The Bottom of the Market
At the expense of eliminating my credibility (before I have any), I would like to go on record and say that we have hit the bottom of the market. It was very likely last week in fact.
Now I don’t have any fancy math or pretty charts to distract you from prove this point, but I do have a collection of facts:
- Everyone knows about the sub-prime mess and thus it is already priced into stock prices
- Most financial institutions have sold or written-off these risky assets, yet out of all the bad ones, there are some good ones which will need to be added to their balance sheets again.
- Most (all?) financial institutions have restricted (or temporarily eliminated) their lending practices to ridiculous levels. The only thing for them to do is ease their lending (thus increasing liquidity) or face becoming the next Bear Stearns.
- JP Morgan has increased its bid for BSC 5x. I personally believe this is out of fear that shareholders will revolt or (more probable) another firm will enter a bid.
- The Fed has cut the discount rate to historical lows as well as taken other very creative methods to increase liquidity despite the current credit crunch.
- Bernanke’s own house is upside down. He has a very personal incentive to make this period of creative destruction as easy as possible.
Although this isn’t as in-depth as this dissection of the Rich Dad Poor Dad book, I hope it illustrates why I think now is probably the greatest opportunity my generation will see. I’ve been adding to my stock positions and quickly approaching my $10k goal (at the expense of my money market goal). In case you’re curious, here are my current positions:
- 27 BAC
- 15 CPL
- 12 EWZ
- 21 MO
- 17 MT
- 16 PCU
- 32 VZ