Wednesday, September 17, 2008

And the fire continues...

It's only Wednesday and the fire continues in global markets. These are the days when having a playbook of prospective stocks ready to buy comes in handy. When investors see their 401k's and investments take huge dives, their are two extreme actions.

"I'll hold on, I don't want to take losses now, and hold on to losers no matter what. Things will turn around"

or

"What the hell is going on, Lehman, Merrill, and now Morgan!???? I need to liquidate, move into cash/gold"

The least popular action these days is to buy more equities. For those without capital "buying low" is not even a possibility. With the limited capital I have left, I decided to add to my Select SPDR Financials (XLF) today, and added Southern Copper (PCU) a few days ago. "Discipline" is an overused word, but now more than ever is the time to stick with it.

An update on Student Lending

An article in the WSJ reported today that the U.S. Department of Education and Sallie Mae are battling out over who will be paying for processing student loans that are backed through the Education Department's loan purchasing program. A few months ago the US government announced it would step in to inject liquidity into the student loan market after auction rate securities that back much of these loans froze. In my analysis back in March covering the for-profit education sector I had quickly discounted ITT Educational Services (ESI) due to their large exposure to private loans. With private lenders drying up, borrowing costs increasing, and Sallie Mae's fight with the government coming to light, it is rather impressive for ESI to continue it's upward climb.

Whatever it is that ITT Educational Services (ESI) is doing, they are proving me wrong... well, partly wrong :)

We'll see what happens tomorrow with Morgan Stanley and Wachovia.

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