The Elephant Dance

Why don't you tell me what's going on?
Why don't you tell me who's on the phone?
--Fleetwood Mac

Sometimes you have to actually own a stock before you realize just how tenuous a situation is. Late last week I bought a couple of bank stocks thinking that the selling was overdone. Stalwart names like Wells Fargo (WFC) were yielding 5%+ and regionals like Sun Trust (STI) were yielding 9% or so.

As soon as I bought them, however, I knew I couldn't hold them. I felt the structural risk right away. Even if the fat dividends are safe (a big if), bank stock prices could easily melt below the margin of error afforded by the rich yields.

So, this nervous long 'fed the ducks' (read: sold) into the oversold bank stock rally over the last couple of days.

What did I learn? Now is not the time for me to initiate long term positions in the financial sector. And since I'm not a trader, my best course of action is to do nothing when I perceive risk this high.

no positions