Tactical Maneuvers for Today's Stock Market

The markets continue to whipsaw back and forth as investors follow their emotions instead of the fundamentals that drive the market. Any hint of a debt problem in Europe, e.g. now Hungary, or a worse than expected job report (private hiring has slowed while the census has temporarily boosted employment) causes and out-sized response by investors which is more on the downside than on the upside and is exacerbated by stop loss orders and the shorts jumping on the bandwagon.

This is a sign that the market is in for a long slog growth-wise and the market will continue to jump up and down, more down than up, in panicked response to the latest scare. There is not enough strength in the U.S. economy to force an overall upward trend in the markets so it is possible that the markets in general and the DJI will continue to oscillate a few hundred points and range between 9600 and 10400 until the Global economy strengthens enough that growth will drive some of the emotion out of the markets.

This could go on until the end of the year and possibly a year or longer and smart investors could benefit by using a small portion of their portfolios to buy on the dips and sell on the peaks with stocks, ETFs, or index funds that they know and have no redemption fees with the given caveat that no one can time the market and I don't advocate that anyone do that unless it is an element of an overall investment strategy and that they use funds that they don't need in the foreseeable future. I also don't advocate taking a short position unless you really understand what you are doing and are not aghast at the moral aspects of kicking a good company when it is down.

Given the likelihood that this market will continue to seesaw back and forth for a long time, one can make a good argument for taking advantage of the oscillations as a tactical maneuver of an overall strategy to bolster the performance of your portfolio with the prospects of a market averaging 2 to 4% growth on the next few years.

Is BP a Good Buy Now?

BP stock has lost over a third of its value as it tries to cap the Gulf oil well and some investors and analysts are claiming that the price makes a good entry point for those looking to get in cheap with the added benefit of a dividend yield near 8%. BP can be hugely profitable, but be extremely cautious if you are looking to buy shares of this company.

The expense to cap oil well and pay for the cleanup and compensate seafood industry workers and others impacted by their inability to fish the Gulf will be enormous, but BP can handle those costs. They can also handle the cost to litigate any civil and criminal lawsuits and pay damages if they are found liable. The greater danger is in the societal and political implications and ultimately the cost impact of being branded an evil-doer as Dubya would say.

Several congressmen have already said that it is incomprehensible that BP continue to pay a dividend until the depth of their liability is known and the gulf tragedy continues. There are calls for Tony Hayward, their CEO, to resign and that BP should be broken up and sold.

BP may in fact be a good buy, but a smart investor will wait until the picture becomes clearer before making a bet on BP.