Timing the Market

Much talk in the news about glimmers of improvement and the green shoots to be seen here and there. My plan for starting my future investment career was to buy 1,000 shares of our local Sterling Bank if it ever got to a dollar or below/share. And, although it did get very close to that--$1.03, I think, was the bottom so far—it did not meet my timing requirement and so I did not invest in bank shares. Alas, had I done so in early March when it got down very near a dollar, I would now have quadrupled my investment. Of course, because I was going to buy only 1,000 shares, I would have profited only $3,000. I think getting rich probably requires something more than penny stocks, $1,000, and a quixotic timing strategy. By contrast, many have recently found that losing a lot of money doesn’t require much of anything at all by way of strategy.

Sterling (and, to a lesser extent, Banner bank) continue to interest me, though. Sterling was around $9 in January, and now it is $4.33. About a month ago, it surged ahead of Citibank, and has managed to stay ahead, and everybody says that Citibank is insolvent. So the market seems to know that Sterling is better off than Citibank/Citigroup, but then that’s not saying much.

In any case, it may still be too early to give up my dreams of penny stocks. According to the academic economics blog ‘Calculated Risk’ (May 19) ‘Commercial real-estate loans’ (which are the real problem for small banks) “could generate losses of $100 billion by the end of next year at more than 900 small and midsize U.S. banks if the economy's woes deepen, according to an analysis by The Wall Street Journal. . . ..Total losses at those banks could surpass $200 billion over that period “

And today, according to the same source, “the FDIC released the Q1 Quarterly Banking Profile today. The FDIC listed 305 banks with $220.0 billion in assets as “problem” banks in Q1, up from 252 and $159.4 billion in assets in Q4.” That’s 305 banks out of the ‘900 small and midsize U.S. banks.’ And to add to Sterling Financial’s woes: the Fitch Rating Service downgraded the corporation ten days ago: Outlook, Negative.

Those green shoots now…where were they spotted?