Anyway. "...to discuss how to stabilize and inject more capital.... Why can't they say bailout and move on? My gut is to want to slap them and explain that excess liquidity was/is the problem and just one more mainline injection isn't the answer.
This guy will have lots of connections for future lunch parties! r. Neustadt joined the Department from the Office of the New York State Comptroller, where, since January 2003, he was Senior Advisor and Communications Director. There, he was part of the three-person Executive Committee that met daily with the Comptroller to decide all critical issues, including the state pension fund, contracts, audits, state and local government finance and government reform.
Prior to that, he was Assistant Commissioner for Public Information at the New York City Human Resources Administration. Mr. Neustadt also spent 12 years at the New York City Comptrollers Office, where he was Press Secretary.
Before joining the public sector, he spent 10 years as a reporter covering business and finance for television, radio, newspapers and magazines. His work has appeared in publications as varied as the New York Times, the Village Voice, American Banker and Newsday.
Ohhhh... nasty. No, we are the "Gold Coast" just ask any relitter. Try as we might, we are caught in the gravitational pull of SoCal and like Pluto probably only count as a planetoid. We prefer to "visit." Disneyland, skiing, kulture, that stuff.
What "we" think doesn't matter. When Countrywide implodes and Amgen moves to Longmont, CO the headlines are going to say SoCal take a hit. Worse, we are on the state level tightly bound to LA County. We share Caltrans Dist 7 oversight for but one example. When California starts hacking away at funding and loading up on taxes we are going to make Closette on Le Miserables look pampered in her youth.
It's kind of like paying the guy you hit with your car out of pocket so your rates don't go up. Maybe if they don't make any claims, they can claim to have insurance.
Citigroup moved to bolster capital levels in the wake of deteriorating housing and credit markets, which led to more than $30 billion of debt write-downs and credit losses over the last two quarters.
"We wanted to make sure that we can put capital to work for our clients and capture market opportunities for our shareholders," Chief Executive Vikram Pandit said in a statement.
That Citigroup, always thinking of its shareholders. I mean after losing 50% of their share's value on the market, now it is going to do lots more thoughtful favors for its lucky shareholders.
Maybe we should start a naming contest for the soon to be created GSE bond insurer? If it operates with some semblance of reasonable standards like Fannie or Freddie (reasonable only in comparison to the no standards in banking I suppose), at least it's a better idea than the super sewer.
Speaking of parties,
Housing Panic is working on a possible house bubble convention to be held in Las Vegas perhaps July 11-13. If anyone is interested check out the thread about possible locations, speakers, etc. Could be very fun especially if the NAR pickets the party!
Jan. 23 (Bloomberg) -- Bank of America Corp., the nation's second-largest bank, plans to raise $6 billion by selling preferred shares.
The offering will be split between preferred shares and convertible preferred shares, the Charlotte, North Carolina- based company said in a statement. Proceeds will be used for general corporate purposes, the bank said.
Bank of America said yesterday fourth-quarter earnings dropped 95 percent after $5.28 billion of mortgage-related writedowns and higher provisions for future loan losses.
Wouldn't be surprised if the rally has to do with a rumor that the federal government is going to assume all of the monolines insurance obligations.
What would be the ramifications of this (besides a massive stock market rally)?
Longer term it would probably mean more government debt and higher taxes and/or inflation to pay off the debt (inflation being a form of default on money in general) and perhaps more risk taking in the future as the result of "yet another bailout".
In the short-term, inflationary policy is more politically viable providing oil prices cooperate, so you'd have to expect that as the more likely outcome.
I was sitting fat and happy after trading out of my ultrashort ETFs pre-market.
Then the mini-rally was staged, and I started feeling like today may be "the big one," so i put on a couple of trades that backfired and then another one, and now i'm down slightly for the day. errrr.
it would be a lot easier if the gov didn't keep getting involved in my business.
Re: Maybe we should start a naming contest for the soon to be created GSE bond insurer
I think all GSEs should be rolled into one non-public entity called OFHEO, and then downsize anyone that worked there prior to the consolidation, then have a very public audit and place lots of people in jail for fraud, then dump every bad loan that was underwritten by automated software and by hand, have new accountants verfify each loan held by the public trust!
Stupidity like that -- contemplating nationalization/bail out of the bond insurers -- is what makes a earner/saver like me consider moving to a safe, sane place.
US Secretary of State Condoleezza Rice said Wednesday that the US economy was "resilient" and its structure "sound," addressing fears about a possible looming recession
Is this a foreshadow of what Bush is to say at the State of the Union next week???
IS everyone in Congress going to stand and applaud if he says' " the economy is strong"?
I say all these asshats that have made millions on Wall Street ought to adopt at least five foreclosed homeowners and let them live in their huge estates they bought with the money.
Does anyone really think America can wait 11 months for an election? That gives the currently appointed mafia 11 months to crash the dollar, bonds, stocks, housing, jobs and continue destroying every agency. Why should they be allowed to continue? Why is Congress and The Senate so complacent in this collusion?
Re: IS everyone in Congress going to stand and applaud if he says' " the economy is strong"?
Im seriously thinking of calling my elected officials and suggesting they boo and hiss during the dog and pony show; if they dont, they aint gonna win next time!
US Secretary of State Condoleezza Rice said Wednesday that the US economy was "resilient" and its structure "sound," addressing fears about a possible looming recession
And the Israelis and Palestinians will be friends, and Iran and North Korea are anxious to please, the problems in Africa are soon to be fixed, and... why is the Secretary of State addressing the domestic economy issue?
M in A: You are correct. I apologize to the people of Austria. They are probably ashamed that their good name is attached to a bunch of crackpot economists.
Ambrose Evans-Prichard had a few things to say on this subject. He felt the reason the fed had to ease was because of the dire implications of the failure of the monoline insurers
does anyone really think NY State will stand and watch their pension funds go splat for lack of a few billion dollars? It's no bailout of monolines that's goin on round here.
Monolines aren't going to be saved by the government. As an Ambac shareholder, the last thing I need is some government entity undercutting the shareholders. What may happen is for insurance regulator to facilitate some capital injection. But taxpayers won't lose any money. I'm sure the capital will come from the private sector. I know the shorts won't agree with me but these are profitable businesses with a solid business model (Wilbur Ross just said so today).
Those trying to pin all the blame on the monolines, especially Jim Cramer and some people on this board, are simply out there to blame everyone except themselves. Market correction has little to do with the monolines. Monoline problems will be solved and the market can still go down.
Re: hy is the Secretary of State addressing the domestic economy issue?
Why is the Fed protecting Paulsons banking buddies and getting involved in stocks? The same reason that Bush will get involved with stocks, as they have insider interests and they lost touch with what they are in office for!
I'm staying out of the market for the next 2 days - 600 pt swing in a day is out of control. A nice 3 day rally back to DOW 13,000 would be nice - EEV/TWM/FXP will be verrrry cheap.
Sivaram, The market going down because of a potential or actual recession implying lower earnings is normal and requires no action. What we have been seeing in the last couple of weeks is a financial panic which merits action. The market drop has gone way beyond what would be reasonable given a 0 to -1 % GDP for the next couple of quarters.
I'm staying out of the market for the next 2 days - 600 pt swing in a day is out of control. A nice 3 day rally back to DOW 13,000 would be nice - EEV/TWM/FXP will be verrrry cheap.
dunham | 01.23.08 - 4:08 pm | #
You can't imagine how badly I'm hoping for exactly that outcome. One more chance to go short with every penny. A short bounce won't stop the eventual outcome (Dow 9K) this summer. Give us some more monoline rumors.
Where are the banks going to get the money the State regulators want them to come up with? I'm hearing $15b in capital. Ha! I bet Citi wish it could find that much capital
RE: Neustadt's resume. The man is running the financial arm of NYS Gov't and he has no in the trenches finance experience!!!!
