I wonder if Bernanke hasn't cut on purpose because he's concerned about the dollar falling out of bed and what that would do to inflation. And maybe even cause capital flight. Thoughts?
One thing is different when looking back over the history of the market...when was the last time that millions of retiring baby boomers who have been stashing away for a lifetime in 401k's in stocks suddenly realize that their retirement is about to go up in smoke.
I doubt the massive selling pressure has been so great because there has never been so many people so invested and so near the time where they actually need it.
Combine that with falling real estate prices and you have a huge reason to move to cash.
The last real crash in 2000 was big, but it was mostly speculative money and boomers were a decade away from retirement and real estate prices were rising.
There was a long and interesting profile on Ben Bernanke in the Sunday New York Times magazine this week. I think it was called: "The education of Ben Bernanke." It said Bernanke is to blame for some of the damage Greenspan did, because he advised Greenspan as a Fed governor in 2001. But Bernanke's style is very different than Greenspan's.
It said Bernanke is heavily data-driven and even could possibly be replaced by a computer program. It said Bernanke is a great listener and tries to summarize and guide FOMC opinions, not enforce them heavily like Greenspan. It said Bernanke knows better than anyone alive how politicians have browbeat Fed chairman in the past, and reportedly (according to the article) LBJ actually physically beat McChesney Martin while Secret Service men watched.
Based on this article, I would not look for an emergency rate cut prior to next scheduled meeting. I could be wrong.
... and have a public pulpit from which to kick and scream. Most people just have to take their loss and their pain with nobody to complain to, nobody to listen.
Don't be fooled by McCulley, he's not scared. He's one of the smartest minds in the business, and saw this whole mess all the way. And he's pure evil.
He encouraged the Fed to blow up the housing bubble, knew all about the corrupt shadow banking system (he invented the term), and now is calling for a bailout of the financial industry he benefits so much from. Do not be fooled by his wit and concerns for the economy. He and his ilk will have plundered the country blind before this is all over.
A couple of reasons why there have not been more cuts yet:
As you say, the Dollar and inflation etc.
They simply have less ammunition or room to cut this time.
Yes, many are nervous and want the Fed to cut. The problem is that there are solvency issues more than liquidity issues and the cut(s) will not really help much.
Watch the Dollar, Yen, Gold, Soft Commodities, Oil, etc. vs global markets.
mp, risk capital, and all the others who are more knowledgeable than me:
Is there counterparty risk in puts on the SPX? I bought a bunch with strike prices 800 and below expiring Jan 09. which I think is not a crazy trade ---I can certainly go into the logic, but I keep worrying there won't be anyone to pay up.
My broker says the CBOT guarantees them, but call me suspicious.....
TIA
Another point made by the Sunday Times magazine article is that the whole FOMC (not just Bernanke) is annoyed at how Wall Street is barking at them and scrutinizing every little move and word. They all think it's excessive and counter-productive. So, maybe this is a good time not to cave in, or else Wall Street will just demand more and more from them in the future. The article said this might happen.
01/20/2009 end of an error, Haloscan took it away. Bummer. I really liked that counter - instead Haloscan added some ads. Oh well, I get what I pay for (nothing to Haloscan).
probert,sure I repost that video of Cramer later today (probably at the bottom of the posts).
Yes, the counterparty risk for listed options (puts and calls) is through the Options Clearing Corp. OCC is the counterparty to both sides. But there's miminal chance they will fail.
Yeah, I agree. Those LAST rate cuts haven't done squat. They don't make a bad mortgage, CDO, SIV, whatever alphabet you want to add, suddenly become solvent.
Always wondered about that with my LEAPS, too. I think when we're seriously talking about "systemic risk", and the IBs are the center of the storm, it's always a possibility.
It'd be a bitch to make a mint that you couldn't collect.
Does anyone know about capital gains on the 2 year rule. Is it calander year or a running 2 years. I have 01/09 PUTS bought in 09/2007 that I debated on wether waiting till January 1 would be beneficial. Of course this is assuming they stay in the money till then.
CR,
Bummer I always liked the counter too I imagine it would have been high today. Thanks for a great read everyday. Nothing like getting news from 2 months in the future.
Yeah, scared of what their book is telling them. I'm still not convinced that sacrificing monetary stability on the altar of the market is in the country's long-term interests, or will actually do anything in the short-term. This blow-up was baked-in 2-3 years ago, or more.
It's definitely not, but since when has either DC or Wall Street been interested in the long term? "Long term" is only a phrase they use to get people to turn over their money to them.
Indeed, the acronyms have not yet come home to roost.
I think it's important to note that as the markets go down they will cause a variety of follow on selling. This is also true of the housing market. We are seeing now the effect of the housing market collapse overflowing into the derivatives market, then into the financial stocks, and on into the broad markets.
Credit bubble in reverse.
It's a good thing if you saw it coming and were able to prepare/profit.
"It'd be a bitch to make a mint that you couldn't collect."
Probably you would be able to collect it after a while, although maybe not right away if there are bank runs, etc. The broker must implicitly guarantee the puts and the put writers take your money when you are wrong, so they contractually must pay you when you are right and you have legal recourse against them if they don't pay up. Puts are a legally binding contract.
I'd worry more if I was in E-Trade or some other marginally insolvent broker. Not as much with Fidelity. Technically, the broker should only be making money with trading commissions as they aren't the counter-party to the trade, except in the case of margin where it could be said that they are financing the put writers on margin. So it may be a situation where you have to wait for you money while the brokers go after these insolvent counter-parties and milk them for everything they have, or the broker itself becomes insolvent and you may only get a portion of what is owed to you or possibly none.
I'm not a securities lawyer, just trying to apply common sense. Anyway, what's the old saying, gold is what you keep when you are worried about a return of your capital as opposed to a return on your capital.
One of the issues that I am still unclear on, even after 4 years of looking into this credit bubble, is what should we expect to be the effect of a reduction in Fed Funds target rate in THIS particular environment. It'll steepen up the curve for banks... ok what else?
Misean, et al, be clear on this: Conjure is not bearish on gold. He is neutral. Conjure is simply warning all to be very careful with gold in this environment because it can bite you in the ass.
It takes a rich man to get really scared of becoming poor. Whereas the poor have been poor all their life and become used to other people not giving a hoot.
Just which assets can one move to? They're all declining in value. Might as well stay put provided there's some cash for near term.
probert, I think cutting the Fed funds rate will have little impact this time.
A Fed cut can't help housing - once the speculative phase was broken, the bust has to run it's course. A fed cut can help the banks with lower borrowing costs. And a Fed cut can help (with a lag) some business investment.
Hopefully the recession will also knock down inflation (it usually does) and it would be very helpful if oil prices fell significantly. If inflation stays high, the Fed's hands will be tied.
Tomorrow is a really tough call. I doubt the Fed wants to cut a week before their scheduled meeting. If we walk in tomorrow and the Bank of England has cut 25bps, or s&p's are more than 7% down, then I think they may go 50 tomorrow and 25 or 50 next week. Of course, then they run the risk of looking awfully stupid when the next employment report isn't that bad (which claims suggest will be the case) and we have real interest rates at negative 1% after the next inflation report.
energecon, Conjure has smoked 4 macs so far today and is becoming fairly grizzly. I suspect that it will take 6 or 8 hours of Duck Tales tonight to calm him down.
If you're a boomer close to retirement aren't you supposed to have insulated your portfolio from long stocks by now?
Yeah, and in theory communism works. I bet there's a bunch of boomers who got burned in the dot coms, and decided to take on a little more risk in the hopes of making it back up.
FWIW, I am also leaning towards a "damage is done" viewpoint. The fed rate cut affects the expected cost of money; the plunging markets are reflecting a re-valuation of many underlying assets. Not the same thing at all!
Investor A: "This bank stock smells bad. Sell! Sell!
Investor B: "But they are going to cut rates again."
"At GLD, there's unleveraged gold bullion sitting in a vault with your name on it. And nobody can steal if from your house."
Alot of debate, James Turk et al, about whether the GLD actually has in POSSESSION all the ozs it claims. Also, those are NOT your ozs. That is clear when you buy the GLD. You have no entitlement to them. You merely participate in a fund that tracks the price movement of bullion. You do not own any apportioned share of that bullion. With physical, it's yours, end of story.
"I bet there's a bunch of boomers who got burned in the dot coms, and decided to take on a little more risk in the hopes of making it back up."
Dave, you owe me a keyboard - I spit wine all over it!
I wish I had a dollar for every time I heard one of my contemporaries (I'm a boomer) say exactly that.
That is precisely the attitude they took on just after the dot com bust. And, to top it off, they invested in real estate because it "never goes down".
I plan to work until I'm of a much older age because I enjoy what I do. Others of my generation will continue to work because they must.
A Fed cut can't help housing - once the speculative phase was broken, the bust has to run it's course.
One sentence, all truth. The Fed imagines a cut giving the banks more margin but that only works when they make performing loans which cannot happen at current real estate prices. A reduction in prices kills their Re loan portfolio. Catch-22 and why CR is spot on.
Still to early to tell if the global sell off is continuing with New Zealand, IMEO, because NZ didn't sell off significantly on Monday, but NZX is now off over 4%.
This will mark 14 down days in a row for the index if it holds; last up day was 31 Dec 07!
Allow me to dispel a few myths being bandied about-
1) PE ratios mean absolutely "zero" in a recessionary environment, the trailing pe's being touted on a valuation basis for supporting one's position are toilet paper.
2)Those claiming they use "technicals" to trade daily in a "leveraged" market are complete morons.
3)Hedge funds are/will amplify the problem, the IB's per published reports have been reducing/eliminating leverage to hedge funds and increasing margin rates, normally non-correlated assets will again (like August) become correlated.
4) Those predicting the size of the move in the indices are not taking into account when comparing this to prior potential recessions the effects of leverage, we are more leveraged now than in any time in our history and the predictions being tossed about can be thrown out the window, up or down, past periods do not mean squat.
5)The credit contraction taking place and the future contraction of credit will make this cycle a long period of subpar returns, interest rates are going much lower, and this will be a tough. but, manageable period.
6)Commodities being immune is complete and utter bullshit, see hedge comments.
Mish -- the uberdeflationist -- has dispelled the notion that deflation is bad for gold on numerous occasions."
Mish makes some good points, but I wouldn't say he proved the point. Gold is a complex beast, I'm not that confident to make a call on it during inflation or deflation.
i do own a few thousand shares in a Swiss acct but most in junior mining stocks and some in bullion. it is what the hedge funds buy however when times get rough since they like the liquidity so as long as u accept that u can still make money.
tj
i don't think a 100 pt cut will stop the fall tomorrow given the worldwide damage done today. compound that with a coiled spring from Fri OPEX props and Ambac and down we go. if the cut comes in pre hours look for an opportunity to short into a temporary bounce.
Sometimes when you are ill, you make an appointment with your doctor; other times, you go straight to the emergency room. Now is an other time. ... Time is of the essence. What needs to be done needs to be done. Now."
Neverminding the merits of a rate cut right now, I think the idea of the Fed as a doctor is the most dangerous idea in economics today.
IMHO gold isn't an inflation -or- deflation play, it's an "instability" play. High inflation and deflation are indicative of economic and/or political instability, so it's easy for people to confuse the two.
As far as I know, PIMCO's loaded based on the assumption of a rate cut, so McCulley is talking his book. I don't mean to say he's wrong, but he is talking his book.
The foreign markets diving during the holiday gives them the perfect chance of playing possum, doing nothing and letting it nose dive.
They have to know that the sooner it resets the better, the speed of the shock should prevent everyone from whining for bail outs. Wake up on Tuesday and it's a done deal.
Quick reader poll.... Who thinks it unwise to buy a bunch of PUT options at the open tomorrow? (specifically, LEAPS on the Nasdaq, Russel2000, plus certain banks, bubble-techs, IBs, retailers, and casinos).
I am very short on courage today... This seems to me a very risky time, but also a possible big move down.
I wouldn't be surprised if there is all sorts of panic selling. But generally, panic selling makes you a sucker - especially if you did some panic buying near the top of the market.
One thing I would like noted, is that while rate cuts may not 'save' housing, the affordability is definitely on its way back and will bring some buyers back. You can get a 5.0% 30 year mortgage now if you are willing to pay 2 points (ditech.com) Compare the monthly payment on a 300k mortgage at 5% vs. paying 400k a year ago at 6.5% - huge difference!
One funny thing - I was kind of expecting to see my Starbucks here in Orlando much quieter over the past month. It is just the opposite, I haven't been able to find parking near the starbucks - it was as busy as I have ever seen it the past couple of weekends. The local bars were overflowing for the past few NFL palyoff games also.
You guys know those roadside signs taped to traffic light poles and so forth? You know, for home based businesses and meet singles now? Saw a timely one in San Diego yesterday:
WE BUY GOLD
Either hoarders, or capitalizing on down-and-out HELOC'ers. Either way, ouch.
I don't think they're lying, because that would be fraud. It's physical gold that the ETF owns, and as a sharehholder you own a piece of it.
The gold and silver ETFs are different than all the rest. They actually own hard, unleveraged, un-derivative-ized assets. It's more efficient to own GLD than any type of buillion, after commissions.
I'm thinking the premium will be insane tomorrow if the futures are down anything like they are atm...which is not to say that would not pay off in a big way. But entertaining similar thoughts...anc concerns.
PIMCO doesn't really need to talk its book. The Fed's gonna ease, it's just a question of how much. So PIMCO's positions either appreciate now or in the near future.
CR said' "If inflation stays high, the Fed's hands will be tied."
I beg to differ with that comment. Inflation isn't "high." Perhaps it's a little higher than it's been, but compared with the 70's, this is no big deal. The Fed will not be held back by inflation concerns. If the solvency of the banks and brokerages houses is at risk, they will ease. Not that easing is necessarily a cure, but easing is the only arrow in the quiver for the moment.
