Here's a holdover from 2011 that will be very important to your investing
success in the year ahead: Don't buy financial stocks. Plain and simple. In
fact, I'm putting this on the record and saying I expect financials to be the
worst sector in 2012. I've written about the plight of this beleaguered sector
many times before. Even my InvestorPlace colleagues have suffered at the hands
of this declining behemoth. So, please trust me when I say, as an investor, you
should stay as far away from this sector as you can if you truly appreciate the
shirt on your back. Just to name a few, take a look at the various organizations
that have lost well over 40% in 2011: Bank of America (NYSE: BAC ) -59%
Citigroup (NYSE: C ) -44% E*TRADE Financial (NASDAQ: ETFC ) -50% Goldman Sachs
Group (NYSE: GS ) -46% Jefferies Group (NYSE: JEF ) -48% Och-Ziff Capital
Management Group (NYSE: OZM ) -46% Yes, some time has passed since the Lehman
Brothers bankruptcy, and some improvements have been made in certain areas. Even
now, financials are expected to grow just 0.3% in 2012. However, the housing
market is still far from being stable, and financial stocks in general need to
show a lot more improvement before my negative opinion of the sector as a whole
changes any time soon. I am an ex-banking analyst, and I can tell you firsthand
that too many unresolved issues and too much exposure to the housing crisis
remain for any significant profits to be made. Just look at housing and you'll
begin to see what I see. Approximately 11% of the homes in the U.S. are
unoccupied, and more foreclosures are still in the pipeline. This is going to
continue to create bad press and financial strain for the U.S. banking industry.
I want you to think of financial stocks like a new item on the menu of your
favorite restaurant. You see it and it looks tempting, but the head chef
personally comes out and tells you not to order it. He's been in the kitchen,
he knows something you don't, and you should heed the warning. This is the
same situation: I have been in the kitchen, and financials are one dish you want
to avoid in the year ahead. New Year's Prediction #4: Retail, The Hottest
Sector of 2012
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