Monday, 18 August 2008

Position review

Before the summer began I discussed a few positions, purely on a didactic basis (of course). Time for a reckoning.
  • Seller of credit protection on LEH and MER and long a FTD basket on the subordinated prefs of national champion banks. Both ugly on a MTM basis, but both positive carry. I still wouldn't touch the financials' equity, but I do think too big to fail is a profitable position in the medium term. I am toying with adding CDS on Fannie and Freddie's senior debt based on the same philosophy.
  • Short Gold. This has finally made a decent chunk of change. Time to take it off.
  • Long prime jumbos. Good news: the conforming/jumbo spread has come in as more jumbos have become agency-eligible. Bad news: the agency/treasury spread has gone to the moon. I still like long liquidity/funding risk in the current markets. Hold on, but it may be a while.
  • Long the iTraxx, short the component's equity. The short has done well, and the long is basically flat. This is a long term equity/credit dislocation play.
Additionally I would consider long dollar vs. EUR and GBP, and receive fixed in GBP for one year.

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