A surprise to me in some aspects, a late day Friday rally pumped some new money into the markets. Although many of the larger companies are still seeing skids towards lower prices, Friday was similar to an effect where a ball hits the ground and there is a small rebound before it falls again and I’m sure Monday will prove this point.

With GM looking for a financial bailout, some good has finally come in the execs that run the company. They have opted to return 3 of the 7 leased jets in order to cut costs. Although they still own 4 which is unnecessary when they have been forced to idle plants and production which in essence cuts into wages of blue collar workers at a time when every dollar earned counts.

Another issue at hand this weekend is falling back to the financial sector where Citi (C) is falling like a stone and at the moment is poised to go down as the largest bank failure in history just after WaMu took that title a couple of months back. I’m not an expert, but with Lehman Brothers, WaMu, Bear Sterns all big power houses falling apart and now Citigroup in line for the same fate, does the government really think a rally is imminent? Hopefully by Monday some new news on Citi can come out that is positive. As a failure of Citi will be a fatal blow to the overall market next week and will cause a further crisis rather than bringing anyone closer to an economic solution as we have all been hoping and waiting for.

Interest rates are also once again poised to fall a bit soon. This is bad as we are watching deflation in the markets. Deflation in basic terms is the opposite to inflation (obviously) and means that prices for the most common goods within a country are dropping in value (eg. rent, food prices, basic needs, etc). Although for the common consumer this may seem good, but conventional logic will dictate that as prices drop so dramatically, people tend to put off purchases of items expecting for further reductions later on.

Take for example LCD TV’s. In the past few months there has been many drops in prices week after week. As one looks at local adverts and watches the prices drop, you can only think and expect that next week will bring even lower prices and that makes you put off buying now and prevents money from being pumped into the economy.

Well back to some stocks, I’m watching GM and Ford stock heavily as there are some swings throughout the day. If you look at the past few sessions, GM had a dip before lunch before a swing up and another slight drop towards the end of the day. If I have time, I will be watching for those and possibly getting in and out within a few hours.

Another stock I’m going to watch is Citigroup which is really badly beaten up at the moment and with any good news this weekend or Monday, its poised to shoot up to more realistic levels. I know both transactions are going to be risky, but either can bring some potential gains if I time my buy and sell points correctly.

I’ll talk more later…

Happy Investing!

Aman, MBA

No related posts.