By Clyde Noel
Stock Report
Last June the Dow lost 400 points. Look for the same this year. Anyone who’s not already in the stock market or is squeamish about risk should stay out.
Each day brings another story about a company playing around with its books to make its business appear better than it is, and investors are becoming increasingly disillusioned.
People feel more comfortable keeping their money in cash making less than 2 percent, than losing 10 to 20 percent in the market. There is no place to hide, with the constant back-and-forth action the last couple of months, and the stagnant summer months are now facing us.
Last week the Dow Jones industrials slipped 179 points or 1.8 percent. The tech-driven Nasdaq index lost 45.7 points or 2.7 percent, and the Town Crier index lost 37 points or 3.5 percent. For the year, the Town Crier index is down 11.8 percent or the equivalent of $5,920 since Jan. 1.
Two changes were recently made in the Town Crier index. Elantic Semiconductors (ENTL) was dropped when Intersil (ISIL), of Southern California, purchased Elantic for $1.4 billion. 3DO Company (THDO) was removed from the list because when a company’s stock price falls below $1 the Nasdaq ultimately delists it from the national over-the-counter list of companies.
Replacing those companies are two corporations with executives living in the Los Altos and Los Altos Hills area. Greater Bay Bancorp (GBBK), a bank holding company with 11 bank subsidiaries in the Bay Area, including Cupertino National Bank, joins the index.
Also added is Intuit Inc., a Mountain View company noted for its tax preparation and personal finance software products. The company’s principal products include Quicken, TurboTax and ProSeries.
Stocks are set to go sideways to slightly higher this week as Wall Street digests a pile of key economic data. But increasing tensions between India and Pakistan could throw a wrench in the works. The foreign situation is a psychological overhang.
There seems to be no stability in sight, and that’s why a lot of people are moving cash to the sidelines. Some of that cash is finding its way into “safe haven” investments, such as gold bullion and gold stocks, sending both soaring.
Gold stocks are now priced at $327 an ounce, and a Wall Street analyst recently placed gold at $515 an ounce by year-end. Gold stocks are often viewed as the biggest predictor of future gold prices, but keep in mind gold stocks are very volatile. I would never put more than 15 percent of cash into this sector.
Gold stocks have done very well lately. Does that suggest that maybe something negative is going to happen?
Since I don’t like tech stocks for the time being, I am high on Washington Mutual. It’s the biggest S&L in the United States and trading at eight times earnings. The reasons I like the stock are that it pays a dividend that yields more than you can get in the bank and the stock is still growing at a double-digit rate.
Noel, a seasoned investor, covers the stock market for the Town Crier.
