Things Just Got A lot Messier

Like I predicted, the market saw red today. With so much news thrown at the markets and profit-taking occurring, it was only inevitable. Lets try and clear some things up.

Financials

While I was scouring the web last night, I could not help but read some comments that were floating around. My favorite was that both Goldman Sachs – GS and Morgan Stanley – MS would surge higher on Monday (why you shouldn’t listen to everything you read).

For those that are a little shaky on what has gone on with the two companies, let me somewhat clear it up. Essentially two “investment banks” have been “taken over” by the government. The move is to allow these two companies raise funds easier by making them bank holding companies.

It all seems fine and dandy until one actually considers the effects. Companies like Morgan Stanley and Goldman Sachs essentially made their money by taking risk. Yes it eventually caught up with them, but their profits were driven by this high-stake game.

Now that these companies have become bank holdings, they can no longer practice the same type of risk as before, which means they won’t see the same type of success but it will help them raise capital. Until the overall problems can be solved, both companies will most likely lose great value. Eventually these companies will be let free and the stocks will rise back up, but who knows how long that will be and what will happen in between?

We can now throw on top of all this that billions if not trillions will be spent on bailing out some of these financials, yet there is no clarity to this situation as well. People are debating what protection tax payers will get, if any, or if we should even help these companies. Why not just let them fail?

Oil

Call me a fortune teller, but I did predict oil prices going higher. With the record setting $16 single day price jump, it didn’t help matter any better.

The dollar dropped and uncertainty in the gulf is leading to the resurgence of oil. Perhaps it could be a short-term move up, but in the long-run oil is bound to move up anyways.

Blah, Blah, Blah

Last week it almost seemed like things were cleared up; however, it almost seems like they were more complicated than before. I personally feel that unless we just let things fail it will only take longer to solve the problem. For example, say we kept spending money on repairs to an old car. Eventually it gets to the point where we could of saved more time and money if we just dumped the piece of junk.

Stocks will continue to move lower for the forseeble near future; however, I still feel confident in looking for great buying opportunities. There are tons of them out there.

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