Although many banks reported more writedowns on collateralized debt (CDOs) and negative earnings, there are signs the banks are crawling out of the graves they dug for themselves. Many reports say that the banks are taking their last big writedowns. Hopes are up for banks with the bad news behind them.

As I talked about in my article Financials Maimed, Pick 'Em Cheap, the financial stocks have been beaten and beaten again. Financial stocks have started to rise with sentiment about banks rising, and there is a movement of institutional money (mutual funds, insurance companies, hedge funds, and pensions) into financials as well. The prices of financial stocks have risen significantly in the past few weeks:

Bank of America (BAC) has risen over 8% from about $35.50 to $38.38 since April 14th. Merrill Lynch (MER) has risen over 15% from $43 to $49.50 in the same time period. Even struggling private equity giant, Blackstone (BX), has gone from $17.20 to $19.40; That's a 12.7% increase.



Don't feel like you've missed out on the good opportunities here though. These financials have fallen hard, so they have a long way to go up. If you would have looked at a quote on Merrill a year ago at $90 and asked yourself if you'd like to buy that same stock for $50, would you take it? Absolutely.

Banks won't see the same kinds of earnings they saw in 2006 and 2007 this year, but just as any industry in the stock market, it fluctuates. 2009 and 2010 may see those outstanding earnings numbers, and this time they could be bigger than ever. Stocks go up, stocks go down. Buy them on the way up, and you have no reason to frown.