Only Time Can Cure What Ails Us: Stocks Slump on Bailout, Stimulus News
Aaron Task 10 February 2009
Stocks slumped Tuesday in the wake of Tim Geithner’s midday announcement of the new bailout plan and the Senate’s subsequent approval of the stimulus bill.
In recent trading, the Dow and S&P were each down about 4% while the Nasdaq was off by 3.3% as any goodwill created by last week’s rally (the first up week in five) dissipated quickly.
“This [bailout] package may help banks to be able to lend but they have to be willing to lend and consumers willing to borrow,” says Vitaliy Katsenelson, a portfolio manager at Investment Management Associates, author of Active Value Investing. “The only cure for what we have going on is time. Instant gratification is not in the cards.”
Clearly not, and not even for the “stress test” element of the plan, which Katsenelson calls a “net positive.” But it’s only a positive if the government allows bad banks to fail, which doesn’t seem to be the case, as detailed here. For these and other reasons, Katsenelson continues to avoid the big bank stocks but does recommend one financial with a great brand and (relatively) clean balance sheet.
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Only Time Can Cure What Ails Us: Stocks Slump on Bailout, Stimulus News
Aaron Task
10 February 2009
Stocks slumped Tuesday in the wake of Tim Geithner’s midday announcement of the new bailout plan and the Senate’s subsequent approval of the stimulus bill.
In recent trading, the Dow and S&P were each down about 4% while the Nasdaq was off by 3.3% as any goodwill created by last week’s rally (the first up week in five) dissipated quickly.
“This [bailout] package may help banks to be able to lend but they have to be willing to lend and consumers willing to borrow,” says Vitaliy Katsenelson, a portfolio manager at Investment Management Associates, author of Active Value Investing. “The only cure for what we have going on is time. Instant gratification is not in the cards.”
Clearly not, and not even for the “stress test” element of the plan, which Katsenelson calls a “net positive.” But it’s only a positive if the government allows bad banks to fail, which doesn’t seem to be the case, as detailed here.
For these and other reasons, Katsenelson continues to avoid the big bank stocks but does recommend one financial with a great brand and (relatively) clean balance sheet.
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