Investing

Well, 2008 has been a period of deflation. The U.S. and global economy has slowed dramatically and thus corporate expansion has come to a halt as consumer spending dried up.

So the Fed didn’t sit idly by. No, they do what they feel they do best which is print money. It’s a great tactic short term to get things going…normally (but usually a bad mistake longer term for the economy).

I say, normally, because when the Fed pumps money into the economy and gives banks access to more money and lower interest rates…they normally pass along the money and the low rates to the public and to corporations which need the money to expand and grow.

2008 was a wild and hairy year for sure. Volatility was the highest I’ve ever seen it and also the highest I can ever find on record.

The Dow dropped from over 14,000 down into the 7000s. Oil dropped from $147 down to just under $40. These were some of the fastest drops I’ve ever seen in my life.

 So what’s in store for 2009 for stocks, bonds, commodities and currencies?

 Stocks finally stabilize and a few “select” sectors will lead the way out!

In stocks, you are going to see stabilization for 2009. In fact, it will likely “base” in a very wide sideways range for much of 2009 as it catches its breath to head higher into the next bull market in late 209 or 2010.

I remember the 201k joke very well from the last stock market dive back in 2001-02. It’s a term used for when your 401k gets chopped in half, and it goes from a 401k to a “201k”    It certainly wasn’t used in the 1929 crash, because 401k’s did not exist. Today they very much do exist and are a huge part of people’s financial future and still a great tool regardless of this painful market.   I am not being a dipster here, (a dipster is a term for people that just mindlessly buy any investments just because they are down) I see this market as an opportunity to get smarter about your investing and your finances in general. 

 The Fed just released its interest rate decision ....cut interest rates to a range between 0% and 1/4%. The first time I've ever heard of a "range" but that's the word.  

The Dow popped 50 points upon the Fed lowering rates by "at least" 75 basis points from the former 1% level.

Sean Hyman

Head Instructor

www.mywealth.com

shyman@mywealth.com

Being an avid chart watcher, I always like to see what indices seem to show improvement the quickest. It’s always good to be attune to the first “signs of life” and where they appear.

 So I was looking around recently as I routinely do and I noticed that China’s stocks are perking back up again. That’s a good thing. Because if that large economy perks up, then it will help the entire global economy.

 In looking at the Shanghai Composite Index below, I see the first signs of life “higher lows and higher highs” on the charts. This tells me that for the first time in a long time, new buyers are coming back into Chinese stocks (as noted by the red downtrend line being broken).

Is there a “holy grail” out there to be had? No! But if you want to know something that is about as close as it gets….it’s sector rotations.

 You see, it’s no wonder that Wal-mart (WMT) has done well in the recession. It’s because it’s in a “defensive” sector of the economy. Then you look over at Whole Foods Market (WFMI) and it gets creamed. That’s because it’s in a cyclical sector that does good when “the cash is flowing” pretty good in the economy.

 So over the past year, Wal-mart moved up from $44 to $54 a share while Whole Foods went from $40 down to $10 a share. Considering the economic/business cycle can help to keep you in the right stocks at the right time.