Tough start for 2008

The new year got off to a rough start in the stock market in the last three days, just about every stock sold off. Banks were weak & REITs had a major sell off. However Treasury bonds had a major rally as yields fell 40 points on substantially higher bond prices. Junk bond funds found nibblers, they inched up with yields 7 points above the 3.85% Treasury rate tempting bargain hunters.

Meanwhile, regular stocks sold off. Many in the S&P Dividend Aristocrat list saw significant selling. Even MLPs which have been strong in recent days slipped back on Fri.

Worries about an economic recession are key behind the decline. The next FED meeting is at the end of Jan when another rate cut is widely expected, the betting is whether it will be 25 or 50 basis points. Even if there is an early rate cut, the effect may only be temporary. Fundamentals remain: credit crunch, sub prime loan mess, sluggish retail sales, the worst housing market in years, not to mention the weak dollar. The time when stock prices are declining should be used for homework, uncovering hidden values in stocks. Many in the groups followed here will survive & do well in a subsequent recovery. Meanwhile, another friend, Blanca, has a good idea - get a good night's sleep every night.