U.S. Stocks Rise in S&P 500's Best 2nd Quarter Start Since 1938
April 1 (Bloomberg) -- The U.S. stock market posted its best start to a second quarter in 70 years after Lehman Brothers Holdings Inc. and UBS AG said they are raising $19 billion to replenish capital, spurring speculation that banks can weather further credit losses.
Why in the hell did stocks shoot up today? Go and read the brand new (free) write-up on ContraryInvestor.com.
Now tell me, could de-leveraging be a primary factor in today's market movements?
Hedge funds closing out their short positions and selling their gold? That explanation seems more plausible to me than lots of folks taking up strategic long positions in this climate.
Why in the hell did stocks shoot up today? Go and read the brand new (free) write-up on ContraryInvestor.com.
Now tell me, could de-leveraging be a primary factor in today's market movements?
What I'm seeing is that the worst stocks went up the most (financials, real estate stuff, tech). The relatively better stuff (non-asia emerging markets, commodity related stocks) didn't do quite as well.
That tells me pretty much everything I need to know.
"The following table shows the $232 billion in asset writedowns and credit losses since the beginning of 2007, including reserves set aside for bad loans, at more than 45 of the world's biggest banks and securities firms."
Wow, that's not bad!
I'll start to worry when we reach more than 13 zeros after the number.
--
The same guy (Bernanke) said during the Congressional Q&A in March 2007 that home prices will not decline, but the growth rate of price appreciation will decline to 3-5%.
We know that he didn't want any price decline because of the problems they will cause.
The same guy (Bernanke) said during the Congressional Q&A in March 2007 that home prices will not decline, but the growth rate of price appreciation will decline to 3-5%.
If Bernanke couldn't see that prices were going to decline, how can he now even begin to comprehend the effects of his current actions?
Having an economist who can't make basic coarse-grained market predictions in charge of radically overhauling the financial system seems like guaranteed economic suicide to me.
It's a beautiful tongue in cheek send up of the endless (and meaningless) narrative fallacy of the MSM with respect to daily market movements...tied into Doug Kass's bit of fun.
ac, do you really think he did not see home prices falling? I presume that his public statements do not reflect his private misgivings.
Okay, decipher for us slow folks: what does your read of the stock market action -- strong gains for weak assets, weak gains for strong assets -- today tell you?
OT -- in the interest of zeroing my exposure to counterparty risk with SDS (UBS and Credit Suisse are counterparties underlying SDS), I moved from long SDS to short SSO.
It was a neutral swap -- SDS was down 6% and SSO was up 6% today -- but psychologically painful: tough day for SDS, which I have held for some time.
Okay, schmucks/shysters/shylocks, have your fun trying to fool folks into thinking that all is well, but just keep the S&P below 1500 (my margin call point).
I think he was agreeing that deleveraging was the prime mover today. Hedgies with short positions in weak stocks were buying those stocks to close out their positions. They were selling their long positions in commodities and commodity-related stocks in order to capture their gains.
When Mr. Margin calls, you gotta answer.
Of course, this could be wishful thinking on my part, blinded by all my puts!
lenders would reduce the principal of the mortgages to take account the new lower value of the home. The borrower would get a fixed rate loan from the Federal Housing Authority. In return, the government would get a small stake in the home.
The program would be capped at $300 billion.
Recent events in the market for mortgage-backed securities have placed the US subprime mortgage industry in the spotlight. Over the last decade, this market has expanded dramatically, evolving from a small niche segment into a major portion of the overall US mortgage market. Can the recent market turmoil triggered by the sharp increase in delinquency rates be related to this rapid expansion? In other words, is the recent experience, in part, the result of a credit boom gone bad? While many would say yes to these questions, rigorous empirical evidence on the matter has thus far been lacking.
Credit booms There appears to be widespread agreement that periods of rapid credit growth tend to be accompanied by loosening lending standards. For instance, in a speech delivered before the Independent Community Bankers of America on March 7, 2001, former Federal Reserve Chairman Alan Greenspan pointed to an unfortunate tendency among bankers to lend aggressively at the peak of a cycle and argued that most bad loans were made through this aggressive type of lending. ...
Of course, this could be wishful thinking on my part, blinded by all my puts!
ShortCourage | 04.01.08 - 6:52 pm | #
It's probably not your wishful thinking:
Investors also reduced their exposure to commodities and safe havens including government debt and gold, which fell to $880 an ounce, a two-month low.
But senior bankers said the rebound was driven in part by hedge funds closing short positions and warned that UBS had negative implications for the rest of the sector.
Marcel Rohner, UBSs chief executive, said the market was wrong to infer too much from UBSs situation.
We will need a few days and weeks to understand the broader significance of where we are, he said. One institution alone will not be sufficient to judge.
ac, do you really think he did not see home prices falling? I presume that his public statements do not reflect his private misgivings.
Privately I agree with you, but then this brings up a more disturbing question:
Why did the Fed do nothing to stop the US from becoming a bubble economy despite warning of this possibility themselves in Greenspan's infamous 1996 "irrational exuberence" speech?
If they did nothing to stop a problem that they themselves saw coming, how can they be trusted to do anything constructive?
Lacking further information one has to assume that they have some ulterior motive and ultimately no real interest in serving the American public.
The US consumer has been gutted. The Federal Reserve knowingly served them up on a silver platter to speculators and corporate interests.
Thank you, S-C-, for your read, and thank you, ac, for your amplification.
Great question, ac: Why? I think J-J- is right, although it boggles my mind that a reputable academic like B-B- could get involved with these schmucks/shysters/shylocks.
Maybe they should pay off everybodys mortgage, cut a check for a couple of hundred thousand dollars for all,define it as a future tax rebate, and then we can all retire in prosperity.
Ben-Frank'll-Tank-Bernanke (nametag before banking committee)
Inflation selectively injected.
Deflation universal on all hard asset classes.
Equity markets rise/trade sideways despite no existing sales, few products, and hushed-up BKs. Sustains self through cannibalism for a while. Funds accessed at Fed window used for speculation. Borrowers cannot access legitimate rates, denied by overly stringent standards.
Australian stocks fell the most in 20 years during the first quarter after rising interest rates cut demand for bank shares and slowed the economy's 17th year of expansion.
The All Ordinaries index declined 16 per cent in the first three months of the year, the most since the end of 1987, following the October crash. The benchmark S&P/ASX 200 index, started in 1992, lost 16 per cent in its worst quarter on record.
This is my theory as to why the Dow is holding up, hedge funds etc flight to perceived safety and known knowns that is US equities.
Re: U.S. Stocks Rise in S&P 500's Best 2nd Quarter Start Since 1938
April 1 (Bloomberg) -- The U.S. stock market posted its best start to a second quarter in 70 years after Lehman Brothers Holdings Inc. and UBS AG said they are raising $19 billion to replenish capital, spurring speculation that banks can weather further credit losses.
My apologies, but I can't stop laughing!
OH MY GOD, that is beyond retarded; we can also compare football teams, shoes, job growth, ........ too sick!
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Sorry, y'all. Long day - had to rant.
I want some of what the people playing the market right now are smoking.
I think its pointless to rationalize day-to-day moves in the market.
The key questions to ask a) are housing prices going back up to their peaks or will they likely continue to decline b) are corporate earnings going to show y-o-y growth or decline c) will banks balance sheets continue to be under stress or are they sufficiently re-capitalized d) is the American consumer going to continue their spending levels or will they be forced to cut back.
With respect to covert and overt taxpayer bailouts of bank shareholders and bondholders the key question is - will foreign creditors finance these bailouts?
Your conviction on the above questions should allow you to position yourself appropriately.
Palacio most recently served as the Deputy Communications Director and Legislative Assistant for Rep. John Salazar. In the speechwriter position, Hoyer welcomes Rob Goodman. Goodman joins the Leaders office after serving as a speechwriter for Sen. Chris Dodd for the last 18 months.
Two U.S. senators, citing a plunge in regulatory fines against companies and individuals, yesterday asked government watchdogs to examine whether the federal Securities and Exchange Commission isnt being aggressive in fighting fraud.
Sen. Jack Reed said in a speech that he and Senate Banking Committee Chairman Christopher Dodd, D-Conn., asked the Government Accountability Office to look at the SECs enforcement division. Reed sought the review after sanctions fell about 51 percent to $1.6 billion in fiscal 2007.
The drop raises questions about whether changes have taken place in enforcement philosophy or scope of activity, Reed said in a statement. The GAO will examine whether the enforcement division has sufficient staff and funds to perform its mission and whether there have been fundamental changes in operation to the way they handle cases.
This is the second time in 18 months that a member of Congress has called for a review of the SECs vigilance. Since taking over in August 2005, SEC chairman Christopher Cox has given commissioners more power over enforcement penalties as the agency considers whether fining companies also hurts shareholders.
Your conviction on the above questions should allow you to position yourself appropriately.
malabar I thnk the answers to those questions are obvious. We have, however, been pulled back from the brink by a combination of intervention and lower rates. That doesn't mean there's still not a mess out there, but I do think we've averted total financial chaos. For now.
So I say decline, decline, strees, and WAY back. Banks are also causing a huge side effect that will further impact their balance sheets...by restricting credit to the people who need it the least, they are going to see a huge drop in fees and interest. I think financials are absolutely screwed for at least the next 18 months. Anyone buying in now might as well just stuff the money in the fireplace. At least they'll lower their heating bill. Glod and PMs are also going to get killed as the dollar starts a slow slog back as the EU will cut and is just as screwed up.
Nowhere nearly overbought, either. We're just crossing midline on all of the oscillators I watch. I think McClellan Summation Index will start to be a little overbought by today, though.
Could run for a couple of more, then I'd start taking off my longs. I have two marine transports left - ALEX and EXM.
So it is better to be short a long fund than long a short fund.
Interesting. Doesn't make sense why that would be if they are truly inverses of each other.
I wouldn't jump to that conclusion.
But heavy volatility seems to wear down both the Ultra and Ultra Short funds, which benefits short positions on the Ultra funds.
But notice that SRS was up almost 100% at one point while URE was only down 60%.
Of course something can't go down more than 100%. So you couldn't make more than 100% with a straight out short and hold position, though you could with a long position on the Ultra Short funds.
btw mp, i think you have a bit more moxie than i at this point. i'm still very cautious about financials, but running scenarios to see who was punished too harshly.
my intelligence says the fed family is trying to marry off a couple of their ugly daughters, so i'm trying to figure out who.
