Category: Bailouts

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.

38 Responses to “Corporate Sleigh Ride”

  1. Chief Tomahawk says:

    Pretty good! Just beware of the trophy wife’s divorce attorney anxious to exploit before a jury anyone connected with this f-up.

  2. Mannwich says:

    Crude oil below $33/barrel.

  3. larster says:

    Couldn’t help but think of the article today in the WSJ re cutting white collar pay by 10% and stopping contributions to the retirement plans (401 K’s). Merry friggin’ Christmas guys. With a 5% increase in pay in 2010 you will be at 95% of your salary in 2008 with no company contribution to retirement. Meanwhile the honcho Smith can fall back on the $17 million earned two years ago, unspecified stock awards, and a exec pension that is fully guaranteed.

    As if the the billions or trillions of deficit spending now being shoveled out the door aren’t a big enough problem, lets cut tax revenues from millions of workers in the UAW, FedX, Agilent, etc.

  4. ironman says:

    BR: Very nice! If you haven’t seen it yet, Tim Harford has written a modern fairy tale for the credit crisis (here’s the link to the original version at FT.)

  5. Winston Munn says:

    Nothing says Deflation like wage cuts do. Wakari-masu ka?

    Liquidity Trap: when the liquidity introduced by the central authority is trapped by banks and hoarded rather than lent. SEE: Federal Reserve Excess Reserves.

    Kids, it time to play America’s fastest growing game sensation: That’s right, it’s time to play Save the Bank! Yes, you too can sacrifice your wages, your job, your home, and your family to save an over-leveraged, crooked bank and have no choice in who gets your help!

    Slightly higher west of the Rockies. Void where prohibited by law. (Right. Who are we kidding?)

    Tell them what they’ve won, Johnny….

  6. Steve Barry says:

    This chart is really amazing:

    http://www.investorsintelligence.com/x/free_chart.html?r=101#

    For a period of 5 years (a long time in charting…includes a massive housing bubble and it bursting) NYSE Bulls never moved up more than 30% in a move without a healthy correction…and those rises took around 6 months usually. It has now moved up 40% in a matter of 3 weeks or so and still rising.

    Conclusion: Market is way too euphoric in the face of worst crisis since depression. Put/calls also at multi-year lows and short interest negligible. Never a better time to short the market since I’ve been doing this (15 years).

  7. brewhaha says:

    larster: Your math is terrible, and I can’t believe it. A 5% gain after a 10% loss puts you at less than 95%.

  8. Pat G. says:

    BR: Great toon.

    Ironman: Thanks for the link.

  9. leftback says:

    @ Steve Barry: I have been sitting in a fair amount of cash all week. The market feels terrible, low volume and sloppy action, rather like it did at the end of August before all hell broke loose. I don’t feel there is much point in getting short here over the holiday period but I am looking very hard at SRS and QID as we approach the new year. I also feel that the health care industry’s days of scamming are numbered and the market knows that, so RXD.

    Two things bother me a lot right now. First, I KNOW there are a ton of hedge fund redemptions to come. Second, we have just had significant events that threaten to damage investor confidence (Madoff, GE). Third, we are going to see a mass of layoffs in January as many firms delayed firings until after the holiday period is over. I have a few positions I am going to try to hold on to, but I am getting ready to batten down the hatches again very soon.

    I don’t always agree with your chosen indicator but on this occasion I see complacency and I think risk is high.

  10. Jojo99 says:

    WALL STREET BAIL OUT WONDERLAND
    (Winter Wonderland)
    WilliamBanzai7

    Opening Bells ring, are you listening,
    On the Street, the snow job is glistening
    An ignoble sight,
    We’re happy tonight,
    Working in Wall Street bailout wonderland.

    Gone away is the old bird,
    Here to stay is a new bird
    He sings an opprobrious song,
    As we go along,
    Working in Wall Street bailout wonderland.

    We can go and eulogize a subprime snowman,
    Then pretend that he is Madoff the clown
    He’ll say: Whats my carry?
    We’ll say: None man,
    But you can always do a fleece job
    In Ponzi town.

    Later on, we’ll all conspire,
    As we dream of not being fired
    To face unafraid,
    The new scams that we’ll make,
    Working in Wall Street bailout wonderland.

