LOL!!! Fitch still doesn't have the cajones to downgrade MBIA. This is so reminiscent of Enron's downgrade. Fitch is just waiting for hopefully someone else to show a card before they follow suit. A game of Economic Chicken!!!
My simple analogy for the current mess:
The banks and lending institutions were force fed a huge diet of fat and lard (read as easy money via 1% interest rates) by the FED. They happily gobbled it all up, and went back for second and third helpings. They even invented new and creative ways to prepare the fatty foods to consume even more. They pretended that they could do this forever without any problems.
Eventually the intake was too great and the system had to be relieved (read as housing prices finally exhausted themselves)and relieved quickly. The banks then proceeded to take a huge dump right in the middle of the living room on the brand new carpet. The explosive diarhea was so voluminous that all the rooms of the home (read as the economy) are in danger of being stunk up by the mess.
Now the big banks and the central banks want to force the citezenry to clean up the mess under the guise that if the mess is left out, the smell will kill us all! First they soil the carpet, and now they want someone else to clean up the mess just like tha little babies that they are. No admision of guilt. No responsibility taken for the accident. Just great banks that are in trouble and need to be bailed out at any and all costs.
Sorry banks. If I had my way I would rub your noses in it just like an animal to teach it not to do these kind of things. Alas, I will not have my way. There is going to be major bailouts of all shapes and sizes coming down the line over the next year.
"WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission's review of the credit rating agencies is in process and agency staff may make some recommendations on how to improve disclosure and conflicts of interest as early as June or July, a senior SEC official said on Tuesday."
Just water under the bridge, this is a PR stunt to make it look like they are doing something really important....who cares about these fake ratings? Where were these gurus 3 years ago...ILL tell yah, they were smoking dope on yachts and getting free lunches and drinking with the big boys that wanted AAA ratings......they are pigs!
"Unlike the CDO (collateralized debt obligation) market, where there's obviously issues, the quality of the securities in the muni bond market is really strong," Bair said.
Even if bond insurers see more rating downgrades, she said she expects municipal bonds will remain strong.
Bond insurers are looking to raise capital to protect their credit ratings as any downgrades could force investors to sell billions of dollars of bonds, lifting borrowing costs for consumers, city governments and others.
Bair said on Tuesday that she believes bond insurers were seduced by the supposed safety of mortgage investments.
"You can't fault them," Bair said. "Why were money market funds buying this stuff? Everyone was relying on the rating, and no one was looking at what is behind the ratings. (They said,) 'Oh they're mortgages, they must be safe.
riskcapital- agency staff may make some recommendations on how to improve disclosure and conflicts of interest as early as June or July, a senior SEC official said on Tuesday."
Conjure Bag says, "Too late."
Bob Dobbs- "Time to put some Wagner on the Gramophone."
Conjure says, "How appropriate, because the Fat Lady is about to sing."
risk capital cites Reuters: SEC may recommend credit rater guidelines by July...
For a second, I thought he had referred me to some Onion article... like "Bush EPA to study whether study on global warming deserves further study, with study to conclude by 2009..."
With all due respect, given that this is the most telegraphed downgrade in history [when it actually happens], isn't it likely that the municipal market has already priced it in?
My conversations with muni people is that they are already treating insured bonds as uninsured...Don't forget, the great thing about the muni bond insurance business is that there were never claims in the first place.
I am not so sanguine of the effects on counterparty issues...I assume that is the bigger problem.
Yeah, that's my understanding. You can look at the closed-end muni funds (at etfconnect.com) and see the differential is pretty much closed.
Personally, I think the larger problem for munis is that the assumption that they are generally pretty safe may be wrong.
Partly because they aren't as free to raise revenue as before (think proposition 13 and the like) and because their pensions are underfunded, often times severely.
OK so these were almost all muni bonds, yet there's no downgrade amount, and almost no mortgage stuff. That just smells funny.
Yeah, some of those munis may run into some difficulty down the road with tax revenue drying up, and empty suburbs of McMansions becoming mosquito breeding grounds, but out of 172,326, only 158 were non-municipal.
Apocalypse Now was based on Conrad's "Heart of Darkness", which was an account of life along the Congo in the midst of King Leopold of Belgium's nasty ivory and rubber colonial enterprise.
I've heard when production did not meet quota, the workers would get hands, feet, etc. chopped off to scare the others.
I read the Roubini article. Quite frightening actually the way it's all laid out. This quote kinda fits the 158 downgrades.
"The lack of trust in counterparties driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch."
I really like the quote about size of losses and who the fuck the bagholders (beside us)are.
Can I start using my term more...
"Cascading cross defaults" O.K. I happy now!!!!
This being Super Tuesday and all, I was thinking about what the next President will face. I don't think it's fair to anyone - Democrat or Republican - to make them clean this mess up.
A message to our grandchildren:
Never let anyone calling themselves a "businessman" run your country. Never deregulate banks or securities. Never pay more than 3x your gross income for living quarters. Investigate at the first sign of corruption. Impeach at the first offense. Prosecute political crimes to the full extent of the law. Never vote against your own best interests (and for Christ's sake don't vote for anyone who says they talk to god). Never vote for someone who promises war. Always eat everything on your plate.
There are certainly many in the finance world who know the true value of the CDO's in all of its exotic varieties. The trouble is that these things do not unfold in an orderly and manageable fashion. Rather they take on a ferocious and expeditious path that quickly triggers multiple effects never before considered.
I fear that even what we are discussing here is but a small fraction of the potential of this hurricane.
Be very defensive with your assets. Protect them with all your vigor and determination.
Watch out for down town, and never go without a gun. Remember, your horse is your life, take care of it. Treat well the oxen that pull your plow. If a neighbor asks for help raising a barn, make time, you'll need his help down the road. And for Crissake, NEVER eat your seed corn.
Marcus-cont
Get a lawyer when it comes to contracts; learn about finance and listen; Don't believe the media; Don't spend more than you take in; Let envy make your friends broke not you; work to live; Make your voice heard;
Personally, I think the larger problem for munis is that the assumption that they are generally pretty safe may be wrong.
What about municipal money market funds?
They are holding a lot of auction rate securities that are only fungible because of the AAA ratings of the municipal bond insurers. If the insurers go down, then the bonds start trading on their own merits and a lot of people who thought they were holding "short term money" are going to find them are actually holding long term securities. Another example of "money that isn't money".
I think this was a big reason that the Fed's Open Market Operations desk was knocking on these funds doors last week:
Allen: I was 1st Air Cav 1966, got to tell you that nobody went near the beaches on foot, LOL, very beautiful but full of mines, fly over many times not a sole in sight for miles must have taken years to de-mine all the beaches.
Since all that we can do now is to think to the advice we've given, and had ignored, a little OT from William S. Burroughs:
WORDS OF ADVICE FOR YOUNG PEOPLE
People often ask me if I have any words of advice for young people. Well, here are a few simple admonitions for young and old.
Never interfere in a boy and girl fight.
Beware of whores who say they don't want money. The hell they don't. What they mean is they want more money. Much more.
If you're doing business with a religious son of a bitch, get it in writing. His word isn't worth shit, not with the good Lord telling him how to fuck you on the deal.
Avoid fuckups. You all know the type. Anything they have anything to do with, no matter how good it sounds, turns into a disaster.
Do not offer sympathy to the mentally ill. Tell them firmly, "I am not paid to listen to this drivel. You are a terminal fool."
Now some of you may encounter the devil's bargain if you get that far. Any old soul is worth saving at least to a priest, but not every soul is worth buying. So you can take the offer as a compliment. They charge the easy ones first, you know, like money, all the money there is. But who wants to be the richest guy in some cemetery? Not much to spend it on, eh, Gramps? Getting too old to cut the mustard. Have you forgotten something, Gramps? In order to feel something, you have to be there. You have to be 18. You're not 18, you are 78. Old fool sold his soul for a strap-on.
How about an honorable bargain? "You always wanted to become a doctor. Now's your chance. Why, you could have become a great healer and benefit humanity. What's wrong with that?" Just about everything. There are no honorable bargains involving exchange of qualitative merchandise like souls. Just quantitative merchandise like time and money. So piss off, Satan, and don't take me for dumber than I look. As an old junk pusher told me, "Watch whose money you pick up."
All I Ever Really Needed to Know I Learned in Kindergarten
by Robert Fulghum
Most of what I really need to know about how to live, and what to do, and how to be, I learned in Kindergarten. Wisdom was not at the top of the graduate school mountain, but there in the sandbox at nursery school.
These are the things I learned: Share everything. Play fair. Don't hit people. Put things back where you found them. Clean up your own mess. Don't take things that aren't yours. Say you're sorry when you hurt somebody. Wash your hands before you eat. Flush. Warm cookies and cold milk are good for you. Live a balanced life. Learn some and think some and draw and paint and sing and dance and play and work some every day.
Take a nap every afternoon. When you go out into the world, watch for traffic, hold hands, and stick together. Be aware of wonder. Remember the little seed in the plastic cup. The roots go down and the plant goes up and nobody really knows how or why, but we are all like that.
Goldfish and hamsters and white mice and even the little seed in the plastic cup - they all die. So do we.
I was wondering what was with the home builders this morning--about the only up sector. It seems that analysts were busy with upgrades, now that the sector has bounced up well above any reasonable value. One big news was that SPF lost only $6 per share and has been able to free up a little cash flow. Analysts think that the lower interest rates and lower prices should start to turn this housing ship by summer!
OK, I dont get it, isn't the whole point of bond insurance that you buy the insurers AAA rating? If they are downgrading the bonds aren't they saying the bond insurer isn't AAA, yet they haven't downgraded MBIA ...yet...
I was wondering what was with the home builders this morning--
We are now entering a period of bear market rotation where retail, transports and financials, which led the market down, are being cushioned by value buyers and short covering, while new sectors like technology, industrials, cyclicals, machinery and oil related stocks are starting to roll over. The market is never a monolith and some sectors like coals and healthcare services still look like decent places to hide. At a minimum we expect the Dow to get down to 11,000 with a June/July bottom possible, but you could certainly overshoot on the downside."
Global Trend Alert
OK, I'm getting a little more nervous. I've been in cash since the middle of last year. Good call, I'll pat myself on the back for that. But I'm starting to get a feeling that things are about to start to spiral out of control. Maybe not tomorrow but it's on the horizon. I've posted this question before but I haven't gotten an answer. I'm sure there are others with a similar question. Here it is:
Most of my money (95% plus) is in cash positions, sitting in Fidelity cash reserves and money markets. These are the proceeds of last year's sales. MM's are not suppose to break the buck. But I'm nervous. How nervous should I really be? Fidelity tells me not to worry, because they are privately owned and very conservative. But then again, what are they going to say?
What do you think? Should I stay put or is there some real danger? I value the opinions here. Thanks.
OK, I dont get it, isn't the whole point of bond insurance that you buy the insurers AAA rating? If they are downgrading the bonds aren't they saying the bond insurer isn't AAA, yet they haven't downgraded MBIA ...yet...
r0m30,
My guess is that the ratings agencies are dragging their feet while they wait for Buffett's new bond insurer to get moving full speed ahead.
There is an attempt to fasttrack the approval of his insurer by allowing it/him to submit one form for approval by all states.
I think, for structural reasons, they need another insurer in place.. but, of course, this is all speculation by me.. The Ignoramus.
Good points. Given your name, you might know this quote by Cicero (which I cribbed off the head of the Sudden Debt blog):
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt. People must again learn to work, instead of living on public assistance. (Cicero, 55 BC)"
Buddha says suffering comes from attachment to your fears and desires. Diversify so a point failure can't take you out [consider having some stuff at Vanguard, for example], but then, realize that whatever happens, you'll be OK!
Then, sit back, and watch the awesome, and fearsome, show, that is unfolding before you.
I assume those are 401k's so you're kinda stuck. If they're not, do some charting and research on gold and silver. The market is a bit over bought right now IMHO, so watch it this week. Silver is still very affordable. Get a safe and buy some...5%...and lock it up.
Gold's a trickier play right now, but as long as it stays above 850, grab some.
Move some into CASH, as in your safe. Fire up a 3 mos and 6 mos CD. When the 3 mos expires roll it into a 60 mos. You want some cash on hand...or close. Leave the rest...if you trust the fund.
Remember, I wear a Super Colander Tin Foil Hat, and am probably certifiably insane...so take that for what it is worth.
..oh.. and part of my speculation is that the ratings agencies have been approached by officials from many of the states informing this of the need to wait on downgrading.
They're probably telegraphing their intentions (to set expectations).. but as long as the downgrades haven't actually occurred, then there is no need for Pension Funds and the like to dump any bonds.
If Buffett gets ramped up, is it feasible to shift the insurance to his entity?
I think this whole situation calls for an old Kinks tune - Catch Me Now I'm Falling - the lyrics seem pretty appropriate and could have been penned by Hank Paulson in 2007:
I remember, when you were down
And you needed a helping hand
I came to feed you
But now that I need you
You wont give me a second glance
Now Im calling all citizens from all over the world
This is captain america calling
I bailed you out when you were down on your knees
So will you catch me now Im falling
Etc., etc., etc....
You all know the lyrics.
The reason behind this bond insurance stupidity, retardation, is the fact that a massive amounts of muni/pension account traders collectively decided as a group to buy into the derivative trader bullshit that bonds were out of fashion and that bonds required too much of a premium, which resulted in lower yields. Thus all these morons, like a huge herd of lemmings moved away from traditional bond investing into CDOs, SIVs and any derivative that offered higher yields -- no questions asked.
Now, that questions are being asked, the synthetic derivative financial engineering that bridged the gap between yield enhanced expectations and the reality linked to the premiums associated with bond security are like looking at a war zone filled with death and the opposite side of the coin, where old fashioned bonds were not only safer, but doing something unthinkable, they continue to provide a yield.
Umm...Greenslime dropped interest rates down to 1%. The MBS stuff was extraordinarily complicated, but were rated AAA. They chased yield. One can blame the buyers for lack of due diligence, but hell, the regulators said that AAA rated poop from the issuers was good as gold.
Not saying the "'tards" are innocent. But they were led to this disaster...starting with the FRB.
No private sector bailout for the monolines. Downgrades AH Friday and before the open Monday they are all nationalized. There's no way the Fed & Treasury let the whole mess explode and pension funds, large mutual funds & 401s get vaporized.
What happens to common and and the feeble USD is a wonder.
Why not just a Treasury Fund? Since this is short-term, is the extra interest payment worth the potential headaches if the issuing bank becomes "troubled"?
The reason no one has answered is because no one can answer. If we knew what to do, we'd be sitting back laughing. At least you're not trying to trade in this insane market.
In my opinion, the best you can do is to hedge your bets. I'm not savvy enough to sort out the good from the bad in stocks, bonds, or exotic financial instruments (then again, neither are the ratings agencies), but heres what I'd do:
If you're as twitchy as you say you are (and it is understandable if you are), for the short term, I'd hold as much cash as you are comfortable with, plus some in a safe deposit box with a mix of currencies (DYODD), some gold and silver coin (which either adjusted today from their recent gains, or which will continue to follow everything else into the abyss - again, DYODD). Shop for the best exchange fees on the currencies. Personally, I'm staying away from anything I can't possess physically (including access to what's in the safe deposit box).
If you do this, and are still uncomfortable, welcome to the club.
Others posting here will probably tell you that I am absolutely wrong. Their opinions should be given great weight.
Read the prospectus. I tried to read them online a couple months ago because I have a fidelity acct, but it simply would not specify what securities the MM was invested in. Been looking at European banks for a safe place ever since.
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
I dunno. That's why it's important to have some cash in hand.
Roubini becomes darker and more saturnine re the economy:
Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.
To understand the Fed actions one has to realize that there is now a rising probability of a catastrophic financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown.
The details need a subscription that I don't have. Perhaps somebody else does or can summarize them.
When the fed loans money short-term, like via the TAF or fed discount window, what happens when the recipient cannot pay the money back? And, beyond that, what is to stop the fed from forgiving those loans, and would they do that? What would the effect of that be?
"In Italy, for thirty years under the Borgias, they had warfare, terror, murder, bloodshed they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
I will quote the bottom line of Roubini's grim article for you:
I will argue in my next article - that one should be pessimistic about the ability of policy and financial authorities to manage and contain a crisis of this magnitude; thus, one should be prepared for the worst, i.e. a systemic financial crisis.
Thanks again to all for the additional comments. I kinda sense I'm not alone in nervousness. Let's hope that we all come out OK on the other side of this mess. Opportunities will present themselves (as they always do). Thanks again and much success to all.
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
Misean,
I guess you could put it in tiers.. assuming one wants liquid funds to use for the purchase of random assets in the event of some discontinuous drop in prices... then you want straight cash or treasuries (i am assuming).
It's hard to tell where some brokerages hold your cash.. Several years ago, I had to specifically indicate that I did not want OptionsXpress to put my cash in any MMF funds.
In general, a flight to liquidity sends money to Treasuries. If it gets so bad that there is no money available to buy even Treasuries... I don't know what it would matter.
I guess, in the worst case scenario, all bets are off. Treasuries might be the safest... but you couldn't guarantee liquidity. If you had cash under your mattress, it'd be useful for buying local goods.. I wonder if you'd be able to wire it back into a brokerage account and put it to use..
