Michael Shulman

Weekend at Bernanke's

by Michael Shulman   07/24/08

Well, if you've been waiting for an engraved invitation to play the short side of the market with puts, I suggest showing up to the party anyway because there is plenty of room -- and profits -- for everyone.

In the short term, banking stocks may stabilize or go up as the markets heave a heavy sigh of relief and investors probably go out to celebrate with a few BUDs that InBev (INB) recently acquired with its Anheuser-Busch buyout.

The Feds have acted in a sensible manner and are doing all they can with this. But after the market wakes up from its hangover, they're going to realize it's just not going to be enough to cure the overall banking sector's problems.

The IndyMac failure is merely the beginning. Between 75 and 150 small and regional banks could close in the next 12 to 18 months. Each one carries a headline and reminder of how messed up big banks are.

THERE'S NO PLACE LIKE HOMEBUILDERS

My ChangeWave Shorts subscribers know that I've been pounding the table about this for several quarters. All of my table-pounding during the past year-plus is rattling the stack of coins that we made in our short-side plays: 114% in Bank of America (BAC), 195% in Wachovia Bank (WB), 118% in the Financial Select SPDR (XLF) and one of my favorites, 285% in puts for the now-defunct Bear Stearns (BSC).

And I'm going to have to buy a bigger table, because this slide ain't over.