7 Stimulus Trades That No One is Talking About

• «
• »

Trade #2:
The Corner Bank

The new Secretary of Treasury Timothy Geithner is going to stick it to Wall Street under powers they already have in place under the Troubled Asset Relief Program (TARP). In 2009, the purchase price for toxic assets and more preferred shares bought by Treasury under TARP is going to penalize existing shareholders, big time.

Regardless of the details of any Treasury action, the banks' shareholders are going to take big hits either from write-offs or dilution from new capital injected into the banks. By far the worst of the big banks have already been hit, but they are all going to take a big hit. So go after the darling -- JPMorgan Chase (JPM). They have many tens of billions in bad option ARMs on their balance sheet they are legally allowed to write down slowly – but write them down they must. They are not going bankrupt, they will not be insolvent, but the stock is going down.

Recommendation:  Bet against JPMorgan Chase (JPM).

Next: Trade #3 - Big Pharma