Recent comments by Mike in Long Island

Kurt Russell as "Snake" Pliskin for Escape From the USA

Hey AB. How's the boating season for you? Getting any sailing in?

Cocaine stops you recognising other people’s emotions | Dazed

Cocaine stops you recognising other people’s emotions
A new study reveals that a dose of the drug actually can make you a bit of a dickhead

Which is why I shorted GE. Not only do they pimp China in the prospectus, FIRE is 25% of their biz too.

GE seeks to shed systemically important designation - Business Insider

GE was first designated as a SIFI in the summer of 2013. On its own, GE Capital would be the seventh-largest bank in the US, so it makes some sense that the company would be subject to this additional regulation.

But the company has been reshaping itself over the past couple of years and does not think it is quite as systemically important anymore.

Earlier this year, GE spun off its personal-finance arm, Synchrony Financial, in an initial public offering, and the company said it planned to totally divest this unit by the end of 2015. And now with the divestment of its real-estate operations, and the associated loans, the company said it would shed about $200 billion in ending net investment, or ENI. This brings the company's total ENI to about $90 billion, down from more than $580 billion in the years leading up to the financial crisis.

Read more: GE seeks to shed systemically important designation - Business Insider

Our horizontally integrated divisions are on the peeing edge of innovation.

Blowouts - never fun unless you are on the winning side. When it comes to deposit blowouts there are no winners...

I don't get it. If you're worried about losses, why not just work on Wall Street and have everyone bail you out? It worked for me!

Today I learned that Whiskey is a bank holding company. Are the twins named Checking and Savings?

Me too. Like SKF.

Shorting ban in 3, 2, 1...

I've been scare as of late due to a project at work that is seemingly never ending. Anyway it looks like the markets have gotten interesting again. Has there been a counterpointer sighting?

Beer

I just had something called "Not Your Fathers Root beer"

It's a spiced ale that tastes just like root beer. I like root beer. I like beer.

This drinks just like a root beer - no alcohol taste at all at 5.8% ABV. This could be really dangerous stuff Smile

I'm going to drop a scoop of vanilla ice cream into a pint glass of this stuff. I will report back later but I suspect it will be amazing.

Not Your Father's Root Beer (5.9%) | Small Town Brewery | BeerAdvocate

I was reading somewhere that having a dividend paying stock loaned out to a short seller can occasionally cause you to lose the "qualified dividend" distinction (and related preferential tax treatment)..because the short seller pays the dividend and not the company. I wasn't completely clear on when this would be triggered..but the author was recommending always having a g.t.c. sell order on your stock around the dividend date of record (when ownership of the stock is determined).

From IB

Potential adverse tax consequences from receiving cash Payments in Lieu of Dividends on loaned shares
When you lend stocks, you receive the full equivalent of all dividends. However, because you have loaned the stock, the cash you receive "in lieu of" dividends may be taxed as ordinary income instead of at the qualified dividend rate of 15%.2 IB will try to return shares to you prior to a dividend to reduce or avoid any potential negative tax consequences.

IB has one of the best overviews of the stock loan process - at least in terms of how they charge/rebate monies tied to the activity.

Stock Borrow/Loan Marketplace | Interactive Brokers

Why would a brokerage client agree that his shares can be loaned out?

It's part of the new account agreement usually. For larger accounts it might lead to more favorable margin or commission rates.

There's tons of money in the stock loan business. People pay a premium to borrow, hard to borrow, shares to short. That market (fees charged for hard to borrow stocks) is beyond opaque.

the brokerages do it on their own, unless , i think, you specifically deny them the ability

You are conflating two things.

In order to sell short, you borrow shares you don't own to sell. You can only sell short in a margin account.

In order to borrow shares, you have to find someone willing to lend them to you. That someone is usually a broker/dealer who is lending shares owned by their brokerage clients who have signed a rehypothecation agreement.

