Posts Tagged ‘Yves Smith’

Fears of Regime Change in New York

Fears of Regime Change in New York

Courtesy of Yves Smith of Naked Capitalism

Time Square New York

Normally, I don’t report on anecdotes from my immediate circle, but a set of conversations in less than a 24 hour period suggests that even those comparatively unaffected by the crisis are bracing themselves for the possibility of sudden, large-scale, adverse changes. And that sort of gnawing worry seems to be growing in New York despite being buoyed by TARP funds and covert bank subsidies.

When out on my rounds the day before yesterday, I ran into an old McKinsey colleague, who had subsequently had impressively titled jobs in Big Firms You Heard Of before semi-retiring to manage family money. He and his very accomplished wife were big Bush donors and had been invited to both inaugurations.

He made short order of niceties and got to the point: “We need more fiscal stimulus. Obama did too little and too much of what he spent on was liberal pork. We could and need to spend a lot on infrastructure. This is looking a lot like 1936. I’m afraid it could get really ugly. And I’m particularly worried that the Republicans will win big this fall. They’ll cut even deeper, that’s the last thing we need right now.”

No I am not making this up, and yes, this is one of the last people I would have expected to express this line of thinking.

Next day, I had lunch with a two long standing, keen observers and participants in the New York scene, as in very involved in some of the city’s important institutions. Both have witnessed the shift in values over the last thirty years and the rising stratification, particularly at the top end (New York has always been plutocratic, but it formerly had a large upper middle class and a much smaller and much less isolated upper crust).

They started by commenting on my Bill Gross post, which had mentioned the appalling Steve Schwarzman contention that taxing private equity overlords more on their carried interest was like HItler invading Poland. Schwarzman is not only not retreating from his remark, he is convinced that the reason the economy is so lousy is that rich men like him are not getting their way (this is if anything an understatement of their account. Both men expect his head to be the first…
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Are Bank Stocks Such a Good Buy?

Are Bank Stocks Such a Good Buy?

Courtesy of Yves Smith at Naked Capitalistm 

banks

A fund manager who will go unnamed mentioned to me that he is putting clients into bank stocks because they are trading at or below book value.

Now of course, individual stocks can and do always outperform the outlook for their sector, so there are no doubt particular banks whose stocks are cheap right now. But there are good reasons to question the notion that banks in general, and money center banks in particular, are a bargain.

First and perhaps most fundamental is the notion that bank equity is a readily-measured number, and that book value is therefore a useful metric. In general, even in companies in make-and-sell businesses, balance sheet items are subject to artful reporting. Notice, for instance, how every four or five years most big public companies take a writeoff that they classify as extraordinary, and equity shills dutifully exclude it from their calculation. In most cases, the writeoff is an admission that past earnings were overstated, but seldom is anyone bothered by what this says about the integrity of that company’s accounting or the acumen of its management.

Bank earnings, even under the best circumstances, involve a great deal of artwork, and most of all in the very big banks with large dealer operations. As Steve Waldman pointed out,

Bank capital cannot be measured. Think about that until you really get it. “Large complex financial institutions” report leverage ratios and “tier one” capital and all kinds of aromatic stuff. But those numbers are meaningless. For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements.

Lehman is a case-in-point. On September 10, 2008, Lehman reported 11% “tier one” capital and very


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NYT Muffs Merrill/Magnetar Piece (And Why is No One Investigating the Related Bonus Fraud?)

NYT Muffs Merrill/Magnetar Piece (And Why is No One Investigating the Related Bonus Fraud?)

By Yves Smith and Tom Adams, an attorney and former monoline executive, at Naked Capitalism 

Radar Marking an Earthquake's Epicenter

Louise Story has penned what presents itself as an important story at the New York Times, one that charges Merrill Lynch with misrepresenting the size of its subprime, specifically, collateralized debt obligation exposures, in the runup to the global financial crisis. The ruse the article depicts is a CDO called Pyxis., which purportedly served as a dumping ground for exposures Merrill could not unload. Initially, Merrill was able to escape reporting these positions because it claimed to have hedged the risk. In fact, the hedges failed, the bank was ultimately on the hook and was later forced to ‘fess up to the magnitude of its holdings. This revelation sounds juicy in that Citigroup and some of its recent senior executives paid fines to the SEC for similar, albeit less convoluted-sounding, misconduct.