University of Maryland economist Carmen Reinhart and Harvard University economist Kenneth Rogoff agree. They say the current crisis appears on track to be at least as bad as the five most catastrophic financial crises to hit industrialized countries since World War II.
If those past experiences are any guide, the economy is in trouble, they argue in a recent paper. Indeed, "if the United States does not experience a significant and protracted growth slowdown, it should either be considered very lucky or even more 'special' than most optimistic theories suggest," they write.
gab - inflation is almost as high as it was in the 80s, the only reason its not reported as being so high now is that the Fed, changed its inflation equation (CPI) in 1990.
Check out this website to compare inflation with the current equation vs. the old equation. Inflation now is very high (>10%)
I really hope they do cut tomorrow morning; lets get this last hope out of the way and get on with correcting the excesses ( as seen by the equity market).
I don't think it would do any good - the reaction of the market to the TAF announcement, BB's speech talking of substantive aggressive cuts, to Bush's stimulus plan is pretty indicative - the market participants don't buy it.
I don't think he WILL cut - a prime paradigm for Fed behavior is that their actions WORK and be SEEN to work ! after all the wizard of Oz must not be seen to be powerless ! It used to be axiomatic that they acted AFTER the market has turned - taking credit for what the market has done anyway ( recall how the market turned in Aug on Thu. afternoon, before their early Fri . am announcement of discount rate cuts and a new Fed statement).
They are already smarting from the failure of the TAF announcement and BB's speech to halt the market slide. They won't risk another IMO.
We'll see. The tension is killing me ! Lets get it on already !
Don't do it. Whatever evil is going to happen tomorrow, it is too late to front run it. You're either positioned for it, or not. I lost a fair amount of cash last summer trying to front run a Fed-rate cut day.
If you do have the gumption to put in an order before market open, at least use limits, for God's sake. The gap down is likely to be insane.
Playing any bounce during the day or this week is a better play, IMO. I've got plenty of dry powder to use once the dust clears.
Regarding buying options tomorrow. Volatility in the markets has been high, and expectations for future vol will also be high. So option prices will be high (both for calls and puts) regardless of what the market does. I have seen, many times, options positions go down in value even when the market moves in the direction which should be beneficial to the option, due to volatility declining (or, more specifically, implied volatility or expectations of future volatility).
Profits on options on futures (like S&P 500 futures) should be taxed liked futures - 40% income and 60% long term capital gains. While the OCC guarantees the counterparty, the exchange (and your broker) set margin rates daily, to ensure that there's enough cash in your account to absorb the loss of most daily adverse moves. If not, there will be a margin call, which, if not met, will result in the liquidation of your positions. So in theory the counterparty risk will be only one day's adverse move. Of course, this can be quite large.
It was a holiday in NZ on Monday, so they're only playing catch-up to yesterday's selloff in Asia and Europe. It's not an indication of a new downleg, not yet at least.
Ditto central -- don't try it. I tried exactly the same strategy last year and got my ass handed to me. The market & options will open exactly at what the futures say they'll be, so the big gains simply aren't there. Meanwhile, you get left holding the bag when things reverse.
The reason Pimco wants an emergency rate cut is because they are stuffed with junk! Just look at the mechanics of the portfolios and strategies:
Bill Gross recently singled out Agency mortgage backed securities as one of the high quality sectors that have underperformed Treasuries and should offer compelling value. Can you elaborate, given whats going on in the market and at the Agencies?
Simon: Agency MBS are yielding more relative to Treasuries, swaps and Agency debt than they have in over 20 years. These are extremely high quality securities that are collateralized by single family homes, and carry guarantees by government sponsored enterprises (GSEs) or the full faith and credit of the U.S. government in the case of GNMA. Although there has been a run of bad news coming from Fannie and Freddie relating to credit losses and capital positions, PIMCO is not concerned about their ability to provide guarantees for MBS.
And finally, even though Fannie and Freddie MBS do not carry an explicit U.S. government guarantee, a default by the Agencies would be catastrophic for the U.S. economy. This view is the basis for most investors belief that the U.S. government would not allow them to fail.
Federal National Mortgage Association (FNMA) is a privately owned corporation, which provides a secondary market for federally guaranteed or insured mortgages as well as conventional mortgages. Its stock trades on the NYSE. It issues a number of different mortgage-backed securities, with values that are sensitive to changes in prevailing interest rates.
This article contains the current opinions of the manager and such opinions are subject to change without notice.
For those who think Canada is such a peaceful place...ongoing drug wars being fought in the streets of Vanocuver. The murder rate in Vancouver makes it the deadliest place to live anywhere in North America (based on murders/100,000 residents).
VANCOUVER -- Two men were shot to death just outside a swank, high-end restaurant frequented by celebrities and Hollywood stars on Saturday night, ending a brief lull in the city's spate of gangland violence with a hail of gunfire.
The victims had been on their way to a private party at the Gotham Steakhouse and Cocktail Bar when two assailants gunned them down before horrified pedestrians
Pimco wants a bailout pure and simple because they are tied to lots of trash, like this: As of September 30, 2007, TERI had a Baa3 counterparty rating from Moody's Investors Service, which is the lowest investment grade rating, and an insurer financial strength rating of A+ from Fitch Ratings, which was subsequently downgraded to a rating of A on October 25, 2007. TERI also had a rating of A from Dominion Bond Rating Service as of September 30, 2007. Dominion Bond Rating Service initiated coverage of TERI on May 15, 2007. If these ratings are lowered, FMC's clients may not wish to enter into guarantee arrangements with TERI. In addition, FMC's up-front structural advisory fee yields could decline or market conditions could dictate that FMC obtain additional credit enhancement for the asset-backed securitizations that it structures, the cost of which could result in lower revenues. Finally, if TERI's ratings were downgraded below the ratings TERI held in January 2003, or if Moody's Investors Service or Fitch Ratings were to place a negative watch on TERI, FMC's agreement with Bank of America relating to the purchase of direct-to-consumer loans would terminate. In January 2003, TERI had a Baa3 counterparty rating from Moody's Investors Service and an insurer strength rating of A from Fitch Ratings. If TERI experiences a material adverse financial change such as a reduction of its credit rating below investment grade, Bank of America could suspend the processing of new applications for school channel loans.
Vancouver has lots of immigrants - Canada might regret its very very libral immigration policy over the past 20 years. Wouldnt be surprised if the crimes were committed by immigrants.
the aussie market is going to open down a whole chunk. Whether it stays down, or falls further, will be determined by what reaction Japan and the other asian markets have.
On the other hand, I'm in australia now and the economy is jumping. Low unemployment and high wages restaurants are full and so on. CD rates over 7%. Darwin recently claimed dubious honor as the countries least affordable city for housing (resource boom).
There isn't quite the direct CNBC connection people feel with the markets as there is in the US. Few people are more than dimly aware of some distant thrashing on the financial pages.
LOL! last summer with silver at $14 i went out and bought 2 bags of silver rounds and stuck them in my backpack thinking i'd just throw it over my shoulder and walk out. damn, i almost broke my back! ppl were looking at me like what the hell u got in that bag, man?
--
McCulley is part of the gangs of Fraudsters. H needs to serve Bankrupters and Fraudsters to be in good standing with them. It is very important for him and Bill Gross.
Gross is grossly ignorant of the UST market. He changed is range for 10-Year yield from 3.0-4.5% to 4.0-5.5% once the yield went above 5%. Then he hired the moron Greenspan who said the 10-year rate will go to 8% and Gross changed his range to 4.0-6.5%. All within the past 12 months. Guess, where are we now?
I have never wavered from my bullish position on USTs for 15 years. I predict below 2% yield on 10-Year before 2009 is out.
There are leaders and then there are propagandists and followers. Money whores can never be true leaders. Gross and McCulley are power hungry money whores and there is lies their doom as truth tellers.
Thanks for your thoughts re: buying puts at the open.
mp, dont worry, I bought a bunch of them beginning about 3 months ago. However, Im looking to increase my positions over time (this time with some cash I got from selling gold bullion). I think this bear market has a long way to run. So Im just trying to pick my spots. And I need to hedge my remaining gold bullion holdings with some PUTS that will move opposite to gold, most likely.
I need to be patient and buy on the mini bull runs that will inevitably happen
SC - if you are already in, and looking for more action, hold your breath at 630am tomm PST, then wait for the inevitable bounce before reloading the sho(r)tgun.
carnage down here NZX lost 3.92% in 27 minutes of trading.
NZX web page ticker down.
Aussies yet to open...
whats that sucking sound
andy in NZ | 01.21.08 - 4:40 pm | #
AHHHH!!!Panic among the JAFAs at coffee shops all over Parnell. If I were you I'd move into the mountains around Wairoa and start growing ganj and take up witha plump Maori girl!
This is one boomer who learned the hard lessons of the dotcom bust. It sounds sooooo stupid now, but up to that point I thought my "financial advisor" was really my advisor. Now I understand that brokerage firm retail staffers are financial advisors the way a used car salesman is a transportation advisor. The retail investor is the plankton in their food chain.
Now I know better, but not enough better. I did sell off a bunch of stuff and increase my cash and equivalents significantly a couple of months ago, but I let my broker talk me out of my best instincts to sell even more equities. (He did earn his commissions about that time when he talked me out of buying WaMu when the yield hit 6 percent.)
If the downturn doesn't last many years, I guess I'll have some dry powder to recover some of what I'm going to lose this week.
The biggest lesson I learned from the dotcom era was to beware of high rates of return and the people who sell them.
i'm just guessin but i don't think they'll do an emergency cut in the morning either as it would be seen as responding to foreign mkts. but if we tank 500 pts look for a cut the NEXT DAY. that could be the ultimate bear trap. i would just day trade tomorrow and close out end of day.
There are about $11.6 B of TIO auction disbursed tomorrow, about half is a two day maturity and the other half is an eight day maturity...wonder if there is no rate hijinks there might be a big snap auction...
Dave NYC - Some people moved into the house across the street from us - about 2003-4. Said they had lost a lot of their retirement money in the bear market and needed to make it up. So they bought a house - figuring they'd make a bundle. From the frying pan...
As for physical gold - I happen to own some. A constant reminder of my belief that the world was ending in 1980-81. Terrible investment. But - I think if you're going to own physical gold - you want it in your house - or your own personal safe deposit box. If you think the world is ending - why do you think that some stranger far away is going to handle your gold properly? Roby
Regarding options, I've been buying spreads, that way you mitigate the increased risk premiums being charged now. It decreases your potential payout, but I usually buy fairly far in-the-money puts and usually aim to make 100-150%. It's worked well for me, profitable, yet still able to sleep at night...
However, a major index fall at this very early stage of a recession could result in an inversion well below fair value, as most investors thinking in terms of a liquidity trap will be very slow to bottom fish or see this stage as an opportunity for future value; however, future value being subjective, one must realize there will be opportunities to cost average after some of the smoke has cleared, and then be willing and able to wait long term for yield enhancements! This stage is what I would call the falling knife period which needs to go through at least a six month period of consolidation/digestion; however, as housing remains as an unwinding bubble associated with other financial bubbles related to GSEs and globalized setbacks, earnings growth will remain very challenging if not stagflationary, compounded by industrywide bond problems, class action impacts and inflation related pressure associated with oil and food costs. In a nutshell, cash is king, dont spend a dime on anything unimportant!
"can u imagine fearing a 20% wipeout of your portfolio right when u wake up?"
idoc | 01.21.08 - 5:50 pm
Perversely, perhaps, but tonight my biggest fear is that they'll halt trading before I can get my order in and filled.
On Topic: when informing the wife about a possible surprise rate cut tomorrow, she quickly replied, face beaming with anticipation, "I want a pony!"
idoc, please keep it up.
Do you have a tip-jar?
Finished 2007 finances: Sweetums lost $200K day-trading, but family finished + 10.2% Less than previous but marital unit fully intact. That's more important.
Thanks to you, other posters, CR and Tanta.
Went totally ultrashort last Thursday, sold all GLD and GDX. 5 different reasons. Only holding DBA as commodity inflation hedge, shorting my beloved emerging markets (EEV, FXP). That was tougher than I thought, married them too many years ago.
And of course, SRS, SRPIX, SDS, DUG, SKF.
That cry you hear is from India Goats rounded up for the slaughter who are now facing the same fate as they watched for America Pigs and ignored. Even America Pigs are resting their hopes on China Bulls and India Goats to keep consuming. Not if lot of China Bulls and India Goats get slaughtered.
Indias Crooks, trained in America, or badly copying America, took pages out of Americas Crooks on how to scam the public (Pushing Debt and goosing up the Scam Market), spiced it up for local consumption and then they started serving the hot curry to America Pigs and the rest. It was the rush of Americas Crooks and Pigs that took India Goats to a whole new level of delirium.
Let me be clear: Slaughter of America Pigs, China Bulls and India Goats has begun in earnest and impotent Bernanke and Bush are of no help (they could make it uglier, though). What sort of dope would put faith in these guys' ability? In case it matters, American People are politically impotent. All the real political power rests in the hands of Americas Crooks. Policies that favor America's Crooks will keep getting implemented in the name of helping the overall economy and at the expense of hardworking Americans. I am sure that it is no different in India.
Rule of the Crooks always ends badly, be it America, or India.
Sorry kids, I screwed up on a few assumptions, I think The S&P 500 E/P will be more like 6.08 and with bond yields falling the 10 year will probably be more like 3.4%,
Thus S&P Fair Value for tuesday will probably at least 2.7%, thus a range around 1290 +/- 2%
Austock Securities client adviser and strategist Michael Heffernan said there was ``blood on the floor'' with the market falling three per cent in the first few minutes of trade.
"I think the blood bank is trawling all broker's floors to recover the blood,'' he said...
"Aussie stocks are set for their largest one-day fall since 9/11," Martin Slaney, head of derivatives trading at GFT Global Markets in London said in an email, prior to the start of trading.
"There is a wave of panic emerging as the fear unfolds."
