I'm with you CreativeMind, but I'm personally scared by some of the obtuse nature of the current administration. There has been LOTS of speculation of bank nationalization...And I'm not PER SAY opposed to that. I just want more information about WHAT government interests will spell for stock???!!! As of the past 48 hours, some of the government's preferred shares have been converted to common shares, increasing the government's stake to 36%! Now, that obviously leads to common shareholder dilution, which is likely to depress prices further. I'm with you, I DON'T think Citi is going anywhere, but I wish I had emphatic or contractual guarantees about what happens to common shares as the bank gets more bought out by the government!
Regarding other companies...I'm long in GE right now, despite their recent slashing of the dividend by 68%. I actually think that GE is one of the more responsible corporations, because they are doing everything they can to preserve capital so as to maintain their AAA credit rating. It's painful for me as a shareholder to have a dividend cut, but I think it's the lesser of evils (dividend cut versus long-term sustainability). Similarly, I expect many DOW and S&P companies to trim dividends...I've alread seen this trend happen in dividend yields that were over-valued relative to market-caps...
That said, I still think this is a GREAT market to play. I'm not going to begin to call bottom...I have no idea where it will be! But one hedged way to nibble at the bottom is to assume long plays in stock that you suspect will drop further (but remain strong in the OVERALL economy). At the same time, sell a bear-call set of options which will create a vertical credit spread. If the stock continues to drop, you have the vertical credit spread that is created by the options to partially offset losses. Thus, equity losses is minimized. If the equity moves against bearish sentiments, well...You have the benefit of increased appreciation in the equity! Meanwhile, the (non-bearish) gains begin to cancel out the vertical credit of the options. It's a very hedged way of testing bottom...The biggest negative is that you have three brokerage fees for every position, as opposed to one for a naked position. I wouldn't begin to recommend this strategy in just any market, but in a market where we are questioning bottom, and nibbling on stocks which might fall further...I think the long/bear-call-credit-spread options is a sensible way to hedge market movements while increasing exposure to stocks which you think are good for the very long!
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