Financials were down as much as 3% on Wednesday on downgrades and mounting concerns of further losses. According to Merrill analyst Richard Bernstein the credit crisis is “far from over.”
“Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation," he wrote in a note to investors. "The problems are not confined to large institutions that are overexposed to U.S. subprime loans.''
Strategic investor Bill Fleckenstein agrees with that analysis. (You might remember that he’s known for making money by shorting selling.)
“If you take a step back from all the hype,” Fleckenstein says on Fast Money, “the problem in the financials is too much leverage.”
He sees the current credit crisis as a multi-layered issue centered around “mortgages that are larger than the house price, supported by people who can’t afford them.”