BankUnited: 2009′s Biggest Bank Failure
As they round the clubhouse turn, moving up on the inside post, its Florida’s BankUnited FSB.
We have a new winner for the biggest bank failure this year: Expect this debacle to cost the FDIC’s insurance fund $4.9 billion.
BankUnited moves into the 2nd place position in recent years, behind only IndyMac Bank, which cost the FDIC $11 billion. (Schumer!)
WSJ:
BankUnited’s failure is a stark reminder of how fragile many banks in the country remain. The U.S.’s 19 biggest banks this month performed better than expected on government “stress tests” and several large and midsize banks in recent weeks have successfully raised capital through public stock offerings. Government officials say they are still concerned, though, about dozens of banks across the country that made bad bets on real estate, and these troubles will likely continue to ripple through the financial system.
BankUnited Financial Corp., the ailing Florida lender, was shut by federal regulators and its assets were sold to private-equity firms including WL Ross & Co. and Carlyle Group in the largest U.S. bank failure this year. The group’s purchase of the bank, deemed “critically undercapitalized” by the Office of Thrift Supervision, was the “least costly” resolution, the Federal Deposit Insurance Corp. said today in a statement. The closing will cost the insurance fund $4.9 billion, pushing the total cost of 34 seizures so far this year to more than $10 billion.
>
Previously:
Office of Thrift Supervision: Asshat Central (December 24th, 2008)
http://www.ritholtz.com/blog/2008/12/ots-asshat-central/
Sources:
BankUnited Fails in Year’s Biggest Bust
DAMIAN PALETTA and JOE BEL BRUNO
WSJ, May 22, 2009
http://online.wsj.com/article/SB124294168567644901.html
BankUnited Shuttered, Assets Sold to Kanas-Led Group
Jonathan Keehner and Linda Shen
Bloomberg, May 21, 2009
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSXxrVqwoLGM
~~~
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May 22nd, 2009 at 8:00 am
Blue skies ahead.
May 22nd, 2009 at 8:03 am
“…”This report paints the disturbing picture of a regulatory agency being much too cozy with the industry it’s supposed to be regulating,” Grassley said in a statement.
Rich Delmar, counsel to the inspector general for Treasury, said the office planned “to review the other corrective actions taken” at OTS.
The Treasury audit report released on Thursday follows the inspector general’s “material loss review” of IndyMac, which was seized in July after loan defaults mounted and tight capital markets caused losses on mortgages it could not sell.
That material loss review uncovered the capital backdating at IndyMac and other thrifts, prompting the audit report.
The report does not name the five other thrifts but notes that the capital contributions that were backdated occurred at the institutions from January 2007 through August 2008.
**BankUnited Financial Corp is among the institutions that were included in the report but not named, according to a source familiar with the matter. The troubled Florida lender is in the process of being sold and has drawn at least one bid from a private equity consortium, according to a source familiar with the matter…”
http://www.guardian.co.uk/business/feedarticle/8520031
http://news.google.com/news?um=1&ned=us&hl=en&q=BankUnited
..nice..
May 22nd, 2009 at 8:13 am
I wonder how long before FDIC makes an announcement similar to what the PBGC did the other day. It seems only a matter of time.
May 22nd, 2009 at 8:30 am
SanFranHobo: You must be watching CNBC: “Blue Skies for the Markets” theme day today.
I have it muted as usual, but they have on Noah Blackstein who is apparently telling us about the current recovery. Should be mandatory to post the records of these tools. Here’s his. If I had bought his fund 10 years ago, I coulda made 1%. Certainly makes me want to listen to him:
http://funds.dynamic.ca/fundprofile.aspx?f=PW2K&s=A&c=CDN&lang=EN&r=7735
May 22nd, 2009 at 8:31 am
Sorry, I coulda lost 1% …. plus inflation.
May 22nd, 2009 at 8:36 am
Mike,
looks like a typical mutual fund to me. Goes up when the market goes up, goes down when the market goes down.
Are those returns net of that 2% mgmt fee he charges.
Clown.
May 22nd, 2009 at 8:38 am
I wonder if we’ll ever see a penny of the 14B that the Treasury is going to dump into GMAC. A bank thta really isn’t a bank.
Looks like the big healthy banks will be able to repay TARP with Treasury waving off any taxpayer profits on the warrants, then Turbo Tim will have more monopoly money to throw into the sickest banks at probably the first loss tier to help their ratios – and then it will be pick and choose the surviving mid & regional banks. And F&F will need another boatload of cash too.
There must be beads of sweat on the lips of Uncle Ben, Turbo Tim and O’B when they see the UK credit downgrade warning and start looking at some US stress test results with trillions more debt at higher interest rates. Thats when we go super nova wit hyperinflation overlaid on a moribund economy. At least the 19 immortal banks will be laughing all the way to…where do they go to laugh?
May 22nd, 2009 at 8:40 am
jc,
I think that might be The Hamptons.
May 22nd, 2009 at 8:41 am
I guess it’s an impossible dream, but the beginning of every interview with one of these turkeys should be a their fund returns over the past ten years, or maybe a chart like the one on that page. Would save a lot of investors and certainley improve the quality of interviewees.
May 22nd, 2009 at 8:42 am
Bank U was sold to Wilbur AND it cost the FDIC ~5 billion. Huh, what did Wilbur pay?
Total FDIC outlays so far ~10 billion on 34 seizures. One bank, Bank U, required half of the total!
Strange stuff
May 22nd, 2009 at 8:47 am
I have a prediction – the US will create a superagency to take possession of the abandoned and foreclosed homes and shield the banks from massive losses by paying a “fair” price and then hold and maintain them so local communities receive property taxes and the areas are not blighted and renting them at “fair” prices losing money at both ends – but holding and praying for a housing rebound. A new form a can kicking and loss transferral from banks to taxpayers
May 22nd, 2009 at 8:51 am
I certainly hope they save GMAC, or at least the Ally Bank. While not a great rate compared to the QE days, they have the best CD’s and savings rates around at the moment and are easy to deal with. I don’t buy the inflation talk yet. One of the few havens for those willing to be patient.
None of the other currencies is any better and you will again see a flight to treasuries when stocks sink again. UK we know is crap. Euro may break apart. As someone said it’s Germany supporting the lazy Greeks and Italians. Japan will likely depreciate it’s own currency to increase sales. CA and AUS depend on commodities which are in a temp bubble. China’s is not convertible. You can’t actually spend gold.
The may come a day when the dollar collapses, but not this day.
May 22nd, 2009 at 8:54 am
Re: united bank
Un muted it for a minute while Wilbur was talking. He said they paid close to $1B and the bank had a lot of non-amortizing loans.
May 22nd, 2009 at 8:57 am
@Mike in Nola
And Wilbur admitted that it would likely to get worse before it got better to the tune of about 15%
May 22nd, 2009 at 9:00 am
Mike in Nola, maybe that will persuade Karen. …..deflation first, inflation second….
