Red Monday
By Barry Ritholtz - December 1st, 2008, 4:00PM
"My formula for success is rise early, work late and strike oil." —John Paul Getty
Macro Notes
Consumer Credit continues downward trendPeter Boockvar
Consumer Credit outstanding fell $14.8b in Sept seasonally adjusted, almost $5b more than expected and marks the 11th month in the past 12 of declines. At $2.456T outstanding, it is 4.9% below the record high in July '08. After a flat reading in Aug, (didn't fall b/c of the CARS program), non revolving debt outstanding fell by $4.9B. Revolving (mostly credit cards) balances outstanding fell by $9.9B. To fully put into perspective today's data, look at the current level of consumer credit (doesn't include mortgages, the biggest chunk of consumer credit) relative to GDP. As of Q3, it totaled 17.2%...
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December 1st, 2008 at 4:05 pm
celebrate bloody monday with a bloody mary…
and you might want to adjust your Down 600, to Down 700…
December 1st, 2008 at 4:06 pm
Started to cost average into DXO (oil)…
December 1st, 2008 at 4:06 pm
Cried into my coffee, gathered doc.s for a refi, read Tantas old posts on CR…..
Oil below $50
Where does it end?
December 1st, 2008 at 4:06 pm
Sold some EEV into the close. Hung onto most of it. Hung onto SRS, QID and DUG and watched it with glee.
Bought small amount of SSO into the close and a small amount of TBT.
December 1st, 2008 at 4:09 pm
Watched my QID, SKF, and DUG get closer to my targets something I thought would take a week (still may) but I like the first day move.
Targets 90, 195, & 50
December 1st, 2008 at 4:09 pm
The recession is official, about damn time. But honestly did that shock more than 30 die hard nut jobs? How does that tank the market?
December 1st, 2008 at 4:10 pm
Bought 108k of called cd’s (not new money)…only 2 year time frame…boring….still over 4%….
Barry, you should give us a head’s up when you are going to pull your money out of stocks…when you cash your toes in, it creates quite a stir…
December 1st, 2008 at 4:11 pm
freaking bonds are tanking the market if you ask me…
December 1st, 2008 at 4:11 pm
i went sledding with my kids.
i called to get my oil tanks filled up at $2.50!
Iin the market. nothing. i haven’t done anything in days.
50% long and poorer than I was on on friday but still +38% YTD.
December 1st, 2008 at 4:11 pm
This is what I was looking for. The market has now priced out a good Xmas as a possibility. That’s what the market was speculating on last week. Now we can look forward into next year.
December 1st, 2008 at 4:12 pm
I gleefully watched my shares of Fozzie Bear (FAZ), purchased late Friday afternoon, jump 41%.
My FXP holdings also moved up nicely. And I still have plenty of cash sitting in wait. All in all, I’m feeling great about today’s rout.
December 1st, 2008 at 4:12 pm
Saw my SKF, SRS and short COF positions rip through the roof for an incredible 1-day return. Staying in overnight, hope I don’t regret it in the morning.
December 1st, 2008 at 4:17 pm
i went to a yoga class.
i did not sell my puts.
i will buy more on a snapback (banks and indices).
December 1st, 2008 at 4:20 pm
MikeDonnelly:
If you review the economic news for the past month, I don’t find today surprising. To list just a few:
Housing: Back up to 11.1 months inventory (no progress at all)
Baltic Dry Index: (contracts to ship commodities over the seas in the future) may break 700 tomorrow, down from 12.6k
Rapidly increasing unemployment, really rapidly.
Declining commercial real estate, very unstable it appears
States nearly uniformly planning severe cutbacks and layoffs.
Credit card crisis is building…
NO strong global entity…uniform and increasing weakness.
And again, we start from a point of weakness in this downturn, with upside down mortgages, no appreciable savings rate, and realize that this is now a global phenomenon…
Not a bear, but reality bites here…and of course recessions must end…but to see the end of this mess may require binoculars… My question would be Who was confident about the near future to buy last week???
December 1st, 2008 at 4:20 pm
RECESSION??? I had no clue, but when I found out I sold everything I own. Well in all reality, I really was a bit confused on that late day selloff. I’m still long, still planning on S&P 1100 by February or March. I don’t really see any way around that, but who knows what it’ll do in the meantime? Maybe we’ll hit 50? Or maybe 5000? Maybe the DOW 50,000 guy and the DOW 5 guy are BOTH right??
December 1st, 2008 at 4:26 pm
googled “investopedia bonds” and other things on bonds
What is the intrade bet on a 2% bounce upward overnite?
December 1st, 2008 at 4:30 pm
I was playing for a longer bounce, but I lost my nerve and sold the rest of my longs this morning. I’m back at a net flat position. I still think we’re in a temporary counter trend move, but I don’t have the nerve for it. We did hit the +20% from the bottom that I was looking for, but this rally only started a week ago. I don’t know what to think so I’m back in my bunker waiting for new lows before I start scaling back in.
