Market Update: Storm Ahead

I'll tell you a story that still haunts me from my days as a stock market reporter for PBS Nightly Business Report...

It was 2002. The Nasdaq bear market was still in full force. My crew and I visited a small boutique trading firm in south Florida to interview the firm's owner on how he was navigating the treacherous market.

And while my camera crew was setting up their lights and microphone, the owner related a tragic story regarding a member of his own research staff.

His young staffer had been a huge believer in the roaring late 1990s dot-com bull market, trading on his own personal account - with a lot of success, from what I was told. So when the market began weakening after March 2000, this young man saw bargain tech stocks galore, and went all-in with every last dollar he had.

After that, he was trapped with ever-widening losses. The market sagged lower and lower - through late 2000, then 2001 and into 2002.

Finally, the young man couldn't take it anymore. In despair, he drove to a motel in Naples about 2 hours away...

And killed himself.

The story above is a terrible, awful reminder of the treacherous nature of the stock market - and the despair and sadness that comes when we lose a lot of money (and feel we will never get it back).

1987 Again?

That story above is on my mind right now because we're still looking at very dangerous market conditions.

For example, the S&P 500 continues to track just like it did before the October 1987 crash. I can't really compel myself to think we'll actually have another crash - it would be like lightning hitting the same spot twice. Yet the ongoing comparison gives me chills and shouts "be cautious":

Speaking personally, and the status of the newsletter's goodBUYs portfolio...I'm mostly in cash, with a handful of short positions. I'm only "long" a few stocks.

As I was telling a subscriber friend of mine the other day, I'd rather put my cash in guaranteed 5% CDs (while we can get them at that level). Even though stocks are the better buy over the long term, there's too much risk in the short term (in my view) owning the S&P 500 and Nasdaq at current valuation levels.

Utility Selloff

Another reminder of severe stress in the markets right now is the gigantic selloff going on in the largest utility stocks.

Utilities are boring, safe (most of the time), with the most stable of business models, with regular paid dividends.

So when utility stocks begin keeling over as a group, it often signals extreme uncertainty as fund managers abandon one sector, then another, then another - finally exiting out of the most certain of all businesses (electric, gas, and water monopolies) in their haste:

I know the next question you're going to ask... if stocks are beginning to decline, isn't this a good time to start buying?

I can only tell you what my own view is...which is that I'd rather wait on the sidelines for now. These things - selloffs, corrections, bear markets - take time to unfold. There will be plenty of time for buying when the smoke clears.

Best of goodBUYs,

Jeff Yastine