So much for yesterday morning's rescue rally. With financial stocks going down in flames -- and the broad market not faring much better -- bearish traders are making hay on their short positions.

My friend Cash McDash, who has shared a number of short ideas in these pages, is absolutely cleaning up, too. For two off-the-cuff examples, just check out the charts of VMWare (VMW), Chipotle Mexican Grill (CMG), and Verso Paper (VRS), all traded on the NYSE.

Any reader who acted on those short plays could be sitting on some hefty gains by now. There are more ideas where those came from, too... including a strong long or two to balance out the shorts. Speaking of which, let's check in with Cash now.

JL: So, Cash. Another week, another fire-and-brimstone, banks-in-peril mini-crisis. The mortgage giants are falling down under their own weight. Now the rumor is that stockholders in Freddie Mack (FRE) and Fannie Mae (FNM) could be wiped out.

CASH: Hmm... That sounds pretty familiar, no? When was the last time a major financial institution almost went belly up and the government had to bail it out (or arrange for someone else to do it)?

JL: I can only assume you're talking about the Bear Stearns fiasco from back in March. What a mess that was... And yet here we are back in the same kind of trouble.

CASH: Exactly. I'm sure you've heard the phrase that history doesn't repeat, but it rhymes.

JL: Yep. In that light, this certainly looks like "same song, second verse." Does investor fear have the new-issues market locked up pretty tight?

CASH: It's not quite as bad as you might think. You remember the Energy Recovery IPO that we talked about a couple of weeks ago? That stock has traded very well, despite the indexes giving up so much ground. At the same time, there were a couple of other energy secondary offerings that traded well, too. All this goes to show that there is still liquidity available... but only for select deals that investors have confidence in.

JL: It seems there are very few places for that confidence to take hold. The energy sector is an exception, but mostly money is being parked on the sidelines.

CASH: And that's what makes me so excited! We were talking about FNM and FRE blowing up and comparing it to the Bear Stearns tragedy. This kind of market-altering event could be just what we need to get at least a short-term bottom in place... and then get a sharp bear market rally started.

JL: Do tell.

CASH: Remember what happened after the market plummeted in March on the Bear Stearns bailout? We saw an incredible rebound in IPO activity the next month. If "same song, second verse" applies, then we could have the same rally chorus in late July or August. Companies who desperately need cash to grow their businesses have been forced to wait for the market to shape up. If we get even a ray of sunlight, you should see a few dozen deals quickly come to market.

JL: Will these be attractive deals that we can make money on? After all, you were saying a couple of months ago that there is a huge difference between quantity of deals and quality of the deal flow.

CASH: That's a great question, because I think the answer is "yes" and "yes."

JL: C'mon... Can't you be a bit more straightforward? What does "yes and yes" mean?

CASH: Firstly, yes, I think there will be a large quantity of deals hitting soon. And regardless of that quality (or lack thereof), traders should be able to make some serious dough. If we get hit with a rash of ugly companies pricing IPOs, there will be a huge opportunity to short weak stocks and watch them drop. You remember how quickly that Verso Paper (VRS) deal gave up half of its market value, right? You can make money in a hurry shorting stocks like that.

JL: And if we instead see some quality deals arrive?

CASH: Then yes -- that's the second yes -- we will have our first chance to really play the bullish side of this business. Strong new issues, you see, are often like growth stocks on steroids. In the right market you can see your investment double, triple or even more in just a few short months! There haven’t been too many of this type of IPO so far in 2008... the climate has just been too tough. But if we get enough fear in the market and sell it down low enough, it will create an environment that sets up for explosive upside moves. That's when you buy with both hands.

JL: Do you have your eye on any upcoming IPOs that fit the bill?

CASH: Right now there's only one on the calendar that has a shot. But after a week or two of positive markets, we could see a dozen or more hit the list.

JL: So tell us about the lone current one then.

CASH: You know I can't give away all my info for free -- especially now that IPO Confidential is out -- but I'll at least whet your appetite. The company is GT Solar International (planned ticker SOLR). It's expected to be listed on the Nasdaq next week. While the solar stocks have been very volatile this year, SOLR has an advantage in that it is basically a supplier and consultant to the solar panel manufacturers. So instead of seeing its sales rise and fall with the dynamic changes in regulations, supply and demand, and technology, SOLR manages a solid business serving the companies with all the volatility.

JL: Sounds like a neat niche. It reminds me of the old California gold rush stories. Back in those days, finding gold was hit or miss. Speculators' fortunes would rise and fall according to whether they randomly happened upon the mother lode or not... And yet there was steady profit to be made selling picks and shovels to these speculators. The real winners of the California gold rush were the general stores that sold all the supplies.

CASH: That's exactly how SOLR works. It keeps the manufacturers in business and makes a pretty penny by offering stable service. And the risk is much lower because it doesn't have to deal with all the uncertainty inherent with the crazy energy cycle we are in.

JL: So what's the play here? Obviously you're pretty excited about the IPO.

CASH: Now you know I can't give you all the details here. This is a name we will cover in IPO Confidential as the weeks go on. The stock should give us some great profits sometime this year, but it's also a dangerous stock to play without seeing the full picture.

JL: So you're saying you don't know how you'll play it until you get a feel for the initial activity, to see whether it's safe to buy?

CASH: Exactly. I'll get a better feel for how it will trade out of the gate once I get calls from all my contacts on the deal. Then we'll take that information and patiently watch for a place to pounce. I want to have an entry point that offers a great chance at serious profits, but limits risk, too. The key is to buy it at a time with the least amount of risk. It would be tragic to buy at the wrong time, get stopped out of the position, and then watch it sprint ahead to triple-digit gains without us.

JL: Fair enough. We'll have to keep tabs on this one on a week-by-week basis in the IPO Confidential service. It's pretty cool, by the way, to see that service off and running with some exciting action already. The market touched off two of your alerts on Friday, so we already have some active and profitable trades working.

CASH: I told you we could start making money quickly!

JL: That you did. So we better wrap things up for this week. But as mentioned, we'll keep an eye on GT Solar. In the meantime, it sounds like you're not too worried about the big Fannie Mae concerns.

CASH: No, I'm actually excited. A panic (as twisted as it may sound) is just what the doctor ordered to get the market turned around and ready for a rally. We should be able to make some great gains on the long side once we get to the other side of this fear.

JL: Sounds good. Keep us posted on new IPO developments, and keep racking up those double-fisted gains long and short.

CASH: Aye, Cap'n.

P.S. As I've mentioned on multiple occasions, Cash is a real trader with real profits... We simply have to protect his identity for strategic reasons. Just check out the back issues of the Taipan Daily Cash McDash series to see all the killer calls he's made.

And better still, if you want to see Cash in person -- shake his hand, hear him speak and so on -- you'll be able to do so in San Francisco. Cash will be in the mix at the upcoming Taipan Global Opportunities Summit just a few weeks from now.

I'd love to meet you in person also, if you can make it out to the City by the Bay.