Dan Schmeidler

Financials: How - And When - We Reached the Bottom

This is a very misleading article. But I have to give it up for Tom Brown's brilliant timing. The article bases its assumptions on strictly stock meachnics and how stocks respond in extreme situations. We are in a very sad situation with equities, and our overall economic condition, especially in the financial sector. The equities within the financial sector got a big jolt that pushed them all higher. The question now is how well can they sustain their current levels. A lot of that is dependent on their abiliity for capital expansion. Unfortunately for them it is a diffucult road up from here on. Maybe a few more upward jolts the next few days, as investors interpret more bad news from the sector as the bottom of all bottoms and then drive their stock price higher. But, unlike investors in the last 7 trading days or so, those investors are going to be far and few in between. This will occur as the realities of the credit market will kick in. The effect of deleveraging inflated balance sheets will contract and constrict and choke anything that deals with the trading of financial instruments and severly punish everything that sits on a balance sheet that has anything remotely to do with leveraged derivatives and other financial instruments. In other words all the financial stocks are going to head lower. But that is not to say that clever, in fact, brilliant, (and deservingly so, well paid) fund managers such as Tom Brown are not going to have a field day obliterating the shorts and reaping the last bit of profits possible before the final curtain is drawn on them.