What to buy in this market?

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Oct 5, 2008 8:06 pm

I gotta say, the traditional stuff (mutual funds, VAs) aint cutting it. Have you seen what the insurer stocks (Met, HIG,etc.) are doing lately?  Clients want FDIC coverage and that pays us nothing. I am sure this post will attract some smart ass responses but I am curious to hear. 

Oct 5, 2008 8:12 pm

Bond Guy was right when he said T-Bills a few weeks ago. Now it may be too late for that trade. Or maybe not.

What do you thinnk we should buy? Blue Chip Stocks? Emerging Markets?
Municipal Bonds? Maybe we should be conservative right now and buy high
grade corporates, only those rated AA or better! Like Hartford
Insurance Group. AA- rated and you cant even get a bid if you want to
sell it.

Right now, i dont think how much we make should be the driver of our
decisions. Unless we dont care if we have a book in six months.

I know some will say thats wrong, that its time to load up the truck,
while everyone is panicking. I would sort of like to wait, until at
least the first two or three stocks get at least close to their 200 day
moving averages!. I dont mean that literally, but i think my point is
made.

Be safe and keep your clients safe, till there is some sense of normalcy.

Oct 5, 2008 8:18 pm

If you compaire yields on munis to treasuries, its a no-brainer.  Get some high quality munis - don't load the boat, but some nibbiling is certainly in order.

Oct 5, 2008 8:18 pm

http://www.bloomberg.com/apps/news?pid=20601087&sid=aUi1pU8IdPn0&refer=home

 
I took grief from some fc on the board when I said the biggest purchase I made lately was the Wachovia bank CD special that paid me zippo. The VIX doesn't lie, this is what it feels like to buy low. Problem is I am not buying anything. Ultrashort etfs make sense given my pessimism but what retiree would warm up to them (or maybe they would!).
Oct 5, 2008 8:19 pm

they were a no brainer a year ago and they still got their teeth kicked in. I am with you coceptually, just frustrated.

Oct 5, 2008 9:09 pm

The problem is, the market is not operating on fundamentals right now, it's in a period of deleveraging. This does not happen that often, and nobody knows what the fuc! is going on. So making any bold moves is probably not a wise move in the short term, unless it is to something very safe and liquid. Who knows how long this will take to work out, but everyone trying to jockey into bargains, shorts, safe plays, etc. is just adding fuel to the volatility fire.



IMHO, if you have long-term money, and you are in quality, you are best to sit tight for a while. If your time horizon is 5 years or less, something safer is probably in order.

Oct 5, 2008 9:13 pm

I completely agree with ice. Most of my clients are in mutual funds and my primary concern is to make sure they're balanced and not panicking and bailing. 

 
For their long-term money, I'm trying to convince them to add to their funds. I do not believe in loading up on what looks safe today and then trying to get back into the market at some "ideal" time in the future.
 
Where do these guys work where they're being taught to move in and out of asset classes based on what they feel the market will do next? I've been taught to buy quality, diversify and be patient. With the exception of ice and maybe a few others, the majority of us in the FA position have zero business playing Russian Roulette with our clients' portfolios.
 
If you were selling cars, computers, office equipment, teaching history or writing speeding tickets at your job prior to this one, do the right thing and build balanced mutual fund portfolios for your clients and then leave the rest up to the money managers. You are not more capable or talented than the brainiacs at American, OppenheimerFunds, etc. Get over yourselves.
 
Oct 5, 2008 10:17 pm
Sportsfreakbob:

Bond Guy was right when he said T-Bills a few weeks ago. Now it may be too late for that trade. Or maybe not.

What do you thinnk we should buy? Blue Chip Stocks? Emerging Markets?
Municipal Bonds? Maybe we should be conservative right now and buy high
grade corporates, only those rated AA or better! Like Hartford
Insurance Group. AA- rated and you cant even get a bid if you want to
sell it.

Right now, i dont think how much we make should be the driver of our
decisions. Unless we dont care if we have a book in six months.

I know some will say thats wrong, that its time to load up the truck,
while everyone is panicking. I would sort of like to wait, until at
least the first two or three stocks get at least close to their 200 day
moving averages!. I dont mean that literally, but i think my point is
made.

Be safe and keep your clients safe, till there is some sense of normalcy.



I admit it is scary to leap in, but IMHO waiting for a sense of normalcy will cost you 10% to the upside by the time you get in...

Oct 6, 2008 12:12 am

Scary thought is last down market took the DOW down to 7500.  I know seems far fetched seeing how bad it is now, but If you asked me if the news was worse then or now?  I would say hands down now.  People are afraid to keep their money in a bank, can't get a loan, there was virtually nobody who was underwater on their house in 2002,  Hope i am wrong, but think this could get ugly.

Oct 6, 2008 1:06 am
fritz:

Scary thought is last down market took the DOW down to 7500.  I know seems far fetched seeing how bad it is now, but If you asked me if the news was worse then or now?  I would say hands down now.  People are afraid to keep their money in a bank, can't get a loan, there was virtually nobody who was underwater on their house in 2002,  Hope i am wrong, but think this could get ugly.



This isn't ugly already?

Perhaps few were underwater on their houses, but plenty more were WAY underwater on their tech stocks.

