Monday, December 8, 2008

Bookkkeeping: Cutting some Bank Exposure

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We have very excellent technical set ups in 2 of our 3 banking stocks - Regions Financial (RF) and BB&T (BBT). Both stocks had broken down when we had that bought of reality the past few months, and now have rallied back on the hope phase to come within spitting distance of some key resistance areas. I'm going to employ strategy I use in a normal market even though we live in abnormal times; that is cut these names sharply as they bounce from below key technical support, and then if the stock shows enough strength to burst through, we'll buy back our exposure at higher prices, but with more confidence the market believes in these names. For RF that is a close above $10.50 and BBT a close above $31 - these are actually some of my favorite sort of set ups.


BB&T was a 1.0% position and RF Financial was a 1.5% position, so we're cutting both back to 0.1% holding stakes. (we';re moving 2.4% of exposure from "financial" to cash) RF in $9.90s and BBT $29.50s. Again, if these move back above the key levels we mentioned above, we'll pile right back in and declare the "bottom in financials" as we bathe ourselves in Kool Aid and kiss posters of Obama.

We own 3 bank stocks and than the financial ultra long ETF - with this move our exposure remains in 2 of the 4 instruments. Despite all the hoopla about financials thus far these have been losing trades for us as we bought in late summer during the last round of Kool Aid. We did not go extra heavy into financials since we were cynical about the call for their (73th iteration) "bottom", but the drumbeat grows louder among the investment community that banks will be the cool kids on the block for 2009. Failing commercial loans, mortgages, credit cards as the economy worsens? No problem - the government will buy it all from the banks.

Long BB&T, Regions Financial in fund; no personal position

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