Faced with ubiquitous signs of global economic meltdown, investors are selling stocks in force. The result is broad market indexes that have been dragged down to near all-time lows. Among the hardest hit sectors are bank stocks, oil service stocks, and semiconductor stocks. Gold Mining was among rare winners, the industry group actually rose.
In even more unfortunate news however, the dragging stock market has garnered near universal acceptance that this recession is going to be longer and deeper than the consensus estimated just three months ago. In fact, investment firm Credit Suisse lowered its projected operating earnings for S&P 500 companies to $58. It had previously expected earnings closer to $70. The firm also released its overall operating earnings expectations for the S&P 500 in 2009; a 34% fall. In lowering its estimate, Credit Suisse analysts added a note of caution to the grim forecast: “We worry that while financial earnings have already seen considerable weakness, non-financial earnings have further to fall.”
Faced with such pessimism the S&P finished below the 800 ‘technical support’ level analysts have felt is critical in maintaining investor confidence. Add to that the shaken state of investor sentiment that came with news of Japan’s economy shrinking at an annualized rate of almost 13% in the latest quarter, and we can only conclude that economic news from the world over is reinforcing the notion that this recession knows no bounds and may be gaining fury.
Even in the face of promising news — as the market sank President Obama signed a $787 billion stimulus into law with a promise more could be on the horizon if needed – this grim perception is causing investors to seek cover from the storm.
Even with recent reports from credit markets indicating that the great credit freeze may finally be starting to thaw, it isn’t likely that investors will bet on nascent signs of improving credit with the housing market in turmoil.
With funds like Great Lakes Secured Fixed Income paying a 50% ROI it’s no surprise that in turbulent times like these, investors are considering their options for fixed, secured income investments instead.
After all, a fixed secured note of $32,000 at 10% APR (interest only) for a 5 year term would pay the note holder $267 per month. That’s a total of $16,000 in 60 monthly payments; a 50% ROI plus the original $32,000 investment back at the end of the term.
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