Things are different this time

We keep hearing analysts who try to pick the bottoms.  People think that the financials are so low that they are a bargain. 

Remember that when trying to pick a bottom, you could be cought with a falling knife.  To me, trying to pick a bottom in housing and financials is like catching a falling knife.

An article in Barrons this week by Jacqueline Doherty discusses the same point.  Because in terms of Finacials, we are only at the beginning of the downturn.  Remember we have discussed in past about Credit Cards or auto loans and rising defaults.  There will also be rising corporate defaults.

Doug Krass is another analyst who thinks this is a dead cat bounce.

 

http://online.barrons.com/article/SB119646780833210138.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_right&apl=y

 

 

THE BOND MARKET is certainly signaling that all's not well. The London Interbank Offered Rate -- or Libor -- is what banks charge each other to borrow money. Last week marked the first time that a bank could borrow one-month money through the turn of the year. The rate on one-month Libor jumped from 4.82% Wednesday to 5.22% Thursday. Such stress hasn't been seen since 2000, when investors were worried about Y2K, and the Fed had to provide massive infusions of liquidity

As the banks and brokers deleverage, it's unlikely they'll be able to boost earnings. "This is the epitome of a dead-cat bounce," warns Doug Kass, the head of Seabreeze Partners, who has long been bearish on the financials. "People don't recognize how far bank and broker earnings will fall."

So, yes, there will be a time to buy bank and brokerage stocks... but it's certainly not right

Disclosures: Short Countrywide through puts.