Banks, Bulls and Bear: Gauging a Wild Week
It was a week in which the news began and ended with the financials.
In between, the Federal Reserve took dramatic action to pump liquidity into the economy, New
York's governor was caught up in a career-ending scandal, and the markets posted their biggest one-day gain in years.
Taking It to the Bank
Billionaire investor Wilbur Ross opened the week with a sobering prediction.
"I think you're going to see a lot of depository institutions fail,' he told CNBC.
The next day, the Federal Reserve announced plans to pump hundreds of billions of dollars into the economy, setting off a stock-market rally that produced the biggest one-day percentage gain in the Dow Jones Industrials in five years, the biggest Dow point gain since 2002, and the biggest point gain in Standard and Poor's 500-stock index since 2001.
Many market experts were unimpressed. Charlie Smith of Fort Pitt Capital agreed with a commentator who dismissed the Fed action as "a cortisone shot," and, in the same interview, Thunderstorm Capital Chairman John Dorfman said, "The Fed has dressed the wound, but the patient still has the flu."
Hard to Bear
On Friday, there was dramatic evidence that Bear Stearns couldn't even hold up until the Fed's liquidity-injection took effect. JPMorgan Chase said it and the Federal Reserve Bank of New York had agreed to provide Bear Stearns with secured funding, as necessary, for up to 28 days.
The development underscored the problems at Bear Stearns, but it also gave new evidence of the clout at JPMorgan.
"For me, you want to own the highest quality banks that you can," BlackRock portfolio manager Kevin Rendino told CNBC. "My favorite is JPMorgan, because I think that Jamie Dimon is the best bank CEO that there is right now, and I think they'll win coming out of this, and there will be a 'coming out of this' at some point."
Blue Chip Blues
But not yet. Colossal problems continued to haunt the economy through the week. The dollar skidded against world currencies, passing 100 yen, one and a half euros, and two pounds. Consumer sentiment slipped to a 16-year low.
Financial exposure even continued to drag on solid giants like CNBC.com parent General Electric, making skeptics of people like BlackRock vice chairman Bob Doll.
"If we're going to own GE, we would much rather play the non-financial part of GE, and you can get that in other places: Honeywell, Raytheon, as examples," Doll told CNBC.