This Rally Is Ridiculous

I realize the market is a discounting machine -- with investors collectively trying to anticipate future events and price shares accordingly -- but let's face it: This rally is getting ridiculous. Wall Street is on a bender (yet again), and the shiny, happy future it seems to be looking forward to overlooks the fierce grimness of now. It's a mirage, at least in the near term. Maybe the midterm, too.

You may be right; I may be crazy
Still, it's worth pondering just how much longer this particular bout of irrational exuberance might last. If the market can make it here, after all, it can make it anywhere.

Unemployment is high and poised to climb higher; GDP has famously fallen off a cliff; and the much ballyhooed news that consumer spending rose during the year's first quarter (hurrah!) evaporated on contact with even just casual analysis. January produced virtually all the quarterly gains; February was flat; and March actually saw consumer spending decline. (Boo! Hiss!)

And yet the market has been on a tear, with the S&P 500 climbing by some 11% during the month of April alone. And guess -- just guess -- where the bulk of those gains have come from? Why, from financial stocks, of course, with the sector posting a 22% rise over the period.

Black hole sun
This particular mirage is a mesmerizing doozey, with the likes of American Express (NYSE: AXP  ) , Wells Fargo (NYSE: WFC  ) , and Capital One (NYSE: COF  ) rocketing to gains in excess of 30% over the period. And this despite the fact that the black hole at the center of our financial galaxy remains, with toxic assets sucking liquidity out of the credit markets just about as fast as government largesse can pour it back in.

That, however, is a temporary "solution" (right, elected officials?). And unless someone pulls a rabbit out of a hat soon, the latest Treasury-floated TARP initiative -- a public/private partnership that socializes risk while privatizing reward -- seems likely to die an ignominious death. Gallingly, it may be the banks themselves that shoot this one down.

And why not? Our apparent willingness to prop 'em up into perpetuity has yet to be seriously challenged, which explains the financials rally. Rumors of profitability have been greatly exaggerated (thanks in part to mark-to-dream-on accounting), but when the U.S. taxpayer is your compulsory patron, it is, as the kids used to say, all good. Indeed, we might as well call it rational exuberance.

History repeats?
With that as a backdrop, it's worth asking whether financial-stock multibaggers can be far behind, even from their currently inflated levels. Based on its closing price last Thursday, for example, seemingly beleaguered AIG (NYSE: AIG  ) would be a 10-bagger by returning to "just" $11 a share, a price it exceeded as recently as last September.

Don't get me wrong: I don't believe such a rocket-shot would be warranted, at least not based on fundamentals. Indeed, I'm among those who believe that the financial sector should return to its former lack of glory, becoming a comparatively much smaller slice of the market's pie chart, complete with permanently shrunken market caps for former big boys.

Between now and that smaller, shabbier future, though, there may be money to be made, largely by speculators betting that the financial sector will essentially become a government entitlement program -- albeit one that puts up with little of the pesky regulatory oversight that attends, say, Medicare or Social Security.

Get smart
For those who prefer to invest rather than speculate, there are far smarter ways to proceed -- and to align your portfolio with what a sustained market recovery will probably look like. As shell-shocked investors return to equities, they'll likely do so judiciously, newly aware of the benefits of bonds, for example. And for the equity sleeves of their portfolios, a focus on cash-flow kings with tremendous track records of success -- and beaten-down share prices -- will be in order.

IBM (NYSE: IBM  ) , Apple (Nasdaq: AAPL  ) , and Oracle (Nasdaq: ORCL  ) , for example, have those first two attributes in spades. But they're on my watch list (rather than in my portfolio) because I think their valuation profiles will become more attractive when our dead cat finally touches down back here on planet Earth.

The Foolish bottom line
For those looking to put money to work right now, my colleagues at Inside Value have identified a host of companies that fit the kind of profile I like. And their market-beating recommendations come with "buy-below" prices to help guide you to the right time to buy. That's handy indeed. If you don't have the quality (or quantity!) time to don a green eyeshade and conduct deep-dive fundamental research and valuation work, not to worry: They've done it for you.

Even better, you can check out the service's complete list of recommendations for the low, low price of, well, nothing. Click here for 30 days of complete access to the service that helps you "invest like an adult." Even your inner child -- if not your inner speculator -- will thank you for it.

