Buffet Strikes Twice, Lightning Strikes Once
Buffett gets massively into Goldman Sachs and GE, and the market yawns. The terms were fabulous for Berkshire, and the companies will be issuing new shares which will lead to EPS dilution, so I kind of understand why no one took it as a broader signal.
Then today, Wells goes in for Wachovia, saying that they will take it all on without any federal bailout help. This is a brilliant move for Wells, as the Wachovia retail branch footprint and cash-cow brokerage business has long been coveted by ALL of the larger players.
More importantly for everyone out there, lightning has struck, and this bold move is a solid indication that things are not as bad as they seem. Stop watching TV and start watching the big-boy investors who are placing their bets now. I am not saying mimic them; just be aware that they are laying their money down.
At this point do you buy WFC? Not until after the new shares are floated and they have an actual handle on how bad the bad stuff that sunk Wachovia really is. This way you go in eyes wide open.
If you are trading, here are stocks to watch for the next two weeks: CHK (own some, disgustingly beat down, buying more Monday first thing if the broad market futures are up or even), GS, BAC, MOS (oversold to the point of ridiculous), and QCOM (beaten down; dominant position, cash rich at a time when cash is king).
If you are investing, you have heard this from me before: This market is not coming back until the mess in financials is over. The bailout signed today should help get things moving. For now, sit on your cash, as the turnaround in this market is still aways off, and will be telegraphed way in advance, so you will have all the time you need to get reinvested. And, in my opinion, the DOW has not yet put in a bottom.
Disclosure: As of publication I am long CHK and QCOM, but positions can change at any time. I am not a professional, but I am trying this at home. It is highly recommended that you consult a licensed financial advisor or broker before making any and all investment decisions.
Discussion Area - Leave a Comment
You must be logged in to post a comment.