"...The truth is, through criminal neglect and incompetence, the people at the top of these firms chose to look away, to take more risk, to enrich themselves and to put shareholders and indeed, the country itself and the country's economy at risk. It is truly not only a shame, it is a crime." - 60 Minutes
Let's be frank here...
Wall Street has failed us.
They devised a $50-$60 trillion market in a Dr. Jeckyll-like lab, and dolled it up with a guaranteed regulation-free name: Credit Default Swaps
"...So, thanks for buying that sexy mortgage-backed security! What's it gonna take for me to get you into this beautiful, new 'insurance' to—you know—hedge against the risk?"
"... Say it with me, here: 'credit default swaps!' How can you lose in this market?"
Truth is, unspeakable fortunes have been made through gaping, horrific loopholes in the 'shadow market.' And now we're left to pay the price.
Duped. Swindled. Bamboozled.
Pissed off yet?Just ask your family members, friends, or colleagues what they think of Wall Street.
Chances are, they've all suffered. And they're probably wondering, like the rest of us, why someone... stock broker, advisor, or especially our government leaders... didn't clue us in to exactly what's been going down.
So, Who Let This all Happen in the First Place?
For starters, consider the "3 Bill Buckners"...
That's the phrase John Yarmuth (D-KY) uses to describe the trio that oversaw the U.S. financial markets as the housing bubble took shape—former Fed Chairman Alan Greenspan, SEC Chairman Christopher Cox, and former Treasury Secretary John Snow.
(The phrase is a reference to Bill Buckner, the Boston Red Sox first baseman whose error some fans blame for their team losing the '86 World Series... though, in all fairness, the blame could go to Red Sox Manager John McNamara, who should've pulled a hobbling Buckner for a more able-bodied defensive replacement.)
With regards to the Treasury's continuing role in our financial debacle, look no further than this excerpt from Bloomberg.com:
"...You can imagine the devilish grins on the faces of Morgan Stanley employees last week, after the Treasury Department said it would pump $10 billion into the bank. Not only did we, the taxpayers, save their company, with the help of a Japanese bank named Mitsubishi UFJ Financial Group Inc. More importantly, we funded their 2008 bonus pool...
...Here's all you really need to know to see who lost and who benefited most [from Goldman, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns]. From the start of their 2004 fiscal years through yesterday, the big standalone investment banks lost about $83 billion of stock-market value. During the same period, they reported about $239 billion of employee-compensation expense."
Nothing like rewarding failure with lined pockets...
And now we come to learn that Alan "Father of Subprime" Greenspan concedes to being "partially wrong" in his relaxed attitude toward the banking industry and credit crunch during his watch. "A state of shocked disbelief," he says before Congress.
Did this so-called 'economic genius' and global free market advocate not see the exposed loopholes, or was he in on the fix, too?
What's more, Greenspan's influence was harmful on a global scale. He served (note the past tense) as honorary adviser on economic matters to British Prime Minister Gordon Brown. Misery has company, at least. Truth is, Greenspan could've put the brakes on the irresponsible lending practices that propelled the sub-prime mortgage market... but didn't.As financial writer James Grant puts it, Greenspan was a "cheerleader for imprudence."
Now two things are certain... there'll be enough blame to go around for the next decade or so, and those who are most guilty will walk away indignantly, with a mere shrug of the shoulders. Deny everything!
Still, why did we have to lose so much of our savings... our nest eggs and retirement plans?There's no good single answer... but there is a payback, and it's rock solid.
Like every good payback, it's seasoned with vindication and closure.
Only this payback comes with a bonus plan.
It's called getting filthy rich, and—for our readers so far—it comes at the expense of Wall Street's banks...
...The same institutions that helped plunge the global financial system into full-scale crisis.
...The same avaricious, degenerate scumbags who got us into this stinking mess.
Hypocritical, you ask, to capitalize on the situation?
Not at all. Here's why...
This is the reality of today's markets! Right now, it's the only way to make money. Plain and simple. Dead are the days of the traditional buy and hold.
Here's how we've played the situation...
Case Profit Study # 1: The Lehman Brothers Lecherous Failure
On September 9, we jumped into an investment play... one in which all our indicators triggered simultaneously.
