Thanks again goes to Pete.
I have tons of respect for Richard Pzena. He is one of my favorite value investors. He has been painfully early and I think he is still early. Over the long term he is almost always right.
It really is a good read and essentially I don't really disagree but I think he is early.
As a side note the market seemed to surge today but nothing really happened. Volume was decent but the market once again failed to surpass that 1395 to 1400 level in the S&P. Financials shot up today but the ETF (XLF) is still in that range between 24 and 27 it has been in for months. Don't get me wrong there should be no doubt that the bulls are in control. Overall nothing still has been proven and we continue to stay in the ranges.
http://www.forbes.com/finance/2008/04/23/pzena-citigroup-freddiemac-pf-guru-in_jl_0423adviserqa_inl.html
On financials
This is a once in a generation opportunity to get franchises like Citigroup at five times their normal earnings power. You just don't get those opportunities. You only get them when there is panic. And the last time there was panic was 25 years ago.
Right, the idea that people will never use a bank again, or that the whole financial system is now different than it was, is crazy.
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The thing is not a per of 5 but the quality of earnings meaning the quality of assets. No wonder that level 3 has been increasing hiding losses,and funding operations are announced days after reports are released. Why ncc needs a 7 billion capital infusion at a 40% under market price and posts only 200mm loss. It doesnt square me!!. Tough times are unavoidable, americans are highly indebted and if unemployement soars at 200m per month as i expect ,deliquencies rates will crush profits.
I basically agree. Be careful on your job loss assumptions or expecations. That was one thing that casused the rally yesterday.
We had a jobless recovery in 2003 to 2005. There were not that many jobs added compared to most economic expansions. In the same way I think there are going fewer job losses in this economic contraction. I think the markets may take this as a false signal that things are not as bad as they appear which would be wrong but you could get some decent extended rallies off of better than expected job numbers.
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