India's main stock index fell for a sixth straight session on Monday, its longest stretch of losses in almost five years, weighed down by weak world markets and US credit-related worries.
Investors were also disappointed as September industrial output grew at a slower-than-expected 6.4 per cent from a year earlier, well below annual growth of 10.7 per cent in August and missing market forecasts of 9.9 per cent growth.
The 30-share BSE index ended down 0.9 per cent, or 170.33 points, at 18,737.27, with 18 of the components falling. It had dropped as much as 3.03 per cent in early deals.
It matched the longest falling streak since early March 2003, when it had fallen for six days in a row. The index had fallen 5.4 per cent last week and is 7.4 per cent off a lifetime high of 20,238.16 hit on October 30.
"One reason for this fall is the global markets and the other one is foreign fund flows - some selling, some slowdown that we have witnessed in the last one week," said Neeraj Dewan, director at Quantum Securities in New Delhi.
Technology stocks Infosys Technologies, Tata Consultancy, Wipro and Sat-yam Computer, and index heavyweight Reliance Industries, which together account for more than a quarter of the total weightage in the main index, led the drop.
Foreign inflows have slowed this month after the market regulator curbed the use of participatory notes used by unregistered foreigners to buy Indian shares, while the lingering credit worries in the US have also weighed.
Foreign fund flows
Data showed foreign portfolio investors have been sellers of around $300 million in the first six sessions in November, trimming their net purchase in 2007 to about $17 billion.
"All eyes will be now on the foreign fund flows. If we see positive figures then a recovery is possible. But I think the pace at which they have invested in the last few months will slow down," Dewan said.
DD Sharma, vice-president at local brokerage Anand Rathi Securities, said fresh investment by the foreigners could only be expected in January next year.
"I don't think foreign investors are going to inject fresh funds at this fag end of the year. We will see fresh money only in January. So we are advising to book profit," he said.
In the broader market, 1,685 losers outpaced 987 gainers on volume of 387.1 million shares. The 50-share NSE index was down 0.81 per cent at 5,617.10.
Monday, November 12, 2007
Oil falls over $2 on US economy fears
New York: Bloomberg - Crude oil fell more than $2 a barrel on forecasts for reduced US consumer spending and on slowing growth of oil imports in China.
Rising fuel costs may have slowed retail spending growth in the US, the world's largest oil user, to a four-month low in October, according to a Bloomberg survey.
Saudi Oil Minister Ali Al Naimi and Kuwait's acting oil minister said that Opec may discuss an output boost, Agence France-Presse reported on Monday.
"There is broad weakness across the commodity markets because of economic concerns,'' said Eric Wittenauer, an energy analyst at AG Edwards & Sons in St. Louis. "The Saudi remark is leading traders to expect another 500,000 barrels of Opec oil in the near future.''
Crude oil for December delivery fell $2.45, or 2.5 per cent, to $93.87 a barrel at 10.12am on the New York Mercantile Exchange.
Futures climbed to $98.62 on November 7, the highest intraday price since trading began in 1983. Prices are up 58 per cent from a year ago.
Brent crude oil for Dec-ember settlement fell $1.97, or 2.1 per cent, to $91.21 a barrel on the London-based ICE Futures Europe exchange. Brent reached $95.19 a barrel on November 7, the highest since trading began in 1988.
"It looks like the global economy is slowing, which will have an impact on demand,'' said Kyle Cooper, director of research at IAF Advisors in Houston.
"Rising demand has been the main story for years now,'' Cooper said.
China's October oil imports fell to the lowest since February after the summer consumption peak passed and as crude oil prices rose to records. China is the second-biggest oil consumer after the US.
Rising fuel costs may have slowed retail spending growth in the US, the world's largest oil user, to a four-month low in October, according to a Bloomberg survey.
Saudi Oil Minister Ali Al Naimi and Kuwait's acting oil minister said that Opec may discuss an output boost, Agence France-Presse reported on Monday.
"There is broad weakness across the commodity markets because of economic concerns,'' said Eric Wittenauer, an energy analyst at AG Edwards & Sons in St. Louis. "The Saudi remark is leading traders to expect another 500,000 barrels of Opec oil in the near future.''
Crude oil for December delivery fell $2.45, or 2.5 per cent, to $93.87 a barrel at 10.12am on the New York Mercantile Exchange.
Futures climbed to $98.62 on November 7, the highest intraday price since trading began in 1983. Prices are up 58 per cent from a year ago.
Brent crude oil for Dec-ember settlement fell $1.97, or 2.1 per cent, to $91.21 a barrel on the London-based ICE Futures Europe exchange. Brent reached $95.19 a barrel on November 7, the highest since trading began in 1988.
"It looks like the global economy is slowing, which will have an impact on demand,'' said Kyle Cooper, director of research at IAF Advisors in Houston.
