Bo Peng

Sell Into the Financials Rally - Morgan Stanley

The height of this sucker's rally, IMO, is WM and UBS. WM virtually eliminated dividend, diluted existing shares by over 50%, had a massive write-down. And the end is nowhere in sight with their substantially sub-par (which is already very low) subprime and alt-A holdings performance so far. Guess what happened? The stock has gone up.

UBS -- 30% dilution, massive write-down, fights over future directions going public. Stock goes up.

I understand the sucker's thinking -- private equities and Uncle Ben's safety net et al. I just think TPG paid a very expensive price at $8.25 for WM, which will not be rescued because

1. their depository base is relatively small, and
2. they're not nearly as weaved in to the counterparty risk web as BSC, so that their demise will not cause a significant systemic shock. They hold most of their originations.