If you don't sign the rehypothecation agreement your broker cannot lend out your shares or other collateral that is held in your name.

black, thanks, so would i be wrong when t appeared to say that 1.6% of the outstanding shares are held short.
i made a lot on puts during the glory days, abstained for 7 years, and recently rejoined via aapl puts

Short Interest is the % of shares short relative to the shares outstanding.

Short Interest ratio is the days to cover based on ADV of the stock.

sorry the short interest ratio reflects what?

Number of trading days for all short positions to be covered based on the stocks average daily volume.

Why isn't PR as fun to follow?

Not too much muni debt held by banks. Mostly held by individuals and recently, hedge funds who are looking for a quick flip.

So - if PR defaults it is not likely we will get any bank failures requiring TARP 2.0 - instead individuals and some hedge funds get to see what happens when you mis-price risk. Of course if any of those hedge funds are TBTF then they will get bailed out but no one else will.

You see, we only privatize profits and socialize losses when it is to the benefit of the few, the proud, the bankers....

Puerto Rico's debt is held by 20% of U.S. bond funds - Jul. 1, 2015 

Over 20% of bond mutual funds own Puerto Rican bonds, according to data from Morningstar (the exact numbers are 377 funds out of 1,884 United States bond mutual funds).
The majority of the funds with exposure are municipal bond funds or high yield bond funds. Puerto Rico's bonds have municipal status, meaning they are tax exempt. That's why a lot of retirees buy them.
In total, bond mutual funds hold about $11.3 billion of the island's debt. Another roughly $15 billion is held by hedge funds. The remainder of the debt is held largely by individuals -- mostly Puerto Ricans and mainland Americans.

And josap thinks it gets hot in Phoenix...

No Foreseeable Relief After Iran City Feels Like Exceptional 163 F

The combination of an actual temperature of 115 F (46 C) and a dew point temperature of 90 F (32 C) pushed the apparent temperature to 163 F (73 C) Friday afternoon local time. This reading would have been even higher if a breeze was not blowing, a factor in the calculation of the apparent temperature.

It's what you get when you compound daily returns on a leveraged basis.

Hence my reference to "path dependency"

The starting point and ending point aren't nearly as important as the path taken between them.

Take it to extremes.

Index goes up 10% 100 to 110

3x leveraged long ETF goes up 30% 100 to 110

3x leveraged short ETF goes down 30% 100 to 70

next day

Index goes up 10% 110 to 121

3 x leveraged long ETF goes up 30% 110 to 143

3 x leveraged short ETF goes down 30% 70 to 49

next day

Index goes up 10% 121 to 133.10

3 x leveraged long ETF goes up 30% 143 to 185.90

3 x leveraged short ETF goes down 30% 49 to 34.30

next day

Index drops 24.86% 133.10 drops to 100

3 x leveraged long ETF drops 30% and goes from 185.90 to 130.13

3 x leveraged short ETF goes up 30% and goes from 34.30 to 44.59

Path dependency writ large.

These Leveraged ETFs Show Just How Bad the Commodities Crash Has Been - Bloomberg Business

The Direxion Daily Gold Miners Bear 3X Shares, or DUST, is up a whopping 99 percent in July. Not bad for a few weeks, eh?
Meanwhile its index was "only" down 23 percent. The 3x inverse of that is 66 percent, but DUST is up another 33 percent on top of that.

Blackstone Venture Said to Buy 25 NYC Apartment Buildings - Bloomberg Business

A venture led by Blackstone Group LP agreed to buy 25 Manhattan apartment buildings for about $700 million in the private equity firm’s first purchase of rental housing in the borough, a person with knowledge of the transaction said.
The mainly midrise properties have about 1,000 units and are located primarily in and around the Chelsea and Upper East Side neighborhoods, according to the person, who asked not to be identified because the deal is private.

Blackstone will have a majority stake in the Manhattan properties, where only 5 percent of the apartments are subject to rent controls, according to the person. The largest building, at 250 W. 19th St., has 200 units, the person said.

