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Crash Test Dummies

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Banks getting slammed against the wall.

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Minyanville CMO Charlie Mangano just sauntered into my office--he's a sauntering type--and peered over my shoulder. "The financials are getting killed, what happened?" He asked, quelling any doubts I might have had about coming back in my next life as a marketing guy. "Carlyle, UBS (UBS), the credit-equity disconnect... the banks are sitting directly on their January lows. If they don't hold, we're gonna melt."

I'm not an alarmist, or at least I try not to be. And there is a big "if" there, with regard to the January lows (BKX 77.80) which, in all likelihood, would lead to a breach of the broader market lows (S&P 1310). I am, however, a risk manager and given what I'm seeing--from the banks to the breadth to continued credit contagion--I would be remiss if I didn't pass along my honest thoughts.

I'm not making big bets right here, right now, because whichever way the fray snaps, we'll likely see some serious gappage. Instead, I've begun some feeler positions in DBA (agricultural ETF) and Pan American Silver (PAAS) puts, with defined risk on both. I know the best bets occur between the twenties, so to speak, so I'm being gentle as I corner these cusps.

N's over S's as we find our way. If you're bullish, tech is likely the best Snapper candidate. If you're bearish, old school names are under distribution. If you don't know, sit back and do less. This is the world's wildest reality show and there's no reason to ruin it with coin tosses.

As always, I hope this finds you well.

R.P.
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Positions in DBA, PAAS
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