Trades, Missed Opportunities, and Intellectual Excersises

Trades.

Sold TOL at $20.96 and DECK at $ 103.98. Both of these are consumer pain from inflationary blowback trades.

Missed Opportunities

I should have cashed in GS and MER when the Fed announced that they were letting the investment banks monetize worthless paper through Treasury swaps. I believe that the Fed may have gone far enough here to actually make a difference for the broker-dealers. I will look for an opportunity to salvage what's left of my profits from GS and MER.

Intellectual Excersize on the Fed, the Banks, and What Happens Next

First, a quick recap of the credit crunch. The freeze remains. That is why the Fed has been forced to allow banks to swap frozen assets (MBS) for Treasury bonds they can sell and then lend money on. What will happen as this process continues? Obviously, the banks will offload as much crap as they can on the Fed, swapping it for Treasuries. This has increased the amount of Treasuries for sale, which should have pushed yields up. The recent panic, however, has precipitated a flight to Treasuries that has trumped the additional supply and such has been the demand for safety that yields have actually been driven down. Despite the soaring prices on Treasuries, there are a few cracks developing in the system. The recent pricing preference of German CDS favoring German bonds over Treasuries is a sign of this. First of all, the Fed now runs a serious risk of running out of Treasuries to swap with the banks. If they do, they would have no other option than to print money to buy those Treasuries back from the banks. However, if they do this, FCB's will probably protest by selling their Treasury holdings. The Fed would be unable to buy back everything without making the dollar completely worthless.