dollar. It’s not just that oil or gold is expensive, but the dollar is cheap. Given our savings habits, and government deficit, I’m not sure that’s about to reverse course. Invest in Berkshire Hathaway, and hope Buffet lives another century….
financials, insurance, and pharmaceuticals. Despite the subprime mess, there are solidly rich banks out there that will only get richer regardless of subprime. It will take another two quarters for the subprime affect to be clear, and then the financials will continue upwards again. They are too cheap right now and the numbers just don’t add up for them to be this low, moreover, the dividends can offset in the meantime.
insurance companies always end up making money and will continue to do so.
pharmaceuticals and all those old people service companies seeing as lots of people becoming older these days and in the near future.
i think you can ride the gold wave right now, but the fundamentals for the rise are not there. I see it as another parabolic spike that will plunge again to the $400 and below levels.
oil, oil, and more oil right now. once oil reaches $100, companies like Chesapeake will fly as well as companies in alternative fuels.
Writers Coin says
LazyMan, I only have index funds in my portfolio but there is one and only one stock that I have bought and kept since I started investing: Berkshire Hathaway. I don’t have to tell you all about the marvels of Warren Buffett but it’s really nice when the whole market (even foreign markets) goes down and BRK.B (I can only afford a B share) chews into that loss. It’s a great diversifier.
Plus it helps that I have such blind faith in the Church of Warren.
I agree with what you say about not jumping on the hot stock bandwagon (unless, say, one of them takes a major one or two-day dip)… but a random regional bank? Any reason for picking that one in particular?
Lazy Man says
Will: It’s an ETF that attempts to track the regional banking sector. I don’t know if I’d be a good stock picker, but I like to look at sectors in general and I think ETFs are a great way to do that – as long as you can keep commissions limited
You could look at home builders like BZH and KBH. Canadian Royalty Trusts like AAV and PWI are still recovering from last year’s fall as well.
But there’s a lot to be said for cash! I agree that a lot of sectors seem too high right now.
Wealth Building Blog says
As an investor from the UK, I think our banks are now looking ridiculously cheap, particularly RBS, even accounting for the fact that profits are likely to be lower.
Also think housebuilders will recover from their lows in 2008, although I think they may have further to fall in 2007.
Infohip Guy says
Don’t touch the DOW or any stock with a ten pole.