Luckily for us the market is decoupled from any of the fundamentals, so GS should have no problem managing this piffle of reality. Back to the commodity bubble, already in progress!
So what is Citi suggesting? That we should upgrade the crap and debase the currency until the "value proposition" comes back around? Or are they really expecting a rebound in tenant pricing power and demand?
I guess it isn't worth the brainpower to interpret. Citi analysts are dumber than rocks.
From previous thread;
"ResistanceIsFeudal (profile) wrote on Thu, 5/28/2009 - 7:49 pm reply Ignore user
Lucifer (profile) wrote on Thu, 5/28/2009 - 5:56 pm
Nuke,
A society that considers some people to be intrinsically more trustworthier than others is asking for the consequences.
If you believe that doctors, police, firefighters etc are intrinsically more trustworthier than others, they will screw you.
If you think reverends, chaplains, rabbis, priests are intrinsically more trustworthier than others, they will screw you.
If you think bankers, lawyers, managers, accountants are intrinsically more trustworthier than others, they will screw you.
There is no other option in a society devoid of ethics and based on self-interest than complete distrust. It is unfortunate that we live ever more in a society in which such a position becomes necessary... it seems like everything is a marketing scam being run by someone looking to take advantage of us... we have built a paranoid world and immolated the social contract all in the name of personal gain. I hope the trade off was worth it. "
We live in a society that has been for the most part stripped of its morals. What a shame.
Here is how our society has been demoralized with techniques developed by the KGB;
Black holes have a useful function unlike our esteemed financial institutions. Black holes assist galaxy formation and star formation by helping gas clouds to aggregate.
Just curious, where did they come up with the 75B number?
The Fed probably lost $12B in the past few days on their MBS holdings (3% of 400B), and will probably lose hundreds of billions when it is all said and done, so changing the rules and overpaying by $75B is nothing.
ResistanceIsFeudal (profile) wrote (in reply to...) on Thu, 5/28/2009 - 9:05 pm
"we built this financial system on a black hole" just doesn't have the same ring, does it?
S.R.Barbour (profile) wrote on Thu, 5/28/2009 - 8:12 pm
Kudos to anyone that can replace the entire lyrics of 'We built this city on Rock and Roll'. Smile
I'll throw up a stanza:
Say you don't know phi or recognize hyperspace
Say you don't care what goes on in that kind of place
Knee deep in hoopajoops, it just don't feel right
Too many complex equations clouding out the light
Does anyone have an idea of GM volume multiplied by price over the last month maybe? Is there tick by tick data that I could access? Just want a rough estimate of how much money was swindled assuming it does go to 0 in the end.
"A third critic, a lawyer and Madoff victim named Helen Davis Chaitman, complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” because claims were being paid too slowly." (NYT)
_ _ _ _ _
broward (homepage, profile) wrote on Thu, 5/28/2009 - 8:25 pm
Is it always the same Mr. Alpha Male?
Heck, no, it's a parade, man.
I'm bombarded by the scam scripts almost daily at Starbucks.
It's disturbing.
it reminds me of the cash pyramid schemes of the late 1970s, I'd hear the scam almost every day from a new participant.
the infuriating part about all confidence scams is that they work if you can get enough suckers into the MLM system, and you get a cut of every transaction... even if you're selling worthless promises on pieces of paper.
The best part of that scam is that it's so great, it's not even FDA approved!
Actually, these juices represent themselves as "dietary supplements" which allows them to make certain health claims without going through any FDA approval processes for safety and efficacy. The caveat is that the product cannot claim to treat any condition.
Highly deregulatory. so it makes sense that it's another Clinton-era law.
The deterioration is reflected nicely on Markit. Too bad SRS isn't reacting this time. Maybe they are pricing in Ben a little more optimistically than the debt markets. Equities Disconnected. What's new ?
Nothing ever gets priced in in the equities markets. They are a random UP number generating casino.
Samdog (profile) wrote on Thu, 5/28/2009 - 6:33 pm
.... complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” [emphasis added]
No, those prices were as phantom as Madoff's returns.
we built this citi on black and scholes... ROTFLOL! ! ! ! Great stuff....
.........
Bond Girl I actually asked the question here 'will an agency down grade a loan that is already in the Feds hands.....' basically the consensus was that.... no f'in way.... they dont want to go down that road (edit).... I definitively agreed.....
I guess this is kinda a green shoot of honesty.... I'm kinda glad to see it... Lets just hope they dont over shoot...
(Then again I dont think public people can overshoot to the down side.... )
For those who aren't privy to the data, something like 11% of Citi's CMBS originations since 2005 are in default. Their research people are probably not aware of this but if they are, they really ought to shut it.
Bond Girl (homepage, profile) wrote on Thu, 5/28/2009 - 8:43 pm
Did you add Federal Reserve, broward?
The silly dollar even SHOWS you the damn pyramid. The scam is at least as old as Babylon. There's no need for a conspiracy, just a class of psychopaths reinventing human exploitation.... meme-transferrence if you will. What culture can pass up this particular invention as they raid the artifacts of the conquered civilization?
dcr100 (profile) wrote on Thu, 5/28/2009 - 9:53 pm
Was S&P not flawed, lacking justification with a methodology that did not seem rational or predictable on the way up?!
I have no idea.
Is this the same S&P whose 'S&P 500' P/E Ratio is now at 120+?
I cannot stop laughing that 'water boy' Geithner is tasked to reassure that its massive US bond holdings are safe despite concerns being that US economy carries about $20 trillion of excess debt.
Samdog (profile) wrote on Thu, 5/28/2009 - 8:56 pm
Good point ... "One Federal Reserve Ponzi Dollar"
... and I might add it has that creepy eye looking at you, too ....
eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!
Ah, BondGirl,
I read your latest bond post- I found it quite interesting to look at your interpretation of that steep yield curve.
Looking back at the last 30 years of data, the yield curve only assumed large divergences between the 2 and 10 during times of potential deflation.
What I get out of the current situation is that the bond market assumes two years of low economic growth, with inflation igniting later on.
A bet that one should practically contemplate.
Further, shorting long term bonds right now in a market subject to quantitative easing bids seems a mite brave.
Never underestimate that Velvet Fist of Government.
You seem to be doing a good job providing a counterargument for the accuracy of blond jokes- but then does the exception prove the rule?
S&P telling Timmy G. the jig is up? That they don't want to be on the hook for perpetuating the lie? I agree, the green shoots of honesty, from one of the primary enablers is reassuring. I do not think it will last as the full force of GS will be brought to bear.
//eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!//
Citigroup commented that the changes were "a complete surprise", "flawed", lacked "justification" and the "S&P methodology changes do not seem rational or predictable". Ouch.
Citi also noted that this will impact the CMBS legacy TALF announced last week by the Fed. According to Citi the "S&P changes could impact nearly 40% of the triple-A TALF eligible universe" and they expect the Fed to change their criteria. - CR
Despite the vast outpouring of commentary and outrage over the financial crisis, one of its most fundamental causes has received surprisingly little attention. I refer to the perverse incentives built into the compensation plans of many financial firms, incentives that encourage excessive risk-taking with OPM -- Other People's Money.
What, you say, hasn't huge attention been paid to executive compensation -- especially those infamous AIG bonuses? Yes. But the ruckus has been over the generous levels of compensation, or the fact that bonuses were paid at all, not over the dysfunctional incentives that inhere in the way many compensation plans are structured.
Take a typical trader at a bank, investment bank, hedge fund or whatever. Darwinian selection ensures us that these folks are generally smart young people with more than the usual appetite for both money and risk-taking. Unfortunately, their compensation schemes exacerbate these natural tendencies by offering them the following sort of go-for-broke incentives when they place financial bets: Heads, you become richer than Croesus; tails, you get no bonus, receive instead about four times the national average salary, and may (or may not) have to look for a new job. These bright young people are no dummies. Faced with such skewed incentives, they place lots of big bets. If tails come up, OPM will absorb almost all of the losses anyway.
Whoever dreamed up this crazy compensation system? That's a good question, and the answer leads straight to the doors of the top executives of the companies. So let's consider the incentives facing the CEO and other top executives of a large bank or investment bank (but, as I'll explain, not a hedge fund). For them, it's often: Heads, you become richer than Croesus ever imagined; tails, you receive a golden parachute that still leaves you richer than Croesus. So they want to flip those big coins, too.
