A reader asked me if it is time to cover the shorts of Proshares Ultra Financials. The short has lost 60% since we recommended it in September 2010. The reason has been President 0bama's orders to the Treasury to increase the printing of money. In my opinion, this year the market is peaking and financials usually precede market declines when the origination of the crisis is financial.
In 2007, the market peaked on October 1, but the financials peaked 4 months earlier. In 2000, the market peaked at the end of the year, while the financials peaked 4 months later. This was because that crash started in the tech sector. This time is once again likely to start by the bursting of the financial bubble created by the Fed. Meredith Whitney, who called the peak of the housing market, agrees that hard times are coming for financials. The only thing inflating this market is the printing of massive amounts of dollar bills.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
