I call BS. Use the Buffet metric. Sell 1% of the face/marked price $1.2bn or $12 million at market and revalue the rest. JPM can accurately get 3 decimal point accuracy -if- they want. Aye, there's the rub.
Not sure, but I think about 100 million of E-Trade's latest loss on statement was attributable to similar preferred equities of Fannie and/or Freddie.
Some of the institutions holding this stuff have my sympathy, as the institutions may not have done anything whatsoever to contribute to the credit problems. These losses are going to spread far beyond the blameworthy institutions, but I guess that's usually the case with making private losses public too.
JPM isn't the only bank with big (relatively) exposure to the GSE preferreds. Insurance companies also own a boatload.
That's why I don't think any bailout hoses the preferreds - at least not totally. They might give 'em a haircut for PR purposes or maybe even defer paying dividends (which I don't think is likely) but a total wipeout seems unlikely.
Be interesting to see if the momentum playas hold FNM and FRE through the close.
E-trade actually sold its FNM and FRE preferred, taking the writedown. At the time, it looked like the ETFC folks had maybe panicked into July. Now, maybe not so much.
He pioneered the practice, now commonplace, of declaring bankruptcy as a strategic maneuver. He had no scruples about using stock manipulation and insider trading (which were then legal but frowned upon) to build capital and to execute or prevent hostile takeovers.
The Firm estimates that such preferred stocks have declined in value by approximately an aggregate $600 million in the third quarter to date, based on current market values.
I go to the butcher and he weighs out a pound of beef and charges me the going rate for one pound.
I go home and weigh it and find it only weighs half a pound.
The meat didn't lose half it's value.
Nor did I lose half a pound of meat on the way home.
The butcher's scale was merely rigged to say that half a pound of meat weighed one pound so he could scam me out of some cash.
Let's be clear on what's really going on with these securities.
Apparently, Warren Buffett is one of the rumormongers. Last week he said that the two mortgage finance companies "don't have any net worth," and added that shareholders are likely to be wiped out.
Spot on, that has been the story since the get go with the BS about a 'buyer's strike' - ain't no buyers strike - just sellers unwilling to accept the mark looking to the Fed for a bagholder...
Dawg-
OT: very dubious story. Cat out of the bag is a naval term: It refers to cat of nine tails and the term implies discipline was about to be enforced.
This financial mess is brought to you by the people who gave us madcow -- the FDA and the unregulated markets, which goes back to The FBI being about 7 years late on subprime corruption and The FTC still being asleep with antitrust, and The SEC bought off, The DOJ broken up by Bush, etc....
"The precise amount of losses that may be incurred on these securities for the third quarter is difficult to determine, given the significant volatility being experienced in the market values of these securities."
Translation we may get a Fed bailout so we won't count it as a loss yet. Jamie you are brilliant!
the debt is much more important (and also WAY too big to bail)
from VIRTUAL poster at the tickerforum:
Even with a Government Rescue,
Fannie and Freddie Bond Investors
Are STILL in Grave Jeopardy Because ...
The quantities of Fannie and Freddie bonds outstanding and needing government support are so massive. According to the Federal Reserve's recently released Flow of Funds (pdf page 96), agency- and GSE-backed securities mostly issued by Fannie and Freddie total a whopping $7.6 trillion, or $2.4 trillion MORE than the entire amount of Treasury securities outstanding.
These agency- and GSE-backed debts are held so widely around the world, no one in government can control who dumps what, how much, or when. U.S. Commercial banks hold $1 trillion.Insurance companies own another $518 billion. Broker and dealers own $268 billion. Foreign investors hold a whopping $1.5 trillion!
All it takes is for these investors to liquidate 10% of their holdings and the avalanche of supplies on the market would sink their value regardless of the government's efforts to shore up confidence in Fannie and Freddie.
Federal bailouts will sink the wobbly market for U.S. Treasury bonds. When private companies are failing, investors rush to the safety of the U.S. Treasury securities. But when the Treasury throws their money into failing companies, investors rush the other way.
Result: To the degree that the government bails out Fannie, Freddie, Detroit, Wall Street, or anyone else, investors in Treasury securities will rebel, dump their own holdings and drive the value of Treasury bonds into a tailspin like none other in history.
And here again, the quantities outstanding are massive ($5.3 trillion) ... the ownership worldwide is far-flung (including nearly half overseas) ... and the ability of the government to control the market, virtually nil.
So, yes, right now, the U.S. Treasury may come to the rescue of Fannie Mae and Freddie Mac debt holders, and these investors will rejoice.
But ultimately, in order to avoid a collapse in U.S. Treasury bonds themselves, the U.S. government will have to
Draw a line in the sand beyond which no more government rescues will be possible.
Let some of America's largest banks, brokers and other companies fail, liquidate their assets, and fade into history ...