December 1st, 2008 at 4:31 pm
I knew this was coming today, who didn’t? I did nothing but grieve for Tanta. That, I didn’t see coming.
December 1st, 2008 at 4:31 pm
1. Chillin on light volume watching a completely normal reaction to last weeks bear market vacation…
2. Wondering why the hell there isnt a cover page story about the fed buying long term govies…
and what the implications of that are.
3. Eating left overs. Old sweet potatoes kick ass.
4. Wondering if the yen will truly break down or not.
5. Wondering just how much volume is actually traded in the dark pools.
December 1st, 2008 at 4:32 pm
Swore a f*** of a lot.
Enjoyed my SRS and sold it – too early.
Bought some COP and VLO, GMO and SLW.
Tried to distract myself by watching soccer.
Sold TBT – for now (I am not a masochist).
I thought a great deal about the latest bubble in our midst.
December 1st, 2008 at 4:34 pm
Shovelled snow, unloaded a kiln full of pottery for Xmas sales (?!) … Now to glaze them …. Dark at 4 p.m.
December 1st, 2008 at 4:37 pm
Made 11 points in the QID…I’m out of that trade. Nice to make money (not lose) for a change.
Regretting not selling last week the last bit of SPY I have. That would of brought me to ZERO equities.
I got stopped out of my LINE energy trade. I’ll never trade with out limit orders again.
Does anyone have a strategy for oil/gas MLPs? Buy when oil gets close to 40?
December 1st, 2008 at 4:37 pm
We are currently experiencing the practical application of the old adage “Markets can stay irrational, longer than you can stay solvent”. Another more verbose way to say things is, markets can get oversold and remain oversold longer than you can remain solvent. Many of the traders in the past year have gotten a crash course (pun intended) in this axiom. Their guidposts that they follow on a daily and weekly basis have become the Bonneville salt flats. Wide open, barren, desolate, hard and fast if you find momentum.
I think traders looking for a sustained rally here may be asking for too much. I firmly believe that on a longer term trading horizon (weeks and months) the carnage in the financial sector (BKX) foreshadows considerable downside to the overall market. Being that this is a financial crisis of the likes there are few comparisons and that the financials constitute the single largest (~16%) percentage of the S&P 500, it should be no surprise that the 2002 lows will be substantially violated; and I am not talking about 738 verses 768. We are talking about a possible 40% decline from the lows.
guidepostings.blogspot.com
December 1st, 2008 at 4:37 pm
I meditated on what this economy really needs. People keep saying “the arteries are clogged,” that money is being created but is not flowing.
With a nod to Shel Silverstein (http://www.fantasticfiction.co.uk/images/x2/x13991.jpg), now here’s my plan: We need a federally run bank, 50 state-run banks, and lots of county, city, and school district banks to compete on UNFAVORABLE terms with the private-sector banks as an alternative money flow system, a sort of bypass surgery.
We need these “Civic Institutional Banks” (CIBs) to accept deposits from all comers at a low rate (admittedly hard when the fed funds rate is already effectively zero) and to lend money to all comers FROM THEIR EXISTING PUBLIC FUNDS at a rate slightly above the going rate for private-sector banks.
All of the money from, for example, tax receipts and government bond issues exists and must be invested somewhere prior to being spent. Why not invest it in CIB loans?
Each CIB at each level of government will run inefficiently but should end up making some money for that level of government. Most importantly, the money will flow. The economy can limp along.
And as private-sector banks get healthy, they will eat the lunch of the CIBs until the CIBs can go out of business. (Obviously the CIB employees can’t be regular civil service. They will need to be let go as the CIBs decline and close.)
Terrible idea? Law of unintended consequences? Shoot it down.
December 1st, 2008 at 4:39 pm
California BK- Chalk it up. Tomorrow Red, shyt.
http://biz.yahoo.com/ap/081201/california_budget.html
December 1st, 2008 at 4:39 pm
nibbled at SSO going into the close (though not quite late enough in to the close not to feel some pain), ready to bail if 800 doesn’t hold.
December 1st, 2008 at 4:40 pm
I am also puzzled about the fed buying long term govies – why?
Are they trying to spank those who are shorting them?
Did they reveal this to scare them out (and into stocks)?
December 1st, 2008 at 4:41 pm
to add insult to injury, $gold is headed back under $770 as i type; i clearly am a masochist, or i wouldn’t have checked…
December 1st, 2008 at 4:44 pm
Very interested to hear any responses to query by SWMOD52 Says:
“Does anyone have a strategy for oil/gas MLPs? Buy when oil gets close to 40?”
December 1st, 2008 at 4:45 pm
Asked our 401K administrator if I could fade his action!
.
December 1st, 2008 at 4:46 pm
I said 6 months ago that shortly after they officially declare a recession would be a good time to buy, and I’m sticking to that view.
December 1st, 2008 at 4:46 pm
In order during the day:
Sold 10% of SRS position
Bought Jan 30 puts on RL
Sold 15% of my SRS December Calls [up 300% today]
I gotta look at calls on FAZ that wershovenistpig @4:12 mentions. I imagine some deep OOTM calls like the Jan 120’s could yield some decent returns if we get more black swan action. SRS calls seem a little tame.
