Posts Tagged ‘Bear Stearns’

Goldman’s Hit List: Bear, Moody’s, NatCity, PMI, WaMu And Capital One

Goodfellas’ Hit Scene 

 

Goldman’s Hit List: Bear, Moody’s, NatCity, PMI, WaMu And Capital One

Courtesy of Tyler Durden

As Bruce Krasting disclosed yesterday, Goldman’s Josh Birnbaum "slipped" when disclosing the firm’s prop equity positions, in listing the companies his firm was actively shorting. We hope none of these were naked shorts as that would not reinforce the case of prudent risk management by Goldman’s discount window-accessible hedge fund (in other words, the entire firm). Today, via the full exhibit list, we learn that in addition to Bear Stearns, in July 2007 the firm, via Josh, was also actively shorting a variety of other mortgage-related firms at the Structured Products Group via puts, which in addition to Bear, included Moody’s, National City, PMI, WaMu, and Capital One. The firm only had a micro S&P long offset. As the list demonstrates, the firm had a big delta short in fins offset with no financial longs, thus refuting Josh’s testimony that this was a "hedge" when in reality this was nothing than a directional short bet on fins. What is more troubling is that Josh was planning on expanding the list to a whole slew of other firms, and specifically competitors, most of which eventually going under: including Lehman, Merrill, and Morgan Stanley.

We are confident that sooner or later AIG made the list, if not so much on the equity short side, as long CDS. If anyone wants to make the conspiratorial case that Goldman may have had the upper hand on these firms by knowing their liquidity situation and profited from it by shorting them as each bank in turn experienced a bank run, this could be a good place to start. It also begs the question if Dodd’s worthless bill has anything to see about predatory practices by Wall Street firms which actively short each other, potentially leading to a destabilization of the system.


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DÉJÀ VU

DÉJÀ VU

By James Surowiecki, The New Yorker 

A major Wall Street firm is accused of misleading clients by concealing key conflicts of interest. E-mails suggest that an employee touted its wares in public while slamming them in private. The scandal is front-page news, and observers anticipate severe damage to the firm’s reputation. We could be talking about Goldman Sachs today. But we could also be talking about Citigroup or Merrill Lynch in 2002, after the tech bubble burst. Then there was widespread anger at banks’ dodgy practices and reckless behavior, and an insistence that investors and regulators needed to be more vigilant. So why are we going through this all over again?

 

In the middle of the past decade, it seemed as if Americans thought that Wall Street could do no wrong. But just a couple of years earlier people thought that Wall Street could do nothing right. High-profile analysts had put “buy” ratings on the stocks of companies that they privately called “pigs.” WorldCom and Enron committed outrageous accounting fraud, the latter abetted by the venerable Arthur Andersen. There was so much bad behavior that it was hard to keep track—I.P.O. spinning, mutual-fund late trading, Adelphia, Tyco. There was shock that companies whose viability depended on reputation had so casually exploited their clients, and a sense that it would take a long time for the banks to win back trust.

Continue Deja Vu here.>>

Don’t You Forget About Me – Simple Minds

 


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Goldman Sachs Charged With Fraud: Who Could Have Guessed? Part III

Goldman Sachs Charged With Fraud: Who Could Have Guessed? Part III 
The firm’s history suggests its vulnerability in periods of negative social mood.

By Elliott Wave International

For the full GS/Fraud article, parts I-III, click here.>>

In the November 2009 issue of Elliott Wave International’s monthly Elliott Wave Financial Forecast, co-editors Steven Hochberg and Peter Kendall published a careful study of Goldman Sachs history — and made a sobering forecast for its future.  Here is our special report, Part III. 

Special Section: A Flickering Financial Star, Part III

With the market’s downtrend recently in abeyance, these transgressions failed to capture the imagination of the public or the scrutiny of law enforcement. But the extreme recriminatory power of the next leg down in social mood suggests that Goldman’s dealings will become a lighting rod for public discontent.

In January 2008, Elliott Wave Financial Forecast noted that Goldman’s success relative to the rest of Wall Street pointed “to the eventual appearance of a much larger public relations problem in the future. In the negative-mood times that accompany bear markets, conflict of interest charges will come pouring out.” The recent revelations about Paulson’s and Friedman’s actions are exactly that to which we were referring. Additional claims against Goldman — including front-running its clients and profiting from inside information — are already too numerous to mention. As the bear market intensifies, the firm will attract scrutiny as easily as it brushed it off in the mid-2000s.