Even abandon prior rescue efforts for the sake of saving the one institution it must keep solvent and liquid at all costs: The United States Government itself.
An earlier story had the yields for Freddie's bills up 95 / 78 bps in the last week, but nobody is reporting where the spreads went vs treasuries. Anyone know?
Shares of Freddie Mac rebounded about 15% on Monday afternoon as solid demand for a $2 billion debt auction showed the troubled mortgage company is still able to raise capital, even if the markets demand higher yields.
We have Bear Stearns-like entities, bonds, derivatives, CDOs that can't walk or stand alone and as they get weaker, they get culled out of the herd, at which time, the meat left on the bones, is mixed into another pool of synthetic products, which is then infected by the Bovine Spongiform Encephalopathy. The investors are thus eating from pools of BSE that contain a specific type of misfolded protein called a prion -- or subprime no-doc no -collateral security that connects to a chain of events that is killing off investors.
IMHO, may I suggest a diet which is free from cow?
A downer cow is a live cow that cannot walk. This state can be caused by disease or injury. In nearly all cases it is considered by most farmers to be both humane and cost-effective to slaughter the animal when it becomes a downer, rather than keeping it alive and unhealthy. A "splitter" cow is a live beef or dairy animal that the hindquarters have done the complete splits and looks spraddle legged upon initial viewing.
As you wander the halls of "how bad can this get?", it is my sincere hope that you feel the full brunt of your negativism. May you become toast as this unfolds. Not my prediction, just my hope. You folks are sickos.
One more gross Fannie The Cow Post, then off to another mutation:
A British inquiry into BSE concluded that the epidemic was caused by cattle, who are normally herbivores, being fed the remains of other cattle in the form of meat and bone meal (MBM), which caused the infectious agent to spread.
Don't yah see it, whats happenin here in this mess, this is about the act or practice of humans eating flesh of other humans. In zoology, the term "cannibalism" is extended to refer to any species consuming members of its own kind ... the fuc-ing banks are canabals eating their young.... oh the humanity!
those who didn't see that needed a way to "explain" to themselves that the truth was still somewhat being told here.
The key phrase is the PR release was "par value" and then they decided that the current valuations were "difficult to determine"
This is not rocket science....but it is for some.
The current game now (of course unreported) is one of musical chairs. Who is going to be the first to offload those shares at something well south of that "difficult to determine" input price.
Ac-
I think most understand this (now) with your description above.
Cannibalism is all about derivatives and synthetic financial engineering that seeks to use supercomputer risk analysis to tell us that there is no risk in cannibalism and that yields can be exponentially exploded into safer and safer bets and that The Ownership Society should have it all today and that there is no risk, there is no need to regulate tainted markets, etc..... (do I hear an amen)?
There was a nasty feedback loop built into all these cross-investments. The GSE's owned lots of bank-issued securities and the banks owned a lot of GSE-issued securities. The result is a lot of formally AAA paper which necessarily would lose value if the owner was in trouble because of the feedback, as well as shared risk characteristics. So nobody was as well-capitalized as thought.
Who is going to be the first to offload those shares at something well south of that "difficult to determine" input price.
It might be a forced sale that is someone who needs to raise capital a foreign bank outside the FED jurisdiction will dump it out of necessity like the Australian bank who dumped their mortgage paper. Merrill soon followed...
"May you become toast as this unfolds. Not my prediction, just my hope. You folks are sickos."
Then why are you here? Too much time on your hands? Can't find a decent trade?
Why not start your own blog?..call it Unfounded Optimism, Unfettered by Reality.
If these investors knew or should have known there was no federal guarantee despite any contrary verbal statements, and we now bestow that valuable benefit upon them, they need to provide something of value in return. If they don't, then the written agreements are virtually meaningless.
hmmmmm.....IMB at the bottom of the list (total assets in L3)and already under the FDIC.
Does anyone else not see the "power" of leverage??? For you graphical people you'll see how that power is/was used in the charts just below the first one kindly posted by KM4.
Oh that's right it was ALL Chuckie Shumer's fault.
OT - The SPX/INDU lower trendlines (from 7/15 lows) were broken last Monday and retrested last Friday. Today is a "continuation down patter" in candlestick charting - but what bothers me as to whether this move is real and lasting is that there's no volume.
So, I like the idea of continuing down - makes the most sense; however, as mentioned on an earlier thread, tomorrow is Case/Shiller data release Tuesday. The last 3 or 4 Case/Shiller Tuesdays have been absolute scorchers for the equity markets - despite data being worse than expectations. So be careful.
the volumes are the same regardless of up or down. To say they have been pathetic is an understatement.
IMO the brokers/I-banks are simply trading this market back and forth to themselves.
