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inappropriate, says Geithner. Shocker!
As another wise man once said: "I'll believe it when I see it".
2 years into the credit crisis and what new laws have been passed preventing another bubble?
ALways leave yourself an out...."those that are just too unique” are backed by extra capital..
Rubbish. This is an out for financial "innovation"
The logical result is that everything will be reinnovated to elude the ban.
"Geithner said that while comprehensive oversight is needed, a ban [on unlimited Goldman Sachs profits] would be inappropriate."
Ghost - by the time any law has been passed, it wil llikely be so toothless as to have not been worth the effort. So far, Im pretty sure nothing has been done, which is effectively going backward, in terms of progress.
2 years into the credit crisis and what new laws have been passed preventing another bubble?
What bubble? This is just a robust recovery, you hater.
"...what new laws have been passed preventing another bubble? "
Other than Madoff, we haven't even gotten to the perp walks yet. There's plenty of time to pass new laws. Pass new laws too soon, and "innovators" will have plenty of time to prepare BubbleFodder v3.0 in preparation for the next period of easy money.
And what financial purpose did unregulated naked default swaps have? I forgot. Maybe Phil Gramm can tell us.
Re: The logical result is that everything will be reinnovated to elude the ban
Just like speed limits. I think if we enforced speed limits the entire society would improve. Bottom up law enforcement. Hell, if we shot speeders I'd bet the "financial innovation" types (and a few other testostone infused jerks) would be eliminated as a side benefit.
Just an idea....
so AMZN and MSFT missing should get us over the 10,000 hump tomorrow, right?
Qs:
1. How does a CDS differ from a put on a bond?
2. Why are the effects so much worse than a put on a stock?
so AMZN and MSFT missing should get us over the 10,000 hump tomorrow, right?
You aren't the very same Eric who weeps for his puts are you?
From last thread:
If we continue with a pure fiat currency, heads will be on pikes.
Go take a look at pics of the recent annual chicken wing orgy in Philly.
Blue collar heaven: strippers, lotsa salty food, rock music, etc. Top dog gutted over 200 wings. Burp.
There, in fact, is your heads-on-pikes constituency, and it's stuffing its face. It's a population that can be turned into an army by its masters in a heartbeat, but which has no taste for revolt against said masters, period. Fifty years of TV and Bernaysian cranial rubdowns have seen to that.
As for the kids, well, at the Apple store in depressed, unemployed Portland, OR, this past weekend, the queue for getting an iPhone was 45 minutes.
Signs of a people very far from uprising.
You aren't the very same Eric who weeps for his puts are you?
Heh, I bought more puts today (Jun'10 SPY 97s).
"Don't get sore.... sell some more!"
So far since June 29th I've unloaded real estate into a rising housing market, and loaded up on puts during this huge economic recovery. If you want to make money, just fade my action.
Not that I'm short and bitter at all.
regarding everyone getting a boner about AH trades in MSFT and AMZN. Its amateur hour...you or I won't know what the plan is until tomorrow morning. Until then it's just non-sense. As if results are driving these markets......if they were it would be holistically different.
Classic example is NFLX.....lower Q3 guidance....churn rate is up .2% (not a good thing for it at all) but the headline focus is on "beating estimates"...AMZN exists because the system thinks the FCF somehow translates into operating profit margin..it doesn't and never will.
Fundamentals are not allowed to matter. I suspect that the job #'s will be horrible tomorrow but they just gave them an additional cushion to fall into...again.
Ciao
MS
I suspect that the job #'s will be horrible tomorrow
That's not for two weeks, right?
It's all about "transparency". This guy is running for mayor of NYC. He sure seems like a breath of fresh air:
Yahoo! 404 - Page Not Found
Sorry I meant to type consumer sentiment....I just automatically type that when we get claims. Habit I guess.
Ciao
MS
for the love of all that is holy
cant these guys just trade their credit defaults with their clothes on
Paging Dr. Banner - telephone call for Dr. Seedie S. Banner. Line 1...
Yes?
Seedie, this is Timmy. Whaddya got for me?
