The Credit Crisis Financial Stocks Short Journal

I agree about the change in bailout policy. I have posted my frustration about this many times in recent weeks and months.

However this is what I am loving about the UK policy.

I'm trying hard to find a strong case in favour of a long position in RBS stock, and I just can't find it. With 70% UK government ownership already, it's hard to see why people would want to be long the common equity.


Quote from Daal:

thks. I'm hearing some shortsellers are saying JPM is insolvent and could plunge big time

But I got to say I'm worried about the Paulson Put, he is removing tail risk of bank assets at a cheap prices. I just hope the bailout policy of wiping shares out come back once private capital dries up
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That's interesting to read about JPM.

Do you have a specific source for this?

With regards to the tail risk, for US Banks I am generally shorting out of the money calls, rather than shorting common stock.

Especially with premiums higher than usual (for BAC and C), they provide a nice return, and don't require a plunge towards zero to be profitable.


Quote from Daal:

thks. I'm hearing some shortsellers are saying JPM is insolvent and could plunge big time

But I got to say I'm worried about the Paulson Put, he is removing tail risk of bank assets at a cheap prices. I just hope the bailout policy of wiping shares out come back once private capital dries up
More...
 
Shorted some JPM yesterday, this latest bank bailout doesn't seem all that good for shareholders as it will get banks to mark down their assets and make them issue a lot of common stock for the government but the market seems to like it a lot right now
 
Quote from Cdntrader:

Looks like the insurance co's are next on the BK block.


HIG credit ratings downgraded by Fitch after close friday.

The action in PRU CI et al was ugly friday.
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Well these insurance cos are pretty much all broken now.

What's next? BAC C nationalized and winners run higher? mkt hinting that today.
 
Quote from Cdntrader:

Well these insurance cos are pretty much all broken now.

What's next? BAC C nationalized and winners run higher? mkt hinting that today.
More...

Its interesting that the Treasury secretary and some in congress are saying no nationalization but CNBC reports are saying the bad bank is going bad. Roubini is calling for nationalization as the only way, Larry Summers was involved with RGE and says he is influenced by Roubini writings, soros is also involved with the administration and is calling for nationalization. Shiller too, I'm pretty sure geithner reads Roubini recommendations. It looks like only a matter of time they give up on no natz
This should be good for shorts
 
Quote from Daal:

Its interesting that the Treasury secretary and some in congress are saying no nationalization but CNBC reports are saying the bad bank is going bad. Roubini is calling for nationalization as the only way, Larry Summers was involved with RGE and says he is influenced by Roubini writings, soros is also involved with the administration and is calling for nationalization. Shiller too, I'm pretty sure geithner reads Roubini recommendations. It looks like only a matter of time they give up on no natz
This should be good for shorts
More...
Agree on short trades, but for other reasons. I think a good bet is that "politics" will make things worse, just like at any other time and certainly during the 30s. It appears that only at extremes, politicos react swiftly. Otherwise they are in no hurry. Conclusion, markets may revolt again to show them the way.
 
Quote from rros:

Agree on short trades, but for other reasons. I think a good bet is that "politics" will make things worse, just like at any other time and certainly during the 30s. It appears that only at extremes, politicos react swiftly. Otherwise they are in no hurry. Conclusion, markets may revolt again to show them the way.
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It looks like there is more intervention coming. Just finished reading an interesting Bernanke paper about Japan.
http://www.princeton.edu/svensson/und/522/Readings/Bernanke.pdf
Some bernankes points
-BOJ was too slow in yen printing even though they slashed rates
-Japan's problem are not necessarly coming from deflation but mostly from lack of aggregate demand that created deflation and a number of other problems
-Japan's needs to print yen, raise prices and demand, to argue that such thing is not possible because of keynes 'liquidity trap' is wrong because it would enable the BOJ to buy food, clothing and health care for every man woman and child in japan and print its way to prosperity

This further confirms that inflation will come down the pipe as I dont believe the fed is even close to being 'all-in' like pimco claims. I wrote about that on the link in my profile
 
Just found an interesting article by Bill Gross at forbes
http://www.forbes.com/forbes/2009/0112/032.html

I already own C bonds(8% of my networth) and I'm thinking to buying some more of these preferreds and bonds from too big to fail firms(the yields seem absurd). This could help one holding the shorts in US banks because you get to be helped by all these bailouts and I think the common stock gets killed even if the government does kind deals like they have been doing, the debt though benefits big
 
Decided that I will have to sit this gross preferred stock idea out. Non-US citizens need to pay 30% in withholding tax on dividends, so a third of the yield is out hurting R/R. I also think gross is understimating the odds the big troubled banks will be nationalized and I dont think the preferred will get much(FNM FRE and WM preferred all got wacked)

At this point it seems safer to stick with the senior debt. C got $2T of liabilites, hard to see the US government seizing all that property and wiping it out and if they do my shorts should profit a lot

Also PGF(financial preferred etf) is in a strong downtrend, so the market is trying to say something
 
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