How Low Can It Go?
Thursday, November 20, 2008
Saturday, October 25, 2008
Paris 2008: Lamborghini Estoque LIVE - Autoblog
For the billionaire who's stock portfolio now compels him or her to car-pool, comes a new 4-door Lambo sedan.
Baby seat optional.
Wednesday, October 15, 2008
Wednesday, October 08, 2008
Techdirt: Apparently The Financial Crisis Is The Fault Of Flickering Computer Screens
How many of you as investors have requested paper copies of annual reports?
So the 3 of you that have, how many got beyond the glossy photos?
You must be the one holding cash right now.
It's all the fault of the OK button.
The whole thing, starting with the subprime, is the fault of the computer. I was just talking to a banker the other day, and not that long ago, 20 years ago, an investment banking house, let's say, Lehman Brothers, when it got a package of mortgages, they would go through every mortgage, every single one, and they'd throw out the ones that just seemed absurd, they just wouldn't accept them. Things used to arrive on paper. Today things arrive on a screen, and a screen is back lit, and one of the biggest pains in the neck is trying to read something dully written and complicated on a computer screen. It will drive you nuts -- I mean, try it sometime. Now they say, "Oh, to hell with it," and they just accept the whole package. And if it hadn't been for that, they'd be going over each loan. What's happened is the backward march of technology.
Techdirt: Apparently The Financial Crisis Is The Fault Of Flickering Computer Screens
YouTube - Strong bad - important rap song
Kidz don't play wit 2 many knives
Wish I listened to this before buying into the markets last week.
Monday, September 08, 2008
naked capitalism: Credit Default Swap Worries Go Mainstream
This article is from February, 2008. It applies now more than ever after the FRE/FNM bailout.
Strange that the 2 entities weren't halted after the news of their impending bailout.
Bloomberg.com: LSE Trading Crash
The breakdown left traders in Europe's financial capital in limbo as equities around the world rallied on the U.S. government's takeover of mortgage lenders Fannie Mae and Freddie Mac. The LSE, Europe's oldest independent exchange, said attempts to fix its biggest computer failure in more than eight years was ``taking longer than expected.''
``The LSE will come out of this very, very badly,'' said Omer Bhatti, head sales trader at WorldSpreads Group Plc in London. ``People will begin to think seriously about having alternatives.''
Saturday, July 19, 2008
Hewlett-Packard: Hewlett-Packard Crowned Head Of The Stupid Shipping Gang After Packing 32 Sheets Of Paper In 17 Boxes
This is a good reason not to buy HP stock. Unless they charge for shipping!
Leading the stupid shipping gang takes creative incompetence, and Hewlett-Packard is clearly up to the task. Other companies might have turned to email when faced with the challenge of shipping sixteen software licenses. Not Hewlett-Packard! HP went looking for a box. A really big box, which they filled with sixteen smaller boxes, each containing two precious pieces of paper ensconced in a layer of protective foam.
Saturday, July 12, 2008
ING DIRECT Canada: The Tax-Free Savings Account
ING has started marketing a tax free account for Canadians... whenever the budget for 2008 gets approved.
So what does this really mean? Soon you will have all the features that you have come to expect from ING DIRECT – like high interest, no fees, no minimums – PLUS the added benefit of no taxes on the interest earned in your Tax-Free Savings Account. Your hard earned money has already been taxed – now the interest it earns won't get taxed again.
Friday, July 11, 2008
FDIC Bank Closing Information for IndyMac Bank, F.S.B., Pasadena, CA
Another one bites the dust - to the tune of $1 billion in uninsured deposits.
On July 11, 2008, IndyMac Bank, F.S.B., Pasadena, CA was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. All non-brokered insured deposit accounts have been transferred to IndyMac Federal Bank, F.S.B., Pasadena, CA ("assuming institution") a new FDIC-insured Federal Mutual Savings Bank. No advance notice is given to the public when a financial institution is closed.
FDIC Bank Closing Information for IndyMac Bank, F.S.B., Pasadena, CA
Thursday, June 26, 2008
Investors see higher risk of GM default: Financial News - Yahoo! Finance
Things are getting messy out there. It used to be that $33k or $66k would have been okay for swap insurance. Then it was $100k. Risk-free borrowing was virtually, well, free.
Now it costs over $3 million to borrow $10 million?
Not gonna happen. Money no longer grows with CDS. How does it work?
The cost to insure GM's debt with credit default swaps rose to 33.5 percent upfront, or $3.35 million per year for five years to insure $10 million in debt, plus annual payments of 500 basis points, according to Markit.
Investors see higher risk of GM default: Financial News - Yahoo! Finance
The Fed Overnight rate has gone from an average of 3.94% in January to it's current rate of 1.98%... or free money... however it's not going to last. The hold on Fed funds caused a plunge in the markets that could cause another "cry wolf" scenario over the weekend and someone to bail.
