Is the Bear back?

When I walked into my loft this afternoon, I turned on CNBC and I saw the Dow Jones Industrial Average was down 416 points, about 3.5%, and you know what the expression on my face was? A big smile, now you might think that is a bit of an odd reaction, considering the stocks I own were got caught in the downward spiral, but corrections are healthy, as they help to slice off the frothiness in the market and as it cleans out the overpriced shares caught in the downdraft. But the reason I was smiling was because I thought "ITS ABOUT TIME". There was too much speculative junk out there.

Now if your watching CNBC, you thought the end of the earth was near and you would have to postpone your retirement for another five years. Maybe this is the beginning of a Bear market, but I doubt it. I started looking at the stocks I like and if they were at attractive prices to buy, and most were. JP MORGAN & CHASE is one of the oldest banks in the U.S. and I think they have a great management team and they have not been affected by the Subprime lending collapse that is affecting the U.S. housing market. Only 0.1% of their mortgages were written to Subprime Customers compared to alot of the other U.S. banks, including HSBC bank which has a very large exposure. Morgan Chase has a decent yield of 2.8%, a reasonable P/E ratio of less than 13, and there loans are made to people who can afford them. So if the U.S. economy does go sour, they will hold up better than alot of other financial institutions.

Another great compnay to buy is VERIZON COMMUNICATIONS (VZ-NYSE, $36.66). This is a large U.S. telephone company that is spending billions on adding to their already extesive infrastructure that will payoff for them in spades down the road. They have a juicy 4.2% yield and a growing wireless customer base As a matter of fact, I am adding that stock tommorow to my CommonLaws portfolio tommorow.

So what directions are the U.S. markets heading now? Probably downward and they will stabilize once they find a bottom. But whatever you do don't panic, look at it as a buying opportunity, because the times to buy is when the markets are going down. If you hold good quality shares YOUR GOING TO BE FINE. Every one of my shares took a hit, but those same shares are represented by companies with strong cas flows, shareholder friendly management and were not trading at lofty prices. The market has to have a breather, its been on one of the longest positive streaks in decades and they got ahead of themselves. But borrowing costs are still cheap, central banks are not tightening money supply and the foreign central banks that have are raising rates very slowly. Also unemployment is low, and consumers are still spending. Recessions do happen, and we might have one next year, but right now things still look good and corporate profits still look strong.

So kick back, enjoy the show, pick up some good qualites companies like the ones I have recommeded in my previous blogs at cheaper prices than when I bought them at and have a big smile.

See you next month

Marko Duran
trader7230@hotmail.com