Is This What Motion Sickness Feels Like?

Yep, and we're all out of Dramamine. Fortunately, I have an iron constitution. Once while taking the ferry back from Martha's Vineyard, I read the newspaper while people were heaving over the railing. Volatility is good for us. It provides good entry points and then rapid swings downward. The market tumbled over 200 points, went positive, then finished down 100 yesterday.

Bad things are happening. IndyMac blew up. Fannie and Freddie are insolvent. Guru Bill Ackman has a plan for saving them at the cost of wiping out all shareholder value. People will scoff at this initially, but he had a similar plan for the bond insurers and he was right 6 months ago. Perhaps the government will quit screwing around and acknowledge this mess.

CPI was through the roof. Really? I hadn't noticed my $70 fill-ups, gas stations charging for refills, diminished container sizes at higher prices, bananas up 40%, 75% off signs in every retail window, and McDonald's selling burgers at 1960s prices.

Retail had an awful June despite the stimulus checks. Not good. ``The stimulus checks are providing a fairly potent environment for retail sales,'' said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ``That is masking the real condition of the consumer, who is flat on his or her back. Once the impact of the stimulus fades, we're going to have a massive payback.''

Just when I thought there wasn't enough room to short financials even more, I, uhh, found some. Doesn't take much to convince me these days. After Citi has had 9 hedge funds fail in the last year, turns out they have a mysterious $1.1 trillion dollars in assets that might make it onto their balance sheet. That would make them more bankrupt than they already are. So far, only $100 billion in assets have "reappeared," but this could change quickly.

Downey Financial, a $38 stock 6 months ago, is now trading for a dollar. I guess that's what happens when you're non-performing assets hit 15%.

And Wachovia. Financial hating Meredith Whitney says they're finished. When their mortgage-backed securities get written down, they'll lose every penny of their $40 billion. Stock is up
10 % today. Sounds like a good time to bet against them.

National City had a run against it this week, pushing my strangle into 25% profitability when the put was sold at 150% profit. It would take a miracle to ever squeeze 5 cents out of the call, so I consider this trade closed.

And thank you Barron's, for your stellar first-half recap. "Not surprisingly, our biggest losers this year were in the financial sector, the worst industry group in the stock market, with a 30% drop in the year's first half. Seemingly inexpensive stocks like First Horizon, East West Bancorp and American International Group got crunched after our articles, largely by credit problems." Yeah, I believe I've covered these winners extensively. Nice call pros.

IOD: WB 1/09 $5 puts, KMX 1/09 $10 puts, BAC 1/09$15 puts

http://www.bloomberg.com/apps/news?pid=20601109&sid=a1liVM3tG3aI&refer=home

http://www.marketwatch.com/news/story/downey-non-performing-assets-jump-1433/story.aspx?guid=%7B764132AD%2D6C6E%2D438D%2DA8BA%2D1A59DE86C66B%7D&dist=hplatest

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOAhjktHvbXU&refer=home