Will Monorail Send Financials Off Track?


Bond insurer Ambac is facing fresh trouble from an unlikely source - the Las Vegas Monorail! What's the trade if subprime woes spread to the “safe” space of municipal bonds?

There’s speculation that the municipal bonds backed by the unsuccessful Vegas monorail could default, explains Dylan Ratigan. Should that happen companies that insure them would have to make good – and Ambac may have trouble meeting its liability.

The concern is that this could be the tip of the iceberg, adds Karen Finerman. In other words, there could be a whole pile of defaults and a large number of claims against companies like ABK who insure these municipal bonds.

It could be a huge pool of potential defaults, Finerman says. And I want to know who securitized them? In the end, all of this could very well lead back to the investment banks.

Consequently, I think the trade is to be short Lehman she adds.

Or you could short Washington Mutual adds Pete Najarian.

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Trader disclosure: On Jan 8, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (SWY), (INTC); Najarian Owns (BIIB), (MCD), (MSFT); Najarian Owns (AAPL) Options, (CFC) Options, (VLO) Options, (YHOO) Options; Najarian Is Short (WM) Through Options; Finerman's Firm Owns (CROX), (DVA), (GS), (YHOO), (DSW); Finerman's Firm Is Short (IJR), (IYR), (IWM), (SPY), (SPG), (TCO); Finerman's Firm Owns Russell 2000 Puts; Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns (MDY) Puts And Is Short (MDY); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Finerman's Firm Owns (MSFT) Options