Based strictly on the form of its advance, a July 2007 issue of The Short Term Update called for a peak in Goldman shares at $234. Goldman managed one more new high to $250 in October 2007; it then fell 81 percent to a low of $47 in November 2008. The stock market’s wave 2 rise brought Goldman back to $193 on October 14. Its affinity for marching in lock-step with the DJIA strongly suggests that Goldman will decline to below its November 2008 low.

Another key socionomic trait is for the most successful recipients of bull-market goodwill to be singled out for special treatment in the ensuing decline. Even fellow financiers are taking aim. In a not-so-veiled reference to Goldman, one Wall Street titan said that big profits made by investment banks are “hidden gifts” from the state, and resentment of such firms is “justified.” Let the bloodletting begin. 

Let the Buyers (of Stock) Beware
Goldman’s heavy involvement in the hedge fund…
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Reform We Can Believe In

Reform We Can Believe In

Courtesy of John Mauldin at Thoughts from the Frontline 

New York Mets Opening Day at Citi Field in New York

It’s Time for Reform We Can Believe In 
The Fed Must Be Independent 
Credit Default Swaps Threaten the System 
Too Big To Fail Must Go 
And This Thing About Leverage 
What Happens If We Do Nothing? 
New York, Media, and La Jolla

Casey Stengel, manager of the hapless 1962 New York Mets, once famously asked, after an especially dismal outing, "Can’t anybody here play this game?" This week I ask, after months of worse than no progress, "Can’t anybody here even spell financial reform, let alone get it done?" We are in danger of experiencing another credit crisis, but one that could be even worse, as the tools to fight it may be lacking when we need them. With attacks on the independence of the Fed, no regulation of derivatives, and allowing banks to be too big to fail, we risk a repeat of the credit crisis. The bank lobbyists are winning and it’s time for those of us in the cheap seats to get outraged. (And while this letter focuses on the US and financial reform, the principles are the same in Europe and elsewhere, as I will note at the end. We are risking way too much in the name of allowing large private profits.) And with no "but first," let’s jump right in.

Last Monday I had lunch with Richard Fisher, president of the Federal Reserve Bank of Dallas. Mr. Fisher is a remarkably nice guy and is very clear about where he stands on the issues. My pressing question was whether the Fed would actually accommodate the federal government if it continued to run massive deficits and turn on the printing press. Fisher was clear that such a move would be a mistake, and he thought there would be little sentiment among the various branch presidents to become the enabler of a dysfunctional Congress.

federal reserveBut that brought up a topic that he was quite passionate about, and that is what he sees as an attack on the independence of the Fed. There are bills in Congress that would take away or threaten the current independence of the Fed.

I recognize that the Fed is not completely independent. Even Greenspan said so this past week: "There’s a presumption that …
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Former Fed Gov. Poole Blasts Fed’s Favoritism; Soros Bought More Gold, Says Pound Devaluation is Option; New York Faces $1 Billion Shortage in June

Former Fed Gov. Poole Blasts Fed’s Favoritism; Soros Bought More Gold, Says Pound Devaluation is Option; New York Faces $1 Billion Shortage in June

Courtesy of Mish

In a candid attack on his former colleagues, Poole Says Fed Has ‘Tilted Playing Field’

“The Fed did not provide assistance to all on an equal basis but tilted the playing field,” Poole said in remarks prepared for a lecture at the University of Delaware, where he is a scholar in residence. “Why should the Fed have had a program to buy commercial paper from large corporations and no program to help small businesses starved for funds?”

The Fed’s program to purchase $1.25 trillion in mortgage- backed securities issued by government-sponsored enterprises probably contributed to the demise of the market for non- government mortgage-backed securities and will “complicate monetary policy in the years ahead,” Poole said.

“Much more research is necessary to determine whether the Fed made the right choices; clearly, I have my doubts,” said Poole, 72. He was president of the St. Louis Fed from 1998 until retiring from the post in March 2008, the month that Bear Stearns collapsed.

Poole expressed concern about “an appalling lack of economic literacy in Congress” and said that neither the House nor Senate versions of legislation to overhaul financial regulation address the most important shortcomings.

