Thursday, July 24, 2008

When the Funds Decide to Exit the "Financial Trade", Look Out Below

I've said this before, and I believe it now: This rally in financial stocks is a trade. It is rotation of mutual fund and hedge fund money out of weak dollar stocks into financial stocks. How long will it last is the question? These funds can't actually be building huge positions in companies that were on the verge of collapse a week or two ago, can they? Its purely a trade in my opinion. The unwinding of this trade would put us in a true bear market situation, where there are no safe havens. Up until this point, you could park money in commodity based stocks. But with oil selling off, and demand destruction well under way, investors are getting spooked out of these stocks as well. Its times like these that are truly frustrating for investors...

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