That’s a quote from Charles Gradante of hedge-fund consultant Hennessee Group.

The only question is how far this thing is going to spread — to other funds, to underwriters and ratings agencies, to investment banks special charges. You know, how *CONTAINED this is.

The latest example of how well "contained" the sub-prime fall out is comes to us via a letter to hedge fund investors from Bear Stearns. From this communique, we learn that the two funds that have had everyone so worried are mostly worthless. The "better" fund is down 91%, while the "lower quality" fund is down 100%.

In the letter, Bear claims to have drawn down only $200 million of the $1.6 billion it put up, essentially to ensure an orderly liquidation of the market in the CDO derivatives the fund held. 

As we noted late Monday (WTF is going on in the ABX Markets?), the RMBS/CDO market, as shown in the ABX indexes, are reflecting that "orderly liquidation," as well as ongoing Subprime mortgage risk. 14 of 15 ABX indexes declined to new lows yesterday, according to Markit Group. I have little doubt that CDO traders knew the Bear Stearn’s funds were near worthless, and were front-running the liquidation all this week.

We must note, not coincidentally, that one of the biggest sources of all this sub-prime junk, Southern California, saw home & condo sales tank 36% in June. That’s the biggest decline in 14 years, according to DataQuick Information Systems. It is almost enough to make one ignore the abysmal Home Builders Index, now scraping new 16 year lows.   

After the NYSE close, Intel defiled the parade of tech and capex bulls. Intel said demand for flash products is lower than expected, and it lowered capex to $4.9B from $5.5B. Q2 revenue declined 2% and operating income 19% from Q1. The tax rate was 29%: 31% was expected – but for that, they would have missed consensus forecasts. A JPMorgan analyst stated Tuesday morning, “Clearly business has bottomed for Intel.”  You know, kinda like housing has bottomed. So much for the coming capex boom.

~~~

Futures are reacting to the subprime and disappointing Intel report.  Today should be interesting, to say the least. 

>

_____________

* Every time I hear the word "Contained," I am reminded of that very amusing scene from "The Princess Bride:"   

[Vizzini has just cut the rope The Dread Pirate Roberts is climbing up]
Vizzini: HE DIDN’T FALL? INCONCEIVABLE.
Inigo Montoya: You keep using that word. I do not think it means what you think it means.

They keep using that word "Contained,". Someone get these folks a dictionary.

>

Sources:
Subprime Uncertainty Fans Out
Bear’s Hedge Funds Are Basically Worthless;
More Bond Fire Sales
KATE KELLY , SERENA NG and MICHAEL HUDSON
WSJ< July 18, 2007; Page C1
http://online.wsj.com/article/SB118470713201469384.html

Moody’s Says It Is Taking Hit
Ratings Firm Loses Business As Tougher CMBS Stance
Spurs Issuers to ‘Rate Shop’
KEMBA J. DUNHAM
WSJ, July 18, 2007; Page B7
http://online.wsj.com/article/SB118471274304469543.html

Category: Credit, Derivatives, Markets, Psychology, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

63 Responses to ““Right now things are starting to come unglued””

  1. Paul says:

    See that Journal hed? “Basically Worthless.” That’s going to cause a couple of spit-takes this morning as Wall Street settles down with its coffee and newspaper!

  2. Gary says:

    Seems like everyone is using the INTC report and the Bear Stearns news, which has been priced into the market for sometime, as an excuse for the market taking a beating tomorrow. When everyone is thinking the same thing it often just means that the market is ready to take a lot of investors money. The big boys have been buying heavily. I seriously doubt that the meager 5% decline in INTC and the news which isn’t actually news from Bear Stearns are going to be the catalyst to end the bull market. We still need to enter the euphoric phase. We haven’t even gotten close to that yet.

  3. alexd says:

    Ok I know falling knife and such, but for some reason I am now onclined to call a friend in the mortage biz in CA and talk to him about land.

    Something the Rothchilds said about blood…

    Rothchilds? I’ll tell you about the Rothchilds. (sound of Bear Stearns imploding)

    Also something about standard deviations…

  4. Fenner says:

    you have to wonder if this is not scaring the heck out of many hedgefund investors and if redemptions will not start coming fast and furious no matter what the fund’s exposure is to. I do in fact know one person who is about to do this the next time he can.

