I have been investing in equities for over 10 years, and this is one of those few times when I believe absolutely nobody knows which way the market will go tomorrow. If they do, they are lying. Unless you can predict what the bail out package will be, and that it will be approved or not, you cannot bet on the market one way or another.
So what do individual investors do in this environment? Panic selling is not the answer. If it were a different time and place, I would recommend loading up on Apple at $100 and Google at $400. I would recommend picking up RIMM at $60, US Steel at $70 and AIG under $3. Unfortunately, I can't recommend opening any long positions here, specially since it is an UP day for the market and tomorrow may well be another triple digit down day.
So, if you haven't sold some of your longs today or on the way down these past few weeks, take some off the table. Otherwise, the best way to play this market is to buy some short ETFs. SDS, EEV or DOG are some good plays that are down nicely today after yesterday's huge gains. I would buy those to hedge your portfolio against another big down day. Remember, some pundits are predicting the Dow to fall another 1000-2000 points. If that happens (and I am not saying it will), you will need this hedge.
-- Faisal Laljee
Full Disclosure: I own AAPL, GOOG, EEV but my positions can change anytime without notice.
5 comments:
If you own GOOG you must have seen the action into the close yesterday. I saw prints going off below $160.
May I know what is your reason for being bullish on AIG? Fundamental or technical reason?
Brendan - The reason I haven't posted anything detailed on AIG is because it is a speculative play. However, there is method to my speculation. AIG is the largest insurance company in the world, with stakes in insurance companies in China and Europe. Besides its home mortgage insurance business, they have rental insurace, fire, earthquake, hurricane, auto and many other types of businesses that are still thriving. The government just gave them a $80 billion loan. Worse case, the government will own AIG. But I think this is one financial company that is likely to emerge from this mess. I could be wrong, but its a bet I am willing to make. Buying at under $3 makes sense to me. Its like buying options without an expiration period.
Thank you for sharing.
How about JP Morgan? This guy is a survivial in this crisis and it has used this opportunity to acquire companies & assets at cheap price.
Yes JPM has been very good at picking up assets for cheap. For the long-term, it is perhaps the best financial institution to own, but in the near term, they will incur integration costs as a result of the merger. They will also need some time to realize profits from the mergers.
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