get set..
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"Fine Tuning" Mark To Market: The Two Cows Version
http://www.businessinsider.com/fine-tuning-mark-to-market-the-two-cows-version-2009-4
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?/
Good article & simple read on the 3 legs of leverage that got us into our mess
Net Capital Rule relief
Glass-Steagall Act of 1933 repealed
Deregulation of derivative securities
"In the hour of our country's greatest financial peril we are reaping the product of leverage sown by the irresponsible acts described above. To prevent complete collapse of our financial system Congress must, among other steps, move to rebuild the wall between investment and commercial banking, to regulate derivative securities and to reinstitute net capital requirements for all investment entities."
http://m.startribune.com/topic/1551-Business/articles/190833421
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?
dusting off the quotetracker & trade ideas alert screens
look out!
need some dmso for my stiff trading joints
have been keeping up with scans on telechart partic. the pinch scan
time for some diligent diligence
CREE is crying out to me but i don't know why
VPHM need to revisit. partic. if it cracks 4.65 area
did the FDA decide on generic vancocin? what a haircut.
New Investing Ideas to radar: Roth Capital Conference this week
http://www.businesswire.com/portal/site/bwges-roth-growth-09/?ndmViewId=news_view&newsId=20090130005650&newsLang=en
2008 Pick(s) of the Year contest: Conclusion
Getting out early made Stuffit the winner with his PDS sale
In at 15.58 on 12/28/07 and out on 4/5/08 at 23.93 for an annualized gain of nearly 200%.
Shmoulton picked FRPT at 5.02 and scored the best % gain for a yearlong hold when it closed at 5.98 on Wednesday.
The last congrats for a positive pick go to our hostess, Ico, who chose the gold trust GLD at 83 on 12/28/07. It closed at 86.52 at yearend.
Noone else had a positive pick.
35 of the 52 symbols lost over 1/2 their value during 2008.
The obvious lesson from the past year was to be nimble, humble, and NOT subscribe to buy & hold.
Hope everyone has a terrific 2009.
greetings from the sidelines
early Dec closes a higher low?
now trying for a higher high?
here's a view, worth your time imo, regarding the velocity of money in the economy:
http://www.frontlinethoughts.com/pdf/mwo120508.pdf
You have permission to publish this article electronically or in print as long as the following is included:
John Mauldin, Best-Selling author and recognized financial expert, is also editor of the free Thoughts From the Frontline that goes to over 1 million readers each week. For more information on John or his FREE weekly economic letter go to: http://www.frontlinethoughts.com/learnmore
To subscribe to John Mauldin's E-Letter please click here:
http://www.frontlinethoughts.com/subscribe.asp
John Mauldin is also president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of John Mauldin. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions. Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staff at Thoughts from the Frontline may or may not have investments in any funds cited above. Mauldin can be reached at 800-829-7273.
OT heh heh
OT: the McCain-Drudge-FOX axis of weasel
thx for that link.
great!
so much slime
soon to end
OT how low can you go? Palin regurgitation of rightwing bloggers' on "bankrupting the coal industry"
the Repubnithug Party now harping on months-old comments from Obama re. the need to reduce carbon emissions from coal fired power plants via clean coal technology in hopes of turning Ohio and Pennsylvania.
http://www.sfgate.com/cgi-bin/blogs/sfgate/logout?blogid=5&entry_id=23636
i wish i'd coined "repubnithug"
haven't done any research on "clean coal" technology, the cap and trade proposals that both candidates support, carbon tax credits, sequestration, etc. but I've heard that tremendous volumes of water are required. How do we reduce greenhouse gas emissions when coal is such an easy, but high polluting, energy source?
http://cleantechnica.com/2008/10/09/5-dirty-aspects-of-clean-coal/
I will be so glad when the pre-election posturing and pandering ends and we can get about the business of saving the planet's future, and reversing the pressure on future generations to pay for our current mess.