["Margin Call of Cthulhu" remains my favorite]
I always got a chuckle out of "Zimbabwe Billionaire"
Margin Call is probably my favorite, too, so far. I also like ResistanceIsFeudal and ghostfaceinvestah and Notorious AIG. Juvenal D. comes up with many amusing puns, though the nick could be better, sorry JD.
dryfly (profile) wrote on Thu, 5/28/2009 - 7:21 pm
Citigroup commented that the changes were "a complete surprise", "flawed", lacked "justification" and the "S&P methodology changes do not seem rational or predictable". Ouch.
Citi also noted that this will impact the CMBS legacy TALF announced last week by the Fed. According to Citi the "S&P changes could impact nearly 40% of the triple-A TALF eligible universe" and they expect the Fed to change their criteria. - CR
Wow - just WOW!
Really ? I say it its complete bullshit and just more gaming of the system to get more free bailout $$$ with burden to ...yes you guessed it ....the Americans taxpayer.
One Bilderberger said that, “the banks themselves don't know the answer to when (the bottom will be hit).” Everyone appeared to agree, “that the level of capital needed for the American banks may be considerably higher than the US government suggested through their recent stress tests.”
Lucifer (profile) wrote on Thu, 5/28/2009 - 9:15 pm
ResistanceIsFeudal,
Guilty as charged
//eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!//
I have to hand it to you Luci, this soul-destroying system you have devised will ensure a plethora of will-less host bodies are available for possession. Tricking them into giving up their humanity, sense of ethics and pursuit of virtue for illusory wealth and position in a global plantation was truly the coup d'etat!! My hat is off to you.
The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar
EvilHenryPaulson (profile) wrote on Thu, 5/28/2009 - 9:35 pm
The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar
Damn, I failed to realize that they fully abandoned it. Now my $300 Trillion in Zim dollars (3 bills btw) will be worthless for all time.
"The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar"
Surely they will just charter a new central bank with the currency initially backed by Dollars and/or Rands. Then when the new currency is in acceptance....
A buddy sent me an email - I've posted it before but sums up the situation - an auto supplier:
From what I heard the XXXX Company Auction was a blood bath for the bank. YYYY from ZZZZ Inc. said he didn't think the total auction exceed 1,000,000 3 year old 2 pallet horizontals that sell for $250,000 went for $10,000 The new die casting machines went for 10-20,000 Everything older was scrapped.
3.75 cents on the dollar sounds about right considering.
My point in that post was a follow-up to an earlier discussion on the expectations hypothesis.
If you believe that the Fed is intervening in the Treasury market to keep interest rates low and you believe the expectations hypothesis explains the shape of the yield curve, then the best QE can accomplish is a series of rate shocks, and even that depends on the bond market's belief in the credibility of the Fed's commitment to QE. This effect will diminish as bond market participants' inflation expectations increase.
If you believe that the Fed does not care about keeping rates low and is just using the Treasury market as a conduit to pump x amount of dollars into the system, then this should get interesting.
I think supply stands to overwhelm this entire operation, however. I am aware that the Fed may choose to give the long end of the curve everything it has in the near future. I think that would be The Worst Idea Ever, but it certainly could happen and that would be my loss.
yogi
and stocks normally do not undergo a most public bankruptcy while they remain not only listed on the NYSE but a member of the Dow Jones Industrial Average. You could always subtract xx¢ * yy mn shares from the money swindled figure if you want
edit: I don't mean to suggest that your info has no value, but I think the above aberration is the more substantial story
Dryfly,
A couple of these failed auctions of parts suppliers and the whole sector is going to "marked down" and then it becomes a credit spiral into oblivion.
Michael (profile) wrote on Thu, 5/28/2009 - 9:41 pm
I like to take a black Sharpie when I get one dollar bills and black out the eye on them. It helps to ward off evil spirits.
If we're going to destroy the dollar can we start with the stinky ones? I don't think they would compete with decaying human corpse, but I hate the dollars that smell like someone used them as a puke filter six years ago. I would try to clean them, but it's illegal to launder money, so they usually end up in soda machines.
Bond Girl (homepage, profile) wrote on Thu, 5/28/2009 - 7:43 pm
My point in that post was a follow-up to an earlier discussion on the expectations hypothesis. You should discard expectations, as almost all of the bond market has no experience with the current situation, as most of us were not bond market participants during WWII- the last time the Fed actively capped rates and bought bonds.
If you believe that the Fed is intervening in the Treasury market to keep interest rates low and you believe the expectations hypothesis explains the shape of the yield curve, then the best QE can accomplish is a series of rate shocks, and even that depends on the bond market's belief in the credibility of the Fed's commitment to QE. This effect will diminish as bond market participants' inflation expectations increase. I think you underestimate the Velvet Glove of this government- they definitely mean what they say.
If you believe that the Fed does not care about keeping rates low and is just using the Treasury market as a conduit to pump x amount of dollars into the system, then this should get interesting.
I think supply stands to overwhelm this entire operation, however. I am aware that the Fed may choose to give the long end of the curve everything it has in the near future. I think that would be The Worst Idea Ever, but it certainly could happen and that would be my loss. Today's test float of new taxes shows they are going to be pulling a lot of stunts- VATs are fun to evade. Further, they intend to reduce long term expenditure for health care through their programs, a point that is lost on most of the commentariat.
"And they put up the money? Why wouldn't everyone sell into that price and get a $1 rather than pennies?"
Oh, no - they would never pay you dollars. Maybe a penny a share or something. It's just to get a transaction done so that you officially sold it - it's less complicated than doing a declaration to the IRS for dead shares.
the confusion regarding pricing BK-imminent stocks is that not all BK are the same. In a C7 liquidation, the ultimate price of a balance-sheet insolvent company is necessarily zero. However, it is possible for a C11 reorganization to be successful, which would return value to the equity. e.g. MCI Worldcom.
Citizen AllenM writes;
"Today's test float of new taxes shows they are going to be pulling a lot of stunts- VATs are fun to evade."
You would need a well-developed shadow economy to evade a VAT, I would think. Maybe the guys running the drug operations will get consulting jobs explaining how it's done.
and;
"Further, they intend to reduce long term expenditure for health care through their programs, a point that is lost on most of the commentariat."
Not sure how many missed that. They have to reduce health care costs or the country will be even more bankrupt than it already is, if that's possible. Providing first-world health care to all comers free of charge is not a viable model. And many hospitals have been doing that for at least 20 years now. Which is why health insurance is unaffordable, hospitals are closing, etc. Once people realized that they could declare poverty and get free health care, the game was up, and it was only a matter of time until the system crashed.
Why? Aside from the obvious-- transaction costs, the gamble that the company may actually have positive equity-- the author, Stephen Moyer, concludes, "Perhaps...not enough investors understand the restructuring process...Perhaps... some investors have psychological difficulty admitting a bad decision...a sense of denial. Who knows? But the reality, based on the observation that many reorganizations have left stockholders with no recovery and yet the stock trades at positive values very late into, if not at the conclusion of, the reorganization, is likely to be that they were simply wrong."
Most bankruptcies are no surprise to even small shareholders. GM is just the biggest ever.
A couple of these failed auctions of parts suppliers and the whole sector is going to "marked down" and then it becomes a credit spiral into oblivion.
RD - I think we are back to the late 70s & early 80s... back then mfg companies in 'rust belt' were easy to value - their net worth was the NPV of expected future earnings less liabilities... and at 17-18% interest rate hurdles the discounted future earnings' go to zero pretty fast.
The actual 'hard assets' were worthless.
The land they sat on had negative value after Love Canal.
The machines were older than dirt & with technology even older.
The 'designs' were mostly 'generic commodities'... franchise value? Good luck rebranding Rambler or Gremlin.
If your factory was still busy, had customers and cash flow it was worth something as an ongoing concern... once all that went away it had zero or negative value in BK.
That will happen again as is typical on the back end of Schumpeter Waves... the fires of creative destruction are just now getting going.
"Well then, you can stick a fork in RE, MBS, and (last but not least) FNM/FRE/FHA. Hear that giant sucking sound? "
How can Ben not know this? Does he not have a ton of MBS on HIS balance sheet now? What can he possibly do to prevent bonds or inflation from killing any MBS market? What is his play? How does he and the 19 TBTF not fail? I do not see an out.
dryfly;
re: auto parts suppliers:
"If your factory was still busy, had customers and cash flow it was worth something as an ongoing concern... once all that went away it had zero or negative value in BK."
This is going to be the interesting part. I would think that the tooling for automobile replacement parts would have some value, and a business that sells the parts should be able to continue operating. I'm pretty sure that people will be keeping cars longer, gas-guzzler rebate or no. There has to be some sort of a parts business to keep the old cars running, with head and tail lights operative, etc.
Yes, dryfly.
