Tuesday, December 23, 2008
Monday, December 22, 2008
1a. If you want to go long credit there is no place to invest.
1b. If you want to go long duration, well... check your 10-yr rates.
Conclusion: banks will in early January rush to buy all the short term credit paper they are going to get, and probably some more treasury and that will give a signal as if credit is thawing when the case was just people drowning in liquidity.
2. In case you are thinking of carry trade, please note that you would need to have the growth in both income and productivity RIGHT here in the US. I know, you say China this and China that will grow but not gonna be enough by any stretch of imagination. (Hint: check the GDP sizes).
3. Low mortgage rates from Dec - Feb have helped TRAPPED the housing market further. How?
3a. Most who took the rates were refinancers - these made the case further given that about $5-10k equity was stripped in exchange for lower rates that the probability of moving is even lower after than before refinancing.
3b. The guys who didn't refinance have lost both the opportunity to do so (as the market marches back up) and proved they couldn't do so in the first place when they had the chance. In the parlance: they are burnt out 100%.
3c. The unlucky few picking up houses would find out that indeed affordability is a function of mortgage interest rate, and that does not mean very good for them after artificial treasury prices were lifted.
4. Remind yourself everyday that everybody else in the world will cut rates to zero. There is no currency for which you can hope to make money beyond speculative spurts.
5. Two large banks, currently viewed as a bullwark of the remaining financial industry, will collapse H2 2009 or H1 2010. Cause of death: drowning.
Monday, December 15, 2008
Friday, December 12, 2008
Thursday, December 11, 2008
Tuesday, December 9, 2008
Monday, December 8, 2008
Put 100% your nest egg in from cash to international growth stock, sure enough by 6 pm it's up, but only by 1-2%, depending on fund. You already nailed 3-4% arbitrage at this point. Then on Monday you get an additional session in which most of the SPX gain happens before 11am (30pts, we closed at 33pts) and add 3-4% more to the "arbitrage" gain we forecasted off friday.
The result is a 6-8% risk free. You only need $200-250k to make the ENTIRE of next year contribution and some change to boot.
Now turning to more serious topic and maybe, philosophy.
Roads add to supply. Adding roads don't add demand.
Buildings add to oversupply. Building houses/malls/buildings don't add demand.
Basic education adds to oversupply. Cheap labor is ALWAYS on the rise. Only specialized training gets you somewhere new.
Black dude doesn't get it.
Grab his money hand over fist. TC, AA, CX, BGC. Then run.
In the mean time, watch the 61.8% Fib and 100% Fib of your favorite consumer and financials name. (If you can find the shorts, that is.)
Monday, November 17, 2008
"Multiple wholesalers began inundating mortgage brokers with offers for the same applications. Some brokers chose to exercise their power by asking for something extra in exchange for their business: sex. "
"Wholesalers also offered sexual favors to co-workers."
Sunday, November 16, 2008
Friday, November 14, 2008
Look at these two statements in the article:
1. "The past era can best be described as a more than half-century build up in credit extension and levered finance."
2. "There will come a time, however, perhaps over the next few weeks or months, when deleveraging of the private sector is met by the leveraging up of the government sectors: the TARP, CPFF, and MMIFF will inject over a trillion dollars of liquidity into the system over a short period of time."
Dead giveaway. If I were a cop, I would smash the perps head to the desk and yell "Where the f*** did you bury the hooker you son of a *****. Who says lying is easy.
( Also, never mind that several days after the article: a) the 700B gameplan has changed and b) the whole thing is a drop in the bucket of deflationary ocean. )
Thursday, November 6, 2008
Tuesday, November 4, 2008
Monday, November 3, 2008
I assure you, every red penny going to "plug" the hole, ... never mind, the system was a hole, ... would come from your pocket. Every single one of them. And so far there is no indication there is going to be any change in the system at all, let alone bringing the corruptors to justice.
Quotes from the article:
1. Brokers often tried to bribe Ms. Cooper to approve loans, she says. One offered to pay $900 to send her son to football summer boot camp if she would approve a loan that had been declined by a host of other lenders.
2. Four months later, the loan was in default, she says. The borrower had not made a single payment.
3. WaMu executives told employees they were not making enough loans and had to get their numbers up, she says.
4. “WaMu was allowing brokers to get 6 to 8 percent off one loan,”
5. “When they went to foreclose on the house, they found it was an empty lot,”
6. “The more you fight, the more you get in trouble,”
7. "“I swear 60 percent of the loans I approved I was made to,”
8. "“Killinger pocketed tens of millions of dollars from WaMu, while investors were left with worthless stock.”
and of course
9. "The lawyer representing WaMu and Mr. Killinger did not return a phone call seeking comment."
Friday, October 31, 2008
Woke up this morning and all the colors were flipped. That after all the rhetorics and CAPS yesterday was an absolute shock. It sends shivers up my spine so badly I actually felt dizzy.
It does look like PPT was feeling EXACTLY the same and was on "overdrive" mode this morning. "They" have to stabilize the money flow right here and now. And the way to do that is none other than unlimited currency swap, moral hazard be damned. I am fully aware of what the strength in USD at this rate would do to the "hard industry" in america (as opposed to the paper industry). Anyone with any amount of self preservation instinct would not stop at anything to protect those from liquidity issues. I would absolutely give away USD for free just to prevent that from collapsing, or I'd really have an unsolveable problem in my hands, if I were Ben.
"Gary Rosenberger's monthly survey of placement industry executives, not surprisingly, found pervasive weakness. Firms are sitting on their hands in terms of hiring, and placement agencies are seeing floods of resumes coming in, as the pool of jobseekers balloons. The tone of the comments ranged from 'bad but surprised it's not even worse' to 'disaster.' There seemed to be some degree of variance on whether contacts had felt the full brunt of the credit crunch/economic slowdown yet. Some had just started to see worsening over the past week or so, while others have been suffering since September. In a sign of the times, several contacts talked about their concerns of whether their customers (employers) would pay their bills.
