Over the weekend, I added ProShares Ultra Financials (UYG) to The Kelly Letter’s list of what I’d like to own. UYG is an exchange-traded fund that returns 200% of the performance of the Dow Jones U.S. Financials Index, which owns the likes of Citigroup, Bank of America, JPMorgan Chase, AIG, Wells Fargo, Wachovia, Goldman Sachs, and so on.
These are the stocks that have suffered the most in the sub-prime unwinding of late. UYG is down 39% since the end of February, and 28% just since Oct. 9.
There is little doubt that these high-powered names will weather the current storm individually, but when grouped together in an index there no question. Doubling the return of the rebound could be very profitable, to the tune of 100%.
I will keep an eye on it a little longer to be sure we’ve reached a good bottom, then put some money to work on the end of the sub-prime worries.