But in fact, the story is astonishingly incomplete, to the point of being misleading. While Merrill’s probable accounting improprieties are noteworthy and merit investigation by the authorities, they are not the most important element of this episode. CDO abuses amounted to accounting fraud to enable employees and executives to loot their companies. Moreover, they were not perpetrated by isolated actors, but were part of what Bill Black calls a criminogenic environment.

To put it more simply, if you think Merrill’s misrepresentations to investors are a big deal, they are only a small aspect of the bigger, and frustratingly largely untold, tale of the role of CDOs in the crisis. CDOs were the epicenter of the upheaval, the device that magnified a what otherwise would have been contained subprime bubble into an economy-wrecking meltdown. When the music stopped, it was the dealers themselves that wound up holding much of the toxic paper they’d created. AAA rated CDOs went from haircuts of 2-4% in early 2006 to 95% in later 2007. The collapse in CDO valuations and the resulting inability to use CDOs as collateral for repo was a major, if not the major, cause of dealer illiquidity and insolvency which resulted in massive bailouts and backdoor subsidies.

Accounts like Ms. Story’s are blind man and the elephant affairs: at best, they do a good enough job of depicting, say, the trunk, but leave the beast…
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Stop the madness now!

Excellent post on the economy and saving it (or not) by Edward Harrison at Credit Writedowns. (My yellow highlighting) – Ilene

Stop the madness now!

mad as hellThis is a post I just wrote over at Yves Smith’s site Naked Capitalism in response to a reader request. Marshall Auerback has already written a reply as well and I will post this later today.

A reader at Naked Capitalism asked us to respond to a recent article from the Christian Science Monitor asking Does US need a second stimulus to create jobs?

Marshall Auerback has already done some heavy lifting. He says emphatically yes. Now I want to take a crack at this. My short answer is no. But before I go into this, as an aside, I wanted to mention Marshall’s new smiling, happy picture up at the great blog New Deal 2.0 where he now writes.  Earlier, when Credit Writedowns was hosted at Blogger, he used a picture best described as a mug shot in his profile, but he has changed that one too (although he smiles there a little less). He thinks we haven’t noticed this sleight of hand.  Well I have! Once upon a time, Marshall wrote with a man I called all bearish, all the time this summer. Take a look at that post; you don’t see him smiling now do you? We have Lynn Parramore, New Deal 2.0’s editor to thank for making Marshall Auerback into an optimist.

Different policy choices

But all teasing aside, I do want to take the opposite side of this trade.  You see I too was a deficit hawk. And while I may have been backing fiscal stimulus, I have felt conflicted for doing so. Here’s how I see it. 

You have four options:

  1. No stimulus. Let the chips fall where they may. Yves Smith calls this the ‘Mellonite liquidationist mode.’ The thinking here is that trying to avoid the inevitable bust only makes it that much larger. And the economic policies during recessions in 1991 and 2001 seem to bear that out. The Harding Recession of 1921 is commonly seen as gold standard response.
  2. Monetary stimulus only. Quantitative easing mania. My understanding is this is what Ambrose Evans-Pritchard has been advocating.   The thinking here is that the flood of money and the


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Sympathy for the Treasury

Wondering what happened at the bloggers-Treasury officials’ get-together?  Here’s Steve Randy Waldman’s account of the meeting. – Ilene

Sympathy for the Treasury

us treasury buildingCourtesy of Steve Randy Waldman of Interfluidity

On Monday, I was among a group of eight bloggers who attended a discussion with "senior Treasury officials" in Washington. Several nice accounts of that meeting have already been posted (see roundup below). Here’s mine.

First, I’d like to thank the "senior Treasury officials" for taking the time to meet with us, and for being very gracious hosts. Whatever disagreements one might have, in statistical if not moral terms it was an extreme privilege to sit across a conference table and have a chance to speak with these people. And despite the limitations of the event, I’d rather there be more of this kind of thing than less. So a sincere tip o’the hat to all of our hosts. Thank you for having us.

