Financials led the rally today and most of them should probably be sold on the strength. The constant conversation on CNBC today has been the "good bank, bad bank" issue. The financials rallied on the news of the potential of the government doing what they originally wanted to do with the TARP. This does not make the banks solvent. It does not make them investable. They are zombies. Do not think that some pops short term mean that the coast is clear.
The place to look is Tech, Pharma, and any other company with a ton of cash. Debt is frowned upon in this market and that is the place to be. You need to be invested there not because of some calamitous issue with the credit markets. But because that is where fund managers want to be. They want to be able to tell their clients that they have those types of companies in their managed portfolios. It is truly that simple. Of course, there is certainly something to be said from an earnings standpoint with avoiding companies with a ton of debt. But the most important part is being able to tell their clients that they have the strong safe companies.
Overall, I think there are plenty of places to put cash to work in the market. Will the financials recover? Maybe. If they do it will be a glorious rally. The problem is that I don't need to take that kind of risk. There are plenty of places to make money with much less risk. Even a stock that trades at $3 can still go to $0. That is a 100% loss no matter how you cut it. No one got rich taking 100% losses.
Until next time, stay low risk..
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