Who knows.. certainly not me. Though, I think we're at a point in time where one may not need to focus on eeking out an extra percentage point of yield here or there by using CDs or other assets IF one is looking for maximum potential liquidity in a brokerage account.
Refundings really are the dirty secret of the muni industry, especially revenue bonds.
Most 30-year revenue bonds don't last more than 7-10 years. They are refunded, with the new money paying off the old bond principal. It's not different than refinancing a house at higher levels of debt/appreciation.
Without insurance, a lot of bonds can't refund. Without refunding, they eventually default. There's not enough money there to pay the bond off. But by constantly refunding, they can hide this, like any other type of ponzi scheme.
They want Buffett to be an insurer of refundings. He could do it. It's not bad biz. But it's still ponzi.
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
Dang Misean,
How many batteries you got in that tin-foil hat of yours.
Short term treasuries liquidate themselves. The only risk is holding them through a broker and your broker goes under (and the SIPC goes under too).
I have a 403b in Fidelity, which allows me to buy any of the 250+ Fidelity funds. I think that cash reserves are safe, but you can also buy Government money market and gov bonds. I moved about 60% of my 403 b into cash and gov bonds in Nov-Dec. I also have a fair position in gold and some defensive sectors, like health and consumer stables (Fidelity select funds). Unforunately (for this week, at least), I also have a good chunk of Asia. The Asia, energy and gold all did well last year. I don't like to go 100% cash/bonds, although I have another retirement fund that's only 20% equities.I have a timing system that will give me confidence to buy equity funds again when it will feel very scary. Not their yet.
The retards were thinking "going to double my bonus again this year"...its one thing to do this with the proprietary book, but to take down the widows & orphan customers with you....
AllenM, thanks for your signature line. It's given me a lot of comfort.
CBC TV just aired a feature noting the American voter now cares less for the war than their piece of the economy.
Welcome to Ash Wednesday:
Because I do not hope to turn again
Because I do not hope
Because I do not hope to turn
Desiring this man's gift and that man's scope
I no longer strive to strive towards such things
(Why should the aged eagle stretch its wings?)
Why should I mourn
The vanished power of the usual reign?
I got an option on a sweet german shepard puppy and I put whats left of my old uniform in the wash. I am still looking for my cleaning kit but I think I can shoot the rust out.
BillD, the prospectus has the MM's and cash reserves investing something like 25% in commercial paper. THAT's what scares me. Government bonds are "safe" but in an all out scare I wonder about liquidity. Not enough real money to go around.
With money market funds, check their SEC filings after reading the Prospectus and SAI(Statement of Additional Information).
Their SEC filings are available in the EDGAR data base at:
SEC.GOV
The Prospectus and SAI are included in the 485POS filing, if you cannot download them from the fund management website.
Annual and mid-year financial statements and holdings are contained in the N-CSR filings.
Quarterly holdings are contained in the N-Q filings.
If you quickly scan the holdings shown in these filings you can get a sense of what the fund holds. If you are uncomfortable with or confused by what the fund owns, DON'T INVEST!
Remember: $1 per share NAV offered by most money market mutual funds is a marketing convention designed to make the funds look like a bank CD. All mutual funds, including money market funds, can go up and down in value.
For those interested in opening accounts elsewhere.
CIBC (CAD only)
For CIBC call their # and arrange for a day to go show ID in Canada and open a account in CAD. Everything else can be done online.
HSBC (In Singapore) http://www.hsbc.com.sg
Call/email the singapore branch. They will send the forms. Fill them and take over to the nearest US HSBC branch. Get them attested by officer. Not sure about relationship of HSBC US and HSBC Singapore. US HSBC was considered to be one of the banks likely to fail according to market watch
I'd guess that the main way one would not be able to convert a Treasury to cash would be if everyone was done selling or if just everything locked up and no one wanted to convert their assets into Treasuries since they couldn't sell anything.
If there was a lockup, you'd probably not really want to buy at that moment (but it could be a good gamble if the asks were low enough).
If everyone was pooping their brown pants, one would assume money would be first flooding into Treasuries.
Again.. this is all speculation by The Ignoramus, me.
As of 9/30/2007, Fidelity Cash Reserves: 26% CD's, 20.7% commercial paper, 29.3% medium-term notes (Citigroup, GE Capital, Sigma Finance, etc.), 18.9 % repurchase agreements of mortgage-backed securities (Barclays, Lehman, Bear Stearns, etc.), and 15.2% yankee dollar and foreign bonds. This info from rough notes, and may or may not be accurate. It is available on the Fidelity web site. The CD's offered by Fidelity are issued by banks which may or may not inspire confidence. There is a Fidelity U.S. government bond money market account. The yield is, of course, rather low.
The Nikkei drop of 4%+ is meaningful. The Hang Seng drop of 5%+ is not.
Drops of 3% or more in major markets, not the backwater pretenders to serious economic power, are rare and over 95% of the time lead to additional movements in the greater than 3% range. These don't continue for extended periods of time, but they do repeat in close time order.
Look at the DJIA monthly chart. The high was October, the low was November, December was an inside month, and that set up the most powerful top reversal on a monthly basis ever seen, from pre 1929 to the present. Sinclair has called it. So did Richard Russell. And immodestly, so have I, though I'm scared stiff here because this is "it".
Roubini's talking about something that's really the tail, not the dog. The dog is found in housingbubble.com The underlying economic cause has not begun to stabilize. It's at a wonderment pause for the subprime, but the alt-A will follow in '09, and CR is pointing out repeatedly that CRE is now about to be 2nd, ahead of alt-A. And the big boys, the jumbos and primes will be defaulting in '09 along with the alt-A's. We can all do the rest of the math re: the funds holding these flaming stink bags.
The joke here is there's nothing coming from the gov'ts on what to do after this all implodes. Denial is all they're offering. Destruction of the currencies via governmental buy outs are politically tasty yet ludicrous.
It will continue; we're not all going to die. But nada is thinking about what's seriously next that will maintain the quality of life most of us are now living.
I retract that it will continue. The events in Pakistan, Bangladesh, and India, right now, viz a viz bird flu are high probability precursors of even more biological boiling water being tossed on the economic corpus now being being drawn and quartered. One pain apparently is not enough.
If I remember correctly, money market funds are grouped into a few broad categories:
Prime or cash reserve funds can hold corporate, bank, and government paper.
Government only funds hold US Treasury, agencies, and GSE (Fannie, Freddie, etc.) paper.
Treasury only funds should hold only US treasury paper and repos fully collateralized by US treasury securities.
Yield and risk move in opposite directions. If a fund is offering higher yields, then it is taking risks. The difficult question is identifying the source of the risk generating outsize yields.
I'm pretty ignorant too. I just hang out here waiting for additional pronouncements from Conjure Bag.
Bystander,
While I am a fan of the Conjure Bag entity... I personally wait around to hear the announcements about free ponies for all..
That really gets me pumped because I'd really like a pony.
I mean.. if you can't sprinkle Zoloft or Ecstasy on everyone.. why not try sprinkling ponies? That would cheer people up.. then they would ride their pony to the store and buy some stereo equipment.
Sometimes I wonder at how history will view us, sitting here making pronouncements about what awaits us.
I can hardly wait until the Fed hits 1 percent. I watched Becky Quick talking with wilbur this AM, and thought, wtf- he isn't going to put a dime into a monoline. He is shorting bigtime.
When the fed loans money short-term, like via the TAF or fed discount window, what happens when the recipient cannot pay the money back? And, beyond that, what is to stop the fed from forgiving those loans, and would they do that? What would the effect of that be?
Money triva, my favorite!
The Fed would try to sell the defaulted securites on the open market. Most likely, it would be able to recover full value because Federal Reserve is like Uncle Vinny's Pawn Shop. It never loans the full market value of what it's taking at the discount window.
If the security had dropped so fast that the Federal Reserve couldn't recover full value the Federal Reserve would technically be insolvent (bad).
The possible remedies would be:
Congress could buy the defaulted assets from the Fed, sell them on the open market, and the taxpayer would take the loss.
A smaller loss could be covered through by keeping more interest collected on holdings in the Fed's System Open Market Account (excess interest is normally handed over to the US Government)
A Presidential Proclamation could be issued that would re-value gold reserves from $45 an ounce to something higher to cover the short-fall. I'm not sure if Congress would need to be involved, but the exchange stabilization fund was created this way.
While the Federal Reserve would certainly survive, the result would be a black mark on the USD.
Owl -
Short term treasuries is the answer. Just stay short - 3-6 months and you wont really take much rate risk - granted you wont get paid much but you'll be ready to go if/when the sh_t hits the fan.
I went all treasuries in April with an average duration of about 2 years - recently I brought the duration down to about 7 months - and bought long term puts on the markets and financials. I intend to hold my puts (although I have to sell some March 08s in the next couple months) and may even shorten up my duration further. I'd love to buy some puts on the Euro and Pound through an ETF but I can only go out until June (I'd want at least a year) and I'm also pretty long US Dollar already so I'm not sure its the prudent thing even if I like the trade.
Dont think I'm saying anything different than what you've been hearing from others.
While the Federal Reserve would certainly survive, the result would be a black mark on the USD.
Small problem: US Dollars no longer exist. All we have are Federal Reserve Notes that are fully redeemable for more Federal Reserve Notes. Check the paper in your wallet to confirm this.
Ok, that was a trick question before, because, as I look for historic yield patterns, it is interesting that the yield on treasuries is bouncing around in a death dance, embraced by Paulson & The Fed, who want to have sustained economic growth -- no matter the cost and to try any possible means of factoring out the cost of the war in Iraq.
This collusive mindset from this coup seem hellbent on furthering the illusionary nature of The Bush Legacy, as if his daughters just dont get it yet, that he is The Greatest President Ever Placed In Power God Damn It!
The premise that the housing market was the greatest leg of the American Economy and thus immune to slowdowns, no matter what, is currently being understood for what it actually was, which was a way to use American Patriotism to buy into a housing bubble while The Iraq War costs went unchecked, unregulated and unaccounted for, just as Wall Street was given the green light for a anything goes with derivatives and synthetic bubbles. Now we see the great power of illusionary and deceptive rating agency powers that blessed the economic dream, the agencies that hyped, rated, modeled, verified, endorsed and pumped the greatest illusion in American history...
I want an elephant - not a pony. Riding an elephant reflects status - it shows I'm not worried about miles per bale. in traffic, ponies will get out of the way of an elephant, plus, elephants have more trunk space.
With money market funds, check their SEC filings after reading the Prospectus and SAI(Statement of Additional Information).
Money Market Funds have been playing games around quarter end to hide what they are actually holding. It's one reason that liquidity for conduits was tight at year end '07.
Misean,
Not judging. You're talking to a guy with 3M calories stored in his basement (May be a nut, but not sure). But, if short term treasury funds get taken out there really isn't any place to hide. After all, it's all paper.
"In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
There is quite a misunderstanding about the Swiss, especially in the U.S. The Swiss have a tremendous warrior tradition though were involved in few wars as a nation after 1515. There is good reason why the pope even today has the Swiss guard.
"Swiss mercenaries were soldiers notable for their service in foreign armies, especially the armies of the Kings of France, throughout the Early Modern period of European history, from the Later Middle Ages into the Age of the European Enlightenment. Their service as mercenaries was at its apogee during the Renaissance, when their proven battlefield capabilities made them the most sought-after mercenary troops in the world."
If you are really worried about the collapse of the US banking system, then study the coping strategies used by the Russians during the Ruble collapse in the 1990s.
Foreign hard currencies can help, but a large hoard of Marlboro cigarettes are excellent for barter.
Anyway, we are all held in submission by The Lords that point us to where we shall go, but to get back to where I was before this goo poured out:
Yields, damn it, open up your friggn windows and look around outside for some yield; do you see it, do your neighbors have it, do your landlords have, do the people on wall Street have it; does The Fed.......does Japan or China or that vast group connected to The Euro or Libor?
Hell no, no one has it and the reason none of us have it, is because of several things:
Global inflation
Global Illiquidity
Global accounting fraud
Global earnings decreases
Global bond manipulation
Global derivative manipulation
Global overvaluation based on # 1 through 6, i.e, Global engineering has placed us all a great risk by pooling our collective assets into pools of excessive risk which link pensions in Japan to pensions in the Uk to pensions in the USA and the best part is, these pooled, packaged derivative timebombs are exploding like terrorist attacks in Iraq.....oh wait.....the war in Iraq war in Iraq was all about WMD, but oh my God, it turns out, the terror is really from the college kid down the street that works for a global bank that wants to think global and screw people locally and steal your pension money with the full 100% blessing of The USgovt/DOL...
US Dollars no longer exist. All we have are Federal Reserve Notes that are fully redeemable for more Federal Reserve Notes. Check the paper in your wallet to confirm this.
The paper notes in my wallet are special. They are issued by the US Treasury and the Treasury only accepts US Government debt as collateral. So, each paper note has exactly one dollar of US government debt standing behind it. That's what "The full faith and credit of the U.S. Government" means.
Anyhoo, I'm going to venture out into the world in search of food, and gaze upon the beauty of Downtown Brooklyn.
I'm crossing my fingers that the impending financial clusterscrew will salvage it from the developers (I promised my girlfriend that I'd put a hex on them last Summer, and they would all pay.)
Fidelity and Vanguard are safe in that they are owned by the people putting the money into the accounts. Each fund stands on its own, it is a trust. Loses are contained to each fund. I would not be in the MM however, because of all the various vehicles trading in the short term cash area, and many have hair on them. I am nearly all in Vanguard VUSXX, short term treasury account, lower cost than Fidelity.
It is not about the return on my capital, it is the return OF my capital. Hope that helps.
Can anyone really explain the difference between a derivative time bomb and a WMD; what is the difference in destruction between financial terrorism from wallstreet and some terrorist from Iraq or Ireland or Russia? What constitutes terror or destruction, and then why do we have a government that wants to bail out corrupt and destructive forces? What has happened in our land?????????
They are still 25% overvalued and this is why you need to understand correlated /relative yield related to exchange ratios and valuation; Japan and China have a long way to fall and that is why you see the volatile crashes week after week. The S&P 500 is still overvalued in America as well, but at this stage of game, one should look for comparative reality in regard to yield !!!!!!
Ok, wake up here with some Hot Ramen Cocoa and a spoonfull of Ovaltine:
eb. 6 (Bloomberg) -- Japan's 10-year bonds rose, halting a two-day decline, as a slump in global stocks attracted investors to the relative security of government debt.
Ten-year yields fell from near the highest in a week after Japanese stocks slumped on a report that showed U.S. service industries contracted at the fastest pace since 2001, boosting concern the U.S. will enter a recession. The U.S. is Japan's largest export market.
``Now it is back to the bear trend in the equity market people have to buy JGBs,'' said Xinyi Lu, chief strategist at the international treasury division at Mizuho Corporate Bank Ltd. in Tokyo.
The yield on the 1.5 percent bond due December 2017 fell 6.5 basis points to 1.41 percent as of 11:05 a.m. in Tokyo according to Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
Ten-year bond futures for March delivery rose 0.77 to 137.97 at the Tokyo Stock Exchange. The Nikkei 225 Stock Average lost 4.1 percent.
Cooking ramen in my percolator writes:
What has happened in our land?????????
Bushwhacked beyond disbelief...
Cooking ramen in my percolator | 02.05.08 - 10:52 pm | #
Please, our dear leader has everything under control. Currently he's reading My Pet Goat, and as soon as he's through with that, he'll attend to the country's problems.
I appreciate the way some of you have been offering financial advice, winding up with disclaimers that display admirable humility: "I may be crazy, other people see it differently, I don't know for sure etc."
If only the masters of the financial universe had a little bit of that in their brilliant minds--a little voice saying, "You could be wrong. What if you are wrong? Are you really smart enough to control this immense engine of financial destruction that you have built?"
build machines that they can't control, bury the waste in a great big hole...
No, they lacked that humility, and they lacked the imagination to see what would happen when their schemes failed.
To be fair to the Swiss, they did come up with Dada, or at least the movement started on their soil.
But the Italians started Futurism. And Futurist cooking is one of my favorite things. Most is rather silly -flavoring the food with steel and blasting diners with sounds of airplanes and jet fumes (the sounds and smells of progress!). They did have some interesting ideas though.
"A Futurist cuisine had to find ways of reestablishing "gustatory virginity." To annul one set of tastes
and smells before presenting the next set, a suction fan would draw
scents out of the room. To intensify sensory acuity, they
periodically changed the lighting and room temperature, suddenly
instructed the diners to quickly move themselves and their dinners
two places to the right, released a live turkey into a room where
diners had just eaten the bird, and presented blue wine, orange
milk, and red mineral water."
"Please, our dear leader has everything under control. Currently he's reading My Pet Goat, and as soon as he's through with that, he'll attend to the country's problems."
Well thank the maker for that...I was getting worried.
The yield on the 1.5 percent bond due December 2017 fell 6.5 basis points to 1.41 percent as of 11:05 a.m. in Tokyo according to Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
Hello my fellow global friends, look at the friggn yield! We have yields at 1.5% with an overvalued market, where there will be a flight to safety, which besides having investors look for Depends does what........Oui, the flight to safety drives up the price and lowers the yield, because stocks are overvalued and oh yah, currency hedging>>>
Thanks Darknite,
seems that many people here agree with you and are going for the short term treasuries. Some for CD's. It seems that the MM fund may not be the best place to be right now (just in case). I'm planning on calling Fidelity and Vanguard tomorrow to compare and inquire.