financial world in graphs:
http://patrick.net/housing/crash.html
see Monday Oct 27
excellent graphs from Merril Lynch
http://patrick.net/housing/contrib/frugal.pdf
weekend perusal material Bill Gross from PIMCO: Investment Outlook
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+Gross+November+2008+So+CQish.htm
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
DXO could be a real winner if you are patient
More scary sh*t: CDS covering MBS are a drop in the derivatives bucket
Coming Soon: The 600 Trillion Derivatives Emergency Meeting
October 13, 2008
http://seekingalpha.com/article/99674-coming-soon-the-600-trillion-derivatives-emergency-meeting?source=article_sb_popular
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
Bullish signals from a bear
read the October 10 12:30pm entry
10 Bullish Charts, Signals, Indicators
http://bigpicture.typepad.com/comments/markets/index.html
it got into street.com posts this week
here is the source blog
The Group of Seven finance ministers and central governors released on Friday the following plan of action to address financial disruptions.
The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to:
1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.
The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the IMF's critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan.
http://www.marketwatch.com/news/story/text-g7-plan-action/story.aspx?guid={AA17FACB-A411-4971-91FD-C9811C0534DC}&dist=hplatest
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
drys
read somewhere that the value of their ships is worth more than the market cap here
didn't verify that for myself
Roubini... i hope and pray he is wrong!
"Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:
- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;
- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;
- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;
- massive and unlimited provision of liquidity to solvent financial institutions;
- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;
- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;
- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances.
At this point anything short of these radical and coordinated actions may lead to a market crash, a global systemic financial meltdown and to a global depression. At this stage central banks that are usually supposed to be the "lenders of last resort" need to become the "lenders of first and only resort" as, under conditions of panic and total loss of confidence, no one in the private sector is lending to anyone else since counterparty risk is extreme. And fiscal authorities that usually are spenders and insurers of last resort need to temporarily become the spenders and insurers of first resort. The fiscal costs of these actions will be large but the economic and fiscal costs of inaction would be of a much larger and severe magnitude. Thus, the time to act is now as all the policy officials of the world are meeting this weekend in Washington at the IMF and World Bank annual meetings."
http://www.rgemonitor.com/roubini-monitor/253973/the_world_is_at_severe_risk_of_a_global_systemic_financial_meltdown_and_a_severe_global_depression
D day is Friday
according to various news releases
i think the markets have basically priced in the worst possible outcome
that those danged financial WMDs are going to blow up the financial bastions of institutions around the globe
however, the spectre of an insolvent Iceland, and other turmoil could send us down more
Asian markets were in free fall in their Friday sessions.
maybe i didn't atone enough?
http://blogs.wsj.com/marketbeat/2008/10/09/the-looming-lehman-cds-unwind/
note the first reply on that blog:
"Interesting that the fed is so concerned. How much of the $400 billion is a “true hedge” and how much represents the equivalent of Las Vegas gambling? It’s a sad commentary on our financial system and government that the Fed has to get involved to help settle “gambling debts”."
did anyone see that the CDSs for fannie & freddie were priced?
http://www.efinancialnews.com/homepage/content/2452085102
October 10, 2008
Banks still too delicate to start lending again
"Some were particularly nervous before today’s auction of Lehman credit default swaps. Until the auction is completed the banks do not know how much they would have to pay out or receive on the contracts after the collapse of the Wall Street bank.
The implosion of the Icelandic banking system has not helped matters, either.
Yesterday Landsbanki, one of the three banks to be nationalised by the Icelandic Government, launched a fire sale of about €600 million of loans that funded private equity buyouts.
UK banks hold loans for some of the same buyouts and may have to write down the value of those loans to the price that Kaupthing receives. "
http://business.timesonline.co.uk/tol/business/columnists/article4917039.ece
what i think is that until some of the derivatives get a pricing
noone really knows how exposed they are. and that's part of the reason why everyone is hoarding all of the cash they can.
I still believe that noone who does not also own CMOs and other mortgage-backed securities has any business speculating in default swaps.
most of these holders have probably already made millions and millions... let them end up as bagholders when they make bets on things they have no intrinsic interest in.
on a lighter note...........
someone sent me some new definitions:
NEW STOCK MARKET TERMS
CEO -- Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the
wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING -- The art of buying low and selling lower.
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO -- What you yell after selling it to some poor sucker for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.