"Rising demand has been the main story for years now,'' Cooper said.
China's October oil imports fell to the lowest since February after the summer consumption peak passed and as crude oil prices rose to records. China is the second-biggest oil consumer after the US.
Doomsayers Dead Wrong About Dollar's Decline
The dollar is hitting all-time lows vs. the euro on almost a daily basis. Even the Japanese yen, long the laggard in the currency world, is starting to catch a bid. Recent comments from Chinese officials about diversifying away from the greenback to "strong currencies" pushed the dollar's descent into overdrive, and seemed to want to drag equity markets with it.
This kind of market action has encouraged familiar warnings from those "bunker monkeys" who link the dollar's decline to dark visions of a disorderly global collapse.
But the U.S. dollar has been depreciating for about five years in pretty much linear fashion and is primarily a structural phenomenon, not a cyclical one. Moreover, even though the U.S. economy is clearly facing headwinds that are, if anything, likely to intensify, the greenback's decline, in and of itself, is not a symptom of U.S. weakness.
Instead, it reflects other countries finding confidence in their own currencies, and weaning themselves of excessive dependence on the dollar as the only international currency for their savings and transactions. In short, across the globe, individuals, companies, central banks and investors are de-dollarizing.
What we are witnessing is the unwinding of an overhang of dollars that has been built up in the global system over the last 60 years. And it could last for quite some time. The good news is that this wouldn't be happening if the global economy weren't in unprecedentedly great shape.
That said, I don't mean to suggest that some of the cyclical arguments commonly mentioned for the dollar's weakness don't carry some weight at certain points in time. Some of them do, but they tend to be grossly overstated, and many of the common reasons cited for the dollar's weakness are merely ex-post facto rationalizations for the price action - Thestreet.com
This kind of market action has encouraged familiar warnings from those "bunker monkeys" who link the dollar's decline to dark visions of a disorderly global collapse.
But the U.S. dollar has been depreciating for about five years in pretty much linear fashion and is primarily a structural phenomenon, not a cyclical one. Moreover, even though the U.S. economy is clearly facing headwinds that are, if anything, likely to intensify, the greenback's decline, in and of itself, is not a symptom of U.S. weakness.
Instead, it reflects other countries finding confidence in their own currencies, and weaning themselves of excessive dependence on the dollar as the only international currency for their savings and transactions. In short, across the globe, individuals, companies, central banks and investors are de-dollarizing.
What we are witnessing is the unwinding of an overhang of dollars that has been built up in the global system over the last 60 years. And it could last for quite some time. The good news is that this wouldn't be happening if the global economy weren't in unprecedentedly great shape.
That said, I don't mean to suggest that some of the cyclical arguments commonly mentioned for the dollar's weakness don't carry some weight at certain points in time. Some of them do, but they tend to be grossly overstated, and many of the common reasons cited for the dollar's weakness are merely ex-post facto rationalizations for the price action - Thestreet.com
European Central Banks Blew It With Gold
The yellow metal has turned out to be one of the best investments of the 21st century, rising from around $260 an ounce barely half a dozen years ago to $831.50 around midday Friday. Most of those gains have come in just the last two years.
Gold has taken a tumble this morning, falling nearly 3% from Friday's Comex close of $834.70. But it's still been quite a ride.
If you're kicking yourself for missing out, here's a crumb of comfort: Some really smart people fared even worse.
After all, you probably weren't actually dumping gold bullion by the truckload right at the bottom of the market.
For that bone-headed move, you have to look to the brightest, best-connected and most financially savvy minds over in Europe --namely, their central bankers and finance ministers.
Oddly enough, it's the central banks with the best reputations that made the worst moves.
Like the Swiss.
They've got into trouble before over gold -- like the bullion that made its way into their safety deposit boxes back in the early 1940s.
But like them or not, the Swiss have a hard-earned reputation for financial prudence and an ability to take the long view. So their central bank looked smart coming into the new millennium with one of the world's biggest holdings of gold bullion in its reserves. Switzerland had nearly 2,600 tonnes of bullion. Only France, Germany and the U.S. had more.
Gold has taken a tumble this morning, falling nearly 3% from Friday's Comex close of $834.70. But it's still been quite a ride.
If you're kicking yourself for missing out, here's a crumb of comfort: Some really smart people fared even worse.
After all, you probably weren't actually dumping gold bullion by the truckload right at the bottom of the market.
For that bone-headed move, you have to look to the brightest, best-connected and most financially savvy minds over in Europe --namely, their central bankers and finance ministers.
Oddly enough, it's the central banks with the best reputations that made the worst moves.
Like the Swiss.
They've got into trouble before over gold -- like the bullion that made its way into their safety deposit boxes back in the early 1940s.
