Archive for 2008

Paul Volcker

Todd Sullivan’s – ValuePlaysrecommending this video. 

Paul Volcker on Financial Crisis (Charlie Rose)

Todd:  Without question the strongest Fed Head we have had talks about the current crisis and possible solutions. This is a great discussion.


 

 

 





Mitsubishi & Morgan Stanley

This shouldn’t be unexpected — if I were Mitsubishi, I would be renegotiating the terms -- but here’s an update on the Mitsubishi and Morgan Stanley deal.  By Yves Smith at Naked Capitalism. 

Mitsubishi and Morgan Stanley Renegotiating Mitsubishi Equity Purchase

Excerpt:  "Oh, just when it might be looking safe to go into the pool again, by virtue of the EU putting up a substantial enough plan to possibly start calming overfrayed nerves, another source of worry appears to be deteriorating, namely Morgan Stanley.

Sports fans may recall that a badly-needed cash injection into the embattled investment bank by Japanese bank Mitsubishi UFJ was due to close Tuesday. However, the deal had come to look like a complete turkey from the Japanese side, since their investment of $9 billion, which at the time of announcement amounted to 21% of the company, now contrasts with a market cap of just over $10 billion.

The good news is that Mitsubishi does not appear to be attempting to reduce the size of the investment but securing better terms, namely…

From the New York Times (hat tip reader Tim):

Morgan Stanley was racing to salvage a crucial investment from a big Japanese bank on Sunday in an effort to allay growing fears about its future — negotiations so critical to the financial markets that they have drawn in both the Treasury Department and the Japanese government.

Morgan Stanley, one of the most storied names on Wall Street, was locked in talks on Sunday to renegotiate its planned $9 billion investment from the Mitsubishi UFJ Financial Group of Japan, according to people involved in the talks.

The completion of a deal might help calm markets worldwide, which sank last week because of escalating concerns about the fate of financial institutions like Morgan Stanley. Investors might read the investment as a sign of confidence in the bank’s future.

Mitsubishi was pressing for more favorable terms after Morgan Stanley lost nearly half its market value during last week’s stock market plunge.

Treasury, however, is not planning to have the United States government take a direct stake in Morgan Stanley as part of a broader effort to stabilize the financial industry and the markets, these people said. Wall Street had buzzed


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Swing trading virtual portfolio – Optrader

That was a great week! We booked some big profits in puts but also in calls (thanks to the bounce in commodities like FCX and MOS, but also in AAPL the last 2 days). Congratulations also everyone who daytraded ES successfully ! It is very rewarding to see people doing so well in such a difficult market.

It looks like the market might have printed a bottom, at least a temporary one. But in any case, we will keep following and trading price, not our beliefs.

Live comments and virtual portfolio are only available to subscribers to the swing trading virtual portfolio.

To learn more about the swing trading virtual portfolio (strategy, membership etc.), please click here

- Optrader





Swing trading virtual portfolio – Optrader

That was a great week! We booked some big profits in puts but also in calls (thanks to the bounce in commodities like FCX and MOS, but also in AAPL the last 2 days). Congratulations also everyone who daytraded ES successfully ! It’s great to see people doing so well in such a difficult market.

It looks like the market might have printed a bottom, at least a temporary one. But in any case, we will keep following and trading price, not our beliefs.

To learn more about the swing trading virtual portfolio (strategy, membership etc.), please click here

To view the full strategy, please click here

- Optrader





Stocks Cheaper Now

Here’s an optimistic commentary (not easy to find lately) about stock prices being extremely low with the implicit assumption that psychology and prices will soon improve.  Courtesy of Scott Granis, Calafia Beach Pundit , citing the WSJ article What History Tells Us About the Market.

Stocks could be cheaper now than in 1932 

There’s an article in today’s WSJ I highly recommend, by Jason Zweig. He compares today with the conditions that prevailed just a few days before the absolute bottom of the stock market in 1932, after prices had fallen almost 90% from their 1929 highs. The summary: many stocks today are trading at levels that rival the ridiculously low valuations that the famous Benjamin Graham, the father of value investing, discovered back then. Here are some excerpts:

The nation was in the grip of what U.S. Treasury Secretary Ogden Mills called "the psychology of fear."

More than one out of every 12 companies on the New York Stock Exchange, Graham calculated, were selling for less than the value of the cash and marketable securities on their balance sheets.