  5. Philippe says:

    Prices are just starting to be « unglued » and financial papers to be sticky.
    Goldman, JPMorgan Stuck With Debt They Can’t Sell to Investors
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aserXf4f8u2M&refer=home

  6. zell says:

    The market can do whatever it wants. The issue is how predictable this outcome has been and what you can extrapolate from this point.

  7. Winston Munn says:

    Underwriters are affected already, having to pony up for some of the riskier corporate bonds no one is willing to buy.

    “Those looking to raise money to finance the recent private-equity deals are getting a front-row view of the turbulence. Just months ago, there were more than enough eager buyers of the bonds and loans sold to support highly leveraged takeovers. But now investors are pushing back, demanding higher rates and protections from risk.

    In some cases, investors are asking for so much that the bond offerings never even make it to market. ServiceMaster Co.’s underwriters called off a $1.15 billion sale of junk bonds earlier this month after investors balked at provisions in the bonds that would have let the company cover some of its interest expense by issuing more debt.

    That forced the lawn-care and pest-control company to obtain a bridge loan directly from the underwriters. A $2.85 billion loan issue still needs to get done as part of the $5.5 billion takeover by private-equity firm Clayton, Dubilier & Rice and others, according to KDP Investment Advisors Inc.”

  8. ECONOMISTA NON GRATA says:

    “The big boys have been buying heavily.”

    Gary:

    The “big boys” are bailing out… Check out BX…. If that IPO wasn’t a bail I don’t know what is…. How about Apollo and KKR….? Don’t they wish they would have been first out of the gate…

    Are those boys big enough for you….?

    Best regards,

    Econoliicious

  9. Chief Tomahawk says:

    Does the U.S. dollar index hold today and bounce, or breakthrough to the downside? Meanwhile the market is in blowoff mode…

  10. UrbanDigs says:

    Chief Tomahawk – US dollar should be weak today. Moderate inflation news, some disappointing earnings, stock selloff, bond yields down all equal no support for US dollar.

    10YR yield is down almost 4 basis points already. Looks like a new low for the greenback..

  11. fred says:

    MER’s latest survey of fund managers has 3% believng equities are overvalued. so, how is that not euphoric? Perhaps what is not said is as important as what is…..

  12. Stuart says:

    This overnight bounce in the USD has the smell of the PPT all over it. @ 1:00 am EST, somebody said no more.

  13. Charles says:

    “This overnight bounce in the USD has the smell of the PPT all over it. @ 1:00 am EST, somebody said no more.”

    Stuart, what does this mean? Just curious…

  14. michael schumacher says:

    from San Diego:

    headline from yesterday (sorry not available any longer, as if it is not positive it’s not worth keeping-LOL)

    Home Prices and Sales Were Steady Last Month

    and then it proceeded to show a graph that showed sales were down almost 20% and the median price was down 4.3%.

    hardly what I would call steady. but it “sells” well.

    Ciao
    MS

  15. Fred says:

    The dollar is bouncing because there is massive buying of U$D denominated “stuff”, as it’s on a fire sale. And that “stuff” includes US equities, which we saw MASSIVE buying from foreigners in the TIC report yesterday. This will be another support to the market. This is not a good developement for da bears.

    The “ppc” is the paranoid term “plung protection team” — a conspiracy theory.

  16. michael schumacher says:

    Economista-

    I guess he also does’nt see that the last three days have been, technically speaking, dist. days. Easy to see if you actually look. But that COT report seems to trump EVERYTHING.

    and yes BX…..;-) I wonder how long the chinese stuck around?….my guess was all of the first hour or so.

    All that news and the dow is only down something like 20 points? It should be called the Rally protection team as any allusion to a purely defensive use of that has gone out the window as of last March.

    I hope some good questions are asked today, however I expect they’ll just protect themselves yet again.

    Ciao
    MS

  17. sam says:

    come on Gary, you came to the party when biggies were starting to leave.

  18. jm says:

    Bare Sterns

  19. Woodshedder says:

    Hmmm…. more conspiracy theories abounding… lmao. I can’t believe that reasonable, insightful, intelligent folks would waste brain cells and research time even considering such things.

