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:
continue reading


Tags: , , , , , , ,




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…
continue reading


Tags: , , , , , , , ,




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


Tags: , , , ,




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."


Tags: , , , ,




 
 
 

Phil's Favorites

We should look closely at Britain's decision to elect a man so renowned for his untrustworthiness

 

We should look closely at Britain's decision to elect a man so renowned for his untrustworthiness

Courtesy of Barry Richards, Bournemouth University

In previous British elections, to say that trust was the main issue would have meant simply that trust is the trump card – whichever leader or party could secure most trust would win. Now, the emerging question about trust is whether it even matters anymore.

This is at least partly because Brexit has deepened the crisis of trust. The 2019 election was always going to be about Brexit – and not only because some people would vote according to where they stood on the matter. It was also because the emo...



more from Ilene

Zero Hedge

Trade-Deal Rumorgasm Sparks Stock Meltup To Record Highs, Bond Bloodbath

Courtesy of ZeroHedge View original post here.

It's a deal... again...

Oct 11: NEWS "Trump says the US has come to a substantial phase one deal with China"

Dec 12: RUMOR *TRUMP: GETTING VERY CLOSE TO A BIG DEAL WITH CHINA

Dec 12: RUMOR *U.S. NEGOTIATORS OFFER TO CANCEL NEW DEC. 15 CHINA TARIFFS: DJ

Dec 12: NEWS/RUMOR "Trump says he and China reached a 'phase one' trade deal in principle"

And that was good enough for new record highs for stocks...



more from Tyler

Insider Scoop

The Daily Biotech Pulse: European Nod For Amgen, miRagen Overhauls Clinical Pipeline, Tonix Snags Patent Win

Courtesy of Benzinga

Here's a roundup of top developments in the biotech space over the last 24 hours.

Scaling The Peaks

(Biotech stocks hitting 52-week highs on Dec. 11)

  • Acceleron Pharma Inc (NASDAQ: XLRN)
  • Aimmune Therapeutics Inc (NASDAQ: AIMT)
  • Aprea The...


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

Digital Currencies

Three Men Arrested In NJ For Running Alleged $722 Million Crypto Ponzi Scheme

Courtesy of ZeroHedge View original post here.

Authored by Kollen Post via CoinTelegraph.com,

United States authorities in New Jersey have announced the arrest of three men who are accused of defrauding investors of over $722 million as part of alleged crypto ponzie scheme BitClub Network, per a Dec. 10 announcement from the Dep...



more from Bitcoin

Kimble Charting Solutions

Is Freeport McMoRan (FCX) Making A Run For the "Gold"?

Courtesy of Chris Kimble

Mining company Freeport McMoRan NYSE: FCX is enjoying the tailwind from a strong year for gold and silver prices. And although Copper prices are down, Copper has been turning up lately.

This has helped Freeport’s stock price recover in 2019 and has FCX testing a key breakout level.

Below is a “weekly” chart of Freeport McMoRan (FCX). The shaded channel outlined by each (1) highlights the longer-term downtrend that FCX has been stuck in.

But this could change on a dime, especially if FCX can breakout above (2). This area represents its re...



more from Kimble C.S.

Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



more from Lee

Chart School

Silver stock taking the sector higher

Courtesy of Read the Ticker

As the US economy begins to show late cycle characteristics like: GDP slowing, higher inflation, higher wage costs, CEO confidence slump. 
Previous Post: Gold Stocks Review

The big players in the market are looking for the next swing off good value lows. This means more money is finding it way into the gold and silver sector, and it is said gold and silver stocks actually lead the metal prices. The cycle below shows prices are ready to move in the months ahead (older chart re posted).




 

Click for popup. Clear your browser cache if ...



more from Chart School

Members' Corner

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

 

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

By Matt Wilstein

Excerpt:

Sacha Baron Cohen accepted the International Leadership Award at the Anti-Defamation League’s Never is Now summit on anti-Semitism and hate Thursday. And the comedian and actor used his keynote speech to single out the one Jewish-American who he believes is doing the most to facilitate “hate and violence” in America: Facebook founder and CEO Mark Zuckerberg.

He began with a joke at the Trump administration’s expense. “Thank you, ADL, for this recognition and your work in fighting racism, hate and bigotry,” Baron Cohen said, according to his prepared...



more from Our Members

The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



more from Tech. Traders

Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

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

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



more from Biotech

Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

more from M.T.M.

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:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

more from Promotions





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...

Learn more About Phil >>


As Seen On:




About Ilene:

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.

Market Shadows >>