|
By Ian Wyatt, Daily Profit |
EBS | Dec 30, 2008 |
*****2008 Predictions
*****EBS and GHM
*****Oil
Two more days and we’ll put 2008 behind us. 2008 set a number of stock market records, none of them good. I came across a Business Week article highlighting some of the worst predictions for 2008. Among the gems:
*****"I expect there will be some failures. I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."—Ben Bernanke, Federal Reserve chairman, Feb. 28, 2008
Helicopter Ben missed that one by a mile. But it may not be so simple. Wall Street’s investment banks depended on faith. Once investors and account holders started pulling their money out, they were doomed. Aside from the now-obvious problems at Lehman, it wasn’t until rumors of bad debt prompted investors to pull out of certain investments that the bank’s asset ratio forced it into bankruptcy.
We can certainly excuse Ben’s optimism in that he didn’t want to start a bank run. And after-the-fact reporting has showed that the Fed was in constant contact with Wall Street’s investment banks as their leveraged businesses started unraveling.
*****"I think you’ll see (oil prices at) $150 a barrel by the end of the year"—T. Boone Pickens, June 20, 2008
By all accounts, Pickens’ whiff on his prediction of $150 a barrel oil prices cost him a billion dollars personally. Come to think of it, I haven’t heard much about the Pickens Plan for wind farms lately, either.
*****AIG (NYSE:AIG - News) "could have huge gains in the second quarter."—Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008.
The article goes on to note that AIG lost $5 billion in the 2nd quarter and another $25 billion in the 3rd quarter.
This prediction makes the analyst seem pretty out of touch. But it should go to illustrate that many analysts were completely surprised by the depths of the problems Wall Street investment banks had created. It’s probably not fair to pick on the analysts who made the wrong call, but it sure feels kind of good.
*****This one has to be my favorite, from TheStreet.com’s Jim Cramer: "No! No! No! Bear Stearns is not in trouble."—Jim Cramer, CNBC commentator, Mar. 11, 2008
5 days after Cramer said this, JP Morgan (NYSE:JPM) acquired Bear Stearns with the help of the Fed. As an aside, the fact that the Fed was involved makes me think the earlier quote I provided really was an attempt by Bernanke to calm the financial markets.
*****In the December 18th issue of Daily Profit, I advised adding stop losses for the remaining stock positions I’ve recommended here. You should have been stopped out of Questcor Pharmaceuticals (NASDAQ:QCOR) at $8.80 on December 12. The stock’s nearly back to that point, but I want to see what it does at $9. There should be a huge amount of resistance at that point.
Emergent Biosciences (NYSE:EBS) was recommended in Daily Profit on October 28 ($15) and again on November 21st ($17.50). The stop loss for is at $22. The stock was pounded for $2 a share yesterday, and there seems to be stiff resistance at $26. The next time the stock gets that high, I’ll recommend taking profits.
Graham Corp (AMEX:GHM) was officially recommended on November 21st ($7.50). The stop is currently at $10. But I think there’s a lot of upside for Graham so I’m not going to put a target on it like I did with Emergent.
According to the entry prices I have, the Graham position is up 45% and Emergent’s up between 33% and 58%. If you’ve got gains on these stocks, I’d love to hear about it.
*****Israeli Defense Minister Ehud Barak says it’s "all-out war" with Hamas militants in Palestine. Prime Minister Olmert says the Israeli offensive in Gaza in the "first stage of the operation..." Israel is calling up 2,000 military reserves to join the air raids against Hamas that have already claimed 375 lives in Palestine.
With accusations that Iran is supporting Hamas starting to fly, this situation has the potential to get ugly. It would seem reasonable for Hamas to back down. After all, Israel probably won’t, at least not without a lot of international pressure.
The conflict has sent oil prices a bit higher, but few analysts think it will last. This is how bad it’s gotten for oil prices. Even the threat of war in the Middle East can’t get prices higher. As TradeMaster strategist Benson George pointed out to me, oil prices will move temporarily on supply issues, like this conflict between Israel and Hamas. But it will take a rise in demand, or at least an end to demand destruction, to get oil prices trending higher.
| Enjoy the article you just read? Sign up for 24/7 Investor's Daily Profit Newsletter and Receive Our Profitable Insights Direct to Your Inbox. |
|
Daily Profit is your leading resource for stock market insights, useful commentary and profitable stock recommendations. And it's totally free. Every day, Ian Wyatt will discuss what's moving stock prices... and how you can profit from those trends.
What our readers are saying:
"It is a pleasure to read something by a public writer who uses his head and not just his imagination to explain things in the world."
"CHEERS and thanks for the great advice, I think you are doing a great job in tough times."
"I find your letter very interesting and up to date. Best thing is that it comes hot and live."
Get your FREE subscription now. All we need is your email address.
|
|
 Comments on this article
Add your comments
|
I think you’re dead on about the bio sciences. We’re seeing a lot of the companies in Big Pharma sniffing around for small companies with promising products under development. Most Big Pharma companies are cash rich but pipeline poor, and many of their top dollar products will go off patent over the next few years. Given how long it can take to develop a blockbuster drug, they’re finding it’s better to buy up the technology rather than develop it in-house. Not necessarily a bad play. The trick is finding the companies you think will get scooped up by Big Pharma. Any recommendations?