Too risky to bet on bank failures
With government intervention swarming Wall Street its too risky to touch anything financial. Though in the case of both Fannie and Freddie where shareholder equity will be nulled, Bear Stearns was able to catch a $10 price tag for its shares and if Lehman ever decides enough is enough it is likely that they’ll be sold on the auction block as well.
In this kind of market, its nearly impossible to take any kind of interest in the financials. Buying a financial stock means that you’re exposed to risk beyond your control. Without any Martha Stewart style tips, you’re unlikely to see a huge profit. There is money to be made out there in sectors that are non financial.
Deep Discounters
Deep discounters continue to rise through a falling market. As the rest of the market tumbles, companies that solicit products to low income consumers are doing very well. Buying your products at the local Big Lots or Dollar General might have been looked down upon during the HELOC days, its become a common concern for many Americans that saving money starts at buying cheap. With so many people living on the edge of poverty, these stores hit it big with closeout pricing. Surprisingly, their operating margins are usually up to par with the rest of the retailers.
Short Term Loans
I like EZCorp mainly for the economic situation we’re in right now. Pawn shops are seeing a great deal of business, and their cash loan business isn’t doing too bad either. When the state laws for these companies permit triple digit interest rates, its almost impossible to churn a profit. The only way these companies could fail is pure economic depression, either way you’re still out money. I’d get in these before they explode, especially with sub-1 PEG ratios.
