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Merrill Lynch (MER) came out with a clever bit of research this morning. As financial stocks take a sharp spike up due to the Fannie Mae (FNM) and Freddie Mac (FRE) bail-out news, use the bounce to sell shares in crummy financial firms.
According to MarketWatch, "The broker said traders might want to look for shorter-term "knee-jerk" reactions to the announcements, but rallies in the sector should still be used as opportunities to sell into strength."
Merrill may well be right. The action by the federal government will do little to solve the housing market’s fall and the underlying credit crisis.
Of course, since Merrill is as bad off as most financial firms, the recommendation means that the brokerage is advising that investors dump its shares as well.
Douglas A. McIntyre
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