Shannon Zimmerman runs point on the Fool's Duke Street and Ready Made Millionaire services, and he runs off at the mouth each week on Motley Fool Money, the Fool's fast 'n' furious podcast. A fresh edition of MFM hits iTunes each Friday, and you can listen by clicking here. (Link opens iTunes.) Shannon doesn't own any of the stocks mentioned in this article. Apple is a Motley Fool Stock Advisor recommendation. American Express is a Motley Fool Inside Value pick. The Fool owns shares of American Express. You can check out the Fool's strict disclosure policy right here.


Read/Post Comments (61) | Recommend This Article (242)

Comments from our Foolish Readers

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  • Report this Comment On May 04, 2009, at 5:07 PM, ilovesum wrote:

    market is stumbling around drunk again ,,

    happy hangover.

  • Report this Comment On May 04, 2009, at 5:19 PM, davegetrational wrote:

    As soon as the stress test results come out some bank stocks could triple in a short time. The conditions that got the banks in trouble are either coming to an end or have been assess as to being able to overcome additional adversity.

  • Report this Comment On May 04, 2009, at 5:46 PM, TSIF wrote:

    Mr. Market can be drunk, it doesn't have to make sense. The fear of missing is a powerful weapon. The slightest bit of postitive news sends stocks upward again. By the same token, the old fear of getting crushed is still here. The VIX is quieter, but not asleep. While moderate news can send the market up another leg, it can all be wiped out by enough investors deciding to cut and run, taking out tight stops. All in all, there are still some great values to be had. Expecting a pullback is rationale, betting on one and missing the rally is Foolish.

  • Report this Comment On May 04, 2009, at 5:52 PM, jbrt wrote:

    LEAN MORE AND MORE to the RIGHT , what will you say if the SPX passes 950 ? gloom and doom , its not the end of the world , no market has ever gone straight up or straight down since the market began , give it a rest . NUMBERS TALK and you know what " walks "

  • Report this Comment On May 04, 2009, at 5:56 PM, jbrt wrote:

    whoever wrote that article probably wishes they never went SHORT ! , cough up the cash its time to COVER !

  • Report this Comment On May 04, 2009, at 6:11 PM, olboy2 wrote:

    What about oil tankers, not so good right now but maybe when they are scrapped and there is a shortage of Ships, the shares will go sky high / supply = demand. Also sliver?

    Recommend TNK AND CDE

    Fools what U say ??

  • Report this Comment On May 04, 2009, at 7:06 PM, theMovement wrote:

    The present might not be so hot, but remember the market reflects future earnings, so I'm not so sure this is a deadcat bounce. If you look at the previous history of recessions, what is happening right now (the rally) makes complete sense and the rally should continue. I know a money manager who managed billions (basically was the money manager for a whole state after his gig on wall st) and he showed me a bunch of historical indicators that this rally is no fluke.

  • Report this Comment On May 04, 2009, at 7:12 PM, TellyL wrote:

    I'd like to see the data that shows this rally is mainly financial stocks. Huge gains have been registered in many manufacturing and commodity plays, including poor GE, in spite of its financial arm. Too many good companies got dragged down with the bad. Now the market is climbing that wall of worry back to some semblance of rationality.

  • Report this Comment On May 04, 2009, at 8:38 PM, TxTom wrote:

    I've been hearing this "bear rally" and "dead cat bounce" story during the entire time that my portfolio doubled+. I didn't believe the story then, I don't believe it now. This is a unique time in history with unique factors at work, not the least of which is the huge amount of stimulus being pumped into the system. Get it while it lasts folks. This is a once-in-a-lifetime opportunity. Or... you can sit on the sidelines while you miss the next 50% of upside. Your choice.

    (And I agree with TellyL... GE is next to go way up, along with all the good tech stocks.)

