Should we thank Bernie?

Let’s take a little stock of the market we’re in right now.
As I crunch the numbers on Friday’s close,  being the last trading day of January, the results aren’t exactly comforting — but stick with me here, as I still like the numbers on most of the stocks I’m tracking — and I see a little light at the end of the tunnel.
On one hand, the S&P fell 8.5 percent in January, it was 2 percent off for the day,  and the Dow fell back to 8,000 — the biggest drop since 1982.
I warned you previously that I was staying clear of financial stocks for the time-being — and, not surprisingly — the financials are down 26 percent for the month — and I still don’t like them.
Now, if I was new to investing — or had got beaten up in last year’s market by not sticking to the sidelines — I’d be looking at the market as if it was a pool infested with sharks — and I’d be more than hesitant about jumping in.
Have you checked out that volatility index lately?
It’s setting up perfectly to see some of those cream of the crop companies start soaring once again in the second half of this trading year.
The waters are calming, and the sharks — or should we just call them hedge funds and their ilk — seem to have gotten a big chunk of their own hides bitten off, and they just may not be in quite the same preying position they once were to short the markets and chew-up the little guy on Main Street. 
You see, the  Bernie Madoff scandal is sending rippling effects in many private equity and hedge funds — and some people who have their money vested in them are asking for some loot back. After seeing what happened to Madof’f’s investors, they no longer have blind faith — they never should have.
And with less money on their balance sheets — there’s not as much volatility in the market — and that’s good news for the little guy, as it tends to let the market move a bit more on fundamentals.
However, I caution that doesn’t mean there still aren’t enough shorts around to take a bite out of certain companies — so you want to keep a close daily watch — starting right now — on how a company moves on fundamentals versus volatility  — and pay particular attention on how it moves around option days and earning reporting days, as it is usually a good barometer on how many shorts are playing with the stock.
Remember — even though my best guesstimate is we’re going to see some cream of the crop stocks start rallying in the second half of this trading year — there’s still going to be a lot of ripples and volatility — so choosing the right companies to invest in is going to require good old fashioned due diligence.
Although I’m still doing due diligence on the same companies I’ve previously listed, including McDonald’s, Family Dollar and Walmart — though Walmart’s numbers in a couple of weeks may be a determining factor in whether I continue to hold them on my research list — I’ve recently started due diligence on gold (GLD),, Celegene and Genentech (DNA).
For the newbies on the board — remember — that doesn’t signify I’m running out to buy any of these names, it means I’m crunching numbers and doing homework on them. And, if I like what I see — I’ll pick my price point very carefully — you should, too.
Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence, or at least enough research to pick the right professional to do it for you.

One Response

  1. […] you paid attention to my add of Genentech to my due diligence list in my Feb. 1 column — and you did your own due diligence on it and picked up some for where it was trading just under $82 […]

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