Russell 2K Vs SP500 Question

Q: I'm looking at the Bank stocks right now for potential shorts, and Banks are about as solid as investing comes. Trying to come up with a hit list, I'm finding nearly all banks are showing up as recommended shorts.

A: Russell 2000 small cap stocks are the last to go up during positive economic
climate for stock, and the first to go down when the economic climate for
stocks turns negative. I watched a dicscussion of this topic on an
investment TV Show circa '96. I've since read the odd article on the same
topic and there seems to be some truth to it.

Investors pile into solid
large cap stocks first and wait to pile into riskier small caps until the
uptrend in the overall market is firmly established. At the first sign that
economic climate trends are changing negatively, people bail out of the "riskier" small cap
stuff first and then dump their "safer" large caps next. Safer is the term
frequently used in these discussions, however, the term is entirely relative,
and does serve for discussion purposes. No large cap firm can ever be
seriously viewed as "safe", especially today with all manner of creative
accounting methods floating around in great abundance:-) Safe investing
still boils down to the three Ds - Diversify, Diversify, Diversify and 2
main investment rules: Rule one, protect your net worth with asset
diversification across a broad range of business sectors, and hold some
bonds and cash. Rule Two: please refer to rule number one :-)

Here is an example:
http://forbes.marketedge.com/Secop/C.asp?refer=forbes


Just plunk your favorite bank in and see if it comes up as a recommended
short. If it does, and it does seem almost all of them do, then this down
trend would seem pretty serious indeed. I'd invest in banks before I'll
invest in any small cap stock any day. If the banks are tanking so
dramatically, so as to be on short recommended lists then all other dross
doesn't have a prayer, imo. When and long period of U.S. Fed interest rate
easing gives way to tightening, and this appears to be imminent currently,
then the whole thing reverts to a stock pickers market. Very few companies
can absorb higher rate related borrowing costs and still continue to produce
blockbuster growth and profits. Our mission as investors during rate rise
periods is to find them.