Was the TARP a Ruse?
The rush to repay TARP monies gives us another opportunity to consider why the hell this absurd financial giveaway ever happened in the first place. A close inspection suggests some dishonesty on the part of the prior Treasury Secretary.
From its inception, the TARP never made much sense. Forcing banks that did not need money to accept government bailouts was simply irrational.
The basis for the TARP went through several differing rationales — it began as a recapitalization of the major money center banks, then came the explanation of removing toxic assets, then it moved to freeing up credit and making banks lend again.
Its was $700 billion dollar pile of money in search of a justification for its existence.
Most people still look at TARP the wrong way. When trying to discern what the true basis of it was, we eliminated what made no sense whatsoever, and what was left were a few strange ideas. When you eliminate the impossible, what’s left, no matter how improbable, becomes the best explanation.
What was that explanation? In Bailout Nation, we discuss the possibility that The TARP was all a giant ruse, a Hank Paulson engineered scam to cover up the simple fact that CitiGroup (C) was teetering on the brink of implosion. A loan just to Citi alone would have been problematic, went this line of brilliant reasoning, so instead, we gave money to all the big banks.
Bailout Nation excerpt:
“Shortly after the TARP was passed, Paulson added to its original intent—to use the funds to buy toxic debt from the banks—with a mishmash of programs and schemes, including:
- Injection of $250 billion into the nation’s banks.
- The U.S. government would guarantee new debt issued by banks for three years; this was designed to prompt banks to resume lending to one another and to customers.
- The FDIC offered unlimited guarantees on bank deposits in accounts that don’t bear interest—usually those of small businesses.
- The Treasury took preferred equity stakes in the nation’s largest banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Bank of New York Mellon, and State Street).
Beyond those massive expenditures, Uncle Sam was to “temporarily guarantee $1.5 trillion in new senior debt issued by banks, as well as insure $500 billion in deposits in noninterest-bearing accounts, mainly used by businesses.”
All told, the costs of the “bailout package came to $2.25 trillion, triple the size of the original $700 billion rescue package.”
Now for the punch line: It was all an elaborate ruse, a coverup of the fact that Citigroup was busted.
As of October 2008, the other banks, while somewhat worse for wear, neither wanted nor needed the capital injection. None of them were in the same trouble as Citi. Even Bank of America’s problems via Merrill Lynch wouldn’t become acute until December 2008. Washington Mutual, the most troubled on the list, had already been put into FDIC receivership the month before.26 JPMorgan bought WaMu from the FDIC for under $2 billion, and Wachovia was swept up by Wells Fargo for about $15 billion. Thanks to a change in the tax law, Wells Fargo got to shelter $74 billion in profits from taxation. Instead of the FDIC absorbing a few billion in losses from Wachovia’s bad assets, the taxpayers lost 35 times that amount.
The hurry to repay this cheap cash confirms that the fix was in. If this banks were really in the basd shape Paulson suggested, they would hold onto this cheap source of credit. Instead, they want to throw the yoke of government monies off as soon as possible.The desire to return to their old compensation packages for executives cannot be the only factor . . .
June 9th, 2009 at 10:15 am
And in the interim the accounting rules have been changed, so now most everyone is just fine. So go ahead, by the secondary, because I’m sure Dick & Jane’s household balance sheet will be just fine after the coming wave of ARM resets…
(Cue soundtrack from “Jaws”)
June 9th, 2009 at 10:18 am
You’re ignoring Occam’s Razor, Barry. The simplest explanation is probably the correct one:
Nobody knew exactly what was going on from September – December 2008, but they knew whatever it was, it was huge. A fundamental rule of the streets is “never bring a knife to a gunfight,” so they brought a bazooka.
Are you saying that Paulson and Bush “feigned” incoherence from September-December? It was all an elaborate ploy to fool the people? Come on. I actually give Paulson and Bush credit for their handling of a crisis that was of unknowable magnitude.
June 9th, 2009 at 10:20 am
Maybe . . . but I’ve got two questions:
1) What would the banks’ balance sheets have looked like under mark-to-market?, and
2) How would it have been if AIG’s swap obligations had not been paid out at 100%?
June 9th, 2009 at 10:26 am
BR, your analysis doesn’t include the use of TARP for GE, GM and Chysler. My take is that TARP was a ruse, but not simply for Citi. It was a stop-gap, a prelude to the non-stress tests that would then allow the banksters to raise more cash via secondary offerings. This is one of the ALL-TIME CON JOBS in history and we are watching it live. Well, I hope they pay TARP back because they will be back begging for more later this year or next. Good luck trying to keep the lid on this steaming teapot:
http://www.cnbc.com/id/31177176
June 9th, 2009 at 10:31 am
@franklin:
>You’re ignoring Occam’s Razor, Barry. The simplest explanation is probably the correct one:
The simplest explanation is this: Anyone will gladly take money with no strings attach. When they find out there ARE strings, you get rid of it like week old sushi
HCF
June 9th, 2009 at 10:32 am
Does this mean that the toxic assets go back to banks they came from? Are the Level 3 assets still on the books and is there a market for them? All this is is smoke and mirrors. Complete and utter BS. I feel sorry for those who bought the bank stocks during this bear rally.
June 9th, 2009 at 10:33 am
Now that the ‘mission’ has been accomplished, what does the future hold. The mkt has rallied, somtimes defying logic as the ‘all clear’ message was flashed across the MSM. Could this be another move in the great game.
Check out his possibility. Rumblings from the FDIC about C indicate the situation is still critical. C will be able to hide some of their garbage, but just like dead bodies, it will eventually float to the surface.
Time for the GS, JPM and MS club to eliminate another competitor. With no more government ties, their hands are free to set up another bank take down. Good luck to the taxpayers as no one save the inner circle knows how much of C’s debt has been guaranteed by Uncle Sam.
Watch the mkt after op ex. Things might get interesting just like 2007 and 2008.
June 9th, 2009 at 10:34 am
The desire to return to their old compensation packages for executives cannot be the only factor . . .
BR, you’ve been silent on PPIP. What if the banks think that PPIP can replace or even enhance their balance sheets as compared to TARP? What if this is a bait-and-switch? If memory serves, there are no compensation limits attached to PPIP. Also, Transor Z makes some excellent points that the banks have been receiving every life boat possible.
~~~
BR: See all of these on PPIP
June 9th, 2009 at 10:35 am
BR Says-
‘The desire to return to their old compensation packages for executives cannot be the only factor . . .”
hmmm . . . if you say so
~~~
BR: I am trying to avoid being too cynical, but I fear you may be onto something . . .
June 9th, 2009 at 10:38 am
I see Elizabeth Warren is calling for the Stress Tests to be re-run as unemployment has already exceeded the adverse scenario. Didn’t she get the memo? Elizabeth’s going to get a lump of coal in her stocking for Christmas II (whenever that exactly is, but it must be sometime during the summer given the presence of the original in winter.) And the retailers NEED Christmas II…..
June 9th, 2009 at 10:40 am
transor Z Says-
“1) What would the banks’ balance sheets have looked like under mark-to-market?, and”
“2) How would it have been if AIG’s swap obligations had not been paid out at 100%?’
answer to 1) no problem- print more money- give to banks
answer to 2) no problem- print more money- give to banks
I’m a financial genius
June 9th, 2009 at 10:41 am
It’s obvious that it’s going to be back to business as usual on Wall Street. Move along. There are no big issues to resolve. Nothing to see here.
June 9th, 2009 at 10:44 am
And on cue, WSJ’s Newmark calling Paulson a “national hero.” You can’t make this stuff up. Taibbi’s take on that……
http://trueslant.com/matttaibbi/2009/06/08/mean-street-it%e2%80%99s-time-to-enshrine-hank-paulson-as-national-hero-deal-journal-wsj/
June 9th, 2009 at 10:47 am
Believe me, the banks are laughing all the way to the…..bank? Sacrifice a few casualties of war (Bear, Lehman), get six month government “intervention” in return for free bailout money, throw in interest bearing reserve accounts, a multi-year record positive yield curve, an voila…. “Clean” earnings, a less competetive landscape, a government guarantor, and now…no more messy TARP rules to contend with. Way to engineer a soft landing! Well…except for the taxpayer, the dollar, and anyone foolish enough to own treasuries for the next few years or so. Sorry China!
