Bank of America (NYSE:BAC) closed below $5 yesterday during the regular session, although it traded above the figure after hours. The whole sector was down a lot yesterday; I saw articles blaming Europe and others blaming the new capital requirements. I usually get pushback on this, but I will say again that this is not over. The financials will continue to see more shoes drop.

The book value arguments made by Barron’s and others over the last few years have not mattered, and will not matter for a while longer. I don’t know how long this will last, I just know we are not done yet. By financials I mean the big banks in the US that dominate the Financial Sector SPDR (NYSEARCA:XLF) and the big European banks, although I would note that that our only US financial exposure is an index provider. Not related, but I would also continue to avoid Chinese banks, which means avoiding most China ETFs.

The other news of the day was AT dropping its bid for Deutsche Telecom’s (OTCPK:DTEGF) T Mobile and so presumably having to fork over the $4 billion break up fee. The worst reaction I can recall to an M going bad was when the LBO for UAL (NYSE:UAL) unraveled in 1989. It caused a 6.1% drop in the S 500 on October 13 of that year.

I don’t know whether this news could be that significant (probably not) but it is worth knowing a little market history about this and that deals collapsing can adversely affect the entire market.

The idea that the market volatility would decrease to close out the year as function of towels being thrown in seemed very plausible to me but based on the last couple of hours yesterday’s trading seems to be off the table. Volatility, engage.

As I’ve disclosed in the last few weeks, I’ve been a little more tactical in the portfolio and mentioned doing a little buying if we dip far enough. No trade yet, but I do have one penciled out and ready to implement if this current slide continues I will keep the blog posted.

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