I've read all the comments by everyone and really, thanks to all. Much success.
About a week or so ago I wrote something to the effect that many panic lows have a secondary low which evinces at least as much if not more negative prognostication as the first one even though prices are higher. I would say that todays action fits the bill exactly. None of the leadership down groups are near their lows, the real damage today is in all the stuff that has great implied value based on current prices. There are now a multitude of sectors where one can find prospective earnings yields north of 10% and up with little or no risk yet there is no interest because everyone is scared out of their wits.
Consider Roubini, with virtually zero new economic news over the past month other than 125 basis points of rate cut his rhetoric has ratcheted up to armageddon levels. This is mostly because you can't be in the limelight unless your predictions are provocative. In order to achieve that status in this environment you must talk of total collapse or you are just a run of the mill bear.
Isn't it odd that january marked the first month in something like 15 years when corporate insider buying was actually higher than sales? Do you really believe that en masse their understanding of their companies and prospects are less informed than the views of outside pundits?
This is beyond bullish. There's not much more to downgrade, and obviously housing will turn around this spring. With interest rates dropping and all the bad stuff now priced into the forward looking markets, AND an extremely oversold condition in the stocks, we're set to rally big.
You silly bears, and doom and gloomers, don't understand just how much our gov't and those that run the stock market love us. We're little lost puppies to them, and they could never hurt us.
I see sunny days comming as winter moves into spring.
"With interest rates dropping and all the bad stuff now priced into the forward looking markets, AND an extremely oversold condition in the stocks, we're set to rally big.
You silly bears, and doom and gloomers, don't understand "
Your correlation to past events has no relativity to future events; I can understand that you have a tangent to follow, but the bridges from where you are to where you need to go have structural flaws and this lack of integrity will make your your journey very risky. However, as you are the driver of this drunken limo, go for it and step on the gas, after all, what can you forfeit?
Larger transactions are conducted in multiple ponies. Roughly one domestic mid sized sedan is ten ponies.
More day to day transactions are based on single ponies, with variation for pony size. The 56" flatscreen is a big, big pony. A 32" is a normal sized pony.
Smaller transaction are handled by pieces of ponies.
Incidentally, fractional ponies can also be converted to food items.
"I want a hamburger.. no a cheeseburger. I want a hot dog. I want a -- You'll get nothing and like it!"
Can you use black market pancakes in a still to make booze? I think so...probably be kinda vodka like, unless there's syrup in there. Then it could be sorta rum like.
we're seeing real estate deals here with 10-12% current yield at stabilization and 20%+ IRRs. local banks still seem willing to lend at 275bps over the 5 yr treasury fixed for 5 years.
but the security of the tenant income stream is coming into question.
even municipal building tenants are questionable when facing deficits.
at least dc has a fairly certain velocity enhancing time period coming here as the administration changes.
The core consumer price index, which excludes fresh food, will climb to as high as 0.9 percent by April from 0.8 percent in December .
Why does USA not break out "fresh food" into inflation data; there are any possibilities for geometric substitution with "fresh foods"!!! Hi!
Ten-year government bonds have returned about 0.3 percent so far this year, according to index compiled by Merrill Lynch & Co., while inflation-linked securities handed investors a loss of about 0.2 percent in the same period.
I prefer to deal in slivovitz...
I did drink Vodka from the Diplo shipments on the delaware in the early 90s. Those guys said the could get me anything. I said, a Tank? T-72? They said sure, got 50K and an import license?
I wished I had one, apparently they did import a few for collectors.
This country is more than a little insane in what folks collect;-}
The least beat up sectors today were Staples and Healthcare, but those are still not doing too good this year.
Are there any safe sectors, relatively speaking? I know you can't spend relative performance, but some did hold up well during 2002-02, but this may be more like 81-82 or 73-74. Maybe there is no safe sector?
Seems to me you're missing the importance of pancakes.
Marcus Aurelius wrote:
I hope the Black Market economy is based on pancakes.
Someone will cook the pancakes and sell them. The buyer will take a little nibble and resell them to someone who doesn't even like pancakes, but likes to buy and sell things. Well, maybe he likes pancakes a little. So he'll take a little nibble.
But since he likes to sell things more than anything else, he'll buy lots of pancakes and nibble on them all.
Pretty soon he'll have piles of pancakes and it'll be too much trouble to haul them around, so, for convenience, he'll just start selling the receipts for the pancakes he has back home. No one will ever know that the mice at home have been busy while he was out.
That is...
until someone notices that you don't actually need pancakes to sell pancakes.
Shortly thereafter, (as in NOW for instance,) we arrive at a pancake-less society based on pancakes.
Poor economic grad students from FSU- funny they used to load up a van full of stoli every couple of weeks from Kennedy Airport. I guess they sold it to the local bars to provide spending money.
Pertsovka. Wybora.
Ugh, my liver is telling me to forget about it.
There is always something going on that is profitable, and not quite legit.
Just not in my house. I work for the gummint now;-}
"crispy&cole writes:
Anyone long the market and on suicide watch - dont visit Roubini's blog...it might push you over the edge."
Roubini said on his blog: "So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters. What will be the consequences of it?"
The consequence is that a lot of us holding Jan. '09 puts will be forced to cash in sooner than preferred.
allen-
spent two weeks in russia this summer sampling vodkas of every type. loved every second of it but Hangar One from california is the tops for me.
"Are there any safe sectors"
No, all investing means risk. The question is are there any risks worth taking?
Here are some interesting factiods:
The xoi (amex oil index) started the year at around 1550. It closed today around 1320.
The ten year treasury started the year at about 4%. It closed today at about 3.60.
The 10 year oil strip is up a bit for year.
So in the span of about one month the prices of the stocks are down about 15%, the price of the product is up a little and the discounting rate for earnings is down 10%. So either the market was very very wrong 30 days ago or it is very very wrong today.
These calculations are doable in a number of sectors with similar results.
Spent an afternoon drinking with lance in early 2000 in the old building in Alameda before they made it big. The St Georges stuff is far better than plain old vodka. Raspberry, cherry, plum, yum. They also had some stuff that was experimental from the copper boiler. Tangerine. Fantastic.
and god damn do i feel like an idiot. i refi'ed my option arm about 15 months ago into a 30 yr fixed. thought it was the right time.
sure wish i'd kept that arm. if i was making the same payments i am today i'd be paying that sucker off faster by several years. i mean paying less interest overall.
Pancake Derivatives and futures based on the theoretical loan value of a stack of pancakes; Im in, but Ill use Yen to hedge the flour, the Euro for flour and then dollars for eggs, and what about salt.....thats where i can get screwed and the baking powder is like crack, so obviuosly you do that with a CDO!
To be snarky, cuz I'm buzzed...buy food, sell paper.
To be a wee bit analytical...as I approach a date with my pillow, I suspect that US gov't policy of subsidizing corn for fuel...which is STUPID beyond belief, as well as SE Asian demand for more calories is causing this.
"Fourth-quarter profits at the 311 companies in the S&P 500 that reported results so far declined 23 percent on average, according to data compiled today by Bloomberg. Still, 64 percent of the companies posted earnings that topped analysts' estimates, compared with 60 percent a year ago. "
In general, with few exceptions (Monsanto), this seems a crazy time for insiders to acquire shares. It reminds me of David Lereah touting the real estate market in 2005 and 2006.
"One statistic that Argus calculates is a ratio of insider selling to insider buying, which has averaged around 2.5 to 1 over the long term. Insiders often receive shares from their companies as part of their compensation; it is therefore quite normal for them to sell more shares than they buy.
For insider transactions in the week ended Jan. 18, the latest for which data are available, the insider sell-to-buy ratio was 0.89 to 1, according to Argus. Not only is that far lower than the historical norm, it also means that insiders actually bought more than they sold. They wouldnt be likely to do that if they believed that the stock market was about to suffer significant losses.
The week-to-week readings of the Argus ratio are volatile, so the firm also calculates an eight-week moving average, and its most recent reading was 1.44 to 1. The last time it was any lower was for the eight weeks ended Nov. 15, 2002, when it was 1.33"
This is from an NYT article last week. I also subscribe to one of the services which tracks this stuff (not argus) and the numbers are similar if not stronger. They use some method to try and determine why the buying and selling occurred.
I recall reading in Barrons in Dec. 06 (not 07) that insider selling in that month was like 33 to 1 over insider buying (or something along those lines). The implication was that insiders thought things were going to be really bad in the new year. Not sure how that worked out. Based upon that, I'm not sure what significance can be attached to sudden insider buying. Although I do recall that insider buying is usually a better sign for a company than insider selling.
Marcus Aurelius wrote :02.05.08 - 10:42 pm| #
...viable Black Market economy arising from this. Interesting. Wonder what they'll be using for currency.
my guess, stuff like, silver dollars, ammunition, garden seeds, drugs, alcohol...and oh yes that perennial crowd pleaser, gerry cans of gasoline.
Richmond Federal Reserve President Jeffrey Lacker in a speech said there is a possibility the US is headed for a 'mild recession,' making him the first Fed official to acknowledge that prospect.
Adding to the pressure, Standard & Poor's said it may downgrade bank ratings to reflect problems in the 2.4 trillion-dollar bond insurance business.
'Bond insurers are suffering as a result of their roles as guarantors of mortgage-related securities, and downgrading them could affect all markets in which they are active, including the municipal bond, commercial mortgage-backed securities, and other structured finance areas,' Tanya Azarchs, a credit analyst for S&P, wrote in a note to investors. 'In turn, dislocation in those markets could affect banks.'
'This is exactly what occurred back in October 2001 when the US moved into recession,'' said Juliana Roadley, an equities analyst at CommSec in Sydney.
The major US indexes plunged overnight with the Dow Jones Industrial Average shedding 370 points, or 2.9 percent, for its worst one-day percentage decline since February 2007.
In Asia, the Hang Seng fell 1,339 points, or 5.4 percent, to 23,468 with financials and retailers leading the slide.
While the insider selling statistics are interesting (and a little bit nervewracking for shorts like me - its really one of the only positive indicators out there IMO), I don't think you can look at it in a vacuum.
In my mind, the eroding economic landscape (consumer spending, chiefly) carries greater significance.
What else are you looking at?
Today's action was extremely bearish - indices blew through supports, AAPL closed below $130, RIMM below $90, energy sector down, financials leading us back down again. Breadth was very good if you're a bear, as was volume. A/D was out of control.
I look at stuff fundamentally, but follow the technicals as well, and both certainly seem to be pointing to a much larger move downward.
A lot of the bullish action seems less predicated on fundamentals than sentiment (things will get better in 2H, rate cuts will kick in, 4Q earnings ex-financials weren't a disaster, etc.). Even the rally was technically driven (after the initial bounce), and it couldn't break through at pretty meaningful chart resistance.
In what many political observers are calling an attempt to shore up his evangelical base on the eve of the nation's Super Tuesday primaries, former Arkansas Governor Mike Huckabee today asked Jesus Christ to stimulate the U.S. economy.
I think what you're really saying is never let a complete moron run the country. Everything he's touched has turned from gold to dust.
Marcus Aurelius wrote...
A message to our grandchildren:
Never let anyone calling themselves a "businessman" run your country. Never deregulate banks or securities. Never pay more than 3x your gross income for living quarters. Investigate at the first sign of corruption. Impeach at the first offense. Prosecute political crimes to the full extent of the law. Never vote against your own best interests (and for Christ's sake don't vote for anyone who says they talk to god). Never vote for someone who promises war. Always eat everything on your plate.
David in CT, I don't see how you can be so optimistic about prospective earnings statements. Have you not read about today's service sector news, the pending recession, and the monoline insurer disaster?
Im with you Rich..too early for EWJ, but Im watching and waiting and biding my time. Next pitch down below 12k, maybe 11k, I'll think about it. Not close yet.
I was just thinking about that today (watching the NIK shed even 4%+ - why can't the S&P do this?).
There is no way Japan is more f'd than we are are right now.
I might be a buyer in the mid-summer.
Also, I owned the holding company for MUJI for a couple of months. Sold it at a recent bottom for a loss, it has since recoverd. ETFs in Japan from now on.
"Did Lereah actually buy anything, or was he just a shill? There is a big difference between writing a check and spouting off."
Quite, but with lots of stock options in the balance and no stock repurchase programs on the horizon, I rather think that execs are trying to project confidence to the markets at a time when shareholders are getting the sell itch.
dunham,
i don't have a great feel for what the market will do tomorrow. the only real edges i can see in very short term holding periods has to be done in the near market making realm. It requires high speed connections directly into NYSE or wherever and is a completely different game than what we 'play' here. Success is measured in pennies and milliseconds.
I am concerned with the next 10 - 30 percent in the price of a stock. The whole technical analysis of price charting on the market as a whole is fairly useless as per any rigorous model that i have seen. there are some edges to be found in very long term holding periods but the statistics are pretty thin, unless you roll the idea out to lots of other different futures.
In the intermediate term, there are a bunch of sentiment indicators that are very bullish. Some of the mutual fund data shows very high levels of money market dollars as a percentage of total holdings. Small fry option players are very bearish and always wrong.
All this sentiment stuff is hard to hang your hat on when valuations are robust but at the moment the valuations are extremely cheap based on just about any historical metric.
Again it is all about risk and reward. If you are long and wrong, what is the value proposition? Or put another way, if you could would you mind being a private owner of some public company knowing that your investment return does not hinge on resale but is just going to be the earnings stream going forward. If you can find companies that you can answer yes that question then the decision is easy to make.
If you are right as a bear, where do you think prices will head. On the other side, where do you think prices might head if you are wrong?
"David in CT, I don't see how you can be so optimistic about prospective earnings statements. Have you not read about today's service sector news, the pending recession, and the monoline insurer disaster?"
Because none of these things have changed the earnings prospects for a large swath of the markets. the only numbers around the monoline insurance 'disaster' have been offered up by ackman. after downloading the spreadsheet and looking at it, i was less than impressed and would be happy to take the other side of the bet.
owl - I do not trust anything denominated in $, euros, yen, renminbi, francs, etc. For a year or so now, I keep my assets in things which can be measured in ounces, grams, kilos, bushels, barrels, and caliber.
I hear you re sentiment, but I would hate to base an investment decision on that. Especially when i'm a small fry, bearish, option player (yikes).
It does make the near future considerably more cloudy, because the market seems extra-manipulatable right now.
At the end of the day, I don't think valuations are that reasonable. I think the "E" is going to start rapidly eroding for a lot of companies. And I think the acceptable P/E ratio is going to contract as the environment become riskier. This suggests a major realignment in the indicies.
If you believe that earnings will hold up, and continue to increase, then this market is the buying opportunity of a lifetime.
I have a hard time seeing that - wages down, unemployment up and spending down are all very bearish fundamental indicators. And I don't need to tell you how important the consumer is to our economy.
Will I get squeezed by rallies along the way? Yes, last week was horrible, and i'm kicking myself for not seeing it, but hindsight is 20/20. Intermediate term however, I believe the trend is down, and we may have a significant crash in the near term.
I won't be going long anytime soon. If get spooked, I'll go into cash and wait it out, but for now i'm comfortable. Until tomorrow or the next day, or whenever the facts change.
The ONLY sectors I like right now is infrastructure and clean tech, but I'm waiting for prices to come down a little more.
AZ:
I don't know the specific numbers used in the Fed model but I recall that it is a basic discounted earnings model using the 10year as the rate?
If so, why would it be wrong to employ as a relative measure?
The following factors, when examined singularly and collectively, would change my mind:
*Increasing Real PCE on YoY basis
*Increasing real average hourly earnings
*Stabilizing credit markets.
The last one is tough. I'm looking for stable consumer credit numbers. Right now I'm expecting major contraction in available credit to consumers.
I'm also looking for commercial credit markets to unlock. I don't believe the banking sector is functioning right now. I KNOW the CRE finance markets aren't functioning. When it starts functioning, maybe things will start turning around.
Knowing that, I don't want to hang my hat on contrarian indicators. What is the empirical evidence behind these anyway? I'll ask again cause you might have missed it - how did they look in 1987 and 2001?
Basically the problem is the "E" in the P/E. My proprietery indicators (neighbors in foreclosure and friends getting laid off) both indicate the market is extremely overvalued.
'how can i be wrong and what will change my opinion'.
Bearish with a deflation bent sitting with a lot of cash on the sidelines. I'd be worried if...
-Banks were able to clear a large chunk of their pier loans
-Recovery of the ABCP market to early 2007 levels
-Drop in the dollar combined with a steepening of the yield curve (decoupling)
-Compressed spreads on corporate bonds and mortgage debt
-Wage inflatio
OT, but I must share this funny exerpt and quote from a Wa Po article titled "Housing Crisis Casts a Cloud Over the Sun Belt" ...
The struggles of Rebekah and Otto Ao in dealing with a crushing mortgage debt show how deep the problems go.