June 9th, 2009 at 10:52 am
I do not doubt that the dire state of C was the principal motivation.
Paulson was taking a page out of the shock and awe war on terror playbook applied to Iraq.
The facts are that the whole administration did not know WTF was going on in any arena.
If PPIP does ever materialize the rules should be tight and punitive to root out any potential for a ruse or bait and switch.
June 9th, 2009 at 11:03 am
Charles Ponzi is laughing out loud at the greatest swindle in American history !
http://en.wikipedia.org/wiki/Charles_Ponzi
June 9th, 2009 at 11:05 am
And Tim waiting for 2012 over at CR replied on Mon, 6/8/2009 – 7:58 pm
A Paper mache statute of Ponzi will replace the wall street bull in 10 years
June 9th, 2009 at 11:09 am
i disagree. banks were begging for this money since AIG was the counterparty on the swaps. GS MS would not have survived. i’d say GS and MS were days away from insolvency. how on earth JPM is solvent will forever remain a mystery. with a derivative book in the trillions how on earth could it have survived. so much money has been funnelled secretly to these banks and it will never ever be transparent.
June 9th, 2009 at 11:10 am
TARP was worse than a ruse — it was ransom. Troubled assets? There are still plenty. The banks are no more solvent with TARP funds than they were without. At best, TARP funds are 1/50th of the liquidity needed to unwind all of the bad debt out there.
BR’s question about executive compensation almost hits the nail on the head. Almost, in that the funds are being used not for compensation, but to prop up leveraged/toxic securities until the holders of those securities can cash them out — once again, leaving the suckers who would buy this crap holding the bag (P.T. Barnum had nothing on Hank Paulson). Who cares about compensation when you’re retiring and leaving town on the next available flight? Compensation is the next guy’s problem — I need someone to buy this blivit, NOW. That someone is the “investing” public.
When the big sell-off comes — and it will come — it will be directly related to the return of the TARP funds. To answer AmenRa’s question: the toxic assets might be returned to the banks, but by then, the banks will be under new management/ownership.
We’re all bankers now.
June 9th, 2009 at 11:12 am
km4-
Ponzi was a visionary- who only now is being appreciated for allowing the American dream to continue longer than anyone could have imagined-
give the man his due
June 9th, 2009 at 11:13 am
A ruse by any other name would smell as sweet…. but only if you’re a banker.
I wonder if the Daily Dimon 2pm bid has ended now that the TARP is over?
June 9th, 2009 at 11:14 am
@Cursive,
I thought I had seen recently that PPIP had all but been shelved. Did I miss something?
June 9th, 2009 at 11:19 am
Was the Tarp a Ruse? Do Bears shit in the woods?
http://market-ticker.denninger.net/archives/1096-PPIP-Failed-BECAUSE-Of-Tampering.html
http://market-ticker.denninger.net/archives/1098-I-Hate-It-When-Im-Right-Stress-Tests.html
June 9th, 2009 at 11:21 am
[...] News Odds and End 9 June 2009 Posted in June 9th, 2009 by Mark in Economy: US The Big Picture – Was the TARP a Ruse? BR’s not the only one asking that question these [...]
June 9th, 2009 at 11:24 am
call me ahab Says:
June 9th, 2009 at 11:12 am
km4-
Ponzi was a visionary- who only now is being appreciated for allowing the American dream to continue longer than anyone could have imagined-
give the man his due
*********************
Yes I agree and why I said Charles Ponzi is laughing out loud at the greatest swindle in American history !
War is a racket. It always has been. It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives. A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small ‘inside’ group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.”
- U.S. Marine Major General Smedley Darlington Butler, one of only 19 people to be twice awarded the Medal of Honor,
The US financial ponzi scheme is a racket…..Only a small ‘inside’ group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of US financial ponzi scheme a few people make huge fortunes.”
- 19 too big to fail banks that were given trillions in TARP by Obama admin.
June 9th, 2009 at 11:29 am
Nadler’s comments at kitco this morning:
In the interim, whither the ‘total and complete failure of the US banking system’ as we have been warned since at least 2007? Nowhere in sight. In fact, as of this morning, the line of customers waiting at the check-out counter over at “Hotel Geithner” (as TARP has been called in various circles) is growing, and the process not only shows signs of finality, but also points to a potential benefit (read: return of the money, and on the money) to the public – whose money these injections consisted of, in the first place. Hotel California, this “resort” appears not to be. If for no other reason, the desire to return to fat bonus-land is too…urgent.
Read the whole thing; it’s good: http://www.kitco.com/ind/nadler/jun092009B.html
June 9th, 2009 at 11:32 am
leftback Says:
June 9th, 2009 at 11:13 am
A ruse by any other name would smell as sweet…. but only if you’re a banker.
I wonder if the Daily Dimon 2pm bid has ended now that the TARP is over?
reply:
————–
No, the afternoon pump will probably become a regular event. I read somewhere that the TARP cash may go, but access to other programs is still alive and well. Free money to pump will live forever, I suspect. The day the free pump money goes will be the day you see the mother of all short sale opportunities.
June 9th, 2009 at 11:34 am
So, the question remains: what is going to happen to C, and why did Treasury ask for “extraordinary powers” to deal with very large institutions? Would you like to be a C bondholder or stock owner now, looking at GM?
June 9th, 2009 at 11:47 am
Nice rally in the 2-yr today. This stuff is amusing isn’t it? Jamie is selling the SPOOs and buying the TWOs.
June 9th, 2009 at 11:50 am
leftback Says:
June 9th, 2009 at 11:34 am
So, the question remains: what is going to happen to C, and why did Treasury ask for “extraordinary powers” to deal with very large institutions? Would you like to be a C bondholder or stock owner now, looking at GM?
reply:
——————
Why the extraordinary powers: Good negotiation. Who knows what they’ll do with it. Your asking about Uncle Stupid. Probably give free money to friends and make it look a good idea.
Be a C bondholder: Depends on how SCOTUS deals with Chrysler issue. Regardless, some creditors will be more equal than others. Bankruptcy laws can be cherry picked if you have enough connections and Uncle Stupid is on your side.
June 9th, 2009 at 11:50 am
I can’t believe no one anywhere has mentioned this – is the government going to set some rule that if you give back the TARP money you don’t get a second chance in the future? like, when REALITY hits, and we don’t have massive GDP growth and massive earnings for the next several years to earn our way out of our deficits – and when all the crap on the balance sheets actually DOES turn out to be crap and the banks need to write it down to the true levels that would render them insolvent – then there will be no TARP 2.0 right?!?! hello? beuller… beuller…
June 9th, 2009 at 11:52 am
So, looking at the chart of C, i’d say uh-oh… and maybe i should add to my FAZ..
June 9th, 2009 at 11:59 am
KidDynamite Says:
June 9th, 2009 at 11:50 am
I can’t believe no one anywhere has mentioned this – is the government going to set some rule that if you give back the TARP money you don’t get a second chance in the future?
reply:
——————
HA HA HA. You’re not thinking big enough. Think revolving credit. Uncle Stupid plastic. The Fed will become an issuer of credit cards. First only for those too big to fail. Then for anybody who likes green wallpaper.
June 9th, 2009 at 12:02 pm
“when all the crap on the balance sheets actually DOES turn out to be crap and the banks need to write it down to the true levels that would render them insolvent – then there will be no TARP 2.0 right”
I wouldn’t bet on that. We may see TARP 2.0 with different recipients, or the big survivors may just eat the small failed banks that will choke on their CRE exposure, plus they will absorb the bits of C after it is broken up.
One thing hasn’t changed. The “legacy assets” are still a steaming pile of dog-doo.
June 9th, 2009 at 12:21 pm
Karen,
You own FAZ!?
–I missed a few hundred posts, but this seems a significant shift.–
June 9th, 2009 at 12:26 pm
@leftback: Is this what you mean by a “steaming pile of dog-doo?”
http://www.calculatedriskblog.com/2009/06/commercial-mortgage-defaults-seen.html
June 9th, 2009 at 12:29 pm
Leftback,
I see you have, in quotes, adopted the new language. Legacy is the new toxic.
