Fasten your seat belts, the market slide isn't over yet. More questionable corporate earnings are expected this week and markets will be closed Friday to observe Good Friday. Anything can happen.
The battle to recover lost ground ended abruptly last Friday when a new set of poor earnings reports were issued, a weak unemployment report surfaced, and PG&E filed for Chapter 11.
With the first quarter over, the Nasdaq lost a stunning 25.5 percent for its worst showing ever. The Dow lost 9.3 percent, so enter the "Colossal Bear Market of 2000-2001." The Dow Jones bounced off 9,700 three times last week, and any more bad news could provide the next leg of decline. Expect another several hundred points at risk for the Dow and the Nasdaq.
At the end of the first quarter, the Town Crier Stock index was down 22.47 percent with many high flyers achieving two-year lows.
By the end of the first quarter, Agilent was down 49.22 percent. Other downers were: BEA Systems, -57.84 percent; Cisco, -64.37 percent; Intel, -21.39 percent; Network Appliance, -73.81 percent; Rambus, -51.43 percent; Rational Software, -58.91 percent; Sun Microsystems, -49.28 percent and Yahoo, -50.73 percent.
Last week, the government reported the largest decline in nonfarm payrolls since the recession in 1991. That report may indicate the suggested economic recovery many are hoping for later in the year may not materialize quite as quickly as investors hope.
Currently, we are in a mild recession and the chances of a deeper recession are closer than we realize. Recent problems with bankrupt Pacific Gas & Electric, rumors Lucent is going broke and Motorola's advanced economic problems indicate there could be a credit problem on the horizon.
During these trying times, it is difficult to be a successful investor. In my opinion, it requires professional help.
Stay with value oriented stocks. Some of the high-tech large caps are beginning to show value. Stay in a cash position because, for the next month, we will hear about more negative earnings surprises that can provide some excellent value stocks for nibbling.
The stock market is the lead indicator telling when the economy will make its U-turn to better times. The market anticipates that by 3-6 months and we are already into that scenario several months.
Short term advice is: Diversify, but stay invested. Renew focus on price/earnings levels. The best protection in the marketplace today is to have a low price to earnings ratio and a low price to book value of any stock you are looking at to invest.
Noel, a seasoned investor, covers the stock market for the Town Crier.