The financial sector and overall stock market reversed course in late-day trading today as word spread that U.S. Treasury Secretary Hank Paulson plans to propose a government vehicle to Congress this evening which would take bad mortgage debts off the books of banks in a similar fashion to the Resolution Trust [RTC] during the savings and loan crisis nearly two decades ago. Major market indexes in the U.S. ended the day in the green by about 4 – 5% on average and followed a gap up at the open on pre-market news of a coordinated central bank effort led by the Federal Reserve to inject billions in liquidity and ease pressure on short-term U.S. Dollar money market funds.
Based on the late-day developments, I decided to buy Goldman Sachs (GS) around $109 per share just before the market close as it could be the sole survivor in the investment bank space as Morgan Stanley (MS) continues advanced merger talks with Wachovia (WB). Shares of Morgan Stanley briefly touched lows not seen in over a decade today at $11.70 per share before a drastic recovery led to a 3% gain at the close. Goldman Sachs briefly touched multi-year lows below $86 per share during a mid-day meltdown in financials before closing the day in the red by 5.7% at $108 per share. I decided to pick up shares of Goldman Sachs on the prospect of a RTC-like entity being announced in the near-term and easing concerns over the ongoing credit crisis and availability of funding.
$23.86 (09/18/08)
