Wednesday, October 04, 2006


Sector Spotlight: Financials

Let's face it, the dip buyers are out in full force and will buy stock, like madmen, until the election is complete. There is a lot of chatter out there-- saying the market has always done well during mid-term elections. It's like a self fulfilling prophecy.

Now, that doesn't mean investors cannot make money shorting stocks. We are in earnings season and there will be chockfull of opportunity.

I am thinking good and hard about shorting LRCX, BRCM and more ATHR. At the same time, I am scouring the market for good longs, such as: FDRY, EQIX and maybe a little more VLO.

Bottom line: Despite my dire warnings about the markets top heaviness, for now, it looks like it will drift higher. However, as always, I am looking to protect my downside with some shorts.

As for the Financials:

Besides housing related banks, like CORS, they have been super. Frankly, I don't understand why investors are piling into expensive banks/brokerages, like GS, MS, BSC and LEH, while the yield curve is inverted. Typically, an inverted yield curve is the death nail for bank stocks. Perhaps this time is different?

The following Financial stocks have mojo:

NFI +3.2
ICE +2.3%
AMTD +2%
SCHW +1.7%
ISE +1.3%

On the financials they are pricing in the bond rally and "expected" rate cuts while ignoring the inversion. I am with you buddy I am worried as hell and have been selling financials up here. I am not going to be the bag holder on this one.
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