- El-Erian: Commodity Surge Infecting Everyone
- LSE Shares Soar 11% on Quarterly Revenue Increase
- ExpressJet Airlines Suspends Commercial Operations
- Banks Boost Markets, Strategists Cautious
- GfK Mulls Cash Bid for TNS After WPP Swoop
- Macau's SJM Delays IPO Debut Amid Legal Challenge
- European Shares Set to Join Global Bounce
- South Korea to Ease FX Borrowing in Fresh Flip-Flop
- Australia Consumer Confidence Hits 16-Year Low
- PGA Tour: A World (And Ratings) Without Tiger Woods
- Bowyer: The Coming Obama Recession
- Farrell: Signs the Fed Will Defend Dollar?
- Weakening Steel
- Lightning Round: Energy, Big Media and Farm Equipment
- Financial Collapse: Banks Going Quietly Into the Night?
- Cramer: Fashionably Healthy
- Tuesday's Web Extra
- Fast & Furious: Oil, Nascar, Ruby Tuesday...
Deciding how to trade Bear Stearns and other financial giants on a day when the bottom seems to be falling out of the sector depends largely on your investment goals.
Long-term investors are in a better position to weather the storm of doubt that has come with the move by the Federal Reserve and JP Morgan Chase to provide emergency funding to prop up Bear Stearns, analysts say. Bear [BSC
Loading...
()
] said its liquidity had deteriorated rapidly in the past 24 hours, and its shares have lost nearly half their value today.
Investors need to weigh their appetite for risk and look long and hard at Bear and the other financials before deciding to make a move.
"In most cases you usually do not sell on a day like today. You let the dust settle, see what's going to happen," said Nadav Baum, managing director of investments at BPU Investment Management. "The problem with making a decision today is you're making that decision based on fear and greed."
"The trading mentality goes in and buys the stock today," Baum continued. "The long-term investor mentally says, 'Wait a minute, let me understand why the stock is down and then I'll go in and make a decision in the next two or three days.' The scared investor usually sells the stock today."
Baum likes financials, but prefers the money-center banks to the brokerages. He recommends JP Morgan [JPM
Loading...
()
] and Bank of America [BAC
Loading...
()
] because of their dividend yields.
BEAR STEARNS TOOLKIT |
Kresh said long-term investors can afford to poke around financials for bargains, but advises avoiding Bear Stearns and most of the others because of the likelihood for volatility in the coming weeks and months.
"Somebody who's close to retirement, you should not be loading up on them to say you're getting in cheap, because we' don't know how cheap cheap can be," he said.
Investor Takeaway |
"As far as Bear Stearns goes, you've got some losses that could turn into bigger losses, so to mitigate risk you take some off the table," he said.
Kresh advises extreme caution all around, especially considering the precarious connection in recent history between Fed moves and the fate of large financials. The Fed caused a major spike in the market earlier this week after announcing an expansion of its term auction facility liquidity efforts, and has been cutting rates aggressively since September 2007.
"In all those cases the stocks that bounced up the most were the financials, yet within a few days thereafter they started to unravel again. That suggests we do not know what the underlying problems are yet," Kresh said. "Investors have to be very, very patient to get through this, because it could be six months to a year until we actually see the bottom."




