Banks are collapsing, but cash is still king

Last month was a very negative month for the financial sector, not to say a disaster. First there was the failure of Lehman. Then the rescues of the European banks by their governments. Although these are very serious situations, this crisis is just the worst one of the past 20 years.

Sometimes there is a company that rises on the stock market, but most of the other businesses are impacted by the financial crisis, even though they are not related to the banks. Examples are Vodafone, Unilever, GlaxoSmithKline and many more.

According to Anthony Bolton, fund manager, now is the time to invest in stocks. He explains by saying that “volatility in stock markets is natural”. It’s normal that the stock prices go up and down. He also said that, in the past, several major falls were followed by even bigger increases.
As longer as the crisis continues, the more severe the damage will be on the general economy. Experts say that a recession is inevitable, but they don’t know how long it will last.

There is also positive news. Oil prices, in general, are still on the same level of the past summer. Secondly, the government bonds. They are taking advantage of the crisis. Because the government guarantee the safety, this is very attractive for investors. In a few months time, they could make a nice profit. The gold prices also increased.

If I had enough money, I would definitely buy stocks now. Because I also believe that now is the right moment to do so. The prices are all very low, so they have to rise again. I am not saying that this will happen immediately, but in a year from now they will have risen. I think I would hesitate to buy stocks from companies in the financial sector, because I don’t think the crisis is completely over yet. But companies like Unilever, Vodafone and GSK would be on my list. They are impacted by the crisis, but should recover rather quickly.
I am not surprised that the government bonds do good businesses. Especially when the interest percentage is high (about 7 %) and the government guarantees the safety.

Source: The guardian - Banks are collapsing, but cash is still king.
http://www.guardian.co.uk/money/2008/oct/05/investments.shares.stocks