If you are worried about where your TARP or any other bailout money is going, this press release from JPMorgan (JPM) may provide a hint:

In the classic book, Security Analysis, Benjamin Graham presents an in depth thesis on how the "margin of safety" determines the attractiveness of an investment. Graham wrote the book based on a thorough analysis of one of the most severe investing environments of this country, the Great Depression from 1929 – 1939.

Currently, our security market is on a downward trend comparable to that historic time. Looking at the historical data regarding the fall of earnings of the industrial companies during the Great Depression, you can see why there was a 90% drop in market cap from peak to trough.

There has been lots of chatter about the recent drop in the 30 year bond price. The debate is focused on two points: “Is the Fed still in charge of monetary policy?” or “Is there really an deflationary scenario unfolding that justifies this currency debasing through debt?”.

For investors looking for low risk gains, this great theoretical debate provides ample opportunity to make a profit.

Due to the credit crisis, the investment banking model is broken. Current stand alone investment banks are racing against the clock to find reliable funding source for their outsized portfolios. That being said, investment banks are voracious capitalist market makers with tremendously talented people. Goldman Sachs (GS), the highest class of the bunch, has produced many powerful government officials and has led the world in financial innovation and ability to make profits facilitating markets.

How can you profit from this situation?

Assume credit cards are the next crisis.  Also, assume the crisis comes because the charge off rates go so high that no wants to buy credit card bonds.  Where is the best place to be short?

Looking at options, both Capital One Financial (COF) and American Express (AXP) charge close to the same amount on their JAN 10 $20 puts ($5.2 and $4.8 respectively as of November 8).

This article is written in response to Felix Simon’s article, "CDS: The Less You Know, the Worse They Look"

The financial markets were recently shrieking in fear of the settlement of Lehman (LEH) and Washington Mutual (WM) credit default swaps. Yet the settlement dates have passed and there seems to be no impact apparent to the market. What happened? Is the CDS question overblown? Are the risk controls in place that the market is discounting?

From Kings 1, 19:11-13: 

The LORD said, "Go out and stand on the mountain in the presence of the LORD, for the LORD is about to pass by. Then a great and powerful wind tore the mountains apart and shattered the rocks before the LORD, but the LORD was not in the wind. After the wind there was an earthquake, but the LORD was not in the earthquake. 12 After the earthquake came a fire, but the LORD was not in the fire. And after the fire came a gentle whisper. 13 When Elijah heard it, he pulled his cloak over his face and went out and stood at the mouth of the cave.

Sometimes it actually rains in Southern California, or just becomes overcast during January and February every year. During that time the depressed residents of this area enjoy nothing more than a trip to balmy climates just south of the border where their dollar goes a little further and the SPF 50 cocoa butter is plentiful off season. Grupo Aeroportuario del Pacifico S.A.B de C.V. (PAC) [GAP] is a company that welcomes the Smog Birds of Southern California to their airports on their way to the vacation resort of their choice.

GAP is one of three airport operators [the other two being Grupo Aeroportuario del Sureste (ASR) and Grupo Aeroportuario del Centro Nort (OMAB)] concessions in Mexico created in 2005 with the privatization of the airport management entity. It has 12 airports under management in the Western part of the country including Guadalajara (third biggest in Mexico), Puerto Vallerta, Los Cabos, Tijuana and smaller locations Mexicali, Hermosillo, Agaucalientes, Bajio, Morelia, La Paz and Manzanillo.

In the movie Die Hard, the evil villain Hans Gruber says that after stealing $20m in bonds from a Japanese bank on Christmas Eve, he planned to store them in a Swiss bank account and retire “sitting on a beach collecting 20%”. Nowadays, he might not be quite as smug with that strategy.

After four consecutive quarters of losses and writedowns, the question outstanding is “Can it get any worse for UBS (UBS) and thus its share price?”