If you miss the CFC rally, short LEH sept 45 puts. IV=75 LEH gave up on its subprime unit only takes on 25M charge.
thought he was fairly negative myself - "definitely heading to recession based on huge foreclosure rate.........."
Even if the fed adjusts rates leading to lower mortgage rates, I don't think will help the subprime homeowners who maxed out their mortgages and can't manage it now and also can't get a bank to consider lending to them at a workable rate at a loan-to-value ration that covers the payoff of the old mortgage, since housing values have dropped and their credit is not so good. I just think plenty of folks too too big of a risk on their house -- buying to much in some cases, buying at all in other cases. I'm not sure these folks should be bailed out. Not that I don't feel bad about the situation, but really, investing in something (including your primary house) involves risk management and accountability. Rising rates and lower values were always realistic possibilities, and if the worst case scenario was too bad, the alternative was to buy a cheaper house or wait to buy until one fixed up ones credentials and could get a better rate. Sounds cold, but like I said, I do feel bad, especially when children are involved, but I guess I also feel like we all must not just grab for what we want without looking at the consequences. Bailing out CFC will not help these folks. Kris
It was caused by policy mistake, then government need to carry on responsibilities. It's very easy to fix 1) Do not make same new mistake: CFC need to stop making sub-prime loans. 2) When adjustable rate got reset, provide special below market rate for existing home owner, of cause that means money which government can provide. BTW here is article Gross to Bush: http://biz.yahoo.com/cnnm/070823/082307_gross_homeowners.html?.v=2