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Dan Genter of RNC Genter Capital Mangement believes Congress will pass a bailout package by the end of the week — but he expects the next day or two to be wildly volatile and painful. Despite this, he sees opportunities in stocks that have been unjustly beat up.
“You can look at some things in the consumer area, in the energy area, especially in the drilling area -- things like Diamond Offshore , Chesapeake ."
Gold prices rallied 14 percent over the last two weeks as stocks declined — but the precious metal is down for the quarter. But Dan Smith of Standard Chartered told CNBC he's bullish on the commodity.
"We've seen very strong physical demand for gold coins in places like India and Europe," he said. "A lot of the bad news [for commodities] is already priced in."
So it's the bottom of the ninth with six outs (as in, out of business -- Bear, Lehman , Merrill , AIG , WaMu , Wachovia ) and the SEC has finally moved to clarify the mandate that has needlessly rendered great firms worthless and brought the global financial markets to their knees.
WHAT TOOK YOU SO LONG?!!
To sit on the sidelines for 10 months and watch "Tropical Storm 157" tear a path of destruction through one balance sheet after another of our country's financial institutions is FEMA-like in its ineptitude.
So now, instead of admitting that their experiment in fairly valuing assets has accidentally blown the roof off the laboratory, we're given a clarification: "Ya know those new mark-to-market accounting mandates we began enforcing last fall..? Well, it seems there have been some unintended consequences and perhaps things got a little out of control..."
- S&P's Stovall: Bottom Seems Near
But we'd like to remind you that accounting is not always as precise as we would all like it to be and that when things get a little crazy and difficult to value, you'll need to use a little JUDGMENT.
Of course, accountants, from their newly elevated status as executioners (see my Sept. 15 blog post, "CSI Wall St.: Financial Homicide "), oppose any setback to their new baby, saying it would have a destabilizing effect on the market and be bad for investors.
Dare I say the markets are far from stable and good for investors right now, with the mark-to-market status quo in place?
Don't get me wrong, I acknowledge and agree with the intent of the FAS 157 Fair Value rules — but strongly oppose its unintended and disastrous consequences.
If these assets were truly worthless and not just temporarily hard to price during this calamitous time, then the vultures would not be circling.
But the vulture funds are circling. And they are also raising billions of dollars — with ease I might add — while they wait for the right moment to pounce and make an absolute killing.
The bottom line here is this entire ordeal didn't have to happen, and the well-intentioned accounting rules that were born out the S&L crisis and the collapse of Enron only made a bad situation worse.
David Sowerby, of Loomis Sayles & Co, says more indicators are pointing toward a market bottom.
“You want to avoid the capitulation trade, which is selling very near the very bottom of a classic bear market, and you want to stick to high free-cash-flow-generating companies."
He recommends investors buy select financials and small to mid-cap stocks. His favorite picks are US Bancorp , Rollins and Interactive Data Corp .
Disclosure information was not available for Sowerby or for his company.
Rick Dillon, fund manager and chief executive of Diamond Hill Investment Group, demanded that his firm be removed from the SEC's "no-short" list. He told CNBC why short sellers are healthy for his business—and offered his favorite stock now.
Dillon also manages the Diamond Hill Long/Short Fund; it's down 11.80 percent year-to-date; but the fund has grown 2.97 percent over the last three years; and it's up 10.79 percent over the last five years.
"It's better for shareholders to have [shorts] as participants," said Dillon. "Short sellers provide a valuable service in two ways: price discovery—their information content is valuable; and they provide liquidity."
Turning to stock picks, Dillon said "it's time to invest" in crude oil exploration and production. He believes the drops in commodities and oil prices in particular are "strictly short-term," adding, "We look at the next five years."
Barry James, president of the James Advantage Funds, thinks the market is in a bottoming phase, and he sees a rally on the horizon.
“We don’t think we’re out of the overall bear market, but we think it’s time to buy, and you should look at securities that will hold over the long haul," he said.
His first pick is BJ’s Wholesale Club , which he says is relatively cheap right now.
“They’ve had membership hold up very strongly, they’ve had good earnings gains and good sales gains in this environment,” he added.