It's all ass backwards now, people in power can't understand the language of their direct reports because they have no technical degrees. So they are led by the nose to the obvious decision. Great way to make a six figure salary with no paper work to worry about.
rom 1916 to 2003," Benoit Mandelbrot writes in The Misbehaviour of Markets , "the daily index movements of the Dow Jones Industrial Average do not spread out on graph paper like a simple bell curve. The far edges flare too high: too many big changes. Theory suggests over that time, there should be fifty-eight days when the Dow moved more than 3.4 percent; in fact, there were 1,001. Theory predicts six days of index swings beyond 4.5 percent; in fact there were 366. And index swings of more than 7 percent should come once every 300,000 years; in fact, the twentieth century saw forty-eight such days. Truly, a calamitous era that insists on flaunting all predictions. Or, perhaps, our assumptions are wrong."
It is only in the context of the last few years that such a market move could be considered truly unusual. Consider that the 7% move that Mandelbrot mentions would be about 840 points on the Dow. Now THAT is volatility!
Barry goes on to show how in the last three onsets of a large market drop, they were followed by increased volatility both to the upside and downside. Looking back on 1997, 1998, and 2000, from the initial drop in the market we saw multiple double-digit moves up and down in the immediate months following. Take 2000:
"In December 1999 and January 2000, several 3% down days were registered. The market peaked on March 10, and two days later suffered a 6% drop (peak-to-trough intraday). The next day was just under a 4% whack.
"These moves set up what would turn out to be one of the wildest years in market history: From that March peak to the beginning of April, the NASDAQ dropped 29%. A 22% bounce by April 10 was followed by a 27% drop, a 23% gain, and a 23% sell off - all before May was over!
"From the lows in May, the NASDAQ subsequently rallied 41% by mid-July. Between then and September 1, the Nazz dropped 17.9% and rallied 21.0%. From September to December, the NASDAQ markets then dropped over 40%, to just about 2,300."
GERALD: "what happens when bonds get dumped because they lose their AAA. There will be no shareholders then."
Ambac lost its AAA and something like a hundread thousand bonds and ABS were downgraded late last week. Nothing happened. No panic.
Most of the insured bonds, from what I understand, are gravitating towards their underlying ratings. In fact there are supposedly some bizarre cases of insured bonds trading below non-insured bonds (which is totally irrational).
Futhermore, the insurance by the monolines is only a small component of all the whole credit problems. Monolines generally only insure the super-senior tranches and only insured a certain amount of the RMBS, CDOs, and CDO-squareds. The banks, hedge funds, and others, will still take losses on their lower tranches and non-insured MBSes. In fact, I will argue that the non-insured stuff is far larger than the insured stuff.
The monoline crisis is the biggest MANUFACTURED CRISIS since Bush's weapon of mass destruction and invasion of Iraq
Monolines CAN become a problem if they get downgraded all the way to junk. Right now, that is a long way away and depends on many factors. Many bears here expect all those conditions to materialize but no evidence of that anywhere.
That Ambrose Evans-Pritchard piece does not make any sense.
How does cutting rates help mitigate monoline counterparty risk, exactly?
More importantly, how does cutting rates on Tuesday help more than waiting until next Tuesday?
Yesterday's rate cut sent a clear message that the market can directly manipulate the Fed. Even if that is true of necessity, it strikes me as an extremely dangerous message to send.
Rumors are swirling that Alopex Capital, the equity volatility arbitrage hedege fund manager founded by ex-Goldman Sachs and Soros trader Peter Van Dooijeweert is shutting down. The Global Vega Fund (no relation to Vega Asset management) was apparently seeded by Tudor Investments in 2003 and in a document filed with the SEC in April 2006 the company listed only $226 million in assets under management although people we spoke with list current assets significantly higher.
Aheadofthecurve, rest assured that Austrian economics is not on the agenda in Austria, too. It is good old deficit spending acc. to Keynes, but of course ignoring the saving in good times.
I am actually an archeologist with ancient money studies background (and MBA) and I hold a small percentage of PM just because I see firsthand what happened to money without exception.
"But the time for tough-love is when the economy is humming along a little too fast, not when it is in the midst of a grave crisis. Calvinist monetary discipline at this point would wreak havoc, and possibly endanger the political stability of several countries (in Europe, if not in the US)."
Evans-Pritchard
No one has any answer to my points:
Do not punish everyone for the sins of some. You didn't like it in school when the teacher did it; you should not tolerate it now.
Criminal law has more than enough sanctions to punish those who are to blame.
Where are the banks going to get the money the State regulators want them to come up with? I'm hearing $15b in capital. Ha! I bet Citi wish it could find that much capital
Lloyd
It came up with almost double that since Sept 30, but the problem is you can go to the well only so many times.
AotC-, B-, the world will be ending (or, at least the market will be crashing), but it is still three-to-six weeks away.
Yeah, Feds: Social Security and Medicare aren't enough of an anchor around us workers/savers; please, sign us up for MBIA and Ambac and FNMA/GNMA, too.
The proposed rule change would provide for: "...the adjustment of outstanding options for special dividends (i.e. cash distributions not declared pursuant to a policy or practice of paying such distributions on a quarterly or other regular basis). ... adding a $12.50 per contract threshold amount for cash dividends and distributions to trigger application of OCC's adjustment rules.
I think it is kinda cool, when you get mentioned in the mainstream media, this is from the Wall Street Journal:
January 23, 2008, 3:56 pm
"Is Mortgage Default Losing its Stigma?
Are homeowners who can afford their mortgage payments walking away from their homes?
A recent post on Calculated Risk cites what it says are comments from a Wachovia conference call that said that some people who have the capacity to pay are deciding not to because they feel like theyve lost equity, value in their properties.
But when does the Mortgage Pig get picked up? That thing is my current screen saver.
"Most of the insured bonds, from what I understand, are gravitating towards their underlying ratings. In fact there are supposedly some bizarre cases of insured bonds trading below non-insured bonds (which is totally irrational)."
No need to sign up for ambac. Just quit paying your bills. What's the point in saving. Get a credir card and run it up. The banks will get bailed out anyway.
"Then the mini-rally was staged, and I started feeling like today may be "the big one," so i put on a couple of trades that backfired and then another one, and now i'm down slightly for the day. errrr."
I covered and went long @ 12.30 thanks for your support. Pigs get slaughtered!
(1) This is the NY State DOI, not the fed or the US Dept. of Treasury. They have no money for a bailout.
(2) The big banks in theory could bail out the bond insurers, but why exactly would they want to do so?
(3) "Bailing out" these companies means making sure they have money to pay claims. Right now the companies can only pay a fraction of their future liabilities. Even a free billion dollars in capital just means they can pay a somewhat larger fraction.
(4) today is a good day to short the financials that rallied. BKUNA, NCT, and DSL are all deeply insolvent companies with huge option arm/MBS portfolios.
(5) as a matter of ideology, the people running the US Gov don't like local government spending, and don't want to further subsidize it by giving money to local gov bondholders. they'd rather use the money to fund the Iraq War and more tax cuts. Or in the case of the people running Congress, more spending on health and education spending.
GARY: "Anyone who took Sivaram's investment advice just a couple of weeks ago would be living in a cardboard box right now. Just sayin'."
I hope no one is dumb enough to follow anything I say. I'll be the first one to say that All I have said is that I am personally taking the risk against some shorts here who said they were going to short the monolines to death... Monolines still have big problems ahead of them but we'll see if I'm right in an year or so... The game still isn't over.
SV - No panic? WTF are you talking about. The fed rate cut one week before the next meeting? Come on, you are analyzing with your heart and not your mind.
Although I do agree with you on the weapons of mass...
M in A- Why are people so dissmissive of 60 years of post-war stability and prosperity? has it been perfect? Certainly not. But compare it to any other period of human history and it comes out quite well. Moral righteousness is great in church, but should be left out of economics.
Twat has various meanings, clearly dependent upon which regional dialect. It is generally used as a vulgar synonym for the human vulva,[1] vagina, or clitoris, and is used as a derogatory epithet. In British English, "twat" is often pronounced /twæt/ (to rhyme with bat). In other areas (eg. Australia, New Zealand and North America) it is also pronounced /twɒt/ (to rhyme with watt), as was common in British English usage in the past.
I disagree, I think the rally is on inside information on a bailout of Ambac and the likes.
