One last parting shot. There will be few times in your lifetime when the deals that are available now are again available. Sure, some companies will go under. Figure out the ones who will not (absent an absolute meltdown) and have faith. If there is an absolute meltdown, money won't matter much. If there isn't, and I firmly believe there will not be, then this is truly the land of opportunity.
Sure, plenty of companies (especially financial) will not return to their prior plentiful ways as those ways were a house of leveraged cards, but they do not need to go all the way back to make their stock look cheap. Stay away from those on the edge. There are plenty of very solid companies down significantly and they will pay out royaly in the long term. I have one third of my retirement money back in equities and have lost a third of that in the past couple of weeks, so my next move is to put another third back in this week or next. Catching the bottom is like catching a knife, but this money will be invested for decades and I do think we are facing a once in a lifetime investment opportunity (for those with a fairly long horizon). Just thought you may want something not so doom and gloom.
If you have a fairly long term horizon, it is time to get excited!! This is the land of opportunity!!!
But don't think I will now stop reporting the negatives. Knowledge of the markets and what is driving them is the key to a secure financial future. There will be loads of bad economic news ahead and I will seek to put the significant pieces here, but this post is meant to emphasize that all is not bad. I don't recall which language it is but in one language the word for problem (or something like it) is also the word for opportunity. I agree with this - as I think does Warren Buffet. We have major problems right now so that means major _________? You fill in the blank.
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As JP Morgan and Bank of America have been buying most everything (not literally of course), would you consider them among the companies here to stay? I asked my Dad (you might know him as Chris :P) about this, but what do you know about the Spanish bank, Santander?
Fill in the blank? Um, China?
Some folks waste their money on beer, some folks waste it at the craps table at Vegas, some folks but cigarettes ... me? If Citibank hits $2 share, on the off chance that that it is in fact "strong and stable", I'll raid my change jar and buy a couple hundred shares.
In favor of full disclosure, in my prior post I should have said "a couple hundred MORE shares."
JP Morgan is the proud owener of Washington Mutual, which had the most subprime loans and, I believe, were number two on Alt-A loans, which includes a lot of ARMs. Most ARMs (adjustable rate mortgages) are resetting this quarter and next year, so they will continue to see a spike in foreclosures. With house prices continuing to fall (probably another 10-15%) next year will be difficult. Moreover, they bought Bear Stearns, which had a lot of CDS and derivative exposure. With a high degree of default risk, that could be a problem. I read, but have not verified, that as part of the Bear Stearns deal, the government let JP Morgan keep the Bear Stearns bad debt off their balance sheet, somewhat like a SIV. I would stay away from that one.
If you treat it like gambling money, i.e. odds are good you will lose it all, then financials are a bet that could pay off nicely in the long run. Pretty much a hit or miss. The government will probably not let these big boys fail, but I suspect the Obama administration may look to do more deals like AIG,where current stockholders and officers get pretty much wiped out.
P.S I don'tknow anything worthwhile about Santander. Personally, there are so many fantastic stocks out there at low prices, I am staying away from financials and placing my bets on companies that hell or high water should survive and prosper. You have the likes of Cisco, Microsoft, Apple, Intel, Pfizer, etc. trading at some cheap prices. You have oil companies well off their highs, but oil is not going to stay under $50 a barrel forever. You have mining companies that are incredibly cheap, but you know commodity prices will rise again when the economy rebounds. Perhaps not to the bubble prices we saw in commodities, but higher than right now. It is basic supply and demand, and supply is limited. Long story short, if you can buy and hold, this is the land of opportunity without looking at risky financials. By the way, I own some Microsoft.
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