New York AG Andrew Cuomo is, in my opinion, striking a good balance between hard-ass prosecutor and free-market realist. Unlike some regulators, Cuomo is quick to say that if people speculate and get burned then that's their own fault. As our guest, New York Times reporter and DealBook editor Andrew Ross Sorkin, and I discuss in the accompanying video, Cuomo is right to draw a distinction between speculation and auction-rate securities, which were often bought and sold as an equivalent of cash.

If banks understood and made clients aware of the risks of ARS and the clients bought them anyway, then there's no foul: When you roll the dice and lose you have no one to blame but yourself. In this case, however, I suspect some banks either underestimated or ignored the risks of ARS (negligence) -- or, in some cases, misrepresented them (fraud). In the latter cases, Cuomo's solution is fair: Ask the banks to make clients whole by buying the ARS back at par. Citi and UBS have agreed to do this. Other banks, such as Merrill Lynch, haven't.

Cuomo's ARS investigation is yet another blow to already-battered financial stocks, along with the continuing saga of Fannie Mae and Freddie Mac (and the spector of a Bear Stearns-style bailout for them). Does it finally signal a bottom in financials? Doubtful, says Sorkin -- and don't expect a V-shaped recovery when the stocks do finally do hit bottom.

As for the Merrill case, I have no idea what the facts are (nor, I suspect, does anyone else opining about the the firm's guilt). If Merrill thinks it adequately represented the risks of ARS and clients bought them anyway, it shouldn't rush to settle. Judging from Cuomo's appearance on CNBC this morning, however, his patience has run out (transcript after the jump).

A nation's economy is suffering from a weak currency, high fuel costs and an overly indebted consumer, which is rapidly losing confidence as job growth stalls. Sound familiar?

Yes, South Korea is battling many of the same ills as America, made worse by its nearly 100% reliance on imported energy and proximity to intensifying competition from Chinese manufacturing.

"I would like to just encourage the Korean people and the public to hang in there for the next year of so along with the government and we will do all that we can to try to improve the overall situation here in Korea," President Myung-bak Lee told me in an exclusive interview at his residence, the Blue House.

A former CEO of Hyundai Construction, President Lee is an avid believer in free trade and deregulation, and is putting a "high priority" on reforming Korea's tax system and related regulations, including those restricting foreign investment.

President Lee believes such changes will help Korea be better positioned for the recovery, paving the way for the nation to reach his ambitious 10 year goals he refers to as the '747' plan: 7% GDP growth, $40,000 in average household income, and becoming the world's seventh-largest economy.

Finally, some good news! My guest Tom Brown, a former top bank analyst, who now runs hedge-fund firm Second Curve Capital, argues that financial stocks bottomed in July. The banks have enough capital, Brown says, and core earnings potential remains intact. He thinks this could be the last financial rally "of this magnitude" we see in our lifetime.

So where are the opportunities? Brown likes Wachovia's "tremendous upside" potential, and thinks guarantor MBIA could be a six-bagger. Washington Mutual, meanwhile, is screwed.

For my earlier discussion with Brown on why financials have bottomed, click here.

The most famous stock analyst in America, Oppenheimer's Meredith Whitney, remains violently bearish about financial stocks. Our guest, Tom Brown of Second Curve Capital and Bankstocks.com, thinks she's already missed the boat. Bank stocks bottomed on July 15, Brown says, the same day that Whitney's popularity peaked.

Stocks bottom before company fundamentals bottom, Brown says, and we're already seeing light at the end of the tunnel. Based on the lessons of the 1990-'91 credit crackup, investors who wait for metrics to improve will miss half the rally.

As the recent market rally continues, more and more analysts are calling the bottom (including, most notably, Jim Cramer). Our guest today thinks they're hallucinating.

Barry Ritholtz, CEO of Fusion IQ and editor of The Big Picture, thinks this is just the latest in a series of predictable bear market rallies and that we won't be done until the Dow is below 10,000.

From ClusterStock, August 12, 2008:

Financial stocks are nowhere close to a bottom. Net charge-offs and non-performing loans are still growing. Banks will have to raise more capital to plug balance sheet holes, further diluting current shareholders. Etc.

So goes the bear argument. Tom Brown at Bankstocks.com begs to differ.

As my guest Barry Ritholtz of Fusion IQ and The Big Picture and I discuss, Brown points out that, historically, markets tend to anticipate improving metrics rather than respond to them. If you wait to see improving loan performance, argues Brown, you'll miss most of the rally. Brown compares today's crisis to the crisis and recover in the early 90s.

Stocks are strong again after last week's sharp gains, including a 300-point move in the Dow on Friday. The key question is whether this is just another sucker's rally.

"Sell everything. Close my account."

That's the kind of stress my guest -- Jeff Saut, chief investment strategist at Raymond James -- was hearing from some of his clients amid the market's June swoon and mid-July lows.

Generally speaking, investor sentiment is "bleak," said Saut, ahead of Friday's big rally. Job security, and rising food and fuel prices rank high as worries among his firm's retail clients' concerns.

Still, Saut said Raymond James has seen any signs of major stress among its best-heeled clients, unlike what American Express CEO Ken Chenault said on his firm's conference call last month.

So what's Saut -- a market veteran -- watching, for clues on the market's next direction? Near term, he's upbeat, and probably more so after Friday's rally left the S&P above the 1,291 level he cited as key.

But Lowry's Selling Pressure Index, which measures the behavior of institutional investors, is a major concern, he says. The index nearly an all-time high in late July, even as the major averages were rallying off the July 15 lows.

That suggests big money is selling into rallies and that we're in a bear market, he says. Bottom line: Cash isn't a bad place to be, and this market is more for traders than long-term investors.

More bad news from the financial sector today as Fannie Mae reported a $2.3 billion loss. The mortgage giant said it will also slash its dividend more than 85%. Meanwhile, Merrill Lynch, Citigroup and UBS have separately agreed to spend about $38.4 billion collectively as part of a settlement over auction-rate securities.

With headlines like these (and others), it's folly to say the credit crisis has hit bottom but "we are closer to the end vs. the beginning," says Jeff Saut, chief investment strategist at Raymond James.

Saut said the three factors necessary for a true recovery in the credit markets are in place:

• Steepening yield curve
• Cheap currency   
• Recapitalization of balance sheets 

As in: was the bounce from the July 15 lows "the" bottom, "a" bottom or just a weigh station on the road to Gomorrah?

Jeff Saut, chief investment strategist at Raymond James, believes the bounce was very likely just an intermediate-term low vs. the true bottom for the broader market. If the S&P can close above 1291, it's recent high, there may be another surge ahead into the 1330 area, he says. But caution is still warranted, says Saut, whose audited portfolio is up 5% year-to-date vs. double-digit declines for the major averages. "This is a trader's market."

One reason Saut has outperformed as a bold bet he made in early July on stocks "with the worst characteristics," including via leveraged ETFs like the ProShares Ultra Financials (UYG) and ProShare Ultra Real Estate (URE).

Saut dramatically pared down those positions after the initial bounce off the mid-July lows. That said, he does believe some financials like Wachovia may have "the" bottom amid the "plunge, panic lows" of last month.