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Random Thoughts: Why Bank Shares Are Ripping


Chatter of a structural shift abounds.


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

Gate Sniffage! - 10:31 a.m.

  • Ss over Ns as we race from the gate, with early traction in the financials (ex-Goldman (GS)) competing with supply in the master beta realm. We spied the lethargy in Research in Motion (RIMM), Amazon (AMZN) and Baidu (BIDU) pre-market, and true to form, they flipped the downside switch.

  • In the interest of full disclosure, I nibbled on some RIMM puts for a very quick schnitz with a tight (trailing) risk profile and a conscious nod that it might be magnetized to $40 into expiration. Not married to it, mind you, just looking for some shekels as we edge through our journey.

  • Bigger picture and broader tape, I'm looking to trade two-sided at current levels. Should we edge back towards S&P 600, I'll skew my book to the buy side (as I did the last few weeks). If we jack higher towards S&P 800, I'll fade (read: sell) 'em with tight and defined risk.

  • I do believe that the incessant efforts by global central banks will "kick in" at a point, but I'm not in the camp that we've made THE ultimate bottom all else (the dollar) being equal. Keep in mind, Minyans, this is no garden variety one-and-done recession.

  • The most bullish thing on my screen? NYSE internals are hanging tough at 2:1 positive.

  • The most bearish thing on my screen? The tenor of tech, by and large.

  • I'll be back, Minyans - take a deep breath, loosen that grip on the handlebars and let's do our best to enjoy this journey.

Answers I Really Wanna Know - 11:09

  • Will we again see a "game changer" announcement (fair value accounting, mark-to-market, CDS) into Friday's expiration for maximum "bang for the buck" effect?

  • Through the lens of trading two-sided -- and with a conscious nod towards "S's over N's" -- does discipline dictate adding some upside exposure against the small Research in Motion (RIMM) schnitzel?

  • Or is the weakness in tech a simple rotation back into the banks?

  • Y'all see NYSE 3:1 positive, paving the way to another push higher?

  • Did I really dream that Syracuse and Louisville would again meet in the national championship game?

  • Hey, do you think Freddy Mercury (in the link above) was an Othello fan?

  • All that stress at FAS $3 kinda seems silly now, eh?

  • How will quarter-end play into the near-term price action given hedgies are massively under-invested if not outright short?

  • Sorta supports picking up some upside SSO hedges, eh?

Hungy Hungry Hippos - 11:57 a.m.

It's just another manic Monday as Citigroup (C) sprints 35% higher (aka 63 cents), Bank America (BAC) tacks on 13% (77 cents), AIG (AIG) adds 66% (33 cents) and Wells Fargo (WFC) and JPMorgan (JPM) add a svelte 5% (about a buck). I am, of course, leaving Fannie (FNM) and Freddie's (FRE) 35% gains off our list as, well, that's only fifteen cents each

Why? There's (unconfirmed) chatter around that the government is in the process of "de-hypothecating" shares they own in the financials, which means they wouldn't allow any shares owned by the government to be borrowed (and subsequently shorted).

Given the size of these moves -- along with stated mission to stabilize the system -- it certainly wouldn't shock me if this proved true

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Position in RIMM, SSO
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