  • Report this Comment On May 04, 2009, at 9:06 PM, Ibeatmykids wrote:

    I have to disagree with this article. I don't think today's investors will allow the market to go down to its recent lows. For one, no news is going to be as bad as the shock of hearing that our banking system/housing market/auto industry are all failing. That was massive. The sell off was dramatic and the government stepped in and took the action that they thought necessary. In turn the market has bounced off the bottom and while it is not stable, there is no way investors will be able to keep their fingers off that buy button to let the market go all the way back down. The worst is clearly behind us, this is very very clear to me. True this rally has been dramatic but the drop was even more so. It is simple physics.

    Some investors will sell off some of their gains and there will be people right there to buy those stocks up because bottom line, people are feeling more comfortable and stocks are dirt cheap and people are looking for an entry point. So the author can keep hoping the market will go down........because she wants to buy. Ha. Ironic isnt it!

  • Report this Comment On May 04, 2009, at 9:46 PM, iamnik77 wrote:

    Are investors are losing their minds? Back when the Dow was 14,000 who would have thought that at Dow 8,400 people would be complaining about irrational exuberance because the market was too high? This really is laughable. Buffett liked stocks when the market fell to 10,000 and I have to think fair value for the market is still above 8,400. Dow 6,600 was a feircely manic over correction and I wouldn't bet on getting back to it. Many of us sat on our thumbs while a once in a lifetime opportunity to buy stocks at 30% or 50% of their value passed us by. When people were saying buy and hold is dead is precisely the time buy and hold would make an investor a lot of money.

  • Report this Comment On May 04, 2009, at 10:31 PM, vmh104 wrote:

    iamnik77 you are exactly right... Some people are somehow pretending the Dow at 6,600 was reasonable and representative... of what?? it was completely ridiculous. If the entire financial sector was about to fail it might have been reasonable.. But the financial sector is not going to fail. We have other systemic problems but they are of a far lesser magnitude. The dow could easily get close to the pre 'all-the-banks-are-going-up-in-smoke' scare.

    PS: I did not sit on my thumbs ;)

    PPS: You may need to check on your usage of the word manic ;)

  • Report this Comment On May 05, 2009, at 1:59 AM, chyer wrote:

    People like to compare this with stock markets of the old. 1920s, 1970s.

    There is no comparison. There are more companies in the DOW. The way stocks are traded are different. In this new information age. We move fast in a hurry in both ways, up or down.

    As long as the data is less bad we will keep going up.

    The fear of losing money have become the fear of missing out.

    The S&P have rebalanced several times, especially near the bottom with companies like ACAS taken out of the index. so actually we have not really broken out alot. DOW is a better indicator to see how far we fallen. S&P is the trend leader now

    Trade the trend.

    Most likely we move to 940 200MA and pull back to 875 before resuming up unless the data turns bad.

  • Report this Comment On May 05, 2009, at 2:21 AM, joandrose wrote:

    Why is it so hard for anyone to accept the DOW and S and P reflecting positive figures - after they have been falling through the floor for UNRELENTING months on end?

    It's no big deal!

    Remember - after going down by say 50 % - you have to go up by 100% to just come square . So' for any sort of rally to be worth comment - we need to see a lot of positive figures - a lot more than we have seen so far. It's barely started to turn around.

  • Report this Comment On May 05, 2009, at 2:30 AM, tgauchat wrote:

    The endless stream of rally-positive comments above are anecdotal proof that this is a sucker's rally.

    Pile on board everyone, pile on board the lemming train.

    Just let me know the last stop before we reach the cliff, ok? Please? Promise you won't forget to tell me when to get off, like you did last year?

  • Report this Comment On May 05, 2009, at 4:36 AM, automaticaev wrote:

    whats going to happen when the government says it needs to raise capital for banks?

  • Report this Comment On May 05, 2009, at 4:39 AM, automaticaev wrote:

    This is really stressfull to try to short everyday.

  • Report this Comment On May 05, 2009, at 5:11 AM, maxhoffa wrote:

    yeah, sure, we'll tell you when we reach the cliff.

    so long as you tell us when to sell our longs.

    deal?

    oh wait, you already have told us to sell . . . for the past 2 MONTHS now!

    i wish i had listened to you.

    well, not really.

    if the perma-bears can't see the irony in their stubborn insistence that the market 'had to go lower,' well, i won't point it out.

  • Report this Comment On May 05, 2009, at 5:51 AM, automaticaev wrote:

    i have 4 seasonal positions now... All markets start going up now that usa is opening.