The negative tone of Gary's piece is of course no great surprise, as it is exceedingly clear that the economy is as weak as it has been in a generation. The only pertinent question seems to be just how bad the payroll data can be. RBSGC looks for a 220,000 job loss for October, and declines at least that large if not bigger in November/December. At this point, our expectations are sufficiently low, that not much could surprise us on the downside."
Thursday, October 30, 2008
BUT I am afraid there WILL NOT BE EITHER IN THE NEXT FEW MONTHS IF HALF THE COUNTRIES IN THE WORLD COLLAPSE AND BY IMPLICATION WE, AS WELL.
The last chance US government has, short of declaring WHO IS GUILTY and FORCED OPEN the TOXIC ASSET to the open, is to ANNOUNCE AN UNLIMITED SUPPORT OF USD LIQUIDITY FOR EVERYONE WHO NEEDS IT. EVERYONE, ESPECIALLY SOVEREIGN, PREFERRABLY BY TOMORROW.
DON'T DO THIS, AND YOU WILL SEE EXACTLY WHAT I MEAN.
Mtgspy, Your Humble Servant
The last bout of insanity was due to USD scarcity and the news is that Ben committing INFINITE USD swap ANYTIME ANYWHERE ANYONE asked.
Since currency = politics, AND we have PRESIDENTIAL ELECTION on Tuesday: I strongly suggest not to take any sizeable short position and especially avoid shorting those AsPac/LatAm currencies and maybe even going long there for at least a week. Not a good sign shorting those currencies because technicals just don't look like it and fundamentals CERTAINLY against it. Those who shorted congratulations and now please get out of DODGE before the sherriffs come and get you.
Tuesday, October 28, 2008
Sunday, October 26, 2008
The numbers to watch are 0.5x, 1x (normal), 10x, 100x. Once it passes third base it always score fourth. Never failed. Don't short USD here. Do it at 100x - will update in two-three weeks or so. Watch Citadel blow up. I suspect (east) european Convertible in the books. This will be historical moment when Fed backstops the entire European and hedgefunds universe, in addition to de-facto eventual back of FHLB this week/next. Legendary deleveraging here.
Edit #1: Still on currency, based on this article I think I have nailed pretty solid where FXA bottom is going to be, which I believe about $12 - 15.
Australia bans word 'drought' as too upsetting for farmers
The word "drought" makes farmers feel depressed and should be replaced with "dryness", a panel of Australian government experts has said.
By Bonnie Malkin in Sydney
Last Updated: 11:47AM BST 23 Oct 2008
The group also warned farmers to get used to the lack of rain because dry conditions are expected to continue.
Friday, October 24, 2008
American Express. NYSE: AXP.
Ok, name TWO companies that have had that "mindset"?
Hint: Their names both begin with an F.
Three rings for the elves.
Five rings for the dwarves.
Nine rings to rule the men.
Well, let's cut to the chase. I have reason to believe that the "men" are FHLB governors and all of them are meeting with Bernanke asking him to guarantee $1.5T of FHLB advances/papers etc. See what happens to you Ben when you started handing out "rings"?
Thursday, October 23, 2008
Maybe y'all can read it and point out all the flaws in both arguments. Keep in mind the these differences are not "light". They either take you to the left or the right. Your choice.
From: Bear C
Sent: Wed 10/22/2008 3:12 PM
Subject: triumph of reason over chaos?
Going back to 1978, I obtain the total market capitalization of the russel 3000, which represents around 98% of public companies today (back in 1978, fewer percent of total GDP came from public companies, but that doesn't really change the moral of the story). Then I obtain the nominal GDP in dollars.
Finally, I take the ratio of market cap to GDP. This is a proxy of the ultimate Price/Sales ratio, of the economy as a whole. That is on the x-axis. On the y-axis is the subsequent 3-yr return of the Russel 3k. Note that once the ratio has fallen below 1, not even once has the 3-yr return been negative (it improves a lot if you look at the 5-yr ratio, but you get a little less data). Today the ratio is about 0.77 (assuming the Q4 GDP nominal is the same as Q2 which probably implies a real contraction of 2% for the remainder of the year).
Sent: Wed 10/22/2008 4:35 PM
To: Bear C
Subject: triumph of reason over chaos?
You cannot take this ratio when the next $ of borrowing (I assume govt = corporate for now so don't distinguish public vs. private - actually that's the reality huh?) create negative GDP - of course all of this is forward looking. At that point the ratio analysis cannot be used, kinda the same way when P/E dips to negative.
From: Bear C
Sent: Wed 10/22/2008 5:17 PM
Subject: triumph of reason over chaos?
How does the next $ of borrowing create negative GDP growth? Even if you took it and just spent it on coffees for the whole country, it wouldn't be negative.
Look at the governments funding rate...the whole world is willing to send their money this way at a nominal 3.60% for 10 years. All you need to do is generate 2% inflation and 1.6% growth and have a GDP multiplier from fiscal stimulus of 1 (which is absurdly low) or more. Multipliers from fiscal stimulus spent on employment benefits, for example, would be on the order of 2 or more; from infrastructure that the country already needs anyway, it might be significantly higher (and longer lived). The US government is like a company that can borrow at 3.6% and whose intake is a larger and larger share of GDP the faster it grows (because of the way the tax code/brackets work). You would need a 10-year treasury rate above 6% before I'd be at all concerned about the argument breaking down.
Sent: Wed 10/23/2008 8:35 AM
To: Bear C
Subject: triumph of reason over chaos?
Ok, so the afternoon cocktail started early yesterday and I didn't really address the question. But after reading the question about the -ve marginal GDP response to new $ in debt and the response were quoting RATES, I was thinking again, wow, is this not an attempt to flame me rather dan debate honestly?
Let's say I give you $10M, no, make it smaller, like $1M, can I task you given an interest rate out there (which are all higher than what you said) make more money than what I have to pay out, given the forward looking? Believe me, you won't and this is coming from a guy who ran a small business with 100% equity. The debt market is oversized relative to the natural capital formation ability (read: supply of worth asset to buy/invest in) and the probability of on average making a positive return from borrowing is zero.