So locally a group funded a banner that was displayed over the beaches this past weekend

Swastika Rehabilitation Day 2015 in Long Island, NY - YouTube

Apparently they are a group that is trying to disassociate the swastika symbol from the nazi usage.

The Swastika - Pro-Swastika

Our local media lusting politician has decried the act saying "not all speech is free" and likened the display (see video above) to shouting "fire" in movie theater.

https://www.newsday.com/long-island/nassau/kate-murray-town-supervisor-calls-for-a-wider-ban-on-displays-of-swastikas-1.10642886

"Not all speech is free," Murray said. "We know you can't yell 'fire' in a movie theater. . . .

Joint report on Oct 2014 Treasury market volatility

Warning PDF

http://www.sec.gov/reportspubs/special-studies/treasury-market-volatility-10-14-2014-joint-report.pdf

The yield on the benchmark 10-year
Treasury security, a useful gauge for the price moves in other, related instruments that day,
experienced a 37-basis-point trading range, only to close 6 basis points below its opening level.
Intraday changes of greater magnitude have been seen on only three occasions since 1998 and,
unlike October 15, all were driven by significant policy announcements.

For such significant price movements to rapidly occur without a clear catalyst in one of
the world’s most liquid markets in such a short period of time is highly unusual. Trading
volumes in the Treasury market on the day posted record highs, and reached 6 to 10 times their
average levels during the event window. Volumes in other electronic fixed income markets for
which data is available, such as plain-vanilla interest rate swaps traded over Swap Execution
Facilities (SEFs), were also high, though not to the same extent as in the Treasury market.

This ought to end well...

College Kid's Secret Stock Trade Shows China's Moral Hazard - Bloomberg Business

The 23-year-old university student in Hangzhou, a city on China’s eastern seaboard, has a stock-market problem. He borrowed 200,000 yuan ($32,215) from mom and dad, piled the money into mainland shares without their permission, and got caught in the biggest sell-off in two decades.
At first, Lu considered liquidating his holdings and owning up to the losses. But now that China’s government has arrived to rescue the market, he’s decided to bear the sleepless nights, keep his parents in the dark and stay invested.
“I won’t exit,” he said. “I still see value and I believe government policies will safeguard it.”

He must be getting the belmont and poic value pak of newsletter subscriptions.

Video: Nigel Farage tells Greece: Have the courage to quit the euro - Telegraph

"The European project is actually beginning to die,” he said. "The plan has failed. This isn't just Greece we are talking about today. The whole of the Mediterranean now finds itself in the wrong currency, and yet virtually nobody in the political arena has the courage to stand up and say that.
"I feel that the continent is now divided from north to south. There is a new Berlin Wall and it's called the euro."

EU Demands Tsipras’s Capitulation as Greek Bailout Costs Spiral - Bloomberg Business 

“The costs for Greece of staying in the euro are reaching a point where the balance could favor grexit,” said Daniel Munevar, who advised former Finance Minister Yanis Varoufakis before he quit last week. “The costs being demanded of Greece are so punitive that they are almost impossible to meet.”

And more Chicago muni debt

From bondbuyer - warning PDF but worth a look - especially page 5

http://www.bondbuyer.com/pdfs/CPS.pdf

Absent significant intervention, the deficit is expected to increase to a run-rate deficit of ~$1.0+ billion annually culminating in an
accumulated deficit of ~$5.4 billion by FY 20.
• Even with a UAAL pension holiday for another five years, there remains an estimated accumulated deficit of $2.4 billion by FY 20

NYSE problem was software related apparently - that post mortem meeting must be fun.

Market Status History

On Tuesday evening, the NYSE began the rollout of a software release in preparation for the July 11 industry test of the upcoming SIP timestamp requirement. As is standard NYSE practice, the initial release was deployed on one trading unit. As customers began connecting after 7am on Wednesday morning, there were communication issues between customer gateways and the trading unit with the new release. It was determined that the NYSE and NYSE MKT customer gateways were not loaded with the proper configuration compatible with the new release.

