We were reminded today that lower commodities and a higher dollar were not going to solve all the world's problems. What happened is that financials again came to the fore and reminded everyone that:
--financials (and housing) remain the center of the economy's problem.
--their problems won't be solved by a decline in commodities.
Late in the day, Richard Bove at Ladenburg Thalman issued a report critical of the entire philosophical foundation of JP Morgan. Mr. Bove called his piece "The Original Concept is Not Working." He cited two specific problems:
1) JP Morgan buying BankOne year ago was supposed to combine a consumer finance bank with a capital markets company which was going to be contra-cyclical: if one was weak, the other would do better, and vice-versa.
It didn't work that way. Both the consumer finance bank and the capital markets company have been declining in tandem.
2) Buying Bear Stearns may have "accentuated the negative impact of the capital market downturn"
Combine this with negative comments from Deutsche Bank and Oppenheimer on Goldman, as well as a Bloomberg interview with value fund manager Michael Price where he state that he is still short Citi and Wachovia, and you have all the makings for a day when financials overwhelm the market.
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