Friday, December 14, 2007

Negative Sentiment Aplenty

The inflation numbers came in higher than most expected. Inflation is one issue that has concerned me, because if it gets out of control, it will erode the consumers ability to spend. If the consumer stays strong though low unemployment and manageable inflation, the market should avoid recession. As far as other issues, I continue to think the credit crunch has been overblown. We're talking about assets that are very difficult to value, so everyone just assumes the worst and that they all went bad? I think this is why banks, Citi specifically, are agreeing to take on more of these loans. The same with the private equity groups. They are taking advantage of panic in the markets, and buying assets at incredible values. But at the same time, this doesn't necessarily mean that these banks are buys for you and me. There will be future uncertainty, and their stock prices could easily fall even more. But in the next few months, I think there will be tremendous opportunity.

Aside from that, there is just too much negative sentiment out right now to have a drastic effect. Major corrections and bear markets begin with euphoric sentiment, not cautious.

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