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mcmike
get set..
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get set..
CLWT
800% vol
up 18%
no sign of news
shaking off the rust: High Vol Leveraged etfs
3x (triple leverage) with avg daily vol > 1mil shares
FAS
FAZ
BGU
TNA
BGZ
TZA
ERX
trading vehicles for the nimble... where's my DMSO for those aching joints?/
ah the pinch play
2 shippers with the lowest debt to equity ratios: FRO OSG
best to wait for pullback i think
the short term stochastic i use is nearly overbought
all this $ flooding in from the fed.... i think you gotta have some gold or silver....
any suggestions?
OT heh heh
reading patterns... stepping aside...
this is a form of broccoli called romanesco
TRADING: "More Signal...less Noise"
LIVING: "One World, One Family, Warm Heart" Dalai Lama
more must reads re. CDS: credit derivatives
Cramer's depiction re. the settlement of Lehman's CDS next week (Oct. 21) was priceless. He likened it to a group of greedy neighbors who all bought fire insurance on the Lehman house and then conspired to burn it down. And the insurance payout will be double the value of the house to all of those who now hold the UOMe bets if it collapses...
Day of Reckoning
On Thursday's "Sell Block" segment, Cramer sentenced AIG (AIG Quote - Cramer on AIG - Stock Picks) to a life sentence without parole. He said Oct. 21 will be a day of reckoning for the once great insurance company.
On that date, Cramer noted that the companies who wrote insurance policies against the debt of the now defunct Lehman Brothers, will be forced to pay up. He said that thanks to failed regulation by the Securities and Exchange Commission, the $158 billion worth of Lehman debt was allowed to be insured for $365 billion.
Cramer said he believes that AIG, which was given a gracious bailout by the federal government, is likely to be on the hook for most of this egregious amount. He said it's outrageous that the company's management could have allowed it to take on such an incredible amount of debt.
http://www.thestreet.com/story/10442796/2/cramers-mad-money-recap-outfoxing-the-hedge-fund-sellers.html
How can we let this continue? Why should parties who have no interest in someone else's debt be allowed to speculate on whether or not that debt will go into default? Why can't these CDSs be directly tied to the actual size of the debts being insured? In no case can the payout exceed the actual size of the debts? Sort of like a closed end fund with a limited set of shares (debt size) It can trade at a premium or discount to the the value while it trades, but can't pay out more than the debt size insured in case of default. I'm not smart enough to understand this mess. Why should you & I have to watch our government cut checks to the holders of Lehman's CDS for more $ than Lehman actually owed?
And to let hyenas circle a weak member of the herd, bid up the CDS, buy puts, short the shares of the common, spread rumors and drive the target to destruction is criminal imo.
here's more on these WMDs
Oct 15 (Reuters) - Regulators have stepped up calls since the collapse of Lehman Brothers last month for more supervision of the $55 trillion credit derivatives market to improve its safety and transparency.
Below are facts about the market to date.
HOW THEY WORK: Credit default swaps (CDS) are over-the-counter contracts between two counterparties that bet on whether a company will default on its bonds within a fixed period of time.
In its simplest form, one side of a CDS contract pays an annual fee to buy protection against default. The other side, the seller of protection, promises to cover losses in the value of the debt if a default takes place within the period of the contract.
When the market began trading, if a default or other agreed "credit event" such as change of control occurred, the buyer of protection would hand the bond over to the seller in return for its face value. Cash settlement is now a more common market option (see below).
Investors use CDS to hedge against cash investments or to speculate on the direction of the credit markets.
MARKET SIZE
end-2001: $918 billion
end-2002: $2.2 trillion
end-2003: $3.8 trillion
end-2004: $8.4 trillion
end-2005: $17.1 trillion
end-2006: $34.4 trillion
end-2007: $62.3 trillion
mid-2008: $54.6 trillion
Amount of outstanding contracts, according to the International Swaps and Derivatives Association (ISDA).
MARKET HISTORY
In the early 1990s dealers began to develop an organized market from ad hoc attempts by banks to hedge credit risks on their books.
In 1997, 1999 and 2003, ISDA issued agreements and definitions that helped standardize CDS contracts.
In 2004, indexes created by different investment banks merged to create the CDX series of indexes in North America and the iTraxx indexes in Europe, with Markit as the sole data administrator.
In spring 2005, the first auction was organized after a default to come up with a price for cash settlement of contracts, instead of requiring that the protection buyer deliver a physical bond.
In September 2005, the New York Federal Reserve Bank called 14 major dealers to a meeting on market operations after backlogs between trade and settlement became as long as 90 days.
