It 10:00 p.m. eastern and we are seeing special reports all over the news that Lehman Brothers didn't find a buyer and they are headed for bankruptcy. To create liquidity, a group of ten banks has set up a $70 Billion credit facility. The Federal Reserve is also expanding its lending facilities. Bank of America is reportedly buying Merrill Lynch for $44 Billion. The futures are getting hammered obviously. I have to tell you that I think we are going to see some shock and the certain selloff in the financial sector. I am sorry for all of the employees and their families. I do think that systemically this needed to happen and we will be getting closer to "starting over from the sound base" that Jim Rogers described in his interviews.
Charlie Gasparino is sitting on CNBC saying that this is not the unwind that we need. He makes the point that the "bad assets" are not being sold. I don't know that I agree from a trading perspective. I think that it is being factored in by the traders now. Tomorrow may offer a good buying opportunity for some---I like SCHW and if it gets hammered tomorrow. David Faber is also saying that things are going to keep getting worse. They are even asking if the trading in the market will be "orderly". I have lost a lot of money, and may lose a lot more---but I don't see tomorrow being the end of the world. I am a fan of the BAC takeover of Merrill. I think it not only makes a good combination going into the future, I think it offers stability to the financial situation. I think we could see Goldman Sachs going shopping for a bank soon.
There are many "talking heads" on TV right now talking about how the Fed has stretched its balance sheet and how it will affect the dollar. Should the Fed cut interest rates this week. YES!!!! You have heard me say that credit is tight even with the Fed Funds rate at 2%. I think the Fed should and will cut rates this week---perhaps as early as tomorrow. If you have your list of shorts ready---you might make some early trades into the panic. I really believe that we are going to capitulate soon. I am getting more bullish right now. Many will say that I am crazy, but our system is not going away and this too shall pass. How many talking heads have you heard talk about the falling dollar being bullish for oil prices. If you listen to the same "channels" that I do you have heard that over and over the past 6 months. Tomorrow is almost certain to be a day where those correlations are non existant. Oil is going to get hammered tomorrow and so is the dollar. Now gold is headed up so watch FCX. If it slams down again, it will present a nice opportunity to buy. The futures are now at their lowest levels since I have been looking at the television.
I hate to hear the MAINSTREAM MEDIA try to instill fear in the general public. Yes tonight is a historic night and true enough things have changed on Wall Street, but it is not the end of the world. I can tell you that I am going to look for companies with strong balance sheets for some longer term buy and hold investment.
While it may be contrary to what the PhD types will tell you, I believe that this credit crunch has served to contract the economy. Further, I believe that the plans by both the private sector banks and the Fed are going to begin to solve some of the liquidity problems---though the process will be slow.
It seems that AIG is the next target of the short sellers with Merrill out of the way. I wouldn't touch that stock with my worst enemies money. If AIG learned anything from Lehman, they will start the fire sale soon and if done properly it could help the stock and burn some shorts---this stock could go either way and it will go hard and fast in some direction.
I will not give a pick until we see some stability. I hopefully will have several updates as things unfold.
PETER SCHIFF RETURNS TO OUR SHOW THIS WEEK!!!!!!! STAY TUNED
Sunday, September 14, 2008
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4 comments:
If you really agree with Mr. Schiff then you are foolish to keep buying dollar denominated assets (stocks). What you need to be buying now is Gold, not bank stocks. Good luck man, but I think you're gonna keep getting cut trying to catch falling knives.
Thanks for the post. I agree that my strategy will be risky and I am anxious to have Mr. Schiff back on the show this week to ask him if we are any closer to the bottom. I also plan to ask him about Oil as a hedge instead of gold. If you look at oil today it seems to be seeing FORCED LIQUIDATION---which may make it very attractive. I also talked about Freeport McMoran--even though it is denominated in dollars---it may be the baby that gets thrown out with the bath water. If gold heads higher, this one could snap back.
Thanks for the post.
Good afternoon from California! Well I can tell you for certain that Peter will say we are nowhere near the bottom in financials/housing decline and that gold will rise to at least $5,000 and/or find a 1:1 ratio with the DOW before this mess is all said and done. I have listened to Peter, Ron Paul and Jim Rogers for the last 2 years and am so thankful I have. I share their insights for the most part. You have some great guests on and get really insightful interviews and I really appreciate stock shotz. It's a great program. Can you please do me a favor though and ask Peter something I have never heard him opine on. I know he thinks gold will go to $5,000 as the fed debases our currency and inflation results via the FED's printing press. However if we go the other route through default of debt and DEFLATION, can you please ask Mr. Schiff how he thinks gold and silver will fare in a deflationary environment? Thanks so much and God bless! Chris.
Glad to hear Schiff is coming back! Not everyone agrees with him, but he sure has been right on many issues.
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