I expect some additional happy news before this week is over and BTW is it a tad fishy to anyone that the market is being recommended to close early on Friday?? I've can't recall it ever closing early before Labor day....the bond market does before major holidays all the time but this smells a bit funny to me. FWIW.
I expect some additional happy news before this week is over and BTW is it a tad fishy to anyone that the market is being recommended to close early on Friday??
A comment above refers to BSC. If these people can help it that will never happen like that again. The whole BSC take down was payback to Cayne for being a self-centered douchebag. Most of LEH's loans it made (and kept) were far worse than BSC's balance sheet yet it's allowed to continue to operate.
I agree somewhat ala volume being light - that is, it's been light pushing this market up since the 7/15 lows. And that means the move has no staying power and the lows will get retested.
On an unrelated note, anyone notice the long bond yield closed at its lowest low since April? So much for inflation expectations....
and I should care, why exactly?
pretty much sounds to me like JPM is looking for some kind of bailout by the Fed of the preferreds of FNM and FRE so that they don't lose $600million.
How are those Bear Stear bonds guaranteed by the Fed doing anyway. I'd wager its close to $15 billion down now.
Two of the biggest U.S. bond investors said they would get involved in a capital raising by Fannie Mae and Freddie Mac as long as the U.S. Treasury participates in the new deals.
Hey John M. - Is Gross talking his book up much or what?
If FNM and FRE go, PIMCO will be losing billions. Gross will do anything he can do to sway a bailout.
you have it... May mean nothing however in today;s environment one must question everything.
Can anyone else recall an early closure on the Friday before a 3-day weekend when the holiday is observed on the following Monday?? Except Thanksgiving, Xmas and Easter (and the closure of the bond market early) I can't at all.
Might be making something out of nothing however nothing can be taken at face value any longer IMO.
Might be making something out of nothing however nothing can be taken at face value any longer IMO.
I expect good news going into the weekend too. There will probably be a rumor of a bank takeover before the weekend again Going into the weekend some of the weak shorts may cover. We'll know the truth come Monday.
I can't figure out what the effect would be of recommending the market for dollar denominated fixed income securities close early, if something was being planned...
"Can anyone else recall an early closure on the Friday before a 3-day weekend when the holiday is observed on the following Monday?? Except Thanksgiving, Xmas and Easter (and the closure of the bond market early) I can't at all."
Assuming you're not being facetious, yes - the bond market always closes early before a 3-day weekend.
It enables bond traders and portfolio managers to get a jump on traffic (before the money-grubbing equity guys) on their way to the Hamptons - or these days, the Jersey shore...
Yes I am well aware of the bond market closing early prior to a holiday it happens with enough regularity. May be I'm confusing the statement they have made with the actuality of said market (bonds) doing a normal thing prior to the holiday. It's unclear if they mean the bond market or the entire market.
You know perfectly well there's going to be a bailout, at the very least for the bondholders, probably for the preferreds as well.
Even if it's a crappy plan fraught with the potential for unintended consequences; even if it's just Nice, Cheap Words, it will be received optimistically.
I know this is Treasury, but if they follow the Fed's playbook, they'll spring it on an expiration day.
If they have any sense of timing, they'll pair it with a shotgun wedding of LEH.
That should be worth 600 - 700 Dow sticks, perhaps in a day, a week, a month. But it'll all be repealed eventually.
I'm very interested in how different industries push yield enhancement and thus increase risk to retarded levels, versus just trying to go about business more efficiently, i.e, there is always a mad scientist approach to super theory and greater gains that rely on super greed, and in this process, people buy into the bullshit that risk is not an issue. Of course we should feed dead cows to living cows and of course, we can supercharge the subprime pools and of course if covered bond pools are large enough, there ain no risk...
Re: In modern industrial cattle-farming, various commercial feeds are used, which may contain ingredients including antibiotics, hormones, pesticides, fertilizers, and protein supplements. The use of meat and bone meal, produced from the ground and cooked left-overs of the slaughtering process as well as from the cadavers of sick and injured animals such as cattle, sheep, or chickens, as a protein supplement in cattle feed was widespread in Europe prior to about 1987.
Funny how hamburger consumption is still a little off...
n February 2001, the USGAO reported that the FDA, which is responsible for regulating feed, had not adequately policed the various bans.[23] Compliance with the regulations was shown to be extremely poor before the discovery of the Washington cow, but industry representatives report that compliance is now 100%. Even so, critics call the partial prohibitions insufficient. Indeed, US meat producer Creekstone Farms alleges that the USDA is preventing BSE testing from being conducted..