December 1st, 2008 at 4:52 pm
I made about $83K on SKF today. Thanks for asking….
December 1st, 2008 at 4:56 pm
Sold some of my QID, bought more FXP. Up 42% on the year. Still 80% in cash.
December 1st, 2008 at 4:56 pm
Not many things go straight up Karen. As I understand it you don’t necessarily want them to. The weekly chart still looks fine to me but I resolve not to look at my gold miners today.
December 1st, 2008 at 4:59 pm
Doubled up on Citigroup puts on Friday, watched them make me money.
That thing is worth zero dollars and zero cents.
December 1st, 2008 at 4:59 pm
@KC, “I really was a bit confused on that late day selloff.”
No need to be, the market works on technicals and not news. I’m not sure why so many people cling to the concept that news moves the market when there’s so much evidence that it doesn’t.
We exceeded the 50% target and nearly made the 61.8% upward target for the A-wave correction (of the big drop). Once the 862 swing low on the S&P was broken a bunch of people sold and once the 829 level (the previous wave 4 low) broke then the bottom totally fell out of the market. These were very rather predictable events. If you want to understand the market then you need to study Elliot wave (at least enough to know where Elliot followers would have their stops!).
December 1st, 2008 at 4:59 pm
“Does anyone have a strategy for oil/gas MLPs? Buy when oil gets close to 40?”
Who knows? There are some oil permabears out there who think it will go to $30. One thing is for sure: when the $ starts to turn downwards (who the heck knows when that will be?), you better buy all the commodity stocks you can get your arms round. A lot of people see a low of $40 crude, there is good long-term support there in the charts. Bear in mind that the stocks may hit the bottom before the commodity reaches its lows. For now, the $40-60 price band seems to favor the refiners, rather than the producers and the drillers. Of course that could change quickly if the $ melts, which is not imminent but is by no means out of the question in 2009.
December 1st, 2008 at 5:01 pm
I read some of my Uncle’s older Theses on Orthomolecular treatment of cardiovascular maladies..
LSS: B, C, E y lysine are good things…and, yes, just for the record, thankfully, it isn’t for me, the reason for the study, that is..
The nearby post on Keynes’ piece re: 1930, included a reference to a “magneto”, which made me laugh. decided to go dig up some of the Papers my Dad had achived from his days when he and GE put the magneto OOB..(yes, I know they still exist, so do buggywhips)
Marketwise, I’ve been finding it helps to trade infrequently, keep high levels of Cash, and utilize derivs to take exposure–still net Short..
Though, have been wondering about ADVNA, now @ ~1.75 these are, for sure, some different days..
December 1st, 2008 at 5:04 pm
Yo Leftback:
Check MacroMan’s analysis on the USD, the Renminbi’s recent sharp devaluation and the Fed’s QE campaign from earlier today… you might find it interesting:
http://macro-man.blogspot.com/
Best-
I-Man
December 1st, 2008 at 5:07 pm
Sold USD/JPY and got stopped out. (Stop was really tight, but consistent with my strategy.) Later, sold EUR/JPY and am sitting in a ‘free’ trade after having automatically covered 1/2 the position just before 1pm.
Other than that, I had plenty of non-trading stuff to do around the house, so I was pretty surprised to see another big down day when I came back to the screen.
December 1st, 2008 at 5:14 pm
Added to longs at EOD. I don’t think we head to new lows yet.
December 1st, 2008 at 5:17 pm
I-Man:
MacroMan is always a good read. Thanks.
The QE campaign in Japan resulted in the JGB yields at the incredibly low levels we see today. The difference is the skyrocketing US deficit – that must at some point present a brick wall to the rally in bonds. Where that wall might be is anyone’s guess right now.
December 1st, 2008 at 5:17 pm
watched more of my hard earned wealth melt away!
December 1st, 2008 at 5:29 pm
lb,
I was with you on the early/wrong side of the USTreas complex, tight stops are a godsend..
December 1st, 2008 at 5:42 pm
There is no reason to be surprised by the actions of the Fed or the Treasury. Bernanke spelled out his thinking in an earlier speech. Here is a copy of the Bernanke deflation-fighting playbook:
http://www.federalreserve.gov/boardDocs/speeches/2002/20021121/default.htm
Of course, you also have to realize that Bernanke, before he was made Fed Chair, said that housing was not in a bubble and that the 25% price rise over the previous 2 years was a result of economic fundamentals – and when the collapse started, Paulson insisted that sub-prime was contained, so any faith I would put into their battle plans might be just a little bit shaky…
December 1st, 2008 at 5:44 pm
Didn’t like the volume. Covered my shorts near the end of day and went long 1/4 position for a trade. Bought some gold long (IAU). 75% in cash.
I think there is one catalyst and one catalyst only to break through new lows – that’s a reduced appetite by our foreign overlords for treasuries that leads to increased interest rates. That could send the market into a panic with a realization that the Fed is now truly out of bullets and will be using a slingshot or a boomerang as it’s new weapon of choice, and that there is no way out of this mess other than pain .
