I hope everyone had a wonderful Labor Day weekend...but I really hate coming back to work the day after a holiday weekend to see the stock markets around the world getting crushed. So, yesterday was Labor Day, and unfortunately today is Groundhog Day. Why? Because we're dealing with and suffering from the same "mess" that we've been talking about for the past couple of months.
Of course there are still major concerns over the stability of the European financial system, Greece is racing towards a default on their debt (bankruptcy), European growth has slowed dramatically, U.S. policy makers in Washington still don't have a solid plan to stimulate the economy, and of course my biggest fear is that the continued assault on the countries largest banks by politicians and state attorney generals could force the U.S. economy back into a recession...why a recession? Because in order for our economy to continue to grow, albeit at a slow pace, we need the banks to lend, we need the banks to grow deposits, and we need the banks to focus on business as opposed to the continued efforts by the morons who believe there needs to be tighter regulations on the banks (they've already changed their practices and been regulated), that banks need to decrease in size and sell off assets, and that they shouldn't be loaning money as aggressively as they are. This is just plain stupid, and not only is it inhibiting economic and personal income growth, it's degrading the overall confidence of the American citizen (this morning it was released that President Obama's approval rating was at the lowest point since he took office - not being political just merely pointing out that the average joe isn't happy with they way things are going).
So again, what does all this mean, and how can I come away from reading this with a positive outlook on the stock market and the economy? That's a tough one...I say continue to know that as long as our politicians don't destroy the growth in our banks, as long as EVENTUALLY Europe can get their act together, and as long as stocks go on sale and there is value to be found in buying them, then everything's gonna be alright (as Bob Marley sang in "No Woman No Cry").
The really good news, despite the market being down over 300 points as I type, is that stocks are EXTREMELY undervalued as they have already priced in a severe recession (which we are not in), and many stocks are trading below their liquidation values (meaning that if Citigroup were to close their doors tomorrow, they would return at least $36.50/share to their stock owners despite the fact that the stock is trading at $27/share). Also of note, continue to watch the merger/acquisiton stocks that we've talked about:
- 99Cents Stores (NDN) - the largest shareholders have offered to buy the company for $19.20/share and it's trading at $18
- Clorox (CLX) - a hedge fund manager has offered to buy the company for $80/share and it's trading at $68
- Etrade is a possible acquisition candidate and it could fetch a price of $18 - $20 but it's currently trading at $11 (the most likely company to buy Etrade is TD Ameritrade or a private equity company)
- Suntrust Bank (STI) - is a possibly acquisition candidate and it could fetch a price of around $35/share but it's currently trading at $18 (the most likely company to buy Suntrust is JP Morgan).
Btw, congratulations to all the Clemson/Carolina fans on their respective wins this weekend (as well as the Terriers). And yes I know the stock market is ugly today, but the verdict is still out on whether it's as bad as the new Georgia and Maryland football uniforms!
