So I caught the cheap bug and bought Lehman stock at $8.00 as a Fed put :) I ignored the main rule in trading that says wait until something stops falling to buy it :). Oh well... such acts of catching a falling knife work about 20% of the time when you look like a genius and other 80% you look like an idiot.
The "second wave" of banking crises is due to hit. The signs are here
- BRL has finally shot back up to 1.80 levels against USD from 1.70 levels
- Financial stocks are falling again
- VIX higher than 25 again
- JPY is rallying again
he 1200 levels for the S&P continue to hold but I think the Lehman crises as it unfolds on Monday has potential to break the 1200 levels. It will be an interesting test for the Fed. For the economy this "second wave" is the other shoe that had been waiting to fall...
What I expect will happen
- EM currencies will go down even more- BRL ( I expect 1.90 from 1.80) , INR(46.50 from 46.00 levels. INR was only 43 a month ago!) , Ruble ( from 25.50 to 26.00 levels) , TRY(Turkish Lira from 1.2650 to 1.3000 levels) etc.
- VIX around 30
- S&P may break 1200 to the downside.
- USDJPY to fall. I am a buyer of USDJPY call options around 99/100 levels right nowHowever, if USDJPY drops very quickly then I will rethink my trade idea.But given that if the US melts, the whole world will suffer a lot, I do believe it is an opportunity to buy the dollar depending on how fast it falls.
To watch-
-Goldman and Morgan Stanley to come under fire as well (maybe more so)> Perhaps these banks will face takeover rumors as well. It should be interesting to watch what happens to the two remaining pure I banks
Good luck!
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1 comment:
How fast do you think my fellowship application goes to the shredder? Maybe they could at least give me 25 shares of Lehman stock as compensation for the postage that I had to pay?
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