Will the Market Sun Ever Shine Again?

Trouble ususally comes in pairs but in the stock market it seems to come in series of waves, unrelenting. Most of the decline in markets all around the world, even Canada is getting it this week, is due to one sector. Once assumed a value proposition; the banks, insurance companies and other dividend paying stocks and preferred shares are now market's whipping boys. They are all down across the board because of the housing, then asset back paper, problems in US, then UK, then Europe and even Canadian banks.

I am positive that when the banks do turn around, today will look like the best opportunity to have bought them in decades. The problem is that’s what I thought back in October of last year and was simply wrong. So in this sector, I am not adding any new money but keeping my position as I do remember back in 1994 when Orange County, California almost folded for a derivative problem taking a write off of nearly 5 Billion only to find out two years later, that had they the patience, they would have recovered and made a good return on their money. Today, while the asset value of these financial securities are down, the income they provide continues to flow in at 5% to 6% rate compared to 3% from govt of Canada bonds.

The next strategy I am embarking on now is to slowly build positions in great US companies like Caterpillar which is down to $72 again, Apple, RIM, Intel, Visa just to name a few. I want to be careful though as emotions can get pretty intense and these can go down even more.

I think the bleeding may have already stopped but not 100% sure and if the other biggest problem of $150 oil gives us a breather, we could be back in the black in a flash.