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Random Thoughts: Bank and Housing Bailout Plans


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

  • 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!


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!

Position in SPY

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

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