But like them or not, the Swiss have a hard-earned reputation for financial prudence and an ability to take the long view. So their central bank looked smart coming into the new millennium with one of the world's biggest holdings of gold bullion in its reserves. Switzerland had nearly 2,600 tonnes of bullion. Only France, Germany and the U.S. had more.
NY gold, silver futures sink as investors flee risk
(Reuters) - Gold futures in New York slid 2.5 percent and silver sank 3.4 percent at the open of Monday's pit session on heavy selling amid the latest round of risk aversion in the global markets.
At 8:27 a.m. EDT , most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange slid $20.3 or 2.4 percent to $814.40 an ounce.
COMEX December silver contracts shed 53.5 cents or 3.4 percent to $15.01 an ounce. (Reporting by Frank Tang, Editing by John Picinich)
At 8:27 a.m. EDT , most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange slid $20.3 or 2.4 percent to $814.40 an ounce.
COMEX December silver contracts shed 53.5 cents or 3.4 percent to $15.01 an ounce. (Reporting by Frank Tang, Editing by John Picinich)
Commodities Slump As Dollar Rebounds
Commodities prices skidded Monday as a strengthening U.S. dollar at least temporarily halted a nearly three-month rally in gold, oil and other raw materials. Gold fell below $800 an ounce.
Gold prices slid in the largest one-day decline since the rally began in mid-August. Many analysts have been calling for a serious correction to gold prices, after the metal piled on nearly $200 an ounce in three months to rise to its highest level since 1980. Falling precious metals prices were accompanied by a rebounding U.S. dollar and sharply lower oil prices.
"It was only a matter of time before you saw a pullback like we're seeing now," said Carlos Sanchez, CPM Group precious metals analyst. "Some of this is profit-taking. Also you're seeing oil prices down around $94 (a barrel), and the dollar has recovered."
An ounce of gold dropped $35.50 to $799.20 an ounce in midday trading on the New York Mercantile Exchange, while silver and platinum prices also tumbled. Gold traded as high as $848 an ounce last week, the highest since gold briefly reached $875 an ounce in January 1980.
Sanchez said he expects more volatility of this magnitude in the months ahead, with gold likely to see $20 to $30 swings more frequently, as investors wrestle with uncertainty. The commodities markets have been buffeted in recent months by the looming threat of inflation on the one hand and, on the other, the concern that economic growth in the U.S. is slowing.
Oil prices retreated on news over the weekend that Saudi Arabia may consider an increase OPEC output of crude oil. The Organization for Petroleum Exporting Countries meets later this week to discuss output quotas for its member nations. The dollar's recovery from its low point last week also pressured energy prices.
Gold prices slid in the largest one-day decline since the rally began in mid-August. Many analysts have been calling for a serious correction to gold prices, after the metal piled on nearly $200 an ounce in three months to rise to its highest level since 1980. Falling precious metals prices were accompanied by a rebounding U.S. dollar and sharply lower oil prices.
"It was only a matter of time before you saw a pullback like we're seeing now," said Carlos Sanchez, CPM Group precious metals analyst. "Some of this is profit-taking. Also you're seeing oil prices down around $94 (a barrel), and the dollar has recovered."
An ounce of gold dropped $35.50 to $799.20 an ounce in midday trading on the New York Mercantile Exchange, while silver and platinum prices also tumbled. Gold traded as high as $848 an ounce last week, the highest since gold briefly reached $875 an ounce in January 1980.
Sanchez said he expects more volatility of this magnitude in the months ahead, with gold likely to see $20 to $30 swings more frequently, as investors wrestle with uncertainty. The commodities markets have been buffeted in recent months by the looming threat of inflation on the one hand and, on the other, the concern that economic growth in the U.S. is slowing.
Oil prices retreated on news over the weekend that Saudi Arabia may consider an increase OPEC output of crude oil. The Organization for Petroleum Exporting Countries meets later this week to discuss output quotas for its member nations. The dollar's recovery from its low point last week also pressured energy prices.
US gold sinks 4 pct below $800; risk aversion weighs
NEW YORK, Nov 12 (Reuters) - Gold futures in New York plummeted 4 percent below $800 on Monday as bullion investors took profits as a wave of risk aversion swept through the precious metals markets.
At 11:26 a.m. EST (1626 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange dived $35.10 or 4.2 percent to $799.60 an ounce.
COMEX December silver contracts dropped more than 5 percent to $14.74 an ounce, while platinum and palladium contracts fell about 2 percent.
At 11:26 a.m. EST (1626 GMT), most-active gold for December delivery on the COMEX division of the New York Mercantile Exchange dived $35.10 or 4.2 percent to $799.60 an ounce.
COMEX December silver contracts dropped more than 5 percent to $14.74 an ounce, while platinum and palladium contracts fell about 2 percent.