You will need a washout, not just in stock price, but in a complete meltdown of employment and uncompetitive factory shutdowns before you have a basis to borrow profitably. I know what you say next is aha that's the average, I am talking about the government who borrowed X% lower than the private sector and therefore they will channel that to utilities and make a ton of money. The key is not in the rates and amounts this time, it's in the people. Read: FRE and FNM. How did that go? Government is not the best allocator of resources, because it is either run by Peter or Paul. Dig?
Wednesday, October 15, 2008
You mean "staple" production chain like JNJ was NOT a good buy? Then you should have cashed the 55 Calls yesterday. :)
Empire State Manufacturing Survey for October
General Business Activity
Retail and Food Services Sales for September (%ch)
Retail Sales --
MV and Parts Dealers
Building Matl., Garden, Hardware
Furniture and Home Furnishings
Electronics and Appliance
Clothing and Accessories
Food and Beverage Stores
Tuesday, October 14, 2008
Sunday, October 12, 2008
Saturday, October 11, 2008
So why am I predicting riots, posting an e-mail about commerce seizing up, and credit goes away, civilization at risk? This is NOT professional. You trade, and only trade.
Yes, but you would leave something out.
Trade the tape you get.
What is the current tape?
(Let me get to that after I go out tonight- what little scientific knowledge that I have at this point is NO USE, just to give you a hint. Later.)
There's just no credit out there, man. Thanks to 10 years of supercharged fraudulent lending/insurance. Tapped out. There are two types of insurance out there: One is where you can insure yourself, and two is where you have a chain of people who either passed the bucket along a straight line down to the dumbest/poorest insurer who insure EVERYONE, or one that goes circular where A insures B, B insures C, and C insures A.
A total shitshow.
What was then the fuzz about covering the shorts, like why did I cover Wamu shorts about 20% each time that went south $5 back in the days? I was sure of my numbers, I can read prices correctly, and based off that Wamu is 3x underwater by equity - so why did I cover?
Again, the fear is that all of us with brain saw that this is a crazy inverted pyramid that has been around for all we know, ages. It defies physics and sometimes it shook, but it always, ALWAYS killed anyone who doubted the inverted pyramid's ability to make money. What use was it then, being right, when in the end you will almost certainly get killed fighting the pyramid?
Then it started to change. The inverted pyramid started swinging with larger and larger amplitudes with every failures the whole scam apparently was unmasked. The difference THIS TIME is that somehow the world REJECTED to stand by and continue the scam.
Other than that's the right thing to do in the first place, I don't yet have any explanation. Maybe it was the critical mass. Maybe there's just too many rats leaking balance sheet to investors from inside the company masking as bloggers. Maybe it was never a secret. Maybe everyone is fed up and wanted a non-finance based economy.
This sort of changes are sweeping. Big hurt came to countries that experienced these changes in the past decades/centuries and mass violence was almost guaranteed. The risk of a total meltdown was always 0% in the last 100 years, and then last week it was 1%, and now I personally feel it's about even odds.
Again, I wish we can just accept the frauds as a fact of life and increase the size of the pyramids instead of toppling it. I really am not being cynical here. There was nothing wrong with inverted pyramid for a looooooong time other than being unsightly and immoral. It will be a monumental task to understand why this time it's different, and that was the basis of calling a social unrest and indices going to zero, which happens when "this time it's different".
I have no problem with being wrong, no problem at all. But I will just trade the tape I get.
Man, this is getting exciting.
|Re:Re: how's it going|
|From: CrazyMan |
|Sent:Sat 10/11/08 6:32 PM|
"You have no idea what's in here right now.
It is beyond the number of digits in your calculator and the world economy cannot get outta this.
There was a bait and Bush took it and have all these meetings this weekend. This one will be tried, will fail, and with it all the confidence in the world to leaders, religions, and anything, and all-out collapse.
This is a taboo subject and just unconsciously embedded in our genetic, to be suppressed by relentless training we called school and religion and then when the primal reality is released the risk is not something you can even begin to understand.
I know this would classify me on the same boat as most lunatics but if this happens would that still matter if I were or weren't? "
If Lehman fails, we are gonna have more to worry about than our "money".
If Freddie fails, we are gonna have more to worry about than our "money".
If Fannie fails, we are gonna have more to worry about than our "money".
If Banks fails, we are gonna have more to worry about than our "money".
If GE fails, we are gonna have more to worry about than our "money".
If USA fails, we are gonna have more to worry about than our "money".
The truth is you get a pound of meat taken away from you each time?
Guys saying things like that are either
a) dumb J6P
b) mischievous individuals like me who at random times mislead people in category a).
The truth is, let's say in the end it's just you and me who survived and there's nothing to eat cuz the world is "over", I would love to hang around a couple more weeks and I will need "food", heheheheheh.
Friday, October 10, 2008
Consider the alternative. You potentially will have to face me in a street fighting, house-to-house combat this weekend. Now why don't we want that? Because I need to take a break and chill.
Now we can work together. I want to count my money. You want to go and cry.
It's a great combo and we can help each other. When you are buying, make sure you chant "USA, USA, USA" to increase your fervor.
Easy 40k in 2 minute: Limit buy DDM at 29, out at 31. Baa baa booya.
Let's see if the rest of the day's gonna be easy(er)?
Q: what's the 2 week ending value of FXA?
d. I lack imagination.
q: maybe I should bail outta SSO 27+ at 30+ at this point. I am not a the greatest momo trader out there. These things should be good for a downpayment on a brothel later on.
q: still watching FXA. this thing doesnt have a bottom and I thought "down under" is a kind "bottom" hehehehe
q: Poster Rjazz in TF opined on my post of "I bot IF at 4.97 and bailed at 5.20 for coffee money, and now I think it'll open sub $1" by saying "I wouldn't invest in Indonesia as it's crawling with muslims. I hate it". This gets my neuron firing different way that perhaps I should be embracing islam to fade this guy as I do think when poverty started climbing up islam gains popularity. AND they have that public execution thing in the market. Again, just a quiet morning reflection, and no this blog is not a masquarading islam recruitment squad, thanks FBI. Public execution in the market hahahaha. Dick fuld beheaded in NYSE opening. ahhahahahahah.
q: BRK/A has a lot to fall. Assume $5k earnings with a more "generous" multiple than SPX at 900 (18x) you get $90k at most. But 18x multiple is a pipe dream that only the best bloggers can dream of so I'd give a 15x max - fairvalue vs 900 SPX should about $75-80k, We'll see.
q: had a bad feeling and decided to forget about FXA. I don't know what the "bottom" is for down-under.