Oh, nothing sir, was just musing to myself and apparently words escaped my mouth.
Good, don't let it happen again.
OF COURSE banning 'naked' CDS is inappropriate in the World according to Geithner! He is a highly paid Wall Street Interests Boy Toy!
BTW, did this kind of after-hours intrigue, rumors, controversial financial news, etc. occur prior to 2M?
Angry Saver: the naked guy? hell yeah! he's cute, he can sing and his tush is tight
what else does one need?
O! yeah, a chicken wing eating contest!
UMICH tomm rocks the house. Count on it. All AH amateur hour action fades away as if it were never there. (just like the earnings of those companies)
Re: consumer sentiment...
That'll be interesting. Like I said, the peasants I know are feeling pretty good. Their 401k statements went up... Things ain't so bad....
(they all still have jobs tho, with a zombie bank - but, it's one of the healthier ones, dude. Well be ok dude...)
"...inappropriate, says Geithner. Shocker!"
who told him? Why, Lassie did.
And what financial purpose did unregulated naked default swaps have? I forgot. Maybe Phil Gramm can tell us.
For one, they allowed the financial industry to do private equity deals with the U.S. CONgress and Executive Branch.
Enormous payoffs on those deals. Absolutely huge.
Im confused, is TImmay the lapdog, or is Lassie?
Too bad we can't throw Timmy down a well.
Volker,
I watch the hot dog eating competition at Coney Island every year. Competitive eating is the next Pro Bull Riding moon shot.
"you or I won't know what the plan is until tomorrow morning.",
or possibly a series of head fakes. a dodge to the left, a momentum that draws in the gullible, a slam dunk,
and you're left with a losing ticket.
oh well, the hosses are running at Del Mar and Saratoga next week
While I'm just getting bits and pieces of the flowing CR comments of the day, I hated that Externalized Costs comment was pigged.
It will be interesting to see how civil rights (Gender, Race, Age, etc) are affected in the times to come and to see which groups are (more) marginalized as times get tough.
"oh well, the hosses are running at Del Mar and Saratoga next week "
you have much better odds at both places. and the "hats" are pretty nice to look at too.
Ciao
MS
"Signs of a people very far from uprising. "
Nothing a currency collapse won't change.
Why are they even talking about things like this?
The rumblings grow louder.
Hong Kong Dollar Peg Designer Says Link Can ‘Easily’ Be Changed - Bloomberg.com
Hong Kong Dollar Peg Designer Says Link Can ‘Easily’ Be Changed
Barton,
Mrs. Gnome wants to know if there was a time limit on the 200 wings.
JP wrote on Thu, 7/23/2009 - 3:32 pm
Qs:
1. How does a CDS differ from a put on a bond?
2. Why are the effects so much worse than a put on a stock?
i am not a futures / options trader but have been told that
the credit default swaps are not publicly traded, at an exchange, thru a clearing house etc
but in trading options on securities or equities,(incl puts) an investor may be called upon by her or his broker to purchase the underlying security to the derivative if the market goes against the play (or settle thru a cash position)
furthermore each CDS can be one of a kind...there are few if any standards and varieties are limited only by imagination and the ability of lawyers etc to write complex contracts
where as futures and options trading has regulations and a degree of standardization
It's not the "naked" thing that really matters, it's not holding adequate reserves to cover and the collateral you have to come up with when TSHTF that makes these things go ugly
Not that I'm short and bitter at all.
Short and Bitter
S&B
S-n-B
SAB
There is a mighty good handle for someone in there...
you guys were warned--don't play in the street
asterisk (profile) wrote on Thu, 7/23/2009 - 3:44 pm
Too bad we can't throw Timmy down a well.
how about if you me and a few frat bros and sorority sisters just hoist him by his ankles and dunk his head repeatedly in a toilet
would that work for you?
(attn nsa this was a joke)
The majority always wins. Nothing feel better than having somebody to look down on, especially when you're near the bottom. The best the minorities will be able to do is stay as invisible as possible. When times get tough natural human behavor takes over, as the "nice" people are too busy keeping themselves alive to moderate the rest of the population.