I personally refuse to say legacy assets in polite conversation. Take leggy and lacy, put them together and you get legacy.
As for the market, I saw Ben was frustrated that TBP is not talking much about the market. I see that as a sign. Of something. Maybe fatigue with the machinations, or just the sideways-ness of it all.
June 9th, 2009 at 12:29 pm
@cjcpa: I’m not sure anyone “owns” FAZ, so much as rents it for a very short period.
June 9th, 2009 at 12:30 pm
re: Mannwich –
So SRS is a buy?! Right?
————
I hid my BP password from myself for a few weeks…..
newly found, hence the gushing.
cjc
June 9th, 2009 at 12:32 pm
@cjcpa: I’m not touching that tramp right now. Probably will (gulp) try again later at some point though. It’s got at least one big run left in it. My timing was initially bad, so I’m going to wait a bit on it. Plenty of time to get back in that little tramp though.
June 9th, 2009 at 12:37 pm
So self centered us American’s are… we think it’s all about us. “They’re hiding something from us” we scream! Uncle Sam, I’m sure, is more concerned about hiding trillion-dollar monetary problems from the rest of the world than the average American Joe with a 150K mortgage and a car payment (but of course, by default must also hide his intentions from gossipy Joe as well – that’s the nature of secrets). Since one of our biggest “export industries,” banking, was in near collapse, we had a big problem. We need to freely trade and borrow from other nations and the dollar is looking like a bad bet because as far as anyone on the outside could tell, the biggest banks were on the brink of simultaneous collapse. See Iceland if you need an example of where we were headed, except then add in the fact that oil (and many other things) are traded in dollars not krona.
Too much risk was being introduced into the system to allow for the free flow of money. So it all needed to be propped up, thus TARP was the medicine spoon fed to every institution that was considered big enough to be a risk that could trigger a cascading collapse. Of course the banks don’t like Uncle Sam in their business, so I’m sure many have been lobbying to stop the treatments from day one. Meanwhile every other economy has faced the same downward adjustment, so things are looking to be in balance again, so it’s unlikely the TARP is really still needed. Occam’s razor doesn’t work in international monetary politics, it’s more like Occam’s chainsaw when you try to apply it there. These things are hardly one sided, but if there’s some grand conspiracy to hide the truth, I think it’s a bit self centered to think it was all about us, or even primarily about us. I’m going to have to agree with franklin411 on his point that there is also the element of nobody knew exactly what was going on or where we were headed last fall, so TARP was to some extent just the best idea they could come up with in the short time that they had. However, I also don’t think that’s all of it. It’s a complex situation, but if you boil it all down, it seems to me that it TARP was just a placebo to keep everyone from panicking. But like a placebo, most will continue to be convinced that it was real medicine. You can call it a ruse, but, given the options, it seems like perfectly valid social engineering to me. “Medically” it was just a social ruse, but socially it was good medicine. Lest we forget that money is only worth something so long a most people think it is.
June 9th, 2009 at 12:44 pm
“The desire to return to their old compensation packages for executives cannot be the only factor . . .”
Vanguard’s John Bogle wrote the book on this subject. His concept is that US companies (not only financial companies) are now run to maximize the wealth of the management class, not the owners. Bogle calls this Managerial Capitalism vs the historical Ownership Capitalism. It wouldn’t surprise me at all that executive pay is “the” main driving force behind the desire to repay TARP. I doubt that it would surprise Bogle either.
Bogle’s book is a good read:
THE BATTLE for the SOUL OF CAPITALISM by John C. Bogle.
June 9th, 2009 at 12:44 pm
cjcpa-
dude- change your password to something you know you will remember
June 9th, 2009 at 12:48 pm
Moss @ 10:52
“The facts are that the whole administration did not know WTF was going on in any arena”.
Certainly, Bush himself didn’t know WTF was going on. Paulson, on the other hand, probably knew exactly what he was doing.
If Paulson had informed the public about all the CDS contracts at AIG, the public opposition to TARP would have been even greater than it was. And if Bush had informed the public that some of the TARP money would go to auto company bailouts, public opposition would have been greater still.
June 9th, 2009 at 12:50 pm
km4 “19 too big to fail banks that were given trillions in TARP by Obama admin.”
if I remember* right that contract was drawn up by GWBs and Os honored the initiated contract/plan
*lots to keep up with these days .. a familyman needs a team of paper pushers to keep up with law and reform
I am officially casting my vote for dumping capitalism for sane martial law when needed
(like now .. before all these transfers become to engrained to figure out who rightfully owns what)
June 9th, 2009 at 12:51 pm
Seconding the Bogle recommendation.
June 9th, 2009 at 12:53 pm
Anyone else up for a little afternoon TBT?
June 9th, 2009 at 12:58 pm
Barry,
It’s as if Hank Paulson was a 17 year old kid trying to buy prophylactics: “Let’s see – I’ll take a Nestles Crunch, a pack of AAA batteries, a bottle of aspirin, a bottle of Gatorade, (hushed tone) a package of condoms, and a Snickers bar…”
Who was the knowing pharmacist or cashier in Paulson’s trip to the counter?
June 9th, 2009 at 1:00 pm
forgot my main chime-in point .. advertising at its best .. is there odds on the # of TBTF banks by year end?
We need the Federal Reserve to initiate PayGo Regional Banking /checks and balances if this capitalism thing is going to continue to try to work for America.
The New York Fed and International F’ism isn’t working for Americas people in general.
No-one ever answers my question. Is America its people or its business? AMERICA IS THE PEOPLE.
June 9th, 2009 at 1:04 pm
@DL.
If Paulson did know what was going on then he is a big fat liar.
How many times did he insist that things were contained blah blah blah.
Only after the bottom fell out did he react in a panic.
He probably then realized the consequences of what was happening but to say he knew what was happening prior to the meltdown.. that is a strech.
His meltdown prescription, TARP, was his desperate action to save the ship.
Saying he is a hero (WSJ) (via Mannwich link above)is a great example of the bogus media coverage of the whole mess.
June 9th, 2009 at 1:08 pm
cjcpa, post away… yup, i got impatient for the 3s and bot a bit at 4.50.. i’m kind of in limbo on it, although Andy told me to keep it for a few weeks… he just was to see me tortured, i suspect : ) my real pain is dto, my oil short..
i let myself get logged out of tbp sometimes, too.
June 9th, 2009 at 1:09 pm
@Greg0658
I vaguely remember Chris Whalen saying that over 1000 (2000?) banks would probably fail by the end of the crisis. Can’t remember where he said it, though.
June 9th, 2009 at 1:16 pm
FYI- poster- “macroecon”- is spam
computer regurgitation of already posted comments- only trying to get you to click on the link
June 9th, 2009 at 1:18 pm
Anyone want to start a pool on when the next banking crisis hits after the banks go back to what they did so well?
June 9th, 2009 at 1:18 pm
I meant besides paying management handsomely
June 9th, 2009 at 1:22 pm
“Does this mean that the toxic assets go back to banks they came from?’
Toxic assets were never purchased under TARP, despite that being its original stated purpose. The banks still hold those assets.
June 9th, 2009 at 1:23 pm
A couple of other points:
3) Was GS just itchin’ to deal with Buffet on unfavorable terms prior to fall 2008?
4) How often did IBs convert to BHCs prior to the same period?
June 9th, 2009 at 1:26 pm
Tranzor, so much has happened I completely forgot about the GS-Buffet deal!!! and GS hit 150+ today..
Does anyone here remember my “do over” theory?
June 9th, 2009 at 1:27 pm
“And if Bush had informed the public that some of the TARP money would go to auto company bailouts, public opposition would have been greater still.”
TARP money didn’t go to the auto companies under Bush. The auto loans that Bush extended in December were made under the authority of legislation “helping” the auto companies retool to produce hybrids. The TARP extensions to auto companies came in the past couple of months.
June 9th, 2009 at 1:32 pm
A few weeks ago you were banging the bank nationalization drum. Now you say Citi was the only one on the brink. WTF?
