Bear Mountain Bull

I always wonder who in the world is jumping in and buying financials like C and BAC when they’re in the low single digits. This article gives us an idea:

Some discount-brokerage firms report a surge of individual, or retail, investors buying shares of Citigroup during the past five months, amid the New York bank’s stock-price slide. For some investors, the chance to buy a Dow Jones Industrial Average stock at a low price, and the hope for a quick buck on a rebound, have proved too tempting to refuse.

“We’re speculators, and that can be really risky, but it’s worth it to take a shot,” said Jin Chen, a 22-year-old Rowland Heights, Calif., resident who recently bought 10,000 shares of Citigroup at $3.10 a share. “This is my opportunity to make some money.”

Where does a 22-year old kid get 30 grand to put into Citi stock? BTW — it’s at 2.74. He’s down more than 11 percent.

“Most brokerage customers are looking at a portfolio down 50% from a year ago, and thinking that they have to get even,” said Don Montanaro, TradeKing’s chairman and chief executive. “The self-directed are becoming more active, and that’s the kind of behavior we’re seeing with Citigroup.”

This doesn’t sound like ‘bottom’ behavior to me. This sounds like ’setting yourself up to get torched’ behavior. And if this is the type of ‘investing’ you’re doing, it’s no wonder you’re down 50 percent.

Several investors who recently bought shares of Citigroup said they are betting that the government won’t allow the bank to fail.

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Casey Russell, a 32-year-old salesman from Little Elm, Texas, started buying and selling Citigroup shares in October, when they slumped to what he thought was a bottom at $20.

Right now, Mr. Russell has about 3,000 shares that he plans to unload if the stock recovers. He says he has 10% to 15% of his portfolio at risk in Citigroup shares.

“There’s been a wildfire of fear about Citigroup,” he said. “I’m like a lot of people who now get to own an icon, not just a brand. And I just feel like it can’t get much worse for the company.”

He’s probably right. This government probably won’t let them fail — even if they should. But IF they have to take over Citi — like they did Fannie, Freddie and AIG — those shares will be next to worthless.

Are YOU willing to take that chance? I’m not. And I really don’t understand why so many people are obsessed with trying to trade the financials here. Read the trading blogs, and you’ll see how many are taking 3X shots with FAS and FAZ, in and out, long, short and long again, over and over. I don’t get it.