Japan was the top importer of U.S. beef, buying 240,000 tons valued at $1.4 billion in 2003. After the discovery of the first case of BSE in the U.S. on December 23, 2003, Japan stopped U.S. beef imports in December 2003. In December 2005, Japan once again allowed imports of U.S. beef, but reinstated its ban in mid-January 2006 after a technical violation of the U.S.-Japan beef import agreement: a vertebral column, which should have been removed prior to shipment, was included in a shipment of veal.
This is a real estate blog. Real estate and its derivative finance are in the tank and getting worse. It's an open question just how bad the blow-back will be to main street, but imho Wall Street traded way too much real estate related crap without adequately accounting for risk.
That's the story here. If you don't believe it, go back to Bloomberg, Reuters and the Financial Times. Just remember, you heard it here first.
Hey what happened to "contained"? You don't mean to say that Bernawizard didn't have a clue? Or Paulson? What happened to our wizards? Did they all lose their wands? Or just forget the words to the spells?
Issued last year at $27.50 as I recall; now selling, after hours, for $10.75. Doubtless a marvelous buy since all is "contained". Besides lots of banks own shares and prolly some foreign central banks. They wouldn't buy anything fishy now, would they?
Hey if banks can "restructure" everything so insolvent borrowers can survive, sorta, can't the Treasury ask the Russians and the Chinese to do the same? I mean we could give China Taiwan on a platter and disband NATO if they'll forgive the debt, right? (And make Condi R. shut up).
Sparks writes:
Very extraordinarily sad and sick people. You folks seriously need to spend less on dominatrixes and more on shrinks.
Sparks | 08.25.08 - 5:22 pm | #
You didn't follow the link to SIFMA's ACTUAL recommendation; they are only recommending the early closure of the fixed-income market. Check JP's tinyurl for confirm. So, yes, you're making something out of nothing.
IMB may have been at the bottom of the L3 asset list, but it was off the top of L3/Total assets chart just below. Perhaps that one's a little more relevant, hmm?
Also, filing the 8-K on this is prob just a SarbOx related abundence of caution thing--the GSE Pref (presumably) wasn't a prop trading asset, so $600mm qualifies as a material, reportable event. I still think that describing them by par value is weird--most of the FNM pref (at least--didn't check Fred) has been issued with no par value.
You post--what? 5 times?--about some mistaken impression you had that the equity markets were closing early on Friday (easily answered by RTF press release) and you question others' read->think->post calculus? Nice laffer at the end of the day. Grazie.
An easy mistake (BMA=SIFMA and I did say I might have made something out of nothing) to make however at least I understand when someone (ala JPM) is lying but you contniued to defend it without seeing the real reason.
You obviously still cling to the magic fairy that inhabits the world of disclosure. Or do you still think par value is something else???
So spare me the "lesson"... you should be looking in the mirror.
More posting with too little read OR think. I plainly suggest that JPM is being deceptive and would rather have not diclosed anything until end of quarter (or later); JPM's (and any other public co) desire to avoid litigation over failure to disclose motives filings, not some desire to keep some fairy happy. Indeed, I suggest that the reality is worse than disclosed.
Please provide the definition of "par value" as you see it used in the JPM 8-K. Looking it up, per your suggestion, won't work as there are apparently multiple meanings. I believe that whoever edited that 8-K may have done so with too heavy a hand.
Oh crap!
I think we can stop referring to these securities as preferred stock.
Yes, these non-desirable Level 3 illusions are obviously unwanted!
You mean there is risk in housing related stocks. Get out of here.
I call BS. Use the Buffet metric. Sell 1% of the face/marked price $1.2bn or $12 million at market and revalue the rest. JPM can accurately get 3 decimal point accuracy -if- they want. Aye, there's the rub.
So does this mean JPM can count Treasury's bail-out authorization as an asset?
Not sure, but I think about 100 million of E-Trade's latest loss on statement was attributable to similar preferred equities of Fannie and/or Freddie.
Some of the institutions holding this stuff have my sympathy, as the institutions may not have done anything whatsoever to contribute to the credit problems. These losses are going to spread far beyond the blameworthy institutions, but I guess that's usually the case with making private losses public too.
Sheesh ... is this bad news EVER going to end?
JPM isn't the only bank with big (relatively) exposure to the GSE preferreds. Insurance companies also own a boatload.
That's why I don't think any bailout hoses the preferreds - at least not totally. They might give 'em a haircut for PR purposes or maybe even defer paying dividends (which I don't think is likely) but a total wipeout seems unlikely.
I wonder how much of a hit Calpers and other (public and private) retirement funds will take?
Be interesting to see if the momentum playas hold FNM and FRE through the close.
E-trade actually sold its FNM and FRE preferred, taking the writedown. At the time, it looked like the ETFC folks had maybe panicked into July. Now, maybe not so much.
He pioneered the practice, now commonplace, of declaring bankruptcy as a strategic maneuver. He had no scruples about using stock manipulation and insider trading (which were then legal but frowned upon) to build capital and to execute or prevent hostile takeovers.
