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Randoms: CIT Another Victim of Moral Hazard


Win some, lose some, but don't forget the important stuff.


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community.

A Manheim Moment - 9:15 am

In this morning's opener, we talked about CIT Group (CIT) and the risk of a regulatory "God Complex."

Shortly thereafter, I received an email from a higher up at CIT who wrote "Toddo, this side of moral hazard is not fun--please send much white light. We appreciate your continued guidance in and out of the market."

I responded, "Thank you brother--we're just trying to balance the sh*t storm and most certainly not passing judgment or placing blame, per se. Moral hazard is what worries me most...well, a lot of things worry me, but that is most certainly problematic. Peace to you and yours."

Why do I share this exchange with ye faithful? To put a human face on a hot topic. There are bad apples in the financial realm--much like there are in most businesses, religions or organizational constructs--but the majority of people, in all of the above, are just like you and me... trying to find their way, do the right thing and lead a healthy and happy life.

Please keep that in perspective as we find our way through this prickly fray. The easiest thing to do is join the lynch mob and look to put someone's head on a stick. As we edge through The Age of Austerity, we must make a conscience effort to be part of the solution rather than a source of the problem.

That's easier said than done--particularly if you're unemployed and can't feed your kids--but our integrity and resolve must see us through to better days and easier trades. As hard as it might be to fathom right now, we'll be better men and women for it.

Trust me on this one, as I stared into the abyss and saw nothing, and that's when I found my character (or characters, as the case may be). And Lou Manheim was right--that's what kept me out of the abyss.

Can YOU Handle the Truth? - 10:10 am

  • JPMorgan Chase Bank One Bear Stearns WaMu Chemical Manny Hanny First Chicago Nat'l Bank Detroit Texas Commerce Providian Great Western Bank "beat," as everyone knew they would, so the reaction to news will speak volumes. Remember, earnings are rear-view while balance sheets are forward-looking.

  • And then there's the CIT implications, which will color the financial complex and in turn, shape the tape. While I've been using strength to build some short-side exposure, I must share that my first thought when I checked the S&P futures last night was "hmm, they should be down more than this. The fact that they're not could be telling."

  • Amazon (AMZN) will be "pulled" to $85 into Friday's expiration and Research in Motion (RIMM) is being drawn to $70. I'm keeping that in the back of my mind as I continue to trade around my put positions.

  • Hank Paulson is set to testify in front of Congress and all I can think of is Jack Nicholson in A Few Good Men.

  • China overtook Japan as the world's second-largest stock market by value for the first time in 1.5 years (it was a photo finish, with the Shanghai Composite valued at $3.21 trillion vs. the tricky Nikkei at $3.2 trillion). The U.S? We're still the biggest bully on the block with a market capitalization of $10.8 billion.

  • Have you ever been to a twenty year high school reunion and ran into the bully? You wouldn't exactly mind seeing him stub his toe or trip on his shoelaces, right? There is a point to this analogy but I'll let Minyans arrive at their own conclusion.

  • Always honest, I tossed on a small Goldman Sachs (GS) put position into the close as I wanna see the response to (my perception that the) window for insider sales. It's the definition of a Todd-lot and truth be told, a pullback to where it broke out ($151) may be the "easy" trade.

  • American International Group (AIG) down another 10%.

  • Tea Leaves? There's nothing going on 'cept the rent. Loose grips on my side of the screen, with a careful eye on those pink piggies (financials).

As an Aside...

When I was originally offered a book deal to publish Memoirs, I "zagged" and decided to release it as an eBook over an 18-week cycle. The response, thus far, has been encouraging. In addition to the weekly Minyan traffic, it's been the top performer on MarketWatch and the WSJ-China is running it on the front page each day.

This is not a victory lap--Minyans know me better than that--simply communication, as the whole thing seems somewhat surreal. I am, so you know, working on submitting chapters 7-9 (due Friday) and, as it's particularly sensitive subject matter, I'll be spending some time over the next two days tweaking it in kind.

Thanks for understanding as we balance the beam and juggle the struggle.


Positions in RIMM, AMZN, GS
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