THE RALLY! March 20 2009
THE RALLY! March 20 2009.
I was subjected to considerable incoming flak over my recent columns in which I predicted the extreme oversold condition of the market below its longterm 200day m.a. and the record level of investor fear and bearishness indicated the market should take off into a significant bear market rally very soon.
Having been in the business for 22 years the flak was expected reflecting the data that showed 70 of investors were extremely bearish each one able to quote many reasons why with the economy headed into the next Great Depression and Samp;P 500 earnings declining sharply the market could only plunge still further.
But while the market moves in the longterm on its expectations for the economy and earnings thus cycles back and forth between bull and bear markets it moves in the intermediateterm by cycling between being overbought and oversold conditions that are usually verified by investor sentiment being either very bullish at the overbought rally tops or very bearish at the periodic oversold lows.
With the Samp;P 500 up 17.4 in just seven days the skepticism has died down some again confirmed by data that investor sentiment has already come down from the extreme of bearishness seen a couple of weeks ago.
For instance the weekly poll of its members by the American Association of Individual Investors reached a record level of 70.3 bearish only 18.9 bullish a couple of weeks ago March 5. My research firm considers bearishness to be extreme to the point where we need to watch for a potential upside reversal by the market any time the poll shows more than 55 bearish and fewer than 25 bullish. As noted the poll on March 5 showed a record 70.3 bearish. The poll on March 12 three days after the big rally began showed 54.5 were still bearish which is typical.
But this week’s poll shows quite a reversal already with only 38.3 bearish and 45.1 bullish.
Such a quick reversal in sentiment is a reason to be cautious about the staying power of the rally. In positioning our subscribers for the rally we told them we would not expect the rally to end until bullishness reached 55 and bearishness dropped below 25 which normally takes several months.
So sentiment will bear watching. If the market experiences a few days of profittaking and pullback as we expect that would likely bring back some fear and bearishness which would be a positive as far as the rally continuing.
The second situation concerns the market’s technical situation in which the market is at an important juncture. That can be seen in two charts I put on my free blog post last Wednesday. You will see that the first a shortterm chart shows how the major indexes have broken out above the shortterm overhead resistance at their 21day moving averages. That is a positive. But will the rally only last until the market becomes shortterm overbought above the moving average where it will also run into a shortterm trendline of resistance? Or as shown in the second chart a long term chart will it continue into an intermediateterm rally of several months duration? The longterm chart shows how substantial such a rally could be given how extremely oversold the major indexes are beneath their longterm 200day moving averages.
One reason to expect the latter is that as the chart shows the Samp;P 500 and other major indexes are even more oversold than they were at the oversold lows in the 20002002 bear market from which significant bear market rallies were launched in that bear market. In fact the Dow has only been this oversold beneath its 200day m.a. once in the last 75 years and that was at a low in 1930 just before the Dow launched into the 50 bear market rally that took place in the middle of the granddaddy of them all 192932 bear.
But investor sentiment might come into play if sentiment becomes too bullish too soon.
So while most investors are spending a lot of time and energy stressing over events that are sideshows to the market; the bonuses paid to Wall Street executives the trillions being thrown at the slowing economy what the massive debt will mean to future generations and looking for signs of improvement in economic reports; their investments and therefore their ability to weather the catastrophes they expect might be better served by ignoring the sideshows and focusing on what the market is telling them with its overbought/oversold conditions and investor sentiment.
Just a thought.
Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding the Bear How To Prosper In the Coming Bear Market. His new book is Beat the Market the Easy Way! Proven Seasonal Strategies Double Market’s Performance!
About the writer: Sy Harding is CEO of Asset Management Research Corp. author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way editor of www.StreetSmartReport.com and www.SyHardingblog.com.
Task Befor Charles Ojo
After the latest phase of banking consolidation was concluded at the end of 2005 Governor of the Central bank of Nigeria Chukwuma Soludo assured Nigerians that they could now afford to keep their money in any of the 25 banks which emerged after consolidation and go to sleep with both eyes shut. Renewed confidence in the banks increased interest in banks and citizens developed faith in the banking system unlike the era of distress that once characterized the industry.
