Time to Shore Up Your Shopping Lists

11/29/2007 12:00 am EST

Focus: MARKETS

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Season's Greetings, Investors!

Howard Gold is in London for our World Money Show. He's interviewing global gurus and gathering some great international investment ideas for you, so I'm tending the home fires for him this week.

And what a week it has been! The market's gyrations remind me of the weather here in Tennessee-if you don't like the action, just check back in an hour or two! It's only Thursday, and so far this week, we've had three days with losses of more than 200 on the Dow Jones Industrial Average and one day with a whopping 300+ point gain.

As for today, we once again have mixed results.

  • First thing this morning, the explosion in Enbridge's Canadian oil pipeline sent the price of oil up as much as $4.50 a barrel, due to the company's decision to close four of its pipelines that account for some 1.9 million barrels of oil that flows into the US each day. That's 20% of our daily imports.
  • RealtyTrac reported that foreclosure filings in October soared to 224,451, 94% over last year and 2% over September's numbers. Piling on the bad news, they also said that 309,557 homes were repossessed in the first 10 months of 2007 and the National Association of Realtors reported that inventory of homes is now at a 22-year high while existing homes sales declined for the eighth consecutive month.
  • The Labor Department announced that new applications for unemployment insurance ratcheted up sharply by a seasonally adjusted 23,000, to 352,000, the highest they've been since February.

But let's talk about the good news! The Commerce Department revealed that gross domestic product grew 4.9% from July through September-better than the government's initial 3.9% estimated growth rate. Of course, it's like a back-handed compliment because they added that growth in the October-December quarter is forecast at just 1.5%.

Consumer spending advanced 2.7% in the third quarter, a rise from the less-than-stellar 1.4% second quarter numbers, but a small beacon of light. But the better news is that from all reports (and I'm sure, no small thanks to my shopping foray!), Black Friday was a stunning success! According to ShopperTrac, retail sales for the day after Thanksgiving grew 8.3%, to $10.3 billion, much better than the 4-5% increase the company had expected.

So, some bad news and some good news. Right now, as long as it's a mixed review of tepid growth and spreading unemployment-especially if accompanied by the absence of inflationary danger-it looks like the Federal Reserve will continue to lower rates in the near-term to spur economic growth. The subprime problem still has legs and pundits continue to talk possible recession.

I'm not sure how viable that possibility is, or whether it's just a case of the media over-hyping to make news. After all, the definition of a recession is two consecutive quarters of negative growth, and the 1.5% currently forecast for fourth quarter is a far cry from negative growth. We'll see how the retail climate holds up for the holiday season.

As for the market, I'm a firm believer that volatility brings tremendous opportunities-for traders, as well as investors. But in an environment like this, it pays to be cautious in your selections.

In his bulletin this morning, Bernie Schaeffer remarked that his Investors Intelligence bullish reading fell by half a percentage point, to 47.3%, its worst reading since Labor Day. The bearish sentiment reading jumped by 2.4%, to 29.0%. But he did have a bit of positive news-23.7% of advisors polled are forecasting a market correction, down from 25.5% in last week's poll.

That's not exactly a run-away bull, so do your homework; look for companies with solid financial strength and good growth prospects that are trading at discounted levels.

Then, you can enjoy a season of real bargain-hunting!

Happy Investing,

Nancy Zambell

Comments? Please E-mail us at TopProsTopPicks@InterShow.com.

Nancy Zambell is Best of Show editor of MoneyShow.com. The opinions expressed here are her own and do not necessarily reflect the views of InterShow.

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