Nemo writes:
"It also doesn't actually do anything, since you can still short via options and options market makers can still short period."
Totally not true. There are hundreds of hedge funds that are NOT shorting right now due to public disclosure of their positions - this means at least 2 more weeks of no trading.. While short sales are a small % of total volume, this changing the rules changes peoples trust in the system. Alot of capital is going to walk away - both shorts and longs...
Stimulation is good, but manipulation is bad. It is the difference between having sex with your girlfriend and a 16 year old. Unfortunately, the Congress prefers 16 year olds.
There are hundreds of hedge funds that are NOT shorting right now due to public disclosure of their positions
Reference?
My point is primarily about the ban on shorting itself. It does nothing. If you or anyone else wants to short stocks, you can still do it (synthetically) via options, and the options market makers are exempt from the order.
Options positions are exempt from the reporting rules. So they do not really do anything, either; if you want to short a financial stock into the ground and not report it, you can just sell the calls and buy the puts.
The short ban is scaring traders off. Especially the ones who were short before the ban. And I noticed the futures are down 100 pts right now per CNBC.
CR, why would you expect anything bright to come out of this administation. The surprise would be if it did something intelligent. Dumb is its modus operandi.
Now, let us turn from the US financial disaster to the disaster in the making in Afghanistan:
My hedge fund pals suggest it adds friction/cost and is doing something negative.
Yes, it does add to the transaction costs, because you have to pay the spread to the options market makers. So it basically adds a (fixed) fee to enter/exit the position.
But if you happen to know a bank (for example) is heading to zero, you can still profit handsomely from shorting it synthetically.
It makes shorting modestly more expensive but does not actually prevent it. So it is stupid, but in an ineffective way, not a Pakistani "stocks must only go up" way.
the real story is how badly the 'stockpickers' like dodge and cox have played this year while warren has been a true master, waiting until the blood is at least ankle-deep.
gramm was right about this being a 'nation of whiners'.
people just don't want to hear the truth.
here's what i wonder - where did the sense of good sportsmanship go? if you can play a market better than me, kudos, you deserve your wins.
why take away the kickball? it is downright unamerican.
it is a much simpler proposition to short a stock than to go short using options.
options are way way less liquid and way way way more volatile. not to mention that they all expire worthless on a defined schedule. time decay is serious and rapid.
furthermore, the margin requirements to sell a call are very high.
so, while it is true you can still go short with it is not the same thing at all and without experience you will get burned until you learn what kind of animal you are dealing with.
also, shorting requires a different risk profile with your broker and different trading permissions.
some brokers will not let you trade options unless you state in writing that you have experience doing it already.
Nemo writes "My point is primarily about the ban on shorting itself. It does nothing. If you or anyone else wants to short stocks, you can still do it (synthetically) via options, and the options market makers are exempt from the order."
No they can't.
The ban on short selling extended from financials and has included new names daily - including today names like Textronic and Sunrise Senior Living were added. Smart money managers will start researching the non-financial names on the list to determine the reason such companies believe they need protection. As usual, these seat-of-pants rule changes will have unintended consequences. In this case, non-financial companies seeking protection on the short sale ban list have marked themselves as businesses that require additional due diligence by the investment community (i.e. problems). In the same vein, when/if House finally passes some plan, expect some ballsy financial firms to opt out of the program as a show of strength. Again, the point is that the rule change itself will have the unintended consequence of delineating between the strong and weak companies.
Regarding the original short-selling ban - an addendum was added requiring additional disclosure for new shorts of stocks NOT on the list for any hedge fund managing more than 100 mil in assets (there are hundreds if not thousands). I personally know of several that are (were) waiting for Friday to start re-shorting - their size is WAY to big to effectively trade via the options market - have you seen the implied vol on options due to this rule? The VIX is at 40 and the bid ask spreads are huge. Options for large players are more than costly - if they have to resort to buying puts to short stocks they will, and should give their money back (and I expect many will).
There are LEAPS that make the time value pretty insignificant, no? If the expiration of your options is > 1 year out (especially in this volatile environment), you're gonna get your chance to sell at a gain. And you can hopefully collect at long-term cap gain rates...
I've never shorted...heard there were some complicating factors (like paying dividends on the stock, being forced to return it before you'd like to, etc...), but mostly just chicken. Thus my alias here.
Yeah, that's what I need, Nemo, in this lovely financial environment; counterparty risk from using an option instead of a straight short.
CR, please start a thread on safe and lucrative ways to cheat on taxes, now that the schmucks/shyster/shylocks in D.C. are shaking us down via threats and bribes.
I will not pull the lever for McCain in November. To hell with him. Sellout.
Hey All - talked to a senior vp friend of mine at Wells - discussed the bailout bill, economy, banking, etc.
I asked if WF is going to lower lending standards in the wake of the bailout bill to spur the economy. He said on the contrary. They plan on tightening up credit for the foreseeable future. That, plus bring in a larger deposit base and containing expenses are the primary business drivers company-wide. "Work good credits" was what he said.
I'm still not seeing data about qualified borrowers having difficulty getting loans. He's not seeing it either.
Many years ago I trained in Aikido. During one early session still vivid in my mind, we were paired up, one person told to continually follow and punch the other, the other to escape the punches. As the receiver, I can tell you I was hit numerous times, and each strike hurt a lot.
Then, we were instructed not to escape the punches, but rather to move towards and behind our attacker. In this case, the less swift among us (ahem) took a single hit, while those more trained managed to completely avoid any pain.
A lesson the people and the Senate could learn much from.
Awareness and appropriate action are so much better than drawing away in fear.
from a broker regarding the original short selling ban and its effect on options...
"The SEC has imposed emergency rules for short sale and economically similar dealing in approximately 800 companies, mostly from the financial services sector. Some of the new rules affect options trading strategies that can lead to a short sale, even if temporarily. The following limitations on option trading have been put in place to conform to the SEC regulations as available from 22 September at 09:30 EST."
"Unfortunately, it appears that an influx of taxpayer money will ultimately need to be a part of any attempt to stabilize and restore faith in our financial sector. However, if the people of Louisiana have learned anything in the last several years, it is that simply throwing money at a disaster doesn't fix the problem unless paired with wise reforms to the practices that failed us.
I personally know of several that are (were) waiting for Friday to start re-shorting - their size is WAY to big to effectively trade via the options market - have you seen the implied vol on options due to this rule?
In other words, no, you do not have a reference.
"Implied volatility" is irrelevant in this context, because for a synthetic short you buy the put while selling the call. Anything you lose to high volatility on the former you get back on the latter. (Do you actually know anything about options?)
Bid/ask spreads are quite relevant, but they do not look that bad to me. Even for NCC at $2.89, you can enter a synthetic short at an effective price of $2.70, or a 7% premium. Nasty, yes, but that is for a penny stock, which is the worst case. For real companies, the premium is significantly lower.
The options market has huge liquidity as long as you are willing to pay the bid/ask of the options market makers. They take the spread and short the stock for you, and they will do so in huge quantities because that is how they make money.
...the times are getting downright predictable..."
yeah but the times they are a changing...
Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.
Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!
Don't know if anyone else has posted this article, but if not, for those of you who were stating the bailout is about Goldman and Morgan Stanley, here's more ammo: 36 Hours of Alarm and Action as Crisis Spiraled
Spoiler alert* - the main writer of this piece, Joe Nocera, was a proponent of the "rescue" when it was a wee three pages long.
options are way way less liquid and way way way more volatile. not to mention that they all expire worthless on a defined schedule. time decay is serious and rapid.
None of which is relevant in a synthetic short, where you are short the put and long the call. All effects of volatility and time decay cancel out, and the result is that you earn precisely the return of an actual short position.
furthermore, the margin requirements to sell a call are very high.
Actually margin requirements on a synthetic short are typically less than for a physical short. See here for a description.
Nemo, I have used puts both for leverage and because I didn't want to get into any margin calls. (Just started with options in May) I figured the spreads were worth the gamble, especially since volatility in these times must be huge. Arrogant, but lucky.
Since uncovered call writing is out, how else do you create a "synthetic short"?
i haven't messed with long term options (LEAPS). my forecasts are shorter term so i match my bets to my time frame. your point is well taken but time premiums are expensive. also, far out derivatives are very thinly traded. for example, I wanted to buy 2008 $80 oil futures in 2005 but they were not offered at my broker.
the most rational choice is to short the calls instead of buying puts but once again, that takes big big margin.
still, you can't beat the leverage. silver futures options have a multiplier of 5000. this means once your strike price is breached you make 5000 for every 1 dollar movement in the underlying. you just have to be right AT THE RIGHT TIME.
""Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!""
Oh, god no! Not more useless, pointless 'first' postings! You fellow comrades know that some blogs (Big Picture for example) actually BAN people who do the 'First' thing, right?
Since uncovered call writing is out, how else do you create a "synthetic short"?
That is the only way, I am afraid. It's called a "synthetic short" because it behaves just like a real short, including the potentially unlimited downside.
That's the price you pay for avoiding the decaying time value...
""Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!""
Actually I believe Nemo built some type of software that alerts him to new post... Came from CR so I am prone to believe it.
Why are these firms getting free protection from short-sellers by the Government? Here in Jersey, if Vito the Enforcer is protecting you, he's also helping you lighten your wallet.
Why don't the "please don't short me" firms start pitching in to fund this bailout?
Lots of references, but one indicating that the biggest short selling funds have totally stopped trading? Nope!
"Implied volatility" is irrelevant in this context, because for a synthetic short you buy the put while selling the call. Anything you lose to high volatility on the former you get back on the latter. (Do you actually know anything about options?)
I used to run a hedge fund. Now I run a blog. Obviously thought you meant buying puts directly not putting on synthetics - bid asks would kill you with any size there. I still think the short selling ban was to give politicos some breathing space and put some high profile money managers who laid into CDS on some financial firms in jail. I expect those announcements will be coming. Meanwhile, lack of liquidity is going to creep from credit mkts into equity markets.
The arrows provision seeks to reverse an anomaly in a 2004 law that created the 39 cent excise tax on the weapons. Intended the levy more expensive arrows, the tax also applies to arrows used by Boy Scouts and other youth organizations that cost about 30 cents a piece. Ten manufacturers in nine U.S. states stand to benefit from the change, according to a description of the legislation from Wyden's office.
If 10 Ten arrow manufacturers can be generally identified, then who on wall street needs bailed out? The arrow people are in nine states, so why is it so hard to explain who on wall street is getting bailed out?
I still think the short selling ban was to give politicos some breathing space and put some high profile money managers who laid into CDS on some financial firms in jail.
Agreed.
Meanwhile, lack of liquidity is going to creep from credit mkts into equity markets.
Perhaps... But I suspect lots of people are going "all cash and wait", so even if we observe that, it will be hard to say how much is due to the short-selling ban. (I do think the exemption for options market makers makes a huge difference.)
Anyway, sorry if I got overly rude. I think I'm getting drowsy, and events in D.C. have me generally pissed off.
I always preferred what Fark.com did with the 'first' posts: changed the word 'first' to 'boobies' and then upped your post time to something like 12 hours in the future so that your 'first' post would perennially be at the bottom of the thread.
Between that and the razzing of the regulars it definitely eliminated the problem.
Senator Wyden
The serious threat to the nation's financial system requires Congress to act as wisely and as quickly as is practical. But that doesn't mean Congress should act recklessly.
Unless we address the underlying faults in the system that brought us to this financial abyss in the first place, we may simply be building the world's largest bridge to nowhere.
Lehman's default on Sept. 15 precipitated a sharp drop in the value of the bank-issued bonds that make up nearly two-thirds of Sigma's investments. That, in turn, led to increased margin calls from lenders and a depletion of Sigma's cash reserves, according to a report from ratings firm Moody's Investors Service.
Nate, why would short selling ban cause any money managers to go to jail? They could lose money and that's worse than jail, but it's still not jail ...
emo,
i don't do synthetic shorts but i do sincerely thank you for the info. i do not know everything and find combination options trades confusing and cumbersome.
in my account, when i have sold short a listed call option the margin was multiples higher than simply buying a put. it makes sense for it to be so since i am exposed to "unlimited" loss shorting the call. my potential loss buying the put is the price of the put.
i trade fundamentals and wait. i don't get too complex. I am in the market. what matters to me is being right.
artichoke writes:
Nate, why would short selling ban cause any money managers to go to jail? They could lose money and that's worse than jail, but it's still not jail ...
The ban itself won't send anyone to jail - but was enacted as a 'time out' so as to gain evidence on some high profile fund managers that were egregiously using shorts in the credit markets, then spreading rumours, and because of their size and credibility, caused self-fulfilling prophecies wrt business dealings (i.e. willingness to take counterparty risk) with the Bear Stearns and Lehmans of the world. I don't think short selling stocks is the problem but rather the credit default swaps and other derivatives - but to ban and enforce that and we all might as well be trading baseball cards..
I've been listening to talk radio the past couple of days. Yesterday there was a lot of public outcry, the calls were 10-0 against the bailout. Today it seemed that the hosts were clamping down on the public opinion and allowing the issues to be diverted.
I called into one show last night (on AM station WWL) and decided the best use of my time was to give the address to download the SIFMA analyst call File Savr - Free File Hosting .
This evening, Conjure and I were discussing the new uses of the Fed discount window.
Some of you may remember Commonwealth Bank (1969 or '70). They had gotten into a lot of scrapes with the Fed over "partner" banks and an application to open an office in Bermuda.
