Once in a while I would like to convey some thoughts I have about the market in shorter form that by themselves aren’t long enough for their own article, but contain important information. So without further adieu, here are a few things on my mind.
Market Direction
I honestly don’t have a great feel for which way the market is heading. Gun to my head scenario? I think stocks are headed lower. I just don’t feel like the negatives are priced fully into stocks. The situation in Europe seems to be worsening with Italy being the latest problem spot. Italy has the biggest Sovereign Debt Market in Europe so this is no small fish. Our markets went down a little before complacency came back.
Debt Ceiling
The market clearly doesn’t believe this is a problem since it has barely focused its attention to it. It doesn’t seem like much progress is being made here and supposedly Obama stormed out of a meeting depending on which news outlet you believe. I think the Republican’s idea that taxes can’t be raised under any circumstances is absurd and equivalent to religious fundamentalism in its dogma. Do they not know that conservative hero Ronald Reagan even raised taxes when he had to? Whatever the case, any kind of default would be disastrous and totally preventable.
I had a nice discussion with a knowledgable market watcher who thought the risk premium built into stock prices was too low given the increasing risks all around the world. I have to agree with this position. As mentioned above, all the European troubles and our political problems are not fully discounted. A higher risk premium would mean lower valuations and lower stock prices,
Bank Woes
How can the market rally when the banks are doing so poorly? Seeing Bank Of America (BAC) dropping below $10 was eye-opening, but not unexpected either. I still wouldn’t touch that stock right now as there are still major problems over there.
On The Positive Side
I’m not all gloomy. There are many stocks that I like on an individual basis, which I will keep profiling here. I like the fact that M&A is still healthy as evidenced by Carl Icahn’s recent activity. The corporate sector is still healthy on a balance sheet basis, which is supportive for stocks. Stocks with low valuations, increasing earnings estimates, healthy balance sheets, and expanding margins will always do well.
These are some of the thoughts on my mind and I will continue to share them from time to time in this format.
Some Random Market Thoughts is an article from: 