    In the meadow we can build another financial snowman,
    And pretend that he’s an SEC circus clown
    We’ll have lots of fun shtuping mister snowman,
    Until the markets inevitably knock him down.

    When it snows, ain’t it thrilling,
    To aim the hose while pyramiding
    We’ll frolic and play, the fraudulent way,
    Working in Wall Street bailout wonderland.

    Found in comments at:
    http://blogs.wsj.com/deals/2008/12/18/some-credit-suisse-bankers-livid-over-new-bonus-plan/

  11. Mannwich says:

    @SB & lb: To add to your points – too many people I’m reading thinks it’s a foregone conclusion that we will rally and probably rally to 1008 or more on the S&P. To me, that’s a contrary indicator but I’m still being very cautious until the New Year. SRS has been brutal and sickening but I’m sticking with it and will continue to add to again on any big dip into low 50′s or lower.

    Bought a small amount of QID today as well to add to a prior position. Sticking with that and EEV, although that’s been terrible too. Am intrigued by RXD. Had it a while back but gave up on it. Might take another look. Health care, the last sacred lamb of conventional wisdom (“it’s recession-proof”) is probably going to blow in ’09 too.

  12. Steve Barry says:

    @Leftback and Mannwich:

    Makes sense to wait till the new year to short…funny things can happen in holiday volume. The 21 day put/call is likely going even lower in the next 2 trading days, providing a no brainer short. It is a perfect setup for the market to free-fall right after the new year as volume picks back up.

  13. larster says:

    Brewhaha- You’re right. My math is terrible, but what I meant to say was the raise would amount to 5% of present pay. The 401K match is at least 3%, so the real cut is at leat 13%. The 5% amount assumes that FedX wants to keep some of their good people.

  14. leftback says:

    @ Steve: I think this is without doubt the most likely scenario. Maybe a couple of days of the January effect on new fund flows, and then bang, express elevator to the basement. The whole thing feels exactly like late August, with most traders out of the market for a week or more and passive investors having no idea what was about to hit.

  15. Simon says:

    @ LB and SB, I’m with you guys in spirit at least. The current rally looks broken just like the ones in May and August. I’ve sold my gold miners and I’ll wait until after Christmas to re-evaluate.

    At the moment I’m looking to reset my miners trades after a correction but everything is up the air until after we get back from holiday. It’s summer here in NZ so I won’t be looking at any charts until possibly near the end of the first week of January. Hopefully I’ll be back sooner cause I to think it will be interesting times again.

  16. leftback says:

    Your Friday night posting from Schadenfeude Asset Management.

    How many more people were taken by the former Long Island lawn sprinkler salesman? More on Madoff victims is coming to light. Apparently many of them (sob) were pillars of the real estate industry:

    http://www.nytimes.com/2008/12/18/business/18brokers.html?em

    BWAHAHAHAHA… more forced liquidations coming as frantic RE developers and Palm Beach socialites scrimp and save like the “little people” to scrape to pay their country club dues and the bills for their polo ponies.

    I simply cannot believe that we are not going to see another hedge fund fraud/blow-up/disaster in the new year. The entire industry is riddled with malfeasance and incompetence.

    We didn’t see real fear in 2008, despite the October waterfalls, but the real pain and anguish is just now finally beginning. The Bear doesn’t slink back into the woods leaving you with a flesh wound.

  17. Simon says:

    One more thing …the Euro rally has the look of a short squeeze of grand proportions on the weekly time scale. Also I’m surprised gold has declined along with the dollar. Confusing.

  18. Mannwich says:

    Someone should really start an asset management firm with that name, lb. That would be a riot.

    Boy, this Madoff mess and the entire fiasco in general really blows the lid off of the “wealthy are that way because they’re intelligent” myth, does it not? Good grief. How could these people not know better?

    There’s gotta be a least a few more of these in the offing for ’09.

  19. Steve Barry says:

    CNBC 2008 retrospective is on…first 2 minutes unbelievably bad…sound bites from every CNBC commentator, showing how clueless each is. Then Maria, looking 200lbs, with a stand-up in front of the NYSE awkwardly reading off a teleprompter.

  20. DP says:

    Some guy on Ludlow just mispoke, he meant to say “banking system” but the first time it came out as “bailout system”, love it.