What's laughable in this whole deal is that it still doesn't explain how the US consumption machine replaces housing in the coming years. It's still laughable how rate cuts make a technology stock more attractive. total BS.
" AotC-, B-, the world will be ending (or, at least the market will be crashing), but it is still three-to-six weeks away."
Market has already crashed, except in slow motion, over the last few weeks. It has reasonably discounted a recession. Whether it goes up or down further should depend on events in the real economy asnd their impact on profits, not panic related to bond insurance
Boy, some pretty sarcastic comments on this site. Have Ye no faith?
I just heard the guy from NY, talk about the "plan", with the banks to "inject capital" into the monolines so they can keep their AAA.
We have heard this before, but then it was a "Super SIV", with the same sort of money in one pocket and out the other. Of course it fizzled. And now that we are wise to these shell games (for the moment) this plan (the Super-duper monoline SIV?) will also fizzle, to be confirmed by a sudden drop in the market (my guess tomorrow afternoon, after the little guys have already been suckered back-in).
CRISPY&COLE: "SV - No panic? WTF are you talking about. The fed rate cut one week before the next meeting? Come on, you are analyzing with your heart and not your mind."
I'm talking about the municipal bondholders (i.e. those impacted by rating downgrades on insured bonds), not the rest of those out there. I agree that a lot of people are panicking...
SV - My advice to others like me, who do not have the size to move markets nor inside information: in the current environment, work, save, keep assets in FDIC insured CDs.
It has worked well for me the last 12 months.
When I think things have settled out, I'll consider putting some money back into index funds (i'm still in my early 30s).
But to me, you and the guys talkintg their shorts here are all a bunch of riverboat gamblers, not all that different from the would-be property flippers.
Big, big effort by the hedgies, today (I've been logging volume of S&P 500 futures purchases over the last nine months): volume of S&P 500 futures purchases today was bested only by that on Nov. 8.
The hedgies are working VERY, VERY hard to keep the market up while they 'take out their trash.
Market has already crashed, except in slow motion, over the last few weeks. It has reasonably discounted a recession. Whether it goes up or down further should depend on events in the real economy asnd their impact on profits, not panic related to bond insurance
Aheadofthecurve | 01.23.08 - 4:42 pm | #
So far, no crash, not even in slow motion. When have big market moves ever depended on events in the real economy. Big moves up are normally a result of "irrational exuberance" and crashes of irrational panic. Still waiting on panic. This isn't it yet.
brokeback-You replace housing consumption slowly over time by a combination of:
Refinancing to lower interest rates, which puts money in people's pockets.
Lower oil prices. You all focus on housing, but high oil is a big part of the current picture.
Real wage gains through increased productivity. This will come through infrastructure investment, which I favour, over rebate checks, which are foolish.
This doesn't happen overnight, but can and will over time, given a change in leadership.
I'm talking about insured vs non-insured for the same bond. When insured trades lower (as supposedly had been the case at times) that's irrational! It basically tells me that people don't want to touch anything with the word insured bond, and would rather pay more for non-insured bond. Monolines may or may not go bankrupt but situations like that makes me think that there is a lot of irrational behaviour right now with respect to the monolines...
RE: Neustadt's resume. The man is running the financial arm of NYS Gov't and he has no in the trenches finance experience!!!!
Ummmm...no he's just a spokesperson for the DOI. You generally want your spokesperson to have a bit of media savvy. It also helps if they can read for comprehension.
AotC
Maybe I missed a key discussion you had recently but asking for some prudence does not appear to me to be dismissive of the great period after WWII (this period has seen many TEOTWAWKI scares and sofar many of these scares lead to a change for the better). But considering the new world (end of Communism) and it's desires some of the problems discussed in the 70ies and predicted for +/-2000 may finaly come to fruition (Energy(infrastructre) and food). BTW there have been many great periods in history that took 60 years and longer.
GARY: "SV - My advice to others like me, who do not have the size to move markets nor inside information: in the current environment, work, save, keep assets in FDIC insured CDs...But to me, you and the guys talkintg their shorts here are all a bunch of riverboat gamblers, not all that different from the would-be property flippers."
I don't think Ambac is up because of inside information. It's up because the shorts are covering. But the stock can drop 50% tomorrow. The stock price for the monolines literally means nothing. It's all speculation. I'm trying to look at it from a longer term point of view.
I think your strategy is perfectly fine for you!!! Benjamin Graham, as well as Warren Buffett, have said that you either (i) invest in a low-cost index fund, or (ii) try to pick investments on your own if you are interested and skilled at it. I'm trying the latter strategy, if that fails (Ambac has started out very badly) then I'll follow the first strategy, which is kind of what you are pursuing.
Today smacked of throwing in the towel selling and forced selling. The xoi/crude ratio made it all the way down to the lowest levels i have seen in recent history. each time we have been here in the past a very strong rally in oil/gas stocks has ensued. all along the natural resource spectrum stocks are priced for underlying commodity prices 25-30% below where the strips are actually trading. these kind of opportunities do not come along every day.
i know that i am very much talking my book, but if it turns out that there is a big disconnect between the financial economy and real economy both the resource stocks and the underlying physicals are going to fly.
we have not remotely approached a blowoff phase in any of these things. it is certainly not a requirement to end what has been a great bull run, but it would be pretty unusual for that phase not to occur. there have been no junior mining lovefests, or the equivalent with the majors. p/e's have never made it above about 15 except in the golds and they generally trade of cash flow and reserves.
to tie this into housing (which is afterall the blog) if we get a sentiment change toward US housing and with the current rate structure it is not much of stretch to believe that we could get one, it is going to change the recession/depression outlook dramatically. this last few weeks might turn out to be one of the great market fakeouts in recent memory.
Gary,
You are speculating too with your money in FDIC insured CDs. You've simply chosen a different, and in my view quite risky, way to speculate. You're counting first on the ability of the FDIC to meet it's commitments, and secondly that the value of the dollars you're holding doesn't decimate your savings. Good luck with that.
Let's see thats Money- Laundering Executive Commision with all delenquincies sent back to the taxpayer. How is that any different than the Mafia?
But,..Paulson is so happy to see banks working together.
Ahead of the curve, you are obiviously happy, being ahead of the curve, but doesn't it irritate you that your mother's savings is being robbed form her and your childrens future is being sold away? It's not the money, it's the priciple that has been lost on all this. These Pigs knew what was going on years ago. Ahead or behind the curve, this joke is not going to be good for our future economy regardless of what you make out of it.
M in A- There are many problems that need addressing-you mention food and energy- and those are very serious. I see this current situation as really a diversion that is soaking up all of the attention that those problems very badly need. I don't give a rat's behind what houses cost in California. In fact, I am much more concerned with the very serious water situation there given that the climate appears to be reverting to its longer term dry state the with housing prices.
What I object to is dogmatic ideological correctness. We are human beings, Our lot in life is to face a problem deal with it and then expect another one to arise. Just lkike our ancestors dealt with large mammal predators. As an archaeologist, I'm sure you know that.
benny- See my response to MinA. You ideologues think that if you change this or that or eliminate this or that "evil person or persons" paradise on earth will dawn. That is not our lot as humans. Never has been never will Tough luck. Now deal with it. If you want criminal prosecution for bankers et al., I'm with you. Ruination for all-then you've lost me and most people not on this blog.
Ya, real slow. Just because rates are low does not mean people will be able to refinance. Housing has been projected to lose 30% and many of these homes were bought with no skin! Hence jingle mail. They would be best to just start up the bulldozers. So I don't buy your refi suggestion to any large scale.
Oil, i agree that there is a speculative froth but i don't see oil going down much past 70 dollars. That's not going to get gas below $2.50. Still a major strain on J6P living in the burbs with his Range Rover.
Increased wages and productivity? In what and with what. Corps are being squeezed by high commodity costs and have not yet figured how to pass this to the consumer.
Hey look, I'm hopeful you are right but I just don't see the US avoiding a reversion to the mean. Our standard of living has to come down. We are broke and now we just pissed off our creditor.