Anyway, Commonwealth ran into trouble and applied to the discount window for funding. The Fed said, sure, we'll open the window...after your board of director and executive suite resigns. They resigned the next day and the discount window opened for them.
Well, now the discount window seems to have all kinds of uses and is open to everyone, kind of like the drive-up at Wendy's. The next thing you know, they'll be asking if you want to super-size your order, or get a passport photo.
otishertz | 10.02.08 - 12:14 am | #
i trade fundamentals and wait. i don't get too complex. I am in the market. what matters to me is being right.
Nope, you are in the market to make money. Not to be right.
Thats trading/wall street. Make money going up, coming down
thats something I learnt going from a being science guy to a worker bee. No, is still dont know how to do it. I can write a copula model for CDO's but dont know how to use it. (No, I did notwrite any model for anyone, and have seen models undergraduates could have done better).
"artichoke writes:
So guys, are we ready to take a deep breath and try to win the House vote (again) on Friday?"
I sure am. I still got lots of faxes to burn up in my metrofax account.
Calling - what a huge pain. It's like phoning a radio station hoping you're caller number 20.
And now the emails to the House of Reps are being throttled. Let me guess - they couldn't afford an extra 50GB hard drive to store the messages. Yeah right.
It's been said before, but if the switchboard is busy, try the local office in the home state. Also, in rating public opinion, politicos weigh calls much more heavily. Emails are too easy and too easily faked or mass produced.
For you debt deflation historians out there: At the start the "senior currency" strengthens before augering in. Yes? Are there typical tells for the change in direction?
The Imperial Senate will no longer be of any concern to us.
I've just received word that the Emperor has dissolved the council
permanently. The last remnants of the Old Republic have been swept
away.
I just saw the Buffett in Interview on Charlie Rose. I regained some of the admiration that I had for Buffett's views before this, but not fully. Warren is without a question a man of integrity. He said that this plan will make money ONLY IF the treasury pays a fair price and he said that is by far the most important component. He also said that the RFC experience shows that the country will be very critical of any purchases that seem overpriced. HE also said that if it were up to him, he would probably do an RFC type preferred stock deal. So really, Buffett agrees with the smart economists much more than I had thought. Another thing is that he said that for this to work it has to be done immediately. I suppose he disagrees with the Iraq War comparisons. I'm not sure I'm on the same page as him, especially because Paulson said he won't be spending more than 50B per month.
Anyway, there is still a big hole in Buffett's logic. As CR and others pointed out, if the US Gov is to buy at fair/undervalued prices, the balance sheets will be violating capital ratios and therefore insolvent! So... I don't get why Buffett doesn't fear this? Could it be a liquidity thing? Or could it be that he is expecting the private sector and SWFs to step in and buy equity? I don't know but it sounds like we will need an RFC type solution anyway.
Another big Buffett contradiction. He said that the Paulson plan is immediate vs. RFC isn't. But, then he said that the patient will not recover right away.
being right is why i trade. it comes from certitude that is far from infallible. it is like a game of trust with myself: proving to myself that i believe what i say.
ya'll are no doubt reading hubris into my word splatters and that's fine. i am wrong all the time. when i'm wrong i get a bill. i call it tuition and i pay the bill.
if i go bust i guess i'll just get a job but i'm 40 and never worked for anyone but me. this delusion works for me. keeps me on my toes.
that and the realization that i am truly, profoundly, a dumbass.
The convertibles market has been closed since the ban. These companies still need to recapitalize and converts are off the table and equity too expensive. The 700bil will most likely be used to support the large banks who in turn will buy the smaller toxic ones. The hope is mark to market suspension will delay the need for write downs in other loan types. I still don't see how this helps the interbank market. They all know the crap that is on some of these balance sheets.
Gumbo writes:
"For you debt deflation historians out there: At the start the "senior currency" strengthens before augering in. Yes? Are there typical tells for the change in direction?"
In the Japanese case (1990s-), the currency tended to strength and it required massive intervention to keep it cheap. At least the intervention seemed massive until we saw what the Chinese have done.
If a debt deflation really rips through the U.S., domestic demand will collapse. That would tend to close the U.S. current account deficit, and the currency may be under upwards pressure, as was the case in Japan.
As for the earlier debt deflations, they were pretty well all pre-WWII. The Gold Standard was in place, so it's a bit harder to follow the currency market developments. But from what I recall, the tendency was to push currencies lower versus gold to create liquidity in the banking system - a.k.a. competitive devaluations. But that mechanism doesn't seem applicable to fiat currencies, as liquidity can be adjusted without reference to exchange rates.
today i attempted to wire some money from my tradeking broker. could not because my reserve fund-in treasuries is slow on redemptions. could this be part of the problem. i believe the Reserve fund is the biggest money market
I don't think Buffett has integrity. Otherwise a successful investor like him would not have a big hole in his argument.
He is good at making the listener think he has integrity, saying very solemnly all the stuff he has to admit anyway.
The key to his comments, from what you wrote, is that "it must be done immediately". All these guys say it must be done immediately, there is no time to sit back and consider alternatives, even though alternatives exist that achieve what these guys "say" they want to achieve.
That's actually because the real purpose(s) is something different. Bank analysts were told the real purpose is to transfer wealth from taxpayers, making healthy banks healthier. File Savr - Free File Hosting
1) Why do you feel support will be for larger ones, and how large is large? IS STI large? is FITB large? is DSL large?
2) If MTM is suspended and capitla ratios too, in a way, solvency issues are suspended. But in another way, it just makes matters worse because there will be no way to assess the actual tangible asset situation and liquidity if each bank, so interbank lending will get worse with this opacity.
3) Granted this will not help interbank lending but isn't the MMF guarantee + direct fed lending + FDIC expansion enough to do that job?
All these guys say it must be done immediately, there is no time to sit back and consider alternatives, even though alternatives exist that achieve what these guys "say" they want to achieve.
As I said, Charlie asked about the preffered stock solution and he said he thought about it, and he would do it, but he thought the 700B was also necessary. I agree with you that there should be time given to debate it, but that then makes the whole thing less powerful, which is why personally I don't believe in the 700B plan at all. I believe in an RFC preferred plan only, combined with various other measures.
probert I agree, all these information-hiding methods (no short selling, suspend MTM) just make things worse. they will not restore confidence in this environment. they will eliminate the possibility that anyone could have confidence.
God it is nice to be back.My computer crashed at am monday,and i tried to follow things on TV which may have caused permanent brain damage.I did watch cramer for the first time...and last.I will say that the Bailout bill is probably a better idea than nuking Iran.probably.
Oh by the way, this plan is NOT immediate. Banking analysts were told it would take two to three weeks before any transactions could take place.
Did you read my post or are you just talking to your wall? I already made that exact comment. Buffett is contradicting himself by saying it must be done right away, even though Paulson is in less of a rush. Buffett is clearly not thinking right about this. But he has set a conditions of the securities being purchased at BARGAIN prices, and so he has integrity.
Will Paulson actually buy them at bargain prices? I don't know.
The Navy boys have been given permission by Somalia to use force on the hijacked Ukrainian ship carrying the T-72 tanks.
That doesn't mean that they will use force, but that's one less roadblock...
Hank Paulson's Mom | Homepage | 10.02.08 - 12:40 am | #
Permission from who? Somalia does not have a gov't, just a few Ethiopian Troops protecting the warlord of Mogadishu. Like the permission of the Somali govt has anything to do with the question. The big question is that the crew of the ship has mostly Russian Nationals, and so it is sort of the russian call on if/when to storm it.
The only benefit I see to suspending MTM is that it will allow banks to avert technical Events of Default that could occur if their numbers are too bad. They can invent the number that avoid such events.
It will be like the ratings given by ratings agencies. They came to be more or less meaningless except for setting an upper bound on the quality of something, and for technical reasons when terms of a contract depended on a rating.
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i can't help wanting the shorts back so that they will drive another opinion into the stock market. there will have to be a short term down burst when they are allowed back.
HPM: "The Navy boys have been given permission by Somalia to use force"
Dirk: "Permission from who? Somalia does not have a gov't"
Dunno...maybe these guys?
Somalia: World can use force against the pirates
"...Mohammed Jammer Ali, acting director of the Somali Foreign Ministry, told The Associated Press on Wednesday that he was giving new permission for such actions.
"The international community has permission to fight with the pirates," he said.
Somalia's president, Abdullahi Yusuf, also appealed to foreign powers. "The government has lost patience and now wants to fight pirates with the help of the international community," he said in a radio address..."
artichoke writes:
Probert if you would please refer to the analyst call you would see the banks are promised that the securities will be bought at above market prices.
Whatever you think of Buffett (someone was trying to convince me earlier that he was sullying his name, or that he had sold out by whoring out his reputation to buttress Goldman Sachs) you really have to give it to the guy. If nothing else, he has managed to get a lot of press out of all this. (Ok, I admit it, I just wanted to use the word "whoring" and "Buffett" in the same paragraph).
Asian stock markets retreated Thursday as broader concerns about a global economic slowdown outweighed any relief over the U.S. Senate's passage of the bailout package to rescue the U.S. financial system.
Naked Capitalism has a new post, mostly authored by "FairEconomist", with an interesting twist on the possible unintended consequences of the TARP/No Banker Left Behind bill:
"...When Paulson dumps out his 700 billion in treasuries it's going to be at the short end. That will drive up rates for short-term treasuries. This will obviously draw even more deposits into the treasury MMs. That means even less in the commercial MMs and thus less working credit, the eventual commercial MM product. Hence Paulson's billions remove working capital by competing for the deposits that could get used to make working capital loans. That 700 billion is going to go to fairly long-term mortgage securities. So Paulson's billions divert credit from working capital to long-term mortgages - from where it's most needed to where it's most wasted..."
Never believe any of the "reasoning" in the financial press. Asian markets are down and find your own reasons.
I don't know the reason. But theirs sounds like fluff, did he do a scientific poll of the traders in the Asian market to see how they feel about the bailout's progress?
I think we are on the same page with the dumbass thing. My perspective is little different though. I don't care whether I'm right, as long as I profit. This attitude works really dealing with technical people: they get to be right, I get to make money.
artichoke: When the smoke clears and Buffet explains what he did, everyone is going to be in awe. He has had years to brood over this. Years to hire the best people money can buy, to model just this scenario, the scenario where weapons of mass financial destruction are detonating on their accord. With his resources, he could have modeled a vast number of scenarios to find out where the profit will be.
And there will be profit, no doubt.
I'll be back into securities probably early 2010. I haven't seen capitulation yet. Once "everybody knows" that stocks are horrible, I'll be 25% mutual fund, 25% individual stocks (spread across various sectors), 25% REIT. I'll leave the rest in coin, just for fun.
Probert if you would please refer to the analyst call you would see the banks are promised that the securities will be bought at above market prices.
Ok I will look at it. So far I have only read the summary, still not listened to the MP3. If that is the case, Buffett has simply not taken enough time to think about this and/or is too close to GS.
BTW Yves Smith is out with some new related stuff, and not simple to think about.
Ha! I read that as SIX Sigma, and breathed a sigh of relief.
I did too, lol. We had one of those wienies in the CCU a few months ago. One of the new Organizational Effectiveness bozos. He was distressed because it was hard to "model" our unit because based on acuity it can be 1/1 care, at the most 2/1. We keep patients on ventilators highly "lubed" as far as bowel movements are concerned to prevent any strain. As he was following us around (becoming familiar with our workflow) one of my patients took that opportunity to eliminate his TPN diet. Needless to say we haven't seen Mr. Six Sigma back up on our unit;)
Re: When Paulson dumps out his 700 billion in treasuries it's going to be at the short end. That will drive up rates for short-term treasuries. This will obviously draw even more deposits into the treasury MMs.
There has been a worry that too much supply would crash yields, because as with housing, this is like a bubble, adding too much inventory into the system. This is the problem with synthetic support to try and un-freeze this system, i.e, they could push in too much inventory, drop yields and make the cost of buying liquidity more and more expensive, which dilutes the value of the "investment". This is a liquidity trap, so adding money into the wrong hole is meaningless, thus the way to thaw liquidity and make cash flow is a matter of building confidence and allowing people to see realistic future value. If the market drops another 10%, that would create a buying opportunity, but would it generate liquidity?
What you want IMHO, is for people to buy bargains and take cash out of a panic state and get people interested in future value; the only way to do that is to let stocks drop in value -- stocks are still overvalued IMHO and obviously, so are short-term Treasuries.
As he was following us around (becoming familiar with our workflow) one of my patients took that opportunity to eliminate his TPN diet. Needless to say we haven't seen Mr. Six Sigma back up on our unit;)
Whereismyretirement | 10.02.08 - 1:56 am |
Too too funny! I doubt it would work well in my environment, but damn funny to hear that at least one koolaid drinking ninja was routed from the workplace.
Calling - what a huge pain. It's like phoning a radio station hoping you're caller number 20.
And now the emails to the House of Reps are being throttled. Let me guess - they couldn't afford an extra 50GB hard drive to store the messages. Yeah right.
Der Kommandant Weather Helm | 10.02.08 - 12:27 am
It's because of all the storage needed for the White House emails circa 2001-2003.
Glad to see everyone's fingers got tired after all those heavily over-commented posts. Not that it wasn't cathartic, but I was starting to worry about the strain on CR's eyes.
Curious... has anyone ever heard Roubini talking about short selling?
