I have yet to hear any explanation for why they could not wait a week, except as a response to (or attempt to manipulate) short-term market reaction.
My guess is they may have been trying to prevent some sudden catastrophic unwinding of leverage from occuring. A 1000 point plunge in the DOW may have forced so many funds to unwind at the same time that there could have been a major breakdown and ensuing panic.
As it is it looks like there's plenty of unwinding going on anyway. The Fed probably wants to drag it out over time and make it more orderly.
Orderly destruction is better than chaotic destruction.
I was thinking along the lines that the US government simply cannot back the housing bubble bust(through FNM, FRE, FED bank bailouts), accept the monoline insurers losses, and continue to spend money at a rate that can never be paid back. Then it hit me! The US economy has been leveraged all over the world in so many ways that a realistic pricing of the situation is no longer wanted, and is in fact opposed, by every financial player in the game. The US owes more money than could reasonably ever be paid back right now, yet foreign countries gobble up our debt offerings like the food rewards on the show "Survivor". The US is a nonperforming asset right now, and it is in every one's best interest to keep pretending otherwise. So why not just have all the losses dissapear down the rabbit hole and start over?
It's just that renters and home owners, in all of our consumer lending businesses -- renters and home owners together in the -- in the challenged housing price markets are degrading in parallel and together.
Presumably because of layoffs from construction and retail? I find that pretty surprising.
"-- A charge of at least $550 million with respect to XL's investment in
Security Capital Assurance Ltd ("SCA") which was carried at
$670 million at September 30, 2007."
"The unprecedented uncertainty and instability affecting our industry make it impractical to consider raising new capital at the present time. Pending greater clarity, we intend to continue pursuing the other components of our capital plan and consider all options available to us," commented Paul S. Giordano, president and chief executive officer of SCA.
"Caxton Global Investment Ltd. told investors in a recent letter that, as of Jan. 1, it won't pursue new strategic investments, a person who's seen the letter said on condition of anonymity. Another person confirmed the general contents of the letter, also without wanting to be identified."
Let's hope Bernanke is hearing this stuff as real time as is feasible. There was a thread about jingle mail being acknowledged by the banks and I know they have been communicating that publicly since Sept, privately probably a lot longer.
I agree that the timing of the cut was a direct response to markets, but if it prevents a trigger to a meltdown, I'm not sure that is a short term outlook. Panic and fear is the battle right now.
Bail out on the bond insurers is interesting. Let's see if the Fed can make the banks eat some of their own dog food.
Should I be concerned that COF has 70% of its credit card loans securitized and thus off balance sheet. Certainly sounds similar to the SIV issue? What happens when those loans start to become nonperformers?
"I have yet to hear any explanation for why they could not wait a week, except as a response to (or attempt to manipulate) short-term market reaction."
It was obviously done to manipulate pyschological confidence in the system.
Greenspan explicitly admitted to this being his primary concern. It's in the interview he did with Jon Stewart on The Daily Show. Look it up.
Allco Finance Group Ltd., an Australian manager of assets including ships and aircraft, slumped 26 percent in Sydney after margin lenders forced share sales.
The company is in talks with lenders to stop further sales, it said in a statement after today's rout, which took the stock's decline from its record in February last year to 83 percent.
Allco's slide contrasts with a 1.3 percent gain for Macquarie Group Ltd., Australia's largest investment bank, and the 7.7 percent increase in Babcock & Brown Ltd., the second largest. Investors including Paul Xiradis said the company's debt was also a concern to investors.
Arrest all the corrupt CEOs of the banks, HB,rating agencies, and insurers.
Put the trials and their entire time in prison on pay for view. Problem solved I would gladly pay 39.95 for the priviledge of watching Chuck Prince dance with his new boyfriend.
Yep tough talk from Cap One so was I suprised when I found a letter from them today saying we're upping your card limit, Yeh Sure. I think they're mad because the balance is paid monthly.
We're pulling back on loan growth, focusing on our most resilient businesses and closely manage credit with the insight and experience we have garnered in prior economic downturns.
Yeah, some insight there, buddy. Lend to anyone who can fog a mirror during good times; pass on good customers during bad times. Just what every bank has done during every business cycle known to man. Brilliant.
Interesting, but come on...if they have $6B in liquidity, what's the trumpeting of $350K in annual cost cutting. Something smelly there, IMHO.
Well, they do slip in another reason:
we concluded that maintaining ratings with all ratings firms, does not make business sense and their continual downgrades created more perception risk than reality.
I wonder if you can hedge against "perception risk"?
I also wonder how downgrades could ever possibly have "created ... reality". It's quite an amusing sentence, actually. I love PR-speak.
said Adrianne Shapira, a retail analyst at Goldman Sachs. Two-hundred-dollar pairs of denim were plausible when home values soared, but now $100 jeans are looking more reasonable
they still don't get it....
I'll wager Adrianne is 24 & pulls 250k from GSCO.
Not quite Dana Telsey...
And kudo's to Dana for bailing BSC at the right time.... another stellar Call
Thanks. 50% chance the core doesn't breach? That doesn't sound so bad. 1973-75 was the best time of my life -- can't wait to see what they've cooked up for Part II.
mp:
i would be very happy to take the other side of conjure's Pr(recession) idea. I would offer to do the trade at 10:1 instead of the 20:1 that was quoted.
let me know if there is any interest and in what size.
d
Ok so let's assume that other lenders are following in the footsteps of Capital One--What happens when the bottom 25% of car buyers can't get a loan to buy a car? Other than those who live in NYC, a car is needed to go to work. Taking this to its logical conclusion, there would be a HUGE number of people joining the welfare ranks simply because they have no car. (I can't exactly picture Juan6P getting on the commuter bus with his stack of ladders).
Sold out of stocks entirely by the end of May. In "safe" (?) investments until it stops raining poop outside.
Thanks to CR et al or, I would be watching the markets dropping, dropping, dropping with much less anxiety than I would have otherwise, from my rented house.
Truly, this blog may have helped save my (financial) life.
"What happens when the bottom 25% of car buyers can't get a loan to buy a car? Other than those who live in NYC, a car is needed to go to work."
They'll buy that 12-year-old Chevy, like the bottom 25% of car buyers have for decades.
If there's a substantial fraction of employed folks who can't afford a junker that will get them to and from work, car loans aren't the answer to the problem.
ades - thats pretty funny. as i went upstairs to tivo everything i thought to myself, what an odd combination - mma, american idol and geeky financial crap
misean - good luck missing out on the next big thing. and you know what? there WILL BE a next big thing. our specie depends on it. we're nothing more than an evolution machine. and our system, as flawed as it is, is generally an evolution enhancer/noninhibitor
we're designed to evolve. our economic system is designed to evolve.
there will be a new big thing.
financial evolution went rampant. yep.
but securitization is here to to stay
this will all settle down in time (who knows how long) once people get a grip on how to properly do this stuff
RMBS CMBS they'll all come back. they are useful tools.
but they overshot the mark.
and by then, once they stabilize, they'll be old news and boring industries and there'll be a new industry that does something new and wild that everyone will love.
and then there will be overcapacity and competition will be force firms to reduce standards and shit will blow up. but the capacity and structure will be there when the dust settles
such is life my friends
over shoot up over shoot down but always innovate.
its not like we're still hunting and gathering right?
"there WILL BE a next big thing. our specie depends on it."
Yes our specie depends on it.
Money ain't hunting and gathering. If things flips around will I. Yep. I'm not stupid. But I sold out at a HUGE profit in 1999 and bought G&S. So far so good.
Fiat has been a dead branch in human history many times. It's a false path...IMHO. It began with coin debasement. It always ends badly.
Have a good night. I'll be 'round until Mythbusters comes on.
dc1000 reminded me of the iTulip fella's cover story in this month's Harper's (not online, sorry - it's been a nonprofit forever).
He surveys the sucky stupid bubble-driven economy, points out its latest meltdown (what he calls the FIRE economy - Finance, Insurance, and Real Estate) as unstoppable, and predicts we'll do the dumb thing and just move on to the next bubble in a few years.
His take? The perfectly positioned next bubble will be...the combo of alternative energy and infrastructure.
dc I once had a friend in marketing tell me I was a difficult one to market to because I watched 1 part HGTV, 1 part BET and 1 part country music... Your trifecta would really blow her mind
if you've been around here long enough, you'll know a few things 1) i'm as educated as any of you minus the PhD's and 2) i also dont give a crap about how fast i type and my typos or my lingo. i've learned all this stuff and lived it on a daily basis. so ivory tower me to death ok.
yes our race, our homo-love-each-other monkeys that we are depend on evolving and we will evolve economically.
so hang on to silver, buy some bullets and keep trying to time the market.
haven't you read ANYTHING?
the 'finest' money managers can't out perform.
and YOU, little YOU, sitting in your office in some bomb shelter with gold bullion surrounding you, is going to beat the market and every one else with all the information in the world at their fingertips? the guys who can actually call BB and Paulson and the rest and say what the FFFFFFF can you fix this? you're going to beat the market over the long run? well lucky you. go bet on a comet.
nonetheless, i'll continue to be the most educated and relevantly experience slob on the board with my beer in one hand and my mma fights in the other.
Contrary to what so many boomers think, keeping up with the Jones is not a concern for those of us who actually HAVE money and plan on keeping it.
If I were Capital One, I would seriously start worrying about all those people they have pissed off in the past with their shady interest increases and other poor lending practices, like the in-laws I had to bail out of their credit card so they could get a new home loan. I really couldn't give a rats ass if they go down the tubes, along with all the other shoddy lenders out there. Good riddance to all of them.
nice - he hasn't fought for a while but he had potential. at least Sherdog's fight finder hasn't caught his sanctioned events.
yes, i'm a finance geek that loves american idol and mma and is actually an active amateur muay thai fighter.
but i'm here now to duke it out, tivo'ing a great night of fights on spike so i can catch up on the world economic melt down.
tomasyalba:
bubble is almost synonymous with Bull Market these days. and in that frame of reference, i'd say your source is right. its going to be either sustainable energy or nanotechnology.
it will take some time but it will happen. it is our nature. it is as normal as breathing. without it we will perish as a 'thing' whats the word race specie animal thing phylum kingdom whatever.
No reason to get upset. It was just funny...the typo. Everyone typos. But you gotta admit it was funny.
As to timing the market, I did ok in '99. Gotta admit that.
And I wasn't calling you stupid. I read your posts and often agree.
"and YOU, little YOU, sitting in your office in some bomb shelter with gold bullion surrounding you, is going to beat the market and every one else with all the information in the world at their fingertips? the guys who can actually call BB and Paulson and the rest and say what the FFFFFFF can you fix this? you're going to beat the market over the long run? well lucky you. go bet on a comet."
Comet's not so much. Super Colander Tin Foil Hats yes. Bunkers, and ammo...yes. Not asking you to join me in the bunker, just expressing where I see things.
No Sir,
i am not... i may have misquoted the location of the massive Harley dealership... it may have been in claude, plainview, quanah , wichita falls, or any place in between all those fine hamlets
"One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago."
Some of you guys been talking to the NYT? That small minority of I must say illustrious economists sounds like they could be regular posters to this board...
DC1000,wha's wrong with hunting and gathering? I love Morels,and the freezer has both salmon and venison in it that are better than anything you can buy.I have neighbors with depredation permits who are happy to have me come by and take out the deer in their vineyards,and they usually give me a bottle or two of their best as a thank you.life is good.
