Bank Bond Investors: Consider FAZ Buy Idea

• Here’s an interesting idea that I acted upon this morning.
• I had Just read this article in the Market Oracle website. The article makes a great argument for the bear case in financial stocks. Are we out of the woods yet ? Maybe - Maybe not. Time will tell.
• I just purchased some FAZ - 3x Financial Bear Shares. @ 9.35
• The stock market has had a great run, as financials have moved up sharply, along with their debt. It’s a manufactured run, in my humble opinion. I don’t really want to give back gains that I’ve made on my bank bond holdings. I thought that perhaps a nice way to play this would be a simple hedge, using FAZ long and bonds long.
• My decision was to either a. Sell the bonds - Don’t really want to do that, because then I’m forced to sit in cash and earn nothing. b. Buy FAZ - My rationale is that - if things get worse in Financials, then the stocks will go back to zero along with the bonds. I’m not buying this position as a day trade, but instead as a swing trade. I’ll hold it to zero. If it goes to zero, then that means that my bonds are doing great……….If banks are forced to restructure their debt, then most likely the stocks will go to zero and the bond holders will be given “new” stock, as the former stockholders are wiped out - The new stock is still not as secure as the debt, but in the event of a restructuring, like I just described, ll own stock in a company that has very little debt.

LONG FAZ @ 9.35

Subscribe by RSS Subscribe by Email