I don't actually know how long "Is now the time to buy financials?" has been part and parcel of every interview.
While I have been underweight for ages, and still am, there is one aspect to this whole meltdown that we need to keep in mind - an aspect that could be relevant especially if one-year or two-year performance does not matter:
Of the larger financial companies, will there be any that fail as a result of the entire event still unwinding? (I believe Bear Stearns market cap topped out in the $20 billion range, and if that is correct, I would not say it was that large.)
Obviously some folks think there will be failures, and with history as a guide, there might be one or two, which would not be a lot. Point being, most of them will survive.
As far as large cap, domestic banks go, I cast my lot with Bank Of America (BAC) a long time ago but I seriously doubt that Citigroup (C) is going to fail. The next 10 points might be down for all I know, but at some point $21.22 (Thursday's closing price) is going to look like a steal of a price.
If one- or two-year performance does not matter, then a 50% drop from here on its way to $100 at some point in the future (not a prediction of any sort) would not mean anything. While I am not predicting any price for Citi, I will point out that after being left for dead in the early 1990s the stock went up 3000% in about ten years. So the idea that some distressed bank stock could be a five-bagger sometime between now and the next financial crisis may not be ludicrous.
Further, any stock with a high yield that can maintain that dividend would add dramatically to the compounding effect of buying the right distressed stock.
To be clear, I am not yet increasing my weight in the sector. The environment is not healthy, but of course it will get healthy again, and just as financials have lagged badly recently, they will outperform at some point. Today's post is not a prediction of when it will happen, just a little reminder of the cyclical nature of this sort of thing.