Tuesday, September 25, 2007
Alan Mulally,CEO of Ford Motor Company(F),still expects the automaker to reach profitability in 2009.Speaking yesterday at a plant opening in Nanjing,China,Mulally said the housing slump will likely slow the economy.Ford is keeping a close eye on the situation.No doubt it is also carefully watching General Motors Corporation (GM) negotiate with the United Auto Workers union,with which it also needs to deal.For the first time since 1976,GM workers went on nationwide strike in the midst of talks yesterday.UAW president Ron Gettelfinger bitterly criticized GM,accusing it of conducting a one way negotiation,to the disadvantage of the workers.From Thursday to Friday,GM made only one concession-regarding a cap on profit-sharing.The UAW had constantly worked with GM over recent years,so it was disappointing to see them act as if they really didn't care about the strike deadline.While the strike continues,GM stands to lose 100 million dollars a day.It has 32 billion in cash on hand.As 12,200 vehicles a day are not produced,Canadian plants will have to shut down by Thursday or Friday,and Latin American plants by Saturday.In the U.S.,73,000 workers are idle,drawing 200 dollars a week from the UAW.The main problem in the talks seems to be the UAW's insistence on job security,which is difficult for GM to commit to for years in advance.David Reilly of Rydex Investments thinks the strike would have to go on for a long time before the stock market to be affected.Yet with the credit crunch and slowing economic growth,defensive caution is warranted by investors.Consumer staples and utilities look safe to him.Investors might consider Procter and Gamble (PG) and Duke Energy (DUK) in those sectors.Among automakers,Ford shares rose yesterday,while GM shares fell.
Tuesday, September 18, 2007
As many Wall Street observers see it,a bear market has begun already;what is more,there is little the Federal Reserve can do about it.This runs counter to the perceptions of traders who insist a cut in the Federal Funds rate will save the stock market.Robert Arnott of Research Affiliates thinks we are in a bear market now.Three-quarters of mortgage resets are ahead of us.This will damage the stock market,which doesn't appreciate how bad the tightening of credit has become.Paul Desmond of Lowry's Reports believes this is the early stages of a bear market.Bear markets run in a four year cycle,and the last market bottom was in October 2002.The current bull market has lasted longer than most,which,in the past,has led to a more intense bear market.Bear markets are characterized by a series of 90 percent downside days.The top of this bull market was July 19.By July 23,we had the first 90 percent downside day.From 1973-74,there were fourteen 90 percent downside days.Investors should get to the sidelines and wait out the decline.In the view of Stan Weinstein of Global Trends Alert,an important turning point was reached in July.Now two-thirds of the market is in a bear market.It is the most volatile market he has ever seen.It should be treated with great caution and selectivity.Robert Reich,who was an economic advisor to President Clinton,notes an undercurrent of fear.Lenders and investors are reluctant because they can't gauge risk.A rate cut at 2:15 PM eastern today may be greeted with a lot of happy talk,but could ultimately fall short of resolving this confidence issue or staving off a consumer-led recession.Hudson City Bancorp(HCBK)is one haven for investors,who have noted that the regional bank has kept its distance from subprime mortgages.
Tuesday, September 11, 2007
Rite Aid Corporation(RAD)is celebrating its 45th anniversary this week.To mark the occasion,the pharmacy chain is having a big sale.Rite Aid is even giving three name brand products away,through its Single Check Rebate program.Halloween candy is on sale,along with raisins and chicken noodle soup.There is also a rebate on Dunkin' Donuts coffee.Besides the relationship with Dunkin' Donuts,Rite Aid has ties to GNC(General Nutrition Center).Many Rite Aid stores have a GNC Location within them.Seniors are prime pharmacy customers,and Rite Aid caters to them with its Living More program.Registration in the program entitles seniors to 10% discounts on health-related items.A Rite Aid I recently visited is a free-standing store.It has a pharmacy drive-up window and plenty of parking.In spite of all the merchandise,the interior isn't junky.The store is bright,neat and well-organized.Health care is unmistakably what it's about.Rite Aid continues to absorb the Eckerd and Brooks stores it recently acquired.The branding process will be complete within sixteen months,resulting in a chain of 5,000 stores in 31 states.Mary Sammons is CEO of the expanding business.
Tuesday, September 4, 2007
As Wall Street goes back to work after Labor Day,the outlook of many analysts remains one of dislocation and danger.Martin Weiss of Martin Weiss Research thinks we've seen just the first shock of the mortgage earthquake.We are only beginning to see a scarcity of credit.We don't have data until it's too late.The mortgage crunch is occurring right now.There has been a blow to the gut of the economy,and it is unlikely the government can stop it.Frank Cochrane of Market Timing Consultants says the market will rally,then fall.The market is seizing on a Federal Reserve rate cut,but it probably won't happen,and the market will fall.We will head down for the next 6-9 months.Michael Metz of Oppenheimer sees the U.S. economy slowing dramatically.There will be a recession because there is a big overhang of debt instruments,and the leverage market has a lid on it.Richard Iley of BNP Paribas notes that we are years away from a housing recovery.The Federal Reserve has underestimated the downturn,and there will be a drag on the economy until 2008.It is the biggest housing slump since World War II.How bad can things get? Between 2000 and 2002,the S and P 500 index fell 47%.Many portfolios lost half their value.One approach for concerned investors is to hedge every stock purchase with a bond fund purchase or savings account deposit.BlackRock's Income Opportunity Trust(BNA) is a broadly based bond fund.Branch Banking and Trust(BBT) offers an eSavings account that yields 4% and includes an ATM card,as well as free online and telephone banking.