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). 


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    Zero Hedge

    Johns Hopkins, Bristol-Myers Face $1 Billion Suit For Infecting Guatemalan Hookers With Syphilis 

    Courtesy of ZeroHedge. View original post here.

    A federal judge in Maryland said Johns Hopkins University, pharmaceutical company Bristol-Myers Squibb and the Rockefeller Foundation must face a $1 billion lawsuit over their roles in a top-secret program in the 1940s ran by the US government that injected hundreds of Guatemalans with syphilis, reported Reuters.

    Several doctors from Hopkins an...



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    Phil's Favorites

    This Is The One Chart Every Trader Should Have "Taped To Their Screen"

    Courtesy of Zero Hedge

    After a year of tapering, the Fed’s balance sheet finally captured the market’s attention during the last three months of 2018.

    By the start of the fourth quarter, the Fed had finished raising the caps on monthly roll-off of its balance sheet to the full $50bn per month (peaking at $30bn USTs, $20bn MBS, although on many months the (balance sheet) B/S does not actually shrink by this full amount which depends on the redemption schedule) and by end-Q4 markets also experienced some of the largest volatility and drawdowns in nearly a decade.

    As Nomura&...



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    ValueWalk

    The Competition For Capital Has Made Stocks Cheap

    By Michelle Jones. Originally published at ValueWalk.

    The new year is upon us, and now is the time many investors look at what 2018 was and prepare for what 2019 might be. Recession jitters are starting to pick back up again, especially now that the full picture of 2018 is in the books. But what if you could pick only one theme for 2018? Jefferies strategist Sean Darby and team have a suggestion which is especially timely given that it appears to mark the end of an era.

    StockSnap / PixabayVolatility carries into the new year

    This past year was one of extremes, and the markets ended i...



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    Kimble Charting Solutions

    Stock declines did not break 9-year support, says Joe Friday

    Courtesy of Chris Kimble.

    We often hear “Stocks take an escalator up and an elevator down!” No doubt stocks did experience a swift decline from the September highs to the Christmas eve lows. Looks like the “elevator” part of the phrase came true as 2018 was coming to an end.

    The first part of the “stocks take an escalator up” seems to still be in play as well despite the swift decline of late.

    Joe Friday Just The Facts Ma’am- All of these indices hit long-term rising support on Christmas Eve at each (1), where support held and rallies have followed.

    If you find long-term perspectives helpf...



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    Digital Currencies

    Transparency and privacy: Empowering people through blockchain

     

    Transparency and privacy: Empowering people through blockchain

    Blockchain technologies can empower people by allowing them more control over their user data. Shutterstock

    Courtesy of Ajay Kumar Shrestha, University of Saskatchewan

    Blockchain has already proven its huge influence on the financial world with its first application in the form of cryptocurrencies such as Bitcoin. It might not be long before its impact is felt everywhere.

    Blockchain is a secure chain of digital records that exist on multiple computers simultaneously so no record can be erased or falsified. The...



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    Insider Scoop

    Cars.com Explores Strategic Alternatives, Analyst Sees Possible Sale Price Around $30 Per Share

    Courtesy of Benzinga.

    Related 44 Biggest Movers From Yesterday 38 Stocks Moving In Wednesday's Mid-Day Session ...

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

    Chart School

    Weekly Market Recap Jan 13, 2019

    Courtesy of Blain.

    In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

    Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

    Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “fle...



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    Members' Corner

    Why Trump Can't Learn

     

    Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

    Why Trump Can’t Learn

    Donald Trump by Gage Skidmore (...



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    Biotech

    Opening Pandora's Box: Gene editing and its consequences

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

     

    Opening Pandora's Box: Gene editing and its consequences

    Bacteriophage viruses infecting bacterial cells , Bacterial viruses. from www.shutterstock.com

    Courtesy of John Bergeron, McGill University

    Today, the scientific community is aghast at the prospect of gene editing to create “designer” humans. Gene editing may be of greater consequence than climate change, or even the consequences of unleashing the energy of the atom.

    ...

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    Mapping The Market

    Trump: "I Won't Be Here" When It Blows Up

    By Jean-Luc

    Maybe we should simply try him for treason right now:

    Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

    The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

    By Asawin Suebsaeng and Lachlan Markay, Daily Beast

    The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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    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.

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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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