The Obama administration continues to demonstrate their lack of understanding about a) how derivatives work, and b) their role in the crisis and collapse.

The proposals to regulate derivatives are weak and ineffective. CDOs and CDS may be trading at healthy discounts to their notational value, but at least Wall Street is getting 100 cents on the dollar for its lobbying efforts.


“The multitrillion-dollar derivatives market, which currently isn’t regulated, enables financial firms to speculate on whether stocks, bonds, currencies and natural resources, among other things, will rise or fall in value. A particular type of derivative called a credit-default swap exacerbated the financial crisis and contributed to the collapse of American International Group, which made bets on derivatives it could not afford. Credit-default swaps, which are linked to the value of bonds, would be overseen by the SEC under the proposed agreement . . .

Obama’s proposal calls for derivatives to be traded through “central clearinghouses,” which would collect data about the market and require that buyers and sellers allocate enough money to cover any trades.

Gensler wants to go a step further and require that derivatives be traded on electronic exchanges, just as stocks are traded on the New York Stock Exchange and the Nasdaq. A derivatives exchange would offer the advantages of a clearinghouse but also provide public information about the pricing and volume of trades.

Non-standard derivatives would be exempt from much of this regulation. These are derivatives linked to highly complex investments, such as securities composed of mortgages and other kinds of debt. But Gensler and Schapiro said it would be important to be vigilant about policing this market.”

No no no!

This is simple, people! Repeal the CFMA to begin with, put ALL derivatives on exchanges, require transparency and reserves.



Broad Agreement Reached on Derivative Oversight
Zachary A. Goldfarb
Washington Post, June 23, 2009

Category: Derivatives, Regulation

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

85 Responses to “Obama’s Weak Regulatory Reform For Derivatives”

  1. matt says:

    You have a little typo up there Barry. I think that “notational” should be “notional.” [BR: Fixed]

    The Obama administration doesn’t understand derivatives, but it doesn’t help that the media is even more clueless.

    “The multitrillion-dollar derivatives market, which currently isn’t regulated, enables financial firms to speculate on whether stocks, bonds, currencies and natural resources, among other things, will rise or fall in value.”

    Come on, they make this sound like a giant [word that gets caught by the spam filter]. The primary purpose of derivatives is risk management. I would also add discovery of prices and market expectations.

    Speculation is a side effect, but speculation aids in the above primary purposes, as speculators add liquidity and allow for risk management by taking the othe side of trades.

    This demonization of what the media thinks is inscrutible speaks to the dumbing of America.

  2. It’s looking more and more hopeless. What can we do to get the message through their thick skulls?

    If they mess this up, the next crisis could make this one look like a walk in the park.

  3. The Curmudgeon says:

    Derivatives are speculation. Buying and selling bets on future prices is speculatin’, pure and simple. Which is not in itself bad. It only becomes bad when the Goldman Sachs, via its US Treasury subsidiary, uses taxpayer dollars to save bettors from having their knees capped when their bets go bad. The best regulation of derivatives that could ever have happened would have been a bankrupt AIG, and all its counterparties (GS, inter alia) along w/ it.

  4. Ned Bushong says:

    >>No no no! This is simple, people! Repeal the CFMA to begin with, put ALL derivatives on exchanges, require transparency and reserves.<<

    Or better yet, keep the government out, stop the bailouts, let fools go broke!!!!!!!!!

    BTW, has everyone read Mauldin, today? Great stuff:;read=18133

  5. Transor Z says:

    Posted this on another thread:

    This link was posted over at Zero Hedge. It’s the video of Chris Whalen et al’s appearance before the House Banking, Housing and Urban Affairs Committee yesterday. Chris Whalen’s statement is at 116:30. Henry Hu’s explanation of why Goldman was an “empty creditor” in the AIG debacle — and thus able to “truthfully” say they had no “material exposure.”

    I don’t know much about CDS and I found the last 30-40 minutes to be extremely interesting/informative. Great overview of the utility of credit default swaps and the downsides.

