Well, look at the stock market now. For example, on Aug 15, Goldman Sachs' shares could have been had for roughly $165/share; yesterday the stock closed above $239/share. I pick Goldman for two reasons. The first is that being a financial powerhouse, it was in the center of the credit market maelstrom. The second is that as a well-run organization, Goldman has weathered the storm. A 75 point move, or 45%, in less than two months is nothing short of spectacular. Critics would state that Goldman was down almost that much before the credit market crisis, which is true. Most financial firms were down, and many have not come back. It is not worth listing them; you know who they are. The same critics would also say that Goldman is really a hedge fund, not a Merrill Lynch or Lehman. That may also be true, and they may take on more risk than their competitors. Goldman also seems to manage it much better than their competitors. At 9+ times earnings, it is certainly not out of line with these same competitors.
The bottom line here is a theme that has been stressed many times here, don't panic in times of crisis. During these times, there are always winners and losers. If you are a long-term investor, this kind of event is going to happen periodically. If it works, stick with your plan and adjust it if necessary. Try to rise above the noise. Step back from the constant stream of financial information if it helps you focus on what is important.
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2 comments:
I ementioend the rebounding of fiaincial companies and mentioned the self fulfilling prophecies of the panic sellers (though it is difficult to do when the phones are ringing off the hook and my colleagues are discussing mindless matters). Goldman is probably the best large manager of risk on the street. They have so much credibility that when their hedge funds needed capital, instead of giving them a cash infusion, they convinced some very reputable palyes to invest their own money.
Is Goldman hiring?
I hope so
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