May 22nd, 2009 at 9:02 am
green shoots baby, green shoots
Bizarro Dead Hobo emulating F411
May 22nd, 2009 at 9:07 am
Good explanation of what’s going on this spring, though I disagree with his advice short term. I think there is be another credit squeeze coming that will deflate things more before inflation takes hold.
http://www.atimes.com/atimes/Global_Economy/KE23Dj02.html
May 22nd, 2009 at 9:07 am
I like it Hobo
May 22nd, 2009 at 9:14 am
BankUnited’s failure could portend green shoots in the space it vacated. Unfortunately, the forest floor gets little sunlight due to the giant too-big-to-fall trees on life support from Ben, Timmy and Larry. No green shoot will ever survive until some of the dead wood is cleared away.
For viable green shoots to emerge, we need a huge conflagration. Somebody needs to cut the water to the fire hoses.
May 22nd, 2009 at 9:15 am
…the paper “dollar” spewing fire hose, I take that to mean….
May 22nd, 2009 at 9:18 am
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOQPmbrh1ZrA&refer=home
TARP Warrant Sale Shows Banks May Reap ‘Ruthless Bargain’
A couple of days ago I speculated that the stock run up and associated favorable bank stock ratings changes, plus the haste to sell new bank stock issues, were all interrelated. A news article about Uncle Stupid planning sales of bank stock warrants made me think of why the banks might want to see the prices of their stock fall a bit. Paranoid: yes a bit but why should I assume honesty has anything to do in the financial markets. Bankers have done nothing of late to deserve a little faith.
Bloomberg has corrected me. Apparently Uncle Stupid doesn’t care about getting good value. He just wants to gift the banks again.
May 22nd, 2009 at 9:20 am
fire hoses still spewing
May 22nd, 2009 at 9:20 am
@dead hobo
When you give someone US$1 billion as an interest-free loan, with an uncertain payback period and no interest costs, do you think they will:
a. Settle all their outstanding debts and start earning money to repay this new facility?
b. Invest in some safe securities to eke out a secure return?
c. Bet the whole thing on red?
If you answered “c”, then congratulations – you are now eligible to become a banker in the United States.
May 22nd, 2009 at 9:25 am
…the Fed and the Treas, have it all in on red….
May 22nd, 2009 at 9:26 am
@Andy T
Andy…are you around?
What does that UNG chart tell you in EW terms…
I’d gotten in at $13 and bailed at $16…
Does EW suggest a lower low?
May 22nd, 2009 at 9:27 am
What’s driving commodity prices:
Of course, the question not asked is: what happens when China stops?
There are many reports that the Chinese stimulus is mostly hokum involving more “high’y suggested” bank lending for non-productive purposes. Sound familiar?
May 22nd, 2009 at 9:27 am
oops – meant “highly”
May 22nd, 2009 at 9:29 am
@Wes Schott
So since helicopter BB did his doctoral thesis on money supply during the GD, when this response blows up in his face, it’s going to make the “paper” on a PhD about as valuable as the “greenback” (or should I say “redback”?).
May 22nd, 2009 at 9:32 am
…….”only the USG can take perfectly good paper, cover it with perfectly good ink and make the combination worthless” Milton Friedman
May 22nd, 2009 at 9:33 am
Mike in Nola Says:
May 22nd, 2009 at 9:27 am
What’s driving commodity prices:
reply:
————-
Asset inflation, greater fools theory. Self fulfilling prophecies. Ignorant regulation. Thieves who know how. China is irrelevant.
May 22nd, 2009 at 9:37 am
Hobo,
are you suggesting that $147 oil was not caused by simple supply and demand?
May 22nd, 2009 at 9:53 am
The predicted snoozer trade seems to be in effect. Not sure whether this sell-off in Treasuries is as serious as people are suggesting, as trading is kind of thin around the holiday. Anyway, we have made a bunch playing this curve steepener since New Year’s but I think it’s getting time to fade that trade for a while, by buying the long end.
Looking for a $ rally, commodity sell off, rally in the long bonds, and a reversal for HY and equities before long.
May 22nd, 2009 at 10:00 am
BTW, I agree with everything Mike in NOLa has been writing about lately. Deflation, then inflation. The Euro is surely at the top of an incredible run. The $ is just not going to go in the tank at the expense of all currencies. Yet.
May 22nd, 2009 at 10:03 am
…yet
May 22nd, 2009 at 10:03 am
I agree with Barry that the regulators were inept and asleep at the switch…
…
Which makes it all the more amazing that he wanted these same regulators to run every bank in America.
May 22nd, 2009 at 10:04 am
We should be auditing the OTS, the FDIC, the UST (TARP/PPIP), the FR, etc. Re-post of something I posted in the Think Tank last night:
Another notch on the belt for the kleptocrats:
The bank will be “sold” to Carlyle, Blackstone and WL Ross. But why should Carlyle et al “pay up” for the asset when they can get Sheila Bair to use taxpayer money to backstop the entire sale for them. And when we are talking $12.8 billion in assets, it surely is much better to get Joe Q. Sixpack to make sure you (Wilbur Ross et al) don’t have any risk exposure. After all, it worked so well for WaMu and JPM. The immediate cost to the FDIC will be $4.9 billion (and up to $10.7 billion based on the loss-sharing arrangement), which means that at this point the FDIC’s DIF is negative with almost 100% certainty. Robbing from poor Peter to pay rich Paul continues.
May 22nd, 2009 at 10:06 am
@cvienne
Nice call. Ditto Ben’s Milton Friedman birthday speech. Agree with leftback and Mike in Nola — “It” WILL happen here.
And later, will the Fed’s balance sheet be too full of crap to unwind? “LOL. We’ll find out.” Someone should tell Bubbles to cool it — inflation will come big time, but only when it’s good and ready, QE be damned. I don’t see any way out of this trade. Doh!
May 22nd, 2009 at 10:09 am
dead hobo: your theory is just as credible :)
What’s the crowd think of puts on TBT if the premium isn’t too bad? It’s in an IRA, so no shorting. And I’m disenchanted with ultras and ultrashorts since my recent experiences with SRS, etc.
May 22nd, 2009 at 10:10 am
@f411 10:03
Franklin, interesting comment from you. If you agree that the regulators were asleep at the wheel prior to this bursting of the bubble, what gives you so much confidence now that the same group will be effective at solving this problem. Very interested on your thoughts.
May 22nd, 2009 at 10:11 am
@Cursive
Karl Denninger had a similar piece today on BU. Yes, we “should” be auditing all of these suckers, but who’s going to do the auditing? Barney Frank would give the job to the Fed — a “super auditor” maybe. In fact, why don’t we nominate this lady.
She seems to be doing a heck of a job:
http://dailybail.com/home/there-are-no-words-to-describe-the-following-part-ii.html
~~~
BR: The FDIC . . .
May 22nd, 2009 at 10:12 am
RIFIN is back-testing a break of the support formed during this rally from March. Let’s see if the old support is now resistance.
May 22nd, 2009 at 10:16 am
@Leftback
I nominate Elizabeth Coleman for recognition in your upcoming opus, “Tyranny of the Incompetent.” I would also suggest that you delineate the qualities of the incompetent from the willfully negligent.