PROFIT -- An archaic word no longer in use.
a "must read". was today a "D" day?
What The Media *Didn't* Cover
So yesterday the "news" was all about the long end of the Treasury curve rocketing higher (yield), which many people believe is about "risk acceptance" and The Fed (along with other central banks) cutting rates by 50 basis points.
Uh huh.
Let's talk about what's really going on.
First, our rates. The EFF (Effective Fed Funds) rate has been trading at 1.5% now for a couple of weeks. Two percent schmoo percent; a target rate only in name is no target at all. In reality the 50 bips cut, even though it resulted in an instantaneous 40 handle rocket shot in the /ES futures Wednesday morning, was entirely a CONfidence game (with the emphasis on "Con"!)
The RTS (Russian Market) is down 87% YTD, and is closed until further notice. The Nikkei is trading below the DOW - that's not good. Indonesia's stock market was shuttered Wednesday and remains closed after tripping "lock limits" within 90 minutes of the opening bell. As of Thursday morning the RTS was closed again after Putin allegedly strong-armed a whole bunch of Russian wealthy to "stick it in" (to the stock market); this sort of v-fib in a market does horrifyingly bad things to ordinary investors who find themselves out just before the market rockets higher without underlying economic cause.
Iceland has essentially melted down. Their currency went straight into the toilet and two of the three largest banks were nationalized - all in the space of 24 hours. The culprit? Bad loans. Where have we seen this movie before?
Mexico's peso has fallen some 40% in days against the dollar. Great if you're traveling there as an American. Sucks severely if you're a Mexican. That alleged fence on our southern border is going to need reinforcements.
Wednesday morning Britain and the EU zone all announced major bank rescue operations. Same deal - "throw money at it, paper it over."
Nowhere a mention of forcing balance sheet transparency and truth.
Except in one place - here in the US! Plans to standardize CDS contracts and force them onto an exchange are actually under way. This is a major positive move and fulfills one of the three prongs of my view of how to solve this problem, once implemented. We'll see how much pushback we get, and whether OTC derivatives are actually banned (as they should be), or whether the big trading houses and banks insist on being able to play "pick pocket" along side the "regulated" world.
The NY Fed announced plans to extend a further $39.6 billion credit line to AIG. The tab is now almost $120 billion dollars. Where did the other $80 billion go? Has it been vaporized trying to raise capital to pay down CDS contracts that have gone the wrong way on them?
Speaking of which, Thursday is D-Day - D standing for either "derivative" or, if things go sideways on people, "detonation."
See, this is the day that Lehman's CDS contracts are supposed to be resolved. Since Lehman's bonds are trading at ~20-30% recovery (horrible, on balance) the writers may have to fork up 60 to 70 cents on the dollar.
The $64,000 question is how many of those contracts net out. The real liability is what's left once everything is "balanced" (a long and short held by the same guy net to zero, assuming that both contracts are "money good", leaving the holder with no liability - and no asset)
This has the potential to be a big "nothingburger", a minor tremor, or a 250' high tsunami that washes over Lower Manhattan (and the City) tomorrow. There's no good way to know in advance which outcome will manifest, since nobody (at present) knows what the true netted-out open interest is. This is one of the problems with not having a public exchange; lack of knowledge.
The bright light of reality will shine tomorrow......
The architects of this, by the way, are the folks who took the cuffs off the banks, going back to the Gramm-Leach-Bailey law and the repeal, piece-by-piece prior but finished by GLBA, of Glass-Steagall. GLBA, by the way, was passed in 1999 - just as the Internet bubble was in full force. Coincidence? No. The root cause of this mess? Right there. Thank Congress, and make sure you include those members who have been around for the entire thing, including John McCain.
On the equity market side shorting is once again available, the order having expired. The lack of shorts was a definite factor in the stiff selloff that we've seen, and Chris Cox owes investors in America an apology - on the air. This was an objectively stupid decision, as shorts provide necessary liquidity during serious downturns. Without them you get "no bid" circumstances, and they sporadically appeared during the last few days in financials, which certainly exacerbated the selloff.
