Is a bottom possible??? REALLY???
I think, yes …
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
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