Wednesday, August 22, 2007

Dollars looking for a home

I voted "No" in the recent StockGeometry poll on "the top of the market". As I wrote in this article, the markets are being force-fed money that has to be invested somewhere.

New proof of this can be seen in a Tuesday article published by Reuters. To quote the article;

"Experts are reassuring investors that U.S. money market mutual funds, which have gathered about $165 billion in new assets over an eight-week period..."

and,

"Money market mutual fund assets stood at a record $2.7 trillion on August 15..."

And given that billions more dollars have been injected to to the worldwide banking system, you just have to think that some sectors of the stock market will respond positively.

Hey, Budweiser still makes a lot of money brewing beer, and they don't seem to be having any difficulty raising funds by way of a bond offering. In fact, the size of that deal was raised from 350 million to 500 million, and I don't see where any other terms were changed. And all the usual suspects were lead brokers on the deal.

Rio Tinto recently posted quarterly earnings in the billion dollar range, and I'm sure they'll keep doing so. The company is always looking for acquisitions and in April they completed a deal on an Australian coal miner. The usual suspects are no doubt "standing on the sidelines" waiting for their next deal (now if the company would do something about their website).

And just to round things out, Johnson and Johnson still makes just about every product you really need in your bathroom and they make a profit doing it.

No, these are not sexy stocks. And it could be argued that many Blue Chips have been dead money for the last couple of years, but if you're looking to own quality, with no exposure to the sub-prime problem, I would argue that you could find many, many examples just like Johnson and Johnson.

3 comments:

vincent raimonda said...

i like how your thinking right now.

pythagoruz said...

Nice post, interesting figures on the cash inflows but it isn't that surprising given the amount of capital the fed just injected. Otherwise where is the $$ coming from, and what are those investors seeing in the US economy going forward? If the fed really wants to do some good for Americans they should be buying up houses on the CA and FL real estate markets rather than bailing out big wigs on wall street that went 10x leveraged on scam mortgages.

"Money funds do not touch subprime directly," Crane said.

-Well you know how I feel about that kind of attitude.

But I like your ideas on beer, consumer staples, you know, essential industries. Those stocks should outperform. I like CVX too.

SpearDriver said...

Savings, and trade dollars. That's where this money is coming from.

Not everybody spends every dollar that comes in. My wife and I certainly don't. I keep her sane by keeping track of our monthly outlays, and automatic deductions feed our savings.

And as was seen today in the news, it turns out that the BOC is a huge player in the sub-prime debacle.

http://www.marketwatch.com/news/story/boc-shares-plunge-after-us/story.aspx?guid={5D189314-D4AC-4B72-BA56-B07075DCD6F2}&siteid=yahoomy