Hope everyone has a great Thanksgiving.....
Wednesday, November 26, 2008
US hedge fund...or just old Big Goverment
I was reading somewhere (I think Traders Daily) mentioned that the US government is now the biggest Hedgefund...
No 2 and 20 he said...well that's because the US government takes more like 30-40% of our earnings. And if somehow these "investments" in failed US companies work out, do you really think there will be a dividend to the "investors" (read: You and ME).....
No 2 and 20 he said...well that's because the US government takes more like 30-40% of our earnings. And if somehow these "investments" in failed US companies work out, do you really think there will be a dividend to the "investors" (read: You and ME).....
Tuesday, November 25, 2008
The bailout, a different perspective:
Back in 1990, the US Government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it.. They failed and it closed. Now America is trusting the economy of our country to a pack of nit-wits who couldn't make money running a whore house and selling booze?
Forget the headline number (revised down to -0.5% A.R. vs. -0.3% originally reported), look at personal consumption expenditures (more than 70% of the U.S. economy), which collapsed by a downwardly revised 3.7% A.R. (vs. 3.2% originally reported), the fastest decline since Q2 1980 when a 20% Fed funds rate and Jimmy Carter’s credit controls paralyzed the U.S. economy. This time the private capital markets are imposing the force typically created by a 600 bps+ inversion in the Treasury yield curve. GDP in Q4 probably will decline by a 4-5% annualized rate.
Treasury, Federal Reserve to unveil plan to increase the availability of consumer loans, reports say.
LONDON (CNNMoney.com) -- The Treasury Department and Federal Reserve are due to unveil Tuesday a new program aimed at increasing the availability of consumer loans, such as car loans, credit cards and student loans, according to published reports.
Treasury will contribute between $25 billion to $100 billion to the program from its Troubled Asset Relief Program, the Wall Street Journal reported.
Treasury Secretary Paulson is due to announce details of the program at a scheduled briefing with reporters at 10 a.m. ET.
Earlier this month Paulson said the government would broaden the reach of its $700 billion bailout plan to support non-bank financial institutions that provide consumer credit such as credit cards and auto loans.
According to the New York Times, the facility to be announced Tuesday will also be broadened to include business debt.
The financial crisis has frozen lending markets, making it nearly impossible for consumers and businesses to borrow money.
Treasury originally had planned to use the $700 billion bailout to buy troubled mortgage assets. But it has shifted gears and focused mostly on injecting capital into banks.
Treasury agreed Sunday to make a $20 billion injection into financial giant Citigroup. (C, Fortune 500) That came on top of the $25 billion it invested in the company earlier this year.
The injection was part of a broader rescue package under which the U.S. federal government will guarantee losses on more than $300 billion of Citi's troubled assets.
Treasury will contribute between $25 billion to $100 billion to the program from its Troubled Asset Relief Program, the Wall Street Journal reported.
Treasury Secretary Paulson is due to announce details of the program at a scheduled briefing with reporters at 10 a.m. ET.
Earlier this month Paulson said the government would broaden the reach of its $700 billion bailout plan to support non-bank financial institutions that provide consumer credit such as credit cards and auto loans.
According to the New York Times, the facility to be announced Tuesday will also be broadened to include business debt.
The financial crisis has frozen lending markets, making it nearly impossible for consumers and businesses to borrow money.
Treasury originally had planned to use the $700 billion bailout to buy troubled mortgage assets. But it has shifted gears and focused mostly on injecting capital into banks.
Treasury agreed Sunday to make a $20 billion injection into financial giant Citigroup. (C, Fortune 500) That came on top of the $25 billion it invested in the company earlier this year.
The injection was part of a broader rescue package under which the U.S. federal government will guarantee losses on more than $300 billion of Citi's troubled assets.
Monday, November 24, 2008
AN ADD FOR OUR RESEARCH FUSION !!!
THE FOLLOWING IS AN EXAMPLE OF OUR RESEACH...IF YOU WANT MORE INFORMATION PLEASE LET ME KNOW...