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Cap One's problems are emblematic of the entire auto finance sector. Many banks and auto finance companies are reporting huge losses,or are either tightening or getting out entirely.
In Florida alone,there have been no less than 3 different auto lenders- both banks and finance companies- that have closed down offices and pulled out of many states altogether. Sovereign has stopped originations in many states. Americredit has closed down branches. Several more are rumored to be trying to sell off the auto finance divisions or pulling out of high risk states.
What once was a very profitable business has turned into one of very thin margins with increasing risks. The customers with the high FICO scores are not buying cars like they did due to the stock market and economy. What's left are the subprime people, which are riskier loans. Most of the lenders are tightening up on underwriting standards and scaling back on volumes. 2008 will be a very difficult year for the auto industry, as the projected number of sold units will decrease substantially from 2007, profits will decrease and charge offs will increase.
As these banks can't grow the revenue side, they will look to make up for it on the expense side of the ledger. I would expect layoffs to be coming for many, just like the mortgage sector suffered last year. The easiest way to save on expenses and increase the bottom line is to cut headcount.
if you need to be educated as to why the barter system is inefficient then i think there are many econ 101 classes that would be a better place to hang out
sorry to be snobby but wtf?
yeah. you killed some stuff and traded it for moonshine
Yeah...me yesterday. I started system updates at 5:00am got done and went to the news and saw th 75bps drop. And about punched my monitor. Was in a mood all day.
I think we are now on the last 1/2 of the trip. The two NYT's articles are basically at the acceptance phase. They are writing off 30% of housing and affordable luxury.
Some areas are still into bargaining. The mortgage insurers bailout and the idea that some fiscal deal will help.
for those wondering why the "emergency Cut" check out the NY Fed data on temporary market operations. I think this means that the Fed is being presented with "price insensitive" demand for short term paper. In other words, the banking system is overwhelming the Fed with the cash that is flowing out of the real economy and, although its resisting the market, it (the Fed) panicked on tuesday and lowered the fed funds rate to the 3.5% demanded by the market (see the rates plummet from weds jan 16th). The problem is when the Fed finally relented and lowered the target rate, the market immediately lowered the rate even more to 1.7% and, again the system is frozen.
This is the curse of Karma. bernanke spent his academic career "proving" that the 1929 depression was avoidable if only the Fed had lowered rates when the market demanded it and cash was flowing out of the 'real" economy. Now he's in the same fix, he's reluctant to do it. Maybe because real life is a little bit more complicated than the theory.
DC1000,the organic pinot I am given by way of thanks by my neighbors ain't moonshine,it runs $80-$125 a bottle at the few places you can find it...And I recieve it for killing and taking away the deer safely.being known as a responsible person has also helped my business as a Real Estate Broker.As far as my kid,I hope she avoids cancer,and the Trust funds set up as part of my divorce settlement should pay for a first rate education and a good deal more.I am not in favor of Barter as an economic system,although I utilize it at times,I love good food and like to hunt and fish.I hope you get as much satisfaction from your leisure activities as I do mine.
"As these banks can't grow the revenue side, they will look to make up for it on the expense side of the ledger. I would expect layoffs to be coming for many, just like the mortgage sector suffered last year. The easiest way to save on expenses and increase the bottom line is to cut headcount.
Anonymous | 01.23.08 - 9:49 pm | #"
Per the WSJ, some of the banks are picking up stuff that was previously directly securitized by IB's. They think they are using traditional lending standards and the deals will hold up.
a little help on options: why would the equity ratio be less than the index ratio? is it like some sort of straddle trade or pair trade to protect yourself?
andy -
no i haven't been to thailand but i train with several former pro fighters from thailand and of course many pro fighters domestically.
thing is, i'm a heavy weight (shocker!! i'm AMERICAN), so those lil thai boys wont do much to me. its the big dutch boys i watch out for. i fared well at nationals last year, hope to make it to the worlds this year. we'll see. too much time dooming and glooming here will cut into my mojo.
misean, i'm all good. i dont know what time zone you're in but here on EST we're well past 'tini time. knowwhatimean?
Stephen Roach, a star economist as head of investment bank Morgan Stanley in Asia, criticised the "reckless" and "dangerous" policy and he blamed the Fed for helping fuel the housing bubble at the source of the problems.
The action "could create another (asset price) bubble-induced recovery" which was "the last thing the world and US needs," Roach said.
New York University economics professor Nouriel Roubini was equally scathing, telling delegates: "The Fed got it wrong on the economy. It didn't understand how these housing problems were going to affect the economy."
Banks such as Wall Street giants Citigroup and Merrill Lynch have been forced to write off tens of billions of dollars in bad debts as a result of subprime-linked investments, leading to tighter credit conditions for companies and consumers.
Veteran financier George Soros called for new global regulator to overlook the global financial system, a call echoed by former US treasury secretary Larry Summers.
"I think the present crisis is the end of an era based on the dollar as the international currency. And we need a new sheriff, not the Washington consensus," Soros said.
Summers added: "George Soros is right. There does need to be somebody and some authority doing what hasn't been done as this crisis has gathered for six months."
DC, Most of those guys have day jobs. Miguel's an engineer. I don't think many of them stay in once they get married or serious about life.
I was the skinny kid in high school. That's why I trained. Some broken this and thats, and now I play pickup basketball.
Anyway, this is not a topic for CR.
Hmmm. Soros calling for a global financial regulator- that's a shock...I didn't realize Summers was part of the New World Order too. One regulator is easier to bribe and manipulate than mulitple Central Banks I guess. Very efficient-just like technology.
I can understand people going short, going into cash, or lightening up long portfolios during recessions.
But if you buy most of the commentary on this board, and you believe there's a good chance a recession is near...and you haven't changed a thing, you should have your head examined. It just means you have bought the buy-and-hold long-only mantra Wall Street has been preaching for 20 years. You're a fish.
Did you actually live through the bear market of 00-02, when the S&P 500 dropped 50% top-to-bottom? It takes a 100% gain to recover, you know.
All evidence says this recession will be much worse than 00-02 and there won't be places to hide (like real estate and small caps were then). And I'll bet it will take at least a decade or more to recover from this bear.
If you pay attention here and still stay totally long through what's coming, you deserve to lose every cent that you will.
P.S. Most people here are strategic traders, not day traders. A strategic trader is the best thing you can be in the market of the next few years. It may be the only way to make money.
"Jan. 23 (Bloomberg) -- American International Group Inc., the world's biggest insurer by assets, will bail out its Nightingale Finance structured investment vehicle, according to Moody's Investors Service."
being 'strategic' also implies market timing even if the markets you're timing are more general and not specific.
if you're less than 50 i'd say being diversified, WHICH by the way means you're already exposed to raw metals, some short action and the rest, is clearly the only sane way to go.
We may now be about one-third of the way through a major global financial fiasco. And the consistent theme of the first third, from beginning to end, has been how the efforts of human beings to exert their flimsy solutions on the Invisible Hand of an enormous, complex, competitive global economy has totally failed.
Why should it be different in the next two-thirds?
if you're less than 50 i'd say being diversified, WHICH by the way means you're already exposed to raw metals, some short action and the rest, is clearly the only sane way to go.
I'm over 50 and I've been writing about finance professionally and also investing (non-professionally) for 30 years. The only thing I've learned is that there are no silver bullets.
According to Dalbar, the average diversified mutual fund investor has averaged an annual return of about 3-4% per year over the last 20 years. In other word, worse than CDs.
And I can almost guarantee you that over the next 10 years, that same investor's return will be zero or negative.
Bingo. There was no demand for Fed Funds at 4.25%, so the money supply stagnated.
The Fed Funds targeting regime works on demand, not supply. In other words, if there's lots of demand for interbank loans, this tends to raise the interest rate: the Fed then injects money into the system (by buying t-bills) and forces the rate down to the "target Fed Funds". No demand, no injections.
So the problem is that banks don't want to borrow and on-lend. Is it because the loans aren't profitable, or because the banks are undercapitalized?
What Bernanke needs to do is not lower the interest rate, but help banks recapitalize. A government injection of capital? No way. Simply, as the regulator, call in the banks and "suggest" that they immediately write down suspect assets, and follow that with massive equity issuance. Once that happens, the problem is solved. The longer its put off, the more the market will be reluctant to absorb all that equity. Just look at Ambac -- it could have issued billions in equity at $50, $40, $30, but at $6 nobody wanted it.
i actually actively traded that market from 00-02. working for a hedge fund at the time and working my own book at the same time. took some crazy ass risks but made a ton. in retrospect it was silly and risky. but sure seemed like the right thing to do. open a put position in the morning and close it at closing. made ridiculous percentages. then i learned about minis and got into futures and had more fun.
all the while we're trading emerging market credit spreads as a firm and just crushing all markets. what an amazing year that was
brazilian C bonds and russian '30's made us a ton.
of course:::::
we worked for no one other than Nicholas Brady. the same guy that um, those bonds we're named after. so we had the info.
take the same group of guys with the same bloomberg machines and no nick brady and no madeline albright and none of that and we dont even beat the index. i'd bet it all on that
Wow, doom and gloom. What the hell's gotten into you all? Everybody on a little downer after the stock market roller coaster ride? And what's with the challenging tone from posters I'm used to laughing with? You guys should know each other better by now.
why compare some joe401k who bought a heavily loaded actively traded mutual fund that kills him on taxes and fees to the market?
lets talk ETFs and a broadly diversified portfolio and right now that means buying commodities and emerging markets and real estate and domestic equities and international equities..
"diversify, truly, and go long. its really the only game in town."
Correct me if I'm wrong, but you're in your 30's, right?
So, you've spent almost your entire adult life in the biggest bull market in history.
What do you think your outlook would be if you had been born in, say, 1952? By the time you hit 30 in 1982, you've seen the stock market do much of nothin' since you had acne and Chuck Taylors.
You think such a person would swallow the buy long, "stocks for the long run" pitch? How about someone born in 1920?
Here's the thing. I'm not much older than you. I'm young enough and lucky enough to have missed Vietnam and WWII and the GD, but I can read a friggin' book and talk to a survivor or two and figure out that pithy slogans work until they dont.
Time the market vs. go long? That argument is as simple as it is dull.
i'm with rich on strategic trading, though i'm man enough to admit that i've let myself enter into one too many "day trades" in the pursuit of risk management, profit taking, and still catching any major "disruption." this has worked well for me, though I've certainly made some poorly-planned and undisciplined decisions in the course of the current market as well (especially today).
Its a tough market to make money in. I could put my head in the sand and go long, or i could go short and hold onto positions on days like this. i think picking "winners" is extremely difficult in this environment, so even a well-diversified strategy may be worse than cash.
i respect a cash position, but i have a hard time respecting a buy-and-hold strategy today, unless you believe that the market action so far this year is just a minor blip in a continued bull run. if you don't think we're going to hit 1100 on the S&P, then by all means go long - i just don't believe that. unless fed/whitehouse keep the shenanigans up, which is also possible.
mthood - come on, read my posts. i didnt say equities are the only answer. broadly diversified. come on now. yeah bull markets through the 90's aside from the big crash SEVEN YEARS AGO and um, the BIG CRASH RIGHT NOW. so its not like i haven't seen the ups and downs, much less actively participated in them.
the point is, broadly diversified portfolios beat out active trading every time.
aren't you all the ones on here bashing hedge funds for their 2/20? i mean, thats the essence of actively traded.
is it me or are the returns on average of the market for the last 100 years plus something like 6% or more?
add in treasuries, commodities, real estate, international, etc. and you've got a solid portfolio.
also, and granted i haven't been here very long, i think any day that the DOW reverses by 600+ points, there will be healty investment and strategy discussion?