Once again the agony will continue for old line manufacturing.
It has been dying ever since we started pursuing strong dollar policies in the late 70s.
Nothing new. I wish we would be more competitive, but as long as we allow huge profits to be made from destroying american industry, well, here we are.
No real changes until the dollar falls, as I tried to point out to bond girl.
We will attempt to defend everything until systemic failure forces us to make more rational decisions.
Until then, this administration will continue to fight fires publicly, while making long term changes that will significantly change the way the entire economic system works in America. They hope to ride just ahead of a wave of destruction to make significant changes.
Which is a good thing, since we are currently screwed.
Not defending a threshold is one thing (this was clear weeks ago and I wrote about it, I think), but not even having a target range is another. What was the point of the purchases supposed to be? From the March meeting statement:
"Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months."
Improving conditions in private credit markets suggests that they are at least trying to keep rates low, and if that is the standard, they need to step it up some or they've just plain failed. But they seem to be changing their tone on this matter by suggesting that they merely want to keep the Fed's balance sheet at a given level and are transitioning from their emergency facilities to other efforts.
At any rate, I was definitely not suggesting anyone imitate me.
FNM/FRE will be nationalized and acid poored through the system. I think Dryfly made that comment last night.
I think a lot of these 'bailout candidates' are going to be brought in from the cold today but end up swimming face down in Grover's bathtub in a few years.
slow down CR! I have to spend my day in court and then in the evenings, usually late, try to peruse the postings and comments
....
OT/
I must say that is is an unique experience to stand within 50 feet of a man who was charged by the UN "of personally overseeing the systematic torture of more than 15,000 prisoners" separated by only a pane of glass... (after much scheming and wheedling I was able to secure a video feed of the trial!!! one track is translated in English, while
for you Francophiles the other is in French..)
I'll save further comments for Sat night....
Somebody has to think that the share is worth something, and that's what I can't figure out.
JP:
If you are short the stock, you need to buy the stock to close out your position. Since stocks of BK companies tend to "trade by appointment", the actual execution price can get really strange if you are value it based on fundamentals instead of how much profit do I have to give up in order to lock in the profits I've made by shorting.
I guess long bond yields increase around mid-year was anticipated on this forum (& elsewhere) and Treasury still has a ways to go with the debt it needs to float. Practically speaking though, how much / how long can the Fed intervene to keep the yield down, if it chooses to do so? Isn't there a point at which it has to stop trying to run in mid-air and just let the free fall begin, a la Coyote?
This is going to be the interesting part. I would think that the tooling for automobile replacement parts would have some value, and a business that sells the parts should be able to continue operating.
:: ::
I can tell you 100% that is NOT the case. I'd have to write a 1000 page Mfg Process book to fully explain but here's the Cliff Notes:
The vast majority of the suppliers are scaled up for builds in the hundred's of thousands to millions... replacement parts run in the tens of thousands or less - the equipment, set up & processes are as different as your kitchen is from a Campbell Soup factory.
Believe me I know - I've actually been winning contracts for one of my companies SPECIFICALLY because we are a fast turn low volume shop focusing on high variety low run 'service' jobs yet have adequate systems [ISO, Lean, etc.] for big upper tier mfgrs. Many of the vol shops would have trouble getting there [price & performance wise] even if they had profits to fund it - which they now don't.
There are a lot of companies out there [Wells Mfg comes to mind] that specializes in 'aftermarket'... the majority of the supply chain like Visteon, Delphi, etc. would get eaten alive by these folks in that niche - if they lived that long to be eaten.
The job loss in the supply chain on up through the OEMs is gonna be something.
How will we know when they're "brought in from the cold"? We're already paying all their bills...
Because we are paying their bills many of them will eventually be drowned in Grover's tub... not because the current admin wants to but because eventually some admin will have to - we won't have the resources to support them all.
You and I have been discussing this for YEARS TJ - I don't get all hung up on the dollars because they can be printed at will - the resources have real constraints however. At the pace we are going we aren't going to have enough of those.
I don't know what the Fed is thinking, but if I was Ben I'd take my ball and go home. It was a good run. Once talking the market down stopped working, he stepped up to the plate with his girly academic arms and hit a weak foul ball. IMO, the QE was just to keep the mortgage market down long enough to get in as many refinances as possible. I don't think it was ever a long term plan. Now it's game over, the market will do what it wants, and Ben shouldn't fight the tape (but he wouldn't have learned not to do that in academia).
'nuff said, I think I get it. I thought that the aftermarket shops could re-use the tooling, but I guess not... so that explains why some auto parts become completely unavailable once production inventory is gone. And why the price of what is available is so ludicrously high.
There was a piece in the LATimes recently about a small company that buys wrecked Porches and strips them for parts. For less expensive cars, I'm pretty sure that the junkyards sold them to recyclers in China, so no parts for you!
There are going to be some seriously messed up cars limping around in a few years - it's going to look like Mexico or Cuba in some places if there are no parts.
"Somebody has to think that the share is worth something, and that's what I can't figure out. "
Looking at the optons chains
CALL OPTIONS Expire at close Fri, Jan 21, 2011
Strike Symbol Last Chg Bid Ask Vol Open Int
2.50 VGNAZ.X 0.16 Down 0.07 0.16 0.17 10,270 47,438
5.00 VGNAA.X 0.08 Down 0.02 0.07 0.09 1,443 19,457
7.50 VGNAU.X 0.05 Down 0.03 0.04 0.06 275 12,695
10.00 VGNAB.X 0.03 Down 0.02 0.03 0.04 13 2,147
12.50 VGNAS.X 0.02 Down 0.02 0.02 0.05 210 3,124
That is an awful lot of people purchasing and option to BUY GM at 2.50. It would have to get to 2.67 to even make a penny a share. That has to be the other side of some weird option/short combo.
Ben's plan was never to provide a permanent solution, it was to simply buy time. Based upon the recent action in the bond market, that time is quickly running out.
'nuff said, I think I get it. I thought that the aftermarket shops could re-use the tooling, but I guess not... so that explains why some auto parts become completely unavailable once production inventory is gone. And why the price of what is available is so ludicrously high.
Bingo! Expect a lot more of that once the Big Three 'debrand'.
My guess is there will be some parts for most vehicles but (1) expensive and (2) sub-standard. I just bought a sensor for my son's 1990 wreck... $250 - there was a total of FIVE in the whole country. When they go that model heads off to the dustbin of history. Why pay $250 for a sensor? Because buying another 'new-used' wreck would cost ten times that amount and need a couple thou to make it road safe.
Blackhalo;
Here is a quote from Jeff Macke:
"From May 15 to May 27, GM went from a close of 1.09 to a May 22 high of $2.24. The stock is worth nothing. Do I envy the guy who caught the 122% move? Yes. Do I think the buyer at $2.24 was an experienced trader? Absolutely not. On TV or in the ‘Ville, my goal is to help “the little guy” avoid the countless traps the Street uses to capture newbies. From where I’m sitting, Wall Street hasn’t been this much of an insider’s game since the 20s."
And following up the meltdown last week, Macke also writes:
"All apologies to those offended by the absurd (and endless) bailout of General Motors (GM). If you’re delighted to pay for the better part of Detroit, I really can’t speak for or to you. You likely think I’m crazy, and I doubt you understand what’s unfolding before your very eyes. If you’re actually in favor of leapfrogging socialism straight into totalitarianism, let’s just agree not to talk to one another at all."
"Regardless, I haven’t been “kicked off” or “put on probation” from Fast Money. I plan on being there next Monday. That’s simply all I have to say on the matter."
Thanks for the explanations. Nevertheless, I must be really stupid tonight. The brokers would not put up the money for purchase, because it would be money out of their pockets.
It makes more sense that people closing short or option positions would drive the price higher, but I am just amazed that it pressures the price all the way to a buck.
Truthfully, my vote is still on stupidity: Avg guys just don't understand cap structure. But that's just the pot calling the kettle stupid.
Bond Girl,
I think you seriously underestimate the power of the Fed.
How about this instead of QE- the fed offers $1,500 an ounce for gold.
They buy and buy and buy, and take the cash and buy long bonds until rates behave.
The interesting question is would this be more effective at actual stimulus of the economy than QE, or would this lead to inflation expectations rising?
The Fed, banks, and pension funds bought almost all of the bonds during WWII, the private market was nearly nonexistent.
Consider history when you talk about metagaming the Fed.
The odds are they are quietly rigging the game against you.