Jamie, time to learn from this dude.
do ya know who he was?
The Firm estimates that such preferred stocks have declined in value by approximately an aggregate $600 million in the third quarter to date, based on current market values.
I go to the butcher and he weighs out a pound of beef and charges me the going rate for one pound.
I go home and weigh it and find it only weighs half a pound.
The meat didn't lose half it's value.
Nor did I lose half a pound of meat on the way home.
The butcher's scale was merely rigged to say that half a pound of meat weighed one pound so he could scam me out of some cash.
Let's be clear on what's really going on with these securities.
Rallymonkey,
James J. Hill or one of those guys who manipulated RR stock in the days when it was legal?
mr gould himself, good guess.
Apparently, Warren Buffett is one of the rumormongers. Last week he said that the two mortgage finance companies "don't have any net worth," and added that shareholders are likely to be wiped out.
What really happened:
Re: Don't buy a pig in a poke; an explanation
Re: Let's be clear on what's really going on with these securities.
What about repackaged old meat that was wrapped in the backroom, then mixed in with new meat.. wait hamburger... this is madcow, isnt it!
Rob Dawg,
Spot on, that has been the story since the get go with the BS about a 'buyer's strike' - ain't no buyers strike - just sellers unwilling to accept the mark looking to the Fed for a bagholder...
Dawg-
OT: very dubious story. Cat out of the bag is a naval term: It refers to cat of nine tails and the term implies discipline was about to be enforced.
This financial mess is brought to you by the people who gave us madcow -- the FDA and the unregulated markets, which goes back to The FBI being about 7 years late on subprime corruption and The FTC still being asleep with antitrust, and The SEC bought off, The DOJ broken up by Bush, etc....
What about repackaged old meat that was wrapped in the backroom, then mixed in with new meat.. wait hamburger... this is madcow, isnt it!
Hmmmm.... I dunno.
I'll have to wait to see what Jim Cramer has to say about it.
MS you were right on...
"The precise amount of losses that may be incurred on these securities for the third quarter is difficult to determine, given the significant volatility being experienced in the market values of these securities."
Translation we may get a Fed bailout so we won't count it as a loss yet. Jamie you are brilliant!
"Many banks hold preferred shares in Fannie and Freddie, and the impact could be widespread."
So basically F&F stocks are a proxy for the US financial system. I think this exceeds the criteria for "too big to fail" by country mile or three.
Reach into your pockets, kids time to cough up some lunch money.
the preferreds CAN'T get much help
the debt is much more important (and also WAY too big to bail)
from VIRTUAL poster at the tickerforum:
Even with a Government Rescue,
Fannie and Freddie Bond Investors
Are STILL in Grave Jeopardy Because ...
All it takes is for these investors to liquidate 10% of their holdings and the avalanche of supplies on the market would sink their value regardless of the government's efforts to shore up confidence in Fannie and Freddie.
Result: To the degree that the government bails out Fannie, Freddie, Detroit, Wall Street, or anyone else, investors in Treasury securities will rebel, dump their own holdings and drive the value of Treasury bonds into a tailspin like none other in history.
And here again, the quantities outstanding are massive ($5.3 trillion) ... the ownership worldwide is far-flung (including nearly half overseas) ... and the ability of the government to control the market, virtually nil.
So, yes, right now, the U.S. Treasury may come to the rescue of Fannie Mae and Freddie Mac debt holders, and these investors will rejoice.
But ultimately, in order to avoid a collapse in U.S. Treasury bonds themselves, the U.S. government will have to
TRANSLATION: were effed
An earlier story had the yields for Freddie's bills up 95 / 78 bps in the last week, but nobody is reporting where the spreads went vs treasuries. Anyone know?
"Freddie, Fannie pare losses: Shares rise on demand for Freddie Mac debt auction; banks under pressure", by John Spence MarketWatch, August 25, 2008.
I bet one trading arm of JP Morgan shorted the preferred issues or bought some puts.
They'll be fine.
Are CDS sold against preferred? If so, who is the counterparty?
Madcow -
Could you please lay off about the meat? There are Canadians in the room.
Hits keeps coming. Where is the next blind sucker punch to the battered financial system going to come from ?
BubbleVision put headlines on their screen. Recurring headline reads; "Indexes still higher in August"
That means plenty of room to give more!
This is madcow:
We have Bear Stearns-like entities, bonds, derivatives, CDOs that can't walk or stand alone and as they get weaker, they get culled out of the herd, at which time, the meat left on the bones, is mixed into another pool of synthetic products, which is then infected by the Bovine Spongiform Encephalopathy. The investors are thus eating from pools of BSE that contain a specific type of misfolded protein called a prion -- or subprime no-doc no -collateral security that connects to a chain of events that is killing off investors.
