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    Ben Stooge's Avatar
    Ben Stooge is offline Corporate Press Weasel, iTulip Select Member
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    Default Buy Financials! Catch a falling knife!

    Buy Financials! Catch a falling knife!

    By Ben Stooge, Corporate Press Weasel

    Years ago, I received a letter that asked a stupid question. The idiot writer asked, "I read you and you’re always telling me to buy stocks just before they go down or go down some more, and to not buy commodities before they go up some more. My portfolio is a wreck from following your advice. Why, oh why, do I listen to you?”

    I pinned the letter to the wall over my desk where it taunts me. This morning I finally tore it down. Enough of you! Listen up, dummy.

    If you read Business Week and The Wall Street Journal you’re going to get all confused. Those writers never agree with each other. It’s as if the editors give them freedom to express their own opinions. They are usually flat out wrong. Why read these writers when they are inconsistent and incorrect most of the time? Read me instead. I’m very consistent. I will always tell you to buy stocks. Buy at the top. Buy at the start of a bear market. Buy at the middle and buy at the bottom. In the long run stocks go up! So what if you may not live long enough to make up for your losses. That’s not my problem. My problem is that I’m 63 and need every dollar I can earn shilling for Wall Street today.

    Take financials, for example. Famous big name financial writers are down on financials.

    Ridiculous.

    They say the investment banks are early innings of attempts to de-leverage their portfolios of garbage mortgage securities. The collateral for the loans that those securities financed will continue to crater, they claim. For years Wall Street stocks and shares of financial companies will be a bad buy.

    Nonsense.

    That ill-educated youthful Wall Street Journal writer doesn’t know the first thing about how to evaluate a sector. Only a fool expects crashing stocks to never rise again.

    Look, home prices can’t decline forever. There is a natural limit to how many mortgages can default, somewhere between some of them and all of them. Debt can’t de-leverage forever. Sooner or later the mortgage securities owned by these banks will stop falling and so will financials. Like the proverbial falling knife, they will stop – thunk! – as they stick into the butcher block below. Should you wait for that? Not on your life. Stick your hand out now and catch a few.

    Won’t that hurt, you ask? Of course it will. Your brokerage account will bleed and bleed and bleed. But your pain will fade away after the mortgage market stops collapsing in ten or twenty years. Then your financial stocks will go through the roof, or maybe back to where they were when you bought them.

    The time to buy any stock or sector is after it’s been hammered down. The time to buy financials is when they are being slapped down by Wall Street Journal and Business Week writers and are trading at multi-year lows but before they reach the levels they hit in the 1970s.

    You can bet that will happen again. My correspondent doesn’t understand that the economic past predicts the economic future. It’s all about cycles. The happen again and again. Buy things when everyone hates them, but never sell them. Journalists lie about this. They tell you to sell stocks that are falling and have a long way to go. Patience is the key and the willingness to understand that investing is about your money in Wall Street’s pocket.

    Editor's Note: Ben Stooge parodies a corporate media business commentator. He does not own any of the stocks or other garbage he shills. He doesn't know what he's talking about but that doesn't keep him from expressing his opinions as if he did. Just like the guy he parodies, you should never take him seriously.

    Previously by Ben Stooge:
    Grease my Palm with Big Oil
    Another View of the Economy from Abroad

    iTulip Select: The Investment Thesis for the Next Cycle™
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    Last edited by FRED; 06-26-08 at 01:53 PM.

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