[DcifrThs]

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If you are right then this is mostly a sentiment price movement. Might be worth checking out when there are a large number of Mortgage resets due. If sub prime defaulting can have this much knock on, if there is a large increase in defaults after resets then this will hit sentiment just as hard if not harder.

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thats a very good point. between now and then you may make money with this position, however if you are unsure of the mortgage results, then it makes sense to reduce your position until after they are released.

you would sacrifice possible gains, but also protect against massive losses. i'd still leave the position on, but just smaller. if it consensus releases and other data you look at make you feel that the report would go one way or the other you can judge accordingly to manage yoru position.

if it did move against you and there was a huge blow out in spreads (beyond what has happened already) i'd think that would be an excellent buying opoprtunity as even if the entire subprime mortgage market cracked to sh*t, goldman would still not be likely to default imo (even considering the knock on effect on growth, demand for goldman's services, and other direct or indirect causes of worsening business environment)

that said, i don't think goldman and merrill have massive exposures to subprime mortgages anywhere near what bear had. and even bear isn't going to default on anything.

thanks for bringing that up though as sentiment clearly can have massive impact on positions.

Barron