Prior to the market open, gateways were updated with the correct version of software and stocks opened at 9:30am. However, the update to the gateways caused additional communication issues between the gateways and trading units, which began to manifest themselves mid-morning. At 11:09am, NYSE issued a Market Status message that a technical issue was being investigated. At 11:32am, because NYSE and NYSE MKT were actively trading but customers were still reporting unusual system behavior, the decision was made to suspend trading on NYSE and NYSE MKT. NYSE ARCA, Arca Options and NYSE AMEX Options were not impacted by this event and continued to trade normally.

NYSE and NYSE MKT began the process of canceling all open orders, working with customers to reconcile orders and trades, restarting all customer gateways and failing over to back-up trading units located in our Mahwah, NJ datacenter so trading could be resumed in a normal state. In consultation with regulators and industry, we determined that we would implement a complete restart and that NYSE MKT primary listings would resume trading at 3:05pm and NYSE primary listings and NYSE MKT Tape C symbols would resume trading at 3:10pm. Trading resumed as scheduled and the closing auctions accepted orders and executed normally. All NYSE and NYSE-MKT listed securities traded for the entire day either on NYSE and NYSE MKT or other market centers.

In California, Big Oil Finds Water Is Its Most Prized Commodity - Bloomberg Business 

California’s epic drought is pushing Big Oil to solve a problem it’s struggled with for decades: what to do with the billions of gallons of wastewater that gush out of wells every year.
Golden State drillers have pumped much of that liquid back underground into disposal wells. Now, amid a four-year dry spell, more companies are looking to recycle their water or sell it to parched farms as the industry tries to get ahead of environmental lawsuits and new regulations.

I am proud to say that Twin A just had her first stinky gas.

Are they eating solid food yet? If not you have much to look forward too...

JP wrote:

Speaking of which, some wag is flying this banner over the beaches in SM this weekend:
Where’s Your Plane Peasants?

Are you sure it was Santa Monica? The same banner was flown off the south shore of Long Island. I have a cell phone pic of the same banner - albeit not as clear - that I was going to throw up as a tile when I get a chance.

Printing the Drachma: The Messy Future of a Post-Euro Greece - Bloomberg Business

“A currency is a national business card, so you want to make it right,” said Ralf Wintergerst, head of banknote production at Giesecke & Devrient GmbH, a Munich company that has printed banknotes since the days of Germany’s Reichsmark in the 1920s.
Wintergerst says introducing a new currency typically takes at least six months, and sometimes as long as two years. Artists must draw the notes, security experts then add anti-counterfeiting measures such as watermarks and special inks, and bank officials need to plan how much of each denomination is needed and get the money to banks.

I guess he isn't terribly concerned about bitcoin and other digital currencies. Of course, lacking a physical banknote makes it that much easier to re-stock ATM's and other things.

I have to go dig up "When Money Dies" and give it another read through. In some ways a digital only currency is a central banks ideal currency.

https://news.vice.com/article/puerto-rico-really-wants-to-declare-bankruptcy-but-it-cant

Puerto Rico's public corporations owe roughly $25 billion dollars to creditors. One of the first tests of García Padilla's new stance on debt was a $400 million payment due from its power authority, PREPRA, on Wednesday. It was reportedly delivered, but only after the authority obtained $128 million in short-term debt from insurance companies that have sold policies on its bonds and would pay investors in the event of a default.

From reddit - a first hand account from an American tourist in Greece

Greeks Are Emptying Their Bank Accounts After Last Night's Referendum Announcement : worldnews

[–]feigns_NA 473 points 10 hours ago
I'm an American on vacation in Greece at the moment. Not only is there a run on the bank going on, but businesses are not accepting credit cards either. I am currently waiting in line for one atm out of three that still has some cash left. Crazy times.