I went to a PM dealer today and he got killed in the past two days. He's telling me that he'll buy my gold at tomorrow's price but asked me to hold his check for several days until his cash flow works through.
But let me ask about the fundamental logic here. The Fed has placed a floor beneath the banking system and will do whatever is necessary to assure its survival - regardless of whether we should make the bank honchos play the Running Man game. The Treasury has nodded and assured the Fed that it'll take the damaged collateral, thereby assuring the liquidity of the Fed's own balance. Right so far?
But with the country running a perenially major deficit and rates at rock-bottom, where does the treasury get the funds? Per recent articles, foreigners are now sitting out the treasury auctions and there's growing concern that China/Saudi/others depeg.
It ain't coming from tax revenue. So what other option but the press? And if that's the case, don't PM still have some legs?
Been largely away from this esteemed blog for a while. It's good to see people getting worked up, what's going on is nothing short of a back-door nationalization of our financial institutions.
You can't have capitalism without risk, as I read somewhere else. All of these "stick saves" and hastily rushed legislative proposals will accomplish is to transfer risk from those that made the bad decisions (banks, homeowners) to current and future taxpayers. Ultimately it will speed up the collapse, as foreign money will flee US treasuries once the full implications settle in.
If I understand correctly, Paulson has basically given the US congress and the constitution the finger. He, along with Comrade Bernansky now have free reign to backstop any failing institution, no matter how small, with taxpayer obligations. This is nothing short of a "high crime and misdemeanor" that should be punishable by impeachment.
I will be raising this exact grievance with all of my Congressional representatives. There must be at least one honest man in Congress who will bring up articles of impeachment ...
I thought we had a few billion to go with subprime resets, then the other credit, bond insurance, munis, over valued stocks and more write downs, however, these are all godd things and not headwinds going forward and the subprime breeze pushing the sails open are maing this a very nice non-eventful voyage. A few trillion in writedowns and a decline in GDP is great for liquidity and this non-recession is just hype!
Re:
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
I represent the disfunctional and illiterate retards that want Bush to lower taxes and prop the market up. I will vote for mccain and I will make money in stocks. Get in with me or be priced out of you homes and stocks!
Look at the Fed's balance sheet homedad, and peruse their website. You'll get some clues as to what's happening there and what they do.
The fundamentals are horrid but, frankly, the cold water tossed in the market's face seems to have done the job and the panic stopped. That means some rational look at the underlying value of what's out there instead of panic selling. Watch out for some plays, however, and further margin calls. The name of the game is to take down an already wounded animal and get the good stuff in the process.
Also remember what i said once before: the EU is in similar shape and will be forced to cut too, as will the UK. That will take pressure off the dollar and that will spell doom for oil and PM. Inflation isn't the issue here and never was. Mr market is waking up to that now too.
"The smoke is the housing crisis, and the fire is the economy.... This is a crisis, and the only way that it's going to be solved is to work together," Majority Leader Sen. Harry Reid (D-NV) is quoted by U.S. News and World Report as saying in a joint press conference wth Minority Leader Sen. Mitch McConnell (R-KY). "The time has come for us to legislate, not continue our bickering."
Senators voted 94-1 on Tuesday to pass a bipartisan bill by Wednesday instead of wrangling about the legislation previously introduced by Democrats. Banking Committee Chairman Sen. Christopher Dodd (D-CT) and Richard Shelby (R-AL), the committee's highest-ranking Republican, have until Wednesday morning to submit a new housing bill.
Reid is also quoted by Bloomberg as saying that the committee has the prerogative to include the $4 billion buy-up provision but that senators "will probably have a vote on the bankruptcy provision.''
The White House said in a statement in February that the president was against the provision because it was equivalent to "a bailout for lenders and speculators.''
Dodd said the current record level of 8,000 foreclosures a day is "on a par" with the foreclosures during the Great Depression. He will include a provision to let the Federal Housing Administration insure homes that have been refinanced by lenders. Also expected to be part of the bill is a provision from the previous measure passed by Democrats providing $10 billion in bonds for bad subprime loans.
Because the best time to sell was a couple of weeks ago, but now is acceptable. The fundamentals just shifted. But we can come back and replay this discussion in 60 days.
Again, PM does well in inflationary environments. The issue never was inflation, and the dollar will start trending up. Glod will march down. Cash is king, and the only cash is in treasuries, not glod.
ipodius- "the EU is in similar shape and will be forced to cut too, as will the UK. That will take pressure off the dollar and that will spell doom for oil and PM. Inflation isn't the issue here and never was."
Um, mp, our vendor finance folks are most likely going to drop our paper on the market this summer.
How many treasuries would you like to sell? $500 billion, very well, this will take a moment, Mr. Hu. What was the card you wanted to send to Ms. Pelosi? Ah, very nice. And at an all time high. Very good sale today, what would you like to do with the proceeds/ Ah, deliver into all these commodity contracts. Very good sir. Your balance seems to very much smaller sir, would you care to deposit your next tranche of earnings? Ah, I see, it is in yen and euros, very good sir.
By way of saying "BOTTOMED," let me make my position perfectly clear:
The Paulson Put is now in operation, so we've got the full faith and credit of the United States backstopping the screw-ups who run our financial "institutions."
How can you NOT make money? This is going to be operative for some time.
Interesting. Doesn't make sense why that would be if they are truly inverses of each other.
Actually, it does make sense. SRS and URE are inverses only on a day-to-day basis, and that imperfectly. But even if they were perfect, the daily compounding effect is geometric, not arithmetic:
Up 10%, up 10%, up 10%, up 10%
compounds to
1.1^4, or up 46%
Down 10%, down 10%, down 10%, down 10%
compounds to
.9^4, or down 34%
So how these entities perform depend not only on where we go, but on how we get there. Which is why I would never touch them. Well, that and the brutal fees...
Crazy day. I could not believe the financials today. It looked like someone was unwinding their financial shorts and their commodity longs. Crazy. All I know is I hope it holds for three more weeks. After three weeks, I will be back into cash from my longs. Doesn't anyone know that we are in a recession? Look at the auto sales, retail sales, home sales, etc.
Traders woke up to a pleasant surprise on Tuesday morning, with equity Futures strongly higher. CNBC anchors were exuberant as previous earnings and credit fears melted away.
The cause? An internet April Fool's hoax that backfired.
Looks like the Yen carry trade could be making a comeback.
Seems to me if that commodity prices start falling and the dollar rises, we gotta start borrowing in Yen and driving up stocks again. And in fact that looks to have been happening the past couple of weeks or so.
Hopefully bonds won't sell off too much and screw it up.
Instead wait, till the price drops to $0.25, and buy back. You've made $0.75 on $0.25, which is 300%.
Sorry, but that is nonsense. You have to put up more than $0.25 of margin to maintain a $1.00 short position. The margin requirement ties up your capital just as effectively as any long position, so it certainly counts as "capital invested".
The whole notion of "percent return" on an individual position is actually not well-defined, and useless besides. The only notion of "return" that matters is: I started with $X in my account, I did various clever and not-so-clever things, I ended with $Y.
my take on this is to beware going long this mkt. the fundamentals are horrific with absolutely no signs of a bottom. reasons touted for a bottom incl. UBS, DB, writedowns and LEH stock dilution. WTF? they said all this last qtr. Money mkt funds are getting hosed via ARS and "enhanced returns" and ppl still calling a bottom. forget stock price action. why wouldn't you wait until the balance sheet fundamentals turn up a bit as opposed to buying when they are still going down? great way to get fleeced IMO.
give me one example where a gov't has interfered/manipulated its way to prosperity?
as for buying financials and the Paulson put. who here honestly believes they have a chance in hell of re-establishing the private equity/LBO boom, mega mergers, IPO's, ABS, CMBS, SIV's, VIE's, ARS, VRDO volumes of just this past yr? for god's sake BSC just got wiped out not to mention the hundreds of mortgage lender feeds to Wall St. how many hundreds of thousands of financial jobs have been gutted? how many CEO's were taken out? earnings are going to be slashed at least 50% going forward.
i still think we're headed for stagflation. inflation is raging worldwide and has arrived here in the form of higher food and energy prices. OPEC won't let the price of oil fall to far and they certainly can't increase production. i don't see anything changing that. clearly costs are rising and credit is contracting.
a takedown of the PM's to this level has not even approached the takedown from 720 to 550 a couple of yrs ago. i bought a sack of glod at 550 and plan on buying some more now. the dollar will continue it's path downwards after this pump.
bzb writes:
Of course, this could be wishful thinking on my part, blinded by all my puts!
ShortCourage | 04.01.08 - 6:52 pm | #
Investors also reduced their exposure to commodities and safe havens including government debt and gold, which fell to $880 an ounce, a two-month low.
But senior bankers said the rebound was driven in part by hedge funds closing short positions and warned that UBS had negative implications for the rest of the sector.
Marcel Rohner, UBSs chief executive, said the market was wrong to infer too much from UBSs situation.
We will need a few days and weeks to understand the broader significance of where we are, he said. One institution alone will not be sufficient to judge.
Let me ask all of you something. Do you for one minute believe that anything these people (idiots) say can change whats coming? Think about it. I see nothing that will in any meaningful way change the undeniable facts that a lot of people f****d up and society as a whole is going to have to pay the piper one way or another. All this MSM bullshit we hear today, tomorrow, next week will not change anything. Its just like what we heard about the homebuilders a year ago.
Lets all remember that nothing has really changed from yesterday till today.
Did someone wave a magic wand over the U.S. and make all the problems were facing go away today? No.
excuse me but have you checked inflation stats worldwide lately? you mean we are an island?
have you also checked the price of gold recently even after the pullback? the price of oil? the price of food? don't expect these things to travel in a straight line.
streetTRACKS Gold topped the list in late trading on Tuesday for Buying on Weakness, which tracks stocks that fell in price but had the largest inflow of money.
One of the problem I have with going long is the rapid deterioration of underlying equities without any significant market signaling just before the tuna roll. When that kind of situation occurs I tend to want to pull my horns in. I lost 3K looking for a bounce from BSC, but made 4K on the LEH bounce net, with hedging costs included.
