Best Bets in a Falling US Market

Which stock are you going to buy in these bad times, if you happened to stay in the United States? Probably, nothing. But isn't that being foolish, being scared of the dips in the markets. Dips are good because they cleanse the system. The only problem, this time around, is that we don't know which sectors are well insulated. Automobiles are in the lurch and financial services, along with insurance and real estate, are to be avoided. That doesn't leave us much room. Pharma stocks are uncertain right now but they wouldn't be a bad bet in the long run.

Today, I would like to speak about a company that has never failed to amaze me. I am sure all of you have heard about it. We are talking about the great Warren Buffett's company, Berkshire Hathaway and about its Class A stock, which is awfully expensive to buy.

You can track the stock here at the AOL Finance website. The current market price is $120,400, so, if you had the money, you could make a purchase. The stock has taken a beating because of the broader market trends and I find it a pretty defensive stock in these market conditions.

(This post does not purport to give advice in the stock markets and constitutes the personal views of the author.)

Only Good News in Stock Market Gloom

The only good news in the present stock market gloom is the fall in oil prices. Oil is selling a bit under $100 per barrel. It has really taken a hit from its highs of $140 odd per barrel. If we had a spike in oil price, even if it were a speculative one, or if we had any other oil related crisis the world over, it would send the financial markets in a real tailspin.

There is real fear on Wall Street. And most companies believe that they might be the next after the fall of Lehmann Brothers. So, the United States government, along with its friends in the OPEC, should ensure stability, or even better a fall, in oil prices for the next week or two till the present crisis subsides. One also hopes that Wall Street does not come up with further gloomy news.

Collapse in Stock Markets

There is a major fall in the stock markets. Wall Stress has been badly bruised. Another one of the venerable financial firms has collapsed. Lehman Brothers is no more and it had been there for the last 158 years. And add to this, another bit, Merrill Lynch has decided to sell itself to Bank of America. And AIG, American International Group, which offered Tata-AIG insurance in India, is trying to keep afloat.

This wave of collapses some after an earlier wave, where we had Bear Stearns being sold off for a pittance. And Citi taking in a big write-down. We also had Fannie and Freddie in deep waters.

The Indian markets are ruling about 4.5% down at the moment. Interestingly, there is nothing which is so serious with India that it should be fall. So, this is actually sentimental. Yes, when the US sneezes, the world catches a cough.

It is undoubtedly shocking and very terrifying for anyone who is into the financial markets right now. But there isn't much room for real panic for the people in the Indian stock markets. In fact, I would suggest my NRI friends and other foreign nationals to seek avenues for investment in the Indian markets.

There is good and real qualitative money to be made from the Indian markets at this juncture. The only important thing to keep in mind is to adopt an intelligent approach.

Stock Picking Strategies: Cherry Picking

There are a number of stock picking strategies. One of them is known as cherry picking. The idea of cherry picking is to buy those stocks which are available at rock bottom prices or which are going through bad times due to various reasons. Cherry picking is a sure short strategy but something that requires a lot of patience from the investor. It is quite possible for the investor to lose faith and exit quickly, which would either result in a loss or in minimal profits.

So, how do you pick the cherries? If you were in the US, should you buy General Motors (GM)? I'm a member of Social Picks, the social networking site on stocks that Reuters runs. I am upbeat on General Motors but a number of other investors feel that it is an absolutely wrong and foolhardy choice. But wait a bit... GM is a pretty old company, which is going through really bad times. There are fears that the company could fold up. The stock price is really down. But does it mean that the company would file for bankruptcy protection? Not really.

The company is going through what are known as classic recessionary conditions. Accumulating such a stock in small and regular quantities is not a very bad idea. It has its risks and it requires a high degree of patience on part of the investor. But it also has the potential of creating decent profits. The only risk with a company like GM is if it were to file for bankruptcy or were to be bundled out for a cheap price, like Bear Stearns. Unless that happens, any worse case scenarios aren't so bad. The company could recover from high oil prices and falling sales. The United States could recover from the recession. If GM performs very badly, it could be taken over by another foreign company, which might as well have a positive effect on stock price.

So, if you think logically, cherry picking isn't such a bad idea.

Fall in Dow Jones

The Dow Jones has fallen again. Right now, at 3.17 pm, it is down 203 points or 1.75%, which is considered a pretty steep fall. So, we need to wait for Nikkei to open next morning and see how Japan reacts and then how Hang Seng reacts in Hong Kong. If they are depressed too, then we can expect the Indian markets to witness a fall.

I know oil has risen a bit and there is news that Iran has offered to launch satellites of Muslim countries. Iran has already claimed that it has test fired a new rocket capable of carrying a satellite into orbit. The story can be read at the New York Times. I still don't know if there is some US economy data that has also contributed to the fall.

Let us wait and watch.

Further Fall in Indian Stock Markets

We have had two interesting developments on June 11, 2008. The first was the hike in the repo rate by the RBI and the second is the fall in Dow Jones by 200 points and a possible fear that oil might see another sudden spurt.

These are two interesting triggers for a fall in the markets. On June 11, 2008, the Bombay Stock Exchange rose 296 points to close at 15185.32. I expect the entire day's gain to be completely erased when the markets close on June 12 and most probably we should witness a 450-500 point fall towards the close. But the markets can be very volatile and how they behave, from 9.55 am when they open to 3.30 pm when they close, is any body's guess. I suspect unless the government comes in with some statements or announcements or unless the Asian and European take a breather, we are in for a good fall tomorrow.

It is already 3.30 am and we have another 6 1/2 hours for the markets to open. These falls are the best times to buy great shares at very cheap prices.