Well, actually, what I meant to say is there WILL be a future for me. I have started cashing out at the today's lows again and I intend to start cashing out my substantial chips, send to my bank, and then cash out before they confiscated it - a risk I can no longer tolerate at this point.
For those expecting a rocket ride, consider what happens if it just stays right here with equal supply and demand cuz saying you buy stocks at 18 P/E is NOTHING to BRAG ABOUT. It's GONNA FIZZLE and STAY HERE FOR A LONG LONG TIME. Is that a RISK you like while the government might come in and loot you?
For those who has been LONG, here is my take, someone is GUILTY, and you know it. I don't care how, you have to take care of that problem. You have been deceived, and you are angry, and you know who the culprit is, and you want to punish him/her. Your judgment is supreme.
Thursday, October 9, 2008
I just heard that Warren Buffett died last week. There was NO succession plan, and the person you see right now is a doppleganger named Albert Krause, a very little known Dutch/German porn actor. It is very likely that the official death will be a year from now when they found a suitable successor, but it is obvious to me that a porn star as a temp successor is not going to be well received by investors at this juncture. Thank you and God Bless. May the Lord bless your path in eradicating Bullish deviants that is 99% of our population."
Well, I don't think so either (about Albert's appointment).
Ok, well, I think this is not exactly what I call Grade-A news, but then again I don't have any idea to prove/disprove it. Maybe you do.
If you happen to be studying Finance/Quantitative Finance/Statistics/MBA with the hope of making the big bucks in this ponzi scheme, please report to your school administration and ADMINISTER JUSTICE. You just lost 100K + foregone earnings opportunity and associate exclusively with fellow DOOFUS like yourselves.
You must be angry by now. Very angry.
Yes, that is correct. Please express yourself by demonstrating demanding your tuition to be refunded and your schools be closed for fraud.
You are a victim.
Wednesday, October 8, 2008
I agree, ok, so there's your 20% rally coming right up.
But let's use the time productively, by mapping each city burning with the corresponding Dow level, I am consulting my LTV chart overlaid and proprietary "colored" chart on top of US map here and I believe it should work like this:
8500 - Compton + LA
8499 - Central Valley + Las Vegas
8250 - Miami/NYC
7600 - Baltimore/NJ/Southeast DC
Unfortunately I don't really have a good time frame for the numbers on the left column as you have your own trusted blogs to get those from, but once you do, you may plan your vacation accordingly.
Of course there IS a point in the left column that you may want to buy one way tickets for reasons that I don't have to explain. It's usually cheaper that way too.
Edit #1 : I think we'll get a riot tomorrow. Yes, (sigh) this is another crash call after the one I make yesterday which likely burn both bears and bulls today. This cornholing looks like gonna be epic.
|1 YEAR |
NASD/Bloomberg Investment Grade U.S. Corporate Bond Index
|Avg Redemption Yld||8.56||0.33||4.05||17:22|
|Totl Rtn Index||117.89||-1.48||-1.24||17:22|
Ok, you are lucky I am looking out for you.
1. Buy SPY here
2. Sell a 115 Dec call at $2.
What would I do at this point?
None of the above. :)
Mozillo + 10 honchos
Dick Fuld + 10 honchos
Dick Syron + 20 honchos
Daniel Mudd + 20 honchos
Lanty + 100 honchos
Chuck Prince + 350 honchos
Mike Perry + his dog
Rubin + Paulson + Ben + all the staffs not under Federal grade including the bald headed Indian geenie Paulson just hired.
Killinger + Wamu board + 40 randomly selected executives.
Karl Icahn + Jeffrey Gendell - for being dumb and obnoxious
Bill Miller - for adultery
Jamie Dimon - for robbing the taxpayer.
Submit your request to the comment section so I can forward it to Fox entertainment.
Fade the first move
IT Bottom, buy buy buy.
Having absolutely no idea which one I just "simulate the vote" out there.
2 out of 3 against me. I am out and went on buying some individual stocks instead.
Yes, that's it. Just go short some indices and go long something "better".
Edit 2: incredibly fast market. It almost looks like EVERY soldier in this battlefield carries a portable nuke cannon. Just incredible.
Tuesday, October 7, 2008
I got pretty close on ABK, but it didn't die and I covered at $7-8
I chickened out and covered my last put of WCI at $1.20
Now I covered GGP at 7.50, and it's gonna go to zero.
There is ONLY ONE WAY to REDEMPTION now:
I will short QLD to Zero.
See you there.
1. Counterparty is very concerned about UK banks. VERY as in thinking of not even having overnight line anymore with them. Everyone not in counterparty was literally stunned to hear about this because this story just wasn't there yesterday. What is happening here? Ominuous looking cloud. I would also like to hear more about Barclays should anybody know anything.
2. The other thing from repo desk, maybe minor but it sounds like it might have a lasting effect, is that the Fed paying interest on reserves, looks to me like banks might be sending cash the Fed's way instead of to each other. I am not sure if the effect is going to be minor, but even if it is, that is NOT positive.
3. Everyone is also not feeling well after American Express came out with their 8-k explaining how much money they have. This is NOT a positive story, in fact could be very negative in the near term.
I got out from several long positions with about $20 loss this morning. Yes, twenty bucks. I will sit this out in cash.
The first rule of war is to understand your enemy and at this point I have close to NONE. So there will be NO war today. In time this will be proven the right move.
Monday, October 6, 2008
Look at the picture in that page. Carefully.
as i was saying.... beware of yourself. You may/will gun down somebody in the future. That I am sure of.
The house is in gated community and appeared expensive, there are 2 suv, one lexus and another massive yukon?