If one just considers that the recession (threat) will put on hold parts of the private energy infrastructure investments. Infrastructure that has reached the end of it's technical life (30-50 years old !), I guess that will be the next "great Deal" in America, maybe a bit too late to not cause problems (in Europe too). Not talking about peak oil (Think of UK that wasted it's oil & gas assets and will be a big importer soon and at the end of the pipeline!).
benny-While those without equity will have trouble re-fiing, there is likely to be some government help for them. But, put them aside, and consider the millions of households (mine is one) with plenty of equity and good credit. I intend to grab the lowest rate I can and save myself a few hundred dollars/month that I can spend or invest. Multiply that by millions and that ain't chump change.
As for gas and productivity, a real investment in mass transit and energy efficiency will go a long way to address that and take up any workers laid off from construction.
If you say a lower standard of living, I prefer to say a better quality of life, with less time spent in traffic and working and more leisure. That works for me.
This really is crap about this dumb meeting, because this was a news story yesterday, which was overlooked; I saw it on the Yahoo bond news and posted here on CR!
So why a 600 point swing?
Much of the equity rally was spurred by a report from The Financial Times that the New York State Insurance Dept. is pressuring big banks to contributed $15 billion to prop up the bond insurance industry and preserve triple-A ratings.
IS everyone in Congress going to stand and applaud if he says' " the economy is stronG?
Probably. After all didn't a majority vote for the war in Iraq? And doesn't it keep funding it with multi-billions of dollars? A really wise way to use that money, right? And notice how few complain saying the money could be used for something else. I guess nothing is as important as doing Israeli's bidding and making Iraq into a US colony. That will surely solve all our economic problems.
The talk about propping bond insurers is eerily similar to the talk about how all the banks would get together for a SUPER-SIEVE and help fix the problems with SIVs. Funny how that got nowhere, but the PR was good enough to give the market a few pops here and there. Of course, all those gains are gone now, but it sure did allow some traders to get out of uncomfortable positions.
Im thinking this will prove to be about as useful as the paulson supershiv.
SivaramVelauthapillai is correct when he mentions there are insured muni bonds selling slighly below comperable uninsured bonds.
I asked a question about this odd situation last week. The only answer I came up with was:
A) if the insurance is regarded as worthless, then the premium should lower NPV. (unlikely)
B) they are more liquid, and therefore have been sold by people seeking liquidity.
SRS is scary. SRPIX isn't double short. Now, if you already have giant gains in that, yeh, you are going to take your lumps on rally days. But Ive sat through them before, and am sitting through this one. I'll hold this the entire year, despite the roller coaster.
You sound like a politician. Looks good on paper but I don't think your math adds up. Who is going to pay for all this infrastructure. I mean it's a great idea. The Army needs recruits too?
Here is a thought for you. The government is broke and nobody is going to lend us money anymore? On top of that what is going to replace the taxes on these foreclosed homes that city and state budgets are counting on? The ECB is already looking to cut us loose and countries are already looking to other currency as the standard.
No new deal....It's going to be called the Amero Zone. The zone where Americans get to let their standard of living equalize with Canada and Mexico.
Ruinization, heck no,....prosecution absolutely. Didn't you love Orangelos golden parachute?
No one is going to lend us money? Some one has bought a sh*t load of treasuries in the last several months. Do you know that defecits/GDP are higher in almost every country in Europe than in the US. Oh, and do you know what the atsndard of living is in Canada? Perhaps you ought to get off the computer and go there and see for yourself. I go about once a month and it's great!
Best wishes, but you are not as well thought-out or expressive as M in A and he is working in a second language. I bet you don't speak a second language...
What languages I speak? what difference does that have in our discussions? Two if it's that important to you. Should have been three or four but I was lazy. French, Itialian, and spanish are so close I could wing it if I had to. I know that probably doesn't make you feel any better but you can think of me as a FB in a trailer with no job if you like?
Here is a post. It is known we are broke as a country. It is known that foriegn counties like China have been financing our debt.
They are not interested in our debt anymore as BB continues to lower rates.
I will give you that they cannot allow us to fail as our consumption is second to none. So they may be FORCED to help us, for a time, much like the ECB may be FORCED to lower their rates. We sill hve a little clout.
we are much like Micheal Jackson and think we can just keep spending, but we can't. I don't think we will hold the world's currency much longer?
first on a busy day like this? wow!
A Counterparty Party
Damn, I was hoping for a SoCal beer bash.
Anyway. "...to discuss how to stabilize and inject more capital.... Why can't they say bailout and move on? My gut is to want to slap them and explain that excess liquidity was/is the problem and just one more mainline injection isn't the answer.
Rob is Ventura technically soCal?
apparently they didn't discuss options at all...they discussed Dom Delouise as a Christ figure in movie Cannon Ball Run. jury's still out on that.
Options for what?
The FED's cut. Ambac's stock is back up. Problem solved.
Try and picture a blizzard, except with dollars instead of snowflakes.
Where is this guy getting money from and why were they not involved sooner? Its just an opportunity to have lunch and writedown some expenses
The options were: cooking the books, delaying and denying while insiders flee, and federal bailout.
This guy will have lots of connections for future lunch parties! r. Neustadt joined the Department from the Office of the New York State Comptroller, where, since January 2003, he was Senior Advisor and Communications Director. There, he was part of the three-person Executive Committee that met daily with the Comptroller to decide all critical issues, including the state pension fund, contracts, audits, state and local government finance and government reform.
Prior to that, he was Assistant Commissioner for Public Information at the New York City Human Resources Administration. Mr. Neustadt also spent 12 years at the New York City Comptrollers Office, where he was Press Secretary.
Before joining the public sector, he spent 10 years as a reporter covering business and finance for television, radio, newspapers and magazines. His work has appeared in publications as varied as the New York Times, the Village Voice, American Banker and Newsday.
I think he should go back to Vouge or Village Voice
Rob is Ventura technically soCal?
Ohhhh... nasty. No, we are the "Gold Coast" just ask any relitter. Try as we might, we are caught in the gravitational pull of SoCal and like Pluto probably only count as a planetoid. We prefer to "visit." Disneyland, skiing, kulture, that stuff.
What "we" think doesn't matter. When Countrywide implodes and Amgen moves to Longmont, CO the headlines are going to say SoCal take a hit. Worse, we are on the state level tightly bound to LA County. We share Caltrans Dist 7 oversight for but one example. When California starts hacking away at funding and loading up on taxes we are going to make Closette on Le Miserables look pampered in her youth.
Maybe Hillary was right, and the President SHOULD convene the PPT! HA!
Anything south of SF is SoCal....
The options are theft, or more theft. Theft of people's wealth via currency debasement.
Print more money and somehow get it in the hands of these crooks. What a wonderful world!
Blow 'em up! Blow 'em all up!
It's almost like Warren Buffett was right.
"The options were: cooking the books, delaying and denying while insiders flee, and federal bailout."
It's kind of like paying the guy you hit with your car out of pocket so your rates don't go up. Maybe if they don't make any claims, they can claim to have insurance.
The options are expensive, especially the Jan 09 $10 puts.
Govt bailout of course. All parties can agree to that.
New York Insurance Department: Hello gentlemen, thanks for having me over for lunch.
BigBanks&Brokers: Shaddap, or we'll HAVE you for lunch.
New York Insurance Department: Sorry?
BB&B: Yes you are. Listen, you have to take over the monolines.
New York Insurance Department: Well we'll consider it.
BB&B: What are you missing here. That wasn't a request.
Cheers,
Citigroup moved to bolster capital levels in the wake of deteriorating housing and credit markets, which led to more than $30 billion of debt write-downs and credit losses over the last two quarters.
"We wanted to make sure that we can put capital to work for our clients and capture market opportunities for our shareholders," Chief Executive Vikram Pandit said in a statement.
That Citigroup, always thinking of its shareholders. I mean after losing 50% of their share's value on the market, now it is going to do lots more thoughtful favors for its lucky shareholders.
"Darn, I want to know the options."
Option 1: Collapse Now
Option 2: Collapse Later
Why is all available cash going down the same rat holes that sucked the money out in the first place.
Does it make sense to put money into something because it's a money loser?
Misean, bingo!
I knew there must of been a new comments section, that when Sebastian usually pops into the previous one.