Poole is correct about the Fed’s favoritism and the Fed buying mortgages. It is very doubtful the Fed helped housing much, but at some point the Fed has to get rid of that $1.25 trillion in mortgages. That will pressure mortgage rates.

Why did the Fed even purchase the last half-trillion? By then, the Fed was already discussing an exit strategy. It made no sense.

Certainly Congress does consist of economic illiterates, but the same thing can be said about the Fed. Pray tell what did Bernanke or Greenspan get right?

New York Faces $1 Billion Cash Shortage in June

In a scene playing out in nearly all states in varying degrees New York Faces $1 Billion Cash Shortage in June.

New York state faces a $1 billion cash shortage in June, budget director Robert Megna told reporters today.

The state is considering all options to deal with the shortage, including borrowing, Megna said. “We are significantly underfunded in the first week of June,” Megna said.

Soros Bought More Gold, Says Pound Devaluation Is Option
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Silver Short Squeeze Could Be Imminent

Interesting press release from the National Inflation Association about Silver price manipulation. 

Silver Short Squeeze Could Be Imminent

Close-up of Indian silver coins

FORT LEE, N.J., April 3 /PRNewswire/ — The National Inflation Association today issued a silver update to its http://inflation.us/ members:

On December 11th, 2009 NIA declared silver the best investment for the next decade. In our December 11th article, we said that it wasn’t a coincidence that the very day Bear Stearns failed was the same day silver reached its multi-decade high of over $21 per ounce. We went on to say, "The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position."

JP Morgan took over the concentrated short position in silver from Bear Stearns and gained complete control over the paper price of silver. Within weeks, JP Morgan was able to manipulate the price of silver down to below $9 per ounce. NIA believes they were able to drive the price of silver down through "naked short selling," selling paper silver that is unbacked by physical silver.

On February 5th, we witnessed another sharp decline in silver prices, which NIA described on February 7th as being "just a temporary wash out, before a huge surge in silver prices later in 2010." Since then, silver prices have rebounded by 18%. The temporary wash out that occurred on February 5th was predicted by independent metals trader Andrew Maguire, who came out this week exposing the fraud that is taking place in the paper silver market.

On February 3rd, Andrew Maguire wrote Eliud Ramirez, a senior investigator for the CFTC’s Enforcement Division, giving him the "heads up" for a "manipulative event" signaled for February 5th. He warned the CFTC that JP Morgan was about to manipulate down the price of silver after the release of non-farm payroll data on February 5th.…
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Bear Stearns Boogie Man Yet Again

Bear Stearns Boogie Man Yet Again

Courtesy of Mish

Once again a series of videos is making the rounds touting how evil short sellers destroyed Bear Stearns. I was asked to comment on this.

The video makes a bunch of assumptions

1. That whoever bought way out of the money Bear Stearns PUTs "knew" something and illegally acted on it.
2. The same institution that bought the PUTs was illegally shorting shares.
3. There is a conspiracy to protect those evil doers.

How The System Really Works

Fact #1: When someone buys PUTs the market maker or counterparty who sold them is short those PUTs. This is a mathematical statement of fact.
Fact #2: The market maker who sold the PUTs, shorts stocks as a hedge against those short PUTs.
Fact #3: The lower the share price, the more shares the market maker has to short to stay delta neutral.
Fact #4: Market Makers are not governed by naked shorting rules

The video alleges that it was the person buying way out of the money PUTs that was doing the shorting. The reality is the market makers who sold PUTs were most likely those doing the allegedly "illegal" naked shorting.

To stay delta neutral, the market makers were forced to short more shares the lower the price dropped. Also remember this happened with every PUT at every strike all the way down, not just on that batch of way out of the money PUTs.

It should not take a genius to figure out how easily this could spiral out of control.

Who Was Shorting?

It was probably Goldman Sachs, Citigroup, Morgan Stanley, Merrill Lynch or whoever sold the PUTs. Moreover, those market makers probably lost money shorting because of how quickly the stock plunged.

The irony is everyone blames the naked sellers for making a fortune by short selling when the PUT sellers lost more on the PUTs they were short than they gained shorting the shares.

Did Someone Know Something?

