I’m not sure why our federal government waited until $10 Trillion in wealth was wiped out before acting, but it is finally done. The silly mark-to-market rules have been eased and age-tested accounting rules are being allowed to prevail once again. Expect financial institutions to begin altering their balance sheets accordingly which will probably mean large paper gains. I don’t expect the gains to recover the paper losses of the old FASB rules but it will certainly make it easier for balance sheets to stabilize.
This action will also help ease the credit markets a little. While some assets will sit on the books at questionable levels, good assets will find an easier rode to market. Confidence still has to recover further, but this latest move might signal the finality of the bear.
Certain firms will certainly have some issues recovering from last years beating but the healthy ones will, indeed, recover.
Here are a few issues I like and probably worth a look:
| ARLP | Coal producer: coal will be the winner in the clean energy arguments |
| VFC | Retail: as the largest apparel company and a strong balance sheet, they will probably move higher early |
| CHKE | Retail: same story, different approach as VFC |
| AINV | Financial: as the credit markets loosen, this stock will recover quickly |
| MCGC | Financial: same story as AINV |
| DOW | Chemicals: while they will have some effort digesting Rohm, these guys are profitable on a scale even Bill Gates would admire. I’m looking for a 50% rise in the next 12 months |
| FRO | Transportation/Energy: my long time favorite firm is still making money and this management team knows how to play their markets well |
| SFL | Transportation/Finance: as the market eases, the reality of billions in built in sales will send this issue back into the 20’s |
If you want a stable 4% – 6% return, play on VFIIX (Vangaurd GNMA). I would not keep CD’s and the dollar play is probably got less risk/reward benefit.
Of course, the broad approach to riding the banking sector back to health is still XLF. And the grand-daddy of diversification is still the old SPY (spiders).