One heckuva rally today, I wonder if it gives it all up in the last half hour.
Refi's are booming according to bloomberg.
My question is, assuming that most are taking advantage of low rates to get 30 year fixed,
who is willing to lock up cash for the next 30 years at historically low rates?
Is this a bullish sign?
There, he was part of the three-person Executive Committee that met daily with the Comptroller to decide all critical issues,
oh, you mean like which cronies and family members to have Hevesi's chauffeur drive around on the public dime?
Maybe we should start a naming contest for the soon to be created GSE bond insurer? If it operates with some semblance of reasonable standards like Fannie or Freddie (reasonable only in comparison to the no standards in banking I suppose), at least it's a better idea than the super sewer.
Speaking of parties,
Housing Panic is working on a possible house bubble convention to be held in Las Vegas perhaps July 11-13. If anyone is interested check out the thread about possible locations, speakers, etc. Could be very fun especially if the NAR pickets the party!
Up on the day !
Rall-e !
George Soros said that the U.S. downturn would end the status of the dollar as the world's default currency.
Business News - Global Business - The New York Times
anyone know how banks account for insured debt? Will their books get shredded retroacively?
Financials up strong! Horesemen GOOG, AAPL & AMZN get whacked!
Is this the snap-back clearing rally?
Wouldn't be surprised if the rally has to do with a rumor that the federal government is going to assume all of the monolines insurance obligations.
What would be the ramifications of this (besides a massive stock market rally)?
Just kidding Rob, I love it up there... Planing a trip in the next few months...
FFDIC interesting. What will it be Euros or Black Gold?
Jan. 23 (Bloomberg) -- Bank of America Corp., the nation's second-largest bank, plans to raise $6 billion by selling preferred shares.
The offering will be split between preferred shares and convertible preferred shares, the Charlotte, North Carolina- based company said in a statement. Proceeds will be used for general corporate purposes, the bank said.
Bank of America said yesterday fourth-quarter earnings dropped 95 percent after $5.28 billion of mortgage-related writedowns and higher provisions for future loan losses.
Bloomberg
and the cup rattles ano
Cramer said that the government should buy the bond insurers so the market can go up 2000 points.
Nades said this is painful for a uberbear! Mighty painful!
mega rall-e
imo, up 200 on da day
Rally Monkey | 01.23.08 - 10:22 am | #
I iza bear, but bounce's be good...
like sittin on a river, catchin the salmon swimmin up to spawn...
$##,###.## - really, really happy today... thanks CR,T and gang
Sorry CA, NY has to step up to the plate once again. You guys are baking your brains with too much sun out there.
Oh, yeah and Austria is a pissant country.
Wouldn't be surprised if the rally has to do with a rumor that the federal government is going to assume all of the monolines insurance obligations.
What would be the ramifications of this (besides a massive stock market rally)?
Longer term it would probably mean more government debt and higher taxes and/or inflation to pay off the debt (inflation being a form of default on money in general) and perhaps more risk taking in the future as the result of "yet another bailout".
In the short-term, inflationary policy is more politically viable providing oil prices cooperate, so you'd have to expect that as the more likely outcome.
Everybody back in the pile!
Is 'Average Joe' a muted version of 'Optimistic Joe?
Volatility is back with a vengeance. Better be careful not to pop too high or we might not get another rate cut.
I was sitting fat and happy after trading out of my ultrashort ETFs pre-market.
Then the mini-rally was staged, and I started feeling like today may be "the big one," so i put on a couple of trades that backfired and then another one, and now i'm down slightly for the day. errrr.
it would be a lot easier if the gov didn't keep getting involved in my business.
Re: Maybe we should start a naming contest for the soon to be created GSE bond insurer
I think all GSEs should be rolled into one non-public entity called OFHEO, and then downsize anyone that worked there prior to the consolidation, then have a very public audit and place lots of people in jail for fraud, then dump every bad loan that was underwritten by automated software and by hand, have new accountants verfify each loan held by the public trust!
Get your EEV here, fresh hot EEV!!! You sir, and you madam, step right up!
Stick it up your lederhosem, stupid Austrians. I fart in your general direction.
"it would be a lot easier if the gov didn't keep getting involved in my business.'
amen....
Stupidity like that -- contemplating nationalization/bail out of the bond insurers -- is what makes a earner/saver like me consider moving to a safe, sane place.
Maybe Alec Baldwin was right.
US Secretary of State Condoleezza Rice said Wednesday that the US economy was "resilient" and its structure "sound," addressing fears about a possible looming recession
Is this a foreshadow of what Bush is to say at the State of the Union next week???
IS everyone in Congress going to stand and applaud if he says' " the economy is strong"?
I say all these asshats that have made millions on Wall Street ought to adopt at least five foreclosed homeowners and let them live in their huge estates they bought with the money.
Does anyone really think America can wait 11 months for an election? That gives the currently appointed mafia 11 months to crash the dollar, bonds, stocks, housing, jobs and continue destroying every agency. Why should they be allowed to continue? Why is Congress and The Senate so complacent in this collusion?
Is the option of "let the chips fall where they may, and eventually the market will correct itself" a valid choice anymore?
Re: IS everyone in Congress going to stand and applaud if he says' " the economy is strong"?
Im seriously thinking of calling my elected officials and suggesting they boo and hiss during the dog and pony show; if they dont, they aint gonna win next time!
Insulting Austrian readers should not be your style Aheadotc.
Don't envy my LEDERHOSEN.
US Secretary of State Condoleezza Rice said Wednesday that the US economy was "resilient" and its structure "sound," addressing fears about a possible looming recession
And the Israelis and Palestinians will be friends, and Iran and North Korea are anxious to please, the problems in Africa are soon to be fixed, and... why is the Secretary of State addressing the domestic economy issue?
M in A: You are correct. I apologize to the people of Austria. They are probably ashamed that their good name is attached to a bunch of crackpot economists.
But really, lederhosen???
Wow. SRS -17%. I wonder if it's time to buy. Or wait until the 50bps giveaway next week..
Ambrose Evans-Prichard had a few things to say on this subject. He felt the reason the fed had to ease was because of the dire implications of the failure of the monoline insurers
Telegraph Blogs
does anyone really think NY State will stand and watch their pension funds go splat for lack of a few billion dollars? It's no bailout of monolines that's goin on round here.
Monolines aren't going to be saved by the government. As an Ambac shareholder, the last thing I need is some government entity undercutting the shareholders. What may happen is for insurance regulator to facilitate some capital injection. But taxpayers won't lose any money. I'm sure the capital will come from the private sector. I know the shorts won't agree with me but these are profitable businesses with a solid business model (Wilbur Ross just said so today).
Those trying to pin all the blame on the monolines, especially Jim Cramer and some people on this board, are simply out there to blame everyone except themselves. Market correction has little to do with the monolines. Monoline problems will be solved and the market can still go down.
Has this become a day trader forum? Blowing pretty hard in here today.
Re: hy is the Secretary of State addressing the domestic economy issue?
Why is the Fed protecting Paulsons banking buddies and getting involved in stocks? The same reason that Bush will get involved with stocks, as they have insider interests and they lost touch with what they are in office for!
I'm staying out of the market for the next 2 days - 600 pt swing in a day is out of control. A nice 3 day rally back to DOW 13,000 would be nice - EEV/TWM/FXP will be verrrry cheap.
Also, if the monolines are the cause of the problems why is tech and commodities getting clobbered? Cramer's Four Horsemen just went down...
Sivaram,
what happens when bonds get dumped because they lose their AAA. There will be no shareholders then.
Blondie, just note that A. E-P is a hack.
Also, this market pop is being attributed to the rumors about the monolines.
Remember M-LEC, and all those other magical saviors? They didn't happen. I think a lot of fools got fleeced in the last 90 minutes.
I'm staying out of the market for the next 2 days - 600 pt swing in a day is out of control.
don't forget that on the 16th/aug... there was a 5% gap in a matter of 3 trading hours.
King Abdullah better not have the caller ID turned on.
Well, at least the Dow did not close 300 up.
Irritating.