I personally think that we could survive without shorting in general. Is there any reason to think we couldn't?
Roubini, Roubini. He is master of chanting buzzwords. He picks up daily the latest and greatest phrases and turns of phrase, and then adds them to his ever growing media litany. PR dream machine.
I sink szhorting allows for equilibrium in regard to opportunity to bet on down versus just up. I need to stretch the back after that last post on NC, so let me ponder that more...
Nothing, just good to see you, be right back, I feel that was an epic post for yves, but most of this crap is lost within minutes, so just thinking out loud
Every up and down in the stock market has a 'reason' that the media/analyst folks are sure about. Has anyone every admitted on the teevee that they didn't have a clue why the market (or futures) are up/down?
They have a magic phone that calls the long dead oracle of delphi who has the reason of the day at hand. Mr. market speaks direct to the oracle, talking in Klingon.
It just wouldn't do for people to admit to being without an explanation. Some days the messages get mixed from the oracle and one channel says reason A and another says reason B. This is due to NSA having a resonant loop somewhere in their wiretaps, and yesterday's or last year's reason gets recycled.
Of course we need the shorts. The whole mechanism of Wall Street depends on the gossip and rumor provided by the supposed machinations of the Adversary (Ahriman, I think).
These inverse relationships allow one person to buy while another sells, i.e, one person may buy Treasuries when the price goes down, in order to buy more units of a security that will go up in value with both yield and price, however, as we see now, people that want safety are willing to buy fewer units at a higher price -- which creates an opportunity for someone that wants to sell. Yah, you need this in stocks as well, because of the P/E and the E/P, yah, oui?
This is interesting to me because Treasury has a flood of synthetic cash to flood the markets with artificial liquidity, thus if they act like PPT and support shit stocks, the value is questionable and the future value is dis-connected from present value, because now, no one really understands how to value "shit".
Furthermore, as Treasury floods the bond market, the same thing happens, but the most interesting part, is that earnings should be falling in a recession and thus earnings yield, the inverse of the P/E should fall and the price should fall, so if we allow them to step in and screw with valuations, we don't really know how to compare a shit P/E or E/P to a treasury yield that is being forced down.
These people need to back away from the bazooka and piss off, allow the markets to fall and then, ahh..... just a sec
Why did customers leave WaMu? Did they leave because of liquidity problems, or was there a confidence problem? Was that a market problem or a social problem? My kid had money there until the very last day, because she had faith in them and liked them, and she didn't have trouble getting transactions done, but then she finally bailed because it looked like it was going to crash. That failure had been identified a year ago, because WaMu had way too many shit loans and they had too much cash burn, thus it was obvious that management and the government were not acting to protect the stability of that system, which created a lack of confidence and then a state of panic. There was never a liquidity problem for customers, but there was a condition of distrust brought about by poor management, poor accounting and a lack of government intervention a year ago!
Bombshell ! A Bailout for Foreigners ! Screwed by Goldman Sacks Again !
"For nearly a year, we have been asking ourselves why the investors and foreign banks that bought up hundreds of billions of dollars of worthless mortgage-backed securities (MBS) from US investment banks have not taken legal action against these same banks or initiated a boycott of US financial products to prevent more people from getting ripped off?
Now we know the answer. It's because, behind the scenes, Henry Paulson and Co. were working out a deal to dump the whole trillion dollar mess on the US taxpayer. That's what this whole $700 billion boondoggle is all about; wiping out the massive debts that were generated in the biggest incident of fraud in history. Rep Brad Sherman explained it like this last night to Larry Kudlow:
"It (The bill) provides hundreds of billions of dollars of bailouts to foreign investors."
Yes, ladies and gentlemen, we are paying for Wall Streets illegal sales of these toxic assets overseas.
In case you haven't heard the CEO of Goldman was in the room when AIG got bailed out ... Why is this important ? That AIG bailout saved Goldman Sacks a cool 20 billion dollars. It only cost the tax payers 85 billion in loans.
Sick. Bloomberg TV keeps asking Congressmen, "Aren't your constituents calling up and telling you to change your no vote". And they keep saying no, it's still 9-1 against.
Sununu just said the Clinton administration helped eased regulation for fannie and freddie and predicted this crisis. Was in an article years ago in NYT 1999 article.
CNBC must have received a lot of complaints about their continual use of the "can't make payroll" canard. They actually backpedaled from it this morning..
and corker was on, trying to equate banks to the honest farmer down south with too much land and no cash at a time when land deals are not being made, just needs the government to buy some of this land to raise cash. He actually said, it isn't about bank profits, it is that banks are running short of cash.
Amazing to watch the spin. Or he has been comprehensively brainwashed by the wall street overlords.
I still don't think we have yet had the stock market crash of 2008.
The glittering generalities about 'saving your 401k' and the like have misled people into thinking this is an economic bailout bill. It is not. The realities will float to the top soon enough.
wally writes: I still don't think we have yet had the stock market crash of 2008.
Agreed. If we are firmly in the craw of the liquidity trap it will be soon. If they can resuscitate the credit market, then it may be postponed for a little while.
I think at this point, we need to start focussing efforts on keeping the vested interests from spinning it as happening "because" of the bailout delay. That is surely their next rhetorical step when the current banker welfare bill fails to address the problem and they take another opportunity to help themselves to the public purse.
No, blame it on not passing the bailout sooner. Everything bad that happens is because they didn't pass the bailout on Monday. Everything good that happens is because they're going to pass it on Friday.
"I think that Congressional leaders know that its a bad bill, but feel compelled to defend it, because theyre (rightly) scared of the financial consequences of a second rejection. And to some extent economists like myself are in the same position; I think I called it the 'hold your nose caucus.'
"So am I for the bill? Yuk, phooey, I guess so. And Im very angry at Paulson for putting us in this position."
[emphasis mine]
You heard the man: Yuk, phooey, I guess so. That's the seasoned judgment of a member of the economics faculty at Princeton. That's why he gets paid the big bucks. Yuk, phooey, I guess so.
I can still sell ( and thus go short) single stock futures as per IB - I'll try it later today on a banned stock I was short on for a long while that got forced bought-in yesterday.
The spread is wider, but the cost per contract is lower.
Builder Bob writes: Interesting, the US dollar is surging, gold is down sharply this morning.
I would judge that it's 'cause Europeans appear to be failing to form a coherent bank/credit policy regime. If they can't meet the crisis, it may tear them apart in short order and people don't want to be under a disintegrating Euro.
I think what Krugman is upset at is the fact that the House Republicans cut Bush/Paulson loose and put political ownership squarely on the shoulders of the Democrats. If the plan succeeds then more power to Reid/Pelosi/Frank. If it fails, then some Republican is going to pull an Obama and run an entire campaign based on the fact that he or she had the judgment to vote against popular legislation.
Further to your observation on home process in Las Vegas, I have been following the Case Shiller stats closely for 4 years and have consistently imported their dat into my own excel analysis of the 20 key markets.
I am a developer from Florida and could see what was happening and sold all of my real estate assets in 2005. I developed property in Las Vegas as well up until 2000 and am very familiar with your market area.
Here are a few comparisons between the Miami market and Las Vegas and a dark "prediction."
The hight of the Las Vegas Market occurred in the calendar year of 2004 with a one years appreciation in property values of a staggering 45.50%. In the year just prior (2003) it was 17.222% and the year just following (2005) it was 10.5%. For 200 it was -15.34%. For the first seven months of 2008 the market is down a further -23.58%.
I chart appreciation over time and look for anomalies. When I was in Las Vegas between 1987-2000 working on single family home development with a very well-known national homebuilder, it was clear that your market was growing due to a very large influx of retirees and refugees from California who were looking for relief from high taxes. In those days we saw the market was appreciating at a rate of about 5% and we were astounded at hoe robust it was.
Robert Shiller's own analysis is that homes in the US across all market areas from 1890 to 2000 only appreciated on "average" about 3.5%+/-.
The other anomaly that most realtors now is that home sale accelerate between March-August and then fall off sharply through the following February. In fact February is the cruelest month of all. In part, this follows with the moving habits of families with a rush to get into a new home before the beginning of a new school year as we all have seen.
It is interesting to note that the Las Vegas market reached its peak a year earlier sooner than Miami and other cities in Florida and California and it will most likely emerge sooner. For Las Vegas the ultimate peak n buying frenzy was August 2006 however, there was already a significant reversal in overall market appreciation "2 years earlier." This is explained by those late to the party who figured that they too could cash-in on the "housing casino" outside the casinos on the strip.
The peak month of the frenzy seems to be between May and June of 2006. The reversal form that point forward is really quite evident and the acceleration to the down side in recent months has been quite shocking. As to my point above of -23.58% loss or the first seven month of 2008, that averages a loss of -3.36% per month with some months recording a loss of greater than -5.10% (January 2008).
The Prediction:
Based on my analysis and the evaluation of the latest Case Shiller numbers I anticipate the Las Vegas market to fall another 45% from current levels before hitting some normal trend line for growth. For Miami it is worse, the market there is still overvalued by 49.36%. Meredith Whitney said last week, when interviewed while in Las Vegas, that nationally she expected "the total market to still fall roughly 30% from current levels." I think she is being too optimistic.
The trend has never encountered the variables that we have now.
I think that we have roughly 3,000,000 too many homes in the market place; this is across all categories single family homes and condo towers, essentially anything termed a "dwelling." When the toxic mix of severe unemployment, huge number of foreclosures thrust upon the market, tightened lending (if any) and a recession (or worse) is factored in, we may very well overshoot far beyond the target I mentioned above. The homebuilders actually need to stop building for two years just to give the market a head start on absorption. I suspect many of them know this and insiders are quietly selling their stock before we see the numbers of builders in the country shrink by 50% or greater.
Playboy magazine is offering a new way to lose your shirt on Wall Street.
The adult entertainment magazine, long famous for its photo spreads of nude women and lessons in living the urbane life of the well-heeled bachelor, is launching a search for models to pose for its upcoming feature, "Women of Wall Street."
Princess on the steeple and all the pretty people
They're drinkin', thinkin' that they got it made
Exchanging all kinds of precious gifts and things
But you'd better lift your diamond ring, you'd better pawn it babe
You used to be so amused
At Napoleon in rags and the language that he used
Go to him now, he calls you, you can't refuse
When you got nothing, you got nothing to lose
You're invisible now, you got no secrets to conceal.
How does it feel
How does it feel
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
I dunno how much there is to learn - I just watched the prices next to spot price for a while, like a couple of months to get a heuristic view of it. I DON'T use it for leverage ! I just treat it as if its a regular spot buy in terms of how I'm committing. The price is always going to be higher 2 months from now ( time value ) than now, based on standard pricing models but after that trading establishes the value. What else. The spreads are wider, but IB charges about 34 cents a contract == 1 contract is for 100 shares.
I'm talking about SINGLE STOCK futures of course here.
Sorry gang the earlier post had a few spelling errors, think I caught them all now.
RE: Further to your observation on home process in Las Vegas, I have been following the Case Shiller stats closely for 4 years and have consistently imported their data into my own excel analysis of the 20 key markets.
I am a developer from Florida and could see what was happening and sold all of my real estate assets in 2005. I developed property in Las Vegas as well up until 2000 and am very familiar with your market area.
Here are a few comparisons between the Miami market and Las Vegas and a dark "prediction."
The height of the Las Vegas Market occurred in the calendar year of 2004 with a one years appreciation in property values of a staggering 45.50%. In the year just prior (2003) it was 17.222% and the year just following (2005) it was 10.5%. For 2007 it was -15.34%. For the first seven months of 2008 the market is down a further -23.58%.
I chart appreciation over time and look for anomalies. When I was in Las Vegas between 1987-2000 working on single family home development with a very well-known national homebuilder, it was clear that your market was growing due to a very large influx of retirees and refugees from California who were looking for relief from high taxes. In those days we saw the market was appreciating at a rate of about 5% and we were astounded at how robust it was.
Robert Shiller's own analysis is that homes in the US across all market areas from 1890 to 2000 only appreciated on "average" about 3.5%+/-.
The other anomaly that most realtors know is that home sale accelerate between March-August and then fall off sharply through the following February. In fact February is the cruelest month of all. In part, this follows with the moving habits of families with a rush to get into a new home before the beginning of a new school year as we have all have seen.
It is interesting to note that the Las Vegas market reached its peak a year earlier than Miami and other cities in Florida and California and it will most likely emerge sooner. For Las Vegas the ultimate peak in the buying frenzy was August 2006 however, there was already a significant reversal in overall market appreciation "2 years earlier." This is explained by those late to the party who figured that they too could cash-in on the "housing casino" outside the casinos on the strip.
The peak month of the frenzy seems to be between May and June of 2006. The reversal from that point forward is really quite evident and the acceleration to the down side in recent months has been quite shocking. As to my point above of -23.58% loss for the first seven months of 2008, that equals an average loss of -3.36% per month with some months recording a loss of greater than -5.10% (January 2008).
The Prediction:
Based on my analysis and the evaluation of the latest Case Shiller numbers I anticipate the Las Vegas market to fall another 45% from current levels before hitting some normal trend line for growth. For Miami it is worse, the market there is still overvalued by 49.36%. Meredith Whitney said last week, when interviewed while in Las Vegas, that nationally she expected "the total market to still fall roughly 30% from current levels." I think she is being too optimistic.
The trend has never encountered the variables that we have now.
I think that we have roughly 3,000,000 too many homes in the market place; this is across all categories single family homes and condo towers, essentially anything termed a "dwelling." When the toxic mix of severe unemployment, huge number of foreclosures thrust upon the market, tightened lending (if any) and a recession (or worse) is factored in, we may very well overshoot far beyond the target I mentioned above. The homebuilders actually need to stop building for two years just to give the market a head start on absorption. I suspect many of them know this and insiders are quietly selling their stock before we see the numbers of builders in the country shrink by 50% or greater.
Eventually, selling of any sort will be banned in the market. Then, selling a house for less than a 10% increase in price per year you owned it will be banned.
Everything (except salaries, savings, and standards of living) WILL GO UP!!!
Reminds me of the old Robin Williams joke about Muammar Ghadafi...
"This is Line of Death! You cross it, you die!... OK, THIS is Line of Death. You cross THIS line, you die... No (steps back again), THIS line, you die... THIS line, you die... THIS line, you die..."
Without short selling, then how to people cover their losses? It's like this...I walk away from my house because all of my Mexican neighbors are foreclosing too, so I decide to short Countrywide in order to offset my loss of not paying them anymore. This should be totally legal. It's exactly what the investment banks have been doing with oil and derivatives.
Furthermore, as Treasury floods the bond market, the same thing happens, but the most interesting part, is that earnings should be falling in a recession and thus earnings yield, the inverse of the P/E should fall and the price should fall, so if we allow them to step in and screw with valuations, we don't really know how to compare a shit P/E or E/P to a treasury yield that is being forced down.
This is related to von Mises' idea that the government can't run anything because you need to know good prices to plan action but government intervention distorts prices so you're stuck acting without information. You're talking about how those price distortions mess up the planning of non-state entities as well.
I disagree with von Mises' conclusion that you should never intervene because in some cases the market fails and coughs up a really bad price. A government intervention into the insane housing boom would have helped a lot, although that was always a political nogo because of the Church of Rising Home Equity. Likewise right now we have a panic into T-bills and that could exacerbate the recession we're unquestionably in for.
Of course the propping itself is bad and exacerbates the boom. The point of a prop is to give you time to clean up the underlying mess (insolvent financial companies today). Unfortunately governments usually use a prop just to delay action and in that case the prop can just make things worse. MP, if I recall correctly, made this point about the Bear bailout. It was a screaming signal to unlever and unwind but TPTB hid under the talk of "a financial crisis ends when a whale comes up" and did nothing. So here we are six months later with the same mess plus some more bad loans and less time to cope with the stuff we knew was coming.
Nemo - cant read every single response you had to Nate's point (which you're right - he didn't really have a reference).
Anyway - you cant buy a put outright on a financial without buying delta, and you cant buy a call and overhedge to short.. so I cant buy a 10delta call and hedge 50% of the notional..overhedging is illegal and similarly, I cant buy a put and underhedge..
If I own stock, sure I can buy puts, but if its naked, then I must delta hedge.. so im taking vol positions.. i cant really bypass the rule..
I am an options mkt maker, and yes, I can short stock on the back of trading options... but an investor cannot circumvent the rule and start buying puts on financials.. naked.. cant happen.. thats illegal
"This is still dumb." Dumb?? There is every indication that this is dealing a crippling blow to the market. It is causing investors to sit on the sidelines instead of putting their money to work. Even if you're short, you're still adding liquidity. But when you cant short, and you believe the market is going down, then all you can do is hold onto your cash and wait.
The market has been usurped by criminals. If it crashes then these people at the SEC have to be brought to justice. This is the #1 issue, even eclipsing the bailout.
It also doesn't actually do anything, since you can still short via options and options market makers can still short period.
Third!
I heard the market makers had a problem making a market on monday.... Without shorts who'es buying ?
Nemo writes:
"It also doesn't actually do anything, since you can still short via options and options market makers can still short period."
Totally not true. There are hundreds of hedge funds that are NOT shorting right now due to public disclosure of their positions - this means at least 2 more weeks of no trading.. While short sales are a small % of total volume, this changing the rules changes peoples trust in the system. Alot of capital is going to walk away - both shorts and longs...
Dumb is a good word, but I prefer manipulative.
I call the bottom the day Crammer is shot by pissed off CramerAmerica.. Didn't he have Wachovia Ceo on TV calling it a buy at 15$
Stimulation is good, but manipulation is bad. It is the difference between having sex with your girlfriend and a 16 year old. Unfortunately, the Congress prefers 16 year olds.
page boys
there is no shortage of uncreative insanity!
Don't even try to short insanity...
Knew this was coming there wasn't a doubt in my mind. The more these clowns do the worse this will get and the longer it will last.
Nemo, you mean it doesn't do anything positive?
My hedge fund pals suggest it adds friction/cost and is doing something negative.
ate --
There are hundreds of hedge funds that are NOT shorting right now due to public disclosure of their positions
Reference?
My point is primarily about the ban on shorting itself. It does nothing. If you or anyone else wants to short stocks, you can still do it (synthetically) via options, and the options market makers are exempt from the order.
Options positions are exempt from the reporting rules. So they do not really do anything, either; if you want to short a financial stock into the ground and not report it, you can just sell the calls and buy the puts.
Dudes, I posted this story back at least an hour before the vote.
but in any case no later than 11:59 p.m. ET on Oct. 17, 2008.
I'm taking bets.
And they keep the short ban in place until options expiration...
OT
I have spent some time asking locals if they have been denied credit.
Local banker has had 148mil in new deposits in the last 2 weeks.
The clerk and trader Joe's said some of his friends a just approved for home loans.
Another said his line of credit was still available.
Banker said heloc's are limited to $150,000 even with good credit. No more $800,000.00
Credit is still available here in the PNW.
HaloScan.com - Comments
The short ban is scaring traders off. Especially the ones who were short before the ban. And I noticed the futures are down 100 pts right now per CNBC.
Sure Ella, but that's only because no one could short financials
Ministry of Truth - you should get hat tip, but the Senate has voted
Comrades,
I'm not dead yet.
YouTube - Monty Python-Bring out your dead!
Nostrovia,
Ministry of Truth --
Dudes, I posted this story back at least an hour before the vote.
And Dealbreaker had it by mid-afternoon...
CR, why would you expect anything bright to come out of this administation. The surprise would be if it did something intelligent. Dumb is its modus operandi.
Now, let us turn from the US financial disaster to the disaster in the making in Afghanistan:
Britain's ambassador to Afghanistan says US strategy is failing |
World news |
The Guardian
USA=loser nation. Dumb.
Philip Crawford --
My hedge fund pals suggest it adds friction/cost and is doing something negative.
Yes, it does add to the transaction costs, because you have to pay the spread to the options market makers. So it basically adds a (fixed) fee to enter/exit the position.
But if you happen to know a bank (for example) is heading to zero, you can still profit handsomely from shorting it synthetically.
It makes shorting modestly more expensive but does not actually prevent it. So it is stupid, but in an ineffective way, not a Pakistani "stocks must only go up" way.
the real story is how badly the 'stockpickers' like dodge and cox have played this year while warren has been a true master, waiting until the blood is at least ankle-deep.
gramm was right about this being a 'nation of whiners'.
people just don't want to hear the truth.
here's what i wonder - where did the sense of good sportsmanship go? if you can play a market better than me, kudos, you deserve your wins.
why take away the kickball? it is downright unamerican.
Manning's Fierce Prayer for Bristol Palin Manning's Fierce Prayer for Bristol Palin | Free News Videos - Watch News Videos Online | Veoh
barley:
From previous thread. Got your reference and will have to read.
Hmmm.
ot: intrade now puts north carolina in obamas column for the first time.
it is a much simpler proposition to short a stock than to go short using options.
options are way way less liquid and way way way more volatile. not to mention that they all expire worthless on a defined schedule. time decay is serious and rapid.
furthermore, the margin requirements to sell a call are very high.
so, while it is true you can still go short with it is not the same thing at all and without experience you will get burned until you learn what kind of animal you are dealing with.
also, shorting requires a different risk profile with your broker and different trading permissions.
some brokers will not let you trade options unless you state in writing that you have experience doing it already.
suns a bitches
Heck yeah. Kepp it going till it breaks! Financial companies like Ford and CVS say thanks.
My hedge fund pals suggest...
Kinda like my mentally incompetent great grandfather suggests...
"SEC Extends Short Selling Ban"
--
why dont they quit monkeeing around and just pass a law that says the djia must go up 1 percent every day...period
Nemo writes "My point is primarily about the ban on shorting itself. It does nothing. If you or anyone else wants to short stocks, you can still do it (synthetically) via options, and the options market makers are exempt from the order."
No they can't.
The ban on short selling extended from financials and has included new names daily - including today names like Textronic and Sunrise Senior Living were added. Smart money managers will start researching the non-financial names on the list to determine the reason such companies believe they need protection. As usual, these seat-of-pants rule changes will have unintended consequences. In this case, non-financial companies seeking protection on the short sale ban list have marked themselves as businesses that require additional due diligence by the investment community (i.e. problems). In the same vein, when/if House finally passes some plan, expect some ballsy financial firms to opt out of the program as a show of strength. Again, the point is that the rule change itself will have the unintended consequence of delineating between the strong and weak companies.
Regarding the original short-selling ban - an addendum was added requiring additional disclosure for new shorts of stocks NOT on the list for any hedge fund managing more than 100 mil in assets (there are hundreds if not thousands). I personally know of several that are (were) waiting for Friday to start re-shorting - their size is WAY to big to effectively trade via the options market - have you seen the implied vol on options due to this rule? The VIX is at 40 and the bid ask spreads are huge. Options for large players are more than costly - if they have to resort to buying puts to short stocks they will, and should give their money back (and I expect many will).
Any word on who the big insurance company is going to be (that's failing)?
You can not write new puts or naked calls. You may trade pre-ban puts and execute short sales pursuant to them.
Kinda like my mentally incompetent great grandfather suggests...
Hank Paulson is your great grandfather?
I monitor the Las Vegas market closely for the past two years.
Today is the big day. For the first time there is a Y2K+ vintage home (2005, 3BR, 3 Bath) available for under $100,000.
ZipRealty, Inc. - Sign In
Such a home would have been on the market 2 years ago for $325K.
Also, there are now 42 homes below 100K in the areas I monitor. There were none below $250K two years ago.
Based on my stats, prices in Vegas are now at 33% to 40% of what they were 2 years ago.
otishertz,
There are LEAPS that make the time value pretty insignificant, no? If the expiration of your options is > 1 year out (especially in this volatile environment), you're gonna get your chance to sell at a gain. And you can hopefully collect at long-term cap gain rates...
I've never shorted...heard there were some complicating factors (like paying dividends on the stock, being forced to return it before you'd like to, etc...), but mostly just chicken. Thus my alias here.
Yeah, that's what I need, Nemo, in this lovely financial environment; counterparty risk from using an option instead of a straight short.
CR, please start a thread on safe and lucrative ways to cheat on taxes, now that the schmucks/shyster/shylocks in D.C. are shaking us down via threats and bribes.
I will not pull the lever for McCain in November. To hell with him. Sellout.
Hey All - talked to a senior vp friend of mine at Wells - discussed the bailout bill, economy, banking, etc.
I asked if WF is going to lower lending standards in the wake of the bailout bill to spur the economy. He said on the contrary. They plan on tightening up credit for the foreseeable future. That, plus bring in a larger deposit base and containing expenses are the primary business drivers company-wide. "Work good credits" was what he said.
I'm still not seeing data about qualified borrowers having difficulty getting loans. He's not seeing it either.
Many years ago I trained in Aikido. During one early session still vivid in my mind, we were paired up, one person told to continually follow and punch the other, the other to escape the punches. As the receiver, I can tell you I was hit numerous times, and each strike hurt a lot.
Then, we were instructed not to escape the punches, but rather to move towards and behind our attacker. In this case, the less swift among us (ahem) took a single hit, while those more trained managed to completely avoid any pain.
A lesson the people and the Senate could learn much from.
Awareness and appropriate action are so much better than drawing away in fear.
Based on my stats, prices in Vegas are now at 33% to 40% of what they were 2 years ago.
RE | Homepage | 10.01.08 - 11:34 pm | #
But then you have to live in Vegas.
Seriously, wait. It's gonna get a whole lot nastier.
Wells has a secret..they are way too quiet.
we need a write-in candidate...
alfred e neuman
...
oh thats right he's already preznit
WHAT ME WORRY?
Can you say Heloc?
Hoocoodanode?
RE: WFC
Can you say extending delinquent definition to 120 days from 90 day ?
-K
right about now theres a dozen or two congressman being water-boarded
from a broker regarding the original short selling ban and its effect on options...
"The SEC has imposed emergency rules for short sale and economically similar dealing in approximately 800 companies, mostly from the financial services sector. Some of the new rules affect options trading strategies that can lead to a short sale, even if temporarily. The following limitations on option trading have been put in place to conform to the SEC regulations as available from 22 September at 09:30 EST."
Nite.
The Times are no longer Interesting.
They are getting downright predictable.
why the futures down?
Can you say Buffet worship wearing thin?
Sen. Landrieu (D-LA) (voted NAY) said:
"Unfortunately, it appears that an influx of taxpayer money will ultimately need to be a part of any attempt to stabilize and restore faith in our financial sector. However, if the people of Louisiana have learned anything in the last several years, it is that simply throwing money at a disaster doesn't fix the problem unless paired with wise reforms to the practices that failed us.
http://landrieu.senate.gov/farmers/index.cfm
Based on my stats, prices in Vegas are now at 33% to 40% of what they were 2 years ago.
Whoa. [/keanu]
Still wouldn't want to live there.
help...on my wifes Macbook. How do I copy and paste?
ate --
I personally know of several that are (were) waiting for Friday to start re-shorting - their size is WAY to big to effectively trade via the options market - have you seen the implied vol on options due to this rule?
In other words, no, you do not have a reference.
"Implied volatility" is irrelevant in this context, because for a synthetic short you buy the put while selling the call. Anything you lose to high volatility on the former you get back on the latter. (Do you actually know anything about options?)
Bid/ask spreads are quite relevant, but they do not look that bad to me. Even for NCC at $2.89, you can enter a synthetic short at an effective price of $2.70, or a 7% premium. Nasty, yes, but that is for a penny stock, which is the worst case. For real companies, the premium is significantly lower.
The options market has huge liquidity as long as you are willing to pay the bid/ask of the options market makers. They take the spread and short the stock for you, and they will do so in huge quantities because that is how they make money.
Thanks Mary. Reform first. Bailout later, or never.
Interesting times wrote
...the times are getting downright predictable..."
yeah but the times they are a changing...
Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.
bob dyla
anyone with apple help?
Those who need to be gotten to will be gotten to.
Remember those envelopes Daschle and the gang got just before the PATRIOT ACT? This is hardball.
Power and money to those with the most power and money. It will pass. The quality of the idea vis-à-vis saving the US is irrelevant.
You're all doomed. Time to get in the bunker.
are you kidding ?
Apple + C to copy
Apple + V to paste
are you kidding me
what's up...maybe
Ok so similar to a PC...Now where is the friggin apple button?
Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!
Sarah Palin On Flute: Watch Her Beauty Pageant Talent (VIDEO)
why the futures down?
Traders learned they can blackmail Congress, perhaps?
Don't know if anyone else has posted this article, but if not, for those of you who were stating the bailout is about Goldman and Morgan Stanley, here's more ammo:
36 Hours of Alarm and Action as Crisis Spiraled
Spoiler alert* - the main writer of this piece, Joe Nocera, was a proponent of the "rescue" when it was a wee three pages long.
please give us a break with pali
found it
otishertz --
options are way way less liquid and way way way more volatile. not to mention that they all expire worthless on a defined schedule. time decay is serious and rapid.
None of which is relevant in a synthetic short, where you are short the put and long the call. All effects of volatility and time decay cancel out, and the result is that you earn precisely the return of an actual short position.
furthermore, the margin requirements to sell a call are very high.
Actually margin requirements on a synthetic short are typically less than for a physical short. See here for a description.
apple (command) button
left of space bar
has icon on button looks like double infinity shape..kinda sorta
Nemo, I have used puts both for leverage and because I didn't want to get into any margin calls. (Just started with options in May) I figured the spreads were worth the gamble, especially since volatility in these times must be huge. Arrogant, but lucky.
Since uncovered call writing is out, how else do you create a "synthetic short"?
The US troops in Japan and Germany are only temporary.
I wrote:
where you are short the put and long the call
...and of course I meant that the other way around... Long the put, short the call.
Help: where should I go to get a rape kit?
Also, does an ass-pounding by 74 Senators count as rape, technically? Whatever it is I want to see justice done.
shortcourage,
i haven't messed with long term options (LEAPS). my forecasts are shorter term so i match my bets to my time frame. your point is well taken but time premiums are expensive. also, far out derivatives are very thinly traded. for example, I wanted to buy 2008 $80 oil futures in 2005 but they were not offered at my broker.
the most rational choice is to short the calls instead of buying puts but once again, that takes big big margin.
still, you can't beat the leverage. silver futures options have a multiplier of 5000. this means once your strike price is breached you make 5000 for every 1 dollar movement in the underlying. you just have to be right AT THE RIGHT TIME.
PeakVT writes:
why the futures down?
of the 12 congressman strapped to the boards and underwater
only one has broken so far
""Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!""
Oh, god no! Not more useless, pointless 'first' postings! You fellow comrades know that some blogs (Big Picture for example) actually BAN people who do the 'First' thing, right?
But then you have to live in Vegas.
I lived there (outside) until a year ago.
yogi --
Since uncovered call writing is out, how else do you create a "synthetic short"?
That is the only way, I am afraid. It's called a "synthetic short" because it behaves just like a real short, including the potentially unlimited downside.
That's the price you pay for avoiding the decaying time value...
Help: where should I go to get a rape kit?
I think Palin is selling them.
Futures are down because now that this thing has passed people are realizing it is not a cure for the markets.
The best quote I heard during the debate was "this is not a beginning of the end but an end of the beginning".
I thought bailout hangover would begin on Monday. Looks like it could start tomorrow.
Sorry, couldn't resist.
ok i cant take it
one guy want to take a break with palin
the other guy is using his puts for leverage so he can gamble on the spread
sheeeesh
Thank you. How does the little guy get in the big boys default swaps?
""Ok, fllow bloggers, Nemo has a window open for Haloscan to type in, and another open to see when new stories are posted, so if you want to be in a better race, better multitask!""
Actually I believe Nemo built some type of software that alerts him to new post... Came from CR so I am prone to believe it.
Are you saying I should use my puts on Palin? I'd almost be willing to take my chances with the full Senate.
i said enough with palin hype
only one disaster at a time
yogi
dont screw with the senate...likely to get a desease
Why are these firms getting free protection from short-sellers by the Government? Here in Jersey, if Vito the Enforcer is protecting you, he's also helping you lighten your wallet.
Why don't the "please don't short me" firms start pitching in to fund this bailout?
talk to everyone in the AM.
when i say sell the call i mean short the call option. not write a call.
In other words, no, you do not have a reference.
Lots of references, but one indicating that the biggest short selling funds have totally stopped trading? Nope!
"Implied volatility" is irrelevant in this context, because for a synthetic short you buy the put while selling the call. Anything you lose to high volatility on the former you get back on the latter. (Do you actually know anything about options?)
I used to run a hedge fund. Now I run a blog. Obviously thought you meant buying puts directly not putting on synthetics - bid asks would kill you with any size there. I still think the short selling ban was to give politicos some breathing space and put some high profile money managers who laid into CDS on some financial firms in jail. I expect those announcements will be coming. Meanwhile, lack of liquidity is going to creep from credit mkts into equity markets.
Actually I believe Nemo built some type of software that alerts him to new post... Came from CR so I am prone to believe it.
It's only like 40 lines of Perl...
Someone else will write one soon and then the game will be really boring.
Back to arrows, from previous post:
The arrows provision seeks to reverse an anomaly in a 2004 law that created the 39 cent excise tax on the weapons. Intended the levy more expensive arrows, the tax also applies to arrows used by Boy Scouts and other youth organizations that cost about 30 cents a piece. Ten manufacturers in nine U.S. states stand to benefit from the change, according to a description of the legislation from Wyden's office.
That Landrieu's not so bad, and she's PC.
ate --
I still think the short selling ban was to give politicos some breathing space and put some high profile money managers who laid into CDS on some financial firms in jail.
Agreed.
Meanwhile, lack of liquidity is going to creep from credit mkts into equity markets.
Perhaps... But I suspect lots of people are going "all cash and wait", so even if we observe that, it will be hard to say how much is due to the short-selling ban. (I do think the exemption for options market makers makes a huge difference.)
Anyway, sorry if I got overly rude. I think I'm getting drowsy, and events in D.C. have me generally pissed off.
Peace.
I always preferred what Fark.com did with the 'first' posts: changed the word 'first' to 'boobies' and then upped your post time to something like 12 hours in the future so that your 'first' post would perennially be at the bottom of the thread.
Between that and the razzing of the regulars it definitely eliminated the problem.
Nemo doesnt have no special program..
hes got a pet monkee on another computer next to him
and the monkey is trained to keep hitting the refresh button over and over
until
a new blog pops up, and then scream for a banana
Senator Wyden
The serious threat to the nation's financial system requires Congress to act as wisely and as quickly as is practical. But that doesn't mean Congress should act recklessly.
Unless we address the underlying faults in the system that brought us to this financial abyss in the first place, we may simply be building the world's largest bridge to nowhere.
Press Releases | Senator Ron Wyden | Standing Up for All of Oregon
mock turtle --
and the monkey is trained to keep hitting the refresh button over and over
Actually that's my job, and the monkey does these posts.
Nemo
touche'
Well screw my million monkeys and a million keyboards...
Time to 'downsize' 999,999 banana-eating parasites.
you can short an spx component or a basket of them trivially by shorting ia spu and buying everything but what you want to short
tihs would need program trade capability and min size of about 50 contracts = $12M give or take
plenty of b/ds would love to put this on for someone
http://craphound.com/images/MADGreedSpirit.jpg
SIV Sigma bites the dust. WSJ:
Lehman's default on Sept. 15 precipitated a sharp drop in the value of the bank-issued bonds that make up nearly two-thirds of Sigma's investments. That, in turn, led to increased margin calls from lenders and a depletion of Sigma's cash reserves, according to a report from ratings firm Moody's Investors Service.
Nate, why would short selling ban cause any money managers to go to jail? They could lose money and that's worse than jail, but it's still not jail ...
Wow, ransom not only works in Congress and Wall Street, but off the shores of East Africa as well:
Pirates off Somalia get $18-30 million ransoms: report
Yahoo! 404 - Page Not Found
barley:
From previous thread. Got your reference and will have to read.
Hmmm.
homedad43 | Homepage | 10.01.08 - 11:30 pm | #
huh?
emo,
i don't do synthetic shorts but i do sincerely thank you for the info. i do not know everything and find combination options trades confusing and cumbersome.
in my account, when i have sold short a listed call option the margin was multiples higher than simply buying a put. it makes sense for it to be so since i am exposed to "unlimited" loss shorting the call. my potential loss buying the put is the price of the put.
i trade fundamentals and wait. i don't get too complex. I am in the market. what matters to me is being right.
So guys, are we ready to take a deep breath and try to win the House vote (again) on Friday?
Remind them of what the bailout plan really means:
File Savr - Free File Hosting
artichoke writes:
Nate, why would short selling ban cause any money managers to go to jail? They could lose money and that's worse than jail, but it's still not jail ...
The ban itself won't send anyone to jail - but was enacted as a 'time out' so as to gain evidence on some high profile fund managers that were egregiously using shorts in the credit markets, then spreading rumours, and because of their size and credibility, caused self-fulfilling prophecies wrt business dealings (i.e. willingness to take counterparty risk) with the Bear Stearns and Lehmans of the world. I don't think short selling stocks is the problem but rather the credit default swaps and other derivatives - but to ban and enforce that and we all might as well be trading baseball cards..
I've been listening to talk radio the past couple of days. Yesterday there was a lot of public outcry, the calls were 10-0 against the bailout. Today it seemed that the hosts were clamping down on the public opinion and allowing the issues to be diverted.
I called into one show last night (on AM station WWL) and decided the best use of my time was to give the address to download the SIFMA analyst call File Savr - Free File Hosting
.
the bailout is unconstitutional!
that that it matters, and living here the past 8 years... what does constitution matter anyway?
don't play by the rules. Break 'em. and break 'em big.
Can you hunt squirrel with wooden arrows?
artichoke writes:
So guys, are we ready to take a deep breath and try to win the House vote (again) on Friday?
the passage of the economic shaft stabilization act of 2008 by 75 senators means something...
it means that phone calls got made and deals got struck.
another shot across the bow of the house of reps is worth a try but be advised
it is a long shot
the water-boarding of congressman continues
This evening, Conjure and I were discussing the new uses of the Fed discount window.
Some of you may remember Commonwealth Bank (1969 or '70). They had gotten into a lot of scrapes with the Fed over "partner" banks and an application to open an office in Bermuda.
Anyway, Commonwealth ran into trouble and applied to the discount window for funding. The Fed said, sure, we'll open the window...after your board of director and executive suite resigns. They resigned the next day and the discount window opened for them.
Well, now the discount window seems to have all kinds of uses and is open to everyone, kind of like the drive-up at Wendy's. The next thing you know, they'll be asking if you want to super-size your order, or get a passport photo.
My, times have changed.
WhatDoesItMean.Com
fwiw ... this source is thought provoking but, I've found, frequently unreliable
Ameriquest commercials are much funnier in hindsight.
Don't Judge Too Quickly... We Won't. - Video
This set is called "Don't Judge Too Quickly, We Won't."
otishertz | 10.02.08 - 12:14 am | #
i trade fundamentals and wait. i don't get too complex. I am in the market. what matters to me is being right.
Nope, you are in the market to make money. Not to be right.
Thats trading/wall street. Make money going up, coming down
thats something I learnt going from a being science guy to a worker bee. No, is still dont know how to do it. I can write a copula model for CDO's but dont know how to use it. (No, I did notwrite any model for anyone, and have seen models undergraduates could have done better).
"artichoke writes:
So guys, are we ready to take a deep breath and try to win the House vote (again) on Friday?"
I sure am. I still got lots of faxes to burn up in my metrofax account.
Calling - what a huge pain. It's like phoning a radio station hoping you're caller number 20.
And now the emails to the House of Reps are being throttled. Let me guess - they couldn't afford an extra 50GB hard drive to store the messages. Yeah right.
comrade sbarrkum,
if i am right i make money. i did not say i was unidirectional.
what are you talking about?