    Agree with you guys on the market. A couple of weeks ago (at the low 800s) it felt like a run up to 900-1000 was going to happen. Market has failed several times now to break 920-925. Buying QID when S&P hits 915-920 and selling a few hours or days later for a few points has been working extremely well, but the range (profit) is narrowing on each trip, has to break out soon one way or the other.

    With everything dropping including things that usually run contrary to each other, we probably have more liquidation out there. Just because people stopped blaming it for the market moves every day doesn’t mean it is not happening. Perhaps some of it was pinning the market for options. Not sure I believe that really exists, but if it does at all, it must be particularly easy to manage on a day as quiet as today.

    Haven’t completely given up on a new year / inauguration rally but if we get one I think we’ll be looking at it lasting for days or weeks, not months. We’ve gone from bad news being unable to shake the market any further to good news not being able to lift it. Futures were down 400 points when the auto-bailout was off, with it back on today the rally was very short lived. RIMM’s results couldn’t help the Nasdaq gain a single percent, etc.

    What good news can there be to come? (I prefer to be optimistic, so if you have some please share!). It seems the focus now will be on real economic data and real earnings. Some companies will have better than expected earnings, perhaps even enough to give us a lift, but I can’t imagine guidance being good even for those.

  21. Steve Barry says:

    CNBC really proud of themselves for releasing stories that move markets…something wrong about that.

  22. Steve Barry says:

    @LB:

    Fascinating peice…thanks for the link. I have to rachet even higher my feeling for the consequences of this. Barry, if you really want to be an author, you should drop everything and write the seminal tome on Madoff.

  23. DL says:

    QUOTE OF THE DAY: We have two classes of forecasters: Those who don’t know . . . and those who don’t know they don’t know.
    – - John Kenneth Galbraith

    My take: there’s a third class of forecasters: those who believe that stocks are going to lose value, but who deliberately try to persuade people otherwise.

  24. AGG says:

    I just read this somewher from someone called Hedgefundgirl:
    The SEC and other regulatory bodies are not equipped or staffed to be able to regulate hedge funds or other offshore or private investment partnerships. I have been through an SEC audit while at the fund of hedge funds firm where I am employed, and it was CLEAR that the
    regulators did not understand the different investment strategies, asked questions that were applicable to traditional long-only money managers but not meaningful for fund of funds and we spent a great deal of time educating them (gently, of course…we wouldn’t want to
    anger the ill-equipped regulators) on what types of information are relevant to an alternative-investment style audit. The SEC can barely monitor the traditional money managers…they would need to
    completely overhaul their staff and go through a complete educational process to adequately be able to provide oversight for non-traditional investment strategies. It was actually a pretty sad thing…considering that as we were helping them to understand what
    is important to look at, we really could have pointed them in any direction. The SEC is understaffed, undereducated and overly confident…which is a pretty frightening concept.

    Actually, frightening isn’t the right word; Mens Rea as in “Dey set da ting up on poipus” type of word.

    I heard a good joke at Counterpunch. It’s funny and tragic at the same time because it’s true. A Jewish publication has snarkingly called for Spielberg to make a movie about Madoff. It will be called “SWINDLERS LIST”.

  25. constantnormal says:

    Larster @6:26 — “The 5% amount assumes that FedX wants to keep some of their good people.”

    So where do you think they would go? Is UPS hiring? The last I heard, DHL abandoned the US because there wasn’t enough business to keep them alive. My impression of this was that it was FedEx’s attempt to hang onto as many of their people as they could, figuring that in a deflationary environment, with pretty much everything costing less, and jobs effectively impossible to come by, that employees would rather take a small hit to the paycheck (which probably would have little or no impact on their ability to pay their bills) than to take the risk that when the music stopped, they would not have a chair anymore.

    It kinda struck me that FedEx wants to keep ALL of their people, as long as they can.

  26. dig1 says:

    on a side note, i am looking for help. I read an article on seekingalpha about exactly what the Fed is doing in trying to control gold prices, and also how it’s going about something they said, “supression notes” or something to that effect. I didn’t bookmark it and i am kicking myself. Does anybody know what I am talking about? pls help because i really think that spelled out exactly why gold is not going through the roof and how the fed can go about printing money as long they want(at least for the short future)

  27. dig1 says:

    found it if anybody is interested… very long but very very important and informative… would love to bounce of some good people if anything struck out at you….

    http://seekingalpha.com/article/109210-the-manipulation-of-gold-prices

  28. DL says:

    AGG @ 9:09

    And the point is?