Sivaram, The market going down because of a potential or actual recession implying lower earnings is normal and requires no action. What we have been seeing in the last couple of weeks is a financial panic which merits action. The market drop has gone way beyond what would be reasonable given a 0 to -1 % GDP for the next couple of quarters.
jg-Suck it up. World may not be ending. Boo-hoo.
Is it just me, or did everyone else miss the punchline to CR's joke?
The options are clearly puts.
I'm staying out of the market for the next 2 days - 600 pt swing in a day is out of control. A nice 3 day rally back to DOW 13,000 would be nice - EEV/TWM/FXP will be verrrry cheap.
dunham | 01.23.08 - 4:08 pm | #
You can't imagine how badly I'm hoping for exactly that outcome. One more chance to go short with every penny. A short bounce won't stop the eventual outcome (Dow 9K) this summer. Give us some more monoline rumors.
Where are the banks going to get the money the State regulators want them to come up with? I'm hearing $15b in capital. Ha! I bet Citi wish it could find that much capital
Looks like everything is ok again in the world huh ?
Anyone who took Sivaram's investment advice just a couple of weeks ago would be living in a cardboard box right now. Just sayin'.
RE: Neustadt's resume. The man is running the financial arm of NYS Gov't and he has no in the trenches finance experience!!!!
It's all ass backwards now, people in power can't understand the language of their direct reports because they have no technical degrees. So they are led by the nose to the obvious decision. Great way to make a six figure salary with no paper work to worry about.
"Is it just me, or did everyone else miss the punchline to CR's joke?
The options are clearly puts.
Mark | 01.23.08 - 4:17 pm | # "
I missed it... good pick up... good stuff...
Any prognostications Banker?
rom 1916 to 2003," Benoit Mandelbrot writes in The Misbehaviour of Markets , "the daily index movements of the Dow Jones Industrial Average do not spread out on graph paper like a simple bell curve. The far edges flare too high: too many big changes. Theory suggests over that time, there should be fifty-eight days when the Dow moved more than 3.4 percent; in fact, there were 1,001. Theory predicts six days of index swings beyond 4.5 percent; in fact there were 366. And index swings of more than 7 percent should come once every 300,000 years; in fact, the twentieth century saw forty-eight such days. Truly, a calamitous era that insists on flaunting all predictions. Or, perhaps, our assumptions are wrong."
It is only in the context of the last few years that such a market move could be considered truly unusual. Consider that the 7% move that Mandelbrot mentions would be about 840 points on the Dow. Now THAT is volatility!
Barry goes on to show how in the last three onsets of a large market drop, they were followed by increased volatility both to the upside and downside. Looking back on 1997, 1998, and 2000, from the initial drop in the market we saw multiple double-digit moves up and down in the immediate months following. Take 2000:
"In December 1999 and January 2000, several 3% down days were registered. The market peaked on March 10, and two days later suffered a 6% drop (peak-to-trough intraday). The next day was just under a 4% whack.
"These moves set up what would turn out to be one of the wildest years in market history: From that March peak to the beginning of April, the NASDAQ dropped 29%. A 22% bounce by April 10 was followed by a 27% drop, a 23% gain, and a 23% sell off - all before May was over!
"From the lows in May, the NASDAQ subsequently rallied 41% by mid-July. Between then and September 1, the Nazz dropped 17.9% and rallied 21.0%. From September to December, the NASDAQ markets then dropped over 40%, to just about 2,300."
GERALD: "what happens when bonds get dumped because they lose their AAA. There will be no shareholders then."
Ambac lost its AAA and something like a hundread thousand bonds and ABS were downgraded late last week. Nothing happened. No panic.
Most of the insured bonds, from what I understand, are gravitating towards their underlying ratings. In fact there are supposedly some bizarre cases of insured bonds trading below non-insured bonds (which is totally irrational).
Futhermore, the insurance by the monolines is only a small component of all the whole credit problems. Monolines generally only insure the super-senior tranches and only insured a certain amount of the RMBS, CDOs, and CDO-squareds. The banks, hedge funds, and others, will still take losses on their lower tranches and non-insured MBSes. In fact, I will argue that the non-insured stuff is far larger than the insured stuff.
The monoline crisis is the biggest MANUFACTURED CRISIS since Bush's weapon of mass destruction and invasion of Iraq
Monolines CAN become a problem if they get downgraded all the way to junk. Right now, that is a long way away and depends on many factors. Many bears here expect all those conditions to materialize but no evidence of that anywhere.
That Ambrose Evans-Pritchard piece does not make any sense.
How does cutting rates help mitigate monoline counterparty risk, exactly?
More importantly, how does cutting rates on Tuesday help more than waiting until next Tuesday?
Yesterday's rate cut sent a clear message that the market can directly manipulate the Fed. Even if that is true of necessity, it strikes me as an extremely dangerous message to send.
banker , heiben,
it really is a party !
Rumors are swirling that Alopex Capital, the equity volatility arbitrage hedege fund manager founded by ex-Goldman Sachs and Soros trader Peter Van Dooijeweert is shutting down. The Global Vega Fund (no relation to Vega Asset management) was apparently seeded by Tudor Investments in 2003 and in a document filed with the SEC in April 2006 the company listed only $226 million in assets under management although people we spoke with list current assets significantly higher.
Aheadofthecurve, rest assured that Austrian economics is not on the agenda in Austria, too. It is good old deficit spending acc. to Keynes, but of course ignoring the saving in good times.
I am actually an archeologist with ancient money studies background (and MBA) and I hold a small percentage of PM just because I see firsthand what happened to money without exception.
Yes I had a Lederhose as a child...
ades & Mark --
See my comment on this thread @ 3:15 pm.
Just sayin'.
So have the financial markets decoupled from the global economy?
"But the time for tough-love is when the economy is humming along a little too fast, not when it is in the midst of a grave crisis. Calvinist monetary discipline at this point would wreak havoc, and possibly endanger the political stability of several countries (in Europe, if not in the US)."
Evans-Pritchard
No one has any answer to my points:
Common sense.
Where are the banks going to get the money the State regulators want them to come up with? I'm hearing $15b in capital. Ha! I bet Citi wish it could find that much capital
Lloyd
It came up with almost double that since Sept 30, but the problem is you can go to the well only so many times.
AotC-, B-, the world will be ending (or, at least the market will be crashing), but it is still three-to-six weeks away.
Yeah, Feds: Social Security and Medicare aren't enough of an anchor around us workers/savers; please, sign us up for MBIA and Ambac and FNMA/GNMA, too.
Nemo, as I stated at 4:11, A. E-P is a worthless hack. Ignore him to your benefit.
Ditto Robert Samuelson, Ben Stein, anyone from AEI, Heritage, or the Manhattan Institute, Amity Shlaes, and Optimistic Joe.
This is a new factor to look at for some here:
The proposed rule change would provide for: "...the adjustment of outstanding options for special dividends (i.e. cash distributions not declared pursuant to a policy or practice of paying such distributions on a quarterly or other regular basis). ... adding a $12.50 per contract threshold amount for cash dividends and distributions to trigger application of OCC's adjustment rules.
Dear CR,
I think it is kinda cool, when you get mentioned in the mainstream media, this is from the Wall Street Journal:
January 23, 2008, 3:56 pm
"Is Mortgage Default Losing its Stigma?
Are homeowners who can afford their mortgage payments walking away from their homes?
A recent post on Calculated Risk cites what it says are comments from a Wachovia conference call that said that some people who have the capacity to pay are deciding not to because they feel like theyve lost equity, value in their properties.
But when does the Mortgage Pig get picked up? That thing is my current screen saver.
Regards,
"Most of the insured bonds, from what I understand, are gravitating towards their underlying ratings. In fact there are supposedly some bizarre cases of insured bonds trading below non-insured bonds (which is totally irrational)."
Yes, nail on the head.
No need to sign up for ambac. Just quit paying your bills. What's the point in saving. Get a credir card and run it up. The banks will get bailed out anyway.
Anon, do you just find random bits to cut n paste to be a twat or are you just stupid?
Nemo i missed it twice
"Then the mini-rally was staged, and I started feeling like today may be "the big one," so i put on a couple of trades that backfired and then another one, and now i'm down slightly for the day. errrr."