When I see difficult risk/reward scenarios like that, along with soaring vols, I tend to get more cautious.
mp writes:
Topher, a letter from Paulson to the New York Fed saying "send the bills to us," is the closet anyone is ever going to get to a magic wand.
mp | 04.01.08 - 9:50 pm | #
That cant last forever and will not solve the problems we face. I believe you and I both know that. It might be good for a lot more upside however.
b/c i am short this mkt. doesn't stop me from being rational.
as for your Paulson put. by all means, bet your money on unprecedented actions by the Fed and Paulson. i will bet mine on the fundamentals.
but look out. all it will take is for Dodd to get religion and derail this madness and you will lose everything. something else unprecedented to consider.
are economic optimists the only ones allowed to have an emotional dimension to their views on the market? whenever I see CNBC their emotions seem totally driven by the market action (up=glad down=sad). But the only legitimate bear is a vulcan with absolutely no skin in the game?
I have no positions and haven't for a while. I'm going to enjoy my spring/summer. My Grandfather always told me "never cry over a profit and don't be greedy". Happy trading to all.
Re: Stocks sometimes take a very short term spike, like one person puts a wrong number in or something. But unless there is sufficient volume to support the new price, it will fall, possibly faster than it rose. A little volume with a price increase shows interest, a lot of volume with a price increase shows momentum.
Today was an obvious mistake soon to unwind hard and fast; sounds like a porn movie.
In other OT: Three out of 10 US public school students do not graduate from high school, and major city school districts only graduate one out of two students, according to a study released Tuesday.
These are the people that dont get it and wont watch Dodd grill Paulson!
On the one hand, we got mp and his alter ego/inner child/pet Conjure bag calling a bottom, based on, among other things, the fact that the boys have committed to a plan of action and "you don't bet against the Fed" as the old chestnut goes.
On the other hand, we have idoc, Topher, and AllenM clinging hard to reality and the bottom line.
Now, if this were any other time, I'd be inclined to go w/Team mp/Conjure, but as we are dealing with criminally insane clowns running the show, I think the market will humm along nicely until it takes an axe in the face.
When will this happen?
Shortly after the hoi polloi get and spend their $600 checks and stop all other additional spending for the foreseeable future. Credit will not trickle down. Cash will not trickle down. Game over.
Frank himself now says it is irrelevant how many people will be helped under the plan, which Congress could take up over the next month.
I would hope a million [would benefit], said Frank, chairman of the House Financial Services Committee. Its irrelevant. Theres no downside. Why not try?
As of 12/31/07, Metlife had $85 billion of mortgage-backed and asset-backed securities in their general account portfolio, almost all of it investment-grade.
So what do you think they stand to lose, and will they report any mark-downs when they report first quarter results? (as of 12/31/07, they were carrying all bonds at cost)
"It reads like amateur hour and it's because none of those guys ever worked in a regulated, chartered bank," said Camden Fine, president and chief executive of the Independent Community Bankers of America, a Washington trade group representing small banks, referring to the authors at Treasury. "A bunch of guys from Wall Street decided this was going to be their proposal."
Treasury Secretary Henry Paulson on Monday formally announced calls for consolidating bank regulation, creating a new type of insurance charter, improving the oversight of mortgage lending and allowing the Federal Reserve to peek into more corners of finance.
Fine said his group, which has members in every congressional district, is firmly opposed to the Paulson approach and planned to make sure members of Congress knew of their unhappiness.
State officials who see the Paulson approach as a power-grab in such areas as insurance regulation also complained. "I will strongly fight any effort to pre-empt or reduce state authority," Connecticut Attorney General Richard Blumenthal said.
The federal agencies that would be revamped can also be expected to weigh in.
Even the Federal Reserve, which would win broad powers to oversee the entire financial system with the new designation of "market stability regulator," would see its day-to-day supervisory power over bank holding companies taken away. Fed Chairman Ben Bernanke has argued in speeches that the Fed needs this power to give it the information it needs to conduct monetary policy.
House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd have both pointed out flaws they see in Paulson's approach with both lawmakers saying that the urgent need now is to address the mortgage and housing crisis.
Thx - so might one draw some conclusions from very divergent total money flow vs. block money flow values (with the bulk of the difference being to retail?)? Specifically, can any additional inference be drawn from the scale of the divergence?
For instance, AMZN total money flow is 80/100 while the block trade money flow is 14/100...
Menzies retold the story of a late 2007 Florida real estate muddle, in which a number of credit unions granted speculative, out-of-state land development loans. By stretching membership rules, out-of-market investors needed to pay only a $5 membership fee to join the credit union. The deal deflated along with the housing market, and three of the credit unions involved failed as a result.
What original members were served in their home states of Colorado and Michigan when these credit unions made these risky loans on Florida real estate? Menzies asked Congress, demonstrating that, given enough freedom to stray off-mission, credit unions, too, could make careless decisions.
In his rebuttal, the CUNAs elected board chair, Tom Doherty, president of the Suncoast Schools Federal Credit Union in Tampa, focused on the lending-limit portion of the bill, stating the cap was too low and stifling for small businesses seeking capital and credit unions ready to offer it.
"I don't see the Paulson plan going anywhere because it is an election year and you have a lot of vested interests out there who want to maintain their powers," said David Wyss, chief economist at Standard & Poor's in New York. "And even with a new administration, this is not going to be easy."
Nope. It's why I'm failing to get apoplectic about today.
Traders and other gamblers want to believe some $30B in financial write downs, and several $B in share holder dilution is a buy? Go ahead. I'll just keep my bets off the Black Jack table until the idiots who hit on eighteen get cleaned out.
How can PIMCO continue to charge 1.5% management fees on their bond funds if nominal interest rates dive toward zero?
Fees that are easy to swallow when you're getting 6.5% a year become intolerable at 3% a year, even though it's largely an illusion -- in real terms it's probably not much different but psychologically netting 1.5% vs. 5% makes all the difference.
Bill Gross is rapidly becoming the Corporate Socialist King since it's not profitable to be the Bond King during a deflationary episode.
Privatize the profits; socialize the losses.
Loot and pillage the US consumer then move on to loot and pillage someone else -- the US government is up next apparently.
Deal Journal: Treasury Secretary Paulsons plan is bound to come under attack. How would you advise investment banks on how to fight it, if they would want to?
Eric Dezenhall: If the banks want to fight it, I think that any resistance would have to come primarily at a lobbying level. I dont know what the benefit would be for a banking CEO to go on television to begin shooting down a proposal like this and appearing as if he doesnt want to be regulated. What usually happens is that people who are seeking to spike a proposal seek to do so through lobbyists and issue surrogates at think tanks. If these banks wanted to advocate something specific, that can be done quite openly and vigorously. If youre looking to oppose something, theres a lot of subtlety involved.
DJ: What tack could the lobbyists take?
Dezenhall: The lobbyists would focus on those who have the power to make decisions. They would have to highlight for those decision makers why there is political risk to them for doing this. I think that the hard thing in this climate is that the outcry to deal with these financial abuses is so intense that its going to be hard to dissuade policymakers from taking punitive actions against Wall Street.
If one were to look at all the headlines for the last six months, they would see theyre just as funny as the ones from that tool that used to be the head of NAR. I remember someone posting a years worth of his garbage in one post. It reminds me daily that the MSM will never scream fire until there hair is going up in flames and their getting trampled trying to reach the exit.
If Kass did affect the market today, this probably says more about the market than it does about Kass's influence. Sometimes the market, notoriously irrational and hard to explain, is just looking for an excuse to go up or down. With billions of investment dollars stuck in savings accounts, low-yielding bonds and other safe investments, investors seem to be itching for the chance to put their money to work. Of course, if economic and financial conditions get worse -- as, remember, Kass still is predicting -- they'll be sorry. But for now, investors will take any opportunity to buy, buy, buy.
The Working Group on Financial Markets (also, President's Working Group on Financial Markets or the Working Group) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".[1]
As established by Executive Order 12631, the Working Group consists of:
* The Secretary of the Treasury, or his designee (as Chairman of the Working Group);
* The Chairman of the Board of Governors of the Federal Reserve System, or his designee;
* The Chairman of the Securities and Exchange Commission, or his designee; and
* The Chairman of the Commodity Futures Trading Commission, or her designee.
Or course I added to my short positions ( which were low because I'm following "close shorts on weakness", add to shorts on strength ) - I added to SKF, SRS, added to shorts to UVG, LEN, V and M.
Sure it hurts when you do that on a day like this; I don't like the idea that its "supposed to hurt" but most of the time it works for me. I do know when I'll cry uncle though and admit that the market is nuttier than I thought - starting around DJIA 12900, expecting to be completely neutral at DJIA 13300.
Re: Paulson' "send the bill to me" - well actually he's simply acknowledging that the zero sum game on Treasuries between the Fed and the US Treasury won't play out that way this year - I've asked the CO senator, Dr(vet) Wayne Allard to ask BB about how much this is going to be in the two sessions in the next two days - we'll see if he does - but, in any case, calling it a "Paulson put" is a stretch.
It's not often the case that it matters much whether one votes Republican or Democrat, and it appears it will not matter much.
But for a few weeks, a brief time, Democrats were ready to bailout every complaining speculator (including families speculating wtih their own family home, and also very rich hedge fund investors, etc., etc), and some Republicans were holding off the transfer of speculator losses onto you and I.....
Since ultimately you and I will indeed to resuce banks, it was only a matter of time.
But the Republicans, who I have not liked at all for their foreign adventure in Iraq, were holding back the tide, and allowing a few more speculators to take their own losses instead of you and I.
Hey, if Dodd is in control of Paulson and helicopter ben, then why is he not in control of PPT??
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".[1]
As established by Executive Order 12631, the Working Group consists of:
The Secretary of the Treasury, or his designee (as Chairman of the Working Group);
The Chairman of the Board of Governors of the Federal Reserve System, or his designee;
The Chairman of the Securities and Exchange Commission, or his designee; and
The Chairman of the Commodity Futures Trading Commission, or her designee.
I respect mp's call on the banks. Paulson did place his put. If the banks will find the changed securitization landscape profitable enough to even sustain their current valuations, I am not so sure.
However, IMO the real economy is only starting to reflect the impact of the credit crunch. Fiscal action is in its nascent stage. I believe that PMs will do just fine over the next few years in this environment. In fact, after the seasonal doldrums, when it becomes obvious what the impact of all these actions on the fiscal deficit will be, I expect a significant reemergence of gold. Combined with much lower federal revenues it will not be a pretty picture and $480 to $500 billion might not be out of the question. I expect this to be the time when gold will again separate itself from all currencies just like it did in 2005.