Will it be GM? GE? Boeing? Oshkosh B'gosh?
Libor spike could be the cause of this too... or the opposite?
Some large caps with low P/E's
Altria - smoking will probably go up after today.
Barclays - Nobody wants a bank stock in this day and age... even if it yields 14%. Down by half 52wk.
ING Groep - Your money?
Lloyds TSB - Nobody wants insurance... Even if it yields 14%? Down just below half 52wk.
National Grid - What's wrong with UNG & electricity in the UK & US?
Interesting to note that ADRs are the lowest P/E.... probably due to the premium in holding them.
Other low P/E - high Yield stocks... according to Google Stock Screener.
|
Aircastle - +Gas price = -AYR
Anthracite - Dividend increased, along with going to the market? Sounds fishy...
Arbor - Structured finance??? Who does that anymore?
Bank of Ireland - On strike.
I could go on... there's nothing that's of interest here though... except maybe Gramercy?
Keycorp raising 1.5B and halving dividend.
Lloyds buying a bank?
MCG Capital? Too small to worry about.
How about Colonial BancGroup? Last year? $22/shr. This year? $4/shr.
Raises $333 million in the markets.
Robert Lowder has been CEO since 1981. He's 65? Time to retire?
He probably wishes he did last year.
The second-largest bank in Alabama isn't doing so well, according to the share price.
Might be worth a look.
Tuesday, May 13, 2008
Save a drowning victim...
Berkshire's philosophy for financial metrics.
CM: One metric catches people. We prefer businesses that drown in cash. An example of a different business is construction equipment. You work hard all year and there is your profit sitting in the yard. We avoid businesses like that.
Reflections on Value Investing: 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes
Some publicly listed companies that are "drowning in cash" at the moment.
Heidrick & Struggles International Inc. (HSII) - down 40% Y/Y
Cryo-Cell International Inc. (CCEL.OB) - down 68% Y/Y
Apparently swimming in cash is a bit different than drowning in it, as these 0 debt companies seem to indicate. It's not 0 debt, it's Cash Flow that's King.
Microsoft Corporation (MSFT) - down 3.6% Y/Y
Berkshire Hathaway Inc. (BRK-A) - up 13.5% Y/Y
Reflections on Value Investing: 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes
Financial investment advice for small amounts of money.
For someone with $50+ billion dollars in the bank, I wonder what a small amount really is?
Q23: With small sums of money, what strategies would you pursue?
WB: If I were working with small sums of money, it would open up thousands of possibilities. We found very mispriced bonds. We found them in Korea a few years ago. You made big returns but had to be small size. I wouldn’t be in currencies with small amount of money. I had a friend who used to buy tax liens. I’d look in small stocks or specialized bonds. Wouldn’t you say that Charlie?
CM: Sure.
Reflections on Value Investing: 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes
More on tax lien certificates.
This really only applies to the U.S. though. Nothing to add.
The system in Canada for dealing with delinquent taxes is much different than in the U.S. This is a non-technical, non-official, very much abbreviated summary of how it works in Canada: The local government does not take action on delinquent property taxes until they haven’t been paid for three years. Then any entity with an interest in the property (such as the mortgage holder) gets a chance to pay the taxes and foreclose on the property. If no such entity takes action, then the opportunity becomes available to the public, and the entire process can take four years. In Toronto, for example, they see just one or two of these a year open up to an investor.
If you want to find out more about how tax liens work and how common they are in a particular area, the best thing to do is to contact the real estate section of your municipality.
Charlie Don't Surf - Reflections on Value Investing: 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes
Charlie Munger is one of my mentors. Here's a good tidbit from the latest AGM for Berkshire that pretty much sums up the subprime crisis, and the "risk management" field when it comes to complex investments like CDOs and SIVs.
CM: You can see how risk averse Berkshire is. We try to behave in a way so that no rational person will worry about our credit. We also try to behave in a way that if people don’t like our credit we wouldn’t notice for months. That double layering of protection against risk is like breathing. The alternative culture is you call a man a Chief Risk Officer, but often he is man who makes you feel good while you do dumb things. Like the Delphic oracle, a dumb soothsayer, and how can he do dumb things if he has a PHD and can do all the advanced math! You crave a system such that you torture reality to fit a structure that doesn’t match with extreme situations in reality, you feel confident because you compute the risks, but you haven’t -- you have just clobbered up your own head.
Reflections on Value Investing: 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes
Thursday, May 08, 2008
Boo-yah
I always enjoy a good conspiracy story. This one takes the cake. Put on your tinfoil hat... cause there's lots of it in this one.
But Cramer don’t know nothin’ about nothin’. And Herb thinks the SEC investigation is an outrage. So Herb and Cramer have commandeered CNBC. They are live on CNBC. Herb has jabbered something about a conspiracy - a conspiracy to get Herb. And now Cramer is going to show us something.
