Member Log In | Help | Contact Us
Home Page First Month for $1 Free Investor Perks Signup Site of the Week
 

Riding Existing Positions

Paul Rabbitt
Paul Rabbitt
Rabbitt Analytics.com
Get Rabbitt's Daily Rankings for free and find the right stocks to own in this market.

We would not add new positions now and would prune issues slightly by reducing positions in stocks that have traded outside normal trends. We still favor stocks as an asset class over real estate of bonds. Bond rates rose nearly 30 basis points in recent weeks. It will take another half percent rise before bonds begin pulling capital away from stocks.

Stocks have been consolidating since gaining three percent immediately following Katrina. For the eleventh time in 15 months, again the Fed has again raised interest rates. We believe they have achieved "neutral" and may be close to stopping the pattern of steady rate hikes. With Alan Greenspan retiring in a few months, it would be plausible that he had wanted to hand the new Fed chairman a rate policy finely balanced. This would give the freedom to the new Chairman to either raise or lower rates, depending on their perception of the nation's monetary needs and risks.

At the meeting Tuesday one voting member dissented from voting to raise rates, probably weighing the slowing effect of Katrina. With estimates running $200 billion, Fed officials still look for a slight dip in the economy by year-end followed by a reconstruction-driven recovery next year. The Fed will continue watching the filter-down effect on inflation as oil prices impact manufacturing and transportation costs. Bank prime lending rates climbed to 6.75% making more expensive to borrow on floating rate loans tied to the prime.

Meanwhile, OPEC is hesitating to pump more oil, fearing global refining can't handle the additional supply. Oil prices closed below $63.

With regard to stock-picking techniques, momentum indicators have become very powerful in the past month suggesting investors should ride gainers and sell losers. relative strength has been very strong indicator. Earnings acceleration and earnings revision/surprise have been excellent performers while earnings consistency has not been profitable. This means investors want growth and are not interested in safety and stability. The shunning of high earnings consistency stocks is counter to strategists who are suggesting investors seek stable earnings companies due to the pending economic slowdown caused by Katrina. We believe it is evidence investors are looking beyond the storm damage to the rebuilding efforts.

Paul Rabbitt will be available to take your questions until Thursday, September 29. Please use the form below to submit your questions.

 
 
Name: 
eMail Address: 
Subject: 
Comments/Questions:
 
 
 
Recent Analyst Articles:
02/07/06TheStreet.com's Alan Farley - As Happy Talk Fades, Bleaker Picture Emerges
01/31/06SchaeffersResearch.com's Bernie Schaeffer - Watching the Retail Sector
01/31/06NeilGeorge.com's Neil George - How We See It
01/31/06MarketEdge.com's Tom Ventresca - Putting It All Together
01/24/06DailyTrends.com's Chris Lahiji - DailyTrends.com Small Cap Play Alert: New Frontier (NOOF)
01/24/06BigTrends.com's Price Headley - Off Shore Investing
01/24/06TheStreet.com's Steven Smith - That Tempting Volatility

Wall Street Secrets Plus Archive of Analyst Articles...