May 22nd, 2009 at 10:17 am
@clawback
We’d better be careful what we wish for (minding the store at the Fed)…
The policy response might just be to oust BB and replace him with Larry Summers…
May 22nd, 2009 at 10:19 am
@Cursive
Because Barry was calling for nationalization in late January/early February. That would have meant that the regulators carrying out the nationalization would be from the Bush era, because it would be impossible for the new administration’s political appointees to put their marks on their agencies.
Let’s not forget that FDR faced a *far* worse crisis in March 1933 than we faced in January/February, and he did not nationalize the banks. He declared a national bank holiday (and the states had been declaring bank holidays on their own in the weeks leading up to the national crisis) and closed all the banks. Then he sent a wave of accountants to audit them. The ones that were sound were reopened, and the ones that were closed were resolved.
The point is that FDR faced a crisis that was several orders of magnitude worse than the one we face, and he didn’t jump into it with both feet without looking to see what the real situation was first either. It was fantasy-land for Barry to have expected President Obama to ignore this piece of wisdom and instead leap blindly into nationalization with neither the data nor the staff necessary to accomplish it.
May 22nd, 2009 at 10:22 am
so one more bank goes down — that’s great news in itself. two or five banks going down on the same day, that’s not nice.
the government plan executing a laissez-faire interventionism: letting the market decide what kind of intervention is required as of … today. free market guys are administering the triage. only essential transfusions, no major surgery until vital signs have stabilized, no forward looking diagnoses, no amputations, etc. just work it as it happens.
note the steep pareto distribution implied the bloomberg quote: indy mac is $11 billion, and then the next 34 banks are $10 billion. we can do this.
May 22nd, 2009 at 10:22 am
>> (Schumer!)
Heh-low, Jerry.
May 22nd, 2009 at 10:23 am
@Franklin: Disagree. Re:BankUnited. Per my recent post regarding this in Think Tank.
Not inept and asleep.
Too cozy with companies like Carlyle, which is one of the biggest and dirtiest companies in the world IMHO.
It’s Resolution Trust Corporation all over again. BankUnited had $10B in deposits according to the other article. They pawn the bad debts off on FDIC for what, $10B or so, and instantly pocket a huge gain. A no-brainer as they say.
And the regulators were willing co- conspirators. Either Sheila Blair is as bad as the rest, or she’s politically adroit enough to let someone else push buttons without blowing the whistle.
May 22nd, 2009 at 10:25 am
@F411
Yeah – he was too occupied at the time doing “al-Arabiya” interviews and having Super Bowl parties at the WH to devote deep thought into the matter…
May 22nd, 2009 at 10:29 am
@ Franklin…
No, No, No… that isnt what Barry said at all. Nationalization yes, but the same regulators, most certainly not. But I wont defend him myself. I’ll just make a bag of popcorn and wait for him to do it himself.
May 22nd, 2009 at 10:32 am
Don’t think the banks were as bad in the same way in the GD. They hadn’t engaged in the craziness we have seen this decade. My impression was that their problems were not in their business models. Their problem was a liquidity problem from a combo of reasonably sound loans going bad and runs on the banks because of no FDIC.
Today we have insolvency because of impossible business models. The Ben and Timmy confuse the two, thinking it’s only a liquidity crisis when it’s really a solvency problem.
May 22nd, 2009 at 10:32 am
cv – that’s not nice…I guess it was a bit later when he was charting the sweet sixteen…
May 22nd, 2009 at 10:35 am
@f411
For the sake of argument, I’ll ignore the horrendous performance of FDR’s administration in it’s vainglorious attempts to right the ship in the ’30′s.
So, FDR is your blueprint? Well, I haven’t read anything about the creation of a similar TARP or PPIP program during FDR’s administration. They did create the FDIC, whose mission is to protect bank liabilities, not assets. Yet, Sheila Bair is trying to buy or backstop bank assets. Don’t you think TARP and PPIP are jumping in with both feet without looking?
May 22nd, 2009 at 10:38 am
…all in on red…
May 22nd, 2009 at 10:40 am
@Mike in Nola
Re: “Ben and Timmy confuse the two, thinking it’s only a liquidity crisis when it’s really a solvency problem”…
That’s well said…LIBOR rates are telling you just that, but nobody seems to understand (or don’t want to)
May 22nd, 2009 at 10:43 am
Mike in Nola @ 10:40 am
has not LIBOR come way down since last fall? Have not checked it recently. Is it spiking back up?
May 22nd, 2009 at 10:44 am
All I can say is that it sure is a good thing america is getting ‘so rich’ off this equity rally, because we’d be feeling a lot poorer with the relentless devaluation of the greenback. Dollar is trying to hang on for dear life with an 80 handle….it needs to snapback hard very soon to save itself. cvienne: in re: natgas…over the next few years I’m a huge bull on NG. I think it could outperform most other commodities as well as the SP500. Shorter term, 3.45 -3.36 should be an area that holds. However, even if we do take out the lows of 3.15, I’m pretty sure this would be the final leg down and will end up being a larger bear trap. as an aside…..don’t really care for the UNG or any other ETF for that matter…they’re “money vampires.”
May 22nd, 2009 at 10:46 am
Everyone has been patting themselves all over the back since last October, saying “look – LIBOR rates keep coming down” ad nauseum…
Sure…Because after the Lehman collapse, there WAS a short term liquidity problem (due to fear of not knowing what anyone else had on their books or what they were exposed to)…
Now that they’ve been backstopped to the tune of GAZILLIONS, that fear factor is gone…But they are still in la-la land not knowing (or caring) that there is a solvency crisis…
May 22nd, 2009 at 10:46 am
More info for Johnny Retail to consider over the barbecue – banks upgrading banks, as only ZH can tell it:
Chasing The Diminishing Marginal Buyer
Laughably transparent, eh??
Sometime next week when the theatre is crowded, Mr Mack and Mr Blankfein will yell “FIRE”.
LIBOR is low b/c all banks are backstopped, big or small, TBTF or FDIC.
May 22nd, 2009 at 10:52 am
@LB
That’s what I’m saying (LIBOR low)…
The problem is, that notion is being spoonfed to the public as a sign that “things are OK”…
Here at TBP, most seem to realize that “SOLVENCY” is the issue, not liquidity…(with the exception of a few dissF411enters)…
May 22nd, 2009 at 10:55 am
OK, I thought the point cv was making in response to Mike in Nola (but really in Houston) was that solvency/liquidity is somehow correlated to LIBOR.
Liquidity can mask insolvency, for a while anyway, LIBOR comes down because the liquidity is there. I see – an illusion to som extent.
Then hope a pray for solvency?
What a freakin’ waste – perfectly good paper + perfectly good ink…..
May 22nd, 2009 at 10:57 am
Money Vampires… what a perfect phrase. I really like some of the etfs, for trading only.. erx just gave me 2 pts from yesterday. hate uco, though. and the more i watch the point spread on dto, the more spectacular it seems… i mentioned i got over 11 pts on it yesterday.
May 22nd, 2009 at 10:59 am
@LB
They’d better bring their “A” game to the weekend barbecue…
If those shares are still sitting around unsold by next week, they’re going to get awful stinky…
May 22nd, 2009 at 10:59 am
A question from the ‘continuing education’ gallery…
Andy T writes:
> over the next few years I’m a huge bull on NG.