From Bloomberg:
Stock hedge funds, unsure about which direction the markets would move, sat on a record amount of cash as the industry headed for its biggest quarterly decline in almost six years.
Equity managers, who oversee about one-third of the $1.9 trillion in hedge funds, held an estimated $90 billion of cash in January, a hoard that dropped to $64.8 billion the next month, according to data compiled by Merrill Lynch & Co. analyst Mary Ann Bartels. The last time equity funds held cash outside of their trading accounts was in 2004, according to Merrill. At that time, market direction was also unclear, with the Standard & Poor's 500 Index up less than 2 percent through October.
The data indicates to us the equity hedge funds have de- leveraged and have record cash balances,'' she wrote in a report last week.Margin debt has declined sharply in recent months as investors have grown more cautious on the U.S. equity market.''
i had my Credit Suisse banker in my office today trying to get me to increase my acct balance for their management. i started railing on him (as the Dow was hitting +350 as you can imagine) about how bad the fundamentals were and how the avg US investor doesn't "trust" bankers or Wall St in this country. i specifically floated the idea about how small retail investors IMO have pulled out of the mkt due to this mistrust and that what was driving the volatility were momentum players like hedge funds and IB's. he didn't bat an eye and said "well at least they're still in there".
someone above was talking about shorting URE, the ultra RE fund.
the only problem with that fund is the low daily trading volume. IIRC its only about 400K/day which is not liquid enough to accurately track the underlying index. you don't want to be trapped in that illiquidity.
The big drops in PMs over the past few days have come when the NY market was trading. Overseas, the prices have been generally horizontal (except for today's which started at around 1:00am EST., apparently in Asia).
Is this people cashing in, the strengthened dollar, or both?
And this is precisely the reason that I read this. My liberal education increases and I thank you.
Aside to mp: the situation reminds me of a classic barfight where the place is being trashed and yet, there's one guy taking advantage and emptying the good bottles. I hope you get the good stuff.
And one more note about what crossed my mind as I was reading all of this. China has moved ahead of S Africa in gold production and is now the world's leading producer. Given that it's still a command economy in some respects, this wouldn't just happen for a reason. Setting up for the demise of the fiat system when they'll be in position to call shots?
I almost hate to bring this up but in the discussion above, there is no mention of contingency. The country is too vulnerable at the moment. An earthquake, another Katrina, another anthrax nut job, etc could push everything right over the edge in the blink of an eye.
The only reason I bring this up is mp's comment: How can you NOT make money? This is going to be operative for some time.
mp | 04.01.08 - 9:31 pm
The last time I saw the markets set up to make money were the weeks preceding 9-11.
Someone wrote: "If I understand correctly, Paulson has basically given the US congress and the constitution the finger. He, along with Comrade Bernansky now have free reign to backstop any failing institution, no matter how small, with taxpayer obligations."
To my understanding, HP & BB are only bailing out investment banks that deal in government debt. Apparently the country vitally needs to keep its own debt markets operating. So are we nationalizing the investment banks or are we instead obligating the country yet more to private bankers? I am so confused!
How will this new figure look in one year's time?
its the end
of the world
Hey, CR, that's not nice, using the Chairman's own words!
Good job, sir.
U.S. Stocks Rise in S&P 500's Best 2nd Quarter Start Since 1938
April 1 (Bloomberg) -- The U.S. stock market posted its best start to a second quarter in 70 years after Lehman Brothers Holdings Inc. and UBS AG said they are raising $19 billion to replenish capital, spurring speculation that banks can weather further credit losses.
My apologies, but I can't stop laughing!
Why in the hell did stocks shoot up today? Go and read the brand new (free) write-up on ContraryInvestor.com.
Now tell me, could de-leveraging be a primary factor in today's market movements?
Hedge funds closing out their short positions and selling their gold? That explanation seems more plausible to me than lots of folks taking up strategic long positions in this climate.
But what do I know?
Why in the hell did stocks shoot up today? Go and read the brand new (free) write-up on ContraryInvestor.com.
Now tell me, could de-leveraging be a primary factor in today's market movements?
What I'm seeing is that the worst stocks went up the most (financials, real estate stuff, tech). The relatively better stuff (non-asia emerging markets, commodity related stocks) didn't do quite as well.
That tells me pretty much everything I need to know.
"The following table shows the $232 billion in asset writedowns and credit losses since the beginning of 2007, including reserves set aside for bad loans, at more than 45 of the world's biggest banks and securities firms."
Wow, that's not bad!
I'll start to worry when we reach more than 13 zeros after the number.
All they have to do is replenish after a writedown and stock market gets a 400+ day. Yipee. Bring em on!!!
--
The same guy (Bernanke) said during the Congressional Q&A in March 2007 that home prices will not decline, but the growth rate of price appreciation will decline to 3-5%.
We know that he didn't want any price decline because of the problems they will cause.
Jas
OT: Is this about an April Fool's hoax, or a hoax itself?
Internet Hoax Gooses Stock Market -- Seeking Alpha
--
The current trend of price declines bode for $2Tr+ in losses. The only question is who will bear the brunt:
Radar Logic Latest Annual Rate Trends\t\t\t
AREA_____\t6M AR\t3M AR\t1M AR
Sacramento, CA\t-40%\t-60%\t-39%
Las Vegas, NV\t-39%\t-46%\t-47%
San Fran, CA\t-34%\t-52%\t-53%
Los Angeles, CA\t-31%\t-39%\t-19%
Tampa, FL\t-30%\t-35%\t-41%
Boston, MA\t-29%\t-46%\t-15%
San Diego, CA\t-28%\t-37%\t-12%
Denver, CO\t-27%\t-33%\t-41%
Atlanta, GA\t-24%\t-31%\t-10%
Detroit, MI\t-23%\t-33%\t-52%
Phoenix, AZ\t-23%\t-20%\t-18%
Miami, FL\t-21%\t-22%\t21%
Seattle, WA\t-21%\t-22%\t-28%
Minneapolis, MN\t-21%\t-30%\t-28%
San Jose, CA\t-20%\t-32%\t-47%
25 MSA Comp\t-22%\t-25%\t-14%
Look at declines in CA and the West, in general.
Jas
The same guy (Bernanke) said during the Congressional Q&A in March 2007 that home prices will not decline, but the growth rate of price appreciation will decline to 3-5%.
If Bernanke couldn't see that prices were going to decline, how can he now even begin to comprehend the effects of his current actions?
Having an economist who can't make basic coarse-grained market predictions in charge of radically overhauling the financial system seems like guaranteed economic suicide to me.
bzb - Yes to both questions.
What? We still have a Senate Banking Committee? Not for long.
Bernanke: Everytime I hear his name all I can think of is the dollar declining.
I guess its one in the same.
What MLM said!
It's a beautiful tongue in cheek send up of the endless (and meaningless) narrative fallacy of the MSM with respect to daily market movements...tied into Doug Kass's bit of fun.
Priceless.
ac, do you really think he did not see home prices falling? I presume that his public statements do not reflect his private misgivings.
Okay, decipher for us slow folks: what does your read of the stock market action -- strong gains for weak assets, weak gains for strong assets -- today tell you?
Re: Since Chairman Bernanke is testifying before the Senate Banking Committee tomorrow,
I hope the SIFMA script is well written and that he doesn't start stuttering like the other crook!
NYTimes - Senate Moves Ahead on Bills to Deal With Housing Slump
- NY Times
OT -- in the interest of zeroing my exposure to counterparty risk with SDS (UBS and Credit Suisse are counterparties underlying SDS), I moved from long SDS to short SSO.
It was a neutral swap -- SDS was down 6% and SSO was up 6% today -- but psychologically painful: tough day for SDS, which I have held for some time.
Okay, schmucks/shysters/shylocks, have your fun trying to fool folks into thinking that all is well, but just keep the S&P below 1500 (my margin call point).
I thought Wa Mu is supposed to be heavily exposed but to date has only reported $5b in losses. Is there a lot more coming? What gives?
How will this new figure look in one year's time?
Kp |
Just add a zero or two to the number...
Good chart of market staying flat for 3 years before this recession with current downward trend obvious:
^DJI: Basic Chart for Dow Jones Industrial Average - Yahoo! Finance
jg,
My take on ac's comments....
I think he was agreeing that deleveraging was the prime mover today. Hedgies with short positions in weak stocks were buying those stocks to close out their positions. They were selling their long positions in commodities and commodity-related stocks in order to capture their gains.
When Mr. Margin calls, you gotta answer.
Of course, this could be wishful thinking on my part, blinded by all my puts!
CR/Tanta,
Any insight into proposed homeowners bailout proposals being laid out by senate?
Senate deal breathes new life into housing rescue efforts - MarketWatch
lenders would reduce the principal of the mortgages to take account the new lower value of the home. The borrower would get a fixed rate loan from the Federal Housing Authority. In return, the government would get a small stake in the home.
The program would be capped at $300 billion.
--
Well worth the read (via Economist's Views):
Recent events in the market for mortgage-backed securities have placed the US subprime mortgage industry in the spotlight. Over the last decade, this market has expanded dramatically, evolving from a small niche segment into a major portion of the overall US mortgage market. Can the recent market turmoil triggered by the sharp increase in delinquency rates be related to this rapid expansion? In other words, is the recent experience, in part, the result of a credit boom gone bad? While many would say yes to these questions, rigorous empirical evidence on the matter has thus far been lacking.
Credit booms There appears to be widespread agreement that periods of rapid credit growth tend to be accompanied by loosening lending standards. For instance, in a speech delivered before the Independent Community Bankers of America on March 7, 2001, former Federal Reserve Chairman Alan Greenspan pointed to an unfortunate tendency among bankers to lend aggressively at the peak of a cycle and argued that most bad loans were made through this aggressive type of lending. ...
Subprime crises: New evidence on the credit boom's role | vox - Research-based policy analysis and commentary from leading economists
-x-x-x-x-x-x-x-x-x-
Then why didn't Greenspan do something? BTW, it is well known that bankers behave badly during the booms and cause catastrophes (depressions).
Jas
I just voted,but my chad may have been bent?
Anyone else have that problem??
Re: I just voted @ here is the Senate banking committee website. write those SOB's about what you think. i did:
United States Senate Committee on Banking, Housing and Urban Affairs : Home
i'm sorry guys but i can't always just evoke short covering for every rally we have. yes, i have to evoke the tin foil hat acronym once again; PPT.
would short covering rallies acct for our stock mkt being down only 15% while most foreign mkts are down 30% plus with the almighty SSEC down 40%?
someday someone is going to go to jail.
