Flash Update – August 14, 2019

Published on: August 14th, 2019

Julian has been examining the implications of a race to the bottom in global interest rates and the Fed will not be able to hold off joining the party. US banks are vulnerable to lower rates and flatter yield curves and are breaking key levels. Sell KBE, the banking ETF


  • RH
    Rob H.
    14 August 2019 @ 21:54
    Hi Julian, How about some put spreads in XLF, the KBE has a very bad options market that why I bring up XLF since it has a very liquid options market. I ask since I see the holdings of these two etfs are very different. Thanks for your thoughts.
    • JB
      Julian B. | Contributor
      15 August 2019 @ 15:01
      Gents I like put spread if you think the KBE is too illiquid
    • DB
      Daniel B.
      15 August 2019 @ 00:06
      I'm inline with your thoughts Rob - XLF will have greater exposure to insurers which also rely on a healthy yield curve spread to make profits. But maybe insurers have already priced in the inversion/flattening and could lead to a pairs trade (long insurers, short banks)?
  • JK
    James K.
    15 August 2019 @ 01:06
    Isn’t there an ETF that shorts a basket of US Banks ...? I can’t seem to locate any ... Only broader Short Financials ....
    • RH
      Rob H.
      15 August 2019 @ 03:06
      FAZ is a triple leverage etf on financials. I’m researching now.
  • PC
    Paul C.
    16 August 2019 @ 04:33
    Many thanks, some good avenues to investigate.
  • RM
    R M.
    18 August 2019 @ 12:53
    Julian: The IMF is planing, and Raoul has discussed in his recession watch pieces, deeply negative interest rates to fight recessions. Can you discuss in future pieces the mechanisms, implications, winners (if any), losers (besides banks) of this approach? It seems so obviously insane to me it is hard to get ones head around it.
  • AT
    Anthony T.
    20 August 2019 @ 02:41
    Is anybody aware of any similar ETFs that are accessible to EU based retail investors? PRIIPS regulations restrict access to KBE :-(
    • JL
      J L.
      25 August 2019 @ 12:15
      you can trade options on American ETFs
  • JM
    Jeroen M.
    5 September 2019 @ 17:36
    The ETF is shortable right, unless you want to use the leverage this should not be a problem?
    • cj
      christopher j.
      13 September 2019 @ 12:42
      IG index spread bets
    • JM
      Jeroen M.
      5 September 2019 @ 17:37
      That was re the spread / liquidity on the KBE options
  • DB
    Doug B.
    12 September 2019 @ 20:10
    Julian, we've been stopped out of this trade. Do you consider yourself proven wrong, or would you be looking for re-entry? By my reckoning, it is now approaching the downtrend line in place for > a year.
  • LO
    Leonard O.
    13 November 2019 @ 23:36
    It’s disappointing how two months have passed and there have been no responses to the below comments. This was not the initial expectation