bearfund

The "No Amount of Bad News Can Bring This Market Down" Trades

The problem with buying banks is that they have to keep paying dividends to remain attractive to anyone, and they have to maintain capital at acceptable levels. While regulators are clearly willing to fudge "for the benefit of all mankind", the shell game can go on for only so long. Eventually dividends have to be cut or in most cases eliminated altogether, or the banks will be so obviously insolvent that even America's see-no-evil regulators will have no choice but to intervene.

I was starting to think about XLF at 22 and C was looking mighty tempting at 18. A few more percentage points down and I'd have been a buyer. But at today's prices the only way I can imagine making money on these guys is on the short side. You're right that the market isn't making much sense right now, and it's still true that it can remain so longer than I can remain solvent betting against it. That doesn't, however, encourage me to bet *on* it, either. I'm staying well clear of the "everything's going to be fine" plays and looking instead for value among companies that have had bad earnings figures but look good in a long-term stagflationary trend. You may well make money; good luck to you.