June 9th, 2009 at 1:34 pm
SD98 @ 1:27
Maybe you’re right about the ruse of retooling for hybrids. But the reality is that Bush was almost as much in the pocket of the UAW as Obama is.
June 9th, 2009 at 1:50 pm
“Anyone want to start a pool on when the next banking crisis hits after banks go back to what they did so well?”
The next banking crisis will occur at a different set of banks. Smaller banks have big CRE exposure and not TBTF.
What DO the big banks do well? Oh yeah, coke and hookers.
Anyone remember trading? LB is in cash, thinking of playing a suite of $ positive trades for tomorrow. There are more and more whispers of problems in Eastern Europe that are going to plague the European banks and the €.
June 9th, 2009 at 1:55 pm
“we discuss the possibility that The TARP was all a giant ruse, a Hank Paulson engineered scam to cover up the simple fact that CitiGroup (C) was teetering on the brink of implosion. A loan just to Citi alone would have been problematic, went this line of brilliant reasoning, so instead, we gave money to all the big banks.”
I have read that GS says that they did not need to have the CDS’s from AIG paid out as they were fully hedged against AIG not being able to pay? Wonder if it was Citi that they were hedged with? Paulson keeps both alive and GS gets a double payout?
June 9th, 2009 at 1:57 pm
@Karen: No kidding. A lot of history in a few months.
I’ll buy the idea that TARP was designed in part as a shell game to conceal specific weaknesses but I think that C could have been carved up if it was the only problem child.
June 9th, 2009 at 2:07 pm
TARP repayments ($bln)
The Treasury Department approved 10 banks to pay back a combined $68 billion of taxpayer money pumped into them last year to combat the credit crisis.
JPMorgan Chase & Co $25.0
Goldman Sachs Group Inc $10.0
Morgan Stanley $10.0
U.S. Bancorp $6.6
Capital One Financial Corp $3.6
American Express Co $3.4
BB&T Corp $3.1
Bank of New York Mellon Corp $3.0
State Street Corp $2.0
Northern Trust Corp $1.6
June 9th, 2009 at 2:13 pm
@ Left:
I and I thought you would have taken a bite out of TBT along with I and I for a little afternoon snack. It’s digesting rather well.
I flipped out of DZZ and into TBT ahead of the auction… looks like I should have left out the bail on DZZ part. I-Man was getting impatient on that one.
June 9th, 2009 at 2:13 pm
Transor Z Says:
June 9th, 2009 at 10:20 am
Maybe . . . but I’ve got two questions:
1) What would the banks’ balance sheets have looked like under mark-to-market?, and
2) How would it have been if AIG’s swap obligations had not been paid out at 100%?
>to #1, the accounting rules, as they now stand, give banks the option of valuing assets at their acquisition cost if the market for them is too queered up for some reason or another and they plan to hold them to maturity. The banks decide what their assets are worth, and whether there is a functioning market for them. HOWEVER, the banks can write down their liabilities as they approach failure/insolvency (due to the liklihood of getting paid back). The metric usually used is the price for a credit default swap on the liability in question. Thus, as a bank gets closer and closer to insolvency, it looks more and more profitable, as its liabilities decline (marked to market) and its assets remain at historical values. I’m not making this shit up. This is really how it works here in bizarro world.
to #2, Goldman Sachs, JPM, Morgan Stanley, UBS, et al., would probably have failed, or be supplied with at least as much cash as was AIG.
I know that you knew the answers when you asked the questions (what good lawyer doesn’t?) but the insanity of the answers just had to be revisited.
And on the Buffett/GS relationship, well, you know the answer to that one, too.
June 9th, 2009 at 2:16 pm
May I point out that the $krx is in a downtrend:
http://stockcharts.com/h-sc/ui?s=$KRX&id=p38298062762&def=N&listNum=1
June 9th, 2009 at 2:19 pm
I know that chart well Karen…
Its a common side effect of being long FAZ.
June 9th, 2009 at 2:35 pm
Got small bites of DZZ and SCO started here. Looking at DUG and FAZ for later.
It will be interesting to see whether the TARP escapees buy large blocks of the SPY today, maybe the SHY instead?
Someone is pumping. Here comes another potential blow-off top. How many times have we said that?
June 9th, 2009 at 2:40 pm
A couple of commenters have suggested that Paulson had no idea what was happening back in September and was taken by surprise. That isn’t true. Take a look at the Neel Kashkari interview with Charlie Rose (thanks for posting it BR), because Kashkari says flat-out that he and Paulson and Bernanke “knew” in early 2008 that a big bailout was going to be needed and the only question was when to go to Congress to ask for it. I thought this was a major f*&$ing bombshell, but no one in the MSM seemed to notice. Anyhow, it wasn’t until Lehman failed and stocks started to tank that Paulson felt he could convince Congress to go along with the whole thing. So yes, both Paulson and Bernanke were LYING throughout 2008. Kashkari seems pretty pleased with himself in that interview. What a hero.
So was it just Citi? I will grant that Paulson may not have known what to DO, but he certainly knew what was going on — at least if Kashkari is telling the truth.
June 9th, 2009 at 2:43 pm
@LB
“Here comes another potential blow-off top. How many times have we said that?”
I’m starting to get the notion that we might keep on hearing it…
I’m entertaining the notion of waiting to get short all the way up at 1,150…
June 9th, 2009 at 2:43 pm
the nasdaq is a show- I know that TXN bumped their forecast- but I still don’t get it- tacking on about 1% a day
June 9th, 2009 at 2:47 pm
Clawback is correct. Lots of people knew that the banking system was insolvent, certainly C and BAC and AIG. Kashkari may have been involved in TARP planning from fairly early on – he and Paulson had a working history.
Stocks may have reached a permanently high plateau, said CNBC host Jim “Irving Fisher” Cramer.
24-48 hour swing trades only for LB. The Schadenfreude desk is playing for quick surgical strikes for now.
June 9th, 2009 at 2:50 pm
civienne, strippers? tmi. lol.
June 9th, 2009 at 2:51 pm
Nice comment from The Economist:
http://www.economist.com/opinion/displayStory.cfm?story_id=13811147&source=features_box_main
June 9th, 2009 at 2:56 pm
@karen
LOL
I love strippers!
OK, let’s do an informal vote on TBP…How many of you here are AGAINST strippers (or strip clubs)?
June 9th, 2009 at 2:58 pm
Guys don’t look now, but the SPX looks to me like it’s about to ramp BIG TIME…
Say, 1,120 by August 1st…
June 9th, 2009 at 3:00 pm
harsh chemical strippers? I prefer a mixture of denatured alcohol and shellac thinner- leaves a nice patina
June 9th, 2009 at 3:02 pm
“OK, let’s do an informal vote on TBP…How many of you here are AGAINST strippers (or strip clubs)?”
My wife’s against them.
Me, I’m fine with them.
June 9th, 2009 at 3:08 pm
Franklin, more green shoots:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQepDRb69OBU
It’s called exotic dancing.
June 9th, 2009 at 3:10 pm
franklin411 Says:
“Nobody knew exactly what was going on from September – December 2008,” You can say that again, in fact I’d argue nobody knew what was going on from January 2000-December 2008. Paulson was a former football player, Bush was a former checker player. The problem was the world stage was more like a chess game And the economy was treated like it was some sort of casino.
Don’t give them any credit, anywhere. The former administration should be jailed for gross negligence, and general stupidity.
June 9th, 2009 at 3:13 pm
BR>> A close inspection suggests some dishonesty on the part of the prior Treasury Secretary.
Hereby nominated as the understatement of the month award.
June 9th, 2009 at 3:15 pm
saw that earlier, lb; more empty commercial space? wonder if one of the big names like saks or nm will flop before this is over… i can’t support them single handedly although i do try…
June 9th, 2009 at 3:18 pm
@LB & karen
I guess unless Obama steps in, we won’t be able to order those Chevy Volt’s with the Eddie Bauer seat package…
June 9th, 2009 at 3:19 pm
Karen @ 2:16
And yet, XLF still looks technically healthy.
June 9th, 2009 at 3:20 pm
Woo doesn’t support Nieman’s at all but occasionally supports online strippers singlehandedly.