One last caveat, a fair value valuation is a target that could happen in the first hour of trading, or it could take 3 months, but I would assume with markets being on high anxiety that we will see a blow off fairly fast and then ease into a new era of a recession, where fair value will be further impacted by decreasing EPS along with lower share prices and thus lower earnings. A flight to Treasuries may occur but the liquidity trap is looking more real every day, i.e, where yah gonna run?
Because it is grossly undervalued relative to Euro and, especially, the "POND." Brits are worse dopes than Americans. Indians are somewhere in-between because of the greater American influence these days. Indian Rupee the also grossly over-valued.
Gold is the best currency and Swissie in next in line.
Re McCulley and Gross - both post monthly comments on the Pimco web site. Gross is usually on or near target with regard to his general observations - and he doesn't wear his politics on his sleeve. But his interest rate predictions are awful. McCulley always just sounds like a shill to me - both in terms of economics and politics - and he rarely writes anything interesting.
FWIW - I think anyone who thinks he can predict anything in the financial markets with accuracy doesn't have to make a living there. At best - you try to make intelligent decisions based on probabilities.
Like with Jas. I am bullish about bonds like he is - and have been for a long time. But predict a yield on the 10 year note down the road? No way. All I know is that at a certain price/yield - I'm a buyer - at a certain price/yield - I'm a seller. And to determine those levels - I look at my charts (we've been in a pretty wide trading range for quite a few years - but it is still a trading range - so I look at the horizontal lines that form the trading range). And I use some common sense (I sold shorter term treasuries at yields of about 1-2% - can't remember the exact yields - in the early 2000's). That was a no-brainer.
Risk Capital - I used to talk with a lot of leveraged traders (futures traders) who used technicals on other internet places a long time ago. Most went belly up - but a few did ok - and some are still around. Takes a lot of dedication - time - a fair amount of capital - and more than a little talent. And sometimes other skills. I did a little day trading in the 90's - and - I swear - I just couldn't follow real time screens fast enough. It was like playing the higher levels of video games (which I'm not good at). In fact - one of the best traders I knew had been a fighter pilot in a former life. Real time trading screens were a snap compared to the control panel in a fighter jet.
Misean - You're weird (smile). But your story reminds me of an equally weird story. My husband (who BTW - not only talks to me but loves me after 37 years of marriage) once settled a case for a fair amount - and his clients - who never had 2 nickels to rub together - asked him to deliver part of the settlement - $100,000 - in cash to them - in $100 bills. Which he did. And then they threw the money on the bed and rolled around in it all night. Roby
ABC covers yesterday news and baby births and new tree plantings things of substance are edited out because they are beyond Grade Two comprehension
Anonymous | 01.21.08 - 6:52 pm | #
Network news and print media is a thing of the past...I don't understand why all these network anchors are still held in such high esteem. When they moderate at these debates, they just come off as irrelevant, desperately trying to appear important.
Is this it? Is this the big one? What will the FED do to avert a panic? Can the US survive?
Sounds like a good promo for a reality TV show! Tomorrow is going to be illuminating on many levels and I am looking forward to the action. remember that it is during a panic that some of the dumbest moves are made by our pals in the government. Look and listen tomorrow, it is going to be a show.
The Fed has more leeway, though inflation has picked up faster in America than in the euro zone. Judging by the spread between American Treasury bonds and Treasury Inflation-Protected Securities, investors' expectations of inflation between five and 10 years hence have been falling.
Given the American backdrop, the Fed's recent decision to step up the pace of interest-rate cuts is understandable. The weak economy poses a bigger danger than inflation.
But there are risks. Even if commodity-price inflation wanes, the falling dollar means America faces other inflationary threats. And if overall price pressure remains stubbornly elevated, inflation expectations may yet rise. If that happens, the Fed will face the unenviable task of curtailing its easing or even raising rates while the economy is weak.
IMEO Odds of a big bounce late tues. or midday Wednesday are increasing. Too much fear...
AAPL reports on Tuesday (after the markets have closed). Those numbers should be locked in regardless of what transpires between now and then. Might make a difference on Wednesday tho.
"They are already smarting from the failure of the TAF announcement"
the TAF did not change the stance of monetary policy. The Fed actually withdrew funds through open market operations as it injected term liquidity through the TAF.
The Economic Outlook and the Fed's Roles in Monetary Policy and Financial Stability Charles I. Plosser President and
Chief Executive Officer
Federal Reserve Bank of Philadelphia
Main Line Chamber of Commerce
Economic Forecast Breakfast
January 8, 2008
No helicopters, no printing presses, in the front door and out the back.
"The gap between what you know and what you think you know is always dangerously wide."
Nassim Talib
--I would not buy long term index options on a high volatility day. I would just about always compare todays implied volatility with historical volatility before buying an option. If I really want a stock option on a day when volatility is high, I would buy a far in the money option and/or a debit spread (buy closer option, sell further out option (as Bob in Mass suggests. I have > 120 put positions and about 10 call positions on about 50 stocks. At least 95% of my positions are in the money, which feels good. I may close some Feb options tomorrow to take profits, but otherwise, I'll just take my chances over the next 2-3 months. My expectation is that a recession, fairly strong one, should be priced in the next few months. Buying in the money options mean that you are not spending most of your money on time value. I hate paying for time. This conservative approach has paid off well and the leverage is still much better than buying or selling short stocks. I also trade index and commodity futures, but trading on a high volatility day is too scary for me and I don't have time to watch the market all day. As Bob in Mass mentions, this means that gains are usually between 50-150% (rather than 200-500%) but a high percentage are winners, at least when you get a big market trend right.
No helicopters, no printing presses, in the front door and out the back.
"The gap between what you know and what you think you know is always dangerously wide."
Nassim Talib
Anonymous
Unlike you I don't hide behind an anon handle and first, if you've read pasts posts in here, many commentators including me has discussed the way the TAF is balanced by 2 other actions of theirs ( you wanna name them ?).
Second if you bother to actually read my statement, it does say TAF announcement.
"This is one boomer who learned the hard lessons of the dotcom bust. It sounds sooooo stupid now, but up to that point I thought my "financial advisor" was really my advisor. Now I understand that brokerage firm retail staffers are financial advisors the way a used car salesman is a transportation advisor..."
John Stark - What you said was important. Along with what other people have said about boomer investments. The average financial advisor is following a formula - something like "your equity percentage should be the inverse of your age or higher" - like I am 60 and should be at least 40% equities. Or listening to the squawk box in the morning which tells them the party line in terms of what they should try to sell to their clients that day.
I mean - don't you love the way GS trots out Abbey Joseph Cohen (permabull) on CNBC while the company is shorting the heck out of the US economy?
The average FA knows zilch about bonds compared to me (that's what I know the most about) - and probably zilch about equities and other markets compared to what people who have been studying them for a long time know.
My primary rule of investing is no one cares more about your money than you do. And if you're in tune with yourself in terms of what you earn - what you spend - what you want in life - what your risk tolerances are - etc. - you can do a better job managing your financial life than any FA who is just "playing by the book" - a book which in all probability doesn't apply to you.
BTW - do not let a broker ever talk you into anything you're uncomfortable with - or don't understand. And if you can't just hang up the phone when they try to talk you into things - do all of your investing on line. Your computer will never argue with you.
As you can tell - I am a big fan of DIY. But to do it yourself - you have to be willing to spend a whole lot of hours doing a whole lot of learning. And be willing to make mistakes. I know I made just about every possible mistake when I was learning - and I still make mistakes. I suspect there isn't a single investment I haven't lost money on (except for CDs). When you're young though (and I think a lot of you are younger) - they're relatively small mistakes in terms of what you lose (unless you're dealing with a big inheritance!). I can't say practice makes perfect - but practice does make "better". Roby
Yup! Some people with psoitions in the wrong direction are scared. Maybe PIMCO's book may not be that hot right now???
You and many folks who have been on this blog since 2005 saw this freight train coming!!! I am not in the least bit surprised at what is transpiring.
Chuck Prince wanted to keep dancing and now the the musical chairs are over.
I think it would be useful to those just coming to this blog now to see the "vicious cycle" chart you did when the talk of the town was the savings glut and the liquidity gusher and the "virtuous cycle" of increasing asset prices leading to more MEW to larger deficits and external dollar reserves to increasing financial asset purchases. Now we have begun the reverse cycle.
Its not time to gloat and say I said so when many will suffer. What I'm upset about but recognize that is the reality is that on the way up Wall Street and The Hedgie's liked their billion dollar bonuses and credited their own ingenuity and "free markets" now they want us common folks to bail out their homes in the Hamptons. And our fully paid politicians will oblige with their hands deep in our pockets.
When do we get our fellow citizens with pitchforks storming the bastille to rid us of this corruption and hypocrisy in DC & Wall Street???
The China Banking Regulatory Commission (CBRC) will implement monthly checks on major commercial banks' subprime investment positions, the official China Securities Journal reported, citing a source close to the matter.
The CBRC will monitor both realized and unrealized gains or losses, the report said, adding that the ""major"" banks will include Industrial and Commercial Bank of China (ICBC), China Construction Bank and Bank of China.
Why do some continue to insist the Fed is able to move the market fundamentally? It's puny in size by comparison. Besides, the market fell from January 2000 to October 2002 all the while the Fed dropped the FFR, and rose from there to the August 2007 top mostly while the Fed raised rates.
Aren't Fed rate cuts affect the markets like cocaine? There's a brief burst of euphoria and then an edgy, dispiriting malaise sets in... and it feels worse than the nomalcy that preceded snorting the lines.
Anonymous coward wrote: "The murder rate in Vancouver makes it the deadliest place to live anywhere in North America (based on murders/100,000 residents)"
There is a learning curve with investing, especially of the more leveraged kind. In 2006, I gained 150K during spring and summer in my options accounts and then lost 180K during fall and early winter. That took a lot of self examination. I've spent about 20 hours of study per week over the last three years and in 2007 did really well. Now I need to gain enough in the next couple of months to pay last year's income taxes. Keep trading small until you really understand what you are doing. This is a comment for newbies. Certainly this site has helped in my bearish picks and on a few occasions I immediated bought options after reading an article on this block.
I love the doctor analogy. Only problem is that the rate cuts are analogous to antibiotics and today's docs are trying hard to minimize antibiotic usage - it breeds new forms of bacteria resistant to the treatments in the first place.
Someone once compared the CDOs as akin to a virus that has spread throughout the financial system; viruses just can't be treated with antibiotics...you have to let it run its course.
Thanks Rob Dawg - I think that's the nicest thing anyone here has said to me. But I don't have the time to do a good job of it. I just hope that some of what I say here when I am "thinking out loud" might be useful to some people.
IMO - this is a scary time. I have been through scary times before in many different arenas (e.g., my husband and I were in NYC celebrating our 30th wedding anniversary on 9/11 - we were caught in the UK Hurricane in Oxfordshire in 1987 - and arrived home at about 2 am Monday morning - just in time to watch markets crash around the world - a market crash without jet lag is bad enough). Then of course - there are personal and family health scares - which are the worst of all. Doesn't make this time less scary. But - I suspect a lot of us here have muddled through a lot - and I think we'll get through this one too. Roby
Reading the comments about physical assets...visiting my folks in '95 and my dad disappeared upstairs, then returned with three 100 oz bars of silver to give to me. He'd bought them at near the peak during the early '80s and had left them in the attic - "pissed me off to even look at them."
I sold them within the next month to finish paying off debt and contribute to the daughter's college fund.
Now it pisses me off to even think about it. (I've been stocking up on physical assets, but would love to still have those bars!)
I love the doctor analogy. Only problem is that the rate cuts are analogous to antibiotics and today's docs are trying hard to minimize antibiotic usage - it breeds new forms of bacteria resistant to the treatments in the first place.
Antibiotics are hugely effective and powerful but only if used occasionally and then allowed to follow the full course of treatment including rest & nutrition. If you expect antibiotics to save you from sloppy unsanitary practices and high risk behavior then you'll be sadly disappointed.
Same applies to fed action. It should be rare but when used there was a clear risk to be averted - not just repeated 'common colds'. I'm afraid the Greenspan-Bernanke fed has overused and abused what could have been powerful RX in a better doctor's hand.
Someone once compared the CDOs as akin to a virus that has spread throughout the financial system; viruses just can't be treated with antibiotics...you have to let it run its course.
Sometimes when a virus runs its course the patient dies. Another risk is that the ravaging of the virus leaves secondary infections. When the infected cells lyse they leave open sores inside the body that bacteria then find quite hospitable. So even though the virus can't be cured by antibiotics - timely and appropriate administration of antibiotics AFTER a serious viral infection can be quite beneficial.
But not until the right time - too early and the benefit is largely lost... too late and the patient is so sick they might not recover (weakened and overwhelmed by multiple opportunistic secondary infections).
I don't think you can apply medical analogies to economics but there are always principles that apply across all disciplines..
1) Know what you are doing
2) Do first things first
3) Do no harm ALWAYS
Verrrrry interesting. Not funny -- unless you're short (and really not very funny even then)."
Agree. Although it is highly funny that I'm going to be debating a guy on TV tomorrow on the subject of bankers' bonuses for 2007. He is taking the view that these titans of capitalism are worth every penny. Maybe I should just roll my eyes and look at the solid red ticker whenever he makes a moronic point.
I would be careful with the 10 year treasuries. It sounds like you are with your trading range etc. We may see a sudden drop in the Dollar and a spike in interest rates at some point.
I'm not messing with it and I'm keeping bond durations short.
I tried pushing the idea that this economic condition is a great deal like colony collapse disorder (CCD) where all the bees are going away and people are not sure why; a few virus ideas have come up but it remains somewhat of a mystery. The strangest part is that the hive remains intact with the honey and the bees vanish. Im not sure if off balance sheet synthetic CDOs are like hives, but one issue is that the future value of the bees working and being efficient is considered to be a future threat. So in those terms, the liquidity for future value will be trapped into less liquid investments that yield less value, which will have domino like effects as people become more challenged to grow investments. Capital will be less available and the economy will look like an empty hive.
