Picking the Bottom

Further to our discussions about when to take the dip and buy into an unloved sector, I found this article about credit cycles:

http://www.minyanville.com/articles/FRE-FNM-C-BAC-CFC/index/a/15019

Although I was not an investor in 1987-1991, I am peripherally aware that there are other examples of previous credit contractions where financial companies really suffered. So far prior to Citi selling a 4.9% stake in itself, the only thing to have happened to financials in the U.S. is a drop in their stock prices. The article suggests that previous bottoms in credit cycles actually had defaults and insolvencies. Maybe today's Fed wouldn't allow such a default as this would do much to destroy confidence, but even the Fed can't monetize all the bad credit sloshing around can they?

I highly doubt that the bottom of this credit cycle will be a sharp 'V' shape. Something more like a prolonged 'U' shape with at least all the major magazines devoting a cover page to the "credit disaster" would qualify more as the bottom in my opinion. If we're in the denial phase as the article suggests then we still have to look forward to the blame stage (class action lawsuits vs. the bond rating agencies etc.), and then the clean up stage (new legislation/regulation like Sarbanes-Oxley). I think investing around this stage will decrease the risk but at the cost of not picking the bottom perfectly!

I love investing part-time! I think what I want because its my own money! I don't know how these professionals do it?