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Chances To Make Money Now


Lessons to be learned from today's changes.

Since I don't know where to begin expressing my thoughts about what we have seen over the last 4 days, I won't.

Entire new storage systems will be purchased to save the trillions of bits that will be typed to explain, rationalize and excuse what has happened, but in the fullness of time, and after the United States financial system snaps out of this socialist cycle, you can rest assured that something similar to what we have seen unfold over the last 3, 5 and 10 years will repeat itself, and despite all the proclamations of the geniuses who got us to the edge of yesterday's abyss, the next time won't be different either.Minyanville's Why Wall Street Will Never Be the Same

Now onward and forward on how we may be able to make some money, and some firsthand lessons:

  • My sense is that at yesterday's highs the US long bond may have seen a secular top: I've been early on this one but in the scheme of things there's plenty of time to still be right. Any rally below yesterday's high will be a good short opportunity in my book.

  • Professors Warner and Shartsis may explain this better, but my sense is that until short selling is allowed again, buying puts will be a waste of money as prices will guarantee that the buyers' odds of making money will be almost nil.

  • This "bear enema" may last a lot longer than people think, so I won't be in a hurry to sell longs here. I think it's perfectly conceivable that the bids-wanted liquidations we saw in the last few weeks may make room for forced covering, which will precede "dozens" of entities being put out of business.

  • On a risk/reward basis mezzanine lender CapitalSource (CSE) is now my favorite long: see Minyanville's archives for the rationale behind that.

  • After the euphoria fades, the cost of capital for Real Estate Investment Trusts will still result in major underperformance for years: My insurance policy on the UltraShort Real Estate (SRS) will be faded sooner than later.

  • When (not if) yesterday's lows are breached: There won't be any more safety nets, keep that in mind if you start getting a bit too giddy.

  • I am not ready to jump full boar on the gold bandwagon, but energy/commodities could have the mother of all rips.

  • If you are short nickel and dime options before expiration, do yourself a favor and cover them.

Stay calm, Minyans, the ride ain't over yet by a long stretch.

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Position in CSE, long bond, SRS.
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