"Pain is inevitable. Suffering is optional"
M. Kathleen Casey

Here is another opinion why financial sector might not be quite out of the woods yet... Some of the graphs from today's Loan Officer Survey look quite convincingly scary. It is likely that Commercial Real Estate could be the next source of trouble for the financial sector and economy in general...

Lending terms have tightened dramatically:

"About 80 percent of domestic banks reported tightening their lending standards on commercial real estate loans over the past three months, a notable increase from the October survey. The net fraction of domestic banks reporting tighter lending standards on these loans was the highest since this question was introduced in 1990. About 55 percent of foreign banks--up from about 40 percent in the October survey--indicated that they had tightened their lending standards on such loans. Concerning loan demand, about 45 percent of both domestic and foreign respondents, on net, reported weaker demand for commercial real estate loans over the past three months."

Outlook for Loan Quality in 2008 is very negative- I highly doubt all of the bad news on the CRE front are priced in into the market

"A set of special questions asked banks about their expectations for delinquencies and charge-offs on loans to businesses and households in 2008 under the assumption that economic activity progresses in line with consensus forecasts. On balance, the responses indicate that large majorities of domestic and foreign banks expect a deterioration in loan quality in 2008. Regarding loans to businesses, between about 75 percent and 85 percent of domestic and foreign banks expect a deterioration in the quality of their C&I and commercial real estate loan portfolios. About 15 percent of domestic and 20 percent of foreign respondents expect a substantial deterioration in the quality of their commercial real estate portfolios. Concerning residential real estate loans, between about 70 percent and 80 percent of domestic respondents expect the quality of their prime, nontraditional, and subprime residential mortgage loans, as well as of their revolving home equity loans, to deteriorate in 2008. Finally, about 70 percent of domestic respondents expect a deterioration in the quality of both credit card and other consumer loans."

And finally when looking at the graphs here please note how similar conditions in 2007-08 look to 2000-01...

So to sum it up into simple investing terms- it is quite possible that rebound in real estate and financials is overdone - so SKF and SRS present an interesting short term opportunity. Also, the severe drop followed by rebound pattern seems to be in play in the Solar Energy sector. I added several ideas to my long portfolio at the open this morning- SPWR, JASO and STP... Will look for a quick double digit return similar to that of the dry shippers (DRYS, DSX, GNK) last week...But will also sell on any real weakness...

Trade safe and cheers, Vad
Skepticalcapitalist@gmail.com