I disagree with McCulley's reasoning. A recession is likely to help calm inflation, however cutting rates right here, right now stokes inflation. No matter what the Fed does not, it appears a debt deflation and price deflation is here already. I don't see how a rate cut right now can help. I also don't see how a rate cut can stop the bleeding in the stock markets.
Why bother robbing Misean? Apparently you can rob the bank that holds the gold for GLD and screw the shareholders. Note that neither the banks that hold GLD's bullion nor their intermediaries are not required by GLD to have insurance. How reassuring.
This is from the GLD prospectus, page seven.
"Shareholders recourse against the Trust, the Trustee and the Sponsor, under New York law, the Custodian, under English law, and any subcustodians under the law governing their custody operations is limited. The Trust does not insure its gold. The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate. The Trust is not a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. Therefore, the Custodian may not maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the Trust. In addition, the Custodian and the Trustee do not require any direct or indirect subcustodians to be insured or bonded with respect to their custodial activities or in respect of the gold held by them on behalf of the Trust.
Consequently, a loss may be suffered with respect to the Trusts gold which is not covered by insurance and for which no person is liable in damages."
or how about this:
"The Trustee may, in its discretion, and will when directed by the Sponsor, suspend the right of redemption or postpone the redemption settlement date, (1) for any period during which the NYSE is closed other than customary weekend or holiday closings, or trading on the NYSE is suspended or restricted, (2) for any period during which an emergency exists as a result of which the delivery, disposal or evaluation of gold is not reasonably practicable, or (3) for such other period as the Sponsor determines to be necessary for the protection of Shareholders. In addition, the Trustee will reject a redemption order if the order is not in proper form as described in the Participant Agreement or if the fulfillment of the order, in the opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Shareholder. For example, the resulting delay may adversely affect the value of the Shareholders redemption distribution if the price of the Shares declines during the period of the delay. See the Trusts Annual Report on Form 10-K, incorporated herein by reference. Under the Trust Indenture, the Sponsor and the Trustee disclaim any liability for any loss or damage that may result from any such suspension or postponement."
stealtwii:
"The gov't stole everyone's gold in 1933 under Roosevelt."
In 1933 Roosevelt confiscated the money base which just happened to be gold. That's not the story today. I think it is highly unlikely that the government is going to rebase money on gold anytime soon.
Even if the gubmnt did make owning gold illegal I really doubt the most people would willingly allow confiscation today. It's a whole new world out there. People in 1933 actually believed in the power of a government to do good. Now we see government as a bunch of crooks.
People in 1933 actually believed in the power of a government to do good. Now we see government as a bunch of crooks.
Ummm not true - reread Will Rogers routines... or Samuel Clemens (Mark Twain). They would have never been as popular as they were had they not hit a common chord with the people. Americans had both a trust & distrust of gov't... just like now.
Some stuff never changes... we just spin around and round while circling the sun.
Gross and McCulley are power hungry money whores and there is lies their doom as truth tellers.
Jas
I've always thought Gross was one of the more honest and insightful people in the financial community. I'm not sure how he's been recently on interest rates, but his big picture comments on the economy are always worth reading. He's expressed his concerns for a while now with the problems with the FIRE (finance, insurance, real estate) economy replacing a production and service based economies, and has recognized for a long time that economic structure, particularly with the lack of savings, credit excesses and the housing bubble, and government deficit.
For a good example of his writing, I'd suggest: PIMCO - IO Feb 2005. A brief, and simplistic, summary is "You won't fund the countries retirement needs by current savings, whether by private accounts or pre-paid Treasury bonds in Social Security. Both are just calls on future production. Most of the things retirees need can't be saved up (for example, they can't save up health care for the future). What can help is that we quit going into debt as a nation, so that we limit the claims from outside the county on that future production." Read it. He says it much better.
Just my opinion, but I've always thought Bill Gross was one of the "good guys" in the industry.
First rule: Don't panic.
Second rule: If you panic, do it first.
Third rule: Always know what your exit plan is before you execute a trade.
That being said. I did not like what I saw and felt last week. I pushed the panic button on Tuesday of last week. It cost me $200 since I had to lose 2% of 10K due to 401K trading rules. However, it has saved me over 6K. So.. panic first if you panic. If you panic, learn how to profit from it.
Will the rate cut include a wheelbarrow so I can carry my $200 to the store to buy a loaf of bread? Note that I say "carry to the store" since nobody will be able to afford gas at $100 a gallon by the time these crooks are done "fixing" this Wiemar-style.
Darth,
By cutting rates, and cutting them hard, the Fed hopes to steepen up the yield curve big time, that will increase net interest margin for banks (the economic function of which is to borrow short and lend long) and thus slowly they will earn their way out of the mess. Its not going to stop the crash, but might cushion the blow a bit, same goes with the fiscal stimulus, it will not stop a recession but could stop it from turning into a depression
Fear is the mind-killer. What people need to do is get the hell out of the stock market. It's not what you've lost, it's what you have yet to lose.
I wonder if Bernanke hasn't cut on purpose because he's concerned about the dollar falling out of bed and what that would do to inflation. And maybe even cause capital flight. Thoughts?
wow...
Remember: McCulley was somewhat in the running as a Fed governor... or was it chairman?
I swear I said something about this a while ago... no never mind wasn't important.
Therefore, this is a big voice, screaming loudly for a big action.
One thing is different when looking back over the history of the market...when was the last time that millions of retiring baby boomers who have been stashing away for a lifetime in 401k's in stocks suddenly realize that their retirement is about to go up in smoke.
I doubt the massive selling pressure has been so great because there has never been so many people so invested and so near the time where they actually need it.
Combine that with falling real estate prices and you have a huge reason to move to cash.
The last real crash in 2000 was big, but it was mostly speculative money and boomers were a decade away from retirement and real estate prices were rising.
This guy needs to lay off the caffiene.
"They have NO IDEA!!! Bill Poole has NO IDEA!"
(CR, can you put up that video?)
There was a long and interesting profile on Ben Bernanke in the Sunday New York Times magazine this week. I think it was called: "The education of Ben Bernanke." It said Bernanke is to blame for some of the damage Greenspan did, because he advised Greenspan as a Fed governor in 2001. But Bernanke's style is very different than Greenspan's.
It said Bernanke is heavily data-driven and even could possibly be replaced by a computer program. It said Bernanke is a great listener and tries to summarize and guide FOMC opinions, not enforce them heavily like Greenspan. It said Bernanke knows better than anyone alive how politicians have browbeat Fed chairman in the past, and reportedly (according to the article) LBJ actually physically beat McChesney Martin while Secret Service men watched.
Based on this article, I would not look for an emergency rate cut prior to next scheduled meeting. I could be wrong.
"Wow. Some people are really scared."
... and have a public pulpit from which to kick and scream. Most people just have to take their loss and their pain with nobody to complain to, nobody to listen.
AJ,
Tie that potent mix to mind blowing amounts of leverage and things could get waaaaay too interesting.
If you're a boomer close to retirement aren't you supposed to have insulated your portfolio from long stocks by now?
And rate cuts will do what to fix the banking solvency issues? I'm still confused on that point.
/sarcasm
What happened to the number of people online at the bottom?
Don't be fooled by McCulley, he's not scared. He's one of the smartest minds in the business, and saw this whole mess all the way. And he's pure evil.
He encouraged the Fed to blow up the housing bubble, knew all about the corrupt shadow banking system (he invented the term), and now is calling for a bailout of the financial industry he benefits so much from. Do not be fooled by his wit and concerns for the economy. He and his ilk will have plundered the country blind before this is all over.
Becky,
A couple of reasons why there have not been more cuts yet:
Yes, many are nervous and want the Fed to cut. The problem is that there are solvency issues more than liquidity issues and the cut(s) will not really help much.
Watch the Dollar, Yen, Gold, Soft Commodities, Oil, etc. vs global markets.
-stealth
OT
Doesn't look like anyone's posted this yet. IRA's take on BAC purchase of CFC.
Institutional Risk Analytics
mp, risk capital, and all the others who are more knowledgeable than me:
Is there counterparty risk in puts on the SPX? I bought a bunch with strike prices 800 and below expiring Jan 09. which I think is not a crazy trade ---I can certainly go into the logic, but I keep worrying there won't be anyone to pay up.
My broker says the CBOT guarantees them, but call me suspicious.....
TIA
Another point made by the Sunday Times magazine article is that the whole FOMC (not just Bernanke) is annoyed at how Wall Street is barking at them and scrutinizing every little move and word. They all think it's excessive and counter-productive. So, maybe this is a good time not to cave in, or else Wall Street will just demand more and more from them in the future. The article said this might happen.
01/20/2009 end of an error, Haloscan took it away. Bummer. I really liked that counter - instead Haloscan added some ads. Oh well, I get what I pay for (nothing to Haloscan).
probert,sure I repost that video of Cramer later today (probably at the bottom of the posts).
Best Wishes.
Yes, the counterparty risk for listed options (puts and calls) is through the Options Clearing Corp. OCC is the counterparty to both sides. But there's miminal chance they will fail.
Hi Stealth
Yeah, I agree. Those LAST rate cuts haven't done squat. They don't make a bad mortgage, CDO, SIV, whatever alphabet you want to add, suddenly become solvent.
What lies between the world's rocks hard places won't be a mystery after this week, methinks.
in india:
FM pitches for rate cut: Will bankers oblige?
canada:
Market plunge stokes talk of steeper BoC rate cut
| Reuters
oh, ok, the world:
FT.com / Global Economy - Panic sparks plunge in global markets
vikas,
Always wondered about that with my LEAPS, too. I think when we're seriously talking about "systemic risk", and the IBs are the center of the storm, it's always a possibility.
It'd be a bitch to make a mint that you couldn't collect.
we panicked ourselves on the way up. we'll do the same to ourselves on the way down.
Does anyone know about capital gains on the 2 year rule. Is it calander year or a running 2 years. I have 01/09 PUTS bought in 09/2007 that I debated on wether waiting till January 1 would be beneficial. Of course this is assuming they stay in the money till then.
CR,
Bummer I always liked the counter too I imagine it would have been high today. Thanks for a great read everyday. Nothing like getting news from 2 months in the future.
tj,
yeah--- the puts were what was supposed to soothe the consternation of exiting equities the last 18 months....and watching them skyrocket.
thanks all.
idoc,
Suppose we get a 100bp cut. Given all the negative sentiment, are we possibly facing the mother of all short squeezes?
I can't see the bulls letting go just yet.
Wow. Some people are really scared.
Yeah, scared of what their book is telling them. I'm still not convinced that sacrificing monetary stability on the altar of the market is in the country's long-term interests, or will actually do anything in the short-term. This blow-up was baked-in 2-3 years ago, or more.
F. Frederson,
It's definitely not, but since when has either DC or Wall Street been interested in the long term? "Long term" is only a phrase they use to get people to turn over their money to them.
Indeed, the acronyms have not yet come home to roost.
I think it's important to note that as the markets go down they will cause a variety of follow on selling. This is also true of the housing market. We are seeing now the effect of the housing market collapse overflowing into the derivatives market, then into the financial stocks, and on into the broad markets.
Credit bubble in reverse.
It's a good thing if you saw it coming and were able to prepare/profit.
"It'd be a bitch to make a mint that you couldn't collect."
Probably you would be able to collect it after a while, although maybe not right away if there are bank runs, etc. The broker must implicitly guarantee the puts and the put writers take your money when you are wrong, so they contractually must pay you when you are right and you have legal recourse against them if they don't pay up. Puts are a legally binding contract.
I'd worry more if I was in E-Trade or some other marginally insolvent broker. Not as much with Fidelity. Technically, the broker should only be making money with trading commissions as they aren't the counter-party to the trade, except in the case of margin where it could be said that they are financing the put writers on margin. So it may be a situation where you have to wait for you money while the brokers go after these insolvent counter-parties and milk them for everything they have, or the broker itself becomes insolvent and you may only get a portion of what is owed to you or possibly none.
I'm not a securities lawyer, just trying to apply common sense. Anyway, what's the old saying, gold is what you keep when you are worried about a return of your capital as opposed to a return on your capital.
Wall Street Dictonary:
Long Term; (phrase), period of time anything longer than the next bonus period.
CR,
One of the issues that I am still unclear on, even after 4 years of looking into this credit bubble, is what should we expect to be the effect of a reduction in Fed Funds target rate in THIS particular environment. It'll steepen up the curve for banks... ok what else?
Bill Gross is a bond expert, so Pimco should be fine. They are probably worried about the less fortunate in society. Breeheehee!!
carnage down here NZX lost 3.92% in 27 minutes of trading.
NZX web page ticker down.
Aussies yet to open...
whats that sucking sound
Greenspan works for PIMCO how's that for a conspiracy theory. Greenspan dictation to Bernanke via OC register
Misean, et al, be clear on this: Conjure is not bearish on gold. He is neutral. Conjure is simply warning all to be very careful with gold in this environment because it can bite you in the ass.
Conjure Clock
11:59:04
mp,
That's why I don't trade GLD, I simply accumulate physical.
mp,
Have you had to break out the Scrooge McDuck cartoons yet or are the Macanudos holding the line so far?
is it a RavingRancidRabbit?
Why doesn't he just come right out and say it: The sky is falling, the sky is falling!
back in the day, Gross was saying dow 5000....
Now, McCuley says ... cut now
Gross says... bail out mortgage's
It takes a rich man to get really scared of becoming poor. Whereas the poor have been poor all their life and become used to other people not giving a hoot.
Just which assets can one move to? They're all declining in value. Might as well stay put provided there's some cash for near term.
Yen/USD: 105.9
Tomorrow is going to be... interesting.
oh yeah, he also said he was trading "the last" bond bull mkt.
probert, I think cutting the Fed funds rate will have little impact this time.
A Fed cut can't help housing - once the speculative phase was broken, the bust has to run it's course. A fed cut can help the banks with lower borrowing costs. And a Fed cut can help (with a lag) some business investment.
