Warren Buffett and Jim Cramer Speak out on 2008 Stock Market !!
THE Gurus of the stock market world include Warren Buffett, Jim Cramer, Carl Icahn and Jim Rogers. The lesser known gurus such as Alexander Green (Oxford Club), Bill Bonner (The Daily Reckoning) and Stephen Leeb (The Complete Investor) are all pretty much saying the same thing about the stock market in 2008. As oil pricing per barrel hits $100 and
gold soars to $860 per ounce on the futures markets, there is a general cause for caution and concern. The news on the first trading day of the year was not a bull's dream.
The Institute for Supply Management's report that its manufacturing index fell to 47.7 percent for December from 50.8 percent in November raised concerns that the economy could be slowing at a quicker pace than some investors had estimated. The reading below 50 signals economic contraction, whereas readings over 50 indicate expansion.
Analysts polled by Thomson/IFR had anticipated that manufacturing would expand modestly in December.The economic reading and rising oil prices were unwelcome for investors wading into the first trading session of 2008 and indicated the concerns that weighed on stocks in the second half of 2007 will for now persist.
"It certainly is a soft number and the declines in production and new orders are eye-catching," said Alan Levenson, chief economist at T. Rowe Price Associates Inc. "Overall, the ISM has generally been a decent guide for the economy. This is a sharp decline in one month."
Stocks failed to gain momentum after an initial bounce after minutes from the Federal Reserve's last meeting. Central bankers, who voted to raise interest rates a quarter percentage point, called the economic outlook "unusually uncertain." While that strengthened the case for lower rates, it also confirmed some of the market's worst fears about the economy.
That is what Buffett and Cramer are saying as well. The financial and credit markets are unusually shaky, and the problems facing the housing sector, the mortgage industry and consumer spending are casting a pall of gloom over the many positives that the US economy has to offer.
Buffett, Ichan, Cramer and T.Boone Pickens always "vote with their wallets" and they are buyers. But they know this is a stock-pickers market. "We cannot say with certainty what most averages will do in 2008. Our guess is that the Fed will do what it must to support the economy. As long as the economy does not enter a recession, we are safe from a bear market. Instead, we expect stocks will remain in a trading range, flirting with all-time highs, but never experiencing a broad-based rally. Inflation will prevent a bull market from arising" said one of the gurus.
In a non-verbal way and verbally, Buffett and Cramer are saying "choose your stocks very carefully". They say they are looking for value, with international money to be made, and themes that can withstand a downturn in the economy. That is why they like companies that have similar profiles to Trinity Industries (NYSE:TRN) and Yamana Gold (NYSE:AUY).
As the stock market starts the new year on a sour note, they are looking for bargains, takeover themes like Alcoa (NYSE:AA) and Steel Dynamics (Nasdaq:STLD). The gurus know that the Fed can't afford to be indecisive at such a critical time like the monetary crisis that the western world finds itself in right now. And they know that inflation is upon us and can keep the bull market from going forward in a robust fashion.
Bottom line: Do like Buffett and Cramer has often preached with enthusiasm. The first rule of investing is "DON'T LOOSE MONEY" and if there are no screaming bargains and virutual sure-fire winners, then just sit on your hands and do nothing. Cramer said it well, "in times like these I'd rather see you with too much cash than not enough".
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Dan A.
18th January 2008, 12:36 AM
Warren Buffett and Jim Cramer Speak out on 2008 Stock Market !!
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