He coulda sold a lot of things first and cut on consumption but he rather offed his family first before his consumption.
I know it. I am a math whiz mortgage modeling expert with psychic gift to understand consumer behaviors - believe it or not. This trend will continue and got worse.
Cutting consumption is NOT an option for Amerikans - as one of the more naive, yet brilliant thinkers, out there suggested in one of the email exchange I had two posts ago in this page. This is like asking a japanese samurai from the 12 th century to surrender. The difference is, the US samurai would shoot up his family first before selling his Lexus.
You have been warned. You may do the same.
Friday, October 3, 2008
I never forgot what people said, for example, Ben said in Harvard graduation speech last year: "We will not have a GD2 because I am a smart guy who studied and understand the cause of it." He might, I don't know, but it's fair to say he does and I won't argue with you. The problem is this: It's the wrong model.
The more correct dynamics is modeled in 1998 Indonesia/Thai/Russia issue, and for USA it's much closer to the Indonesia case. That's why my spines are tingling. This particular virus does look like flu when it's in fact ebola. The DNA for this strain can be read in:
And it's nothing new to me.
I agree the GD is a bad model, but none of the crises you mentioned were accompanied by a strengthening of the crisis countries currency.Explain that one professor mtgspy...I don't think there is a good model, you just have to think thru each of the particulars, eg sector by sector and their interactions...
Well the forward looking part of the model looks good; this is just like that LTV-driven prepayment speed we invented in 2005 that nobody liked until it happens.
"In New York's Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania's coal fields in 1875, when masked workmen exchanged gunfire with the "Coal and Iron Police," a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md."
A 10 pct reduction in GDP in those days meant cutting out things like eggs/meat from your diet, buying no clothes that year...a 10 reduction now means buying 9 outfits instead of 10, making imported coffee at home instead of at sbux, drinking beer at home instead of at a bar. Its quite easy to cut the top 10 pct of consumption for about 80 pct of house holds now without any real effect on actual quality of life. The bottom 20 pcts 10 pct cut will be financed by increasing taxes on the top 5 pct.That's how we'll get back to a 10 pct savings rate, and it might even not involve an outright 10 pct contraction but relative to a 2 pct per year trend growth over 3-4 yrs.
(PS: Actually I was reading that last e-mail and laughed at this very level-headed, albeit very correct approach it's very naive. In my opinion someone would smash a molotov cocktail on the back of my head first before 10% spending cuts would be the average nationwide. Heh).
Thursday, October 2, 2008
This could be a script for a blockbuster: Nicholas Cage and his lackeys f* around in a dungeon and found a manuscript torn straight out of the constitution paper that says a person by the name Zhang owed George Washington 5 shillings for losing a bet on an indian canoe race, to be compounded at 2% monthly interest rate since 1789.
This is then, as the groupies later assert in the happy ending of the movie, the proof positive that USA has the legal right to borrow as much money as it wants and enslave china for eternity, and once more the world is saved.
C'mon people. Why haven't anyone sacked Ben and Paulson yet, or better the rest of them congress?
Consider this sentence:
"If you dont work, then I won't pay"
that makes sense right?
"If you don't pay your loan, I won't lend you more money?"
How the F* does that compute? Why would you want to give more money to someone who showed the intent and ability to renege on his obligation in the first place?
This is a collosal joke.
Those are meaningless.
Do you want to go LONG into Mad Max praying for a grinding up bull market that suddenly appears because people like bankrupt nation all of a sudden?
Do you say you know when to get off and on every 5% up and down perfectly for 20 years like in Japan? Assuming I was wrong about the riots and this becomes Japan because the Martians would like to carry trade with us?
This is the same bullshit that leads to other meaningless words such as "Ownership Society".
I will consider you a big fat GAY if you say that.
The only words that can be said here is "ALL IN SHORT". Don't be a pussy.
Monday, September 29, 2008
Gary Miller, Republican Calif: " Calls coming in 100 to 1 against, but my constituents don't understand the complexity of this like we do here in Congress....We must vote yes for this"
Thursday, September 25, 2008
Sunday, September 21, 2008
Thursday, September 18, 2008
Do you print? Basically assign new bonds with nothing backing it/no collateral?
Do you ROB some entities that has money to pay those that don't? How? Taxes? More GSE thuggeries? Or by force liquidate a few mega hedgefunds by accusing them of something?
Anyway, I feel the two news today just don't have bones:
RTC: Yes, it's interesting, but who's got money?
No short-selling: This will be self destruct button. No hedge, no demand for your stock. Also technically you cannot count on any price discovery anymore. The volatility will be epic, and they will happen for NO reason at all.
This is not a rocket science and I am sure someone with a couple of braincells would find those questions reasonable to ask but will find any "solution" unreasonable.
Saturday, September 13, 2008
Because you CASH them out to pay for BK cheeseburgers, RIGHT?
Now, get thinking. In STRONG deflationary system, why would people set aside CASH to pay for non-necessities?
GLD can increase in price when CASH can be set aside and support its price just because it's an alternative investment and it made sense to diversify.
Suppose you say, NAY, this NOT going to be deflationary? HELICOPTER BEN says it so in HIS PAPER.
In a late night supper, Ben sat down with me and told me people should evaluate that in the context of 2001 economy.
YES, there was a MINOR deflation, and it WAS VERY BAD. Much much much worse than say, a small overinflation.
At the time, he would contend and I agree, houses were 10-20% below fair value. That would translate to 1-2T HELICOPTER DROP now, would it? So long as people were made aware with the government support such as Freddie and Fannie.
NOW, LISTEN HARD BECAUSE YOU'RE ON YOUR OWN AFTER THIS:
Were houses really up 10-20% after that, OR was it up more like 100-200%?
Ben closed the comment by saying he was indeed looking at a B-2 bomber strikes as opposed to a surgical Apache driveby he wanted to execute. And now he is just gonna have to do his best to minimize the damage as the economy DEFLATES.
That means no gold bar for you, no Potash, and you shouldn't think bartering with oil when the s* hits the fan.
