with Oli | Strategies

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WHAT … IF THE BOTTOM WERE HERE???

Is a bottom possible??? REALLY???

I think, yes …

Why?

Here my thoughts … as you know me … a list … not necessarily in order of importance :)

- The reason for the financial crisis is not the housing market, but the STUPID overleverage

- House prices are back on a reasonable level, pressure still put by panicking banks

- The FED/Govt. does not invest leveraged and by doing so, won’t face the same pressure as the banks.

- Even people like PIMCO’s Bill Gross, who did not want to commit more money to the mortgage market, is now POSITIVE. He offered help to the FED to value investments for FREE ;) Good plan as it gives him important inside knowledge :) His guess now is that the FED will gain by doing the deal …

- The U.S. has still a positive growth in inhabitants, meaning, more houses are needed.

- Inflation will help as it drives real estate prices higher.

- As the housing market is backstopped, the “leverage-bubble” can deflate without killing everybody

- The good thing is still … whatever the mortgage is worth … at the end there is a house behind … so there is value waiting to be discovered

- As equity markets … most of the time … look ahead … we even could have seen the bottom … even with more banks failing as by doing so, competition for the remaining stronger institutions gets less … means profits for them will rise …

- Some valuations are close to “unexplainable” … too low

Conclusion:

Markets possibly have seen or are close to a BOTTOM … Deleveraging will go on … We had Bear Stearns with a 40x leverage … now Goldman is down to around 20x leverage …
It will be a rough ride as not all companies will make the cut … so BE SELECTIVE … but start to invest AGAIN … Take an example in Warren Buffett … HE BUYS!!!

He buys THE TOP FINANCIAL … Goldman Sachs … he does not buy trash :)
He buys ENERGY … and he buys a stake in a CHINESE company :)

Get the hint? China again might shine :)

And even more important … the tide will not lift all boats :)

So stay tuned … I’ll be back Wednesday … and I’m quite sure … I will ride the BULL ;)

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This entry was posted on Sonntag, September 28th, 2008 at 20:59 and is filed under FDAX. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “WHAT … IF THE BOTTOM WERE HERE???”

  1. Bep Says:
    September 29th, 2008 at 00:45

    A wiser view than most of the crap out there at the moment. I’m not sure we are at the bottom yet, its tough to call a bottom, but I’m watching closely. Buying now will certainly look very wise 5 or 10 years from now – its really a golden opportunity for someone with cash.

  2. Superoggo Says:
    September 29th, 2008 at 10:13

    The problem in this market: Normally we should have had a bottom already long time ago. CDX HY is trading @ 800 bp + over Treasury. This is insane as it implies that 25% of all commercial Cos go bancrupt over 3 years and nothing will be recovered by bond investors.

    Naturally bond investors make the experience with banks that they get nothing but this surely won´t be the case with industrial Cos. Recession 2001-02 brought 11% default with 6% overall loss. So this is totally stupid. But the problem is technical of nature. Banks are highly leveraged idiot hedge funds. And as long this 10+ leverage is not unwound everybody stalls.

    The system will stabilize itself as the 20+ yields we get on a lot of investments these days bring in an extreme positive cash flow and thus after getting more and more of it every at some point you have to invest.

    So Oli I am with you that the crisis in the USA could be manageable by nature (the homes aren´t gone just in the hands of some stupid succers that aren´t able to hold them). But as long as they haven´t been forced to sell this potential supply is hanging over the market. So we will possibly have a long multi year sideways range where new capital is built. But the relief rallye is far away… as there will be no relief.

    Don´t forget too: We both are used to risk. But it is those funny credit guys that thought they had something secure that are loosing their shirts and are by no means prepared for this nightmare experience. So they won´t buy not if it jumps 20% cause it´s over. They will sell, sell, sell, sell, sell

  3. Oli Says:
    September 29th, 2008 at 13:37

    True, Superoggo … Now they jump out of the closed windows … after denying for some time, that they have to leave the building through the door …

    Stupidity RULES …

    But it SMELLS like a bottom here :)

  4. JD Webb Says:
    Januar 25th, 2010 at 05:18

    Thanks for putting the thought in and writing it

  5. Decking Kits Says:
    Januar 30th, 2011 at 03:24

    ‘:, I am very thankful to this topic because it really gives up to date information ;::

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