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Is the Bottom Near?

Posted on | September 26, 2008 |

Is there a Bull on the horizon for the stock market?

Is there a Bull on the horizon for the stock market?

I wrote a post last week called “Waiting on Buffet“. The general point of that post was that many experts have put forth the proposition that the stock market will be at or very near its bottom when two basic events happen, specifically:

  1. A big fish needs to go under.
  2. Warren Buffet needs to take an interest.

Since that time, it appears very likely that these two indicators have revealed themselves. First, with Buffet announcing his $5 Billion stake in Goldman Sachs and now with the Washington Mutual failure.

As the article at the link above notes, WaMu is the biggest bank to fail in US history. I’d say this qualifies as a “big fish”, and $5 Billion (even from Buffet) is no small interest. Could this mean we have bottomed out and the rise of a new bull is on the horizon?

Maybe, but even with these indicators met I think there is still so much fear and paralysis in the financial market that some form of Government action will still be required to kick start the financial sector again - both domestically and abroad.

Here are some articles that put the whole mess in perspective:

I am by no means a fan of expanding governmental control - especially of the financial market - but it seems likely that some form of government expansion will occur. At any rate, it certainly seems like some action on the part of the Government is needed, at least in a psychological sense to calm fears and uncertainty in the markets and for ordinary citizens to regain faith in the banking system in general.

I think my biggest fear in all this mess is not that the economy will fail, or fall into recession, but that the governmental cure may be worse than the disease.

Photo by bastian.

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