Traders take note... our supertrader colleague Jeff Clark is preparing to bet on lower prices for banking stocks.
In his terrific essay "The Government's Next Scapegoat," Jeff outlined the current bear case for banks. With their insane bonuses and rising fees, banks have ticked off both taxpayers and the government. Profit-limiting regulations, less federal help, and lower share prices are on the way.
Jeff mentioned the S&P Financials Fund (XLF) as a way to trade lower bank prices. This investment fund is a basket of big financial companies. As you can see, XLF enjoyed a huge rally in early 2009. That rally however, has stalled... and XLF has traded in a tight range between $14 and $15 per share for the past six months. A break below $14 would be market confirmation of Jeff's thesis... and a short-selling opportunity.
Keep in mind... some of the world's smartest, richest money managers, like John Paulson, are betting on higher bank prices. Piggybacking on Paulson's ideas is usually a recipe for winning in stocks. An XLF break above $15.50 would be market confirmation of Paulson's thesis.
This is one of those rare situations where there are good arguments on both sides. One simply has to wait for the market to move, then bet on the stronger camp. We'll keep you updated on this developing trade.
In his terrific essay "The Government's Next Scapegoat," Jeff outlined the current bear case for banks. With their insane bonuses and rising fees, banks have ticked off both taxpayers and the government. Profit-limiting regulations, less federal help, and lower share prices are on the way.
Jeff mentioned the S&P Financials Fund (XLF) as a way to trade lower bank prices. This investment fund is a basket of big financial companies. As you can see, XLF enjoyed a huge rally in early 2009. That rally however, has stalled... and XLF has traded in a tight range between $14 and $15 per share for the past six months. A break below $14 would be market confirmation of Jeff's thesis... and a short-selling opportunity.
Keep in mind... some of the world's smartest, richest money managers, like John Paulson, are betting on higher bank prices. Piggybacking on Paulson's ideas is usually a recipe for winning in stocks. An XLF break above $15.50 would be market confirmation of Paulson's thesis.
This is one of those rare situations where there are good arguments on both sides. One simply has to wait for the market to move, then bet on the stronger camp. We'll keep you updated on this developing trade.
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