But in June 11 2007 jitters where sent down the spines of investors and depositors as news that the Central Bank had dissolved the board of directors of Spring bank plc came in. The Central Bank in the letter dated June 5 admitted that the bank was in a grave situation.
In a statement the CBN gave the reasons for dissolving the board as negative shareholders fund contrary to prudential requirements stipulated by the CBN pursuant to the provisions of the Banks and Other Financial Institutions Act 1991 and the CBN Act 1991 as amended.
A few days later erstwhile chairman of the bank Rev Segun Agbetuyi in an open letter dated June 11 published in major Nigerian newspapers convicted the CBN banking supervision unit of complicity in aiding fraud in the bank. Accusations and counter accusations dampened confidence and ensured that the banks profile nosedived and set it in need of salvation. If not perhaps Nigerians could look forward to the first liquidation less than 2 years after consolidation.
Hope was however raised in 2008 when Bank PHB offered to purchase majority stake in the bank whose shares had become a burden on investors portfolio haven not made profit or declared any dividend. Shareholders ratified the takeover and the deal was sealed. The reconstituted board was approved by the CBN late December 2008 and Charles Ojo an Executive Director in Bank PHB in charge of Abuja operations was appointed the new Managing Director of Spring bank. For a bank that had been rocked by various controversies including the consolidation of the bank which was revealed to be inconclusive and a large bad debt portfolio the task ahead for the new managing director is a daunting one.
The reasons arent far fetched;
The image of the bank has been dragged in the mud especially by the very sudden manner in which the board was dissolved and subsequent revelations from the erstwhile chairman and other sources that the bank was in a sorry financial state leaves much to be desired of the new management.
As all the surrounding issues were been reeled out it all seemed like washing your dirty linen in public leaving the bank with an image crisis to grapple with. Spring bank became synonymous with fraud and reminded Nigerians that they couldnt actually be sure about the new mega banks. Pride was far away in the wake of the crisis that saw its share price plummet and depositors scrambling to withdraw their deposits.
More so internal wrangling and fraudulent insider activities had kept the banks finances in the negative hence profit remained an illusion.
All these notwithstanding the situation with Spring bank isnt an impossible one. It only reveals the task ahead of the new managing director Charles Ojo.
The new MD more than anything else needs to restore the confidence of stakeholders especially depositors in the bank. If confidence in the bank is still lacking Bank PHB could as well kiss this new acquisition goodbye. World Bank president Robert Zoellick was quoted as warning that restoring confidence in the banking system was more important than stimulating growth through tax cuts and spending increases in the wake of the global financial crisis. If confidence is still lacking it becomes difficult for Spring bank to source the needed capital to execute its business either from depositors or through equity. The new Managing Director therefore needs to improve on the brand of the bank. A holistic approach must be adopted in trying to achieve this task of pushing up the brand of the bank. Apart from good public relations which the bank is now pursuing vigorously it has enough experience from its parent bank Bank PHB the bank needs to begin to deliver on its promises of excellent customer service superior technology reliable and timely service etc. all these when approached together can help boast the profile and public perception of the bank.
As with the passion of a dare in search of water Mr. Charles Ojo must pursue the turn around of the banks human resource to match the requirements and demand of todays banking landscape. He must build a team of excellent experienced committed and capable people who will lead others to deliver on the banks goals and aspirations. The era of a lackadaisical approach to work must be done away with through continuous training and improved working conditions. Morale must be boosted to ensure that staff members carry the banks identity in pride and with a sense of commitment and ownership.
Finally I believe the bank must return to profitability as soon as possible. All these definitely will not come as easy as enumerated in an ever competitive banking industry but with zeal and a great team Spring bank will actually bounce back and live up to its name.
