Week in Review

Friday DJ plunge
The Dow tumbles more than 240 points after the Labor Department reports the weakest jobs data in four years. Investors also weigh comments from former Fed chief Alan Greenspan about volatility in the stock market.

Country Wide cute more jobs
Reacting to a meltdown in the subprime housing market, the largest U.S. home-mortgage lender is expected to announce plans to reduce its work force over the next several months by about 20 percent. This is in the wake of the Bank of America bailout. What's next?

Home prices have fallen in 1/3 of the metropolitan areas in America over the past three months. How are values where you live? If you are trying to sell now, you may want to be very careful the time is bad. On one street in Cuyahoga County, OH there are 9 houses for sale.

The mortgage "bubble", while it has not you extended into the Prime markets, it has made its way into the creative market. Even high value homes are loosing their value and people are loosing their homes. What happened was that years ago, a man with a 680 credit score could either take a standard mortgage on a 3 bedroom, $250,000 home or he could take a "creative" mortgage and move into a 5 bedroom 1/2 million dollar home. In short prices are falling, and falling fast.

Fed to cut rate?
NEW YORK (AP) - The arrival of September was supposed to bring more clarity to the economic impact of the current credit crisis. Instead, each new bit of data coming out seems to be creating more confusion.

The first labor market contraction in four years, as revealed Friday in a weaker-than-expected jobs report, shows that the housing and mortgage collapse is putting some strain on the economy. And the continued dislocation in commercial paper markets, where companies raise cash to fund their operations, should be taken as a warning sign - in flashing red - that more bad news may be coming.

Yet plenty of good economic news still stands out. Strong August sales results from retailers and manufacturers suggest the painful credit crunch's effect on the broader U.S. economy has been limited so far.

Anyone hoping that Federal Reserve policymakers will reduce the overnight bank borrowing rate when they meet on Sept. 18, should not ignore the positive signs the economy is giving.

American Elitism

Sometimes good ol American arrogance affects us all. Isn’t it odd that most Americans can only name 2-4 stock exchanges? Now we seem to think that our mortgage crisis, which will lead to an eventual recession, will affect the rest of the world’s markets. While CDO (collateralized debt obligations) defaults are at a high point, there are so many sectors to our economy that remain unaffected. Example: when Ford (F) was downgraded by S&P from AA to below “investment grade” , did the US car market plunge? Did prices drop? The “Market” is kind of like the Earth; no matter what we throw at it, the greater good always seems to win out. After an ice age, come the Grand Canyon and Great Lakes. CDO, CDO2, and other mortgage backed securities. That said, in the spirit if “buy low, sell high,” if you have some extra money look at things like Freddie Mac, Fannie Mae, and Wells Fargo. These are all companies that will see short-term dips, but each has what we at Landes refer to as FSP or financial staying power. Basically, over the long haul, these companies will bounce back into the black and see continued growth.
For the more immediate returns you will need to look places like: Tech, Pharma, and Blue Chips. There are some good values in small caps, but you have to look. One other place to look is at short term luxury goods and services, like restaurants. This short-week will see a lot of moving and shaking. I expect to see a lot of volatility, but all-in-all we will be up for the week. My suggestions are: NVIDIA (NVDA), Ultra Petroleum (UPL), and BP.I hate to say this but perennial disasters lead (one month later) to oil spikes. Oh yeah, BP will be pumping in Oman by 2011.

Credit Crunch 2

What makes the Fed Chairman believe that a rate cut will have such economic impact that the Lener's will be more free with lending. Rather I think the converse is true. The Fed hasnt made an interest rate cut in four years. Lenders are not in touble because they didnt have money to loan; they are in trouble for trying to artifically boost profits at the expense of the Middle Class. If you give money to a homeless man, assume that you will not get the money back. In essences that is what happened.

Lets not forget the banks still have money, they are simply keeping it all for themselves.

Wednesday's Stock Pick - August 29

Take advantage of yesterday's weakness-its a natgood idea to look for high value stocks at a bargin.

Watch: The weakest sector is still the financial services. Lehman Bros., is a value stock right now. Remember that there is still "tightness" in the credit market. With a current price of 53.625, I think LB will drop down to about 52.25 by the end of next week.

Buy: Altria (MO)- News should come out shortly about its international tobacco unit, can you say spin off? Garmin LTD (GRMN)- Its M&A season. Semtech (SMTC) - They release earning reports today and I believe that they will "beat the street", new LED drivers are a big seller.