June 9th, 2009 at 3:25 pm
Creating a story to fit the trade. Even the Fed. Government is into it. Sound like what they said in May of last year.
http://www.cnbc.com/id/31176127
June 9th, 2009 at 3:28 pm
DL,
What’s so bad about the UAW? I really don’t get it folks bashing the UAW like they’re some sort of horrible institution stealing suckers out of the mouths of babies, when in reality they’ve been making concessions in pay for the last decade.
June 9th, 2009 at 3:31 pm
Sounds like the left hand knows exactly what the right hand is doing, Matty.
Market resembling computer trading sine wave again.
June 9th, 2009 at 3:31 pm
M in Nola-
my question always is- what’s driving this mythical recovery
June 9th, 2009 at 3:31 pm
DL, negative divergence in that xlf chart.. although the P&F pegs it to 21.5 : )
June 9th, 2009 at 3:33 pm
@bman
If I opened a coffee shop at the end of the corner and hired 10 employees, but then sold “crappy’ coffee that nobody wanted to buy, I would have to close my business, declare banktuptcy, and FIRE all the workers…
I wouldn’t expect to see the US government foot me the bill to keep my doors open just to pour my brew down the sink so a bunch of workers could keep their paychecks…
June 9th, 2009 at 3:35 pm
@ahab
answer:
“Mythical profit expectations based on mythical hope for accounting maneuver fairydust”
June 9th, 2009 at 3:36 pm
bman-
holding the company hostage with unsustainable wages and benefits- this isn’t the 1950’s and GM was losing its ass-
pretty clear that they would fail- and that they had to go the USG for help- well there we have it-
the whole company would have been better off shutting down- becasue it was for certain it was not a going concern
June 9th, 2009 at 3:40 pm
bman @ 3:28
That term “making concessions” is meaningless. Suppose you went to your boss and demanded a 100% increase in salary, and after he (or she) said “no”, you then told him that you would settle for a mere 20% increase. Would your boss call that a concession?
Yes, maybe the UAW made concessions relative to some absurd initial demand. But that’s meaningless.
As for the UAW being “like …[a] horrible institution stealing suckers out of the mouths of babies”, I would say, that no, their not stealing candy from babies, but they (through Obama) are imposing a future tax liability on everyone (including babies). I accept the political reality that the UAW is the master, and Obama the slave. But that doesn’t mean that I have to abstain from pointing out who’s getting ripped off here.
June 9th, 2009 at 3:41 pm
Face it people…
There has been a lot of PUT buying today at the SPY 94 for the June contract…
That’s “protection” $$…This thing is getting to RAMP again in a few days…
June 9th, 2009 at 3:41 pm
“Mythical profit expectations based on mythical hope for accounting maneuver fairydust”
Citigroup business plan?
June 9th, 2009 at 3:57 pm
The $ has pulled back today to support, may resume its rally tomorrow. One wonders whether the rally in crude can continue in the face of increasing evidence that storage is full. $ up, oil and gold down tomorrow?
June 9th, 2009 at 3:58 pm
Looks like the pump today was in the NASDAQ. Guess doing to one index all the time gets boring.
June 9th, 2009 at 4:01 pm
@LB
I sense a complete “disconnect” coming in the next 6-7 weeks…
Oil, dollar, S&P rally
gold selling off…
Bonds may be strange…I think the 10y wants to go to a 4 handle on the yield, but I think the path to doing so will be choppy…
I think the BV’s will hold off firing the last gun until the healthcare proposal details are made public…
June 9th, 2009 at 4:03 pm
bman – “what’s so bad about the UAW?” Hmmmm. I spent over 20 years in Flint Michigan (aka. Buick Town). My extended family is still there. There’s a lot wrong with the UAW, I can tell you first hand.
The UAW is corrupt. They have had too much power for decades, and became a powerful corrupt organization through intimidation and thuggery. They got the power, then they got the money, then they had political influence, then they used it to blackmail auto companies (I’ll bankrupt you now (with a strike) or I’ll bankrupt you latter (through your concessions to “labor”). Management didn’t know how to play hardball with the union. Management chose slow death. Some blame can be put on management for caving in, but they were between a rock and a hard place with the courts and labor laws against them.
UAW is a blood sucker who will kill the host eating its meal. It’s just amazing how long the parasite can feast before killing itself.
June 9th, 2009 at 4:03 pm
so . . . here is my idea- I have some QID- sell at a loss- buy QQQQ- wait it out- re-purchase QID at a cheaper price later-
or- tough it out- pissing me off though- I generally only play one postion at a time- so it has kept me from trying out any other ideas-
advice/ideas?
June 9th, 2009 at 4:06 pm
@cvienne – I expect a disconnect (aka divergence) but I don’t know what direction it will be in. But, I expect the dollar, and real assets, to move in concert for a brief period, that will become known as the “mother of all divergences” (MOAD™).
June 9th, 2009 at 4:06 pm
I used to be very much in support of strippers, then I had daughters and it just never seemed quite right after that.
June 9th, 2009 at 4:07 pm
Watching TV shopping/online retailer VVTV juiced from 79 cents/share to $1.28 on no news today, other than some insider buying. A 57% increase in on day for a company that hasn’t turned a profit in over 8 years, I believe. Has had over a 500% increase since it’s low of 18 cents earlier this year. Has to be juiced by short covering, I’m guessing? Puzzling.
June 9th, 2009 at 4:11 pm
@ahab
all I can say is this ahab…
Today there was a lot of put buying on the “at the strike” SPY & Q’s today (for the June contract)…
It’s hard to say, but I imagine that it was all getting “protection” in place…Which would signal that we’re on the front end of another major vertical move up (in both SPY & Q’s)…
That’s just my interpretation…
Personally, it’s hard for me to be LONG this market but that’s where it seems to want to go…UP
If you’re going to go short…I might look at buying some out of the money calls for August or July just to be safe…
or, just be patient and get a better price…Eventually, we’re coming back down and will bust through many gates on the way down…I’d CERTAINLY stay away from levered ETF’s for now…
That’s my 2 cents
June 9th, 2009 at 4:13 pm
This sure doesn’t look green shooty to me.
http://www.calculatedriskblog.com/2009/06/weak-hiring-and-jobless-recovery.html
June 9th, 2009 at 4:13 pm
It’s simple, Barry:
– The Wall Street banks were/are hugely insolvent.
– Any business entity needs capital.
– Entities want the cheapest capital.
– The banks are repaying TARP because they have less expensive means to get capital.
– When TARP was proposed it was criticized for being cheap capital. However, TALF, paying AIG
counterparties 100% on the dollar, etc. are effectively free capital, or nearly free.
Barry, I think your readers would hope that you would shed some light on the myriad ways the government has cooked up to shovel free capital to the banks. They are trying their best to obfuscate. Help us see through the murk.
June 9th, 2009 at 4:15 pm
Hate strippers. Never worked for me. It just seems like a depressing situation (to be a patron or a stripper). I just don’t get it.
June 9th, 2009 at 4:18 pm
I will say I had a few “dates” who wanted to go to strip clubs. Now that was fun! But, going as a single guy, without a girl on your arm, I don’t get it.
June 9th, 2009 at 4:19 pm
One day at a time.
No post-TARP payback euphoria rally? Sell the news tomorrow?
Commodities are sooooo overbought at this stage of the “recovery” process.
Oil at $70 is back to where we were in a “healthy” economy before the super-spike of 2008. Hmm…
June 9th, 2009 at 4:21 pm
I just employ strippers to work the phones at Dread Capital… I just wish they would stop asking why we keep it so cold in the office…
June 9th, 2009 at 4:22 pm
Oil is an international commodity. So the US economy is only one factor. I pretty sure oil’s recovery will out pace the U.S. recovery. Although, I do expect oil to correct first from where it is now. But, I would be wrong, it might just go sideways or into a trading range.
