Posts Tagged ‘short financials’

The Credit Crisis and Potential Shorts

By: ispeculatornew | Date posted: 03.19.2008 (10:34 pm)

Financial companies have seen severe declines over the past year and they still have the potential to go down a lot further. The reason financial companies are on such shaky ground is because the risk of rising foreclosures and loan defaults has resulted in a really severe credit crisis. For those of you who don’t understand the current credit fiasco I will try to explain it and show why financial companies still present good shorting opportunities.

Before I start I want to point out that the stock market surged on the Fed cut just like I predicted and also sold off quickly just like I predicted. If you bought financials yesterday I hope you sold the news and got out quickly. If you did play the short term volatility I would recommend that you take new short positions in financials again. Now I’ll go back to the credit fiasco.

The last time the Fed tried to fight off a recession Alan Greenspan, who deserves some blame for the current credit mess, lowered interest rates to ridiculously low levels. Consequently, there was plenty of easy money to go around. Since interest rates were at extremely low levels banks were happy to provide consumers with just about any type of loan they wanted without much regard to the credit worthiness of the consumer. (more…)