Xyrus

Calling It Quits on Gold, Platinum - It's Time to Go Financials!

The rally in financials are investors speculating a bottom.

It seems that many people are breathing a sigh of (semi-relief) because the sub-prime mess seems to have peaked. But sub-primes were only a part of the problem.

Defaults in everything from credit cards to car loans have been increasing, even with prime rate borrowers. A good portion of homeowners cashed equity for credit and spent it. Now the bills are coming due and people don't have the resources to pay them.

All you ever hear in the news is sub-prime this and sub-prime that. But the real problems are of a much larger scope. It's credit in general causing issues with financials. The extent of the problem won't be known for awhile.

This is a short term rally, one which probably has some basis in the fact that people will be getting those idiotic checks from the government. In a couple of surveys, most said they would use the money to pay down debt. That's good for financials, except for when you consider US consumers owe a trillion dollars to credit cards, and over 3 trillion in total debt (search around on the web, it's absolutely amazing how much credit we tapped). Those checks will hardly make a dent in that.

I think the financial sector is still in for some pain.

~X~