June 9th, 2009 at 4:22 pm
And for reference on what I was implying…
A 50% fibonacci retracement from 666 low back to 1576 high would take the S&P to 1,121…
What’s interesting in the “design” of a move like that is that it is on the path to be perfectly symmetrical (Basically 5 months from Lehman collapse to March 6th bottom, then another 5 months to around an end of July, 1st week of August peak)…at somewhere near 1,121…a perfect “V”…
In addition…If 1,121 were to mark the high…A retest of the LOW of 666 would put you at the following fibonacci numbers:
- 50% retracement takes you to around the 900 level (where a lot of work was done on the charts in terms of daily closing action…
- 61.8% retracement takes you to around the 840 level (which was the October 6, 2008 low, and the first sign of a real honest to goodness PANIC day)…
So I’m just saying…
June 9th, 2009 at 4:23 pm
I-man Is that why it costs me $2.99/minute to call Dread?
June 9th, 2009 at 4:23 pm
Manny, that’s a good post. If we start to see hours worked increasing, even LB may see green shoots, but not yet.
I suggest we see more and more focus on this metric from BR and others as it gets around part-time v full-time.
June 9th, 2009 at 4:25 pm
@hopeI’m wrong
My ex-girlfriend was the one who got me to go to strip clubs…her and her friends would want to go, and of course I would reluctantly tag along
June 9th, 2009 at 4:25 pm
cvienne-
thanks- I should have put a stop in place- but seems every time i do that it just guarantess the exact loss I am willing to accept-
re levered ETF’s – you also mean leveraged inverse ETF’s?
my impression for the long term is that we will see an ugly labor market, expired unemployment benefits w/ no jobs, no catalyst for a recovery and many years of a stagnant economy w/ diminished consumer demand-
so- my impression is the QID will work out- but like I said- I am a simple man and only like playing one position at a time- so it is the opportunity cost that’s bothering me
June 9th, 2009 at 4:27 pm
Only for the first minute bro- we jack it up to $4.20 for each additional minute.
June 9th, 2009 at 4:28 pm
Strippers can make very decent $$ — and I’m talking about the ones who only dance.
Depends on the club — divey or more respectable.
June 9th, 2009 at 4:32 pm
any stripper I ever met was a coke head- but maybe times have changed
June 9th, 2009 at 4:32 pm
@ Ahab… or Ishmael… or Tibbs… or whatever you are these days…
Same boat here bro- do I chill with QID or let it ride…
I drew my line in the sand at 35.5 on the Q’s… which I ignored for some dumb reason trying to out think the tape.
Now I’m in the same state of limbo that the Q’s are in. I was thinking I would close my QID on an imminent Q’s back test of the breakout from the triangle consolidation… we’ll say approx 35. It should backtest that breakout before running higher… who knows though. I would have expected to see it by now.
Might just have to bite the bullet and live to trade another day. I will post when I make that decision.
June 9th, 2009 at 4:33 pm
@ahab
read my (4:22) post and understand that the VERY REAL possibility exists out there that this is all a big “technical” move (that may have another 6-7 weeks to play out)…and the LEVELS are quite a bit higher than we’re at even today…
So that’s a lot of PAIN if you want to be short…
The market could reverse at any moments time, but you have to consider ANY scenario…
June 9th, 2009 at 4:33 pm
I-Man: The boredom and frustration of this market is really starting to get to this group, isn’t it? LOL.
If things go on like this LB is going to buy a ticket to CA and trade on the beach like our lovely Golden Girl.
June 9th, 2009 at 4:33 pm
cvienne Says at 3:33 pm “If I opened a coffee shop at the end of the corner and hired 10 employees, but then sold “crappy’ coffee that nobody wanted to buy, I would have to close my business, declare banktuptcy, and FIRE all the workers”
Correct Boy Wonder… BUT .. in doing so* (ie the try-it) you would have jump started the building owner / table and chair makers / paper cup makers / and the coffee makers and the carpenters to make a pretty store front .. the mayor the chamber and the newpaper show up and shake your hand and cut the ribbon
… but also ..
the established mom and pop shop down the street suffers cause your the new hip spot on the block
… but .. all is cool cause there is paper pushing jobs in all that and just another day in easy money capitalism where your off the hook and someone else takes the hit for you
* (with your credit card and a friendly banker that knows the game)
June 9th, 2009 at 4:35 pm
About a third of the strippers are coke heads
another third are single moms with kids just trying to survive
another third are pretty smart, and or, in school
I used to date a stripper…She paid for her PhD stripping…now she’s a doctor…
June 9th, 2009 at 4:36 pm
cvienne,
If the market got to 1121, I don’t think it will get back to 666. This is where the risk of being a bear is right now. The higher it goes, and the more time that passes, the more healing can take place: the less likely a re-test is.
June 9th, 2009 at 4:36 pm
leftback @ 4:33
They’ve got beaches in NY, too.
June 9th, 2009 at 4:40 pm
@DL: Yes, but karen isn’t there.
June 9th, 2009 at 4:42 pm
DX really needs to hold the zone around 79.50 (61.8%). It sort of surprises me how they beat the sh&t out of the DX and the stocks couldn’t even muster a rally?!? Interesting….
Based on the real crappy day for the dollar, I’m expecting some overnight weakness and will be waiting with anticipation to see it how it reacts around 79.50. Dollar bulls may have to endure the dreaded “double bottom” action….
FAZ: don’t know anything about these crazy insane ultra money vampire ETFs…and would never really chart any one of them, but…..the last few weeks on the FAZ sort of resembles a “falling wedge” to me…maybe there’s one more slightly lower low coming. Overall don’t mind that trade from the long side, but would love it much more if we could break out of the down trend line that began on 5/14/09.
June 9th, 2009 at 4:43 pm
FYI – my green shoots report of the day. Went to Dick’s Sporting Goods a short time ago. Thought I was going to see tumble weeds rolling by me in the store. Hardly anyone in there. Only one cash register open. Enormous store too. I can’t see how they’ll make it. Was tempted to buy some golf clubs and related golfing items but I’ll wait until they’re 50% or more off, which will be coming by around mid July, I’m guessing. Maybe sooner. Sorry, franklin411. Maybe Dick’s should sell food at bulk/discount prices like Costco?
June 9th, 2009 at 4:43 pm
Cvienne – I’d have to spend a lot more time meeting strippers then I care to, if I wanted to confirm your 1/3,1/3,1/3 split, but I have my doubts the last category is 1/3. I saw a very nice girl with a college degree turn into a coke head tramp (while denying it in her own head), when she got into “dancing.” Things might vary by city, but stripping it a dangerous game if you think your plan is to grow up and be a doctor. I think maybe 2% or less of the women I have ever met could handle that game.
June 9th, 2009 at 4:45 pm
@hopeImwrong (4:36)
I disagree with you 100% on that…
In fact, I think if it were to go to 1,121, it ENHANCES the possibility of not only taking out the 666 lows, but marching to new lows…
What will happen is this…If we reach a “lofty” level like 1,121, then pull back sharply, MM’s are going to be on the phone with a lot of freshly minted bulls who are now in panic…They’ll convince them that “we are finally seeing the DIP to buy”…So Joe stupid will shovel in more money to average down…cramer will help them along with that notion because he will still be yelling BUY at the top and all of his calls will be underwater…
But when there is clear downside momentum, the SHARKS will be out busting down all the stops…That will lead to PANIC SELLING…
No my friend…I think the higher we go, the MORE LIKELY we go to lower lows…
June 9th, 2009 at 4:45 pm
Correction – “stripping IS a dangerous game”
June 9th, 2009 at 4:47 pm
“If the market got to 1121, I don’t think it will get back to 666.”
If I may make a suggestion, this type of “where is it going?” thinking doesn’t make for good trading, especially when the market has been heavily manipulated for so long. Think small and play what you see. There are a lot of small excesses that can be traded here and there every week and you don’t have to become a mental pretzel.
If you have to ask whether it’s all OK, and can you just buy-and-hold, then you are probably on the wrong blog.
June 9th, 2009 at 4:47 pm
@Hope,
If the market got to 1121, I don’t think it will get back to 666. This is where the risk of being a bear is right now. The higher it goes, and the more time that passes, the more healing can take place: the less likely a re-test is.
Is that some rule I don’t know about? The healing that needs to be done is on the personal balance sheets in this country and elsewhere, not in the stock market.
