Notes From An Investor: Is The Worst Over?

More big names are adding their voices to the growing chorus of opinion that the worst of the credit crisis is behind us. In addition to the heads of Morgan Stanley and Goldman Sachs, add Jamie Dimon of J.P.Morgan, Mark Mobius of Templeton Asset Management, and Richard Fuld, the CEO of Lehman who all in similar words said the bulk, not all, but the bulk of the write-downs have been taken (and JP Morgan and Wells Fargo both reported better than expected earnings yesterday).

Merrill Lynch announced its quarterly results and the write downs of a gross $6.5 billion were a little worse than expected, but only a little. CEO John Thain reiterated his statement that Merrill does not to raise additional capital. Of the stuff of debatable value still on the balance sheet ($46 billion total) the biggest slug are commercial real estate loans at $21 billion. I don't see anywhere near as big a problem with these since commercial real estate loans have cash flow (from rents for example) that might need to be restructured, but rarely go bankrupt. The stock is up slightly following the report which is at least a relief move that things weren't worse.

Nigeria, a major oil producer, said they need significant investment or their production could go down by one-third before too long. No way will major outside investors be tempted with the political instability in the country. Add Nigeria to the growing list of countries (Mexico, Venezuela) that will soon report declining production.

A word about airlines. I hate the airlines. I hate flying (of which I have done too much) and I hate them as investments. They have huge fixed costs, crazy variable costs, and the worst labor relations imaginable. Smarter people than I can trade these things, but, to me, airlines are, at best, a rental, and a Netflix rental at that. I would want to be able to mail it back at any time. The coming spate of mergers are all well and good for survival of the companies, but I think the business model was broken a long time ago.

Vince Farrell is a principal of Scotsman Capital, a New York money management firm, and a CNBC contributor. You can read him daily on SmartMoney.com.