    Look at it this way. If you all are so convinced in the PPT and other conspiracies, why aren’t you all 200% long?

  20. michael schumacher says:

    are you???? if not….then STFU

    Ciao
    MS

  21. Stuart says:

    Bern Bernanke’s testimony over the past year discusses the purpose and objective of the PPT. Go due your own due diligence. The existence is not for debate or conjecture. Continued denial is similar to denying a man walked on the moon. The PPT is hardly a conspiracy theory, it’s above the table already by the Fed’s own admission. What is a matter of legitimate speculation, is the degree of their intervention in the currency markets. Again, there’s ample Federal documentation on this working group, set up shortly after the 1987 crash, that should make any research you are willing to undertake quite simple. Conspiracy theories are like UFO cover ups…nonsense. Conspiracy theories are like the white house planned Iraq for oil-nonsense. GW never lies-nonsense. Conspiracy theories are like Guns for money, Ollie North – nonsense. Conspiracy theories are like the VP operating and running financing schemes to fund Sunni insurgents-nonsense. Conspiracy theories are like top ranking officials coordinating intervention in bond markets before auctions benefiting a select few. No one is purporting such nonsense. Why it so readily acknowledged that foreign governments actively intervene in the currency markets to manage their currency, rogue states such as the Swiss, New Zealand, Japan…hell, I think there’s been a word or two written about China, yet few would acknowledge the US never has or would not in kind. That inclination to deny is the mystery. No, no conspiracy is implied, just the active management of a currency in kind with other nations at certain key ponts. The implications of a break below 80 on the USX has been discussed. How accurate is up for question, nevertheless it is reasonable to think there would be some stop loss selling somewhere down there. It is also reasonable that Treasury and Fed officials aware of the implications, an attempted prevention should be expected. @ 1:00 am EST it breached 80.10.

  22. Woodshedder says:

    Stuart- I have done the research, and it is all conjecture.

    Look at this way.

    Can you prove the PPT is NOT propping up the markets?

  23. apw says:

    “If energy prices level off as currently anticipated, overall inflation should slow to a pace close to that of core inflation in coming quarters,” Bernanke said.

    Yes, Ben, assuming that dx(energyStuff) = 0, then the following really does hold true:

    dx(allStuff – energyStuff) = dx(allStuff)

    Very good of you to let us know that.

  24. This dip is a technical *buying opportunity* for the broader market. Watch as all the financials impacted by mortgages, including Bear Sterns, hold above their lows from last week.

  25. Stuart says:

    I think you have your question backwards. Unless I prove the PPT is NOT propping up the makets, the implication is the PPT IS propping up the markets. I think you meant that the otherway around. In any event, look, the PPT is not propping up the markets. That’s not what I suggested or implied. I don’t think the do CONTINUALLY prop up the markets or could CONTINUALLY prop up the markets considering the amount of capital required to do so. Yes, there are many who feel there is continual management of various markets, but I’m not in that camp. Largely because of the amount of money it would take. What I did imply was at certain key junctures, just in the currency markets, a “kick start” infusion of capital is often injected or a sudden foreign selling of their own currency to buy the greenback takes place. They can read charts as well as anybody just the same as many other central banks can and our CB is no different than many other central banks. I’m in Canada and it is openly discussed when our Central bank will intervene in the currency markets as the loonie gets to parity. If the Canadian central bank is willing to intervene, one has to expect the US central bank to do so in kind. That is not a great leap of conjecture. Not suggesting you are, but no one shouldn’t get hung on on negative connotations of the “PPT” acronym as conspiratorial. It is in a nation’s interest to protect its assets and manage them in accordance with its overall goals. What is conjecture is the degree of intervention that takes place, and what I just wrote I think adequately states my position.

  26. michael schumacher says:

    From the last Fed testimony:

    Ron Paul: Did the PPT intervene on February 27th???

    Ben Bernancke: No

    you see a really smart fellow would have said “I have no idea what you are talking about”…instead by answering no he basically admits it exists when previously he has said it did not.

  27. a guy called john says:

    you have to wonder if this is not scaring the heck out of many hedgefund investors and if redemptions will not start coming fast and furious

    ironic that Greenwich will be among the communities most affected by the subprime implosion.

  28. worth says:

    Charles – the “PPT” has a Wikipedia entry at:
    http://en.wikipedia.org/wiki/Plunge_Protection_Team

    Here’s part of the article:

    “Founded in 1988 after the 1987 stock market crash, it theoretically ensures the stability of the financial markets, prevents liquidity problems, and ensures that stock market hiccups do not cause bank runs. Some Wall Street bears believe that it buys stock index futures or uses other methods to help keep the American stock markets afloat.”

    “Upon that suspicion, Plunge Protection Team or PPT for short, has become a catch phrase among those who warn about the danger of monetary inflation being used as a tool to more or less directly support stock market prices.”

  29. Woodshedder says:

    Stuart, I agree with you, mainly anyway, about kick starting the currency markets.

    As for my statement, “Can you prove the PPT is NOT propping up the market,” I use the falsification test as I am currently toying with Popper’s ideas. The falsification test is important because it is often what we do not know that most greatly impacts a hypothesis. The problem with the PPT is exactly this: we do not know what we do not know. Using only what we know, and then treating this as fact, and making the extension that because there is a PPT, that they must be propping up the markets is the problem here. Proving that they are NOT propping up the market is one way of getting at, or at least considering, what we do not know.

    Michael Schumacher, not only are you not smart enough to warrant a debate with me, you are also arrogant and egotistical, which exponentially increases your character flaws. In short, why spank a 5 year old when he doesn’t have the intelligence to understand what he is doing wrong?

  30. Don Luskin says:

    Down 91%? Gee, that’s even worse than me — I only lost 76% of my investors money. I guess I was smart not to use as much leverage as those guys.

  31. zell says:

    Please stop the PPT pissing contest. The last intelligent post was Winston’s.

  32. Woodshedder says:

    Michael, there is no question to be answered, or rather, there is no answer to your question.

    See, anyone can post hypothesis or questions which can be considered, but can never be proven wrong, or too which there are no answers. This is the favorite tactic of pseudo-intellectual scientists, especially ones with egos the size of elephants. It makes them feel smart and important.

    As for your patriotism, that remark was not necessarily directed at you, but since you took it that way, I guess “If you spot it, you got it!”

    As for looking for “rational reasons for a parabolic rise of the market in the face of deteriorating economic indicators,” Michael, why do you waste your time? Do you not understand that there typically is NEVER a rational reason for a parabolic rise in ANY security? The very process is irrational!

    What you are severely suffering from is hindsight bias, thrown in with a need for confirmation. You would be better served to simply drop the need for rational explanation, and instead focus on understanding your OWN psychology, as that is the only thing which Michael can control. Once you learn to understand your own psychology as it applies to your trading/investing, then you’ll realize that whether things are rational or irrational, conspiracy or not, fair or not, etc. do not matter.

    Finally, your attempt at another red herring, that is your feeble bait about my supposed political affiliation just goes to show what I was saying about spanking a 5 year old.

  33. worth says:

    Where’d Michael Schumacher’s reply go? Of COURSE MS is arrogant – aren’t all European F1 winners? And no, I don’t believe a negative can be proved. We are left with some positives to work with: governments DO attempt to control economies, they DO attempt to influence with money supply and other capital tools, and it stands to reason that equities as well as debt would be subject to such machinations. And I would certainly hope that there is some sort of ongoing effort to prevent markets from plunging into intra-day or overnight freefalls, wouldn’t you?
    Finally, I agree with the above Commenter that the “big boys” pursuing the Ultimate Exit Strategy for all of their holdings simultaneously, i.e. their own IPOs, is not a good sign. Not good at all. Nor is the rapid-fire breaking of 1000 point barriers in the Dow.

  34. S says:

    Woodshedder, do you know why the Federal Reserve Board was created?

    Answer: To intervene in the free market to artificially manipulate the money supply (with the stated goals of achieving full employment and price stability). Everybody knows the bond desk at the New York FED is actively buying and/or selling securities every single trading day to achieve monetary policy goals.

    So, why is it such a stretch to believe the Treasury/FED would manipulate stock markets to achieve policy goals?

  35. michael schumacher says:

    thanks for your continued avoidance of the original subject……you do oh so well at it.
