Posted: September 26th, 2008 | Author: Joe | Filed under: Economy | Tags: bailout, Buffet, Economy | No Comments »
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:
- A big fish needs to go under.
- 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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Posted: September 15th, 2008 | Author: Joe | Filed under: Investing | Tags: Buffet, Investing | 4 Comments »
Money Grubbing Lawyer asks if the time is right to invest in banks – on the very day the DJIA opened 300 pts down in the states on news of Lehman Brothers filing for bankruptcy and BofA buying Merrill Lynch & Co.
Is MGL insane?
Or, to (perhaps) quote Homer J. Simpson, “Insane like a fox?”
It’s an interesting question indeed, as financial stocks have been absolutely hammered over the past 12 months or so. In fact, a recent article in Kiplinger posed the same question. Guessing when the financial sector will rebound seems to be the choice of speculation among investors these days, right behind guessing the next direction of oil prices.
Two things seem to be commonly tossed around as potential indicators to the bottoming of the financial landslide:
- A big fish needs to go under
- Warren Buffet needs to take an interest.
OK, I’ve only seen that Buffet bit in Kiplinger’s, but it got me thinking. Buffet’s M. O. is to buy undervalued companies with business models that he understands. Banking and financial services companies are known to have some of the easiest to understand business models out there, and you have to think that eventually the financial sector is going to be beaten up badly enough to take down some pretty decent companies with it, thus creating the value opportunities Buffet thrives upon.
It’s certainly something to look out for. As for who the big fish is that gets sacrificed to the market gods, I’m not qualified to determine what’s “big enough.”
On another note, it occurs to me that the banking woes in the U. S., which are mostly due to a preponderance of bad loans (i.e. sub-prime), might create opportunities in foreign financial stocks. It’s likely the U. S. financial sector will weigh upon the global economy and pull down share prices in other countries, even though the root cause (sub-prime loans) was never an issue there. Just a thought 
I want to say thanks to MGL for providing the impetus to write this post, which I have been toying with for several days.
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