10 Min Market Conditions Talk
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A 10 Minute talk on the current market conditions (11/2008)
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10 Min Market Conditions Talk
- 1. The Low-Down on What’s Up with the Market with Lisa Marie Brugman, RIA, CSFP, CEA Owner, Vice President Client Services AdvisorLisa@gmail.com 562-708-7370 cell
- 2. Are you this investor?
- 3. Flashback Headlines! • “The Market is Heading for a Crash…” • Published in Forbes, October 1, ???? • “Gambling at AIG!” • Published in Forbes, October 24, ????
- 4. 1962
- 7. Let’s Get a Little Perspective. • 1929 – Dow was up to 380 points • Federal Reserve misjudgments caused the money supply to fall by 1/3, combined with trade protectionism of the Smoot-Hawley Tariff Act created the largest stock market crash in US history. • Market dropped 89% in 34 months leading to the Depression with 25% unemployment. • Multinational trade agreements and WWI industrialization led the way to recovery.
- 8. • 1972 – Dow was at 1020 points – Arab oil embargo caused crude oil prices to triple to $12.60 per barrel. – US wallowed for several years in a recession economy until Paul Volcker was appointed Fed Chairman in 1979. – Volcker ended Stagflation (stagnant-inflation) by tightening the money supply.
- 9. • 1987 – Dow is up to 2663 points – Oct. 14th, US Treasury Secretary, James Baker, announced at trade deficit of $1.1 billion, much higher than expected by Wall Street. – The following Monday, the Dow dropped 22.6%. – Computer programs are blamed for the exacerbated crash (investors could get to the market to easily). – Authorities put in “circuit breakers” to freeze trading in a panic.
- 10. • June 1998 – Dow is up to 8952 – Hedge fund long-term capital management blew up. – Dow drops 6% in 1 day. – Fed bails out several banks that would collapse due to their involvement with LTCM. – Dow bounces back within 6 months.
- 11. • 1999 – Dow is up to 11,497 points – Dot-Com companies went public at ludicrous valuation. – Large losses at WebVan, Priceline, and other DotCom’s ended the euphoria. – 9/11/2001 aggravated the damage. – Took 7 years to climb back up to Pre-DotCom levels.
- 12. • 2007 – Dow is at 13,930 – Housing Bubble Burst – Fed bails out Freddie Mac & Fannie Mae – AIG Bailout – “Free Standing” investment bank ceases to exist. – Federalization or full take over of the majority of lending institutions in the country. – Largest Corporate bail out in history, being negotiated by Congress.
- 13. Media “Negative” hype causes emotional market frenzy!
- 14. 513
- 20. Real Perspective
- 22. What to Buy? • What to Buy? – 1 out of 500 firms with a Moody’s rating of A or A- or worse will go out of business. – 1 out of 1,667 firms with a Moody’s rating of A+ or better will go out of business. – Mutually held insurance companies, such as • New York Life, • Mutual of Omaha • MassMutual • Guardian Life, etc. are the least likely to go bust. – Mutual Funds to look at • American Funds – AmCap Fund American Funds – Growth Fund of America • American Funds – Investment Co. of Amer. American Funds – American Mutual • Columbia Small-Cap Value Federated Kaufmann • Fidelity Low-Priced stock Franklin Mutual • Hartland Value Northern Small-Cap Value • Stratton Small-Cap Value T-Rowe Price Small-Cap Value
- 23. • Blue Chips (large-cap stocks) – consistent earnings – Becton Dickinson – BorgWarner – Chevron – Factset Research Systems – General Dynamics – Illinois Tool Works – Johnson & Johnson – Johnson Controls – Nike – TJX
- 24. What to sell NOW! –High Yield/ Junk Bonds –Anything with a rating of B+ or lower
- 26. Says Warren Buffett, the Oracle of Omaha
- 27. The Low-Down on What’s Up with the Market with Lisa Marie Brugman, RIA, CSFP, CEA Owner, Vice President, Client Services AdvisorLisa@gmail.com 562-708-7370 cell