December 1st, 2008 at 5:48 pm
Up last week on low volume. Down hard today on moderate volume. Which is alot considering volume recently. Not in equities. No stomach for it. Besides it is as I have said before, with all the Federal gifts, greed and corruption who could logically estimate the real value of a particular company today? You have to look no further than the bond market to see where folks with a lot of money “feel safe”. But that’s an illusion too.
December 1st, 2008 at 5:48 pm
karen, you are right — the bonds are tanking the stock market, the bond market being much larger, when it gets the shakes, the stock markets get earthquakes.
Just wait until the currency markets get the shakes, and the earthquakes propagate into the bond markets.
The Powers-That-Be have had a year to shrink the size of the problem, but they have foolishly attempted to maintain a shrunken economy at its former size instead of managing an orderly shrinkage.
We will get the shrinkage — that cannot be stopped. Only the manner in which it arrives was subject to alteration.
December 1st, 2008 at 5:52 pm
We’re in uncharted territory. Biryni says we set the S&P low last month at 752. He’s supersmart but he’s using the known world as his guide. We’re out there. Noone knows where we are going. Ben and Hank are grasping at straws.
Mark E. H.- Were the papers on orthomolecular medicine from the mid 1970’s ? I thought it was dead and buried – worked with a Doc who was big in it and it was a mess.
December 1st, 2008 at 5:57 pm
Today, I did nothing in the market. I hope the Office of the President Elect has learned a lesson about their market manipulation. The “Leak” on Op-ex Friday of Geitner appointment and then the actual announcement Monday. Followed by Tuesday speech and Wednesday’s Volker “official” announcement. All trying to manipulate the public that it’s all OK.. Desperate attempt to steer the Thanksgiving table talk to how the market went up and everything is going to be all right. Let’s brainwash the people to go out shopping like good sheep.
December 1st, 2008 at 5:59 pm
Other observation, Bernanke appears to be ALOT worse for the wear. The stress is really taking its toll on him. He looks to be deteriorating at a faster rate than the market…..
December 1st, 2008 at 6:00 pm
> What did you do today ?
I went outside to look at the conjunction of the Moon, Venus and Jupiter this evening. To smell the roses, so to speak.
December 1st, 2008 at 6:04 pm
@ BRUCE:
Are you long or short Lane Kiffin?
December 1st, 2008 at 6:07 pm
@Rightline: I thought the VERY same thing while watching Ben earlier today. He looks terrible, like he hasn’t slept in months. Hank doesn’t look so good either.
Ben probably longs for a cushy job in academia at this point.
December 1st, 2008 at 6:30 pm
I was thinking it’d be nice if the tens made a stand here.
The thing that un-nerves me most – more than the price/op earnings ratio, more than the demise of money center banks, more than the liquidity trap we’re thrashing about in – is that the yield curve has gone from pricing in a nasty recession to forecasting a Japanese-style deflationary depression. That i s, if things continue apace for a few more weeks.
Bernanke knew that expanding M and driving rates down to zero were, at best, a means to fend off an ugly recession. As things stand, with the Japanese experience of the last twenty years front and center, it seems he must know how this story ends (the answer: not well).
How’s this for an idea: send the deficit through the roof, cause the sovereign debt rating to drop from AAA to AA, then buy back all those devalued bonds with inflated money. I mean, what’s the worst that can happen? /sarcasm
December 1st, 2008 at 6:30 pm
leftback,
you sold TBT? I guess I’m trading that one different, I’m convicted about this one and am still willing to take some more pain at this time. I’m using it like I did earlier this year with DUG which I have been out of for several months, I’m also adding to energy positions and have been since Oct, late today I bought more. I have not bought any gold since the recent mid-high 600 range but will add more if it drops to around 650, also own a mining co. I’m probably early on everything but I’m patient. I have a couple longs, boring stuff that has worked well, ex MCD.
as far as what to add to the thread; does anyone else think bb helped accelerate selling today? I do. Zero confidence in anything he or HP have to say, couple this with the terrible news and it happens like clockwork. It’s almost becoming too easy to see it which I wonder about.
as for the announcement of the recession, well, nouriel has been saying for months now that the recession started in december or january and anyone who hasn’t been listening to him…. hasn’t been listening to anything but the wrong thing.
December 1st, 2008 at 6:34 pm
wow I was only half listening but Bloom just said PALM missed by around 35-40%, again I was only half paying attention but I see now the NAS futures are down 91 or so, I guess it is still very early but tom. could get interesting. what else is new.
December 1st, 2008 at 6:42 pm
I again went short last evening on GBP/JPY with expectation of a breakout from one of those silly symmetrical triangle shapes. Of course, everyone knows that’s all self-fulfilling, pseudo-scientific technical gobbledygook. Thought about going long QID at the open but held off. Then took a very tidy profit covering the Guppy this morning at 138.42. Kicked myself this afternoon for hesitating on QID, but came home happy.
