Investments lost? Just follow Wall Street to Pennsylvania Avenue
Today's Financial News - Posted February 25, 2009
The action on Wall Street is nauseating. The more Washington acts, the more Wall Street drops. The folks with stomachs strong enough to keep them in the market are looking more like gamblers than investors. They are quickly realizing all roads lead to Washington.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): The only thing keeping Wall Street from packing up shop and moving to Washington is the fact it can’t find a buyer for the buildings it occupies. Thanks to our elected officials, investors are forced to spend more time reading the political pages than the business section, and that means Wall Street leads directly to Pennsylvania Avenue.
Lately, the equities market has little energy or motivation to move until Washington opens its mouth. When our leaders talk, all bets are off.
Geithner sent the markets crashing. Bernanke sent them soaring. And today, Obama sent them right back down. The more they meddle with the economy, the stronger the reactions and the worse the addiction.
Anybody have any duct tape?
It is an utter mess on Wall Street. Political uncertainty has created financial uncertainty and we are all paying for it, whether it is through higher taxes or our plunging 401(k)s. As I write, all three major indices are down by over 2.25%, getting sucked down by more bad news from the real estate sector.
But even in the midst of the decline, shares of General Motors (NYSE:GM) and Ford (NYSE:F) continue their recent upswing. GM has surged by more than 65% since crashing to a new low of just $1.52 last Friday.
What gives?
Of course, it all has to do with government intervention. Now that Obama has its Detroit review team in place, speculators believe chances of any bankruptcies are greatly decreasing by the day. Some positive gestures from Obama last night only helped to brighten the mood.
Many investors are looking at the action and wondering if this is a sustainable run or merely another government-fueled fake-out. Judging by the recent collapse of support in the equities market, my answer is Detroit has plenty more pain in front of it.
In fact, this action means we can stop considering Ford and especially GM “investment-grade” securities and toss them into the ring of “betters only” stocks like Sirius XM Satellite (NASDAQ:SIRI) and Citigroup (NYSE:C). With the exception of Sirius, which is a haven for speculators, the government has more to do with share price movement than any bit of fundamental change.
As the recession continues and our government refuses to sit on its hands, the list of stocks on the gambling list will continue to grow. If you can afford to risk a few bucks in hopes of doubling your money (and save a trip to Vegas), these investments are just fine. But if you are looking for even a hint of safety or stability, keep looking.
My recommendation continues to be shorting the major indices. The bears are not done with us yet.
Next Article: Success! Three for three on Beta plays
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