The video alleges that someone "knew something". Well someone did know something, and that something is what we all knew: Bear Stearns was not only the most leveraged of the large institutions, but also held the highest concentration of subprime mortgage garbage.

Also other institutions could see or at least feared a run on the bank at Bear…
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DEEP THOUGHTS FROM DAVID ROSENBERG

DEEP THOUGHTS FROM DAVID ROSENBERG

Courtesy of The Pragmatic Capitalist

Rosey was really on point yesterday with these excellent thoughts:

We realize that the nerdy economics term of “The Great Recession” has already been coined, but let’s face facts — this was not a recession, nor was it great. It was not the Great Depression, either, but it was (is, in fact) a depression. So let’s call it the “Not So Great Depression”.

Now what makes a depression different than a recession is that depressions follow a period of wild credit excess, and when the bubble bursts and the wheels begin to move in reverse, we are in a depression. A recession is a correction in real GDP in the context of a secular expansion, which is what all prior nine of them were, back to 1945. But this was not a mere blip in real GDP — it is a post-bubble credit collapse. This is not a garden-variety recession at all, which an economic downturn triggered by an inflation-fighting Fed and excessive manufacturing inventories. A depression is all about deflating asset values and contracting private sector credit. In a recession, monetary and fiscal policy works, even if the lags can be long. In a depression, they do not work. And this is what we see today.

The stock market typically rolls over shortly after the last Fed rate hike at any given cycle. That didn’t happen this time. The Fed last hiked rates in the summer of 2006 and yet the stock market didn’t peak until after the first rate CUT … that does not happen in a normal cycle.

Even with a 0% funds rate, the economy could still not turn around, and that is exactly what happened in the 1930s in the U.S. and in the 1990s in Japan. When the central bank takes rates to zero and that does not do the trick in helping the economy or the markets find the bottom, and then has to engage in an array of experimental strategies and radically expand its balance sheet, then you know you are in a depression.

Moreover, when, a year after the onset of quantitative easing, we see money velocity and the money multipliers still in decline, then you also know that the liquidity is not being re-circulated in the real economy but perhaps finding


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Dubai World & Bear Stearns: Coal Mine Canaries?

Dubai World & Bear Stearns: Coal Mine Canaries?

Courtesy of Joshua M Brown, The Reformed Broker  

Embiggen: click here!

http://thereformedbroker.com

The meme going around now is that the Dubai debt thing is only the start of a wave of sovereign defaults, including Latvia and Greece, coming soon. While this could be the case, I actually see a lot more similarities between what the Bear Stearns blow up ultimately meant to the residential real estate market versus what the default of Dubai World could mean for the commercial real estate market.

While I make no predictions or forecasts on this site whatsoever, I would be remiss if I did not point out some of these similarities (see above chart).

canaryCommercial real estate has long been thought of as 2010’s big meltdown and the proverbial “next shoe to drop”. Nowhere has the worship and commensurate overbuilding of commercial real estate been better exemplified than in the United Arab Emirates.  At one point in 2005, it was estimated that 25% of all the cranes in the world were operating within the UAE.

Like California and South Florida came to represent the worst of the residential RE bubbles, the explosion in spending and financing for commercial RE has its international Ground Zero in Dubai.  Everyone from the major banks to the private equity cabal to Donald Trump has a stake in this story.

We’ll see whether this story is “contained” or if it is just the harbinger of a re-marking of commercial RE portfolios around the world.

Full Disclosure:  Nothing on this site should ever be construed as research, advice or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.

 


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Did The Markit Group, A Black-Box Company Partially Owned By Goldman Sachs and JP Morgan, Devastate Markets?

The Markit Group: A Black-Box Company that Devastated Markets

markitCourtesy of Mark Mitchell at Deep Capture

Although much attention has been directed at the contribution made by credit default swaps  to the financial crisis, most discussion has focused on the companies, such as American International Group (AIG), that posted big losses because they sold these instruments without sufficient due diligence.

Another line of inquiry has not been pursued, however, though it is of equal, and perhaps greater, significance. That line of inquiry concerns the way in which the prices of credit default swaps effect the perceived value of all forms of debt — corporate bonds, commercial mortgages, home mortgages, and collateralized debt obligations — and as a result, the ability of hedge funds manipulators to use credit default swaps in bear raids on public companies.

