Financial topics

[aedens]

New oil-sands mines require a price of around US$80 per barrel to break even. If an upgrader is part of the plans, that break-even price rises to almost US$100. In-situ projects, which use wells and underground steam injection to extract oil from the sands in place, usually carry a break-even price near US$60 per barrel.

I will keep a eye for data as many but we are seeing confirmations. To be exact is impossible for many.
Angolan was 60 unchained $ to Peking confirmed so its pivot for me.
Moscow needed 7~ for budget. As for our knuckheads in Washington they should be fired.
I will keep a eye on crack spreads since that was getting stupid few short months ago.
Since SWIFT was shutdown it will be interesting to see the true Bottom Line they are pushing.
This is my third cost to meet competion global if you know what i mean.
There is no second place kids.

[Higgenbotham]

Based on that quote it would appear he did predict the period between 2005 and the end of 2007 accurately.

Granted he might have made more money if his investors had not forced him to liquidate some positions in early 2007 rather than late 2007, but the stress was from people who second guessed his rather conservative bets, not because his predictions related to the financial crisis were wrong as to scope or timing.

In 2005, betting against sub-prime, adjustable rate mortgages ( then valued as AAA investments ) where the borrower had no chance of making the monthly payments once the teaser period expires, is no risk at all, unless Sol goes nova or some similar unrelated disaster occurs during that two to three year period.

Clearly, he lost 100% of the funds he put toward CDS exposure in 2005 and the first part of 2006, which was unnecessary. Those are quarterly payments, though the contract periods can be longer. Not to say I didn't make the same timing mistake, as I also thought the bubble would top in 2005 and sold out early, losing a lot of potential profits. Point being, in 2005 I would have also thought he was doing the right thing, but the fact is he pissed away a lot of money on quarterly CDS payments when he didn't need to. But based on reading this account and one other one, it would have been necessary to take at least some losses, as the big banks were not willing to sell CDS when it became clear the unravelling was close at hand. When the latest time was to buy CDS I don't know, probably mid 2006 as home prices were turning down then. The fact that he warned investors about the potential time frame was good, but it doesn't seem like he understood the psychology of losing trades because he'd never really had any before this one. Lucky for him that a few more investors didn't withdraw or he'd have hit the wall and we never would have heard of him. But I'd say to figure out as much as he did at his age and with his limited real estate background was a big accomplishment. Let's see if he gets his gold and farmland bets right eventually.

After re-reading this account I'm more inclined to agree with Greenspan than I was.

Terms of a typical CDS contract

The premium payments are generally quarterly, with maturity dates (and likewise premium payment dates) falling on March 20, June 20, September 20, and December 20. Due to the proximity to the IMM dates, which fall on the third Wednesday of these months, these CDS maturity dates are also referred to as "IMM dates".

http://en.wikipedia.org/wiki/Credit_def ... S_contract

[aedens]

I will call principle when we blew the lid off the convenent structure for date h.
Never back down when your correct.

[Higgenbotham]

" bets he had made against the companies most closely associated with the subprime-mortgage market."

He was already in the market for corporate credit-default swaps. In 2004 he began to buy insurance on companies he thought might suffer in a real-estate downturn: mortgage lenders, mortgage insurers, and so on.

Way too early on these.

As far as who was an expert who really did call the real estate bubble in real time: Tanta at Calculated Risk dot com.

[aedens]

http://www.scribd.com/doc/96554552/The- ... f#download

[Higgenbotham]

I would look at her as having good knowledge of the machine as it operated and calling out the facts as the machine ground forward.

Successful traders will tell you, first of all, employ good risk control, have deep pockets and don't go all in, referring to that vaguely as "money management".

So DeMark was asked who is the best trader you've ever run across and he said Steve Cohen, Steve is the best. Why? Money management, he said. From what I remember, DeMark said actual prediction of the event is 25% of trading success, execution another 25%, and money management 50%.

If that is true, then by definition the best traders in the world like Cohen (who is a billionaire from trading) know that markets are somewhat predictable but not predictable enough that they can use specific prediction as the sole basis of their strategy. And if that's true they would also say that you cannot use one marker or one variable as a basis for timing.

DeMark: They're dedicated. They're 100% involved and committed- they've all got the same disposition. They're all calculators. They're good money managers. I'd say if one had to break down the reasons for their trading success--it's probably a 20 to 25 % trading methodology and techniques or systems, whatever they might apply - 25% discipline and 50% money management.

Penn: Really.

DeMark: They're all good money managers. They all are. I can't say they're all good traders. They're not. They can manage money well. Some of them can take pretty big - a large series of hits and at the same time make money and they cut their losses short.

Penn: Interesting.

DeMark: It really is money management. Surprising. I have worked with the best. Steve (Cohen) is definitely the best trader. He doesn't have that high a success rate. It's his disposition, he was built for trading. You can't describe it. The ability is something innate. Similarly, John Burbank is the best long term investor I have seen in my career and he is a global investor. Just as Steve is the best trader John is the best investor.

http://www.tradingmarkets.com/.site/sto ... -77647.cfm

[aedens]

http://www.zerohedge.com/news/vix-corre ... -mousetrap

[Higgenbotham]

http://www.zerohedge.com/news/vix-correlation-and-building-better-mousetrap

One point he makes I want to note because we recently discussed gold and silver. He notes the correlation of gold and silver with the S&P is heading toward zero. I have seen this too and if the trend were to continue and go to zero and then go negative, it might be that a crash in stocks would result in higher gold and silver. My guess at this time would still be that there will be at least a short term reaction where the dollar gets stronger and everything is sold but it might not last very long. So that's a more detailed explanation for exactly why I said what I did the other night when responding to jcsok.

The second point he makes that I am also seeing is conditions are ripe for a high volume panic selloff but thus far the degree of complacency in the market is remarkable with the VIX currently at 20.27 as I type this. I think he is right to say that the lower than "normal" VIX compared to the data he is tracking is lulling the herd to sleep because everyone automatically thinks "low VIX, no problem" which is herd thinking at its extreme. The reason I say that is everyone thinks that if other people aren't paying much for put options then there's no problem and that is feeding on itself. Which would also say that Vince made a very good buy on his puts if that's right.

[aedens]

http://www.youtube.com/watch?v=zvzKgjaV ... re=related
http://www.youtube.com/watch?v=MJSO3H4G ... ure=relmfu
http://www.youtube.com/watch?v=J8CqaHTy ... creen&NR=1

[John]

This morning on CNBC there's a discussion of whether U.S. banks are
too big to fail. Neal Wolin, Deputy US Treasury Secretary, said that
this is all covered in new laws, and the law says that they're not too
big to fail.

This triggered hysterical laughter, and reminded me of the lyrics
to Camelot:

A law was made a distant moon ago here:
July and August cannot be too hot.
And there's a legal limit to the snow here
In Camelot.
The winter is forbidden till December
And exits March the second on the dot.
By order, summer lingers through September
In Camelot.

Camelot! Camelot!
I know it gives a person pause,
But in Camelot, Camelot
Those are the legal laws.
The snow may never slush upon the hillside.
By nine p.m. the moonlight must appear.
In short, there's simply not
A more congenial spot
For happily-ever-aftering than here
In Camelot.