An interesting visualization from 2012 on who lent the money to Greece...

European Debt Crisis: Greece Debt: Who Loaned the Money?

As far as being contained....

German bank exposure to Greece around $28 billion: banks
| Reuters

German banks have about 23.5 billion euros ($28 billion) in credit exposure to Greece, but the systemic risk is limited because the biggest commercial banks, Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE), hold only a tiny fraction of that, according to figures gathered by Reuters.

The lion's share of German exposure is held by the state-owned development bank KfW, with lending to the Greek state totaling 15 billion euros, banking industry group BdB said.

Commerzbank said it held about 400 million euros in exposure to Greece at the end of September, while Deutsche Bank said it held around 298 million euros in corporate, bank and public debt.

Maybe the Greeks could declare Financial Engineer's Day?

I think Engineers would rightfully be offended....

File under collateral damage...

Draghi’s Greek Bank Options Present Bleak Choices as ECB Meets - Bloomberg Business

Tightening collateral requirements
While the ECB insists that the Greek central bank impose discounts on the collateral it accepts against ELA, to protect against losses, those so-called haircuts haven’t changed throughout the recent crisis.
Should the ECB decide to increase the haircuts to reflect the increased probability that banks won’t repay the cash, that would effectively limit their access to ELA and potentially lead to capital controls.
Barclays Plc calculates that banks could access another 29 billion euros of aid based on their collateral and on the assumption that current haircuts, which aren’t public, average about 48 percent. Should the haircuts be raised to 60 percent, it estimates the collateral buffer would be wiped out.
The ECB could also tighten collateral requirements by deciding that some assets are no longer eligible because of their quality.

Margin call of Cthulhu is calling, please pick up line one.

Holiday's are good right?

Running Out of Cash, Greece Counts on ECB to Avert Black Monday - Bloomberg Business

“Monday could be a bank holiday” in Greece, Irish Finance Minister Michael Noonan said late Saturday. “It’s not a question of waiting to see what might happen on Monday in terms of crisis. The crisis has commenced.”

My personal feeling is, the fed should raise rates a percent, this quarter, and a percent next quarter. And then when congress starts spazzing out tell them nothing doing until they raise taxes and commit to some credible fiscal stimulus. Then when congress does nothing, raise rates another percent.

I'm envisioning the epic Cramer rant that would ensue after the first 100bps. Spontaneous combustion on live tv.

I'd welcome a driveby from counterpointer to get his color commentary.

fuscias

Stock Futures of Major World Indexes - Bloomberg

Spoos off 9 pts.

Dow off 77 pts.

Let's see what happens to the 10 year US Treasury yield when it begins trading.

The Germans do not understand there is a limit to the cycle of more austerity, and more economic depression ... eventually, in a democracy, the people will say "no".

What if you live in a kleptocracy?

Cozumel - hope you spend some of that time under the waves as well - drift diving FTW!

If you have time robj, I recommend taking the ferry over to the mainland. it was @ 4 yrs ago but we did that and rented a car to head south to the Mayan ruins at Coba.

Be prepared to do some hiking, bring plenty of water and take lots of pics. Very humbling experience to see first hand the aftermath of a society that faded into the jungle. We hired a local guide onsite of Mayan descent (so he said) - it was well worth it to have some local knowledge guide us through the site.

The language of arrogance derived from too much time in unopposed power.

Preet Bharara creeps closer to Cuomo with latest indictment | New York Post

The latest indictment by Bharara formalized corruption charges against Skelos (R-Nassau), who just resigned as Senate majority leader, and his son, Adam, but added an important element.
The indictment said a state-regulated insurance company — identified as the Bonomo-run Physicians Reciprocal Insurers (PRI) — gave Adam Skelos a no-show job worth more than $100,000 at a time when it was lobbying Sen. Skelos on legislative matters.
A spokesman for the Roslyn, LI-based insurer said Friday that Bonomo — who with family members contributed nearly $250,000 to Cuomo’s campaign committee — and others at the company “are fully cooperating with the US Attorney’s Office.”