We bought Lehman Bros put options, as the underlying stock set up to break below a bearish descending triangle.
We had no doubts this would be a profitable trade.
You see, signs of worry surrounded the company, as shares plummeted early on, debt had been downgraded, and investors became alarmingly worried about Lehman defaults.
It was the same downward spiral we saw with the Bear Stearns collapse.
Here was Lehman—once the number #4 U.S. investment bank... a Wall Street titan with an impeccable reputation—that had weathered every financial storm and every Great War of the last 150-plus years...
And for months, the Lehman brass worked every last angle to convince shareholders everything was okay... in what amounted to a multi-billion-dollar smoke and mirrors campaign.
And even after watching former CFO Erin Callan on CNBC in early 2008, we knew the bank was in serious trouble.
But still, my Options Trading Pit team had to wait on the sidelines, anxiously... for foolish investors to stop buying on this beleaguered executive's ill-conceived bullishness.
Finally, on September 10, one day after our trade was initiated, Lehman tried to convince investors it absolutely didn't need new capital to survive... and that its real estate portfolio was valued properly.
Another boldfaced lie.
They wouldn't have filed for bankruptcy protection if they didn't need it!
At this point, my crew and I determined "truth" to be the exact opposite of whatever Lehman's talking heads were soundbiting to any media outlet that would run it.
But we'll let Lehman executives explain themselves before all the prosecutors... the ones already lined up at the door, sharpening their knives and licking their chops.
In fact, former CFO Erin Callan and ex-CEO Richard Fuld, along with other Lehman executives, are facing subpoenas as federal prosecutors investigate whether the bank misled investors in the run-up to bankruptcy filing.
Meantime, while uninformed Lehman shareholders lost their shirts, we raked in a combined 343% return inside 6 trading days.
And that's just for starters. Here's another way we played the financial meltdown to another raging Options Trading Pit success story:
Case Profit Study # 2: The Morgan Stanley Melee
It was September 16 when Options Trading Pit recommended a buy on January 2009 25 puts, and for good reason...
Our research pointed to Morgan Stanley as the next domino to fall on the understanding that its credit default swaps continued to deteriorate rapidly.
Now, here was a company—one of the stalwart Five Families of Wall Street—that was heavily involved in underwriting those pesky credit default swaps.
With Morgan Stanley holding those swaps—and on the hook for many billions of dollars—it was a no brainer that shareholders would soon be selling in droves.
Turns out, our research was spot on.
Morgan CDS traded as high as 925 basis points, a very distressed level, just a day after our trade was initiated. It put Morgan Stanley in the crosshairs and handed Options Trading Pit subscribers a 71% gain in less than a day.
Are You Ready To Get Your Payback On Now?
You see, as the bailouts, bank failures, mortgage defaults and corporation nosedives pile up... our profit opportunities abound!
In fact, we've just uncorked our newest money-making trade. Here's what we went after...
If you take a look at a multi-year chart for the Russell 2000, you'll notice that a bearish pennant is setting up, as the Russell breaks below 490. Interesting to note, on further drops, the Russell 2000 could fall to about 300 to 350, which puts it in the same range as the 2002 to 2003 bear market.
The bearish pennant, by definition, is a technical set-up that can indicate a longer downtrend may continue. And given today's volatile market environment, that comes as no surprise...
...Which is why the Options Trading Pit team is set to make this play our 21st win since May 2008.
Already our subscribers are enjoying 20 wins out of 25 trades... including a 72% average gain.
Rest assured, we'll be playing both sides of the market. It's the only way to profit in these turbulent times.
Whether it's another big corporation about to go down (but not yet disclosed), or a blue chipper on the verge of increasing its market share, we'll find 'em. And you'll profit.
And right now, you can get in on the profits we're making, including our newest trade, by becoming an Options Trading Pit member... while we're still offering it at our introductory discount rate.
To learn more about how to become an OTP member, just click here.
Good trading,
Ian Cooper
Investment Director, Options Trading Pit
P.S. If you're not an experienced options investor, don't worry. We do all the heavy lifting. We'll tell you what to buy at what price and when to sell. We've even prepared a series of special reports and how-to-guides on trading options. You can learn more about becoming an OTP member here.
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