iShares recently came out with an ETF that covers the space it is the MSCI Europe Financial Sector Index Fund (EUFN). It has 56% in banks, 21% in insurance and 17% in diversified financials. The UK makes up 28%, France 13%, Switzerland 12%, Spain 12%, Germany 10%, Italy 9%, Sweden 5%, Netherlands 3% and Belgium 2%. The largest holdings are HSBC, Banco Santander, BNP Paribas and Barclays.
Clearly some people made some great trades with all sorts of banks but that does not mean that any of the banks were or are fundamentally sound. The fundamentals of a company don't have to be good for a trade to work out but then the question becomes are you a trader or an investor. It is ok to be a trader but if you are more of an investor than you probably care more about the fundamentals than a trader would in which case I think the case for this group still stinks.To my way of thinking it makes more sense to simply bypass these stocks until the story is over unless you are more of a trader or don't mind very big swings. Plenty of other banks that are fundamentally removed from the situation went down plenty but they went down less than the ground zero banks. The consequence for being wrong is greater with these banks. Obviously this will be too conservative for some folks but ultimately this is a know thyself question.
The picture is from Molokai.
10 comments:
What do you think about the bank preferreds? I bought PFF (has a yield of 8%) on Friday but I'm uneasy about banks in general.
I own a couple of individual issues for clients. I feel more comfortable that way than with a fund.
It seems to me that investing in SDS is more like a bandaid then a solution to a down market. To be effective in a very down market you would have to buy a ton of sds to protect a portfolio of even high quality dividend stocks. I thing investments like sds just let you feel somewhat better in a very down market. Protective stops have a much larger place in my opinion,
the flash crash is probably the best example ever of the flaw in universally using stops.
further the context to SDS is defensive action. In the last go around in late 2007/2008 there were many trades done to raise cash to 25% or so which combined with a larger, because it went up in value, position in SDS was very effective in going down less.
jb 6:13--I'm retired and have a small portion of my portfolio in preferreds. I recently sold my positions in European banks because the volatility in price was wiping out any extra yield that they paid. You can find 6% preferreds in very blue chip, non-financial companies. I guess PFF may spread the risk over lots of issuers, but it's very heavy in financials and I wouldn't go there, personally. Just another investor's opinion, FWIW.
I agree with buying select preferred stocks. In addition, there are preferred stocks that are paying a nice dividend that also have inflation protection.
If you're interested, you may want to start with www.quantumonline.com
and go onward from that point.
I own some PFF, but that is just a bit of my current preferred holdings at this time.
T
T, what do you mean by inflation protection? I'm familiar with the quantum online website and don't remember any issues that had and inflation option. That would really be powerful. Please post a link or explanation if possible. Did you write an article you can reference?
thanks,
Sam
Sam--I think T was probably referring to variable or floating rate preferreds. MET-A is one example whose dividend can rise with interest rates.
To be clear, I'm neither T nor Roger!
Thanks for the comments on preferreds. I'm not sure I would be able to evaluate individual issues properly. Atleast I'll look for other preferred funds with perhaps more defensive names.
Anon 4:32: Thanks, that makes sense.
Sam
Post a Comment