  6. Wes Schott says:

    what happened to Chris Whalen’s prepared statement to a congressional committee re. the derivatives market?

    i read it just a day or two ago

    it was very pointed criticism – especially tying the re-insurance w/side letters to the CDS market suggesting there likely were side letters as well => bailout of AIG was really really a looting of the Treasury

  7. Wes Schott says:

    TZ -

    I was typing as you were hitting the enter key – thanks for the link!

  8. Wes Schott says:

    the text was posted somewhere on TBP just the other day

  9. wally says:

    We should put horse races and random rolls of the dice on exchanges, too.

  10. Transor Z says:

    Chris’s testimony goes beyond his prepared statement — which is also posted at ZH but I saw it here first the other day also.

    Excellent video. Great if you’re like me and doing some month-end data entry and need background noise to break the monotony.

  11. Wes Schott says:

    these derivatives are OTC and not transparent

    at least with horse races and rolls of the dice, the outcome is tranparent

    of course one horse might have a little EPO in him, and one die might have a little lead on one face….

  12. Wes Schott says:

    @TZ -

    no month-end data entry for me

    just got back from Rio – 11 hours in the plane overnight – i’m kinda takin’ it easy today

    don’t make a mistake with those numbers ;-)

  13. Transor Z says:


    1.0 hours: Web-based research

    Hmm. . . now I just need a client to bill it to . . . ;)

  14. alfred e says:

    Well yeah, transparency and reserves. Don’t hold your breath.

    Chris Whalen’s testimony nailed it totally and can be found on Think Tank

    I think that should be broadcast everywhere, but also boiled to down “Michael Moore” sound bits that J6P can relate to better. What’s it mean to me?

  15. GB says:

    Change we can believe in. Will I be able to trade them in my TDAmeritrade account?

  16. willid3 says:

    maybe they should just add a small tax to a custom derivative. like maybe 50%? or more? and outlaw any CDS that the buyer has no vested interest in? and treat all of them as you would with any other insurance. the seller has to put cash away to back up the contract, and the buyer cannot increase the likelihood of payout (you can’t buy insurance on your neighbors house or your own, and then set fire to it, or hire some one to do so)

  17. DL says:

    I’m generally pro-free markets and anti-regulation. But after what we’ve gone through over the last year, it is unimaginable to me how anyone can suggest anything less than total transparency for CDS’s. That means that for each and every CDS contract, the entity that has underwritten that contract should be made public, and that entity be required to provide full and complete financial disclosure. In addition, for those who choose to withhold information, the burden on prosecutors to demonstrate criminal intent should be relatively low.

    Anything short of this, and Barry’s going to end up having to write “Bailout Nation II” before long.

  18. Wes Schott says:

    it allways struck me that buying a CDS without owning the underlying bond, is like naked shorting an equity – only difference is a legal OTC side bet

  19. Mannwich says:

    @DL: I think TBP = “Bailout Nation Ad Infinitum”. It will be documented here.

  20. Thor says:

    OT – Wes – are you going to give us all your impressions on how Brazil is doing later? ;-)

  21. matt says:

    “maybe they should just add a small tax to a custom derivative. like maybe 50%? or more? and outlaw any CDS that the buyer has no vested interest in?”

    “it allways struck me that buying a CDS without owning the underlying bond, is like naked shorting an equity – only difference is a legal OTC side bet”

    Maybe both of you should listen to the testimony in the link that Transor Z posted. Listen especially to the testimony given by Mr. Griffin, as he explained that sometimes you can use a CDS for another company in the same industry as a proxy for your target company, which doesn’t have a liquid CDS market. In that case, one doesn’t technically have a vested interest, but the position is no less legitimate.

    Try to remember that there are other players in this market besides primary dealers.

  22. DL says:

    Thor @ 3:18

    What’s not to like about Brazil? EWZ is hauling ass.

  23. Mannwich says:

    @DL: It’s doing fine today after a pullback (I grabbed some), but will it and the emerging markets overall continue if/when the broader market sells off? I kind of doubt it. Seems bubblicious to me.

  24. Thor says:

    DL – before Wes left he said he’d give us his impressions on what the economy looked like there (at least on the surface). Am very curious as to his impressions.

  25. DL says:


    Certainly, if the SPX tanks, EWZ will decline also.

    And the $64K question is what the SPX is going to do over the next few months.

    I certainly don’t know.