I see less risk in becoming a bear every single day lately. The time when it was highly risky to be a bear was obviously in March, when you had super low sentiment, oversold conditions, etc. etc. After a move up in the market, that as DR shared recently, has usually happened 9 months after a recession, during a time in which there has not been any real improvement other than a slower decline and I’m not sure I understand the higher risk view towards being bearish, unless your time horizon is days or weeks.
Now, it’s just the opposite of March so I’m not sure I understand the risk of being a bear. We’ve got bullish levels rivaling where they were at the peak in 07! As I’ve been trying to say, the proof now must come from the bulls that this move is real, thats where the current majority is.
This isn’t directed at you but when I hear pundits trotting out the same line as you are, I basically just think they missed most of this rally and now they need to speak this way.
Last, being a bear does not = ultrashort.
June 9th, 2009 at 4:50 pm
Mannwich @ 4:43
I better run out and buy some June DKS puts, I guess.
June 9th, 2009 at 4:50 pm
Cvienne – “the higher we go, the MORE LIKELY we go to lower lows…”
It’s possible, but does it turn into a 2010-11 bottom then? 2009 seems too soon. And, I hope things don’t get that bad, but I expect them to. I would assume a break of 666 after a rise to 1121 would be fundamentals driven as risk is re-priced for a much lower baseline level of economic activity, and a much lower level of growth. This is where P/e ratios could hit single digits, but not this year.
June 9th, 2009 at 4:51 pm
At least when the market closes in California, the entire day awaits…
Andy, nice summary of another miserable day.. note the black GLD candle and how many times it was followed by a down day…
June 9th, 2009 at 4:52 pm
All this stripper talk has me…
looking at STRIPS.
June 9th, 2009 at 4:54 pm
@hope,
I plotted out the Benner cycle and it indicated problems in 2010. that said, that cycle seems a bit shot since the massive credit creation in the early 80’s.
June 9th, 2009 at 4:55 pm
hopeimwrong-
so – assuming all the healing and no re-test- won’t profits and P/E’s have to come into play- fundamental analysis- if the profits aren’t there- then the market goes down-
just using my basic deduction skills -I would think that would be the case
I-Man-
thanks for the input- also-
“call me ahab” was crafted under faulty assumptions- I- remembered it as the first line from Moby Dick- however- the kind posters of the TBP set me straight after a very public dress down- I have since licked my wounds and soldiered on.
June 9th, 2009 at 4:55 pm
Cvienne, Ben22, and Leftback – thanks for the comments. The value of this blog is in the debate (for me).
Ben22 – no need to worry about me having thin skin. I appreciate your thoughts.
June 9th, 2009 at 5:00 pm
ahab,
I was sort of thinking you should stay with Ishmael. That name has a far greater meaning than Ahab.
But what do I know, I use my real first name on here. Really creative
June 9th, 2009 at 5:00 pm
@hopeImwrong (4:50)
To answer that question, I’d refer to LB’s advice…
Play it as it comes…
Of course, I have the thesis right now that the BOTTOM won’t be reached until late 2011, but if the DATA and ANECDOTES start to change, then so will my viewpoint…
Right now I simply think that, as ben says, we’re OVERBOUGHT sentiment wise, and the fundamentals don’t warrant equities at these levels…
Notwithstanding, markets have a way of confounding everyone and causing maximum pain…So I have in my head that there is a POSSIBILITY of getting to somewhere 1,121…From that point until now, I do what LB does and watch the tape…
June 9th, 2009 at 5:02 pm
[...] of TARP, Barry Ritholtz asks, Was TARP a Ruse?, and concludes, The hurry to repay this cheap cash confirms that the fix was in. If this banks were [...]
June 9th, 2009 at 5:03 pm
and on this UAW concessions stuff
do you kids understand the term /concept “a living wage” “disposable income” and “money velocity going round and round”
we are in the midst of a rebalance’g of the American Standard of Living and spread’g that out to the rest of the world via offshore’g manufacture’g
and what cash was used to build offshore factories? IMO our disposable income (in savings schemes) now its slowly evaporating and not owed anymore. Oh well .. term “race to the bottom” comes to mind .. for Joe6pack
heard a figure on tv 600K new cell users in China .. I was left wondering the rest of the story .. translate costs for me of the new towers and electronics installed and all the phones …. like I’m wondering can they afford installing all that stuff on the cheaper labor dollars alone (equal costs on stuff) .. or are we subsidizing them getting that dreamy stuff as a way to balance the trade imbalances?
I’m in favor of the Chinese joe6pack having the dream .. but not in retaliation for PAST Union/non-Union/Business wars
and I’m not calling for war … anybody thats been following me I’m calling for Utopianism
June 9th, 2009 at 5:03 pm
@ahab
I think you should have stuck with “sally”
June 9th, 2009 at 5:06 pm
ahab – My thought on fundamentals coming into play are this…
If the market gives the economy time to heal (meaning profits have time to improve) then a fundamentals based price may be higher than 666. The longer the up move continues, the more time the economy has to heal.
The wildcards are:
1) what will the price be for those profits? what will people pay?
2) inflation (over time the market will go up in response to inflation, but contained inflation is also ok)
3) economic recovery – will it be enough? will it last?
If the S&P earning gets back to $66 before a retest, and inflation doesn’t get out of control, and the P/e is 11, then we don’t get to new lows.
If inflation gets out of control, a retest becomes less likely because the market will be “inflated” also.
LB – I don’t remember asking if it was ok to buy and hold.
June 9th, 2009 at 5:10 pm
ahab,
The leveraged monsters are infuriating. As someone who’s made a bundle (Woo Hoo!!!) and lost a bundle (G&^%*mn motherf*#kin’ f*&^ers!) on these things over the past year, I seriously and 100% empathetically feel your pain, man. FWIW, I’ve begun to adjust my approach from holding on for the Black Swan event to simply scalping a few percentage points here and there by taking advantage of their daily volatility. I guess you could say I switched my mindset from that of “being right” and losing my shirt to taking what they give me and making money. I think there will be a time when they go asypmtotic (in the right direction) but right now it seems as if there’s too much funny business going on in the market for fundamentals to exert their fair share of pressure on prices.
Hope that helps in whatever small way it can.
MW
P.S.– Heard a great quote that I think applies really well to trading. It goes something like “The man who blames others for his problems hasn’t begun his education. The man who blames himself has begun his education. And the man who blames no one has finished his education.” (I think I’m at stage 2.25.)
June 9th, 2009 at 5:10 pm
cvienne-
I think that was Marcus or Transoz Z that came up with that- I will tell you though-
Marcus literally had me laughing so hard I had tears coming out of my eyes- that- and Whammer came up with a pretty good variation using Marcus Aurelius, Ahab and Whammer combined- pretty funny stuff-
all at my expense!
June 9th, 2009 at 5:13 pm
@matty Woo
“The man who blames others for his problems hasn’t begun his education. The man who blames himself has begun his education. And the man who blames no one has finished his education.”
Interesting quote…Our president is definitely still at stage 1
June 9th, 2009 at 5:19 pm
Leave it to Karen to poison another thread appealing to the crude and crass opposite sex.
June 9th, 2009 at 5:24 pm
Mattywoo-
thanks for the feedback- I am inclined to sell just so I can concentrate on other ideas- really the first time I’ve been stuck with something w/ a sizeable loss- so-
with no stop/s- basically took the risk- had a pretty good winning streak too that is now barely above even
June 9th, 2009 at 5:38 pm
@cvienne 5:13
El Jefe’s policies confuse me. I was amped when he won (hey, what do you expect? I live in Cambridge) and was looking for Change I Could Believe In. (Change In Which I Can Believe? One of those.) I fully expected the adults to shut down the party but instead they joined in, cranked the stereo to 11, and started doing ice luge shots of Gold(man) Schlager with the already inebriated celebrants. Having been long FAZ for a while there, I’m now just plain-old looking for change. At least now I’m close personal friends with cognitive dissonance.
@leftback 3:31
Much like the market these days. Nary an invisible hand to be found.
June 9th, 2009 at 6:14 pm
[...] Ritholtz at The Big Picture blog has an interesting theory. He suspects the entire TARP exercise was a massive ruse to conceal the fact that Citigroup was on the brink of c…. The other banks were not pictures of health, he says, but the real crisis centered on Citi. [...]