I covered and went long @ 12.30 thanks for your support. Pigs get slaughtered!
There will be no gov bailout.
(1) This is the NY State DOI, not the fed or the US Dept. of Treasury. They have no money for a bailout.
(2) The big banks in theory could bail out the bond insurers, but why exactly would they want to do so?
(3) "Bailing out" these companies means making sure they have money to pay claims. Right now the companies can only pay a fraction of their future liabilities. Even a free billion dollars in capital just means they can pay a somewhat larger fraction.
(4) today is a good day to short the financials that rallied. BKUNA, NCT, and DSL are all deeply insolvent companies with huge option arm/MBS portfolios.
(5) as a matter of ideology, the people running the US Gov don't like local government spending, and don't want to further subsidize it by giving money to local gov bondholders. they'd rather use the money to fund the Iraq War and more tax cuts. Or in the case of the people running Congress, more spending on health and education spending.
GARY: "Anyone who took Sivaram's investment advice just a couple of weeks ago would be living in a cardboard box right now. Just sayin'."
I hope no one is dumb enough to follow anything I say. I'll be the first one to say that
All I have said is that I am personally taking the risk against some shorts here who said they were going to short the monolines to death... Monolines still have big problems ahead of them but we'll see if I'm right in an year or so... The game still isn't over.
Having said that, what's your advice?
SV - No panic? WTF are you talking about. The fed rate cut one week before the next meeting? Come on, you are analyzing with your heart and not your mind.
Although I do agree with you on the weapons of mass...
M in A- Why are people so dissmissive of 60 years of post-war stability and prosperity? has it been perfect? Certainly not. But compare it to any other period of human history and it comes out quite well. Moral righteousness is great in church, but should be left out of economics.
Twat has various meanings, clearly dependent upon which regional dialect. It is generally used as a vulgar synonym for the human vulva,[1] vagina, or clitoris, and is used as a derogatory epithet. In British English, "twat" is often pronounced /twæt/ (to rhyme with bat). In other areas (eg. Australia, New Zealand and North America) it is also pronounced /twɒt/ (to rhyme with watt), as was common in British English usage in the past.
Twat - Wikipedia, the free encyclopedia
Dork,
I disagree, I think the rally is on inside information on a bailout of Ambac and the likes.
What's laughable in this whole deal is that it still doesn't explain how the US consumption machine replaces housing in the coming years. It's still laughable how rate cuts make a technology stock more attractive. total BS.
" AotC-, B-, the world will be ending (or, at least the market will be crashing), but it is still three-to-six weeks away."
Market has already crashed, except in slow motion, over the last few weeks. It has reasonably discounted a recession. Whether it goes up or down further should depend on events in the real economy asnd their impact on profits, not panic related to bond insurance
brokeback - And all those rallies on M-Lec news?
"In fact there are supposedly some bizarre cases of insured bonds trading below non-insured bonds (which is totally irrational)"
Come on, SV.
Cursory examination reveals:
Insured Hovnanian bond vs. non-insured General Electric bond
Irrational?
We would need more information than you're providing. Which bonds are we comparing?
Insured vs. non-insured tells us little.
Oh, and Gooooooo Ammmmmmbaaaaaac!
Markit roundup:
Looks like modest improvement across ABX, the CMBX had ~12 new highs today...
Not just replaces housing but CRE as well.
I'll start going long when my Barber starts telling me about ultrashort ETFs.
Boy, some pretty sarcastic comments on this site. Have Ye no faith?
I just heard the guy from NY, talk about the "plan", with the banks to "inject capital" into the monolines so they can keep their AAA.
We have heard this before, but then it was a "Super SIV", with the same sort of money in one pocket and out the other. Of course it fizzled. And now that we are wise to these shell games (for the moment) this plan (the Super-duper monoline SIV?) will also fizzle, to be confirmed by a sudden drop in the market (my guess tomorrow afternoon, after the little guys have already been suckered back-in).
CRISPY&COLE: "SV - No panic? WTF are you talking about. The fed rate cut one week before the next meeting? Come on, you are analyzing with your heart and not your mind."
I'm talking about the municipal bondholders (i.e. those impacted by rating downgrades on insured bonds), not the rest of those out there. I agree that a lot of people are panicking...
SV - My advice to others like me, who do not have the size to move markets nor inside information: in the current environment, work, save, keep assets in FDIC insured CDs.
It has worked well for me the last 12 months.
When I think things have settled out, I'll consider putting some money back into index funds (i'm still in my early 30s).
But to me, you and the guys talkintg their shorts here are all a bunch of riverboat gamblers, not all that different from the would-be property flippers.
But to each their own.
Big, big effort by the hedgies, today (I've been logging volume of S&P 500 futures purchases over the last nine months): volume of S&P 500 futures purchases today was bested only by that on Nov. 8.
The hedgies are working VERY, VERY hard to keep the market up while they 'take out their trash.
Market has already crashed, except in slow motion, over the last few weeks. It has reasonably discounted a recession. Whether it goes up or down further should depend on events in the real economy asnd their impact on profits, not panic related to bond insurance
Aheadofthecurve | 01.23.08 - 4:42 pm | #
So far, no crash, not even in slow motion. When have big market moves ever depended on events in the real economy. Big moves up are normally a result of "irrational exuberance" and crashes of irrational panic. Still waiting on panic. This isn't it yet.
brokeback-You replace housing consumption slowly over time by a combination of:
This doesn't happen overnight, but can and will over time, given a change in leadership.
MT HOOD,
I'm talking about insured vs non-insured for the same bond. When insured trades lower (as supposedly had been the case at times) that's irrational! It basically tells me that people don't want to touch anything with the word insured bond, and would rather pay more for non-insured bond. Monolines may or may not go bankrupt but situations like that makes me think that there is a lot of irrational behaviour right now with respect to the monolines...
Absolutely, Gary, I'm trying to 'earn' money by speculating.
Absolutely, no different than flipping.
But, I've got a family to protect (i.e., we may have to live off of savings) during this coming greater depression.
I look forward to being done with this speculating, then moving to holding gold and gold mining stock mutual funds.
RE: Neustadt's resume. The man is running the financial arm of NYS Gov't and he has no in the trenches finance experience!!!!
Ummmm...no he's just a spokesperson for the DOI. You generally want your spokesperson to have a bit of media savvy. It also helps if they can read for comprehension.
AotC
Maybe I missed a key discussion you had recently but asking for some prudence does not appear to me to be dismissive of the great period after WWII (this period has seen many TEOTWAWKI scares and sofar many of these scares lead to a change for the better). But considering the new world (end of Communism) and it's desires some of the problems discussed in the 70ies and predicted for +/-2000 may finaly come to fruition (Energy(infrastructre) and food). BTW there have been many great periods in history that took 60 years and longer.
GARY: "SV - My advice to others like me, who do not have the size to move markets nor inside information: in the current environment, work, save, keep assets in FDIC insured CDs...But to me, you and the guys talkintg their shorts here are all a bunch of riverboat gamblers, not all that different from the would-be property flippers."
I don't think Ambac is up because of inside information. It's up because the shorts are covering. But the stock can drop 50% tomorrow. The stock price for the monolines literally means nothing. It's all speculation. I'm trying to look at it from a longer term point of view.
I think your strategy is perfectly fine for you!!! Benjamin Graham, as well as Warren Buffett, have said that you either (i) invest in a low-cost index fund, or (ii) try to pick investments on your own if you are interested and skilled at it. I'm trying the latter strategy, if that fails (Ambac has started out very badly) then I'll follow the first strategy, which is kind of what you are pursuing.
