re: Shorting the banks.

I would not short them. Most of the short play is over and done (as I read the charts) and now the price movement is largely dependent upon external, non-economic issues. Some rumor of a plan is spread out of DC, and the stocks go up. News of more defaults, or an investigation, the stocks go down.

The time to short these was last spring, when the very earliest wisps of smoke were being seen. If you go back to last March, there was a downgrade on CDO's and sub-prime debt, and various reports were coming out of houses like Nomura and HSBC as to the size of the problem. You could still have made money if you put the shorts on in July. I read the reports last March and did not short, because I was too busy farming and didn't want to pay the dividend on the bank stocks. Remember, when you short a stock that pays a dividend, YOU have to pay the dividend to the guy who actually owns the stock. If a bank is paying a 4% div on their common and you're short, and you're waiting for the bad news to kick in, you might get tired of forking over that dividend. You might be better off buying out-of-the-money puts, but I leave that to you.

After last August/September/October, the big price movement was done.

The 20% up-move recently is, as I'm guessing you're seeing, a technical rally. If you short, you'll have to be very nimble. Given the rate of developments, it would be a play you'd have to manage every day you have the trade on. Dunno if you want to put that level of time into it.