Thursday, October 09, 2008

My Kingdom for a Bottom

Wow, there is serious panic out there. Stocks are trading for substantially less than they are worth. A great example is ACE (getting away from the MFI theme) and into insurance, which I know a lot about. They are trading at under book value (granted the book value may be overstated) and yet they arguably will have the most to gain from the demise of AIG. Some of my MFI stocks have negative enterprise values, more cash than market cap.

Am I unhappy? I suppose I am. I'll be honest, I sold some stocks last week... just felt I had to have a little more cash. But I am not panicky. But I can understand why people are. If you are near retirement, if your job is not secure, if you have college costs coming up soon... those are big problems. My heart goes out to people who have debt or have been trading on margin.

There is no doubt that I have dug into a rather large hole that may take years to dig out. I also think the market will continue to decline as hedge funds unwind their positions. But then we will take off when everyone who can sell, has sold. That is assuming our financial system is still standing.

Some of my favorite writers actually said opposite things this week (surprised?). Jim Jubak actually said things are much worse than he realized and thinks we could have a recession running 4 to 5 quarters (Everything's changed now -- for the worse).

Then John Hussman, who has been nothing short of omniscient thinks that the market is actually getting to the point of being a decent value and is starting to consider dipping his toe in the water (The Beginning of Wisdom). I did like a couple of his quotes: "It is best to panic before everyone else" and that the recent congressional $700b plan was akin to "starting a fire in the living room to heat the kitchen". Always good to have a little humor on a down day.


No comments: