Third On List?

What Bubblevision has missed today, in all the cheering and hype, is the rise in interest rates.

The 2yr is back over 2% and the 10yr has risen 40 plus bps from the week’s lows.

The bond market sees it coming.

$1.2 trillion in estimated new spending.

Borrow, spend. Print to the end.

I Sold a couple of stocks today. I think my broker at MS thought I was nuts.

Gold spot seems to be holding up well.

The next step will be the outright banning of short sales.

At first I was worried about how the treasury market would absorb this huge flow of new bonds that will be need to be issued. Based on todays results, the long end of the bond market appears not to be celebrating tonight as the equity sector is. But I quickly realized that oil will probably go to $200/barrel and the arabs will come to our rescue again.

Quite an ending for President Bush's eight years. It will certainly make interesting reading in history books fifty years from today.

Santa can't do it without his 360 million diligent little elves; let's hope that the elves never have a moments rest to grasp what is happening to them.

I'd be impressed if someone asked to get off the list.

USB could totally pull that off.

CR,

What happens to towns with very high incomes when a real estate downturn occurs?

Do home prices remain elevated due to higher incomes remaining intact?

Do high incomes get cut faster than the median (or lower ones) causing these areas to drop a lot?

In particular, there are towns in the San Francisco Bay Area and Silicon Valley, where according to Redfin.com Community statistics, more than half the families make six figures and at least a third or a quarter make several hundred thousand.

Similarly, in New York, there are localities where incomes are ten times the city-wide average. Here I can see the loss of financial services jobs having a negative effect.

But are San Francisco's and Silicon Valley's high end areas immune?

Pakistani brokers have the last laugh.

Typical Wall Street rally when we just took a giant step toward nationalizing the financial industry. Say what you want about Federal employees, they don't get 22 million dollar bonuses

Nemo,

Yeah, that's the ticket. They're yanking the floor out from under the next turn down, so it'll be hard to find a bottom north of zero.

That said, I'm still holding onto some PUTs on companies that should crater soon, one way or another.

As long as shorts are only being covered and not made, demand of shares rises, driving share prices up.

As the shorts disappear out of the system, this positive effect will evaporate, and help spark the inevitable crash.

or am I completely wrong.

"Quite an ending for President Bush's eight years".

With the current pace of events, things aren't exactly over yet.

"As the shorts disappear out of the system, this positive effect will evaporate, and help spark the inevitable crash."

I think Homeland security has that covered.

bsneath: Hedge funds and shorts have made it impossible for the retail trader. I hope they ban all short selling. It is not equalizing the markets anymore. With computerized hedge trades, it has resulted in increasingly volatile markets. Ever since Soros brought down the UK financial system, it has been carte blanch for large traders to destroy markets for personal gain. I hope they all got screwed today!

Volatility. I don't think that word means what you think it means.

The NYT front page is telling me the Dow closed just below 40,000

nice.

http://s420.photobucket.com/albums/pp289/rationaljeff/?action=view&current=NYT.jpg

"I sure hope someone's keeping hard copies of all these blogs somewhere".

A pity STASI went belly-up. Or, wait..

CathyG: do comment sections get included in Google caches? And are they kept as part of archive.org's internet project?

Well i can tell ya,,the ETF's have had a large number of put options brought against them,,something like 2puts,,,1 call,,,today

""Zis is CHAOS!""

anyone called?

anyway, i am impressed with GE lately, they have been shedding old non performing businesses and are investing into new energy efficiency by far beyond anyone else in the US.
I think after all will be over, eventually, they are getting their mojo back.

It's pretty clear what the government is trying to do here.

They know that banning short sales is a joke, but they're is desperation mode. They're trying to buy enough time for financial firms so that they can get the new "First National Bailout Bank of Bernanke" in place, divest these firms of the toxic waste they've created, calm down fears by stemming the rising tide of foreclosures, and then lifting the ban. Then the balance sheets should look squeaky clean and investors shouldn't be worried anymore, right?

Well, it's going to backfire down the road, and here's why. They're interfering with the housing market while it's still in a major correction. They want to prop up prices for now and let them slowly fall back down to market clearing levels.

This might be OK if we were doing this on the back end of the correction. However, in some of the major bubble markets like Maryland, Northern VA, Massachusetts, and New Jersey, we've yet to see truly meaningful price declines. In other areas like California and Florida, prices are still not low enough to fall back in line with incomes.

Here's the problem - the viability of the financial sector is predicated on the ability to loan money. However, under conventional lending standards, incomes still don't support thee homes. So banks still can't lend to homeowners under traditional criteria. But in order to survive, what do they do? They have to continue underwriting toxic mortgages as they were before. Only this time it's OK because Uncle Sam is footing the bill.

Add this on top of the thousands of option-ARM recasts which we're expected to see over the next several years and you begin to see this "bailout" getting VERY expensive. As the debt rises, it will quite clearly begin to crowd out the private sector. Interest rates will rise, causing more bad mortgages, causing more borrowing, etc. It's an all new vicious cycle, only this time the taxpayer is getting reamed.

When will these knuckleheads learn that you need to let markets clear?

Here is PIMCO contact info...you can call and tell Bill Gross (or one of his lackeys) what you think of him:

Newport Beach
Pacific Investment Management Company
840 Newport Center Drive, Suite 100
Newport Beach, CA 92660
USA
TEL 866-746-2602*
TEL 949-720-6000
FAX 949-720-1376

New York
PIMCO
1345 Avenue of the Americas
New York, NY 10105-4800
USA

TEL 212-739-3000
FAX 212-739-3926

It's pretty clear what the government is trying to do here.

I am not so sure. The only clear thing to me, is what government can not do, no matter how hard they try...

Frankly, I don't think the posters on this thread show the appropriate appreciation of Comrade Paulson and the People's Glorious Treasury Department. This sort of counter-revolutionary talk is likely to lead to a trip to the re-education camps. Just a word to the wise.

Look at it from the merry side. This will fix air pollution problems all over the globe.

Comrade Fed Up, we're not good enough for Siberia. Effete short selling investor types couldn't cut it there. We'd be liquidated, or made into food.

Better late than never? This is the Bush Administration, so I wouldn't be surprised if this program eventually ends up being called:

C ash
L iquidity
I njection
N ecessary
T o
O bfuscate the
N epotism
S howered

F reely on
A ll
U nderwriters of the
L eague
T able

I will bet that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders shaved bald. Otherwise even bazooka boy couldn't have scared em into bipartisan action so fast.

I hope they pass out rubber gloves and gas masks to the poor souls that have to start picking through that level 3 shit next week.

US to banks: We'll hold your stash, but if we can't get what we paid for it when we want to liquidate it we know where you live. Take it or leave it.

Does the short selling ban bring the US one step closer to declaring a stock market holiday?

Cox should be fired for eliminating the leverage limits on broker/dealers that allowed them to overleverage, and for this shorting ban idiocy. Regardless of your position on McCain, his threat is a definitive statement of policy. Which is fairly rare in presidential elections these days.

Cashing puts gradually since May, although the curveball smacked me in the head today. And I still rent. I'll be liquid for the brew.

As the shorts disappear out of the system, this positive effect will evaporate, and help spark the inevitable crash.

Where's Jack Benny when you need him?

Your performing assets or your life!

I'm thinking, I'm thinking!

Waiting for Chinese and Russian help.

New NYSE Listing: CCCP

We go on the "terrorist" list.
They go on the "safe" list.

We don't even have to have done anything.
They don't ever have to be accountable.

Just go ahead and white-out "we the people" from the Constitution already. Or better yet, just sell the damn thing to a Chinese museum.

We're slaves. And we've sold our kids into bondage as well. I'm going to go break something now.

sorry, should be "report"

DrChaos,

To amplify mmckinl comment, 80 years ago the first question a potential investor in common stock would as was, "What does it pay?", or, in other words, what is the dividend?

Back in those days, a stock might yield 6-10%. Today, many stocks pay nothing. Earnings go to senior management.

Today we invest in businesses not for the cash that they earn, but for the "capital gains".

Take CSCO, for example. The share price today is roughly where it was 10 years ago. CSCO has earned $34 billion after taxes. As an investor, what have you received?

Zero.

It's more and more a casino with every passing year.

Is anyone taking defensive measures due to the propagation of frozen money market funds?

How much cash under mattress?
How much parked in checking accounts?

Fair Economist - completely agreed, it's baffling! No idea how you could manage to do that with Agency paper unless you really screwed up. Maybe the volatility got them, I don't know. They were ridiculously aggressive with their Prime fund (the holdings are full of obscure "financing" companies, which tend to mean SIVs).

Sebastian - how on earth do you have an S&P 500 index fund that is up 3% since January when the Vanguard 500 is down 16.5% YTD through yesterday?
VFIAX Vanguard 500 Index Admiral, mutual funds, quote, price - Morningstar
That's quite a feat.