Here's the song for you to enjoy while lovely gazing that hunk of Potash you put in the living room:
Friday, September 12, 2008
They don't need to rob or fade you, no.
"Federal Reserve is in the business of Moral Hazard" says one of the Fed president.
What they do is sell their "TALKS" and encourage the BIG guys ($1B+ investors) to put in money in the market so the economy runs.
Now, as a bear you MUST cherish this. There is NO place in the market in which upon putting money in CAN YOU expect to see it EVER AGAIN.
In fact, the stampede out will be legendary as this GDII of ours unfolds.
The fed is YOUR friend, as Ben has been a good friend of mine as we shorted DSL together back in the days.
They will as, the SHAMANS of the stone ages, lead the elephants to the narrow valleys, where you, my dearest CROMAGNONs, will savagely murder the beasts and enjoy their bountiful, juicy MAMMOTH burger.
Have a good weekend.
Wednesday, September 3, 2008
Red is the New Green.
Red is the New Green.
Red is the New Green.
Red is the New Green.
Red is the New Green.
Red is the New Green.
I think this has a therapeutic effect on my mind, at least as soothing as the sound of the water rushing down the waterfall just right ahead my boat. You should do the same, it's really just like yoga you know.
Friday, August 29, 2008
Tuesday, August 26, 2008
By David Mildenberg
Aug. 26 (Bloomberg) -- Carteret Mortgage Corp., a closely
held mortgage broker that originated more than $4 billion in
loans in 2006, plans to close in several weeks, said Chief
Executive Officer Eric Weinstein.
``We ran out of money,'' Weinstein, 49, said in an interview
today. ``We're not technically out of business yet, but we're
winding it down and trying to do the best we can for everybody.''
More than 100 lenders that have halted loans, closed or sold
themselves over the past 18 months amid the worst housing market
since the Great Depression. Weinstein said the Centreville,
Virginia-based company has about 800 employees, including 40 at
``You should definitely seek other employment immediately,''
Weinstein said in an e-mail today to the employees. ``I would
expect that you have about 30 days to close your loans before it
starts getting bad,'' he said, signing the note ``Eric `Shut the
Foreclosures are expected to hit a record 2.5 million this
year and next, according to the Mortgage Bankers Association,
cutting demand from investors who buy mortgage-backed assets.
Weinstein founded the company in 1995 and expanded to more
than 4,500 employees by 2003 when annual loan volume peaked at
more than $4.7 billion. The company's business model allowed
employees to work from home and earn income by recruiting and
managing other workers, Weinstein said.
By JULIE B. HAIRSTONThe Atlanta Journal-ConstitutionPublished on: 03/19/08
The most expensive real estate listing in Georgia has hit the market. Le Reve, a 90-acre estate on Trammel Road near Cumming, is for sale for a cool $45 million. James Simons, a Realtor with Jenny Pruitt & Associates’s Buckhead office, is handling the sale of Le Reve. He said he will use the brokerage’s affiliation with Christie’s to market the property globally. “We’re going to throw a wide net to see if we can capture someone from around the world,” Simons said.
He also plans to showcase the property locally with a series of events later in the year.Owners Hubert and Norma Humphrey — who are not related to the late vice president — are looking to downsize from the 82-room, 47,000-square-foot home on the property. The couple started building the complex in 2004 after the city of Atlanta denied them a permit to expand their former home on Garman Road. Construction took three years.
Hubert Humphrey is the founder of World Leadership Group, a marketing and mortgage brokerage company.
Fed Policy Makers Agree Next Move on Rates Will Be an Increase
2008-08-26 18:00:49.60 GMT
By Craig Torres
Aug. 26 (Bloomberg) -- Federal Reserve policy makers agreed
this month that their next change in interest rates will be to
raise them, while reaching no conclusion on the timing of such a
``A number of participants worried about the possibility
that core inflation might fail to moderate next year unless the
stance of monetary policy was tightened sooner than currently
anticipated by financial markets,'' according to minutes of the
Federal Open Market Committee meeting released today. At the
same time, officials agreed that the timing of any move will
depend on economic and financial developments.
The minutes show a debate between Fed officials concerned
about inflation, which accelerated last month to the fastest 12-
month pace in 17 years, and those who say price gains will ease
in response to the economic slowdown and drop in commodities.
The Fed left the benchmark lending rate unchanged at 2
percent on Aug. 5 and signaled that weak employment and
financial instability will delay an increase in short-term
``Many participants noted that the financial system
remained fragile, with some expressing continued concern about
the possibility of an adverse feedback loop'' where tighter
credit conditions push the housing market even lower, the
minutes of the meeting said.
``In contrast, several other participants suggested that
the risks to the financial system had receded' and said that
credit conditions were ``broadly consistent'' with periods of
weak growth or recession,'' the minutes said.
Wednesday, August 20, 2008
This is from the Barron's now-famous article of FRE/FNM. Do you think someone with 100% option ARM book like FED and DSL will think this is beneath them? :D
"The companies also appear to have boosted their capital ratios by sharply curtailing their repurchase of soured mortgages out of the securitizations they've guaranteed. In the fourth quarter of last year, for instance, Freddie Mac took a loss of $736 million on loans repurchased. In this year's first quarter that figure dropped to $51 million -- a stunning decline in view of the continued deterioration of the housing and mortgage markets. Instead, the company made the interest payments to bring the mortgages current -- a much smaller outlay, but a tactic that only pushes an inevitable loss forward into future quarters. In Fannie's case, by postponing the buyback of bad loans the company avoided more than $1 billion in second-quarter charge-offs and a hit to its net worth."
Tuesday, August 19, 2008
Friday, August 15, 2008
now if you scale the problem up - the prodigal kid's debt/losses to be equal TWICE what the daddy's farm is worth ....
and by the way while waiting for you to suggest a few solutions for the family feud, here are a sampling of several stone age tools that the old jeepers may have owned at the time:
Here's a snapshot of loans behind GSE prime MBS, and I circled the 3-month avg annual rate of repayment of such prime mortgages.
Remember this, a loan that hangs around longer signals what? Ok, class dismissed.
