After commercial REITs, insurance will be the next big shoe to fall - although government will try harder to save insurance than REITs. There are a bevy of excellent shorts in this group ranging from Prudential (PRU) to Hartford (HIG) to MetLife (MET). Travelers (TRV) is actually a good soldier in this group.
I threw a dart and chose Prudential ... this is a VERY volatile group and basically trades with banks. When Kool Aid is high, they run - when not they drop.
I am starting with a 3.1% exposure around $20.40, and this will be a long term short I will trade around. I actually dislike HIG even more but its so volatile I don't want to lose 30% in 1 day - just for reference so I can look back in a few months HIG is currently in the $8.90s, and MET is in the $23.10s. Prudential it is for my proxy.
- March 18 (Reuters) - Prudential Financial Inc (PRU.N) was downgraded to the second-lowest investment grade by Moody's Investors Service on Wednesday, which cited the large life insurer's reduced profitability and potential for more capital strain if conditions worsen.
- Moody's lowered Prudential's senior debt rating by two notches to "Baa2" from "A3," and the insurance financial strength rating of its Prudential Insurance Co of America unit by two notches to "A2" from "Aa3." The outlook is "negative," meaning another cut is possible within two years.
- Moody's said Newark, New Jersey-based Prudential is being hurt by "very substantial exposure" to variable annuities with guarantees, as well as increased investment losses.
- It said the two-notch downgrade, as opposed to a one-notch downgrade, reflects Prudential's greater sensitivity to falling stock prices than that of many peers, along with "sensitivity to further capital strain if conditions worsen."
- He also said Prudential Funding retains access to the U.S. Federal Reserve's Commercial Paper Funding Facility. The parent lost access following a Feb 19 downgrade by Fitch Ratings.
- Prudential Funding had $4.35 billion of commercial paper and "master note" borrowings outstanding at year end, according to Prudential's annual report.
Short Prudential in fund and personal account
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