  • Report this Comment On May 05, 2009, at 5:56 AM, automaticaev wrote:

    i just hope Ben Bernanke dosnt mess up my shorts... I need to buy some stuff.

  • Report this Comment On May 05, 2009, at 9:48 AM, JGBFool wrote:

    <Smokey the Bear voice>

    Only YOU can mess up your shorts

    </Smokey the Bear voice>

  • Report this Comment On May 05, 2009, at 1:45 PM, HorsFool wrote:

    While I don't believe that history is a predictor of the future, the study of what happened in the past is valuable in understanding the present. The last time we had a financial correction of the magnatude of 2008 / 2009 was in 1974 / 1975. While I was too young to invest at the time, I was in the job market and well remember the massive lay-offs when unemployment reached double digits. But look what Mr. Maket did back then. He started climbing 6 months before unemployment hit the peak. If an investor waited until the recovery was a sure thing, (s)he missed a large part of the market recovery!

    Just some food for thought from one of your elders.

  • Report this Comment On May 05, 2009, at 1:58 PM, majordm wrote:

    Thanks, Shannon.

  • Report this Comment On May 05, 2009, at 5:52 PM, jesse2159 wrote:

    Read any book on the 1929 Depression. Every one tells the sad tail of rally's that ended in disaster from 1928 before the market tanked to 1940. It was over and over and over. This is no different. A sliver of good news sends the market higher. Then buyers remorse hits, and the investors sell a little in order to sleep at night. Then a little bad news hits, and the anxiety panic starts the sell off. Looking for rational behavior on Wall Street? Good Luck.

  • Report this Comment On May 05, 2009, at 5:53 PM, knighttof3 wrote:

    Maybe it's the "Inflation is coming" rally. Money is cheap again, interest rates are non-existent, gold pays no dividends, real estate is dead, Fed is propping up treasuries. What CAN you invest in except stocks?

    I am waiting for bonds, especially treasuries, to crash and burn once people realize Fed produces nothing except paper money.

    Let's pray Chinese stop buying treasuries and the government wakes up to the unsustainability of spending more than you have, by trillions.

  • Report this Comment On May 05, 2009, at 10:00 PM, Othello4U wrote:

    Inflation or deflation, the real point is that the government has printed and/or borrowed money that can not absorb into the economy, and those birds must come home to roost.

    Our government officials do not need to wake-up, they are awake and know precisely what their actions will produce.

    History has clear examples of what is happening today in the economy, if one is really a student of economics he or she should be able to discern what is on the horizon. Speculators beware, investors happy hunting.

    In short, deflation: gold (money)/stocks, Inflation: income (more gold)/stocks.

    If you think the market is the bulwark of capitalism, think again. It's being manipulated and has been for sometime. So, when the manipulators close a door they must open another, just remember don't panic.

    In conclusion, the Federal Reserve is a private corportaion, who are it's share holders and why has it not paid any taxes on it's profits? Can some one answer those questions and comment on something relevant to the problem and not the symptoms

  • Report this Comment On May 05, 2009, at 11:04 PM, Matt8265 wrote:

    Two thoughts... with excellent writing like this sans hype, you'll never work for CNBC. Second, with excellent writing like this you won't be working for TMF for long.

  • Report this Comment On May 06, 2009, at 12:57 AM, joandrose wrote:

    To HorsFool - you are spot-on with your comments Those who wait for any degree of certainty that the market has turned around will have missed the boat . Learn from history - nothing changes - it's all been said before !

  • Report this Comment On May 06, 2009, at 11:18 AM, Stromprophet wrote:

    All the people who are so high on this rally are drinking the koolaid (and way late to the party...)

    You're jumping in exactly when you shouldn't be. Tell me this...this is not going to be a V market recovery back to 1500 on the S&P...you can forget about it.

    Stock prices are driven by earnings period. In the short term there are extremes, but it always falls in a P/E range, thus earnings growth means stock price growth.

    How can earnings grow while unemployment will continue to contract well into next year? And if we're already up 35% from the bottom...(without one correction mind you) how can we go much further?

