Buy low, sell high often means buy when a company is at its weakest point, a premise no reasonable investor can afford to ignore.
The weak point now, it turns out, is Europe, where financial firms, analyst say, have yet to fully come to grips with the financial crisis of 2008 and are, therefore, a step behind U.S. firms that were forced to raise billions of dollars in fresh capital to cushion themselves against aftershocks.
If this is a good news, bad news story, let's start with the grim reality first: MF Global, which declared bankruptcy on Halloween this year, is suffering the slings and arrows of outrageous investing, having committed far too much to sovereign debt, which former Chief Executive Officer Jon Corzine felt was the bargain of the century. If you're going to bet an investment will turn the corner, that corner better be within sight or the bet better be reasonably conservative.
Vultures, it turns out, frequently come down with appetite-related ailments. belly-aches. Bank of America is having serious heartburn from trying to ingest Countrywide Financial for $4.1 billion in 2008. Last week, the U.S. Justice Department announced a $335 million settlement BofA will pay to settle a case of discriminatory lending by Countrywide. So much for bargain hunting.
But U.S. firms are now heading to Europe in droves, looking for deals, and those efforts are concentrated on the countries that have garnered most of the negative headlines in the past two years: Greece, Ireland, Portugal and Spain, The New York Times reports.
There are sound reasons for doing so. Promising European firms that cannot find funding from domestic investors are seeking investment from U.S. firms, a move exemplified by Kohlberg Kravis Roberts, which sent representatives to Greece to potentially back an up-and-coming firm there.
Then there are the financial firms simply unloading loans under orders from regulators who want banks in Europe to strengthen their risk to capital ratios.
"There is clearly a restructuring and shrinking of European financial institutions. And many of the assets they're shedding are in the United States," said Wells Fargo & Co. Chief Financial Officer Timothy Sloan.
"We're keeping our eyes and ears open for the right situations," he told the Times.
In that case, there may be more than a few situations to review. A Morgan Stanley analyst said banks in Europe will sell $3 trillion in assets by the middle of 2013.
That's a lot of carrion.
In international markets Monday, the Nikkei 225 index in Japan rose 1 percent, while the Shanghai composite index in China shed 0.67 percent. The Hang Seng index in Hong Kong rose 1.37 percent, while the Sensex in India gained 1.47 percent.
In Australia, the S&P/ASX 200 added 1.21 percent.
In midday trading in Europe, the FTSE 100 index gained 1.02 percent, while the DAX 30 in Germany added 0.46 percent. The CAC 40 in France rose 0.99 percent, while the Stoxx Europe 600 gained 0.87 percent.
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