If short sellers can manipulate the price of credit default swaps, they can disrupt those companies whose debt is insured by the credit default swaps whose prices are manipulated.  The game plan runs as follows: find a company that relies on a layer of debt that is both permanent, and which rolls over frequently (most financial firms fit this description). Short sell that company’s stock. Then manipulate the price of the CDS upwards, preferably into a spike, as you spread the news of the skyrocketing CDS price (perhaps with the cooperation of compliant journalists at, say, CNBC).

Frightened Woman

Because the CDS is, in essence, an insurance policy on the debt of the company, the spiking CDS pricing will cause the company’s lenders to panic and cut off access to credit. As this happens, the company’s stock will nosedive, thereby cutting off access to equity capital. Thus suddenly deprived of credit and equity, the firm collapses, and the hedge fund collects on its short bets.

Moreover, credit default swap prices are the primary inputs for important indices (such as the CMBX and the ABX) measuring the movement of the overall market for commercial and home mortgages.  In the months leading up to the financial crisis of 2008, short sellers pointed to these indices in order to argue  that investment banks – most notably Bear Stearns and Lehman Brothers – had overvalued the mortgage debt and property on their books. Meanwhile, several hedge funds made billions in profits betting that those indexes would drop.

It should therefore be a…
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Kimble Charting Solutions

DAX Index Hits Two 18-Year Support Lines, Creates Large Bullish Reversal

Courtesy of Chris Kimble

Has the DAX index from Germany experience a large decline of late? Yes, it has!

Has the decline broken long-term rising support lines? Not so far!

This chart looks at the DAX index on a monthly basis over the past 25-years. Over the past 6-years, it has traded sideways inside of the blue rectangle at (1).

The decline this year saw the DAX hit two 18-year rising support lines at (2) last month, where a large bullish reversal took place.

Until broken, important support remains in play at (2), which is bullish for this key index....



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Zero Hedge

Aaand Its Gone... The Biggest Support For Asset Prices

Courtesy of ZeroHedge View original post here.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Since the passage of “tax cuts,” in late 2017, the surge in corporate share buybacks has become a point of much debate. I previously wrote that stock buybacks were setting records over the past couple of years. Jeffery Marc...



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Phil's Favorites

Here's how scientists are tracking the genetic evolution of COVID-19

 

Here's how scientists are tracking the genetic evolution of COVID-19

Why do scientists care about mutations on the coronavirus? Alexandr Gnezdilov Light Painting

Niema Moshiri, University of California San Diego

When you hear the term “evolutionary tree,” you may think of Charles Darwin and the study of the relationships between different species over the span of millions of years.

While the concept of an “evolutionary tree” originated in Darwin’s “...



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Biotech/COVID-19

Here's how scientists are tracking the genetic evolution of COVID-19

 

Here's how scientists are tracking the genetic evolution of COVID-19

Why do scientists care about mutations on the coronavirus? Alexandr Gnezdilov Light Painting

Niema Moshiri, University of California San Diego

When you hear the term “evolutionary tree,” you may think of Charles Darwin and the study of the relationships between different species over the span of millions of years.

While the concept of an “evolutionary tree” originated in Darwin’s “...



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ValueWalk

Activists demand revamp of anti-redlining law

By Anna Peel. Originally published at ValueWalk.

Over 100 California Community Organizations and Leaders Call for Banking Regulators to Stop Planned Revamp of Anti-Redlining Law during COVID19 Crisis

Q1 2020 hedge fund letters, conferences and more

Worker, Housing, and Small Business advocates call on all resources to be dedicated to saving lives and responding to Coronavirus

San Francisco--Amongst an unprecedented public health crisis that threatens hundreds of thousands of lives, as small businesses are shuttered across California and the nation, and as millions file for...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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The Technical Traders

Founder of TradersWorld Magazine Issued Special Report for Free

Courtesy of Technical Traders

Larry Jacobs owner and editor of TradersWorld magazine published a free special report with his top article and market forecast to his readers yesterday.

What is really exciting is that this forecast for all assets has played out exactly as expected from the stock market crash within his time window to the gold rally, and sharp sell-off. These forecasts have just gotten started the recent moves were only the first part of his price forecasts.

There is only one article in this special supplement, click on the image or link below to download and read it today!

...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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