The Best Stock For 2009
by Michael Shulman 01/08/09
Bank of America (BAC) (where I keep the remainder of my liquid assets) is a great outfit, but it bought Countrywide and Merrill Lynch. It now has to deal with their problems and a big downturn in core business due to the recession.
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How about Buffett's favorite, Wells Fargo (WFC)? These geniuses bought Wachovia, which had big problems with option ARM mortgages and a huge exposure to home equity and other credit lines in California.
Then there is JPMorgan Chase (JPM). These rocket scientists bought Washington Mutual, whose toxic balance sheet was also loaded with option ARMs.
UltraShort Financials ProShares
These are big names, and core banks like these make up more than 40% of the Dow Jones Financial Index. General financial stocks make up 23%, and their businesses are cratering. Real Estate Investment Trusts (REITs) having trouble collecting rents comprise 13% of the index. Insurance companies writing off assets every day and getting 2% on their T-bills are 20% of the index.
So, the Dow Jones Financial Index will be in deep trouble as earnings and losses come in over the course of 2009. And as the index falls due to weakening fundamentals, the UltraShort Financials ProShares (SKF) will rise.
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This ETF is very liquid, trades like a stock and is very volatile.
It broke some investors' hearts in 2008, but made others a lot of money -- remember, the trading range was $87 to $304.
That being said, the ETF is trading around $110, and that is a good entry point given that most people agree the banks will have another major leg down in 2009.
And even if the SKF is not your speed, please, ignore the long-only money managers on CNBC and avoid the banks at all costs in 2009.
Michael Shulman is the editor of ChangeWave Shorts. To learn more about him, read his bio here. Get Michael's insight into the current economic crisis and learn more about his philosophy in his special report, "Double Your Money -- and Double It Again." Get your FREE copy.