DC 1000,It wasn't the first time I mentioned it.Sonoma Real estate is rough right now,the only worthwhile buys are true heritage properties that only come on the market once every generation or two.I am watching a few areas and properties that will be worth making an offer on this fall.And enjoy the sparring,I haven't been able to do that since meeting a drunk driver face to face 20 years ago.I do like seat belts.let me know if you are out this way i'll buy you a cup of coffee.
so you think that buying and holding is a bad strategy today meaning that the market will NEVER EVER RECOVER from this?
well then damn i better get a bunker.
market timing is impossible. buying in steady, programmed rhythms for the long term is the only way. and buy buying i mean, DIA SPY or QQQ or some combination therein and thats just the equity portio
tom - spent a few weeks out there at my friend's parent's place. you know, the kind on acreage that they built by hand in the 60s. a real gem. right around the corner from matanza's creek winery. beautiful country.
dc1000- you're not going to convince many on this blog. After all, the reason they're here is to improve their performance. I don't really believe the markets are efficient, just it's extremely hard to beat them.
"buying in steady, programmed rhythms for the long term is the only way"
Only? That sounds . . . absolute.
"basic 101 stuff" indeed.
Oh, and, I dig this riff:
"working for a hedge fund at the time and working my own book at the same time. took some crazy ass risks but made a ton. in retrospect it was silly and risky. but sure seemed like the right thing to do. open a put position in the morning and close it at closing. made ridiculous percentages."
Do you have any idea how juvenile you sound?
There's nothing people on this site love more than "crazy ass" 20-somethings slinging other people's money around.
sdtfs
what's odd is this place has never put itself out as some trader's haven. nor has it commenters traditionally been traders. seemingly only recently has it gotten that way.
but absolutely no one here is going to refute the power of a portfolio that rides high but hedged with the equities and sinks low but hedge by treasuries. i mean, balance people balance.
what has a long only bond portfolio done in the last 12 months?
pretty well i'm guessing.
but make it 50 equity, 30 bond, 10 intl, and 10 commodity
and you've got a solid portfolio depending on your time frame.
standard deviations, monte carlo analysis, i've seen it all it and analyzed it all
but have still traded my own book for fun. but its that 5% of the total portfolio portion i 'trade' with.
sock away the IRA, 401k and go long baby. because forever is a long time away
I believe I beat the market when I was active, then I took my eyes off for a couple months and poof! I knew right then it takes too goddamn much attention for me to continue.
Lets pretend we had this discussion in November. I'd be down 15% in that time instead of flat to up 15%, depending what trading strategy (cash or shorting) i used.
If i went long, it would take me the rest of the year to break even. I can't wait to go long, but i'm going to do it after the stock market prices in lower earnings and with what is hopefully a lower risk premium (i.e. lower P/Es).
I was looking at KO today, and i couldn't believe the growth assumptions and P/E ratio this stock is trading at. Why would i buy stocks that i think are overvalued? Just for the sake of going long?
Am i 100% certain in my strategy? No. My chief concern is that the stock market rapidly inflates into another bubble due to government intervention and dumb money that has no where else to put it. As bad as real estate will be next year, and with commodities already a bubble, equities may be the only game in town. I just hope there is a mini-crash in the interim that creates a more attractive entry point.
Trust me, I reevaluated my strategy today. Hard. But I don't want to be stuck on the wrong side of the trade if its on the side that I don't fundamentally believe in.
yeah but dunham that 'belief' is couched in today.
what about ten years from now? and when will you know the 'tide has turned'?
if you're so close to retirement that you feel the 'need' to actively' trade then you REALLY shouldnt be doing it
if you're not so close, then trying to guess the whims of them market and the moments of innovation and evolution and ultimately success is impossible!
i mean really, we're all sitting around here talking like people can predict the future and can say hahahaha i know more than the rest of the world.
if you read what i wrote i said i took risks with my own money trading a down market with options.
in retrospect (aka wisdom) they were crazy ass risks but it seemed right at the time.
please stop manipulating what i said and as well stop making ad hominem attacks when you have no facts, analysis, or data to back up what you're saying
dunham:
sorry to double up on ya. why 'pick' stocks like KO? how the heck are you going to know what is actually going on inside the company? how will you know its not some enron waiting to be exposed? you must diversify away business risk and hang on only to market risk.
loading up on any individual stock is insane.
risk/reward
and anyone that thinks they're getting reward with no risk is only fooling themselves until they finally feel it.
mthood - get over yourself and absolutism. go for it dude. try to time the market all along the way for all 40-50 years of your investing life. go for it man!!
Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 !
..Even with today's reversal, from Jan 1st alone - I'm up 18% ! Even if I go totally to cash and so say to myself I'm done for the year, that's pretty healthy!.
BTW, I was probably 50% cash, 40% short, 10% commodities( soft and hard) before today.
Actually, I closed out 1/3 of my short positions fri. yesterday and today and aim to push that up to 2/3 or more and even got long a little - a dirty feeling but that's where the money is IMO for the next hmmm anything from 2 days, to 10 day to 50 days - as events unfold I adjust - but today was a clear clear break and it would require a big re-reversal in the next 2 days to change my mind.
Only thing I regret is not going long on those crappy financials earlier and not getting out much more of the CRE - now I'm indecisive about it - take losses or turn a trade into a long term short - investment - Yech.. I'll solve it - osmotically - the discipline just reasserts itself - it "just" happens.
rich, something that has cost me when I'm right, but saved me when I get a shock like today, is some hedge positions. Don't get me wrong, I didn't emerge from today's nuclear reaction unscathed, but at least I didn't get a margin call like many hedgies did. Of course my hedges arein options and they have been going to zero so I have to pay attention, & re-load.
andy-
hysterical - never thought i'd see a ray sefo reference on CR. then again when Tanta starting talking about bongs and what not i knew i was home.
"There has been some risk expansion pretty much across the boards in the auto space"
LTVs matter, even on low-dollar, rapidly depreciating assets. Unless you're funding Corvettes. :^) Particularly when the sub-prime consumer is becoming liquidity-constrained.
use your inferior data sources, your lack of market power, your lack of political connections, and your lack of top-level professional connections to beat the market?
pray tell, what in your capacity as a presumed 'trader' gives you more insight into lets say:
true and accurate macro-economic stats
true and accurate financial institution activities
true and accurate financial reporting of companies
true and accurate reporting of commodity resources
true and accurate reporting of future regulatory moves
how in your position, sitting in front of your ameritrade account, at best, having a home subscription to bloomberg which i bet you can't afford seeing as its like 15k a year, tell me how you know more than everyone else?
tell me?
what is the secret?
my position is not that long term buy and hold of a diversified portfolio is somehow the best freaking amazing shiny new dollar on the street.
no sir, its the acquiescence that generally most of us dont know crap in relation to those that do. especially vis-a-vis those with power and true market might.
so go ahead. get your sling shot and try to beat the titans
I think a value approach and staying unleveraged works. Passive approaches are fine, but there is an enormous amount of selection bias and backtesting in a lot of recommendations.
In 1999, passive investing was market cap weighted S&P. It worked great until it didn't. A lot of what goes for asset allocation is simply momentum investing. Whatever performed will the last couple of years gets bumped up in the allocation.
most aren't try to "time" the market on a daily basis. but to the extent that there are marked shifts in the landscape (at least in my opinion), i'd like to ride the "right" wave.
"Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 !"
This is interesting. Basically, if you give yourself 50% odds of being right on timing, your $1 probabilistically turns into $625.055 (50% X 1250 + 50% X $0.11). This is extremely simplified obviously (the worst down days are down a much larger percentage than the best up days are up), but maybe gives some credence to those that would like to avoid a day that the DOW goes down 800.
If we get back to the long-term trend line and retest some breakdowns, then I'm back in, but for now, i'm comfortable in cash/short positions.
i'm my asset allocation / wealth preservation experience those asset classes that have out performed recently get reduced in the portfolio.
that was the hardest part to swallow: the asset class that has just outpeformed for the last year or two has to be sold while you buy the one that has under performed?? what craziness is that?
look, i realize that a reasonable amount of hypothesis based trading wrt to the economy as a whole makes sense at times. sure, going long UST is a great trade right now. sure, going long USD since 2002 is a great trade. but then again, staying long too long you'll screw it up.
i think you overestimate one's abilities to be properly positioned for those five days that ruin your portfolio.
lets look at it from a different perspective.
take the duration of your portfolio times the number of trades you make and call that the event possibilities. then compare that to the 5 big days. i think you'll see the odds of missing those 5 big days over a course of DECADES is much higher than you think
anyway
for real
i'm off to ryan seacrest, mike swick, and the next american mma'ist
dc:
i'll somewhat agree and somewhat disagree. since i've spent the better part of 20 years both 'inside and outside the ropes' i can tell you that there are a lot of smart people on both sides. i think that the places where the big firms and the 'street' have a huge advantage are in areas where there is a lot of inside information flow. This applies to most of the large cap stocks and a little bit to some of the macro stuff but not much. once you venture outside these areas there is tremendous opportunity. it does not take s subscription to bloomberg to be successful. all you really need is to think hard, and read and read and read and read and do a little math. There are zillions of little special situations that arise that are too small for the street to even consider looking at, but for a personal portfolio they can be huge. i've said it before, the great advantage of the small investor is near infinite liquidity. in half an hour today i managed to shuffle out of 50% of a position in a fairly illiquid stock that i own to jump into something that showed up on my radar. had i a similar % position and was a fund, i could have done virtually nothing.
if you are trying to beat the street at predicting apple's next earnings number and the subsequent guidance then i agree, it is a hopeless cause.
Since we are discussing that Fast Money stat a little further - they don't talk of being SHORT on the worst 5 days(its implied in their discussion that one would be in cash) and long on the best 5 days. Now THAT would be some return ! ( and the opposite pretty lousy I bet !).
But a real strategy based just on indices must still include periods of going long, of going short, of being in cash, of adjusting the bet sizes and the high principle of money management - NEVER RUN OUT ! It would be interesting to see what that returns.
I think those axioms of investing - "invest for the long term", "dollar cost averaging", "diversified portfolio", regular investment without timing the market have statistical evidence to support them if the time horizon is 40 years or more. The shorter the period the more one can show periods of time when the strategy manifestly failed. Which is why the investment touts ( and that's what they are ) talk first about "invest for the long term" - its probably the only true statement you'll hear from them - its tautological(embedded in the stats backing it ) after all !
I read this site quite often, but don't know anything about investing in the stock market since I've never understood how it all works so pardon my ignorance.
I just wanted to comment on Capital One strategy since I was a former credit card holder until they pulled something stupid and tried to switch me from a fixed 9.90% to a variable rate back in July on the pretense they weren't making enough interest with fixed rate cardholders. I wrote a hot letter and immediately dropped them and paid off the balance.
I will never understand their thinking because I have a high credit score of over 800 and they refused to let me stay on a fixed rate. Evidently, thousands more like me drop their cards so they must have lost a lot of creditworthy business.
The only thing I can figure is my reaction is exactly what they wanted. i.e. pay off the card so they got some immediate influx of cash.
I'd like to share a few thoughts about the monoline bailout garbage. The whole drama today seemed orchestrated and manipulated, including the NY State Insurance newsflash and the pump on MBI and ABK. The SEC should be investigating manipulation in these stocks, assuming the SEC isn't part of it.