They bought their first home in 2005, for $269,000. They paid for it using an Option ARM, which allowed them to make a monthly payment of $850, which was less than what they paid for rent in Los Angeles. Only later did they realize that meant that their loan amount would grow over time, not shrink, as would their payments.
"When we saw the payments were so low we decided to buy another house," Rebekah Ao said.
They now owe $287,000 on the first one and $320,000 on the new home, which they are renting. Their credit card balances, which they once kept at zero, have ballooned to more than $14,000 as they struggle to make ends meet.
Treasury yields headed back to 1960 and beyond, like going backwards. I see yields from 1953 to about 1959 stayed below 4%, so it would be interesting to understand the impacts of inflation related to this period then and how it relates to now!
MarketWatch
Bank ratings may be cut on bond insurer woes "We believe that the specific, identifiable effect on banks may be significant and, in a few cases, could lead to downgrades. Large global institutions have direct exposure to the bond insurers in a number of ways.' - Tanya Azarchs, S&P Banks may be downgraded on bond insurer woes, S&P warns - MarketWatch
Maybe, maybe not. These are the consumers that power the economy. They've been spending like drunken sailors for the past four years. And now they're down for the count. Disregard at your own risk.
"*Increasing Real PCE on YoY basis
*Increasing real average hourly earnings
*Stabilizing credit markets. "
I have never tried to model the stock market with anything resembling econometric time series, so I can't really add to the conversation.
I would remark that since the things that I am most interested in make their money based on global pricing power I don't think being US centric is a great starting point.
To compare this period to either 87 or 2001 is just not right. In 87, two days before the crash the long bond was yielding 10.15. I remember, because I bought a bunch. 2001 the earnings yield of the s&p was around a half of what it is now. the nasdaq was absurd beyond belief. the speculation in both those time was in the equities markets. this time the speculation was in real estate and its finance. two entirely different creatures. also, the crash in 87 happened within about 5% of the top if you count the freefall preceding it. We already made it down better than 20% on the russel and nasdaq, and the s&p missed 20% by a hair. the leading down sectors declined by 75% from the top.
Sentiment stuff can be most useful at extremes because it might answer the question of 'who is left to sell?'
A common example of a random walk is a mathematical problem called ``the drunken sailor''. A drunken sailor on a road walks back and forth, changing direction at random. After a time (T) much larger than the time to take a single step has elapsed, the average (in the sense of the root mean square) distance that the sailor has reached from the starting point is proportional to the square root of (T) .
Pretty simple stuff here really, the consumer is zig zagging and can only get so far from debt, or call it home and no matter what path they take it always relates to time. Look at Brownian motion:
"In reality, while on the smallest scales DNA is indeed shaped like a double helix, on larger scales it is a wriggling, writhing, jiggling, jostling, restless globule of chemical complexity, thrown ever back and forth by random Brownian motion."
Scientists now appreciate that the vital protein components of living cells are only able to "fold" into the right shape to be able to work because their components are mobile chains and helices that are constantly walloped by water molecules and other chemicals.
"Life as we know it can't work without Brownian motion," says Dr Haw. "The membranes of cells writhe and flex according to it; viruses and bacteria must live in a Brownian world."
Within the cells of the body, kinesin proteins work like "cellular trucks" to pull tiny sacks of chemicals along pathways known as microtubules. Studies at the Georgia Institute of Technology by Prof Ronald Fox show how they harness the ceaseless Brownian bashing to do this. "If you could see them, their walk would appear to be more like a drunken sailor than a concerted motion," says Prof Fox.
"Brown really had discovered the secret of life. When you get into this sub-cellular level on the nanometer scale, the dynamics and vitality of protein molecules are really due to thermal motion," he added. However, for those who think this process is akin to getting energy for nothing (in violation of the sacred laws of thermodynamics), he points out that chemical energy must still be burnt to enable molecular machines to harness thermal motion.
Would you buy real estate now? Housing prices have fallen further than stocks, so they must be a real sweet deal now, right?
The bottom in the markets isn't behind us, it's in front, and it's a long way down from here. Dot-bomb took the DOW from 11K down to 7K, and that little episode was simply the foreshock for this coming earthquate.
Knowing that, I don't want to hang my hat on contrarian indicators. What is the empirical evidence behind these anyway? I'll ask again cause you might have missed it - how did they look in 1987 and 2001?
Dunham,
My Ignoramus Guess™ is that contrarian indicators are useful 95% - 98% of the time.
So.. one could say, "Wow, all these douchebags thing everything will fall apart.. I'll take the other side of that trade."
Now, that would be the best bet.. since it would be cheaper to bet against the crowd (you'd get better deals).
That 2% - 5% of the time when the contrarian indicator doesn't work... I'd say that's when you get the severe moves.
I think it's somewhat clear that the financial landscape is not "normal"... so, really, who knows what's about to happen over any 5 day period.
I know that it's impossible to buy puts at a good price and calls really aren't priced so well either.
I can buy puts or calls for about $0.40 on GOOG at +- $95 from the current strike price... so... wtf? Options sellers clearly aren't scared enough to price down their call options.
They're still pricing in an equal chance for a rise. Now... the bids on those options are a little different.
Not as many people are interested in buying the calls.. but the prices they trade at are similar. We'll see if the sellers drop their prices... then I'd say you have a proper contrarian indicator (that may or may not be of any use).
david in ct Appreciate your posts. IMO it will take a steady stream of bad news to make this market go lower. Am pretty neutral since I think there is a decent chance we will get it.
All of the water is sloshing out of the pond.
LOL!!! Fitch still doesn't have the cajones to downgrade MBIA. This is so reminiscent of Enron's downgrade. Fitch is just waiting for hopefully someone else to show a card before they follow suit. A game of Economic Chicken!!!
another large hemmorroid for the market, eh?
MoT, everyone knows the downgrade is coming (well almost everyone).
This is a weird dance.
Best Wishes.
My simple analogy for the current mess:
The banks and lending institutions were force fed a huge diet of fat and lard (read as easy money via 1% interest rates) by the FED. They happily gobbled it all up, and went back for second and third helpings. They even invented new and creative ways to prepare the fatty foods to consume even more. They pretended that they could do this forever without any problems.
Eventually the intake was too great and the system had to be relieved (read as housing prices finally exhausted themselves)and relieved quickly. The banks then proceeded to take a huge dump right in the middle of the living room on the brand new carpet. The explosive diarhea was so voluminous that all the rooms of the home (read as the economy) are in danger of being stunk up by the mess.
Now the big banks and the central banks want to force the citezenry to clean up the mess under the guise that if the mess is left out, the smell will kill us all! First they soil the carpet, and now they want someone else to clean up the mess just like tha little babies that they are. No admision of guilt. No responsibility taken for the accident. Just great banks that are in trouble and need to be bailed out at any and all costs.
Sorry banks. If I had my way I would rub your noses in it just like an animal to teach it not to do these kind of things. Alas, I will not have my way. There is going to be major bailouts of all shapes and sizes coming down the line over the next year.
CR, SEC means business-
"WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission's review of the credit rating agencies is in process and agency staff may make some recommendations on how to improve disclosure and conflicts of interest as early as June or July, a senior SEC official said on Tuesday."
Page Not Found | Reuters.com
R...519743120080205
OT:
Japan is following the US down:
7:04Japan's Nikkei 225 average down 1.4% in early minutes
7:04Japan's Topix index drops 1.4% in early minutes
risk capital:
http://tinyurl.com/
Just water under the bridge, this is a PR stunt to make it look like they are doing something really important....who cares about these fake ratings? Where were these gurus 3 years ago...ILL tell yah, they were smoking dope on yachts and getting free lunches and drinking with the big boys that wanted AAA ratings......they are pigs!
mot-
http://tinyurl.com/37lvqj
Anyone long the market and on suicide watch - dont visit Roubini's blog...it might push you over the edge.
FDIC chairman sees strength in muni bonds
| Reuters
"Unlike the CDO (collateralized debt obligation) market, where there's obviously issues, the quality of the securities in the muni bond market is really strong," Bair said.
Even if bond insurers see more rating downgrades, she said she expects municipal bonds will remain strong.
Bond insurers are looking to raise capital to protect their credit ratings as any downgrades could force investors to sell billions of dollars of bonds, lifting borrowing costs for consumers, city governments and others.
Bair said on Tuesday that she believes bond insurers were seduced by the supposed safety of mortgage investments.
"You can't fault them," Bair said. "Why were money market funds buying this stuff? Everyone was relying on the rating, and no one was looking at what is behind the ratings. (They said,) 'Oh they're mortgages, they must be safe.
"This is a weird dance..."
Elaine Bennis weird.
c&c - Like maybe Greenspan ?
You! Out of the Liquidity Pool!
Nikkei down 3% and counting...
"Nikkei down 3% and counting..."
Time to put some Wagner on the Gramophone.
riskcapital- agency staff may make some recommendations on how to improve disclosure and conflicts of interest as early as June or July, a senior SEC official said on Tuesday."
Conjure Bag says, "Too late."
Bob Dobbs- "Time to put some Wagner on the Gramophone."
Conjure says, "How appropriate, because the Fat Lady is about to sing."
mp- don't get me started!
Bob Dobbs,
Wagner? nah
risk capital cites Reuters: SEC may recommend credit rater guidelines by July...
For a second, I thought he had referred me to some Onion article... like "Bush EPA to study whether study on global warming deserves further study, with study to conclude by 2009..."
DC-
I think it's cool as long as there are no delays, that might pose a crisis of confidence.
Hojotoho!
YouTube
- Anja Silja "Hojotoho" Die Walkure
With all due respect, given that this is the most telegraphed downgrade in history [when it actually happens], isn't it likely that the municipal market has already priced it in?
My conversations with muni people is that they are already treating insured bonds as uninsured...Don't forget, the great thing about the muni bond insurance business is that there were never claims in the first place.
I am not so sanguine of the effects on counterparty issues...I assume that is the bigger problem.
Jay-
"I am not so sanguine of the effects on counterparty issues...I assume that is the bigger problem."
Ya think?
"priced in"
that is funny.
Yeah, kind of like a recession was already priced in.
Jay,
Yeah, that's my understanding. You can look at the closed-end muni funds (at etfconnect.com) and see the differential is pretty much closed.
Personally, I think the larger problem for munis is that the assumption that they are generally pretty safe may be wrong.
Partly because they aren't as free to raise revenue as before (think proposition 13 and the like) and because their pensions are underfunded, often times severely.
YouTube - Apocalypse Now - Helicopter Attack- Kilgore
cue it to 14:40-
The napalm just hit the markets.
Nothing the fed can do.
Smells like victory for the homebuilder shorts.
Someday this war's gonna end...
mp writes:
Yeah, kind of like a recession was already priced in.
Hahahahah. You're killing me. . . it's killing me.
For the heavier crowd,
YouTube - Megadeath - Symphony of Destruction
Cheers,
Nikkei down 460 now
I, for one, can't wait until we know what everything's really worth.
Marcus,
Zero?
Cheers,
Guys, you're killing me. I need some good news.
Where's Sebastian when you need him?!
Misean:
Just as I suspected.
misean...
We can just write it all off now...A nice dark tune to brighten the mood...
http://tinyurl.com/2m3kgc
Chris
Or better yet for a grim analogie:
YouTube - Das Boot (1981)
Kinda like Fitch wants to be the only survivor.
It's a long long way to Tipperry, it's a long long way!!!
OK so these were almost all muni bonds, yet there's no downgrade amount, and almost no mortgage stuff. That just smells funny.
Yeah, some of those munis may run into some difficulty down the road with tax revenue drying up, and empty suburbs of McMansions becoming mosquito breeding grounds, but out of 172,326, only 158 were non-municipal.
Something odd about the details here.
Cheers,
Where's Sebastian when you need him?!
He is updating certain modeling assumptions.
Apocalypse Now was based on Conrad's "Heart of Darkness", which was an account of life along the Congo in the midst of King Leopold of Belgium's nasty ivory and rubber colonial enterprise.
I've heard when production did not meet quota, the workers would get hands, feet, etc. chopped off to scare the others.
Mar-kets
imprisoning me
all that I see
absolute horror
Housing my holding ceeee-ell.
Nice obscure Tool reference, Gary.
Cobra,
This was my second choice:
YouTube - Metallica- Welcome home (Sanitarium) music video
Cheers,
Actually, strike that. I read that wrong.
Metallica!
One, from And Justice For All . . .
Sadly, the monolines will end up even worse off than Johnny. So will many others tied into the madness of structured finance circa 2003-2007.
misean...
I read the Roubini article. Quite frightening actually the way it's all laid out. This quote kinda fits the 158 downgrades.
"The lack of trust in counterparties driven by the opacity and lack of transparency in financial markets, and uncertainty about the size of the losses and who is holding the toxic waste securities will add to the impotence of monetary policy and lead to massive hoarding of liquidity that will exacerbates the liquidity and credit crunch."
I really like the quote about size of losses and who the fuck the bagholders (beside us)are.
Can I start using my term more...
"Cascading cross defaults" O.K. I happy now!!!!
Chris
How much can Japanese CB cut?
Where is O-Joe? Will he pop his head back up sometime later in the week or next as the short coverings bring back a little bounce. I miss his humor.
This being Super Tuesday and all, I was thinking about what the next President will face. I don't think it's fair to anyone - Democrat or Republican - to make them clean this mess up.
A message to our grandchildren:
Never let anyone calling themselves a "businessman" run your country. Never deregulate banks or securities. Never pay more than 3x your gross income for living quarters. Investigate at the first sign of corruption. Impeach at the first offense. Prosecute political crimes to the full extent of the law. Never vote against your own best interests (and for Christ's sake don't vote for anyone who says they talk to god). Never vote for someone who promises war. Always eat everything on your plate.
Y'all can add on, if ya' want.
Dear Chairman Bernanke
I guess the crack high has worn off and it's time for another hit.
Another rate cut anyone?
Cobra,
Read it too. CCD is essentially what he's saying.
That's the fear...the weakest link snaps...hasta la vista baby.
owl,
He's waiting for the next short squeeze to bring his witty and sound arguments out.
Cheers,
Thread music: Diamanda Galas - Let My People Go (live)
YouTube
- Broadcast Yourself.
FFDIC,
Diamanda Galas
Unconventional and simply brilliant!
There are certainly many in the finance world who know the true value of the CDO's in all of its exotic varieties. The trouble is that these things do not unfold in an orderly and manageable fashion. Rather they take on a ferocious and expeditious path that quickly triggers multiple effects never before considered.
I fear that even what we are discussing here is but a small fraction of the potential of this hurricane.
Be very defensive with your assets. Protect them with all your vigor and determination.
MW
Marcus,
I'll bite:
Watch out for down town, and never go without a gun. Remember, your horse is your life, take care of it. Treat well the oxen that pull your plow. If a neighbor asks for help raising a barn, make time, you'll need his help down the road. And for Crissake, NEVER eat your seed corn.
Cheers,
FFDIC,
Unusual, an acquired taste I'm sure. The piano work was quite good.
Cheers,
"And for Crissake, NEVER eat your seed corn."
Growing up on a large grain farm I second this,Pre-emergent chemical treatments are a bitch
.
Chris
Marcus-cont
Get a lawyer when it comes to contracts; learn about finance and listen; Don't believe the media; Don't spend more than you take in; Let envy make your friends broke not you; work to live; Make your voice heard;
Personally, I think the larger problem for munis is that the assumption that they are generally pretty safe may be wrong.
What about municipal money market funds?
They are holding a lot of auction rate securities that are only fungible because of the AAA ratings of the municipal bond insurers. If the insurers go down, then the bonds start trading on their own merits and a lot of people who thought they were holding "short term money" are going to find them are actually holding long term securities. Another example of "money that isn't money".
I think this was a big reason that the Fed's Open Market Operations desk was knocking on these funds doors last week:
Bernanke's New Entourage
There have already been a couple of blow-ups in auction rate securities:
Money & Finance - AOL Money Canada
Buffalo News: 404 Error
Municipal bonds on the nose - Stan Rosenberg - News - Business Spectator
Japanese are cracking again- down 500!
Our destiny is going to be much worse than their experience...
Fox news reported credit card cancellations and reductions in credit are coming here in Phoenix, so now it is fully msm.
No hope of recovery here for years, now.
Someday this war's gonna end...
Kicker,
Nice pulls. Those monoline links in the chain are getting stressed now, ay?
Cheers,
OT
AllenM writes:
Or better yet for a grim analogie:
YouTube - ? v=GOB_ZoIxQZg
Allen: I was 1st Air Cav 1966, got to tell you that nobody went near the beaches on foot, LOL, very beautiful but full of mines, fly over many times not a sole in sight for miles must have taken years to de-mine all the beaches.
Cobra,
Check.
cd...
Nice.
Cheers,
Since all that we can do now is to think to the advice we've given, and had ignored, a little OT from William S. Burroughs:
WORDS OF ADVICE FOR YOUNG PEOPLE
People often ask me if I have any words of advice for young people. Well, here are a few simple admonitions for young and old.
Never interfere in a boy and girl fight.
Beware of whores who say they don't want money. The hell they don't. What they mean is they want more money. Much more.
If you're doing business with a religious son of a bitch, get it in writing. His word isn't worth shit, not with the good Lord telling him how to fuck you on the deal.