German Investor Confidence May Have Declined to Lowest in Year
(Bloomberg) -- Investor confidence in Germany, Europe's largest economy, probably fell to the lowest in a year in November after crude oil rose to almost $100 a barrel and the euro reached a record, a survey of economists shows.
The ZEW Center for European Economic Research may say its index of investor and analyst expectations dropped to minus 20, the lowest since November 2006, from minus 18.1 last month, according to the median of 38 forecasts in a Bloomberg News survey. ZEW will publish the report at 11 a.m. in Mannheim today.
The euro has risen 8 percent against the dollar in the past three months and reached a record $1.4752 last week, eroding the competitiveness of German exports, while higher energy bills have sapped companies' and consumers' spending power. German business confidence dropped to a 20-month low in October and the DAX index of 30 shares is down 3 percent this month.
``High oil prices, the euro's strength and ongoing uncertainty in financial markets are clouding investor sentiment,'' said Lutz Karpowitz, an economist at Bayerische Landesbank in Munich. ``I doubt household spending will be able to compensate for the negative economic impact of slowing global demand.''
Germany's export-driven economy will grow 1.9 percent next year after expanding 2.6 percent in 2007, the German government's council of economic advisers said last week, citing the euro's strength and a U.S. slowdown. The economy expanded 2.9 percent last year, the most since 2000.
Euro, Oil
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, on Nov. 6 reported pretax profit that was lower than analysts had estimated, as a stronger euro reduced the value of U.S. sales and raw-material costs rose.
Crude oil has advanced almost 90 percent since mid-January and traded at $95.33 a barrel in New York yesterday.
The European Central Bank on Nov. 8 kept its benchmark interest rate at 4 percent, even after inflation accelerated to the fastest pace in two years. The bank said it needs more time to assess the economic impact of the U.S. housing slump, which has made banks reluctant to lend and pushed up credit costs.
Citigroup Inc., the biggest U.S. bank by assets, said Nov. 4 it may face an additional $11 billion of writedowns on subprime mortgages and related holdings.
Still, Deutsche Bank AG, Germany's biggest bank, said Oct. 31 the fourth quarter began ``very positively'' and reiterated its profit forecasts.
German exports also rose more than economists expected in September, supported by sales in Asia and the 13-nation euro region.
Exports by German chemical makers, including BASF AG and Bayer AG, climbed 9.5 percent in the third quarter, driven by sales to east Asia and Latin America, the VCI chemical industry association said Nov. 1.
``We're optimistic that positive impulses from exports will continue until the end of the year and that the domestic economic upswing won't slow down significantly,'' the association said.
The ZEW Center for European Economic Research may say its index of investor and analyst expectations dropped to minus 20, the lowest since November 2006, from minus 18.1 last month, according to the median of 38 forecasts in a Bloomberg News survey. ZEW will publish the report at 11 a.m. in Mannheim today.
The euro has risen 8 percent against the dollar in the past three months and reached a record $1.4752 last week, eroding the competitiveness of German exports, while higher energy bills have sapped companies' and consumers' spending power. German business confidence dropped to a 20-month low in October and the DAX index of 30 shares is down 3 percent this month.
``High oil prices, the euro's strength and ongoing uncertainty in financial markets are clouding investor sentiment,'' said Lutz Karpowitz, an economist at Bayerische Landesbank in Munich. ``I doubt household spending will be able to compensate for the negative economic impact of slowing global demand.''
Germany's export-driven economy will grow 1.9 percent next year after expanding 2.6 percent in 2007, the German government's council of economic advisers said last week, citing the euro's strength and a U.S. slowdown. The economy expanded 2.9 percent last year, the most since 2000.
Euro, Oil
Bayerische Motoren Werke AG, the world's largest maker of luxury cars, on Nov. 6 reported pretax profit that was lower than analysts had estimated, as a stronger euro reduced the value of U.S. sales and raw-material costs rose.
Crude oil has advanced almost 90 percent since mid-January and traded at $95.33 a barrel in New York yesterday.
The European Central Bank on Nov. 8 kept its benchmark interest rate at 4 percent, even after inflation accelerated to the fastest pace in two years. The bank said it needs more time to assess the economic impact of the U.S. housing slump, which has made banks reluctant to lend and pushed up credit costs.
Citigroup Inc., the biggest U.S. bank by assets, said Nov. 4 it may face an additional $11 billion of writedowns on subprime mortgages and related holdings.
Still, Deutsche Bank AG, Germany's biggest bank, said Oct. 31 the fourth quarter began ``very positively'' and reiterated its profit forecasts.
German exports also rose more than economists expected in September, supported by sales in Asia and the 13-nation euro region.
