FBR: Stay Away From Financials

Friedman Billings Ramsey is telling its clients to avoid investing in financial stocks, noting that the "future capital structure" of the industry is uncertain "given the growing likelihood of direct equity investment in financials by the government." The firm notes, "We expect that the government will take additional, drastic steps to combat the financial crisis, as rate cuts and Federal Reserve-backed auction facilities have had limited benefits." Earlier in the decade FBR's investment banking arm took many subprime residential firms public using a real estate investment trust ownership (REIT) structure. Every subprime firm it has raised equity for has either failed or merged out of existence. On Thursday FBR's share price hit a new 52-week low: 62 cents. Its high is $5.