MBI and ABK will be downgraded long before any bailout deal can be finished. Maybe several times.
A bailout is very, very complex to engineer. You have to start with the vast array of stakeholders, all of which must be represented. They include stockholders and creditors of the monolines, every issuer with an insured bond, every counterparty, and every investor with an insured bond down to Mom and Pop Muni. You can't dial their rights away. The lawsuits are already starting to fly and they will get ridiculous before it's over. You can bet the ICI, the trade group of mutual funds, and the SIFMA, stock/bond industry trade group, will make sure Mom and Pop Muni are represented at the table.
An insurance regulator has almost no power over any parties unless and until the insurance companies are taken over. At that point, the regulators can exercise broad powers. But until then, they are just in the way until then.
For a counterparty to pump even a measly sum (like a few hundred million) into shoring up capital, the counterparty would need a near guarantee that asset-backed claims will be honored. But there's no way any regulator can promise that. A regulator is not an insurer of last resort. It's like Paulson's M-LEC.
The big pump on the stock today may not last, but even so it may make it more difficult to broker a bailout, because there's no question stockholders will have to lose to make any deal viable. And some stockholders who lose a lot definitely will sue anyway.
It's a mess. And it will get worse, until there is no choice left but for the regulators to take over the insurance companies, leaving the holding companies floundering like beached whales. That's my 2 cents.
"Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 ! "
yes there is good research that suggests you can time the market.
hard or impossible to pick the big up days, but possible to be out during major bear markets if you are willing to give up a broad margin on either side of the trend.
"that was the hardest part to swallow: the asset class that has just outpeformed for the last year or two has to be sold while you buy the one that has under performed?? what craziness is that?"
C'mon now...did you really, REALLY, have such a hard time accepting "dogs of the dow" concept?????
Long timer lurker here, always enjoyed the discussions. Evidence suggests that few people have managed to beat the market in the long run, but I have always find the "diversified long buy-and-hold" investment strategy unsatisfying. Here are my two objections:
First. The buy-and-hold strategy works because "the market is efficient". Why is the market efficient? Because investors actively reallocate resources to where they think the maximum return will be! Arguing that everyone should cease the very activity that makes the whole economy tick seems to be a self-defeating exercise.
Second. I don't consider "you are not going to win, so might as well give up" a healthy way to live. We as a society encourage people to develop new technology and create new businesses (in the name of building a better world) even though many people suck at both tasks. Resource allocation should be no different.
As for dc's challenge on what do we have in us to beat the titans, with their superior intelligence, capital, and political influence... look, if these are really the factors that matter, USSR would still be alive as the world's foremost superpower with its centrally-planned economy. Do you really buy into the "nobody can beat the market" philosophy? Read that sentence again. Nobody can beat the market. Being rich and powerful does not really matter.
Here is how I think about market and the economy. A market is, in some ways, a thermodynamic system. Making money in the market is akin to extracting energy from the system: you need to find imbalances. The very act of extract energy from the system reduces the imbalance, so it becomes more and more difficult to extract more energy as time goes on. Until you find a new imbalance, and the cycle starts anew. (I know there are some engineers on this forum. If you are not one of them... sorry.)
What is the take home lesson? Rich is right: there is no silver bullet. A mass of people following the same strategy any strategy, even diversified buy-and-hold introduces imbalance into the market, which represents energy to be extracted (i.e., money to be made by slautering the sheepe). And some people will find some previously unheard-of pie-in-the-sky way (quants, anyone?) to exploit that imbalance and make that money. Count on it.
And what do we peasants have against the titans? We know the consumer. We are the consumer. We see imbalances that they do not see. That is how we win.
On Tuesday morning, waiting for the market to open and salivating to close out a bunch of short positions, my wife remarked, "Don't count your chickens just yet."
It's been interesting, frustrating, exhausting.
Worst ideas indeed. Can you believe anyone can suggest big tax refunds for banks? After they paid out 40 billion in bonuses, then were forced to sell off chunks to foreign investors? Effectively, the taxpayer will be propping up the foreign investors. Nice.
thirst!
"Managing as if Recession is here"
Where's the House committee on Un-American Activities when you need them?
Sorry nades, nothing but sand.
Good I needed something to pound after today's performance... I got killed...
O'well....
we're acting divisively
Decisively?
Maybe the same thing here.
Simply put, we're acting divisively and aggressively
Did he actually say "divisively"?
In a nut shell homeowner or not, times are tight.
This suggests lenders of all types are going to be struggling to (survive and) build up their capital reserves.
Makes me wonder how much of the Fed's rate cuts will actually result in increased lending to consumers and businesses...
ShortCourage do you think the idea was to increase lending to consumers or to make banks profitable... (serious question)
ades.."make banks profitable"...avoid any [current] solvency issues might be the operative phrase
Hey CR --
If Bernanke (or someone at the Fed) is hearing this from other CEOs, no wonder there was an emergency rate cut.
"Rate cut" -- sure.
But "emergency rate cut"??
I have yet to hear any explanation for why they could not wait a week, except as a response to (or attempt to manipulate) short-term market reaction.
ades,
ShortCourage do you think the idea was to increase lending to consumers or to make banks profitable... (serious question)
Good question. Who knows?
But if the consumer doesn't get some of it, it won't matter. The downward spiral of defaults/BKs/layoffs will kill the banks anyways, if that happens.
If you guys and gals haven't been making money on the bear side since at least November, you need to re-think whether you're suited to be bears.
I get the sense that many of you are day trading, which is not a good idea.
Thanks guys (or gals)!
Commercial Paper market appears to be healing
Maybe this will yet be just a mild recession and not the end of the global financial system. Maybe.
jus me, probably a spelling error in the transript (I don't edit the transcript - other than to add emphasis).
Best to all.
But "emergency rate cut"??
I have yet to hear any explanation for why they could not wait a week, except as a response to (or attempt to manipulate) short-term market reaction.
My guess is they may have been trying to prevent some sudden catastrophic unwinding of leverage from occuring. A 1000 point plunge in the DOW may have forced so many funds to unwind at the same time that there could have been a major breakdown and ensuing panic.
As it is it looks like there's plenty of unwinding going on anyway. The Fed probably wants to drag it out over time and make it more orderly.
Orderly destruction is better than chaotic destruction.
ac- "My guess is they may have been trying to prevent some sudden catastrophic unwinding of leverage from occuring."
They ARE trying to prevent a catastrophic unwinding.
mp there has been a lot of day-trading talk recently, someone commented on it a few threads ago... I think CR has become mainstream...
Maybe the Conjure Clock will also become mainstream...
I was thinking along the lines that the US government simply cannot back the housing bubble bust(through FNM, FRE, FED bank bailouts), accept the monoline insurers losses, and continue to spend money at a rate that can never be paid back. Then it hit me! The US economy has been leveraged all over the world in so many ways that a realistic pricing of the situation is no longer wanted, and is in fact opposed, by every financial player in the game. The US owes more money than could reasonably ever be paid back right now, yet foreign countries gobble up our debt offerings like the food rewards on the show "Survivor". The US is a nonperforming asset right now, and it is in every one's best interest to keep pretending otherwise. So why not just have all the losses dissapear down the rabbit hole and start over?
Re: My guess is they may have been trying to prevent some sudden catastrophic unwinding of leverage from occuring."
They ARE trying to prevent a catastrophic unwinding
Like The SIV bailout plan????
"Orderly destruction is better than chaotic destruction."
But chaos is so much more fun!
ades, Conjure made his last and final Conjure Clock entry at 11:59:30.
He said, "If you don't know what time it is by now, I can't help you."
So many black swans! I think we have bird flu.
If day trading is mainstream, they won't be here long, believe me.
It's just that renters and home owners, in all of our consumer lending businesses -- renters and home owners together in the -- in the challenged housing price markets are degrading in parallel and together.
Presumably because of layoffs from construction and retail? I find that pretty surprising.
but he's got 350 more to go...
They ARE trying to prevent a catastrophic unwinding.
Specifically on Tuesday though. Even with the 75 bps cut did you notice how long it took just to get a quote in the morning?
To me that looked like extreme stress which could have been much worse.
The market could have gone all 1987 on us.
For all those keeping track-
"-- A charge of at least $550 million with respect to XL's investment in
Security Capital Assurance Ltd ("SCA") which was carried at
$670 million at September 30, 2007."
MarketWatch.com
"The unprecedented uncertainty and instability affecting our industry make it impractical to consider raising new capital at the present time. Pending greater clarity, we intend to continue pursuing the other components of our capital plan and consider all options available to us," commented Paul S. Giordano, president and chief executive officer of SCA.
MarketWatch.com
"Caxton Global Investment Ltd. told investors in a recent letter that, as of Jan. 1, it won't pursue new strategic investments, a person who's seen the letter said on condition of anonymity. Another person confirmed the general contents of the letter, also without wanting to be identified."
Caxton's main hedge fund stops making strategic investments - MarketWatch
and a MUST listen to the whole thing!!!!-
YouTube - Rick Santelli Takes Down Jim Cramer
If the lenders are going to get defensive, as Capital One is saying here, then won't their earnings fall substantially?
And that's without even considering the writedowns for loans gone (going) bad.
Given that, why wouldn't the bank stocks fall quite a bit further?
Let's hope Bernanke is hearing this stuff as real time as is feasible. There was a thread about jingle mail being acknowledged by the banks and I know they have been communicating that publicly since Sept, privately probably a lot longer.
I agree that the timing of the cut was a direct response to markets, but if it prevents a trigger to a meltdown, I'm not sure that is a short term outlook. Panic and fear is the battle right now.
Bail out on the bond insurers is interesting. Let's see if the Fed can make the banks eat some of their own dog food.
Nikkei is +231.27
Japanese like Bernanke-san.
Bank of America Plans $6 Billion Preferred Offering (Update3) - Bloomberg.com
Apologies if someone has already posted this.
BofA is raising $6 billion in capital.
Countryfried = $2 billion loaned + $4 billion stock
Hmmmm
we're acting divisively...
They're acting divisively?
"They ARE trying to prevent a catastrophic unwinding."
mp,
What do you think the chances are that "they" will be successful?
By success, I don't mean avert a recession. But ease this thing down in a more orderly way rather than uncontrolled.
Blah blah. Tightening underwriting. Blah blah.
At this point, I'd rather have a wheelbarrow full of money than this crap.
CR,
Should I be concerned that COF has 70% of its credit card loans securitized and thus off balance sheet. Certainly sounds similar to the SIV issue? What happens when those loans start to become nonperformers?
"I have yet to hear any explanation for why they could not wait a week, except as a response to (or attempt to manipulate) short-term market reaction."
It was obviously done to manipulate pyschological confidence in the system.
Greenspan explicitly admitted to this being his primary concern. It's in the interview he did with Jon Stewart on The Daily Show. Look it up.
Allco Finance Group Ltd., an Australian manager of assets including ships and aircraft, slumped 26 percent in Sydney after margin lenders forced share sales.
The company is in talks with lenders to stop further sales, it said in a statement after today's rout, which took the stock's decline from its record in February last year to 83 percent.
Allco's slide contrasts with a 1.3 percent gain for Macquarie Group Ltd., Australia's largest investment bank, and the 7.7 percent increase in Babcock & Brown Ltd., the second largest. Investors including Paul Xiradis said the company's debt was also a concern to investors.
