Wall Street Rug
Good sentiment read . . .
Friday, October 17, 2008 | 05:30 PM | Permalink
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Damned Crisis!
Awesome comic:
Wednesday, October 15, 2008 | 04:26 PM | Permalink
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How This Bear Compares
Great interactive chart from the NYT on this Bear versus priors:
click for ginormous interactive doohickey
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Source:
How This Bear Market Compares
Amanda Cox, Xaquín G.V. and David Leonhardt
NYT, October 11, 2008
http://www.nytimes.com/interactive/2008/10/11/business/20081011_BEAR_MARKETS.html
Monday, October 13, 2008 | 10:32 AM | Permalink
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1929 MovieTone News on Stock Market Crash
The Country is Fundamentally Sound; 'Don't Panic, Stocks are Safe!'
Economist Professor Irving Fischer explains that the stock market crashed due to high expectations- not high stock prices. Too many speculators were playing the stocks with borrowed money, resulting in a run on the banks. 80 years later, the banks are speculating with borrowed money and investors are running away from them.
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Did You Ever Lose a Million Bucks?
Take a tip from Margaret Shotwell who dispenses advice after losing 1 million dollars in the Wall Street stock market crash on Black Friday, October 28, 1929. Her only possessions are her piano and chinchilla fur
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Regulation Will Destroy Capitalism
Richard Whitney, President of the New York Stock Exchange, warns of the risks both to country and to capitalism posed by government regulators in the form of the the National Securities Exchange Act. This almost four full years before he was sent to Sing Sing Prison for embezzlement
Monday, October 13, 2008 | 12:30 AM | Permalink
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Worst. Week. Ever.
Well, if you were long, anyway. Those of you who were defensive, or in cash, or God-love-ya, short, had a pretty good week. (Feel free to hit the wish list anytime and buy yourself something nice!)
This is a headline you probably have never seen before:
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I don't know if you will ever see more astonishing data for another 20 years:
Saturday, October 11, 2008 | 08:53 AM | Permalink
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The Single Best Investment EVER
It is those "Dow 10,000" hats CNBC got for all the on air anchors way back in 1999. They sure got a whole lot of use out of them.
The Dow is 9,868 as I type this.
GE breaks syndicate price of $22.20 secondary, and its now off by a full 10% -- at $19.95.
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Dow Industrials, 10 Years
Chart courtesy of FusionIQ, Bloomberg
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As to forecasting forward from here, there are simply too many unknowns and moving parts to say anything with a high degree of confidence. A lot depends upon the govt response to the credit crisis, to the recession, and other elements
We could theoretically find support between 9,500-9800, or we could see the bottom drop out any day now
With the VIX now over 50 -- the Dow is now off 30% In one year -- I would imagine we are closer to the bottom than to the top.
Monday, October 06, 2008 | 10:30 AM | Permalink
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S&P 500 Review
In our office, we've been using the Fusion IQ quant system for so long, we know it inside out. We use it as the basis for our institutional trading and published research (up ~10% for the year).
Subscribers have asked us to include our market and stock commentary -- beyond the pure neutral software application. In addition to the tools index rankings, there is also an "S&P 500 Marketometer" -- an intermediate term gauge of the S&P 500’s internal health. We use this as the basis of our own market review. As requested, we include our own application of the quantitative equity ranking system. This means in addition to the equity, index and sector work, we upload our own technical and macro commentary, too.
My partner Kevin Lane is a well regarded technical analyst who built his reputation recommending Enron and Tyco be shorted long before it was fashionable. He is usually the yin to my yang, bullish to my bearishness. Here is his most recent technical commentary about the S&P500:
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S&P 500 Index (SPX) - Daily Chart (1999 to Present)
As seen above the S&P 500 broke through what was once a solid support area (green lines and maroon dotted circle) in the last few days of trading last week and continued falling. This support break was critical as it sent a message to market participants that this corrective phase is not yet over. The next support zone for the S&P 500 now comes into play in the 1,015 to 960 zone (blue dotted lines). At these lower support levels, particularly the 960 level, we would likely see a powerful rally set up as the S&P 500 would hit support while also being deeply oversold and more than likely have absorbed a massive selling purge. These aforementioned factors along with a likely new 10-year high in the VIX (if this lower support level is hit) would suggest negative sentiment had peaked.
Trend, Breadth and Momentum are all bearish; Liquidity is bearish to neutral. The only element that is remotely bullish is Sentiment.
As we said to clients early last week (prior to these supports being violated) market internals and momentum were all very negative and the path of least resistance would remain down.
This still remains the case.
Monday, October 06, 2008 | 06:00 AM | Permalink
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Fannie Mae and the Financial Crisis
The Sunday New York Times has a very interesting article on Fannie Mae and the current financial crisis. They do a decent job at delving into the complexities of the GSEs, and the many factors that went into the decision making at the senior level of the company. This includes pressure from clients such as Coutrywide CEO Angelo Mozilo, pressure from Congress, and the demands from investors for the company to be more aggressive. Most of all, it looks at the ongoing competitive demands of the market place that Fanny was in.
