Tempted to buy a few of those real cheap bank stocks? Think again, say the bank analysts at Alex. Brown & Sons Inc. in Baltimore, who looked at the way things are going in the financial services industry and headlined a recent report: "Maybe Chicken Little's Right -- the Sky is Falling!"

Well, analysts usually don't give up easily on the stocks they love to love. But the troubles of the banking industry are so deeply rooted that they have slowly but surely made believers of us all.

Analysts Kyle Prechtl Legg, Sandra J. Flannigan and John A. Heffern wrote in their Sept. 25 banking industry report, "Don't buy bank stocks; but if you opt to do so anyway, then at the very least, avoid the truly 'down and out.' This is not the time to speculate on turnarounds.

"Remember, even in a healthy economic environment, bank turnarounds generally take far longer than anticipated. And unless we are badly mistaken, today's downtrodden will not be blessed with the advantage of a healthy operating environment during which to execute their recoveries."

The Alex. Brown analysts cited three deep-seated banking industry problems.

First, "bank dividends are no longer sacred cows" -- especially after Chase Manhattan and Midlantic Corp. cut their common stock dividends by 52 percent and 47 percent, respectively.

Second, "credit problems are worsening and there is no quick fix."

Third, "current pressure on profitability is not a short-term phenomenon."

The analysts don't need a crystal ball to see what's coming next.

They expect the banks' profit and loss reports for the third quarter, which ended Sept. 30, to confirm that there will be an increase in the number of borrowers who can't pay the interest on their loans. And as a result, the banks will have to ante up more money for reserves, which will again reduce bank profits -- if there are any left.

Not only will the banks have problems with commercial real estate, which is losing value, but businesses that took on high amounts of debt in the merger and acquisition era may have trouble meeting their bank loan payments in a time of recession.

And if that isn't bad enough, the news will probably get worse in the fourth quarter, which has just begun, the analysts said.

The Alex. Brown crew said they would particularly avoid banks located in the Northeast and New England, where the regional economies will be hurt by higher energy costs and increased state and municipal budget difficulties.

The trio named 12 specific stocks, which they said will not perform as well as the industry group and can be considered a "source of funds," meaning the stocks can be sold. The list included three banks in this region, Riggs National Corp., Crestar Financial Corp. and Signet Banking Corp.

The analysts relented on the idea of buying bank stocks in only three cases -- Mercantile Bankshares Corp. of Baltimore, NCNB Corp. of Charlotte, N.C., and Norwest Corp. of Minneapolis.

"We believe that these companies should fare better than the overall industry and that their dividends are secure," they said.We've heard of the ides of April. But the ides of October? Yes, says Yale Hirsch's newsletter, Smart Money, which also publishes the annual Stock Trader's Almanac.

"We are well aware of October's significance in stock market history," Smart Money declares. And, going backward in time, it cites the Friday, Oct. 13, 1989 drop in the Dow Jones industrial average of 190.58 points, the Oct. 19, 1987 market crash in which the Dow fell 508 points and the so-called back-to-back "massacres" that took place in both 1978 and 1979.

And to cap it off, the letter recalls major bear market bottoms in the Octobers of 1946, 1957, 1960, 1962, 1966 and 1974.

It's a bit hard to tell what this October will be like. Even with a budget agreement, Saddam Hussein is likely to make this market nervous, regardless of what month it is.

Incidentally, how do you tell when a falling market has hit bottom?

Prudential-Bache Securities analyst Ralph J. Acampora defines a market bottom this way: "Simply stated, it is a time when prices consolidate within a tight trading range after a meaningful decline," he said. "The process is marked by a series of short-term rallies, followed by retreats back toward the lower end of the emerging band of price consolidation. The longer it takes to make a bottom, the greater the upside potential."It's been a while since we've heard much about Richfood Inc., a wholesale grocery company with headquarters in Richmond. Richfood supplies 600 retail supermarkets in the mid-Atlantic region and chalked up $1 billion in sales in fiscal 1990, which ended last April.

During the last few years, Richfood has encountered many problems, including lost contracts, accounting problems, financial losses and an unsuccessful effort to sell the company.

Now, reports analyst Kenneth M. Gassman Jr. of Wheat, First Securities in Richmond, Richfood is starting its turnaround. Profits are moving up and the company seems to be getting its act together.

"In the past several months, Richfood has met several major goals," Gassman said. A new chief executive and a new chief financial officer have come on board, inventory levels have been reduced, excess warehouse space has been eliminated and the company has gone from being deeply in debt to a more conservative financing mix.

Gassman said he based his optimism about the company on Richfood's sharper pricing system and its new sales development programs. "We expect Richfood to begin to seek new customers in contiguous market areas, such as Washington, Baltimore and western Virginia," he said.Is that awful slide in USAir Group Inc. shares for real? Analyst Richard A. Henderson is highly pessimistic about the outlook for both the airline industry in general and Arlington-based USAir in particular. Henderson works for the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp. in New York.

USAir recently has been trading at about $16 a share, after having been up at $52 within the last year. USAir also operates Piedmont and Pacific Southwest Airlines.

"Industry fundamentals are deteriorating. The consumer sector of the economy is weakening, and corporate profits are in a downtrend. This suggests that air travel should soften," Henderson said. "Consumers will increasingly seek to reduce spending, including vacations. Businesses will also be increasingly trying to cut costs, especially travel expenditures."

With fuel prices rising and competition getting tougher, Henderson added, "We see no reason why investors would want to own the stocks at this time."

As for USAir, its performance has been disappointing, he said. One reason is that USAir is basically a domestic carrier, while most airline growth has been in the international markets. Also, USAir has found it difficult to merge with its new airlines, he said.

Henderson expects the airline to lose $4 a share this year.Just when Microlog Corp. of Germantown, which makes voice-message systems, has seen its profits dropping like the proverbial rock, the firm has signed an agreement with Racal Recorders Ltd. of Great Britain, a major manufacturer and supplier of recording equipment for the communications market in Europe. Racal is expected to pay Microlog a license fee and to commit itself to buying Microlog products.

Microlog could use the help. Its sales for the third quarter, ended July 31, dipped to $3.8 million from $4.5 million a year earlier. But, the profits nearly vanished, dropping 99 percent to a mere $4,366 from $475,000.

"Sales through our distributors have been particularly disappointing," said Chairman J.G. Hartwell. The result is that the stock, which was the biggest gainer of 1989, has been one of the bigger losers of 1990.