    You’ve managed to make this about me more than anything else…
    talk about pseudo-intelligence….

    But I’m sure you knew that….

    Ciao
    MS

  36. Gary says:

    The Commitment of traders report gave a long signal in early Mar. As of last week it had the largest net long position in history (all index contracts combined). The big boys are most definitely not bailing out. Trying to call tops is a losers game. If you are a bear didn’t you get the message about calling tops last Thurs. when you got your head handed to you?

  37. econ101 says:

    Dont worry everything is fine.

    July 18 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke predicted American economic growth will pick up “a bit” next year and inflation will recede.

    “The U.S. economy appears likely to expand at a moderate pace over the second half of 2007, with growth then strengthening” in 2008, he told the House Financial Services Committee in Washington. “Core inflation should edge a bit lower, on net, over the remainder of this year and next year.”

  38. michael schumacher says:

    >>calling tops last Thurs. when you got your head handed to you?>>

    Assume…….as I’ve said before just because I do not agree with the raging steroid known as the current bull sentiment it does not mean I can’t profit from it. As usual if someone disagrees they are automatically “wrong” and act according to what you “think” I would do.

    remember what Assume spells……

    Ciao
    MS

  39. Fred says:

    Lehman jus denied rumors planted that they have big losses in subprime, “The rumors regarding subprime exposure are totally unfounded,” said a firm
    spokeswoman shortly after noon, as Lehman shares traded at roughly $71.

    Fear is easy to plant.

    I am out of my short hedges.

  40. Estragon says:

    Re PPT – just thought I’d toss in the possibility that the mooted “USD PPT” speaks english as a second language.

  41. Mike_in_FL says:

    Besides the ones you have already pointed out, there are numerous other developments/headlines related to the subprime market worth mentioning. It’s incredibly tough to keep up with all of them, but here are a couple …

    * Bernanke is getting rapped hard by a couple of members of Congress for the fact the Fed didn’t do enough to regulate/control the mortgage lending market before it got completely out of control.

    * CIT Group, an independent commercial finance company said it lost $127 million, or 70 cents a share, in the second quarter. The problem? CIT is a big subprime lender. It booked a large $495 million loss related to the write-down of $10.6 billion in home loan receivables. An analyst cited in the Bloomberg story notes that it’s about a 7% haircut on the value of those assets. The company said it will quit the subprime lending business entirely, following a recent move by GE to dump its WMC mortgage business.

    http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=CIT:US&sid=aal8W.hF.QpM

    * The price of buying credit default swaps on bond insurance firms, such as MBIA and AMBAC Financial Group, is going up. The fear is that these guys have guaranteed the repayment of bonds backed by consumer loans and collateralized debt obligations, and if more of those bonds sour, it could cause earnings problems for the insurers.

    http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MBI:US&sid=aOjmmaHo1a9U

  42. techy2468 says:

    i have a question:

    what if the current administration only cares about the short term stability to save face (as every one does) tries to manipulate the market to the point where it goes beyond their control (if all private investors divert their money to some other investment nobody can prop the stock market).

    isnt it in the best interest of everyone in office to make sure things dont go south on their watch….and they just want to buy some time with a ton of positive thinking (things will somehow get better on their own, if we just buy some time..)

    i do not know much about the market to analyze the things needed to make sure that they dont go down much…..and how far can they be done with the help of false data from everyone in the administration….
    (good employment, no inflation etc..)

  43. gn says:

    Gary,

    I remember that tons of portfolio managers (big boys) were super long right at the top in 1987, too. They were wrong then, and they are wrong now.

  44. Stuart says:

    Mike in FL, re: your last pont about AMBAC and MBIA. Bingo. I think that is the real demon in the closet of this unfolding credit debacle. They’re on the hook for default. This cannot be understated IMO. One dare open that closet at their own peril.

  45. michael schumacher says:

    According to Bear Stearns everything was just fine too……..until today.

    it was so fine that Cramer told people to buy BSC despite the unknowns over there

    Article from July 5th titled:

    Bear Stearns Stock still a Great buy

    Share Price when written: about 143
    Share price today: 138 or so

    I do not subscribe however if you do it’s there.

