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Digg- The US is in the midst of the steepest decline in home price on record.
- Short-term treasury yields went negative and are still close to zero.
- Long-term treasury yields hit record lows.
- Foreclosures hit record highs.
- The stock market had the biggest collapse since the Great Depression.
- U-6 unemployment is a whopping 16.8% and still rising.
- The PPI (producer price index) had the biggest drop in 59 years.
- The CPI is at -1.3% is declining at the fastest pace since 1950 according to government calculations. The real CPI by my calculations is -6.2% (See What’s the
Another View At Goldman’s Trading Perfection And Statistical Improbabilities
by ilene - November 4th, 2009 1:11 pm
Another View At Goldman’s Trading Perfection And Statistical Improbabilities
Courtesy of Tyler Durden at Zero Hedge
When a firm’s trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, one can merely stand back and watch in awe. Attached is a graphic of what a rigged, backstopped and manipulated market is all about. The chart demonstrates Goldman’s YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for $11.6 billion in revenue (and is likely much more as Goldman could have easily had a $1 billion trading day in the rightmost bracket as it is open ended). Assuming midline averages for any given bucket and multiplying by the amount of days that the firm traded within these, Goldman Sachs has made $15 billion courtesy of the skewed and very highly improbable (but not impossible, thank you taxpayers and Ben Bernanke) chart.
And a more granular read, demonstrates that as the year has progressed, Goldman has become much better at extracting larger wins and minimizing losses. The firm lost money on just 3 days in the last two quarters. Is this a ponzi scheme? We surely don’t know absent additional information (which will never be forthcoming, despite that GS is a public company). Is this comparable to the returns generated by a ponzi scheme? Absofuckinlutely.
Can the SEC please dissolve itself already and save taxpayers at least a little money?
Questions for Gary Gensler and Henry Hu
by ilene - October 6th, 2009 9:47 pm
Questions for Gary Gensler and Henry Hu
Courtesy of George of Washington’s Blog
Preface: CDS traders, read the note at the end…
Tomorrow, the House Committee on Financial Services will be talking about regulating about over the counter derivatives. Committee Chair Barney Frank has already circulated a draft of the proposed legislation.
The star witnesses are Commodities Futures Trading Commission chairman Gary Gensler and Henry Hu, who is the Director, Division of Risk, Strategy, and Financial Innovation, U.S. Securities and Exchange Commission.
I urge members of the Committee to ask the following question (you’re welcome to hand this out to the witnesses):
Nobel prize-winning economist Myron Scholes – who developed much of the pricing structure used in CDS – said that existing over-the-counter CDS were so dangerous that they should be “blown up or burned”, and we should start fresh.
A Nobel prize-winning economist (George Akerlof) predicted in 1993 that CDS would cause the next meltdown.
U.S. Congresswoman Maxine Waters introduced a bill in July that tried to ban credit-default swaps because she said they permitted speculation responsible for bringing the financial system to its knees
Nassim Nicholas Taleb said this month, "To curb volatility in financial markets some financial products ‘should not trade,’ including complex derivatives."
Warren Buffett’s sidekick Charles T. Munger, has called the prohibition of CDS the best solution, and said “it isn’t as though the economic world didn’t function quite well without it, and it isn’t as though what has happened has been so wonderfully desirable that we should logically want more of it”
George Soros says the market is still unsafe, and that credit- default swaps are “toxic” and “a very dangerous derivative” because it’s easier and potentially more profitable for investors to bet against companies using them than through so-called short sales
Satyajit Das, a leading credit default swap expert – the commonly-accepted figures for the CDS losses suffered due to Lehman’s bankruptcy have been understated. He also says that the justifications for the value of CDS for the economy are phony.
In addition, the proposed regulations of CDS won’t really fix the problem, because they will only cover "standard" derivatives contracts, not the slew of "creative" contracts.
Indeed, Das says that the new credit default swap regulations not only won’t help stabilize…
Depression Debate – Is this a Depression?
by ilene - September 9th, 2009 3:07 am
Depression Debate – Is this a Depression?
