Worst and Best Trades From 2008
Houghton and Atkeson, January 1, 2009
Free Trading Guides
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5. The Financials Are Cheap
It seems that we've heard analysts claim "the financials are cheap " all year long. They may have been cheap, but they only got cheaper. The iShares Dow Jones U.S. Financial Sector Index Fund (IYF) is down 55% year-to-date.
The most notable case of the "financials are cheap" syndrome is Bill Miller, chairman and chief investment officer of Legg Mason Capital Management. After beating the S&P 500 (SPX) for 15 consecutive years, Bill decided this was the year to get long Wachovia (WB), Bear Stearns, Freddie Mac (FRE), Washington Mutual (WM) and Citigroup (C).
As of today, the fund is down almost 60% for the year.
Next: Bonuses, Parties and Private Jets for Bailout Money
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Treasury Auction Boosts Market
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The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