Think of the market as a aging piece of meat in the kitchen of a small crap restaurant. Every day the restaurant opens and they hope people buy a sandwich or whatever. When the meat gets moldy it is washed and served when it gets cold it gets reheated. The restaurant doesn't care who they make sick just as long as they make their money and get rid of the old meat. Then they close up shop...
I don't know squat about the manufacturing biz, but I remember some entrepreneurs going around the closed textile plants in the South and buying up the machines and
selling them over here in the Asian market who turned around and produced a lot of export for the Walmarts of the world
what would be the difficulty of trying that say in a parts manufacturer? You mentioned Wells, are they USA based?
The Fed now WANTS a steep yield curve, to help speed the recapitalization of the banks. They gave everyone a window to refi their mortgages, and that window has now closed. Now it's all about goosing bank profitability. If the 30yr bond goes much above 5%, they'll do some QE to bring it down a bit, but right now they want the fat spread.
We built this Citi on flawed ratings
change the rules until the banks are happy
knew i should've bought more SRS today
Lost? Have they looked for Timmay in the well?
OMG.
More Tsing Tao!
We built this shiti on schlock and holes...
we built this citi on black and scholes...
Citizen Scotto (profile) wrote on Thu, 5/28/2009 - 7:58 pm
we built this citi on black and scholes...
ROTFL IRL... almost lost my lunch
If they hurry they can lose some more on GM common stock!
I can't remember -- is 75 X 10^9 dollars a lot of money anymore?
Wait, you said 75 Billion? Hell, I thought we were talking about real money here! What a relief.
only 75 billion? Come on, that is amateurish stuff, though the leverage is gonna hurt.
Citizen Scotto (profile) wrote on Thu, 5/28/2009 - 8:59 pm reply
I can't remember -- is 75 X 10^9 dollars a lot of money anymore?
Inside the Beltway it's all just "Monopoly" money ...
Bobn,
Do you think that anyone is going to get their promised pensions at this rate?
Inside the Beltway it's all just "Monopoly" money ...
================
Indeed - living and working inside the beltway has totally fucked up my sense of proportion when it comes to $$
Luckily for us the market is decoupled from any of the fundamentals, so GS should have no problem managing this piffle of reality. Back to the commodity bubble, already in progress!
Citizen Scotto (profile) wrote on Thu, 5/28/2009 - 8:58 pm
we built this citi on black and scholes...
We built this Citi on a black hole ...
So what is Citi suggesting? That we should upgrade the crap and debase the currency until the "value proposition" comes back around? Or are they really expecting a rebound in tenant pricing power and demand?
I guess it isn't worth the brainpower to interpret. Citi analysts are dumber than rocks.
I lost 20$ on a bad pair of sneakers once
Guess those stress tests would have factored in this variable. Whew!
C
Turn those machines back on!!!!!!!!!!!!!!!!!
From previous thread;
"ResistanceIsFeudal (profile) wrote on Thu, 5/28/2009 - 7:49 pm reply Ignore user
Lucifer (profile) wrote on Thu, 5/28/2009 - 5:56 pm
Nuke,
A society that considers some people to be intrinsically more trustworthier than others is asking for the consequences.
If you believe that doctors, police, firefighters etc are intrinsically more trustworthier than others, they will screw you.
If you think reverends, chaplains, rabbis, priests are intrinsically more trustworthier than others, they will screw you.
If you think bankers, lawyers, managers, accountants are intrinsically more trustworthier than others, they will screw you.
There is no other option in a society devoid of ethics and based on self-interest than complete distrust. It is unfortunate that we live ever more in a society in which such a position becomes necessary... it seems like everything is a marketing scam being run by someone looking to take advantage of us... we have built a paranoid world and immolated the social contract all in the name of personal gain. I hope the trade off was worth it. "
We live in a society that has been for the most part stripped of its morals. What a shame.
Here is how our society has been demoralized with techniques developed by the KGB;
How to Brainwash a Nation
YouTube - How to Brainwash a Nation
Ex-KGB Uri Bezmenov On Ideological Indoctrination - Part 1
YouTube - Ex-KGB Uri Bezmenov On Ideological Indoctrination - Part 1
Ex-KGB Uri Bezmenov On Ideological Indoctrination - Part 2
YouTube - Ex-KGB Uri Bezmenov On Ideological Indoctrination - Part 2
Samdog (profile) wrote on Thu, 5/28/2009 - 8:03 pm
Citizen Scotto (profile) wrote on Thu, 5/28/2009 - 8:58 pm
we built this citi on black and scholes...
We built this Citi on a black hole ...
"we built this financial system on a black hole" just doesn't have the same ring, does it?
"Citi analysts are dumber than rocks."
Why u drag rock into this?
And I thought I was absent minded...
I can't remember -- is 75 X 10^9 dollars a lot of money anymore?
Not since good ol' Bernie Madoff proved that if only you try hard enough, you too can lose $50+ billion dollars!
Time Warner to spin off AOL, ending ill-fated deal
Yahoo! 404 - Page Not Found
I needed a good laugh
Le roi est mort
Gavshire Hathaway (profile) wrote on Thu, 5/28/2009 - 9:04 pm
So what is Citi suggesting? That we should upgrade the crap and debase the currency until the "value proposition" comes back around?
Of course, that's the only way the toxic football can be passed to taxpayers.
Or are they really expecting a rebound in tenant pricing power and demand?
No.
Black holes have a useful function unlike our esteemed financial institutions. Black holes assist galaxy formation and star formation by helping gas clouds to aggregate.
"we built this financial system on a black hole" just doesn't have the same ring, does it?
Yeah, it doesn't quite fit melody.
Kudos to anyone that can replace the entire lyrics of 'We built this city on Rock and Roll'.
Samdog (profile) wrote on Thu, 5/28/2009 - 8:08 pm
Of course, that's the only way the toxic football can be passed to taxpayers.
one person's toxic football is another's colostomy bag
I'm listening to my fifth "Starbucks scammer / investment hard sell" meeting for today.
Mr. Alpha Male is sitting back confidently in his chair, arms at his sides, "actively listening" to the victim.
"Ceiling for income is unlimited"
Sigh.
Starbucks should segregate their stores into "Scammer-ready" and "Non-annoying".
Just curious, where did they come up with the 75B number?
The Fed probably lost $12B in the past few days on their MBS holdings (3% of 400B), and will probably lose hundreds of billions when it is all said and done, so changing the rules and overpaying by $75B is nothing.
ResistanceIsFeudal (profile) wrote (in reply to...) on Thu, 5/28/2009 - 9:05 pm
"we built this financial system on a black hole" just doesn't have the same ring, does it?
Perhaps ...
but the truth isn't always pretty.
Atrociti, ain't it?
Calls for new investigation on 9/11 collapse of building 7 on a news station in California.
Richard Gage on KMPH Fox 26 in Fresno, CA
YouTube - Richard Gage on KMPH Fox 26 in Fresno, CA
You poor deluded fools, your feeble difference engines cannot compete with the power of the dark pool.
C
Downgrading 90% of the most senior 2007 - that is incredible.
ResistanceIsFeudal (profile) wrote (in reply to...) on Thu, 5/28/2009 - 9:12 pm
one person's toxic football is another's colostomy bag
Um ... okay ... whatever you say, Beavis ....
I remember when $75 Billion was Real Money.
Bobn,
Do you think that anyone is going to get their promised pensions at this rate?
They may get the promised amount, but even if they do, the question is what will it be worth?
your feeble difference engines cannot compete with the power of the dark pool.
they could if they were mechanical.
"the question is what will it be worth?"
yup, we will all be millionaires soon, but totally broke.
S.R.Barbour (profile) wrote on Thu, 5/28/2009 - 8:12 pm
Kudos to anyone that can replace the entire lyrics of 'We built this city on Rock and Roll'. Smile
I'll throw up a stanza:
Say you don't know phi or recognize hyperspace
Say you don't care what goes on in that kind of place
Knee deep in hoopajoops, it just don't feel right
Too many complex equations clouding out the light
Does anyone have an idea of GM volume multiplied by price over the last month maybe? Is there tick by tick data that I could access? Just want a rough estimate of how much money was swindled assuming it does go to 0 in the end.
Mr. Alpha Male is sitting back confidently in his chair,
Is it always the same Mr. Alpha Male?
Why would anybody take financial advice from someone whose office is Starbucks?
Bobn,
That is my point. There are going to be many angry people.
S&P has really put the Fed in an interesting position.
The only way to prop up the banks is to 'fill the black hole' with tax payer money.
Bobn,
That is my point. There are going to be many angry people.
The next bubble!
1) Piss people off
2) ??????
3) Profit!!!!!
Is it always the same Mr. Alpha Male?
