Friday, March 14, 2008

A Lot of Fear in the Market

Bear Stearn's troubles really shook things up today. This morning inflation numbers came in lower than expected, and the market was ready to rally. But Bear through a big curve when news of their lack of liquidity required them to borrow money from the Fed through JP Morgan. Almost 2 billion shares changed hands on the NYSE today. Bear Stearns stock trades an average of 10 million shares per day. Today, 186 million shares changed hands as the stock dropped 47%. The fear isn't just about Bear, its will this spread to other banks. I tend to think there could be one or two, but I don't see a domino effect. Bear was reporting troubles long before any other investment bank was. Goldman was considered to be unscathed until about two weeks ago. Morgan Stanley had some issues, but has continued to look ok.

I'm still looking to buy. Remember Buffett's famous quote, "Be fearful when others are greedy, and be greedy when others are fearful." There is no shortage of fear out there right now. I think some of Buffett's stocks look attractive. Kraft, Johnson and Johnson, US Bank, Coca Cola, Wells Fargo, Proctor and Gamble, American Express.

These are big companies that for the most part have great balance sheets, have little to no risk of default, and little risk of a major decline in earnings. But their share prices have declined. That's why I'm looking hard at these stocks.

Have a great weekend!

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