The Best Opportunity to Make Money in the Market in years

Discussion in 'Trading' started by Brandonf, Apr 10, 2009.

  1. Brandonf

    Brandonf ET Sponsor

    Some of the very best opportunities for traders will occur when a bigger player's hand is forced. When a lot of bigger players are forced you will have a mass movement in one direction, and that creates a huge opportunity for an astute trader.

    Today Moody's downgraded ALL MUNICIPLE DEBT in the United States. They did not bother looking at the individual cases, they just said the situation is such that all of them have become more dangerous.

    Obviously these are the same assclowns that thought tranches of subprime debt were the safest things ever created, so we know the quality of at least some of the work they do.

    In this case there are certainly municipalities that are going to default, and certainly some deserving of downgrades. However many should never have been downgraded, and now that they have been they will be mispriced because of the A) The downgrade and then right now there is the temporary displacement of people being forced to sell them off because they can only sell bonds of a certain grade. The best opportunity will occur in the next few days, but it should last for a little while.

    As I said the very best money is made when you have a situation where big players are forced to do something that they may not really want to do.

    With Moody's having taken the easy way out here, trying to play a game of CYA, this could be one of the biggest opportunities in years to pick up mispriced securities.

  2. i love that term.
  3. Brandonf

    Brandonf ET Sponsor

    Whether or not someone believes in the term or not does not change the fact that there are, in fact, securities that are on occassion mispriced due to some unusual event or circumstance. The last time there was this type of opportunities was 4 or 5 years ago in GM bonds and following 9-11 with the airlines.
  4. Dude, you're somewhat behind the times here. The Muni debacle had been in the mkt for a long time now. As usual, the downgrade is not news, 'cause this storm has been brewing a long time now. People who needed to get out have already gotten out (in 2007 and in 2008, when munis effectively lost the monoline wrappers).

    I don't disagree with the premise that some of the muni debt is overly cheap, but the whole problem is that this is, definitely, a 'catch a falling knife trade'. Also, you have to remember that the whole credit crunch is about balance sheet and availability of capital. To buy cash bonds you either have to be a real money investor or need to have adequate repo facilities. Big real money investors have bigger fish to fry and the funding mkt is still somewhat impaired. So, while it's a nice idea, I wouldn't bet a farm...
  5. Anyone who bases investment decisions using information from the 3 PIGS ( Moody, Fitch, S&P) deserves whatever comes to them :p
  6. OK. Lay some symbols on me. And sell me on the idea of holding fixed income investments when rates have nowhere to go but up (i.e. bonds will decline in price).