Macro Tsimmis

intelligently hedged investment

SELL SHORT Bank of America (BAC), Goldman Sachs (GS), & HSBC (HBC)

Posted by intelledgement on Mon, 08 Sep 08

All these stocks are surging today to levels not seen since May on optimism fueled by Sunday’s move by the US government to take over Freddie Mac (FRE) and Fannie Mae (FNM). Bank of America stock (BAC), for example, has traded as high as $35+/share today, up from a July low of $20. The others have had similar moves. However, with consumer spending still weakening and the economy in general slowing, we don’t expect the housing market to recover anytime soon and consequently, the financial sector in general looks very weak here. We believe today’s optimism to be overdone and in sympathy with our sister IMSIP’s move to purchase the Ultrashort Finance EFT (SKF), we are shorting these three banking stocks—all of which have material residential real estate exposure—here.

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