Wall Street Journal Agrees That the Economy is Still Fairly Strong

Even though there is a financial crisis it doesn't mean that the economy itself is still on fairly strong footing according the the WSJ.

So far, however, this is a financial crisis, as opposed to a broader economic crisis. Giant insurer AIG has gotten into trouble because of its (highly leveraged) investments in complex derivatives and mortgage-backed securities. The latest economic data still show the broad U.S. economy expanding, and these are data from earlier this year when oil, gas and other commodity prices were soaring. Now commodity prices are plunging, which should provide the economy a powerful boost.

I also like his picks for stocks to watch coming out of this crisis. I mean some really good firms are at sale prices. I like his pick of Bank of America as well since they are a pretty strong force now that they have Merrill Lynch for Investment Banking and Countrywide for mortgage initiations.

As for me, I continue to eye some of the financial stocks. Bank of America, which I own, is well-capitalized and is doing exactly what I would do if I were the CEO, which is to aggressively capitalize on its strength. If there's a fire sale, I want to be the buyer. Yet BofA was roundly punished for snatching Merrill Lynch, dropping 21% on Monday. That strikes me as an overreaction. (The stock rose 11% to $29.55 Tuesday.)

For investors interested in some rock-solid financial companies, see my column in the October issue of SmartMoney magazine, which highlights Northern Trust, SVB Financial, Bank of New York Mellon and UMB Financial.