Thursday, September 18, 2008

An Attempt at Clear Thinking

Okay, so the market is pretty much chaos right now. There isn't anyone who won't argue that. Will Goldman Sachs and Morgan Stanley survive? I don't know. But does it matter at this point? We're about out of investment banks now. Truth be told, some clear thinking would help everyone right now. Who isn't frustrated? But its times like these, believe it or not, when the money is MADE. In case anyone didn't notice Warren Buffett picked up Constellation Energy Group for $26.50 per share. It traded at nearly $70 last week. Nice job, Warren.

In the aftermath of this crisis, you're going to have many people who will be very apprehensive with their brokers. A lot of people. These people are going to look at who got them into things like mortgage-back securities for investments, among other things. Who pushed them? The big brokerages and investment banks. (Lehman, Bear, Merrill, Morgan, Goldman). Yeah, those guys. So okay, Ken Lewis, you got a great company in Merrill Lynch this week. But their perception in the investment world will be changed. For Good. They are going to have a tougher time convincing investors to place money in their hands.

What am I getting at? Medium-level or somewhat discount brokerages are probably going to see a major rise in business. I'm talking about Charles Schwab, Fidelity, TD Ameritrade, and Etrade. I'm going to focus on Schwab(SCHW) a little. They have a well known, successful business model. Cheaper commissions than the big guys, but more service and features than the little guys. A good place to be if you asked me. They've been making a major push into the banking business, and it has worked. They offer high-interest checking with no ATM fees anywhere in the US. Its a pretty good program. Shares have sold off a bit this week (what hasn't?) to around $22. I like the stock here, and would love it if we see it lower due to overall market weakness.

So, there's my attempt at clear thinking for the day. Let's keep our eyes open like Buffett.

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