1st Position

Bought 3 contracts of Jan 2010 $40 puts for Centex (YYVMH). Paid $16.50 per share. I would have made this trade yesterday, at a lower price, but my brokerage delayed my funds transfer (even though it was in house). I would go on a rant about that, but it is not as interesting as the one I would like to talk about.

So, last night I did some more reading on Centex. Their 10k from last year is truly abysmal. I am not sure how anyone can expect them to return to profitability any time soon. But guess what, someone does, none other than UBS. They put out a new coverage announcement declaring that Centex is a buy. I assume that they are bottom trolling. Apparently no one there has any idea that the housing downturn is just getting started. Some of the pricing for this downturn is already in the market, but there is a hell of a lot more to come. This announcement has a little bit of a personal aspect for me as well.

I used to be in the Navy, and one of my Commanding Officers, who I respected a lot, went to work for UBS after he retired. He was a reasonably intelligent person, but he had absolutely no financial knowledge. I remember having conversations with him where he was happy that the stock market was faltering (2000 time frame) because his retirement was his Navy pension and his house equity. He had absolutely no interest in investing or economics. I too was glad that the internet bubble was deflating, but only because it was an irrational entity. Over a lifetime stock markets obviously provide one of the best ways to grow an investment base. My point of this though, is that UBS hired someone who had no concept whatsoever about investing. (This is not an exaggeration). Knowing that UBS is a large company and operates many divisions, it is highly unlikely that he is working as an analyst, but I think my point is still valid. UBS, like other large financial institutions, hires people based on their reputation (what Ivy you went to) not their inherent knowledge or skill. I am sure the hack that recommended Centex this morning is just as financially illiterate.