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- Sell all shares of Bebe Stores (BEBE, news, msgs) and Las Vegas Sands (LVS, news, msgs) at today's close.
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Though it was surprising to see General Electric (GE, news, msgs) miss its earnings estimate, it's not at all surprising that the market is down on earnings concerns. We are now beginning what is apt to be a painful and relatively long recession. Businesses across the country aren't optimistic about their immediate futures and have very little confidence about the long-term view.
Consequently, more companies will fall short of the consensus view than normal, and an even higher number will strike a cautionary tone about the next two quarters.
Given that earnings drive the market over the long haul, this isn't very good news. Aside from energy, agriculture and perhaps railroads, it's difficult to find any sectors that are thriving. Slower earnings growth means compressed valuations, which is just another way of saying lower stock prices.
Some groups, particularly the financials, have been beaten down so hard that it's hard to imagine the news getting much worse. As such, bargains can be had here if you are willing to ride out the short-term volatility.
Most retail stocks have also taken it on the chin over the past six to nine months, but with unemployment levels rising and gas prices climbing, there's just no reason to rush into this group and do much buying. Are there some good long-term values? You bet. However, there's no sign of a bottom, so those values are apt to get even better.
All in all, investors should remain very skeptical of rallies. The macro picture is still rather ugly -- slowing earnings growth, rising crude prices, decelerating income levels, escalating unemployment, a falling dollar -- with no real signs of a makeover anytime soon.
With earnings dominating the investment scene for at least another couple of weeks, I'm going to move more money into cash by selling all my Bebe Stores (BEBE, news, msgs) shares and all of my Las Vegas Sands (LVS, news, msgs) shares at today's close.
I'll look to buy again in a week or two with financials my primary target.
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