April 23, 2012 Comments

I sent out a newsletter yesterday with a link to a new article on how much money has to be saved and for how long, to amass one million dollars in stocks.

It feels a bit elitist to talk about getting one million in stocks. But then again we live in a world where 20-somethings are buying their first homes at a half million dollars and more in many parts of the country. That being the case any middle class person without a good pension plan who plans to stay middle class probably needs a million dollar portfolio by the time they retire. (With a good pension plan, nothing else is truly needed, but is certainly nice to have).

Walmart dropped 4.7% today to $59.54 on news that it had not only bribed officials in Mexico several years ago but (more seriously) that top management swept the matter under the rug when they learned of it.

The trading action here offers a lesson or two. 1. Once this news hit on the weekend there was no escaping it, the stock opened down about 4.8% this morning. By the time the stock opened for trading, this news was well known no one was able to sell their shares before the news spread. that’s fair. (I assume the same occurred in the oxymoronic pre-market trading (the market before the market?) but I am not sure about that.

2. This is described as investors sold off Walmart. Well sort of… except that for every share sold there was a buyer. So really investors pushed the price down. Some investors sold at around $59.50 and some bought. In the net no money was “pulled out” of Wal-Mart. Wal-Mart is worth 4.7% less than it was on Friday but the money was not “pulled out”. Rather that money (or more properly, that wealth) simply evaporated into thin air).

3. This illustrates that unexpected crap can happen at any time to any stock.

In the long run it’s unlikely this will have much impact on the value of Walmart but it could stunt it for a while.

Hopefully the Board of Directors will step up and “whack” some people. It may very well be that the CEO has to go.

In other news it was a generally down day in the markets due to concerns about Europe and world growth.

As much as doom sayers wail about the U.S. government debt and money printing, the yield on U’S. bonds was actually down today as people clamored to buy 10 year bonds at a yield of 1.96% which is below expected inflation. It makes no sense really, it just “is”. I certainly don’t think the U.S. government debt is a good thing at all, but that does not mean that the collapse of its currency is in the cards.

I added to my Bank of America position today, taking advantage of the lower price.