Not Buying Financials Yet

The Kelly Letter has been looking to buy financials at lows, but we have no active order in place yet. I’m waiting for a washout and a panic sell-off before buying. It’s a great turnaround sector candidate, though.

Note the specific reference to sector, not individual company names. Such a massive rearrangement of fortunes makes it hard to see who’s going to come out on top, or come out at all. Investing in the recovery of the whole group is a safer way to win.

We have placed active orders in other areas. So far, however, most of them have not filled. The market has not sold off to the next down leg that we’ve identified. Some look at that and say it’s a sign of stabilizing, others say it means the worst is yet to come.

One thing about expectations being aligned in the downward direction is that it leaves a chance for positive surprises, as we got this morning from Advanced Micro Devices, a stock that The Kelly Letter has been acquiring:

Considering the devastating two years Advanced Micro Devices Inc. has endured, investors braced themselves for more bad news in the fourth quarter after rival Intel Corp. disappointed Wall Street with lackluster results.

The slowdown they feared didn’t materialize.

Instead, Sunnyvale-based AMD managed to post a much narrower loss than analysts expected, jolting its stock on signs that AMD is driving down costs and protecting its share of the microprocessor market from an Intel onslaught.

“Obviously, they turned in a truly excellent quarter,” said JoAnne Feeney, senior research analyst with FTN Midwest Securities Corp. “They’ve continued the progress they began making a couple of quarters ago. It should assuage the fears of a lot of investors about the company’s ability to execute.”

Full story

James Cramer wrote last night, “This is one of the worst markets I have ever seen.” Ever?

We don’t have to go back too far to see one much worse. From March 2000 to September 2002, the Nasdaq lost 78%. In this current market, from October 31 to yesterday, it’s lost only 18%. The difference between the two is crystal clear on this chart.

Seems a little early for the “worst market ever” label.

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