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Making Sense Of The Financial System Meltdown

16 September 2008 5 Comments

I’m not going to go into a detailed analysis of the factors at play in this financial system crisis that is affecting truly the world economy. There is plenty of that on TV, on the internet, etc. I will, however, keep you updated on my actions during this time.

Currently it is my thought that until this thing shakes out further, I would stay away from most stocks. I wouldn’t necessarily be selling positions (unless they are financials), but I think the market has further to go before we should commit new money.

I mentioned months earlier that I think the Dow is heading towards 10,000. I think this is still true. If we reach those levels, I will be buying lower risk, high dividend stocks such as Philip Morris Int’l (PM) and Veolia Environment (VE). Depending on the energy outlook, I may commit more money to natural gas related stocks, although I am feeling like I’m in the minority more and more in sticking with this sector. I’m completely out of financial stocks, in fact I’m still a holder of the UltraShort Financial ETF (SKF).  If this ETF continues to spike, I will be unloading this position and buying up a strong long term stock like PM.  I have no idea when I will even consider buying a financial stock as that whole area is just way too risky.

As for what happens next, it will be interesting to see how the AIG thing plays out.  I’ve heard that if AIG falls, it will be much more devastating than the Lehman Brothers collapse as AIG has more impact throughout the market.

Either way, hang on because it’s a bumpy ride and it looks like we’re not done!

5 Comments »

  • sbf said:

    I give up.

  • Chad @ Sentient Money said:

    It would be better if they had let AIG collapse. Saving all these companies just prolongs the downturn by flatenning it out.

  • rebel said:

    It is definitely a tough market, but as always this too shall pass. The financials will bring down other good stocks which will make fore some good buys.

  • Chris said:

    Dow 10,000? Why are you such a bull? j/k good call