The key to understanding the GSE story is grasping their role within the bigger picture of the economy and housing sector. While there are some pundits who prefer talking points over reality (Charlies Gasparino, Lawrence Kudlow, James Pethoukoukis, and Jeff Saut all toed the GOP line) I prefer to keep all of my analyses based on the data and facts. Rather than creating historical revisions for partisan reasons, I prefer to keep it reality based. (I'm an independant, and that's how I roll).
The current housing and credit crises has many, many underlying sources. Its my opinion there were two primary causes leading to the boom and bust in Housing: A nonfeasant Fed, that ignored lending standards, and ultra-low rates.
This nonfeasance under Greenspan allowed banks, thrifts, and mortgage originators to engage in all manner of lending standard abrogations. We have detailed many times the I/O, 2/28, Piggy back, and Ninja type loans here. These never should have been permitted to proliferate the way they did.
The most significant element were the 2/28 APRs, and their put back provision. Just about all of these gave the securitizer/repackager the right to return the loans within 6 (or 12) months if they went into default. Hence, our proposition that the 2002-07 period was unique in the history of finance. If any of these mortgages went bad within 6 months, the undewriter was on the hook.
HOW DIFFERENT WERE LENDING STANDARDS IF YOU ONLY NEED TO ENSURE THE BORROWER WOULDN'T DEFAULT FOR 6 MONTHS VERSUS FINDING BORROWERS WHO WOULDN'T DEFAULT FOR 30 YEARS.
In a rising price environment, 99% of the mortgages were not returned by the securitizers to the originator. From 2001 to 2005, the mortgage firms thrived. However, once prices peaked and reversed, things changed. From 2006-08, Wal Street began putting back mortgages to originators in greater numbers. This led to nearly 300 mortgage firms imploding.
We can blame the lenders, the securitizers, the borrowers, and Fannie/Freddie, but it doesn't matter much. By the time Fannie and Freddie began changing their mortgage buying rules, the Housing boom was already in full gear, and the crash was all but inevitable.
Some people (especially the political hacks) are focusing their energies in the wrong places. According to a recent investigation by Barron's, Fannie's biggest problem was not the subprime mortgages they bought -- it was the better quality Alt A mortgages that caused their demise:
"As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a "100-year storm" in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.
The latter contention is more than disingenuous. A substantial portion of Fannie's and Freddie's credit losses comes from $337 billion and $237 billion, respectively, of Alt-A mortgages that the agencies imprudently bought or guaranteed in recent years to boost their market share. These are mortgages for which little or no attempt was made to verify the borrowers' income or net worth. The principal balances were much higher than those of mortgages typically made to low-income borrowers.
In short, Alt-A mortgages were a hallmark of real-estate speculation in the ex-urbs of Las Vegas or Los Angeles, not predatory lending to low-income folks in the inner cities."
Only pure partisans take as gospel the statements of an embattled CEO whose own words are belied by the firm's balance sheet and P&L statements.
What about the ultra low rates? Consider that the Greenspan Fed maintained a 1.75% Fed fund for 33 months (December 2001 to September 2004), a 1.25% for 21 months (November 2002 to August 2004), and lastly, a 1% Fed funds rate for 12+ months, (June 2003 to June 2004). That was fuel for the fire, and fed the boom even more, sending prices skyward.
And not just here . . . As the central bank for the largest economy in the world, the Fed's rate action had repercussions in Housing markets everywhere. Rate cuts here richocheted around the world, sending home prices upwards globally.
Continue reading "Fannie Mae and the Financial Crisis"
Sunday, October 05, 2008 | 12:30 PM | Permalink
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GE, IBM on "Do Not Short" list?
General Electric has managed to weasel its way onto the DO NOT SHORT list.
This answers the question many people have been asking for years: Is GE an Industrial or a Financial?
I can see GE, with its giant black box hedge fund, as a financial. But somehow, IBM has also gotten itself deemed a financial!
Why, because they finance purchases? So does Cisco, Lucent, EMC, SUN, and all the other big tech companies.
WTF is that about? Are they next on the do-not-short list?
Wednesday, September 24, 2008 | 11:33 AM | Permalink
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House Oversight Committee Seeks AIG, LEH Info
The House Oversight Committee is currently conducting an investigation into the collapse of Lehman Brothers and AIG and is interested in any information that may help further the investigation.
Towards that end, they have set up a Lehman/AIG Tipline.
Anyone -- insiders, counter-parties, trading partners -- with any special information knowledge as to the collapse of AIG or LEH can anonymously p[rovide information to the committee through this web address: http://oversight.house.gov/contact/tiplines/financial.asp.
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click for tip submission form
Tuesday, September 23, 2008 | 11:00 AM | Permalink
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