Hopefully the recession will also knock down inflation (it usually does) and it would be very helpful if oil prices fell significantly. If inflation stays high, the Fed's hands will be tied.
Best Wishes.
Tomorrow is a really tough call. I doubt the Fed wants to cut a week before their scheduled meeting. If we walk in tomorrow and the Bank of England has cut 25bps, or s&p's are more than 7% down, then I think they may go 50 tomorrow and 25 or 50 next week. Of course, then they run the risk of looking awfully stupid when the next employment report isn't that bad (which claims suggest will be the case) and we have real interest rates at negative 1% after the next inflation report.
energecon, Conjure has smoked 4 macs so far today and is becoming fairly grizzly. I suspect that it will take 6 or 8 hours of Duck Tales tonight to calm him down.
GLD and physical gold are one and the same. If they get 5 cents per ounce out of alignment, the arbs bring it back.
At GLD, there's unleveraged gold bullion sitting in a vault with your name on it. And nobody can steal if from your house.
If you're a boomer close to retirement aren't you supposed to have insulated your portfolio from long stocks by now?
Yeah, and in theory communism works. I bet there's a bunch of boomers who got burned in the dot coms, and decided to take on a little more risk in the hopes of making it back up.
rich,
I think GLD is great, but again, I'm accumulating, not trading. Buying and holding physical fits that goal completely.
carnage down here NZX lost 3.92% in 27 minutes of trading.
The nightmare never ends! Aaaiigghh! [/wilhelm]
I understand why Gold and Oil are up on inflation concerns. What I dont see priced in is deflation concerns.
Recessions are deflationary, wouldnt that mean Gold and Oil are going to fall. And considering their speculative excess, fall hard?
probert-
FWIW, I am also leaning towards a "damage is done" viewpoint. The fed rate cut affects the expected cost of money; the plunging markets are reflecting a re-valuation of many underlying assets. Not the same thing at all!
Investor A: "This bank stock smells bad. Sell! Sell!
Investor B: "But they are going to cut rates again."
They are talking past each other.
"I dont see priced in is deflation concerns. "
Look at Treasuries.
On the loss of our visitor counter, it might be a consolation that one of the CR community is about to put a big hurt on their MCAT business.
Be careful with the GLD.
"At GLD, there's unleveraged gold bullion sitting in a vault with your name on it. And nobody can steal if from your house."
Alot of debate, James Turk et al, about whether the GLD actually has in POSSESSION all the ozs it claims. Also, those are NOT your ozs. That is clear when you buy the GLD. You have no entitlement to them. You merely participate in a fund that tracks the price movement of bullion. You do not own any apportioned share of that bullion. With physical, it's yours, end of story.
"I bet there's a bunch of boomers who got burned in the dot coms, and decided to take on a little more risk in the hopes of making it back up."
Dave, you owe me a keyboard - I spit wine all over it!
I wish I had a dollar for every time I heard one of my contemporaries (I'm a boomer) say exactly that.
That is precisely the attitude they took on just after the dot com bust. And, to top it off, they invested in real estate because it "never goes down".
I plan to work until I'm of a much older age because I enjoy what I do. Others of my generation will continue to work because they must.
I think the term is 'paradigm shift'.
A Fed cut can't help housing - once the speculative phase was broken, the bust has to run it's course.
One sentence, all truth. The Fed imagines a cut giving the banks more margin but that only works when they make performing loans which cannot happen at current real estate prices. A reduction in prices kills their Re loan portfolio. Catch-22 and why CR is spot on.
Still to early to tell if the global sell off is continuing with New Zealand, IMEO, because NZ didn't sell off significantly on Monday, but NZX is now off over 4%.
This will mark 14 down days in a row for the index if it holds; last up day was 31 Dec 07!
Dr. Deflation: "Look at Treasuries."
I mean priced into the price of Oil and Gold.
estupido: NZX website is OFFLINE, sheeeit!!!
i am now getting nervous and our media are looking the other way.
that sucking sound is getting very loud.
Cal,
Mish -- the uberdeflationist -- has dispelled the notion that deflation is bad for gold on numerous occasions.
75 basis points or 100?
CR & Rob are right, it's all about psychology now.
tj,
I'll go see what he has to say.
thx.
Not a pretty sight:
Symbol Lookup from Yahoo! Finance
Allow me to dispel a few myths being bandied about-
1) PE ratios mean absolutely "zero" in a recessionary environment, the trailing pe's being touted on a valuation basis for supporting one's position are toilet paper.
2)Those claiming they use "technicals" to trade daily in a "leveraged" market are complete morons.
3)Hedge funds are/will amplify the problem, the IB's per published reports have been reducing/eliminating leverage to hedge funds and increasing margin rates, normally non-correlated assets will again (like August) become correlated.
4) Those predicting the size of the move in the indices are not taking into account when comparing this to prior potential recessions the effects of leverage, we are more leveraged now than in any time in our history and the predictions being tossed about can be thrown out the window, up or down, past periods do not mean squat.
5)The credit contraction taking place and the future contraction of credit will make this cycle a long period of subpar returns, interest rates are going much lower, and this will be a tough. but, manageable period.
6)Commodities being immune is complete and utter bullshit, see hedge comments.
"Cal,
Mish -- the uberdeflationist -- has dispelled the notion that deflation is bad for gold on numerous occasions."
Mish makes some good points, but I wouldn't say he proved the point. Gold is a complex beast, I'm not that confident to make a call on it during inflation or deflation.
Andy in NZ- thanks for some global reporting...it sounds like it is getting rougher out there.
And yet another not-so-pretty sight:
Baltic Exchange Dry Index (BDI) & Freight Rates
No rate this week - sorry. Not until next weeks meeting. Blood in the streets until then...
rich
stuarts right about GLD:
Kitco - Exclusive Commentaries
i do own a few thousand shares in a Swiss acct but most in junior mining stocks and some in bullion. it is what the hedge funds buy however when times get rough since they like the liquidity so as long as u accept that u can still make money.
tj
i don't think a 100 pt cut will stop the fall tomorrow given the worldwide damage done today. compound that with a coiled spring from Fri OPEX props and Ambac and down we go. if the cut comes in pre hours look for an opportunity to short into a temporary bounce.
risk capital,
Good list. You know, every time I review "the fundamentals" I scare myself all over again.
500 comments on this thread by market open Tuesday?
Sometimes when you are ill, you make an appointment with your doctor; other times, you go straight to the emergency room. Now is an other time. ... Time is of the essence. What needs to be done needs to be done. Now."
Neverminding the merits of a rate cut right now, I think the idea of the Fed as a doctor is the most dangerous idea in economics today.
So far they've been nothing but a butcher.
Institutional Risk Analytics
OT, but I thought the above link concerning BAC's acquisition of CFC might be of interest here.
Dr. Deflation,
IMHO gold isn't an inflation -or- deflation play, it's an "instability" play. High inflation and deflation are indicative of economic and/or political instability, so it's easy for people to confuse the two.
idoc,
Nonetheless, I positioned myself for both possibilities, because whatever happens it'll be big.
As far as I know, PIMCO's loaded based on the assumption of a rate cut, so McCulley is talking his book. I don't mean to say he's wrong, but he is talking his book.
"So far they've been nothing but a butcher."
Sweeney Todd perhaps?
The foreign markets diving during the holiday gives them the perfect chance of playing possum, doing nothing and letting it nose dive.
They have to know that the sooner it resets the better, the speed of the shock should prevent everyone from whining for bail outs. Wake up on Tuesday and it's a done deal.
Quick reader poll.... Who thinks it unwise to buy a bunch of PUT options at the open tomorrow? (specifically, LEAPS on the Nasdaq, Russel2000, plus certain banks, bubble-techs, IBs, retailers, and casinos).
I am very short on courage today... This seems to me a very risky time, but also a possible big move down.
rich,
"If they get 5 cents per ounce out of alignment, the arbs bring it back."
Come to my house....try it.
Cheers,
I wouldn't be surprised if there is all sorts of panic selling. But generally, panic selling makes you a sucker - especially if you did some panic buying near the top of the market.
One thing I would like noted, is that while rate cuts may not 'save' housing, the affordability is definitely on its way back and will bring some buyers back. You can get a 5.0% 30 year mortgage now if you are willing to pay 2 points (ditech.com) Compare the monthly payment on a 300k mortgage at 5% vs. paying 400k a year ago at 6.5% - huge difference!
One funny thing - I was kind of expecting to see my Starbucks here in Orlando much quieter over the past month. It is just the opposite, I haven't been able to find parking near the starbucks - it was as busy as I have ever seen it the past couple of weekends. The local bars were overflowing for the past few NFL palyoff games also.
Neverminding the merits of a rate cut right now, I think the idea of the Fed as a doctor is the most dangerous idea in economics today
It makes sense if you remember the Theodoric of York skit from SNL.
Misean, are you daring rich to come to your house to try and arbitrage between GLD and the spot price of gold?
ShortCourage- Quick reader poll.... Who thinks it unwise to buy a bunch of PUT options at the open tomorrow?
Conjure says, "You should have done that weeks ago! Where in Hell have you been, Pluto?"
You guys know those roadside signs taped to traffic light poles and so forth? You know, for home based businesses and meet singles now? Saw a timely one in San Diego yesterday:
WE BUY GOLD
Either hoarders, or capitalizing on down-and-out HELOC'ers. Either way, ouch.
The tide has shifted. Long term bear market, now. Just like you buy into the dips in a bull market, sell into the rallies.
That's about as close to technical analysis as I will get.
How many hedge funds will blow up this week???
HeliBen is the Dark Knight from Monty Python now.
It's just a flesh wound. LOL.
I'd rather believe a hundred more credible sources than Turk about GLD.
What he's saying is that the largest ETF sponsor in the world, State Street GA, is lying every day when they post the amount of gold GLD owns.
Today, it's 622.76 tonnes, 20,022,387 ounces.
SPDR Gold Shares
I don't think they're lying, because that would be fraud. It's physical gold that the ETF owns, and as a sharehholder you own a piece of it.
The gold and silver ETFs are different than all the rest. They actually own hard, unleveraged, un-derivative-ized assets. It's more efficient to own GLD than any type of buillion, after commissions.
Short,
I'm thinking the premium will be insane tomorrow if the futures are down anything like they are atm...which is not to say that would not pay off in a big way. But entertaining similar thoughts...anc concerns.
ah...good old stagflation is here..where I Jimmy Carter when we need him?
rich,
Wrong quote, meant the one where I don't have to worry about being robbed. Silly me.
Cheers,
PIMCO doesn't really need to talk its book. The Fed's gonna ease, it's just a question of how much. So PIMCO's positions either appreciate now or in the near future.
CR said' "If inflation stays high, the Fed's hands will be tied."
I beg to differ with that comment. Inflation isn't "high." Perhaps it's a little higher than it's been, but compared with the 70's, this is no big deal. The Fed will not be held back by inflation concerns. If the solvency of the banks and brokerages houses is at risk, they will ease. Not that easing is necessarily a cure, but easing is the only arrow in the quiver for the moment.
Interesting (?) WSJ piece today:
mp,
Tell Conjure we're just having second thoughts on the position sizing and total exposure discipline...and Pluto is quite nice this time of year.
Playing possum? Dissident, I will only say I hope you're correct as it would please me no end to see the fed turn its back on Pimco.
Well, we'll see.
Cheers,
Misean
Okay, but first tell me how much gold is stored in your house. It's gotta be worth my while!
Doh! stupid Haloscan
U.S. Warning Signs Point Toward a Deep Recession
University of Maryland economist Carmen Reinhart and Harvard University economist Kenneth Rogoff agree. They say the current crisis appears on track to be at least as bad as the five most catastrophic financial crises to hit industrialized countries since World War II.
If those past experiences are any guide, the economy is in trouble, they argue in a recent paper. Indeed, "if the United States does not experience a significant and protracted growth slowdown, it should either be considered very lucky or even more 'special' than most optimistic theories suggest," they write.
Yup, some people are really scared.
gab - inflation is almost as high as it was in the 80s, the only reason its not reported as being so high now is that the Fed, changed its inflation equation (CPI) in 1990.
Check out this website to compare inflation with the current equation vs. the old equation. Inflation now is very high (>10%)
3rd graph down Inflation, Money Supply, GDP, Unemployment and the Dollar - Alternate Data Series
energyecon- "Tell Conjure we're just having second thoughts on the position sizing and total exposure discipline"
energyecon, Conjure gets carried away at times, but he means well.
daveNYC,
"Misean, are you daring rich to come to your house to try and arbitrage between GLD and the spot price of gold?"
I don't know how well armed rich is, so I would never do such a thing. However, I know how well armed I am.
Cheers,
Fear level, or at least fear propaganda level, now off the charts:
""Aussie stocks are set for their largest one day fall since 9/11," Martin Slaney, head of derivatives trading at GFT Global Markets in London said.
"There is a wave of panic emerging as the fear unfolds.""
Aussie stocks set to plummet | News.com.au
IMEO Odds of a big bounce late tues. or midday Wednesday are increasing. Too much fear...
I really hope they do cut tomorrow morning; lets get this last hope out of the way and get on with correcting the excesses ( as seen by the equity market).
I don't think it would do any good - the reaction of the market to the TAF announcement, BB's speech talking of substantive aggressive cuts, to Bush's stimulus plan is pretty indicative - the market participants don't buy it.
I don't think he WILL cut - a prime paradigm for Fed behavior is that their actions WORK and be SEEN to work ! after all the wizard of Oz must not be seen to be powerless ! It used to be axiomatic that they acted AFTER the market has turned - taking credit for what the market has done anyway ( recall how the market turned in Aug on Thu. afternoon, before their early Fri . am announcement of discount rate cuts and a new Fed statement).
They are already smarting from the failure of the TAF announcement and BB's speech to halt the market slide. They won't risk another IMO.
We'll see. The tension is killing me ! Lets get it on already !