    … stay away from hedge funds?

  29. Transor Z says:

    What’s up with the submarine cables getting cut? They’re saying major financial disruptions in the Middle East, possibly thru 12/31:

    http://news.bbc.co.uk/2/hi/technology/7792688.stm

    http://www.dailywireless.org/2008/01/30/oceanic-fiber-cut/

    http://www.iht.com/articles/2008/02/04/technology/cables.php

  30. DL says:

    dig1 9:41

    I read the article (by James Conrad). He makes too many points to comment on, but the tone seemed a bit paranoid. I don’t think that Bernanke is quite that sinister. I do agree, in part, with the following point:

    “By avoiding the use of monitored Congressional funds, the Fed has embarked on a secretive campaign to buy toxic assets. They have refused to give any accounting of their activities, even though they are using taxpayer money to do this”

    Yes, the Fed is buying assets from banks, to the tune of about 3 trillion dollars so far. No doubt many of them are “toxic”. But I don’t think it’s accurate to say that they are using taxpayer money. At the moment, the Fed is simply creating money, and lending against the assets. The 3 trillion dollar question, of course, is what those assets are really worth. And the answer, no doubt, is a lot less than what the Fed has paid for them. So unless those assets rise in value significantly through the normal course of events, one of two things will have to occur: (a) the Fed will have to print more dollars to make those assets rise in value, or (b) the shortfall will have to be added to the deficit (at some point). But I do think it’s inaccurate to say that the Fed is using taxpayer money at this point in time. That the Fed is doing this is not a secret; what is secret is the actual market-to-market value of the assets they have lent against.

    All of this, combined with the various other backstops (of Fannie and Freddie, and of Citicorp assets) is very bullish for gold (in my opinion, and the opinion of many others). In the short run (the next 2-3 months), I think gold could go lower. But it should hit bottom soon if it hasn’t already. A price of at least $2000 for gold within three years seems attainable.

  31. AGG says:

    Dl,
    The point is that the ENTIRE network of information we rely on is questionable. Protect yourself.

  32. AGG says:

    jojo,
    Good one! Thanks for a good laugh.
    You too, Barry.

  33. AGG says:

    Paranoid attitude:
    Now that is something we could have used to reveal truth but didn’t because of peer pressure and media bullshit. We need to totallydispence with the nefit of the doubt for institutions crap. We need to stop assuming that “they” wouldn’t dare do such a thing. We need more paranoia.

  34. AGG says:

    ASSUME = Make an ASS out of U and ME.
    If there’s a way to get you to drop your guard, somebody out there is waiting for the chance to hit you with it. They may not be out to get you but you can be sure they are out to get your money.

  35. constantnormal says:

    @BR — OT (whatever this topic is, exactly)

    So when are we going to see you plugging Bailout Nation on Letterman? And is the publisher flying you to Hollywood to do Leno’s show?

  36. CNBC Sucks says:

    Before I leave for Australia tomorrow, I just wanted to let everyone know that I have handed “custody” of CNBC Sucks to an old b-school buddy, George. CNBC Sucks is about to enter a new era of lameness (some of you would say, it’s the same old era of lameness), so if anyone wants to write your own rant post about CNBC, consider this: http://cnbcsucks.wordpress.com/2008/12/19/why-dont-you-blog-about-cnbc-on-cnbc-sucks/

    Mannwich and leftback, I think retirement is final this time. Thank you all for the page views, and thanks especially to Barry Ritholtz.

  37. wunsacon says:

    Hey CNBC, even if you’re not going to maintain your own site, you’re going to keep reading Ritholtz I hope. Right?

  38. pbr90 says:

    It’s a little curious that the barrier to discover mens rea is ignored in crimes like those of the bail out banks, and perhaps too much reliance upon corporate format and tradition that isn’t borne out by reality.

    Where a corporation can be owned by a sole person, the corporate shield is a mere veil of deceit.
    If veil is lifted, no preemptive immunity exists.

    That there may be several corporate members who make up a corporation merely multiplies the deceivers, as in the case of the LLC. Mens rea is formed by registration of the entity in anticipation of avoiding mens rea to ignore its existence as pertinent to any crime, a.k.a., a license to steal, the way politicians or legislators earmark or steal through the privileges of immunity under the color of law and Constitutional privilege.

    What is the difference?