> don’t really care for the UNG or any other ETF for that matter
question: How, then, do you (and does one) invest in NG?
I can already hear wise voices here saying ‘Go do your homework!’, (and, ‘go buy a tank and fill up!’) and I can’t disagree.
May 22nd, 2009 at 11:00 am
Oh, and thanks for the charts, Andy T!
May 22nd, 2009 at 11:06 am
@Wes
That’s it my friend, now we’re on the same page…
You know something? The DISCONNECT (Wall St. vs. Main St.) right now is that Wall St. & the bankers live in a bubble…Before you laugh at that and say that it’s obvious (which it is) listen to what I’m referring to here…
The crisis is still in its infancy…I mean, the banks are really JUST FRESH from feeling good about getting bailed out, raising capital, stress tests, etc. THEY’RE STILL WRAPPED UP IN THE LIQUIDITY GAME…
Main St., on the other hand, well for them, the liquidity problem FOR THEM was up 6 months ago and NEVER GOT SOLVED…They didn’t receive any bailouts (on the contrary, they’ve been heaped with more problems)…
It’s not like the banks are going to go out and start lending right now…
MAIN ST. SOLVENCY PROBLEM…MEET MR BANK
May 22nd, 2009 at 11:07 am
COP is a solid nat gas investment, actually…
May 22nd, 2009 at 11:16 am
COP is, effectively, a “derivative” of nat gas and a few other commodities
May 22nd, 2009 at 11:16 am
It’s TOO EASY for bulls to call this market up to 900 today…A cakewalk…
Hey, why not? do it before 11:30, hit sell, pack your bags, and head for the beach!
May 22nd, 2009 at 11:20 am
cv – yes, we are on the same page –
Main St’s insolvency will continue to spread as jobs are lost and when those mortgage resets the next few years…the bankster bailouts will continue — feeding at the nozzle of that fire hose full of an endless supply of dollar bills
Kinda like being in a flood and watching the water rise and rise and hoping it stops before the levy is breached.
May 22nd, 2009 at 11:20 am
@Karen, r.e. COP, Thank you. I also appreciate your mentioning the Nison ‘Candlestick’ book, it’s in my queue.
@Cvienne I’ve been astounded since October at the notion that making the banks ready to lend will make borrowers as eager to borrow as they were 2-3-4 years ago. I literally can’t understand how people think that way, but apparently some key people do.
May 22nd, 2009 at 11:22 am
@ pmfl:
Learn to trade futures… its the final frontier. At least for me anyway. I’m beginning to think the same thing about ETF’s AT… and I just revamped my entire trading system around them.
May 22nd, 2009 at 11:23 am
Negative divergence b/t SPX and RIFIN. Hmmm.
May 22nd, 2009 at 11:27 am
Nat gas plays: COP, dividend, large cap conservative stock. CHK, a bit more risky. N.B. I would buy no energy stocks at this time of the year. This usually marks a seasonal high. Andy T may offer more on this.
May 22nd, 2009 at 11:27 am
pmorrison: this is going seriously astray of the topic of the thread….i may have disparaged the UNG too sharply…from the highs of 2008 to the collapse, the UNG lost 78% of its value while Spot natty gas has lost 74%, so not too bad in keeping up. However, from near inception…let’s say around 5/18/07, UNG has lost 74% v. 56% loss in spot NG values, so that’s terrible performance [money vampire]. Maybe they’ve figure out a way to better mirror NG performance lately? Or maybe it has no problem keeping up in a down market, but may lag in an up market? Not sure. So, maybe long UNG with a matching SP500 short (some sort of inverse ETF) would create a nice trade next few years? Or maybe going long some E&P company with heavy NG exposure, like an Apache or an Encana, coupled with an SP500 short? The problem with going long the nat gas companies is that in a bear market, those stocks will go down NO matter what is happening with NG. Bottom line is “Go do your homework!” ha.
May 22nd, 2009 at 11:28 am
LB @ 10:46 ZH post – too funny
“In other news: tomorrow BAC upgrades BAC on the thesis that other banks will upgrade it.”
May 22nd, 2009 at 11:28 am
@I-Man
I’m still eyeing the rocket suspiciously before going in to orbit, but I will keep the ‘final frontier’ in mind.
As a resident of South Florida, I’m lucky to have a number of Jamaican friends, associates and acquaintences, and I can sometimes hear their rhythms in your writing. Much appreciated and enjoyed, a nice glaze on your market comments.
May 22nd, 2009 at 11:29 am
@pmorrisonfl
It’s even worse than you can imagine…
It’s not only that people are LESS WILLING to take on more debt…It’s that they CAN’T…
Banks AREN’T LENDING…period!
I want to throw nerf bricks at the TV when I see someone like Larry Summers come on the Sunday morning talk shows and spout on about how all these bank bailouts are helping to get loans to people and small business that need them…IT’S A BOLD FACE LIE!
I paid cash for my place in WVA recently because I couldn’t get a loan…with perfect credit, and cash on hand, so I said SCREW IT and paid cash…
Donald Trump himself has said he can’t get financing for anything…
The banks are taking this cash and doing this little dance with the Treasury & Equity markets trying to “double down”…the WINNERS pay back the TARP, the LOSERS get a visit from Sheila Bair…
THAT is what is happening my friend…
May 22nd, 2009 at 11:33 am
@Andy T
Andy – Are you in the camp that GOLD and the USD will reverse course hard over the weekend?
Are you leaning any way yet on that? Anything tipping you over the edge?
I’m in the HARD REVERSAL camp
May 22nd, 2009 at 11:33 am
Cvienne Says:
“The banks are taking this cash and doing this little dance with the Treasury & Equity markets trying to “double down”…the WINNERS pay back the TARP, the LOSERS get a visit from Sheila Bair…”
pretty much it- in a nutshell
May 22nd, 2009 at 11:33 am
Full disclosure:
Not playing either though – just a curious bystander
May 22nd, 2009 at 11:34 am
Agreed with COP. They also took a MASSIVE write down which should make their earnings look great for next few years, relative to everyone else. However, I would say all the charts sort of look the same. And, as LB has noted this is the time for a seasonal peak on asset classes. It’s one of those things you probably want to keep in mind later this year, when all hell is breaking loose….So NOTE TO SELF: “Later this year, when the equity market is getting trashed out, pick up some Nat Gas stocks like COP, APA, or ECA.”
May 22nd, 2009 at 11:34 am
Geithner Plan vs. Paulson Plan
http://bit.ly/9HRIS
Geithner plan is a scam, plain and simple. A brilliant scheme concocted again by Goldman and other big investment banks to enrich themselves with free government money.
May 22nd, 2009 at 11:36 am
@lb and AT: Thanks for indulging this distraction!
Back to thread: If all the little banks (like Bank United) that bit off more residential and CRE loans than they can chew go under and are bought by hedge funds and “top 19″ banks, how much further toward a ‘financial-industrial complex’ can this go? I’ve been to Sao Paulo, and I wonder if that’s a model for we’re going to catch up with the rest of the world: tall towers, gated communites and armed convoys between for the few, tin and cardboard boxes (with satellite dishes) for the many.
