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08.20.08: It seems obvious to me that the commodity bubble has burst and money is flooding into financials. Why aren't we getting back into banks right now before they take off?

There are several reasons why getting into financial stocks right now is the wrong move to make. The recent rally in financials was merely a "short squeeze" triggered by the SEC's ban on "naked" short selling–without borrowing the stock first–in 19 major financial stocks. We are only in the second to third inning of the financial crisis and you don't want to be holding these stocks through the seventh inning stretch. Although there are well-managed banks like Wells Fargo and U.S. Bancorp, I wouldn't go near a bank with a 10-foot pole, especially since loan delinquencies are still soaring! Also, we do not buy stocks with declining revenue and earnings, which characterizes almost every banking stock. This short covering rally is extremely misleading.

By the way, commodity prices are still very high, and agriculture and energy stocks will continue to put up the best earnings for the foreseeable future. Although many commodity prices have corrected over 30% since early July, they are still up sharply in the past 12 months. I assure you there was no commodity bubble burst, just a mini-commodity "crunch," which is a normal seasonal retrenchment.

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