    contained……..sure it is. IF you asked Cramer.

    The market is not believing LEH either.
    But I guess that downgrade it got earlier had nothing to do with it’s subprime “issues”.

    Ciao
    MS

  46. stormrunner says:

    I am also not an expert on the PPT however,

    I believe based on reading can’t find where that a Repo is the mechanism with which this is accomplished.

    Federal Reserve use of repos
    Repurchase agreements when transacted by the Federal Open Market Committee of the Federal Reserve in open market operations initially add reserves to the banking system and then withdraw them; reverse repos initially drain reserves and later add them back.

    Under a repurchase agreement (“RP” or “repo”), the Federal Reserve (Fed) buys US Treasury securities, U.S. agency securities, or mortgage backed securities from a primary dealer who agrees to buy them back, typically within one to seven days; a reverse repo is the opposite. Thus the Fed describes these transactions from the counterparty’s viewpoint rather than from their own viewpoint.

    If the Federal Reserve is one of the transacting parties, the RP is called a “system repo,” but if they are trading on behalf of a customer (e.g. a foreign central bank) it is called a “customer repo.” Until 2003 the Fed did not use the term “reverse repo” – which it believed implied that it was borrowing money (counter to its charter) – but used the term “matched sale” instead.

    This is a 5/31 article from stocktiming.com which I forwarded to illustrate PPT intervention to someone unfortunately I can’t post the chart’s they don’t appear to be archived at least not on free page.

    Thursday, May 31st. – Stock Trends, Charts, and Commentary
    __________________________________________________________

    Yesterday, the amount of M3 pouring into our markets was extremely high, and I believe it was a Bernanke attempt at
    showing investors that we are exempt from what happens in China.

    Part of the reason for the huge liquidity injections was the fact that the Shanghai dropped over 6% the previous day and Bernanke
    wanted to make sure that our markets were not going to be a China victim. The irony is that this gave encouragement to Chinese
    investors, and this is now going to make it harder for Chinese officials to curb the out-of-control speculation.

    Below is a number of charts showing how the market initially reacted to China’s 6% drop at the open.

    The first graph shows the S&P 500 dropping at the open. The other indexes did the same.

    The second graph shows the number of stocks declining on the New York Stock Exchange. Note how rapidly
    it was rising at the open as stocks were being sold.

    However, the third graph shows that liquidity was positive from the start, and continued up all day except
    for a blip at 1:30 PM. When high liquidity levels flow in, they reduce the “risk factor” in the market and
    the VIX (Volatility Index) reacts by dropping lower as seen in the bottom chart.

    The old saying was that you can’t fight the Fed, and in these days, you can’t fight inflowing liquidity injections.

    Below is the ETF: SPY. It is representative of the S&P 500. At the close yesterday, it was testing its
    7 year closing high. The previous closing high was 153.56 seven years ago. I expect that it will rise above
    that resistance level today.

    The only next resistance the SPY will have after that is the previous 155.75 intra-day peak seven years ago.

    If that resistance barrier is broken, we could see a much higher run on the S&P.

  47. michael schumacher says:

    as far as the reverse repos. go (and I have not been completely on top of it since it matters very little anyway) they are not done at the same rate as the money going in. I’ve seen one done (reverse repo) since the end of February. They should stop calling it “temporary” , the irony of that is that when you click on the “Permanent” link it shows nothing…

    Ciao
    MS

  48. I am unpublishing these silly cross comments squabbles. (I do not want to babysit)

    I expect there to be a sense of professional decorum and mutual respect — feel free to disagree with each other — or me for that matter — but steer clear of ad hominem, name calling, etc.

    Imagine you work on the trading desk or the investment management committee of a $5 Billion fund. That’s your peer group — talk to each other as if . . .

  49. michael schumacher says:

    BR-

    You act as if transparency is the order of the day and that professional decorum and respect are alive and well from within your peer group. I’d have to say that people who were waiting for those two things from Bear Stearns will be waiting for a long time.

    It’s a two way street it occurs everywhere a disagreement is happening. And yes I am just as guilty as the next person and will no longer call people “names” however I see it as merely assigning the label that they so diligently wear on their sleeves but are reluctant to admit..it just so happens that people are most offended by what they truly are.

