rsinvestor

Widening Rich/Poor Gap Spreads Contradict Global Recovery

Actually, the contrarian view would be: the more articles like this that come out and spell doomsday, the closer we are to a bottom. I am not agreeing or disagreeing with your thesis (you make some good points), but a true contrarian sees all these "Headlines of Disaster", and starts buying.

And by the way, Capitalism is most assuredly not dead. The hiccups we go through every so often are a natural stepping stone to a more efficient form of capitalism. What doesn't kill it makes it stronger.

U.S. Sector P/E Ratios

I appreciate the information. However, just using PE to determine relative valuations falls a bit short of the big picture. Especially when it comes to financials. The current interest rate environment sets the stage for financials to blow away (dismal) estimates in 2H 2008.

My thesis is based on the fact that their cost of money, Federal Funds rate and bond rates, are very low. Meanwhile, consumer interest rates have not dropped at all. A 30 year mortgage is the same today as it was 12 months ago, when the Funds rate was 300 basis points higher. This has to widen margins for banks still lending money.

On a price/book basis, the financials are attractive. I do agree, though, that strictly looking at earnings, financials are toxic.