Thursday, August 14, 2008
ABK and MBI rally HARD in AUGUST 2008!! AUGUST 2008!!! People what is this? Some kind of a prank? What do you do when you have a paper will only pay interest for about, err, 3 more months? Yeah, you pay $2 for it. ABK paid $100 for those with what capital again, like $10? So what will be left of even the SENIOR bond of that company? And this is what the "investors" are thinking about the equity value this evening?
The GSE marked to market about $2B of the combined $300B of Subprime/Alt-A securities? Really? You want my subprime bond for $99.33? Do you want fries with that?
I am too old for this shit ... :D
Wednesday, August 13, 2008
By Nipa Piboontanasawat
Aug. 14 (Bloomberg) -- Hong Kong's economic growth probably slowed for the first time in more than a year as exports and household consumption cooled.
Gross domestic product rose 5.9 percent in the second quarter from a year earlier, according to the median estimate of 15 economists surveyed by Bloomberg News, after gaining 7.1 percent in the previous three months. The government is due to release the figures at 4:30 p.m. tomorrow.
A global slowdown and a more expensive yuan have curbed demand for Chinese-made exports shipped through Hong Kong, a trade hub for China. Also, higher inflation and a stock-market decline have damped consumer spending.
Economy is like the Titanic, by the time it turns left u should have had the wheel on neutral or right. Additionally, CPI is a NEUTERED, IMPOTENT INDICATOR and yet IF IT STILL SHOWS HOT CPI you know which way it points, RIGHT?
PS: Just thinking out loud here, supposing some time later the fire in the theatre is out, was there any reason to hang around and sit on top of the rubles? Or maybe the real entertainment is you - yes, I can see YOU wearing no pants emulating a gorilla, jumping up and down on all four on top of a pile of blackened rock.
By Eric Martin
Aug. 13 (Bloomberg) -- U.S. stocks pulled ahead of Brazil,
Russia, India and China this week for the first time in 2008,
spurred by the Federal Reserve's efforts to cut borrowing costs
even as the biggest developing countries are raising theirs.
The CHART OF THE DAY shows the S&P 500's 12 percent loss
this year leaves it ahead of Brazil's Bovespa Index, whose drop
through last week had been the smallest of the five countries.
The U.S. equity benchmark claimed the lead after banks rallied
22 percent and the steepest monthly retreat in commodity prices
sent the Bovespa into a bear market.
``You have the money on the move,'' said Michael Shaoul, chief executive officer of Oscar Gruss & Son Inc., a New York- based brokerage. ``So many people had cut their allocations to the United States that there was nowhere else to go. It's like a fire in an empty theater. If there's no audience, you're not going to find a stampede to the exit.''
Tuesday, August 12, 2008
( Apparently the primitive survival basic instinct even in dumbed down n***** companies like FRE and FNM are still present. )
The implication of this announcement is far reaching because
1. NY is present in all subprime deals out there. In securitized products, there simply is no mechanism other than outright dump of the security to adhere to the new policy. There is no resecuritization avenue of loans out of the Trusts - None.
For example see the snapshot of a deal from Indymac (a Californian bank) with a bunch of NY loans in it.
2. The legal protection in NYC is only for subprime? Well, define prime vs. subprime. And even if you could, what would be the odds in NYC the law is going to be inclusive for everyone in the very near future? THAT'S WHAT I THOUGHT.
3. And what other states are offering "legal protection" for "home owners" who default? What would happen to loans from those places? Different from those of NY? I didn't think so.
Aug. 12 (Bloomberg) -- Freddie Mac, the second-largest U.S. mortgage finance company, will stop buying subprime loans issued in New York state as a new law takes effect that holds investors accountable for mortgage fraud. Freddie won't buy loans dated on or after Sept. 1 that meet the state's subprime definition, the McLean, Virginia-based company said today in a lender bulletin on its Web site.
New York Governor David Paterson last week signed new foreclosure and lending laws that tighten legal protections for borrowers. The legislation holds mortgage buyers like Freddie liable in ways that ``we have no way of monitoring and preventing,'' company spokesman Brad German said in a telephone interview. Government-chartered Freddie and Fannie Mae, which together own or guarantee 42 percent of the $12 trillion U.S. home loan market, are both slowing their mortgage purchases after last week posting bigger-than-expected losses for the second quarter.
The companies have been battered by record delinquencies and rising losses as they struggle to shore up their weakened balance sheets amid the worst housing slump since the Great Depression. The state law may disproportionately affect borrowers looking to use state and federal mortgage rescue programs to refinance out of unaffordable subprime loans, German said. It will affect a ``very, very small number'' of loans, he said. (See the above writeup from me to see what really will happen).
`Compounds the Situation' A group that advocates affordable housing, the National Community Reinvestment Coalition, is ``very troubled by Freddie Mac's announcement,'' said David Berenbaum, executive vice president. ``In a market that doesn't have liquidity right now, it compounds the situation because it forces consumers to go to less responsible third parties,'' said Berenbaum, whose Washington- based group represents more than 600 housing nonprofits in the U.S. ``Fannie and Freddie have a responsibility to lead us out of this crisis as public chartered institutions.'' Fannie spokesman Brian Faith declined to comment on Freddie's announcement.
Paterson spokeswoman Erin Duggan didn't have an immediate comment. Freddie rose 1 cent, or 0.2 percent, to $5.61 as of 1:33 p.m. in New York Stock Exchange composite trading. Washington- based Fannie fell 23 cents to $8.17. Shares of both companies have dropped about 90 percent in the past year. Subprime loans are issued to borrowers with poor credit or high levels of debt. To contact the reporter on this story: Dawn Kopecki in Washington at email@example.com
Friday, August 8, 2008
these series of trades are what hedgefunds were doing because their logical appeals:
1. short financials
2. long cmdtys
3. short $ vs. euro
4. short high P/E nasdaq stocks
The problem with long-short trade is just that you can be right fundamentally about 3 out of the 4 trades.
But just one of them could be wrong and as you cover, you also cover the existing position and this clearly triggers a feedback loop.
