Reversal of Fortune

Interesting action today. Financials up, commercial real estate up, retail up, homebuilders up - and for the first time in a while it looks like it could actually be "buying" instead of short covering. Meanwhile all the popular sectors (read: stuff I own) is down, quite severely.

Generally this might mark the potential for a reversal and short term bottom, but I have been early on that call for the last week so let's hold off on a conclusion. But I actually like this action from a market sense (if not for the fund performance today).

JP Mogran (JPM) and Wells Fargo (WFC) earnings today showed just how terrible of a company Citigroup (C) has been. They all have problems but Citigroup is about 10 iterations worse than what I am seeing in the former 2 names. Maybe 20 times. I do expect to see some people sent to jail in a few years on the mortgage side - the government will want a scapegoat just like they did in the Worldcom, Enron days of the early '00s. Especially as the economy worsens into 2008. Someone must take the fall - certainly in cannot be politicans who pushed for total deregulation in the mortgage industry and allowed off balance sheet accounting (which was the bane of Enron) to pervade our financial system. In the long run, free markets do correct ills, but the path from "problem" to "solution" is quite painful. If we threw 10 common sense people into a room for 8 hours I am sure they could of came up with some guidelines that would of at least mitigated much of this outcome. But alas, 'financial innovation' rules. And it will repeat again, in some form in 6-7 years. It always does.