-K
Stealth - Inflation already happened.
Deflation right now and for the foreseeable future:
http://www.economagic.com/chartg/var/vel-gdp-per-m3.gif
rich,
It's not worth your while. Nothing to see here. Move along.
Cheers,
Follw the EFF and you'll find your rate cut:
DING DING DING!
There will be no rate cut.
ShortCourage,
re: trying to ride tomorrow's wave:
Don't do it. Whatever evil is going to happen tomorrow, it is too late to front run it. You're either positioned for it, or not. I lost a fair amount of cash last summer trying to front run a Fed-rate cut day.
If you do have the gumption to put in an order before market open, at least use limits, for God's sake. The gap down is likely to be insane.
Playing any bounce during the day or this week is a better play, IMO. I've got plenty of dry powder to use once the dust clears.
Misean,
LOL!
Fortune editor: Keep rates at 4,25%!
The economy in crisis - Jan. 21, 2008
Regarding buying options tomorrow. Volatility in the markets has been high, and expectations for future vol will also be high. So option prices will be high (both for calls and puts) regardless of what the market does. I have seen, many times, options positions go down in value even when the market moves in the direction which should be beneficial to the option, due to volatility declining (or, more specifically, implied volatility or expectations of future volatility).
Profits on options on futures (like S&P 500 futures) should be taxed liked futures - 40% income and 60% long term capital gains. While the OCC guarantees the counterparty, the exchange (and your broker) set margin rates daily, to ensure that there's enough cash in your account to absorb the loss of most daily adverse moves. If not, there will be a margin call, which, if not met, will result in the liquidation of your positions. So in theory the counterparty risk will be only one day's adverse move. Of course, this can be quite large.
It was a holiday in NZ on Monday, so they're only playing catch-up to yesterday's selloff in Asia and Europe. It's not an indication of a new downleg, not yet at least.
SC,
Ditto central -- don't try it. I tried exactly the same strategy last year and got my ass handed to me. The market & options will open exactly at what the futures say they'll be, so the big gains simply aren't there. Meanwhile, you get left holding the bag when things reverse.
Live and learn.
The reason Pimco wants an emergency rate cut is because they are stuffed with junk! Just look at the mechanics of the portfolios and strategies:
Bill Gross recently singled out Agency mortgage backed securities as one of the high quality sectors that have underperformed Treasuries and should offer compelling value. Can you elaborate, given whats going on in the market and at the Agencies?
Simon: Agency MBS are yielding more relative to Treasuries, swaps and Agency debt than they have in over 20 years. These are extremely high quality securities that are collateralized by single family homes, and carry guarantees by government sponsored enterprises (GSEs) or the full faith and credit of the U.S. government in the case of GNMA. Although there has been a run of bad news coming from Fannie and Freddie relating to credit losses and capital positions, PIMCO is not concerned about their ability to provide guarantees for MBS.
And finally, even though Fannie and Freddie MBS do not carry an explicit U.S. government guarantee, a default by the Agencies would be catastrophic for the U.S. economy. This view is the basis for most investors belief that the U.S. government would not allow them to fail.
Federal National Mortgage Association (FNMA) is a privately owned corporation, which provides a secondary market for federally guaranteed or insured mortgages as well as conventional mortgages. Its stock trades on the NYSE. It issues a number of different mortgage-backed securities, with values that are sensitive to changes in prevailing interest rates.
This article contains the current opinions of the manager and such opinions are subject to change without notice.
http://www.streettracksgoldshares.com/pdf/streetTRACKS.pdf
GLD
For those who think Canada is such a peaceful place...ongoing drug wars being fought in the streets of Vanocuver. The murder rate in Vancouver makes it the deadliest place to live anywhere in North America (based on murders/100,000 residents).
VANCOUVER -- Two men were shot to death just outside a swank, high-end restaurant frequented by celebrities and Hollywood stars on Saturday night, ending a brief lull in the city's spate of gangland violence with a hail of gunfire.
The victims had been on their way to a private party at the Gotham Steakhouse and Cocktail Bar when two assailants gunned them down before horrified pedestrians
Pimco wants a bailout pure and simple because they are tied to lots of trash, like this: As of September 30, 2007, TERI had a Baa3 counterparty rating from Moody's Investors Service, which is the lowest investment grade rating, and an insurer financial strength rating of A+ from Fitch Ratings, which was subsequently downgraded to a rating of A on October 25, 2007. TERI also had a rating of A from Dominion Bond Rating Service as of September 30, 2007. Dominion Bond Rating Service initiated coverage of TERI on May 15, 2007. If these ratings are lowered, FMC's clients may not wish to enter into guarantee arrangements with TERI. In addition, FMC's up-front structural advisory fee yields could decline or market conditions could dictate that FMC obtain additional credit enhancement for the asset-backed securitizations that it structures, the cost of which could result in lower revenues. Finally, if TERI's ratings were downgraded below the ratings TERI held in January 2003, or if Moody's Investors Service or Fitch Ratings were to place a negative watch on TERI, FMC's agreement with Bank of America relating to the purchase of direct-to-consumer loans would terminate. In January 2003, TERI had a Baa3 counterparty rating from Moody's Investors Service and an insurer strength rating of A from Fitch Ratings. If TERI experiences a material adverse financial change such as a reduction of its credit rating below investment grade, Bank of America could suspend the processing of new applications for school channel loans.
here we go again..... calling all editors!
If you do have the gumption to put in an order before market open, at least use limits, for God's sake. The gap down is likely to be insane.
Playing any bounce during the day or this week is a better play, IMO. I've got plenty of dry powder to use once the dust clears.
central_scrutinizer
CS-wise words.
Anon-darn, i was thinking of taking my family there in June!
Anonymous RE; Deflation,
Regarding your graph - I guess I'm not convinced by the gov't GDP number.
Anonymous | 01.21.08 - this was a drug gang related hit. yes, Vancouver has a gang problem, but it is far safer than most U.S. cities.
idoc, rich,
I'm holding a nice little ten ounce bar of gold...Beautiful.
Now I'm holding a 100oz bar of silver. Nice.
You want me to hold paper promises?
I like digging through the piles like a pirate. Muahahahah. Something about it makes me smile.
Cheers,
Vancouver has lots of immigrants - Canada might regret its very very libral immigration policy over the past 20 years. Wouldnt be surprised if the crimes were committed by immigrants.
all the US bulls won't be sleeping tonite. can u imagine fearing a 20% wipeout of your portfolio right when u wake up? and knowing its coming?
the aussie market is going to open down a whole chunk. Whether it stays down, or falls further, will be determined by what reaction Japan and the other asian markets have.
On the other hand, I'm in australia now and the economy is jumping. Low unemployment and high wages restaurants are full and so on. CD rates over 7%. Darwin recently claimed dubious honor as the countries least affordable city for housing (resource boom).
There isn't quite the direct CNBC connection people feel with the markets as there is in the US. Few people are more than dimly aware of some distant thrashing on the financial pages.
Just to trend back to this topic's topic, here is my prediction for fed action:
No emergency cut. 50 or 75bp next week depending on data.
That is all.
Misean,
Heh you and Conjure by all accounts - more shinies!
Misean
LOL! last summer with silver at $14 i went out and bought 2 bags of silver rounds and stuck them in my backpack thinking i'd just throw it over my shoulder and walk out. damn, i almost broke my back! ppl were looking at me like what the hell u got in that bag, man?
--
McCulley is part of the gangs of Fraudsters. H needs to serve Bankrupters and Fraudsters to be in good standing with them. It is very important for him and Bill Gross.
Gross is grossly ignorant of the UST market. He changed is range for 10-Year yield from 3.0-4.5% to 4.0-5.5% once the yield went above 5%. Then he hired the moron Greenspan who said the 10-year rate will go to 8% and Gross changed his range to 4.0-6.5%. All within the past 12 months. Guess, where are we now?
I have never wavered from my bullish position on USTs for 15 years. I predict below 2% yield on 10-Year before 2009 is out.
There are leaders and then there are propagandists and followers. Money whores can never be true leaders. Gross and McCulley are power hungry money whores and there is lies their doom as truth tellers.
Jas
Jkinthewoods, mp, idoc, tj, energyecon, central_scrutinizer:
Thanks for your thoughts re: buying puts at the open.
mp, dont worry, I bought a bunch of them beginning about 3 months ago. However, Im looking to increase my positions over time (this time with some cash I got from selling gold bullion). I think this bear market has a long way to run. So Im just trying to pick my spots. And I need to hedge my remaining gold bullion holdings with some PUTS that will move opposite to gold, most likely.
I need to be patient and buy on the mini bull runs that will inevitably happen
SC - if you are already in, and looking for more action, hold your breath at 630am tomm PST, then wait for the inevitable bounce before reloading the sho(r)tgun.
carnage down here NZX lost 3.92% in 27 minutes of trading.
NZX web page ticker down.
Aussies yet to open...
whats that sucking sound
andy in NZ | 01.21.08 - 4:40 pm | #
AHHHH!!!Panic among the JAFAs at coffee shops all over Parnell. If I were you I'd move into the mountains around Wairoa and start growing ganj and take up witha plump Maori girl!
This is one boomer who learned the hard lessons of the dotcom bust. It sounds sooooo stupid now, but up to that point I thought my "financial advisor" was really my advisor. Now I understand that brokerage firm retail staffers are financial advisors the way a used car salesman is a transportation advisor. The retail investor is the plankton in their food chain.
Now I know better, but not enough better. I did sell off a bunch of stuff and increase my cash and equivalents significantly a couple of months ago, but I let my broker talk me out of my best instincts to sell even more equities. (He did earn his commissions about that time when he talked me out of buying WaMu when the yield hit 6 percent.)
If the downturn doesn't last many years, I guess I'll have some dry powder to recover some of what I'm going to lose this week.
The biggest lesson I learned from the dotcom era was to beware of high rates of return and the people who sell them.
SC,
Exactly, and tomorrow at the open isn't one of those times. Maybe later in the day...
i'm just guessin but i don't think they'll do an emergency cut in the morning either as it would be seen as responding to foreign mkts. but if we tank 500 pts look for a cut the NEXT DAY. that could be the ultimate bear trap. i would just day trade tomorrow and close out end of day.
Correlations tomorrow will be liquid assets at 100% and everything else at ???.
idoc,
There are about $11.6 B of TIO auction disbursed tomorrow, about half is a two day maturity and the other half is an eight day maturity...wonder if there is no rate hijinks there might be a big snap auction...
Throw a shrimp on the barbie - Aussie down 2.5% in the opening minutes
Dave NYC - Some people moved into the house across the street from us - about 2003-4. Said they had lost a lot of their retirement money in the bear market and needed to make it up. So they bought a house - figuring they'd make a bundle. From the frying pan...
As for physical gold - I happen to own some. A constant reminder of my belief that the world was ending in 1980-81. Terrible investment. But - I think if you're going to own physical gold - you want it in your house - or your own personal safe deposit box. If you think the world is ending - why do you think that some stranger far away is going to handle your gold properly? Roby
Misean,
BTW, those silver bars easily serve as weapons, too. Hit somebody with one of those and they're dead for sure.
cripsy&cole: And with that the all ordinaries is now down 20.1% from the Nov 1 high.
Aussie now down 3.5%
Were the Aussies open for biz yesterday, or did they have a day off like NZ?
i've got this splitting headache after posting on these threads all day. u guys are relentless.
idoc,
Quit whining and take some aspirin!
You don't want to leave the game just when it's getting exciting, and we need your color commentary!
Regarding options, I've been buying spreads, that way you mitigate the increased risk premiums being charged now. It decreases your potential payout, but I usually buy fairly far in-the-money puts and usually aim to make 100-150%. It's worked well for me, profitable, yet still able to sleep at night...
you got a headache now? wait 'till Asia opens
Jas,
What's it like at your dinner table?
I mean, if I were your guest and I didn't pass the green beans properly, would you stab me with a steak knife and bellow, "Money Whore!"?
Him and every other fool on Wall Street wants a rate cut - More Candy!
MTHood-
Jas and Robyn are in the same exact camp, they are both insanely nauseating.
Mcculley is a drama queen.....
One week for the same cut means nothing to the longer term landscape.
150bps of cuts already made or priced and the Fed going intrameeting means "support for the market" Bullshit.
We might need this tomorrow:
Circuit Breakers for Q1-08
Turbo, was a reigonal holiday. but they shut market so traders could go to beach...I ahd to work
Aussie down 3.3% after open. NZX stabalised but still down 3.79% from open.
4,000-point Decline in the Dow- Close For Day
i like that part the best. "in the interest of sustaining investor value we hearby halt all further redemptions".
Very strong inverse correlation between USD/JPY and ^AORD this morning. Not on the initial gap, but on the moves since then.
Were the Aussies open for biz yesterday, or did they have a day off like NZ?
Dale | 01.21.08 - 6:14 pm
yep down 2.9% yesterday, today is 12th day in a row in the negatives for aussie and 13th for NZ.
S&P 500 Index. $SPX (INDEX) 1,325.19
change:-8.06 -0.60%
SPX Index Quote - S&P 500 Index Index Quote - SPX Quote - SPX Index Price
S&P 500 P/E: = 16.83 E/P = 5.94176%
10 year Treasury @ 3.648%
^TNX: Basic Chart for 10-YEAR TREASURY NOTE - Yahoo! Finance
S&P 500 Overvalued by 2.29376% (for fair value)
S&P 500 Fair Value for Tuesday = 1294
However, a major index fall at this very early stage of a recession could result in an inversion well below fair value, as most investors thinking in terms of a liquidity trap will be very slow to bottom fish or see this stage as an opportunity for future value; however, future value being subjective, one must realize there will be opportunities to cost average after some of the smoke has cleared, and then be willing and able to wait long term for yield enhancements! This stage is what I would call the falling knife period which needs to go through at least a six month period of consolidation/digestion; however, as housing remains as an unwinding bubble associated with other financial bubbles related to GSEs and globalized setbacks, earnings growth will remain very challenging if not stagflationary, compounded by industrywide bond problems, class action impacts and inflation related pressure associated with oil and food costs. In a nutshell, cash is king, dont spend a dime on anything unimportant!
