Financials led the Dow lower on Thursday after the White House moved to crack down on Wall Street. But, had DC not provided the market with a negative catalyst, would something else have taken markets lower?
That qusetion is on the minds of many investors after President Obama introduced some new rules to prevent another financial meltdown and triggered a massive sell-off in the process.
Although the proposed rules are complex the Street is largely focused on two major points: They are:
- Banks would be prevented from owning, investing in or sponsoring a hedge fund or private equity fund.
- Banks would be barred from proprietary trading operations, unrelated to serving customers, for their own profit.
(Proprietary trading refers to a firm making bets on financial markets with its own money, rather than executing a trade for a client – and can be enormously profitable.)
When the news hit the Street, investors immediately crushed big bank stocks but the question is why? Some investors interpret the sell-off as a response to uncertainty.
“Can you be comfortable owning financials with so many unknowns? Personally, I would not want to own them until I understood the new rules of the road,” said veteran trader Kaminsky in response to owning Goldman shares.
Others see the sell-off very differently. People like Lee Markowitz of Continental Capital Advisors thinks bears seized the moment – and used the catalyst to begin a long-awaited correction.
"We think stocks have been ripe for a fall," said Markowitz in a Reuters interview.
"I’m scared," added Fast Money trader Guy Adami. "And it’s not just Obama that scared me. Weakness in Greece as well as rhetoric out of China about curbing growth are a very bearish catalysts."
What do you think? We want to know!
Were the markets overdue for a correction? If Obama hadn't provided this catalyst would something else have taken them lower?
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Trader disclosure: On January 21st, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Finerman Owns (AAPL); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM), (UNG), (USO); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm And Finerman Own (GOOG); Finerman's Firm Owns (MSFT); Finerman's Firm Owns (TGT); Pete Najarian Owns (BBT) Calls; Pete Najarian Owns (BP), Is Short (BP) Call; Pete Najarian Owns (GS) Call Spread; Pete Najarian Owns (INTC) Calls; Pete Najarian Owns (MS), Is Short (MS) Calls; Pete Najarian Owns (MRVL); Pete Najarian Owns (PFE); Pete Najarian Owns (XLF) Calls; Pete Najarian Owns (CLF) Call Spread; Pete Najarian Owns (TCK), Is Short (TCK) Calls; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU)’ Seymour Owns (FXI), (AAPL), (BAC), (GOOG), (INTC), (POT)
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