Profit from Big Bank troubles + drop in US dollar

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BLUE FIRE_IHB

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<p>As everyone seems to believe on this forum, the rest of the year is likely to spell big trouble for the stock price of the Big Banks and very likely more trouble for the US dollar as a result of Fed action. </p>

<p>How do people feel about the taking a position in the ETF <strong>ProShares UltraShort Financials (SKF)</strong>, which supplies twice the inverse action of the Dow Jones Financials Index? </p>

<p>And any other suggestions, besides running for the borders?</p>
 
<p>I am unsure that the financials will continue down for the next year or so, because BB will bail them out if they have serious trouble.</p>

<p>SRS, the re ultrashort, was good for making some profitable trades for a few months, but I am now out of that for the same reason, although with less committment.</p>

<p>I covered all my shorts about a month ago, and even sold the last of my CFC puts today.</p>
 
<p>Speaking of bailouts, what's the market odds on Bernake and a rate cut for Tuesday? I think the market has priced a rate cut in, but not sure if he'll follow through. Wondering how badly the market gets kicked in the groin if he doesn't cut. Wondering how much it runs up if he does?</p>

<p>SWAGs anybody? </p>

<p>I figure if he doesn't cut, the market (DJIA) is in for a 500 point beating. If he does cut, it'll be a 200+ pt run up as everybody figures Bernake has been heeled and will play along. Not really looking forward to being in the market that day either way, but not wanting to out either.</p>
 
<p>I've already built up a position in SKF, though more as an hedge against my otherwise 80% bullish global portfolio. I don't really expect SKF to fly right now unless something new comes in that causes another scare.</p>

<p>You should be aware of potential tracking error issues with leveraged short ETFs in particular, as described here: <a href="http://seekingalpha.com/article/13679-a-closer-look-at-the-proshares-inverse-etfs">http://seekingalpha.com/article/13679-a-closer-look-at-the-proshares-inverse-etfs</a></p>

<p>I also finally sold my CFC puts as well yesterday.</p>

<p> </p>
 
<p>"Sorry but when the people here start thinking of shorting..I have a tendency to do the opposite."</p>

<p>To me, the people here are a tiny sliver of the overall market and repesent a viewpoint that I would still consider very contrarian vs. everybody else. It's all a matter of perspective. The Vanguard Financials ETF is still up 1% from a year ago, I would hardly call that a correction given we are in the middle of what many consider one of the greatest real estate bubbles in history, which helped fuel bank profits.</p>
 
Blue Fire - I'd recommend some type of overseas fund(s) held in foreign currency. As the dollar tanks, all things being equal your overseas funds will rise in value.
 
<p>Two rather scary graphs</p>

<p> </p>

<p> Series: NFORBRES, Net Free or Borrowed Reserves of Depository Institutions</p>

<p>http://research.stlouisfed.org/fred2/series/NFORBRES?rid=19</p>

<p> </p>

<p>Series: BORROW, Total Borrowings of Depository Institutions from the Federal Reserve</p>

<p>http://research.stlouisfed.org/fred2/series/BORROW?rid=19</p>

<p><a href="http://research.stlouisfed.org/fred2/series/BORROW?rid=19"></a></p>
 
Hmmm-m-m, just came accross this thread again. On Sept. 15 the spot price of gold was a bit under $720 per ounce. Today it is a bit under $920 per ounce.
 
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