Dan Schmeidler

Why I Bought the Ultrashort Financial Sector ETF

Use the financials as a short hedge for your long position. This will work well if you are long anything outside of the financials (such as commodities, industrials, retials, etc.) Build a nice short position on some of the financials while they are still near the top of the recent near 20% run-up. There is little fundamentals that can drive these stocks higher. During the next correction some of these financials should come down again, giving your long position a nice cushion. Then close your short position on the next "dooms-day" or "it's the collapse of all capital markets" kinda days, use the extra cash to add to your diversified long positions, (like buying some of the gold miners at an insane 60 earnings ratio, why not!) and then enjoy another bounce up. The banking industry in general is going through a drastic change this time around. A change towards socialization due to their inability to be profitable without goverment intervention. This means less prospects for profitability and real growth. In fact, it appears that our government acutally enjoys watching these monsters bleed to death slowly. In the future we are going to see less branches and far longer waiting times and longer lines. Kinda like banking in Moscow in the 1960's, or East Berlin in the 1970's. Wait, do the communists even have such a thing as banking? Wealth management and private banking will also change to some degree. This bail-out will come at a cost, and the government is not going to let this industry off the hook until they get on their knees and answer to "who is your daddy". Good luck with your trading.