As the great investor, Sir John Templeton, once wisely noted, “For those properly prepared in advance, a bear market in stocks is not a calamity but an opportunity.” Right now, that rare opportunity is at hand and we have recently been able to snatch up some great ï¬nancial franchises at bargain basement prices.
With the sub-prime debacle dominating the headlines, we are convinced the bad news is out and part of this fnancial storm is coming to an end. That said, the Fed’s willingness to step in to protect our economy does not absolve all the excesses surrounding bad credit decisions. The mortgage mess is just one piece of a bigger puzzle and overshadows darker issues surrounding private equity and hedge funds. In fact, we expect a lot more fallout in these areas and are not alone in our bearish views. Jeremy Grantham, head of the well-respected investment ï¬rm GMO, predicts that in just ï¬ve years “…up to half the hedge funds and a substantial percentage of the private equity ï¬rms in existence today will have simply ceased to exist.” since 1929 and it’s easy to see why a protracted, more signiï¬cant correction might be looming. But the march down won’t be led by the publicly-traded ï¬nancial stocks, even though this is where the market’s summer difï¬culties.
Looking forward, we believe our portfolios are poised to do well in the difï¬cult markets that lie ahead. For one, our ï¬nancial names are cheap, which provides a considerable margin of safety. Meanwhile, our other high-quality issues have the ï¬nancial strength and consistent growth to help keep them insulated from market shocks.
Read the complete report
With the sub-prime debacle dominating the headlines, we are convinced the bad news is out and part of this fnancial storm is coming to an end. That said, the Fed’s willingness to step in to protect our economy does not absolve all the excesses surrounding bad credit decisions. The mortgage mess is just one piece of a bigger puzzle and overshadows darker issues surrounding private equity and hedge funds. In fact, we expect a lot more fallout in these areas and are not alone in our bearish views. Jeremy Grantham, head of the well-respected investment ï¬rm GMO, predicts that in just ï¬ve years “…up to half the hedge funds and a substantial percentage of the private equity ï¬rms in existence today will have simply ceased to exist.” since 1929 and it’s easy to see why a protracted, more signiï¬cant correction might be looming. But the march down won’t be led by the publicly-traded ï¬nancial stocks, even though this is where the market’s summer difï¬culties.
Looking forward, we believe our portfolios are poised to do well in the difï¬cult markets that lie ahead. For one, our ï¬nancial names are cheap, which provides a considerable margin of safety. Meanwhile, our other high-quality issues have the ï¬nancial strength and consistent growth to help keep them insulated from market shocks.
Read the complete report
