Tuesday, February 17, 2009

Yeah, shorting makes sense again.

I'm starting to get a better picture of what the government is doing (or trying to do), and I think the future is clear. I think there is a very, very real chance they will nationalize the banks after all. The only two choices are to keep pumping in barely enough money to keep them walking dead (the so called zombie banks) or to realize the largest banks are all insolvent and nationalize them. Either way bank stocks will not do well over time. Regional banks will continue to blow up as the commercial real estate bubble finally explodes, and they will not be saved because they are too small to care about. I think the very largest banks will likely be nationalized. I'm thinking maybe four or five of them -- certainly Citi and Bank of America.

I'll say again what I've been saying since last year...I still expect the S&P 500 well into the 600s. Analyst estimates of $80-90 per share for the S&P 500 are still a complete joke, and I think that is apparent to most people now.

I'm selling short SSO. I think it was the right move to go all cash while I waited for details of the financial bailout, but the writing is on the wall now. I'll probably do this Thursday since Obama is announcing a housing plan tomorrow.

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