Brad DeLong has a good point today: whatever happened to the moral hazard play? It’s an easy enough game: if you think a bank is going to get bailed out, you go long, safe in the knowledge that Ben Bernanke will throw enough money at the problem to make you whole.
And so Brad looked at Bear Stearns trading below book value, and said that’s a buy, it’ll get its bailout. And he was right on the bailout and utterly wrong on the buy.
Which raises an interesting question. If you believe in Helicopter Ben riding to the rescue with Wagner playing in the background, or some equally mixed metaphor, what do you buy?