May 22nd, 2009 at 11:38 am
cvienne, you would have to count me in the camp looking for major reversals in the currencies, but in order to trade that I need to see “something” first….Dollar is showing no signs of bottoming, but there is a TON of “reversal tension” building up…lots of intraday bullish RSI building….but I really need to see some sign of life before jumping on it.
May 22nd, 2009 at 11:39 am
@Cvienne
>I want to throw nerf bricks at the TV
I admire your restraint. I want to throw harder things. Can’t argue with your views, I think you’re spot on. Thanks for sharing them here.
May 22nd, 2009 at 11:41 am
Also, very interesting dynamic last 48 hours…For many weeks now the weak dollar has been the ‘heroin hit’ giving a boost to US equities….but last few days as the $US has unravelled, stocks don’t seem to like it. I’m thinking some sort of stabilization or rebound in the $US would actually help equities a little bit.
May 22nd, 2009 at 11:47 am
Andy, have taken note of that same interesting dynamic.. if in fact it is a correlation and not a coincidence.
May 22nd, 2009 at 11:48 am
@pmorrison
Re: Flavellas & Cruzados for us all!…Back in the early 90′s I used to travel down to Brazil a lot…My “sponsor” had his own provate helicopter that he’d take us from Sao Paolo to his house on Islia Bella…The disparity even back then was what you describe…
And “forget about the currency”…which was the CRUZADO back then…Once time I left there in October with about $40 worth of CRUZADOS in my pocket, when I came back 6 months later in March, they were worth about a nickel (I kid you not!)…
That’s what will happen to the dollar when it falls out of bed…But it will be DEFLATION first, as many of us here agree…
May 22nd, 2009 at 11:49 am
AndyT – why do you think that the correlation will flip? simply phase lag?
May 22nd, 2009 at 11:50 am
@Andy T
Re: dollar
I just keep coming back to the notion that the dollar is still a pretty big parking lot…
If everyone seems to be scared of EVERYTHING all at the same time, that’s a pretty powerful magnet this cheap…
May 22nd, 2009 at 11:54 am
@Andy T
The “sign of life” you’re looking for may not occur intil Sunday night in Hong Kong, or Monday morning in London…
While everyone here is at the beach…
May 22nd, 2009 at 11:54 am
cv and pmorrioninfl,
I remember going to Brazil in mid-80′s – you would hold off converting your currency to pay bills until the last chance before you departed the country – that was even for a one week trip, the inflation/currency devaluation was so rapid.
The disparity between the haves and have not was exceedginly striking.
In recent years, while there is still disparity, there seems to be more of a middle class than before.
May 22nd, 2009 at 11:56 am
AT,
I agree on your take on the ETF’s in a lot of instances. Like Karen said, better for trading unless you are holding some boring bond ETF such as BND. For example, if you were thinking Nat Gas would rally as it has, you were better off owning some of the stocks you suggested, or CHK, or XTO, and buying them back in December.
so far doesn’t look like much is going on for today as LB predicted yesterday. I came pretty close yesterday on the pullback call of 873, or lower to 841. Low tick yesterday was 879.
AT, I had asked a question on another thread about the NAS price action recently, as it wasn’t making sense to me and was looking like it was completing a 5 wave up pattern in my early attempt to identify waves, to me it looks like the pattern started on May 13 and would point to wave 5 stopping out at 1780-1786. You might have discussed this on your charts, I was out of town when you made that offer and I can’t remember what thread you posted the e-mail on.
What do you think?
May 22nd, 2009 at 11:58 am
AT’s post at 11:38 is a very valuable one though it might not appear so on the surface.
Invest when you have an advantage with probability. Otherwise, just watch from the sidelines. It’s the best way to make money, and keep money.
May 22nd, 2009 at 12:00 pm
cruziero
cruzado
cruzado novo
cruziero
cruziero real
real
and each one came with a new economic plan
print baby print
May 22nd, 2009 at 12:02 pm
@Wes
LMAO…That’s classic :-)…Good research there…
Franklin doesn’t know what it means though…better inform him…
May 22nd, 2009 at 12:02 pm
@ pmorrisonfl 11:36
Why do you think we’re moving towards a police state, with surveillance and indefinite detentions for citizens?
Sorry, can’t help but think about that kind of stuff… like that the War on Terror is but a cover to pass laws to protect elites from the ramifications of their looting of the public. Especially with you mentioning Sao Paulo, and me recently reading Shock Doctrine again, in particular the parts discussing the Chicago School’s influence in South America, and the results of that influence.
PS – first post from an epically long time lurker (Back to when Barry was posting in Alterman’s columns on Slate). What do I win? And where do I sign up for the LB Fanclub?
May 22nd, 2009 at 12:04 pm
@karen
Re: Wes (12:00)
what was it I said yesterday?
“Paper currencies don’t exactly have a brilliant history”
May 22nd, 2009 at 12:04 pm
you are here, no need for additional siging up
May 22nd, 2009 at 12:06 pm
cv – “on a long enough timeline…” all fiat goes to zero
May 22nd, 2009 at 12:14 pm
http://macro-man.blogspot.com/ had a little comment on the spx – dollar divergence this morning..
May 22nd, 2009 at 12:17 pm
@Dogfish And where do I sign up for the LB Fanclub?
+1 ‘you are here’
@Dogfish ‘can’t help but think about that kind of stuff’
Actually, my model for where we’re going is feudal: lord/serf. The Ivy league is going medieval on US. I actually don’t think they mean ill, it’s just a natural consequence of trying to help their friends and maintain their status quo. Even if that means indefinite detentions. I forget who said it, but it goes like ‘The terrible thing about this world is that everyone has their reasons.’ What’s cool to me is that there are obvoiusly smart, capable people who care and are trying to figure things out, evidenced, for example by this blog and its commenters. I hope this means our US ship of state will be righted, I plan as though that may not be the case.
May 22nd, 2009 at 12:24 pm
CA job losses fueling the foreclosure bonfire there
Forty-four states lost jobs in April, led by California where employers slashed 63,700 positions, as the recession took a further toll on U.S. workers.
Trailing California in over-the-month job losses were: Texas, which saw 39,500 jobs vanish; Michigan, which lost 38,400 jobs; and Ohio, where payrolls fell 25,200, according to a U.S. Labor Department report issued Friday.
More
* Econ Newsletter: Click here to sign up
California’s unemployment rate dipped to 11% last month, fifth-highest in the country. Michigan’s jobless rate was the highest at 12.9%, followed by Oregon at 12%, South Carolina at 11.5% and Rhode Island at 11.1%.
May 22nd, 2009 at 12:52 pm
Everything’s perfect.
May 22nd, 2009 at 1:10 pm
@ben22 — AT graciously offered to let people subscribe to his mailing list at Andystechnicals at gmail.com.
May 22nd, 2009 at 1:19 pm
Whammer,
Thanks much. That’s what I was looking for.
May 22nd, 2009 at 1:21 pm
LB is flattered to learn that there is a Fan Club – clearly one of the smaller groups among contemporary society…
SPX 893-895 area potentially forming a lower high, but wouldn’t put much stock in anything that happens on a summer Friday, especially around a holiday. Still expecting a rally Tuesday and then would think about fading it.
