Bank of America Befriends a Bear   

Today, Bank of America (NYSE: BAC) announced it could need another dose of government capital to shore up its Merrill Lynch acquisition. Additionally, JPMorgan (NYSE: JPM) just announced it would write down profits by 76% on asset writedowns. Nortel Networks (TSE: NT) just threw in the towel as well.

But these developments come as no surprise to many conservative analysts.

In fact, a number of them believe that we’re seeing a bear-market rally instead of a real turnaround. If this is the case, losses like Bill Miller’s could become commonplace as value investors – who have picked the market off its November bottom ­– get hurt in another “rush to the exits.”

But optimism springs eternal. Regardless of what the unemployment rate, the federal government, the financials or the economy does, there will still be optimism on the market. It’s a forward-pricing mechanism. While it reports what an asset is “worth” today, it’s really pricing for what the future of an asset is worth.

And if that is the ultimate measuring stick for our market – what is the optimism level of the country prospects – then the indexes could still go much lower before we see a turnaround.

Companies mentioned in this article: BAC, JPM and NT.