Don't forget, you can explain ALL behavor if you remember for 4 F's of human motivation: Food, Fear, Fighting, and Sex. This might just apply to males, or so I"ve been told a few times.
Let's get rid of speed limits on all roads. Let's allow smoking in public places again. Oh what the hell, let's allow everyone to issue there own money/credit too.
Everybody needs to be TBTF.
Don't short the market, it's a trap!
Actually, I do have insurance on my neighbor's house, with AIG.
edit dbl post
MS said,
"As if results are driving these markets......if they were it would be holistically different.....Fundamentals are not allowed to matter."
You are stretching it a bit to say that fundamentals don't matter. They matter as soon as the momentum traders head for the exits.
Based on the drop in AMZN's quarterly earnings (down .05 from the same quarter a year ago), I figure their PE ratio, based on TTM earnings and today's closing price, is 62.20. If that doesn't alarm investors a bit, I don't know what will.
Re: Actually, I do have insurance on my neighbor's house, with AIG.
HA!! too funny.
Based on the drop in AMZN's quarterly earnings (down .05 from the same quarter a year ago), I figure their PE ratio, based on TTM earnings and today's closing price, is 62.20.
Good thing that they bought Zappos to obfuscate earnings for another year or two.
The american dream is making it big selling hope to suckers.(AKA Insurance).
It gets even sweeter when that hope is government mandated for the sucker.
Burn, baby, burn.
Comrade Coinz - 3:56 p
Don't short the market, it's a trap! (youtube link)
coinz, ok i looked at it
didnt seem like a trap to me
seemed more like a tarp
"Good thing that they bought Zappos to obfuscate earnings for another year or two. "
Can Zappos really do that much business?
Seems to me like Wachovia buying Golden West at the peak of the housing market.
"Based on the drop in AMZN's quarterly earnings (down .05 from the same quarter a year ago), I figure their PE ratio, based on TTM earnings and today's closing price, is 62.20."
What is their dividend yield again?
"It's not the "naked" thing that really matters"
well, I beg to differ, but it DOES. Otherwise, I'd take out cheapy life insurance policies on every past-prime drunk and speed-freak I know. I sure as hell wouldn't be doing my own weeding, THAT'S for sure!
Re: Can Zappos really do that much business
It's not the business they do, it's the business they don't do but might do, maybe.
Wells is still shuffling the deck with the Wachovia / Golden West purchase.
Would you like to play another round of the "earnings" game?
jamie dimon gets it...
It's simply the fact that these are available to only large 'tutes without having a damn thing in reserves to cover them. Add in that the holder of them can actually cause the failure and you have a recipe for what we are seeing now.....CIT, BSC, LEH, ML, CFC I could go on but..I won't .
short-
Sure I get that...I understand it very clearly.... but let's face fact's the P/E ratio is a pipe dream especially in that stock. IF it were a true relevant metric the shares would be much lower than your example. Momo. surely makes up for some of it but the thing with AMZN is that no one metric that is applied to similar business's are allowed to affect it. It's a 'friggin retailer not the next cure for cancer. It trades as if it is. Now I certainly understand why.....you have such a small concentration in ownership but AMZN is purely a payback to Bezos' prowess as a programmer in his previous life. That they are even allowed to book one time sales (for hard assets) in the operations 'bucket; is not only wrong but last time I looked it was illegal. But we seem to have this problem of enforcement now....
Ciao
MS
"I'd take out cheapy life insurance policies on every past-prime drunk and speed-freak I know."
Big difference against betting against another human life and a company's bonds. Not the moral issues, but your ability to influence the outcome.
OT, from Bloomberg:
Lubert-Adler Said to Mull Bid for Chicago’s Corus Bankshares
Lubert-Adler Said to Mull Bid for Chicago’s Corus Bankshares - Bloomberg.com
Snippet:
“However, the bank was already not in compliance with its minimum capital ratios and was classified as “undercapitalized’” as of May 1, the filing said.
