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President Obama cannot permit continued failure and a loud "no confidence" vote directed towards the financial sector. He will act boldly, probably this week, to announce a very large and very public TARP 2 initiative designed to restore confidence and stability. If, indeed, he does act, it will make my adding to PortfolioiShares S&P U.S. Preferred Stock Index Fund (NYSEARCA:PFF) and PowerShares Financial Preferred (NYSEARCA:PGF) today an astute move. If not, I still have a nice dividend cushion one big step removed from bank common shares.

Although I do like certain banks over others, in this economic climate not diversifying risk within a sector (especially financials) seems foolhardy. Going a step further, I believe that the current proposed and House-passed stimulus bill (called in some quarters "porkulus") will not do much of anything to jump start anything except pet progressive social programs and to buy votes for 2010. Surely President Obama knows this, and needs a huge TARP 2, attacking the deep recession with a surge of support for financials, and by extrapolation, housing and the markets. I won't quarrel with this approach. That's politics.

Purchasing the common stock of financials may be a tactical mistake, as surely there will be conditions attached to any financial institutions that accept TARP 2 funds. One stipulation will almost certainly be common stock dividends. Another may be an equity stake within the common shares by the Feds. I do not think that bonds or preferred shares will be impacted, in part because they are not as valuable a political currency bacause they are not as newsworthy an entity to attack.

If "change" is coming to Washington with my prediction of a massive TARP 2 next week, I anticipate with some audacity of hope that a share of change will shower my brokerage accounts through preferred shares' total return.

IShares U.S. Preferred Stock Index ETF (PFF) trades around $26.00 and has a current yield of 9.50%. Expenses are .48%. 85% of this ETF consists of financials. The average quality of the portfolio is BB+.

PowerShares Preferred Financial Portfolio ETF (PGF) trades at $11.07 and has a current yield of 12.51%. Expenses are .60%. The average quality of the portfolio is A2.

Of the two, I prefer the iShares' PFF. It is 100% in the U.S., where the TARP 2 will occur, and the portfolio contains many more securities for appropriate diversification. PowerShares PGF has about forty five securities, quite a few outside of the United States as compared to PFF. Still. PGF will benefit, moreso if European governments deploy their version of a bailout in coordination with the U.S.

With the nice yield and the chance for some capital appreciation forthcoming, the investor giving these ETFs consideration early this upcoming week may be well rewarded.

Source: Profit from Obama's TARP 2 with Preferred ETFs