Avoid fuckups. You all know the type. Anything they have anything to do with, no matter how good it sounds, turns into a disaster.
Do not offer sympathy to the mentally ill. Tell them firmly, "I am not paid to listen to this drivel. You are a terminal fool."
Now some of you may encounter the devil's bargain if you get that far. Any old soul is worth saving at least to a priest, but not every soul is worth buying. So you can take the offer as a compliment. They charge the easy ones first, you know, like money, all the money there is. But who wants to be the richest guy in some cemetery? Not much to spend it on, eh, Gramps? Getting too old to cut the mustard. Have you forgotten something, Gramps? In order to feel something, you have to be there. You have to be 18. You're not 18, you are 78. Old fool sold his soul for a strap-on.
How about an honorable bargain? "You always wanted to become a doctor. Now's your chance. Why, you could have become a great healer and benefit humanity. What's wrong with that?" Just about everything. There are no honorable bargains involving exchange of qualitative merchandise like souls. Just quantitative merchandise like time and money. So piss off, Satan, and don't take me for dumber than I look. As an old junk pusher told me, "Watch whose money you pick up."
-- William S. Burroughs
I have a AAA Rated Chrysler LeBaron with a Landau roof and 3 matching spoked wheel covers.
Misean and sd:
Thanks, y'all. Good advice. Especially Misean's tips for living in the post-industrial, Pennsylvania Dutch-esque, America.
On that note:
There are plenty of good uses for a corn cob. Corn cobs have value.
Nikkei off 560
lama,
I'm looking to package those into CDD's.
Chrysler-Dodge Duds. I suspect they'll be a hit with the pension funds.
Cheers,
Marcus Aurelius
All I Ever Really Needed to Know I Learned in Kindergarten
Most of what I really need to know about how to live, and what to do, and how to be, I learned in Kindergarten. Wisdom was not at the top of the graduate school mountain, but there in the sandbox at nursery school.
These are the things I learned: Share everything. Play fair. Don't hit people. Put things back where you found them. Clean up your own mess. Don't take things that aren't yours. Say you're sorry when you hurt somebody. Wash your hands before you eat. Flush. Warm cookies and cold milk are good for you. Live a balanced life. Learn some and think some and draw and paint and sing and dance and play and work some every day.
Take a nap every afternoon. When you go out into the world, watch for traffic, hold hands, and stick together. Be aware of wonder. Remember the little seed in the plastic cup. The roots go down and the plant goes up and nobody really knows how or why, but we are all like that.
Goldfish and hamsters and white mice and even the little seed in the plastic cup - they all die. So do we.
I was wondering what was with the home builders this morning--about the only up sector. It seems that analysts were busy with upgrades, now that the sector has bounced up well above any reasonable value. One big news was that SPF lost only $6 per share and has been able to free up a little cash flow. Analysts think that the lower interest rates and lower prices should start to turn this housing ship by summer!
Marcus,
A moistened cob is better than a bidet.
Cheers,
Unusual, an acquired taste I'm sure.
Misean,
Some people say..
..financial apocalypse..
..is an acquired taste.
yehehehhe!
BillD,
"Analysts think that the lower interest rates and lower prices should start to turn this housing ship by summer!"
The problem is the same as the Bismarks. The British fleet pursuing the Bismark, and its air launched torpedo damaged rudder got there first.
Cheers,
Misean:
Thanks for the tip (pardon the pun). I'd hate to have to learn that from experience.
Yours is, apparently, the voice of experience. ; )
OK, I dont get it, isn't the whole point of bond insurance that you buy the insurers AAA rating? If they are downgrading the bonds aren't they saying the bond insurer isn't AAA, yet they haven't downgraded MBIA ...yet...
I was wondering what was with the home builders this morning--
We are now entering a period of bear market rotation where retail, transports and financials, which led the market down, are being cushioned by value buyers and short covering, while new sectors like technology, industrials, cyclicals, machinery and oil related stocks are starting to roll over. The market is never a monolith and some sectors like coals and healthcare services still look like decent places to hide. At a minimum we expect the Dow to get down to 11,000 with a June/July bottom possible, but you could certainly overshoot on the downside."
Global Trend Alert
OK, I'm getting a little more nervous. I've been in cash since the middle of last year. Good call, I'll pat myself on the back for that. But I'm starting to get a feeling that things are about to start to spiral out of control. Maybe not tomorrow but it's on the horizon. I've posted this question before but I haven't gotten an answer. I'm sure there are others with a similar question. Here it is:
Most of my money (95% plus) is in cash positions, sitting in Fidelity cash reserves and money markets. These are the proceeds of last year's sales. MM's are not suppose to break the buck. But I'm nervous. How nervous should I really be? Fidelity tells me not to worry, because they are privately owned and very conservative. But then again, what are they going to say?
What do you think? Should I stay put or is there some real danger? I value the opinions here. Thanks.
I'm long corn cobs and water.
And still trying to get my order filled for that ETF that shorted Cali - FUCA
Hang Seng down 1,350 (5.4%) 15 min into trading
OK, I dont get it, isn't the whole point of bond insurance that you buy the insurers AAA rating? If they are downgrading the bonds aren't they saying the bond insurer isn't AAA, yet they haven't downgraded MBIA ...yet...
r0m30,
My guess is that the ratings agencies are dragging their feet while they wait for Buffett's new bond insurer to get moving full speed ahead.
There is an attempt to fasttrack the approval of his insurer by allowing it/him to submit one form for approval by all states.
I think, for structural reasons, they need another insurer in place.. but, of course, this is all speculation by me.. The Ignoramus.
Best Wagner clip per Subprime Virus: YouTube - Apocalypse Now - Helicopter Attack- Kilgore
Marcus -
Good points. Given your name, you might know this quote by Cicero (which I cribbed off the head of the Sudden Debt blog):
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt. People must again learn to work, instead of living on public assistance. (Cicero, 55 BC)"
Plus ca change...
Owl,
Buddha says suffering comes from attachment to your fears and desires. Diversify so a point failure can't take you out [consider having some stuff at Vanguard, for example], but then, realize that whatever happens, you'll be OK!
Then, sit back, and watch the awesome, and fearsome, show, that is unfolding before you.
owl,
I assume those are 401k's so you're kinda stuck. If they're not, do some charting and research on gold and silver. The market is a bit over bought right now IMHO, so watch it this week. Silver is still very affordable. Get a safe and buy some...5%...and lock it up.
Gold's a trickier play right now, but as long as it stays above 850, grab some.
Move some into CASH, as in your safe. Fire up a 3 mos and 6 mos CD. When the 3 mos expires roll it into a 60 mos. You want some cash on hand...or close. Leave the rest...if you trust the fund.
Remember, I wear a Super Colander Tin Foil Hat, and am probably certifiably insane...so take that for what it is worth.
Cheers,
..oh.. and part of my speculation is that the ratings agencies have been approached by officials from many of the states informing this of the need to wait on downgrading.
They're probably telegraphing their intentions (to set expectations).. but as long as the downgrades haven't actually occurred, then there is no need for Pension Funds and the like to dump any bonds.
If Buffett gets ramped up, is it feasible to shift the insurance to his entity?
Owl, I can vouch for Misean's last staement
owl,
roll it into a 6 mos CD.
Gary,
Cheers,
I think this whole situation calls for an old Kinks tune - Catch Me Now I'm Falling - the lyrics seem pretty appropriate and could have been penned by Hank Paulson in 2007:
I remember, when you were down
And you needed a helping hand
I came to feed you
But now that I need you
You wont give me a second glance
Now Im calling all citizens from all over the world
This is captain america calling
I bailed you out when you were down on your knees
So will you catch me now Im falling
Etc., etc., etc....
You all know the lyrics.
I actually found a video of Hank pleading his case in Abu Dhabi last month:
YouTube
- catch me now I'm falling
Hope you enjoy it. Hank looks a little jet lagged.
The reason behind this bond insurance stupidity, retardation, is the fact that a massive amounts of muni/pension account traders collectively decided as a group to buy into the derivative trader bullshit that bonds were out of fashion and that bonds required too much of a premium, which resulted in lower yields. Thus all these morons, like a huge herd of lemmings moved away from traditional bond investing into CDOs, SIVs and any derivative that offered higher yields -- no questions asked.
Now, that questions are being asked, the synthetic derivative financial engineering that bridged the gap between yield enhanced expectations and the reality linked to the premiums associated with bond security are like looking at a war zone filled with death and the opposite side of the coin, where old fashioned bonds were not only safer, but doing something unthinkable, they continue to provide a yield.
What were these retards thinking?
Gary,
one:
YouTube -
Cheers, forgot.
Thanks for your input, DCRogers and Misean. I think I will get some out of there and diversify it with bank CD's. I appreciate your feedback.
I'll be here all week!
Some day, this wars gonna end.
How many times have I seen that here....LOL, finally I see: YouTube - Apocalypse Now - Helicopter Attack- Kilgore
11:19 - Stocks: Plunge 4%, Nikkei Sheds Over 550 Pts On U.S. Woes
LOL!
Anonymous | 02.05.08 - 9:35 pm |
"What were these retards thinking?"
Umm...Greenslime dropped interest rates down to 1%. The MBS stuff was extraordinarily complicated, but were rated AAA. They chased yield. One can blame the buyers for lack of due diligence, but hell, the regulators said that AAA rated poop from the issuers was good as gold.
Not saying the "'tards" are innocent. But they were led to this disaster...starting with the FRB.
Cheers,
No private sector bailout for the monolines. Downgrades AH Friday and before the open Monday they are all nationalized. There's no way the Fed & Treasury let the whole mess explode and pension funds, large mutual funds & 401s get vaporized.
What happens to common and and the feeble USD is a wonder.
Hang Seng down 5%+ at ope
anon,
It is just that perfect moment of anomie generated by all that madness.
The bon mot that makes perfect sense in the midst of insanity.
Sort of like the last couple of weeks, rallies as things get worse...
Somedays I feel like Kilgore, just trying to make it the best I can, and trying to avoid reality by hanging out here...
Someday this war's gonna end...
roll it into a 6 mos CD.
Misean,
Why not just a Treasury Fund? Since this is short-term, is the extra interest payment worth the potential headaches if the issuing bank becomes "troubled"?
barely,
I hope you are wrong. On the nationalization thingy. I suspect Fri AH downgrades are coming.
Cheers,
The reason no one has answered is because no one can answer. If we knew what to do, we'd be sitting back laughing. At least you're not trying to trade in this insane market.
In my opinion, the best you can do is to hedge your bets. I'm not savvy enough to sort out the good from the bad in stocks, bonds, or exotic financial instruments (then again, neither are the ratings agencies), but heres what I'd do:
If you're as twitchy as you say you are (and it is understandable if you are), for the short term, I'd hold as much cash as you are comfortable with, plus some in a safe deposit box with a mix of currencies (DYODD), some gold and silver coin (which either adjusted today from their recent gains, or which will continue to follow everything else into the abyss - again, DYODD). Shop for the best exchange fees on the currencies. Personally, I'm staying away from anything I can't possess physically (including access to what's in the safe deposit box).
If you do this, and are still uncomfortable, welcome to the club.
Others posting here will probably tell you that I am absolutely wrong. Their opinions should be given great weight.
Good luck.
owl, I will second what misean said about CDs, for real.
That's where my (meager) funds are parked.
Owl:
Read the prospectus. I tried to read them online a couple months ago because I have a fidelity acct, but it simply would not specify what securities the MM was invested in. Been looking at European banks for a safe place ever since.
What were these retards thinking?
Mmmmm..... yield.
eli,
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
I dunno. That's why it's important to have some cash in hand.
Cheers,
Owl - the only thing that went up today in my 401(k) is my TIPS fund.
Roubini becomes darker and more saturnine re the economy:
Why did the Fed ease the Fed Funds rate by a whopping 125bps in eight days this past January? It is true that most macro indicators are heading south and suggesting a deep and severe recession that has already started. But the flow of bad macro news in mid-January did not justify, by itself, such a radical inter-meeting emergency Fed action followed by another cut at the formal FOMC meeting.
To understand the Fed actions one has to realize that there is now a rising probability of a catastrophic financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. The Fed is seriously worried about this vicious circle and about the risks of a systemic financial meltdown.
The details need a subscription that I don't have. Perhaps somebody else does or can summarize them.
The details need a subscription that I don't have.
You can subscribe at Roubini for free, at least to see the main articles and comments.
zac - no subscription required, just free registration.
rcyran | 02.05.08 - 9:26 pm |
Thanks for the quote, I hadn't read it. Some things never change.
When the fed loans money short-term, like via the TAF or fed discount window, what happens when the recipient cannot pay the money back? And, beyond that, what is to stop the fed from forgiving those loans, and would they do that? What would the effect of that be?
YouTube -
"In Italy, for thirty years under the Borgias, they had warfare, terror, murder, bloodshed they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
Sometime I would settle for that Cuckoo clock.
Someday this war's gonna end...
I will quote the bottom line of Roubini's grim article for you:
I will argue in my next article - that one should be pessimistic about the ability of policy and financial authorities to manage and contain a crisis of this magnitude; thus, one should be prepared for the worst, i.e. a systemic financial crisis.
RGE - The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster
Thanks again to all for the additional comments. I kinda sense I'm not alone in nervousness. Let's hope that we all come out OK on the other side of this mess. Opportunities will present themselves (as they always do). Thanks again and much success to all.
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
Misean,
I guess you could put it in tiers.. assuming one wants liquid funds to use for the purchase of random assets in the event of some discontinuous drop in prices... then you want straight cash or treasuries (i am assuming).
It's hard to tell where some brokerages hold your cash.. Several years ago, I had to specifically indicate that I did not want OptionsXpress to put my cash in any MMF funds.
In general, a flight to liquidity sends money to Treasuries. If it gets so bad that there is no money available to buy even Treasuries... I don't know what it would matter.
I guess, in the worst case scenario, all bets are off. Treasuries might be the safest... but you couldn't guarantee liquidity. If you had cash under your mattress, it'd be useful for buying local goods.. I wonder if you'd be able to wire it back into a brokerage account and put it to use..
Who knows.. certainly not me. Though, I think we're at a point in time where one may not need to focus on eeking out an extra percentage point of yield here or there by using CDs or other assets IF one is looking for maximum potential liquidity in a brokerage account.
Yes, the reason for this is that about one-third of the muni new issuance, in a given year, is refundings.
http://www.sifma.org/research/pdf/Municipal_New_Money_Refunding.pdf
Refundings really are the dirty secret of the muni industry, especially revenue bonds.
Most 30-year revenue bonds don't last more than 7-10 years. They are refunded, with the new money paying off the old bond principal. It's not different than refinancing a house at higher levels of debt/appreciation.
Without insurance, a lot of bonds can't refund. Without refunding, they eventually default. There's not enough money there to pay the bond off. But by constantly refunding, they can hide this, like any other type of ponzi scheme.
They want Buffett to be an insurer of refundings. He could do it. It's not bad biz. But it's still ponzi.
I ask myself that a lot. But if markets break down that bad, then how will I sell the treasuries to get the cash? I mean if we have bank holidays, am I gonna be able to cash the treasuries?
Dang Misean,
How many batteries you got in that tin-foil hat of yours.
Short term treasuries liquidate themselves. The only risk is holding them through a broker and your broker goes under (and the SIPC goes under too).
OWL:
I have a 403b in Fidelity, which allows me to buy any of the 250+ Fidelity funds. I think that cash reserves are safe, but you can also buy Government money market and gov bonds. I moved about 60% of my 403 b into cash and gov bonds in Nov-Dec. I also have a fair position in gold and some defensive sectors, like health and consumer stables (Fidelity select funds). Unforunately (for this week, at least), I also have a good chunk of Asia. The Asia, energy and gold all did well last year. I don't like to go 100% cash/bonds, although I have another retirement fund that's only 20% equities.I have a timing system that will give me confidence to buy equity funds again when it will feel very scary. Not their yet.
The retards were thinking "going to double my bonus again this year"...its one thing to do this with the proprietary book, but to take down the widows & orphan customers with you....
AllenM, thanks for your signature line. It's given me a lot of comfort.
CBC TV just aired a feature noting the American voter now cares less for the war than their piece of the economy.
Welcome to Ash Wednesday:
I got an option on a sweet german shepard puppy and I put whats left of my old uniform in the wash. I am still looking for my cleaning kit but I think I can shoot the rust out.
Meanwhile the missus is canning M&M's.
This is my 3rd Armeggedon and I want to be ready.
BillD, the prospectus has the MM's and cash reserves investing something like 25% in commercial paper. THAT's what scares me. Government bonds are "safe" but in an all out scare I wonder about liquidity. Not enough real money to go around.
Much success, I wish you (and me) well
eli & Jonathryn:
With money market funds, check their SEC filings after reading the Prospectus and SAI(Statement of Additional Information).
Their SEC filings are available in the EDGAR data base at:
SEC.GOV
The Prospectus and SAI are included in the 485POS filing, if you cannot download them from the fund management website.
Annual and mid-year financial statements and holdings are contained in the N-CSR filings.
Quarterly holdings are contained in the N-Q filings.
If you quickly scan the holdings shown in these filings you can get a sense of what the fund holds. If you are uncomfortable with or confused by what the fund owns, DON'T INVEST!