Heck, no, it's a parade, man.
I'm bombarded by the scam scripts almost daily at Starbucks.
It's disturbing.
it reminds me of the cash pyramid schemes of the late 1970s, I'd hear the scam almost every day from a new participant.
We built this citi on Hock and Holes.
Heck, no, it's a parade, man.
I'm bombarded by the scam scripts almost daily at Starbucks.
If you really get bored, you can prick-tease them:
"Uh yeah...yeah....yeah...." - an hour later: "Call me next week at 555-1212"
edit: speling
Dow Jonestown cocktail:
Lemon kool-aid laced with larceny
Here's one of the latest "make money fast" schemes i heard last week.
Australia's Best Kept Secret - Kakadu Juice!
I mean, look at the flipping NAME.
Who the hell is going to buy "Ka-Ka-Du" juice?
The best part of that scam is that it's so great, it's not even FDA approved!
It's too GOOD for the FDA to even verify!
Juvenal - or an Atrociti Exhibition...
YouTube - Joy Division - Atrocity Exhibition
nytol
C
re: Oil
Interesting comparison of S&P500 Oil & Gas Sector equities / Oil spot price
The $147 oil of last summer would compare to $90 oil now
"A third critic, a lawyer and Madoff victim named Helen Davis Chaitman, complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” because claims were being paid too slowly." (NYT)
_ _ _ _ _
The Schadenfreude is almost unbearable ...
Simon says due American Idoligarchy
broward (homepage, profile) wrote on Thu, 5/28/2009 - 8:25 pm
Is it always the same Mr. Alpha Male?
Heck, no, it's a parade, man.
I'm bombarded by the scam scripts almost daily at Starbucks.
It's disturbing.
it reminds me of the cash pyramid schemes of the late 1970s, I'd hear the scam almost every day from a new participant.
the infuriating part about all confidence scams is that they work if you can get enough suckers into the MLM system, and you get a cut of every transaction... even if you're selling worthless promises on pieces of paper.
The best part of that scam is that it's so great, it's not even FDA approved!
Actually, these juices represent themselves as "dietary supplements" which allows them to make certain health claims without going through any FDA approval processes for safety and efficacy. The caveat is that the product cannot claim to treat any condition.
Highly deregulatory. so it makes sense that it's another Clinton-era law.
"they work if you can get enough suckers into the MLM system, and you get a cut of every transaction"
Or if you can get taxpayers to backstop them.
HAHAHAHA!
Ka-ka-doodle-du!
sell their homes for a fraction of what they are worth
It takes a while for it to sink in.
broward (homepage, profile) wrote on Thu, 5/28/2009 - 8:31 pm
Who the hell is going to buy "Ka-Ka-Du" juice?
For me, that depends on whether or not it tastes good.
The deterioration is reflected nicely on Markit. Too bad SRS isn't reacting this time. Maybe they are pricing in Ben a little more optimistically than the debt markets. Equities Disconnected. What's new ?
Nothing ever gets priced in in the equities markets. They are a random UP number generating casino.
Somebody has a wicked sense of humor.
Scroll down to "See Also" entries at the bottom of "pyramid scheme".
Pyramid scheme - Wikipedia, the free encyclopedia
How dare they downgrade something you want to sell. Bastards.
This is inflationary right????
)
(just cause no one else said it!
Did you add Federal Reserve, broward?
broward (homepage, profile) wrote on Thu, 5/28/2009 - 8:31 pm
Who the hell is going to buy "Ka-Ka-Du" juice?
It reminds me of an unpleasant LI issue I had when I was down in the Caribbean ...
Caca, doo, juice ... I dunno, maybe throw in a "squirt!" or two ...
Samdog (profile) wrote on Thu, 5/28/2009 - 6:33 pm
.... complained that her clients “have been forced to go on welfare, use food stamps, and sell their homes for a fraction of what they are worth” [emphasis added]
No, those prices were as phantom as Madoff's returns.
we built this citi on black and scholes... ROTFLOL! ! ! ! Great stuff....
.........
Bond Girl I actually asked the question here 'will an agency down grade a loan that is already in the Feds hands.....' basically the consensus was that.... no f'in way.... they dont want to go down that road (edit).... I definitively agreed.....
I guess this is kinda a green shoot of honesty.... I'm kinda glad to see it... Lets just hope they dont over shoot...
(Then again I dont think public people can overshoot to the down side.... )
Cheers!
For those who aren't privy to the data, something like 11% of Citi's CMBS originations since 2005 are in default. Their research people are probably not aware of this but if they are, they really ought to shut it.
"Who the hell is going to buy "Ka-Ka-Du" juice?"
People who are tired of hair and would like to grow gorgeous feathers on their scalps.
Bond Girl (homepage, profile) wrote on Thu, 5/28/2009 - 8:43 pm
Did you add Federal Reserve, broward?
The silly dollar even SHOWS you the damn pyramid. The scam is at least as old as Babylon. There's no need for a conspiracy, just a class of psychopaths reinventing human exploitation.... meme-transferrence if you will. What culture can pass up this particular invention as they raid the artifacts of the conquered civilization?
People who are tired of hair and would like to grow gorgeous feathers on their scalps.
It would be better than a lifetime of blond jokes.
Was S&P not flawed, lacking justification with a methodology that did not seem rational or predictable on the way up?!
Someone shoot me. Do these bankers live so totally in a reefer fog that they can come out and say this sh-- with a straight face?!
ResistanceIsFeudal (profile) wrote on Thu, 5/28/2009 - 9:50 pm reply
The silly dollar even SHOWS you the damn pyramid.
Good point ... "One Federal Reserve Ponzi Dollar"
... and I might add it has that creepy eye looking at you, too ....
BG I knew that was you in your avatar before.... (Re blonde jokes)
Re: nominal quotation email address... Why is it that bond people pick the best names...
Across the Curve, Accrued Interest, etc...
Austin Tex's moniker could have used a little jargon tho... Has he commented recently?
There's a good FI crowd around here now... Turbo started posting again... I like the free classes!
Gotta run... Red Bull DJ night at the Academy of Sciences...
Cheers!
Now if I only had a basement to start hoarding guns, water and canned goods...
dcr100 (profile) wrote on Thu, 5/28/2009 - 9:53 pm
Was S&P not flawed, lacking justification with a methodology that did not seem rational or predictable on the way up?!
I have no idea.
Is this the same S&P whose 'S&P 500' P/E Ratio is now at 120+?
Unsurprisingly, everything I tried that included "Bond Girl" was already taken.
broward (homepage, profile) wrote on Thu, 5/28/2009 - 5:53 pm
OMG.
More Tsing Tao!
Nice to see my meme has taken green shoots
"Margin Call of Cthulhu" remains my favorite.
and of course ghostface was breaking out the ole wu-tang CMBS trading liquid swords stuff too...
I cannot stop laughing that 'water boy' Geithner is tasked to reassure that its massive US bond holdings are safe despite concerns being that US economy carries about $20 trillion of excess debt.
Crouching Tiger Hidden Dragon vs the 'water boy'
Got popcorn !
Samdog (profile) wrote on Thu, 5/28/2009 - 8:56 pm
Good point ... "One Federal Reserve Ponzi Dollar"
... and I might add it has that creepy eye looking at you, too ....
eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!
Ah, BondGirl,
I read your latest bond post- I found it quite interesting to look at your interpretation of that steep yield curve.
Looking back at the last 30 years of data, the yield curve only assumed large divergences between the 2 and 10 during times of potential deflation.
What I get out of the current situation is that the bond market assumes two years of low economic growth, with inflation igniting later on.
A bet that one should practically contemplate.
Further, shorting long term bonds right now in a market subject to quantitative easing bids seems a mite brave.
Never underestimate that Velvet Fist of Government.
You seem to be doing a good job providing a counterargument for the accuracy of blond jokes- but then does the exception prove the rule?
Someday this war's gonna end...
I can only hope that Citi did not kill any more chickens to divine the new value of it's CMBS market capitalization
"they expect the Fed to change their criteria."
S&P telling Timmy G. the jig is up? That they don't want to be on the hook for perpetuating the lie? I agree, the green shoots of honesty, from one of the primary enablers is reassuring. I do not think it will last as the full force of GS will be brought to bear.
ResistanceIsFeudal,
Guilty as charged
//eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!//
Didn't I read that Geithner got his BA from Dartmouth in Chinese?
If he can speak to them in Chinese, they'll be damn impressed. I can tell you that from personal experience.
["Margin Call of Cthulhu" remains my favorite]
I always got a chuckle out of "Zimbabwe Billionaire"
This is inflationary right????