    Nevertheless, I’m convinced that EWZ will be a lot higher in two years… I think the Fed will keep the money flowing during that time.

  26. call me ahab says:

    bond holders who have hedged their risk with CDS can benefit from a company going bankrupt – so why would they ever try to negotiate to avoid the bankruptcy?

    how did bondholders/banks minimize risk prior to the advent of CDS?

  27. Mannwich says:

    @DL: Agreed, which is why emerging markets like EWZ are becoming core holdings in my portfolio right now. Of course, that could change in a minute, no, second.

  28. Mannwich says:

    @ahab: Call me crazy, but maybe they actually did their due diligence on the company to which they decided to lend money?

  29. DL says:

    “call me crazy” VERSUS “call me ahab”.

  30. call me ahab says:


    exactly- that’s my point

  31. dead hobo says:

    BR said:

    This is simple, people! Repeal the CFMA to begin with, put ALL derivatives on exchanges, require transparency and reserve

    Assume a derivative that says I win $1 billion if the Queen Mary 2 sinks and you were the other side. How would you price it? Since I have no insurable interest and only a morbid feeling, why would you even take the other side? Would Uncle Stupid pay out if you couldn’t?

    More regulation other than transparency, reserves, and exchanges are necessary. Some contracts should be made to be simply unenforceable. For example, assume I won on the above derivative and demanded a payout, since I paid the extortionate premium you required. It should be legal for you to say to me “Screw You, thanks for the free donation to my retirement.”.

  32. DL says:

    DH @ 4:02

    There’s a long history of regulating insurance companies. It seems to me that many of those laws could be readily adapted to companies that underwrite CDS contracts.

  33. leftback says:

    I expect Wes to report in that the thong business is exceptionally strong at Copacabana.

    Less strong was today’s rally. Notable was the anemic trade in crude oil despite the $ being crushed. That suggests more weakness in the commodity area and Schadenfreude re-established some small shorts in that area today. Not touching anything bank or RE-related until after an expected FOMC green shooty statement and the ensuing garbage rally. After that I will get really short. The technical picture for SPX and $wtic and even GLD really looks ugly now.

    You chaps happen to notice (translation for cvienne: Y’all see) the rally in Treasuries since the 10-yr kissed 4%?

  34. flipspiceland says:

    Obama understands precisely what he and his henchpersons are doing. These characters are nothing more than robbers with advanced degrees.

    They live in a privileged position that permits them to rip off the entire country if not the world economy. They don’t make a move that Goldman Sucks hasn’t told them to make. And last I looked the honchos at Lloyd Blankfein’s lemonade stand are doing just dandy thank you. And it ain’t luck that’s responsible.

  35. Wes Schott says:

    ahab@3:43 -

    They used re-insurance (like Berkshire’s GenRE) – with side letters

    the Feds were catching on to the side letter scam

    so, the thinking goes, they started the CDS’s, which may have had side letters as well

    you gotta read the Chris Whalen statement to congress mentioned earlier and posted on TBP while I was down south a few days ago

  36. call me ahab says:


    when you say south- I’m thinking Alabama, Mississippi and Louisiana


    big pat on the back- you did say money would switch into treasuries once we hit 4%

  37. leftback says:

    @ahab – thank you kindly sir, even a stopped clock is right twice a day.

    Now watch crude oil CRUMBLE, baby. I know Andy T is with me on this call.
    $50 would be a 50% retrace of the rally. I think we are going there, and we’ll also see USD 84.

  38. Thor says:

    LB – do you think oil will stop at $50 though? Or push back through it’s March lows?

  39. call me ahab says:

    to any and all-

    what is the best long $ play-

    UUP, short Euro, short precious metals, DDG, DTO, DUG, ERY

    if you had to pick two- and please feel free to add to the list

  40. Onlooker from Troy says:

    I don’t know, I feel a nasty correction coming in the EMs when it becomes apparent that the China story of recovery is a bit shaky. Plenty of evidence coming to light lately. Tread cautiously. Remember decoupling? You really think it’s changed since last year? I don’t. Not yet.