2008 has again been another good year for FusionIQ and its research team. Below are some small excerpts from Fusion’s various research publications …
· 10/22/07 Bank Index Review (BKX) - “ Many of the BKX components: C, CMA, COF, FITB, RF and WM have extremely low technical scores in our FusionIQ quantitative ranking with scores of 23, 10, 17, 4, 8 and 11 respectively (out of a possible 100). While there may be an attempt short-term to bounce after Friday’s sell-off the technical structure of the index suggests sellers are in control …. “
· 2/12/08 American Intl. Group Inc. (AIG) – Technical Sell – “ Additionally with a FusionIQ Technical Rank of only 12 (out of a possible 100) forward returns for AIG do not look promising … Analyst sentiment remains overly bullish with 14 BUYS and only 4 Holds ….
· 08/07/08 KBR Inc. (KBR) - Technical Sell – “ The catalyst for the breakdown in KBR Inc. was the sharp fall in second-quarter profits. KBR shares are ranked a low 44 out of a possible 100 in our FusionIQ quantitative ranking system and with over 90% of its float already in institutional hands there is a lot of potential supply out there … Our technically delivered target is $ 15.00 and the objective point and figure target is $ 7.00. KBR was at $ 23.79 at the printing of this report – today it is - $ 9.93.
Note: In all fairness we had some calls that did not work out such as BUYS on WU @ $ 26.00, LZB @ 10, However EVERY recommendation that is published comes with a defined stop loss or drawdown point so even the bad recommendations get wiped out quickly and with minimal damage. Please note the attached pdf has all of our published research calls and the results relative to the market are fantastic. All of these recommendations plus access to our quantitative ranking system (and expanded economic coverage ) http://www.fusioniqrank.com/ Given what the market has gone through this is a small price to pay for solid, unbiased guidance, recommendations and risk management tools.
We also will leave you with this picture. Everyone loved Google (GOOG) as an investment however FusionIQ, with its independent, unbiased ranking ability placed a SELL signal on GOOG @ $ 452 its now below $ 275 !! For a second opinion to help you determine if you should buy sell or hold something is a no brainer !!!
2008 has again been another good year for FusionIQ and its research team. Below are some small excerpts from Fusion’s various research publications …
· 10/22/07 Bank Index Review (BKX) - “ Many of the BKX components: C, CMA, COF, FITB, RF and WM have extremely low technical scores in our FusionIQ quantitative ranking with scores of 23, 10, 17, 4, 8 and 11 respectively (out of a possible 100). While there may be an attempt short-term to bounce after Friday’s sell-off the technical structure of the index suggests sellers are in control …. “
· 2/12/08 American Intl. Group Inc. (AIG) – Technical Sell – “ Additionally with a FusionIQ Technical Rank of only 12 (out of a possible 100) forward returns for AIG do not look promising … Analyst sentiment remains overly bullish with 14 BUYS and only 4 Holds ….
· 08/07/08 KBR Inc. (KBR) - Technical Sell – “ The catalyst for the breakdown in KBR Inc. was the sharp fall in second-quarter profits. KBR shares are ranked a low 44 out of a possible 100 in our FusionIQ quantitative ranking system and with over 90% of its float already in institutional hands there is a lot of potential supply out there … Our technically delivered target is $ 15.00 and the objective point and figure target is $ 7.00. KBR was at $ 23.79 at the printing of this report – today it is - $ 9.93.
Note: In all fairness we had some calls that did not work out such as BUYS on WU @ $ 26.00, LZB @ 10, However EVERY recommendation that is published comes with a defined stop loss or drawdown point so even the bad recommendations get wiped out quickly and with minimal damage. Please note the attached pdf has all of our published research calls and the results relative to the market are fantastic. All of these recommendations plus access to our quantitative ranking system (and expanded economic coverage ) http://www.fusioniqrank.com/ Given what the market has gone through this is a small price to pay for solid, unbiased guidance, recommendations and risk management tools.
We also will leave you with this picture. Everyone loved Google (GOOG) as an investment however FusionIQ, with its independent, unbiased ranking ability placed a SELL signal on GOOG @ $ 452 its now below $ 275 !! For a second opinion to help you determine if you should buy sell or hold something is a no brainer !!!
BREAKING NEWS: Pirates and Citigroup
November 20 -- The Somali pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup.
The pirates would buy Citigroup with new debt and their existing cashstockpiles, earned most recently from hijacking numerous ships,including most recently a $200 million Saudi Arabian oil tanker. TheSomali pirates are offering up to $0.10 per share for Citigroup, piratespokesman Sugule Ali said earlier today. The negotiations have enteredt he final stage, Ali said. ``You may not like our price, but we are notin the business of paying for things. Be happy we are in the mood tooffer the shareholders anything," said Ali.
The pirates will finance part of the purchase by selling new PirateRansom Backed Securities. The PRBS's are backed by the cash flows fromfuture ransom payments from hijackings in the Gulf of Aden. Moody's andS&P have already issued their top investment grade ratings for thePRBS's.
Head pirate, Ubu Kalid Shandu, said "we need a bank so that we have aplace to keep all of our ransom money. Thankfully, the dislocations inthe capital markets has allowed us to purchase Citigroup at anattractive valuation and to take advantage of TARP capital to grow thebusiness even faster."
Shandu added, "We don't call ourselves pirates. We are coastguards andthis will just allow us to guard our coasts better!
Pretty funny huh? forwarded on the internet from unknown original source
The pirates would buy Citigroup with new debt and their existing cashstockpiles, earned most recently from hijacking numerous ships,including most recently a $200 million Saudi Arabian oil tanker. TheSomali pirates are offering up to $0.10 per share for Citigroup, piratespokesman Sugule Ali said earlier today. The negotiations have enteredt he final stage, Ali said. ``You may not like our price, but we are notin the business of paying for things. Be happy we are in the mood tooffer the shareholders anything," said Ali.
The pirates will finance part of the purchase by selling new PirateRansom Backed Securities. The PRBS's are backed by the cash flows fromfuture ransom payments from hijackings in the Gulf of Aden. Moody's andS&P have already issued their top investment grade ratings for thePRBS's.
Head pirate, Ubu Kalid Shandu, said "we need a bank so that we have aplace to keep all of our ransom money. Thankfully, the dislocations inthe capital markets has allowed us to purchase Citigroup at anattractive valuation and to take advantage of TARP capital to grow thebusiness even faster."
Shandu added, "We don't call ourselves pirates. We are coastguards andthis will just allow us to guard our coasts better!
Pretty funny huh? forwarded on the internet from unknown original source
CitiGroup saved????
Can anyone please tell me why Citi is up today? This chart looks just like WAMU before it died...
So, the US government guarentees the crap on the books and we should all be happy!!! NO is the simple answer, these companies are still being run by the same "risk" people who put the firms in trouble.
Same if you save GM, Ford and Chrysler...The old way that they ran the companies did not work....Time to let someone big (outside of wall street) fail....Wake up management and boards at other companies..
UGH
So, the US government guarentees the crap on the books and we should all be happy!!! NO is the simple answer, these companies are still being run by the same "risk" people who put the firms in trouble.
Same if you save GM, Ford and Chrysler...The old way that they ran the companies did not work....Time to let someone big (outside of wall street) fail....Wake up management and boards at other companies..
UGH
Friday, November 21, 2008
Buffett's huge derivatives bet proves costly
A good read below:
Buffett's huge derivatives bet proves costly Posted Nov 20 2008, 12:48 PM by Jon Markman Rating:
http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/20/buffett-s-huge-derivatives-bet-proves-costly.aspx
Shares of Warren Buffett's insurance holding company are on the ropes this month, plunging 30% in part because the famed investor dabbled in an area of the market he has long publicly derided: derivatives. And due to a tangled web of financial relationships, they may be taking Goldman Sachs shares down with them.
Investors are concerned about a $37-billion bet that Buffett made last year that U.S. and world equity values would be higher in 15 to 20 years than they were then, when the Dow Jones Industrials were trading around 13,000. Through his firm, Berkshire Hathaway, Buffett sold option contracts, known as "naked puts" to an undisclosed group of investors for around $4.85 billion, reportedly using Goldman as broker.
The buyers saw the puts as a type of insurance that would pay off royally if stocks fell over the next decade. They were seen by Buffett as an easy way to pocket a quick $4 billion-plus, which was booked much like an insurance premium, even though he is famous for scoffing at derivatives as "weapons of mass financial destruction."
But easy money is the worst kind. The problem is that stocks worldwide have gone downhill in a hurry, and with a lot of the sort of volatility that makes put contracts swell in value. And due to accounting rules, this has made Buffett already need to mark down a $6.7 billion loss on the trade even though the trade has another 14 years to work out.
Because of its solid-gold credit rating, Berkshire Hathaway was not required to put up collateral to make this trade. But now rumors are flying on Wall Street that the owners of the contracts have demanded that broker Goldman Sachs put up collateral for the rest of the amount due. Since the value of the trade could be enormous, the collateral demands are said to be very large, and fears that Goldman will struggle to make good on its obligation has panicked shareholders.
Indeed one theory making the rounds this week is that Buffett put $5 billion into Goldman at around $125 per share in September not as an investment but to help provide funds for the collateral.
Of course, there are other reasons for investors to sell Berkshire shares, which are down 42% overall this year, back to 2003 levels. Many of its biggest stock holdings have plunged in value this year, including American Express, General Electric, SunTrust and Goldman itself. And like most insurance companies, it holds a lot of bonds that have plunged in value during the credit debacle.
To see how Buffett described the put contracts in his 2008 letter to investors, click here. There's little doubt that he and Berkshire will survive this mess. But for now this a blemish on his otherwise sterling record of achievement.
Buffett's huge derivatives bet proves costly Posted Nov 20 2008, 12:48 PM by Jon Markman Rating:
http://blogs.moneycentral.msn.com/topstocks/archive/2008/11/20/buffett-s-huge-derivatives-bet-proves-costly.aspx
Shares of Warren Buffett's insurance holding company are on the ropes this month, plunging 30% in part because the famed investor dabbled in an area of the market he has long publicly derided: derivatives. And due to a tangled web of financial relationships, they may be taking Goldman Sachs shares down with them.
Investors are concerned about a $37-billion bet that Buffett made last year that U.S. and world equity values would be higher in 15 to 20 years than they were then, when the Dow Jones Industrials were trading around 13,000. Through his firm, Berkshire Hathaway, Buffett sold option contracts, known as "naked puts" to an undisclosed group of investors for around $4.85 billion, reportedly using Goldman as broker.
The buyers saw the puts as a type of insurance that would pay off royally if stocks fell over the next decade. They were seen by Buffett as an easy way to pocket a quick $4 billion-plus, which was booked much like an insurance premium, even though he is famous for scoffing at derivatives as "weapons of mass financial destruction."
But easy money is the worst kind. The problem is that stocks worldwide have gone downhill in a hurry, and with a lot of the sort of volatility that makes put contracts swell in value. And due to accounting rules, this has made Buffett already need to mark down a $6.7 billion loss on the trade even though the trade has another 14 years to work out.
Because of its solid-gold credit rating, Berkshire Hathaway was not required to put up collateral to make this trade. But now rumors are flying on Wall Street that the owners of the contracts have demanded that broker Goldman Sachs put up collateral for the rest of the amount due. Since the value of the trade could be enormous, the collateral demands are said to be very large, and fears that Goldman will struggle to make good on its obligation has panicked shareholders.
Indeed one theory making the rounds this week is that Buffett put $5 billion into Goldman at around $125 per share in September not as an investment but to help provide funds for the collateral.
Of course, there are other reasons for investors to sell Berkshire shares, which are down 42% overall this year, back to 2003 levels. Many of its biggest stock holdings have plunged in value this year, including American Express, General Electric, SunTrust and Goldman itself. And like most insurance companies, it holds a lot of bonds that have plunged in value during the credit debacle.
