Wednesday, January 25, 2012

Scenario 1: How 2012 Could Play Out Well for the Market

This is my musing on how the world might play out in 2012 with respect to the financial markets.  I'll put forth other scenarios in the coming days.  The US economy makes a slight recovery, with lower unemployment and some growth.  People take this as a sign that we are moving into a real recovery.  President Obama gets reelected and manages to inspire Americans again.  The debt crisis in Europe gets a temporary fix.  Europe's economy is stagnant but not awful.  China moves sideways in terms of growth.  Investors begin to forget about the volatility of recent years and react accordingly.  They particularly fear missing out on the beginning of another run up.  The US stock indices advance 10-15%. 

Monday, January 23, 2012

MGM: How to Be Right Enough

Thought I'd revisit MGM since I recommended at a price around $9.60.  Since then it's gone up before going slightly down before going way up again to more than $13.  I felt the stock would produce a good short term return but nothing like it's done.  I made about 10% on it in a few weeks.  If I'd stayed in, I'd have made more like 40% in not much more time.  Still, given the risk of reversal in this relatively volatile stock, I'd say I was right enough.  I hope you were more right since my recommendation.

Friday, January 20, 2012

Investing Scenarios for 2012: Odds Are in Favor of a Rally

    I've been quiet for a while, doing some thinking about where markets are heading.  There are a couple of factors occupying my thoughts.  First, US corporate profits are nearing record levels.  Second, US unemployment does seem to be trending down.  Third, US equity shares outstanding have shrunk in volume significantly due to buybacks.  Fourth, interest rates will likely remain low for the foreseeable future.  Fifth, there have been recent statements from the federal government that principal writedowns will occur on as many as 1 million mortgages.  This would seem to be an ideal recipe for a massive market rally in the next year. 
    What stands in the way?  Only that the US is debt-ridden, has fixed very few or none of the problems with its financial system, and due to a dearth of marketable skills may have difficulty re-employing people in jobs that pay meaningful wages.  And Europe may still collapse.
    Only the last problem worries me in the near term.  The other problems may ultimately spell disaster but will not be meaningful in the short term.  I don't think Europe will be allowed to collapse, however.  So this analysis argues in favor of a market rally this year. 

Wednesday, January 4, 2012

MGM Again

Patience saved me on MGM, although it had me worried for a while.  Got in at $9.63 and stock was up over $11 yesterday.  Didn't get out quite that high but did well.  Hope you did, too.  I look for MGM to have continued volatility in line with economic news.  MGM does appear to have some interesting projects in Asia, however, which could help stabilize the stock.  Still, its US exposure will override this factor in the near term.