Remember: $1 per share NAV offered by most money market mutual funds is a marketing convention designed to make the funds look like a bank CD. All mutual funds, including money market funds, can go up and down in value.
For those interested in opening accounts elsewhere.
CIBC (CAD only)
For CIBC call their # and arrange for a day to go show ID in Canada and open a account in CAD. Everything else can be done online.
HSBC (In Singapore) http://www.hsbc.com.sg
Call/email the singapore branch. They will send the forms. Fill them and take over to the nearest US HSBC branch. Get them attested by officer. Not sure about relationship of HSBC US and HSBC Singapore. US HSBC was considered to be one of the banks likely to fail according to market watch
regards
sbarrkum
oh.. re: Treasuries
I'd guess that the main way one would not be able to convert a Treasury to cash would be if everyone was done selling or if just everything locked up and no one wanted to convert their assets into Treasuries since they couldn't sell anything.
If there was a lockup, you'd probably not really want to buy at that moment (but it could be a good gamble if the asks were low enough).
If everyone was pooping their brown pants, one would assume money would be first flooding into Treasuries.
Again.. this is all speculation by The Ignoramus, me.
Nova | 02.05.08 - 10:03 pm |
When you get the puppy neutered, don't forget to send his balls to Conjure Bag.
Looks like the elephant in the room just did a cannonball into the pond.
Marcus -
Neutered? What! Thats $$ you are cutting off.
As of 9/30/2007, Fidelity Cash Reserves: 26% CD's, 20.7% commercial paper, 29.3% medium-term notes (Citigroup, GE Capital, Sigma Finance, etc.), 18.9 % repurchase agreements of mortgage-backed securities (Barclays, Lehman, Bear Stearns, etc.), and 15.2% yankee dollar and foreign bonds. This info from rough notes, and may or may not be accurate. It is available on the Fidelity web site. The CD's offered by Fidelity are issued by banks which may or may not inspire confidence. There is a Fidelity U.S. government bond money market account. The yield is, of course, rather low.
What's the deal with the Nikkei? Is it limit down? I get flatline on bloomberg and finance.yahoo
Nova:
If the cur's nads were worth that much, you'd be securitizing them and selling them on the open market. Ball bonds.
The Nikkei is taking their lunch break.
Thanks Nil, I haven't been crazy about where this money is invested. And now, my stomach is turning. I went "cash" so I wouldn't worry. I need plan B.
The Nikkei is taking their lunch break.
Bystander,
ah I see..
I will forever remain, The Ignoramus.
Marcus
And any bids would be "low ball?"
Thanks Nil, I haven't been crazy about where this money is invested. And now, my stomach is turning. I went "cash" so I wouldn't worry. I need plan B.
Owl,
For a quick safety play, just go into Treasuries at your brokerage while you figure out something else to go into.
I think it it is about as good as you'll be able to get.
I'm pretty ignorant too. I just hang out here waiting for additional pronouncements from Conjure Bag.
U.S. Treasury - Daily Treasury Real Long-Term Rates
Daily Treasury Real Long-Term Rates
06/01/05
1.67%
06/02/05
1.66%
06/03/05
1.70%
06/06/05
1.68%
06/07/05
1.68%
Then:
01/23/08
1.68%
01/24/08
1.81%
01/25/08
1.72%
01/28/08
1.71%
01/29/08
1.75%
01/30/08
1.80%
01/31/08
1.69%
Why do I get the impression these people are trying as hard as possible to adjust yields??
here
The Nikkei drop of 4%+ is meaningful. The Hang Seng drop of 5%+ is not.
Drops of 3% or more in major markets, not the backwater pretenders to serious economic power, are rare and over 95% of the time lead to additional movements in the greater than 3% range. These don't continue for extended periods of time, but they do repeat in close time order.
Look at the DJIA monthly chart. The high was October, the low was November, December was an inside month, and that set up the most powerful top reversal on a monthly basis ever seen, from pre 1929 to the present. Sinclair has called it. So did Richard Russell. And immodestly, so have I, though I'm scared stiff here because this is "it".
Roubini's talking about something that's really the tail, not the dog. The dog is found in housingbubble.com The underlying economic cause has not begun to stabilize. It's at a wonderment pause for the subprime, but the alt-A will follow in '09, and CR is pointing out repeatedly that CRE is now about to be 2nd, ahead of alt-A. And the big boys, the jumbos and primes will be defaulting in '09 along with the alt-A's. We can all do the rest of the math re: the funds holding these flaming stink bags.
The joke here is there's nothing coming from the gov'ts on what to do after this all implodes. Denial is all they're offering. Destruction of the currencies via governmental buy outs are politically tasty yet ludicrous.
It will continue; we're not all going to die. But nada is thinking about what's seriously next that will maintain the quality of life most of us are now living.
I retract that it will continue. The events in Pakistan, Bangladesh, and India, right now, viz a viz bird flu are high probability precursors of even more biological boiling water being tossed on the economic corpus now being being drawn and quartered. One pain apparently is not enough.
If I remember correctly, money market funds are grouped into a few broad categories:
Prime or cash reserve funds can hold corporate, bank, and government paper.
Government only funds hold US Treasury, agencies, and GSE (Fannie, Freddie, etc.) paper.
Treasury only funds should hold only US treasury paper and repos fully collateralized by US treasury securities.
Yield and risk move in opposite directions. If a fund is offering higher yields, then it is taking risks. The difficult question is identifying the source of the risk generating outsize yields.
I'm pretty ignorant too. I just hang out here waiting for additional pronouncements from Conjure Bag.
Bystander,
While I am a fan of the Conjure Bag entity... I personally wait around to hear the announcements about free ponies for all..
That really gets me pumped because I'd really like a pony.
I mean.. if you can't sprinkle Zoloft or Ecstasy on everyone.. why not try sprinkling ponies? That would cheer people up.. then they would ride their pony to the store and buy some stereo equipment.
YouTube - "The Third Man Theme"
Sometimes I wonder at how history will view us, sitting here making pronouncements about what awaits us.
I can hardly wait until the Fed hits 1 percent. I watched Becky Quick talking with wilbur this AM, and thought, wtf- he isn't going to put a dime into a monoline. He is shorting bigtime.
Someday this war's gonna end...
When the fed loans money short-term, like via the TAF or fed discount window, what happens when the recipient cannot pay the money back? And, beyond that, what is to stop the fed from forgiving those loans, and would they do that? What would the effect of that be?
Money triva, my favorite!
The Fed would try to sell the defaulted securites on the open market. Most likely, it would be able to recover full value because Federal Reserve is like Uncle Vinny's Pawn Shop. It never loans the full market value of what it's taking at the discount window.
If the security had dropped so fast that the Federal Reserve couldn't recover full value the Federal Reserve would technically be insolvent (bad).
The possible remedies would be:
Congress could buy the defaulted assets from the Fed, sell them on the open market, and the taxpayer would take the loss.
A smaller loss could be covered through by keeping more interest collected on holdings in the Fed's System Open Market Account (excess interest is normally handed over to the US Government)
A Presidential Proclamation could be issued that would re-value gold reserves from $45 an ounce to something higher to cover the short-fall. I'm not sure if Congress would need to be involved, but the exchange stabilization fund was created this way.
While the Federal Reserve would certainly survive, the result would be a black mark on the USD.
eli,
Thanks.
Kicker,
I was assuming broker purchase.
Cheers,
Owl -
Short term treasuries is the answer. Just stay short - 3-6 months and you wont really take much rate risk - granted you wont get paid much but you'll be ready to go if/when the sh_t hits the fan.
I went all treasuries in April with an average duration of about 2 years - recently I brought the duration down to about 7 months - and bought long term puts on the markets and financials. I intend to hold my puts (although I have to sell some March 08s in the next couple months) and may even shorten up my duration further. I'd love to buy some puts on the Euro and Pound through an ETF but I can only go out until June (I'd want at least a year) and I'm also pretty long US Dollar already so I'm not sure its the prudent thing even if I like the trade.
Dont think I'm saying anything different than what you've been hearing from others.
Kicker:
While the Federal Reserve would certainly survive, the result would be a black mark on the USD.
Small problem: US Dollars no longer exist. All we have are Federal Reserve Notes that are fully redeemable for more Federal Reserve Notes. Check the paper in your wallet to confirm this.
Ok, that was a trick question before, because, as I look for historic yield patterns, it is interesting that the yield on treasuries is bouncing around in a death dance, embraced by Paulson & The Fed, who want to have sustained economic growth -- no matter the cost and to try any possible means of factoring out the cost of the war in Iraq.
This collusive mindset from this coup seem hellbent on furthering the illusionary nature of The Bush Legacy, as if his daughters just dont get it yet, that he is The Greatest President Ever Placed In Power God Damn It!
The premise that the housing market was the greatest leg of the American Economy and thus immune to slowdowns, no matter what, is currently being understood for what it actually was, which was a way to use American Patriotism to buy into a housing bubble while The Iraq War costs went unchecked, unregulated and unaccounted for, just as Wall Street was given the green light for a anything goes with derivatives and synthetic bubbles. Now we see the great power of illusionary and deceptive rating agency powers that blessed the economic dream, the agencies that hyped, rated, modeled, verified, endorsed and pumped the greatest illusion in American history...
To be continued...while Iook for more vodka...
if you can't sprinkle Zoloft or Ecstasy on everyone.. why not try sprinkling ponies?
I like ponies (Buffett promised me one after he buys out the monolines and the homebuilders) but I don't want them sprinkling on me.
eli:
I want an elephant - not a pony. Riding an elephant reflects status - it shows I'm not worried about miles per bale. in traffic, ponies will get out of the way of an elephant, plus, elephants have more trunk space.
Your friend,
Marcus
With money market funds, check their SEC filings after reading the Prospectus and SAI(Statement of Additional Information).
Money Market Funds have been playing games around quarter end to hide what they are actually holding. It's one reason that liquidity for conduits was tight at year end '07.
Misean,
Not judging. You're talking to a guy with 3M calories stored in his basement (May be a nut, but not sure). But, if short term treasury funds get taken out there really isn't any place to hide. After all, it's all paper.
"In Switzerland, they had brotherly love, they had five hundred years of democracy and peace, and what did that produce? The cuckoo clock."
There is quite a misunderstanding about the Swiss, especially in the U.S. The Swiss have a tremendous warrior tradition though were involved in few wars as a nation after 1515. There is good reason why the pope even today has the Swiss guard.
Swiss mercenaries
"Swiss mercenaries were soldiers notable for their service in foreign armies, especially the armies of the Kings of France, throughout the Early Modern period of European history, from the Later Middle Ages into the Age of the European Enlightenment. Their service as mercenaries was at its apogee during the Renaissance, when their proven battlefield capabilities made them the most sought-after mercenary troops in the world."
eli,
Conjure's call for a free pony. I think it's a disguised call for those that will pony-up for this mess.
Kicker,
Or the Fed could just keep rolling over the TAF. I think that's the current play.
Cheers,
If you are really worried about the collapse of the US banking system, then study the coping strategies used by the Russians during the Ruble collapse in the 1990s.
Foreign hard currencies can help, but a large hoard of Marlboro cigarettes are excellent for barter.
Never considered a viable Black Market economy arising from this. Interesting. Wonder what they'll be using for currency.
Marcus and F. Federson,
I still want ponies sprinkled around.. me and my pony will fly off into outer space while your elephant rolls in the dirt.
Misean,
I'm sad to hear that the pony is not a literal pony.. but, instead, some sort of metaphor..
..I'm still holding out for an actual pony (preferably sprinkled).
Yah,
Anyway, we are all held in submission by The Lords that point us to where we shall go, but to get back to where I was before this goo poured out:
Yields, damn it, open up your friggn windows and look around outside for some yield; do you see it, do your neighbors have it, do your landlords have, do the people on wall Street have it; does The Fed.......does Japan or China or that vast group connected to The Euro or Libor?
Hell no, no one has it and the reason none of us have it, is because of several things:
More vodka...
US Dollars no longer exist. All we have are Federal Reserve Notes that are fully redeemable for more Federal Reserve Notes. Check the paper in your wallet to confirm this.
The paper notes in my wallet are special. They are issued by the US Treasury and the Treasury only accepts US Government debt as collateral. So, each paper note has exactly one dollar of US government debt standing behind it. That's what "The full faith and credit of the U.S. Government" means.
US IOU perhaps?
Anyhoo, I'm going to venture out into the world in search of food, and gaze upon the beauty of Downtown Brooklyn.
I'm crossing my fingers that the impending financial clusterscrew will salvage it from the developers (I promised my girlfriend that I'd put a hex on them last Summer, and they would all pay.)
Don't watch the pot too hard... it'll never boil.
OWL:
Fidelity and Vanguard are safe in that they are owned by the people putting the money into the accounts. Each fund stands on its own, it is a trust. Loses are contained to each fund. I would not be in the MM however, because of all the various vehicles trading in the short term cash area, and many have hair on them. I am nearly all in Vanguard VUSXX, short term treasury account, lower cost than Fidelity.
It is not about the return on my capital, it is the return OF my capital. Hope that helps.
The mint sells dollars.
I bought two $50 coins last year for $830 each;-}
As for what to have- a little bit of everything. Booze is outstanding.
But hey, japanese stocks actually look undervalued now.
Everyone is going to hunker down.
Someday this war's gonna end...
Can anyone really explain the difference between a derivative time bomb and a WMD; what is the difference in destruction between financial terrorism from wallstreet and some terrorist from Iraq or Ireland or Russia? What constitutes terror or destruction, and then why do we have a government that wants to bail out corrupt and destructive forces? What has happened in our land?????????
Re: J apanese stocks actually look undervalued now.
They are still 25% overvalued and this is why you need to understand correlated /relative yield related to exchange ratios and valuation; Japan and China have a long way to fall and that is why you see the volatile crashes week after week. The S&P 500 is still overvalued in America as well, but at this stage of game, one should look for comparative reality in regard to yield !!!!!!
What has happened in our land?????????
Bushwhacked beyond disbelief...
You guys are all freaking me out here. Whatever happened to a poster named Banker? He seemed to offer more balanced takes on events...
AllenM,
Forgot the booze part. Oh yeah, and the ammo and food bit. I gotta make a checkoff sheet.
Cheers,
I am friggn Banker, what balance do you seek?
BTW, First!
Anonymous | 02.05.08 - 10:53 pm |,
Bankerdome I suspect.
Cheers,
Don't freak out man, cops can smell fear...
You should try mac & cheese in percolator, I have heard it is very tasty and fast!
Cooking ramen in my percolator,
BTW, First!
That's been done. It's novelty has worn out.
Cheers,
I want a Prozac donut sprinkled with Ecstasy.
Ok, wake up here with some Hot Ramen Cocoa and a spoonfull of Ovaltine:
eb. 6 (Bloomberg) -- Japan's 10-year bonds rose, halting a two-day decline, as a slump in global stocks attracted investors to the relative security of government debt.
Ten-year yields fell from near the highest in a week after Japanese stocks slumped on a report that showed U.S. service industries contracted at the fastest pace since 2001, boosting concern the U.S. will enter a recession. The U.S. is Japan's largest export market.
``Now it is back to the bear trend in the equity market people have to buy JGBs,'' said Xinyi Lu, chief strategist at the international treasury division at Mizuho Corporate Bank Ltd. in Tokyo.
The yield on the 1.5 percent bond due December 2017 fell 6.5 basis points to 1.41 percent as of 11:05 a.m. in Tokyo according to Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
Ten-year bond futures for March delivery rose 0.77 to 137.97 at the Tokyo Stock Exchange. The Nikkei 225 Stock Average lost 4.1 percent.
Cooking ramen in my percolator writes:
What has happened in our land?????????
Bushwhacked beyond disbelief...
Cooking ramen in my percolator | 02.05.08 - 10:52 pm | #
Please, our dear leader has everything under control. Currently he's reading My Pet Goat, and as soon as he's through with that, he'll attend to the country's problems.
I appreciate the way some of you have been offering financial advice, winding up with disclaimers that display admirable humility: "I may be crazy, other people see it differently, I don't know for sure etc."
If only the masters of the financial universe had a little bit of that in their brilliant minds--a little voice saying, "You could be wrong. What if you are wrong? Are you really smart enough to control this immense engine of financial destruction that you have built?"
build machines that they can't control, bury the waste in a great big hole...
No, they lacked that humility, and they lacked the imagination to see what would happen when their schemes failed.
This thread has really taken a turn. A very paranoid, apocalyptic turn.
There is now no doubt in my mind that we end up green tomorrow.
Y'all are screwing with my shorts!
Bad karma!
Everything is fine, bull market, rate cuts, housing recovering, banks making much cash!
Way way OT:
To be fair to the Swiss, they did come up with Dada, or at least the movement started on their soil.
But the Italians started Futurism. And Futurist cooking is one of my favorite things. Most is rather silly -flavoring the food with steel and blasting diners with sounds of airplanes and jet fumes (the sounds and smells of progress!). They did have some interesting ideas though.
"A Futurist cuisine had to find ways of reestablishing "gustatory virginity." To annul one set of tastes
and smells before presenting the next set, a suction fan would draw
scents out of the room. To intensify sensory acuity, they
periodically changed the lighting and room temperature, suddenly
instructed the diners to quickly move themselves and their dinners
two places to the right, released a live turkey into a room where
diners had just eaten the bird, and presented blue wine, orange
milk, and red mineral water."