How long will they let this thing suffer (and lose more blood) before they shoot it?
"Not the moral issues, but your ability to influence the outcome"
not true for everybody
sounds to me like BSR has already figured out the pre-issue underwriting standards
and--morality? bwahahahaha!
"Add in that the holder of them can actually cause the failure and you have a recipe for what we are seeing now.....CIT, BSC, LEH, ML, CFC I could go on but..I won't"
But that would argue for not allowing bond puts too, wouldn't it? Or covered CDS?
The big problem is the lack of collateral put up by the seller. It is selling insurance without holding capital against the risk.
Imagine State Farm could sell auto policies without holding capital.
most of my cohorts buy most of their shoes online. so much more efficient shopping for shoes online while while supposedly working than to go to a brick and mortar.
Otherwise, I'd take out cheapy life insurance policies on every past-prime drunk and speed-freak I know.
In many states, you can get sell your life insurance policy to third parties. I know a guy that's underwater on a dozen life insurance policies he bought from HIV patients.
Basel: they're called viatical agreements
I'm not sure we know whether market mechanisms can manage the risk yet. A clearing function requires adaquate margins and that they be posted all the time, and increased when the risk manager expects increased risk. And of course, this requires a good risk manager.
Another problem is determining what qualifies as a legitimate hedge so that the risk manager can calculate how much, if any, profit will be gained to offset the losing side of the hedge. According to Michael Lewis' article on AIG in Vanity Fair, apparently AIG sold CDSs on housing across America betting that all housing markets couldn't lose value at the same time and the ones that didn't lose value would offset those that did. Is that a hedge? If so, it didn't work too well this time.
If exchanges, clearing members, and traders can handle the risk without having to be bailed out, I say , "permit naked CDSs".
But lets make sure they can handle the risk, first.
How different Ghostface?
Also, I think if you make it so any CDS contract that doesn't flow through the requirements of the law isn't legally enforceable, i.e. you can write as many weird contracts as you want, but don't expect the courts to help you if the counter party welches, would be a fun feature.
ghost-
the first sentence covers that....
Ciao
MS
we dont need no stinkin regulation
that will just mess up innovation
so let me see if i understand
the loans are bundled
then we pay off a ratings agency to give us triple A
then we slice
we assign each slice an interest rate and a payment sequence
the people who buy the highest interest rate slices take the higher risk
but hey , theres no risk because
its all AAA
we hook them up with a counterparty who sells them insurance (cds)
then we bundle the CDS we bought to insure our triple A
we slice that, and borrowed money is "acquired" to buy it (more leverage)
and we sell those slices to “investors” who again get their share of the premiums based upon
risk...which of course there is none, because we hedge these slices too
and of course everything being bought and sold here
every step of the way, makes me, (us) a commission
and is bought with OPM (borrowed money)
and so we are leveraged each step of the way
weeeeee doggie
now you see why these guys deserve their bonuses
cause they are so smart
and all this could be done without being regulated or eveen having to own an underlying security
cause man we ARE NAKED and lovin it
makes the hippies look like amateurs
MS,
I think with Amazon (and Apple, etc..) it all comes down to this: buyers of these stocks at these prices believe that our credit-based-consumption cycle can be resumed.
I don't think so, and I think that further deterioration in house prices, foreclosures, and continued high unemployment will make matters worse. And the problems are climbing up the class ladder, thus impacting some of these premium retailers more later than has been the case so far.
IMHO. And latelly MHO has not been very accurate...
"Imagine State Farm could sell auto policies without holding capital. "
Exactly, IMO what caused HIG to have "issues". They certainly wrote massive policies against little or no capital..that's why they went to the alphabet soup facility more than once. I'm fairly certain that this is a much larger issue then it's been made out to be (not much so far)...wait until the next hurricane, earthquake, flood etc. We'll get to see how "adequately capitalized" they really are.
Ciao
MS
Won't this just take the fun out of the casino?
I don't own the horses at the track, but I bet on them.
