Charlie Stromeyer Jr

Financials: How - And When - We Reached the Bottom

Thanks for your answer, Swiss_Buffett, which I agree with.

Disclosure: One of the board members of a company that I advise is a manager at State Street in Boston.

Financials Have Bottomed? Readers Say We're Nuts

Tom, I appreciate that you are willing to defend your case, but could you or someone else please help me to understand this question:

Many CDOs and other crap are still tied to home prices, so how can the financials make a long term bottom before there is some more compelling evidence that home prices have started to bottom? Thanks.

Financials: How - And When - We Reached the Bottom

User 225887 or anyone else, do you agree with some analyst whose name I don't remember who said that in terms of business recovering that first the trust banks will recover then the commercial banks and then last the investment banks?

Financials: How - And When - We Reached the Bottom

You make some good points, DSB. I myself don't trust the ratings agencies which is why I try to follow credit default swap spreads as a sign of potential trouble.

Also, according to the Bank for International Settlements (BIS), at the end of 2007 just in the OTC derivatives markets there was $596 trillion in outstanding contracts which was 8x the total value of all exchange traded financial contracts.

Until Tom Brown can convincingly explain why there won't be more blowups with derivatives then we should be skeptical that a bottom for the financials has finally occurred.

Financials: How - And When - We Reached the Bottom

Historically, during a major credit crunch the stock market bottoms before the credit markets start to recover which may be another reason to be bullish. (On Wednesday morning I went long IXG which is the iShares global financials ETF but I am ready to sell at any moment).

My question is how much credit derivatives such as credit default swaps (CDSs) are tied to commercial real estate (CRE) prices? I am asking because U.S. CRE prices are having a significant decline.