New York University > 404 Not Found
Denzel,
"Please, our dear leader has everything under control. Currently he's reading My Pet Goat, and as soon as he's through with that, he'll attend to the country's problems."
Well thank the maker for that...I was getting worried.
Cheers,
Flash:
Hillary Clinton tells us that it was people who were so determined to send their daughter to college that they took out a subprime mortgages..
That woman ( not THAT woman ) has no scruples; even on Shrove Tuesday ( so who made pancakes then?) she is quite comfortable telling porkies.
I wonder how she'll handle Lent.
-K
Ok, nice break, but re-examine again:
The yield on the 1.5 percent bond due December 2017 fell 6.5 basis points to 1.41 percent as of 11:05 a.m. in Tokyo according to Japan Bond Trading Co., the nation's largest interdealer debt broker. A basis point is 0.01 percentage point.
Hello my fellow global friends, look at the friggn yield! We have yields at 1.5% with an overvalued market, where there will be a flight to safety, which besides having investors look for Depends does what........Oui, the flight to safety drives up the price and lowers the yield, because stocks are overvalued and oh yah, currency hedging>>>
more vodka please
John Stark:
Their nefarious, self-serving schemes.
Thanks Darknite,
seems that many people here agree with you and are going for the short term treasuries. Some for CD's. It seems that the MM fund may not be the best place to be right now (just in case). I'm planning on calling Fidelity and Vanguard tomorrow to compare and inquire.
I've read all the comments by everyone and really, thanks to all. Much success.
About a week or so ago I wrote something to the effect that many panic lows have a secondary low which evinces at least as much if not more negative prognostication as the first one even though prices are higher. I would say that todays action fits the bill exactly. None of the leadership down groups are near their lows, the real damage today is in all the stuff that has great implied value based on current prices. There are now a multitude of sectors where one can find prospective earnings yields north of 10% and up with little or no risk yet there is no interest because everyone is scared out of their wits.
Consider Roubini, with virtually zero new economic news over the past month other than 125 basis points of rate cut his rhetoric has ratcheted up to armageddon levels. This is mostly because you can't be in the limelight unless your predictions are provocative. In order to achieve that status in this environment you must talk of total collapse or you are just a run of the mill bear.
Isn't it odd that january marked the first month in something like 15 years when corporate insider buying was actually higher than sales? Do you really believe that en masse their understanding of their companies and prospects are less informed than the views of outside pundits?
ding ding ding...
The Nikkei dipped down 600 points and then back up again. Whew. For a minute there, I thought this thing wasn't gonna stay contained.
Lunch break is over. Back on your heads.
owl,
Re: Vanguard
Ask them about VIPERS that are connected to Prime Money Market and any disclosure they have on derivatives trading; they will ignore you, but ask!!
dunham,
Gimme a sec...GAHHH!
(Smoke clearing)
This is beyond bullish. There's not much more to downgrade, and obviously housing will turn around this spring. With interest rates dropping and all the bad stuff now priced into the forward looking markets, AND an extremely oversold condition in the stocks, we're set to rally big.
You silly bears, and doom and gloomers, don't understand just how much our gov't and those that run the stock market love us. We're little lost puppies to them, and they could never hurt us.
I see sunny days comming as winter moves into spring.
Cheers,
they had five hundred years of democracy and peace, and what did that produce?
Hmmm, let me take a wild guess here.
They produced the one place on Earth where people WANT to park their money and still sleep at night?
Dunham:
Apocalyptic, ain't it? Duck and cover!
David,
Please, no prognostication, unless your finding some new cloud patterns that are not in my cognition library!
Thanks in advance!
Someone mentioned pancakes.
I hope the Black Market economy is based on pancakes.
I love pancakes.
"With interest rates dropping and all the bad stuff now priced into the forward looking markets, AND an extremely oversold condition in the stocks, we're set to rally big.
You silly bears, and doom and gloomers, don't understand "
that about sums it up.
Misean,
Your correlation to past events has no relativity to future events; I can understand that you have a tangent to follow, but the bridges from where you are to where you need to go have structural flaws and this lack of integrity will make your your journey very risky. However, as you are the driver of this drunken limo, go for it and step on the gas, after all, what can you forfeit?
Some people will make blackmarket pancakes in percolators...its a vision I live with; I see it now, very clear!
dunham,
Oooff!
You owe me a beer, dude. Shorting out the Super Colander Tin Foil Hat with fresh batteries is painful.
Cheers,
david_in_ct
"... virtually zero new economic news over the past month...."
Huh. Read much?
The black market is based on ponies.
Larger transactions are conducted in multiple ponies. Roughly one domestic mid sized sedan is ten ponies.
More day to day transactions are based on single ponies, with variation for pony size. The 56" flatscreen is a big, big pony. A 32" is a normal sized pony.
Smaller transaction are handled by pieces of ponies.
Incidentally, fractional ponies can also be converted to food items.
"I want a hamburger.. no a cheeseburger. I want a hot dog. I want a -- You'll get nothing and like it!"
Can you use black market pancakes in a still to make booze? I think so...probably be kinda vodka like, unless there's syrup in there. Then it could be sorta rum like.
Cheers,
The end result of this whole mess is they're going to have to bring back prohibition.
we're seeing real estate deals here with 10-12% current yield at stabilization and 20%+ IRRs. local banks still seem willing to lend at 275bps over the 5 yr treasury fixed for 5 years.
but the security of the tenant income stream is coming into question.
even municipal building tenants are questionable when facing deficits.
at least dc has a fairly certain velocity enhancing time period coming here as the administration changes.
"Huh. Read much?"
Probably more than is healthy.
Misean:
Yeah, you could make pancake vodka (even with syrup on them, but I don't know about butter). I think it's called ooby dooby.
Another good reason to switch to pancake currency.
Misen, point well taken; more syrup!!
To wit, please review:
1.
The core consumer price index, which excludes fresh food, will climb to as high as 0.9 percent by April from 0.8 percent in December .
Why does USA not break out "fresh food" into inflation data; there are any possibilities for geometric substitution with "fresh foods"!!! Hi!
What do you make of that spread? Hi!
I prefer to deal in slivovitz...
I did drink Vodka from the Diplo shipments on the delaware in the early 90s. Those guys said the could get me anything. I said, a Tank? T-72? They said sure, got 50K and an import license?
I wished I had one, apparently they did import a few for collectors.
This country is more than a little insane in what folks collect;-}
Someday this war's gonna end...
The least beat up sectors today were Staples and Healthcare, but those are still not doing too good this year.
Are there any safe sectors, relatively speaking? I know you can't spend relative performance, but some did hold up well during 2002-02, but this may be more like 81-82 or 73-74. Maybe there is no safe sector?
Seems to me you're missing the importance of pancakes.
Marcus Aurelius wrote:
I hope the Black Market economy is based on pancakes.
Someone will cook the pancakes and sell them. The buyer will take a little nibble and resell them to someone who doesn't even like pancakes, but likes to buy and sell things. Well, maybe he likes pancakes a little. So he'll take a little nibble.
But since he likes to sell things more than anything else, he'll buy lots of pancakes and nibble on them all.
Pretty soon he'll have piles of pancakes and it'll be too much trouble to haul them around, so, for convenience, he'll just start selling the receipts for the pancakes he has back home. No one will ever know that the mice at home have been busy while he was out.
That is...
until someone notices that you don't actually need pancakes to sell pancakes.
Shortly thereafter, (as in NOW for instance,) we arrive at a pancake-less society based on pancakes.
davidct:
do you have a source for your insider buying claim?
if its true, thats a pretty interesting signal i think
everyone here claimed the converse earlier.
(i'm no logician, so maybe that was the corollary or the opposite or somethun')
Poor economic grad students from FSU- funny they used to load up a van full of stoli every couple of weeks from Kennedy Airport. I guess they sold it to the local bars to provide spending money.
Pertsovka. Wybora.
Ugh, my liver is telling me to forget about it.
There is always something going on that is profitable, and not quite legit.
Just not in my house. I work for the gummint now;-}
Someday this war's gonna end...
"crispy&cole writes:
Anyone long the market and on suicide watch - dont visit Roubini's blog...it might push you over the edge."
Roubini said on his blog: "So let us suppose that the recession of 2008 will last at least four quarters and, possibly, up to six quarters. What will be the consequences of it?"
The consequence is that a lot of us holding Jan. '09 puts will be forced to cash in sooner than preferred.
allen-
spent two weeks in russia this summer sampling vodkas of every type. loved every second of it but Hangar One from california is the tops for me.
As I recall, music was safe and so were hair styles; however, back to my issue of yields, please to look here at flashing blue link:
404 Not Found
You will note the current yet outdated valuation of bonds in Japan and yields, which a year ago were @ 1.65%
Guess what, the yields have gone down.....
Anyone think the stocks there are based on earnings yield????
India falling at open.... -4%
HI
Last time.
Please say the word Billons and it's the race to the bottom
"Are there any safe sectors"
No, all investing means risk. The question is are there any risks worth taking?
Here are some interesting factiods:
The xoi (amex oil index) started the year at around 1550. It closed today around 1320.
The ten year treasury started the year at about 4%. It closed today at about 3.60.
The 10 year oil strip is up a bit for year.
So in the span of about one month the prices of the stocks are down about 15%, the price of the product is up a little and the discounting rate for earnings is down 10%. So either the market was very very wrong 30 days ago or it is very very wrong today.
These calculations are doable in a number of sectors with similar results.
Yeah, lance and jorg make a dynamite concoction.
Spent an afternoon drinking with lance in early 2000 in the old building in Alameda before they made it big. The St Georges stuff is far better than plain old vodka. Raspberry, cherry, plum, yum. They also had some stuff that was experimental from the copper boiler. Tangerine. Fantastic.
An afternoon I will never forget.
Sdtwge
and god damn do i feel like an idiot. i refi'ed my option arm about 15 months ago into a 30 yr fixed. thought it was the right time.
sure wish i'd kept that arm. if i was making the same payments i am today i'd be paying that sucker off faster by several years. i mean paying less interest overall.
then again...
Pancake Derivatives and futures based on the theoretical loan value of a stack of pancakes; Im in, but Ill use Yen to hedge the flour, the Euro for flour and then dollars for eggs, and what about salt.....thats where i can get screwed and the baking powder is like crack, so obviuosly you do that with a CDO!
Anonymous | 02.05.08 - 11:24 pm |,
To be snarky, cuz I'm buzzed...buy food, sell paper.
To be a wee bit analytical...as I approach a date with my pillow, I suspect that US gov't policy of subsidizing corn for fuel...which is STUPID beyond belief, as well as SE Asian demand for more calories is causing this.
Cheers, cut short phone call...
allen-
wish i knew who you were talking about. taking a stab that its the hangar one people. good stuff and sounds like a day i'd like to have.
Insider Buys Exceed Sales, Signaling Market Bottom
However, I don't think it is smart to ignore this even more important tidbit:
U.S. Stocks Fall After Service Industries Unexpectedly Shrink
"Fourth-quarter profits at the 311 companies in the S&P 500 that reported results so far declined 23 percent on average, according to data compiled today by Bloomberg. Still, 64 percent of the companies posted earnings that topped analysts' estimates, compared with 60 percent a year ago. "
In general, with few exceptions (Monsanto), this seems a crazy time for insiders to acquire shares. It reminds me of David Lereah touting the real estate market in 2005 and 2006.
dc1000
it is the hanger one people- look up St georges distillery- that's them.
The eau de vie made from fruit is sooooo much better than vodka.
But more expensive.
Central European acquired taste.
sdtwge
If we have a 500 point rally tommorow, it only means that we will crash on thursday(-1500).
"One statistic that Argus calculates is a ratio of insider selling to insider buying, which has averaged around 2.5 to 1 over the long term. Insiders often receive shares from their companies as part of their compensation; it is therefore quite normal for them to sell more shares than they buy.
For insider transactions in the week ended Jan. 18, the latest for which data are available, the insider sell-to-buy ratio was 0.89 to 1, according to Argus. Not only is that far lower than the historical norm, it also means that insiders actually bought more than they sold. They wouldnt be likely to do that if they believed that the stock market was about to suffer significant losses.
The week-to-week readings of the Argus ratio are volatile, so the firm also calculates an eight-week moving average, and its most recent reading was 1.44 to 1. The last time it was any lower was for the eight weeks ended Nov. 15, 2002, when it was 1.33"
This is from an NYT article last week. I also subscribe to one of the services which tracks this stuff (not argus) and the numbers are similar if not stronger. They use some method to try and determine why the buying and selling occurred.
david_in_ct,
re:insider buying
I recall reading in Barrons in Dec. 06 (not 07) that insider selling in that month was like 33 to 1 over insider buying (or something along those lines). The implication was that insiders thought things were going to be really bad in the new year. Not sure how that worked out. Based upon that, I'm not sure what significance can be attached to sudden insider buying. Although I do recall that insider buying is usually a better sign for a company than insider selling.
Oh yeah, the Walmart executives know for a fact that the economy is due for a sharp rebound. Sure, that is exactly the type of info they would have.
Also citi execs know for sure that
the CDO market is gonna blow wide open soon, thats why they are buying so heavily.
yada,yada,ya
Marcus Aurelius wrote :02.05.08 - 10:42 pm| #
...viable Black Market economy arising from this. Interesting. Wonder what they'll be using for currency.
my guess, stuff like, silver dollars, ammunition, garden seeds, drugs, alcohol...and oh yes that perennial crowd pleaser, gerry cans of gasoline.
Richmond Federal Reserve President Jeffrey Lacker in a speech said there is a possibility the US is headed for a 'mild recession,' making him the first Fed official to acknowledge that prospect.
Adding to the pressure, Standard & Poor's said it may downgrade bank ratings to reflect problems in the 2.4 trillion-dollar bond insurance business.
'Bond insurers are suffering as a result of their roles as guarantors of mortgage-related securities, and downgrading them could affect all markets in which they are active, including the municipal bond, commercial mortgage-backed securities, and other structured finance areas,' Tanya Azarchs, a credit analyst for S&P, wrote in a note to investors. 'In turn, dislocation in those markets could affect banks.'
'This is exactly what occurred back in October 2001 when the US moved into recession,'' said Juliana Roadley, an equities analyst at CommSec in Sydney.
The major US indexes plunged overnight with the Dow Jones Industrial Average shedding 370 points, or 2.9 percent, for its worst one-day percentage decline since February 2007.
In Asia, the Hang Seng fell 1,339 points, or 5.4 percent, to 23,468 with financials and retailers leading the slide.
Rousseau = Swiss. One of the greatest thinkers of all time.
Anonymous | 02.05.08 - 11:46 pm |
Apparently, Richmond Federal Reserve President Jeffrey Lacker has no windows in his office.
The Richmond Federal Reserve President is always the last to know.
Black Market economy
Anything taxed, which is why Hillary should give the ok to growing pot, if you pay a consumption tax!
David,
While the insider selling statistics are interesting (and a little bit nervewracking for shorts like me - its really one of the only positive indicators out there IMO), I don't think you can look at it in a vacuum.
In my mind, the eroding economic landscape (consumer spending, chiefly) carries greater significance.
What else are you looking at?
Today's action was extremely bearish - indices blew through supports, AAPL closed below $130, RIMM below $90, energy sector down, financials leading us back down again. Breadth was very good if you're a bear, as was volume. A/D was out of control.
I look at stuff fundamentally, but follow the technicals as well, and both certainly seem to be pointing to a much larger move downward.
A lot of the bullish action seems less predicated on fundamentals than sentiment (things will get better in 2H, rate cuts will kick in, 4Q earnings ex-financials weren't a disaster, etc.). Even the rally was technically driven (after the initial bounce), and it couldn't break through at pretty meaningful chart resistance.
Thoughts?
Here is the India CNBC link:
404 Not Found
mock turtle,
I got ammo...Muahaaha...
I should just brush my teeth, and couch it.
Ya'll have a good night.
Much better board than last night.
Cheers,
"It reminds me of David Lereah touting the real estate market in 2005 and 2006."
Yeah, but the tanman, the exec with the biggest exposure to real estate sold and sold and sold and sold.
Did Lereah actually buy anything, or was he just a shill? There is a big difference between writing a check and spouting off.
**
*
But wait, this makes it all better:
In what many political observers are calling an attempt to shore up his evangelical base on the eve of the nation's Super Tuesday primaries, former Arkansas Governor Mike Huckabee today asked Jesus Christ to stimulate the U.S. economy.
Andy Borowitz: Huckabee Asks Jesus to Stimulate Economy
Thanks Huck!
I think what you're really saying is never let a complete moron run the country. Everything he's touched has turned from gold to dust.
Marcus Aurelius wrote...
A message to our grandchildren:
Never let anyone calling themselves a "businessman" run your country. Never deregulate banks or securities. Never pay more than 3x your gross income for living quarters. Investigate at the first sign of corruption. Impeach at the first offense. Prosecute political crimes to the full extent of the law. Never vote against your own best interests (and for Christ's sake don't vote for anyone who says they talk to god). Never vote for someone who promises war. Always eat everything on your plate.
