Market Optimism???

Optimism in this market environment???

The CaseShiller Home Price print came in this morning at 138.49. This is an awful report, but having newly found my optimistic spirit good things can come from it; maybe not good things…..but opportunities. The CaseShiller "tracks the value of residential real estate in 20 metropolitan regions across the United States." It tells you if your house has gone up/down in value or if it’s worth anything; as of lately most houses are worhtless.

Although I am not an economist, don't have a PHD, and do not work at a bank; this came as no surprise to me, (a capitalistic son of a gun) nor anyone who doesn't have their head up their ass. Anyone who owns a home/pays a mortgage knows very well the value of their house, and it is not what it was back in 2006 (aside from the very few housing markets that avoided the boom, and the bust). Roughly more than a quarter, yes over 25% of homeowner are underwater on their mortgage, ie they owe more on their mortgage than what their house is worth. (Zillow’s Third Quarter Real Estate Market Reports)

Why am I writing about housing? Good question, because housing historically leads the economy (out of recession). But if housing prices are lower, how are we going to get out of the recession?

If I knew that, I wouldn't be wasting my time writing a blog. Id be living out my dream teaching either history or math, maybe business ethics, but like I said I'm a capitalistic bastard......do we have ethics??

My thoughts, and strictly my own, not the firm I work for (disclaimer) are as follows, the Fed has shown its willingness to give the economy a boost ;QE1, QE2, Operation Twist (and Shout). And with a combination of decreasing housing prices and oil creeping over 100 dollars a barrel spells recession (oils 50 day Moving Average just shy of $100 barrel) I think the fed will act. There has been wide spread rumors, thank you Bill Gross of PIMCO, of some new actions by the fed through the purchasing mortgage backed security over the next few months. I agree with Gross, and think the fed will step in but SHOULDN’T.

Here is where my optimism comes in. By now many of you have heard about my BAC 6 March call (Bank of America, strike 6, expiration March), which was one of the hottest topics on twitter (seriously).

I am a trader NOT an investor, I look for the quick buck. My rational behind my BAC call was simple. You are buying a pile of horse S@&t and hoping it will turn to Gold, courtesy of the Fed. And that's precisely what happened.

The options traded for .35$ an option as of 12/21, which is when I told my lawyer buddies to buy. They have since hit a high of $1.57 as of 1/24. Returning 349% return in a month. In lay mans terms, my buddy bought 15 options for roughly 500 bucks (1 option .35 cents*100{denomination of option contracts}*15) are now worth over 2,000$ using today’s prices.

HAVEN'T LOST MY TOUCH

In the coming months, there will be plenty of these opportunities and I will do my best to find them. I appreciate if everyone can spread the word......HES BACK……with an optimistic spirit…….