Harry Rady News

The middle of July was a difficult time for investors. After 8 weeks of general improvement, the market dropped 187 points in just one day of trading, the largest single day point drop since April 20. Confidence that the spring rally was for real was badly thwarted, as all the major indexes declined over 2%.

Trading in oil has been mostly keeping pace with the stock market’s ups and downs these past three months. So it was no surprise that the price of benchmark crude oil fell $1.42 in July, reaching $70.62 per barrel on the New York Mercantile Exchange. The price of crude has fallen almost 3% during just two days of trading in mid-July.
These events were not a surprise to Harry Rady of Rady Asset Management.

“The market just seems to keep driving the car into the wall and then wonders why it can’t keep driving,” Rady said.

Signs that the surge in stock prices experienced over the spring months continue. The Dow Jones fell 187 points last Monday, which is the biggest one day drop since April 20. The other major indexes also fell more than 2%.

Since there was not much trading volume, the loss is explained as due to a shortage of buyers rather than a large number of sellers, suggesting a hesitancy to get involved in the market until there is more clarity as to which way the market is actually heading.

It is clear that stocks have been rising too quickly considering the trouble our economy is still in, according to Harry Rady of Rady Asset Management.

“The market just seems to keep driving the car into the wall and then wonders why it can’t keep driving,” Rady said.

Porsche-tractor

In order for the U.S. automobile industry to compete in the global marketplace Harry Rady, of Rady Asset Management argues that there must be strict downsizing of the industry. Any products that are irrelevant in the marketplace, such as cars that are simply not selling, should no longer be produced. Instead the manufacturer should focus on producing the cars that are selling in the most cost efficient way, and revenues should be funneled to research and development so that the company can continue to compete.

When asked which car manufacturer he prefers, Rady answered that he has always been bearish on this industry and finds that while it is  a difficult question to answer, if he had to recommend any particular company, he admits to admiring the business practices of Porsche. He feels that Porsche is an excellent engineering firm, and they not only produce quality engines for  cars, but they are well diversified with a top-notch product.

In his discussion of the bailout of the American Automobile industry Harry Rady explains why it is a mistake to have politicians dictating business practices. The bailout should be strictly limited to fixing the problems in the industry and not getting muddled in other tangential enterprises like producing electric cars or rail cars or other activities that will make the process of repairing the industry more complicated. Rady believes that if a business has the right management in place and the right structure for the industry to compete, then it must be up to that company or industry to decide what the right time and the right conditions are for the development of a new product, such as electric cars.

In an interview on Fox Business Harry Rady of Rady Asset Management discusses the United States Auto Industry and the bailout by the government. Rady believes that at the moment the auto industry is “structurally flawed” with a bad relationship with their unions, their fixed costs are too high, they have too much debt, plus much more.  Harry goes on to say that any government bailout should be “laser-like” in that they should be directed at fixing the multitude of problems in the industry. If these problems could be fixed, Rady is confident that the industry could compete successfully in the global marketplace.

Listen to the full interview here:  Rady Asset Management on Fox Business Network

In order to “Make Sense of the Markets” Harry Rady of Rady Asset Management, Quincy of The Hartford;  and Jim McCaughan of Principal Global Investors all appeared on the following CNBC Video. “Preparing your portfolio for next week, asks the above mentioned experts to analyze the market trends and advice on how to proceed into the future. Watch the video and glean some of their wisdom.

Despite an over two-month long surge in prices, there was little good news to maintain the market’s upward trend of the week ending on May 23rd. Advising caution, Harry Rady of Rady Asset Management remarked,

“Everything is overpriced. A very long, protracted recession is still very much alive.”

According to an article on “BradentonHerald.com” the week began on a positive note with stocks rallying on Monday. As the week progressed however, markets began a downward slide in response to several pieces of “not-so-good’ news which were announced during the week.

The federal government expects unemployment to reach as much as 9.6 percent, a much worse prediction than previously, and Standard and Poor’s may demote the British government from their present credit rating of AAA.
Hopes were thwarted when an early market gain on Friday ended the day with a total 15 point loss for the Dow Jones industrial average. As for the gains of the week, the major indicators all finished in the black, but only just.  The Dow squeeked ahead by 0.10 percent; S & P 500 index did slightly better with a 0.47 percent rise; and the Nasdaq did the best, almost finishing up by one whole percentage point at 0.71 percent increase in value.

The 10 week rally has lifted stocks by 30 percent since their 12-year low in March. With not much good news to continue to fuel this market surge stocks have been teetering and tottering without much gain in recent days.

The upcoming economic calendar is full of data such as reports of home sales levels, orders for manufactured products and indicators of consumer confidence, which should help determine which way this market is heading for the next few weeks.

Harry Rady of Rady Asset Management discusses his apprehension concerning the stress tests that government regulators are subjecting financial institutions to during the present economic downturn that the United States is facing at the moment.
Rady’s first concern is that the regulators don’t really have the “big picture” in mind. He believes that the stress tests are too homogeneous and rely too heavily on quantitative metrics.
His other concern is that there is a built in conflict of interest between the regulators, shareholders and management. The job of the regulators is to make sure that the companies stay solvent and that the flow of capital is unobstructed. They are not doing anything to protect the interests of the shareholders.
Listen to the entire interview now.

The Stock Market continued its downward progress after six weeks of an upward climb causing investors to speculate on what to expect in the coming days.

Despite the fact that Bank of America posted large profits for the first quarter of 2009, declaring net income triple its previous quarter, there was an overall 23% slide in their stocks value. The acquisition of Merrill Lynch added more than 3 billion dollars to its bottom line, but due to net charge-offs rising and huge credit card business losses the overall picture for B of A was not positive.

Commenting on the latest market swing Harry Rady of Rady Asset Management declared:

“The bank earnings so far just seem to be smoke and mirrors and the other companies aren’t reporting quality earnings. It’s just reducing expenses and dipping into reserves.”

For a more in depth discussion please follow the link to the full article: ‘US Stocks Lower As Banking Concerns Lead To Broad Sell-Off.’

Taking some of the wind out of the sails of a 6-week market upturn, a wave of sell-offs in small capitalization stocks seems to have returned investors to the skittish mood they have been experiencing of late.

Banks seemed to have set the tone last Monday for small caps. Despite the fact that larger banks such as Bank of America have posted better-than-expected gains in earnings, smaller, regional banks, which operate differently than the larger, national banks, did not do nearly as well.

Adding to the already nervous mood of investors, the smaller banks traditionally depend more on real estate and construction loans whose sectors are suffering disproportionately in the current economic climate.

Because “charge-offs” are much higher than what had been anticipated, there will be a erosion in book value and reported earnings for the regional banks as a whole.

For further analysis you can read more in: ‘US Small Caps Close Lower on Slide for Regional Banks.’