Stock Market Analysis – Financials Lead the Way – Overbought?
Posted on | March 28, 2009 | 1 Comment
The S&P 500 was up over 6% for the week which was the third consecutive week of gains for the overall market. Last week I made the assumption that you should short financials on any strength as they were overbought. Last week, the financials pushed even higher giving you a great oppotunity to short these dogs. The CEO’s of Citi, Bank of America and JP Morgan all expressed the troubles they were having in the month of March. This is no surprise to me and it will be no surprise when they report horrendous quarterly earnings.
No one knows how the stock market will react to the earnings reports of the major banks, but logic says that if you continue to lose money, your stock should retreat. Some of the financial stocks have been beaten up so badly investors feel that must go up. Well, if that were the case, why are Freddie Mac and Fannie Mae trading under $1. If troubling times continue, as I think they will, these banks are not going to be able to produce a profit. They are so entrenched in subprime mortgages that they will not be able to pull themselves out for several years.
If you are not a proponent of shorting stocks, a hedge against the current economic crisis is buying precious metals, particularly gold. It is almost a given that inflation will rear it’s ugly head sometime in the near future. If inflation is a strong as I think it will be, we could see gold go to over $3000 an ounce. Peter Schiff actually predicted that gold could go to as much as $5000 an ounce before President Obama leaves office. How can you argue with Mr. Schiff? He has been right on almost every other prediction he has made!
Be sure to check in every Saturday as I will post my weekly stock market analysis. Bookmark the link below for easier access to the content.
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April 13th, 2009 @ 5:36 pm
[...] of 2009 were profitable and Bank of America would pay back TARP money by year end. I called bullshit then and I call bullshit [...]