Leading banks sink below book value: Still not cheap enough?

Few things get a value investor as excited as a well-known company with a strong brand and a history of profitability trading at a discount to book value. And yet J.P. Morgan Chase (NYSE: JPM), Wachovia (NYSE: WB), and many other big banks are trading right around that magic number equal to a company's assets minus its liabilities.

The reason: Fear over the subprime fiasco, of course. But fear spells opportunity for intelligent investors who are willing to be contrarian, right? Right? A lot of times.

But according to the Wall Street Journal [subscription required], it might still be too early to start buying. That's because these companies may have to take additional write downs, making the rear-view price/book ratios compiled based on past financial statements about as relevant as the fact that Sandy Koufax used to have a heck of a fastball -- you still wouldn't want him on your team. He's in his seventies.

I generally like making contrarian bets. But the problem is that the accounting at the investment banks is a little bit of a mess -- no one's quite sure how much they've really lost. And it's impossible to be a value investor when you have no idea what you're buying. It's just speculation.

True: there's a very good chance that the brave souls scooping up banking stocks now will do quite well. Contrarian strategies seem to work well, and sentiment's pretty negative right now. But those of us who like to know what we're buying will have to keep looking and waiting.