Hysteria

A Bet Against the Banks

I definitely concur with this article.

globalmacro - the pain felt thus far in financials has come as a result of an average 10% drop in nationwide home prices. Granted, not all markets have fallen or need to fall. However, the overall market value of real estate in California, Nevada, Florida, the entire US Northeast, etc, is massive. These markets have more like 50-60% to fall to reach historic price/rent ratios.

Think about it, if all this pain has come from only a 10% drop in nationwide average real estate, imagine when we get to the 30-40% average drop needed to bring us back to historic norms. If you dont believe this is true, just google the Case Shiller National Home Price index. Although a particular house in Kansas may not need to drop this much, the AVERAGE, which includes this house, does.

I just dont see the pain ending until we reach these levels, so Ill also be holding my SKF position for the next 6-24 months, and slowly shifting profits into gold as Helicopter Ben steadily tries to inflate our way out of this mess.

Buying the Oversold Financial Sector

All the pain financials have felt so far has come from only a 10% correction in nationwide home prices. Imagine the level of devestation when prices fall another 30-40% necessary to return to their historic long term appreciation and price/income trends! Buying financials now means you believe none of these historic norms mean anything and that real estate is done correcting, which is obviously false. A simple Google on ¨Case Shiller historic home values¨ shows how far we still have to fall.

Have Bank Stocks Hit Bottom?

Shaun-- great post. All this mess has been from a 7% national drop in home values. Imagine when we get to the 30-50% correction needed nationally to return to historic home values! I'll be holding my shorts til this timeframe...