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Can You Take Profits From the Financials?

By Tobin Smith

It's no secret that we've been making a ton of money shorting financial stocks in our ChangeWave Shorts service.

And there's still more pain to come for many of these stocks -- just look at what happened to American Express (AXP) Tuesday, July 22 after it reported disappointing earnings. (What a shock.)

If you want to profit from this pain by taking a position on the short side, ChangeWave Shorts Editor Michael Shulman can show you how.

That said, I want you to circle July 15, 2008, on your calendar, because I believe it will turn out to be the official low point for the surviving bank stocks. I know this is contrary thinking, but the key word to remember here is "surviving."

No matter what happens today or next week, you can rest assured that there are going to be more rough days before things get better. But it's when things get ugly that the bravest investors begin to step into the beaten-down sectors.

Anyone who was clever (or crazy) enough to buy Freddie Mac (FRE) and Fannie Mae (FNM) at their lows has seen their investment double in a week. And I think there will be similar opportunities for those who dive into the strongest financials in the next month or so.

But, to do that, you must be able to stomach the volatility when everything goes to hell in a handbasket. If you do, you could ride a wave in the financials that will dwarf the one we saw in the '90s.