December 1st, 2008 at 6:43 pm
Get used to this. The larger financials are going to keep sinking until Uncle is forced to do the right thing and nationalize them. Merger with the USPS? We can have the Citi/JPM/Girobank. That said, it remains a matter of wonder to me that most of the banks in the US are still relatively unstressed. As we wrote this AM:
US Banking Industry Stress Rises, Led By Citigroup
A couple of thoughts about the Q3 2008 results for the US banking industry. The IRA Bank Stress Index rose from 1.4 at the end of Q2 to 1.5 in Q3, a 7% increase for the entire industry. The key factors driving the increase continue to be ROE degradation and default rates, but remember that most US banks remain below the industry average, including four banks in the top-ten institutions by assets…
Perhaps the single biggest mover among the top-ten US banking institutions in Q3 was Citigroup (NYSE:C), which saw its stress rating almost treble during the quarter. Subscribers to The IRA Bank Monitor login and then click here to see the current profile for C.
As we told Katie Benner of Fortune last week (Citi’s ’slow, grudging nationalization’), we’ve never been negative on C. Fact is, C and its subsidiary banks have been outliers among the large bank peer group for years, decades even. The sharp deterioration in defaults and ROE data for C in Q3 2008 displayed in the Bank Stress Index tells the story.
Chris
December 1st, 2008 at 6:45 pm
I bought some QID in the IRA accounts, and picked up fewer Jan’09 calls on QID than I wanted to in the taxable accounts — seemed like there was a scarcity of people willing to sell QID calls, at least at reasonable prices, can you imagine that?
Then I walked away and didn’t look back until around 3 pm, when I thought I might be able to pick up some more QID calls during the end-of-day reversal.
Some reversal, huh?
December 1st, 2008 at 6:48 pm
Oh, check this out:
ATLAS SHRUGGED
UPDATED FOR THE CURRENT FINANCIAL CRISIS.
http://mcsweeneys.net/2008/11/20tucker.html
Very funny.
Chris
~~~
http://www.ritholtz.com/blog/2008/11/updating-atlas-shrugged/
December 1st, 2008 at 6:50 pm
I improved my trading account 17% by selling SMN far too early this morning and holding my SPG 45/50 bear call spread. My retirement account probably lost about 1% (90% cash/10% equity). Before any vicious bears jump on me, the 10% equity is because I didn’t change my payroll elections when I put my entire account into MM.
-Mike J
December 1st, 2008 at 6:56 pm
What a great day…was fully margined in my trading account with longs in sds, dxd and shorts of jpm, cof, amzn, gs. My COF buy to cover at 26.6 was hit at 3:59 covering me at the low trade for the day, also lightened some sds at 101.7. I plan to ride down amzn, gs, jpm until they are teenagers, Now if I could only get something out of my uso, slv, tbt, ewj, and yum in my IRA’s things would really be great. I think the market is finally coming to the realization of just how insolvent our financial system is and that the govt bailouts do not do a thing other than let the criminals push their losses on the innocent. By no means do these bailouts wipe away any of the losses as many of the clowns in the market believe. Oh well, is it too late to go back and elect Ron Paul..let him put Jim Rogers as US Treasury….Peter Schiff as Fed Chair…and find a nice position for Hugh Hendry on the economic team. Bush nor Obama have any clue whatsoever of the problems at hand. I laugh when Benny speaks of lowering rates more as he still believes monetization is the answer. I must say I am baffled by the continued downturn in commodities and increase in treasuries with Ben ordering new printing presses as we speak.
December 1st, 2008 at 6:58 pm
I-Man:
I think Kiffin will be just fine. No one in their right mind could or would work for Al Davis.
December 1st, 2008 at 6:59 pm
If you are heavily short be very careful here or be willing to accept a huge loss. I’d look for the gov’t to give you a big dicking if we start falling fast. I’m looking at either a somewhere between 1% up to 3% down for tomorrow morning’s open.
I’ll be emptying my final puts onto some other sucker in the morning.
I’ll be buying in blocks as we fall close to or below previous lows.
December 1st, 2008 at 7:17 pm
I smoked pot and walked in the mountains.
December 1st, 2008 at 7:20 pm
Ditto jmborchers. The plunge protection team is getting ready to counter attack. The Dow is the litmus test for the political class, like it or not. I have been telling clients to watch the shorts and lighten up on profitable CDS ASAP.
We reported this AM that the EU may be getting ready to declare a moratorium on CDS payments by at least two French banks and one large German name:
We hear from a very well placed Buy Side investor with extensive business interests in the US and EU that three primary banking institutions in Europe, two French and one German, have such significant CDS exposure and other problems that they cannot even begin to fund the payouts anticipated over the next quarter.
The funding squeeze reportedly is exacerbated by a near-collapse among weaker players in the hedge fund market, who were accustomed to receiving loans from one large French institution, which then stupidly converted the loans into equity. That’s right. This past summer, when the bank put out a call for redemptions of $4 billion in hedge fund investments, says the source, only $400 million was returned. And the French bank also used these same hedge funds and others to reinsure some of its own CDS exposure. Sound familiar? Yup, just like AIG.