There must be a big bank failure tonight. I want blood red raw meat. This bear has the munchies.

"When will these knuckleheads learn that you need to let markets clear?"

Not gonna happen if market clearing means their candidate loses. There's no way you can tell me there aren't hard political calculations driving all this.

Just imagine the self-righteous bleating by the GOP about "big government" if all these bailouts had happened under a President Gore or Kerry. Rush would have choked on his cigar by now.

Let's see if foreign investors begin dumping Treasuries. Or they will continue to drug us with endless supply of illusion of wealth. IMO, the latter scenario will happen with some uptick on inflation. This will play out until they are strong enough to mount credible resistance against our global hegemony.

"Private profit - socialized loss

the big boys are walking away with hundreds of billions while the financial system smolders."

maybe, (talking about 2 nd sentence ) but if profits are not PRIVATE the loss to society is even greater.
Right now, it is the market place that decides who gets what, if profits are socialized, it will be only a couple people on the top.

What you are suggesting is the LARGER role of government in dividing a pie, which will lead to more bailouts, more corruption, more unfairness and lesses social good.

Cashing puts gradually since May, although the curveball smacked me in the head today. And I still rent. I'll be liquid for the brew.

I'd hold them there puts if I were you. Particularly if things start to turn south before the shorting ban goes away or a market maker exemption gets put into place, you're holding a rare and potentially extremely valuable commodity. Today's option spreads were just plain silly. As I noted this morning in an earlier thread, at one point DSL October $2.50 puts had a $0 bid and a $4.80 ask. At one point, the last sale was about $1.25, which is simply unreal.

Austin Tex - I would be THRILLED to have 20% a year. That wouldn't require much patience at all.

"The lines between public and private also get blurry when you have companies that have public shareholders but are private (non-government) enterprises."

The public firms do not belong to the whole public but only the public that holds shares, so technically they always are private to the public that holds shares.

So i would rather say that the definitions are blurry and the lines are always there... unless the government decides to start the largest socialist experiment in the history of this country....

I had to be away from the computer most of the day, and when I came back tonight, I felt like those anxious groundlings outside the post-Revolution Constitutional Convention, calling out to the departing delegates,

"So which do we have, a republic or a monarchy?"

You all remember Ben Franklin's famous reply, "A republic, if we can keep it."

"Dr Chaos whats your problem??"

well

"privatize profits - check

socialize losses - pending"

Profits have always been private and it is not something that happened in the last 7 or 20 years.

This statement sounds like a populist slogan from one of the USSR news papers claiming the evil of western world. And I, well I guess I have strong bias against anything Populism, because most of the time it only brings disaster.
(I am talking about modern Populism movement, that was common in South America and stopped just short of being socialism with all of its beautiful attributes).

The only long-term solution is to rebuild our economy so that it is focused on production and services that add value to production. Once we bail out the financial industry they will start revving back up the great machine of financial wizardry. And then we will go through this all over again.

Exactly - but that requires allowing the massive system failure that gives great pause to even the most prepared folks here.

yogi writes:

I will bet that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders shaved bald.

Yes, but didn't someone here post earlier that guilty parties will still evade financial responsibility and manage to keep passing it on to consumer/taxpayers?

RE: Ambac GICs-

CHECK YOUR 401K!!!!!!!!!!!!!!

This was posted a few days ago on another blog:

"Doesn’t anyone worry that an AIG bankruptcy would hurt small investors who have put 401k money in so-called “stable-value funds?” Touted by employers as conservative investments (at my company, they were actually used as a default option if people couldn’t decide where to put their 401k funds), they rely for funding on contracts they have purchased from insurance companies. They’re known as GICs, and AIG issues them, although I can’t find any public info on who owns them.

The GICs don’t have to be marked to market and at least in my case, the stable value fund in my 401k that relies on them is so opaque(such fund aren’t subject to SEC disclosure) that you can’t find out who the insurance companies are.

It seems to me that if AIG and/or another insurance company goes bust, a lot of 401k participants who feel safe are in danger of losing money, or having it frozen for a long time, unless an employer or the fund manager is willing to step in.

That’s what happened to thousands of innocent people in the 1990s whose pensions were– unbeknownst to them -tied to a GIC issued by Executive Life, an insurance company that collapsed after the junk-bond crisis.
"

posting for free beer later

yogi writes:
oil touches 400 in '09 or I buy every poster to this thread a beer (disclaimer: if a beer is < $20. Must hedge, you know)
yogi | 09.19.08 - 5:34 pm | #
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Me Too! Me Too! Beer List!