Out of 9,194 stocks tracked by Standard & Poor’s Compustat research service, 3,518 are now trading at less than eight times their earnings over the past year — or at levels less than half the long-term average valuation of the stock market as a whole (according to Graham’s calculation methodology).

Nearly one in 10, or 876 stocks, trade below the value of their per-share holdings of cash — an even greater proportion than Graham found in 1932. Charles Schwab Corp., to name one example, holds $27.8 billion in cash and has a total stock-market value of $21 billion.

Those numbers testify to the wholesale destruction of the stock market’s faith in the future.

This market is priced to a belief that we are in the early stages of a profound recession or perhaps even a Depression. If you believe the future is just a tad brighter than that, you should be buying stocks today with abandon.

 





Action Plan

Willem Buiter writes his own action plan, showing how easy it can be to get something done.  Courtesy of Willem H. Buiter, Professor of European Political Economy, writing in the Financial Times‘ blog section.

Action plan – my foot

Please read the following “Action Plan to Combat Crisis”, cribbed from the IMF’s website

Yesterday, October 10, the G-7 met and agreed the following plan of action:

  1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
  2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
  3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
  4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
  5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.

Now that you have read this, please tell me: where is the beef? Where are the actions? Where are the decisive actions? Where are the internationally coordinated concrete measures and steps to be taken?

If by the time the markets open on Monday morning, this vague list of pious intentions has not been complemented with a rather longer list, by each of the G-7 and preferably by each of the G-20 nations, of specific actions and measures to suppport their key financial markets and institutions, including essential cooperative measures to stabilise border-crossing markets and institutions, then stocks will continue to plummet as they did last week.  Some suggestions on what to do can be found in my previous posting on this blog.  Even sitting alone in front of my laptop in my dressing gown, I came up with eight rather specific actions.

(1) Public guarantees of interbank lending between banks in different national jurisdictions. This could be implemented by national central banks acting as counterparty
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Action Plan

Willem Buiter presents his own action plan with specific details.  Courtesy of Willem H. Buiter, Professor of European Political Economy, writing in the Financial Times‘ blog section.

Action plan – my foot

Please read the following “Action Plan to Combat Crisis”, cribbed from the IMF’s website

Yesterday, October 10, the G-7 met and agreed the following plan of action:

  1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
  2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
  3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
  4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
  5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.

Now that you have read this, please tell me: where is the beef? Where are the actions? Where are the decisive actions? Where are the internationally coordinated concrete measures and steps to be taken?

If by the time the markets open on Monday morning, this vague list of pious intentions has not been complemented with a rather longer list, by each of the G-7 and preferably by each of the G-20 nations, of specific actions and measures to suppport their key financial markets and institutions, including essential cooperative measures to stabilise border-crossing markets and institutions, then stocks will continue to plummet as they did last week.  Some suggestions on what to do can be found in my previous posting on this blog.  Even sitting alone in front of my laptop in my dressing gown, I came up with eight rather specific actions.

(1) Public guarantees of interbank lending between banks in different national jurisdictions. This could be implemented by national central banks acting as counterparty of last resort in the (unsecured) interbank markets.

(2) International agreement on limits
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G7 Meeting

Live Blogging Paulson’s Post G7 Meeting Press Conference

Courtesy of Deborah at  Wall Street Weather.   

“This is a plan I am confident will work.” – Treasury Secretary Paulson after G7 meeting.

The stock market staged a late day recovery, on the belief that the meeting of G7 finance ministers would save the world. If the market was expecting details, they would surely be disappointed reading the statement G7 ministers released following their meeting in Washington today.

Treasury Secretary Paulson just finished a press conference which failed to provide any insight regarding the statement’s five point plan of action, other than calling it “aggressive.” Here’s what I consider to be the highlights of Paulson’s press conference:

  • Paulson was asked if he had anything to say to “calm the markets.” He replied that there will be “some volatility for awhile." "This is about restoring confidence. There would be a reason not to be confident if the G7 didn’t acknowledge the problem. The press and the markets are naïve if they think that different countries with different financial systems, sizes, structures, and laws will come up with precisely the same policy to deal with the issues.” He said the attitude among participants was “here’s the issues, let’s learn from each other.” Paulson added that the Europeans are interested in the TARP.
  • Paulson was asked if any assurances had been made that Goldman Sachs (GS) and Morgan Stanley (MS) wouldn’t suffer the same fate as Lehman Brothers. He said the ministers “did not mention any firms specifically,” but “did speak about firms important systemically.” He said that when he went to Congress requesting additional authorities in July, that authority did not cover investment banks. And there are “no investment banks today.”
  • Paulson would not say when Treasury would begin to take action. “People are working around the clock” and it will happen “as soon as we can do it properly.” Paulson made it clear that he had been “encouraging institutions to raise capital for over a year” and “it hasn’t worked as well as we would have liked.”
  • On Equity Participation: A “standardized program” is “under development”.
  • On Equity Injections: Paulson said that “given the magnitude of the problem, the addition of buying equity is necessary and more effective”; “taxpayer money will go further.” Asked why he was previously skeptical about making


