Wednesday, May 30, 2007

Here Comes A Wall St. Sale! Get Ready To Buy

"Wall St. is the only place where when the things people want to buy go on sale, they panic" Warren Buffett.

There was a 6% sell off in China last night and that spread into the European markets overnight. The Chinese government tripled the "stamp tax" on stock trades to 3/10 of 1% in an effort to slow down the wild speculation in their market. The global sell off will undoubtedly hit the US market today. That means if there are stocks you have wanted to buy but were hoping to get them cheaper, today may be your chance. DOW and S&P futures are both negative this morning meaning at least at the open, we are looking at red.

For ValuePlays reader that means we may get the chance to buy Lowe's(LOW) under $30 like I speculated about yesterday. Maybe I can also buy those Citi (C) shares back at a price cheaper than I foolishly sold them for in January. If you think about it, it was reported Eddie Lampert bought them at around $54 a share, if they dip below that, I can't think of a reason not to pick them up.

Think about the logic for just a moment. Because the Chinese government raised a tax on stock trades and folks there panicked, there is now a reason to sell US shares? By any measure the US markets is NOT overvalued. Now, you could argue it is fairly or undervalued depending on the metric you want to use but by no measure is it overvalued. That means there is no logical reason for a sell off today. Of course we do know that markets are not logical, right?!?

Altria (MO) will get whacked today if the market does and the logic must be that because Chinese investors have to pay 3/10 of 1% on stock trades now, little Johnny in Newark won't light up this morning? Uncle Leo who goes through two packs a day will be so distraught at the plight on Chinese investors he will not be able to bring himself to smoke that first Marlboro today? Folks in the US who were going to paint their house this summer and use Sherwin Williams (SHW) paint will just hold off worrying about the poor Chinese investors? Please............

The Chinese market is up 60% this year and is clearly in a bubble stage. Folks have been saying this for a year now. I mean when Greenspan finally comes around and recognizes the obvious, you know it is a bubble. When you have a market in a bubble, any hiccup causes a wave of fear and then a sell off and this is what you have in China. If anything, fear of a bubble there or its "popping" should cause a "flight to quality" and that is the US market.

Alas it probably will not today and that is just fine with me as it has been a while since we have had a "Wall St. Sales Event".

Happy buying today...

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