22 replies to this topic

[SemiBizz]

And, while ya'll calculate your bullish possibilities... don't forget to cover your back !! We could see big time financial institutions GOING UNDER in Days, not weeks from now... That's what's different... The Psychology of buying and selling runs deep. Deeper than these charts. From the looks of it, all of our homes are worth quite a bit less now than they were a year ago, and the prospects are that all of our R.E. is going into the tank. Go ahead and be the ultimate contrarian. Stick to that buy and hold forever stuff... I saw plenty of them stick to the script in 2000 and were devestated. I was able to convince others to sell their CSCO in the 60s and 70s... Go out and buy yourself some CSCO, since your brokerage account is unsafe. It might not go back to $8 again, but I'm not going to bet on it... Oh Yeah and as they say in the gold market... TAKE DELIVERY !! You don't want your shares tied up in this mess.

Edited by SemiBizz, 18 August 2007 - 07:57 PM.

[SemiBizz]

Basically, this board is in the same state of denial of May 2006. If your memory or access to my posts will verify... I told you all then that the stock options scandal would cause a strong retracement in stocks and basically until something got resolved fundamentally that it would cast a shadow over this market. That little episode lasted a full 2 1/2 mos. We are about 3 wks into this liquidity CRISIS... FAR BIGGER THAN ANYTHING THAT HAPPENED IN MAY 2006 and the denial is THICK. I hope that some of our traders will not be so hard-headed this time that they let their trades run big numbers against them because they had to be right... And BTW, this little episode was not about interest rates, it was about liquidity, so they may as well cut the rates by 3 % Sure the Feds can give you a 30 day band aid for 1/2% less... meanwhile you bleed maybe even more than your principal investment if you leveraged against this trash...and many did. So let's get our stories STRAIGHT !! It doesn't matter what the balance is in your brokerage, fund or bank account is, if you can't access it. Now tell me how 30 days and 1/2% less solves all the problems of the Financial World????

Edited by SemiBizz, 18 August 2007 - 10:04 PM.

[ogm]

How do you know what amount of liquidity is out there ? Can you put numbers on it ? There were record volumes on NYSE and the selling was absorbed. Looks like there is liquidity to me. The levels of interest rates comparing to what high risk CDO's where paying were simply unacceptable. The balance will be found once again at some point. Also look at how the treasuries are pushing up. Plenty of liquidity to move em. But the fear is sending that money into treasuries. The most liquid market in the world. If US financial system was threatened to the core, don't you think the world would've found some other vehicle to use as safeheaven, rather then the US Treasuries ? And yet people all over the world are buying dollars to buy treasuries.

[SemiBizz]

And you know what is the same though? It's the same as June 23, when most of the board was bearish... I called for new all time highs in the SPX and new highs on the Nasdaq... so no, there's nothing new for me, here I am out on the same old limb, sticking with a trend until it truly proves me WRONG !!

http://bigcharts.mar...&mocktick=1.gif



And that hasn't happened... so good luck trend-fighters.

Edited by SemiBizz, 18 August 2007 - 10:34 PM.

[stocks]

The Rating Agency Blame Game

The ratings agencies have put 101 different CDOs on "watch," which is market speak for "we are probably going to change our rating." But that's a little too late.

In 2006, nearly $850 million or 44% (up from 37% in 2002) of Moody's Investors Service total revenue came from the rarefied business known as structured finance. In 1995, its revenue from such transactions was a paltry $50 million. Moody's took in around $3 billion from 2002 through 2006 for rating securities built from loans and other debt pools. The same pattern holds for Standard and Poor's and Fitch.

In short, the ratings agencies were making huge amounts of money from the investment banks for rating these structured products. And let's make no mistake about it, they were selling their name and credibility. Everyone knew what a AAA rating meant when it came to a corporation or a country. And even though there were disclaimers in the 500-page documents accompanying the CDO sales material, the investment banks were clearly pointing to the ratings as they sold that paper.

