Financial Acumen

Is Economic Expansion Dependent upon a Healthy Banking Sector?

This is not a bad article, but the mention of Circuit City weakens it:

"Now, we can move on to Circuit City. The rumor was that Circuit City had three parties that were potentially interested in acquiring the company. Apparently, none of them was willing to pay a price sufficiently high that would exceed what Circuit City thought it could gain by selling off inventories and closing its doors. Again, here is a bet the potential acquirers were not willing to make - a bet on the value of the assets of Circuit City. This seems to be the other side of the Bank of America / Merrill Lynch transaction: How can a company buy someone else when they don’t have a good feel for what the underlying assets are really worth?"

I can name at least two reasons off the top of my head why Circuit City was forced to liquidate:

1) Business conditions going forward are not at all friendly to consumer discretionaries - this could result in unforeseen inventory write-offs completely unrelated to the credit crisis, but very much related to the ongoing recession

2) Best Buy has a stranglehold in this segment of retailing, nearly reaching saturation on its own, to say nothing of Walmart, Kmart, etc.

Besides this, I completely agree with CautiousInvestor.

Using Sector Weight Analysis to Identify the Next Bubble

Good article. It's nice to see ideas about opportunity during these gloomy times.

I must say, I find it hard to believe that basic materials have fallen throughout these past 5 years. That would seem ripe for a pullback, if not an outright boom, after the economy rights itself. Well done.