Well, on the bright side jg, the difference between you and SV is that you're making money
Today smacked of throwing in the towel selling and forced selling. The xoi/crude ratio made it all the way down to the lowest levels i have seen in recent history. each time we have been here in the past a very strong rally in oil/gas stocks has ensued. all along the natural resource spectrum stocks are priced for underlying commodity prices 25-30% below where the strips are actually trading. these kind of opportunities do not come along every day.
i know that i am very much talking my book, but if it turns out that there is a big disconnect between the financial economy and real economy both the resource stocks and the underlying physicals are going to fly.
we have not remotely approached a blowoff phase in any of these things. it is certainly not a requirement to end what has been a great bull run, but it would be pretty unusual for that phase not to occur. there have been no junior mining lovefests, or the equivalent with the majors. p/e's have never made it above about 15 except in the golds and they generally trade of cash flow and reserves.
to tie this into housing (which is afterall the blog) if we get a sentiment change toward US housing and with the current rate structure it is not much of stretch to believe that we could get one, it is going to change the recession/depression outlook dramatically. this last few weeks might turn out to be one of the great market fakeouts in recent memory.
Gary,
You are speculating too with your money in FDIC insured CDs. You've simply chosen a different, and in my view quite risky, way to speculate. You're counting first on the ability of the FDIC to meet it's commitments, and secondly that the value of the dollars you're holding doesn't decimate your savings. Good luck with that.
Exactly Gary,
Let's see thats Money- Laundering Executive Commision with all delenquincies sent back to the taxpayer. How is that any different than the Mafia?
But,..Paulson is so happy to see banks working together.
Ahead of the curve, you are obiviously happy, being ahead of the curve, but doesn't it irritate you that your mother's savings is being robbed form her and your childrens future is being sold away? It's not the money, it's the priciple that has been lost on all this. These Pigs knew what was going on years ago. Ahead or behind the curve, this joke is not going to be good for our future economy regardless of what you make out of it.
M in A- There are many problems that need addressing-you mention food and energy- and those are very serious. I see this current situation as really a diversion that is soaking up all of the attention that those problems very badly need. I don't give a rat's behind what houses cost in California. In fact, I am much more concerned with the very serious water situation there given that the climate appears to be reverting to its longer term dry state the with housing prices.
What I object to is dogmatic ideological correctness. We are human beings, Our lot in life is to face a problem deal with it and then expect another one to arise. Just lkike our ancestors dealt with large mammal predators. As an archaeologist, I'm sure you know that.
benny- See my response to MinA. You ideologues think that if you change this or that or eliminate this or that "evil person or persons" paradise on earth will dawn. That is not our lot as humans. Never has been never will Tough luck. Now deal with it. If you want criminal prosecution for bankers et al., I'm with you. Ruination for all-then you've lost me and most people not on this blog.
Ahead,
Ya, real slow. Just because rates are low does not mean people will be able to refinance. Housing has been projected to lose 30% and many of these homes were bought with no skin! Hence jingle mail. They would be best to just start up the bulldozers. So I don't buy your refi suggestion to any large scale.
Oil, i agree that there is a speculative froth but i don't see oil going down much past 70 dollars. That's not going to get gas below $2.50. Still a major strain on J6P living in the burbs with his Range Rover.
Increased wages and productivity? In what and with what. Corps are being squeezed by high commodity costs and have not yet figured how to pass this to the consumer.
Hey look, I'm hopeful you are right but I just don't see the US avoiding a reversion to the mean. Our standard of living has to come down. We are broke and now we just pissed off our creditor.
AotC
I can agree 100%.
If one just considers that the recession (threat) will put on hold parts of the private energy infrastructure investments. Infrastructure that has reached the end of it's technical life (30-50 years old !), I guess that will be the next "great Deal" in America, maybe a bit too late to not cause problems (in Europe too). Not talking about peak oil (Think of UK that wasted it's oil & gas assets and will be a big importer soon and at the end of the pipeline!).
it's its of course
benny-While those without equity will have trouble re-fiing, there is likely to be some government help for them. But, put them aside, and consider the millions of households (mine is one) with plenty of equity and good credit. I intend to grab the lowest rate I can and save myself a few hundred dollars/month that I can spend or invest. Multiply that by millions and that ain't chump change.
As for gas and productivity, a real investment in mass transit and energy efficiency will go a long way to address that and take up any workers laid off from construction.
If you say a lower standard of living, I prefer to say a better quality of life, with less time spent in traffic and working and more leisure. That works for me.
m in A- Well now we agree!
Best wishes to you
This really is crap about this dumb meeting, because this was a news story yesterday, which was overlooked; I saw it on the Yahoo bond news and posted here on CR!
So why a 600 point swing?
Much of the equity rally was spurred by a report from The Financial Times that the New York State Insurance Dept. is pressuring big banks to contributed $15 billion to prop up the bond insurance industry and preserve triple-A ratings.
Total crap!
IS everyone in Congress going to stand and applaud if he says' " the economy is stronG?
Probably. After all didn't a majority vote for the war in Iraq? And doesn't it keep funding it with multi-billions of dollars? A really wise way to use that money, right? And notice how few complain saying the money could be used for something else. I guess nothing is as important as doing Israeli's bidding and making Iraq into a US colony. That will surely solve all our economic problems.
AotC best wishes to you too, and for the insulation of the average American "cardboard" house.
And I meant "new New Deal", well those foreigners...
The talk about propping bond insurers is eerily similar to the talk about how all the banks would get together for a SUPER-SIEVE and help fix the problems with SIVs. Funny how that got nowhere, but the PR was good enough to give the market a few pops here and there. Of course, all those gains are gone now, but it sure did allow some traders to get out of uncomfortable positions.
Im thinking this will prove to be about as useful as the paulson supershiv.
Some details on Bloomberg and Financial Times
Banks, New York Regulator Meet on Bond Insurer Rescue (Update4) - Bloomberg.com
FT.com / Financials - Banks pressed to bail-out bond insurers
SivaramVelauthapillai is correct when he mentions there are insured muni bonds selling slighly below comperable uninsured bonds.
I asked a question about this odd situation last week. The only answer I came up with was:
A) if the insurance is regarded as worthless, then the premium should lower NPV. (unlikely)
B) they are more liquid, and therefore have been sold by people seeking liquidity.
Why isn't anyone talking about SRS anymore?
-16.92% in one day? Yikes.
SRS is scary. SRPIX isn't double short. Now, if you already have giant gains in that, yeh, you are going to take your lumps on rally days. But Ive sat through them before, and am sitting through this one. I'll hold this the entire year, despite the roller coaster.
Makes sense, Geoff, and I hope that you are right.
You sound like a politician. Looks good on paper but I don't think your math adds up. Who is going to pay for all this infrastructure. I mean it's a great idea. The Army needs recruits too?
Here is a thought for you. The government is broke and nobody is going to lend us money anymore? On top of that what is going to replace the taxes on these foreclosed homes that city and state budgets are counting on? The ECB is already looking to cut us loose and countries are already looking to other currency as the standard.
No new deal....It's going to be called the Amero Zone. The zone where Americans get to let their standard of living equalize with Canada and Mexico.
Ruinization, heck no,....prosecution absolutely. Didn't you love Orangelos golden parachute?
what,...no best wishes?? I'm hurt AC.
Good luck brother
and... why is the Secretary of State addressing the domestic economy issue?
Because the Bush White considers the American people a rogue nation.
No one is going to lend us money? Some one has bought a sh*t load of treasuries in the last several months. Do you know that defecits/GDP are higher in almost every country in Europe than in the US. Oh, and do you know what the atsndard of living is in Canada? Perhaps you ought to get off the computer and go there and see for yourself. I go about once a month and it's great!
Best wishes, but you are not as well thought-out or expressive as M in A and he is working in a second language. I bet you don't speak a second language...
What languages I speak? what difference does that have in our discussions? Two if it's that important to you. Should have been three or four but I was lazy. French, Itialian, and spanish are so close I could wing it if I had to. I know that probably doesn't make you feel any better but you can think of me as a FB in a trailer with no job if you like?
Here is a post. It is known we are broke as a country. It is known that foriegn counties like China have been financing our debt.
Is China holding or selling its U.S. Treasuries? - The New York Times
They are not interested in our debt anymore as BB continues to lower rates.
I will give you that they cannot allow us to fail as our consumption is second to none. So they may be FORCED to help us, for a time, much like the ECB may be FORCED to lower their rates. We sill hve a little clout.
we are much like Micheal Jackson and think we can just keep spending, but we can't. I don't think we will hold the world's currency much longer?