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Warren Buffet on Hunt for Bargains !

Finally Warren Buffet have started scooping the market for bargains. He spent $10B in one week picking up Constellation Energy at about 26% of all time high and Goldman Sachs at about 40% of its all time high. Does it indicate that finally US markets are bottoming out. I have been calling out bottom for some time and I am a follower of Buffet. It's good that I picked some FRE, FNM and MS even before Buffet took stake in GS (but I did some silly mistakes also which I am sure Buffet avoided).

Now that Buffet owns major chunks of Wells Fargo and Goldman Sachs and GS is becoming commercial bank and need to expand into branches etc, I won't be surprised if there is merger/takeover of Wells Fargo and GS in next few years.

Now coming to $700B bailout package. I think Paulson thought that he can get away by rushing this bailout package through and bail Wall Street over weekend (similar to what he did with all the weekend dramas over Bear, Lehman and FRE/FNM). He did not know that he has to deal with congress - thanks God it is controlled by Democrats and hopefully they would not get rushed into approving this bailout package same way as they did for Iraq war. They should not approve till there is solution to core of the problem which is housing and greed. Thinking about this bailout package, imagine if US invested $700B in educating its young generation - give them free or subsidized college education. It would be much more productive than just buying bad mortgages and bailing out banks

McCain was at his best in terms of flip-flop. No bailout for AIG/there was no option. No regulation to fire Cox.. so many flip-flops even before the elections. What would happen if he becomes President. Hopefully we citizens can make the right choice and change the Washington which got us in this mess and get Obama to fix this mess. Democrats have done it in 1992 and they can do it again.

Any investment recommendations ? I would go with UYG which is ETF focused on banks (below $18). FRE/FNM offers good upside if they come down below $1. If one has to do speculative investment, check out WM-PR (R series Preferred) which is selling at less than $150 (has face value of $1000 with 7.75% annual interest)

Good night and good luck !

/Shyam

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