Doc - at this juncture I think if you want to short a financial you should have a better reward/risk ratio by shorting money center with international exposure such as CCI, JPM, MER and so forth. Domestic loaners (AFS, KRB, COF, PVN) still have good fundamentals thanks to AG's help. Their growth rate next year are all >20% and they didn't disappoint as a group this quarter. I expect a great Christmas spending season as once again people don't walk the talk and just keep spending (and digging into their credit cards) away. Just see what this election showed - the opposite from expectation tend to happen. If nothing else, shorting them will be a bone work on patience until there is clear evidence the US will go into recession after Christmas. Fortunately or unfortunately, AG is again trying his best to engineer a soft landing and based on history he will likely succeed this time as well and avoid a recession (2 quarters of negative GDP growth). The easy money going short has been made two months ago and I think it will be tough on either direction going forward. Until, of course, AG gives some tangible hint as to what the immediate rate picture looks like (tomorrow) or after the FOMC meeting on Nov 17. I threw in the towel last week and took some losses on both AFS and KRB. There are better opportunities elsewhere.
The easiest money right now is to pick the small caps with >20% growth next year and low PE (~10%). The sentiment shifted a month ago and it will take a while before this trend is disrupted. If your timeline is days to week, this group is the best bet. Can you run a screen based on the above parameters for us? |
