Welcome to another action-packed Monday. (The weekend went by fast, no?) All in all, it looks like a good week to be long the financials for a quick trade. Though by "quick trade," I really mean a lightning-quick trade... the kind that works best for trigger-fingered scalpers who like catching moves that threaten to finish before they start.

As the great Bob Dylan sang, that ain't me, babe. Or I should say it isn't "us," rather -- because no one particularly favors those types of trades here at Taipan. We're not the ones toggling back and forth between multiple trading screens 40 times an hour.

That type of action can be profitable for the properly caffeinated in-and-out set. But you have to be psychologically built for it (and physically set up for it). For most of us, in contrast, the words of trend follower Ed Seykota ring true: "High frequency trading makes about as much sense as high frequency flying."

That's why Taipan focuses more on swing-trade type opportunities, where the goal is to carve out meaty chunks of a move over weeks (if not months) at a time. There's more money in sailing with the wind, we've found, and less hassle in not being chained to a screen.

So what is it, exactly, that has the short-term trigger-pullers so excited? Believe it or not, it's basically the chart below (and others like it in the financials).

As Taipan Daily covered on Friday, there is a growing sense of hope that the worst has passed. The belief is that the Fed may be close to "done" slashing interest rates, and that after this week's meeting, all things credit-related will start looking up. This belief has pushed up financials (and pushed down safe-haven assets like precious metals).

Growing Wheat in the Desert

Let's be honest here, shall we? Your humble editor suggests that the "all clear" whistle is being blown by idiots. Now, "idiots" is undoubtedly a strong word. But it's a tame word in comparison to some that come to mind upon hearing from the likes of James Oelschlager, a money manager based in Akron, Ohio.

According to Barron's, Mr. Oelschlager runs $1.5 billion in assets. How he ever amassed that sum, one is hard-pressed to say. This is the opinion Mr. Oelschlager expressed on the current market environment: "Stagflation won't happen... Money [supply] is under control. Valuations look cheap. Lousy sentiment is always bullish. Wheat will grow in the desert when man's imagination fertilizes the soil."

Madre de Dios! If you are bullish on the banks and brokers here, you should quake in fear knowing that this man is on your side of the ledger. Let's break down that treasure trove of nuttiness shall we?

Stagflation won't happen. Except for the fact, sir, that it is already happening to tens of millions of Americans.

Money [supply] is under control. On which planet, exactly? Alpha Centauri?

Valuations look cheap. Valuations of what? This is about as helpful as saying "restaurant menus look cheap." There's a difference between Smith & Wollensky's and Joe Bob's Chicken Shack.

Lousy sentiment is always bullish. Two pips for honesty here… at least you're revealing your true colors.

Wheat will grow in the desert when man's imagination fertilizes the soil. Ah, what a quote. What... a... quote. This one is, how might one put it, a "humdinger."

Grade-A Fertilizer

As a Barron's-anointed standard bearer of the bulls -- in the midst of a full-blown food crisis no less -- Mr. Oelschlager has made his case akin to that of growing wheat in the desert. The mind boggles.

No lack of touch with reality here, hey? For cynics like yours truly, this is manna from the Gods. Stocks will go up and up and up, as certainly as man's cheery attitude can make crops take root in sand... could there be a better example of stupidly wishful thinking? Even Norman Vincent Peale would turn away in shame.

And speaking of "man's imagination fertilizing the soil"... Mr. Oelschlager's imagination is certainly being fertilized by something potent. Whatever it is, he should bag it up and sell it in the gardening section of Lowe's or Home Depot -- if not to farmers across the globe.

Our lovable Barron's buffoon also grounds his optimism in belief that the price of oil will fall back to $75 soon. (Never mind the fact that the only way crude oil falls hard is if equities fall even harder.) But enough about him. Bullish goofballs willing to rave about wheat in the desert are probably more the exception than the rule. The broader point is, they are out there... and it doesn't take many of them to bid up a market on the slightest ray of hope. And some of them are running billions of dollars.

These are the type of buyers who make bear-market rallies into the fiascoes they always are.

Perhaps you have an image of Wall Street money managers as staid, sharply dressed Ivy League types… folks who would never say or do anything ridiculous, apart from the odd derivatives mistake. But that's not the case, oh no. Many of these folks are just idiots.