IMHO, may I suggest a diet which is free from cow?
A downer cow is a live cow that cannot walk. This state can be caused by disease or injury. In nearly all cases it is considered by most farmers to be both humane and cost-effective to slaughter the animal when it becomes a downer, rather than keeping it alive and unhealthy. A "splitter" cow is a live beef or dairy animal that the hindquarters have done the complete splits and looks spraddle legged upon initial viewing.
John M,
Sorry. I saw your post too late!
As you wander the halls of "how bad can this get?", it is my sincere hope that you feel the full brunt of your negativism. May you become toast as this unfolds. Not my prediction, just my hope. You folks are sickos.
Trade well
One more gross Fannie The Cow Post, then off to another mutation:
A British inquiry into BSE concluded that the epidemic was caused by cattle, who are normally herbivores, being fed the remains of other cattle in the form of meat and bone meal (MBM), which caused the infectious agent to spread.
Don't yah see it, whats happenin here in this mess, this is about the act or practice of humans eating flesh of other humans. In zoology, the term "cannibalism" is extended to refer to any species consuming members of its own kind ... the fuc-ing banks are canabals eating their young.... oh the humanity!
daddiemac-
those who didn't see that needed a way to "explain" to themselves that the truth was still somewhat being told here.
The key phrase is the PR release was "par value" and then they decided that the current valuations were "difficult to determine"
This is not rocket science....but it is for some.
The current game now (of course unreported) is one of musical chairs. Who is going to be the first to offload those shares at something well south of that "difficult to determine" input price.
Ac-
I think most understand this (now) with your description above.
Lather,rinse repeat...
Ciao
MS
Hanky Panky's bazooka has their back, if anyone is going to get a good screwing on this deal it isn't going to be the banks.
In case you missed this
Level Three Assets: Banks & Brokers
from The Big Picture by Barry Ritholtz
Friday, August 15, 2008
The Big Picture
Cannibalism is all about derivatives and synthetic financial engineering that seeks to use supercomputer risk analysis to tell us that there is no risk in cannibalism and that yields can be exponentially exploded into safer and safer bets and that The Ownership Society should have it all today and that there is no risk, there is no need to regulate tainted markets, etc..... (do I hear an amen)?
There was a nasty feedback loop built into all these cross-investments. The GSE's owned lots of bank-issued securities and the banks owned a lot of GSE-issued securities. The result is a lot of formally AAA paper which necessarily would lose value if the owner was in trouble because of the feedback, as well as shared risk characteristics. So nobody was as well-capitalized as thought.
Who is going to be the first to offload those shares at something well south of that "difficult to determine" input price.
It might be a forced sale that is someone who needs to raise capital a foreign bank outside the FED jurisdiction will dump it out of necessity like the Australian bank who dumped their mortgage paper. Merrill soon followed...
"May you become toast as this unfolds. Not my prediction, just my hope. You folks are sickos."
No I think most here will be making toast with the likes of people like you who is far from embracing any form of reality.
If you fail to embrace reality than you will not...ahem...."trade well".
Ciao
MS
"May you become toast as this unfolds. Not my prediction, just my hope. You folks are sickos."
Then why are you here? Too much time on your hands? Can't find a decent trade?
Why not start your own blog?..call it Unfounded Optimism, Unfettered by Reality.
Am I the only one that feels the FNM/FRE front is a little too quiet, like Henry P. is just marking time before stepping to the podium?
Madcow -
I'm still hoping this will someday help the study of protein folding and perhaps get a better handle on prions.
x-man -
... but ... but ...
"Who pays when lenders fail? Fannie Mae and Freddie Mac investors should pony up too", by James P. Tuthill, San Francisco Chronicle, August 7, 2008.
km4-
hmmmmm.....IMB at the bottom of the list (total assets in L3)and already under the FDIC.
Does anyone else not see the "power" of leverage??? For you graphical people you'll see how that power is/was used in the charts just below the first one kindly posted by KM4.
Oh that's right it was ALL Chuckie Shumer's fault.
Ciao
MS
OT - The SPX/INDU lower trendlines (from 7/15 lows) were broken last Monday and retrested last Friday. Today is a "continuation down patter" in candlestick charting - but what bothers me as to whether this move is real and lasting is that there's no volume.
So, I like the idea of continuing down - makes the most sense; however, as mentioned on an earlier thread, tomorrow is Case/Shiller data release Tuesday. The last 3 or 4 Case/Shiller Tuesdays have been absolute scorchers for the equity markets - despite data being worse than expectations. So be careful.
Are CDS sold against preferred? If so, who is the counterparty?
Yes CDS are sold. Sometimes, reduction in dividends can trip their wire.
