As most have heard, news came out on friday that JP Morgan, the largest U.S. bank, lost 2 billion dollars last month when one of the financial firms trades back fired on them. The news has crushed stocks in the financial sector as investors are concerned that the U.S. financial system could once again become unstable. First of all, that's not the case. The trading loss at JP Morgan was merely the result of some bad decisions and "bets" that the trading department at the company made and lost money on. To repeat for emphasis, the U.S. financial industry is stable and growing. While the 2 billion dollar trading loss at the bank is massive, it's more damaging to the overall confidence that people and investors have with respect to the banks and the stock market in general. Warren Buffett, the famed Wall Street investor and second richest man in the world once said, "it can take a man 20 years to build a reputation, and only 20 minutes to destroy it"...and that's exactly what JP Morgan has done; they've given the stock market and the banking industry a black eye. That being said however, eventually this will be old news and investors will once again focus on the positive fundamentals and growth in U.S. banks.
My personal take on the banking sector? I think in light of the growth we are seeing, and because valuations (stock prices) are so ridiculously low, I think they're a ton of extremely inexpensive well run companies out there to invest in (of course only for someone who has a longer term investment time line). Some of the banks stocks that I think are too cheap not to own are Etrade, Citigroup, KKR Financial, Sallie Mae and Bank of America...if someone has the time and patience, then there is going to be a ton of money made by owning these stocks over the next year. I have not done so yet but I am looking to buy stock in some of these names over the next several days.
Broadly speaking, the markets are once again down so far today; stocks have been down 8 of the last 9 as the European financial crisis continues to frighten investors amidst concern that Greece will leave the European Union and more financial and social chaos will ensue. Broken record time...we are being held hostage by Europe and our markets will continue to struggle as long as the same issues over their exist (which they will for quite some time). While frustrating, the way to make money is to take a longer term approach to investing and buy stocks when they are down (on sale) and sell them when they are up (get expensive), and as I've written stocks are pretty cheap right now which is why I'm positive on the markets right now.
In the news this weekend and today, Scott Thompson the recently named CEO of Yahoo, a stock that I own, has resigned. Also of great importance is news that Daniel Loeb, one of the largest shareholders of Yahoo now has 3 seats on the Board of Directors...this is big news and the reason the stock is up today because Mr. Loeb is an activist shareholder and has been pushing the company to sell itself inorder to maximize shareholder value (this is why I own the internet powerhouse because I think they will eventually get bought by another company).
That's all for now
