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The Bear Stare

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The New York Times is reporting that Warren Buffett is considering a 20% stake in the once venerable firm of Bear Stearns.

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The following appeared on the Buzz at 3:34 PM today.

As you've no doubt heard--and possibly see--the earlier noodle that something was afoot in Bear Stearns (BSC) has turned into a full fledged broth. The New York Times is reporting that Warren Buffett is considering a 20% stake in the once venerable firm.

That chatter has sparked a 10% rip in the beaten down broker as traders yell "ready, fire, aim!" I clearly have no insight as to whether the Oracle of Omaha is gonna take the plunge but I will remind investors that the last time we heard this chatter, it was in Hovnanian (HOV). And after the initial, euphoric spike, we all know what happened to the homies.

Be that as it may, and as I've been trading around the short side in Goldman, this chatter lit a match under the group. I've been trying to keep a loose grip on the handlebars while, at the same time, stay somewhat tight in my risk/reward profile. Not the easiest combination, nor is it one that should be envied at present.

As discussed this morning, I was (am) giving GS a bit of room on the other side of $214 as a function of price. While my gut is to fade (read: sell) spikes rather than chase 'em--particularly on rumors--I'm being very conscious not to rationalize my risk. Sometimes discipline is a bitter pill to swallow but it's medicine that has saved me many times through the years.

I'm nothing if not honest and, along those lines, I've yet to cover. My thought process, so it's transparent, is to let the initial emotional euphoria settle before pulling any triggers. The high print of the session, if nothing else, will serve as my technical toggle into the close (and perhaps beyond).

In the meantime, I'm bidding for Calgon...

R.P.

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