Crisis brings out the extremes on Wall Street. On one hand, we’re trained to buy the dip along with Warren Buffett and anyone else who pounces while other investors are too busy panicking.

But nobody wants to catch a falling knife either. Once we smell blood, the natural impulse is to run for cover until we can determine exactly which stocks are truly wounded and which are just running scared with the herd.

We’ve seen that pattern play out this week with the financials. One failed bank is rarely an isolated accident. The factors that killed Silicon Valley Bank make similar institutions vulnerable to a similar fate.

And until we hear an “all clear” message from management and regulators, it’s easy and even prudent to dwell on the worst-case scenarios. No news is not good news here.

Silicon Valley Bank’s CEO was making presentations at investor conferences mere weeks before his whole company imploded. Whether his show of confidence at the time was misguided or malfeasance remains to be seen . . . but the important thing now is that every bank with any profile at all go back to the books this weekend.

If something is wrong in the portfolio, they need to reach out to the regulators. And if they don’t see anything wrong, they need to tell Wall Street.

In effect, I’m asking for a fresh round of self-administered stress tests with public results. I don’t care if you’re too big to fail or too small to matter.

Remember, last year’s Fed stress tests didn’t even address what would happen to big banks if short-term interest rates climbed above 4%. The severe scenario was for an economic crash and a reversion to zero at the near end of the yield curve.

The more banks that can either pass or fail in the current environment and show their work, the more clarity we’ll have. Contagion fears won’t run quite so wild. Sick banks will vanish. Strong ones will expand to fill the void left behind.

In the meantime, there isn’t a lot of point in buying the dip. Contagion will run its course. Stocks across the financial sector will falter . . . brokerages, insurance companies, business development lenders, REITs.

I don’t think a company like Charles Schwab (SCHW) is going to evaporate like Silicon Valley Bank did. But you can’t tell that from where the stock is now.

SCHW was a $48 stock three years ago as the world spiraled into pandemic lockdown mode. Revenue has doubled and earnings are up 55% in the intervening time.

I wish Chuck Schwab would speak up. When he does, it will be time to consider buying the dip. For now, while it’s nice to see insiders grabbing shares, the mood isn’t going to turn around overnight.

And if the mood doesn’t turn, there’s no reason to throw money at the stock. That’s the definition of a falling knife and why nobody wants to expend a lot of effort trying to catch it in the air.

What interests me is when contagion talk gets so far out of hand that it strains the limits of reason. There needs to be a rational argument why one company’s bad luck will spill over to hurt another.

If that argument is not compelling, then stocks are falling out of nothing more substantial than fear. I don’t let fear dictate any of my investment decisions.

Right now, 90% of the S&P 500 is down for the month. That includes all but one of the financial names on the index . . . only MKTX is holding up in the storm.

Maybe the entire sector needs to be quarantined. All right. I get it. But unless every single bank, brokerage firm and insurance carrier fails, I’m not seeing a reason for Big Energy to be crashing.

Yes, pain for the financials could signal a deep recession on the horizon and that’s not constructive for oil demand. But the link isn’t as ironclad as Wall Street seems to be thinking.

I suspect that what’s really going on here is that nervous people are cashing out of everything simply to raise cash. This is a near-universal de-risking move in a world that suddenly looks more threatening than it did a month ago.

How else can you explain the ultra-defensive healthcare sector dropping 3% this month and even the utilities feeling the pain? No matter how many banks go under, we’re going to need to keep the lights on. Contagion just doesn’t work this way.

And Big Tech is actually up 5% in the past month. Aren’t these stocks supposed to be riskier and more speculative, thus more vulnerable to cloudier economic conditions? Here, too, the contagion argument just doesn’t hold water.

This looks more like a rotation than the end of the world. The financials have become the risk zone and tech is now the safe haven. That narrative has changed endless times in the past and will change again.

When Big Tech flinches, I think contagion will hit its natural limit and it will be safe to start buying the banks again . . . provided of course that they can demonstrate that they’re in good shape to face the future.

That’s a capitulation. We’re not quite there yet. But the moment is coming when the blood on Wall Street draws real predators looking for good eating.

Warren Buffett is buying oil stocks. He’s got plenty of bank shares left over from the last financial crisis.

He called the 2008 crash the best buying opportunity in a generation. So if you’re paralyzed with 2008 flashbacks, keep that in mind.

We’re a long way from our Lehman moment here . . . if one even comes.