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Economy

Dow 5,000?

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I remember years ago (in dot com era) there is a book named Dow 36,000. Obviously that predication was a laughing stock becaue Dow crashed in year 2000. No I am not trying to make a fool of myself, my title Dow 5,000 is merely to reflect today the Dow and S&P dropped to 12 year low again (source: bloomberg).

Seriously, I think as Citi (NYSE: C) got partially nationalized, whether the US gov wanted to admit or not, at the same time the 4Q 2008 GDP in the US dropped more than 6% year over year, the downside will be more limited compared to upside, if we look at long term (I mean at least 5 to 10 years). I am not trying to make a fool of myself predicting when is the exact bottom, maybe 2009, maybe 2010, or even 2011, who knows? The situation is still pretty bad, considering BoA (NYSE: BAC) is still not nationalized while trading under $4, the unemployment rate in California exceeded 10%, GE finally cut the dividend (how about Wells Fargo, time to forgo the dividend?)…China’s stimulus plan, while bold, appears not getting much traciton considering after all, China is NOT decoupled with the rest of the world.

For the time being, I am thinking about dividend paying stock (not the JPM or GE type, who cannot make the dividend, the ones can keep paying dividend), with strong long term fundamentals, if I have some cash. Also, food/staples is probably the only safe place, if things really really go bad. Time to shop at Wal-mart (NYSE: WMT), maybe?

Tomorrow, the Oracle of Omaha, Mr. Buffett is going to release his annual letter to shareholders, expect a rough ride. I will tight my seat belt.

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