(just cause no one else said it! Wink )
LOL - I was scrolling and scrolling fast to see if ANYONE had posted that - sure enough: nades.
That will teach me to go out!!!
I am meta-gaming the Fed and can afford to get burned.
Citigroup commented that the changes were "a complete surprise", "flawed", lacked "justification" and the "S&P methodology changes do not seem rational or predictable". Ouch.
Citi also noted that this will impact the CMBS legacy TALF announced last week by the Fed. According to Citi the "S&P changes could impact nearly 40% of the triple-A TALF eligible universe" and they expect the Fed to change their criteria. - CR
:: ::
Wow - just WOW!
The revelations never stop.. hoocoodanode?
Crazy Compensation and the Crisis - We're all paying now because skewed financial incentives led to too many big bets.
Crazy Compensation and the Crisis - WSJ.com
By ALAN S. BLINDER
Despite the vast outpouring of commentary and outrage over the financial crisis, one of its most fundamental causes has received surprisingly little attention. I refer to the perverse incentives built into the compensation plans of many financial firms, incentives that encourage excessive risk-taking with OPM -- Other People's Money.
What, you say, hasn't huge attention been paid to executive compensation -- especially those infamous AIG bonuses? Yes. But the ruckus has been over the generous levels of compensation, or the fact that bonuses were paid at all, not over the dysfunctional incentives that inhere in the way many compensation plans are structured.
Take a typical trader at a bank, investment bank, hedge fund or whatever. Darwinian selection ensures us that these folks are generally smart young people with more than the usual appetite for both money and risk-taking. Unfortunately, their compensation schemes exacerbate these natural tendencies by offering them the following sort of go-for-broke incentives when they place financial bets: Heads, you become richer than Croesus; tails, you get no bonus, receive instead about four times the national average salary, and may (or may not) have to look for a new job. These bright young people are no dummies. Faced with such skewed incentives, they place lots of big bets. If tails come up, OPM will absorb almost all of the losses anyway.
Whoever dreamed up this crazy compensation system? That's a good question, and the answer leads straight to the doors of the top executives of the companies. So let's consider the incentives facing the CEO and other top executives of a large bank or investment bank (but, as I'll explain, not a hedge fund). For them, it's often: Heads, you become richer than Croesus ever imagined; tails, you receive a golden parachute that still leaves you richer than Croesus. So they want to flip those big coins, too.
["Margin Call of Cthulhu" remains my favorite]
I always got a chuckle out of "Zimbabwe Billionaire"
Margin Call is probably my favorite, too, so far. I also like ResistanceIsFeudal and ghostfaceinvestah and Notorious AIG. Juvenal D. comes up with many amusing puns, though the nick could be better, sorry JD.
Methinks Citi doth protesteth too much.
"Margin Call of Cthulhu" remains my favorite
Me too - he should get it copywrited & sequelled off into it's own blog. The Children of CR Series...
remind me why S&P and Moodys still exist as ratings agencies?
S&P methodology changes do not seem rational or predictable
Apparently Citigroup wasn't informed when S&P threw out the "AAA" rubber stamp.
dryfly (profile) wrote on Thu, 5/28/2009 - 7:21 pm
Citigroup commented that the changes were "a complete surprise", "flawed", lacked "justification" and the "S&P methodology changes do not seem rational or predictable". Ouch.
Citi also noted that this will impact the CMBS legacy TALF announced last week by the Fed. According to Citi the "S&P changes could impact nearly 40% of the triple-A TALF eligible universe" and they expect the Fed to change their criteria. - CR
Wow - just WOW!
Really ? I say it its complete bullshit and just more gaming of the system to get more free bailout $$$ with burden to ...yes you guessed it ....the Americans taxpayer.
The Bilderberg Plan for 2009: Remaking the Global Political Economy
The Bilderberg Plan for 2009: Remaking the Global Political Economy
One Bilderberger said that, “the banks themselves don't know the answer to when (the bottom will be hit).” Everyone appeared to agree, “that the level of capital needed for the American banks may be considerably higher than the US government suggested through their recent stress tests.”
In case anyone missed this earlier over at Zero Hedge:
Edscha LCDS Secured Auction Final Price... 3.75 Cents On Dollar
Zero Hedge: Edscha LCDS Secured Auction Final Price.... 3.75 Cents On Dollar
"I am meta-gaming the Fed and can afford to get burned."
Probably a popular play. I am underwhelmed of Ben's prowess. Ben can try to game the markets, but the bond market is going to eat his lunch.
Lucifer (profile) wrote on Thu, 5/28/2009 - 9:15 pm
ResistanceIsFeudal,
Guilty as charged
//eh, that's just the Eye of Lucifer. overseeing completion of a godless scientific dictatorship and all that. boring... here we get to talk to him in person!//
I have to hand it to you Luci, this soul-destroying system you have devised will ensure a plethora of will-less host bodies are available for possession. Tricking them into giving up their humanity, sense of ethics and pursuit of virtue for illusory wealth and position in a global plantation was truly the coup d'etat!! My hat is off to you.
S&P has really put the Fed in an interesting position. - Bond Girl
I think they call that 'bend over and touch your toes' position.
The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar
I have a 100 trillion Zimbabwae note and a 100 billion note and 1 dollar note. May be worth something some day.
RIF,
But the choice is always theirs to make. I believe in free choice.
EvilHenryPaulson (profile) wrote on Thu, 5/28/2009 - 9:35 pm
The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar
Damn, I failed to realize that they fully abandoned it. Now my $300 Trillion in Zim dollars (3 bills btw) will be worthless for all time.
Qty Stock No Description Price Each Total
3 F8617 Zimbabwe 2008 100 Trillion Dollars Unc $6.00 $18.00
"The Zimbabwean dollar was officially abandoned. They use the US Dollar and South African Rand, although the volatility of the USD has caused a shift towards the SA Rand since the end of the Zimbabwean dollar"
Surely they will just charter a new central bank with the currency initially backed by Dollars and/or Rands. Then when the new currency is in acceptance....
In case anyone missed this earlier over at Zero Hedge:
Edscha LCDS Secured Auction Final Price... 3.75 Cents On Dollar
http://zerohedge.blogspot.com/2009/05/edscha-lcds-secured-auction-final-...
Thanks TJ... I don't doubt it.
A buddy sent me an email - I've posted it before but sums up the situation - an auto supplier:
From what I heard the XXXX Company Auction was a blood bath for the bank. YYYY from ZZZZ Inc. said he didn't think the total auction exceed 1,000,000 3 year old 2 pallet horizontals that sell for $250,000 went for $10,000 The new die casting machines went for 10-20,000 Everything older was scrapped.
3.75 cents on the dollar sounds about right considering.
"Samdog (profile) wrote on Thu, 5/28/2009 - 8:56 pm
Good point ... "One Federal Reserve Ponzi Dollar"
... and I might add it has that creepy eye looking at you, too ...."
I like to take a black Sharpie when I get one dollar bills and black out the eye on them. It helps to ward off evil spirits.
My point in that post was a follow-up to an earlier discussion on the expectations hypothesis.
If you believe that the Fed is intervening in the Treasury market to keep interest rates low and you believe the expectations hypothesis explains the shape of the yield curve, then the best QE can accomplish is a series of rate shocks, and even that depends on the bond market's belief in the credibility of the Fed's commitment to QE. This effect will diminish as bond market participants' inflation expectations increase.
If you believe that the Fed does not care about keeping rates low and is just using the Treasury market as a conduit to pump x amount of dollars into the system, then this should get interesting.
I think supply stands to overwhelm this entire operation, however. I am aware that the Fed may choose to give the long end of the curve everything it has in the near future. I think that would be The Worst Idea Ever, but it certainly could happen and that would be my loss.
Ehp according to a good book I'm reading called "Disressed Debt Analysis" common stock rarely goes to zero even when bankruptcy is clearly imminent.
Ehp according to a good book I'm reading called "Disressed Debt Analysis" common stock rarely goes to zero even when bankruptcy is clearly imminent.
Why? Who would buy?
yogi
and stocks normally do not undergo a most public bankruptcy while they remain not only listed on the NYSE but a member of the Dow Jones Industrial Average. You could always subtract xx¢ * yy mn shares from the money swindled figure if you want
edit: I don't mean to suggest that your info has no value, but I think the above aberration is the more substantial story
dryfly - Children of the CRon? Spawn of CRVIX? CR and the Maxed Out Mummy?
Horror meme building.
New bubble?
C
The "Bride" of CR.
