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Random Thoughts: Bank and Housing Bailout Plans

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Moral hazard, socialism on Wall Street, call it what you will. Just see it with both eyes wide open.

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  • So, Lennar (LEN) unloaded real assets (land) for 40 cents on the dollar? That's a premium to what E*Trade (ETFC) sold its assets (to Citadel) for (27 cents) but underscores the underlying pain resting in many portfolios.

  • We know the importance of S&P 1490. Did you know that S&P 1491 was also a 50% retracement from the all-time high to the November lows?

  • Fed Fund Futures are pricing in a 30% chance of a fitty bip snip at next week's FOMC meeting. I'll again ask "why" vs. "what" but will respect the possibility that it could create a crutch.

  • I'm comfy with some long "situations" vs. S&P puts (part spec, part hedge, part a desire to have some gamma with the VXO at 25. Net/net directionally, I'm not forcing a bias in here.

  • I did peel out of some puts this morning (vs. adding them Friday at 1490) but I'm just trading. I don't mind being smaller, tighter and less stressed as we edge into the nutty December strut.

  • These are interesting times on a number of levels, not the least of which is back-to-back bailout plans for banks (super-conduit) and housing (sub-prime freeze). At best, this will push risk farther along the time curve. At worst, it will manifest through the cracking of the confidence (credibility) bubble.

  • And both, from where I sit, will only occur with government subsidy. Moral hazard, socialism on Wall Street, call it what you will. Just see it with both eyes wide open.

  • I find it most interesting that while chatter abounds that the FOMC will again lower rates, the real cost of money (LIBOR) continues to rise. We're in the early innings of a multi-year credit contraction and the sooner we prepare, the better off we'll be.

  • What's that mean? Something different for each of us. In general, it means that we would be wise to remain diligent in capital preservation, debt reduction and financial literacy.

  • Today's tape? Let's see, we've got a firm Goldman (GS) vs. a drippy General Electric (GE) (let's call that a push). nondescript internals, mixed beta (note Research in Motion (RIMM) off a finski), a marginally lower dollar (contra-tell) and an S&P with lower highs and lower lows (under resistance). That's a recipe for doing less, and doing so with two-sided discipline.

  • Behind the scenes, we're in chug mode as we juggle Friday's beta launch of MV Kids and The Exchange with year-end reviews and the upcoming Festivus for over 300 of our closest friends. All good things, just a lot of things, as we enter the final twelfth of 2007.

  • Engine room, more steam!


R.P.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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