Why the sell-off is just getting started
With Greece's new bailout plan in jeopardy, intense selling pressure triggers a number of warning signals.
Stocks fell early and often Tuesday as the situation in the eurozone continued to deteriorate.
The Greek Bailout 2.0 plan is being jeopardized by weaker-than-expected participation in the country's debt swap offer and fears that its failure would result in €1 trillion in losses for European banks. Also adding to concerns is word that Ireland could require a second bailout package -- something that might not be forthcoming if the Irish reject a strict new fiscal austerity pact.
The result is what's set to be the worst market performance since December and the breaching of significant technical support levels. By all indications, the losses are just getting started.
Here's how you can profit from the emerging downtrend.
I've already said a lot about the intractable problems being faced by Greece, so be sure to review my recent blog posts. Overall, the country is headed toward a "hard default" -- the first in 60 years for a developed country -- and a very likely exit from the eurozone. By restoring its national currency, Greece can promptly devalue it and restore its economic competitiveness by making its exports and tourism industry more attractive to foreigners.
The problem of Ireland is a new wrinkle that has taken the market by surprise.
And as a result, people are selling and selling hard. In the process, a number of important foundations of the post-November uptrend are getting whacked:
- Cyclical, economically-sensitive stocks are underperforming non-cyclical defensives on a scale not seen since the fallout from the collapse of Lehman Bros. back in September, 2008.
- Breadth, calculated as the percentage of NYSE stocks above their 50-day average, is plummeting in a way not seen since November.
- Declining issues are outpacing advancing issues in a way not seen since last August's market collapse.
- And the CBOE Volatility Index ($VIX), Wall Street's "fear gauge," has reached an extreme not seen since October.
For nimble traders looking to get in on the action, emerging market stocks is the latest group to roll over and suffer from a bout of severe underperformance thanks to safe haven inflows into the U.S. dollar. When the dollar does well, foreign stocks and commodities tend to suffer.
Monday, I added exposure to this by including the ProShares UltraShort China (FXP) in my Edge Letter Portfolio. Existing positions include a short in AKSteel (AKS), up nearly 17% since I added it on Feb. 14, and a short in Mechel Steel (MTL), up 14.2% over the same period.
For long-term investors, the best strategy would be to move to cash and wait out the storm. If that's not possible, I recommend a rotation into utilities and consumer staples -- areas that tend to limit their losses in situations like these. Examples include Duke Energy (DUK), which offers a 4.8% dividend.
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So in case you all wonder why the market is now going down down down, It's because of me and my impeccable timing! The last time I made a major move like that was in January of 2001, just before the mega-crash, when I put some money in an IRA account in blue chip stocks. It took all of 2 weeks for my stocks and my heart to plunge!
Maybe I should let you all know when I am moving my money again. :-(
Greeks' debt is not our debt. The idiot business models that Goldman Sachs and others sold to investors to garnish global wealth is coming back to haunt them.
Time for Americans to invest in OUR future by installing apprenticeship programs in high schools so kids can learn a real trade (IT techs, welding, automotive, nursing, foreign language, etc.). They can come out of high school with enough credits to be a junior level in college.
Enough of this nonsense of get rich quick, short term monetary heroic's. Invest in the next generation. Our generation is already bankrupt.
'the market' is nothing more than a huge casino ! Gone are the days when the price of a stock was a reflection of the growth, stagnation or problems of a specific company. Here are the days of: rabid speculation, short selling, shuffling of blocks of stock via the computer; and turbulence.
I predict a lot of you gamblers (those still in the delusion that you're smarter than the average bear and will make profits this spring) are going to have deep and nasty knife gashings in the palms of your hands. Why, from grasping at falling knives.
Don't say you weren't warned.
We have some major issues.
Our massive debt and unfunded liabilities.
Decreased numbers of working people in the US (yes, unemployment can go down while there are less jobs).
High fuel commodities prices.
We are nowhere near the end of this mess. We haven't even raised taxes and printed money to pay for our debt yet - just wait until the inflation comes.
So I figure we will besimilar to Japan. Let's see - the NIK was at 36,000 about 20 years ago. It is around 10,000 today. Well, 15 years to go and the DOW will be at 4,000.
Wait until the Artificially LOW RATES IN THE US -(THANK YOU, BERNANKE AND OBAMA)- GET TO MARKET RATES. The U. S. is screwed and the interest costs will not be able to be paid. IE: see GREECE!!!
As of March 1, 2012 the U.S. had $15.5 TRILLION in debt not counting underfunded liabilities as of SEPT. 30, 2011 for S. S. of $18.8 TRILLION, Medicare $24.4 TRILLION, and Federal Employee Retirement and veterans benefits of $7.3TRILLION.
Think the cut in payroll tax OBAMA INSISTED ON WILL NOT BE DEVASTING IN COMING YEARS? The Social Security part of the payroll tax was 5.20% and the Medicare part was 2.45% before the reduction starting in 2011. This reduction from 5.20% to 3.20% in S. S. withholding is a decrease in revenue of 38% for 2011 and 2012. It should have never been implemented and our SO CALLED LEADERS IN D.C. did not have the guts to say no on both party lines because the reelection to a cushy job is more important than doing what is best for the future of our country and young people who will be paying a dear price in the future.
$15.5 TRILLION or to be exact it was $15,501,014,716,144. I say was because it goes up every minute. This was a debt to each person of $49,587 and to every household of $130,610. IT IS NOW MORE!!!
IT IS COMING!!! -
Remember 21% PRIME and 16% CD's. One Year ARM Mortgages W/ 30 year amortization with a start rate of 17.5% with 2% yearly and 5% lifetime caps. Think I am wrong? Try the Jimmy Carter years. I was in banking for 36 years. When I started in 1973, mortgage rates were 7.50% and that was a good deal as a passbook savings account paid 5.50%!
People who have only seen rates of 6.00% or below are in for a real eye opener. Oh- the entitlement people will really be angry then.
usual suspects....sir...The only jobs that are available these days are in IT, nursing, automotive, and welding. Foreign language is a big ticket item as well. You really don't expect to send our children to a Liberal Arts School (not to offend degree holders) and expect them to nail that 50K job after graduation do you?
Maybe an Ivy league school, but really, in this economy?
Apprenticeship programs in High School (when created) that give you a lethal set of skills, and cut your college course study in half, is the way to go.
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Consumers are very status conscious in Asia, Africa and other emerging-market areas. This is especially true in China.
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