Oops. Left out the punch line

http://www.nydailynews.com/news/politics/skelos-son-turn-corruption-case-article-1.2209349

During one secretly recorded chat, Adam Skelos complained to his father, “You can’t talk normally because it’s like f---ing Preet Bharara is listening to every f---ing phone call. It’s just f---ing frustrating.” His father replied, “It is.”

“I’m going to be president of the Senate,” he told his son. “I’m going to be majority leader. I’m going to control everything. I’m going to control who gets on what committees, what legislation goes to the floor, what legislation comes through committees — the budget, everything.”

The scheme centered on a prominent developer who’s now cooperating with the feds and which sources identified as Glenwood Management. Glenwood is also involved in the Silver corruption case.

Glenwood got Skelos to promote tax breaks and rent-stabilization laws favorable to developers. The company has showered donations on both parties for years, taking advantage of loopholes in campaign-finance laws.

Glenwood arranged a $20,000 no-show job for Adam Skelos and set up monthly payments, eventually totaling $198,000, from an environmental tech firm, prosecutors charged.

I see poic has gotten creative

PoicTradingGroup??

SEC Reviews Fishy Avon Bid - WSJ

Avon’s shares shot up by more than 20% midday to nearly $8 after an entity calling itself PTG Capital Partners Ltd. said in a securities filing that it had lodged a bid of $18.75 a share to buy the company.

Efforts by The Wall Street Journal to reach PTG Capital or verify its existence were unsuccessful. The firm isn’t registered with the Securities and Exchange Commission. An initial call to the contact number listed in the SEC filing went to voice mail, which said the subscriber was either on the phone or hadn’t set up a voice-mail account. Twelve minutes later, the voice mail said the caller had reached PTG Capital.

The listed address, 125 Old Broad Street, formerly housed the London Stock Exchange. It is now an office tower.

The apparent Avon hoax underscores a weakness in the SEC’s “Edgar” filing system. It is relatively easy to set up a fake account and make fraudulent filings directly to a legitimate firm’s cache of disclosures. To make filings, one only needs to provide Edgar with a street address and a document signed by a notary, according to an Edgar user’s manual published by the SEC.

From Matt Levine via Bloomie

Nomura and RBS Told a Few Mortgage Fibs - Bloomberg View

As for Nomura knowing specifically about the defects, Judge Cote describes the actual process of securitization in some detail, explaining how Nomura would bid to buy mortgages from originators, and would then conduct due diligence after winning the auction but before closing the purchase. Her conclusion is that Nomura's diligence was rushed and defective, and overly influenced by the trading desk's desire to buy loans, but still rigorous enough to find lots of defects in the loans the desk had agreed to purchase. But then Nomura largely ignored those defects, telling its due diligence consultants to change the loans' grades from failing to passing, so that Nomura could securitize the loans.

Looks like I should have held out for another 3800 per square foot.

South Beach may as well be another universe or an alternate reality. I hadn't been there for a few years and was a bit shocked at the money that was being thrown around. I guess $950 magnums of vodka are de riguer these days for bottle service at the clubs.

Random housing data point.

I was in Miami recently. Cranes dotted the skyline. Someone in a position to know said there were currently 40,000 condo units under development. At the market peak in 2007 there were 30,000.

I also heard of a residential place in south beach closing recently for $3900 - per sq foot.

ZIRP makes all things possible...

Perhaps of interest to some

http://www.brookings.edu/~/media/Research/Files/Reports/2015/04/29-college-value-add/BMPP_CollegeValueAdded.pdf?la=en

Higher education is enormously important to individual and collective prosperity. Yet
escalating costs have created an urgent need for more and better information about the
huge investment in time and money on the part of students, families, and taxpayers.