  41. Mannwich says:

    @ahab: TLT. QID should even do well with a strong dollar. SDS…….so many, so little time. ;-)

  42. Mannwich says:

    @Onlooker: I agree, which is why I’ve pared back my EM holdings lately. Will probably hang onto some as core holdings in my IRA’s for the time being though. Decoupling, my ass. Someday, perhaps, but not yet.

  43. Wes Schott says:

    OK – Leftie, Thor and Co –

    i don’t do Copa, and neither should you – Ipanema and Leblon are more to my liking.

    thongs? you mean dental floss – talking about bubblicious – a left one and a right one on every beautiful garota de ipanema

    so how is the feeling – Rio is a laid back kinda beach city – the people love their beach. Not like Sao Paulo, which is more hectic. compared to last time I was in Rio summer 2007 – hotel prices up, restaurants about the same, not too many americans or europeans to be seen, more aussies and asians than i recall from before. freeways are just as jammed up as before. Lula says the financial problems are a mere light breeze – hardly a storm. GM auto manufacturing facitility to be spun off to local hands. Petrobras is holding back on some big projects due to cash flow problems – but these projects take 10+ years to come to first oil, so as oil prices rebound, they should start progressing again. being a net exporter of commodities, they are positive on the future. my driver told me to be careful not to let america become like brazil – 140 mm voters – 120 mm in poverty – promise something to the impoverished, and you get elected no problem (120 beats 20 by a big margin)

  44. leftback says:

    I am not a talented TA person, but I think $50 would be a reasonable first target. I am thinking $50 oil and USD 84 as the target for the July $ rally, before THE TRADE turns again. I know Andy T has a model for crude that is very bearish indeed. We expect a larger $ rally in the fall as the bottom falls out of everything once again in a delightful echo of 2008′s deleveraging panic and mayhem.

    No opinion on March lows as it depends on the nature of additional interventions. Anyone’s guess. Without more QE I think we can go lower than $32 oil and SPX 666 (LB Bottom). My guess is they will print and print and print.

  45. leftback says:

    @ahab: I like SCO and DUG and that’s what I am in right now. I think SMN could also be a nice play here.

  46. Wes Schott says:

    @ahab – you may need them all by the time we get to SP 333 – but that won’t be right away…

    Dow Jones Industrial Average SM Short Dow30 Single DOG
    Dow Jones Industrial Average SM UltraShort Dow30 Double DXD
    Dow Jones U.S. Basic Materials SM Index UltraShort Basic Materials Double SMN
    Dow Jones U.S. Consumer GoodsSM Index UltraShort Consumer Goods Double SZK
    Dow Jones U.S. Consumer Services SM Index UltraShort Consumer Services Double SCC
    Dow Jones U.S. FinancialsSM Index UltraShort Financials Double SKF
    Dow Jones U.S. Health CareSM Index UltraShort Health Care Double RXD
    Dow Jones U.S. Industrials UltraShort Industrials Double SIJ
    Dow Jones U.S. Oil & Gas SM Index UltraShort Oil & Gas Double DUG
    Dow Jones U.S. Real Estate Index UltraShort Real Estate Double SRS
    Dow Jones U.S. Semiconductors Index UltraShort Semiconductors Double SSG
    Dow Jones U.S. Technology SM Index UltraShort Technology Double REW
    Dow Jones U.S. Utilities SM Index UltraShort Utilities Double SDP
    FTSE/Xinhua China 25 Index UltraShort FTSE/Xinhua China 25 Double FXP
    MSCI EAFE Index Short MSCI EAFE Single EFZ
    MSCI EAFE Index UltraShort MSCI EAFE Double EFU
    MSCI Emerging Markets Index Short MSCI Emerging Markets Single EUM
    MSCI Emerging Markets Index UltraShort MSCI Emerging Markets Double EEV
    MSCI Japan Index UltraShort MSCI Japan Single EWV
    NASDAQ-100 Index Short QQQ Single PSQ
    NASDAQ-100 Index UltraShort QQQ Double QID
    Russell 1000® Growth Index UltraShort Russell1000 Growth Double SFK
    Russell 1000® Value Index UltraShort Russell1000 Value Double SJF
    Russell 2000® Growth Index UltraShort Russell2000 Growth Double SKK
    Russell 2000® Index Short Russell2000 Single RWM
    Russell 2000® Index UltraShort Russell2000 Double TWM
    Russell 2000® Index Rydex Inverse 2x Russell 2000® ETF Double RRY
    Russell 2000® Value Index UltraShort Russell2000 Value Double SJH
    Russell Mid-Cap® Growth Index UltraShort Russell MidCap Growth Double SDK
    Russell Mid-Cap® Value Index UltraShort Russell MidCap Value Double SJL
    S&P 500® Index Short S&P500 Single SH
    S&P 500® Index UltraShort S&P500 Double SDS
    S&P 500® Index Rydex Inverse 2x S&P 500 ETF Double RSW
    S&P MidCap 400 Index Short MidCap400 Single MYY
    S&P MidCap 400 Index UltraShort MidCap400 Double MZZ
    S&P MidCap 400 Index Rydex Inverse 2x S&P MidCap 400 ETF Double RMS
    S&P SmallCap 600 Index Short SmallCap600 Single SBB
    S&P SmallCap 600 Index UltraShort SmallCap600 Do u b l e SDD