In the bond markets Treasury refunded some "off the run" bonds and got an ugly surprise - the market didn't want them. They had to pay a 40 bips "tail" to get them to go, which may be the start of a really troublesome trend. See, Treasury is now throwing over $100 billion a week into the market, and this only works on days when the market is crashing. THEN you can get people to suck up all you puke out, but the rest of the time you're going to have to pay up, and Treasury has had to do so - dearly.
This may be the start of the "bond market dislocation" that I have long feared. I hope and pray not, but if this trend continues Treasury is going to find that it cannot sell its debt into the market without slamming rates higher, especially on the long end of the curve, which means an instantaneous implosion of what's left in the housing market.
The ugly is that 3-month LIBOR widened today, as did the TED Spread. Both should have come in. They did not. LIBOR is essentially unsecured lending and the bad news is that a lot of corporate (and some personal) borrowing is indexed off it. If you are, you're screwed.
Why has LIBOR refused to come in despite these "coordinated" effort? Its simple: the underlying trust issue has not been addressed, and nobody is seriously proposing to do so.
Paulson and Bernanke now are truly caught in the box, as I have been talking about for more than a year. As they introduce and fund these silly programs like the "TARP" each new program produces more foreclosures by depressing home values and thus tightens the spiral.
See, as long rates go up house prices go down, since the value of a home for most people is Dependant on what they can finance, and that is directly related to interest rates. Get out your HP12C and run the principal value change for a fixed payment if interest rates change from 6% to 8% or 10% - that's the impact on the value of your house from these changes that are occurring in the Treasury marketplace.
This outcome is what I warned of in "Our Mortgage Mess" back in April of this year; a potential ramping of borrowing costs for government debt, which will not only make sustaining government spending (and perhaps government operation) impossible, but in addition destroy private credit by driving costs in the private sector skyward as well.
Simply put, the "TARP" or "EESA" must be repealed here and now.
It is unacceptable to risk Treasury Funding destruction in order to bail out some bankers. And make no mistake - there is and will be no benefit to taxpayers.
We are also now entering into earnings season, and Alcoa was a warning blast. They missed badly. That won't be the last.
This is the "value trap" problem that many investors fall into. You see the market down 30% and think its a great buying opportunity.
It is a great buying opportunity only if earnings going forward can be sustained. But in this case, they cannot. It is flatly impossible; with Treasury borrowing money like a madman, tacking on more than 20% to the national debt in the space of months, carrying costs will inevitably rise as will taxes. Both of these have a multiplier effect (in the wrong direction) on corporate profits, and in addition the "faux profits" from financial engineering have all disappeared at the same time.
The S&P 500's profit, in terms of gross dollars, are almost certainly going to come in by 50% from the highs, and that assumes we get a garden-variety recession and not something worse. This of course puts "Fair Value" on the SPX down around 750, or another 25% down from here.
The ugly stick potential is what I discussed yesterday, and that risk is very real. Treasury borrowing cost ramps can produce a 1930s-style dislocation in credit, and if it happens then you will see mass bankruptcies not only in corporate America but among individuals as well as borrowing costs ramp to the point of shutting down the marketplace for credit.
Treasury and Bernanke claimed that "credit markets seized"; this is only half-true. Credit markets always close to those who are lying, because there is no reason to loan someone money if you're not reasonably sure you will get paid back.
But there is a second form of seizure and this is the frying pan into which we've now jumped - that is a credit market that prices beyond what the market can bear at its imputed rate of return. In that market credit is available but it does not matter, as you can't make enough profit to generate a positive carry on the borrowed money, and consumers in that environment fall into a vortex of interest payments that spiral faster than they can borrow to stay ahead of them.