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Swept Up

Swept Up by Insanity of Markets 

Excerpt: 

I can calculate the motions of heavenly bodies, but not the madness of people.” — Isaac Newton, 1721, after the South Sea bubble burst.

Sometimes I think we must be living in a movie, some kind of nightmarish, upside-down version of “Back to the Future.” It can’t possibly be that in the sophisticated, computerized 21st century, we find ourselves experiencing the same kind of financial panic — the same kind of financial insanity, really — that has dogged mankind at least since the Dutch tulip mania of the 1630s. Can it?

We look at those other eras — Dutch tulips and the South Sea bubble, the panics of 1825 and 1907, the crash of 1929 — and they seem so predictable in retrospect. They were marked by years of speculative excess, by financial innovation that got out of control and by mammoth asset bubbles that seem incredibly obvious in hindsight. There had to be a crash. It was all so unsustainable! Isaac Newton is said to have lost his life’s savings during the South Sea bubble. We think to ourselves, “A smart guy like that should have known better.”

And yet here we are. Iceland is bankrupt. European banks are teetering. Barely a week after the federal government passed a $700 billion rescue plan that revolved around the sale of toxic assets from financial institutions to the government, the Treasury Department announced it would focus its attention on a new plan to inject capital directly into the banks that most needed it. That is now supposed to be the thing that rescues the banking system

…So why didn’t we know any better? Why do we, as a species, continually have these bouts of financial insanity? This week, with the markets collapsing, that was what I most wanted to understand.

“What does humanity ever learn about romance?” said James Grant, editor of Grant’s Interest Rate Observer and the author of the forthcoming book “Mr. Market Miscalculates.” Science, said Mr. Grant, is a discipline that builds cumulatively. Previous knowledge isn’t forgotten or cast aside — it is built upon. But finance isn’t like that. 

“People keep on stepping on the same rakes because money, like romance, is only partly an intellectual experience,” Mr. Grant continued. “Money,
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Truly Oversold

Discussion of market bottoming potential, courtesy of Alan Brochstein at AB Analytical Services. 

How Oversold We Truly Are

I would certainly not like to be known as the "Sponge Bob" of bottom calling (how about now, what about now?) - it isn’t a fun game in these markets.  I was oh-so-negative in the summer of 2007 and ecstatic with the declines in January and March, when I was still short.  But, I changed teams early.  Quite frankly, I was able to navigate the long side well, as the types of stocks in which I was investing proved to perform quite well despite the pressures on the market, even into the end of Q3 (just 11 very long days ago).  In late September, I shared my views regarding "the bottom" being near if not even behind us.  While I may have been right if one assumes I meant in time but not price (God help us if not!), I, like anyone else who was long any stock, have had my proverbial hat handed to me, stuffed down my throat and et cetera.  It hasn’t felt good – that hat was a hard one.  A long-only portfolio that I manage was actually up 1% YTD through quarter-end, but now is down a whopping 17%.  I guess that’s not so bad relative to the market, but it’s very bad.

What now?  While most of the elements that were signalling a potential bottom are still present (to an even greater degree, obviously), I still can’t be more confident than I was then (which was more hopeful than declatory) despite the plunge in prices.  As a reminder, here is what I was looking at:

  • It’s that time of the year
  • We got the spike in VIX
  •  

  • Credit Spreads reflect dire pessimism
  • Put/Call and sentiment ratios reflect dire pessimism
  • We have a "confirmed rally" according to IBD
  • Market strength in early recovery sectors
  • Valuations are extremely low
  • Rates are likely to stay low
  • ***The right solutions are in the public domain now

    We can certainly take off the "confirmed rally" – it quickly failed (as I pointed out might be the case). 


