fxtrader07

Financials Have Bottomed? Readers Say We're Nuts

Hi Tom, appreciate your follow-up on the surely controversial piece. However, if JPM's Dimmon said that pain froma recession will be far worse than the pain suffered so far from subprime and CDOs, SIVs etc- i wonder how the market could have really figured this coming pain out? And how can you be so certain? 70 percent book may sound like a decent margin of safety. but given the high leverage and the L3-assets and lots of loans that have not been written down but may well start to default i wonder whether books will not be further impaired soon. and that current 70% may soon turn into 150%?
I also disagree on your L3-notion and accountants , regulators and (new) CEOs. I think regulators and ceos have every incentiv NOT to tell the truth if it is too devastating. rather hide it as long as possible, adjust those valuations step by step over many years. if they did otherwise, they might well be required to raise billions of fresh capital instantly - which may be next to impossible or extremely dilutive right now.
for me, these banks are way too high risk because i have no way to find out if they tell or told me the truth until after the bomb exploded. i will gladly skip a reward of 300% or 400% if the downside is that i could easily lose 80-100% pretty much overnight (remember bear stearns? it sure was a high reward-high risk play at $30-$40 - only to get killed over a weekend)