And the moral of the story? There's no morals on Wall Street.
Wednesday, April 30, 2008
In Play ® - Yahoo! Finance - The basics of investing.
Crystallex has been a speculative stock for years... the permit has always been "one month away".
No longer...
10:39AM Crystallex announces the Director General of the Administrative Office of Permits has denied request for the authorization to affect natural resources (KRY) 1.65 -0.03 : Co announces it has become aware that the Director General of the Administrative Office of Permits at the Ministry of the Environment and Natural Resources of Venezuela has issued a communication to the Corporacion Venezolana de Guayana, the owner of the Las Cristinas concessions, denying a request for the authorization to affect natural resources to carry out exploration activities in the mining area of Las Cristinas in Sifontes, Bolivar State. In issuing the communication, the Director General cites sensitivities surrounding indigenous peoples, the small miners and the environment in the area generally known as the Imataca Forest Reserve, which contains a number of mining projects, which like those of Crystallex, are seeking the required permits to continue their development and exploitation. The communication by the Director General appears to be in conflict with the Las Cristinas EIS approval, Construction Compliance Bond Request and Environmental Tax request issued by the MinAmb (that Crystallex posted and satisfied last summer) and the communication appears to be in opposition to all mineral mining in the Imataca Region. (stock is halted)
Monday, April 28, 2008
Why Things Cost $19.95: Scientific American
People following price in stock investments will appreciate this.
University of Florida marketing professors Chris Janiszewski and Dan Uy suspected that something fundamental might be going on, that some characteristic of the opening bid itself might influence the way the brain thinks about value and shapes bidding behavior. In particular, they wanted to see if the degree of precision of the opening bid might be important to how the brain acts at an auction. Or, to put it in more familiar terms: Are we really fooled when storekeepers price something at $19.95 instead of a round 20 bucks?
Friday, April 11, 2008
Holiday Patterns/FinancialCalendar.Com - Thousands of Holidays, No Vacations
FinancialCalendar.com is the source of worldwide calendar data.
There are similar year-to-year variations in the number of weekends, with the result that the number of working days can also be very variable (see chart below). The different weighing methods produce different numbers (an average of 259.1 days on a population-weighted basis, 251.4 for GNP and 251.6 for stock market capitalization) because many countries with below-average GNP work a six day week.
This gives rise to an interesting economic question: Should GNP be higher in years when there are more working days? Not being economists, we're not qualified to answer that question. However, we can point out that the effect is very significant in some years. For example, in 2032 there will be 0.9% more working days than in 2031 (see chart below).
Holiday Patterns/FinancialCalendar.Com - Thousands of Holidays, No Vacations
Thursday, April 10, 2008
Computational Finance - Using your Nvidia card to perform risk analysis with Cuda
High-end graphics card GPUs like Nvidia's 8800 are hundreds of times more powerful than Intel Duo-Core CPUs. So why not use them for something other than graphics?
A great way to justify purchasing a couple of these for your home/work PC for something other than just gaming.
Monte-Carlo Option Pricing with Multi-GPU support
This sample evaluates fair call price for a given set of European options using Monte-Carlo approach, taking advantage of all CUDA-capable GPUs installed in the system.
GeForce® 8 Series
Quadro® FX 5600 or later
Tesla™
Download - Windows
Download - Linux
Monte-Carlo Option Pricing
This sample evaluates fair call price for a given set of European options using Monte-Carlo approach.
GeForce® 8 Series
Quadro® FX 5600 or later
Tesla™
Whitepaper
Download - Windows
Download - Linux
Black-Scholes Option Pricing
This sample evaluates fair call and put prices for a given set of European options by Black-Scholes formula.
GeForce® 8 Series
Quadro® FX 5600 or later
Tesla™
Whitepaper
Download - Windows
Download - Linux
Binomial Option Pricing
This sample evaluates fair call price for a given set of European options under binomial model.
GeForce® 8 Series
Quadro® FX 5600 or later
Tesla™
Whitepaper
Download - Windows
Download - Linux
Tuesday, March 25, 2008
Credit Rating Agencies: (the full global list)
Large list of credit rating agencies. According to Moody's site, the Chicago Fed index reveals a recession may end by Q3. What did I say about predicting the future???
At 64 credit rating agencies worldwide (Mar-2008), this list is only one more than our previous tally, see the historical list. Listing all the world's credit rating agencies is a hopeless task, but several kind people have written to me so this compilation represents significant turnover, see the nine names dropped from prior list.
Interestingly, mechanical credit scoring continues to gain acceptance and application. This trend is fueled by: a) increased uniformity and electronic reporting of financial information, 2) decreased "name recognition" of borrowers by investor/lenders, as 3) credit becomes more global, 4) an increased ability to make use of a quantitative value within the growing tide of Credit Value-at-Risk models/systems, and 5) regulator incentives for some to adopt an Internal Models Approach.
