Wall St. Capitulates On Financial Shares (C)(MER)(BAC)(WB)(LEH)(AIG)

Banking, finance, and taxes

Published: June 11, 2008 11:58 am

From the viewpoint of pessimists, it was just a matter of time. The run-up in financial shares which began in mid-March would be tomahawked by a flailing economy and the leprosy of mortgage-backed paper.

Several of the banks and brokerage CEOs went on TV and out to investor conferences with news that, in their opinions, the worst was over. It has been a short and messy few months, but the world could move back to spinning on its axis.

If nothing else did, AIG (AIG) and Lehman (LEH) put an end to the fantasy. Financial companies have several quarters of rough earnings ahead. (Of course, Goldman Sachs will do just fine). Some of the weakest companies may even be dissolved or sold.

Whatever hope the market had ended earlier this week, but the sentiment became more grim today. Citigroup (C) fell below $20 for the first time in almost three months. Wachovia (WB) moved near to its low. Bank of America (BAC) and Merrill Lynch found new bottoms.

For these companies, 2008 is dead. They can only hope for some faltering improvement next year. No one wanted to believe that it is a fifty-year storm.

Douglas A. McIntyre

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