Well, folks, what do you say after a day like yesterday? Watching the market drama in the wake of S&P’s downgrade of U.S. debt, I was reminded of something an old floor trader, Sam Shanker, said to me back when I was just a young punk at the CME. “When there’s blood in the streets,” he said, “there’s an abundance of opportunity.”
Sam’s been gone, gosh, probably about 20 years now, but if he were around today I know exactly what he’d be doing: backing up the truck and checking off the wish list. On days like yesterday, babies get thrown out with the bathwater. Look at Bank of America, for example. Their stock got hammered yesterday, but here’s an institution that could pay back every loan on their books tomorrow and still have billions. And yet, all of a sudden, B of A is a $7 buy. I’m not a stock picker and I’m not a bank analyst, but I do know value when I see it. That’s one example of a baby I might want to catch.
If you’ve been rolling down your protection on your portfolio these last few weeks like I’ve told you to, those hedges have been very lucrative. It’s time to take that money off the table and reinvest. This is not 2008 all over again. This is a healthy bull market correction that, in my mind, was absolutely necessary considering everything that’s been going on both here and in Europe. I’m not good enough to pick an absolute bottom, but fundamentally, this is a tremendous opportunity to put money to work.
Corporate America is still leaner and meaner than it’s ever been. Oil is down to $80/barrel. The middle class population in places like Shanghai and Sao Paolo is not going to stop growing. And the Fed has already taken us halfway down the inflationary path—we’ll see if they decide to finish the journey later this afternoon.
Could the market go down another 5% before this is over? Absolutely. This is not a time for instant gratification—there’s just too much volatility. But eventually, things will settle down and the market will work its way up. Look at this as a period of accumulation. That’s what the greatest financial minds are doing, because they know that’s how wealth is created.