Courtesy of Mish
In 1929 Versus 2007: Employment Change Barry Ritholtz posted a chart of unemployment with a comment: "This chart makes it pretty clear that the current recession is no Depression"
click on chart for sharper image
Actually the chart does not make anything clear other than unemployment is not as bad now as during the great depression. Given that no definition of the word depression was made it is certainly unclear whether or not we are in a depression.
Does one define a depression in terms of unemployment alone?
If so what is the cutoff?
Do we include U-3 numbers as Barry did or should we use U-6?
Is U-6 even accurate?
Do we count unemployment the same way now as during the great depression?
The answer to the latter is no, and anyone 16 years old without a job in 1930 was considered unemployed.
Comparing Recessions
Here is a chart from Calculated Risk with my forward assessment on jobs.
click on chart for sharper image
Does that chart depict a "recession" or something else? If something else, do we have to keep saying the "worst recession since the great depression" or is it a "depression"?
Others have posted charts saying this was not a depression because GDP growth will not drop to -10%. Is that the definition of depression?
Point blank there is no official definition of the word.
I think one needs to look at a number of factors including GDP, unemployment numbers, duration of unemployment, consumer spending, asset prices, housing prices, consumer prices, treasury yields, wages, consumer spending, bank failures, foreclosures, etc, to make a reasonable determination.
Here’s the deal.
…
THE STIMULUS CAN’T SAVE THE STOCK MARKET….
by ilene - September 3rd, 2009 11:21 am
THE STIMULUS CAN’T SAVE THE STOCK MARKET….
Courtesy of The Pragmatic Capitalist
By now we all know that government’s around the globe have implemented the largest single stimulus plan in the history of economics. There is no doubt that the global stimulus plans have been highly effective. What is less certain is how much of the underlying structural problem we have actually solved with these programs. Let’s not forget – debt got us into this mess and much like the Great Depression and Japan, it is unlikely that short term stimulus will solve these long-term structural debt problems. In fact, you could argue that much of what governments have done have actually made the problems worse. Unfortunately, we haven’t solved the problem of excess debt and all the stimulus does is prolong and delay the eventual day of reckoning with this mountain of debt. Comstock does a wonderful job of detailing these long-term issues.
Strategists at Morgan Stanley Europe are still quite optimistic that the stimulus plans will continue to inject equity markets with life. They do a nice job of connecting the dots between the short-term effects of this stimulus and the long-term structural problems that still exist. In essence, we’ve stimulated the markets in the near-term, but kicked the can down the road:
We have a positive bias to equities in the near term and believe in range-bound markets for years to come. We believe downside risks to equities are limited until this new growth (and earnings) cycle ends, probably when rates / inflation go up by too much, or when there is a negative growth surprise in China. Our economists expect the 1st Fed hike by mid-10, and expect 10% China GDP growth in 2010.
Post the rebound rally, we expect some sort of trading range for years to come because of the structural problems of the financial sector and household deleveraging as well as the poor state of government finances. We expect MSCI Europe to be in a broad trading range for years to come, between 600 and 1200 (Latest value 1046). Timing-wise, we do not expect material fiscal tightening and/or significant spending cuts in the next 12-18 months, but the 95/96 VAT hike in Japan highlights the risks of a policy mistake. The implication would clearly be negative for growth and equities, as evident in Japan. At the sector
…
The Cover Curse Continues
by ilene - August 2nd, 2009 2:35 pm
The Cover Curse Continues
Courtesy of Tim Knight at Slope of Hope
The latest issue of Time magazine prominently mentions "Housing Seems to Have Bottomed" on its front cover, which only amplifies the blaring Newsweek cover that the Recession is Over. And now we have Barron’s joining in the fun:
Are they kidding? I suppose the dumb money will push the stock a bit higher on Monday, thanks to this cover story, but it will only make the shorting opportunity that much grander.
Sheesh.
*****
Well, it’s not Newsweek, or TIME, or Barron’s but anyway…
Cover Of The Rolling Stone-Dr.Hook
Energy Options Strangle Play Delivers the Goods for Investor
by Option Review - June 29th, 2009 4:27 pm
Today’s tickers: XLE, MFE, FITB, SLM, XHB, F, INTC & XLF
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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