Monday, November 19, 2007

More Selling

The financial media has basically proclaimed that we are headed for a recession. Although it is easy to side with this argument with the way current trading action is heading, I'm still not sold on it. The market is continuing to price in risk of future events, just like it should. Based on the evidence we've been given, stocks will respond accordingly. But looking at today, not much has changed. Citigroup (C) was downgraded, and that is probably the biggest news of the day. But all the headlines are re-treads. Yes, the housing market has been poor. This has spilled over into the mortgage and credit markets. From a valuation standpoint stocks are still mostly attractive. To me, sentiment has to be over the top positive for me to think we're headed for a decline. We're in the opposite situation right now. As hard as it is to think this way, it is the only way to be a successful investor. I can guarantee you that Buffett and other successful investors are excited at the opportunity of finding buying opportunities which just aren't available when stocks are at levels like they were a few weeks ago.

Don't get me wrong, I'm not issuing an "all-clear" or "buy now" proclamation, but rather a "don't panic." Don't get shaken out yet. There's still a lot to be seen before we can announce a bear market. If oil prices subside, the Fed will cut rates again before the end of the year. If things stabilize with the banks, it will also allow the stocks with positive outlooks to climb again.

Thats it for now, and I'll keep updating with anything of note.

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