If there is one major sector that will suffer like few others in the major decline it is going to be the banks.
Stories about banks recommending their employees get private carry permits, and Fed Chairman nearly missing a renomination are going to be common fodder soon enough. In fact, we estimate that banks are going to be even more hated this time around than they ever were during the Great Depression (Ever wonder why your grandparents always told you they hated bankers? You'll have ample opportunity to replace that wonder with a fresh dose of loathing that's all yours)
Furthermore, the financial sector topped out before the broad markets, just as they did in 2007. We are anticipating a crushing, near fatal blow to the financial sector in terms of stock prices over the coming year. As such, you have ample opportunity to get in, and you pretty much have the pick of the litter!
I wouldn't recommend shorting some of the big names like Citigroup or BAC - while they may yet go to the alternate (bankruptcy) exchange, the downside potential is not as great in dollar terms as some of those bank whose stocks have staged a momentous comeback.
We've been short the financials via LEAPS since September - and we unfortunately can't post our most profitable positions on here because that is going to be a subscriber only feature. Needless to say they are performing well and we expect some of our LEAPS to make upwards of 500% - 1000% as this decline continues.
But there are two big-boys who look ripe for the short - and the nice is that these are stocks you can verily short anytime in the next couple of days and they should produce an extraordinary profit in the coming months.
My favorites, and soon-to-be-most-hated-of-them-all, are of course Goldman Sachs and JPMorgan Chase. Coming up so close to their 52-week highs (relative to their brethren of the money), the mood toward them is far more elevated than to firms like AIG and Citigroup, who topped out even before the broad financial sector.
So we are formally recommending you short these two into the dirt - and virtually any other financial institution that seems to follow the Financial Index fairly closely.
Goldman has just broken through a head-and-shoulders neckline, and will probably make a break-up attempt to the $160.00 mark where the neckline is. I would recommend opening up a short position now, and doubling or tripling up on it at this point because if it does make it that high, there will be a serious roof there. Officially, we are short Goldman.... Now - at $153.35.
JPMorgan Chase should be experiencing a major leg down within the next 1-2 weeks (possibly 1-2 days though. It's at a pretty precarious point.), and as such we highly, and cheerfully, recommend shorting the beloved Mr. Dimon's bank along with his "vampire squid" counter part GS.
Officially, we are short JPM at 39.65.
Hold on to your seats.
Another though as well, which I'll do some more analysis on shortly, is a little (or not so little anymore) Chinese company which looks to be a ripe short.
This one is actually a top pick from one of the more popular economists of the Austrian School, has had an explosive runup, and seems to have made a topping formation. Any guesses?
We'll follow up on this one early next week.
Best of luck!