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The economy will get worse from here and the recession is not over yet. After this rally, the stock market will resume its down trend to match the worsened economic situation down the road.
However, I do feel that, financial sector has gone through probably three fourth of its destruction path and it will be one of the sectors that will rebound hard once the stock market starts to reverse its course. This also makes a lot of common sense. Without a healthy financial sector, the economy will not truly recover.
I published my financial picks months ago and with the development of the financial regroup, I am dropping BAC and GS from the list. One thing I don\'t like about BAC is, it is following the failed track of Citigroup trying to make itself a one stop shop kind of bank. I might be wrong on my assessment of BAC but I rather play safe than being sorry later. I did predict C would go to single digit and could be at 8 dollar range mainly by looking at its book back then, but I have to admit that, I did not expect it to drop to this range so soon, I was expecting the first quarter of 2009.
My picks on financial now are JPM, HBC(which I have already owned since 1998 as Hong Kong shares and still own) and USB. I believe these three banks give me a very well rounded foundation on the banking industry which will also have great exposure to international market. And I do expect them to emerge as greater leaders in the industry after the crisis is over. I will add more financial picks in the future on top of these three banks as they will serve as the core of my banking picks.
I will GRADUALLY start to buy those stocks when the darkest day arrives. Not now!
When is the darkest day? Please let us know so that we can catch the train. Thank you so much for your sharing.