We are the home of the LEADING investment forecaster in the world. This claim is backed by a $100,000 guarantee. Have you ever heard of anyone back their claim with $100,000? So, who is the leading expert on the economic collapse? MIKE STATHIS, Author of America's Financial Apocalypse (2006) and Cashing in on the Real Estate Bubble (2007). as well as the Wall Street Investment Bible (2008). Those who followed the advice in these books made a fortune. We are #1 in Market Forecasting Mike advised investors to get out of the market before the collapse. In fact, he predicted the Dow would collapse to 6500 in his 2006 book. On March 9, 2009 Stathis recommended buying into the stock market. That would end up being the EXACT bottom. NO ONE else in the world made that call. Since March 2009, Stathis has kept his research clients in the US stock market. Mike has also nailed every market sell off since the financial crisis. Mike Stathis and AVA Investment Analytics... #1 in Distressed Securities Analysis #1 in Currency & Commodities Forecasting, #1 in Macroeconomic Analysis, #1 in Precious Metals Forecasting Yet, Stathis continues to be banned by the media...Why? Because the media intentionally airs jug heads and charlatans since they have been bought off by Wall Street. The "experts" in the media have terrible track records. By airing clowns and extremists, Main Street will be misguided. This will make it much easier for Wall Street to take your money. So if you pay attention to the media, you are going to get screwed. FACT: if you do not have our research, you are behind the curve.
AVA Investment Analytics

January 2014 Emerging Markets Forecast

AVA Investment Analytics

January 2014 US Stock Market Forecast (Dow Jones & Nasdaq)

AVA Investment Analytics

January 2014 Commodities, Currencies & Precious Metals Forecast

AVA Investment Analytics

Brazil Economic Analysis 2013

AVA Investment Analytics

November 2013 Commodities, Currencies & Precious Metals Forecast

AVA Investment Analytics

November 2013 Dow Jones & Nasdaq Forecast

AVA Investment Analytics

November 2013 Emerging Markets Forecast

AVA Investment Analytics

August Precious Metals and Commodities Forecast Video Update

AVA Investment Analytics

August 2013 Emerging Markets Forecast

AVA Investment Analytics

August 2013 Dow Jones & Nasdaq Forecast

Finding The Bottom In Financials
Saturday, July 12, 2008, by Stathis

I've read and heard countless investors who have been thinking the banks were a "good deal" since the first big market sell off in January 2008. Since then many are down another 60% - some even more.

Every month I see new investors looking to pick up a "bargain" in the financials without realizing the only bargains have been short positions. Most investors have been programmed by the financial media to always buy stocks when they go down because "in the long-term they are a great value."
Well I don't know about you, but long-term to me means at least 20 years. And anyone who considers long-term any shorter than that needs to consider these sobering facts:
  • Since making its highs in March 2008, the Nasdaq is still down by over 55%; that's going on 8 years folks. In the 'best of scenarios' I cannot see those highs being tested for at least another 8 years.  
  • Since making its highs in 1990, the Nikkei is still down more than 65%. Next year will mark 20 years since the Nikkei approached 40,000.
  • Finally, since making its highs in 1999, the Dow is now by about 3% after 9 years. Most likely the Dow will go considerably lower
These are things to consider when buying stocks in general. But when we are talking about the biggest banking crisis ever, things look much worse. The financials continue to write down assets and take losses. And they still have no idea how large the total losses will be. Finally, they continue to sell off assets and raise capital using debt, and more so by issuing new equity.
Now, what do you think is going to happen to say, Citigroup (C) once it realizes all its losses?
Next, consider how the future of its ability to deliver earnings after selling off assets.
Finally, consider what the shareholder dilution will do to per share earnings. Yet, Citigroup is in much better shape than most of the other banks.
Before it's all said and done you should expect to see most of the financials trading in the teens, some the single digits (as we already see). As for Goldman Sachs (GS), I'm betting it will break down well below $100 before it's all said and done.
When you take huge losses, you can recover as long as you have strong assets to deliver earnings. But when you are selling off a good portion of these assets your ability to deliver earnings will be diluted. These dilutions are even more severe after you have issued more shares.

If you're determined to bottom-fish, you need to contend with the high possibility that things are going lower. And the trip back up is going to be slow and nerve-racking.


Those of you who are looking for a bottom need to stick with stocks that are not distressed and have already declined due to other issues, such as the drug makers. Medicare Part D combined with the retirement of up to 80 million boomers will position these stocks for at least a decent recovery. And in the meantime you can collect the huge dividends. My top pick for this strategy is Pfizer (PFE). While a large market sell off could take it down another 2 points, the current dividend yield of over 7% is quite a deal. And note that in its 41-year history of being listed on public exchanges, it has always increased the dividend.
In conclusion, with rare exception, I do not envision any point in time when I will buy the financials hoping for a long-term recovery. In the best of scenarios, the only way they will be able to mount a reasonable earnings rebound will be through share buybacks or reverse splits. But that is unlikely to happen anytime soon if ever.
Consider that Citigroup still has not realized the need to eliminate its dividend completely. It would rather sell off revenue-generating assets to raise cash like the one announced today in order to appease nervous shareholders.
But with 5.25 billion shares outstanding and an annual dividend of $1.28, this $7 billion ($4 billion post-tax) asset sale only allows them to continue dividend payments for one year. In contrast, they have lost a powerful retail presence in France, and all of the future earnings it would have brought.
These banks need to wake up and start managing their business in crisis mode rather than the irresponsible mindset that got them where they are today.
So if you think the banks will be a great buy when they do bottom, you should reconsider. Your money can be invested elsewhere with much lower risk and higher returns.
And while inflation is sure to eat away at any cash, at least you don't risk losing it all.

See Our Copyright Policy

Copyright © 2008-2015. AVA Investment Analytics, LLC. All Rights Reserved.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher.

These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

Article 19 of the United Nations' Universal Declaration of Human Rights: Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.

Printing Version More On US Markets

Education (most articles are restricted)   Focused Research
Asset Management
Clearing Your Mind
Fundamental Analysis
How to Use Forecasting
Instructional Videos
Investment Boot Camp
Labor Market
Latin America
Liars & Idiots
Media Deception
Mutual Funds
Precious Metals
Real Estate
Technical Analysis
US Markets
  Proof that Mike Stathis is One of the Top Investment Minds on Earth

2013 Mid-Year Global Economic Analysis (Video Presentation)

The Most Comprehensive Global Economic Report in the World

We recently released what we believe is the single most comprehensive and insightful global...

60 Stocks Poised for HUGE Moves

Next week we plan to release a special video presentation highlighting approximately 60...

Fundamental & Technical Analysis of Twenty Stocks Trading over $100

We have just released twenty (20) videos, each covering the fundamental and technical analysis of...

Economic Focus: Canada

In this report, we analyze Canada's economic health, its long term fiscal challenges and examine...

UK Economic Analysis: Housing and Banking Risk

Just released for subscribers of the Intelligent Investor is a 30 minute video presentation...

Telcom Analysis Video Presentation

In this 23 minute video, Mike discusses ways to play the AT&T/T Mobile deal, and summarizes the...

Investment Strategy Video Tutorial

We have just released an investment strategy video tutorial for subscribers to Dividend Gems. In...

Italy, France and Japan Economic Analysis

As a reminder, we released an economic analysis of Italy, France, Japan and the US in the October...


Terms and Conditions | Privacy Policy | Legal Disclaimers
Copyright (c) 2008-2016. AVA Investment Analytics. All Rights Reserved