Dec. 2 at 3:40 PM
$FAS ---
The case for selling KRE and FAS rests on structural risks in banking magnified by current conditions. Banks hold over
$300B in unrealized losses—nearly a year of industry profits. Large banks can absorb this, but regional banks, concentrated in KRE, are vulnerable if forced to sell under deposit pressure. CRE stress in office and multifamily properties adds strain, with regional banks disproportionately exposed. Rising FHA/VA mortgage delinquencies above 10% further weigh on earnings. Fed policy and ongoing QT amplify valuation losses, with timing of relief uncertain. Leveraged exposure via FAS is especially dangerous, magnifying downturns threefold. Meanwhile, unemployment is creeping higher and consumer sentiment weak, hitting local lenders harder than diversified megabanks. In short, KRE concentrates fragility and FAS magnifies volatility—selling both avoids amplified exposure to risks that could evolve into systemic stress.
