In a word, no.
The market is only down about 3% right now. That’s not a terrible day, given how volatile things have been this year. That’s a very slow unwind. I don’t believe that things are that good. To put my money where my mouth is, I bought some SPY puts today.
I think that you should see some significant consequences to the Lehman collapse. Lehman was supposed to be “Too Big to Fail.” I’ll put money on people playing for the bailout that never happened.
So what’s in store for tomorrow? Will the Fed cut rates? Is AIG going to get a huge loan from Uncle Sam? I won’t put the probability of a rally at 0, but if such a rally materializes, I plan on selling the rally (well, buying more puts). The compelling story right now is wealth destruction, mis-allocation, and de-leveraging. Someone is holding the bag on Lehman, and not just PIMCO.
