Posts Tagged ‘“too big too fail”’

Are Pig Farmers Doing All The Trading? “The Top Five Prop Desks Are Buying And Selling Securities With Leverage … To Each Other!”

Are Pig Farmers Doing All The Trading? "The Top Five Prop Desks Are Buying And Selling Securities With Leverage … To Each Other!"

Courtesy of Tyler Durden at Zero Hedge 

Swine Flu Threat Reaches Indonesia

A suitable follow up to our earlier post on domestic equity fund flows (which have been negative year to date), and our conclusion that Primary Dealers are merely taking advantage of the ZIRP carry trade, is Rosie’s observation that the only entities doing any relevant trading are the prop desks of the Big Five TBTFs. If that is indeed the case, the market, which Rosenberg concludes optimistically is 25% overvalued will certainly face a Black Monday-type correction as soon as the elusive "unpredictable" occurs and the Prop desks as always scurry for cover, with no volume consolidation to the upside.

It would be such a wonderful time to truly implement the Volcker Rule as the bank’s prop desks, if David is correct, are about to cause some major damage to the market… Of course, it is these very prop desks that are the staunchest opposition to the Volcker Rule and its negative implication on prop trading.

From David Rosenberg and Gluskin-Sheff:

Well, well, the theory that the stock market has turned in a double top may not have gone the way of the Dodo after all, following the reversals we saw in the last two trading days of last week. Negative reversals and distribution days in three of the last six sessions is something to be concerned about if you are long this market — and volume remains tepid at best.

The market is now overvalued by over 25% but is also extremely overbought having gone 24 sessions without a decline of 1% or more, and 89% of the stocks in the S&P 500 are now trading above their 50-day moving averages (see page M3 of Barron’s). The Dow has advanced in 17 of the past 21 days. I mean, even if you are bullish on the outlook, one would have to admit that such a parabolic move is vulnerable to at least a modest pullback… or more. I know what a broken record sounds like and this has been a confounding and confusing market — for both the bears and many (though not all) of the bulls.

Looking at the fund flows, there is only one conclusion that can be reached:
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Senator: Which Part Of “Too Big To Fail” Do You Not Understand?

Senator: Which Part Of “Too Big To Fail” Do You Not Understand?

Courtesy of Simon Johnson at Baseline Scenario

When a company wants to fend off a hostile takeover, its board may seek to put in place so-called “poison pill” defenses – i.e., measures that will make the firm less desirable if purchased, but which ideally will not encumber its operations if it stays independent.

Large complex cross-border financial institutions run with exactly such a structure in place, but it has the effect of making it very expensive for the government to takeover or shut down such firms, i.e., to push them into any form of bankruptcy.

To understand this more clearly you can,

The Citigroup situation is simple.  They would like to downsize slightly, and are under some pressure to do so.  It is hard to sell assets at a decent price in this environment, so why don’t they just spin off companies – e.g., quickly create five companies in which each original shareholder gets a commensurate stake?

The answer is that Citi’s debt is generally cross-guaranteed across various parts of the company.  US and foreign creditors have a claim on the whole thing, more or less (including the international parts), and you can’t break it apart without upsetting them.  The cross-border dimensions make everything that much more knotty.

Senator Kaufman explains what this means – essentially the “resolution authority” proposed in the Dodd legislation is meaningless.  How would any administration put a huge bank into any kind of “resolution” (a FDIC-type bank closure, scaled up to big banks) when it knows that doing so would trigger default across all the complex pieces of this multinational empire?

You could do it if you are willing to accept the costs – and if you understand there are big drawbacks to providing an unconditional bailout of the 2009 variety.  But will a future administration be willing to take that decision?  The Obama administration was not – and big finance will only become bigger and more complex as we move forward.

If you look into the eyes of the decision-makers from spring 2009, they honestly believe that taking over Citi or Bank of America would have caused greater financial trouble and a worse recession.  You can argue about their true motivation all you want; this…
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Oh I Feel So Safe Back in the Arms of Our Dear Leaders!

I am a big fan of the law of unintended consequences. 

My thoughts on Michael Covel’s article: you can’t legislate away human nature, true, but if you define and enforce penalties for criminal behavior, you can decrease its occurrence.  It is part of human nature to be deferred by harsh penalties. We’ve seen a lot of fraud go un-prosecuted and even rewarded recently. As long as this persists, it is human nature that the human behavior will continue.

This is where good legislation vs. bad legislation comes in, and real law enforcement (rarely spotted in the financial kingdom) vs. non-enforcement makes a difference.  - Ilene 

Oh I Feel So Safe Back in the Arms of Our Dear Leaders!

We will see the law of unintended consequences arrise from this:

“[Senator] Dodd’s 1300-plus page proposal includes a laundry list of items: a new consumer financial protection agency, new supervision of hedge funds and derivatives trading, a reshuffling of banking industry regulators, investor protection, new federal authority to handle too-big-to-fail financial firms meant to limit taxpayer bailout funds and the creation of a systemic risk council as part of an early warning system.”

Kids, repeat after me and tap your ruby red slippers three times: you can’t legislate away human behavior, you can’t legislate away human behavior, you can’t legislate away human behavior…Followed by: bigger bubbles will follow, bigger bubbles will follow, bigger bubbles will follow…

Seriously, doesn’t it appear the United States federal government is attempting to strap a diaper on all of us? I get the idea of a diaper’s job, but guess what: When everyone shits away it might not hit the floor, but it will still smell awful — diaper or not.