Of course, this could be wishful thinking on my part, blinded by all my puts!
ShortCourage | 04.01.08 - 6:52 pm | #
It's probably not your wishful thinking:
Investors also reduced their exposure to commodities and safe havens including government debt and gold, which fell to $880 an ounce, a two-month low.
But senior bankers said the rebound was driven in part by hedge funds closing short positions and warned that UBS had negative implications for the rest of the sector.
Marcel Rohner, UBSs chief executive, said the market was wrong to infer too much from UBSs situation.
We will need a few days and weeks to understand the broader significance of where we are, he said. One institution alone will not be sufficient to judge.
FT.com / Financials - Stocks rise in spite of fresh bank woes
bzb, thanks for confirming my biases.
Products and Services Overview
curious that CMBX spread increased.
I don't think those pushing the indexes are stupid. There is more money to be made in a volatile market than one that goes either straight up or down.
ac, do you really think he did not see home prices falling? I presume that his public statements do not reflect his private misgivings.
Privately I agree with you, but then this brings up a more disturbing question:
Why did the Fed do nothing to stop the US from becoming a bubble economy despite warning of this possibility themselves in Greenspan's infamous 1996 "irrational exuberence" speech?
If they did nothing to stop a problem that they themselves saw coming, how can they be trusted to do anything constructive?
Lacking further information one has to assume that they have some ulterior motive and ultimately no real interest in serving the American public.
The US consumer has been gutted. The Federal Reserve knowingly served them up on a silver platter to speculators and corporate interests.
Why?
The government would take a small stake in the house? Repayable after 28 days? Sounds familiar.
Why are we voting??
I just voted @ here is the Senate banking committee website. write those SOB's about what you think. i did:
United States Senate Committee on Banking, Housing and Urban Affairs : Home
Re:
Why?
Bear Stearns bail out; yes or no:
I just voted @ here is the Senate banking committee website. write those SOB's about what you think. i did:
United States Senate Committee on Banking, Housing and Urban Affairs : Home
anon,
Your link doesn't offer any voting option. Where did you vote?
Thank you, S-C-, for your read, and thank you, ac, for your amplification.
Great question, ac: Why? I think J-J- is right, although it boggles my mind that a reputable academic like B-B- could get involved with these schmucks/shysters/shylocks.
Maybe they should pay off everybodys mortgage, cut a check for a couple of hundred thousand dollars for all,define it as a future tax rebate, and then we can all retire in prosperity.
Yahoo! 404 - Page Not Found
"Fed approves JP Morgan purchase of Bear Stearns bank" --- more like 'Fed approves of itself'
Remind's me of the old gag during the Nixon era
"This is the FBI. I know I'm in there. If I don't come out with my hands up, I'm coming in after me"
Ben-Frank'll-Tank-Bernanke (nametag before banking committee)
Inflation selectively injected.
Deflation universal on all hard asset classes.
Equity markets rise/trade sideways despite no existing sales, few products, and hushed-up BKs. Sustains self through cannibalism for a while. Funds accessed at Fed window used for speculation. Borrowers cannot access legitimate rates, denied by overly stringent standards.
Australian stocks fell the most in 20 years during the first quarter after rising interest rates cut demand for bank shares and slowed the economy's 17th year of expansion.
The All Ordinaries index declined 16 per cent in the first three months of the year, the most since the end of 1987, following the October crash. The benchmark S&P/ASX 200 index, started in 1992, lost 16 per cent in its worst quarter on record.
This is my theory as to why the Dow is holding up, hedge funds etc flight to perceived safety and known knowns that is US equities.
The Free Market system appears down in the 8th round by a solid right uppercut by the Federal Reserve. What a punch.
The oddsmakers had said the Free Market System was a large 12/1 favorite over the Fed to win the fight and was thought to be exceptionally resilient.
The free market system was the Heavy Weight Champion of the world. Undefeated. But the Free Market System was unaware of new tactics by The Fed.
Can the Free Market System get back on its feet before the ref rings the bell?
Could it be that the eubank is about to follow comrade Ben to cut after today 22bn writedown ?
Re: U.S. Stocks Rise in S&P 500's Best 2nd Quarter Start Since 1938
April 1 (Bloomberg) -- The U.S. stock market posted its best start to a second quarter in 70 years after Lehman Brothers Holdings Inc. and UBS AG said they are raising $19 billion to replenish capital, spurring speculation that banks can weather further credit losses.
My apologies, but I can't stop laughing!
OH MY GOD, that is beyond retarded; we can also compare football teams, shoes, job growth, ........ too sick!
OT rant, so skip it if you want.
We should go to an all lottery system.
Wanna' buy a house? Tickets cost $5. The property list and drawing dates are on line. Proceeds from the sale will go to pay outstanding debt on the residence. Residual proceeds will be divided among our Investment Banking affiliates.
Wanna' be President? Add your name to the list. The drawing will be in November. Same goes for Congress - just be sure to fill out the appropriate forms. We've found that we save a ton of money in the campaign/election cycle AND end up with more competent leadership when we do it this way.
Want an advanced degree? You don't have to know shit. Just pay your tuition and take a number. If you want law, surgery, or a specific school, additional charges apply. If you don't have the money, see the Armed Forces recruiting officer in room 502.
If you like playing stocks, we've got a game you're going to love. Here's how it works: Ya' pick 5 stocks. Any stocks will do - but go ahead and pick the one's you like.
Here's where it gets interesting:
At the end of the "trading day", on the floor of the NYSE, a gigantic barrel filled with ping pong balls printed with stock symbols will be dumped into the world's biggest Pachinko machine. First ball to the bottom is the big winner - your stock pick jumped 66%! Congratulations! If your ball is last, too bad - your stock lost 65%.
But don't worry, you still have 3 additional stock balls, and they'll be ranked* as winners or losers based on the order they came down the chute (*Rankings based on a proprietary continuum of a Fabionaci sequence divided by the square root of Pi. Don't even ask).
Since the winning ball always out-gains the losing ball, the market only goes up, and there are always more winners than losers!
Best of all, the Game is backed by the full faith and credit of The US Government*, via its holding company, the Federal Reserve Bank.
(*Not affiliated with the Constitution of the United States of America)
Remember: The Market only goes up, and you gotta' play to win!
Sorry, y'all. Long day - had to rant.
I want some of what the people playing the market right now are smoking.
Then again, after reading the above, maybe not.
I think its pointless to rationalize day-to-day moves in the market.
The key questions to ask a) are housing prices going back up to their peaks or will they likely continue to decline b) are corporate earnings going to show y-o-y growth or decline c) will banks balance sheets continue to be under stress or are they sufficiently re-capitalized d) is the American consumer going to continue their spending levels or will they be forced to cut back.
With respect to covert and overt taxpayer bailouts of bank shareholders and bondholders the key question is - will foreign creditors finance these bailouts?
Your conviction on the above questions should allow you to position yourself appropriately.
Palacio most recently served as the Deputy Communications Director and Legislative Assistant for Rep. John Salazar. In the speechwriter position, Hoyer welcomes Rob Goodman. Goodman joins the Leaders office after serving as a speechwriter for Sen. Chris Dodd for the last 18 months.
Two U.S. senators, citing a plunge in regulatory fines against companies and individuals, yesterday asked government watchdogs to examine whether the federal Securities and Exchange Commission isnt being aggressive in fighting fraud.
Sen. Jack Reed said in a speech that he and Senate Banking Committee Chairman Christopher Dodd, D-Conn., asked the Government Accountability Office to look at the SECs enforcement division. Reed sought the review after sanctions fell about 51 percent to $1.6 billion in fiscal 2007.
The drop raises questions about whether changes have taken place in enforcement philosophy or scope of activity, Reed said in a statement. The GAO will examine whether the enforcement division has sufficient staff and funds to perform its mission and whether there have been fundamental changes in operation to the way they handle cases.
This is the second time in 18 months that a member of Congress has called for a review of the SECs vigilance. Since taking over in August 2005, SEC chairman Christopher Cox has given commissioners more power over enforcement penalties as the agency considers whether fining companies also hurts shareholders.
Conjure Bag says, "Financials have bottomed, thanks to the Paulson Put. I am buying selectively."
BTW, notice how much better you've done if we were short URE the past year versus being long SRS during the same period.
These funds are supposed to be the inverse of each other but SRS is up about 17% while URE is down about 42%.
So it is better to be short a long fund than long a short fund.
Interesting. Doesn't make sense why that would be if they are truly inverses of each other.
Your conviction on the above questions should allow you to position yourself appropriately.
malabar I thnk the answers to those questions are obvious. We have, however, been pulled back from the brink by a combination of intervention and lower rates. That doesn't mean there's still not a mess out there, but I do think we've averted total financial chaos. For now.
So I say decline, decline, strees, and WAY back. Banks are also causing a huge side effect that will further impact their balance sheets...by restricting credit to the people who need it the least, they are going to see a huge drop in fees and interest. I think financials are absolutely screwed for at least the next 18 months. Anyone buying in now might as well just stuff the money in the fireplace. At least they'll lower their heating bill. Glod and PMs are also going to get killed as the dollar starts a slow slog back as the EU will cut and is just as screwed up.
Conjure Bag says, "Financials have bottomed, thanks to the Paulson Put. I am buying selectively."
mp! nice to see you and conjure. I concur. There is nothing left to see here, move along.
Nowhere nearly overbought, either. We're just crossing midline on all of the oscillators I watch. I think McClellan Summation Index will start to be a little overbought by today, though.
Could run for a couple of more, then I'd start taking off my longs. I have two marine transports left - ALEX and EXM.
Banks: The best and the worst
Complaint data, surveys give some guidance for consumers
By Gail Liberman and Alan Lavine
Identifying the best -- and the worst -- banks - MarketWatch
So it is better to be short a long fund than long a short fund.
Interesting. Doesn't make sense why that would be if they are truly inverses of each other.
I wouldn't jump to that conclusion.
But heavy volatility seems to wear down both the Ultra and Ultra Short funds, which benefits short positions on the Ultra funds.
But notice that SRS was up almost 100% at one point while URE was only down 60%.
Of course something can't go down more than 100%. So you couldn't make more than 100% with a straight out short and hold position, though you could with a long position on the Ultra Short funds.