That rabbit hole is how we got the 1930s, and it is the danger we now face. Congress was in fact conned by Treasury, George W. Bush and the banking industry (including Ben Bernanke), who instead of forcing the malefactors into the open and exposing those who were bankrupt (or just plain corrupt - notice the common stem on both words?) threw them a line - unfortunately, the line is cleated to the entire economy of the United States, and they have enough negative buoyancy to drag us all under the waves.
http://market-ticker.denninger.net/
http://www.drinksamericas.com/files/MAXIM_GROWTH_PRESENTATION%20[Compatibility%20Mode].pdf
would have preferred to hear about a continuing concerted effort to bring the DKAM growth trajectory story to institutional investors. i agree that hiring an IR firm to raise retail investor awareness is largely a waste of resources.
presenting at Maxim conference a start.
was unclear re. the statement re. warrant conversion at .50. There's obviously no financial reason to convert until the share price exceeds that area.
is it, in fact, the case that DKAM will not need a $ raise to effect it's business plan?
does anyone know what DKAM "gave away" viz a viz margins to secure the Israeli distribution agreement? can't imagine that their Israeli distributor would do a deal like this without a nice discount on case pricing?
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
new scan
stocks up 40% or more in last 26wks
at least 200K vol/day avg /wek
>$5/shr and <70
Beta no less than 0.5 except QCOR
AVAV CNC COCO DMND ENER JOSB
MDVN MTZ NPSP OCR PGNX QCOR
ROCK SF SYNA THOR TSYS USMO XRM
only DMND QCOR SF and CNC have positive ema8s currently
can't hurt to look at the high relative strength stocks for thoughtful food for future
graph of derivative settlement
what do the x and y-axis represent?
PHO on hodrunner list today
never seen the water resource portfolio as a mover
http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=150699
http://www.invescopowershares.com/products/holdings.aspx?ticker=PHO
PBW and PHO look like good nibbles for the future
not sure re. it as a trade
there is another, more concentrated but slightly less liquid etf, the Claymore S&P Global Water Index
http://www.claymoresecurities.com/etf/
http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=174478
http://seekingalpha.com/article/93573-etf-pick-of-the-week-claymore-s-p-global-water
this fund is much more globally oriented with 60% of it's assets based in foreign companies
MOO potential if selling in the MOS AGR POT etc. is overdone
Tickers non-correlated to equities... worth a repeat
http://seekingalpha.com/article/30369-commodity-etfs-and-etns
Broad Based Commodity ETFs and ETNs
GreenHaven Continuous Commodity Index (GCC)
GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index ETN (GSC)
iShares GSCI Commodity-Indexed Trust ETF (GSG)
iPath Dow Jones-AIG Commodity Index Total Return ETN (DJP)
iPath S&P GSCI Total Return Index ETN (GSP)
PowerShares DB Commodity Index Tracking Fund ETF (DBC)
Agricultural Commodities ETFs
ELEMENTS Linked to the MLCX Biofuels Index ETF (FUE)
ELEMENTS Linked to the MLCX Grains Index ETF (GRU)
http://seekingalpha.com/article/63987-two-new-renewable-energy-etns-hit-market
ELEMENTS Linked to the Rogers International Commodity Index – Agriculture ETN (RJA)
iPath Dow Jones AIG-Agriculture ETN (JJA)
iPath Dow Jones AIG-Grains ETN (JJG)
iPath Dow Jones-AIG Livestock Total Return Sub-Index ETN (COW)
PowerShares DB Agriculture Fund ETF (DBA)
Gold, Silver and Metals ETFs
iPath DJ-AIG Industrial Metals Total Return Sub-Index (JJM)
iPath DJ-AIG Nickel Total Return Sub-Index (JJN)
iShares COMEX Gold Trust ETF (IAU)
iShares Silver Trust ETF (SLV)
PowerShares DB Gold Fund ETF (DGL)
streetTRACKS Gold Shares ETF (GLD)
PowerShares DB Silver Fund ETF (DBS)
PowerShares DB Precious Metals Fund ETF (DBP)
PowerShares DB Base Metals Fund ETF (DBB)
Oil and Gas ETFs and ETNs
Claymore MACROshares Oil Up Tradeable ETF (UCR)
iPath DJ-AIG Energy Total Return Sub-Index (JJE)
iPath DJ-AIG Natural Gas Total Return Sub-Index (GAZ)
iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)
PowerShares DB Energy Fund ETF (DBE)
PowerShares DB Oil Fund ETF (DBO)
United States Oil Fund, LP ETF (USO)
United States 12 Month Oil Fund, LP ETF (USL)
United States Natural Gas Fund, LP ETF (UNG)
Commodities-Related ETFs
Van Eck Market Vectors Agribusiness ETF (MOO)
Van Eck Market Vectors Coal ETF (KOL)
Van Eck Market Vectors Gold Miners ETF (GDX)
re Menu Boards
makes perfect sense that this step would be accompanied by digital menu signage
but I did some googling without ever finding a hint of a mention that this implementation of caloric content was going to occur electronically.
i'm hoping....
investor.relations@sunh.com
Dear Sirs,
I am interested in increasing my investment in SUNH.