"can u imagine fearing a 20% wipeout of your portfolio right when u wake up?"
idoc | 01.21.08 - 5:50 pm
Perversely, perhaps, but tonight my biggest fear is that they'll halt trading before I can get my order in and filled.
On Topic: when informing the wife about a possible surprise rate cut tomorrow, she quickly replied, face beaming with anticipation, "I want a pony!"
aussie was very much open and the drop was equally huge yesterday so if this holds it is a 7%+ decline over two days in the australian market.
If I'm reading bloomberg right, bombay opened 9% down.
idoc, please keep it up.
Do you have a tip-jar?
Finished 2007 finances: Sweetums lost $200K day-trading, but family finished + 10.2% Less than previous but marital unit fully intact. That's more important.
Thanks to you, other posters, CR and Tanta.
Went totally ultrashort last Thursday, sold all GLD and GDX. 5 different reasons. Only holding DBA as commodity inflation hedge, shorting my beloved emerging markets (EEV, FXP). That was tougher than I thought, married them too many years ago.
And of course, SRS, SRPIX, SDS, DUG, SKF.
OMG. ABC World News tonight not even mentioning the world stock market plunges on its opening teasers.
People must be terrified.
Re: Gold buying
Cash also may be a good idea for physical. The gov't stole everyone's gold in 1933 under Roosevelt.
--
OT, Indian and American Scam Markets...
Baaaaaa, baaaaaa, baaaaaa
That cry you hear is from India Goats rounded up for the slaughter who are now facing the same fate as they watched for America Pigs and ignored. Even America Pigs are resting their hopes on China Bulls and India Goats to keep consuming. Not if lot of China Bulls and India Goats get slaughtered.
Indias Crooks, trained in America, or badly copying America, took pages out of Americas Crooks on how to scam the public (Pushing Debt and goosing up the Scam Market), spiced it up for local consumption and then they started serving the hot curry to America Pigs and the rest. It was the rush of Americas Crooks and Pigs that took India Goats to a whole new level of delirium.
Let me be clear: Slaughter of America Pigs, China Bulls and India Goats has begun in earnest and impotent Bernanke and Bush are of no help (they could make it uglier, though). What sort of dope would put faith in these guys' ability? In case it matters, American People are politically impotent. All the real political power rests in the hands of Americas Crooks. Policies that favor America's Crooks will keep getting implemented in the name of helping the overall economy and at the expense of hardworking Americans. I am sure that it is no different in India.
Rule of the Crooks always ends badly, be it America, or India.
Jas
"ABC World News tonight not even mentioning the world stock market plunges on its opening teasers"
Keep the Sheeple in the dark...
Welcome to our counter party. We got some highly leveraged granite...
Why would anyone be nervous post Katrina?
Sorry kids, I screwed up on a few assumptions, I think The S&P 500 E/P will be more like 6.08 and with bond yields falling the 10 year will probably be more like 3.4%,
Thus S&P Fair Value for tuesday will probably at least 2.7%, thus a range around 1290 +/- 2%
A public service of DHE
ahh...Dow, S&P, Naz futures look green, but maybe I am colour blind.
Do the circuit breaker limits get doubled on the day after a trading holiday?
Hmm... nevermind. Just read 80B upside and down and it clearly says "Below the level at the close of the previous trading day".
So if you hear that one being floated (and I've heard it twice tonight) -- it's not true!
S&P and Nasdaq futures are positive at this hour!
What gives?
Bloomberg.com
Well, I guess the sheeple wouldn't react well to stuff like this...
Australian shares in freefall
Austock Securities client adviser and strategist Michael Heffernan said there was ``blood on the floor'' with the market falling three per cent in the first few minutes of trade.
"I think the blood bank is trawling all broker's floors to recover the blood,'' he said...
"Aussie stocks are set for their largest one-day fall since 9/11," Martin Slaney, head of derivatives trading at GFT Global Markets in London said in an email, prior to the start of trading.
"There is a wave of panic emerging as the fear unfolds."
G'day!
subtract off yesterday's close nimrod.
One last caveat, a fair value valuation is a target that could happen in the first hour of trading, or it could take 3 months, but I would assume with markets being on high anxiety that we will see a blow off fairly fast and then ease into a new era of a recession, where fair value will be further impacted by decreasing EPS along with lower share prices and thus lower earnings. A flight to Treasuries may occur but the liquidity trap is looking more real every day, i.e, where yah gonna run?
The US Index Futures are green from their closes yesterday, NOT from the markets' closings on Friday! Check the values, not the change
DJIA Future 11623 as of 6:30pm.
Aussie now down 4.1% - time to rebound??
"OMG. ABC World News tonight not even mentioning the world stock market plunges on its opening teasers"
ABC covers yesterday news and baby births and new tree plantings things of substance are edited out because they are beyond Grade Two comprehensio
Tokyo exchange should open in about an hour.
so why is the dollar going up?
The US Index Futures are green from their closes yesterday, NOT from the markets' closings on Friday! Check the values, not the change
DJIA Future 11623 as of 6:30pm.
estupido
You are far too polite. I would prefaced the comment with elstupido
-K
"ABC covers yesterday news and baby births and new tree plantings things of substance are edited out because they are beyond Grade Two comprehension"
tv news = bookends to contain laxative and depends ads and put in a hook for news at 11
"S&P and Nasdaq futures are positive at this hour!
What gives?"
PPT in futures goes full throddle. Opening is going to burn some shorts
1271.6 +6.5 +0.44% 945 559981 18:39 all months
ES.H08.E S&P 500 INDEX (E-MINI) Mar (CME) 1271.50 +6.00 +0.41%
Up on the Day !
"PPT in futures goes full throddle. Opening is going to burn some shorts
Anonymous | 01.21.08 - 6:55 pm "
sk politely explained to me the error of my ways. Don't get your hopes up, Anonymous!
--
"so why is the dollar going up?"
Because it is grossly undervalued relative to Euro and, especially, the "POND." Brits are worse dopes than Americans. Indians are somewhere in-between because of the greater American influence these days. Indian Rupee the also grossly over-valued.
Gold is the best currency and Swissie in next in line.
Jas
How about Greenspan working as a consultant for Paulson & Company:
Sorry but we haven't been able to serve the page you requested - please try again -
Service - The Independent
Unseemly at best.
Re McCulley and Gross - both post monthly comments on the Pimco web site. Gross is usually on or near target with regard to his general observations - and he doesn't wear his politics on his sleeve. But his interest rate predictions are awful. McCulley always just sounds like a shill to me - both in terms of economics and politics - and he rarely writes anything interesting.
FWIW - I think anyone who thinks he can predict anything in the financial markets with accuracy doesn't have to make a living there. At best - you try to make intelligent decisions based on probabilities.
Like with Jas. I am bullish about bonds like he is - and have been for a long time. But predict a yield on the 10 year note down the road? No way. All I know is that at a certain price/yield - I'm a buyer - at a certain price/yield - I'm a seller. And to determine those levels - I look at my charts (we've been in a pretty wide trading range for quite a few years - but it is still a trading range - so I look at the horizontal lines that form the trading range). And I use some common sense (I sold shorter term treasuries at yields of about 1-2% - can't remember the exact yields - in the early 2000's). That was a no-brainer.
Risk Capital - I used to talk with a lot of leveraged traders (futures traders) who used technicals on other internet places a long time ago. Most went belly up - but a few did ok - and some are still around. Takes a lot of dedication - time - a fair amount of capital - and more than a little talent. And sometimes other skills. I did a little day trading in the 90's - and - I swear - I just couldn't follow real time screens fast enough. It was like playing the higher levels of video games (which I'm not good at). In fact - one of the best traders I knew had been a fighter pilot in a former life. Real time trading screens were a snap compared to the control panel in a fighter jet.
Misean - You're weird (smile). But your story reminds me of an equally weird story. My husband (who BTW - not only talks to me but loves me after 37 years of marriage) once settled a case for a fair amount - and his clients - who never had 2 nickels to rub together - asked him to deliver part of the settlement - $100,000 - in cash to them - in $100 bills. Which he did. And then they threw the money on the bed and rolled around in it all night. Roby
Nikkei 225 opens gap down 1.5%. Now down 30% from last year's highs. Woof.
why is USD going up?
its called unwinding of the dollar carry trade or repatriation of dollars from abroad.
And then they threw the money on the bed and rolled around in it all night.
Well, sounds kind of kinky to me but I guess it's cool that you're into open marriage...
"turn those machines back on!" - Mortimer Duke
ABC covers yesterday news and baby births and new tree plantings things of substance are edited out because they are beyond Grade Two comprehension
Anonymous | 01.21.08 - 6:52 pm | #
Network news and print media is a thing of the past...I don't understand why all these network anchors are still held in such high esteem. When they moderate at these debates, they just come off as irrelevant, desperately trying to appear important.
Is this it? Is this the big one? What will the FED do to avert a panic? Can the US survive?
Sounds like a good promo for a reality TV show! Tomorrow is going to be illuminating on many levels and I am looking forward to the action. remember that it is during a panic that some of the dumbest moves are made by our pals in the government. Look and listen tomorrow, it is going to be a show.
The Fed has more leeway, though inflation has picked up faster in America than in the euro zone. Judging by the spread between American Treasury bonds and Treasury Inflation-Protected Securities, investors' expectations of inflation between five and 10 years hence have been falling.
Given the American backdrop, the Fed's recent decision to step up the pace of interest-rate cuts is understandable. The weak economy poses a bigger danger than inflation.
But there are risks. Even if commodity-price inflation wanes, the falling dollar means America faces other inflationary threats. And if overall price pressure remains stubbornly elevated, inflation expectations may yet rise. If that happens, the Fed will face the unenviable task of curtailing its easing or even raising rates while the economy is weak.
Bill Gross is usually right, just early.
Mike Q,
Post of the day.
Robyn,
You have a lot to offer. I look forward to your own blog where your positions can stay focused on the topics of your choosing.
IMEO Odds of a big bounce late tues. or midday Wednesday are increasing. Too much fear...
AAPL reports on Tuesday (after the markets have closed). Those numbers should be locked in regardless of what transpires between now and then. Might make a difference on Wednesday tho.
"They are already smarting from the failure of the TAF announcement"
the TAF did not change the stance of monetary policy. The Fed actually withdrew funds through open market operations as it injected term liquidity through the TAF.
The Economic Outlook and the Fed's Roles in Monetary Policy and Financial Stability Charles I. Plosser President and
Chief Executive Officer
Federal Reserve Bank of Philadelphia
Main Line Chamber of Commerce
Economic Forecast Breakfast
January 8, 2008
No helicopters, no printing presses, in the front door and out the back.
"The gap between what you know and what you think you know is always dangerously wide."
Nassim Talib
Aussie now down - 4.8%
Options on a high volatility day
--I would not buy long term index options on a high volatility day. I would just about always compare todays implied volatility with historical volatility before buying an option. If I really want a stock option on a day when volatility is high, I would buy a far in the money option and/or a debit spread (buy closer option, sell further out option (as Bob in Mass suggests. I have > 120 put positions and about 10 call positions on about 50 stocks. At least 95% of my positions are in the money, which feels good. I may close some Feb options tomorrow to take profits, but otherwise, I'll just take my chances over the next 2-3 months. My expectation is that a recession, fairly strong one, should be priced in the next few months. Buying in the money options mean that you are not spending most of your money on time value. I hate paying for time. This conservative approach has paid off well and the leverage is still much better than buying or selling short stocks. I also trade index and commodity futures, but trading on a high volatility day is too scary for me and I don't have time to watch the market all day. As Bob in Mass mentions, this means that gains are usually between 50-150% (rather than 200-500%) but a high percentage are winners, at least when you get a big market trend right.
Wow. Nikkei down 550. I should stop these index quote posts, but that's pretty major following on the heels of yesterday...
In terms of indexes, we may be following Japan, take a look and think in term of large national indexes that have related core valuations:
Japan down 25% in 6 months
^N225: Basic Chart for NIKKEI 225 - Yahoo! Finance
FTSE & S&P down about 15% in 6 months
^FTSE: Basic Chart for FTSE 100 - Yahoo! Finance
The Nikkei site is getting hammered - Nikkei.com - Market Live
No helicopters, no printing presses, in the front door and out the back.
"The gap between what you know and what you think you know is always dangerously wide."
Nassim Talib
Anonymous
Unlike you I don't hide behind an anon handle and first, if you've read pasts posts in here, many commentators including me has discussed the way the TAF is balanced by 2 other actions of theirs ( you wanna name them ?).
Second if you bother to actually read my statement, it does say TAF announcement.
ElStupido !
There I feel better
-K
10yr Bond at 3.50% opening in Asia...
closed 3.64% Friday...
"This is one boomer who learned the hard lessons of the dotcom bust. It sounds sooooo stupid now, but up to that point I thought my "financial advisor" was really my advisor. Now I understand that brokerage firm retail staffers are financial advisors the way a used car salesman is a transportation advisor..."
John Stark - What you said was important. Along with what other people have said about boomer investments. The average financial advisor is following a formula - something like "your equity percentage should be the inverse of your age or higher" - like I am 60 and should be at least 40% equities. Or listening to the squawk box in the morning which tells them the party line in terms of what they should try to sell to their clients that day.
I mean - don't you love the way GS trots out Abbey Joseph Cohen (permabull) on CNBC while the company is shorting the heck out of the US economy?
The average FA knows zilch about bonds compared to me (that's what I know the most about) - and probably zilch about equities and other markets compared to what people who have been studying them for a long time know.
My primary rule of investing is no one cares more about your money than you do. And if you're in tune with yourself in terms of what you earn - what you spend - what you want in life - what your risk tolerances are - etc. - you can do a better job managing your financial life than any FA who is just "playing by the book" - a book which in all probability doesn't apply to you.
