SAN FRANCISCO (CNN/Money) -
If you haven't been paying attention lately you actually didn't miss much. The market rockets up on better-than-expected news. It plummets on worse-than-expected news.
What's changed? Relatively little.
This is what's known as a stock-picker's market, a time for pros with real market insight. What about the rest of us? What should we be doing? Here are three ideas.
1. Don't wait for tech. The funny thing about the rotten Intel news is that anyone was surprised. We know the PC market is slow. We knew Intel was making heavy investments for the future. We knew there was no real reason for optimism in tech. Just wishful thinking.
"When people say tech is a growth industry, that's code for saying it's GDP-insensitive," reminds one of my better sources. "Believe me, it's very GDP sensitive." Translation: Tech suffers when the economy suffers.
Along those lines, and I hate to say this, my very best tech source, the savvy analyst who warned you at $22 that Intel's shares were going to $7, says it's getting worse. "They just did a 60 percent price cut with no forecast of increased unit volume," the analyst says. "What does next year look like? The first quarter is never better than the fourth quarter. And the second quarter is almost never better than the first quarter. And these were in periods when there were a few people in Ghana who didn't have a PC on their desks."
My source's next projection: Cisco pre-announces a hugely disappointing quarter. Imagine that.
2. Don't expect miracles soon. So let's see. As CNN/Money's Justin Lahart has been chronicling so well, there's been precisely one boring day in recent memory. And that was Monday, when Mayor Bloomberg was having lunch with his pals in the Bronx and there was no earnings news. Boredom, not huge ups and huge downs, is what's required before the market begins climbing.
But generally the mantra remains the same. The economy stinks. Companies don't need more stuff. War is a huge concern. Consumer spending can't prop up the economy forever. What will make most of us with equity investments happy is a prolonged, sustained upturn in the stock market. That could take years. Years.
3. Don't run to bonds. Bonds are a good part of anyone's portfolio, especially people who need their cash sooner rather than later. But if you're disturbed by everybody suddenly turning to them, your instincts are right.
Sure, interest rates could go lower still. But not much lower. Eventually they'll rise, and that's a terrible time to be putting lots of cash into bonds because as yields rise prices plummet. You essentially missed this boat. Next time the Fed raises rates five times to cool off an overheated economy -- and it will happen -- that will be the time to begin thinking again about bonds.
Why it pays to be skeptical
Kudos to Floyd Norris of the New York Times, who wrote a presciently headlined column last Friday about TXU, the utility company embroiled in a controversy over its U.K. operations.
| Recently by Adam Lashinsky
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"A Tempting 13% Yield, but Is It Secure?" Norris asked of TXU's then 13.7 percent yield on its $2.40-per-share annual dividend. (One quibble: The headline writers should have rounded up!)
Norris quoted Erle Nye, TXU's chief executive, saying "I believe the dividend is secure. I don't know of anything today that would make me think otherwise."
Not three days later, TXU slashed its dividend to 50 cents per year. Nye, his credibility shot, blamed downgrades by credit-rating agencies for TXU's action. Now, with TXU's shares having plummeted to just over $10.88 (from $17.55 at the time of Norris's column), the yield on the dividend is about 4.6 percent. But is it secure?
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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