Your release today indicated an earnings upside due to discontinued operations. You also stated:
"Sun has been experiencing favorable interest rates related to the variable portion of its bank term loans throughout 2008. Sun expects that its total interest costs for 2008 will be approximately $3.6 million less than originally projected, and has increased its pre-tax earnings guidance to reflect the favorable interest expense. Currently, approximately $200 million of the bank term loans are subject to LIBOR resets. Of that amount, approximately $150 million will be reset at the end of November 2008."
But the current credit crisis and loss of liquidity in financial networks is paralzying the system: "The London interbank offered rate, or Libor, that banks charge each other for such loans climbed 6 basis points to 4.21 percent today, the highest since Jan. 11, the British Bankers' Association said. The corresponding rate for euros advanced 3 basis points to a record 5.32 percent. The Libor-OIS spread, a gauge of cash scarcity among banks, widened to a record."
http://www.bloomberg.com/apps/news?pid=20601085&refer=europe&sid=aM2CD9k.CgyM
Can you still claim a $3.6 million dollar saving from interest rate expense if you are resetting $150 million in 2 months? Or should I presume that your Q4 earnings will be favorably impacted, but the reset will lead to increased interest expenses reported in Q1'09 and subsequently negative consequences?
Thank you for your attention to my question, and Congratulations on being one of the very few companies to shine today in an incredibly difficult market.
my index finger on the tip of my nose
sigh
SDTH more searching
Doublestar is located in Shandong province, but they are already a customer:
The use of NPCC provides a 10-20%
overall improvement in performance measured by increased
traction wave resistance, tear resistance, break elongation,
tensile strength and aging resistance. In addition to producing a
better functioning tire, the use of NPCC reduces the cost of
manufacturing tires by about 3%. ShengdaTech’s main
customers in tire industry include the top tire manufacturers,
such as Triangle (#1 in China, and #12 in the world), Double Star
Tire, and Zhaoyuan Liao. These manufacturers are also located
in the same province as ShengdaTech, Shandong Province.
http://www.shengdatechinc.com/files/6_12_07_ShengdaTech_profile%20FINAL.pdf
Do you have the marketing personnel and relationships to begin the “design in” selling process with international tire OEMs such as Michelin?
A: As a high-tech new functional material, NPCC can enhance the tires resistance to wear and elongation that the other fillers can not replace. The tire manufacturers usually have their own steady formulas which have been used for many years making manufacturers cautious to include any new material. However, the world’s second-tier tire manufacturers have shown interested in NPCC influenced by Chinese domestic tire manufacturers who use NPCC. We plan to approach these international companies in the future. Our plan is to win 1-2 international brands in the following 6-12 months.
17. What is the value proposition to the tire manufacturer in terms of a unit of output? If NPCC is a partial substitute for carbon black, then what is the incremental savings to a tire manufacturer?
A: As the different formulas we provide to our customers, the improvement to performance of tire is different accordingly. In general, the use of NPCC provides a 10-20% overall improvement in performance. We take the formulas provided to by one of our customers -.
Modulus (300% MPA) increase up to 13%
Tear resistance increase up to 50%
Break elongation increase up to 20%
Abrasion loss decrease up to 20%
Tensile strength increase up to 18%
In the formulas of tire, each filler has its own advantage. However, comparing with these fillers, NPCC has its unique functional improvement to its application. Simultaneously, we estimate NPCC can save the tire manufacturer about 3% cost if NPCC is substitute for 10 par carbon black.
http://google.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFilingHtmlSection1?SectionID=5802055-57971-73279&SessionID=rEJiWeQJI-jtWp2