BTW - do not let a broker ever talk you into anything you're uncomfortable with - or don't understand. And if you can't just hang up the phone when they try to talk you into things - do all of your investing on line. Your computer will never argue with you.
As you can tell - I am a big fan of DIY. But to do it yourself - you have to be willing to spend a whole lot of hours doing a whole lot of learning. And be willing to make mistakes. I know I made just about every possible mistake when I was learning - and I still make mistakes. I suspect there isn't a single investment I haven't lost money on (except for CDs). When you're young though (and I think a lot of you are younger) - they're relatively small mistakes in terms of what you lose (unless you're dealing with a big inheritance!). I can't say practice makes perfect - but practice does make "better". Roby
CR
Yup! Some people with psoitions in the wrong direction are scared. Maybe PIMCO's book may not be that hot right now???
You and many folks who have been on this blog since 2005 saw this freight train coming!!! I am not in the least bit surprised at what is transpiring.
Chuck Prince wanted to keep dancing and now the the musical chairs are over.
I think it would be useful to those just coming to this blog now to see the "vicious cycle" chart you did when the talk of the town was the savings glut and the liquidity gusher and the "virtuous cycle" of increasing asset prices leading to more MEW to larger deficits and external dollar reserves to increasing financial asset purchases. Now we have begun the reverse cycle.
Its not time to gloat and say I said so when many will suffer. What I'm upset about but recognize that is the reality is that on the way up Wall Street and The Hedgie's liked their billion dollar bonuses and credited their own ingenuity and "free markets" now they want us common folks to bail out their homes in the Hamptons. And our fully paid politicians will oblige with their hands deep in our pockets.
When do we get our fellow citizens with pitchforks storming the bastille to rid us of this corruption and hypocrisy in DC & Wall Street???
The China Banking Regulatory Commission (CBRC) will implement monthly checks on major commercial banks' subprime investment positions, the official China Securities Journal reported, citing a source close to the matter.
The CBRC will monitor both realized and unrealized gains or losses, the report said, adding that the ""major"" banks will include Industrial and Commercial Bank of China (ICBC), China Construction Bank and Bank of China.
Why do some continue to insist the Fed is able to move the market fundamentally? It's puny in size by comparison. Besides, the market fell from January 2000 to October 2002 all the while the Fed dropped the FFR, and rose from there to the August 2007 top mostly while the Fed raised rates.
Aren't Fed rate cuts affect the markets like cocaine? There's a brief burst of euphoria and then an edgy, dispiriting malaise sets in... and it feels worse than the nomalcy that preceded snorting the lines.
Anonymous coward wrote: "The murder rate in Vancouver makes it the deadliest place to live anywhere in North America (based on murders/100,000 residents)"
False. Do you just make this stuff up?
Vancouver 2004 Homicide rate rate per 100,000 was 2.6 in 2004.
The Daily, Thursday, July 21, 2005. Crime statistics
Several American cities have rates above 10 per 100,000.
There is a learning curve with investing, especially of the more leveraged kind. In 2006, I gained 150K during spring and summer in my options accounts and then lost 180K during fall and early winter. That took a lot of self examination. I've spent about 20 hours of study per week over the last three years and in 2007 did really well. Now I need to gain enough in the next couple of months to pay last year's income taxes. Keep trading small until you really understand what you are doing. This is a comment for newbies. Certainly this site has helped in my bearish picks and on a few occasions I immediated bought options after reading an article on this block.
It seem simple to me.
Over consumption based on debt ramped up jobs. Now the reverse seems to be in full force.
Just wish the unwinding was a little slower.
Scarry days ahead.
I love the doctor analogy. Only problem is that the rate cuts are analogous to antibiotics and today's docs are trying hard to minimize antibiotic usage - it breeds new forms of bacteria resistant to the treatments in the first place.
Someone once compared the CDOs as akin to a virus that has spread throughout the financial system; viruses just can't be treated with antibiotics...you have to let it run its course.
Thanks Rob Dawg - I think that's the nicest thing anyone here has said to me. But I don't have the time to do a good job of it. I just hope that some of what I say here when I am "thinking out loud" might be useful to some people.
IMO - this is a scary time. I have been through scary times before in many different arenas (e.g., my husband and I were in NYC celebrating our 30th wedding anniversary on 9/11 - we were caught in the UK Hurricane in Oxfordshire in 1987 - and arrived home at about 2 am Monday morning - just in time to watch markets crash around the world - a market crash without jet lag is bad enough). Then of course - there are personal and family health scares - which are the worst of all. Doesn't make this time less scary. But - I suspect a lot of us here have muddled through a lot - and I think we'll get through this one too. Roby
Reading the comments about physical assets...visiting my folks in '95 and my dad disappeared upstairs, then returned with three 100 oz bars of silver to give to me. He'd bought them at near the peak during the early '80s and had left them in the attic - "pissed me off to even look at them."
I sold them within the next month to finish paying off debt and contribute to the daughter's college fund.
Now it pisses me off to even think about it. (I've been stocking up on physical assets, but would love to still have those bars!)
Nikkei 225 12,740.34 7:45PM ET\tDown 585.60 (4.39%)
^N225: Summary for NIKKEI 225- Yahoo! Finance
Verrrrry interesting. Not funny -- unless you're short (and really not very funny even then).
I love the doctor analogy. Only problem is that the rate cuts are analogous to antibiotics and today's docs are trying hard to minimize antibiotic usage - it breeds new forms of bacteria resistant to the treatments in the first place.
Antibiotics are hugely effective and powerful but only if used occasionally and then allowed to follow the full course of treatment including rest & nutrition. If you expect antibiotics to save you from sloppy unsanitary practices and high risk behavior then you'll be sadly disappointed.
Same applies to fed action. It should be rare but when used there was a clear risk to be averted - not just repeated 'common colds'. I'm afraid the Greenspan-Bernanke fed has overused and abused what could have been powerful RX in a better doctor's hand.
Someone once compared the CDOs as akin to a virus that has spread throughout the financial system; viruses just can't be treated with antibiotics...you have to let it run its course.
Sometimes when a virus runs its course the patient dies. Another risk is that the ravaging of the virus leaves secondary infections. When the infected cells lyse they leave open sores inside the body that bacteria then find quite hospitable. So even though the virus can't be cured by antibiotics - timely and appropriate administration of antibiotics AFTER a serious viral infection can be quite beneficial.
But not until the right time - too early and the benefit is largely lost... too late and the patient is so sick they might not recover (weakened and overwhelmed by multiple opportunistic secondary infections).
I don't think you can apply medical analogies to economics but there are always principles that apply across all disciplines..
1) Know what you are doing
2) Do first things first
3) Do no harm ALWAYS
Need to send a memo to the fed...
Robyn:
No offense, but I really just want to read your comments and not actually meet you...
"Nikkei Down 585.60 (4.39%)
Verrrrry interesting. Not funny -- unless you're short (and really not very funny even then)."
Agree. Although it is highly funny that I'm going to be debating a guy on TV tomorrow on the subject of bankers' bonuses for 2007. He is taking the view that these titans of capitalism are worth every penny. Maybe I should just roll my eyes and look at the solid red ticker whenever he makes a moronic point.
Hi Robyn,
I liked your comments on financial advisers. I'm an adviser and I put up a post on my blog about advisers that you might want to check out.
Stealth Advisor: The Problem With Most Financial Advisers and Brokers
I would be careful with the 10 year treasuries. It sounds like you are with your trading range etc. We may see a sudden drop in the Dollar and a spike in interest rates at some point.
I'm not messing with it and I'm keeping bond durations short.
-stealth
hey, Paul McCulley: What's in your wallet?
Show still going it looks like: Nikkei 225 down 2.7% at 12,972.79,Topix down 2.5% at 1261.53
I tried pushing the idea that this economic condition is a great deal like colony collapse disorder (CCD) where all the bees are going away and people are not sure why; a few virus ideas have come up but it remains somewhat of a mystery. The strangest part is that the hive remains intact with the honey and the bees vanish. Im not sure if off balance sheet synthetic CDOs are like hives, but one issue is that the future value of the bees working and being efficient is considered to be a future threat. So in those terms, the liquidity for future value will be trapped into less liquid investments that yield less value, which will have domino like effects as people become more challenged to grow investments. Capital will be less available and the economy will look like an empty hive.
I disagree with McCulley's reasoning. A recession is likely to help calm inflation, however cutting rates right here, right now stokes inflation. No matter what the Fed does not, it appears a debt deflation and price deflation is here already. I don't see how a rate cut right now can help. I also don't see how a rate cut can stop the bleeding in the stock markets.
rich:
Why bother robbing Misean? Apparently you can rob the bank that holds the gold for GLD and screw the shareholders. Note that neither the banks that hold GLD's bullion nor their intermediaries are not required by GLD to have insurance. How reassuring.
This is from the GLD prospectus, page seven.
"Shareholders recourse against the Trust, the Trustee and the Sponsor, under New York law, the Custodian, under English law, and any subcustodians under the law governing their custody operations is limited. The Trust does not insure its gold. The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate. The Trust is not a beneficiary of any such insurance and does not have the ability to dictate the existence, nature or amount of coverage. Therefore, the Custodian may not maintain adequate insurance or any insurance with respect to the gold held by the Custodian on behalf of the Trust. In addition, the Custodian and the Trustee do not require any direct or indirect subcustodians to be insured or bonded with respect to their custodial activities or in respect of the gold held by them on behalf of the Trust.
Consequently, a loss may be suffered with respect to the Trusts gold which is not covered by insurance and for which no person is liable in damages."
or how about this:
"The Trustee may, in its discretion, and will when directed by the Sponsor, suspend the right of redemption or postpone the redemption settlement date, (1) for any period during which the NYSE is closed other than customary weekend or holiday closings, or trading on the NYSE is suspended or restricted, (2) for any period during which an emergency exists as a result of which the delivery, disposal or evaluation of gold is not reasonably practicable, or (3) for such other period as the Sponsor determines to be necessary for the protection of Shareholders. In addition, the Trustee will reject a redemption order if the order is not in proper form as described in the Participant Agreement or if the fulfillment of the order, in the opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Shareholder. For example, the resulting delay may adversely affect the value of the Shareholders redemption distribution if the price of the Shares declines during the period of the delay. See the Trusts Annual Report on Form 10-K, incorporated herein by reference. Under the Trust Indenture, the Sponsor and the Trustee disclaim any liability for any loss or damage that may result from any such suspension or postponement."
stealtwii:
"The gov't stole everyone's gold in 1933 under Roosevelt."
In 1933 Roosevelt confiscated the money base which just happened to be gold. That's not the story today. I think it is highly unlikely that the government is going to rebase money on gold anytime soon.
Even if the gubmnt did make owning gold illegal I really doubt the most people would willingly allow confiscation today. It's a whole new world out there. People in 1933 actually believed in the power of a government to do good. Now we see government as a bunch of crooks.
is keeping your gold in someone else's vault kinda like keeping your 357 in your neighbors night stand?
Robyn:
"And then they threw the money on the bed and rolled around in it all night."
Wonderful story. I hope she got pregnant.
People in 1933 actually believed in the power of a government to do good. Now we see government as a bunch of crooks.
Ummm not true - reread Will Rogers routines... or Samuel Clemens (Mark Twain). They would have never been as popular as they were had they not hit a common chord with the people. Americans had both a trust & distrust of gov't... just like now.
Some stuff never changes... we just spin around and round while circling the sun.
"is keeping your gold in someone else's vault kinda like keeping your 357 in your neighbors night stand?"
Not when I'm sleeping with her.
ah...good old stagflation is here..where I Jimmy Carter when we need him?
He's still around, and so is Paul Volcker, the man Carter appointed to the Fed to end stagflation.
throth...touche
have appreciated your research
good luck tomorrow
the sad thing is even if we do well or are "safe" in our investmeents our community and neighbors will be in tatters...very sad
thoth not throth...ok im a dummy now every one knows
sorry
Gross and McCulley are power hungry money whores and there is lies their doom as truth tellers.
Jas
I've always thought Gross was one of the more honest and insightful people in the financial community. I'm not sure how he's been recently on interest rates, but his big picture comments on the economy are always worth reading. He's expressed his concerns for a while now with the problems with the FIRE (finance, insurance, real estate) economy replacing a production and service based economies, and has recognized for a long time that economic structure, particularly with the lack of savings, credit excesses and the housing bubble, and government deficit.
For a good example of his writing, I'd suggest: PIMCO - IO Feb 2005. A brief, and simplistic, summary is "You won't fund the countries retirement needs by current savings, whether by private accounts or pre-paid Treasury bonds in Social Security. Both are just calls on future production. Most of the things retirees need can't be saved up (for example, they can't save up health care for the future). What can help is that we quit going into debt as a nation, so that we limit the claims from outside the county on that future production." Read it. He says it much better.
Just my opinion, but I've always thought Bill Gross was one of the "good guys" in the industry.
First rule: Don't panic.
Second rule: If you panic, do it first.
Third rule: Always know what your exit plan is before you execute a trade.
That being said. I did not like what I saw and felt last week. I pushed the panic button on Tuesday of last week. It cost me $200 since I had to lose 2% of 10K due to 401K trading rules. However, it has saved me over 6K. So.. panic first if you panic. If you panic, learn how to profit from it.
Will the rate cut include a wheelbarrow so I can carry my $200 to the store to buy a loaf of bread? Note that I say "carry to the store" since nobody will be able to afford gas at $100 a gallon by the time these crooks are done "fixing" this Wiemar-style.
Darth,
By cutting rates, and cutting them hard, the Fed hopes to steepen up the yield curve big time, that will increase net interest margin for banks (the economic function of which is to borrow short and lend long) and thus slowly they will earn their way out of the mess. Its not going to stop the crash, but might cushion the blow a bit, same goes with the fiscal stimulus, it will not stop a recession but could stop it from turning into a depression