Archive for the ‘The Stock Market’ Category
Warren Buffett appeared on CNBC this morning (with another market legend: former Vanguard CEO John Bogle) to discuss his offer to re-insure bonds from troubled bond insurance companies such as MBIA and Ambac. His offer would cover around $800 billion of municipal bonds but would not include any portfolios of exotic instruments such as CDOs, etc.
Buffett on Stocks
Buffett was also asked about his opinion on current stock valuations. While he did mention that he believes stocks are priced in the general range of fair value, another comment he made concerned me. Buffett stated that corporate profits have been strong for some time, and both he and Bogle agreed that this could not last - bottom line: both believe a reversion to the mean in corporate profits is imminent. If the market has not already factored this into stock prices, the stock market could have further to fall moving forward.
In an attempt to steady the stock market in an election year, Congress revealed a plan to deliver $150 billion to businesses and consumers via an economic stimulus package yesterday. Bottom line: most individuals will get a $600 tax credit based on 2007 tax information ($1,200 joint) as well as an additional $300 per child.
Boosting Businesses & Housing
In addition, as part of the plan businesses now can write off half of their cost of capital purchases as well as deduct up to $250,000 for expenses (vs. the prior limit of $125,000). Also, in an attempt to revive a floundering housing market, the limit on government sponsored mortgages would be raised to over $600,000 from the current $417,000.
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