The one that is wrong was the idea that USA will print like Zimb, and thus long commodities indiscriminately. These would prove disastrous as they force unwind the otherwise "correct" trades.
So far from my trades I anticipated #1 - 3 correctly (deffering financials short while continuing to sell cmdtys).
I underestimated the extent to which the hedgefunds do #4 though, and as a result took a bit of a hit although not much as I just scaled in 2 days ago.
From Amaranth's experience, once the margin call is over prices quickly adjust to where they were and in this case I am just salivating over the potentials in financials.
By the way, the CRE lack of participation in this rally is perfectly explained by the LACK of shorting in that sector as opposed to financials. There's no immediate comparison of ABK/MBI/FRE in CRE space, ... well maybe GGP who seems to have a refinance schedule every other weeks.
As a final reminder, in a margin call, the lender's goal is not to maximize profit but to minimize losses and thus prices could be unpredictable as the need to cover quickly outweighs EVERY other consideration. Thus the strong incentive for everyone to stay away from this runaway trainwreck just purely from technical reason. One week is about as good as historically true in the unwindings of such event, but the larger the trade typically it takes longer periods to clear. Think back on how crazy people were in the past 3 months on commodities and decoupling theories to help quantify that last statement.
PS: Greenie observed astutely by saying:
""There were correlations between completely unrelated sectors (like the above one, or QID - gold shown yesterday)"
= SMOKING GUN OF PAIR TRADES WE WERE SUSPECTING.
Now we know the disease, the winner is the one who guesses correctly the end of the episode AND identify the most mispriced stock.
Let the game begins.
The popular hedgefunds trades were:
1. short financials
2. long BRIC
3. long momo-basic material/metals/oil
4. short dollar
While indiscriminate buying happens in #1 because hedgefunds are in liquidation mode from misguided bets from #2-#4, the best one can do is move in gradually to short position in financials.
Don't get me wrong though, it is a bitch trying to time this correctly because who the hell knows which other one(s) will get margin call next. And when unwinding of bad bets happen, such as Amaranth's, we get to hear the news a couple of weeks after the facts (maybe a week for some).
Which brings me to the point of this conjectures, that could this sort of thinking be applied to today's situation assuming some hedgefunds did cover their pair trades this week and next?
Also the other thing to improve timing, maybe the one to watch is #2-#4 and spend less time analyzing the movement in #1, which is like analyzing why Joseph Stalin ordered the executions of this farmer or that plumber because its indiscriminate nature.
Thursday, August 7, 2008
I will share one more secret with you all.
Do you remember 2002-2005?
When refinancing was heavy? When rates were low?
A mortgage investor like Freddie and Fannie would lose a lot of money from mortgages prepaying EARLY (due to incessant repeat cashouts and declining rates) if they don't hedge.
So they hedge using CHEAP options on interest rates. in other words, OUT OF THE MONEY options.
Including these and still Not-marking to market, Freddie Mac already in their own words, negative capital.
There's 1 - 2 yrs life left on these options, and they're still out of the money for both FRE, and more so for FNM.
Combined, these are "valued" at $20B+ when by admission, their book value is negative including that +$20B.
How much confidence do you have, that these options will be in the money and realize the value of that $20B, given your own experience trading out of the money option?
Given that house prices are not controllable variables, do you think the government would relinguish the last thing they control, interest rate?
Or even if they do, have you seen that mortgage rates are taking a life on their own, that they continually going up just from risk based pricing.
Hehehehheh. $20B just from NON-MORTGAGE book in these GSEs, going poof in a year or so.
And how's the prime book losses pal? I really want to keep the story about prime defaults as a turkey for y'all before I go for winter vacation.
The 3 inputs are
We failed to use #1 to inflate production in 2001.
We failed to use #2 to inflate wealth via shadow capital in 2006 and from lack of savings the past 20 yrs.
I think we should focus our efforts on #3.
America, I set new goals for thee, beat Chinese population by 2025.
I can help rewrite sex-ed for schools, this can potentially reverse the tide of deflation. ( I think in addition to outlawing contraceptives, I would also outlaw anal and oral sex, only allowed is good old pregnancy inducing activities.).
Wednesday, August 6, 2008
This is the TRUE face of Mad Max. Not the solemn, melancholic face of defaulted fraudsters, waiting for the next taxpayers handouts, no. The rule is still the same: GET AHEAD of the price actions or else, that means AT LEAST creating a 50-75bps MORE FUTURE Rate increases in the expectation, if immediate action was foregone. This is gonna get ugly or uglier.
Tuesday, August 5, 2008
To recap, in April SP500 index was earning at the rate of $63 per share per annum, compared with an "analyst expectation" of $90 at the time. Pretty wild eh?
Today, in AUGUST, SP500 index is earning at the rate of, get this, $50 per share per annum, compared with "analyst expectation" of $87.
In April, the P/E was 21x. Today we are clocking 25-26x easy. However dramatic the selloff you have seen, the fact remains that valuation simply has not kept up at all with reality.
None of these was intentional - no such thing as manipulation in the largest index in the face of the planet, no.
How to use this information?
Whenever the expectation and actual #s are pretty close to each other, that is when you say a bottoming process can occur. It is gonna be southward from here.
What's the value added of World Bank?
"The bank thought it financed an electric power station, but in fact financed a brothel."
- Paul Rosenstein-Rodan, 1961 (source: The Rise and Fall of the World Bank Economic Department)
Aug. 5 (Bloomberg) -- Morgan Stanley, the second-biggest
U.S. securities firm, told several thousand clients this week that they won't be allowed to withdraw money on their home- equity credit lines, said a person familiar with the situation.
By Jody Shenn
Aug. 5 (Bloomberg) -- Fannie Mae, the largest U.S. mortgage-
finance company, will raise a fee it charges lenders to buy their
mortgages or guarantee home-loan securities, a move that may
increase costs for borrowers.
Fannie Mae's ``adverse market delivery charge,'' introduced
earlier this year for all mortgages that the company helps finance, will rise to 0.50 percentage point on Oct. 1, from 0.25 percentage point, according to a letter to lenders posted on the Washington-based company's Web site.