Lingering Financial Concerns

I expect the market to increase from current levels.  I think financials might have a tough going, especially the ones that are going to need to sell some assets at pennies on the dollar.  However, companies outside of the financial realm are likely to do fine.  In fact, technology was devastated along with all the rest of this, but I don't know if that devastation was warranted.  In fact, I think it was severely overdone.

 

In the coming weeks financial stability will become more apparent.  Worldwide, financial markets will stabilize and everyone will breathe a deep sigh of relief.  We might see a slight pullback on Monday or Tuesday, but the big boys now believe that a near-term bottom is in place.  That means, they are willing to buy the dips again.  Your mentality should be the same. 

 

If the market pulls back, buy high quality names or ETFs outside of the financial sector.  If you choose to enter the financial sector made sure that the companies that you choose are not exposed significantly to mortgage backed securities and, or, leveraged to the hilt.  Highly leveraged companies are in the same boat as those carrying significant amounts of mortgage backed securities.  We are not going to hear any thing about significant write-offs until such time as a bill is passed, but the rumor mill will turn relentlessly for a while.  I know that financials can't be shorted, so this makes them relatively attractive, but the problems that caused this shortselling run have not gone away.  The government has found a way to deal with it, and that's great, but significant losses lie ahead for everyone who has made the mistake of abusing the system.  That means these financial companies are likely to take huge losses, and therefore buyers may be apprehensive after the short covering rally is exhausted in financials.  That's like to be very soon, by the way.

 

However, again, although financial stocks may still have lingering concerns, other companies are beginning to look very attractive because a meltdown has been averted.  This recent action established the bottom of an endless pit that was the perception of Wall Street as recently as Wednesday.  Even if a pullback occurs early next week, the bottom is in for now and the big boys know it. 

 

I do not expect anything like the increases of the past few days, but I do expect the market to trend higher from here.  Eventually I expect the NASDAQ to outperform significantly.

Comments

[venividivici:]

Mate just a few days ago the market was teetering on the brink of the precipice and it came within a hair's breathe of going over, saved by another gargantuan government bailout, money of course that will have to be borrowed from overseas. I just wonder what it would take to wipe that smirk off your face?

2008 Sep 22 08:37 AM

[investor88:]

Thomas is bullish saying the bottom is in place and the trend will be higher. Venividivici is cautious at best. The Paulson monster bailout fund of usd 700m is yet to be put in place and tested. In view of the other problems in the economy like falling house prices and develeraging, I would be rather cautious and take a cautious view unless market actions prove otherwise.

2008 Sep 22 09:14 AM

[Steven Hansen:]

don't try to pump the market ...... we are not buying yet. the systemic issues must play out to avoid investing in a suckers market.

2008 Sep 24 02:22 AM