The second thing I’d like to discuss is corruption. Not, I hasten to add, the corruption of senior Treasury officials, but my own. As a slime mold with a cable modem, it was very flattering to be invited to a meeting at the US Treasury. A tour guide came through with two visitors before the meeting began, and chattily announced that the table I was sitting at had belonged to FDR. It very clearly was not the purpose of the meeting for policymakers to pick our brains. The e-mail invitation we received came from the Treasury’s department of Public Affairs. Treasury’s goal in meeting with us was to inform the public discussion of their past and continuing policies. (Note that I use the word "inform" in the sense outlined in a previous post. It is not about true or false, but about shaping behavior.)

Nevertheless, vanity outshines reason, and I could not help but hope that someone in the bowels of power had read my effluent and decided I should be part of the brain trust. The mere invitation made me more favorably disposed to policymakers. Further, sitting across a table transforms a television talking head into a human being, and cordial conversation with a human being creates a relationship. Most corrupt acts don’t take the form of clearly immoral choices. People fight those. Corruption thrives where there is a tension between institutional and interpersonal ethics. There is "the…
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Phil's Favorites

What's unconscious bias training, and does it work?

 

What's unconscious bias training, and does it work?

Courtesy of Calvin K. Lai, Washington University in St Louis

A Starbucks manager in Philadelphia called the police on two black men on April 13, leading to their arrest. The two men, who had been waiting for a friend at the store, were released without being charged.

Starbucks has since apologized and announced it will close more than 8,000 of its stores in the United States to provide “racial bias” training for its 175,000 ...



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Zero Hedge

Apple Slides After Taiwan Semi Blames "Very High-End Smartphone" For Unexpectedly Poor Guidance

Courtesy of Zero Hedge

In the latest confirmation that earnings from Apple are set to disappoint, perhaps bigly, overnight, the world's largest semiconductor producer, Taiwan Semiconductor, reported disappointing guidance, with management blaming a "very high-end smartphone" prompting renewed questions about the collapse in global iPhone demand.

The market wasted no time to price in the ongoing decline in demand for $1000+ iPhones and Taiwan Semi ADRs fell more than 5% in pre-market trading while Apple, Nvidia and AMD are all down ~2% in sympathy; this followed weakness in European chip stocks like AMS -3.7%, STMicro -2.2%, and Dialog Semi -1.9%.

...



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Insider Scoop

30 Stocks Moving In Thursday's Mid-Day Session

Courtesy of Benzinga.

Gainers
  • AGM Group Holdings Inc. (NASDAQ: AGMH) shares jumped 27 percent to $7.9992 after rising 26 percent on Wednesday.
  • OpGen, Inc. (NASDAQ: OPGN) shares climbed 23.4 percent to $2.58. OpGen completed rapid testing clinical trial in Colombia and expanded international operations.
  • PLx Pharma Inc. (NASDAQ: PLXP) gained 15.6 percent to $4.449.
  • Monaker Group, Inc. (NASDAQ: ...


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Chart School

Short Opportunity Negated

Courtesy of Declan

Well, that didn't last long.

The shorting opportunities which offered themselves yesterday didn't last the morning; morning gaps held beyond the first half-hour of trading and bar a small sell-off into the close markets finished higher and above key moving averages and trading channels.

The Dow created a breakout which now offers a potential long play. Stops go on a loss of 24,600. Technicals finished with a new long 'buy' trigger in Stochastics.
 


The S&P finished above the 3-week ...



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Digital Currencies

Only 0.04% Of Taxpayers Are Reporting Any Bitcoin Gains To The IRS

Courtesy of Zero Hedge

With the US tax deadline just one day away, crypto investors who traded actively during the market's run-up and inevitable meltdown should have a lot of activity to report to the IRS.

But according to a survey conducted by Credit Karma, only a handful of people who have filed their taxes using Credit Karma's tools have reported bitcoin holdings or holdings of some other cryptocurrency - fewer than 100 out of a total of 250,000 filers, or a whopping 0.04% in total.

In all likelihood, this means that (tens of) thousands of bitcoin traders are refusing to pay the IRS, either betting on the anonymity of the blockchain to conceal th...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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Biotech

How your brain is wired to just say 'yes' to opioids

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

How your brain is wired to just say ‘yes’ to opioids

A Philadelphia man, who struggles with opioid addiction, in 2017. AP Photo/Matt Rourke

Courtesy of Paul R. Sanberg, University of South Florida and Samantha Portis, University of South Florida

...

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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...



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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

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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All About Trends

Mid-Day Update

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

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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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