The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverageNEW YORK ( Zenpenny) - The former whales seem to be in a state of perpetual floundering. After great, well-publicized runs, the whales have drawn the attention of those who seek to feed off excess. At the first sign of blood, they will swarm. There is a lot of blood in the water currently and there is a lot of swarming. How much of an effect does this predatory behavior have on the markets? How much of a further dislocation in the markets can be attributed to a few great whales being stranded in shallow water while hundreds of sharks proceed to take bites of the flesh?
It is only natural that the markets would rush at an imbalance such as this, where the opportunity to take out multiple targets with only a few shots exists. The European crisis is blamed, but the reality goes beyond any fundamental issues and into the functioning of the markets. At what point does the natural functioning of the markets turn into a self-reinforcing cycle of fundamental pain for the financial institutions that have fallen victim? At some point, the natural functioning of the financial markets begins to influence fundamentals. Rumors end up becoming reality as customers flee and counter-party risk skyrockets. The functioning of the markets morphs into a new reality for a company, the employees of the company and customers. The question for those considering investing in the financial sector is as follows: 1. Will the functioning of the markets begin influencing the fundamental reality of companies in the banking/financial services sector? 2. How much of a discount in shares of banking/financial services companies can be attributed the functioning of the markets vs. fundamental realities? 3. At what point will the market relent and allow banking/financial services companies to begin trading on fundamentals rather than their current predatory state driven by the natural functioning of markets? It's my opinion that we are going to encounter several cycles of this type of behavior in the coming one to two years. The trade on the upside for financial sector will end up being a lucrative one. However, lucrative investments do not typically occur without a period of adversity for those seeking to profit. The larger and more widely followed the opportunity, the more potential for the markets functioning in their current manner exists. Opportunities for intermediate term profits exist. We are nearing a point where that opportunity is to the upside. Longer-term we may have quite a few whales to gut before the market allows those with patience and appetite for risk to be rewarded.