Alex Sebastian

Is the U.S. Banking System Safe?

The recent spike in financial stock after earnings is similar to all the previous spikes, except of a greater magnitude. Everyone thinks "oh wow they really threw in the kitchen sink this quarter" in relation to the banks' writedowns, and then as things continue to grow worse, everyone realizes the banks are going to have to take bigger and bigger writedowns and the whole sector gets s***kicked for the rest of the quarter. Buy some September or October puts, that's my advice.

On Ben Graham, Bank Stocks, Jason Zweig and Tom Brown

With all due respect to Mr. Gannon, I feel that you may need to go back to and re-read your copy of "Investment Analysis." If you even own own...

You said:

"Graham saw every investment as a black box – and that didn’t trouble him. A lot of investors spend a lot of their time worrying about the inner workings of the companies they own – Graham never did. He didn’t look inside the “system”, i.e. the company itself; instead he looked only at the outputs – the financial statements. He spent almost no time worrying about a business’s management, corporate culture, or future prospects." (Note especially the last item on the list of things Benjamin Graham would barely consider)

Benjamin Graham said in the last few pages of Chapter 11 of The Intelligent Investor:

"We suggest that analysts work out first what we call the 'past-performance value' which is based solely on the past record...The second part of the analysis should consider to what extent the value based solely on past performance should be modified because of new conditions expected in the future"

Although I have found other articles written by Mr. Gannon to contain good analysis, I feel that the above seriously comprises his authority to speak on Benjamin Graham and value investing until he goes back to the books.

Jason Zweig on Graham and Bank Stocks: 'The Un-Intelligent Investor'

Right now I am starting to look for way out of the money calls for financial stocks maturing in '10. My reasoning is as follows: it is hard to call which stocks will rebound and by how much, but if the firms don't go bankrupt they will have likely rebounded enormously from these levels by then and if that is case, these options will have gone up in value by considerable orders of magnitude. This is a financial buy and hold strategy which allows for small investment that will yield potentially hundreds or even thousands of percent gains with limited downside (barring bankruptcy).