We mentioned on several occasions that investors usually look six to nine months into the future when they are deciding how much to pay for stocks. The higher prices we are seeing now indicate that many investors believe the end of the bear market is coming into view.
As much as we would like to agree with the optimists, we think the credit crunch probably has further to run before the turnaround begins. It is possible that another bank might follow Bear Stearns into the dustbin of history. Some analysts think the whole financial service industry is a house of cards that may fall apart.
We don't agree with the house of cards outlook, but we do think you should stay out of the bidding race that is occurring for most banks and money centers. There is more than a touch of overconfidence creeping into the market now that isn't likely to last. I think the Market will give patient investors better prices in a few weeks.