  • continue reading





     
     
     

    Phil's Favorites

    Congress is considering privacy legislation - be afraid

     

    Congress is considering privacy legislation – be afraid

    Courtesy of Jeff Sovern, St. John's University

    Supreme Court Justice Louis Brandeis called privacy the “right to be let alone.” Perhaps Congress should give states trying to protect consumer data the same right.

    For years, a gridlocked Congress ignored privacy, apart from occasionally scolding companies such as Equifax and Marriott after their major data breaches. In its absence, ...



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    Zero Hedge

    Key Events This Week: Trade War, EU Elections, Durables, PMIs And Fed Minutes

    Courtesy of ZeroHedge

    Looking at this week's key events, Deutsche Bank's Craig Nicol writes that while the unpredictable nature of US-China trade developments will likely continue to be the main focus for markets again next week, we also have the European Parliament elections circus to look forward to as well as various survey reports including the flash May PMIs which may offer some insight into the impact of trade escalation on economic data. The FOMC and ECB meeting minutes are also due, along with a heavy calendar of Fed officials speaking.

    The European Parliament elections will kick off next Thursday with voting continuing into the weekend across the continent, with results expected on Sunday. With the elections surrounded by internal and external challenges for the EU, members di...



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    Kimble Charting Solutions

    Will S&P 500 Double Top Derail The Rally?

    Courtesy of Chris Kimble.

    The rally off the December stock market lows has been strong, to say the least. The S&P 500 rallied 25 percent before hitting and testing the 2018 high.

    The old highs proved to be formidable resistance and ushered in some volatility in May… and a 5 percent pullback.

    In today’s 2-pack, we look at that resistance level – could that be a double top? We can see similar patterns develop on the S&P 500 Index and its Equal Weight counterpart.

    Both indexes are testing short-term Fibonacci retracement levels of the recent decline at point (2).

    What takes place here after potential double top highs will be important. Stay tuned...



    more from Kimble C.S.

    Insider Scoop

    60 Biggest Movers From Friday

    Courtesy of Benzinga.

    Gainers
    • Fastly, Inc. (NYSE: FSLY) shares jumped 50 percent to close at $23.99 on Friday. Fastly priced its 11.25 million share IPO at $16 per share.
    • Outlook Therapeutics, Inc. (NASDAQ: OTLK) shares climbed 37.3 percent to close at $2.10 on Friday after the stock rose over 68 percent Thursday following an Oppenheimer initiation at Outperform with a price target of $12.
    • Cray Inc. (NASDAQ: CRAY) shares rose 22.5 percent to close at $36.52 after Hewlett Packard Enterpri...


    http://www.insidercow.com/ more from Insider

    Chart School

    Weekly Market Recap May 18, 2019

    Courtesy of Blain.

    China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

    On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

    Then on Wednesday:

    The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

    ...

    more from Chart School

    Digital Currencies

    Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

     

    Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

    The high seas are getting lower. dianemeise

    Courtesy of Iwa Salami, University of East London

    The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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    Biotech

    DNA as you've never seen it before, thanks to a new nanotechnology imaging method

    Reminder: We are available to chat with Members, comments are found below each post.

     

    DNA as you've never seen it before, thanks to a new nanotechnology imaging method

    A map of DNA with the double helix colored blue, the landmarks in green, and the start points for copying the molecule in red. David Gilbert/Kyle Klein, CC BY-ND

    Courtesy of David M. Gilbert, Florida State University

    ...



    more from Biotech

    ValueWalk

    More Examples Of "Typical Tesla "wise-guy scamminess"

    By Jacob Wolinsky. Originally published at ValueWalk.

    Stanphyl Capital’s letter to investors for the month of March 2019.

    rawpixel / Pixabay

    Friends and Fellow Investors:

    For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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    Members' Corner

    Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

    Are you ready to retire?  

    For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

    Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

    Still, the stock market has been better over the last 10 (7%) an...



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    Mapping The Market

    It's Not Capitalism, it's Crony Capitalism

    A good start from :

    It's Not Capitalism, it's Crony Capitalism

    Excerpt:

    The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

    This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



    more from M.T.M.

    OpTrader

    Swing trading portfolio - week of September 11th, 2017

    Reminder: OpTrader is available to chat with Members, comments are found below each post.

     

    This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

    We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

    Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

    To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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    Promotions

    Free eBook - "My Top Strategies for 2017"

     

     

    Here's a free ebook for you to check out! 

    Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

    In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

    This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

    Some other great content in this free eBook includes:

     

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    About Phil:

    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...

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    Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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