Unlike the approach taken by Paulson and Geithner to bailout AIG and JPM (via the Bear Stearns rescue), however, the investor claims that EU officials are considering a moratorium on CDS payments by the three Euroland banks in question. The banks would be given ten years to write down their CDS and hedge fund exposures and would receive additional infusions of capital by their respective governments. The source claims that French banks have such huge exposure to both hedge funds and CDS, sometimes linked together, that the positions are beyond the ability of the EU governments to bail them out without a cessation of CDS payments.
The IRA was not able to obtain a comment from EU officials over the weekend about these allegations. We’ll be making some calls Sunday night and Monday. But if this unconfirmed report turns out the be true, then the beginning of the end of the CDS market as we have known it will be at hand. And ironically, the catalyst for the final solution will come not from the failure of a US dealer, but instead by a moratorium on CDS payments by an EU bank.
In the event, as other governments around the world follow the very reasonable example of the EU, the OTC derivatives market will implode and these unfunded liabilities may very well force the nationalization/liquidation of C, JPM and AIG, among others. And in the event, Hank Paulson, Tim Geithner, Alan Greenspan, Ben Bernanke and other senior officials at the Fed in Washington are going to have a lot of explaining to do to the Congress, to a new President and the global financial community.
Tell us again, Chairman Greenspan and Chairman Bernanke, just why do you believe dealing in OTC derivatives and particularly CDS contracts are activities that are safe and sound for global banking institutions?
Read the whole comment here:
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=326
Chris
December 1st, 2008 at 7:23 pm
said F**K a lot
December 1st, 2008 at 7:40 pm
Added to my stake in INTC at 13.04. Watched it promptly fall to 12.56. Looking forward to collecting the 4.2% cash flow going forward. Also looking forward to selling covered calls every month
We’re entering tax loss season folks. Hold on, it could get bumpy. At least until mid January
December 1st, 2008 at 7:51 pm
@CWhalen
might that german bank be deutsche bank? faber wrote months ago they were too big to fail and too big to bail out.
December 1st, 2008 at 7:57 pm
What did I do today?
Made a homemade christmas present for the significant other.
December 1st, 2008 at 8:07 pm
Sat here in disbelief that the Volcker rally could peter out so fast. Truly this is like log rolling on Niagara Falls.
December 1st, 2008 at 8:12 pm
Darkness, I hope it wasn’t similar to the one George Clooney made for his wife in “Burn After Reading.”
December 1st, 2008 at 8:35 pm
Thought the 50% retracement would put up more support at 818 but there was no real hops at that level, which is a little surprising. My wave analysis is still that we completed the Major Degree Third Wave at 741. The move from 741 to 897 was the initial A wave up and now we’re in the midst of a B wave which can last a few days and be irritating for most. The 800-775 (61.8%-78.62%) zone is now KEY to hold to support this count. I will be a buyer in that zone and will probably hold it for more than a few days. There’s a bearish count that still exists, but it’s not my primary count. The short term bearish count is that the we DID NOT complete a five wave move from 1008 to 741 and the Major Degree Third Wave has still yet to finish. If we take out 741 then that will become my primary count and it will get nauseating.
In regard to U.S. Ten Year bonds, which is the instrument I trade. Way back in March, I issued a technical report that suggest the Ten Year could see 131′-00, which would be some really, really low rates. It seemed outlandish at the time, but we seemed destined for that level ultimately. It’s definitely getting overbought at this point and it’s due for some consolidation, but don’t get sucked into the “it’s a bubble” bullshit talk you hear on CNBC. The last bubble that was routinely discussed was oil at $85 bucks….then it hit $120….then $140…then $150. True enough, it was a bubble and the Ten year bond is a bubble as well….but bubbles have a tendency of expanding WAAAY further than you think. Wait for that bubble to burst first.
- AT
December 1st, 2008 at 8:40 pm
I doubled each put position I initiated on Wed and Fri of last week this morning while the VIX was still @60. I will close them when the VIX gets into the mid-70’s and then leg into some ultra proshares of a couple sectors or indices to place yet another bounce…
I will look for hope, but until then, I will profit from despair. The hope I see is only technical, the despair I see is from the govt ignoring the true problems of CDS’ and instead using a time wasting strategy of doling out dough to buy time for price discovery…
December 1st, 2008 at 8:54 pm
@ChrisW > In the event, as other governments around the world follow the very reasonable example of the EU, the OTC derivatives market will implode and these unfunded liabilities may very well force the nationalization/liquidation of C, JPM and AIG, among others.
Should it come to pass, this would have to be a huge negative for the markets, as it will slow the already limp velocity of money to a crawl (in the short term, at any rate). But I could imagine a scenario in which money managers and individual investors would see that as an “all-clear” signal and off to the races we go. Your thoughts?
December 1st, 2008 at 9:05 pm
Was in the car all day driving from Long Island to Boston. Covered my *shorts* – SKF and SDS – that I put on late last week well after the close.