This led to the creation of a central depository and an agreed protocol under which investors and dealers must request the approval of a counterparty to transfer the risk to a third party, known as novation. This enabled dealers to better determine risk exposures by netting out offsetting trades.
At end-July 2008 in a letter to the New York Fed, CDS dealers and industry organisations agreed on a set of goals to make market operations more efficient, including creation of a central clearing house.
In September 2008, Lehman Brothers (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) was the first major dealer to file for bankruptcy, triggering billions of dollars of losses by its counterparties and by sellers of protection on its debt.
CASH SETTLEMENT: Auctions for cash settlement of contracts have become standard practice, used to resolve around 13 credit events so far, according to the ISDA Web site. This has allowed the outstanding amounts of CDS contracts to expand to multiples of the number of outstanding cash bonds for the names that are most active.
The latest auctions in October covered the debts of Lehman Brothers and Fannie Mae and Freddie Mac.
CASH SETTLEMENT AUCTIONS - FORTHCOMING DATES:
Oct. 23: Washington Mutual (WAMUQ.PK: Quote, Profile, Research, Stock Buzz)
Nov. 4: Landsbanki (LAIS.IC: Quote, Profile, Research, Stock Buzz)
Nov. 5: Glitnir (GLB.IC: Quote, Profile, Research, Stock Buzz)
Nov. 6: Kaupthing (KAUP.IC: Quote, Profile, Research, Stock Buzz)
TARGETS AGREED WITH NY FED FOR END-2008:
* Creation of a central clearing house, which will start by clearing U.S. indexes and extend to other CDS contracts in 2009.
The Clearing Corporation, owned by a group of major dealers, is vying with The Chicago Mercantile Exchange (CME.O: Quote, Profile, Research, Stock Buzz), NYSE Euronext's (NYX.PA: Quote, Profile, Research, Stock Buzz) Liffe unit, the IntercontinentalExchange (ICE.N: Quote, Profile, Research, Stock Buzz) and others that plan to offer this service.
* All novations processed electronically on the same day.
* Trades unconfirmed over 30 days not to exceed one business day of trading volume.
* A plan that sets timeframes for achieving confirmation of electronically eligible trades on the trade date.
BACKLOGS: Business days worth of oustanding confirmations aged over 30 days -- a measure of efficiency of trade processing
June 2008: less than 1
March 2008: 1.3
December 2007: 2.5
September 2007: 3.5
June 2007: 2
December 2006: 3.5
February 2006: 7.5
Rough estimates based on line graph published by Markit.
BENCHMARKS: The most liquid instruments in the market are CDS on benchmark indexes that reference the five-year debt of portfolios of companies.
Markit iTraxx Europe -- based on 125 European investment-grade companies
Markit iTraxx Crossover -- based on 50 European companies mostly junk-rated with stable outlook
Markit CDX IG -- based on 125 investment-grade North American companies
Markit CDX HY -- based on 100 North American companies that do not rank as investment grade
UNDERLYING COMPANIES: About 3,400 corporate names, although that includes some duplication of senior and subordinated debt of the same companies, according to Markit.
NETTING: Average number of pre-netted and post-netted settlements per dealer per month
June 2008: pre 300,000, post 25,000
December 2007: pre 240,000, post 25,000
June 2007: pre 175,000, post 30,000
December 2006: pre 140,000, post 15,000
December 2005: pre 80,000, post 35,000
Rough estimates based on line graph published by Markit.
DEALERS INCLUDE: Bank of America, Barclays Capital, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Dresdner Kleinwort, Goldman Sachs, HSBC Group, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Royal Bank of Scotland, Societe Generale, UBS AB, Wachovia. (Signatories of July letter to New York Fed.) (Reporting by Jane Baird in London; Editing by Greg Mahlich)
http://www.reuters.com/article/euIpoNews/idUSLE19313020081015?sp=true
The Fed's move to backstop the banks just might prevent the destruction that almost took down the entire financial system a month ago that led to all of the brouhaha that brought Paulson to Congress:
The Feds Are Learning
http://www.thestreet.com/story/10442516/1/the-feds-are-learning.html
more on Lehman: $400 Billion Lehman CDS Unwind?
