US Stock Market Searching For A New Bottom

I have been believing that the market hit its lows for the current bear market in November, the week before Thanksgiving. It now looks like the market will be testing those lows again 3 months later. Here are the current values of the major market indices and their 52 week lows:

• Dow Jones Industrials (^DJI): 7,365.67….7,226.29
• S&P 500 (^GSPC): 770.05….741.02
• Nasdaq (^IXIC): 1,441.23….1,295.48

The DJI is less than 2% above the recent low but the Nasdaq has another 10% to fall before cracking the recent low. In November, we were in the midst of all of the 4th quarter economic turmoil that is resulting the bad results we are seeing now. I think the market is reacting again to the same stimuli. With more government stimulus money coming, leading economic indicators turning positive and my favorite, the Baltic Dry Index continuing to climb, I see at least a 50% possibility of the economy turning to positive growth as early as the 2nd quarter of 2009. Too many pundits are pushing their predictions of the recovery dates further out based on news that is really from the last quarter of 2008.

With the market crapping on everything it is difficult to try to write in depth analysis of interesting stocks. Their fortunes will not turn until market sentiment does, no matter how compelling their story. So here are a few brief notes on stocks that released earnings this week:

Bladex, the Banco Latinoamerico de Exportaciones (BLX) reported earnings for the year of $1.51 per share compared to $1.98 in 2007. During the 4th quarter the bank called in aboout 20% of their outstanding loans, those that they considered the most risky. They currently have 0% non-performing loans. Bladex is in excellent financial shape and their niche of providing trade credit in Latin America has lost most of its competition. Bladex is now in a strong defensive position and is ready to resume growth when regional trade recovers. BLX historically has traded within a few percent of its book value, currently $15.77 per share.

Silver Wheaton (SLW) reported a paper loss for the 4th quarter on a $64 million non-cash write down on long term investments. Silver prices averaged less than $11 per oz. during the quarter compared to $14 in the previous quarter. Silver is again trading around $14. SLW sold 11.1 million oz. of silver in 2008, a drop of 2 million oz. from 2007 and is projecting sales of 15 to 17 million for 2009. Silver Wheaton has been in the potential is in the future quarters camp for the  2 years I have been watching the stock. Hopefully, someday that future will get here. Rising silver prices and silver sales could at some point make this a hugely profitable company. I keep the stock in this site’s portfolio because I still believe it is an excellent way to have precious metal exposure. SLW is the only stock in positive return territory for my Opportunities Portfolio, which kicked off on October 1, 2008.

Note: SLW and BLX are components of this site’s Opportunities Portfolio. I also hold a personal small position in SLW.

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