Also bought more TBT at 45.40. (link)
December 1st, 2008 at 9:11 pm
DavidB, good to see someone else buying INTC because of the CASH balance and YIELD. I added today at 13.o3 and 12.76. Plan to sell SDS (depending on the open) and start poking at DIG. Buying PFE – paying 8+ and DOW now paying me 9.5%.
December 1st, 2008 at 9:25 pm
Folks quit trying to bottom pick here. The DOW will settle between 4-6k next year. Just about everyone on this board was saying how they thought last weeks rally had legs and their elliot waves showed 910 on the S&P. Give me a break folks, the smart money is slowly getting out of all long positons on any wave up. This economy is worse than Japan in the 90’s being that the Japs are religious savers and producers and did not have the current account deficits and large national debts the US has. It is either deflation or hyperinflation and the US Treasury market and commodities are showing Uncle Ben cannot print fast enough to offset the lack of lending in the economy.
December 1st, 2008 at 9:45 pm
@ventura2012
I think you’re right. 6k sounds a little high, 4k a little low, 5k — what the NYPost’s John Crudele said was true value before the dot.c0m boom boosted the markets into Bubbleland– just about right. Fulll disclosure: I’m 100% in MM and have been since fall 2005.
December 1st, 2008 at 9:59 pm
After a ridiculous rally last week, on weaker volume everyday, and no shorts to squeeze, this was a no-brainer. Of course, I only trade once every two years or so, so it doesn’t affect me either way. I’ll sell QID at 120 and sail off.
Funniest thing I heard in awhile was this morning on Bloomberg radio. Retail analyst Howard Davidowitz was asked if Black Friday was encouraging…he went off on a 2 minute rant about massive retailer bankruptcies and closures coming…by the time he was done, the host sounded like he was going to jump out the window.
December 1st, 2008 at 10:08 pm
Any bets on when the official depression call is made?
December 1st, 2008 at 10:19 pm
Even the Fast Money crowd sounded depressed tonight. Sounds like the credit card companies are cutting everyone regardless of their credit rating / payment history. It might save them some charge offs next year but when you’re in the business of providing credit, and you’re not providing credit, where does that lead? Look at FMD 2 year chart as an example of a company in the business of securitizing student loans that stopped securitizing student loans (not by choice of course).
I received a letter from capital one earlier telling me that my CD account was subject to escheatment because of inactivity if I don’t contact them soon. Inactivity? What )@#($)@$( kind of activity do they expect on a CD? Anyway, they got some activity all right, leaving a CD at Capital One right now seems about as smart as buying their stock.
Tried MOS long @26.40 earlier as it held 26.30 all day. Got stopped out at 26, lucky, because after close they decided lowering guidance for 2009 was for pansies and just flat out suspended it. @23 in aftermarket. I’d been trading it between 24 and 30 for the past few weeks, will have to wait now and see what it’s new range will be.
Also accumulating INTC and (call me crazy), KOL.
December 1st, 2008 at 10:25 pm
And hats off to Gary Shilling, as he is the only one who I have heard correctly call the crisis and put people in the proper investments. Peter Schiff called the crisis but his clients are getting blown out as he put them in commodities and foreign dividend paying stocks in the respective currencies. Jim Rogers touted commodities, asia, and agriculture so he is performing poorly even though he called the crisis. Anyone know of anyone else who has both called the crisis and put people in Treasuries over the past year and didnt try to pick a bottom…I know Panzner made some good calls and I just heard some clips from Hugh Hendry a Euro hedge fund manager whom seems like a highly intelligent guy who has been spot on.
December 1st, 2008 at 10:51 pm
Dennis Kneale is still predicting WRITE-UPS for the banks! Barry, you have to call this guy out at some point.
“3. Banks reap billions on overdone writeoffs.
By late next year some big banks will realize ample profits on the damaged assets they wrote down so severely—the mortgage-backed securities, collateralized debt obligations and other arcane weapons of their own destruction. ”
http://www.cnbc.com//id/27955830
I started doubting Steve Barry for a second last week with the market responding so positively to Obama and the new Citi bailout scheme. Then I remembered the rules of the game: #1 Never doubt Steve Barry. # Don’t ever forget rule #1.
December 1st, 2008 at 10:58 pm
Ventura 2012:
“Folks quit trying to bottom pick here. The DOW will settle between 4-6k next year. Just about everyone on this board was saying how they thought last weeks rally had legs and their elliot waves showed 910 on the S&P.”
Which Elliot Wave guys were saying 910? The 23.6% retrace of the Large Degree Wave Three was 906, so my target was 906. We got pretty damn close last week and on the futures. I think we will eventually rigorously test the 906/1008 ‘zone’ as the 23.6/38.2%. My last post last week was suggesting that folks start taking profits into the 906/916 zone…..which means start getting the hell out of the market before that zone. How much precision do you want? Geez.
I see some solid support 775-800 coming up. If you’re short, I would trim shorts into that zone. If you’re a ‘daredevil’, then try getting long into that zone. I would actually rather take stabs at commodity based trades in lieu of stocks on the new lows for crude, wheat, corn, gasoline, HO, etc…..
