bearfund

Calling It Quits on Gold, Platinum - It's Time to Go Financials!

You do that, dude. I'll be the guy on the other side of your trades. SKF is looking mighty tempting at 92. If we see 86 I'll have to get in. Anyone buying financials after a 15-20% rise is nuts, especially with most of the banks trading well above book value now (which itself is highly dubious). The time to buy financials for a short-term trade was the BSC debacle. Way too late now. Watch the cold, hard reality of dilution, endless writeoffs, and inevitable dividend cuts sink in over the next 3 months. Citigroup raised $4.5b and everyone acted like it was the greatest thing ever. To put that in perspective, that's enough to pay their ridiculous dividend on the outstanding common stock alone for all of 8 months. Of course, if they actually intend to use it as capital, they could gear up 10x on paper yielding 10% and make enough each year on the margin to pay their dividends for 73 days - and we all know that 10% paper is rock-solid; the ratings agencies said so! That strategy has worked so well, after all. Or maybe they think they can raise more capital and keep paying the dividends out of it forever? Hmm, Charles Ponzi tried that once; I forget how it turned out. Bottom line, these companies aren't going to fail, at least not all of them, but they're extremely overvalued today.

I don't blame you for staying out of metals right now, though I think there's money to be made on some short-term long positions in gold (I entered last week at 848). If we see 730 it will be time to start getting big again. But surely you can do better in the meantime than chasing hot money around 6 weeks late.