Pete doesn’t see relief from the volatility for two more weeks. These systems tend to run through the whole cycle, he says, and they typically last at least four weeks – so investors should expect, at a minimum, another two weeks of wide volatility.
THE WEEK: FINANCIALS:
The headline: Despite Apocalyptic Headlines, Financial ETF (XLF) Is Up Nearly 4% For The Week; Bloomberg: Global Bank Shares Are At Cheapest In More Than A Decade
Many of the big financials actually ended the week unchanged or up. Goldman Sachs (GS) was up 0.2%, Merrill Lynch (MER) was up 6.1%, Lehman Brothers (LEH) was up 5.6%, and Morgan Stanley (MS) ended the week down just 1%.
“That’s why I think this was a panic situation,” Pete says. Despite all the hand-wringing, some of the financials are actually working.
Tim is a bit more skeptical until the financials show more transparency. We don’t know how bad the financials have it, he says. “It’s impossible to value these guys here.”
If you’re looking for a quick trade in the sector, Guy recommends American Express (AXP) as less of a consumer credit story and more of a sea change story as “more people use plastic.”