    A market always, ALWAYS, retests it's low point at one time or another. One instance you could say it didn't would be after the depression...the DOW bottomed at 41, and only came back down to 50, not a full retest.

    Does anyone really believe losses at banks are done? Housing prices have not stopped declining yet. We're getting a spring bounce, but year-over-year prices are still declining. We haven't even seen the full recession rise of defaults yet, from credit cards, to business loans, to car loans, etc.

    And mark to market works the same way on the positive side...i.e. the assets banks don't have to mark down immediately, can't be marked up immediately either. Meaning, banks won't run like they did before, before all their assets were continually increasing, and being marked up every quarter.

    So why on earth, would any bank ever be priced like it was just 1 year ago, in short order?

    We have triple resistance at 930-950 range right now...that's the 200 day MA, the January peak, and the downtrend line from May/August 2008 lower peaks.

    S&P forward earnings put the P/E at 15 already for the S&P 500...that's way overpriced for the market we're dealing with.

  • Report this Comment On May 06, 2009, at 11:46 AM, PricePro12 wrote:

    The Market is overbought and all we have to do is sit and wait...

  • Report this Comment On May 06, 2009, at 11:57 AM, jesse2159 wrote:

    How is it possible that the banks in the United States made a stunning reversal of fortunes in a month, and the stock markets surged over 30% when all other world wide markets and banks are still reeling? Is this the miracle on Wall Street or the remake of Miracle on 34th Street,....(yes, Virginia, there really is a Santa Clause) No one understands it. So, thank you Shannon for pointing out the oddity in lucid terms even the dullest among investors could grasp.

  • Report this Comment On May 06, 2009, at 12:35 PM, Masterofdabull wrote:

    Isn't amazing how we all think we know the movement of the market, me included. Every week we think wow this must be the bottom, must have had a great weekend. And some weeks are started with an oh crap, I should have dumped everything on Friday, probably watched the talking heads this weekend, the world is ending and such talk. So where do we go from here? We have this money lying around in the banks? Oh no not the banks. We have this money lying around in CDs, oh the banks, and wall street can't borrow the money. Under the mattress is no good, wife cleans under there. So perk up butter cup look at what the companies did in the past, look at the management and then look at the product/service. Do you buy that product/service? Even in a struggling market?

    And hold on for the ride. Inflation will get it if the market doesn't. Hope this cheers everyone up, or at least makes everyone think they have just taken an antacid.

  • Report this Comment On May 06, 2009, at 12:47 PM, automaticaev wrote:

    rofl rediculous ye. Please keep buying id like to pull out of bofi for maximum profit today so that i can take a look at a new and finicial position sometime thurs friday or next week depending on market conditions thx.

  • Report this Comment On May 06, 2009, at 12:50 PM, automaticaev wrote:

    and ive reebout ung 2 days this week now and made easy profit not working but sitting watching tv on my comp. This is easy because you all keep buying. But how high can you go obviously 14k seems to be your maximum limit for the dow.

  • Report this Comment On May 06, 2009, at 12:50 PM, automaticaev wrote:

    all take bofi position for short if you havent already prolly too late now.

  • Report this Comment On May 06, 2009, at 12:53 PM, automaticaev wrote:

    looks like starting to sell day trades on ung now 14.99

  • Report this Comment On May 06, 2009, at 12:54 PM, automaticaev wrote:

    do i hold or take the money??

  • Report this Comment On May 06, 2009, at 12:57 PM, automaticaev wrote:

    bac is worth like 50$ a share at least...

  • Report this Comment On May 06, 2009, at 7:11 PM, tomd728 wrote:

    automaticaev:

    Why is BAC worth $50 ?

    Thank you,

    Tom

  • Report this Comment On May 07, 2009, at 8:35 AM, Usnzth wrote:

    What gives Shannon Zimmerman the right to call hundreds of buyers "ridiculous"? Did Shannon call the top of the market? Did Shannon call the bottom last November? How does Shannon know that this is not the beginning of a long bull market?

    Really, how does anyone know?

    Let's face it, we are all guessing. Some more intelligently than others, but everyone is guessing.

    It just seems petty to me that when one person guesses differently than someone else, that they feel the right to call that other person "ridiculous".