About the writer: Sanyaolu kehinde taiwo are business research analysts and banking strategists. They have done extensive research in finance banking and entrepreneurship
How Investing In Precious Metals Will Help Baby Boomers Retire Comfortably Without Fear
Baby boomers with every year that you get older do you become more and more afraid of retiring?
I don’t blame you at all.
The worldwide economic slowdown epidemic that is forcing homeowners into foreclosure halting consumer spending driving up credit card bills and crashing stock exchanges on a global basis are seriously hurting many baby boomers’ plans for retirement.
Many boomers have become very fearful of their future because they were relying on their 401Ks and IRAs for a comfortable retirement. Now they’re watching their profits freefalling downward. Many boomer investors are now seeing lots of red in their portfolios so how can they retire?
In other words if baby boomers aren’t adding to their wealth and if their asset values are falling their chances of a comfortable retirement are quickly diminishing.
So what can you do?
Simply change the way you fund your retirement. Start diversifying wisely!
Two Alarming Reports That Should Convince All Baby Boomers to Change the Way They Invest in Their Retirement Plans
A recent Samp;P report which calls Americans “dangerously unprepared for retirement” notes that the poor performance of asset markets in recent years is hitting the piggy banks of even those most primed for retirement. The Samp;P 500 Index for example is on track to have its worst decade performance since the Great Depression!
In an AARP survey fifty percent of the respondents said the value of their 401k accounts and other investments had dropped over the past 12 months. Onequarter of retirees said their goldenyears income had fallen in tandem with interest rates.
How You Should Invest in Your IRAs and 401Ks If You Want to Avoid Retiring Poor
You should fund your Individual Retirement Accounts IRAs and 401Ks with physical gold and silver. Yet very few investors are aware of this fact.
Here’s why you should diversify your retirement portfolio with precious metals:
Precious metals are exempt from all capital gains taxes so if your investments perform well over a long period of time it can result in huge savings.
Precious metals normally rise during periods of unsettling events such as wars terrorism inflation deflation downturns in the stock market and the US dollar.
Precious metals usually yield large profits in no matter the circumstances.
What Makes Investing in Gold and Silver Unique
When you invest in gold and silver you can take physical possession of the actual gold or silver when you make your withdrawals. That’s correct! You can cash out in real honesttogoodness gold and silver instead of fiat dollars. This is the most important feature of all. Down the road in this generational bull market in gold and silver the odds are in your favor that you will want and need the physicals when it’s time to access your investment.
How to Get Started in Investing in Gold and Silver in Your IRAs and 401Ks
Once you decide that you want to include precious metals in your retirement planning you need to determine how much you want to invest.
How much you invest depends on:
Your annual contribution
Your personal goals
Your individual investment philosophy
Three other factors to consider are:
Your age
Total assets
Risk tolerance
Very few institutions are set up to handle the precious metals component of retirement plans. One of the leaders in the field that I personally recommend using is GoldStar Trust Company. They serve as custodian for approximately 20000 selfdirected IRAs with assets in excess of 700 million. One thing to note is that GoldStar is not a coin dealer but it will work with dealers who buy and sell precious metal coins and bullion for your IRA on your instructions.
Setting up a selfdirected IRA with a company like GoldStar is easy. And there are only three steps to follow:
1. Submit the paperwork.
2. Fund the account.
3. Direct your broker which precious metals to buy.
So start investing in gold. Start investing in silver. And start investing in other precious metals unless you want to continue having to drink a bottle of Maalox every night because you’re so afraid of the future. Follow my advice in this article in my book “Get the Skinny on Silver Investing” and on my website http://www.silverinvestor.com and you will retire comfortably without fear.
About the writer: Following the silver market for more than 30 years Silver Investor David Morgan believes NOW is the time for baby boomers who want to retire comfortably and without fear to start investing in precious metals. Now you can discover his Ten Rules of Silver Investing for Baby Boomers when you sign up for his free newsletter at: http://www.silverinvestor.com/joinfreelist.html