  47. Thor says:

    SP 333? God, how depressing.

  48. karen says:

    i wouldn’t short the spx yet… it may have one foot in the grave with 2 closes below the 50 day ema.. but this week isn’t over yet. oh, i posted this link to the spx chart in the previous thread to show the tap on the lower BB..$SPX&id=p36249577370&def=N&listNum=1

  49. Onlooker from Troy says:


    Ah, but wouldn’t you just love to be in cash when we hit that kind of low? Now that would be a Generational Low!

    But it does conjure up some ugly imagery, doesn’t it?

  50. Wes Schott says:

    @Thor -

    no, not really – a good buying opportunity for dividend paying stocks :-)

    you should have read my commented technical analysis on how we get there

    how come AT is TA backwards?, uh oh, i feel another bought of technical analysis coming on

  51. Thor says:

    Onlooker – I’m pretty much all in cash now. I came into some money earlier this year and I have absolutely no trading background so I’m not doing anything with it until I know where the hell we’re going with the economy. I took a small portion of the money and bought some FAZ – I call that my Vegas money, if I lose it all then I lose it all.
    I figured being in cash when we finally do hit bottom could end up being very lucrative if I invest the money the right way.

    And yes, it does conjure up some ugly imagery. Have loved history all my life, never thought I’d get to live through so much of it though.

  52. Thor says:

    Wes – Agreed. my comment was more for what that number means for the overall economy than for those of us who will be in good positions to take advantage of it ;-)

  53. Wes Schott says:

    P/E at bottoms ~10 , Earnings of $33 => SP333 not as far fetched as one might think

    with the huge credit bubble overhang (it is bigger than the fed) it is doubtful that Uncle Ben can muster up a big enough fleet of helicopters to over come this

    so the tension – does all the air have to go out of the bubble first or can we just keep patchin’ the leaks until we can inflate a new bubble

  54. karen says:

    Thor, are you still exploring the palm springs/palm dessert area for an income property? just wondering if you’ve made any progress.. being a property manager is not a headache i’d like to take on.. but i have a friend that has closed on one (tenant has moved in) and is looking for more in an area where prices have fallen 50%. The sellers in my town seem to be content to let their homes wallow in the pool for YEARS. One has gone from 8 million to just under 5 million.. 2, is more like it…

  55. john6pack says:

    Today the 50-day simple moving average crossed the 200-day. The last time the 50 was above the 200 was December 2007.

  56. Thor says:

    Karen – Yes, I am. I come into a second chunk of money (inheritance) in July and I was thinking about buying a condo for income property. I’m not sure now though – property has gone through the floor in PS the last three years and you can get a decent two bedroom condo in of of the golfing communities for under 150K now. I know one couple who owns a unit in one that they bought 7 years ago, they’re able to rent it out for about 1.5K a month – more during the high seasons. They use a property management company for maintenance and to find tennants to rent it out.

    I’m not 100% sold on the idea though. I haven’t looked at anything yet and am nervous that the market there has more to fall. As I’ve said before, this would be an investment I’d be making for the long run but I’d like to time the bottom as close as I can. Also, at some point next year I’ll likely move out there myself – I’d be renting out my house in Hollywood when I do so I’m not sure I’m going to want to have two properties to worry about in addition to a full time IT job.