If we take out the 741 lows, then more bearish counts come into place in the short term. Longer term, we have a pretty major bear market rally in the offing through the Spring 2009.
- AT
December 1st, 2008 at 11:03 pm
1 am %100 long and bleeding heavily. I am expecting a medium-term rally. i think this is a large blip
.
December 1st, 2008 at 11:05 pm
I don’t think I’ve ever caught any reference to the auto subprime debacle which took place in the early 90’s. I remember it because there were quite a few companies that went the way of the dodo because they didn’t have enough reserves to cover their exploding losses. The reason I bring it up is that I’ve been a steadfast bear since, oh, about February earlier this year. My rationale isn’t overly complicated. Housing is HUGE, and the implications of crappy lending standards looked certain to bury this market.
I also must say it has helped me to be a pessimist, perhaps in the same way an optimist might in the past have seen benefits for their bullishness In answer, then, to your posted question over what I did today as the market plunged, I sat back and watched ship take on more water.
I don’t extend a lot of credit towards these rallies. The Fed cannot stop the downward spiral, though it certainly tries hard.
December 1st, 2008 at 11:20 pm
From headlines I’d like to see,
Recession Declared, Market Shocked, Drops 679 Points
December 1st, 2008 at 11:29 pm
Picked up a few long-term calls on some very battered stocks, but also picked up some puts on some with more room to the downside. I would be VERY careful about going long here. A lot of the analysis I’ve looked at is indicating SPX 600. We might get some form of a short term rally or some chop-chop action, but by early to mid 2009 we’ll blow through the recent lows IMO
December 1st, 2008 at 11:48 pm
There’s a video of Laszlo Byrini over on Bloomberg.com. He says that SPX 741 was THE bottom.
I don’t think so, but I do think that 741 is THE bottom for 2008.
December 1st, 2008 at 11:56 pm
Ventura2012 @ 10:25
“And hats off to Gary Shilling..”
Two years ago, he was calling for a global recession, a 10 yr Treasury yield below 3%, a collapse in oil prices, and a collapse of the Chinese stock market. At the time, most people thought that he was totally nuts.
Now he’s calling for 600 on the SPX.
December 2nd, 2008 at 12:03 am
Why does Birinyi think 741 is the bottom? Based on his data from the last 25 years of a mirage?
December 2nd, 2008 at 12:41 am
I lit up the computer a half hour after the market opened. I’d stayed home from work because I was under the weather and had an hours sleep due to the illness. I saw the market had gapped down big and I figured my opportunity had been mostly missed. I threw out a hundred SDS’ just to stay busy and figured to minimize my losses when it turned against me. By the end of the day I’d done 60 trades in and out with SDS and was up 6% for the day despite missing the gap down at the open, the first 45 min of trading, and with virtually no opportunity to read any of the market,economic, financial, general, or trading news like I usually do. It was pure video game and nice as it ended up, (and as adrenaline charged as I was, trading with a potential margin call ticking on the screen), I really missed investing. you know, like last year. I could buy and sell on limit orders posted the night before and I could look away and even hold a position overnight and over a weekend. I could think of myself as an investor and trader rather than a gamer. Here’s hoping we get back there soon…
December 2nd, 2008 at 1:13 am
jose madre @ 12:41
“By the end of the day I’d done 60 trades in and out with SDS …”
You must have an agonizing time preparing your tax returns.
December 2nd, 2008 at 2:14 am
SB @ 12:03
25 years…?
I guess Reagan doesn’t escape blame either.
December 2nd, 2008 at 2:18 am
Probably will retest the lows. Love the pessimism.
I went out to dinner and had to wait in line an hour. On a Monday. Sheez.
And I’m talking Cheesecake Factory, not a soup line.
December 2nd, 2008 at 2:38 am
Thanks, Andy Tabbo, for confirming with your technicals what Mish has said about bond fundamentals. Who knows? Maybe without your statement I would’ve been trying to short.
December 2nd, 2008 at 5:32 am
zell:
to your Q, no, those studies(abstracts), in specific, were more recent. though his work goes back further than the ’70’s..
see: http://www.orthomed.org/jom/jom.html link to Journal of Orthomolecular Medicine
and: http://www.orthomolecular.org/ main site
~~
AT,
I only wish I had seen that 131^00 call, those are the kinds of outliers I dig..
December 2nd, 2008 at 6:14 am
DL@ 2:14
He appointed Greenspan, didn’t he? I could argue he deserves MOST of the blame.
December 2nd, 2008 at 10:29 am
Chris Whalen’s probably right, we’ve got to let these zombies die in bankrupcy and nationalize big sections of the banking system.
Here’s what I think is a major mystery that nobody is covering. Canada. GDP is doing great, banking sector (all 7 of them) doing fine too. Yet, they are more connected to us than UK/Europe, participate in logging (housing) and the auto sector, yet where’s the panic and pain ?
Could it be their financial system is set up and regulated better than ours? Is that possible?