July 9th, 2008
08:29 AM GMT
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NEW YORK – For most of his career, Jamie Dimon was known as the whiz kid who, alongside Sandy Weill, built Citigroup into a global powerhouse.

More recently, as CEO of JP Morgan Chase, he became the buyer of last resort of Bear Stearns. The man who, at least temporarily, helped halt the global financial meltdown.

Tuesday he stepped out even further, offering some very frank criticism of the lack of long-term leadership in the U.S.

In a rare public speech, Dimon said: "We knew 40 years ago we had an oil problem and we did nothing. We need long-term policy that transcends two-year Congresses."

He said it is time for Americans to be "mature." "You can't run a trade deficit for eight years and not expect a weak dollar. You can't have no energy policy and then talk about energy volatility."

Dimon dismissed the excuse. "It is not politically feasible." He argued tough decisions need to be made to improve the medical and pension systems, education and energy.

A frequent contributor to Democrats, his frustration with the political process may not be a big surprise.

But Dimon was equally blunt when discussing the problems facing the financial sector. He said that while the market was working through some of the credit problems, it was possible things could get "far worse" and if the economy turns down it will hurt the commercial banks.

Consider that official notice of where to look for the next shoe to drop. Dimon said it was his job to make sure JP Morgan Chase was in a position to ride out the storm. He also warned that "financial institutions are not too big to fail."

He ended by saying the future of America is very, very bright and that he was optimistic, but investors had to walk away feeling skittish. Jamie Dimon seems worried about the economic outlook.

This got me thinking. When everyone is bearish and things feel awful ... isn't that exactly the time to think about buying? Some technicians say yes.

One study of 10 bear markets where the S&P 500 plunged 20 percent from its high showed that stocks went on to gain an average of 9.6 percent six months out and 19.3 percent 12 months out.

There were exceptions, including the bear markets of 1973 and 2001, but it is worth thinking about.

I know what our resident bear Todd Benjamin will say to that, but what about you? Could this be a good buying opportunity or do you think the global economy and stocks are headed for more trouble?

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soundoff (13 Responses)
  1. F. Huber

    To Maggie Lake.
    So, Todd Benjamin is your " resident bear"? May I say hello to "Toddy Bear" – just this once?
    I usually watch mostly German bizz news, but Todd is a real favourite of mine.

    As a Swiss investor, I have reservations about the banking sector generally, as I think there is some fundamental restructuring coming.

    The Swiss Banking Commission
    http://www.EBK.ch
    wants to introduce a "Leverage Ratio Limit" – a bottom limit for the ratio of a bank's own capital to its "Bilanzsumme" (I don't know the english word for that). This would probably mean that banks who accept this leverage ratio, and by doing so would definitely imo gain investors' confidence, would probably have to spin-off their investment banking operations in order to maintain maximum freedom of action in markets and operations where the (much) higher risks CAN bring in huge profits, but also big losses. The risks in investment banking activities are probably unacceptable to average investors.

    For some years now I prefer German stocks. Private investors should look at the stocks in the German DAX index.
    This site
    http://www.ariva.de
    has the DAX companies listed with price movements etc.

    A fact not generally known is that German companies are now much more generous to shareholders than ever before, as a defence against takeovers.

    Examples: Deutsche Telekom, Allianz , BASF and Deutsche Post
    are now yielding between 3.5% to over 6% and are unlikely, imo, to have to cut their dividends. In fact Allianz increased its latest dividend
    to €5.50 per share, from the previous €3.80 per share!

    But in these still-dangerous times, you should remember Warren Buffet's Investment Rules:
    1) Buy brand names
    2) Buy companies with proven regular growth
    3) Buy companies that will still be around in 10-10 years time (though of course, there might be a takeover bid, but if so, you'll make extra money)
    4) Buy shares in industries you understand.

    Mr Buffet visited Germany, Switzerland, Italy, Spain in May looking for
    buying opportunities in Europe. He was welcomed royally; he has a "down to earth", sensible approach to investing that appeals to Europeans.

    P.S. On German ARD TV just now, Michael Arpe (chairman of the Hanseatic Stock Investors Club) said it's time now to start buying quality stocks – "Wann die Kanone donnern" – when the guns are thundering i.e. when there is blood in the streets....

    July 9, 2008 at 12:04 pm |
  2. Peter Kramer

    Empires comes and go, and while the US heavily invests in lost wars, other countries are investing in their own development. McCain was singing "bomb, bomb, bomb...bomb, bomb Iran". Seems to me that that tune accompanies investment much less well than improved Chinese-Taiwanese relations.

    July 9, 2008 at 1:37 pm |
  3. F. Huber

    P.S. to my earlier mail today 12.04h

    JFI. The German companies I mentioned have English pages.
    This is usual practice for DAX stocks and also for many other quoted German companies.

    July 9, 2008 at 3:03 pm |
  4. Roman Paarshooting.ch

    I have bought in bear markets and have bought in once-great companies. Bad idea. Thinks can (and probably will) get worse. If you know when to buy you are already rich. For the rest of us: We will be buying – and selling – the wrong things at the wrong time.

    July 9, 2008 at 5:42 pm |
  5. Peter

    I’m an ant in terms of investor significance, but my instinct tells me that the gaping hole from the credit crunch needs to be plugged before investor trust can return for money to circulate more freely between banks and businesses, and energy prices have to come down significantly – whether through increased oil supplies (unlikely in the short run), or viable alternative energy sources over time to keep the economic engine from sputtering or stalling outright at some stage.

