The business stories that matter, by Fortune's Colin Barr
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November 26, 2007, 2:22 pm

Financials in free fall

Financial stocks are in free fall again. Round up the usual suspects: Fannie Mae (FNM) and Freddie Mac (FRE) were off around 8% amid the latest worries over their capital strength. E*Trade (ETFC) slid 10% as Wall Street decided a buyout of the mortgage-burdened online trader might not fly after all. Citi (C) shares fell 5% after CNBC reported Citi could cut as many as 45,000 jobs. Citi denies having decided on a layoff target but says it seeks to be “more efficient and cost effective to position our businesses in line with economic realities.” Economic realities are hammering other parts of the market as well. Banks continue to shy away from lending to one another, sending interbank interest rates such as Libor higher. The Fed, in turn, resorts to what David Merkel calls “half measures” such as a push to provide extra liquidity through year end. Merkel points out that the Fed doesn’t want to cut rates, because it would like to avoid further declines in the dollar and resulting inflation pressure, but the near panic in the market seems to suggest it won’t have much choice.

Yes, these stocks are falling… But as usual, the markets are going ahead of the fundamentals. It has overreacted, and the valuation of many fundamentally good financial companies has become very attractive! Its a great time to do your home work, and pick up excellent stocks at a bargain price.

You can read more on this at RaagVamdatt.com in “Stock Market Crash - What you should do now”.

Posted By Raag Vamdatt, New York, NY : April 2, 2008 10:34 pm
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Colin Barr covers business and finance for Fortune.com. Previously he was an editor at TheStreet.com and author of the weekly Five Dumbest Things on Wall Street column, and an editor at Dow Jones Newswires.
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