Saved by the ECB...

The ECB has done what the Fed refused to do. In order to return overnight interbank Libor rates to target rates, they needed to inject $215 Billion over the last two days.

What does this mean? I believe that while they may have averted a crash, the liquidity will not prevent a bear market, at least for housing and financial sectors.

Mortgage lenders and homebuilders may not have the noose tightened, but it's unlikely to get any looser. I don't see a market for non-conforming mortgage backed CDO's any time soon. I don't see home prices rising any time soon. I don't see alt-A, subprime, 100% LTV, or jumbo mortgages becoming more available no matter how much money the Fed throws out there. The only way that might happen is if Fannie Mae is allowed to change the criteria for conforming loans, so that they can buy more non-conforming loans. However, that will take time. It also just socializes the losses, with the result that the overall economy will bear the burden of the pain in the mortgage sector.

While my tactical trades (and non-trades) have been terrible, my overall strategy has been pretty clear of major blunders. I need to improve my tactics by taking advantage of opportunities to take profits and enter positions at more favorable times.

For example, I put in a sell order (unfilled) for my WaMu Jan '09 $20 put at $2.15. At that price, it gives me the equivalent annualized return of holding the option to close with WM dropping to $0 on the day of expiration. With the VIX near its yearly high, it's time to look for some profits. If I had had my wits about me, I could've sold it for $2.50 last Friday.