What is Goldman Sachs (GS) up to?

Goldman Sachs (GS) has been stressing that they are doing great and they don't have any huge write-downs to report. It's very difficult for me to believe this. When all these financial institutions are reporting nightmarish write-downs, how can everything be hunky-dory with GS? The worse part is that investors actually believe that and GS was up as much as $221 today, finally settling down to $214.71 (up by 1.6%).

So what is going to happen when GS reports their earnings sometime in December? What if they come out and say, 'Oops! We made a calculation error'. Is the market prepared for the worse? If GS does come out with bad news, it will crash the market again.

These big financial institutions really need to get their act together and come out with all the bad news they have to report. What's happening right now is not good for the economy. Everyday some institution comes out and reports big write-downs and the market goes in a frenzy. Look at what happened with E*Trade today. It is down 60% today after reporting worse write-downs in the fourth quarter. To make matters worse, Citigroup analyst said that E*Trade might go bankrupt.

If these financial institutions come out and give us a clear picture, it will be good for the market and the economy in the long run. The investors need to know the truth. Also, these institutions need to get together and come up with a long term solution to protect the economy, investors and the consumer. Hopefully, the Merrill Lynch Banking and Financial Services Investor Conference on November 13th will bring out some positives.

Big Retail Earnings Report

Starting tomorrow (Tuesday November 13th), some big retail stores report earnings. Home Depot and Walmart report tomorrow at 8:30 AM E.T. In the next few days, we will here from JC Penney, Macy's, TJ Maxx, Kohls etc. The chances that these retailers will report blowout earnings are bleak. This again is going to affect the market negatively. The DOW, NASDAQ and S&P might fall further as a result of the domino effect. Every time I feel that a bottom is forming, I am proved wrong and the market (especially NASDAQ) crashes further.

I learned a very important lesson in these 3 months of trading - always take out some profits. When I bought AAPL at $112 and $125, I should have taken out some profits at $192 or $185. I also bought RIMM at $80, $110 and $115 and never bothered to take out any profits. Not a good idea. It's very important to have an exit strategy. I argue that I saw AAPL as a $250 stock or RIMM as a $180 stock or GOOG as a $1000 stock. Great! But it is still important to take some profits.

Unfortunately, I still don't think that AAPL, GOOG, RIMM or BIDU have found their bottoms. May be the severely negative outlook of the market is affecting my thought process but there is every chance that it will still go lower before it starts sky-rocketing towards new highs. Starting November 01, NASDAQ has lost 9.61%, AAPL has lost 19.05%, RIMM has lost 17.6% and Google has lost 10.6%. It's bad that we still don't see the bottom.

But I am hopeful that we will see the bottom soon and these stocks will do well again. When a company has strong fundamentals, a few bad days do not really matter in the long run. This unpredictable market does call for long term strategies though. Playing it for the very short term can bring unpredictable and undesirable losses.

Markets in turmoil

The past few days have seen a phenomenal downturn in the markets with DOW, NASDAQ and S&P declining steadily. Ben Bernanke in his address to the Congress expressed worries about inflation and economy downturn. Other experts have also expressed varied concerns about declining economy. This hasn't helped the stock market at all.

The tech stocks are the worse hit. Apple (AAPL), Google (GOOG) and Research In Motion (RIMM) have led the tech decline. A few days ago these were the high fliers and absolutely nothing could have hampered the march of these stocks. I own all of these and I felt the same way too. But once CSCO came out with 'not so good earnings and even worse guidance', the downfall of the entire tech sector began. In a dramatic reversal of fortunes, the three strongest tech companies shed several points, sending a wave of fear among investors. Thursday turned out to be one of those worse days for stocks like AAPL, GOOG and RIMM. People were hoping that Friday would be better. Oh boy, were they in for a rude shock! Qualcomm lamented about a weak forecast and tech bellwethers plummeted further. Wachovia and Barclays Plc reignited concerns about collapsing value of debt securities and subprime loan losses, sending jitters among the investors. The huge sell-off continued and the market kept dropping, NASDAQ being hit the hardest.

So, what's going to happen in the next week or few weeks from now? Will the market rebound? Will the tech stocks recover? I wish I knew the answer to these questions. I really do. Unfortunately, the situation still looks bleak and all indicators seem to be pointing towards further market deterioration. I have a feeling that many tech stocks (RIMM, GOOG, AAPL included) have started to get oversold. Of course they will bounce back. The question is when? The market sentiment is amazingly negative and bearish. How do you explain a 1.44% drop for a company like Nvidia (NVDA) who reported awesome earnings and a brilliant guidance? If CSCO and QCOM led to the NASDAQ decline, why didn't Nvidia's earning reports help propel NASDAQ? It seems as if investors are completely ignoring positive news and literally waiting for more negative news.

Big Institutional investors and fund managers seem to be on a profit taking spree. I am hoping that we have hit the bottom for some of the tech and financial stocks or at the very least hit the bottom soon. Next week is also the Option Expiry week which might lead to a further decline, hopefully a very small decline. The tech sector needs one strong report from one of the tech leaders. Let's hope that Research in Motion can put NASDAQ in sixth gear when it reports it's earnings on December 20.


In my next post, I would like to mention the stocks I am looking at and why I think they should do well. These are just my thoughts and I consider myself a rookie investor (yeah, the blog title is just intended to make it look cool! Whizinvestors looks better than Rookieinvestors, right?!).