Thursday, February 12, 2009

Almost time to open into short positions again.

I think I've figured out what is going to happen here. I think we're going to try another half-baked bailout with "tough regulations" which will do nothing to remedy the situation. The government "stress tests" currently going on at the largest banks in the U.S. by federal regulators will reveal them all finally to be completely insolvent. When that happens, I think the Obama Administration - and Congress - will finally do the right thing and nationalize the banks. They've left enough doors open and they've shown an understanding. Regulators stormed major banks today to start conducted their stress tests. One month from now, they will admit banks are insolvent and we will likely nationalize a few of the biggest while wiping out shareholders and bond holders.

I'm about ready to enter my short positions again, although I will once again be shorting entire markets rather than individual companies. In all likelihood, Citi and Bank of America will be total losses...but the government could keep trying to prop them up forever, so it isn't worth a short. That would be gambling rather than investing. Instead, I will again be shorting the S&P 500, and will do so sometime in the next few days.

1 comment:

Scott said...

I hope it's not like those "Stress Tests" designed to recruit people into using Dianetics, and then becoming Scientologists.
http://en.wikipedia.org/wiki/File:Stresstest.jpg