    There are two kinds of investors: Those that guess the market direction and get mad at the market when it disagrees with them, and those who guess the direction and change their guess when the market disagrees with them.

    Shannon appears to be investor #1. I strive to be investor #2. You can tell fairly easily what category each of the previous commentators fall into by their statements.

  • Report this Comment On May 07, 2009, at 1:45 PM, geojak wrote:

    I gotta wonder how much of the article is just trying to sell inside value subscriptions and how much of it is an honest opinion. Of course the market is going to go down, but could it be that the collective have gotten comfortable that uncle Sam is standing behind greenback and things aren't as bad as October? Perhaps only as bad as August? For sure the vast majority of the market has a long way to climb back but I'm shocked how my best performing stocks are all topping out and hitting a technical limit at near their Pre Sept 17 lows (JLL; GMKT). For sure there will be profit taking and I think it's afoot right now. But can we seperate out the profit taking dip from a crash and stay the course to see GNW continue back towards it's inflated glory and or get out before in tanks again back to 1$.

  • Report this Comment On May 07, 2009, at 5:08 PM, Coolview wrote:

    Ridiculous is being bullish during a worlwide recession. Now is the best time in your life to be a value investor not a gains chaser.

    Excuses for buying BAC include "uncertainty is gone" nevermind that certainty is death without additional handouts or severe share dilution. Any gamblers?

    I've tried some Fool services in the past and this article makes a decent case for subscribing to a value letter.

    I'd rather do the work myself now and im currently waiting for prices to fall back down to earth before buying anything else. I own some miners, agriculture and wind. But looks like China has the growth right now followed by Brazil. Im looking for a pullback to get into those regions.

    At least I see a little balance in these posts and not just ignorant exuberism.

    Stay Foolish!

  • Report this Comment On May 07, 2009, at 5:09 PM, chali2na wrote:

    whatever you bulls are smoking, please pass it this way. This country is struggling right now and there is no way we've hit bottom...no way. I myself am an investor, not a gambler, and would rather use my spare cash to stock up on food, bread and water than flush it down the market's toilet. Once we hit 20-25% unemployment in the cities, then I may hear the bottom arguement. Until then, buy American products while the prices are still good. Buy the stocks when we hit bottom. Go Cavs!

  • Report this Comment On May 08, 2009, at 10:48 AM, edvale wrote:

    Step back I think, look at the P/Es post a crash - currently 16 or so [which is the historical AVERAGE], usually bottoms at about 7. So, price in much lower earnings in 09 maybe 2010, and do the P/E to 7 on those earnings rather than historic, and we should bottom at around 5,000 for the Dow.

    Weiss Research has it right in my view.

  • Report this Comment On May 08, 2009, at 1:50 PM, JackPlompy wrote:

    the unemployment is growing slower now, the housing has started to turn around, the shock of a few big banks failing is over. i dont expect a return to normal, but its reasonable for the majority of stocks to return to around 2/3 of their value before the major drop off last october.

  • Report this Comment On May 08, 2009, at 3:15 PM, Ironbob wrote:

    Well I for one am on the side of the author of this article because the many of you sound like drunken sailors on Fleet Week. The myopia most of you are infected with concerns the view of what is actually happening. Rally's based on government intervention are almost always irrationally exuberant...well until the quarterlies come in.

    What do you think is going to happen when GM finally hits bankruptcy court and most assuredly they will? What, you think that will be a case for exuberance? The news in the banking sector is not good. All but a couple of small ones earn a big fat F.

    The problem is that the government can pump all the trillions it wants to into banks, auto companies, and a whole assortment of failing businesses but the fact remains if the quarterlies come in and profits keep free-falling then intelligent investors are going to get out or refuse to get in.

    Right now, the market is clinging to the hope that Messiah Obama will save their collective rear ends but it's not going to happen because the money spigot is drying up.

    With the current crop of imbeciles running the show, it's like watching the Exxon Valdez shopping around for a clue. Invest in small ticket items that are easily stored like popsickles. They're about a dollar a piece now but should be $15 or $20 a piece once all that worthless dollar bill starts circulating.

  • Report this Comment On May 08, 2009, at 5:50 PM, michaelbinCA wrote:

    ...one of the downsides to trying to be just a little bit different....