    Ciao
    MS

  50. Fred says:

    There have been many option expiration weeks where we get a volatile day mid week. We certainly got one today, yet interestingly we have (so far) gotten a lower high on the VIX/VXO. Put call was very high all day as well, meaning bears were pressing their bets. I believe we’ve seen the lows of this move, and am aback to 100% long.

    BTW, thanks Barry…’nuff mud.

  51. Bill aka NO DooDahs! says:

    Somewhere, oh, around the 20th comment down or so, somebody said something really sharp early this morning. Something actionable and useful, as opposed to the pissing and moaning about PPT. That somebody said,

    “This dip is a technical *buying opportunity* for the broader market. Watch as all the financials impacted by mortgages, including Bear Sterns, hold above their lows from last week.”

    Any takers?

  52. Stuart says:

    From Bloomberg: JPMorgan’s Dimon Sees `A Little Freeze’ in Lending for LBOs

    JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said demand for leveraged buyout debt is drying up and banks may be left holding more loans that they can’t sell.

    Alot of eyes are watching the chrysler deal. Any chinks in the armour of that deal and alot of heads will take notice for sure.

  53. Woodshedder says:

    Bill, I bought, a lot.

    Still, wasn’t the pissing and moaning ANY fun to read?

  54. Bob says:

    Barry, just wanted to point out that Bear said in its client letter that $1.4B remains “outstanding” under the line. In my banker-speak interpretation (I work in commercial real estate lending), that means that all but $200MM is drawn and “outstanding” under the facility. In other words, I don’t think there is as much room under the line as you may think (though I suppose they can always go back to the Bear “well” if needed).

    It helps when you have the inside track with your lender…

  55. Gary says:

    GN,
    You’re not paying attention to what I’m saying. When the net position in the COT report becomes very bullish the market usually goes up. When the net position is extremely net short then one should start looking for a decline. I explain it all on my blog if you wish to learn more. However if you are only interested in defending your bias then don’t bother. I try not to have a bias in the mearket. I let the big money make that decision for me.

  56. Bill aka NO DooDahs! says:

    Wood,

    Nah, not really. It reminds of what my buddy “Barfly” used to say, when you argue with a drunk, it’s a problem, because after a while it’s hard to tell who the drunk is.

    I came into today long, and got stopped out of one position. When I get a better look at things, I’ll assess reloading. But then again, I’ve been long through the whole rally ….

  57. mhm says:

    “Any takers?”

    I’m holding a position in one of the big investment banks and will likely be assigned a couple of my short puts tonight. Fine. I still expect the investment banks will finish the expiration at the strike they were aiming last Monday. This Bear Sterns letter was a non-event really; nobody was expecting those funds to have any value left for the investors.

  58. Winston Munn says:

    “Lehman jus denied rumors planted that they have big losses in subprime, “The rumors regarding subprime exposure are totally unfounded,” said a firm
    spokeswoman shortly after noon, as Lehman shares traded at roughly $71.”

    Yes, and if memory serves me Goldman Sachs put out a buy recommendation on Enron 5 days before Enron filed for banruptcy protection.

  59. Mark says:

    expectations of the home eq wreck over the have already been baked in sorry but no armageddon today, heck even yesterday after the bear stearn HF news the SPY, DIA & QQQQ were down a whopping 0.50%!!! some implosion, BSC ended down 0.41% today, and every series of the ABX BBB- tranche ended the day UP today (thats notational BR)

  60. Jimmy says:

    being bearish of the microeconomics doesn’t mean also being bearish on the stock market.

    i being BULLISH and making a killing in the stock market the last 5 years.

    but i had been warning people about the mortgage/housing frenzy since 2003 and the CDO exposure too them the last 2 years. there are plenty of people suffering and its impacted in these sectors still other parts of the economy will be okay. look at the dot com bubble aftermath, many technology sectors suffered but the economy was okay.

  61. Write-Offs: 07.19.07

    $$$ Choose Your Seat Wisely [Banker's Ball] $$$ Google: not so perfect anymore [CNN Money] $$$ “Right now things are starting to come unglued” [The Big Picture]…

  62. citiblah says:

    what exactly index are you using? the S15HOME is at 4 year lows, not 16 years