Answer to all this nonsense.
Arrest all the corrupt CEOs of the banks, HB,rating agencies, and insurers.
Put the trials and their entire time in prison on pay for view. Problem solved I would gladly pay 39.95 for the priviledge of watching Chuck Prince dance with his new boyfriend.
Punch bowl's drying up. The great sobering begins. This hangover is gonna suck.
Oh crap I thought I was posting on DirtyScottsdale.
Cheers,
MTHood- "By success, I don't mean avert a recession. But ease this thing down in a more orderly way rather than uncontrolled."
Pr(averting recession) = .05
Pr(averting meltdown) = .50
And I'm an optimist.
mp, ac,
Not orderly unwind. Just a chance for the big boys to get their positions right. Then Joe 401k can be properly fleeced in a chaotic panic.
Cheers,
IndyMac to Moody's: What are we paying you guys for??
Heh.
whats a relatively safe place to be right now for 401ks?
(i.e. what type of fund)?
Nemo,
Interesting, but come on...if they have $6B in liquidity, what's the trumpeting of $350K in annual cost cutting. Something smelly there, IMHO.
Cheers,
stealthwii,
The most liquid fund available that your plan offers. Unfortunately, some funds don't have very liquid funds as options.
Cheers,
Presumably because of layoffs from construction and retail?
and lending... and forestry... and trucking... and automotive... and [ insert other lines here ]
uhhhh, what about those 50,000 sq ft Harley Davidson Dealerships in posh places like Lubbock TX and Othello, WA??
Yep tough talk from Cap One so was I suprised when I found a letter from them today saying we're upping your card limit, Yeh Sure. I think they're mad because the balance is paid monthly.
This sounds exactly like what AHM & IMB (NDE at the time) were saying late last Winter. I expect the same outcome.
"I get the sense that many of you are day trading, which is not a good idea."
Day trading is for fool gambelers.
I am short HB and financials and I went down $100K today (BUT NO FEAR), I beleive in my convictions. These companies have very dark future.
Believe in your convictions and do NOT panic, truth will prevails.
We're pulling back on loan growth, focusing on our most resilient businesses and closely manage credit with the insight and experience we have garnered in prior economic downturns.
Yeah, some insight there, buddy. Lend to anyone who can fog a mirror during good times; pass on good customers during bad times. Just what every bank has done during every business cycle known to man. Brilliant.
Where do they grow these idiots?
Misean --
Interesting, but come on...if they have $6B in liquidity, what's the trumpeting of $350K in annual cost cutting. Something smelly there, IMHO.
Well, they do slip in another reason:
we concluded that maintaining ratings with all ratings firms, does not make business sense and their continual downgrades created more perception risk than reality.
I wonder if you can hedge against "perception risk"?
I also wonder how downgrades could ever possibly have "created ... reality". It's quite an amusing sentence, actually. I love PR-speak.
said Adrianne Shapira, a retail analyst at Goldman Sachs. Two-hundred-dollar pairs of denim were plausible when home values soared, but now $100 jeans are looking more reasonable
they still don't get it....
I'll wager Adrianne is 24 & pulls 250k from GSCO.
Not quite Dana Telsey...
And kudo's to Dana for bailing BSC at the right time.... another stellar Call
Condi is practicing for her next occupation: stand-up comedian.
My Way
mp,
Thanks. 50% chance the core doesn't breach? That doesn't sound so bad. 1973-75 was the best time of my life -- can't wait to see what they've cooked up for Part II.
RC,
ty,ty,ty for the utube santellivs cramer link.
Pr(averting recession) = .05
Pr(averting meltdown) = .50
mp | 01.23.08 - 8:10 pm
mp:
i would be very happy to take the other side of conjure's Pr(recession) idea. I would offer to do the trade at 10:1 instead of the 20:1 that was quoted.
let me know if there is any interest and in what size.
d
FF,
Vats.
Cheers,
David, Conjure and I invest. We also speculate, but we never gamble.
Sorry.
Nemo,
Yeah, read it, just the other thing stuck out like a sore thumb.
PR speak...gotta love it.
Cheers,
mp:
i considered it a pure arb as i knew i could lay it off though i probably would have kept some for myself.
thanks
d
Rick Is DaBomb
Ok so let's assume that other lenders are following in the footsteps of Capital One--What happens when the bottom 25% of car buyers can't get a loan to buy a car? Other than those who live in NYC, a car is needed to go to work. Taking this to its logical conclusion, there would be a HUGE number of people joining the welfare ranks simply because they have no car. (I can't exactly picture Juan6P getting on the commuter bus with his stack of ladders).
Here's my version of being a bear 'day trader':
Sold out of stocks entirely by the end of May. In "safe" (?) investments until it stops raining poop outside.
Thanks to CR et al or, I would be watching the markets dropping, dropping, dropping with much less anxiety than I would have otherwise, from my rented house.
Truly, this blog may have helped save my (financial) life.
That should read: I would have been watching the dropping markets with much MORE anxiety if it weren't for CR et al.
Thanks!
Punditry,
You familiar with Lubbock, Texas?
Misean,
Thanks for the info, Im with T. Rowe Price, looks like the most stable (perhaps not ness. liquid) is the Prime reserve fund.
I'm in a 2040 retirement now, may just leave it there.
Cheers,
i'm getting loans and tenants signing up to open shop.
new clients every day to expand attic space or put on that addition they always wanted.
now its cheaper than its been in two years to do it. and gonna get cheaper tomorrow even.
what a wacky world we live in.
"What happens when the bottom 25% of car buyers can't get a loan to buy a car? Other than those who live in NYC, a car is needed to go to work."
They'll buy that 12-year-old Chevy, like the bottom 25% of car buyers have for decades.
If there's a substantial fraction of employed folks who can't afford a junker that will get them to and from work, car loans aren't the answer to the problem.
and i know no one believes me. thats ok. and my forthcoming radio silence is only because i'm going to watch american idol and MMA on tv.
trading and timing the markets is a fool's errand.
diversify, truly, and go long. its really the only game in town. and i bet 90% of the people on this blog including CR and tanta are mostly long.
They'll buy that 12-year-old Chevy, like the bottom 25% of car buyers have for decades.
But then they won't be able to keep up with the Joneses! That's cruel and unusual.
dc1000,
Yep, I'm long Gold and Silver.
Cheers,
"I'm going to watch american idol and MMA"
That could be interesting... Rampage vs that annoying english chap?
I'd love to see that... what channel?
ades - thats pretty funny. as i went upstairs to tivo everything i thought to myself, what an odd combination - mma, american idol and geeky financial crap
misean - good luck missing out on the next big thing. and you know what? there WILL BE a next big thing. our specie depends on it. we're nothing more than an evolution machine. and our system, as flawed as it is, is generally an evolution enhancer/noninhibitor
we're designed to evolve. our economic system is designed to evolve.
there will be a new big thing.
financial evolution went rampant. yep.
but securitization is here to to stay
this will all settle down in time (who knows how long) once people get a grip on how to properly do this stuff
RMBS CMBS they'll all come back. they are useful tools.
but they overshot the mark.
and by then, once they stabilize, they'll be old news and boring industries and there'll be a new industry that does something new and wild that everyone will love.
and then there will be overcapacity and competition will be force firms to reduce standards and shit will blow up. but the capacity and structure will be there when the dust settles
such is life my friends
over shoot up over shoot down but always innovate.
its not like we're still hunting and gathering right?
Hey DC,
I once sparred with Miguel Menendez, no kidding. He's a gentleman, so I'm still in one piece (just lost a few brain cells).
dc1000,
"there WILL BE a next big thing. our specie depends on it."
Yes our specie depends on it.
Have a good night. I'll be 'round until Mythbusters comes on.
Cheers,
Oh specie,
Quick def:
specie - Definition from the Merriam-Webster Online Dictionary
Cheers,
Ahhh.. I couldnt figure out the type-o... good stuff....
dc1000 reminded me of the iTulip fella's cover story in this month's Harper's (not online, sorry - it's been a nonprofit forever).
He surveys the sucky stupid bubble-driven economy, points out its latest meltdown (what he calls the FIRE economy - Finance, Insurance, and Real Estate) as unstoppable, and predicts we'll do the dumb thing and just move on to the next bubble in a few years.
His take? The perfectly positioned next bubble will be...the combo of alternative energy and infrastructure.
dc I once had a friend in marketing tell me I was a difficult one to market to because I watched 1 part HGTV, 1 part BET and 1 part country music... Your trifecta would really blow her mind
RE: Santelli Smackdown
you can send an e-mail to squawkonthestreet@cnbc.com if you want send Rick a note.
har har i see the humor.
if you've been around here long enough, you'll know a few things 1) i'm as educated as any of you minus the PhD's and 2) i also dont give a crap about how fast i type and my typos or my lingo. i've learned all this stuff and lived it on a daily basis. so ivory tower me to death ok.
yes our race, our homo-love-each-other monkeys that we are depend on evolving and we will evolve economically.
so hang on to silver, buy some bullets and keep trying to time the market.
haven't you read ANYTHING?
the 'finest' money managers can't out perform.
and YOU, little YOU, sitting in your office in some bomb shelter with gold bullion surrounding you, is going to beat the market and every one else with all the information in the world at their fingertips? the guys who can actually call BB and Paulson and the rest and say what the FFFFFFF can you fix this? you're going to beat the market over the long run? well lucky you. go bet on a comet.
nonetheless, i'll continue to be the most educated and relevantly experience slob on the board with my beer in one hand and my mma fights in the other.
weeeee
just closed a 2MM lease yesterday. weeeee
(as the landlord mind you)
weeeeeeeeeeeeeeeeeeeeeeeeee
Contrary to what so many boomers think, keeping up with the Jones is not a concern for those of us who actually HAVE money and plan on keeping it.
If I were Capital One, I would seriously start worrying about all those people they have pissed off in the past with their shady interest increases and other poor lending practices, like the in-laws I had to bail out of their credit card so they could get a new home loan. I really couldn't give a rats ass if they go down the tubes, along with all the other shoddy lenders out there. Good riddance to all of them.
lama -
nice - he hasn't fought for a while but he had potential. at least Sherdog's fight finder hasn't caught his sanctioned events.
yes, i'm a finance geek that loves american idol and mma and is actually an active amateur muay thai fighter.
but i'm here now to duke it out, tivo'ing a great night of fights on spike so i can catch up on the world economic melt down.
tomasyalba:
bubble is almost synonymous with Bull Market these days. and in that frame of reference, i'd say your source is right. its going to be either sustainable energy or nanotechnology.
it will take some time but it will happen. it is our nature. it is as normal as breathing. without it we will perish as a 'thing' whats the word race specie animal thing phylum kingdom whatever.
you all know what i mea
dc1000,
No reason to get upset. It was just funny...the typo. Everyone typos. But you gotta admit it was funny.
As to timing the market, I did ok in '99. Gotta admit that.
And I wasn't calling you stupid. I read your posts and often agree.
"and YOU, little YOU, sitting in your office in some bomb shelter with gold bullion surrounding you, is going to beat the market and every one else with all the information in the world at their fingertips? the guys who can actually call BB and Paulson and the rest and say what the FFFFFFF can you fix this? you're going to beat the market over the long run? well lucky you. go bet on a comet."
Comet's not so much. Super Colander Tin Foil Hats yes. Bunkers, and ammo...yes. Not asking you to join me in the bunker, just expressing where I see things.
Again, no reason to get mad.