May 22nd, 2009 at 1:31 pm
@LB
Something on the order of 910 (Tuesday), & fade at 3:45?
May 22nd, 2009 at 1:36 pm
@cvienne: That is certainly a reasonable scenario, but we could even have a Patriotic Pump to 920. :-)
May 22nd, 2009 at 1:40 pm
I thought Schadenfreude’s offices were closed today…
May 22nd, 2009 at 1:41 pm
@LB
Yup…Probably will depend on how the weekend barbecues go…
(Whether the brokers can sweet talk those bank shares into the hands of JP, or whether they choke on the thing)…
It’s all in the marinade…
May 22nd, 2009 at 1:45 pm
I-Man: We are not trading, but recovering from a hangover induced by a night on the tiles in NY NY.
May 22nd, 2009 at 1:48 pm
“The 34 bank failures this year in the U.S. compare with 25 in 2008 and just three in 2007. As the economy nationwide has soured, amid rising unemployment, tumbling home prices and soaring loan defaults, bank failures have cascaded and sapped billions out of the deposit insurance fund. According to the most recent data available, the fund now stands at its lowest level in nearly a quarter-century — $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.
The FDIC expects that bank failures will cost the insurance fund around $65 billion through 2013.
The FDIC has planned to impose a new emergency fee on U.S. banks to replenish the fund. Legislation passed by Congress this week boosts the FDIC’s authority to borrow from the Treasury Department if needed from $30 billion to $100 billion, allowing the agency to reduce the amount of the insurance fees.”
Excerpt from:
http://finance.yahoo.com/news/Floridas-BankUnited-fails-apf-15325280.html?sec=topStories&pos=3&asset=&ccode=
So whats the big deal??? Just a measly 46.1 BILLION dollar shortfall at the FDIC insurance fund… and hey, with only 7 months to go in 2009, what’re the chances that that will run out? Oh… wait. It dont matter, they can just borrow from the Treasury. Print baby… PRINT.
Should be good for another round of analyst bank upgrades… let’s see.
May 22nd, 2009 at 1:48 pm
You guys have probably seen this, but just in case:
http://zerohedge.blogspot.com/2009/05/chasing-diminishing-marginal-buyer.html
Another classic from ZH. It’s all just way beyond the pale. Leaves you (me) speechless, lest you (I) rant on again about the sordid state of affairs. There’s just no shame.
May 22nd, 2009 at 1:49 pm
I-Man
Funny coincidence, as I posted my last then saw your post. Almost looks planned!
May 22nd, 2009 at 1:56 pm
Onlooker: I posted that baby this morning. Agreed. Realizing there is in fact no shame leads to profitable trading !!
May 22nd, 2009 at 2:02 pm
@Karen: I thought that post by Macro-man was pretty amusing too. To be frank, the action yesterday confused me more than anything. I wanted to lock in the profits on the rest of my longs, but the falling dollar w/ falling U.S. equities confused me into a state of inaction. What is there to do from here?
The rally “feels” long in the tooth, but there is a lot of dumb money starting to pour in preventing a retracement, but not powerful enough to drive us up further. Shorts don’t sound attractive here either. Now isn’t the best time to take a punt in oil (in my opinion). I’m not touching the gold in my safe or my positions in DBA/RJA (albeit, I think there will be another chance before autumn to reload hard on these). Guns and ammunition are waaaaaay overpriced (you have to mortgage your house to buy a Glock 19 or Sig 229 and a decent amount of good ammo, if you can find it).
I guess I should just buy more video games?
May 22nd, 2009 at 2:03 pm
@LB
A-Ha!…Now I see how you arrive at your 920 (rah-rah) print for Tuesday!
May 22nd, 2009 at 2:14 pm
I hope that treasuries sink a bit more before Uncle Ben shows the speculators the power of the Dark Side.
Seeing some much more decent CD’s showing up Fidelity’s secondary list. Not really good, but the wife doesn’t want her IRA in anything not guaranteed. Not like a year ago, but a lot better than the past six months. You can even get a 1 year at near 2% :)
May 22nd, 2009 at 2:15 pm
While I’m digging… I thought I’d share this little nugget I found… on my favorite friends, GS.
I dont care much for the title, or the bonus part, but the part about AIG and the additional FDIC loans is something I hadnt heard before:
http://www.alternet.org/workplace/140166/why_goldman_sachs_is_the_greediest_and_most_dastardly_of_the_wall_street_pigs/
May 22nd, 2009 at 2:15 pm
@matt
Tough to find ANY ammo these days…it’s the only thing that’s flying off the shelves…
You’d think they could melt down a couple of Pontiacs or something and help a poor fella out!
May 22nd, 2009 at 2:21 pm
@ Mike: Slowly buying in the 5s and 10s as Treasury yields become more attractive, this could turn out to be a nice trade once the $ turns and the deleveraging begins anew. Remember December??
May 22nd, 2009 at 2:32 pm
H&S forming on the SPX? Peak on Wed as the head. VIX is climbing as the market moves sideways. Hmmm
May 22nd, 2009 at 2:33 pm
> You’d think they could melt down a couple of Pontiacs or something
Seems like melted down Pontiacs these days would just be a smoking pile of goo.
Now if I still had my ’62 Buick Invicta and a furnace, I could be in business!
May 22nd, 2009 at 2:33 pm
LB: Yep.
You must be hung over. You forgot Remember December?TM.
May 22nd, 2009 at 2:34 pm
@LB: in my misspent youth, I would interpret “night on the tiles” as meaning I slept on the bathroom floor, interspersed with episodes of driving the porcelain bus.
Say it ain’t so! ;-)
May 22nd, 2009 at 2:36 pm
Oops, the tag didn’t work :(
May 22nd, 2009 at 2:44 pm
@Whammer, Not LB, but an associate was indeed talking on the Big White Telephone™.
May 22nd, 2009 at 2:48 pm
@ Onlooker:
Nice spot on the VIX… now that is really interesting now isnt it…
Insty’s picking up some puts on the sly on a thin trading preholiday session perhaps?
Thats quite a move for a quiet day.
May 22nd, 2009 at 2:53 pm
@LB, it just occurred to me that kids these days are not going to understand what the heck that Big White Telephone reference is about, what with their little Bluetooth thingies and all…..
Yet another cultural reference soon to disappear, after first serving as an age marker!
May 22nd, 2009 at 2:55 pm
@Whammer
look at all the VIX chatter buddy…You were on that a couple of days ago…
May 22nd, 2009 at 2:58 pm
JC at 8:47 am is probably right on!
Anyway the market looks like a sell right here despite the seasonal pull of the holiday. SPX is above its 20 day daily, but lots of other indices are breaking down theirs ahead of it.
Happy Shorting!
May 22nd, 2009 at 2:59 pm
@cvienne — that plus $3.50 gets me a latte at SBUX ;-)
May 22nd, 2009 at 3:12 pm
Any of you guys ever traded FXP before? Anyone got that on their watchlist yet?
May 22nd, 2009 at 3:13 pm
@Whammer, yes that Big White Telephone reference is missing me, and I’m hardly young anymore…
May 22nd, 2009 at 3:17 pm
I-Man: Bought some a couple of weeks ago. Too early. It’s like the rest, friction eats it up.