June 9th, 2009 at 6:27 pm
@ahab, we weren’t laughing at you, we were laughing with you
At least I was — the whole thing just got hilarious there for a bit…..
June 9th, 2009 at 6:33 pm
This seems like deja vu. Oh yeah, that’s because I read the excerpted chapter of the book this morning. Moving on…
P.S. Darn fine book Barry, darn fine.
June 9th, 2009 at 6:38 pm
@ ahab:
All along I thought your handle was just a clever twist on the opening line of M. Dick.
Ahab would have been a trader, always searching for the white whale. Ishmael, well, would have written a book about him.
Don’t change your moniker….even if it was a mistake, it was fortuitously better than your intended one.
June 9th, 2009 at 6:55 pm
curmudgeon-
I like your take- that’s my story from here on out- “that other story”- well I just did that to amuse the folks on the TBP-
wink, wink
June 9th, 2009 at 6:58 pm
Whammer-
I was definitely the entertainment that night- you got that right- pretty funny stuff- you and Marcus and a few others definitely had me laoughing
June 9th, 2009 at 7:41 pm
Franklin about those student loans…maybe there won’t be any help paying them off…
http://www.nytimes.com/2009/06/10/your-money/student-loans/10repay.html
California Worries About Fate of Loan-Repayment Aid for Teachers
“The state program, called the Assumption Program of Loans for Education, pays up to a total of $19,000 toward student loans over four years. About 6,500 teachers are currently in the program.
Despite the latest assurances that the checks will finally be going out, Ms. Fuentes-Michel said she was concerned that the worst might not be over. She said she had asked her staff to look into the effect the state’s finance crisis could have on the teachers’ loan program and two similar ones that serve nurses.
“We’re looking into whether California can renege on its commitment,” she said.”
June 9th, 2009 at 8:15 pm
great rant about Paulson
http://www.businessinsider.com/matt-taibbi-explodes-all-over-the-wsjs-evan-newmark-2009-6
June 9th, 2009 at 8:37 pm
wow- great link mike
June 9th, 2009 at 8:43 pm
ahab@6:55 –
you almost said it…
try, “that’s my story and I am stickin’ to it”
that was a funny night – you are the man – ahab, ish, tibbs, sally – did i forget anyone!
June 9th, 2009 at 8:45 pm
ahab and Mike in Nola,
that was posted earlier today
i enjoyed the rant
i think that F411 would be on the hero worship side of the mirror – cv, please dont’ GO OFF
June 9th, 2009 at 8:57 pm
Wes: sorry, didn’t notice it. This is a helluva long thread.
How bout this one:
http://mandelman.ml-implode.com/2009/06/former-sub-prime-lenders-are-back-to-profit-off-the-mess-they-made-seriously/
June 9th, 2009 at 9:01 pm
QQQQ puts are pretty cheap. It’s at almost 37. Low earlier this year was 25.xx. You can get a Dec. put at about a buck. I guess it’s the confidence that the low is in.
June 9th, 2009 at 9:02 pm
Forgot to say that was at a strike price of 30.
June 9th, 2009 at 9:29 pm
[...] sure you’re sitting down before you read this. Barry Rithholtz, speculates in his forthcoming book, Bailout Nation that the entire multi-trillion dollar boondoggle was a [...]
June 9th, 2009 at 9:46 pm
Mike in Nola @8:57
no reason to be sorry
but those were really funny rants
like the other one….guy venting on a CTR display
June 9th, 2009 at 10:00 pm
Mike in Nola-
Read Bob Lefsetz at Lefsetz.com….article titled WWDC. Don’t think the cheaper iphone will cannibalize the new one, but will rather bring in new buyers who didn’t want to pay the higher price. Current iphone users will upgrade to the new one, and a whole new generation of holdouts will pick up the $99 ones. It’s like that Seinfeld carpet episode only with phones…..someday the whole world will want a smartphone, and we will sell it to them.
June 9th, 2009 at 10:16 pm
@greg: I might be a buyer at $99.
June 9th, 2009 at 10:43 pm
Once the 10yr hit 3.74% the 3rd time it hasn’t looked back
It’ll be at 4.0% by Friday. I’m waiting to see how many indirect bidders show up for the 10yr and 30 yr auctions.
June 9th, 2009 at 11:00 pm
Mannwich-
I knew you really wanted to be an Apple convert, but beware my friend, it won’t stop there. It won’t be a sudden thing, in fact it will be almost imperceptible. You’ll find yourself at Mall of America one Saturday, near the Apple Store, and you’ll think to yourself, what can it hurt, I’ll just go in and browse. You’ll slowly make your way to the iMac displays and after just a hint of hesitation you’ll begin playing with one. It will not be evident at first, but soon you’ll notice the brushed aluminum, the seamless styling of the monitor with it’s black band separating the aluminum from the actual screen display, and you’ll wonder albeit briefly, how did they decide on exactly how wide to make the black band, and is the ratio correct. And then you’ll find yourself thinking, yes it is correct, in fact it’s perfect. You’ll surf the web, bringing up favourite sites, probably TBP, and you’ll marvel at the speed and the look of the page on display, and it will look familiar yet somehow new, and different. You’ll start to feel a childlike sense of wonder come over you, am almost giddy feeling, and you’ll remember back to when you were 12 years old, and you got that new bike you had always wanted and how that had made you feel. You want that feeling again. So with with just a fleeting feeling of hesitation, but with an overriding sense of entitlement you’ll tell the clerk you’d like to take the 20″ iMac. You can afford the 24″, but your a practical man, and besides the 20″ is more than adequate. As you leave the store you notice a certain spring in your step, your posture is suddenly more erect, your breathing more even, you feel in complete control. You have arrived.
Yeah, it’ll happen something like that!
June 9th, 2009 at 11:10 pm
@greg: Or I’ll feel like I’ve felt when I’ve finally entered a trendy “velvet rope club”. Happy at first I got in and excited to to check out all the hot babes everywhere, but eventually disappointed at the lack of substance. I hope you’re right though. Am worried I’ll miss Blackberries keyboard and haven’t heard good things about the actual phone on the I-Phone. Plus, AT&T is terrible, although they’re better than they used to be (not saying much). I have them now and would rather switch when my current contract runs out in November.
June 9th, 2009 at 11:14 pm
hahah nice posts greg and mannwich
June 10th, 2009 at 5:33 am
Mannwich:
Now’s your time to get in cheap. All the snob appeal at a cut rate price:
http://i.gizmodo.com/5284638/when-pro-doesnt-mean-pro-anymore
June 10th, 2009 at 7:04 am
@Mannwich
all the strippers hang out inside the velvet rope…
June 10th, 2009 at 7:06 am
@greg
You could get a table dance in the champagne room for $99…
June 10th, 2009 at 12:00 pm
I guess there’s no more crisis anymore, huh? no more recession? all
done. Problem fixed by minting a trillion dollars out of thin air. Happy days are here again.
yay i love jobless recoveries. I love outsourcing. i love hyperinflation. I love huge
deficits. I love fear mongering pandering politicians, I love $4 gas and 140 oil. I love
making petro dictators rich
good finance & econ articles for a slow news day: http://budurl.com/wet8
Wealth polarization, labor trends, trade imbalances, size of FIRE economy vs. productive economy, consumption vs. investment. I’m less interested in proving it mathematically as I am about coming up with an explanation that makes intuitive sense. If you look at historical depressions, they’ve all centered around a huge malinvestment. Tulips, South Seas bubble, 1870’s railroads, farm production/investment, etc.. And each has had a speculative buildup focused on this unproductive excess.
June 10th, 2009 at 9:32 pm
[...] TARP IT [...]
June 10th, 2009 at 9:46 pm
[...] TARP IT [...]
June 11th, 2009 at 9:08 pm
[...] of them, Barry Ritholtz, blogs on the question here, as Stephen Spruiell notes at The Corner [...]
June 12th, 2009 at 11:00 am
[...] The Ritholtz blog suggests: [...]
June 16th, 2009 at 4:00 pm
[...] example, National Review pulled a quote from our comments last week at on the TARP repayment. That was an excerpt from the [...]