Time To Buy Goldman Sachs?

Here are some ideas I’ve been thinking through lately (full disclosure: I have no position in any of the following firms unless specifically noted)

1. Buy Goldman Sachs?
WHY: All of the other investment banks had tons more exposure to debt writedowns than did Goldman, and those banks also managed the crisis poorly once it arrived. Investors are running away from investment banks that teeter near insolvency (Lehman Brothers, et cetera) due to the counterparty risk (if your broker goes bankrupt, your trades with them may be worthless). This means that investors might flock to safe, solvent brokerages, like Goldman Sachs. A price/earnings of less than 9 makes the bank look even more palatable.

2. Short Airlines?
WHY: Oil prices are sky-high. If the airlines raise fares, they’ll find themselves flying empty planes. Also, airlines are particularly f***ed when it comes to cost-cutting: they can’t easily scale-down the size of their fleets during downturns, and the high-fixed costs of operating a fleet equal a noose around their necks as costs rise. (Full disclosure: I’m short more than one airline).

3. Go long Brazil?
WHY: Brazil has the highest ethanol usage of any nation, allowing it to relieve the pain of skyrocketing oil prices. Their sugar ethanol capacity is unmatched, providing both an opportunity and a recession-reducer.

4. Go long China?
WHY: The iShares Xinhua China 25 Index is down more than 36% since its high last fall. In a global recession, China’s low labor costs might effectively pull it through unscathed. (Full disclosure: I’m holding a long position in several Chinese ETFs).

What assets do you think will outperform in the next year or two?