I have vowed to verbally confront an elected official who votes or has voted yes. I may need a real bail out.
It's been said before, but if the switchboard is busy, try the local office in the home state. Also, in rating public opinion, politicos weigh calls much more heavily. Emails are too easy and too easily faked or mass produced.
Good luck.
"Emails are too easy and too easily faked or mass produced."
What? I just wanted to know if Feinstein was interested in buying some Cialis.
comrade sbarrkum,
making money is a by-product of being right, always, and throughout my life. money is the score. this is my perspective and it works for me.
whenever i have focused solely on the money i have suffered. when i have focused on the reasons for doing something i have prospered.
but i do understand how greeeed works for most. for a while anyway...
Being right, or having might?
Can't short'em, wont buy'em or their products or services. Screw the bastards.
For you debt deflation historians out there: At the start the "senior currency" strengthens before augering in. Yes? Are there typical tells for the change in direction?
The Imperial Senate will no longer be of any concern to us.
I've just received word that the Emperor has dissolved the council
permanently. The last remnants of the Old Republic have been swept
away.
Seems apropos.
"Pirates off Somalia get $18-30 million ransoms: report"
The Navy boys have been given permission by Somalia to use force on the hijacked Ukrainian ship carrying the T-72 tanks.
That doesn't mean that they will use force, but that's one less roadblock...
"For you debt deflation historians out there"
there is only one real historical model, that being Japan last decade, of cousre. all pre-73 history is irrelevant.
otishertz | 10.02.08 - 12:28 am | #
if i am right i make money. i did not say i was unidirectional.
Mea culpa. saw the sentence, "if i am right"
I just saw the Buffett in Interview on Charlie Rose. I regained some of the admiration that I had for Buffett's views before this, but not fully. Warren is without a question a man of integrity. He said that this plan will make money ONLY IF the treasury pays a fair price and he said that is by far the most important component. He also said that the RFC experience shows that the country will be very critical of any purchases that seem overpriced. HE also said that if it were up to him, he would probably do an RFC type preferred stock deal. So really, Buffett agrees with the smart economists much more than I had thought. Another thing is that he said that for this to work it has to be done immediately. I suppose he disagrees with the Iraq War comparisons. I'm not sure I'm on the same page as him, especially because Paulson said he won't be spending more than 50B per month.
Anyway, there is still a big hole in Buffett's logic. As CR and others pointed out, if the US Gov is to buy at fair/undervalued prices, the balance sheets will be violating capital ratios and therefore insolvent! So... I don't get why Buffett doesn't fear this? Could it be a liquidity thing? Or could it be that he is expecting the private sector and SWFs to step in and buy equity? I don't know but it sounds like we will need an RFC type solution anyway.
Another big Buffett contradiction. He said that the Paulson plan is immediate vs. RFC isn't. But, then he said that the patient will not recover right away.
Questions linger...
Comrade LA Investorgirl | 10.01.08 - 11:34 pm
where'd you hear this?
@WeatherHelm
LOL!
yogi,
being right is why i trade. it comes from certitude that is far from infallible. it is like a game of trust with myself: proving to myself that i believe what i say.
ya'll are no doubt reading hubris into my word splatters and that's fine. i am wrong all the time. when i'm wrong i get a bill. i call it tuition and i pay the bill.
if i go bust i guess i'll just get a job but i'm 40 and never worked for anyone but me. this delusion works for me. keeps me on my toes.
that and the realization that i am truly, profoundly, a dumbass.
but whatever, you work with what you got.
yogi | 10.02.08 - 12:34 am | #
Being right, or having might?
When you get single minded about the goal doesnt the old adage "ends justify the means".
Me thinks Paulson is in that position.
I really think he sees he is doing whats in the best interests of the country.
The convertibles market has been closed since the ban. These companies still need to recapitalize and converts are off the table and equity too expensive. The 700bil will most likely be used to support the large banks who in turn will buy the smaller toxic ones. The hope is mark to market suspension will delay the need for write downs in other loan types. I still don't see how this helps the interbank market. They all know the crap that is on some of these balance sheets.
Gumbo writes:
"For you debt deflation historians out there: At the start the "senior currency" strengthens before augering in. Yes? Are there typical tells for the change in direction?"
In the Japanese case (1990s-), the currency tended to strength and it required massive intervention to keep it cheap. At least the intervention seemed massive until we saw what the Chinese have done.
If a debt deflation really rips through the U.S., domestic demand will collapse. That would tend to close the U.S. current account deficit, and the currency may be under upwards pressure, as was the case in Japan.
As for the earlier debt deflations, they were pretty well all pre-WWII. The Gold Standard was in place, so it's a bit harder to follow the currency market developments. But from what I recall, the tendency was to push currencies lower versus gold to create liquidity in the banking system - a.k.a. competitive devaluations. But that mechanism doesn't seem applicable to fiat currencies, as liquidity can be adjusted without reference to exchange rates.
today i attempted to wire some money from my tradeking broker. could not because my reserve fund-in treasuries is slow on redemptions. could this be part of the problem. i believe the Reserve fund is the biggest money market
I don't think Buffett has integrity. Otherwise a successful investor like him would not have a big hole in his argument.
He is good at making the listener think he has integrity, saying very solemnly all the stuff he has to admit anyway.
The key to his comments, from what you wrote, is that "it must be done immediately". All these guys say it must be done immediately, there is no time to sit back and consider alternatives, even though alternatives exist that achieve what these guys "say" they want to achieve.
That's actually because the real purpose(s) is something different. Bank analysts were told the real purpose is to transfer wealth from taxpayers, making healthy banks healthier. File Savr - Free File Hosting
masta shake,
Very interesting comments.
1) Why do you feel support will be for larger ones, and how large is large? IS STI large? is FITB large? is DSL large?
2) If MTM is suspended and capitla ratios too, in a way, solvency issues are suspended. But in another way, it just makes matters worse because there will be no way to assess the actual tangible asset situation and liquidity if each bank, so interbank lending will get worse with this opacity.
3) Granted this will not help interbank lending but isn't the MMF guarantee + direct fed lending + FDIC expansion enough to do that job?
Oh by the way, this plan is NOT immediate. Banking analysts were told it would take two to three weeks before any transactions could take place.
Integrity? Buffett has billions but he doesn't have that.
and the monkey is trained to keep hitting the refresh button over and over
Actually that's my job, and the monkey does these posts.
LOL!
Buffett interview on Charlie Rose is worth watching, don't have a link, watched it on TV, but would encourage all to watch it.
All these guys say it must be done immediately, there is no time to sit back and consider alternatives, even though alternatives exist that achieve what these guys "say" they want to achieve.
As I said, Charlie asked about the preffered stock solution and he said he thought about it, and he would do it, but he thought the 700B was also necessary. I agree with you that there should be time given to debate it, but that then makes the whole thing less powerful, which is why personally I don't believe in the 700B plan at all. I believe in an RFC preferred plan only, combined with various other measures.
probert I agree, all these information-hiding methods (no short selling, suspend MTM) just make things worse. they will not restore confidence in this environment. they will eliminate the possibility that anyone could have confidence.
God it is nice to be back.My computer crashed at am monday,and i tried to follow things on TV which may have caused permanent brain damage.I did watch cramer for the first time...and last.I will say that the Bailout bill is probably a better idea than nuking Iran.probably.
Oh by the way, this plan is NOT immediate. Banking analysts were told it would take two to three weeks before any transactions could take place.
Did you read my post or are you just talking to your wall? I already made that exact comment. Buffett is contradicting himself by saying it must be done right away, even though Paulson is in less of a rush. Buffett is clearly not thinking right about this. But he has set a conditions of the securities being purchased at BARGAIN prices, and so he has integrity.
Will Paulson actually buy them at bargain prices? I don't know.
Futures down a little? That's just the cold steel of the blade against your 401k/rep's neck. This is as fun as trading arms for hostages.
RFC method is a sound one. Hoover wasn't bad, that's why the Democrats keep saying that his programs were actually done by Roosevelt.
I know I also hate this FDR revisionism
Probert if you would please refer to the analyst call you would see the banks are promised that the securities will be bought at above market prices.
I assume Sir Warren knows what was said in that call which had 800 listeners, according to a Treasury guy, including moi.
The Navy boys have been given permission by Somalia to use force on the hijacked Ukrainian ship carrying the T-72 tanks.
That doesn't mean that they will use force, but that's one less roadblock...
Hank Paulson's Mom | Homepage | 10.02.08 - 12:40 am | #
Permission from who? Somalia does not have a gov't, just a few Ethiopian Troops protecting the warlord of Mogadishu. Like the permission of the Somali govt has anything to do with the question. The big question is that the crew of the ship has mostly Russian Nationals, and so it is sort of the russian call on if/when to storm it.
The only benefit I see to suspending MTM is that it will allow banks to avert technical Events of Default that could occur if their numbers are too bad. They can invent the number that avoid such events.
It will be like the ratings given by ratings agencies. They came to be more or less meaningless except for setting an upper bound on the quality of something, and for technical reasons when terms of a contract depended on a rating.
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This Is Definitely Going To Be An Issue For Brownback This Is Definitely Going To Be An Issue For Brownback - Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip
We mentioned earlier that for some reason, the Don't You Care About Golden Retrievers With Leukemia Act had this on page 300:
i can't help wanting the shorts back so that they will drive another opinion into the stock market. there will have to be a short term down burst when they are allowed back.
bgates writes:
all pre-73 history is irrelevant.
I'm pretty sure it's that attitude that got us in this mess in the first place.
"Curious about Wooden Arrows for Children?
There may more to this than you think!"
Senate found shit sandwich more palatable by adding a slice of pork...
HPM: "The Navy boys have been given permission by Somalia to use force"
Dirk: "Permission from who? Somalia does not have a gov't"
Dunno...maybe these guys?
Somalia: World can use force against the pirates
"...Mohammed Jammer Ali, acting director of the Somali Foreign Ministry, told The Associated Press on Wednesday that he was giving new permission for such actions.
"The international community has permission to fight with the pirates," he said.
Somalia's president, Abdullahi Yusuf, also appealed to foreign powers. "The government has lost patience and now wants to fight pirates with the help of the international community," he said in a radio address..."
financial stocks are all hanked up.
artichoke writes:
Probert if you would please refer to the analyst call you would see the banks are promised that the securities will be bought at above market prices.
Well above, as the "the plan" is to save healthy banks (not sure what that is anymore) and let the others go. King Henry decides.
For those who didn't see/here the analyst call refered to see here for live blogging during the call:
Bailout Bill To Make Money Market Liquidity Crunch Worse? « naked capitalism
and audio:
File Savr - Free File Hosting
dealmaker:
Whatever you think of Buffett (someone was trying to convince me earlier that he was sullying his name, or that he had sold out by whoring out his reputation to buttress Goldman Sachs) you really have to give it to the guy. If nothing else, he has managed to get a lot of press out of all this. (Ok, I admit it, I just wanted to use the word "whoring" and "Buffett" in the same paragraph).
pirates are more honest than politicians. politicians are land pirates.
"Somalia's president, Abdullahi Yusuf, also appealed to foreign powers..."
LOL.
Yeah. Somalia's "president", i.e. chief warlord who happens to be still alive ATM, with a network of goons surrounding his presidential "palace".
We should carefully study these "loose lands" like Somalia. The tactics and strategies may become useful in the US in a few years.
"there is only one real historical model, that being Japan last decade, of cousre. all pre-73 history is irrelevant."
My God, even the Talmud goes into detail about people starving in the streets despite the price of bread being low, in the First Century.
Why are the asian markets down?
They should have been up because of this bailout...
What? The Somali Naval Fleet couldn't handle a bunch of two-bit pirates?
Found the answer too.
Asian stock markets retreated Thursday as broader concerns about a global economic slowdown outweighed any relief over the U.S. Senate's passage of the bailout package to rescue the U.S. financial system.
Yahoo! 404 - Page Not Found
Naked Capitalism has a new post, mostly authored by "FairEconomist", with an interesting twist on the possible unintended consequences of the TARP/No Banker Left Behind bill:
Naked Capitalism
"...When Paulson dumps out his 700 billion in treasuries it's going to be at the short end. That will drive up rates for short-term treasuries. This will obviously draw even more deposits into the treasury MMs. That means even less in the commercial MMs and thus less working credit, the eventual commercial MM product. Hence Paulson's billions remove working capital by competing for the deposits that could get used to make working capital loans. That 700 billion is going to go to fairly long-term mortgage securities. So Paulson's billions divert credit from working capital to long-term mortgages - from where it's most needed to where it's most wasted..."
Never believe any of the "reasoning" in the financial press. Asian markets are down and find your own reasons.
I don't know the reason. But theirs sounds like fluff, did he do a scientific poll of the traders in the Asian market to see how they feel about the bailout's progress?
SIV Sigma bites the dust. WSJ
Comrade Sub-Prime Shady | 10.02.08 - 12:11 am |
Ha! I read that as SIX Sigma, and breathed a sigh of relief.
My bad.
Life in corporate America sux and I thought my ashamed black belt warriors/co-workers had been freed.
Carry on.
otishertz:
I think we are on the same page with the dumbass thing. My perspective is little different though. I don't care whether I'm right, as long as I profit. This attitude works really dealing with technical people: they get to be right, I get to make money.
artichoke: When the smoke clears and Buffet explains what he did, everyone is going to be in awe. He has had years to brood over this. Years to hire the best people money can buy, to model just this scenario, the scenario where weapons of mass financial destruction are detonating on their accord. With his resources, he could have modeled a vast number of scenarios to find out where the profit will be.