Counterparties = your guess is as good as anyone's.
Anon-
the volumes are the same regardless of up or down. To say they have been pathetic is an understatement.
IMO the brokers/I-banks are simply trading this market back and forth to themselves.
I expect some additional happy news before this week is over and BTW is it a tad fishy to anyone that the market is being recommended to close early on Friday?? I've can't recall it ever closing early before Labor day....the bond market does before major holidays all the time but this smells a bit funny to me. FWIW.
Ciao
MS
I expect some additional happy news before this week is over and BTW is it a tad fishy to anyone that the market is being recommended to close early on Friday??
I missed that. Link?
Yes, when do we get a 'bank holiday' as well?
A comment above refers to BSC. If these people can help it that will never happen like that again. The whole BSC take down was payback to Cayne for being a self-centered douchebag. Most of LEH's loans it made (and kept) were far worse than BSC's balance sheet yet it's allowed to continue to operate.
BSC like failures will not be allowed.
Ciao
MS
MS,
I agree somewhat ala volume being light - that is, it's been light pushing this market up since the 7/15 lows. And that means the move has no staying power and the lows will get retested.
On an unrelated note, anyone notice the long bond yield closed at its lowest low since April? So much for inflation expectations....
jp-
have to look for it again....be back shortly.
Ciao
MS
JP, the early close recommendation is on SIFMA's website
and I should care, why exactly?
pretty much sounds to me like JPM is looking for some kind of bailout by the Fed of the preferreds of FNM and FRE so that they don't lose $600million.
How are those Bear Stear bonds guaranteed by the Fed doing anyway. I'd wager its close to $15 billion down now.
Thanks. For those who are interested:
SIFMA News
The bond cavalry is warming up the horses, but they are demanding air cover.
"Gross, Fuss say any new GSE deal needs Treasury", by Jennifer Ablan Reuters, August 25, 2008.
The bond cavalry is warming up the horses, but they are demanding air cover.
hell they want the "nuclear option"
Hey John M. - Is Gross talking his book up much or what?
If FNM and FRE go, PIMCO will be losing billions. Gross will do anything he can do to sway a bailout.
JP-
you have it... May mean nothing however in today;s environment one must question everything.
Can anyone else recall an early closure on the Friday before a 3-day weekend when the holiday is observed on the following Monday?? Except Thanksgiving, Xmas and Easter (and the closure of the bond market early) I can't at all.
Might be making something out of nothing however nothing can be taken at face value any longer IMO.
Ciao
MS
Might be making something out of nothing however nothing can be taken at face value any longer IMO.
I expect good news going into the weekend too. There will probably be a rumor of a bank takeover before the weekend again Going into the weekend some of the weak shorts may cover. We'll know the truth come Monday.
I can't figure out what the effect would be of recommending the market for dollar denominated fixed income securities close early, if something was being planned...
Big bailout?
"Can anyone else recall an early closure on the Friday before a 3-day weekend when the holiday is observed on the following Monday?? Except Thanksgiving, Xmas and Easter (and the closure of the bond market early) I can't at all."
Assuming you're not being facetious, yes - the bond market always closes early before a 3-day weekend.
It enables bond traders and portfolio managers to get a jump on traffic (before the money-grubbing equity guys) on their way to the Hamptons - or these days, the Jersey shore...
This is a sure sign the Fannie and Freddie dust up is contained.
dean-
same here.....makes no sense but again it may just be something tied to the holiday however it smells to me.
Ciao
MS
gab-
Yes I am well aware of the bond market closing early prior to a holiday it happens with enough regularity. May be I'm confusing the statement they have made with the actuality of said market (bonds) doing a normal thing prior to the holiday. It's unclear if they mean the bond market or the entire market.
Ciao
MS
You know perfectly well there's going to be a bailout, at the very least for the bondholders, probably for the preferreds as well.
Even if it's a crappy plan fraught with the potential for unintended consequences; even if it's just Nice, Cheap Words, it will be received optimistically.
I know this is Treasury, but if they follow the Fed's playbook, they'll spring it on an expiration day.
If they have any sense of timing, they'll pair it with a shotgun wedding of LEH.
That should be worth 600 - 700 Dow sticks, perhaps in a day, a week, a month. But it'll all be repealed eventually.
SIFMA, formerly the BMA always announces early closes in bonds.
There's plenty to worry about in markets these days. This isn't one of 'em.
John M,
I'm very interested in how different industries push yield enhancement and thus increase risk to retarded levels, versus just trying to go about business more efficiently, i.e, there is always a mad scientist approach to super theory and greater gains that rely on super greed, and in this process, people buy into the bullshit that risk is not an issue. Of course we should feed dead cows to living cows and of course, we can supercharge the subprime pools and of course if covered bond pools are large enough, there ain no risk...
