Trading on the Wall of Worry

It would seem that rants haven’t gone out of style. I received many supportive comments as Daily Profit readers were nodding in agreement to my rant about Alan Greenspan from yesterday.
Yes, I’m still angry about the irresponsibility that led to the financial meltdown. And I tend to focus it on Greenspan because the Fed should be an independent body, and Greenspan clearly wasn’t. He was far too concerned with stock prices to the point where he couldn’t see the housing bubble or the financial machinations that accompanied it.
Of course, I’ll try and keep such rants to a minimum. But, they sure feel good. But they are backward-looking and can divert me from my mission. It seems like 5 days a week is plenty of time to cover every important item that comes up. But it’s not, really. I missed discussing yesterday’s worse-than-expected unemployment number, for instance.
*****And as you know, I nearly neglected to follow up on the Maguire Property (NYSE:MPG) recommendation I started last week. Turns out, Wednesday was the perfect day to remember. The stock traded below $1.50 a share for practically the entire day. Then yesterday, the stock took off and closed at $1.84 for a 22% gain.
I’ve been hearing and seeing more murmuring about REITs getting healthier and starting to turn the corner. Yesterday, some columnist in Kiplinger’s was recommending a shopping mall REIT as one of his top stocks for 2010.
The logic is fairly straightforward: as the economy rebounds, credit markets open up, onerous debt can be refinanced and maybe REITs will stop losing lease-holders. Of course, you have to believe that the economy is on a steady incline to health. Which brings up another point…
*****It’s one of my dark secrets, but I sometimes watch Jim Cramer’s Mad Money. I can’t watch it often because the show is such a sensory overload it leaves me feeling kind of strange for a few days. And I also have an issue with Cramer making such snap decisions on people’s investments.
But between the yelling, the sound effects and "booyah’s", Cramer made an interesting point. He asked "How much more can this market take?" We’ve seen an incredible number of secondary offerings hit the market, we’ve seen virtually no improvement in unemployment numbers, we’ve seen home prices continue to weaken, we’ve seen oil rally, we’re seeing gold rally on inflation concerns, we’ve seen sovereign wealth funds default, we’ve seen Europe slide back to the brink of recession – and still the stock market moves higher.
Talk about climbing the proverbial "Wall of Worry"…Cramer pondered what will happen when we actually get some good news. It’s a question worth considering. And I think the answer is why some investors are starting to look at REITs, and why Buffett bought a railroad stock and why Exxon-Mobil (NYSE:XOM) is trying to buy natural gas company XTO Energy (NYSE:XTO).
Incidentally, Buffett’s acquisition of Burlington Northern (NYSE:BNI) seems to have established a bottom for the Dow Transports, and may be anticipating increased use of natural gas in the future. So Exxon Mobil’s XTO Energy bid may also be putting a floor in for natural gas.
For now, though, I’ll be happy if Maguire Properties can keep climbing the Wall of Worry and make you some more money. As always, I enjoy hearing from you. My address is: [email protected].
*****This Friday my top analyst, Jason Cimpl, looks at the Russell 2000 and what lies ahead for small cap stocks. It seems after a nice run up since March the Russell 2000 has been trapped in a 70 point range since October. Jason’s seeing some break-out activity about to happen and shares his thoughts on where small caps are going over the next couple weeks and how you can profit from the momentum. To view his video CLICK HERE.

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