Bank Stocks: One Winner, One Takeover Target

Banking stocks aren't dead, said Richard Bove, financial strategist at Punk, Ziegel; but they have to be judged differently going forward. Bove gave his insights into which Wall Street firms are the strongest-positioned -- and which will see their troubles getting even worse.

Ben White, Wall Street correspondent for the Financial Times, joined Bove in singing the praises of Goldman Sachs Group; White also said Morgan Stanley will "fare the worst" among the financial giants.

But Bove offered a caveat about Goldman: its returns will beat rivals, but in the current environment, may not reach its own recent heights. "You have to separate its operating company from its hedge fund company," he said, cautioning that Goldman's operations may disappoint going into 2008.

Bove also said that Bear Stearns is "in deep trouble," due to its core business being built on mortgage lending. "The best solution would be for Bear to sell out" to an acquiror, he said.