Why I'm short equity right now...

Tomorrow we'll see if Bernanke has any balls.
If he admits that the 75bps emergency cut was too extreme, given that the MLK market volatility resulted in a big part from SocGen's seppuku as they surrendered to losses in a way only the French could (by immediately liquidating all their massive "fraudulent" positions and flooding the market instead of doing it gradually like any normal trading house would), he will cut rates 25bps. Of course this is still 100bps for the month, which sets us up nicely for stagflation in the near future, and 50bps more than the market originally estimated for January.
Nevertheless, even after every last financier, from BSD to Broker, had their chance to laugh at SocGen's Krevieling stupidity the market is still demanding a 50bps cut. Thus if Helicopter Ben continues playing limbo to the market's benchmark nothing will change (maybe a 2-3% intraday spike at most), but if he shows some backbone and cuts 25 the markets will tumble.
That's why I'm short SPH8 with an ATM straddle to hedge the vol (and compound profit) . Tomorrow should be fun.

Update: So ball less Bernanke cuts 50bps. Like I said - short intraday spike to unwind the call from the straddle and keep the put for free. All in all, nothing lost (except the credibility of the Fed).

Update 2: So even a fiddy ain't enough for the markets, as SPX finished down a percent. Good news for me though - I sold all three parts (call, put, future) in the money before market close. This turned out to be a pretty great trade, after all.

The "Real" PR from the Dirty Bear

BEAR STEARNS NAMES ALAN D. SCHWARTZ CHIEF EXECUTIVE OFFICER, SUCCEEDING JAMES “JOINT” CAYNE, WHO REMAINS CHAIRMAN

New York, New York — January 8, 2008 — The Bear Stearns Companies Inc. (NYSE:BSC) announced today that James E. Cayne has informed the board of directors of his desire to step down as chief executive officer, effective immediately after he finishes this phat blunt. While Mr. Cayne will retire from the firm, he will stay on as chairman of the bong and will be succeeded as chief executive officer by Bear Stearns president Alan D. Schwartz.

"Jimmy has much to be proud of -- under his leadership Bear Stearns has grown substantially over the past 15 years, with revenues increasing to $7 billion from $2 billion. We can’t say for sure that any of this actually happened because of Jimmy’s leadership, but he was in his office for at least half of those 15 years, so maybe it did." said Vincent Tese, Bear Stearns lead independent director. "This was mainly his decision, and we are very pleased that he has agreed to stay actively involved in the business as chairman of the bong. We can never find the good shit ourselves."

Mr. Cayne, commented, "I am elated and, frankly, surprised that the board has continued confidence in me" he said. "Leading Bear Stearns and its wonderfully talented people has been one of the great joys in my life for nearly 15 years. I’ve never had the chance to play bridge and smoke with such talented people, or play so much golf – not that it helped my handicap." Cayne added that he would remain in the same office, come to work as many days as he used to as CEO and work the same number of hours as before. [not making that one up from - see Bloomberg]

"I am dubiously honored to have the opportunity to lead one of Wall Street's great franchises," said Alan D. Schwartz, president of Bear Stearns. "Bear Stearns has a bright future now that the smoke has cleared. Our franchise is crack-rock solid thanks to Jimmy's leadership, so I have much work to do. We had a strong capital position before our market cap halved last year, a unique culture that rewards absenteeism and casual drug use, and great talent throughout the organization – especially the 4^th floor men’s room."

Alan D. Schwartz joined Bear Stearns in 1976. He became executive vice president and head of the Investment Banking Division in 1985. Mr. Schwartz was named president and co-chief operating officer in June 2001 and sole president in August of 2007 after Mr. Cayne fired Warren Spector since he was the only senior executive actually at the office during the firm’s meltdown. "Jimmy Cayne is a Wall Street legend, he’s practically the Cheech and Chong of the Street. I've learned a lot from him in the 30 years we have been friends and partners here at Bear Stearns – especially while in the 4^th floor men’s room, and I am pleased we will be able to continue our relationship." Mr. Schwartz said.