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"Higher Risk" Trades Unwind
The "higher risk" trade is unwinding. In the last week, there has been a simple trade: lighten up on defensive positions, take on more risk.
As a result, Treasuries were sold and higher beta, higher risk investments (techs, industrials, commodities) were bought.
That trade is unwinding today. The VIX (Volatility Index) is spiking to a nearly 3-week high, while Treasuries are rallying and techs, industrials and most commodities and commodity stocks are selling off.
This is partly due to the well-telegraphed trade "buy the rumor, sell the fact" on the stimulus/TARP/TALF announcement, but also due to disappointment over lack of specifics in Geithner's speech.
In financials the story is more complicated. Aside from the general disappointment with the lack of specifics, banks got hit hard on talk about an additional "stress test" to determine if they are healthy.
Regional banks simply fell apart when the Geithner speech was floated.
Midday, we are seeing declines of more than 20 percent on Regions Financial[RF
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] , Fifth Third [FITB
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] , Huntington Bancshares [HBAN
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On the lack of specifics, it's easy to understand why the Street is disappointed: what they want is to 1) reduce the uncertainty in asset values, and 2) make private investors more confident of making new investments in financial assets, and financial firms themselves.
The speech did not accomplish that goal.
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Questions? Comments?
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- Hostage to Headlines
- Facebook Analyst Reports All Over the Map
- More Fallout From the Facebook Fiasco
- Facebook and Morgan Stanley's 99 Problems
- Lousy Economic Numbers, but Stocks Hold Up
- Eurobond Talk: Good News and Bad News
- Hopes Fading for Big Announcement From EU Leaders
- European 'Crisis Tennis' Again
- Facebook IPO 'Conspiracy' Theories Abound
- OK, Facebook Is Embarrassing
Data is a real-time snapshot *Data is delayed at least 15 minutes
