Deal or No-Deal?

By Jim Farrish | September 26, 2008 | 9:00 AM | 0 Comments

Maybe we should send Howie Mandel to Washington Mutual (NYSE: WM) to head up the negotiations on this package. It would we easier and we could add 5 – $750 billion prizes to the board. The agreement in principle that was announced yesterday afternoon seems to have no principle. The Republicans have decided there has to be a better method than socialism to deal with the current issues facing the financial markets. The rumors are flying everywhere on what if anything will be agreed upon. The only agreement so far it seems is there needs to be an agreement. Wow, these guys are good, maybe the Washington Mutual announcement gave them a clue.

There is a new Republican plan that is suppose to shift some of the burden of responsibility to the financial markets versus the taxpayers. Novel idea! One proposal calls for a mortgage backed security insurance fund. The details of which would provide temporary tax breaks freeing up capital, suspending dividends, and easing the mark-to-the-market rules. That would put some of the burden on the companies as well as the taxpayer. Shared resources. Whatever the end solution is, all this talk has made the markets very nervous.

The futures are down on the Washington Mutual news and RIMM's (NSDQ: RIMM) earning miss. Add in the lack of news from Washington and it could be another ugly day for the markets. The credit markets are freezing up again and the uncertainty is not helping. My focus remains on preservation of principle. I continue to hold large cash positions, waiting patiently for the opportunities that will result on the other side of this mess.

Sectors I continue to dig around in and like are energy, healthcare, and housing. Energy seems to have found a temporary bottom. Healthcare is a defensive move to the current market environment and housing has momentum on the belief things are going to get better. IYE (NYSE: IYE), IYH (NYSE: IYH) and XHB (NYSE: XHB) are three ETFs that represent the broad sectors.

Digging into the energy sector some stocks moving higher are TransOcean (NYSE: RIG) and Tesoro (NYSE: TSO) both moving to the upside showing some short term strength. Refineries, Valero Energy (NYSE: VLO) and Sunoco (NYSE: SUN) are on my list to watch as well. Healthcare, American Medical Systems (NSDQ: AMMD) and Conmed (NSDQ: CNMD) are showing some promise and continued uptrend. Homebuilders the ETF offers the best play to keep it diversified. But, I do like Toll Brothers (NYSE: TOL) and Meritage Homes (NYSE: MTR).

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