Exports by German chemical makers, including BASF AG and Bayer AG, climbed 9.5 percent in the third quarter, driven by sales to east Asia and Latin America, the VCI chemical industry association said Nov. 1.
``We're optimistic that positive impulses from exports will continue until the end of the year and that the domestic economic upswing won't slow down significantly,'' the association said.
Europe Finance Chiefs Prod China to Let Its Currency Strengthen
(Bloomberg) -- European finance ministers pressed China to let its currency strengthen so their economy no longer bears the brunt of the drop in the U.S. dollar.
With the dollar plumbing record lows against the euro this month, the officials meeting yesterday in Brussels complained the European economy is shouldering a disproportionate share of the U.S. currency's decline and urged the Chinese government to share the pain by allowing the yuan to rise more broadly.
European governments expect ``some adjustment with respect to the exchange rate'' in China, Finance Minister Michalis Sarris of Cyprus told reporters. Spain's Pedro Solbes said there should be a ``rebalancing with the Asian currencies.''
The officials are stepping up complaints two weeks before a European delegation led by Luxembourg Finance Minister Jean- Claude Juncker, EU Commissioner Joaquin Almunia and European Central Bank President Jean-Claude Trichet arrives in Beijing to make their case for exchange-rate revaluation directly to the Chinese. The topic is also high on the agenda of this week's meeting of the Group of 20 near Cape Town.
``We'll try to make clear to our Chinese friends and counterparts that China has a growing responsibility as far as international monetary policy is concerned,'' Juncker said. He played down the likelihood of any imminent shift from China by noting it will take more than the trip for the ``whole world to change.''
While the yuan has gained 5 percent against the dollar this year, the currency has dropped 4 percent against the euro, hurting Europe's exporters and forcing its trade account closer toward deficit.
Trade Gap
China's trade surplus rose to a record $27.05 billion in October, an increase of 13.5 percent from a year earlier, the country's custom's bureau said yesterday. The euro-area trade gap with China widened 25 percent to a record 59.9 billion euros ($87.1 billion) in the seven months through July, according to data released Oct. 18 by the European Union's statistics office.
Trichet said Nov. 8 that it is ``essential'' that China step up to its ``global responsibilities'' after the ECB chief complained that recent currency-rate shifts have been ``brutal.'' Juncker agreed that the ``recent sharp moves in exchange rates are unwelcome.''
Businesses are making similar complaints, with Ernest- Antoine Seilliere, president of BusinessEurope, the European employers' federation, telling the ministers in a speech that an undervalued yuan is ``damaging for the global economy and in particular for Europe.''
`Signal of Confidence'
Not every European official is worried by the euro's gains, which have amounted to a 7 percent jump against the dollar since August. In an interview yesterday in Rome, European Commission President Jose Barroso said a strong euro is preferable to a weak one and is a ``signal of confidence in the European economy.''
The euro ``reflects the confidence people have in the European economy, which means we are doing well,'' Dutch Finance Minister Wouter Bos said in Brussels.
Almunia and Juncker both predicted the turbulence in financial markets that began in August will continue to pose a threat to Europe's expansion, although how much remained in doubt.
``The financial-market turmoil is not over,'' Almunia said. ``The longer the trend, the higher the risks are that the economy will be affected negatively.''
With the dollar plumbing record lows against the euro this month, the officials meeting yesterday in Brussels complained the European economy is shouldering a disproportionate share of the U.S. currency's decline and urged the Chinese government to share the pain by allowing the yuan to rise more broadly.
European governments expect ``some adjustment with respect to the exchange rate'' in China, Finance Minister Michalis Sarris of Cyprus told reporters. Spain's Pedro Solbes said there should be a ``rebalancing with the Asian currencies.''
The officials are stepping up complaints two weeks before a European delegation led by Luxembourg Finance Minister Jean- Claude Juncker, EU Commissioner Joaquin Almunia and European Central Bank President Jean-Claude Trichet arrives in Beijing to make their case for exchange-rate revaluation directly to the Chinese. The topic is also high on the agenda of this week's meeting of the Group of 20 near Cape Town.
``We'll try to make clear to our Chinese friends and counterparts that China has a growing responsibility as far as international monetary policy is concerned,'' Juncker said. He played down the likelihood of any imminent shift from China by noting it will take more than the trip for the ``whole world to change.''
While the yuan has gained 5 percent against the dollar this year, the currency has dropped 4 percent against the euro, hurting Europe's exporters and forcing its trade account closer toward deficit.
Trade Gap
China's trade surplus rose to a record $27.05 billion in October, an increase of 13.5 percent from a year earlier, the country's custom's bureau said yesterday. The euro-area trade gap with China widened 25 percent to a record 59.9 billion euros ($87.1 billion) in the seven months through July, according to data released Oct. 18 by the European Union's statistics office.