Hense the run-up in the market today in anticipation of the Bernanke bomb tomorrow.
btw mp, i think you have a bit more moxie than i at this point. i'm still very cautious about financials, but running scenarios to see who was punished too harshly.
my intelligence says the fed family is trying to marry off a couple of their ugly daughters, so i'm trying to figure out who.
I went to a PM dealer today and he got killed in the past two days. He's telling me that he'll buy my gold at tomorrow's price but asked me to hold his check for several days until his cash flow works through.
But let me ask about the fundamental logic here. The Fed has placed a floor beneath the banking system and will do whatever is necessary to assure its survival - regardless of whether we should make the bank honchos play the Running Man game. The Treasury has nodded and assured the Fed that it'll take the damaged collateral, thereby assuring the liquidity of the Fed's own balance. Right so far?
But with the country running a perenially major deficit and rates at rock-bottom, where does the treasury get the funds? Per recent articles, foreigners are now sitting out the treasury auctions and there's growing concern that China/Saudi/others depeg.
It ain't coming from tax revenue. So what other option but the press? And if that's the case, don't PM still have some legs?
Hmmm...
Been largely away from this esteemed blog for a while. It's good to see people getting worked up, what's going on is nothing short of a back-door nationalization of our financial institutions.
You can't have capitalism without risk, as I read somewhere else. All of these "stick saves" and hastily rushed legislative proposals will accomplish is to transfer risk from those that made the bad decisions (banks, homeowners) to current and future taxpayers. Ultimately it will speed up the collapse, as foreign money will flee US treasuries once the full implications settle in.
If I understand correctly, Paulson has basically given the US congress and the constitution the finger. He, along with Comrade Bernansky now have free reign to backstop any failing institution, no matter how small, with taxpayer obligations. This is nothing short of a "high crime and misdemeanor" that should be punishable by impeachment.
I will be raising this exact grievance with all of my Congressional representatives. There must be at least one honest man in Congress who will bring up articles of impeachment ...
I thought we had a few billion to go with subprime resets, then the other credit, bond insurance, munis, over valued stocks and more write downs, however, these are all godd things and not headwinds going forward and the subprime breeze pushing the sails open are maing this a very nice non-eventful voyage. A few trillion in writedowns and a decline in GDP is great for liquidity and this non-recession is just hype!
Re:
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.
Members, 110th Congress
The Committee is chaired by Christopher Dodd (D-Connecticut), and the Ranking Minority member is Richard Shelby (R-Alabama)
I keep hearing the song... we've only just begun...
maybe a bit of an exaggeration.. but certainly the fat lady hasn't even cleared her throat!
I represent the disfunctional and illiterate retards that want Bush to lower taxes and prop the market up. I will vote for mccain and I will make money in stocks. Get in with me or be priced out of you homes and stocks!
Let the retards beware
Look at the Fed's balance sheet homedad, and peruse their website. You'll get some clues as to what's happening there and what they do.
The fundamentals are horrid but, frankly, the cold water tossed in the market's face seems to have done the job and the panic stopped. That means some rational look at the underlying value of what's out there instead of panic selling. Watch out for some plays, however, and further margin calls. The name of the game is to take down an already wounded animal and get the good stuff in the process.
Also remember what i said once before: the EU is in similar shape and will be forced to cut too, as will the UK. That will take pressure off the dollar and that will spell doom for oil and PM. Inflation isn't the issue here and never was. Mr market is waking up to that now too.
homedad,
why sell now?
Why not buy?
I noticed the markets are already coming back for pms.
These wild unwinds of hedge fund bets will continue as the great hedge fund leverage slaughter continues.
The long bond funds are next, imho.
The ARS debacle illustrates the potential for anyone leveraged up.
Long wall street too.
They seem to be killing shorts today, but the next slaughter will be the this recession is different crowd.
In short, cash is king if you have margin calls to make. Welcome to a fast and volatile market.
Someday this war's gonna end...
"The smoke is the housing crisis, and the fire is the economy.... This is a crisis, and the only way that it's going to be solved is to work together," Majority Leader Sen. Harry Reid (D-NV) is quoted by U.S. News and World Report as saying in a joint press conference wth Minority Leader Sen. Mitch McConnell (R-KY). "The time has come for us to legislate, not continue our bickering."
Senators voted 94-1 on Tuesday to pass a bipartisan bill by Wednesday instead of wrangling about the legislation previously introduced by Democrats. Banking Committee Chairman Sen. Christopher Dodd (D-CT) and Richard Shelby (R-AL), the committee's highest-ranking Republican, have until Wednesday morning to submit a new housing bill.
Reid is also quoted by Bloomberg as saying that the committee has the prerogative to include the $4 billion buy-up provision but that senators "will probably have a vote on the bankruptcy provision.''
The White House said in a statement in February that the president was against the provision because it was equivalent to "a bailout for lenders and speculators.''
Dodd said the current record level of 8,000 foreclosures a day is "on a par" with the foreclosures during the Great Depression. He will include a provision to let the Federal Housing Administration insure homes that have been refinanced by lenders. Also expected to be part of the bill is a provision from the previous measure passed by Democrats providing $10 billion in bonds for bad subprime loans.
why sell now?
Why not buy?
Because the best time to sell was a couple of weeks ago, but now is acceptable. The fundamentals just shifted. But we can come back and replay this discussion in 60 days.
Again, PM does well in inflationary environments. The issue never was inflation, and the dollar will start trending up. Glod will march down. Cash is king, and the only cash is in treasuries, not glod.
mp - bottomed as in "for now" or BOTTOMED? If the latter - thats an amazing call.
Some of the most exciting emerging market bubbles are coming back to life.
ipodius- "the EU is in similar shape and will be forced to cut too, as will the UK. That will take pressure off the dollar and that will spell doom for oil and PM. Inflation isn't the issue here and never was."
Yes, exactly.
ac said:
So you couldn't make more than 100% with a straight out short
Yes, you can!
You sell short for $1, and buy back for $0.5. You made $0.5 on $0.5, which is 100%.
Instead wait, till the price drops to $0.25, and buy back. You've made $0.75 on $0.25, which is 300%.
As the price drops, the gain percentage skyrockets.
Yes, you can!
You sell short for $1, and buy back for $0.5. You made $0.5 on $0.5, which is 100%.
Instead wait, till the price drops to $0.25, and buy back. You've made $0.75 on $0.25, which is 300%.
As the price drops, the gain percentage skyrockets.
Well... that's not what I'd call a "straight out short and hold".
Noble- "bottomed as in "for now" or BOTTOMED?"
BOTTOMED.
Um, mp, our vendor finance folks are most likely going to drop our paper on the market this summer.
How many treasuries would you like to sell? $500 billion, very well, this will take a moment, Mr. Hu. What was the card you wanted to send to Ms. Pelosi? Ah, very nice. And at an all time high. Very good sale today, what would you like to do with the proceeds/ Ah, deliver into all these commodity contracts. Very good sir. Your balance seems to very much smaller sir, would you care to deposit your next tranche of earnings? Ah, I see, it is in yen and euros, very good sir.
Someday this war's gonna end...
By way of saying "BOTTOMED," let me make my position perfectly clear:
The Paulson Put is now in operation, so we've got the full faith and credit of the United States backstopping the screw-ups who run our financial "institutions."
How can you NOT make money? This is going to be operative for some time.
Interesting. Doesn't make sense why that would be if they are truly inverses of each other.
Actually, it does make sense. SRS and URE are inverses only on a day-to-day basis, and that imperfectly. But even if they were perfect, the daily compounding effect is geometric, not arithmetic:
Up 10%, up 10%, up 10%, up 10%
compounds to
1.1^4, or up 46%
Down 10%, down 10%, down 10%, down 10%
compounds to
.9^4, or down 34%
So how these entities perform depend not only on where we go, but on how we get there. Which is why I would never touch them. Well, that and the brutal fees...
BIS heralds demise of CDOs
FT.com / Financials - BIS heralds demise of CDOs
Crazy day. I could not believe the financials today. It looked like someone was unwinding their financial shorts and their commodity longs. Crazy. All I know is I hope it holds for three more weeks. After three weeks, I will be back into cash from my longs. Doesn't anyone know that we are in a recession? Look at the auto sales, retail sales, home sales, etc.
AllenM, hey, it's the only game in town and--right now--I'm counting on Paulson.
Marcus Aurelius
A creative alternative to mortgage financing. From the Imperial Capitol of the World of Technology, Los Alamos0
ABQjournal.com: Albuquerque Journal
Wow.
I think this fueled the April Fools Rally.
Internet Hoax Gooses Stock Market -- Seeking Alpha
Traders woke up to a pleasant surprise on Tuesday morning, with equity Futures strongly higher. CNBC anchors were exuberant as previous earnings and credit fears melted away.
The cause? An internet April Fool's hoax that backfired.
The original April Fools Article that started it:
Kass: Time to Buy the Bull? | Financial Advisor Update | Financial Articles & Investing News | TheStreet.com
Looks like the Yen carry trade could be making a comeback.
Seems to me if that commodity prices start falling and the dollar rises, we gotta start borrowing in Yen and driving up stocks again. And in fact that looks to have been happening the past couple of weeks or so.
Hopefully bonds won't sell off too much and screw it up.
Curious --
Instead wait, till the price drops to $0.25, and buy back. You've made $0.75 on $0.25, which is 300%.
Sorry, but that is nonsense. You have to put up more than $0.25 of margin to maintain a $1.00 short position. The margin requirement ties up your capital just as effectively as any long position, so it certainly counts as "capital invested".
The whole notion of "percent return" on an individual position is actually not well-defined, and useless besides. The only notion of "return" that matters is: I started with $X in my account, I did various clever and not-so-clever things, I ended with $Y.
mp,
I would not count on Paulson.
i watched that man speaking, and quite frankly, I don't think he quite has a handle on what needs to be done.
If this was being managed properly, some sort of bailout for the state governments would already be on the way.
All I see is yet another FEMA style screwup aimed at housing. The cat is out of the bag and the collateral damage is mounting behind the scenes.
The skyrocketing M3 is a sign of liquidity hoarding. Not a sign of folks willing to return to business as usual. There is no more business as usual.
