First Post In a While

Wow. It has been an awful long time since I have posted here. Let's see what do we need to catch up on? First off, both Lehman and WaMu went, as I said needed to happen, although not in the way I expected. Second, in the face of unprecedented market stress, Goldman and Morgan became bank holding companies - something I didn't foresee happening. Third, Wachovia was bought by Wells Fargo. The TARP didn't pass, then it did. The TARP's mandate was changed to buying stakes in banks with the first $150B or so (a move I fully support). We had the 17th worst month ever for the Dow and the 9th worst for the S&P. Within that month was the worst week ever, and the best week in 34 years for the Dow. The volatility index (VIX) was also at historic highs, reflecting panic in the markets. Oh and oil dropped from $110 to $64 at last check. Finally, we saw enormous coordinated moves by a number of Central Banks to address the freeze up in credit markets following the G7 meeting.

If you want some comedy amongst all this bad news, we also had some moron at seekingalpha.com blaming Cramer for that awful week. Don't even get me started on that tool.

What else? It's looking like Chrysler and GM are going to merge, eliminating thousands of jobs (the UAW is clearly unhappy and trying to block the deal). Wachovia also exposed a massive hole in its balance sheet that Wells Fargo needed it to write of before the merger was complete.

Okay, that wasn't in chronological order, but I think that about does it. Where are we now? Well the credit markets are starting to thaw, as evidenced by the steady falling of the TED Spread and LIBOR over the last few weeks. As this occurs, it seems that some confidence is returning to the market. By no means are things good, but it doesn't seem like the whole system is going to collapse - at least not immediately. Therefore, some investors are starting to pick up bargain stocks. There are so many good companies which have been thrown out with the bad. Some real fortunes can be made in the market right now for people who have strong stomachs and a long term outlook. I read one interview with an institutional investor who said he has never seen opportunities like those that prevail in the current market.

It seems that earnings are going to be bad for a couple quarters - especially in financials, but I feel that has already been priced in. I guess I am throwing my lot in with the others who say that buy the good companies now. Good companies include those that won't need to go to the credit markets anytime soon, are well diversified internationally, have a consistent long term track record, pay a safe dividend and ideally have relatively recession-proof products (consumer staples and pharmaceuticals to name a few).

I would stay away from credit card companies for sure though. I remember back in July I opened my Mastercard bill and read that my minimum payment was optional this month, and took that as an indication that they were trying to lowball writeoffs due to delinquint customers. Shorting Mastercard would have returned ~50% since then. It seems to me that the consumer credit bubble will be the next to burst. I also watched a really interesting movie called In Debt We Trust that reaffirmed my opinions. That means stay away from credit card companies and discretionary consumer products.

Finally, it looks like Obama will win tomorrow night (I was ambivalent until that hack Sarah Palin was nominated for Vice). It will be interesting what the market's reaction will be either way...