One of my favorite investors Bruce Berkowitz of Fairholme Funds posted a new slide show today. He correctly identifies the difference between volatility and risk as defined by a permanent loss of capital. In this market anything with the perception of risk is being punished quite viciously as the macroeconomic situation is trumping individual stock analysis. History show that these periods come and go but eventually the individual circumstances of companies will matter. Tomorrow we get the earnings results of Wells Fargo and JP Morgan, and while I don’t expect amazing results, I believe both companies will continue showing improvement on cost management and credit. Both stocks are far too cheap, but relative to their competitors Citigroup and Bank of America they seem almost fairly valued. Berkowitz got beat up badly last year by the media and investors who believe that one bad year makes someone an idiot. I think it is very likely that he’ll do quite well over the next decade as I think he is one of the best managers out there.
http://www.fairholmefunds.com/pdf/071012-FairholmeStaysTheCourse.pdf