San Diego Housing Bubble News and Analysis

If the DOW falls off a cliff I will add substantially to my DIA shares. I have recently added (last week) to positions in IWM and MDY at low points and plan to add to SPY and QQQQ depending on the severity of dips. As you can tell I am primarily an index guy.

With the exception of some biotech and tech stocks I am mostly a value guy when it comes to individual stocks, so I'm watching the financials, retail and home-related industry companies. There appear to be some unbelievable discounts right now, but it's only a discount if the company survives and the stock goes up. Discounts are only confirmed in the rear-view mirror. I also track two indices - ITB and XHB, which are both beaten down bad. I'm not sure the downward trend is over yet, though.

First, I consider Warren Buffet to be a personal hero and an inspiration to all. I have many of his books and have even read some of them.

I should note that I'm NOT a professional stock trader (as my nickname would indicate) although I do play one on here.

>> I have already dumped most of my long stocks and am in a holding pattern for D-day.

My response: If you're expecting "D-Day" as I am, why not short the market?

I certainly haven't held any LONG stock positions for over a year. If you are implying that you liquidated your long positions after the markets recently tanked 10% you won't get any awards from us on your stock market savvy.

You write you've dumped most of your long positions and now in a holding pattern. Well, recently I've dumped most of my SHORT positions (after I made a good deal of money as the market recently tanked 10%), and I'm in a holding pattern while the markets continue this TEMPORARY minor recovery apparently driven by expected end of month FOMC 1/2 point rate drop. When this minor recovery seems to have run out of steam after estimated 5% (possible) or 10% (doubtful) upswing, I will take those short positions again in a Big Way. We are now entering a very nasty recession. Read Barron’s from this last weekend; see the comments in the roundtable discussion interviews. Those people are a order-of-magnitude smarter than me on the financial markets, and many are expecting the worst.

I continue to hold gold, and am increasing my exposure to gold. Some people talk about $1,000/ounce gold. Since the idiotic FOMC appears to have chosen the "print money" approach to this economic crisis (and to the larger problem of America's excessive foreign debt), I'm thinking we may see a response in gold markets taking the price to $2,000/ounce, and that may happen within 24-36 months.

stockstradr: Financial Times seems to concur with your assessment as regards gold prices, and the potential for a steady upward climb over the next two to three years.

As far as Buffett goes: He is a Ben Graham guy all the way, and would push for value investing. The only problem with value investing at present is finding a "clean" set of books to look at, company-wise. To a certain extent, a lot of the companies being traded are "cooking" their books as regards accounting practices and how their respective balance sheets are being valued, both from the Asset and Liability side.

The FED/FOMC are completely helpless here, and the market's continued tepid reaction to the rate cuts, as well as the severely restrained liquidity (reaction to the uncertainty as to whom is holding bad assets) is going to plague us for a while yet.

Thanks DaCounselor, I'll take a look at those.

Stockstradr, I didn't dump long-held stocks recently. I dumped them some time back and was lucky with the timing. I dabbled with some shorts (made a nice return off those), then gave up and pulled out of most positions (short or long) due to what I see as the irrationality of the markets. I think it would be logical to short the market as you say, but what scares me is things like BoA buying CFC and the latter shooting up 50% as we saw last week. So I have no more than $10k in stocks right now and the rest in CDs and so on.

The purpose of this thread is so I can get some ideas of stocks to buy when D-day arrives. A lot of decent companies are being battered so if I can get some good tips I'll start doing my research now and be ready when the bloodletting begins. As Warren Buffet says (this guy is full of great quotes):

"I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."

Nost: Interesting article on MSN Money. Includes picks and tips on various companies the author deems worth of investing in. The agribusiness recommends caught my eye (wife's family owns corn/soya properties in Nebraska and Iowa).

http://articles.moneycentral.msn.com/Inv...

the idiotic FOMC appears to have chosen the "print money" approach to this economic crisis (and to the larger problem of America's excessive foreign debt)

Correction.

FOMC chose to appear to print their way out of this economic crisis.

The runup of gold is not justified by the amount of money that was printed thus far (which is basically zero).

Furthermore, there are some substantial limitations to how much the Fed CAN print unless ECB agrees to print money too which they seem to be reluctant to do.

Finally, global recession will dampen the demand for gold jewelry. Especially in China and India, and jewelry demand is something like 60-70% of total gold demand.

I think it's a good time to start reducing your exposure to gold. Today it's at $905. If it hits $1000, I'm going to cash out completely.

It sounds like you're asking which beaten down stock to buy versus some of the standouts which I continue to hold including BRK and DE. I could see adding to BRK-b at this point as it's currently oversold. Buffet has bet on the increase in commodity prices (specifically corn and wheat which needs to be tranported by rail) by buying railroads and his recent purchase of Marmon reinforces that long term trend so those kinds of companies are intriguing.

At some point homebuilders and financials are going to be enticing as well as retailers like HD, but it's still too early IMO unless you have some insight into which homebuilders will survive and which financial has really fessed up in terms of their CDO exposure. I'm concerned that just about all the big financials except GS seem to be looking for more capital which leads me to believe they are worse off than anyone thinks. The only reason to raise funds when your stock is so depressed is because you must be desperate. Citi reports tomorrow and the rumor is that they are going to write down ANOTHER $24 Billion. The good thing about these guys having new CEO's is that they should quickly write off everything so they can start from scratch. If C has a huge write off and the stock doesn't budge then maybe financials are near bottom. I'll still wait and catch the rise versus looking for an absolute bottom.

One thing that I haven't seen discussed here is that the 10 year yield and LIBOR are both plummeting which at some point should translate into lower mortgage rates and easier resets for those with adjustables. Jumbos haven't really budged, but I expect that to change once the credit crunch eases. Bill Gross says the FF rate is going to 3%.

Thanks Allan that's a nice article and I was already looking at several of those picks so now I feel I'm on the right track.

How do you feel about American auto makers? They have been getting slammed even without the subprime-related market mashings. They are pretty much all trading at or near their 5-year low and most people wouldn't touch them. My crazy theory is that with Japanese auto makers opening manufacturing centers in the U.S. either domestic workers will become enriched with Japanese auto-maker skills or Japanese auto makers will merge/acquire U.S. companies. This is a totally off-the-cuff thought with no data whatsoever supporting it other than my experience with cars.

Another pick I like is Blockbuster (BBI) and other online movie rental businesses. Walt Disney really made it big during the great depression with his movies, showing that even in down times people need an escape (which we might call denial) so they go for movies and entertainment. BBI on Jan 9th announced an increased focus on digital media downloads, and I think they are in a better position than Netflix is because of BBI's recent aquisition of Movielink. One big threat is Apple which has started providing movies thru their iTunes store (but they're expensive). And now we can watch movies on our phones and iPods and so on.

Anyhow, those are some of the things I plan on scooping up on D-Day. JNJ has always been a great company and I look forward to grabbing some of that too.

Gents,

I think you are looking at this period with the wrong mentality. We are in pretty uncharted territory and until we see some things wash through the current system I would be thinking in terms of wealth preservation not wealth accumulation. There will be plenty of time to earn money on this downturn but wait for the bottom to show itself and then get in. Missing 10% on the bottom is better than getting in 30% early. I found a chart of the Dow around the 1929 crash with comments from "experts" of the time. If you are going to do some knife catching in the current market play with money that you can throw away. Think of it as buying lottery tickets.
http://www.gold-eagle.com/editorials_01/...

My2Cents

Chief Running Bear, that's my point! I'm preserving funds now so that I can buy at the bottom.

I liked the last quote on your chart:

"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." -FDR