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Whither the Banks?


Do we have the makings of a real bottom?

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community.

Green Beans
Jeff Cooper, 10:55 a.m.

Did you see Bank of America (BAC), Morgan Stanley (MS) and Goldman Sachs (GS) go green?

A month ago, a downgrade of the banks would have sent the market into a tailspin.

The point is that the financial stocks are the most heavily discounted on the downside, and may well be the most immune to negative information.

In its own inimitable perverseness, a broad market pullback could see resiliency in the financials - while other areas shed point count.

Minyan Peter, 11:30 a.m.

To Jeff Cooper's post, should financials show support relative to the rest of the market during this "retest," I'd expect that many will view this as a positive for the market. In fact, some may even tout this as why March was the bottom.

But I'm afraid that we're all looking at the world from a cyclical perspective, where less deterioration and slower rates of decline mean the bottom is near. Unfortunately, most people ignore the fact that in a secular economic decline, there are no straight lines down - just waterfalls, as hope and despair struggle for dominance in our minds. And coupled with unprecedented fiscal and monetary stimulus and marked-to-manana accounting, I can see why hope would prevail.

But actions speak louder than words. And when I see corporations issuing stock -- not to expand their business, but to pay down debt -- "hope" just feels too, well, hopeful.

Survival, while necessary, is hardly sufficient for the makings of a real bottom. Worse, with every day, the cost of survival is rising.

Spot On
Jeff Cooper, 11:50 a.m.

I think Minyan Peter's last comment in response to my prior post regarding a possible period resiliency in the financials is spot on.

The key word is a "period" of resiliency. It would underscore the notion of a pullback and a higher low into May, if that's how things play out, prior to a leg up into the summer.

But I believe this is within the context of a bear-market rally phase.

I suppose it all depends upon how you define time and temporary, as Bubba might say.

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