 

See Also: 

Senator Kaufman Blasts Dodd Bill, Says It Gives Regulators "Reshuffled Set Of Regulatory Powers That Already Exist", Zero Hedge


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Reich Joins Those Calling for an End of “Too Big to Fail”

Reich Joins Those Calling for an End of "Too Big to Fail"

Courtesy of Washington’s Blog

Economics professor and former Labor Secretary Robert Reich today joined the growing ranks of top economists calling for an end to the too big to fail concept:

Visit msnbc.com for Breaking News, World News, and News about the Economy

If you don’t have time to watch, Huffington Post summarizes Reich’s statement:

Buchanan then asked Reich if he believed the government should have allowed a couple of the massive banks to fail like Lehman Brothers to teach them them the lesson that the government won’t always consider them too big to fail. Reich found himself unexpectedly agreeing once more:

"You know it’s interesting Pat Buchanan, I start worrying about my own convictions when I hear you repeating back to me exactly what I believe. We ought to have either had kind of a restructuring of all of these big banks based upon something like Chapter 11, or we should have had a kind of temporary receivership, but we have the worst of both worlds. Taxpayers bailed them out so right now they know they were going to get a bailout next time. Before they didn’t even know they were going to get a bailout, now they’re making these wild trades they’re doing the same risky stuff they were doing before, and now they know that if they get in trouble the government is going to bail them out because they are, quote, "too big to fail." Nothing in capitalism, no entity should be too big to fail."


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Phil's Favorites

Don't be fooled by fake images and videos online

 

Don't be fooled by fake images and videos online

Nope, not a real news report from Hurricane Irma. Snopes

Courtesy of Hany Farid, Dartmouth College

One month before the 2016 U.S. presidential election, an “Access Hollywood” recording of Donald Trump was released in which he was heard lewdly talking about women. The then-candidate and his campaign apologized and dismissed the remarks as harmless.

At the time, the authenticity of the recording was never questioned. Just two years later, the public finds itself in a dramatically different landscape in terms of believin...



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Zero Hedge

Why Today's Fed's Minutes Release May Result In Brief Market Chaos

Courtesy of ZeroHedge. View original post here.

Traditionally, when the Fed releases the Minutes for its most recent FOMC meeting, the sequence of events is that Bloomberg, Reuters and a handful of other news service blast flashing red headlines with the key highlights and soundbites, which are delivered to markets precisely at 2:00pm which then sets the market mood for the rest of the day, allowing algos to trade in kneejerk response to the initial information disclosure, and forcing analysts and strategists to goalseek their narrative to the market's reaction: if stocks spike, the minutes are more dovish than expect, conversely if...



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Kimble Charting Solutions

Are Bank Stocks Ready to Right-Side the Bull Market?

Courtesy of Chris Kimble.

The bank sector is a good indicator of the health of the broader stock market.

Bulls like to see the banks in a leadership role because it indicates that the economy is doing well. But when they begin to lose momentum and underperform, it often leads to pullbacks and corrections.

As you can see in today’s chart, the Bank Index (BKX) began to stumble well before the recent correction. And that bearish divergence was a warning to market bulls – similar to the 2015-2016 setup.

On the other hand, the recent rally has given bulls an opportunity to right-side th...



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ValueWalk

Whitney Tilson Likes Activision Blizzard On Fortnite Mania

By Jacob Wolinsky. Originally published at ValueWalk.

Whitney Tilson‘s email to investors discussing Activision; Snapchat; TradeStops; and hiring writer or editor .

1) I’m going to start sending out short blurbs on stocks that are on my radar screen that I think are interesting enough to do a second round of research. To be clear: these are NOT stocks I own or am recommending – just ones that pass my initial five-minute screen (which few do these days!) that I’m doing some more work on. That means reading the latest quarterly earnings and annual report, investor presentation, any write-ups on ValueInvestorsClub, SumZero or Seeking ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Thursday, 02 August 2018, 07:48:20 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: $600 BN interest payments for US gov, print baby print



Date Found: Sunday, 05 August 2018, 09:22:26 PM

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Comment: Hire FED interest rates always brings double trouble



Date Found: Monday, 06 August ...

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Insider Scoop

The Street's Early Reaction To Walmart's Q4 Beat

Courtesy of Benzinga.

Related WMT Mid-Morning Market Update: Markets Edge Higher; Walmart Tops Q4 Expectations Walmart Brings Bright Spot T...

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

Digital Currencies

Cryptos Are Surging: Bitcoin, Ethereum Hit One-Month Highs As Institutions Dip Toes

Courtesy of Zero Hedge

Cryptocurrencies are surging while the US equity markets take the day off. Ethereum is up over 18% from Friday's 'close' and the rest of the crypto space is a sea of green. While no immediate catalyst (headline or technical level) is clear, increasing chatter over institutional investors dipping their toes in the space have prompted an extension of the positive trend.

A sea of green...

Source: Coin360

Ethereum is leading the charge follow...



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Biotech

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

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

 

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

Illustration of acute lymphoblastic leukaemia, showing lymphoblasts in blood. Kateryna Kon/Shutterstock

Courtesy of Alba Rodriguez-Meira, University of Oxford and Adam Mead, University of Oxford

...

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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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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"

 

 

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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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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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