And the caffeinated hedge fund guys alluded to earlier? The trigger-finger trades toggling back and forth between the Bloomie and the screens? They love these "wheat in the desert" types who grin like hayseeds at every optimistic data point.

Not everyone can dart in and out with a profit, you see. Some sad-sack groom has to be left at the false-rally altar. For the fleet-footed trading crowd, it's most kind of money managers like Mr. Oelschlager to step up and volunteer.

Fed Folly Spreads Across the Pond

So, again, to quickly recap: If you listen to the Street chatter, you'll hear about the near-term upside in the financials. You'll hear talk of the Fed being close to done, and the U.S. dollar environment being supportive.

This is all fine as far as it goes. But as far as the financials go, I'm much more inclined to wait for the rally to peter out... setting up for a nice opportunity to short them hard again.

Why pour cold water on this budding optimism, some of you ask. Because of events, really... events that continue to take place behind the scenes, not just in the United States but around the world.

To give you an example of what I mean, let's take a quick look at what's happening in the UK right now.

First, it's helpful to note that the word "scheme" does not necessarily have bad connotations in the UK. When the British press talks about a "house-price scheme," they are actually using neutral language.

And yet, the Bank of England's latest "mortgage-swap scheme" carries with it all the baggage of the word "scheme" as used in America.

Not to put too fine a point on it, jolly old England is bracing for a housing bust. Prime Minister Brown is greatly concerned about the state of the British consumer... and there are fears that the coming UK housing fallout could be as bad as, or worse than, what we've seen in the States. Potential disaster looms. (We've seen that disaster foreshadowed with the fall of Northern Rock, a British mortgage lender whose troubles brought about Britain's first true "bank run" in 150 years or so.)

In order to head all this off at the pass, the Bank of England (or BOE) has taken a page from the U.S. Fed. They have done this by engaging in a "toxic mortgage swap" -- taking in the worst of the garbage on bank balance sheets, trading it for cash, and offering to hold the muck for up to three years in an effort to steady the lending market.

Do you see the implications here? A few short weeks ago, the world was hammering Ben Bernanke for bailing out Wall Street in unprecedented ways. Now his British counterpart is taking the same steps. Nor is it just Britain -- other European housing enclaves are bracing for a bust too.

There is at least one key difference, though: Europe's bankers are at least acting preemptively. They have watched in horror as the boom-turned-bust unraveled in the U.S., and so now they are grabbing water buckets and manning battle stations before the fire burns too hot at home.

But the unavoidable lesson is that there's more to come for them, and more to come for us. We just aren't finished, folks. The story isn't over.

Not Just the Bankers, but the Banks

Nor is it just European central bankers aping the American Fed. Banks across the pond are showing signs of trouble, too.

One of the most spectacular write-downs of all -- a whopping $37 billion -- was coughed up not by a U.S. bank, but by the (supposedly) cautious and conservative United Bank of Switzerland. (Wags now suggest that the bank’s initials, UBS, stand for "Used to Be Smart.")

Another European bank, the Royal Bank of Scotland, was bragging just a short time ago of its bedrock financial strength. That tone changed a few days ago, when RBOS was forced to raise $24 billion to shore up its balance sheets. (As an Economist article leader so wonderfully put it, "Look Ma, no capital.")

In sum, there is a great debate going on right now over whether the woes of the credit crisis are finally winding down... or whether they are just getting started. We think things are just getting started, as the evidence above attests -- and as food and gas prices attest, and as consumer troubles in the U.S. attest.

That makes the current rally in financials more an opportunity to watch and wait… and to go short again as Fed folly spreads.

Not Anti-Bank -- Just Anti-Foolishness

You might get the sense from all this, by the way, that we at Taipan are resolutely "anti-bank." That's not the case. We are simply anti-foolishness.

The banks we don't like all seem to have one thing in common: They are supposedly "sophisticated" rich-world outfits that turned out to be too clever by half.

The banks we do like have one thing in common, too: They are less-sophisticated players who dominate their respective emerging markets.

These "Taipan approved" banks are none the worse for wear for having sidestepped most of this subprime mess. And best of all, the banks we like have far less leverage, far more cash on the books, and far better opportunities for organic growth than their Western counterparts. You'll hear more on this theme from Adam Lass and Sara Nunnally in the coming days.