US Financials are about 13% of the SP500 right now. That's from 20+% during the 2004-2007 leverage bubble years. The historical average is closer to 10-12% so yes, over time the financial system can digest the banks and financial industry shrinking relative to the indexes. I believe over the years more financial companies including banks will shrink, be bought out or otherwise disappear.
There are political considerations in case they are found out/caught. Some people claim they already do this, M Whitney said that in 2009 the Fed did that in QE1 by buying MBSs, propping their price when the banks owned a lot of it. She called a backdoor capital injection or something like that
He didn't say anything new. The trade is a good one but I don't see how its a favorite to work, the downturn is close both in China and HK, tightening policy now would be getting the worst of both words(the boom/bubble and a hardlanding). They will be forced to keep policy loose in the hopes that will produce a soft landing Tightening will also put the blame of breaking the bubble on them, still, the odds are just too good to pass
Good job, Daal. Do you short HK stocks through IB? Presumably, only the large cap stocks - HSI constituents - are available? Thanks.
Just bought a bunch of calls in FAS, XLF, BAC. With all the folks who blew it in 2008, now calling for a repeat, some cheap OOM call options on financials could pay off handsomely. Also a nice hedge to my short AUD, though I'm barely short at the moment.
Freudian typo, Fed email version? "New York Fed purchases $8.870 billion in Treasury coupons" "CORRECTION: New York Fed sells $8.870 billion in Treasury coupons"