In the tech sector, he thinks Hewlett-Packard is best in breed.
First, some notes about today's market ....
And now, consider this ...
"A mediocre idea that generates enthusiasm will go further than a great idea that inspires no one." - Mary Kay
Anything come to mind when you read this?
For me, 700 billion things come to mind, foremost of which is the bi-partisan failure to properly sell this banking system rescue plan (by any name) to the American people. Even as Congress prepared to vote, citizen complaints were being acknowledged — but ignored — under the guise that, ''the risk of doing nothing would be even worse''... which in itself left John Q. Taxpayer with the horrid option of chosing between bad and worse. Is it any wonder most people have chosen to walk out of the proverbial car dealership in the face of that choice? I mean, Congressman John Boehner politely refered to the bill as a ''mud sandwich'' — and he was for it!
I also bristle at the inference that people outside the financial industry don't really understand the complexity of the issue.
Again, a huge sales pitch error was made since virtually everyone earns, spends, saves, invests and borrows money within our financial system — not just the ''fat cats'' on Wall St. And I think Americans of all walks largely do understand the inter-connectedness and importance of the national/global economy. But if people really don't understand what's at stake — make them, educate them and as Mary Kay said, inspire them!
Although Hank Paulson tried, his gravely-voiced testimony probably brought fewer converts into the tent than his knee-delivered plea to Nancy Pelosi.
Where was Ben Bernanke's expertise in the Great Depression when a vivid portrait of a fianancial meltdown was really needed?
If this plan is ever going to get sold — than somebody better start enthusiastically selling it... and maybe throw in a guarantee too.
The US Federal Reserve needs to step into the market for short term borrowing in order to give banks the confidence to resume trading with each other, traders say.
"The US Treasury has already implemented a guarantee program to prevent a run on money market funds. Several commentators (including our New York team) have proposed that the Fed play a similar role in the repo market, acting as a clearinghouse for trades and removing counterparty risk," Merrill Lynch wrote in a note to clients Sept 26.
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Banks have become reluctant to lend to one another for fear they do not know whether the other bank (the counterparty) will have enough money to make good on the trades. Installing the Federal Reserve as a clearing firm in between the banks would reduce that fear.
The reduction of that fear would allow the aggressive selling in banks like Wachovia and others to subside, traders say.
"This will allow us to see what everybody has without fear of collapse, " said Jon Najarian, co-founder of Optionmonster.com . "And fear is our biggest problem right now."
Reporting by CNBC's Dylan Ratigan.
Maria Bartiromo discusses Friday's top business and financial stories, and looks ahead to Monday's events.
(Watch her on-air on CNBC TV's Closing Bell .)
Topics discussed in video, above:
Washington Mutual : the biggest bank failure in history. JPMorgan Chase sells stock to help pay for WaMu unit purchase.
Pilgrim's Pride : The poultry company may need to seel assets to offset soaring feed costs. Will debt overwhelm the firm?
Oil prices . U.S. light, sweet crude slipped $1.13 to end Nymex trade at $106.89.
KB Home : The homebuilder's third-quarter loss quadruples, as inventory is stagnant and home prices drop. (But Jim Cramer thinks KB Home has a chance .)
The New York Times reports that Citigroup and Wachovia Bank are in "early" deal talks
Monday's earnings reports:
- Circuit City
Monday's personal income & spending report
University of Michigan's consumer sentiment index;
Commerce Dept. report: second-quarter U.S. GDP growth of 2.8 percent annualized rate; down from previous estimate of 3.3 percent.
Another black eye for the housing sector: KB Home reported that its third-quarter loss was more than four times that of the same quarter last year.
The homebuilder posted a quarterly loss of $144.7 million, or $1.87 per share; compare this to its year-ago loss of $35.6 million, or 46 cents per share.
However, the figures can be read with a tinge of optimism: The year-ago period included divestment of a French business unit; excluding gains from that divestment, those losses amounted to $478.6 million, or $6.19 per share.
The California-based homebuilder's latest results included pretax charges of $82.2 million.
And another ray of hope: Jim Cramer says KB Home could soar on the Paulson Plan .
(Click tickers For complete stock data)
- DR Horton
- Toll Bros.