Financials Are Up: Boom or Short Covering?

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 |  Includes: BWF, PGF, XLF
by: Alex Filonov

Banks are up last couple of weeks. I'd be happy to believe Cramer, who said that it's a great boom in financials. But something else draws my attention.


It's true that common stocks are up. At the same time, bank preferreds are down. Just a couple of months ago we saw the opposite: common down, preferreds up. It was the time when all fixed income boomed, including preferreds.


There are several explanations for the current action. Maybe Cramer is right and banks just joined the Santa rally. Maybe funds are unwinding the pair trade "short common, long preferreds". Or maybe we will see a bullish action in financials next year. I don't know, my crystal ball is not showing anything.

Time will tell, so far I'm not planning any actions.


Full disclosure: at the time of publication author had long positions in banks: GS, USB and in bank preferreds: PGF, BWF. Positions can change any time.