SHORT TIP: Bear Stearns Drops 25% on Subprime!

In a negative market, it’s always wise to hedge our longs with some shorts.  If you missed out in shorting American Home Mortgage (AHM), there are still some possible shorting opportunities with the majority of mortgage rates resetting the end of this year and early next year so there is more negative news to come.

Douglas A. McIntyre of Street 24/7 thinks that Bear Stearns (BSC) will drop from the current $121 to below $100 by Labor Day especially with another hedge fund getting very close to liquidation.  Also it does have exposure to American Home Mortgage which dropped 85% yesterday on missing it’s margin call.

There is a possibility of Bear Stearns dropping more especially with Australia’s Macquarie Bank (ASX:MBL.AX – News) warning that retail investors in two debt funds face losses of up to 25 percent from exposure to US mortgage.  So this is spreading and with every bit of bad news, BSC could eventually go under $100.  A bearish sentiment over financials and the overall market will not help either.