Someday this war's gonna end...
my take on this is to beware going long this mkt. the fundamentals are horrific with absolutely no signs of a bottom. reasons touted for a bottom incl. UBS, DB, writedowns and LEH stock dilution. WTF? they said all this last qtr. Money mkt funds are getting hosed via ARS and "enhanced returns" and ppl still calling a bottom. forget stock price action. why wouldn't you wait until the balance sheet fundamentals turn up a bit as opposed to buying when they are still going down? great way to get fleeced IMO.
give me one example where a gov't has interfered/manipulated its way to prosperity?
as for buying financials and the Paulson put. who here honestly believes they have a chance in hell of re-establishing the private equity/LBO boom, mega mergers, IPO's, ABS, CMBS, SIV's, VIE's, ARS, VRDO volumes of just this past yr? for god's sake BSC just got wiped out not to mention the hundreds of mortgage lender feeds to Wall St. how many hundreds of thousands of financial jobs have been gutted? how many CEO's were taken out? earnings are going to be slashed at least 50% going forward.
i still think we're headed for stagflation. inflation is raging worldwide and has arrived here in the form of higher food and energy prices. OPEC won't let the price of oil fall to far and they certainly can't increase production. i don't see anything changing that. clearly costs are rising and credit is contracting.
http://web.nacm.org/cmi/pdf/CMI_March2008.pdf
a takedown of the PM's to this level has not even approached the takedown from 720 to 550 a couple of yrs ago. i bought a sack of glod at 550 and plan on buying some more now. the dollar will continue it's path downwards after this pump.
AllenM, nowhere have I said that we are returning to business as usual. I'm talking about making some money, that's all.
Nothing has changed my outlook, or Conjure's, but this is quite an opportunity.
$232 Billion is a mere drop in the bucket for the financial engineered driven bullshit US economy with massive market bubbles.
The USA needs $1B a day from Chinas or the United States could not keep its economy stable or spare the dollar from collapse.
The USA already has close to $10 Trillion in national debt
The USA has a trade deficit of $800B/yr
The cost of Bush to America since 2000 is $32 Trillion dollars in total liabilities and unfunded commitments for future payments.
But the stock market today is up about 400 points
The kabuki dance and illusion of prosperity continues with the musical chair game....
bzb writes:
Of course, this could be wishful thinking on my part, blinded by all my puts!
ShortCourage | 04.01.08 - 6:52 pm | #
Investors also reduced their exposure to commodities and safe havens including government debt and gold, which fell to $880 an ounce, a two-month low.
But senior bankers said the rebound was driven in part by hedge funds closing short positions and warned that UBS had negative implications for the rest of the sector.
Marcel Rohner, UBSs chief executive, said the market was wrong to infer too much from UBSs situation.
We will need a few days and weeks to understand the broader significance of where we are, he said. One institution alone will not be sufficient to judge.
Let me ask all of you something. Do you for one minute believe that anything these people (idiots) say can change whats coming? Think about it. I see nothing that will in any meaningful way change the undeniable facts that a lot of people f****d up and society as a whole is going to have to pay the piper one way or another. All this MSM bullshit we hear today, tomorrow, next week will not change anything. Its just like what we heard about the homebuilders a year ago.
Lets all remember that nothing has really changed from yesterday till today.
Did someone wave a magic wand over the U.S. and make all the problems were facing go away today? No.
"Inflation isn't the issue here and never was."
excuse me but have you checked inflation stats worldwide lately? you mean we are an island?
have you also checked the price of gold recently even after the pullback? the price of oil? the price of food? don't expect these things to travel in a straight line.
and these are the other games in town.
Topher, a letter from Paulson to the New York Fed saying "send the bills to us," is the closet anyone is ever going to get to a magic wand.
Would one be correct to think these write downs have to come out of capital, rather than assets in general?
"is the closet anyone is ever going to get to a magic wand."
i assume you meant closest and you're exactly right; close but no cigar.
idoc, no offense intended or implied, but you and some others here seem to have some emotional investment in this discussion. Why is that?
idoc, just to note:
streetTRACKS Gold, Merck: Money Flow Leaders (GLD, MRK)
streetTRACKS Gold topped the list in late trading on Tuesday for Buying on Weakness, which tracks stocks that fell in price but had the largest inflow of money.
One of the problem I have with going long is the rapid deterioration of underlying equities without any significant market signaling just before the tuna roll. When that kind of situation occurs I tend to want to pull my horns in. I lost 3K looking for a bounce from BSC, but made 4K on the LEH bounce net, with hedging costs included.
When I see difficult risk/reward scenarios like that, along with soaring vols, I tend to get more cautious.
just sayying.
Someday this war's gonna end...
mp writes:
Topher, a letter from Paulson to the New York Fed saying "send the bills to us," is the closet anyone is ever going to get to a magic wand.
mp | 04.01.08 - 9:50 pm | #
That cant last forever and will not solve the problems we face. I believe you and I both know that. It might be good for a lot more upside however.
mp
b/c i am short this mkt. doesn't stop me from being rational.
as for your Paulson put. by all means, bet your money on unprecedented actions by the Fed and Paulson. i will bet mine on the fundamentals.
but look out. all it will take is for Dodd to get religion and derail this madness and you will lose everything. something else unprecedented to consider.
mp, it seems to me that Paulson's magic wand could be very inflationary. Will it be used with moderation, or is there something I'm missing?
are economic optimists the only ones allowed to have an emotional dimension to their views on the market? whenever I see CNBC their emotions seem totally driven by the market action (up=glad down=sad). But the only legitimate bear is a vulcan with absolutely no skin in the game?
I have no positions and haven't for a while. I'm going to enjoy my spring/summer. My Grandfather always told me "never cry over a profit and don't be greedy". Happy trading to all.
It might also be worthwhile to check out Money Flows: Selling on Strength
Ahhh, the financials primarily...
I am shocked today!
S&P 500 is just 4.2% overvalued, don't be priced out of market or housing, bet the farm before prices skyrocket out of site.
I agree with Tanta that this is a great opportunity and CR has been screaming to buy!
LOL!
April Fools!
RE,
Are the block trades big money/institutional investors?
mp - If the Paulson put is written as an official regulation (ie. more FED power with backing of the Treasury), yes I will get back into financials.
BUT - never again in US dollars.
Anyone notice volume in the market today?
Re: Stocks sometimes take a very short term spike, like one person puts a wrong number in or something. But unless there is sufficient volume to support the new price, it will fall, possibly faster than it rose. A little volume with a price increase shows interest, a lot of volume with a price increase shows momentum.
energyecon,
block money flow: a gauge of net institutional buying and selling activity
On balance money flow??
Today was an obvious mistake soon to unwind hard and fast; sounds like a porn movie.
In other OT: Three out of 10 US public school students do not graduate from high school, and major city school districts only graduate one out of two students, according to a study released Tuesday.
These are the people that dont get it and wont watch Dodd grill Paulson!
On the one hand, we got mp and his alter ego/inner child/pet Conjure bag calling a bottom, based on, among other things, the fact that the boys have committed to a plan of action and "you don't bet against the Fed" as the old chestnut goes.
On the other hand, we have idoc, Topher, and AllenM clinging hard to reality and the bottom line.
Now, if this were any other time, I'd be inclined to go w/Team mp/Conjure, but as we are dealing with criminally insane clowns running the show, I think the market will humm along nicely until it takes an axe in the face.
When will this happen?
Shortly after the hoi polloi get and spend their $600 checks and stop all other additional spending for the foreseeable future. Credit will not trickle down. Cash will not trickle down. Game over.
Frank himself now says it is irrelevant how many people will be helped under the plan, which Congress could take up over the next month.
I would hope a million [would benefit], said Frank, chairman of the House Financial Services Committee. Its irrelevant. Theres no downside. Why not try?
energyecon, obviously the smart money sold.
As of 12/31/07, Metlife had $85 billion of mortgage-backed and asset-backed securities in their general account portfolio, almost all of it investment-grade.
So what do you think they stand to lose, and will they report any mark-downs when they report first quarter results? (as of 12/31/07, they were carrying all bonds at cost)
"It reads like amateur hour and it's because none of those guys ever worked in a regulated, chartered bank," said Camden Fine, president and chief executive of the Independent Community Bankers of America, a Washington trade group representing small banks, referring to the authors at Treasury. "A bunch of guys from Wall Street decided this was going to be their proposal."
Treasury Secretary Henry Paulson on Monday formally announced calls for consolidating bank regulation, creating a new type of insurance charter, improving the oversight of mortgage lending and allowing the Federal Reserve to peek into more corners of finance.
Volume does look a little thin.
Cheers,
Fine said his group, which has members in every congressional district, is firmly opposed to the Paulson approach and planned to make sure members of Congress knew of their unhappiness.
State officials who see the Paulson approach as a power-grab in such areas as insurance regulation also complained. "I will strongly fight any effort to pre-empt or reduce state authority," Connecticut Attorney General Richard Blumenthal said.
The federal agencies that would be revamped can also be expected to weigh in.
Even the Federal Reserve, which would win broad powers to oversee the entire financial system with the new designation of "market stability regulator," would see its day-to-day supervisory power over bank holding companies taken away. Fed Chairman Ben Bernanke has argued in speeches that the Fed needs this power to give it the information it needs to conduct monetary policy.
House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd have both pointed out flaws they see in Paulson's approach with both lawmakers saying that the urgent need now is to address the mortgage and housing crisis.
RE,
Thx - so might one draw some conclusions from very divergent total money flow vs. block money flow values (with the bulk of the difference being to retail?)? Specifically, can any additional inference be drawn from the scale of the divergence?
For instance, AMZN total money flow is 80/100 while the block trade money flow is 14/100...
mp,
What is Conjure doing with his Euros?
energyecon - sounds to me like the retail investor is about to go another round without lube...
mp:
thanks for the call on Financials and subsequent clarification
Debate
Inflation Camp: Bill Gross (yesterday), TIPS, Prices, Commodities until recently, FED Bailout, Dollar (depreciation)
Deflation Camp: Team mp/Conjure, Assets, Credit, Demand Destruction, Treasuries
Opinions? mp?
Boring but nonetheless OT:
Menzies retold the story of a late 2007 Florida real estate muddle, in which a number of credit unions granted speculative, out-of-state land development loans. By stretching membership rules, out-of-market investors needed to pay only a $5 membership fee to join the credit union. The deal deflated along with the housing market, and three of the credit unions involved failed as a result.
What original members were served in their home states of Colorado and Michigan when these credit unions made these risky loans on Florida real estate? Menzies asked Congress, demonstrating that, given enough freedom to stray off-mission, credit unions, too, could make careless decisions.
