Staying Neutral

There are some tempting bargains out there right now.  However, with a Fed rate decision on Tuesday, making big moves is just too big a risk.  I’m happy to be fairly neutral right now not betting on one direction or another.  I may nibble on a couple of things but for the most part, I need proof this oversold market has legs.

To give more clarity to the Bear Stearns (BSC) situation, basically the Fed is bailing out Bear Stearns (BSC) using JP Morgan (JPM) as the conduit.  JP Morgan is free to do this without taking any risk.  Bear Stearns (BSC) said its liquidity position has deteroriated in the last 24 hours.  On Wednesday morning, the CEO of Bear sounded fairly confident.  Can things change that quickly?  24 hours?  I guess in this volatile market, it’s possible.  Curious.  Another curious tidbit regarding this is somebody bought 55,000 puts on BSC Tuesday at around $.15.  They are worth $4.70 each.  That’s about a $25 million profit.  They were 30 strikes.  This was way out of the money at the time.  So, either somebody was real lucky and/or smart or there’s something fishy going on. 

The market is reacting to the fact that if its Bear, who else could it be?  One thing that is clear to me is that the Fed and government are going to bail anybody out they need to in addition to bailing out people staring at foreclosure.  Could prop the market but not real healthy in the long run.

I’m off for a weekend of fishing.  Looks like the buyers on Wall Street already left.  Have a nice weekend.


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