Dryfly,
A couple of these failed auctions of parts suppliers and the whole sector is going to "marked down" and then it becomes a credit spiral into oblivion.
Michael (profile) wrote on Thu, 5/28/2009 - 9:41 pm
I like to take a black Sharpie when I get one dollar bills and black out the eye on them. It helps to ward off evil spirits.
If we're going to destroy the dollar can we start with the stinky ones? I don't think they would compete with decaying human corpse, but I hate the dollars that smell like someone used them as a puke filter six years ago. I would try to clean them, but it's illegal to launder money, so they usually end up in soda machines.
"Why? Who would buy? "
Sometime a broker will buy a BK stock from you so that you can nail down the loss.
Heck, Thornburg Mortgage is still quoted in the pink sheets @0.031 today.
OK, I guess I have to roll-out that hoary Citigroup vid-mash up of mine from Nov 24th... YouTube - What's Wrong with America? Saving Scum like Indian Beggar Pandit & Citibank by Uncle Sugar. Revolt!
it needs to go into the shop for changes... but promise to keep Run for the Hills as final track for some of you Mad Max types
out there....!
FWIW, the FED says they have no intention of defending the 10 year rate and will not in the future.
Sometime a broker will buy a BK stock from you so that you can nail down the loss.
And they put up the money? Why wouldn't everyone sell into that price and get a $1 rather than pennies?
It would quickly drive to zero.
Somebody has to think that the share is worth something, and that's what I can't figure out.
Bond Girl (homepage, profile) wrote on Thu, 5/28/2009 - 7:43 pm
My point in that post was a follow-up to an earlier discussion on the expectations hypothesis.
You should discard expectations, as almost all of the bond market has no experience with the current situation, as most of us were not bond market participants during WWII- the last time the Fed actively capped rates and bought bonds.
If you believe that the Fed is intervening in the Treasury market to keep interest rates low and you believe the expectations hypothesis explains the shape of the yield curve, then the best QE can accomplish is a series of rate shocks, and even that depends on the bond market's belief in the credibility of the Fed's commitment to QE. This effect will diminish as bond market participants' inflation expectations increase.
I think you underestimate the Velvet Glove of this government- they definitely mean what they say.
If you believe that the Fed does not care about keeping rates low and is just using the Treasury market as a conduit to pump x amount of dollars into the system, then this should get interesting.
I think supply stands to overwhelm this entire operation, however. I am aware that the Fed may choose to give the long end of the curve everything it has in the near future. I think that would be The Worst Idea Ever, but it certainly could happen and that would be my loss.
Today's test float of new taxes shows they are going to be pulling a lot of stunts- VATs are fun to evade. Further, they intend to reduce long term expenditure for health care through their programs, a point that is lost on most of the commentariat.
Someday this war's gonna end...
"And they put up the money? Why wouldn't everyone sell into that price and get a $1 rather than pennies?"
Oh, no - they would never pay you dollars. Maybe a penny a share or something. It's just to get a transaction done so that you officially sold it - it's less complicated than doing a declaration to the IRS for dead shares.
the confusion regarding pricing BK-imminent stocks is that not all BK are the same. In a C7 liquidation, the ultimate price of a balance-sheet insolvent company is necessarily zero. However, it is possible for a C11 reorganization to be successful, which would return value to the equity. e.g. MCI Worldcom.
"Why? Who would buy?"
Plus options traders who might want to exercise an option to sell on a naked put.
Citizen AllenM writes;
"Today's test float of new taxes shows they are going to be pulling a lot of stunts- VATs are fun to evade."
You would need a well-developed shadow economy to evade a VAT, I would think. Maybe the guys running the drug operations will get consulting jobs explaining how it's done.
and;
"Further, they intend to reduce long term expenditure for health care through their programs, a point that is lost on most of the commentariat."
Not sure how many missed that. They have to reduce health care costs or the country will be even more bankrupt than it already is, if that's possible. Providing first-world health care to all comers free of charge is not a viable model. And many hospitals have been doing that for at least 20 years now. Which is why health insurance is unaffordable, hospitals are closing, etc. Once people realized that they could declare poverty and get free health care, the game was up, and it was only a matter of time until the system crashed.
Why? Aside from the obvious-- transaction costs, the gamble that the company may actually have positive equity-- the author, Stephen Moyer, concludes, "Perhaps...not enough investors understand the restructuring process...Perhaps... some investors have psychological difficulty admitting a bad decision...a sense of denial. Who knows? But the reality, based on the observation that many reorganizations have left stockholders with no recovery and yet the stock trades at positive values very late into, if not at the conclusion of, the reorganization, is likely to be that they were simply wrong."
Most bankruptcies are no surprise to even small shareholders. GM is just the biggest ever.
FWIW, the FED says they have no intention of defending the 10 year rate and will not in the future.
Well then, you can stick a fork in RE, MBS, and (last but not least) FNM/FRE/FHA. Hear that giant sucking sound?
TJ,
Of all people, you should be the least surprised...
A couple of these failed auctions of parts suppliers and the whole sector is going to "marked down" and then it becomes a credit spiral into oblivion.
RD - I think we are back to the late 70s & early 80s... back then mfg companies in 'rust belt' were easy to value - their net worth was the NPV of expected future earnings less liabilities... and at 17-18% interest rate hurdles the discounted future earnings' go to zero pretty fast.
The actual 'hard assets' were worthless.
The land they sat on had negative value after Love Canal.
The machines were older than dirt & with technology even older.
The 'designs' were mostly 'generic commodities'... franchise value? Good luck rebranding Rambler or Gremlin.
If your factory was still busy, had customers and cash flow it was worth something as an ongoing concern... once all that went away it had zero or negative value in BK.
That will happen again as is typical on the back end of Schumpeter Waves... the fires of creative destruction are just now getting going.
Keep them, if you live in the US, you may be able to trade them for soup.
FNM/FRE will be nationalized and acid poured through the system. I think Dryfly made that comment last night.
by the way the book is from 2005
"Well then, you can stick a fork in RE, MBS, and (last but not least) FNM/FRE/FHA. Hear that giant sucking sound? "
How can Ben not know this? Does he not have a ton of MBS on HIS balance sheet now? What can he possibly do to prevent bonds or inflation from killing any MBS market? What is his play? How does he and the 19 TBTF not fail? I do not see an out.
dryfly;
re: auto parts suppliers:
"If your factory was still busy, had customers and cash flow it was worth something as an ongoing concern... once all that went away it had zero or negative value in BK."
This is going to be the interesting part. I would think that the tooling for automobile replacement parts would have some value, and a business that sells the parts should be able to continue operating. I'm pretty sure that people will be keeping cars longer, gas-guzzler rebate or no. There has to be some sort of a parts business to keep the old cars running, with head and tail lights operative, etc.
Yes, dryfly.
Once again the agony will continue for old line manufacturing.
It has been dying ever since we started pursuing strong dollar policies in the late 70s.
Nothing new. I wish we would be more competitive, but as long as we allow huge profits to be made from destroying american industry, well, here we are.
No real changes until the dollar falls, as I tried to point out to bond girl.
We will attempt to defend everything until systemic failure forces us to make more rational decisions.
Until then, this administration will continue to fight fires publicly, while making long term changes that will significantly change the way the entire economic system works in America. They hope to ride just ahead of a wave of destruction to make significant changes.
Which is a good thing, since we are currently screwed.
Someday this war's gonna end...
Re: Fed defending a rate threshold on 10 year
Not defending a threshold is one thing (this was clear weeks ago and I wrote about it, I think), but not even having a target range is another. What was the point of the purchases supposed to be? From the March meeting statement:
"Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months."
Improving conditions in private credit markets suggests that they are at least trying to keep rates low, and if that is the standard, they need to step it up some or they've just plain failed. But they seem to be changing their tone on this matter by suggesting that they merely want to keep the Fed's balance sheet at a given level and are transitioning from their emergency facilities to other efforts.
At any rate, I was definitely not suggesting anyone imitate me.
FNM/FRE will be nationalized and acid poored through the system. I think Dryfly made that comment last night.
I think a lot of these 'bailout candidates' are going to be brought in from the cold today but end up swimming face down in Grover's bathtub in a few years.
slow down CR! I have to spend my day in court and then in the evenings, usually late, try to peruse the postings and comments
....
OT/
I must say that is is an unique experience to stand within 50 feet of a man who was charged by the UN "of personally overseeing the systematic torture of more than 15,000 prisoners" separated by only a pane of glass... (after much scheming and wheedling I was able to secure a video feed of the trial!!! one track is translated in English, while
for you Francophiles the other is in French..)