The entire process hinged on the credibility of the rating agencies. Somehow, no one seemed to think that the default rates from "no-documentation" and "liar" loans would possibly be different. I am sure you can find a paragraph in the offering documents which will make that contention, at least obliquely. Lawyers are good at that stuff. But that is entirely beside the point.

http://www.2000wave.com/gateway.asp

[Wombat]

I think it's different, too. Nouriel Roubini at RGE Monitor talks about this being not just a liquidity crunch but an actual insolvency problem. I'm not sure how interest rate cuts can bail out CDOs that are worth less than everybody thought, etc., and bad structured investment products are in accounts all over the world. It feels to me like this house of cards that was built on liquidity is now crumbling, the proverbial "Minsky Moment." I do think we have at least a short term rally because people think the Fed can bail is out. But I'm not so sure this time. I'm just watching and waiting in a US Treasury money market.

[bulls_make_money]

SemiBizz you make excellent points and I agree,...at least one major mortgage lender, and probably one money center bank, will likely go bankrupt. Friday's Fed action to buy any and all types of debt paper for the next 30 days is clearly a move of desperation. Any rate cuts in the 5.25% Fed Funds rate would impact the economy 12-18 months from now, if history is any guide. Given the crisis of confidence in the debt markets, the best move may something suggested by Larry Kudlow (can't believe I actually agree w/ Kudlow!), ie, a coordinated effort between the US Treasury and the Fed. One scenario would work like this,... Treasury issues paper of maturities of <10 yrs to meet the demands of investors desperate for a flight to safety (Paulson knows well the old wall Street adage, "When the ducks are quacking, you've got to feed the ducks!"). This could easily be absorbed, given the recent price increases seen in 10 yr bonds. In addition, the Fed would not only lower the Fed Funds rate, but would also buy up ALL the paper nobody no longer wants (at least for now) and allows it to sit on its books. Unfortunately, this paper would have to sit on the Fed's books a whole lot longer than 30 days. But while the strategy may save the equity markets near-term, the longer term ramifications are unclear.

[ogm]

In addition, the Fed would not only lower the Fed Funds rate, but would also buy up ALL the paper nobody no longer wants (at least for now) and allows it to sit on its books. Unfortunately, this paper would have to sit on the Fed's books a whole lot longer than 30 days.

But while the strategy may save the equity markets near-term, the longer term ramifications are unclear.

The Fed will write any losses off its books and no one will ever notice in the big scheme of things ? Who ever checks the Fed's books.

If they tighten the lending standards going forward, the toxic paper will be dissolved overtime among higher quality credit.

And by the looks of it they have purged most of this low quality lending already. All those AHM type garbage lenders went belly up and the big banks for the most part exited subprime. So the quality of the paper will star improving.

Also don't forget a lot of big players are scooping up the subprime paper at Distressed levels. Look at Blackrock, GS, JPM, Citadel announcements. They will take some of this junk at pennies on the dollar from overleveraged hedgehogs. They will make money.

The situation will resolve over time.

Edited by ogm, 19 August 2007 - 12:09 PM.

[SemiBizz]

Well, if the Fed steps in and resolves it to the satisfaction of the Global Financial Community then this episode will conclude.. until then, market's going to keep on going DOWN.... This is NOT a tough call.

[thespookyone]

Nice of you to lay out the fundamentals here, semi. I have found over the years that some folks with the very best TA skills tend to totally ignore them-which I have always considered a mistake. I trade charts, sure,BUT, there are certain fundamental realities that will cause pattern failure in a moment. The "fed cut" a prime example. I think everyone saw where futures were Friday morning before the cut. Your points are well thought, and well made. It seems many feel the subprime issue has been miraculously solved-imho that is VERY far from the truth. There are many hard shoes yet to drop, many of which I'm sure will effect the market. To me, the timing of the cut wasn't merely a gift to the large brokerages-but a sign of huge panic-and with good reason. Subprime didn't affect only bad credit-but all credit. As for those chanting liquidity is not a problem-what the heck ever happened to those two buyout a day headlines every morning? hmmmm. You may, however be worried too much about the traders here, if the poll is any indication-it would seem the largest position is "flat" currently my position, and I feel the most prudent at this juncture. My feeling is-test the bottom for me, I'll observe the market at that juncture, and become more aggresive-one way OR the other. Until then, I'm daytrading, and NOT holding overnight-pure and simple. Thanks as well for all of your VERY accurate volume posts-they have been of great help to myself, and I'm sure many others here. Spooky