To see how Buffett described the put contracts in his 2008 letter to investors, click here. There's little doubt that he and Berkshire will survive this mess. But for now this a blemish on his otherwise sterling record of achievement.
Sad News!! Pub Burnt Down
Break from market talk....A local watering hole burnt down last night. Fireside in Stamford CT..reminds me of a song:
The Day the Pub Burned Down
Pull up a stump and lend an ear, a story I'll relate
About a shameful waste of beer, I will elucidate
I'll tell of how calamity struck Wopa Kiwi town
And caused a dreadful tragedy the day the pub burned down
The boys were gathered in the bar upon that fateful day
The Maori and the Pakeha from near and far away
While listening to Manuka Jones, New Zealand's finest liar
We heard a cry that chilled the bones, "The flamin' pub's afire"
There'd been a drought for weeks and weeks, the wells and tanks were dry
No water flowed along the creeks, we've got no town supply
The blazing sun without relent turned all the green to brown
Imagine our predicament the day the pub burned down
Through smoke and flames we dragged the booze to safety through the door
We thought of what we stood to lose and rushed back in for more
Standby, the fire brigade is here; those men of high renown
Oh fireman, fireman save the beer and let the pub burn down
They bashed the tops of barrels is, while strong men knelt to pray
They shoved their flippin' hoses in and shouted, "Pumps away"
They fought with beer and lemonade to try and save the town
We fought and cursed the fire brigade the day the pub burned down
The moreporks haunt the old pub site in Wopa Kiwi town
Where madmen roam the land by night and hunt the firemen down
They curse the cash they cannot spend, their raging thirst to drown
Dry horrors drove them 'round the bend, the day the pub burned down
Our Market Sentiment Piece
Liquidity plays a major role in the future direction of stocks because it gauges available (as well as future) buying and selling power. When investor allocations to equities are very low this is bullish for stocks as it suggests investors have moved to the sidelines in droves. This does two things; first and probably most important the low equity allocations suggest investors have sold in droves thus removing the selling pressure from the market and second the low equity allocations suggests a large buildup in sideline cash (ie. new buying power).
The chart above shows equity allocations by individual investors above and below their normal 21 year mean allocation to stocks (the 21-year mean allocation to stocks is typically 60 %).
The present reading puts us 15 % under the 21-year historical mean. This reading is significant because it mirrors the readings seen at other major lows such as 1987, 1990 and 2002. Now while it doesn’t mean we bottom tomorrow (though we could) it does mean stocks are certainly in the 8th or 9th inning of the decline and not the 3rd or 4th (however as we know in baseball even the last few innings can get ugly sometimes before the game ends)
The chart above shows equity allocations by individual investors above and below their normal 21 year mean allocation to stocks (the 21-year mean allocation to stocks is typically 60 %).
The present reading puts us 15 % under the 21-year historical mean. This reading is significant because it mirrors the readings seen at other major lows such as 1987, 1990 and 2002. Now while it doesn’t mean we bottom tomorrow (though we could) it does mean stocks are certainly in the 8th or 9th inning of the decline and not the 3rd or 4th (however as we know in baseball even the last few innings can get ugly sometimes before the game ends)
Thursday, November 20, 2008
J.P. Morgan sees Fed cutting funds rate to 0% by end-January
J.P. Morgan Chase & Co. economists said late Wednesday they now expect the Federal Reserve to make two half-point cuts to its fed funds rate, currently at 1%, by the end of January, bringing the fed funds rate to 0%. The U.S. central bank will then hold this benchmark rate at 0% for the rest of 2009, they said. "The change in our call is motivated in large part by the risk that deflation becomes more likely in an environment where labor market slack is building, and ongoing financial tightening is delaying the prospect that slack begins to get worked down," wrote Michael Feroli, U.S. economist for J.P. Morgan.
Are they kidding???? Why don't they bring rates negative, pay the banks to borrow money. Oh, wait a minute isn't that want TARP is?