And there will be profit, no doubt.
I'll be back into securities probably early 2010. I haven't seen capitulation yet. Once "everybody knows" that stocks are horrible, I'll be 25% mutual fund, 25% individual stocks (spread across various sectors), 25% REIT. I'll leave the rest in coin, just for fun.
Probert if you would please refer to the analyst call you would see the banks are promised that the securities will be bought at above market prices.
Ok I will look at it. So far I have only read the summary, still not listened to the MP3. If that is the case, Buffett has simply not taken enough time to think about this and/or is too close to GS.
BTW Yves Smith is out with some new related stuff, and not simple to think about.
You ever thought about the people who read these comments with laughter.
Who watch the events and cast a cynical eye?
Who know the agenda and wonder at our innocence...
Ever wonder why other human beings take joy at others misery?
Sociopaths. Also known as winners in our society. Great place to be. Fuck them.
Ha! I read that as SIX Sigma, and breathed a sigh of relief.
I did too, lol. We had one of those wienies in the CCU a few months ago. One of the new Organizational Effectiveness bozos. He was distressed because it was hard to "model" our unit because based on acuity it can be 1/1 care, at the most 2/1. We keep patients on ventilators highly "lubed" as far as bowel movements are concerned to prevent any strain. As he was following us around (becoming familiar with our workflow) one of my patients took that opportunity to eliminate his TPN diet. Needless to say we haven't seen Mr. Six Sigma back up on our unit;)
Re: When Paulson dumps out his 700 billion in treasuries it's going to be at the short end. That will drive up rates for short-term treasuries. This will obviously draw even more deposits into the treasury MMs.
What you want IMHO, is for people to buy bargains and take cash out of a panic state and get people interested in future value; the only way to do that is to let stocks drop in value -- stocks are still overvalued IMHO and obviously, so are short-term Treasuries.
As he was following us around (becoming familiar with our workflow) one of my patients took that opportunity to eliminate his TPN diet. Needless to say we haven't seen Mr. Six Sigma back up on our unit;)
Whereismyretirement | 10.02.08 - 1:56 am |
Too too funny! I doubt it would work well in my environment, but damn funny to hear that at least one koolaid drinking ninja was routed from the workplace.
Buffet interview with Charlie Rose in case you missed it on TV.
Charlie Rose - Home
Calling - what a huge pain. It's like phoning a radio station hoping you're caller number 20.
And now the emails to the House of Reps are being throttled. Let me guess - they couldn't afford an extra 50GB hard drive to store the messages. Yeah right.
Der Kommandant Weather Helm | 10.02.08 - 12:27 am
It's because of all the storage needed for the White House emails circa 2001-2003.
Whereismyretirement | 10.02.08 - 1:56 am |
By the way, I thank you for all that you do. It's a very difficult job and without people like you we'd be a lot more effed up than we are now.
Having said that, can you stick a DNR tag on IB's you might see in your CCU?
I kid.
Having said that, can you stick a DNR tag on IB's you might see in your CCU?
Would that I could!
Glad to see everyone's fingers got tired after all those heavily over-commented posts. Not that it wasn't cathartic, but I was starting to worry about the strain on CR's eyes.
do you guys get cnbc squawk europe? (english accents). Pretty entertaining studio guest they have on right now.
I was just about to launch into one sd.
Curious... has anyone ever heard Roubini talking about short selling?
I personally think that we could survive without shorting in general. Is there any reason to think we couldn't?
Roubini, Roubini. He is master of chanting buzzwords. He picks up daily the latest and greatest phrases and turns of phrase, and then adds them to his ever growing media litany. PR dream machine.
This is still great infotainment to go with squackbox:
YouTube - The Spiral - Part I - Those Vultures
Uncle B,
You missed my post to you on Paradise Lost, no?
Sadly I missed almost all comments on all posts today.
I don't anyone is conscious enough to care if you repost it
Or send me link, better.
UB,
I sink szhorting allows for equilibrium in regard to opportunity to bet on down versus just up. I need to stretch the back after that last post on NC, so let me ponder that more...
Nine, nine
It was just a repost of wiki and some paste of: Paradise Lost is an epic account of the Fall of Man. Paradise Lost - Wikipedia, the free encyclopedia
Nothing, just good to see you, be right back, I feel that was an epic post for yves, but most of this crap is lost within minutes, so just thinking out loud
Ok, I have to sleep though, since I forgot to do that yesterday, and I've got an 8:00 appointment.
I like to float that question once in a while, though, about whether we neat the shnorts at all. I would be perfectly happy without them.
Every up and down in the stock market has a 'reason' that the media/analyst folks are sure about. Has anyone every admitted on the teevee that they didn't have a clue why the market (or futures) are up/down?
They have a magic phone that calls the long dead oracle of delphi who has the reason of the day at hand. Mr. market speaks direct to the oracle, talking in Klingon.
It just wouldn't do for people to admit to being without an explanation. Some days the messages get mixed from the oracle and one channel says reason A and another says reason B. This is due to NSA having a resonant loop somewhere in their wiretaps, and yesterday's or last year's reason gets recycled.
Ok, ding ding, Don't let the gall wasps sting.
Is our "fair economist" the same one who wrote the post on nakedcapital?
He did a very nice job.
Of course we need the shorts. The whole mechanism of Wall Street depends on the gossip and rumor provided by the supposed machinations of the Adversary (Ahriman, I think).
In regard to shorting yes you do need it, because as with a Treasury note, you have price and yield and the have a relationship...
More?
These inverse relationships allow one person to buy while another sells, i.e, one person may buy Treasuries when the price goes down, in order to buy more units of a security that will go up in value with both yield and price, however, as we see now, people that want safety are willing to buy fewer units at a higher price -- which creates an opportunity for someone that wants to sell. Yah, you need this in stocks as well, because of the P/E and the E/P, yah, oui?
This is interesting to me because Treasury has a flood of synthetic cash to flood the markets with artificial liquidity, thus if they act like PPT and support shit stocks, the value is questionable and the future value is dis-connected from present value, because now, no one really understands how to value "shit".
Any names for this "major insurance company" about to fall according to Sen. Reid?
Furthermore, as Treasury floods the bond market, the same thing happens, but the most interesting part, is that earnings should be falling in a recession and thus earnings yield, the inverse of the P/E should fall and the price should fall, so if we allow them to step in and screw with valuations, we don't really know how to compare a shit P/E or E/P to a treasury yield that is being forced down.
These people need to back away from the bazooka and piss off, allow the markets to fall and then, ahh..... just a sec
IMHO, he is full of shit with the word "major"
"Any names for this "major insurance company" about to fall according to Sen. Reid?"
I've seen nothing.
Ranting continues...
Why did customers leave WaMu? Did they leave because of liquidity problems, or was there a confidence problem? Was that a market problem or a social problem? My kid had money there until the very last day, because she had faith in them and liked them, and she didn't have trouble getting transactions done, but then she finally bailed because it looked like it was going to crash. That failure had been identified a year ago, because WaMu had way too many shit loans and they had too much cash burn, thus it was obvious that management and the government were not acting to protect the stability of that system, which created a lack of confidence and then a state of panic. There was never a liquidity problem for customers, but there was a condition of distrust brought about by poor management, poor accounting and a lack of government intervention a year ago!
Im tired of this!
Re: insurance
I gave a hint/guess a few hours ago
Apologies if it's been pointed out before, but CR and buymyshitpile are getting mainstreamed:
Failout Fun - The Troll Blog - Newsweek.com
Next up, my Aunt Mary from Cucamonga with her take on lifting the short selling ban...
Europe is happy that the bill passed.
Asia however remained unconvinced.
The sentiment around EU is that the US made this mess( although we participated a bit too ) so you should solve it.
Lets see if the US congress does the same.
CRVIX indicates more stock market weakness some time soon.
Bombshell ! A Bailout for Foreigners ! Screwed by Goldman Sacks Again !
"For nearly a year, we have been asking ourselves why the investors and foreign banks that bought up hundreds of billions of dollars of worthless mortgage-backed securities (MBS) from US investment banks have not taken legal action against these same banks or initiated a boycott of US financial products to prevent more people from getting ripped off?
Now we know the answer. It's because, behind the scenes, Henry Paulson and Co. were working out a deal to dump the whole trillion dollar mess on the US taxpayer. That's what this whole $700 billion boondoggle is all about; wiping out the massive debts that were generated in the biggest incident of fraud in history. Rep Brad Sherman explained it like this last night to Larry Kudlow:
"It (The bill) provides hundreds of billions of dollars of bailouts to foreign investors."
Yes, ladies and gentlemen, we are paying for Wall Streets illegal sales of these toxic assets overseas.
Not One Dime!
Not One Dime! :
Information Clearing House - ICH
Screwed by Goldman Sacks Again !
In case you haven't heard the CEO of Goldman was in the room when AIG got bailed out ... Why is this important ? That AIG bailout saved Goldman Sacks a cool 20 billion dollars. It only cost the tax payers 85 billion in loans.
Wall Street's Infinite Sleaze:
Dean Baker: Wall Street's Infinite Sleaze: Goldman and AIG
They said subprime was contained, and we laughed.
They said the banks were solid, and we laughed.
They said it was only a tiny proportion of mortgage loans, and we laughed.
They said CDOs were a smart innovation that moved risk to where it could be absorbed, and we laughed.
They said ARMs were a good way to save money, and we laughed.
They said housing only had a little "froth", and we laughed.
They said WaMu was well-capitalized, and we laughed.
They said Fannie and Freddie wouldn't need the hastily arranged bailout, and we laughed.
They said the mortgage borrowers would pay their bills, and we laughed.
They said it was only a liquidity problem, and we laughed.
They said it was the fault of mark-to-market accounting, and we laughed.
They said the shorts were bringing down good companies, and we laughed.
They said we weren't in a recession, and we laughed.
Then the Senate spoke. They said We and Our Children should pay dearly for the Arrogance of Wall Street. So we got royally fucked, and we cried.
Well on the bright side, the dollar seems to be moving up despite calls for its demise.
time ?
Timberrrrrrrrrrrrrr.
Fat old Buffett said the patient has had a heart attack and needs to be resuscitated.
So why are we stuffing him with bacon and chocolate cake?
More evidence that we're in a liquidity trap:
Libor Rises a Fourth Day as Banks Hoard Cash After Bill Passed - Bloomberg.com
Libor Rises a Fourth Day as Banks Hoard Cash After Bill Passed
Sick. Bloomberg TV keeps asking Congressmen, "Aren't your constituents calling up and telling you to change your no vote". And they keep saying no, it's still 9-1 against.
Deplorable.
Sununu just said the Clinton administration helped eased regulation for fannie and freddie and predicted this crisis. Was in an article years ago in NYT 1999 article.
He makes a good case.
Jobless Claims Highest Since September 2001. Rise 1,000 to 497,000.
CNBC must have received a lot of complaints about their continual use of the "can't make payroll" canard. They actually backpedaled from it this morning..
and corker was on, trying to equate banks to the honest farmer down south with too much land and no cash at a time when land deals are not being made, just needs the government to buy some of this land to raise cash. He actually said, it isn't about bank profits, it is that banks are running short of cash.
Amazing to watch the spin. Or he has been comprehensively brainwashed by the wall street overlords.
This crisis goes beyond a whole bunch of subprime defaults. Bush has brought the debt to $10,000,000,000,000
Amazing to watch the spin. Or he has been comprehensively brainwashed by the wall street overlords.
Pure spin. They know their master's voice.
So if Wall Street says "meh" and Wall Street finishes down today, does that affect tomorrow's vote?
I still don't think we have yet had the stock market crash of 2008.
The glittering generalities about 'saving your 401k' and the like have misled people into thinking this is an economic bailout bill. It is not. The realities will float to the top soon enough.
Nice summary of why bailout plan is not gonna work on ml-implode:
The Mortgage Lender Implode-O-Meter News Pick-ups: The Top Five Reasons The Bailout Interventions Are Making Things Worse
Read this over the phone to your U.S. rep today -while there's still a chance!
Congress.org - Get informed, get involved
The Baseline Scenario
Good new blog by IMF Chief Economist. Global view of the economic crisis.
The Baseline Scenario
First-time jobless claims: 497,000
wally writes:
I still don't think we have yet had the stock market crash of 2008.
Agreed. If we are firmly in the craw of the liquidity trap it will be soon. If they can resuscitate the credit market, then it may be postponed for a little while.
I think at this point, we need to start focussing efforts on keeping the vested interests from spinning it as happening "because" of the bailout delay. That is surely their next rhetorical step when the current banker welfare bill fails to address the problem and they take another opportunity to help themselves to the public purse.
Tester (D)and Bunning (R) from the banking committee voted no. Thank you Senators.
Mike writes:
First-time jobless claims: 497,000
Nothing to see here. Blame it on the hurricanes.
Nothing to see here. Blame it on the hurricanes.
No, blame it on not passing the bailout sooner. Everything bad that happens is because they didn't pass the bailout on Monday. Everything good that happens is because they're going to pass it on Friday.
I for one welcome our new bailout overlords.
Test
When do the hedge fund redemptions hit the exchange?
Interesting, the US dollar is surging, gold is down sharply this morning.
