The Dow Jones Speaks - 4 / 2 / 2009

Feels good for a change watching the Dow go higher on bad news, doesn't it? One week ago we were still uncertain about what the Dow Jones Index moves were saying. This week though it has become clear. The speculators, the day traders, the risk takers believe a bottom has been made. They believe the total down side of the US economy for the next six months has been priced into the market. That US corporate and asset values won't go down any further, and that the risk of a deeper economic slide during the next six months is reducing. Reducing to the point that they want to begin speculating on consecutive upside days.

The recent week's Dow Jones gains are strictly sentiment moves though. These are days when any good news from the government on regulation, economic data or economic stimulus is released and regardless of its potential near term impact, it completely over runs any bad news released from corporations or the government. But sentiment moves are what market reversals are made of and over time they create momentum, renewed investor interest in the markets, and index moves to the upside.

At our economy's ground level, job losses keep advancing on a weekly basis. And while a few cheeky analysts suggest that the rate of decline is "declining", until we see 4 weeks of reduced job losses we can not be certain we have hit bottom. Job losses or gains are the only indicator of economic direction that we have been able to trust.

But for investors and investments, now is the time to get back into your favorite equity issues. Seek out the big names, the companies we know, who the speculators have beaten down equal to or below their industry competitors. Most have reasonable P / E multiples now, use that indicator alone as a relative value gauge. In this environment they will be the issues that protect your principal investment (your downside) while they continue to gain market share over their less well capitalized competition. These are easy days for value investors. Take advantage of your perspective.

Build Value Every Day.

Brad van Siclen