Cheers,
donna,
Yeah, I hate Cap One too. I've had a similar experience.
Cheers,
Sounds like dc1000 is having a bad hair day. We all do.
No Sir,
i am not... i may have misquoted the location of the massive Harley dealership... it may have been in claude, plainview, quanah , wichita falls, or any place in between all those fine hamlets
"One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago."
Some of you guys been talking to the NYT? That small minority of I must say illustrious economists sounds like they could be regular posters to this board...
NEWS ANALYSIS; A Fear That the Cure Could Be Poison - NY Times
DC1000,wha's wrong with hunting and gathering? I love Morels,and the freezer has both salmon and venison in it that are better than anything you can buy.I have neighbors with depredation permits who are happy to have me come by and take out the deer in their vineyards,and they usually give me a bottle or two of their best as a thank you.life is good.
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Cap One's problems are emblematic of the entire auto finance sector. Many banks and auto finance companies are reporting huge losses,or are either tightening or getting out entirely.
In Florida alone,there have been no less than 3 different auto lenders- both banks and finance companies- that have closed down offices and pulled out of many states altogether. Sovereign has stopped originations in many states. Americredit has closed down branches. Several more are rumored to be trying to sell off the auto finance divisions or pulling out of high risk states.
What once was a very profitable business has turned into one of very thin margins with increasing risks. The customers with the high FICO scores are not buying cars like they did due to the stock market and economy. What's left are the subprime people, which are riskier loans. Most of the lenders are tightening up on underwriting standards and scaling back on volumes. 2008 will be a very difficult year for the auto industry, as the projected number of sold units will decrease substantially from 2007, profits will decrease and charge offs will increase.
As these banks can't grow the revenue side, they will look to make up for it on the expense side of the ledger. I would expect layoffs to be coming for many, just like the mortgage sector suffered last year. The easiest way to save on expenses and increase the bottom line is to cut headcount.
tom stone:
if you need to be educated as to why the barter system is inefficient then i think there are many econ 101 classes that would be a better place to hang out
sorry to be snobby but wtf?
yeah. you killed some stuff and traded it for moonshine
good luck using it to buy your kids chemotherapy
dc1000 delivers a good thigh smash!
leg checked by Misean.
Karate sparring for me tonight, then beer...
Osu
No, we're not buying cars because US dealers refuse to give us what we want. Where's my hybrid minivan already? I could buy one if I were in Canada!
Barley,
Yeah...me yesterday. I started system updates at 5:00am got done and went to the news and saw th 75bps drop. And about punched my monitor. Was in a mood all day.
Cheers,
Wonderful! The visitor counter is back!
i've been in a 'mood' since july '05. way to go making the biggest RE purchase of my life at the peak.
still buying more now mind you but still.
dc1000 you been to Thailand, those boys are hard.
Balance-Sheet Loans Return
More Real-Estate Projects
Take Old-Fashioned Route
As Mortgage Securities Dry Up
By LINGLING WEI
January 23, 2008; Page B9
Traditional lenders are starting to write loans that where snapped up by IB's with unrealistic prices, terms and conditions
I'm not sure what this means.
Balance-Sheet Loans Return - WSJ.com
I would say though that this is potentially good news if the lenders are doing strong deals.
This combined with the two NYT's articles today lead me to believe that msm is getting connected to reality.
The times articles being:
ECONOMIC SCENE; Worries That the Good Times Were a Mirage - NY Times
and
THE NATION; Thinking Twice About That $400 Handbag - NY Times
If you look at the stages of grief....DABDA....
I think we are now on the last 1/2 of the trip. The two NYT's articles are basically at the acceptance phase. They are writing off 30% of housing and affordable luxury.
Some areas are still into bargaining. The mortgage insurers bailout and the idea that some fiscal deal will help.
dc1000,
It's all good man. I took a solid hit in '98...and 89-91.
Cheers,
for those wondering why the "emergency Cut" check out the NY Fed data on temporary market operations. I think this means that the Fed is being presented with "price insensitive" demand for short term paper. In other words, the banking system is overwhelming the Fed with the cash that is flowing out of the real economy and, although its resisting the market, it (the Fed) panicked on tuesday and lowered the fed funds rate to the 3.5% demanded by the market (see the rates plummet from weds jan 16th). The problem is when the Fed finally relented and lowered the target rate, the market immediately lowered the rate even more to 1.7% and, again the system is frozen.
This is the curse of Karma. bernanke spent his academic career "proving" that the 1929 depression was avoidable if only the Fed had lowered rates when the market demanded it and cash was flowing out of the 'real" economy. Now he's in the same fix, he's reluctant to do it. Maybe because real life is a little bit more complicated than the theory.
Temporary Open Market Operations - Federal Reserve Bank of New York
DC1000,the organic pinot I am given by way of thanks by my neighbors ain't moonshine,it runs $80-$125 a bottle at the few places you can find it...And I recieve it for killing and taking away the deer safely.being known as a responsible person has also helped my business as a Real Estate Broker.As far as my kid,I hope she avoids cancer,and the Trust funds set up as part of my divorce settlement should pay for a first rate education and a good deal more.I am not in favor of Barter as an economic system,although I utilize it at times,I love good food and like to hunt and fish.I hope you get as much satisfaction from your leisure activities as I do mine.
"As these banks can't grow the revenue side, they will look to make up for it on the expense side of the ledger. I would expect layoffs to be coming for many, just like the mortgage sector suffered last year. The easiest way to save on expenses and increase the bottom line is to cut headcount.
Anonymous | 01.23.08 - 9:49 pm | #"
Per the WSJ, some of the banks are picking up stuff that was previously directly securitized by IB's. They think they are using traditional lending standards and the deals will hold up.
a little help on options: why would the equity ratio be less than the index ratio? is it like some sort of straddle trade or pair trade to protect yourself?
Total Put/Call Ratio 1.13
Index Put/Call Ratio 1.70
Equity Put/Call Ratio 0.75
andy -
no i haven't been to thailand but i train with several former pro fighters from thailand and of course many pro fighters domestically.
thing is, i'm a heavy weight (shocker!! i'm AMERICAN), so those lil thai boys wont do much to me. its the big dutch boys i watch out for. i fared well at nationals last year, hope to make it to the worlds this year. we'll see. too much time dooming and glooming here will cut into my mojo.
misean, i'm all good. i dont know what time zone you're in but here on EST we're well past 'tini time. knowwhatimean?
Stephen Roach, a star economist as head of investment bank Morgan Stanley in Asia, criticised the "reckless" and "dangerous" policy and he blamed the Fed for helping fuel the housing bubble at the source of the problems.
The action "could create another (asset price) bubble-induced recovery" which was "the last thing the world and US needs," Roach said.
New York University economics professor Nouriel Roubini was equally scathing, telling delegates: "The Fed got it wrong on the economy. It didn't understand how these housing problems were going to affect the economy."
Banks such as Wall Street giants Citigroup and Merrill Lynch have been forced to write off tens of billions of dollars in bad debts as a result of subprime-linked investments, leading to tighter credit conditions for companies and consumers.
Veteran financier George Soros called for new global regulator to overlook the global financial system, a call echoed by former US treasury secretary Larry Summers.
"I think the present crisis is the end of an era based on the dollar as the international currency. And we need a new sheriff, not the Washington consensus," Soros said.
Summers added: "George Soros is right. There does need to be somebody and some authority doing what hasn't been done as this crisis has gathered for six months."
DC, Most of those guys have day jobs. Miguel's an engineer. I don't think many of them stay in once they get married or serious about life.
I was the skinny kid in high school. That's why I trained. Some broken this and thats, and now I play pickup basketball.
Anyway, this is not a topic for CR.
This was at the World Economic Forum in Davos
tom stone:
you've outed yourself as a RE broker, now we'll have to be friends.
too bad my fights dont get me paid in fine wine. wish it got me more than broken bones
glad we agree on the barter system's inefficiencies
dc1000,
Still tini time...west coast...got about an hour left.
Cheers,
Hmmm. Soros calling for a global financial regulator- that's a shock...I didn't realize Summers was part of the New World Order too. One regulator is easier to bribe and manipulate than mulitple Central Banks I guess. Very efficient-just like technology.
always tinnie time somewhere in the world.
dc1000, best wishes, smash em!
I can understand people going short, going into cash, or lightening up long portfolios during recessions.
But if you buy most of the commentary on this board, and you believe there's a good chance a recession is near...and you haven't changed a thing, you should have your head examined. It just means you have bought the buy-and-hold long-only mantra Wall Street has been preaching for 20 years. You're a fish.
Did you actually live through the bear market of 00-02, when the S&P 500 dropped 50% top-to-bottom? It takes a 100% gain to recover, you know.
All evidence says this recession will be much worse than 00-02 and there won't be places to hide (like real estate and small caps were then). And I'll bet it will take at least a decade or more to recover from this bear.
If you pay attention here and still stay totally long through what's coming, you deserve to lose every cent that you will.
P.S. Most people here are strategic traders, not day traders. A strategic trader is the best thing you can be in the market of the next few years. It may be the only way to make money.
km4-
global regulator. yeah thats grand.
you know part of the pain of being in this system we're in is that most times we overshoot with our innovations.
but thats ok in the long run
sure sucks to be me right now with RE turning into a sh*thouse, but thats my problem.
and the others the same
but in the long run we'll all be better served by this latest round of financial innovation. seriously.
so we mop up and move on. so what if it takes five or ten years.
whip out your timescale of humanity and tell me what ten years means.
nadda.. zilch..
dark side of the system...shhh : sometimes people/generations/cultures/civilizations get wiped on as we collectively march onwards
yep
"Jan. 23 (Bloomberg) -- American International Group Inc., the world's biggest insurer by assets, will bail out its Nightingale Finance structured investment vehicle, according to Moody's Investors Service."
Bloomberg.com:
News
rich -
it all depends on your time frame.
being 'strategic' also implies market timing even if the markets you're timing are more general and not specific.
if you're less than 50 i'd say being diversified, WHICH by the way means you're already exposed to raw metals, some short action and the rest, is clearly the only sane way to go.
We may now be about one-third of the way through a major global financial fiasco. And the consistent theme of the first third, from beginning to end, has been how the efforts of human beings to exert their flimsy solutions on the Invisible Hand of an enormous, complex, competitive global economy has totally failed.
Why should it be different in the next two-thirds?
I'm over 50 and I've been writing about finance professionally and also investing (non-professionally) for 30 years. The only thing I've learned is that there are no silver bullets.
According to Dalbar, the average diversified mutual fund investor has averaged an annual return of about 3-4% per year over the last 20 years. In other word, worse than CDs.
And I can almost guarantee you that over the next 10 years, that same investor's return will be zero or negative.
bklyn_rntr ,
Bingo. There was no demand for Fed Funds at 4.25%, so the money supply stagnated.
The Fed Funds targeting regime works on demand, not supply. In other words, if there's lots of demand for interbank loans, this tends to raise the interest rate: the Fed then injects money into the system (by buying t-bills) and forces the rate down to the "target Fed Funds". No demand, no injections.
So the problem is that banks don't want to borrow and on-lend. Is it because the loans aren't profitable, or because the banks are undercapitalized?
