Monday, August 18, 2008

Washington Mutual is going to blow up or come close to it.

Forget every economic indicator you may follow and consider this one; If you walk into your average bank and tell them you'd like to buy a 12-month CD (Certificate of Deposit) you'll be offered an interest rate of somewhere around 3.5% to 4%. Most banks are offering under 4. Go into a WaMu, and they will pay you 5%. That is a huge markup on something so simple and "safe" as a CD, and it's because they need the money. 5%! The only time I can remember a rate difference like that is...let's see...at Indymac right before they blew the hell up.

I've been dissing on WaMu for awhile now, though never actually shorted them with real money. Wonder if it is time. This rally has been completely detached from economic reality, and therefore is offering some nice short opportunities.

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