What Can I Say? GDP No Bueno - Buffett Admits Mistakes

Buyers were out of luck before the market even opened on Friday, having to compete with some horrific GDP numbers. Although, it did look at times as though buyers were maybe going to get the market in the green (NASDAQ did go green for a while), lets be honest, at a -6.2% drop in GDP, no good news can be derived out of that. We once again, saw a pretty strong battle close to neutral grounds for a large portion of the trading day, but as has been the trend lately, bears came in with the last word during the last hour of trading. The new numbers for analysis are critical, and depending on next week's performance, we are becoming very close to some very dangerous numbers.

With the bad GDP announcement, it was no surprise to me to see us close at where we did, just over 1% on the Dow. In fact, at opening, it was much worse and I even thought of the possibility of a 3% or more down day to close the week. I was a bit surprised at the strength to bring the market back at midday, but both sides has shown their ability to be violent lately. If anything, we are in even more dangerous waters, no matter which side you're on, because there still exists the feud of technicals vs emotion. With this battle going on, a very violent rally could exist on either side, which could be bad being caught going in the wrong direction.

A critical reading from Friday is that we did indeed close the S&P under the original November 20th lows. Being as big of a move as that is, however, it is even more critical to see if this position can hold going into Monday. We did see the market reach this low Monday, only to bounce right off it the next day and rally over 3%. So, Monday acts as a very critical day for these market tests and I will be interested to see if they hold up. With the GDP numbers, consumer spending was down considerably, as was the prices of common goods. I will be very interested to see how the level of the drop in prices affects the deflationary models. We won't be able to tell for a couple weeks, but these new numbers could indeed confirm my suspicions of a near coming deflationary spiral, which could propel us into capitulation. So I will be watching that very, very closely.

Warren Buffett got a letter out to his shareholders telling them, he had made some mistakes during 2009. Didn't we all? I respect the old man for being frank with his investors and admitting to the wrong moves he made the year prior. If only there were more Buffetts out there. He speaks of his bad decision to enter into Conoco Phillips last year at such high prices. He didn't believe that energy would get killed as much as it did, but still feels oil has a lot of upside from its recent low levels. In fact, I love Conoco right now. I threw it in my IRA a couple weeks ago. COP has a Market Club report score of -100, but they have shown they are a strong company even in tough economic conditions (get your own symbol analyzed for free, all you need is a name and email, Click Here).

He also spoke of putting $244 million into Irish banks, which he felt like was cheap enough at the time. However, the value of that investment has been reduced to $27 million. As big as the mistakes may seem and even having the worst year for his company since he took over in 1965, he beats out most major indexes for performance for last year.

Buffett also feels that we should continue to experience a rough 2009 throughout the rest of the year and that economically, we should have problems for the next few years. However, he does not feel that it necessarily means in the stock market. He finishes off to say that the best days for America still lie ahead.

So, a big Monday awaits the market. Once again, no big moves for me. I wait in mostly cash until I can get some readings from the models. I just feel we are in a dangerous, volatile time where either way I position myself, whether it be long or short, I am very vulnerable to an opposite rally. So, I am just holding with my municipals, few short positions, as well as my very small long positions. Have a great weekend, Happy Trading and see you Monday.

10 comments:

  1. Anonymous Says:

    FF, do you still have shares in LVS or did your stop-loss kick in?

  2. 5U Says:

    Old guys are krazy. Remember Kapitan Kirk Keokrian with GM and Ford? There comes a time in Old Doods' lives when they care more about legacy and proving they can still get it up than rational investing decisions.

    I think Buffet wants to be remembered as a patriot. He has more than enough money. At this point he wants his legacy as the man that helped save America and not as the hedge fund whipersnappers of Wall Street that destroyed it.

    I gotta give The Buffet credit. He is a man willing to go down with the ship.

    If he wasn't so old I'd like to get a serving of some BRK.B at The Old Country Buffet. But like every great company with a charismatic leader, it is buyer beware when The Bill Gates, Jack Welsches, and Steve Jobs of the world step down.

  3. 5U Says:

    Hey FF, didn't you recently go to Vegas?

    How was the scene? Is Encore all its cracked up to be and how does XS compare to Tryst?

    Is Sunday School at the HRH still rockin?

  4. Finance Fanatic Says:

    Anon, I did indeed get out of LVS from my stop loss...before the upgrade and bump. Oh well.

    5U,
    I was expecting to see a ghost town this weekend, having us in a recession. However, it was as hopping as it ever is. I think it was due to a few big conferences and some big Nascar event. Encore is looking nice. I'm waiting for the City Center, the hotel part looks almost completed.

  5. Newbie Says:

    I'm 100% short now. No reason waiting for the market to show me any signs. The signs are in front of you everyday.

  6. Finance Fanatic Says:

    Oh and we didn't make it over to Hard Rock on Sunday, but I hear their "Rehab" pool party is what is usually rocking over there in warmer months.

    Newbie,
    I wish I had the confidence you did Newbie...I definitely would have made more the last couple of days. Good luck.

  7. GP Says:

    XS is the hottest club by far now ...

  8. 5U Says:

    Letter from Granddad (An excellent letter for children who are expecting an inheritance, as well...)

    I guess most of you have heard that 68% of the youth voted for Obama in the last election. My granddaughter called this morning to tell me she was one of them. I replied with this e-mail:

    Dear Granddaughter,

    The election of Obama comes down to this. Your grandmother and I, your mother, and other productive, wage-earning tax payers will have their taxes increased and that means less income left over. Less income means we will have to cut back on bas ic purchases, gifts and handouts that include firing the lady who cleans our house twice a month. She just lost her job. We can't afford her anymore.

    What is the economic effect of Obama's election on you personally? Over the years, your grandmother and I have given you thousands of dollars in food, housing, cash, clothing, gifts, etc. By your vote, you have chosen another family over ours for help. So in the future, if you need assistance with your rent, money for gas, tires for your car, someone to bring you lunch, etc., call 202-456-1111. That's the telephone number for the Office of the President of the United States. I'm sure Mr. Obama will be happy to send you a check from his personal or business accounts (as we have), or will leave cash in an envelope taped to his front door for you, as we have.

    It's like this. Those who vote for the President of the United States should consider what the impact of an election will be on the nation as a whole and not just be concerned with what they can get for themselves (welfare, stimulus checks, etc.). What Obama voters don't seem to realize is that the government's money comes from taxes collected from tax paying families. Raising taxes on productive people means they will have less money to
    spend on their families.

    Congratulations on your choice. For future reference, you might attempt to add up all you have received from us, your mom, Mike's parents and others and compare it to what you expect to get over the next four years from Mr. Obama. To personally congratulate Mr. Obama (and to make sure you're on the list for handouts), write to:


    The White House
    1600 Pennsylvania Ave. NW
    Washington, DC 20500

  9. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Yes warren buffett has made his share of investment mistakes.

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