I very much echo this guy from “Investment News Update”.
Last night US Federal Reserves has cut 0.5% interest rate to 1%. This has caused USD to weaken. So what will happen?
I expect stock market to rally for the next few weeks or even months. We will also see gold, silver, oil, copper and other commodities prices going up for the next few weeks.
During this period of time many investors will think market has bottomed, and they will buy aggressively.
As this rally is mainly driven by sentiment and not fundamental, poor earnings announcement from companies will push the stock market even lower after the party is over.
My model shows that STI Index is going to bottom at around 1200. I will advise to buy and hold for long term only when STI goes to this level.
One particular stock that I had already bought is AIG. I had bought it at $1.50. This is a high risk high return stock. Fundamental of the company is in serious trouble, but I do know that the stock price will not go down to zero as US government already owns 80% of the stock.
As this is a high beta stock, it will rise much more than the general market in a rebound. I intend to take profit if the share price double or triple.
In this credit crunch, I will avoid stocks that are not generating free cashflows and are highly in debt. These stocks are candidates that may not survive in current situation.
AIG is definitely volatile. I’m liking gold and silver too, but in the long run.
What’s your take on all the bailouts? I read this morn that the price tag thus far is more in the 5 trillion range. That screams inflation to me.