Financial topics

[Reality Check]

Fighting the last war are we padawan.

http://www.youtube.com/watch?v=mkAfl2RmAZc&feature=related

Based on your posting, and mine immediately above it, I believe we both got it.

So did Monty Python.

I believe it is really, really funny that a group of government employees get together and write a regulation ordering a bank "not to allow a crisis" and ordering a bank to "plan to handle a crisis on your own because the government has no plans to bail you out, this time".

This is the next war, not the last one. When the new hero generation learns the lesson that all those promises from the government mean nothing. The promise that your money is safe in the bank. The promise that another banking crisis can not happen because government employees ordered the banks to "not have a crisis". We laugh because it hurts.

[Higgenbotham]

Temporary bridge company created, which assumes all assets and some liabilities of JPMC. As part of this process, the FDIC marks the Firm’s assets down leading to an additional $150B loss.

http://www.law.harvard.edu/programs/abo ... e/baer.pdf

I wonder how JPMC came up with that estimate, and whether they consider it realistic. If so, with equity of $184B, they are borderline insolvent.

[aedens]

I remember the paper, The bridge funds are tax payer funded as Chris noted. The TBTF banks were all over 3 years in arrears on FDIC payments unlike the regionals.

[Higgenbotham]

As forwarded from the Florida study "Higg made a astute notation we all understand here on actual conditions of balance sheets."

"She did make the point, though, that many of the insolvent Florida banks remained in operation for a number of years before they failed, as many as 5 years as I recall. That was news to me. In other words, by finally having the records, this researcher was able to determine that many of these banks were insolvent for years before they failed and the bank employees and regulators covered it up."

Going on 5 years now in this go round, as I'm assuming if the books were opened the insolvency would date from about March 2008(?)

[aedens]

Same as California as we speak. We had some so called numbers unreported.

[Higgenbotham]

As far as the technical condition of the stock market, I reviewed extensively this weekend and can draw no firm conclusion.

There is a time element and a price element. The time element is spent, which argues for a peak here. However, the price element is not, which says (to me anyway) that there could be a delay in a final price burst if the market can find a reason.

As far as the time element, comparing to 2000 and 2007, on the S&P 500,
On January 3, 2000 there was a peak, a dip, then a final burst into March 24, 2000 and
On July 19, 2007 there was a peak, a dip, then a final burst into October 11, 2007.
The July 19, 2007 date could be interpreted as June 1 or so. Looking at the current situation, in any case, time has run out on the market compared to these previous topping formations.

However, in terms of price, while price in this case has been slower to move, if it has been delayed for some reason but the impetus is still there, then there would be upside targets the market may still reach.

I've spent probably 20 hours since the Friday close studying the current price configuration of the market and have no idea as to which outcome is more likely.

One of the better analysts makes the observation that the "commercials" are heavily hedging their holdings in the futures markets (as I had stated in opposition to Tyler's view) and normally in a rational market that would be good reason to follow along, but I don't think the next few weeks are going to see the market dominated by rationality. The safest stance is probably to stay away. The risk/reward probably favors the bears if they can withstand volatility and blow torching from the Fed.

[aedens]

http://www.cboe.com/data/mktstat.aspx yep same book as gordon gekko
Total Put/Call Ratio 0.99 Volume call 1,466,662 put 1,454,657 Yummy Sheep

[Higgenbotham]

http://www.youtube.com/watch?v=gHAMQ3eGNjA

Rational people aren't going to understand the final part of this bubble, whether it has already passed or is yet to come. In this interview, Robert Prechter says in the late 1990's he saw savings rates hit zero and he said that had to be the end of the bubble. But he said little did he realize that people would get second and third mortgages and savings rates would go negative.

I could give rational, plausible reasons as to why the stock market may have topped out last Tuesday (the top is still holding) but that may not mean much. The chart shows the previous bouts with insanity in 2000 and 2007 but whether this round yields more or less is impossible to say.

I'm not well connected but a friend did tell me late last week that he has a friend who manages a several billion dollar stock fund and they are hedged. The fund has a very successful track record and, of course, the hedges are performing poorly and dragging down his returns. Investors are pissed off (irrational). If the manager of this fund and others were to lift their hedges under pressure, that could send the stock market higher. That would be an example where rationality on the part of the fund managers yields an apparently more irrational market behavior.

[aedens]

A rather large hedge said insanity express and refunded customer investments. Forgot the fund name. He said F it. He noted there was no rational move.
Another decided to return $2 billion to investors or about a quarter of the assets under management of Moore Global Investment fund. Regulation threshold assumed.

[Higgenbotham]

My prediction. No short term predictions are possible from here on out. And whereas short term trading has been easier these past few months, that may not be true from here on out. Longer term, if someone wants to be short, put your fire suit on, include face protection and get ready for a possible 100 point S&P drawdown on your position before it's over. Or it may have been over last Tuesday. No way I can tell. I remain short. I read Louis Bacon refunded $2 billion. Yup, same one you just mentioned.