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Posts Tagged ‘Citigroup’

In earlier posts, I talked about the signficance of the S&P 500 staying above the price level of 741.  Incidentally, if you have not read Thursday’s post yet, please do so.  This will help you understand the meanings behind price levels.   The S&P 500 has been as low as 734 this morning which should be a stern warning to investors.

As I write, the S&P 500 has managed to rise back above 741.  Where the market finishes at the end of the day is critical for three reasons.  First, it would be a big negative if the market finished the day below 741.  Every professional money manager in the free world is watching that level.  So, that in itself could cause a great deal of future selling.  

Second, today is the last day of the month.  We would be closing at a month on a very negative note. 

Finally, investors will be receiving more bad news when they go to their mailboxes in March.  This should create more selling as the small investors starts to throw in the towel and yell surrender.

The market is reacting to a decline in growth (Gross Domestic Product or GDP) of -6.2% for the fourth quarter announced this morning.  That was much worse than expected.  It was the biggest decline in growth since 1982.  The report also showed the largest drop in consumer spending in 28 years.  The bigger problem is that although the fourth quarter was very negative, the first quarter of this year looks like it could be even worse.

The Government also announced that they were increasing their control (read:Nationalization) of Citigroup to 36%.  So, we should see some real fireworks today with the end result anyone’s guess.  If the stock market were to end on a positive note, that would be short-term bullish (postive) for the market. 

On an interesting note, the S&P 500 did close below 755 yesterday (see Thursday’s post).  I noted that was a critical price level.  That ended up being a warning that the stock market is about to fall apart again. 

Check back at the end of the day for another post.

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Today on Prudent Money, I talked about how extremely important it was to reduce your risk when it comes to your investments.  You can listen here for the podcast.  I also didn’t even get to remotely cover the topic today as I would have liked.  So, I am working on a special paper on the subject which will go out this week in the Prudent Money Newsletter. 

Make sure that you sign up for the newsletter so that you will receive it in your inbox.

I want to stress that making sure you understand your risk in this environment is extremely important.  Unfortunately, the mutual fund industry scares you into believing that you should never change your investments and definately never sell stocks because you might miss out.  I want to make sure that you are looking at this the right way and not the way that the financial services industry wants you to view it (which makes them the most money).

The problems in this economy and financial markets are many and they run deep.  That is still the case after the Government has thrown billions of dollars of our money at the problem.  The problem is that the crisis just doesn’t go away.  AIG announced today that they will report a loss of $60 billion for LAST QUARTER.  They will need another $40 billion or so.  How about we continue to pump more of our money into a horrible business model?  After all, we are going to continue to keep propping up the car industry.

Finally, we are now proud owners of 40 to 50% of  Citigroup.  Throwing even more taxpayer money at this problem will probably not make this problem go away.

That was just Monday’s news!

So, we are not in just a normal cycle and you shouldn’t view your investments as if we are experiencing normal risk.

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