  • Report this Comment On May 08, 2009, at 5:53 PM, michaelbinCA wrote:

    Ironbob hit some RBI's today. The thing is....how do I put it? Oh, never mind.

  • Report this Comment On May 08, 2009, at 6:41 PM, Matt8265 wrote:

    Nice of the government to pump up the banks so that the banks could dump their shares on the average Joe Sucker. ...Share price goes up while dilution takes place and joe could care less cause Cramer told him to buy..buy...buy.

    The world and Cramer are lunatics.

  • Report this Comment On May 08, 2009, at 6:50 PM, automaticaev wrote:

    well if it is true that cramer and the world are lunatics and gonna buy up worthless banks thats still a great reason for you to buy it and sell it short making u one of the lunatics.

  • Report this Comment On May 08, 2009, at 8:09 PM, automaticaev wrote:

    @ tom Bac is worth 50$ because they control your government and have a lot of slaves that labor for their profit. Bank is power and money. Its worth 50$ because eventually you can sell it for 50$

  • Report this Comment On May 09, 2009, at 8:53 AM, crushers wrote:

    I have bought a number of bank stocks in the past month. Obviously I am doing well. (You gotta buy em when they are clobbered right?) It takes courage for sure. The reason I had the courage? Well, that's something that I have yet to see discussed anywhere here. Its something called fundamentals.

    Remember, these banks have been forced to write down assets at a ridiculously low number. Remember what I am telling you, there will be WRITE UPS. We are already starting to see a few. Also, the yield curve is in a place that the banks are going to make money hand over fist for a while! Nobody is talking about that. They are literally borrowing at 0% for the time being and lending on a 30 year mortgage at 5%. That's a huge margin!

    The banks are poised to start having very good quarterly numbers. The easiest money has been made already. When everyone is panicked, that's the time to buy. When everyone is buying, it's time to be cautious. When Citi was at $1.80, people were running from the hills. Now it is a short squeeze candidate with insiders buying and 22% of it's stock short. Bank of America at $7.50 was the place to be. Even if you didn't know what to buy, you could have bought UYG, the financial ETF.

    My point is that everyone wants to call this a dead cat bounce. That's why it won't be. People have been calling it a dead cat bounce since 7,000. Ummmmm, ok.

    The fundamentals are changing, not only for financials, but for the economy as a whole. Retailers are raising estimates! Firings are at least slowing down. Don't miss the boat. If you are a long term investor, this is it folks. Back up the truck. Stop listening to people who are concerned about the next 6 months. Think 6 years. Where will bank of america be in six years??? Certainly not out of business. How about Dell? You think it will be $11 when the recession is over in another 12 months of not sooner? And you think you have time to wait? Not so fast my friends. The market is looking 6 months out all the time. That's why we are rallying. The fundamentals are changing.

    Haoppy investing.

    Crushers

  • Report this Comment On May 09, 2009, at 1:03 PM, RaiddinnRZ wrote:

    Mark to dream on accounting?

    Last I checked we were utilizing mark to stupidly low values accounting.

    I wish I could buy me some CDOs for 30 cents on the dollar. Apparently that is doable for institutions and just not doable for me.

    Banks are the first to go down in a recession and the first to come out of it. There is no good reason to believe that given our position between there, that we are not on the second half.

    Fear can't rule forever, anyone that was alive and investing during black friday and the dot com bust should be well familiar with this concept.

    Raiddinn

  • Report this Comment On May 09, 2009, at 2:49 PM, multi007 wrote:

    I dont know what the prices of my holdings AA, BAC or HIG or DRYS, MGM should be, but I went all in in February 09 and doubled my money so far. I gave back 25% for DRYS the past 2 days and may give back more (i'll buy more too since its going down because of the recent $475 mill stock offering - which happened before and drove the stock down to $5 and it rebounded in a few months later), but I look at these stocks and say "These were $50,to $110 stocks. In 5 years (and as a 36 year old person) I got nothing but time on my side and long term horizon - I say to myself "man these stocks are on sale!" Will I be right? Who knows. Will AA, MGM, HIG, DRSY or BAC go bankrupt? I dont think so. I put my money where my mouth - er keyboard is. Im all in - 100% in these equities at 20% each.

