Financials can be very good value buying because, practicaly they lose on subprime-related assets but a company like MS made very good results on other operations.
The losses due to subprime is worse than I thought, but it will last no more than one year. By mid 2008 this stocks will recover nicely. All the write-off will be done.
I hope they would be half done yet, but I'm not very gifted for timing financials.
Remeber that's a mark to market loss. That means that such loss fluctuate with the asset value. It's not like they sold less products, it's more like you buy bonds which lose half of their values. But they also make profit on commercial operations and other stuffs.
If mortgage backed securities rise in value due to a rebound in real estates, lower interrest rates, less deliquency, let's say in one year, they will post a profit where they posted a loss before.
Of course I remains cautious, that's why I don't consider buying above $50.
Now that the market knows about the worse case scenario, we will reach the bottom. That's why I think there is little downside based on $50.
article