OTCPicks Market Blog

October 1, 2008

Investors have been watching and waiting for more than a week as Congress tried to hammer out a financial rescue plan for the U.S. banking system and the economy. On Monday the markets were shocked when the bailout plan failed a vote in the House of Representatives. The Dow Jones industrial average lost 500 points in mere minutes as the vote took place and ended up down 777 points. The 777 point drop represented the biggest single-day fall ever outpacing the 684 point drop the first trading day after the September 11, 2008 terrorist attacks.

Citigroup agreed on Monday to purchase Wachovia's banking operations for $2.1 billion. The buyout was arranged by federal regulators, making Wachovia the latest casualty of the widening global financial crisis.

September 24, 2008

As things seem to grow more dire, and housing prices are dropping like a stone, credit is tightening up, job losses are mounting and everyone is bailing from the market, what is billionaire Warren Buffett doing?

Well, Mr. Buffett and his company Berkshire Hathaway (NYSE: BRK) happen to be sinking $5 billion into Goldman Sachs Group, Inc. (NYSE: GS). Says Mr. Buffett, "I am betting on the Congress doing the right thing for the American public and passing this bill,'' Buffett said on cable channel CNBC. "I certainly have a vote of confidence in Goldman and a vote of confidence in Congress.''

September 22, 2008

Oil prices were up more than $25 a barrel today as investors became unsettled about the government's $700B bailout plans. This was the biggest one day price surge ever for oil. The Fed is going to have to auction off a truely huge amount of Treasurys to fund this gigantic financial industry bailout. This is going to cause the dollar to get hit and start to weaken against other currencies.

The Dollar and Oil are in kind of an inverse relationship where Oil rises when the Dollar falls and visa versa. This also hold true for precious metals as a weak dollar causes a monetary flight to the safe havens of commodities.

September 22, 2008

This past week has seen an unprecedented events happening on Wall Street and a major rollercoaster ride in the stock market. This past week shook the foundations of the world financial system. A sharp slide in U.S. housing prices and a subsequent rise in delinquencies on home loans is the root cause of these massive losses on mortgage-backed bonds that in recent years have spread across the global financial landscape.

The financial crisis that began 13 months ago has entered a new, far more serious phase. Hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated this past week. Now increasingly big cracks have appeared in the system beyond the original problem -- troubled subprime mortgages -- in areas like credit-default swaps, the credit insurance contracts sold by American International Group Inc. and others. This led to a crazy week last week on Wall Street:

September 17, 2008

In recent weeks mortgage rates have been dropping. This is great news for buyers, but only buyers with impeccable credit. Within the last week mortgage rates have dropped below 6% making it a great time to consider buying a house. But, the “Devil is in the Details” and the Devil in this case is finding a lender willing to loan you the money to buy.

Lenders do not want to take risk anymore. Taking excessive risk on sub-prime loans is what started this mess in the first place, so the pendulum is now swinging the other way where lenders have become very conservative and are requiring ever higher credit scores, larger loan down payments, and more stringent income verification checks.

September 15, 2008

Sunday, September 14th is already being called Black Sunday for Wall Street as troubled financial giants Lehman Brothers, Merrill Lynch and AIG were all desperately seeking lifelines for survival as frenzied behind-close-doors meetings happened around the clock. And today might well become Black Monday if the cloud of the current financial crisis does not lift.

U.S. financial stocks and markets are getting battered unmercifully today as worried investors react to the uncertainty and instability of the U.S. financial system happenings.

September 11, 2008

Presidential election years are typically good for stocks despite which party wins the Oval Office. There are a few interesting barometers of what might happen in November in looking at history and the statistics of what has happened in the past during election years. A few of them are correct a fairly high percentage of the time.

One indication that is pretty reliable is the movements of the stock market in the 3 months leading up to the election. An up market during the 3 months leading up to the election typically leads to the incumbent party winning the election. A down market during the 3 months leading up to the election generally sees the challenger to the incumbent as the winner.

September 8, 2008

The cyclical patterns of the stock market predictably create the “summer doldrums,” where trading volume diminishes in the warmer months, as traders take vacations, enjoy the beach, and spend time with their kids. We like to call it Disneyland season.

Now that summer is over, the kids are back in school and the long vacations now just seem like a fading memory, does this mean increased stock market volume is just around the trading corner? Does the saying, “sell in May and buy in November” still hold true?

September 8, 2008  

Wind and solar energy stocks are on the rise on Wall Street. Oil’s dramatic rise in the first half of 2008 was a wake-up call as to the need and the potential of alternative energy sources. Historically the problem with solar and wind as alternative energy sources was that oil was so cheap it was not cost effective to pump lots of money into alternative energy research and production plants. As the world economies grow accustomed to oil’s triple digit prices, the investment in wind and solar energy research and production becomes more practical. And over time, the increasing efficiency of wind turbines and solar panel technologies also makes those technologies more attractive.

September 7, 2008

The price of oil has skyrocketed in 2008 and even back into 2007. Considering that oil prices are pegged to the dollar, the fluctuating value of the US dollar has played a significant role in oil prices. When the US dollar depreciates, international oil producers – who all sell their barrels in US dollars – see their profits suffer from the currency conversion. Subsequently, to offset this reduction, oil producers inflate oil prices accordingly – which is for the most part what we have witnessed in 2008. There more to oil prices than just the strength or weakness of the dollar, but they do correlate to a great extent.