Are they kidding???? Why don't they bring rates negative, pay the banks to borrow money. Oh, wait a minute isn't that want TARP is?
The following is a post I saw from Mike Darda:
After yesterday’s close, the S&P 500has declined 48.5% from the October 2007 peak though yesterday’s close. This trumps the 1973-1974 bear in which the S&P 500 dropped 48.2%, the worst bear in post WWII history. So this naturally takes us back to the Depression for comparison sake. Below I have the peak-to-trough S&P 500 from this cycle juxtaposed to the peak-to-trough S&P 500 from 1929-1932. We came down faster and harder initially in the ’29-32 bear, but the magnitude of decline at this stage (292 trading days in) is eerily similar. Hopefully that’s where the similarities end………….
After yesterday’s close, the S&P 500has declined 48.5% from the October 2007 peak though yesterday’s close. This trumps the 1973-1974 bear in which the S&P 500 dropped 48.2%, the worst bear in post WWII history. So this naturally takes us back to the Depression for comparison sake. Below I have the peak-to-trough S&P 500 from this cycle juxtaposed to the peak-to-trough S&P 500 from 1929-1932. We came down faster and harder initially in the ’29-32 bear, but the magnitude of decline at this stage (292 trading days in) is eerily similar. Hopefully that’s where the similarities end………….
JEF Short
Good Morning:
Jefferies Group Inc. (JEF) closed last night at $9.84, this is in the target range that we suggested less than one month ago (see below as well as the attached PDF). This is a return of over 36% in one month!
As we have seen in this market financial names continue to be taken out back and beaten over and over again. We are suggesting to our trading accounts that they install a tight stop on their JEF short. All indications are that the melt could continue, and we would like to keep the profits rolling. However, the $9-$10 range was our initial target and we would not want to give back too much of a great return.
Best
*These recommendations are given to our institutional clients
Jefferies Group Inc. (JEF) closed last night at $9.84, this is in the target range that we suggested less than one month ago (see below as well as the attached PDF). This is a return of over 36% in one month!
As we have seen in this market financial names continue to be taken out back and beaten over and over again. We are suggesting to our trading accounts that they install a tight stop on their JEF short. All indications are that the melt could continue, and we would like to keep the profits rolling. However, the $9-$10 range was our initial target and we would not want to give back too much of a great return.
Best
*These recommendations are given to our institutional clients
Wednesday, November 19, 2008
Softy says "pound sand"
Microsoft Says Yahoo Purchase Talks Are `Done,'Microsoft Corp. Chief Executive Officer Steve Ballmer said all acquisition talks with Yahoo! Inc. are “done,” even after the Internet company announced plans to replace CEO Jerry Yang
Tuesday, November 18, 2008
Will Microsoft go for it?
With Jerry Yang stepping down as CEO of Yahoo, the message is out to Steve Balmer and group that YHOO wants to be bought. Yahoo tried in vain to get Google to partner up with them, now they are showing their desperation and almost begging for a new bid....
news flash to holders/board of YHOO, Balmer will bring one but you may not be happy!!! you missed out on the juicy high $30's bids. With this market and TARP stuff out there expect a mid $20 bid.
Peter
news flash to holders/board of YHOO, Balmer will bring one but you may not be happy!!! you missed out on the juicy high $30's bids. With this market and TARP stuff out there expect a mid $20 bid.
Peter
Market continues slide
This post election market seems to want to break the Oct. lows....we actually have broke the closing close and in some indices we have closed below the closing lows...
These retest are normal, as we at wrote about at work. These markets are broken and need to settle a lot of problems..
Today's thought the VIX looks like it may break above $70...that could mean a big break lower...a rough end of year then..
UGH
Peter Greene
These retest are normal, as we at wrote about at work. These markets are broken and need to settle a lot of problems..
Today's thought the VIX looks like it may break above $70...that could mean a big break lower...a rough end of year then..
UGH
Peter Greene
Monday, November 3, 2008
Elections tomorrow
Elections are tomorrow; I hope everyone who is legally registered (no, not you Mickey Mouse) votes....
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