What a Week: Devaluing Corporate America

Our country is under attack, not by terrorists or a foreign army, but by foreigners, after all, who own most of our debt and a lot of the very same stocks they sold this week.

Corporate America took a nearly 5% devaluation in the course of trading this week. It wasn't a happy sight, nor was the close of trading today, with all three major indices closing at - or very close to - their lows. Such a close does not bode well for Monday.

Assessing the damage, Friday's numbers:
Dow: 12,114.10 -120.24; NASDAQ: 2,368.00 -36.21; S&P 500: 1,387.17 -16.00

And for the week:
Dow: -533.38 (-4.22%); NASDAQ: -147.1 (-5.83%); S&P 500: -64.02 (-4.41%)

What's surprising (at least to me) is the extent of the selling on the NASDAQ. I'd assumed that since the NASDAQ had not recovered from 2000 as well as the other indices, that it would be less prone to massive meltdowns, but the numbers don't lie: techs took a beating this week, nearly half again as much in percentage losses of the other major exchanges.

I can't put my finger on just what it is, but making the NASDAQ the whipping boy in this downtown doesn't exactly add up. Perhaps the market - or some entity acting as a proxy for the market - is trying to make the case that stocks on the junior circuit just aren't as stable and capable of handling bad news, that they are overvalued to an exaggerated degree, or that the NASDAQ is an inherently unsafe haven for investment money.

Call me cynical, but when 28 of the 30 Dow components show losses, as they did on Friday, I'd consider that to be a vulnerable situation. Of course, there's a degree of crossover, as some of the Dow stocks are listed on the NASDAQ, but that still doesn't account for the disparity.

Perusing the Dow components, one after another sports a p/e in the teens, dividend yield of less than 3% and a long history of positive earnings. With that in mind, perhaps there was somewhat of a flight to quality, with investors seeking safe haven in the Blue Chips. If that is indeed the case and we are in the initial stages of a serious correction, I may be out ahead of myself. Over the next 2-4 weeks, we should see the Dow - and the S&P - running a little colder than the NASDAQ. Eventually, bargains will emerge in the beaten down techs as the downtrend lengthens and broadens.

At some point - probably mid-to-late April - we will hear the term shooting the generals at which point I would suggest buying unduly depressed NASDAQ stocks with gusto. The aforementioned term comes from military parlance, and envisions the end-point of a war, when the well-protected leaders are finally rousted and dispatched. So it may be with the Dow stocks which look safe for now, but will eventually capitulate near the end of the correction.

The commodity markets also deserve a glance. Oil was off 36 cents to close at $61.64. I'd like to say that the price of crude has topped or is capped around $62-64, but that would be nothing more than wishful thinking. The charts show that oil isn't about to rise dramatically any time soon unless there is a politically-unstabilizing event or more outright manipulation of the price. With heavy driving months of Spring and Summer approaching, the price is expected to rise, but supply-demand dynamics and a slowing economy may derail such a movement. We can only hope that the charts, which indicate a retracement back into the 50s in the cards, are more prescient than the news media and crude hucksters who preach "driving season" economics.

Gold got slammed again, down 21.00/oz. to 644.10. Silver tagged along again, failing from its breakout at 14.35. Today, the price of silver slumped 0.69 to close at 12.96. Safe haven, my foot! You'd be better off stuffing mattresses.