Two Ways to Play: Obama Tanks the Banks

By Terry Woo  JAN 22, 2010 8:30 AM

Strengthen your portfolio in good times and bad.


Obama Tanks the Banks

Big banks took a hit in trading yesterday after President Barack Obama announced a new assault on the financial sector.

With the support of former Federal Reserve Chairman Paul Volcker, Obama called for the banning of proprietary trading by banks as well as a prohibition on investing in hedge funds and private equity funds.

According to the Financial Times, Treasury Secretary Timothy Geithner also backed the plan, and while Republicans leaders were ho-hum on the announcement, they didn’t flat out reject it with Senior Republican on the Senate Banking Committee, Richard Shelby, calling for more details.

Shares of the large Wall Street banks -- Goldman Sachs (GS), Bank of America (BAC), and JPMorgan Chase (JPM) -- all took a tumble, but regional bank shares like Keycorp (KEY) and Regions Financial (RF) rallied on the news.

From the Bull Pen: The bull case is that this would never pass through the Senate. The market will gradually price in the risk in the meantime, but these scary pullbacks are buying opportunities. Consider JPM into its 200-DMA near $40. A sell stop can be set below that level.

From the Bear Cave: The bear case is that there's a lot of complacency among investors about the lack of accomplishments by the Obama administration. But Wall Street is one area that almost everyone agrees on. A rally in UBS (UBS) back to its 200-DMA ($15.30) might be a downside opportunity. If and when.

For more ways to play and other trading ideas from more than 30 top market pros, take a free trial to our Buzz & Banter.

A Quick Check Around the World

Asian trading closed with the Nikkei 1.22%, India -2.42%, Hang Seng -1.99%, Shanghai 0.22%, and Taiwan -1.13%.

Across the pond, we see the FTSE -0.04%, CAC 0.41%, DAX 0.19%

As of 8:10 AM EST, S&P Futures are trading -2.75 to 1108.50. Nasdaq futures are +1.75 to 1842.75.

A Look at Commodities

Over in commodities, crude oil is -0.28 to 75.80 while gold is -9.700 to 1093.70 this morning. Silver is -0.145 to 17.365 and copper +0.0005 to 3.2955.

The dollar Index is -0.0650 to 78.4500.

Nothing on the radar today. Have a happy FIT Friday. These short weeks somehow always feel longer. Have a great weekend! And Go Saints!
Position in GS, BAC

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