I know we are on a sinking ship. with the capitalists punching holes in the hull, but the casino is the only interesting part of this disaster.
Like the health care debate all this talk of regulating the financial sector misses the underlying problem.
What regulators and policy makers should be focusing on is protecting the "main street banking system". i.e. the taking of deposits and the making of garden variety loans". That is easily done by limiting the activity of "main street banks" to those things that are necessary for the execution of that role.
All the other activities including trading of foreign exchange, bonds CDS etc should be moved into separate subsidiaries of the bank holding company with very strong firewalls between the main street bank and these subsidiaries- specially with regard to the extension of credit by the bank to the trading subsidiary. The stop worrying about the bank holding companies in fact make sure that you have nothing to do with them so that the market understands that there is no tax payer back up for these entities.
Bottom line nobody has been able to domesticate a wolf and nobody is going to be able to regulate Wall Street. They have the money to buy off regulators and politicians and the brains to out smart any regulations that are developed. For Wall street a regulation is just another profit opportunity for somebody who can engineer around them.
short-
sure the retail buyer's of the stock but the big boys are busy unloading as the next "buy it now or be priced out forever" mantra is at full swing. I'll also add that the equity prices at this level already reflect the continuance of that cycle...hasn't happened yet but the market is sure priced as if it already transpired. If you say it enough times and provide some tacit evidence (ala rising markets) it just might happen....it's not going to.
It's just blatant thievery at this point. No better example on how a stock can be manipulated to serve a small group of people. I'd say Goog is another one but.....not as bad as AMZN at all.
Ciao
MS
.....the whole idea that they would be banned is ludicrous. It'll be watered down, and agreed to by the Masters of the Universe on Wall Street. It's time for "all-out-looting".
"........and nobody is going to be able to regulate Wall Street.".........lets just make any financial instrument not around on or about 1990 illegal starting next month. See what happens.
"...and there may be “alternatives to banning naked credit-default swaps”
Yes, Barney, there is: if your name is on the 'special' list, the government will just have the taxpayers make up your losses. That's right - the US government now offers free gambling losses insurance to certain people.
Online shoe sales seems like a doomed concept from the point of view of the single largest shoe purchasing market, the women...just sayin' from watching my wife's shoe purchasing POV...
The comparison between "naked" CDS to "naked" options is a good one. Until the '87 crash, there were all kinds of mis-pricings in options - it was the huge monetary loss that forced a revaluation of pricing models etc and options are priced much more realistically today than they were 20 years. Much much more so.
Which of course is a significant reason CDS was needed - buyers can't get cheap insurance unless sellers are grossly miscalculating downside risk and sellers can't cook their books - sorry, can't make optimistic assumptions - if they're dealing in well-understood and characterized asset classes.
So to bring this full circle, making CDS exchange-traded will not solve anything. All that will happen is a new asset class will be designed, one free of the regulatory/fiscal restraints imposed by exchange-trading, and the cycle will repeat.
'Cause that's what markets do.
And markets do that 'cause - for all the current bitching - that's what people want.
The way to make your next fortune is to wait for this new instrument to be developed and make a bet correlated with massive uptake. Wait a few years, cash out, take GTZ positions on every company with heavy exposure.
And what financial purpose did unregulated naked default swaps have?
They allowed people to pick whatever model would allow them to show gains whether they were buying or selling the things. This directly allowed a monetary expansion that is the closest thing you can get to a rising tide that lifts all boats.
It's unsustainable, of course, but that doesn't really matter.
Anyone know how many of the AIG CDS that we bailed out were naked CDS?
it would be more galling than it is if we bailed out gamblers.
I can understand the argument for banning naked selling of credit protection - the seller might not be able to make good if the reference asset defaults - but why ban naked buying? This adds minimal risk into the system.
To answer the previous question about differences between CDS and put options on bonds. Key differences are:
- CDS only pays off if there is a default; put option pays off if the bond just declines in value.
- CDS has a much longer tenor. 5 years is standard.
- Volatility has a huge impact on the value of the option, not on a CDS, so CDS is a purer bet on the credit worthiness.