May 22nd, 2009 at 3:18 pm
Trying to grok where exactly any bear side liquidity is going to come from. Assuming the recent run up was driven by banks with TARP funds, they don’t really need to sell as long as they can still get liquidity from the government. Of course there are some bears out there (and in here) but are there enough to trigger real selling? Or does this thing just churn sideways until some major outside event generates the liquidity needed to move the market in either direction.
There’s a bit in Confessions of a Stock Operator where Livermore is trying to get back in the game and goes a million in debt because according to him the market just won’t generate any direction up or down for a few years. Wondering if we could be looking at something like that coming.
May 22nd, 2009 at 3:20 pm
@I-man
I’ve never heard of it b4…
On the chart it looks like a “bowzer” since Inauguration Day (any correlation?)…Isn’t that around when Hillary was over there begging for money and telling them that we REALLY DIDN’T MIND if they rounded up all the Tibetans and gave them the Gitmo treatment?
May 22nd, 2009 at 3:21 pm
Its usually right at that time where it seems there are no bears that they just happen to show up in masse… just my two cents on that.
May 22nd, 2009 at 3:25 pm
I-Man, we’ve talked about fxp before… that was my biggest money maker in 2008, followed by skf… ben22 will remember. I’ve only traded it once this year for a very small gain.. but around this price level.. 15.90 was my buy price.
May 22nd, 2009 at 3:26 pm
@Outlier: If we’re range bound for ever more, you just play the technicals. Nothing easier than trading a range.
May 22nd, 2009 at 3:27 pm
My father is a big Obama fan, but he hated FDR. “People were starving and they just plowed crops under.” Also he was the only one in his 2nd grade class for Alf Landon. Of course the class probably had about 8 students.
May 22nd, 2009 at 3:32 pm
Outlier
I don’t really understand what you mean by “bear side liquidity.” If buyers become less enthused about buying stocks in light of economic conditions, prices will droop down until they see enough value to compensate for the risks of holding stock. And if a trend gets going then the herd will follow, like earlier this year. I really don’t know what you’re getting at.
May 22nd, 2009 at 3:49 pm
@Outlier
It’s in your name my friend “OUTLIER”…
There is no such thinh as INERTIA in a high tech world…Some “outlier” will act as a catalyst…
Netanyahu vs. Ahmadinejad
Yankees vs. Red Sox
Dogs vs. Cats
Americans vs. their bills
…something
May 22nd, 2009 at 3:50 pm
@OfT I’m not really sure the herd is there right now. The most compelling theory for the recent rally is big banks taking government money and pumping up stocks. The retail investor got pulled in for a peak for a second, but there is no real evidence they bought in in any volume. As long as volumes remain low and the government provides liquidity to the banks there is no momentum to break the market in either direction. There is however it seems the funds and impetus for large players to prop up prices and it appears they can do it rather easily.
Then again I-Man’s point about the bears showing up just when it seems they have dissipated is probably pretty spot on.
May 22nd, 2009 at 3:52 pm
@cvienne hah yes, that’s what I was getting at with “until some major outside event generates…”
May 22nd, 2009 at 3:57 pm
I-man,
Yes, I traded FXP last year, I remember Karen doing it as well. It was my most profitable single trade of the year just like her. I just about doubled in it.
I have been thinking about it lately but I’m currently still long FXI, still think it’s better to be on the long side in that one.
Still holding out for the bull case up to SPX 965-1000. Then I’ll put more shorts on for the summer, though, it’s already getting hot here.
May 22nd, 2009 at 3:59 pm
Bear side liquidity = big bear funds and naked shorting, I suppose. May not be available this time around.
I can see a long dribble downwards this summer as institutional investors, hedgies sell to meet redemptions.
A slow low volume sell off is quite easy to trade, even with the much reviled leveraged ETFs.
Not tempted to take sides into the weekend, I prefer to react to the reaction on Tuesday. Play what you see.
May 22nd, 2009 at 3:59 pm
Outlier,
If you disagree with everything I say, trust me on one thing: retail wants into certain stocks (C, WFC, BAC)/sectors (tech, mainly AAPL)/oil very badly right now. Give it time, they will come in right at the very top, and I don’t think we are there yet.
May 22nd, 2009 at 4:13 pm
Yeah, I suppose if you mean aggressive short selling as “bear side liquidity” I see what you mean. But I’m not convinced of this conspiracy to keep the markets afloat (i.e. control them) by the banks, et al.
In my opinion buyers will become less and less enthusiastic as they see that this magical recovery that’s been talked up is nothing at all or nothing more than a pull out of the slide that causes a slight GDP bump on the back of inventory restocking. But that may not even materialize as companies are going to be very hesitant to build inventory in the face of what we all know is a broken consumer base.
Bottom line is that it doesn’t take aggressive short selling to cause the market to fall from here. Just a less and less enthusiastic, delusional, and misguided buyer. We’ll see if ben22′s thesis plays out from here. I’m hesitant to doubt him as he’s on the front lines in this and I’m blinded by all my knowledge of the ugly truth. :) Also my desire for a fall from here so as to jam it down the throat of Cramer and Co. Spiteful, yes; but honest.
May 22nd, 2009 at 4:16 pm
@ben22: There is more than a grain of truth in that analysis of Johnny R. I will keep that in the back of my mind.
I don’t care if we are range bound for months here, I would just keep on selling 920 and buying 875. :-)
A good week here at Schadenfreude Asset Management. Evenin’ all.
May 22nd, 2009 at 4:41 pm
halfback,
Most bear markets end with a whimper-bleed downward on low volume. Its not so much the sellers as there are no buyers. ’74 was like that. This doesn’t mean it has to happen anytime soon. A lot of the predictions here will eventually come true. I was talking to a hedge fund guy in ’03 and we basically called a debt crises, only 5 years early. There was still a heap o’ money to be made.
May 22nd, 2009 at 4:47 pm
Not really taking a stance here, just mulling prospects forward. A slow creep downward makes plenty of sense, unless this possibly mythical plunge protection team actually exists in which case range bound seems more likely. And a rush to the exits is possible too. In other words who knows… Basically out of this market for now. Hate not having a framework to understand what’s up though.
As for J Retail, just anecdotally, I hear more “I’m done/Want out” than “Missed C, F, AAPL, whatever” musings. I’m sure there is some move back, but I’m wondering if a lot of the spring rally was based on the Sell side betting they could generate the interest to flip their pumped crap, and now they are sitting there wondering what to do with it all now that the suckers are scarce and worrying about their ARMs resetting…
May 22nd, 2009 at 4:52 pm
I’ve said this before and I’ll say it again. If we get another big crash no PPT is going to make the market range bound. They are powerless against credit deflation and the bags of credit they hold are not enough.
tanman,
nice observation.
That is the big question now isn’t it. There is a chance, though I don’t think it’s probable, that they fake us through another leg up much like the false bull market of 03-07. In any event, if you go big time short, you had better be able to unwind it quick if you are wrong.