I'll save further comments for Sat night....
dryfly,
How will we know when they're "brought in from the cold"? We're already paying all their bills...
WOW THAT WAS CLOSE!!! The taxpayer almost lost $75 billion
Basel
Sarbans-oxley
Enron loophole
Any other legal regulatory issues I am missing?
Somebody has to think that the share is worth something, and that's what I can't figure out.
JP:
If you are short the stock, you need to buy the stock to close out your position. Since stocks of BK companies tend to "trade by appointment", the actual execution price can get really strange if you are value it based on fundamentals instead of how much profit do I have to give up in order to lock in the profits I've made by shorting.
NW
I guess long bond yields increase around mid-year was anticipated on this forum (& elsewhere) and Treasury still has a ways to go with the debt it needs to float. Practically speaking though, how much / how long can the Fed intervene to keep the yield down, if it chooses to do so? Isn't there a point at which it has to stop trying to run in mid-air and just let the free fall begin, a la Coyote?
This is going to be the interesting part. I would think that the tooling for automobile replacement parts would have some value, and a business that sells the parts should be able to continue operating.
:: ::
I can tell you 100% that is NOT the case. I'd have to write a 1000 page Mfg Process book to fully explain but here's the Cliff Notes:
The vast majority of the suppliers are scaled up for builds in the hundred's of thousands to millions... replacement parts run in the tens of thousands or less - the equipment, set up & processes are as different as your kitchen is from a Campbell Soup factory.
Believe me I know - I've actually been winning contracts for one of my companies SPECIFICALLY because we are a fast turn low volume shop focusing on high variety low run 'service' jobs yet have adequate systems [ISO, Lean, etc.] for big upper tier mfgrs. Many of the vol shops would have trouble getting there [price & performance wise] even if they had profits to fund it - which they now don't.
There are a lot of companies out there [Wells Mfg comes to mind] that specializes in 'aftermarket'... the majority of the supply chain like Visteon, Delphi, etc. would get eaten alive by these folks in that niche - if they lived that long to be eaten.
The job loss in the supply chain on up through the OEMs is gonna be something.
The Fed can intervene all it wants, but it may ultimately find itself the only purchaser around, among other things.
How will we know when they're "brought in from the cold"? We're already paying all their bills...
Because we are paying their bills many of them will eventually be drowned in Grover's tub... not because the current admin wants to but because eventually some admin will have to - we won't have the resources to support them all.
You and I have been discussing this for YEARS TJ - I don't get all hung up on the dollars because they can be printed at will - the resources have real constraints however. At the pace we are going we aren't going to have enough of those.
I don't know what the Fed is thinking, but if I was Ben I'd take my ball and go home. It was a good run. Once talking the market down stopped working, he stepped up to the plate with his girly academic arms and hit a weak foul ball. IMO, the QE was just to keep the mortgage market down long enough to get in as many refinances as possible. I don't think it was ever a long term plan. Now it's game over, the market will do what it wants, and Ben shouldn't fight the tape (but he wouldn't have learned not to do that in academia).
dryfly,
'nuff said, I think I get it. I thought that the aftermarket shops could re-use the tooling, but I guess not... so that explains why some auto parts become completely unavailable once production inventory is gone. And why the price of what is available is so ludicrously high.
There was a piece in the LATimes recently about a small company that buys wrecked Porches and strips them for parts. For less expensive cars, I'm pretty sure that the junkyards sold them to recyclers in China, so no parts for you!
There are going to be some seriously messed up cars limping around in a few years - it's going to look like Mexico or Cuba in some places if there are no parts.
"Somebody has to think that the share is worth something, and that's what I can't figure out. "
Looking at the optons chains
CALL OPTIONS Expire at close Fri, Jan 21, 2011
Strike Symbol Last Chg Bid Ask Vol Open Int
2.50 VGNAZ.X 0.16 Down 0.07 0.16 0.17 10,270 47,438
5.00 VGNAA.X 0.08 Down 0.02 0.07 0.09 1,443 19,457
7.50 VGNAU.X 0.05 Down 0.03 0.04 0.06 275 12,695
10.00 VGNAB.X 0.03 Down 0.02 0.03 0.04 13 2,147
12.50 VGNAS.X 0.02 Down 0.02 0.02 0.05 210 3,124
That is an awful lot of people purchasing and option to BUY GM at 2.50. It would have to get to 2.67 to even make a penny a share. That has to be the other side of some weird option/short combo.
I haven't checked the Citi site lately but it said in the past:
Welcome to Citi.
We work to turn dreams
into realities.
Ben's plan was never to provide a permanent solution, it was to simply buy time. Based upon the recent action in the bond market, that time is quickly running out.
I should probably get a replacement tailight assembly for my Chevy Malibu before the parts dry up.
You've got to love this site. Hoocoodanode that things as simle as basic auto parts could be an issue?
'nuff said, I think I get it. I thought that the aftermarket shops could re-use the tooling, but I guess not... so that explains why some auto parts become completely unavailable once production inventory is gone. And why the price of what is available is so ludicrously high.
Bingo! Expect a lot more of that once the Big Three 'debrand'.
My guess is there will be some parts for most vehicles but (1) expensive and (2) sub-standard. I just bought a sensor for my son's 1990 wreck... $250 - there was a total of FIVE in the whole country. When they go that model heads off to the dustbin of history. Why pay $250 for a sensor? Because buying another 'new-used' wreck would cost ten times that amount and need a couple thou to make it road safe.
Be a lot of those choices going forward.
Edited to 'make some sense'...
Blackhalo;
Here is a quote from Jeff Macke:
"From May 15 to May 27, GM went from a close of 1.09 to a May 22 high of $2.24. The stock is worth nothing. Do I envy the guy who caught the 122% move? Yes. Do I think the buyer at $2.24 was an experienced trader? Absolutely not. On TV or in the ‘Ville, my goal is to help “the little guy” avoid the countless traps the Street uses to capture newbies. From where I’m sitting, Wall Street hasn’t been this much of an insider’s game since the 20s."
Dow Watch: Swimming With Sharks-Minyanville
And following up the meltdown last week, Macke also writes:
"All apologies to those offended by the absurd (and endless) bailout of General Motors (GM). If you’re delighted to pay for the better part of Detroit, I really can’t speak for or to you. You likely think I’m crazy, and I doubt you understand what’s unfolding before your very eyes. If you’re actually in favor of leapfrogging socialism straight into totalitarianism, let’s just agree not to talk to one another at all."
"Regardless, I haven’t been “kicked off” or “put on probation” from Fast Money. I plan on being there next Monday. That’s simply all I have to say on the matter."
sm, blackhalo, et al.
Thanks for the explanations. Nevertheless, I must be really stupid tonight. The brokers would not put up the money for purchase, because it would be money out of their pockets.
It makes more sense that people closing short or option positions would drive the price higher, but I am just amazed that it pressures the price all the way to a buck.
Truthfully, my vote is still on stupidity: Avg guys just don't understand cap structure. But that's just the pot calling the kettle stupid.
Youse guys keep talking about the "inevitability of the market" and I keep seeing it not happen.
Bond Girl,
I think you seriously underestimate the power of the Fed.
How about this instead of QE- the fed offers $1,500 an ounce for gold.
They buy and buy and buy, and take the cash and buy long bonds until rates behave.
The interesting question is would this be more effective at actual stimulus of the economy than QE, or would this lead to inflation expectations rising?
The Fed, banks, and pension funds bought almost all of the bonds during WWII, the private market was nearly nonexistent.
Consider history when you talk about metagaming the Fed.
The odds are they are quietly rigging the game against you.
Someday this war's gonna end...
Think of the market as a aging piece of meat in the kitchen of a small crap restaurant. Every day the restaurant opens and they hope people buy a sandwich or whatever. When the meat gets moldy it is washed and served when it gets cold it gets reheated. The restaurant doesn't care who they make sick just as long as they make their money and get rid of the old meat. Then they close up shop...
You can't have any pudding til' you eat your meat. How can you have any pudding if you don't eat your meat?
dryfly,
I don't know squat about the manufacturing biz, but I remember some entrepreneurs going around the closed textile plants in the South and buying up the machines and
selling them over here in the Asian market who turned around and produced a lot of export for the Walmarts of the world
what would be the difficulty of trying that say in a parts manufacturer? You mentioned Wells, are they USA based?
The Fed now WANTS a steep yield curve, to help speed the recapitalization of the banks. They gave everyone a window to refi their mortgages, and that window has now closed. Now it's all about goosing bank profitability. If the 30yr bond goes much above 5%, they'll do some QE to bring it down a bit, but right now they want the fat spread.