iShares D J Broker-Deal E.T.F. (IAI-N)

Generally, the challenge with a broker/dealer ETF is it's more sensitive to the vagaries of the market. If the US market is flattish for the next decade, then ETFs like this will underperform, because they are highly levered to the market. He would underweight this ETF.

Financials have been slower to recover, only gaining strength in September-October. Still have a long way to go. If you believe we had a generational low in long-term interest rates, and we're just entering a reflationary cycle, insurance companies benefit as assets go up in price. Higher rates are really good. Also interesting are KIE, KRE and KBE. Most interesting is IAI, making new highs. As a group, financials have underperformed since 2007, so they should now have a tailwind in this environment.

This broker – dealer ETF has a decent dividend and is composed of half brokers and half exchanges. He likes the exchange side, with large margins and good scale. The broker side will start to weaken, so they have exited their position and thinks it will worsen more.

It is one of their largest holdings. This is really a play on short rates. If Fed funds keep rising, then this will continue to work. The fundamentals look like they will continue to look good. The ETF is part exchange, part large cap, and interest rate sensitives trading houses. He likes it all day long.

Is this a good way to play the US financials or you rather play the individual names? There is nothing wrong with this, but this Is focused on the broker-dealers side and you don’t want to miss on some of the retail banks

This sector holds big bank deposits, which benefit from higher interest rates – especially shorter term rates. It also benefits as the market improves.

There is a lot of interest rate sensitivity. There is cyclical balance from the market data. Volumes should go higher if times get tougher.