Re: In modern industrial cattle-farming, various commercial feeds are used, which may contain ingredients including antibiotics, hormones, pesticides, fertilizers, and protein supplements. The use of meat and bone meal, produced from the ground and cooked left-overs of the slaughtering process as well as from the cadavers of sick and injured animals such as cattle, sheep, or chickens, as a protein supplement in cattle feed was widespread in Europe prior to about 1987.
Funny how hamburger consumption is still a little off...
n February 2001, the USGAO reported that the FDA, which is responsible for regulating feed, had not adequately policed the various bans.[23] Compliance with the regulations was shown to be extremely poor before the discovery of the Washington cow, but industry representatives report that compliance is now 100%. Even so, critics call the partial prohibitions insufficient. Indeed, US meat producer Creekstone Farms alleges that the USDA is preventing BSE testing from being conducted..
Japan was the top importer of U.S. beef, buying 240,000 tons valued at $1.4 billion in 2003. After the discovery of the first case of BSE in the U.S. on December 23, 2003, Japan stopped U.S. beef imports in December 2003. In December 2005, Japan once again allowed imports of U.S. beef, but reinstated its ban in mid-January 2006 after a technical violation of the U.S.-Japan beef import agreement: a vertebral column, which should have been removed prior to shipment, was included in a shipment of veal.
Very extraordinarily sad and sick people. You folks seriously need to spend less on dominatrixes and more on shrinks.
Isn't Memorial Day on a Monday?
Did SIFMA issue a recommendation in a similar fashion in April?
It does look like they did...
SIFMA News
Might be a routine holiday getaway thingy...
@sparks
This is a real estate blog. Real estate and its derivative finance are in the tank and getting worse. It's an open question just how bad the blow-back will be to main street, but imho Wall Street traded way too much real estate related crap without adequately accounting for risk.
That's the story here. If you don't believe it, go back to Bloomberg, Reuters and the Financial Times. Just remember, you heard it here first.
"Isn't Memorial Day on a Monday?
"
Hey what happened to "contained"? You don't mean to say that Bernawizard didn't have a clue? Or Paulson? What happened to our wizards? Did they all lose their wands? Or just forget the words to the spells?
Issued last year at $27.50 as I recall; now selling, after hours, for $10.75. Doubtless a marvelous buy since all is "contained". Besides lots of banks own shares and prolly some foreign central banks. They wouldn't buy anything fishy now, would they?
TRANSLATION: were effed
I think the Russians have figured that out already. But have the Chinese?
Hey if banks can "restructure" everything so insolvent borrowers can survive, sorta, can't the Treasury ask the Russians and the Chinese to do the same? I mean we could give China Taiwan on a platter and disband NATO if they'll forgive the debt, right? (And make Condi R. shut up).
Sparks writes:
Very extraordinarily sad and sick people. You folks seriously need to spend less on dominatrixes and more on shrinks.
Sparks | 08.25.08 - 5:22 pm | #
Ben, is that you?
Henry?
Sheila?
ALAN?
C'mon - Outen ze!
MS:
Also, filing the 8-K on this is prob just a SarbOx related abundence of caution thing--the GSE Pref (presumably) wasn't a prop trading asset, so $600mm qualifies as a material, reportable event. I still think that describing them by par value is weird--most of the FNM pref (at least--didn't check Fred) has been issued with no par value.
gab-
That's where I lost it
BMA=SIFMA
The more things change the more they stay the same.
Zal-
Point #2 is exactly what I was referencing. Do you not read a post before you try to "clarify" others??
You really need to read the whole thing and think about it. I wasn't really pointing out the first chart.....but you knew that.
Ciao
MS
MS:
You post--what? 5 times?--about some mistaken impression you had that the equity markets were closing early on Friday (easily answered by RTF press release) and you question others' read->think->post calculus? Nice laffer at the end of the day. Grazie.
An easy mistake (BMA=SIFMA and I did say I might have made something out of nothing) to make however at least I understand when someone (ala JPM) is lying but you contniued to defend it without seeing the real reason.
You obviously still cling to the magic fairy that inhabits the world of disclosure. Or do you still think par value is something else???
So spare me the "lesson"... you should be looking in the mirror.
Ciao
MS
More posting with too little read OR think. I plainly suggest that JPM is being deceptive and would rather have not diclosed anything until end of quarter (or later); JPM's (and any other public co) desire to avoid litigation over failure to disclose motives filings, not some desire to keep some fairy happy. Indeed, I suggest that the reality is worse than disclosed.
Please provide the definition of "par value" as you see it used in the JPM 8-K. Looking it up, per your suggestion, won't work as there are apparently multiple meanings. I believe that whoever edited that 8-K may have done so with too heavy a hand.
Please show a "defense" of JPM. Grazie.