From Krugman's latest blog post:
"I think that Congressional leaders know that its a bad bill, but feel compelled to defend it, because theyre (rightly) scared of the financial consequences of a second rejection. And to some extent economists like myself are in the same position; I think I called it the 'hold your nose caucus.'
"So am I for the bill? Yuk, phooey, I guess so. And Im very angry at Paulson for putting us in this position."
[emphasis mine]
You heard the man: Yuk, phooey, I guess so. That's the seasoned judgment of a member of the economics faculty at Princeton. That's why he gets paid the big bucks. Yuk, phooey, I guess so.
I can still sell ( and thus go short) single stock futures as per IB - I'll try it later today on a banned stock I was short on for a long while that got forced bought-in yesterday.
The spread is wider, but the cost per contract is lower.
-K
sk: how does one learn such futures trading? thanks
Builder Bob writes:
Interesting, the US dollar is surging, gold is down sharply this morning.
I would judge that it's 'cause Europeans appear to be failing to form a coherent bank/credit policy regime. If they can't meet the crisis, it may tear them apart in short order and people don't want to be under a disintegrating Euro.
Just an idle guess.
dollar up because rate cuts in Europe are coming.
Yawn
The world stinks worse than the U.S. Dollar rallies.
So am I for the bill? Yuk, phooey, I guess so.
I think what Krugman is upset at is the fact that the House Republicans cut Bush/Paulson loose and put political ownership squarely on the shoulders of the Democrats. If the plan succeeds then more power to Reid/Pelosi/Frank. If it fails, then some Republican is going to pull an Obama and run an entire campaign based on the fact that he or she had the judgment to vote against popular legislation.
RE:
Further to your observation on home process in Las Vegas, I have been following the Case Shiller stats closely for 4 years and have consistently imported their dat into my own excel analysis of the 20 key markets.
I am a developer from Florida and could see what was happening and sold all of my real estate assets in 2005. I developed property in Las Vegas as well up until 2000 and am very familiar with your market area.
Here are a few comparisons between the Miami market and Las Vegas and a dark "prediction."
The hight of the Las Vegas Market occurred in the calendar year of 2004 with a one years appreciation in property values of a staggering 45.50%. In the year just prior (2003) it was 17.222% and the year just following (2005) it was 10.5%. For 200 it was -15.34%. For the first seven months of 2008 the market is down a further -23.58%.
I chart appreciation over time and look for anomalies. When I was in Las Vegas between 1987-2000 working on single family home development with a very well-known national homebuilder, it was clear that your market was growing due to a very large influx of retirees and refugees from California who were looking for relief from high taxes. In those days we saw the market was appreciating at a rate of about 5% and we were astounded at hoe robust it was.
Robert Shiller's own analysis is that homes in the US across all market areas from 1890 to 2000 only appreciated on "average" about 3.5%+/-.
The other anomaly that most realtors now is that home sale accelerate between March-August and then fall off sharply through the following February. In fact February is the cruelest month of all. In part, this follows with the moving habits of families with a rush to get into a new home before the beginning of a new school year as we all have seen.
It is interesting to note that the Las Vegas market reached its peak a year earlier sooner than Miami and other cities in Florida and California and it will most likely emerge sooner. For Las Vegas the ultimate peak n buying frenzy was August 2006 however, there was already a significant reversal in overall market appreciation "2 years earlier." This is explained by those late to the party who figured that they too could cash-in on the "housing casino" outside the casinos on the strip.
The peak month of the frenzy seems to be between May and June of 2006. The reversal form that point forward is really quite evident and the acceleration to the down side in recent months has been quite shocking. As to my point above of -23.58% loss or the first seven month of 2008, that averages a loss of -3.36% per month with some months recording a loss of greater than -5.10% (January 2008).
The Prediction:
Based on my analysis and the evaluation of the latest Case Shiller numbers I anticipate the Las Vegas market to fall another 45% from current levels before hitting some normal trend line for growth. For Miami it is worse, the market there is still overvalued by 49.36%. Meredith Whitney said last week, when interviewed while in Las Vegas, that nationally she expected "the total market to still fall roughly 30% from current levels." I think she is being too optimistic.
The trend has never encountered the variables that we have now.
I think that we have roughly 3,000,000 too many homes in the market place; this is across all categories single family homes and condo towers, essentially anything termed a "dwelling." When the toxic mix of severe unemployment, huge number of foreclosures thrust upon the market, tightened lending (if any) and a recession (or worse) is factored in, we may very well overshoot far beyond the target I mentioned above. The homebuilders actually need to stop building for two years just to give the market a head start on absorption. I suspect many of them know this and insiders are quietly selling their stock before we see the numbers of builders in the country shrink by 50% or greater.
If the plan succeeds then more power to Reid/Pelosi/Frank
I've offered 12-5 on a $50 tip to CR that Pelosi is not the speaker through '09.
No takers yet.
Why does a pirate need a tank?
Playboy magazine is offering a new way to lose your shirt on Wall Street.
The adult entertainment magazine, long famous for its photo spreads of nude women and lessons in living the urbane life of the well-heeled bachelor, is launching a search for models to pose for its upcoming feature, "Women of Wall Street."
RPT-Playboy looks for bare market on Wall Street
| Reuters
Princess on the steeple and all the pretty people
They're drinkin', thinkin' that they got it made
Exchanging all kinds of precious gifts and things
But you'd better lift your diamond ring, you'd better pawn it babe
You used to be so amused
At Napoleon in rags and the language that he used
Go to him now, he calls you, you can't refuse
When you got nothing, you got nothing to lose
You're invisible now, you got no secrets to conceal.
How does it feel
How does it feel
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
re: yogi
Single-stock futures - Wikipedia, the free encyclopedia
I dunno how much there is to learn - I just watched the prices next to spot price for a while, like a couple of months to get a heuristic view of it. I DON'T use it for leverage ! I just treat it as if its a regular spot buy in terms of how I'm committing. The price is always going to be higher 2 months from now ( time value ) than now, based on standard pricing models but after that trading establishes the value. What else. The spreads are wider, but IB charges about 34 cents a contract == 1 contract is for 100 shares.
I'm talking about SINGLE STOCK futures of course here.
-K
Has this been commented on?
Page Not Found - - The Chronicle of Higher Education
Strikes me as rather enormous news.
Sorry gang the earlier post had a few spelling errors, think I caught them all now.
RE: Further to your observation on home process in Las Vegas, I have been following the Case Shiller stats closely for 4 years and have consistently imported their data into my own excel analysis of the 20 key markets.
I am a developer from Florida and could see what was happening and sold all of my real estate assets in 2005. I developed property in Las Vegas as well up until 2000 and am very familiar with your market area.
Here are a few comparisons between the Miami market and Las Vegas and a dark "prediction."
The height of the Las Vegas Market occurred in the calendar year of 2004 with a one years appreciation in property values of a staggering 45.50%. In the year just prior (2003) it was 17.222% and the year just following (2005) it was 10.5%. For 2007 it was -15.34%. For the first seven months of 2008 the market is down a further -23.58%.
I chart appreciation over time and look for anomalies. When I was in Las Vegas between 1987-2000 working on single family home development with a very well-known national homebuilder, it was clear that your market was growing due to a very large influx of retirees and refugees from California who were looking for relief from high taxes. In those days we saw the market was appreciating at a rate of about 5% and we were astounded at how robust it was.
Robert Shiller's own analysis is that homes in the US across all market areas from 1890 to 2000 only appreciated on "average" about 3.5%+/-.
The other anomaly that most realtors know is that home sale accelerate between March-August and then fall off sharply through the following February. In fact February is the cruelest month of all. In part, this follows with the moving habits of families with a rush to get into a new home before the beginning of a new school year as we have all have seen.
It is interesting to note that the Las Vegas market reached its peak a year earlier than Miami and other cities in Florida and California and it will most likely emerge sooner. For Las Vegas the ultimate peak in the buying frenzy was August 2006 however, there was already a significant reversal in overall market appreciation "2 years earlier." This is explained by those late to the party who figured that they too could cash-in on the "housing casino" outside the casinos on the strip.
The peak month of the frenzy seems to be between May and June of 2006. The reversal from that point forward is really quite evident and the acceleration to the down side in recent months has been quite shocking. As to my point above of -23.58% loss for the first seven months of 2008, that equals an average loss of -3.36% per month with some months recording a loss of greater than -5.10% (January 2008).
The Prediction:
Based on my analysis and the evaluation of the latest Case Shiller numbers I anticipate the Las Vegas market to fall another 45% from current levels before hitting some normal trend line for growth. For Miami it is worse, the market there is still overvalued by 49.36%. Meredith Whitney said last week, when interviewed while in Las Vegas, that nationally she expected "the total market to still fall roughly 30% from current levels." I think she is being too optimistic.
The trend has never encountered the variables that we have now.
I think that we have roughly 3,000,000 too many homes in the market place; this is across all categories single family homes and condo towers, essentially anything termed a "dwelling." When the toxic mix of severe unemployment, huge number of foreclosures thrust upon the market, tightened lending (if any) and a recession (or worse) is factored in, we may very well overshoot far beyond the target I mentioned above. The homebuilders actually need to stop building for two years just to give the market a head start on absorption. I suspect many of them know this and insiders are quietly selling their stock before we see the numbers of builders in the country shrink by 50% or greater.
dow futures -114
s&p -14
nas -18
TED 3.52
GO TEAM BAILOUT!
From meatloaf's article:
Many colleges use the organizations short-term investment fund for operating expenses, almost as a checking account, he said.
Kind of sucks, but there is no such thing as a free lunch. There's a reason checking accounts don't pay interest...
ew thread
Short ban will lift 3 days after the House of Representatives votes on the financial package. Or the 17th of October. So....
thanks, will investigate
that college/wachovia/payroll story gets more and more limp as you read through it.
Maybe they should have thought first before leaving their critical funds in a firm everyone knew was sinking fast. A phone call could have moved them!
what time does the house vote?
Eventually, selling of any sort will be banned in the market. Then, selling a house for less than a 10% increase in price per year you owned it will be banned.
Everything (except salaries, savings, and standards of living) WILL GO UP!!!
Reminds me of the old Robin Williams joke about Muammar Ghadafi...
"This is Line of Death! You cross it, you die!... OK, THIS is Line of Death. You cross THIS line, you die... No (steps back again), THIS line, you die... THIS line, you die... THIS line, you die..."
(I was talking about the "temporary" short selling ban)
Hmmm... didn't see that one coming.
NOT!
The idiocy of government officials is breathtaking.
Just reinstate the uptick rule and be done with it.
Without short selling, then how to people cover their losses? It's like this...I walk away from my house because all of my Mexican neighbors are foreclosing too, so I decide to short Countrywide in order to offset my loss of not paying them anymore. This should be totally legal. It's exactly what the investment banks have been doing with oil and derivatives.
the short ban is scaring off buyers, who don't want to buy a stock without true price discovery.
like any other form of price control, this move won't work.
Is our "fair economist" the same one who wrote the post on nakedcapital?
Yes. I have password-protected accounts on the Irvine Housing Blog and OpenLeft if anybody ever needs to verify my identity.
Furthermore, as Treasury floods the bond market, the same thing happens, but the most interesting part, is that earnings should be falling in a recession and thus earnings yield, the inverse of the P/E should fall and the price should fall, so if we allow them to step in and screw with valuations, we don't really know how to compare a shit P/E or E/P to a treasury yield that is being forced down.
This is related to von Mises' idea that the government can't run anything because you need to know good prices to plan action but government intervention distorts prices so you're stuck acting without information. You're talking about how those price distortions mess up the planning of non-state entities as well.
I disagree with von Mises' conclusion that you should never intervene because in some cases the market fails and coughs up a really bad price. A government intervention into the insane housing boom would have helped a lot, although that was always a political nogo because of the Church of Rising Home Equity. Likewise right now we have a panic into T-bills and that could exacerbate the recession we're unquestionably in for.
Of course the propping itself is bad and exacerbates the boom. The point of a prop is to give you time to clean up the underlying mess (insolvent financial companies today). Unfortunately governments usually use a prop just to delay action and in that case the prop can just make things worse. MP, if I recall correctly, made this point about the Bear bailout. It was a screaming signal to unlever and unwind but TPTB hid under the talk of "a financial crisis ends when a whale comes up" and did nothing. So here we are six months later with the same mess plus some more bad loans and less time to cope with the stuff we knew was coming.
Nemo - cant read every single response you had to Nate's point (which you're right - he didn't really have a reference).
Anyway - you cant buy a put outright on a financial without buying delta, and you cant buy a call and overhedge to short.. so I cant buy a 10delta call and hedge 50% of the notional..overhedging is illegal and similarly, I cant buy a put and underhedge..
If I own stock, sure I can buy puts, but if its naked, then I must delta hedge.. so im taking vol positions.. i cant really bypass the rule..
I am an options mkt maker, and yes, I can short stock on the back of trading options... but an investor cannot circumvent the rule and start buying puts on financials.. naked.. cant happen.. thats illegal
just fyi
"This is still dumb." Dumb?? There is every indication that this is dealing a crippling blow to the market. It is causing investors to sit on the sidelines instead of putting their money to work. Even if you're short, you're still adding liquidity. But when you cant short, and you believe the market is going down, then all you can do is hold onto your cash and wait.
The market has been usurped by criminals. If it crashes then these people at the SEC have to be brought to justice. This is the #1 issue, even eclipsing the bailout.
agree...this is totally dumb. time to bring out the dead