Russian Roulette

I’m meaningfully underweight the banks in the various accounts I manage having hated the sector for as long as I can remember – but that doesn’t mean days like today don’t hurt a bit.  The indices are being dragged down on the same game we were playing in 2008: Who’s Holding the Bomb?

Since Obama decided to tackle health care in the wake of the credit crisis rather than financial and banking regulation, we’re in pretty much the same boat as we were three years ago.  We simply do not have a clue as to who owns what and what is exposed to the other thing.  Any one of these bastards could be holding the bomb, so we sell all of them and hope the rest of our stuff is a safe distance away, crouching behind a line of police cars and sandbags as the market fucks with the red and green wires.

This is a high-finance game of Russian Roulette, folks.  We don’t know which chamber holds the bullet.

Is it Jeffries ($JEF), which is now in single-digits after breaking its own ribs and splaying its balance sheet innards for all to see?

Is it Morgan Stanley ($MS), a stock that has become the proxy for Euro-exposed bank stocks in the US market?

How about the other names in the $XLF – half of which are looking more 2008 everyday?

How about all those other weird non-bank financial thingies like MF Global (deceased) or Leucadia ($LUK), the poster child of opacity?

And the insurance companies?  God knows what they’ve been doing on the investment side to make those assumptions….

Are the financial sector insiders going to buy?  If not, why not?  And what do they know that they haven’t disclosed?

Who’s holding the bomb?  Where is that bullet?



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