May 22nd, 2009 at 4:55 pm
Outlier,
That’s interesting you are still hearing that. I have been referred to 17 prospects this year and have met with 11 since the March bottom. All of them asked about taking shots at what I mention above. I had a clients father meet with me in April. He had 500k to invest. Wanted to put the whole boat into oil.
People forget pain very quickly. Besides, retail never sells after a rally, they typically only do that at the bottom, or buy at the very top. It’s how the market works.
May 22nd, 2009 at 5:07 pm
@ben22 There is a bit of a selection bias in the prospects you wind up talking to though, no? Not sure precisely your position, but it seems clearly on the inside, the people who want out our have left aren’t likely to be “prospects”. My main venture now is in the garment industry so it’s mostly true Johnny Retails I talk to.
May 22nd, 2009 at 5:15 pm
Kass with an interesting take: http://www.thestreet.com/story/10504723/1/kass-revenge-of-the-longs.html
May 22nd, 2009 at 5:26 pm
Outlier,
No doubt, but I’m hearing the same from most other advisors. I’d be curious where exactly you work, or how much those garment’s cost. The crowd that can invest 100k or more, they will want in this thing bad at the wrong time.
That said, I made a prediction on here and have repeated it over the last several weeks:
Before this bear market rally is over, the desire to hold cash instead of equity will be at an all time high. I really think this is where that eventually leads. it will be a great time to buy stocks then.
May 22nd, 2009 at 5:30 pm
Outlier,
I just checked your site. Your stuff is a little pricey for Johnny Retail no? You’ve got some cool stuff on there though.
The guy I talked to with $500k, it was almost his entire life’s savings, he was 62 and had a fairly large mortgage payment to deal with, no pension, small social security check which he had not yet applied for.
It’s really not a lot of money if you think about it. There is a general rule of thumb in financial planning that you shouldn’t take more than 4% from a portfolio each year for income, lest you run out of money.
That’s $20k a year before taxes. Not exactly the high life.
May 22nd, 2009 at 5:55 pm
Outlier
I really like Kass: he’s crusty and contrary. And has balls of steel. But he made a serious error on oil last year. But who doesn’t get their ass handed to them occasionally? He called the bottom, but he had a couple of false starts that really stung. The important thing is that we now at least go sideways-that would allow a continuation ramp. I’ve found one of the best trading rules is-furious ramp, consolidation, and then continuation. I think this has the greatest probability. So if we are going to break down, we’d better do it real soon. Kass thinks yesterday bounce back sealed the deal. If you want to see someone who has been totally correct for over 2 years check out Bob Hoye-maybe you already have. He calls for a plunge, but he’s way overdue to be wrong.
May 22nd, 2009 at 6:19 pm
tanman,
Any thoughts on the long bonds?
May 22nd, 2009 at 7:40 pm
ben22,
if this: “ben22 Says:
May 22nd, 2009 at 5:30 pm
Outlier,
I just checked your site. Your stuff is a little pricey for Johnny Retail no? You’ve got some cool stuff on there though.
The guy I talked to with $500k, it was almost his entire life’s savings, he was 62 and had a fairly large mortgage payment to deal with, no pension, small social security check which he had not yet applied for.
It’s really not a lot of money if you think about it. There is a general rule of thumb in financial planning that you shouldn’t take more than 4% from a portfolio each year for income, lest you run out of money.
That’s $20k a year before taxes. Not exactly the high life.”
is what you’re doing, specifically: “..There is a general rule of thumb in financial planning that you shouldn’t take more than 4% from a portfolio each year for income, lest you run out of money…”
to your Clients, over the Weekend, you better hit Rewind, and Re-learn.
to Amortize One’s Portfolio, no matter the Size, unless that is the Explicit wish of the Client, is to Commit a grievous Error.
LSS: “rules of thumb”, like “Conventional Wisdom”, are, often, Traps–that one cannot chew their way out of, even if their Incisors are able..
May 22nd, 2009 at 7:53 pm
tanman-
or serious ramp up, reality, slow plummet-
for your hypothesis to work there needs to be a reason for the market to continue higher- there isn’t one- the consumer is spent- is deleveraging and will not incur more debt-
deflation all the way- no matter how badly the Fed wants you to BELIEVE otherwise-
the debt fueled consumption is over- and the real economy begins
May 22nd, 2009 at 9:03 pm
Agreed ahab
In a bear the market takes multiple stabs at guessing the next bull market; thus bear market rallies. Eventually it guesses right and it sticks, the way tanman describes. But all the other times it does what you’ve described.
It goes back to the fundamental question we’re dealing with here. Do you really think that economic conditions portend a recovery of any substance and thus will yield something soon for the market to continue to hang it’s hat on and continue onward and upward? I think our consensus here has been – no.
So I just don’t buy this idea of the market just hanging here, going sideways at worst, when the mythical recovery doesn’t materialize. The market likes to go up or down depending on the economic outlook (or the herd’s perception of it anyway). Rarely does it just go sideways in a narrow range for very long.
I think the sideways market thesis is just the product of hopeful bulls who don’t want to sell, giving up their positions, but don’t really see conditions that justify an upward move, so they delude themselves into the idea that a sideways market is tenable. We heard the same thing in January.
May 22nd, 2009 at 9:29 pm
no mark
you are right, I was just giving an example but what I think you are getting at is exactly the problem that people like that face, the expectations are in outer space. see my statement about the mortgage. his goal, at least what he told me before I said I would not work with him as I said 500k in oil was inappropriate, was to have 10,000 per month to spend from the 500k, the balance on the mortgage was 320 or so if I remember right. He had just bought a new house in the Keys, which I also didn’t think was very smart.
I hope you know by now I don’t follow the general rules in my world. I don’t buy into monte carlo simulations either in case you were wondering how I run the retirement projections.
good point as always.
May 22nd, 2009 at 9:48 pm
mark,
when I hear amortize I think annuity. not a big fan of them. I re-read your post, if you are getting at me setting up an account to only pay out a specific amount each year, in this case 4%, that a client can live off of then no, not only is that wrong but it’s not practical in the real world. The math doesn’t work.
I’ve never once had a client request a specific amount each month, most of them don’t even have the slightest idea what they can even live off of anyway. they typically only have a guess.
sometimes I gotta read your stuff a few times to figure out what you are trying to say.
May 22nd, 2009 at 10:21 pm
ben22,
Good. this: “not only is that wrong but it’s not practical in the real world. The math doesn’t work.” is what the Fact of the matter is.
That “Rule of Thumb” has been designed by those who want an Individual to: “Shut Up. Pay your Taxes, and Die.”, and that is, exactly, what it ensures.
LSS: People that are buying CDs, “Fixed-Income” “Investment” Products, w/o the appropriate Hedges, not Arborvitae, are F***ing Stoopid.
3 decent Equities, w/ an Options Chain, will, absolutely, Smoke ~97+% of available “Investment” options, on a, yes, believe it, “Risk-adjusted” Rate of Return basis.
It is why the FIRST thing one hears, when querying about “Options”, is that they are “2, 2, 2, Risky”.
Of course, such “Conventional Wisdom”, will not lead you to 6, but 6 Feet Under.
To Know the difference of that Sum, divides those who get to Multiply, and those stuck with the Product–of B***S***.