Waiting for Irene
Aug 28, 2011
Posted by Jody Eisenman | Filed under Uncategorized
As I write this in the early morning on Sunday, August 28, 2011, I am charting
the hurricane from my home in New Jersey. Southern New Jersey looks bad;
I’m hoping NY and Northern New Jersey fair better. Probably the best thing you
can do is stay indoors. Meanwhile, the markets had a good week, albeit a volatile
one. The US markets closed up almost 5%, helped somewhat by Warren Buffett’s
$5 billion investment in Bank of America. As was the case with his investment in
Goldman Sachs, Buffett is purchasing a convertible preferred issue which gives
him a strong dividend plus the ability to profit if the stock rises in value. By week’s
end, BAC stock closed at 7.76, up about 11% for the week, after trading as high
as 8.80. Naturally, this news lifted the prices of bank stocks in sympathy. The
financial sector ETF (XLF) closed at 12.77, up about 5% for the week, although it is
still down from 15.85 at the beginning of the year.
The second piece of big news last week was that Steve Jobs is stepping down
as CEO of Apple due to health reasons. Under Jobs’ tenure, Apple has created
the Mac, iPhone and iPad, and sales now exceed $100 billion. When Steve Jobs
rejoined the company in 1997, Apple was trading around $7, and had a $6 billion
market cap. On Friday, the stock closed at $383 with a market cap of $355 billion.
Finally, the markets were waiting for some guidance from Fed Chief Bernanke
on Friday. Although Bernanke did not really say anything earth shattering, he
did leave the door open for a possibility of around round of quantitative easing.
After initially selling off about 200 points, buyers jumped in and the DJIA wound
up closing up 134 points on the day. Although the VIX would up dropping, it
still closed about 35.5, well above the yearly low of around 14. I cannot see a
meaningful rally until the volatility begins to drop. Stay safe!
