Archive for the ‘Stock Market News’ Category
Per the Wall Street Journal, Bank of America (NYSE: BAC) is in talks to finally acquire ailing mortgage giant Countrywide Financial (NYSE: CFC). After buying a 16% stake in CFC last year, Bank of America has returned to the table to buy the rest of the company outright. It’s a good strategic move, as they’ll be buying at a significant discount in the wake of the subprime collapse.
Further, since a subsidiary of the company is technically a federal “thrift”, BAC may slip through a loophole in the law that normally prevents a bank from owning over 10% of US national deposits after an acquisition. Even so, given the current state of financial stocks and the overall economy, it looks like it will be a long road to recovery for both of these firms.
Tags: bank of america, countrywide
Buckle up kids, 2008 is starting to look like the year of the bear. In the midst of tightening credit markets, rising unemployment, and a housing market that continues to head south, the US economy may put the bulls out to pasture and succumb to the dreaded “R” word. That’s right, after 6 years of economic expansion, many investors believe the US will feel the pinch of a recession in 2008.
No Shortage of Naysayers
Goldman Sachs came out with a notably pessimistic economic report today, announcing that recent softness in the job market indicates a recession could be upon us within 3 months, if not sooner. AT&T also added fuel to the smoldering fire when it revealed it was having to disconnect an increasing number of consumers due to missed payments. Throw rising energy prices, shrinking corporate capital expenditures, and a tepid holiday spending season into the mix and you have all the makings of a bust.
Don’t Despair
For investors who are patient, however, bust cycles can be an opportunity to find good companies that trade at a discount to intrinsic value. In fact, there is an old saying that “smart investors buy when there is blood in the streets”. This is true, as long as you take a long term approach to investing. In the next several weeks, I’ll be taking a look at some of the companies I believe will reward patient investors over the long term. After all, Rome wasn’t built in a day. Neither was Berkshire Hathaway.
Tags: bear market, credit market, housing, recession
Stocks were lifted by positive GDP growth numbers today, as investors chose to buy into the market after the announcement and ahead of the Fed’s rate decision. However, like many indicators, GDP is a lagging metric of past performance. While the news is still good, many are still scratching their heads and wondering if this is simply wishful thinking for the economy. With the recent rise in oil prices, the tightening of credit markets, and the housing “flu”, we could be in for some stormy weather going into 2008. Tissue anyone?
Investors are crossing their fingers and hoping another rate cut will be announced by the Fed today. With the housing market, a credit hangover, and high oil prices weighing on Wall Street’s mind, many fear consumer spending (which accounts for almost 2/3 of GDP) will take an extended holiday without Fed intervention. Still, while many believe the Fed will act, GDP growth may slow anyway.
Related Links:
http://www.federalreserve.gov/
Warren Buffett, famed value investor and head of international bellwether Berkshire Hathaway, is rumored to be in talks to obtain a minority interest in investment firm Bear Stearns. The company, having suffered from the subprime lending disaster, had seen its stock pounded after several of its hedge funds collapsed. The latest word on the street is that Buffett sees value in the company at its current price, and may join the ranks of Bank of America and Wachovia in buying a minority stake in the firm.
However, many also believe that this is pure speculation - hedge funds and highly leveraged investments aren’t exactly Buffett’s cup of tea. Remember the most important rules of value investing:
- Never lose money
- Always refer to rule #1
Unfortunately, Bear has already broken them both. I’m not sure the rumor is really true, but I suppose we’ll see in the months to come. Buffett has certainly surprised us before.
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