    Personally, I would forget about short-term equities in the present, rather dire context, but long-term equities e.g. in renewable energies and related industries would get my attention in terms of potential fruitful returns.

    July 9, 2008 at 7:54 pm |
  6. Darwin

    The dividend yields in german companies have gone up just as they have in practically all markets; in spain, for example, they have risen by almost fifty percent. This is largely, if not solely, due to a decreasing share price. Let's not forget that a sizeable majority of companies around the world are increasing their bottom line year in year out and can quite comfortably afford to increase their dividend by roughly the same amount each year (it's not because they feel generous, it's just the normal procedure). Now, couple the steady increase of corporate profits and dividends with decreasing share prices and you have a golden opportunity for investors to buy stocks with a yield that outstrips the interest paid by any high street bank account. These should, of course, be investors who don't flap on so about the current share price – it doesn't really matter if it loses twenty percent in six months, so long as it's a stable company paying a regular yield that combats not only bank rates but inflation too. As for the Sage of Omaha; yes, his dictum is pure and realistic but he had the good fortune (brains) to buy into the likes of Coca Cola, Gillette, etc when they were a tenth of the size of what they are now – he bought into these companies for cents and not dollars. It's now up to you to do the same with the new kids on the block if you want to be the next "Sage". Remember, there are too many companies doing the same thing out there and competition is tight. It's the companies, new or old, with foresight and large testes that will be the reward for the pacient investor – but who are they?

    So, to sum it up, I believe that for long term/yield seeking investors, Goldilocks and her three bears have presented another opportunity for a spending spree – but just like politicians, who wants to think that far ahead? The fact that we live in a society where communication at the speed of light just isn't enough tells us an awfull lot about just how 'short term' we have all become.

    July 9, 2008 at 8:10 pm |
  7. Ali Mutahir

    Sure...when markets are falling...its a good time to buy....but I think with the volatility in crude oil and the unstable global political horizon....especially the Iran-Israel affair....more trouble is bound to come..not to forget the global food crises.

    July 10, 2008 at 9:59 am |
  8. Ali Mutahir

    Jamie Dimon.....by the way is a genius!!but even he must be losing sleep over this multi-faceted turmoil that grips us today!!

    July 10, 2008 at 10:03 am |
  9. Charles

    The market is manipulated by crooks taking billions of dollars for their own personal power. These people need to be found and put in prison. No one is worth all the money these people are pocketing for their own status. When are people in the public going to wake up and invest their own communities and each other. It feels like a war zone in the US. The buzz work in my town is the market is manipulated by greedy people in government and the corporate power. Bring these people down and to justice.

    Charles Portland Oregon

    July 17, 2008 at 6:15 pm |
  10. Tom in LosAngeles

    The market has plunged as the sub-prime scandal has been exposed.
    The lack of regulation on the marketing of these junk instruments pushed by Wall Street MBA's now is hammering the world economy. These
    instruments (c.d o's.) helped fuel a false demand in Real Estate
    allowing consumers to take out additional loans on their property as the prices of real estate boomed. I think like $100 billion had already been written off in the last year but billions more loom over the economy.
    Share prices will not recover until we clear the books of these bad loans
    and we get our oil consumption under control by putting solar panels on every roof top.

    August 2, 2008 at 7:01 pm |
  11. Mike Chase

    Dear Ms. Lake and "Toddy Bear",

    First of all Herr Huber, your name is perfect. Congradulations.

    Perhaps it is time to think in broader terms that short term time to buy, hold, sell. If you want to think of the financial markets as the worlds largest legitimate floating crap game and securities as things that go up and down and place bets, go to it.

    If you want to look at a bigger picture think of the the Kondratiev wave theory long dismissed by those of us that are academically trained as economists. This guy was a communist economist, what could he know anyway. Could he have found something that we Western economists don't know about–Naaah!

    Then there are the "gold bugs" that think money should have some intrinsic value and that a monetary economy is just a sophisticated barter economy. If money is a commodity and has no intrinsic value, why should monetary economies continue to work? Valid Question?–Naaah!

    If all the cracks in the current world financial structure get worse, can the politicians like Bernake and Greenspan fix it?–Sure they can!! What are the chances that this is the precursor to an important restructuring of the world financial and monetary system?–It jolly well better be!!

    The point is, the question, "Is this the time to buy" may not be the right question.

    August 10, 2008 at 9:59 am |
  12. Simon design student

    firstly i would like to admit im not the strongest minded person when it comes to the global economy however i have a couple of questions so i can better understand what is happening.

    Coming back to the Kondratiev wave, the pattern shows rise and decline in an economy over a space of 50-60 years. For a university project i am working on i am trying to understand what is hapening to the global economy to make a market prediction for future vehicles.

    MIke Chase i understand he was a communist economist but im sure he would have studied western economies. if you believe this is not the pattern our current economy is following, what is happening? You certainly seem to know alot more on what is happening and if anyone else would like to shed some light to help me that would be fantastic.

    cheers. Simon

    November 17, 2008 at 2:12 pm |
  13. libinos

    It is difficult to invest in times of financial crisis because of market instability. Despite you should remain optimistic. I am always on the look for stocks that are down. http://american-schools.net
    Sure the economy will recover. this is just temporary thing.

    June 12, 2010 at 12:28 am |

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