In his rebuttal, the CUNAs elected board chair, Tom Doherty, president of the Suncoast Schools Federal Credit Union in Tampa, focused on the lending-limit portion of the bill, stating the cap was too low and stifling for small businesses seeking capital and credit unions ready to offer it.
look guys. throw away the 3 mo charts and put up a year long chart. has anything changed yet?
energyecon, yes, that is correct.
"I don't see the Paulson plan going anywhere because it is an election year and you have a lot of vested interests out there who want to maintain their powers," said David Wyss, chief economist at Standard & Poor's in New York. "And even with a new administration, this is not going to be easy."
so which of the many Paulson's plans has gone thru so far?
idoc,
Nope. It's why I'm failing to get apoplectic about today.
Traders and other gamblers want to believe some $30B in financial write downs, and several $B in share holder dilution is a buy? Go ahead. I'll just keep my bets off the Black Jack table until the idiots who hit on eighteen get cleaned out.
Cheers,
Inflation Camp: Bill Gross (yesterday),
Bill Gross is just looking out for himself.
How can PIMCO continue to charge 1.5% management fees on their bond funds if nominal interest rates dive toward zero?
Fees that are easy to swallow when you're getting 6.5% a year become intolerable at 3% a year, even though it's largely an illusion -- in real terms it's probably not much different but psychologically netting 1.5% vs. 5% makes all the difference.
Bill Gross is rapidly becoming the Corporate Socialist King since it's not profitable to be the Bond King during a deflationary episode.
Privatize the profits; socialize the losses.
Loot and pillage the US consumer then move on to loot and pillage someone else -- the US government is up next apparently.
Tips on How Wall Street Can Scuttle Paulsons Plan
Tips on How Wall Street Can Scuttle Paulson’s Plan - Deal Journal - WSJ
Deal Journal: Treasury Secretary Paulsons plan is bound to come under attack. How would you advise investment banks on how to fight it, if they would want to?
Eric Dezenhall: If the banks want to fight it, I think that any resistance would have to come primarily at a lobbying level. I dont know what the benefit would be for a banking CEO to go on television to begin shooting down a proposal like this and appearing as if he doesnt want to be regulated. What usually happens is that people who are seeking to spike a proposal seek to do so through lobbyists and issue surrogates at think tanks. If these banks wanted to advocate something specific, that can be done quite openly and vigorously. If youre looking to oppose something, theres a lot of subtlety involved.
DJ: What tack could the lobbyists take?
Dezenhall: The lobbyists would focus on those who have the power to make decisions. They would have to highlight for those decision makers why there is political risk to them for doing this. I think that the hard thing in this climate is that the outcry to deal with these financial abuses is so intense that its going to be hard to dissuade policymakers from taking punitive actions against Wall Street.
mp: is the Conjure clock reset?
If one were to look at all the headlines for the last six months, they would see theyre just as funny as the ones from that tool that used to be the head of NAR. I remember someone posting a years worth of his garbage in one post. It reminds me daily that the MSM will never scream fire until there hair is going up in flames and their getting trampled trying to reach the exit.
Re:
Did Stocks Rally Because of an April Fool's Joke?
Investing Insights Did Stocks Rally Because of an April Fool's Joke? - BusinessWeek
If Kass did affect the market today, this probably says more about the market than it does about Kass's influence. Sometimes the market, notoriously irrational and hard to explain, is just looking for an excuse to go up or down. With billions of investment dollars stuck in savings accounts, low-yielding bonds and other safe investments, investors seem to be itching for the chance to put their money to work. Of course, if economic and financial conditions get worse -- as, remember, Kass still is predicting -- they'll be sorry. But for now, investors will take any opportunity to buy, buy, buy.
OT,
I just saw an add for a TLC new show, called Date My House, by some realtor try to sell houses.
Hmmmmm......
BWAHAHAHAHAHAHAHAHAHAAHHAHAAHAHHAHAHA!
Cheers,
The Working Group on Financial Markets (also, President's Working Group on Financial Markets or the Working Group) was created by Executive Order 12631,[1] signed on March 18, 1988 by United States President Ronald Reagan.
The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions for "enhancing the integrity, efficiency, orderliness, and competitiveness of [United States] financial markets and maintaining investor confidence".[1]
As established by Executive Order 12631, the Working Group consists of:
* The Secretary of the Treasury, or his designee (as Chairman of the Working Group);
* The Chairman of the Board of Governors of the Federal Reserve System, or his designee;
* The Chairman of the Securities and Exchange Commission, or his designee; and
* The Chairman of the Commodity Futures Trading Commission, or her designee.
Who has full disclosure of The plunge Protection Teams investments?????
Or course I added to my short positions ( which were low because I'm following "close shorts on weakness", add to shorts on strength ) - I added to SKF, SRS, added to shorts to UVG, LEN, V and M.
Sure it hurts when you do that on a day like this; I don't like the idea that its "supposed to hurt" but most of the time it works for me. I do know when I'll cry uncle though and admit that the market is nuttier than I thought - starting around DJIA 12900, expecting to be completely neutral at DJIA 13300.
Re: Paulson' "send the bill to me" - well actually he's simply acknowledging that the zero sum game on Treasuries between the Fed and the US Treasury won't play out that way this year - I've asked the CO senator, Dr(vet) Wayne Allard to ask BB about how much this is going to be in the two sessions in the next two days - we'll see if he does - but, in any case, calling it a "Paulson put" is a stretch.
As ever we'll see.
-K
It's not often the case that it matters much whether one votes Republican or Democrat, and it appears it will not matter much.
But for a few weeks, a brief time, Democrats were ready to bailout every complaining speculator (including families speculating wtih their own family home, and also very rich hedge fund investors, etc., etc), and some Republicans were holding off the transfer of speculator losses onto you and I.....
Since ultimately you and I will indeed to resuce banks, it was only a matter of time.
But the Republicans, who I have not liked at all for their foreign adventure in Iraq, were holding back the tide, and allowing a few more speculators to take their own losses instead of you and I.
I have to respect that.
Hey, if Dodd is in control of Paulson and helicopter ben, then why is he not in control of PPT??
As established by Executive Order 12631, the Working Group consists of:
Hello Dodd, what's up??
I respect mp's call on the banks. Paulson did place his put. If the banks will find the changed securitization landscape profitable enough to even sustain their current valuations, I am not so sure.
However, IMO the real economy is only starting to reflect the impact of the credit crunch. Fiscal action is in its nascent stage. I believe that PMs will do just fine over the next few years in this environment. In fact, after the seasonal doldrums, when it becomes obvious what the impact of all these actions on the fiscal deficit will be, I expect a significant reemergence of gold. Combined with much lower federal revenues it will not be a pretty picture and $480 to $500 billion might not be out of the question. I expect this to be the time when gold will again separate itself from all currencies just like it did in 2005.
Stock Hedge Funds Hold Record Cash Positions
Excerpt
From Bloomberg:
Stock hedge funds, unsure about which direction the markets would move, sat on a record amount of cash as the industry headed for its biggest quarterly decline in almost six years.
Equity managers, who oversee about one-third of the $1.9 trillion in hedge funds, held an estimated $90 billion of cash in January, a hoard that dropped to $64.8 billion the next month, according to data compiled by Merrill Lynch & Co. analyst Mary Ann Bartels. The last time equity funds held cash outside of their trading accounts was in 2004, according to Merrill. At that time, market direction was also unclear, with the Standard & Poor's 500 Index up less than 2 percent through October.
The data indicates to us the equity hedge funds have de- leveraged and have record cash balances,'' she wrote in a report last week.Margin debt has declined sharply in recent months as investors have grown more cautious on the U.S. equity market.''
Stock Hedge Funds Hold Record Cash Positions « naked capitalism
Jas wrote:
What does the 2nd line mean, "6M AR 3M AR 1M AR" ? Sales/prices/?
re: retail investor participation.
i had my Credit Suisse banker in my office today trying to get me to increase my acct balance for their management. i started railing on him (as the Dow was hitting +350 as you can imagine) about how bad the fundamentals were and how the avg US investor doesn't "trust" bankers or Wall St in this country. i specifically floated the idea about how small retail investors IMO have pulled out of the mkt due to this mistrust and that what was driving the volatility were momentum players like hedge funds and IB's. he didn't bat an eye and said "well at least they're still in there".
someone above was talking about shorting URE, the ultra RE fund.
the only problem with that fund is the low daily trading volume. IIRC its only about 400K/day which is not liquid enough to accurately track the underlying index. you don't want to be trapped in that illiquidity.
The big drops in PMs over the past few days have come when the NY market was trading. Overseas, the prices have been generally horizontal (except for today's which started at around 1:00am EST., apparently in Asia).
Is this people cashing in, the strengthened dollar, or both?
Everybody, one and all:
And this is precisely the reason that I read this. My liberal education increases and I thank you.
Aside to mp: the situation reminds me of a classic barfight where the place is being trashed and yet, there's one guy taking advantage and emptying the good bottles. I hope you get the good stuff.
And one more note about what crossed my mind as I was reading all of this. China has moved ahead of S Africa in gold production and is now the world's leading producer. Given that it's still a command economy in some respects, this wouldn't just happen for a reason. Setting up for the demise of the fiat system when they'll be in position to call shots?
Citicorp will bottom at 3.
I almost hate to bring this up but in the discussion above, there is no mention of contingency. The country is too vulnerable at the moment. An earthquake, another Katrina, another anthrax nut job, etc could push everything right over the edge in the blink of an eye.
The only reason I bring this up is mp's comment:
How can you NOT make money? This is going to be operative for some time.
mp | 04.01.08 - 9:31 pm
The last time I saw the markets set up to make money were the weeks preceding 9-11.
mp calls a bottom on financials on April Fools day
OT-
Bush video via youtube- now deleted
Bush booed throwing out pitch opening night-classic
YouTube -
Only .25 Trillion? The stock market should go up on that news! And we're not even close to being done yet? Wow - it'll be a huge rally on that news!
I look forward to $5 a gallon gas (assuming the gas stations aren't empty) as the stock market keeps going up! Right...
Someone wrote: "If I understand correctly, Paulson has basically given the US congress and the constitution the finger. He, along with Comrade Bernansky now have free reign to backstop any failing institution, no matter how small, with taxpayer obligations."
To my understanding, HP & BB are only bailing out investment banks that deal in government debt. Apparently the country vitally needs to keep its own debt markets operating. So are we nationalizing the investment banks or are we instead obligating the country yet more to private bankers? I am so confused!