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Tuesday, January 20, 2009

Financials Get Destroyed

In the post Banking Index Chose Never I wrote, “Time to test them there lows. You can thank BAC and C for that.”

Forget “TEST”. A more appropriate word would be “RAPED”.

BCS -40%
BAC -28%
C -17%
GS -17%
JPM -19%
MS -14%
STT -61%
UBS -16%

In Royal Bank of Scotland: Kills Oversold Bounce I wrote: “Do not buy bank common shares for anything but a quick scalp or trade. The overnight gap or event risk is far too great. The banking system is insolvent. Discovering which individual banks are not is a very dangerous game to play.”

I must emphasize that again. Most of the financial system will be outright or de facto nationalized. Common shares are either worth zero or close to zero JUST like Fannie Mae (FNM), Freddie (FRE), Bear Stearns and Lehman.

Stay away. You won’t miss the bottom. Trust me. The bottom will be a long time in the making and it will be booooooooooooring. Financials will languish for years. You’ll have plenty of time to cherry pick the best of the survivors.

The rest is just trading.


Charts and Coffee said...

Using BAC as an indicator whether to get long or short -

wunsacon said...

Ninja cat!

Andy said...

Okay fundamentals are not great, but the sharp falls are caused by pure panic. I think we have yet another golden trading opportunity and I am using UYG to double my play on a financial sector bounce. Just wait and watch.

bhargava said...
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