Thursday, October 09, 2008
http://bigpicture.typepad.com/comments/2008/10/lehman-cds-unwi.html
i've been fond of posting the CDS/derivatives images
the proliferation is scary BUT
how much of these heretofore unregulated derivatives positions are 'counterbalanced', cancelling, to a significant extent, each other out.
movement is afoot to bring some transparency to the CDS market
http://blogs.wsj.com/deals/2008/10/09/financials-got-you-down-cme-pitches-credit-default-swaps-the-safer-way/?mod=googlenews_wsj
i think we could get a big boost when we discover that not all these financial institutions are total greedy idiots that never counterbalanced their counterparty risk situation. Obviously some of the largest investment houses didn't handle their risk management very well. But they were at the center of the most lucrative and risky crappy collateralized obligations. it's pretty gloomy but i think there's cause for hope
lots of links here
http://www.creditwritedowns.com/
still think credit markets will stay largely locked until they are guaranteed a safety net for new loaning
more on credit default swaps + headlines from G7 & G20
http://www.forbes.com/business/2008/10/10/lehman-bonds-banking-biz-wall-cx_lm_1010auction.html
Finance chiefs endorse G7 action plan: IMF panel
http://www.reuters.com/article/newsOne/idUSTRE49A43L20081011
G20 pledges joint action to fight financial crisis
http://www.reuters.com/article/marketsNews/idUSN1130180420081012
talk is not enough
don't they have to guarantee interbank lending?
TRADING: "More Signal...less Noise"
LIVING: "One World, One Family, Warm Heart" Dalai Lama
DRYSHIPS ANNOUNCES STRATEGIC EXPANSION
ADDING 9 CAPESIZE VESSELS AND 2 UDW DRILLSHIPS
CONFERENCE CALL TO BE HELD TODAY AT 9:00 A.M. EDT
October 6th, 2008, ATHENS, GREECE
transactions in shares and not cash and not debt
"When we saw the market mature in 2008 we shifted our chartering strategy to long
term period coverage as a result of which 61% of the vessels in the water are
employed on fixed rate contracts [with favorable pricing now-my note] with an average remaining term of 5 years."
webcast presentation:
http://www.irwebpage.com/dryships/files/drys100608.pdf
http://www.capitallink.com/ppress/ppressfile/23406845/dryships100608.pdf
interview re. the
http://www.irwebpage.com/dryships/files/BPinterviewOctober2008.pdf
i've previously owned NM for a profit and TOPS for a big haircut.
DRYS is looking very attractive to me, but I'm going to do little more dd before i pull the trigger
TRADING: "More Signal...less Noise"
LIVING: "One World, One Family, Warm Heart" Dalai Lama
John Manley sez "seal the pipes"
i don't pretend to understand the nuances, but the counterparty risk still seems to be a major issue keeping people from loaning their money out.
they have to bring some transparency into the unregulated credit default swap market... don't know how they can do it, but if they can coordinate a solution to those credit WMDs, we will have a resounding rally
Dow claws itself back above 10,000
may hold after final settlement
Read this: It's The End Of The World As We Know It
"By now you've heard that BNP Paribas has suspended redemptions on three of its hedge funds, telling investors that problems in the US sub-prime mortgage sector have made it "impossible to value certain assets fairly."
The funds had about 2 billion euros or $2.76 billion of assets. Or, you know, was pretty sure it did. Those assets included something like 700 million euros in securitized debt products rated AA or higher. But now it says that it has no idea what the assets might be worth. And, well, we've all learned that those debt ratings aren't all they're cracked up to be.
To make matters worse, the funds have ridiculous French names like Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. We're thinking of just calling them "Freedom Funds."
"Remember those pictures from the Great Depression? The ones where the banks had to lock their doors because depositors were rioting to withdraw their savings. That's what we've got right now," one particularly morose money manager told DealBreaker.
Another described this morning as a "Rumsfeld moment."
"There are known unknowns and unknown unknowns. And now we're discovering there are a lot more unknown unknowns than anyone thought," the manager said.
The announcement hit the European stock markets hard, and it's putting huge downward pressuring on US equities futures. LIBOR leaped upward. US Treasuries shot up. The European Central Bank has already reacted by injecting Euros into the market and throwing the debt window wide open. The Fed is also throwing out some more money. No doubt central bankers hope that the move will hold off an even broader sell-off. But it may just further obscure asset valuation and create additional capital misallocation.
One factor that hasn't been getting a lot of attention yet is the risk to counterparties. Depending on how much leverage the freedom funds employ, banks that have lent them money may now be facing a "collateral crunch"—a situation where they can't evaluate their own risk because their clients have no idea what their assets are worth. This concern could hit many other hedge funds, as counter-parties attempt to manage their risk by re-evaluating collateral valuations."
http://www.dealbreaker.com/2007/08/its_the_end_of_the_world_as_we.php
Now look at the date!
over a 14mo ago.
It's The End Of The World As We Know It
BNP Paribas Suspends Redemptions And Sets Off Panic
Posted by John Carney, Aug 09, 2007, 9:02am
MOO potential if selling in the MOS AGR POT etc. is overdone
