More on the idea behind my BAC and GS trading longs

One of my oft-repeated phrases for subscribers to you guys is that “contarianism is a way of life”. I mean, if you’re going to bother to try to be contrarian, then you really do have to be willing to challenge not just just the trends in the markets, but you have to continually be willing to look at every one of your positions, assumptions and premises. In order to make sure you’re staying contrarian. Indeed, one of the biggest advantages to the Revolution Investing approach is to remain politically-contrarian which helps us reach the kinds of very profitable conclusions we’ve made about how to layer our stock picking into long and short positions based partly upon governmental and political dynamics in the marketplace and the economy.

Another incredibly important trait among great investors and traders is that of being flexible enough to change your stance when the trading set up changes. Indeed, one of my proudest moments as a hedge fund manager was when I shifted from tech bear to tech bull just as the markets put in their final bottoms back in 2003.

So let’s talk a bit more about our new long positions in the financials — BAC and GS that if you’ve been reading me, will probably blow your mind. Contrarianism is a way of life, man.

And let me be clear from the outset here, that unlike with most of our positions, I’m planning to hold these for a time period measured in weeks or months rather than years.

You guys know that we’ve been very profitably short the financials, including several ETFs, LPS and Wells Fargo over the last couple years in the Revolution Investing portfolio and I continue to want to hold our existing shorts, LPS and Wells Fargo as longer-term core investing short positions. But when these stocks and other financials have been as crushed as they have been this year, with many down 70 or 80% from their highs just a few quarters ago, it might be time to take a trading long and to try to hedge some of these hugely profitable shorts with some long positions in the sector.

When every headline and every analyst and every pundit you hear on TV is explaining to you that the reason these stocks are down so much is the reason you need to be selling them right now — because of the companies are still on welfare, are still overstating the value of their assets and have lots of fundamental problems yet to be addressed in their business models, not to mention the liabilities and potential criminal suit angles. Heck, I was at my parents’ house last night when my mom said, “I heard on TV today someone said you better sell your BAC now no matter what.” I almost fell out of my chair as I had been planning to come home and finish writing up this BAC buy addition to the portfolio.

I’m adding these two stocks in particular for several reasons. BAC is a great hedge for our WFC long, as both have similar problems with liabilities, foreclosure fraud and business models. The biggest difference between these two stocks right now is simply the state of recognition of the problems they face. I think the problems might be more than overcooked into the current stock price for BAC, at least for the near-term. But I actually think WFC might have a lot more downside potential to it in the near-term as the market starts to recognize that it’s in as much trouble as BAC longer-term.

And I’m adding Goldman because it’s not in as much operating trouble as BAC and WFC are and it’s business model, without all the branches and mass consumer customer base, is going to be able to navigate the next round of bailouts/bank-welfare/bank-accounting-gimmick-legalization and endless help from the Republican/Democrat Regime and the Federal Reserve that provides its trillions of slush funds to banks like BAC and GS.

I expect we’ll probably still have our LPS and WFC shorts by the time we sell these two new long trading positions. But contrarianism is a way of life.

Huge, huge rally into the close today. Hope you did some buying of these names yesterday and today as I’ve been highlighting them.  BAC is up 10% from its lows today alone.

That said, don’t let these crazy headfakes distract you from what matters.  Steady as she goes, people.