    I know what you mean with wallowing for years. My partner and his ex have had their house in Rancho Mirage on the market for over a year and a half. It started out at 695 (they paid 500 five years ago) – they’ve got it down to 595 now with no offers in the last couple of months. A home in the same complex as theirs, very similar in size and model just foreclosed at 375 four months ago. Trying to get either one of them to budge on the asking price is like pulling teeth. Add to this that the ex’s partner is a real estate agent who keeps telling both of them that the bottom is near, that prices overshot on the downside.

  57. karen says:

    interesting point, john. could work for either scenario.. but my preferred inflationary one is still on top as of today’s close. note that the spy crossed last week, fwiw.

  58. Wes Schott says:

    @karen and j6p –

    wasn’t the old resitance/support ~Sp875 ?

    maybe it has inched up a bit

    help Andy T…or the guy from BR’s team who occasionally posts a chart – haven’t seen one of his in a while

  59. Wes Schott says:

    Thor@5:32 -

    I assume you have seen the graphs of mortgage resets – subprimes were mostly the first wave, now largely over, primes just peaked in the first half of this year – big group of option arms and alt A’s from now until endQ1/earlyQ2 2011. After that it is largely done.

    so, depending on the type of mortgage that typically financed the properties you are interested in, may give some hint as to the bottom – coupled with unemployment rate in the area

  60. john6pack says:

    hmmm, I was talking about the SP500 index, and the chart I’m looking at shows that it just crossed today.
    I read you guys (and Barry of course) to get your ideas about things like resistance/support and where the market might go, so I can’t say anything about SP875. I’m a 100% long buy-and-holder who has taken a beating over the past year and a half. In that time, I’ve been soaking up various alternatives and apparently a tried-and-true simple timing mechanism is to be in the market when the 50 day SMA is above the 200 day and out of it when it is below. Today it crossed and I’m hoping that it will lead to a flood of buying to boost my longs!
    Yes, hope is my investment strategy.

  61. call me ahab says:

    for the inflationista- from Jess’e Cafe Americain-

    “As long as the government is able to generate debt, deflation is a highly unlikely outcome. And when the government reaches the practical limits of debt creation, the underpinnings of the currency give way and the economy tends to collapse in a stagflationary slump”

    appears he agrees with you Karen

  62. I-Man says:

    Dammit… everytime I put alot of work into a market post you guys jump threads on me! I should know by now…

    Here goes (sorry to the Editor):

    The main thing on my mind is that the US National Team has a great R/R at kicking the snot out of Spain tomorrow. What can I say? I love being an underdog. Finals baby, finals.


    After adding to FAZ, SRS, QID, and SDS today…
    I might be looking to close those positions if we get a cliff dive down to 880 on SPX tomorrow and bounce.

    Note that in the spirit of good R/R, a close of the Ultrashort positions at support levels isnt necessarily a statement on the trend breakdown, but moreso an effort to reduce risk. I would like to see a bounce at these levels tomorrow, another lower high take shape, and then re-enter shorts again for the next wave down, should it occur. There is always the risk that the old Admin will come out and say something ridiculous to send the markets up well, ridiculously. Just below support would be a great place for them to do something like that.

    The H&S top that looks to be in play on SPX is what got me thinking on this strategy. Since I have been short from the top, might as well cover at 880, expect a bounce up to 915-920ish, and then give em hell. That way, at least I know my boundary on the upside. 956 feels like a long way from here to ride a short position.

    Here’s my tentative support levels for the Ultrashorts I have in play…

    QID- Close position @ Q’s 34.

    SDS- Close position @ SPX 880

    SRS- Close position @ IYR 30

    FAZ- Close position @ XLF 10.75

    Re-enter short positions at the exhaustion of the bounce off of those support levels.

    Of course, if we blow through those levels and dont look back, this strategy is likely out the window… but given the resiliency of this rally to date- I highly doubt that there wont be a bounce off those levels. Too many dip buyers still in the house.