What Bernanke needs to do is not lower the interest rate, but help banks recapitalize. A government injection of capital? No way. Simply, as the regulator, call in the banks and "suggest" that they immediately write down suspect assets, and follow that with massive equity issuance. Once that happens, the problem is solved. The longer its put off, the more the market will be reluctant to absorb all that equity. Just look at Ambac -- it could have issued billions in equity at $50, $40, $30, but at $6 nobody wanted it.
and rich -
by the way
i actually actively traded that market from 00-02. working for a hedge fund at the time and working my own book at the same time. took some crazy ass risks but made a ton. in retrospect it was silly and risky. but sure seemed like the right thing to do. open a put position in the morning and close it at closing. made ridiculous percentages. then i learned about minis and got into futures and had more fun.
all the while we're trading emerging market credit spreads as a firm and just crushing all markets. what an amazing year that was
brazilian C bonds and russian '30's made us a ton.
of course:::::
we worked for no one other than Nicholas Brady. the same guy that um, those bonds we're named after. so we had the info.
take the same group of guys with the same bloomberg machines and no nick brady and no madeline albright and none of that and we dont even beat the index. i'd bet it all on that
Wow, doom and gloom. What the hell's gotten into you all? Everybody on a little downer after the stock market roller coaster ride? And what's with the challenging tone from posters I'm used to laughing with? You guys should know each other better by now.
rich-
"The only thing I've learned is that there are no silver bullets."
you are wise for your young age.(:-
rich -
why compare some joe401k who bought a heavily loaded actively traded mutual fund that kills him on taxes and fees to the market?
lets talk ETFs and a broadly diversified portfolio and right now that means buying commodities and emerging markets and real estate and domestic equities and international equities..
where is jeremy siegel when we need him?
dc1000,
"diversify, truly, and go long. its really the only game in town."
Correct me if I'm wrong, but you're in your 30's, right?
So, you've spent almost your entire adult life in the biggest bull market in history.
What do you think your outlook would be if you had been born in, say, 1952? By the time you hit 30 in 1982, you've seen the stock market do much of nothin' since you had acne and Chuck Taylors.
You think such a person would swallow the buy long, "stocks for the long run" pitch? How about someone born in 1920?
Here's the thing. I'm not much older than you. I'm young enough and lucky enough to have missed Vietnam and WWII and the GD, but I can read a friggin' book and talk to a survivor or two and figure out that pithy slogans work until they dont.
Time the market vs. go long? That argument is as simple as it is dull.
I like to think of myself as a "strategic trader" but when a very comfortable margin position goes to margin calls in two days, I get upset.
With good reason. This entire week has tried my patience big time.
What really peeves me is that I almost bought the low of the day today and instead loaded more homebuilder short on ryl and got creamed.
I can hardly wait until they finally go down the tubes.
Someday this war's gonna end...
i'm with rich on strategic trading, though i'm man enough to admit that i've let myself enter into one too many "day trades" in the pursuit of risk management, profit taking, and still catching any major "disruption." this has worked well for me, though I've certainly made some poorly-planned and undisciplined decisions in the course of the current market as well (especially today).
Its a tough market to make money in. I could put my head in the sand and go long, or i could go short and hold onto positions on days like this. i think picking "winners" is extremely difficult in this environment, so even a well-diversified strategy may be worse than cash.
i respect a cash position, but i have a hard time respecting a buy-and-hold strategy today, unless you believe that the market action so far this year is just a minor blip in a continued bull run. if you don't think we're going to hit 1100 on the S&P, then by all means go long - i just don't believe that. unless fed/whitehouse keep the shenanigans up, which is also possible.
mthood - come on, read my posts. i didnt say equities are the only answer. broadly diversified. come on now. yeah bull markets through the 90's aside from the big crash SEVEN YEARS AGO and um, the BIG CRASH RIGHT NOW. so its not like i haven't seen the ups and downs, much less actively participated in them.
the point is, broadly diversified portfolios beat out active trading every time.
aren't you all the ones on here bashing hedge funds for their 2/20? i mean, thats the essence of actively traded.
is it me or are the returns on average of the market for the last 100 years plus something like 6% or more?
add in treasuries, commodities, real estate, international, etc. and you've got a solid portfolio.
somehow i thought this was all basic 101 stuff
also, and granted i haven't been here very long, i think any day that the DOW reverses by 600+ points, there will be healty investment and strategy discussion?
DC 1000,It wasn't the first time I mentioned it.Sonoma Real estate is rough right now,the only worthwhile buys are true heritage properties that only come on the market once every generation or two.I am watching a few areas and properties that will be worth making an offer on this fall.And enjoy the sparring,I haven't been able to do that since meeting a drunk driver face to face 20 years ago.I do like seat belts.let me know if you are out this way i'll buy you a cup of coffee.
dunham:
so you think that buying and holding is a bad strategy today meaning that the market will NEVER EVER RECOVER from this?
well then damn i better get a bunker.
market timing is impossible. buying in steady, programmed rhythms for the long term is the only way. and buy buying i mean, DIA SPY or QQQ or some combination therein and thats just the equity portio
tom - spent a few weeks out there at my friend's parent's place. you know, the kind on acreage that they built by hand in the 60s. a real gem. right around the corner from matanza's creek winery. beautiful country.
dc1000- you're not going to convince many on this blog. After all, the reason they're here is to improve their performance. I don't really believe the markets are efficient, just it's extremely hard to beat them.
It is pretty,and Rabid quail are less of a danger than you might think.
"buying in steady, programmed rhythms for the long term is the only way"
Only? That sounds . . . absolute.
"basic 101 stuff" indeed.
Oh, and, I dig this riff:
"working for a hedge fund at the time and working my own book at the same time. took some crazy ass risks but made a ton. in retrospect it was silly and risky. but sure seemed like the right thing to do. open a put position in the morning and close it at closing. made ridiculous percentages."
Do you have any idea how juvenile you sound?
There's nothing people on this site love more than "crazy ass" 20-somethings slinging other people's money around.
sdtfs
what's odd is this place has never put itself out as some trader's haven. nor has it commenters traditionally been traders. seemingly only recently has it gotten that way.
but absolutely no one here is going to refute the power of a portfolio that rides high but hedged with the equities and sinks low but hedge by treasuries. i mean, balance people balance.
what has a long only bond portfolio done in the last 12 months?
pretty well i'm guessing.
but make it 50 equity, 30 bond, 10 intl, and 10 commodity
and you've got a solid portfolio depending on your time frame.
standard deviations, monte carlo analysis, i've seen it all it and analyzed it all
but have still traded my own book for fun. but its that 5% of the total portfolio portion i 'trade' with.
sock away the IRA, 401k and go long baby. because forever is a long time away
mthood:
that was MY money.
not theirs.
plus i was a simple PM assistant. booking trades, doing analysis, making suggestions. all hedged, mostly long.
why go ad hominem?
I believe I beat the market when I was active, then I took my eyes off for a couple months and poof! I knew right then it takes too goddamn much attention for me to continue.
Ad hominem?
I don't know. I guess it's 'cause I'm a crazy ass risk taking Jeremy Siegel-loving money making machine.
dc1000,
Lets pretend we had this discussion in November. I'd be down 15% in that time instead of flat to up 15%, depending what trading strategy (cash or shorting) i used.
If i went long, it would take me the rest of the year to break even. I can't wait to go long, but i'm going to do it after the stock market prices in lower earnings and with what is hopefully a lower risk premium (i.e. lower P/Es).
I was looking at KO today, and i couldn't believe the growth assumptions and P/E ratio this stock is trading at. Why would i buy stocks that i think are overvalued? Just for the sake of going long?
Am i 100% certain in my strategy? No. My chief concern is that the stock market rapidly inflates into another bubble due to government intervention and dumb money that has no where else to put it. As bad as real estate will be next year, and with commodities already a bubble, equities may be the only game in town. I just hope there is a mini-crash in the interim that creates a more attractive entry point.
Trust me, I reevaluated my strategy today. Hard. But I don't want to be stuck on the wrong side of the trade if its on the side that I don't fundamentally believe in.
yeah but dunham that 'belief' is couched in today.
what about ten years from now? and when will you know the 'tide has turned'?
if you're so close to retirement that you feel the 'need' to actively' trade then you REALLY shouldnt be doing it
if you're not so close, then trying to guess the whims of them market and the moments of innovation and evolution and ultimately success is impossible!
i mean really, we're all sitting around here talking like people can predict the future and can say hahahaha i know more than the rest of the world.
who sounds juvenile then?
mthood - have fun with that one.
if you read what i wrote i said i took risks with my own money trading a down market with options.
in retrospect (aka wisdom) they were crazy ass risks but it seemed right at the time.
please stop manipulating what i said and as well stop making ad hominem attacks when you have no facts, analysis, or data to back up what you're saying
dunham:
sorry to double up on ya. why 'pick' stocks like KO? how the heck are you going to know what is actually going on inside the company? how will you know its not some enron waiting to be exposed? you must diversify away business risk and hang on only to market risk.
loading up on any individual stock is insane.
risk/reward
and anyone that thinks they're getting reward with no risk is only fooling themselves until they finally feel it.
Here's the analysis:
"market timing is impossible. buying in steady, programmed rhythms for the long term is the only way"
Anyone who writes in absolutes (impossible, only way) loses the argument by default.
That's 101 simple.
Educated people know this.
dc1000: dutch guys are dope smoking hippies, get yourself in a ring wit the Samoans.
big bad and fast...
andy -
no doubt!! mark hunt is the MAN!
and i doubt ernesto hoost is too much of a hippie
mthood - get over yourself and absolutism. go for it dude. try to time the market all along the way for all 40-50 years of your investing life. go for it man!!
dc1000: don't mess with the Sefo brothers, boys from my neighbourhood.
Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 !
..Even with today's reversal, from Jan 1st alone - I'm up 18% ! Even if I go totally to cash and so say to myself I'm done for the year, that's pretty healthy!.
BTW, I was probably 50% cash, 40% short, 10% commodities( soft and hard) before today.
Actually, I closed out 1/3 of my short positions fri. yesterday and today and aim to push that up to 2/3 or more and even got long a little - a dirty feeling but that's where the money is IMO for the next hmmm anything from 2 days, to 10 day to 50 days - as events unfold I adjust - but today was a clear clear break and it would require a big re-reversal in the next 2 days to change my mind.
Only thing I regret is not going long on those crappy financials earlier and not getting out much more of the CRE - now I'm indecisive about it - take losses or turn a trade into a long term short - investment - Yech.. I'll solve it - osmotically - the discipline just reasserts itself - it "just" happens.
-K
rich, something that has cost me when I'm right, but saved me when I get a shock like today, is some hedge positions. Don't get me wrong, I didn't emerge from today's nuclear reaction unscathed, but at least I didn't get a margin call like many hedgies did. Of course my hedges arein options and they have been going to zero so I have to pay attention, & re-load.
"try to time the market all along the way for all 40-50 years of your investing life."
Again with the simplification. There is black (Siegel) or white (market timing).
Sorry, but I'm not working up a sweat pointing this out.
Lash back if you will, but it doesn't make your argument, such as it is, stronger.
andy-
hysterical - never thought i'd see a ray sefo reference on CR. then again when Tanta starting talking about bongs and what not i knew i was home.
dc1000: bongs made me snicker too, but life never ceases to amaze me with Black swans my friend
Ray sefo V Mark Hunt on youtube, brutal.
lov it.
