Sold the USB puts. Got lucky that the co decided to raise capital ($2.5b common stock offering at $18 announced last night/this am). Stock trading at $17.50 now so our 19 strike puts are in the money ($1.50 itm which is the premium we paid). We sold them at $1.70 figuring we were wrong on our stress test thesis and lucky to escape this having actually made money on those puts.
Overall, the market feels range bound now. Stocks are sharply off their lows and banks have gone thru the stress test. Bears like to talk about commercial real estate which is a 100% legitimate concern, but it isn't like that is anything new. CRE should have been a concern in January (before CNBC started talking about it). There may still be markdowns left, but between the stress test and various government programs to support real-estate backed loans, I think we can reasonably hope that CRE won't fall as much as residential. I think the market has priced in a lot of these concerns. Still, you won't see us going long any banks. Hardest part is finding reasonably priced stocks. The S&P 500 at 900-ish levels imply a 15-16x p/e multiple for the market, a level that we don't find particularly cheap. We're going to hang onto names like MSFT (12x p/e, 6x ev/ebitda) and look for names that are either cheap (not that many) or offer a better GARP-like (growth at reasonable price) valuation.
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