As we have opined in the last few months we believe the underpinnings of this market will keep the recent sell off to a minimum. Yes, it could go to and maybe beyond a bit the widely accepted 10% move downward to make it an official correction or it may not. In any case if it does go down more consider it a gift for long term investing. Again we highly suggest mega and large cap stocks. Just yesterday we made the move to invest our annual retirement contribution in the S&P 500 Vanguard Index fund, so we place our money where our mouths are going. We are still fully invested in our trading portfolio and will step up Monday to buy some opportunities this sell off has offered up.
The market is responding to a downturn in the economy right now. Europe is hurting and Japan is still lingering in nowhere land. But the American retail buyer continues to spend and with the significant move down in the cost of gasoline much of that new found money will be spent just as we move into the holiday season. That spending will also be a buoy on the market. Add in that stock buy backs and dividends continue to move forward and expect that to pick up a bit now due to the sell off and the opportunity for large cap companies to buy back stock even cheaper.
Maybe we are wrong as some pundits are saying now. The biggest bear we follow believes this is the start of a big sell off and he has been right before. But of course bears have called the last ten of two actual sell offs as they say. We believe this is a slow or no growth economy and we have it for awhile under Democratic leadership and it's high taxes and regulation. Big companies thrive and small business dies. So until something changes we continue to believe such and this sell off does nothing to change that opinion.
As the Wall Street Journal noted yesterday we are seeing lots of financial risk taking and very little economic risk taking. That again due to the issues the Obama economy has pushed on small business which is where most economic risk is taken. We would expect tomorrow, Friday, could be a roller coaster ride since many traders might prefer to be on the sidelines for the weekend and it is the October options expiration day. So keep your powder dry at least until Monday if you are buying individual stocks.
Again if you are a retirement investor follow what we said earlier and buy some mega cap index funds. If you are an individual stock buyer look around in the sell off for bargains. We still like the big insurance stocks here for the long haul as they have taken a pounding the last week and screaming buys. PRU and MET are our favorites. JPM just reported solid earnings this morning and has a low PE and looks good for the long term as well. The oils have sold off too much and BP looks good here too. Note that low gas prices are here for at least two years as Saudi Arabia is pumping big time in an effort to hurt Russia and also push back on the current US energy boom.
Other stocks we like right now are AAPL and SF. APPL has a fixed base of buyers and they are into the latest new phone run so profits are headed up. SF has sold off way too much and now just above $40 is a solid short term and long term holding. IBM has been taken to the woodshed this week as well and taking a position there could even make for short term profits. BRK.B, Berkshire Hathaway has sold off here and offers up a good entry point for long term holders.
Falling interest rates also make for investments in leveraged bond funds. We still like NNC for North Carolina investors seeking tax free income. NNC is now selling about $2 per share below net asset value.
Keep the faith and understand this is a market event and NOT completely an economy event. At least not in the sense of being a big drop in business. Until the political equation changes to be pro-growth there is money to be made in markets like this one however if you buy correctly. No jobs to be made and low interest rates hurt a lot of young and poor people, but as we continue to opine you play the hand, or market, you are given.
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