Trichet said Nov. 8 that it is ``essential'' that China step up to its ``global responsibilities'' after the ECB chief complained that recent currency-rate shifts have been ``brutal.'' Juncker agreed that the ``recent sharp moves in exchange rates are unwelcome.''
Businesses are making similar complaints, with Ernest- Antoine Seilliere, president of BusinessEurope, the European employers' federation, telling the ministers in a speech that an undervalued yuan is ``damaging for the global economy and in particular for Europe.''
`Signal of Confidence'
Not every European official is worried by the euro's gains, which have amounted to a 7 percent jump against the dollar since August. In an interview yesterday in Rome, European Commission President Jose Barroso said a strong euro is preferable to a weak one and is a ``signal of confidence in the European economy.''
The euro ``reflects the confidence people have in the European economy, which means we are doing well,'' Dutch Finance Minister Wouter Bos said in Brussels.
Almunia and Juncker both predicted the turbulence in financial markets that began in August will continue to pose a threat to Europe's expansion, although how much remained in doubt.
``The financial-market turmoil is not over,'' Almunia said. ``The longer the trend, the higher the risks are that the economy will be affected negatively.''
Strategies for a scary market
The Dow tumbled last week, and the bad news is spreading. Concerns are mounting that a recession is already under way and that a bear market is inevitable.
In times like these, it's more important than ever to have a focused investing strategy and to stick with it.
You can destroy your long-term returns by dumping stocks after the worst of a decline is already over and missing the rebound.
And it's equally easy to hurt your returns by going bargain hunting too soon and being blindsided by a second wave of share price declines.
In fact, it's foolish to try to outguess short-term fluctuations. Very few investors can do it consistently enough to beat the market over the long term.
Instead, you should concentrate on positioning yourself to maximize your long-term profits. The good news in today's turmoil is that you'll get plenty of opportunities to buy top-quality stocks at bargain prices over the next few months.
What's going on
At the moment, we're experiencing the stock market version of a perfect storm, where everything seems to be going wrong at the same time.
If you're an optimist, you can make the case that current problems are overstated.
A weak dollar boosts exports and the overall economy. It's only a problem if it encourages inflation, which so far hasn't happened.
Oil above $90 is a concern, but it has been bid up a lot by speculators, well above a fair market price. With a slowing economy, we could see the price of a barrel of oil drop by $20 over a relatively short period of time.
Falling home prices and subprime loan defaults are hitting some markets very hard, but the problems are local and can be absorbed given the overall real estate market and the total volume of outstanding mortgage loans.
If you're a pessimist, of course, you believe that share prices have a lot further to fall.
There's no way to tell which view is right. There are really only two things you can be sure of in a situation like this.
The first is that stock prices already reflect all the bad news we know about. The market will fall further only if earnings are even worse than expected, if oil prices keep going up more than expected, or if losses on bad loans are even bigger than expected. In fact, sentiment is currently so negative that it wouldn't take much good news to spark a rebound.
The second is that no one really knows how bad things are going to get. Federal Reserve chairman Ben Bernanke told Congress last week that the economy is slowing but that it will likely pick up again by spring.
Bernanke acknowledged, however, that it's hard for economists to identify turning points.
What to consider buying
Traders may have to worry about short-term market risks. But if you're investing for retirement or any other major financial goal that's a decade or more away, you've got a much easier job.
The key ways to minimize your investing risk are well-known: Buy high-quality stocks and diversify as broadly as you can, owning shares of companies in a variety of industries.
If you don't have enough money to buy lots of individual stocks, consider using index funds or ETFs for specific sectors. They're typically cost-efficient and well diversified.
There are plenty of good buys among large, high-quality growth stocks. They have never fully recovered from the tech wreck of 2000-2002. And now that they're dropping along with the Dow, they're getting underpriced again.
The easiest choices for tech investing are two ETFs - Technology Select SPDR (XLK (Charts) and iShares Dow Jones U.S. Technology (IYW (Charts).
Financial stocks are dangerous to buy until all the bad news is out. But when the troubles end, the best quality banks and brokerages are likely to be great deals.
Historically, financial stocks have dropped for six-to-nine months after a credit crisis developed. That suggests that this decline may not be over until February. That's also a good target date because the banks will have completed their audits for full-year earnings by then.
Attractive ETFs for this sector include Financial Select SPDR (XLF (Charts), Vanguard Financials (VFH (Charts) or one of the iShares Financials (IYF (Charts) and IYG (Charts).
A smart alternative is to play the financial stocks indirectly, through a high-yield equity ETF. The S&P Dividend SPDR (SDY (Charts) tries to match the S&P High Yield Dividend Aristocrats. That index consists of the 50 highest-yielding stocks in the S&P Composite 1500 that have increased their dividends for 25 consecutive years.
