Ken Trester

Thriving on Mr. Toad's Wild Stock Market Ride

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It has often been said on Wall Street that as go the financials, so goes the rest of the market.

And when the news of Wachovia's (WB) CEO Ken Thompson entering forced retirement, plus lowered debt ratings by Standard & Poor's of three financial firms -- Lehman Bros. (LEH), Merrill Lynch (MER) and Morgan Stanley (MS) -- the experts who've been calling for a bottom in that sector felt that very same bottom fall out from under them.

Let's face it, when you hear that the CEO of one of the nation's top banks -- one that has endured significant losses -- is being ushered to the door, you can probably "bank" on it that there are more dark days ahead for Wachovia.

Although his ouster was accompanied by a considerably less-impressive exit package in comparison to other exiting executives at Merrill, Bear Stearns (BSC) or Citigroup (C), no doubt the payout isn't exactly going to help WB's bottom line -- not to mention the next leg of loan write-downs that are likely in store.

Call it a retirement, resignation or simply parting ways -- in any case, it serves as a reminder that the head honcho of any publicly traded company is getting paid big bucks to, well, make big bucks for his or her respective empire … to not only make it competitive, but to beat the competition at their own game.

In the case of many financial companies, a series of bad deals, bad timing and maybe even simply bad luck has led not only to the ouster of top executives, but also a loss of faith among its investors -- which is evident in charts that are reminiscent of Mr. Toad's Wild Ride.

It's no secret that executive shake-ups are meant to show the investing public that the company in question is trying to save face and show that it's committed to digging itself out of the hole in which it has found itself.

But at the point where hundreds of billions of dollars in loan write-downs are looking like a first step to recovery, it's probably safe to say that a sea change in leadership is probably not enough to turn the tide anytime soon -- not for this particular sector, anyway.

So, how do you play names that are on the move when a bad headline can drive them down several points on a day like today and catapult them up on a better day, particularly when option premiums can shoot through the stratosphere on a volatile day?

I'm glad you asked. ...