Some Good News Can Create A Spark

Listening to the Business News Network, I heard that we had one of the worst weeks since 1937 in the markets. Although I didnt verify the statistics. I am feeling somewhat beat up as are most investors and professionals with my afterwork workouts providing me with some sanity.

I keep telling our clients to maintain the course and hold on if they can as the biggest returns take place after the biggest declines. With each passing day, the message seems to get a little old. That being said, I see some positives based on some headlines that get put on the back pages as well as some true valuations that are staring at me right on my trading screen.

First, some of the good news. Walmart announced same store sales growth of 2.4% for the month of September showing that spending by the consumer is not totally gone. To confirm this, Costco announced their fourth quarter results showing that sales increased 16% while same store sales grew by a very impressive 9% while earnings grew by 7%.

Here in Canada, new home starts grew unexpectedly as most analysts were expecting a decline. These figures don’t indicate a depression by any stretch. Couple that with lower interest rates to encourage spending and a $700 billion bailout package that has not yet been fully utilized will inject much needed liquidity into the banking system which should encourage lending to business, individuals and bank to bank.

The bid/ask spreads on many companies are huge right now and in some cases a dollar or more rather than a couple of pennies. The yields on Real Estate Investment Trust has gone through the roof with yields in the 10% – 30% range depeding on the quality. However, some good quality REIT’s that have stock buyback programs in place are yielding 15%. You can’t tell me that the value of their Real Estate has dropped 40% in the last month from an already depressed price. 

Buying will come back in to the marketplace and people will only dream of buying shares at these valuations. Your comments or thoughts are greatly appreciated.

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