A colleague of mine has an idea.
And I usually listen when he has an idea. Because he's a smart guy. Very smart. Plus he was one of the top analysts at The Street. And before that he was a fairly major player on Wall Street itself for years... a former sell-side analyst.
Anyway, his idea is this: With sub-prime imploding, now is the time to find the perfect "contrarian" play on the sector. Go for some real value by finding a bank, say, with small subprime exposure and loading up.
With all respect to my investing brother - and with apologies to my son, who's line I'm about to steal - WRONG-O!
The problem with this kind of thinking is that nobody knows for sure what the exposure to subprime really is for any given bank. Hell, even the banks themselves don't know!
Citibank, for example, is in the crapper. But according to indepent analysis, as reported in today's Financial Times, Citi could have an additional $4 billion worth of bad debt hidden in the books related to subprime.
My point is, looking for value in the subprime mess - at this early stage - is like looting during a riot. High risk behavior. And you're more likely to get injured or killed by playing around in the war zone than you are to find long-term satisfaction in that "stolen" TV set.
I dunno. But you will NOT see Green Investments taking any chances with subprime, or banking, or financial stocks right now. Wait until the dust settles a little before making that kind of move.
Monday, November 5, 2007
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