CR,
"There has been some risk expansion pretty much across the boards in the auto space"
LTVs matter, even on low-dollar, rapidly depreciating assets. Unless you're funding Corvettes. :^) Particularly when the sub-prime consumer is becoming liquidity-constrained.
so mthood what is your proposal?
use your inferior data sources, your lack of market power, your lack of political connections, and your lack of top-level professional connections to beat the market?
pray tell, what in your capacity as a presumed 'trader' gives you more insight into lets say:
true and accurate macro-economic stats
true and accurate financial institution activities
true and accurate financial reporting of companies
true and accurate reporting of commodity resources
true and accurate reporting of future regulatory moves
how in your position, sitting in front of your ameritrade account, at best, having a home subscription to bloomberg which i bet you can't afford seeing as its like 15k a year, tell me how you know more than everyone else?
tell me?
what is the secret?
my position is not that long term buy and hold of a diversified portfolio is somehow the best freaking amazing shiny new dollar on the street.
no sir, its the acquiescence that generally most of us dont know crap in relation to those that do. especially vis-a-vis those with power and true market might.
so go ahead. get your sling shot and try to beat the titans
i think they are called the smart money......
Punditry,
Maybe it was in Turkey?
ok. wife is home. time to double down on 'tini time and get to watching that MMA.
nothing could please me more than a night full of geeky financial banter, mma, american idol, my wife and a martini.
not too shabby
enjoy
dc.....
I think a value approach and staying unleveraged works. Passive approaches are fine, but there is an enormous amount of selection bias and backtesting in a lot of recommendations.
In 1999, passive investing was market cap weighted S&P. It worked great until it didn't. A lot of what goes for asset allocation is simply momentum investing. Whatever performed will the last couple of years gets bumped up in the allocation.
"i think they are called the smart money"
Smart money? You mean like the MBS smart money? The SIV smart money? The gotta keep dancing smart money?
Dang. I see what you mean.
Ain't no way a dumb ass with a brain and a computer can beat that.
Should have added:
They're invincible!
dc,
most aren't try to "time" the market on a daily basis. but to the extent that there are marked shifts in the landscape (at least in my opinion), i'd like to ride the "right" wave.
"Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 !"
This is interesting. Basically, if you give yourself 50% odds of being right on timing, your $1 probabilistically turns into $625.055 (50% X 1250 + 50% X $0.11). This is extremely simplified obviously (the worst down days are down a much larger percentage than the best up days are up), but maybe gives some credence to those that would like to avoid a day that the DOW goes down 800.
If we get back to the long-term trend line and retest some breakdowns, then I'm back in, but for now, i'm comfortable in cash/short positions.
Sorry, I meant "a day the DOW goes down 1800"
missed an important "1".
Dunham.....
I think you need geometric averages, so getting it 1/2 right isn't going to give you anywhere near 50% of getting it perfect.
Also, I'll bet some great days are the day after some of the worst days.
zigurrat:
i'm my asset allocation / wealth preservation experience those asset classes that have out performed recently get reduced in the portfolio.
that was the hardest part to swallow: the asset class that has just outpeformed for the last year or two has to be sold while you buy the one that has under performed?? what craziness is that?
look, i realize that a reasonable amount of hypothesis based trading wrt to the economy as a whole makes sense at times. sure, going long UST is a great trade right now. sure, going long USD since 2002 is a great trade. but then again, staying long too long you'll screw it up.
i think you overestimate one's abilities to be properly positioned for those five days that ruin your portfolio.
lets look at it from a different perspective.
take the duration of your portfolio times the number of trades you make and call that the event possibilities. then compare that to the 5 big days. i think you'll see the odds of missing those 5 big days over a course of DECADES is much higher than you think
anyway
for real
i'm off to ryan seacrest, mike swick, and the next american mma'ist
sorry zig - last comment for dunham
crap
i meant to say "SHORT the USD since 2002"
dc:
i'll somewhat agree and somewhat disagree. since i've spent the better part of 20 years both 'inside and outside the ropes' i can tell you that there are a lot of smart people on both sides. i think that the places where the big firms and the 'street' have a huge advantage are in areas where there is a lot of inside information flow. This applies to most of the large cap stocks and a little bit to some of the macro stuff but not much. once you venture outside these areas there is tremendous opportunity. it does not take s subscription to bloomberg to be successful. all you really need is to think hard, and read and read and read and read and do a little math. There are zillions of little special situations that arise that are too small for the street to even consider looking at, but for a personal portfolio they can be huge. i've said it before, the great advantage of the small investor is near infinite liquidity. in half an hour today i managed to shuffle out of 50% of a position in a fairly illiquid stock that i own to jump into something that showed up on my radar. had i a similar % position and was a fund, i could have done virtually nothing.
if you are trying to beat the street at predicting apple's next earnings number and the subsequent guidance then i agree, it is a hopeless cause.
I detect some genuine kindness in this thread. Carry on!
dc,
best of luck, and feel free to throw popcorn at ryan seacrest on the screen.
it's quite cathartic!
i'm trapped hanging out here in the tide pool, working on my evolution...
sk wrote:
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 !"
Clarification: I saw the same Fast Money segment tonight and am pretty sure they said the best/worst 5 days per year.
For those who missed it, a similar analysis from a few years ago is here:
FundAdvice.com - Market Timing: The Rest of the Story
Since we are discussing that Fast Money stat a little further - they don't talk of being SHORT on the worst 5 days(its implied in their discussion that one would be in cash) and long on the best 5 days. Now THAT would be some return ! ( and the opposite pretty lousy I bet !).
But a real strategy based just on indices must still include periods of going long, of going short, of being in cash, of adjusting the bet sizes and the high principle of money management - NEVER RUN OUT ! It would be interesting to see what that returns.
I think those axioms of investing - "invest for the long term", "dollar cost averaging", "diversified portfolio", regular investment without timing the market have statistical evidence to support them if the time horizon is 40 years or more. The shorter the period the more one can show periods of time when the strategy manifestly failed. Which is why the investment touts ( and that's what they are ) talk first about "invest for the long term" - its probably the only true statement you'll hear from them - its tautological(embedded in the stats backing it ) after all !
-K
RE: R
Thanks for the correction of my pretty serious error. I checked the CNBC website and you are right:
Hold On Loosely - CNBC
-K
I read this site quite often, but don't know anything about investing in the stock market since I've never understood how it all works so pardon my ignorance.
I just wanted to comment on Capital One strategy since I was a former credit card holder until they pulled something stupid and tried to switch me from a fixed 9.90% to a variable rate back in July on the pretense they weren't making enough interest with fixed rate cardholders. I wrote a hot letter and immediately dropped them and paid off the balance.
I will never understand their thinking because I have a high credit score of over 800 and they refused to let me stay on a fixed rate. Evidently, thousands more like me drop their cards so they must have lost a lot of creditworthy business.
The only thing I can figure is my reaction is exactly what they wanted. i.e. pay off the card so they got some immediate influx of cash.
Am I right to believe that?
K O
I'd like to share a few thoughts about the monoline bailout garbage. The whole drama today seemed orchestrated and manipulated, including the NY State Insurance newsflash and the pump on MBI and ABK. The SEC should be investigating manipulation in these stocks, assuming the SEC isn't part of it.
MBI and ABK will be downgraded long before any bailout deal can be finished. Maybe several times.
A bailout is very, very complex to engineer. You have to start with the vast array of stakeholders, all of which must be represented. They include stockholders and creditors of the monolines, every issuer with an insured bond, every counterparty, and every investor with an insured bond down to Mom and Pop Muni. You can't dial their rights away. The lawsuits are already starting to fly and they will get ridiculous before it's over. You can bet the ICI, the trade group of mutual funds, and the SIFMA, stock/bond industry trade group, will make sure Mom and Pop Muni are represented at the table.
An insurance regulator has almost no power over any parties unless and until the insurance companies are taken over. At that point, the regulators can exercise broad powers. But until then, they are just in the way until then.
For a counterparty to pump even a measly sum (like a few hundred million) into shoring up capital, the counterparty would need a near guarantee that asset-backed claims will be honored. But there's no way any regulator can promise that. A regulator is not an insurer of last resort. It's like Paulson's M-LEC.
The big pump on the stock today may not last, but even so it may make it more difficult to broker a bailout, because there's no question stockholders will have to lose to make any deal viable. And some stockholders who lose a lot definitely will sue anyway.
It's a mess. And it will get worse, until there is no choice left but for the regulators to take over the insurance companies, leaving the holding companies floundering like beached whales. That's my 2 cents.
sk made a great point at 11:07 pm above:
"Talk of timing the market - today's FAST MONEY had some interesting stats: $1 in the S&P 500 40 years ago turns into $16 if left there.
Try timing and miss the 5 best days over that time and you make 11 CENTS
BUT, try timing, get it right and miss the worst 5 days and you make $1250 ! "
yes there is good research that suggests you can time the market.
hard or impossible to pick the big up days, but possible to be out during major bear markets if you are willing to give up a broad margin on either side of the trend.
YouTube
- Ray Sefo Vs Mark Hunt
good pick... great fight...
hahah was watching that earlier as you brought up sefo.
i'm off to bed. enjoy NZ guy
"that was the hardest part to swallow: the asset class that has just outpeformed for the last year or two has to be sold while you buy the one that has under performed?? what craziness is that?"
C'mon now...did you really, REALLY, have such a hard time accepting "dogs of the dow" concept?????
Long timer lurker here, always enjoyed the discussions. Evidence suggests that few people have managed to beat the market in the long run, but I have always find the "diversified long buy-and-hold" investment strategy unsatisfying. Here are my two objections:
First. The buy-and-hold strategy works because "the market is efficient". Why is the market efficient? Because investors actively reallocate resources to where they think the maximum return will be! Arguing that everyone should cease the very activity that makes the whole economy tick seems to be a self-defeating exercise.
Second. I don't consider "you are not going to win, so might as well give up" a healthy way to live. We as a society encourage people to develop new technology and create new businesses (in the name of building a better world) even though many people suck at both tasks. Resource allocation should be no different.
As for dc's challenge on what do we have in us to beat the titans, with their superior intelligence, capital, and political influence... look, if these are really the factors that matter, USSR would still be alive as the world's foremost superpower with its centrally-planned economy. Do you really buy into the "nobody can beat the market" philosophy? Read that sentence again. Nobody can beat the market. Being rich and powerful does not really matter.
Here is how I think about market and the economy. A market is, in some ways, a thermodynamic system. Making money in the market is akin to extracting energy from the system: you need to find imbalances. The very act of extract energy from the system reduces the imbalance, so it becomes more and more difficult to extract more energy as time goes on. Until you find a new imbalance, and the cycle starts anew. (I know there are some engineers on this forum. If you are not one of them... sorry.)
What is the take home lesson? Rich is right: there is no silver bullet. A mass of people following the same strategy any strategy, even diversified buy-and-hold introduces imbalance into the market, which represents energy to be extracted (i.e., money to be made by slautering the sheepe). And some people will find some previously unheard-of pie-in-the-sky way (quants, anyone?) to exploit that imbalance and make that money. Count on it.
And what do we peasants have against the titans? We know the consumer. We are the consumer. We see imbalances that they do not see. That is how we win.
Good night all.
On Tuesday morning, waiting for the market to open and salivating to close out a bunch of short positions, my wife remarked, "Don't count your chickens just yet."
It's been interesting, frustrating, exhausting.
Worst ideas indeed. Can you believe anyone can suggest big tax refunds for banks? After they paid out 40 billion in bonuses, then were forced to sell off chunks to foreign investors? Effectively, the taxpayer will be propping up the foreign investors. Nice.
Wow
Thanks for the good article. The author points to a number of factors that will help move company for the next phase of the company's development.
Business Development Metrics