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Financials: The Wait Continues

July 14, 2008 11:17 PM

perplexed.jpgI have waited, and waited, and waited, for a call to be long financials. The bottom is seemingly far lower than even I imagined. And if you have read my articles the last few months, you would have noticed that I have been the most negative person on the U.S. economy  in the entire country not named Peter Schiff over the last 6 months.  Remember my call that Dick Green, the President of Briefing.com was 100% wrong? Unfortunately, my views continue to be correct.

The mortgage issues will likely take down another lender or two. Or ten, hard to say. The fundamentals are clearly still getting worse. These stocks cannot possibly turn the corner until the housing problems end, as I have long mentioned. I still believe we will eventually see one more, at least, big firm collapse before this is over. The market is obviously speculating on LEH, Washington Mutual, and C. I still would would shocked if at least one of these does not go under.

Without being privy to their “real: balance sheet, I would guess WAMU would be a strong candidate to lead the charge into insolvency. They and Countrywide wrote more pay option arms (read the most grossly incompetent lending decision in the history of the world, literally) than anyone, by far. I simply cannot imagine how they can survive without either insolvency, a takeover, or the government rescue Bill passing - and soon. These loans are growing debt by the day, literally, and most likely all are bad debt, regardless if they are disclosed as such.

Anyhow, I just find it hard to believe the market can move higher - and last - without some end to this. Even after 6 months, nobody actually has any idea of any kind of the magnitude of the problem. How many more billions are there? With FNM is the number more than billions, perhaps another 100 billion? A trillion? Nobody knows. These numbers are not to be laughed at. The risk of many firms going under is still a real possibility. In fact, my personal view is that it is likely.

Remember what I have said about 800 times lately? Never invest on so called “valuation”. Fundamentals is all that matters. Well, the fundamentals are getting worse for financials, by the day. This isn’t over.

I still believe, as I have mentioned, that the ONLY way this bear market has any possibility of ending is the Housing Bill. If that cannot pass (it will pass in some form) this bear market could easily last 5 years or longer, not 5 quarters as all these idiots on TV scream every day. I still believe that the long term fundamentals for the U.S. are VERY ugly, but that is an entirely different article.

Written by Tom@StockBlade.com · Filed Under Stock Comments, XLF 

Comments

2 Responses to “Financials: The Wait Continues”

  1. mikey on July 15th, 2008 2:46 pm

    Financials will bottom when the money-center banks hit tangible book value. I think one more writedown for C and a possible dividend cut would seal the fate.

  2. Tom@StockBlade.com on July 15th, 2008 10:20 pm

    I am not sure of that Mikey, maybe. The problem is i believe we will see many more banks, possibly large ones, go under unless the housing bill is passed like NOW. The book values mean nothing if their true liabilities are not accounted for, and that is exactly what is happening, IMO. The liabilities of many, many banks are grossly understated, in many cases, by many billions. Therefore, I consider their “book value” to be meaningless as they are all based on accurate asset and liability information, which we are clearly not getting.

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