    I look at people all around me and the ones who have jobs, are saving, saving, saving. I ask them "For what?" They say "In case I loose my job". Ok. Fair enough. I did the same thing. But once people realize they wont be laid off, people will return to spending and with these savings accounts get fatter and fatter, the spending will come and it will happen in droves. What better stocks to be in than AA, BAC, MGM, DRYS and HIG? Sure - dollar store? its safe - if you want a single digit returns, but....

    Fundamentals are good with these - we'll see though.

  • Report this Comment On May 09, 2009, at 4:26 PM, StopLaughing wrote:

    The banking system has basically become a utility. The government would never let one of the big electric utilities go out of business and permanently black out large metro areas.

    Ditto for the banks. Some of the big banks are partly owned by the gov and all are more regulated with a lot more regs to come. Hopefully a lot more regs for the shadow banking system also.

    Banking is now a utility and banks may be evaluated somewhat like utilities. That seems rational to me.

  • Report this Comment On May 10, 2009, at 12:14 PM, offthepoint wrote:

    The bullishness prevalent on this thread is probably due to those who failed to sell a year ago.

    They are now waiting for their money back and have nothing to lose [and everything to gain] by singing the praises of government bailout deliverance.

    If those same people thought for one moment about the absurdity of a rally without pull back or a financial system with 50% [$5trillion] losses still unaccounted for, they might start to do the selling now that they should have done last May.

  • Report this Comment On May 10, 2009, at 8:39 PM, TerranFirebat wrote:

    There are plenty of value stocks right now and there are also plenty of overpriced stocks. Remember, all that you will get with bottom picking are dirty fingers. Get the good stuff while you can.

  • Report this Comment On May 11, 2009, at 3:44 PM, Ironbob wrote:

    Look, I know I rained on the bully parade but the fact is, the news comes in and it's not good. Look at the last unemployment report as illustration. We're now told that we have lost over 500K jobs as opposed to over 600K in the report prior. We're being sold that this is a GOOD thing because well...it's lower!

    The fact is a 500K job loss is a near economic disaster in the minds of rational people. There comes a time when job losses will lessen of course but that doesn't mean things are on the upswing. It could mean that we're running out of jobs to lose. At some point what's left is bare bones operations and bare bones usually doesn't make a whole lot of money.

    If you want to hold out then for God's sake buy value dividend stocks! I'm up almost 5% for the year and part of that is attributed to reinvestment plans. Yes, there's always the risk of the dividend being cut but lowered earnings don't always percipitate a dividend cut and certainly doesn't universally urge a wipe out either.

    Buy low and sell high doesn't work well if the company is crap. Don't believe me, just ask a few internet company speculators during the 90s. Usually in those cases, one is buying in to a company that is on the way out but the buyer refuses to acknowledge it. For every google.com investor there's usually 3 pets.com investors. Which one would you rather be?

    For a great many people, a down market is ripe for speculation but for me, a down market is the greatest opportunity to buy VALUE. So don't think in my previous message that I'm suggesting staying out of the market because I'm not. What I am saying is "be careful what you buy because you just might get it."

  • Report this Comment On May 16, 2009, at 5:17 AM, offthepoint wrote:

    'Buy low and sell high' works every time, my friend. It's all about timing - nothing else.

  • Report this Comment On May 22, 2009, at 12:34 PM, sa44ron wrote:

    CRAZY

    It just may be a lunatic you are looking for. (Billy Joel)

    .

    Buy large and medium gold and silver producers. Some of the largest and best financed ones are Canadian. When Obama confiscates the gold held by Americans, look to Canada.

    .

    Disclosure: I own several of these companies stock.

  • Report this Comment On June 08, 2009, at 7:40 PM, stgmorgan wrote:

    The permabears are right about one thing there will be a correction on the way back to more normal times whatever that is. So be prepared and keep some dry powder and buy some covvered calls. Soon you will able to buy stuff at between a 5 and 20 % discount but I do not think you will get better bargain than that.

    The market is acting like DJIA 7000 is a possibility in the next few months but DOW 10000 in a year is virtual certainity.

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