3/18/08 Investment Strategies

3/18/08 Investment Strategies
Dow closes at 12396The market closed up 420 pts.
Mergers and Acquisitions?
The action by the fed to open the discount window to investment banks at 3.25% loans for 30 (90?) days, not done since the depression is probably more the reason for the big market move than a further large drop in the fed fund rate. By being able to borrow at the low rate, investment banks should be able to put off trying to sell their asset backed securities, which in fact the fed will accept as collateral for their loans. This should provide a great boost in liquidity. Meanwhile, the asset backed securities will continue to drop in market value as the housing market sees no near-end to its drop. This continue fall in the value of these loans should continue to depress lending between institutions. but, thanks to the fed offer of use of the discount window, will borrowing from other finance groups be necessary. the new borrowing will allow leverage to again function but in a recession lending possiblities are greatly reduced. Perhaps, we can expect mergers and acquisitions to gain momentum now. Speculation, as well.
3/20/08
Dow Closes 12361
Has the Fed opening of the Discount window to the largest investment houses put a floor under the market by fending off the credit crunch? Analyst Bove, who called the July drop in financials, now characterizes financials as in a historic buy opportunity. But the search for the liquidity of treasuries in the repo market remains in panic mode. Will the trickle down in liquidity pick up speed to unfreeze the market for asset-backed securities?
Personal Investing
we want to continue to remove risk from the downside. I do not trust the market has seen a bottoming. More patience is required to end my fruitless chasing of trends. Long-term we are attempting to step outside any overtly speculative positioning. for now, only our shorting positions are speculative in expectation of the market trending towards 15000. if this expectation proves mistaken, we must suck it up and accept our losses. but by all means, patience.
not unusually i'm continually making the wrong moves with my portfolio. i want to stop the chasing and cut way back on the trading.
short-positioning
we want to make changes to holdings no more than 3 times a month. i continue to expect that the market is going to break through the lower 18000 threshold for the dow. i am overweight on shorts. We will cut half the shorts at 19000 on the low end or 28000 on the high. close the position at either 18500 or 30000. At 30000 we will end our shorting expectations.
long-positioning
We wish to move toward buying index funds as market searches for bottom. We will try to shift balance towards fixed income funds. need to work out a balance. for now, 50-50 stocks and bonds.
At 19000 i will start buying vanguard large cap. adding to the position with every drop of 100 points.
we will buy pbw, vti, vv as market reaches 19000 and more as it falls from there by 100.
bonds: we will add to our postions twice a month
individual stocks:
spwr only at 50.
cash: move to savings account