Bear Stearns has more than $1 billion of short positions on subprime, up $400 million from the end of November, Bloomberg reports. Of course, since Bear Stearns got the subprime trade so wildly wrong last year, people are already wondering if this might be a signal that it is time to go long subrime.
Over at The Big Picture, Barry Ritzholz writes, “While I do not expect us to be done with the subprime slime yet, I do get a ‘Is this a bottom indicator?’ sense from Bear on this.”
JPMorgan Chase, which emerged relatively unscathed from the credit market debacle, is apparently taking the opposite position. Yesterday Jamie Dimon was reported to have said that the bank plans to expand its role in the subprime mortgage business. Goldman is also rumored to have reversed it’s position on subprime, taking a net long position.
Bear Stearns Is `Short' Subprime Mortgages $1 Billion [Bloomberg]
Posted by CT , Feb 08, 2008 3:33PM
This should just about finish em off.
Posted by , Feb 08, 2008 3:54PM
I'm not sure characterizing bear as being on the other side of the "subprime trade" is not more than a little misleading since most of their losses did not evolve from directional trading positions but from the factory business they had built but, nonetheless, is this really cause for concern? Anyone expecting Paulson to get wiped out too?
Posted by The guy who's not gonna make it , Feb 08, 2008 3:55PM
I've gone long subprime too by buying a house I cannot afford while running the risk of getting laid off...I always knew Dimon and I have a lot in common...
Posted by Ned , Feb 08, 2008 4:04PM
Hey "guy" just don't pay your mortgage, you will be okay, and will live rent free for at least nine months at the expense of some Kraut bank.
Posted by Tin-Foil Hat , Feb 08, 2008 5:19PM
Barry Ritholtz commenting on any firm's business is similar to to all of his other missed calls that he never speaks of ... like Dow 8600 on its way to 14,100
Posted by Orson , Feb 08, 2008 5:29PM
Just lose that grammatical error. "It's" means "it is", not "its".
Posted by , Feb 08, 2008 7:04PM
I thought that was a correct usage of its.. Am I missing something?
Posted by anon4life , Feb 08, 2008 11:27PM
I think Paulson said that he was done with the short subprime position last month. It may have been mentioned in that long WSJ article on him ...
Posted by Anonymous , Feb 09, 2008 2:54AM
@ 7:04 pm. Yes, you are missing something.
Posted by Anonymous , Feb 11, 2008 3:36AM
It doesn't look like a directional bet. From Bloomberg:
In an interview after Molinaro's remarks, Bear Stearns spokesman Russell Sherman said the New York-based firm's subprime trades are a ``hedge'' against potential losses on investments in higher-rated mortgages, he said.
``We are using short positions to offset other long positions in our mortgage inventory,'' Sherman said. He didn't provide details on specific trades.
Posted by , Feb 11, 2008 7:53AM
yeah, yeah. It's called a Kerviel trade.