  63. call me ahab says:

    j6p Says-

    “Today it crossed and I’m hoping that it will lead to a flood of buying to boost my longs!”

    hmm . . . you must be one hopeful guy

  64. john6pack says:

    Actually, I read this blog to decide when I’m going to pull the plug and go all cash.

  65. Wes Schott says:

    j6p@5:50 –

    all the best

    please take anything i comment upon as entertainment, at least i’m tryin’ to have some fun here

    some people think that these key points are good entry points for new money if going long or warning signs for older money

  66. karen says:

    john, i realized you were referring to the $spx, i just wanted to point out that the spy (which is actually bot and sold) crossed last week.. sso, on the other hand, hasn’t crossed.

  67. Thor says:

    Wes – thanks for the info. Haven’t done any research yet, buying a condo there is just an idea I’m tossing around. No real commitment on it yet. Palm Springs is an interesting market though – lot’s of retired folks, lot’s of ultra-wealthy, and a whole bunch of low income to service them. I have a much better understanding of Hollywood and it’s long term potential- new subway line, close to downtown, recent redevelopment, good mix of small and medium sized properties. Prices have fallen quite a bit here as well, but I’ve noticed the pace of gentrification picking up – people who can actually afford to buy homes are doing so and getting some pretty good deals.

  68. john6pack says:

    Karen, gotcha, I have spy and spx confused.

    Wes, it’s all entertainment to me since I haven’t acted to chang anything since this all began … but that may soon change!

    mahalo for well-wishes

  69. call me ahab says:

    thanks for all the trading ideas- i’ve decided to do all of them including Wes’s 2000 picks- i’ll just divide the money accordingly

  70. Wes Schott says:

    ahab – you da’ man!

  71. Mannwich says:

    @ahab: Bundle ‘em up as a short fund of ETF fund mutual fund and charge 2 & 20 to the sheeple (sorry Thor).

  72. call me ahab says:

    sheeple, sheeple, sheeple

  73. Thor says:

    baaaaaaaaaah BAAAAAAAAAAAH!

  74. jeg3 says:

    matt Says:
    June 23rd, 2009 at 12:09 pm

    “Come on, they make this sound like a giant [word that gets caught by the spam filter]. The primary purpose of derivatives is risk management. I would also add discovery of prices and market expectations.

    Speculation is a side effect, but speculation aids in the above primary purposes, as speculators add liquidity and allow for risk management by taking the othe side of trades.

    This demonization of what the media thinks is inscrutible speaks to the dumbing of America.”

    It’s easy to call Unregulated Derivatives a risk management tool when the Government will bail you out (especially with “economist” & financial regulators being hired from financial firms). Where would the derivatives industry be today if AIG went to bankruptcy court instead of funneling taxpayers dollars to counter parties who would not have gotten funds otherwise. Is it risk management or corporate communism?

    BR is having a book opening, maybe you should go.

  75. call me ahab says:

    Karen the Inflationista- now an opposing view regarding inflation-


    “Cash Supply Shows No Green Shoots for Fed Rates: Chart of Day”


    “while the Fed’s balance sheet has grown, the so-called money-multiplier, the proportion of newly printed money that passes on to consumers, has dropped. M2, a gauge that includes savings and checking accounts, is 4.7 times the base cash supply, down from 9.3 times a year ago. ”

  76. Wes Schott says:

    ahab@6:24 –

    the banks are not lending

    inflation will come when money velocity picks up – banks start lending

    fed can have the banks lend whenever the creature is ready to have his families horrors unleashed upon the backstoppin’, dare i say, sheeples!

  77. matt says:

    “It’s easy to call Unregulated Derivatives a risk management tool when the Government will bail you out (especially with “economist” & financial regulators being hired from financial firms). Where would the derivatives industry be today if AIG went to bankruptcy court instead of funneling taxpayers dollars to counter parties who would not have gotten funds otherwise. Is it risk management or corporate communism?

    BR is having a book opening, maybe you should go.”

    Where did I say anything about regulation? I was simply pointing out that a great many people (including the media that fuels misconceptions) think that derivatives don’t have any purpose except speculation.

    Don’t even bother going to BR’s book opening, since you can’t read.