Oct 6, 2008 1:37 am

Last week I put 2 million to work.  This week will be no different.  Even if I don't catch the bottom for clients, eventually we will be in the black significantly.  I'm going to be buying the double short long treasury (TBT) and the dollar long fund (UUP).  I'll be adding to quality stocks like MMM, INTC, and EMR.  I'll be backing the truck up on muni's across the board.  I'm going to be continuing to add to our advisory platform in a balanced approach, buying when the market is over 30% on sale.  I'm going to be taking small percentages over the next several months, as I sit down with clients, and see if they can handle moving money out of bond funds and ETF's and into equities.  My average client is down around 15% over the last year, and may decline even more.....but to waste an opportunity that only comes around every 4 years....no way....

Oct 6, 2008 9:10 am
rankstocks:

Last week I put 2 million to work.  This week will be no different.  Even if I don't catch the bottom for clients, eventually we will be in the black significantly.  I'm going to be buying the double short long treasury (TBT) and the dollar long fund (UUP).  I'll be adding to quality stocks like MMM, INTC, and EMR.  I'll be backing the truck up on muni's across the board.  I'm going to be continuing to add to our advisory platform in a balanced approach, buying when the market is over 30% on sale.  I'm going to be taking small percentages over the next several months, as I sit down with clients, and see if they can handle moving money out of bond funds and ETF's and into equities.  My average client is down around 15% over the last year, and may decline even more.....but to waste an opportunity that only comes around every 4 years....no way....



Appreciate the input Rank.  Funny that despite my earlier posts, with the latest dose of morning news I am(at the moment) finding it a little harder than usual to stay calm and objective.

What about T or GE?  True GE has finance exposure, but they also have a lot of new capital, and a mighty nice divy.

Oct 6, 2008 9:36 am

Liquor, tobacco and porn...WALMART

Oct 6, 2008 9:54 am

JKD. Capitulation: in crisis there is opportunitiy.

Oct 6, 2008 10:08 am

Today is no different than any other day in my career...I don't have a clue as to what tomorrow will bring.  Therefore, nothing has changed in any of my recommendations.

Oct 6, 2008 10:48 am

the longer I do this job, the more what you say rings true (it is always true, it's just in down times that we brokers remember it).

Oct 6, 2008 12:45 pm

i love munis at these levels, preferreds, high quality corporates, and convertable bond funds.

 
there is some $ to be made in these markets...
Oct 6, 2008 2:03 pm

Buy munis!

 
The price decline of the last month (preceded by the price decline of the past year) is not a function of credit quality. It is a function of the market. I should say what market? Which aptly describes the problem. With the stampede to the 30 day treasuries the further you get in time and qualty from those treasuries the more adverse the pricing move to the downside. This has cut new issue issuance by 90% over the past couple weeks and secondary trading to a drip. There is no volume. Yet in absence of volume and in a market absent of buyers, bonds continue to be marked to the non market on a daily basis. Muni funds have been especially hard hit.
 
Points to factor in:
 
1. The move of major ratings companies toward Global-Scale ratings on munis will boost muni ratings across the board.
 
2. Muni bond holders have first call on real property- ahead of 1st mortgage holders in a tax default. Realistically, if a homeowner/developer doesn't pay their taxes a tax lien is sold. The lien buyer, usually the 1st mortgage holder buys the lien at a tax sale. OR, the property goes to a lien buyer at a tax sale. Either way, the taxes get paid. It may take two years for the property to go thru this process, but ultimately the taxes get paid. Even in a forclosure, the bank can't move forward if a tax lien is attached to the property. The Lien has to be cleared before the bank can remarket the property.  Outside of Treasuries, what other security has this kind of security?
 
3. Reassessment unlikely. Reassessments are unlikely anyway, but with property values down it unlikely that any taxing entity that isn't required by law to do so will reassess. Reassessment would reduce income to the towns, counties etc. That ain't gonna happen.
 
4. Price of a muni can be calculated as the present value of future cash flows plus maturity value with a discount rate set by the market. Right now that discount rate is ridiculously high.
 
5. Biggest default in recent history, Orange county CA ,paid off Principal and interest 100%.
 
6. Every day that goes by bonds move one day closer to maturity.
 
7. As this is written, Obama leads in the pols by a wide margin. Highly possible that taxes will be going up for upper tax bracket tax payers. This is good news for tax free bonds.
 
8. Bear Sterns was the number 4 muni market maker, JP morgan number 7. This is contributing to the illiquidity/pricing problems within the market. The market makers are in disarry. But not for long or at least not forever.
 
9. The muni market default rate has not changed. This is a market event, not a credit quality event within the muni market.
 
10.  The stock market has been crushed before and the sky has fallen before. 21 years ago this month the market had it's worst one day performance. Today, we stand five times higher than at that point. That's a five hundred percent return when every expert said it was all over. Is it Buffet who is saying the time to buy is when things look scariest?
 
It's plenty scary right now. But it's also time to buy. For those who need to buy income, it's time to buy tax free bonds.
 
 
 
 
 
 
Oct 6, 2008 2:34 pm

Bravo, dude! Well written!

Oct 6, 2008 5:12 pm

Guys you are missing the bonanza of a lifetime. Dont but unless it's a 'buy back to close'. I've been selling in and out of options contracts like they are going out of style!