Monday, September 29, 2008

Bailout Looks Likely :-(

Today's Politico reports that the House opposition to the bailout looks insufficient to stop the bill's passage. I can't think of anyone in the Senate who can filibuster this thing. We're screwed.

As such, I've decided to buy out my uncovered call on Bank of America at a loss. I don't like that, but it beats having to unwind it after the bailout bill is signed into law. The bailout will artificially propell BAC's price to a new unsustainable high. After this turkey is signed into law, I'll think about re-opening my short call on BAC.

I'm keeping my uncovered call open on Merrill Lynch, in the assumption that BofA's buyout will be done by January.

Just remember this: No matter how hard the financial class tries to change the rules in the short run, Mr. Market always wins in the long run.