Just about every realtor and mortgage rep I know bought a bigger house within the last few years. And they were on the "inside" of that market.
o one knows how this plays out.
maybe the fed goes to zero this week and treasury rolls the presses big time and saves the day...could happen.
a remote possibility is that the country moves temporarily to a command economy and then after a period, moderates back to a market system.
And , or, congress goes WPA a la 1930s so all have work and a (small) paycheck.
the scary thing is nobody...however smart really knows how this plays out. we are off the charts.
so as my wise grandmother used to say...brace or the worst and hope for the best. i myself like p. metals, ibonds and fdic and ncua insured accounts.
Gosh...CR this has to be a record for comments!!!
David,
Also, what is the history of the insider buying/selling ratio - what was the ratio in 2001? 1987?
Would it have tipped you off to the crash?
Execs are notoriously poor at identifying potential "black swan" events, though I would suppose that this is the definition of said event.
Barley,
You don't get around at nightime much do you?
JK...this is slightly above ave.
Cheers,
"The eau de vie made from fruit is sooooo much better than vodka."
Agreed. This small distillery is within walking distance, and it's right across the street from a small brewery.
Say, perhaps having a piece of a brewery would be prudent financial planning.
"What do you think? Should I stay put or is there some real danger?"
Buy gold on the dips. Gold is experiencing a dip right now.
I can haz Okanagan Spirits?
Cheers,
David in CT, I don't see how you can be so optimistic about prospective earnings statements. Have you not read about today's service sector news, the pending recession, and the monoline insurer disaster?
I agree. It may be a year from now. But the next stocks I own will be Japanese.
They have usually been counter-cyclical with the U.S. The lowest correlation of any equity market with U.S.
Im with you Rich..too early for EWJ, but Im watching and waiting and biding my time. Next pitch down below 12k, maybe 11k, I'll think about it. Not close yet.
awgee,
Watch that dip though. It could correct to 850 and take other PM's with it. There's resistance at around 865:
24-hour Spot Chart - Gold
Just be careful. Gold can easily be overbought.
Cheers,
Taxes, beware of sales taxes, etc: Sales taxes in the United States - Wikipedia, the free encyclopedia
During the recession, better to be near cheaper stuff!
Conjure says, "AlphaBear, meaning a bear who's an alpha. What an awesome handle!"
"Misean writes:
I can haz Okanagan Spirits?"
Perhaps. Is Absinthe still illegal in the U.S.?
Re EWJ -
I was just thinking about that today (watching the NIK shed even 4%+ - why can't the S&P do this?).
There is no way Japan is more f'd than we are are right now.
I might be a buyer in the mid-summer.
Also, I owned the holding company for MUJI for a couple of months. Sold it at a recent bottom for a loss, it has since recoverd. ETFs in Japan from now on.
Anyone with a pressure cooker has a small distillery at home. Just make sure you stock up on yeast.
"And mock turtle writes: congress goes WPA a la 1930s so all have work and a (small) paycheck.
You can bet that if they do, there'll be a signing state4ment by the screwup-in-chief, George Wrongway Botch, the man with the Myass Touch.
I'm getting drunk just reading this thread. What is it, a combination of Super Tuesday and down market makes the bears happy?
Conjure says, "AlphaBear, meaning a bear who's an alpha. What an awesome handle!"
Thanks, Conjure. Actually, I'm Alpha_Bear because I'm more bearish than everyone else. Roubini is an optimist.
rich,
i don't like it one bit. this thread has "contratrian indicator" tattooed all over it.
"Did Lereah actually buy anything, or was he just a shill? There is a big difference between writing a check and spouting off."
Quite, but with lots of stock options in the balance and no stock repurchase programs on the horizon, I rather think that execs are trying to project confidence to the markets at a time when shareholders are getting the sell itch.
dunham,
i don't have a great feel for what the market will do tomorrow. the only real edges i can see in very short term holding periods has to be done in the near market making realm. It requires high speed connections directly into NYSE or wherever and is a completely different game than what we 'play' here. Success is measured in pennies and milliseconds.
I am concerned with the next 10 - 30 percent in the price of a stock. The whole technical analysis of price charting on the market as a whole is fairly useless as per any rigorous model that i have seen. there are some edges to be found in very long term holding periods but the statistics are pretty thin, unless you roll the idea out to lots of other different futures.
In the intermediate term, there are a bunch of sentiment indicators that are very bullish. Some of the mutual fund data shows very high levels of money market dollars as a percentage of total holdings. Small fry option players are very bearish and always wrong.
All this sentiment stuff is hard to hang your hat on when valuations are robust but at the moment the valuations are extremely cheap based on just about any historical metric.
Again it is all about risk and reward. If you are long and wrong, what is the value proposition? Or put another way, if you could would you mind being a private owner of some public company knowing that your investment return does not hinge on resale but is just going to be the earnings stream going forward. If you can find companies that you can answer yes that question then the decision is easy to make.
If you are right as a bear, where do you think prices will head. On the other side, where do you think prices might head if you are wrong?
rich,
If Super Tuesday is a strong vodka tonic and a down market a chaser of Heineken,
then yes.
burp...
Cheers,
rich writes:
I'm getting drunk just reading this thread. What is it, a combination of Super Tuesday and down market makes the bears happy?
No, it's the fermented honey. Just don't get your head caught in the jar.
dunham,
Where's the heck is my beer...I shocked the poop outa myself giving a bullish thread...burp.
Alpha_bear...sure join the party now...where were you a year ago when I was postul...postulati...postulating this stuff.
I need to go sleepeze.
Cheers,
Hastas all.
A fun night.
Asians down... will Europe follow suit?
Yeah...I'm just funnin ya'll.
G'night.
Cheers,
"David in CT, I don't see how you can be so optimistic about prospective earnings statements. Have you not read about today's service sector news, the pending recession, and the monoline insurer disaster?"
Because none of these things have changed the earnings prospects for a large swath of the markets. the only numbers around the monoline insurance 'disaster' have been offered up by ackman. after downloading the spreadsheet and looking at it, i was less than impressed and would be happy to take the other side of the bet.
owl - I do not trust anything denominated in $, euros, yen, renminbi, francs, etc. For a year or so now, I keep my assets in things which can be measured in ounces, grams, kilos, bushels, barrels, and caliber.
Goodnight Misean.
Goodnight everyone.
Regular drinkers go for beer and wine so they got to be bulls. Bears are for stronger stuff, it's their time now. I would not mind having one too.
David,
I hear you re sentiment, but I would hate to base an investment decision on that. Especially when i'm a small fry, bearish, option player (yikes).
It does make the near future considerably more cloudy, because the market seems extra-manipulatable right now.
At the end of the day, I don't think valuations are that reasonable. I think the "E" is going to start rapidly eroding for a lot of companies. And I think the acceptable P/E ratio is going to contract as the environment become riskier. This suggests a major realignment in the indicies.
If you believe that earnings will hold up, and continue to increase, then this market is the buying opportunity of a lifetime.
I have a hard time seeing that - wages down, unemployment up and spending down are all very bearish fundamental indicators. And I don't need to tell you how important the consumer is to our economy.
Will I get squeezed by rallies along the way? Yes, last week was horrible, and i'm kicking myself for not seeing it, but hindsight is 20/20. Intermediate term however, I believe the trend is down, and we may have a significant crash in the near term.
I won't be going long anytime soon. If get spooked, I'll go into cash and wait it out, but for now i'm comfortable. Until tomorrow or the next day, or whenever the facts change.
The ONLY sectors I like right now is infrastructure and clean tech, but I'm waiting for prices to come down a little more.
U.S. big bank failure remote: FDIC chief (Bair's main job is to calm the public regardless of the facts)
Page Not Found | Reuters.com
"Until tomorrow or the next day, or whenever the facts change."
Probably the most important questions you can ask of yourself are 'how can i be wrong and what will change my opinion'.
If the only things that will change your opinion are price then you are destined for standard investing behavior. buy high, sell low.
Dave: "..but at the moment the valuations are extremely cheap based on just about any historical metric."
Please tell me you aren't referring to the Fed Model.
AZ:
I don't know the specific numbers used in the Fed model but I recall that it is a basic discounted earnings model using the 10year as the rate?
If so, why would it be wrong to employ as a relative measure?
dont you two start talking models, cause that pisses me off and the market is way overvalued!
Best model:
Take the earnings yield of a security, which for a stock is the inverse of P/E (E/P)
ok, really you find earnings EPS and then find the P/E by dividing price into earnings, thus to get the yield, divide earnings into price.
Now wait a friggn sec...if the stock pays a div, you have to add that div yield to the earnings yield and then find the E/P
David,
The following factors, when examined singularly and collectively, would change my mind:
*Increasing Real PCE on YoY basis
*Increasing real average hourly earnings
*Stabilizing credit markets.
The last one is tough. I'm looking for stable consumer credit numbers. Right now I'm expecting major contraction in available credit to consumers.
I'm also looking for commercial credit markets to unlock. I don't believe the banking sector is functioning right now. I KNOW the CRE finance markets aren't functioning. When it starts functioning, maybe things will start turning around.
Knowing that, I don't want to hang my hat on contrarian indicators. What is the empirical evidence behind these anyway? I'll ask again cause you might have missed it - how did they look in 1987 and 2001?
Dave - Barry had a great writeup on the Fed Model today. http://tinyurl.com/3bzau3
Basically the problem is the "E" in the P/E. My proprietery indicators (neighbors in foreclosure and friends getting laid off) both indicate the market is extremely overvalued.
'how can i be wrong and what will change my opinion'.
Bearish with a deflation bent sitting with a lot of cash on the sidelines. I'd be worried if...
-Banks were able to clear a large chunk of their pier loans
-Recovery of the ABCP market to early 2007 levels
-Drop in the dollar combined with a steepening of the yield curve (decoupling)
-Compressed spreads on corporate bonds and mortgage debt
-Wage inflatio
FDIC chairman sees strength in muni bonds
FDIC chairman sees glowing green alien in own backyard
FDIC chairman sees strength in muni bonds
| Reuters
Kicker - You might as well add the second coming of Christ. It's just about as likely as the others.
OT, but I must share this funny exerpt and quote from a Wa Po article titled "Housing Crisis Casts a Cloud Over the Sun Belt" ...
The struggles of Rebekah and Otto Ao in dealing with a crushing mortgage debt show how deep the problems go.
They bought their first home in 2005, for $269,000. They paid for it using an Option ARM, which allowed them to make a monthly payment of $850, which was less than what they paid for rent in Los Angeles. Only later did they realize that meant that their loan amount would grow over time, not shrink, as would their payments.
"When we saw the payments were so low we decided to buy another house," Rebekah Ao said.
They now owe $287,000 on the first one and $320,000 on the new home, which they are renting. Their credit card balances, which they once kept at zero, have ballooned to more than $14,000 as they struggle to make ends meet.
You can't make this stuff up!
Housing Crisis Casts a Cloud Over Sun Belt - washingtonpost.com
CNNMoney
W Holding Company, Inc.,the Financial Holding Company of Westernbank Puerto Rico, Provides an Update
CNNMoney.com: 404 Page Not Found
^TNX: Basic Chart for 10-YEAR TREASURY NOTE - Yahoo! Finance
10 year treasury at 3.587%
Treasury yields headed back to 1960 and beyond, like going backwards. I see yields from 1953 to about 1959 stayed below 4%, so it would be interesting to understand the impacts of inflation related to this period then and how it relates to now!
AllenM writes:
"Yeah, lance and jorg make a dynamite concoction.
Spent an afternoon drinking with lance in early 2000 in the old building in Alameda before they made it big."
I hope this was after the Navy gave the air station to the city:-)
Good luck to everybody tomorrow. Might be an interesting one.
MarketWatch
Bank ratings may be cut on bond insurer woes "We believe that the specific, identifiable effect on banks may be significant and, in a few cases, could lead to downgrades. Large global institutions have direct exposure to the bond insurers in a number of ways.' - Tanya Azarchs, S&P
Banks may be downgraded on bond insurer woes, S&P warns - MarketWatch
"My proprietery indicators (neighbors in foreclosure and friends getting laid off) both indicate the market is extremely overvalued."
This would be a correlate to the farmers that do their umm 'hedging' by looking out the back door. homey, but useless.
Dow 10,000 by Easter 2008, Dow 9000 by 4th Of uly, Dow 8000 by XMAS 2008
Maybe, maybe not. These are the consumers that power the economy. They've been spending like drunken sailors for the past four years. And now they're down for the count. Disregard at your own risk.
"*Increasing Real PCE on YoY basis
*Increasing real average hourly earnings
*Stabilizing credit markets. "
I have never tried to model the stock market with anything resembling econometric time series, so I can't really add to the conversation.
I would remark that since the things that I am most interested in make their money based on global pricing power I don't think being US centric is a great starting point.
To compare this period to either 87 or 2001 is just not right. In 87, two days before the crash the long bond was yielding 10.15. I remember, because I bought a bunch. 2001 the earnings yield of the s&p was around a half of what it is now. the nasdaq was absurd beyond belief. the speculation in both those time was in the equities markets. this time the speculation was in real estate and its finance. two entirely different creatures. also, the crash in 87 happened within about 5% of the top if you count the freefall preceding it. We already made it down better than 20% on the russel and nasdaq, and the s&p missed 20% by a hair. the leading down sectors declined by 75% from the top.
Sentiment stuff can be most useful at extremes because it might answer the question of 'who is left to sell?'
got to hit the hay
good luck
d
david_in_ct,
C'mon, you really mean that, "who is left to sell?"...?
Lotsa leverage to unwind still.
...and the decline in profits is just beginning.
There will be lots of screaming, panicing sellers in the next year or two.
A common example of a random walk is a mathematical problem called ``the drunken sailor''. A drunken sailor on a road walks back and forth, changing direction at random. After a time (T) much larger than the time to take a single step has elapsed, the average (in the sense of the root mean square) distance that the sailor has reached from the starting point is proportional to the square root of (T) .
Pretty simple stuff here really, the consumer is zig zagging and can only get so far from debt, or call it home and no matter what path they take it always relates to time. Look at Brownian motion:
"In reality, while on the smallest scales DNA is indeed shaped like a double helix, on larger scales it is a wriggling, writhing, jiggling, jostling, restless globule of chemical complexity, thrown ever back and forth by random Brownian motion."
Scientists now appreciate that the vital protein components of living cells are only able to "fold" into the right shape to be able to work because their components are mobile chains and helices that are constantly walloped by water molecules and other chemicals.
"Life as we know it can't work without Brownian motion," says Dr Haw. "The membranes of cells writhe and flex according to it; viruses and bacteria must live in a Brownian world."
Within the cells of the body, kinesin proteins work like "cellular trucks" to pull tiny sacks of chemicals along pathways known as microtubules. Studies at the Georgia Institute of Technology by Prof Ronald Fox show how they harness the ceaseless Brownian bashing to do this. "If you could see them, their walk would appear to be more like a drunken sailor than a concerted motion," says Prof Fox.
"Brown really had discovered the secret of life. When you get into this sub-cellular level on the nanometer scale, the dynamics and vitality of protein molecules are really due to thermal motion," he added. However, for those who think this process is akin to getting energy for nothing (in violation of the sacred laws of thermodynamics), he points out that chemical energy must still be burnt to enable molecular machines to harness thermal motion.
We are screwed!
A Chancellor powered by Brownian motion - Telegraph
Anonymous: Are you somebody's AI bot gone awry?
david,
Would you buy real estate now? Housing prices have fallen further than stocks, so they must be a real sweet deal now, right?
The bottom in the markets isn't behind us, it's in front, and it's a long way down from here. Dot-bomb took the DOW from 11K down to 7K, and that little episode was simply the foreshock for this coming earthquate.
Is Blair getting ready for political office?
Knowing that, I don't want to hang my hat on contrarian indicators. What is the empirical evidence behind these anyway? I'll ask again cause you might have missed it - how did they look in 1987 and 2001?
Dunham,
My Ignoramus Guess™ is that contrarian indicators are useful 95% - 98% of the time.
So.. one could say, "Wow, all these douchebags thing everything will fall apart.. I'll take the other side of that trade."
Now, that would be the best bet.. since it would be cheaper to bet against the crowd (you'd get better deals).
That 2% - 5% of the time when the contrarian indicator doesn't work... I'd say that's when you get the severe moves.
I think it's somewhat clear that the financial landscape is not "normal"... so, really, who knows what's about to happen over any 5 day period.
I know that it's impossible to buy puts at a good price and calls really aren't priced so well either.
I can buy puts or calls for about $0.40 on GOOG at +- $95 from the current strike price... so... wtf? Options sellers clearly aren't scared enough to price down their call options.
They're still pricing in an equal chance for a rise. Now... the bids on those options are a little different.
Not as many people are interested in buying the calls.. but the prices they trade at are similar. We'll see if the sellers drop their prices... then I'd say you have a proper contrarian indicator (that may or may not be of any use).
Just typing the damn things into their database sounds exhausting.
david in ct Appreciate your posts. IMO it will take a steady stream of bad news to make this market go lower. Am pretty neutral since I think there is a decent chance we will get it.
The horse has left the barn.
The barn has burned down.
The horse has been killed by a diesel locomotive.
All that's left of the horse is blood and guts splattered around the neighborhood.