Currently, the S&P Dividend SPDR is only about a third financial stocks. Half of the portfolio is split among utilities, consumer goods and industrials. The ETF yields almost 3.3 percent, and that kind of payout provides share price support that couldn't be more welcome.
In times like these, it's more important than ever to have a focused investing strategy and to stick with it.
You can destroy your long-term returns by dumping stocks after the worst of a decline is already over and missing the rebound.
And it's equally easy to hurt your returns by going bargain hunting too soon and being blindsided by a second wave of share price declines.
In fact, it's foolish to try to outguess short-term fluctuations. Very few investors can do it consistently enough to beat the market over the long term.
Instead, you should concentrate on positioning yourself to maximize your long-term profits. The good news in today's turmoil is that you'll get plenty of opportunities to buy top-quality stocks at bargain prices over the next few months.
What's going on
At the moment, we're experiencing the stock market version of a perfect storm, where everything seems to be going wrong at the same time.
If you're an optimist, you can make the case that current problems are overstated.
A weak dollar boosts exports and the overall economy. It's only a problem if it encourages inflation, which so far hasn't happened.
Oil above $90 is a concern, but it has been bid up a lot by speculators, well above a fair market price. With a slowing economy, we could see the price of a barrel of oil drop by $20 over a relatively short period of time.
Falling home prices and subprime loan defaults are hitting some markets very hard, but the problems are local and can be absorbed given the overall real estate market and the total volume of outstanding mortgage loans.
If you're a pessimist, of course, you believe that share prices have a lot further to fall.
There's no way to tell which view is right. There are really only two things you can be sure of in a situation like this.
The first is that stock prices already reflect all the bad news we know about. The market will fall further only if earnings are even worse than expected, if oil prices keep going up more than expected, or if losses on bad loans are even bigger than expected. In fact, sentiment is currently so negative that it wouldn't take much good news to spark a rebound.
The second is that no one really knows how bad things are going to get. Federal Reserve chairman Ben Bernanke told Congress last week that the economy is slowing but that it will likely pick up again by spring.
Bernanke acknowledged, however, that it's hard for economists to identify turning points.
What to consider buying
Traders may have to worry about short-term market risks. But if you're investing for retirement or any other major financial goal that's a decade or more away, you've got a much easier job.
The key ways to minimize your investing risk are well-known: Buy high-quality stocks and diversify as broadly as you can, owning shares of companies in a variety of industries.
If you don't have enough money to buy lots of individual stocks, consider using index funds or ETFs for specific sectors. They're typically cost-efficient and well diversified.
There are plenty of good buys among large, high-quality growth stocks. They have never fully recovered from the tech wreck of 2000-2002. And now that they're dropping along with the Dow, they're getting underpriced again.
The easiest choices for tech investing are two ETFs - Technology Select SPDR (XLK (Charts) and iShares Dow Jones U.S. Technology (IYW (Charts).
Financial stocks are dangerous to buy until all the bad news is out. But when the troubles end, the best quality banks and brokerages are likely to be great deals.
Historically, financial stocks have dropped for six-to-nine months after a credit crisis developed. That suggests that this decline may not be over until February. That's also a good target date because the banks will have completed their audits for full-year earnings by then.
Attractive ETFs for this sector include Financial Select SPDR (XLF (Charts), Vanguard Financials (VFH (Charts) or one of the iShares Financials (IYF (Charts) and IYG (Charts).
A smart alternative is to play the financial stocks indirectly, through a high-yield equity ETF. The S&P Dividend SPDR (SDY (Charts) tries to match the S&P High Yield Dividend Aristocrats. That index consists of the 50 highest-yielding stocks in the S&P Composite 1500 that have increased their dividends for 25 consecutive years.
Currently, the S&P Dividend SPDR is only about a third financial stocks. Half of the portfolio is split among utilities, consumer goods and industrials. The ETF yields almost 3.3 percent, and that kind of payout provides share price support that couldn't be more welcome.
$100 oil: It's not dead yet
NEW YORK (CNNMoney.com) -- While it seems like oil's recent attempt to break $100 a barrel has come to a end, experts say a steep fall in price is unlikely, and another shot at $100 could be just around the corner.
"The only thing that can kill this rally is an economic slowdown," said John Kilduff, an energy analyst at MF Global in New York.
But Kilduff's optimism about the resilience of high oil prices runs counter to the falling prices which the market has seen in the last few days.
Several analysts thought it would be inevitable for the price of a barrel of NYMEX crude to top $100 last week.
It got close - $98.68 a barrel - but since last Wednesday crude has pulled back and currently trades around $94 a barrel. With the planned options and contract expirations later this week, it is beginning to look less likely that oil will return to record-breaking levels in the immediate future.