  78. Greg0658 says:

    the problem I have with this whole derivatives escapade is
    … why should we taxpayers spend one dime to ensure the legality / functionality of them
    … they should not be subsidized by taxpayers in the courts or any other taxpayer funded office operation
    … if there are over $500Trillion floating around .. just how many cops should we hire to oversee that
    … why try … and just what are markets again .. I thought they were invented to fund corporations that you thought had sound plans to boost your investment to the moon
    … from my my pov it seems just a mind bend from expecting the courts to back you after asking the mafia for a loan that the dog ate before you got it back from its intended purpose
    … I am wasting my finger movements talkin to the choir ain’t I

  79. Andy T says:

    Wes: I was away belatedly watching a very funny and crude movie, The Hangover. To your point on TA….this is short term stuff:

    I hate the action in the DX last 24-48 hours….it makes me nervous that we’re going to set new lows in the DX before or a very strong rally this summer.

    The SP500 is facing very short term resistance 903-904…I see two impulsive lowers that have completed….the big question is do we set one more new low on an impulsive move? If we do, then it will look “horriblus maximus” for stock bulls. I see MAJOR resistance 928-930 if we can bounce that high from the current levels. I would be advising friends and family to hit the exits into anything with a 900+ handle.

    I’ll get an SP500 and DX update out tomorrow….FWIW.


  80. David Merkel says:

    You can’t ban nonstandard OTC derivatives without infringing the right of contract.

  81. Wes Schott says:

    Andy@11:51, 6/23 -

    hey dude, glad you showed up – i went to bed

    look forward to your take on the SP and DX wiggles

    you are not buyin’ in to the reverse H&S in Au – some goldbugs are salivating – perhaps it is time for the slaughter, unless and until the bank start deleveraging again……

  82. Hal says:

    Power corrupts

    in additon these folks want to be proven right–consequently they keep on pushing for their end game no matter what other evidence may surface along the way.

    Did I hear Obama say in yeaterdays daily press conference that 75% of our population likes the current health system and then, if true, why is he changing something that 75% of the population likes.

  83. DeDude says:

    I say we should put a really heavy tax on all derivative trades. Then the gamblers would not find it so attractive, and only those few who have a real legit need for insurance would get it. The trillions of dollars of derivatives serve no positive purpose for society. More than 90% of it is a tool for gamling and fraud – get rid of it.

  84. DeDude says:

    How about risk management by not investing in things you don’t understand, and not investing in something that carry more risk than you are willing to suffer!

    Now there is a new concept that would never be implemented. Way to many suits would have to work for their money, and a lot of them would lose their jobs when all those juicy fees on derivatives of derivaties of derivaties were no longer there to milk investors out of their yields.

  85. calltoaccount says:

    A very important, well reasoned piece by The Institutional Risk
    Analyst at:
    suggests worldwide economic/financial disaster is imminent unless and
    until the US government cuts off CDS speculators like GS, JPM
    and others who have tens of trillions in monstrously leveraged negative CDS bets– but no underlying risk interest, so can’t deliver a bond. The piece doesn’t quite say so, but the monstrous leverage is certainly tantamount to abusive naked shorting of the underlying debt/business– not to mention the self-perpetuating, self-fulfilling power it wields.

    It makes several references to insurance industry standards– and
    argues for CDS protection to be available only to those with an
    underlying [sic. insurable] interest, (evidenced by being able to
    deliver the bond, the default of which, you were supposedly hedging
    with the CDS.)

    The piece refers to a powerful “CDS Mafia”– but refrains from
    mentioning that these gumbas ran roughshod over long-standing
    insurance laws by prestidigitating a market innovation that’s allowed
    them to walk away with billions in profits and destruction wrought–
    but which would clearly be against public policy and therefore
    unenforceable, if called “bond insurance”– instead of a Credit
    Default Swap.

    a few excerpts:

    “commercial banks, insurance companies and commercial companies,
    [are] all…targets for the CDS Mafia and the unlimited leverage they
    use as weapons against us all to generate speculative gains.”

    “The Fed and Treasury must immediately force the CDS market onto
    exchanges and go back to the pre-Delphi bankruptcy model to require
    physical delivery of the underlying bonds in order for purchasers of
    protection to collect their insurance payments.”

    It’s about time this quintessential reality got some “leverage” in
    the public forum.