We are a week or so away from the third quarter wrapping up and
Wall Street was out with numerous upgrades this morning.
We'll get to some of those calls in a moment, but earnings
results did fuel gains in names like Oracle (
) and Darden Restaurants (
), although Oracle's report seemed fairly in-line. As for some of
the upgrades, International Paper (
) and Apple (
) rallied early, but both names closed well off their earlier
highs. McDonald's (
) shares were up following the company's latest dividend hike
announcement. Once again, we did see the markets fade late in the
session. The recent earnings warnings coming out of the transports
sector - FedEx (
), Norfolk Southern (
), may have some investors a bit wary.
The Next Flash Crash
It's not a question of if another flash crash is coming, but
just a matter of when. There has been no let up in "High Frequency
Trading", in which trading firms/hedge funds set up
technically-advanced programs to step in front of retail traders
and their trades, all in an effort to make pennies on the trades
over and over again. The thought process or defense of high
frequency traders is that they are providing liquidity to the
overall markets, until their system backfires and we see the net
I can't even imagine trading for a living these days, yet many
get lured in by the focus and attention the business media pays to
hedge fund tycoons that have made hundreds of millions from
implementing high frequency trading strategies, among other
techniques. Here's the thing, as systems evolve and strategies get
even more advanced, there will undoubtedly be winners and losers.
It's when the losers end up losing big and getting wiped out that
the market's foundation gets shaken, leading to panic and
eventually calls for hearings in Congress to find out what went
wrong and how it can be prevented from happening again.
The result of the crash doesn't hurt longer-term investors such
as dividend/income-seeking investors, as much as it could devastate
those who had attempted to sit at the table with these algorithm
scientists. The stories of life savings being lost in a trading day
or two are numerous, but the lessons are always forgotten.
Meanwhile, the financial engineers of whatever fiasco happens will
plead ignorance to the results that were never expected to happen.
You don't have to look far to see the little recourse the recent
financial down-drafts have had. Leverage remains a key concern, yet
no one bats an eye until things go terribly wrong.
It comes down to this, if one is positioned in the wrong part of
the momentum trade at the wrong time, years of gains could
disappear in the blink of an eye. For dividend investors, it could
mean a great buying opportunity in some cases, but chances are, the
pullbacks in the quality names won't last long as the run for
safety trade tends to lead most back to how investing should be
For those who want to take their seat at the table with the big
hedge fund players, be prepared for anything and everything. I
can't say it enough!
A Look to Next Week and a Weekend Preview
Looking ahead to next week, third quarter earnings will continue
to be very light, but we will get results from companies such as
), Walgreen Co. (
), and Accenture (
). The focus will also continue to be on the economic data as well
as the latest Wall Street analyst calls.
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, as well as a detailed explanation of
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