"Unless we touch $100 by tomorrow, it's going to become increasingly difficult" to get there, said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. "The momentum is going to change very quickly."
Tuesday is when options on the December contract expire. Options allow traders who buy them the opportunity to buy or sell oil at a predetermined price at a predetermined time, but don't require them to do so.
Barakat said a few days ago there were 60,000 options that would have let traders buy oil if it reached $100 a barrel. Now there are just 40,000 options, a sign that traders are betting on lower prices.
Plus, the December contract itself expires on Friday. Prices usually fluctuate widely the day a contract expires, as those people who do not want to take physical delivery of oil sell and commercial users - like refineries and airlines - take the opportunity to buy.
Also pulling prices lower are comments that indicated OPEC may raise production, a stabilizing dollar, and the stock market declines of the last few days and associated fears of a slowing economy.
With all these factors taken together, Barakat said oil could trade in the low $90s by the end of the week.
Phil Flynn, a senior market analyst at Alaron Trading in Chicago, agreed prices could fall significantly over the next few days.
"We could see the high $80s by the end of the week," said Flynn, noting the contract expirations and the fact that traders may begin pricing in a foreseen drop in demand caused by the high prices.
Still, it's not like the high $80s is exactly a bargain price for crude, considering it traded at $79 just a month ago, under $50 at the start of the year, and under $20 in 2002.
Oil price? Check the weather
Most analysts said that while a fall to the $80s may be possible, it's likely crude will stay fairly high for the foreseeable future.
Flynn said another run at $100 could happen as early as January, when cold weather increases the demand for heating oil worldwide. He also said the rise to near $100 a barrel was justified by the fundamentals - strong demand and limited supply - rather than speculative investing.
If $100 isn't reached this winter, there's always the runnup to the summer driving season in the spring, or fears of hurricanes in late summer.
Some analysts say oil prices could even top $100 this week. They question OPEC's ability to lower prices and don't think the expiring contracts will pull prices lower and say the dollar is likely to remain weak.
"It doesn't look like the dollar has bottomed out yet," said MF Global's Kilduff. "That and geopolitics will keep us going."
"The only thing that can kill this rally is an economic slowdown," said John Kilduff, an energy analyst at MF Global in New York.
But Kilduff's optimism about the resilience of high oil prices runs counter to the falling prices which the market has seen in the last few days.
Several analysts thought it would be inevitable for the price of a barrel of NYMEX crude to top $100 last week.
It got close - $98.68 a barrel - but since last Wednesday crude has pulled back and currently trades around $94 a barrel. With the planned options and contract expirations later this week, it is beginning to look less likely that oil will return to record-breaking levels in the immediate future.
"Unless we touch $100 by tomorrow, it's going to become increasingly difficult" to get there, said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. "The momentum is going to change very quickly."
Tuesday is when options on the December contract expire. Options allow traders who buy them the opportunity to buy or sell oil at a predetermined price at a predetermined time, but don't require them to do so.
Barakat said a few days ago there were 60,000 options that would have let traders buy oil if it reached $100 a barrel. Now there are just 40,000 options, a sign that traders are betting on lower prices.
Plus, the December contract itself expires on Friday. Prices usually fluctuate widely the day a contract expires, as those people who do not want to take physical delivery of oil sell and commercial users - like refineries and airlines - take the opportunity to buy.
Also pulling prices lower are comments that indicated OPEC may raise production, a stabilizing dollar, and the stock market declines of the last few days and associated fears of a slowing economy.
With all these factors taken together, Barakat said oil could trade in the low $90s by the end of the week.
Phil Flynn, a senior market analyst at Alaron Trading in Chicago, agreed prices could fall significantly over the next few days.
"We could see the high $80s by the end of the week," said Flynn, noting the contract expirations and the fact that traders may begin pricing in a foreseen drop in demand caused by the high prices.
Still, it's not like the high $80s is exactly a bargain price for crude, considering it traded at $79 just a month ago, under $50 at the start of the year, and under $20 in 2002.
Oil price? Check the weather
Most analysts said that while a fall to the $80s may be possible, it's likely crude will stay fairly high for the foreseeable future.
Flynn said another run at $100 could happen as early as January, when cold weather increases the demand for heating oil worldwide. He also said the rise to near $100 a barrel was justified by the fundamentals - strong demand and limited supply - rather than speculative investing.
If $100 isn't reached this winter, there's always the runnup to the summer driving season in the spring, or fears of hurricanes in late summer.
Some analysts say oil prices could even top $100 this week. They question OPEC's ability to lower prices and don't think the expiring contracts will pull prices lower and say the dollar is likely to remain weak.
"It doesn't look like the dollar has bottomed out yet," said MF Global's Kilduff. "That and geopolitics will keep us going."
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