02-09-2009, 04:13 PM
Grieve Wrote:The problem with all the financials (or all companies with large financial arms, like GE) is that investors are afraid that they will either go out of business, or be nationalized, or that the common shares will be wiped out through some other government action, such as major dilution.
I don't think there is any doubt that GE, Bank of America, Wells Fargo, and so on are excellent companies that will be worth much, much more in a few years...if they survive. But it is entirely possible that they won't, which makes any long term investment pretty much a gamble.
So really, why risk it? There are plenty of excellent companies out there that are beaten down right now that are far safer to invest in for the long haul. Apple and Microsoft aren't going anywhere, unless we truly do have armageddon. Or go with McDonalds, or WallMart. For now, bank stocks are just too risky.
Having said that, they are great for a trade! GE up 13% today, and BAC has doubled since it's low on Thursday.
That fear is exactly why the price of those companies is well below their real value. The only real question for me is how long that fear remains in place before I see a return on my investment and I get to say "I told you so" .. maybe it will be 2-3 years, who knows. I'm mostly refering to Wells since I know alot about them. I still need to get that confidence level with GE and decide if I want to get more into it.
"Hamilton is really a Colossus to the anti republican party. Without numbers he is an host within himself. They have got themselves into a defile where they might be finished but too much security on the republican part will give time to his talents and indefatigableness to extricate them. We have had only middling performances to oppose to him. In truth when he comes forward there is nobody but yourself who can meet him. His adversaries having begun the attack he has the advantage of answering them and remains unanswered himself. For God's sake take up your pen and give a fundamental reply to Curtius and Camillas" - Thomas Jefferson to James Madison