IF YOU'VE BEEN

following the action in recent days you've probably noticed the race to the bottom being run between the financials and the airline stocks. Judging from the price action of various securities, it would appear to be only a matter of time before one of these industries all but collapses. The downturn has gone from ugly to downright obscene.

And virtually no member of either sector has been spared. In the financials, it's not just the likes of Lehman Brothers that's been crushed; it's seemingly every bank and big-cap financial you can find. AIG is at its lowest point in over a decade, Washington Mutual at the lowest point in 16 years, and National City trading at levels not seen since 1984. These are historic moves from which many of these companies will take years to recover, if they ever do.

The airlines' performance has been equally pitiful, with the Amex Airline Index down nearly 50% year to date. United Airlines parent UAL, Delta Air Lines, JetBlue Airways, Northwest Airlines and the rest of the index components are trading either at or near all-time lows.

Looking for value amid the rubble? Consider that for JetBlue to regain the $31 price it traded at back in 2003, the stock will have to climb 726%. For IndyMac to regain the $50.53 it traded at back in 2006, the stock will need to climb 3,098%. How's that for long-term investing?

And although dire news regarding both industries will likely continue to dominate headlines, it's worth noting that their weakness showed up much earlier in their stock charts than on the business pages. Trouble in the financial sector began to surface even before I pointed it out last summer. And after treading water for most of the past four years, the airline sector began to deteriorate in early 2007, as oil prices rose, and has consistently trended down for the better part of a year.

Losing Altitude

Two-year performance of Amex Airline Index (XAL)

Source: BigCharts.com

If you've been shrewd enough to avoid these stocks, I congratulate you, although it's likely that foresight will be for naught as America's increasingly interventionist leaders step in to save businesses that otherwise can't survive on their own. The Federal Reserve's response to Bear Stearns, as I

wrote

this spring, has set a dangerous precedent by which any notable firm, from a brokerage to bank to large airline, is now assumed too big or too important to fail.

So whether it's billion-dollar backstops from the Fed as was the case with Bear Stearns, or the loan guarantees that were handed out to airlines after 9/11, you can bet that government will be increasingly looked to as the investor of last resort. Too bad the bailouts will be financed with our money.

Holy Margin Call

Is Batman moonlighting as a broker in the soybean pit? Judging from the

trailers

of "The Dark Knight," set to be released on July 18, the Caped Crusader would appear to spend plenty of time on LaSalle Street. Filmed in Chicago last summer, the film promises plenty of gorgeous money shots of notable financial landmarks, especially the magnificent Chicago Board of Trade, built in 1930.

With the May closing of the Chicago Mercantile Exchange's trading floor, the CBOT is arguably the last active bastion of true open-outcry futures trading anywhere in the world. And while the film looks promising, Batman would likely be better served by paying off the subprime mortgage on Wayne Manor than buying CME stock at current levels.

Looking south on LaSalle Street

Arial view of CBOT Building with statue of Ceres, the Roman goddess of grain

Heath Ledger as the Joker with the Board of Trade in background

(Source: Photo stills courtesy Warner Bros.)

Jonathan Hoenig is managing member at Capitalistpig Hedge Fund LLC.