More Bailouts
January 24th, 2008 by Buck Woodford
As soon as I mention the shaky bond insurer group, they bounce big on news that New York’s insurance regulators are cooking up a deal that would keep Ambac & MBIA from simply dying off via their ill-fated move into insuring mortgage CDO’s (instead of sticking to plain old municipal project bonds).
Things like that — not to mention Fed rate cuts — are what make the short side always a dangerous place. Even in bad times like these.
We saw a tremendous rally today on the bond insurance news. The stocks that soared the most were the same ones that have been beaten senseless for many months — even Citigroup traded up like a tech stock in the 1990’s.
Still, I’ll bet that most folks who made a big return today have been heavily invested for some time, and are significantly down from their portfolio’s high value.
At Teewinot, we move relatively fast… but not from “all-out” to “all-in” during just a few hours. If conditions continue to improve, we will be looking for opportunities to play this bounce. But we’ll remain judicious in setting risk parameters. The Fed has scheduled its next announcement on short-term interest rates for next Wednesday Jan 30 — I am envisioning a decent market environment into that event but all our bets will be off by Noon that day.