Friday, March 21, 2008
Top 10 of the TSX
Suncor's looking like it's hit some downward resistance from it's big drop and bigger recovery today. Looks like a $92-$100 trading range, with a nice bounce going forward. Currently sitting at $95 so the pendulum could tilt either way.
Manulife looks a bit frightening... if the bottom drops out of $34 support level it's hard to say where it goes. It did recover a bit from the insurance sector drop last week. Upside is $38-$40. Probably going to stay range-bound for a bit.
Royal Bank is another one with a long way to go down if the bottom drops out. A fairly decent recovery today up to $46.68 is much better than a couple days ago, where the low was $42.82. Looks to be stable around the $43 range. Upside could be $51.
RIMM looks strong. Upside to $112. Downside to $94. Closed in strength at $104.94. Watch for weakness Monday.
RIMM
http://tinyurl.com/2o7o5lEncana was fairly flat today and probably hit some resistance against the resources/energy selloff. With a floor of $70 and a close of $75.71, there appears to still be some upside. Perhaps back up to $78 or above? Or did it peak last week and it's all downhill from here.
Hoping it is, only because the resources and commodities sector is too hot to maintain a stable global economic environment. Something needs to give.
Looking for more downside in TD, $56 - $58 range, appears to be resistance at $58. Currently $61.29. Upside potential could be much greater than downside, especially if something happens with the CBH deal. Upside could be anywhere from $70-$75.
BNS has an ugly chart. 'nuff said. Head and shoulders on a P&F chart? It is at lows, so popping back up to the $48 mark would give some decent upside potential. Currently $44.18.
Potash is at resistance levels around $138. Still kicking myself for not buying it at $86 a couple of years ago before the split. Could bounce to $162. $147.57 current. Down 6.68%.
CNR is above bottom resistance at $48.67, resistance around $46, upside around $52-$53. I'm in Monday on CNR I think. Need someplace to park cash for a bit.
Barrick, blech. Down 20% today. I'm a buyer Monday... not. Seriously though, short covering Monday will probably bring it back to the $46-$48 range if things don't continue to deteriorate with the price of gold. When it rains it pours in commodities, so the downside for gold has got to be the $820/oz range.
Thursday, March 20, 2008
Ugly day today in stocks
"We live in a world in which we need to share responsibility. It's easy to say 'It's not my child, not my community, not my world, not my problem.' Then there are those who see the need and respond. I consider those people my heroes." - Fred Rogers
It's Mr. Rogers birthday today. The banks, financials and stock markets need a hero.
It will be a full moon in the UK this weekend. Overseas markets are none too happy today with the margin requirements on CFDs being moved from 25% to 90%. Oddly enough the FTSE is fairly flat.
"You are going to see a lot of forced selling," said one leading London stockbroker.
- no foreign travel for easter holidays by senior bank of england staff, supposedly means UK clearer in trouble.
- LLOY LN IR actually denied fundings probs.
- HBOS denied prob to Merril’s , but as yet, not to the mkt, still being sold.
- RBS annual report which was released last night apparently shows massive funding requirements.
- ARE UK BANKS THE SUB PRIME OF WORLD BANKING CONSIDERING THAT NONE HAVE CONFESSED TO ANY CREDIT PROBS YET, IS BARC MADE OF TEFLON ?
- UBS, Swiss Govt apparently asked CSGN to put togther rescue package for UBS in case that the crisis worsens.
- Soc Gen, BNP says no merger interest, spec thats because they have more horrors
MF Global warning adds to market worries - Telegraph
http://ftalphaville.ft.com/blog/2008/03/19/11714/panicky-banks/
And then there's the plummeting gold price. I see a bottom forming today... or perhaps on Monday. Something about an election overseas is causing some tensions...
Two U.S. aircraft carriers, including the USS Kitty Hawk, have been sent to the Taiwan region for training exercises during this weekend's Taiwanese election, a U.S. defense official said on Wednesday.
http://news.yahoo.com/s/nm/usa_taiwan_carriers_dc;_ylt=Av2Uoji3qkE2UlCECsHrB_sDW7oF
Friday, March 14, 2008
Who suffers in a bear market? The bears...
``There is a good analogy to Long-Term Capital,'' said Anthony Sanders, a former director of mortgage-bond research at Deutsche Bank AG who starts next month as a professor of finance and real estate at Arizona State University's W.P. Carey School of Business in Tempe, Arizona. ``They were all friends with Bear Stearns when they thought the spreads were huge. Now that the market has turned, Bear's standing there like the lone grizzly.''
Chart of the Day: Debt Tranche Correlation - Finance Blog - Felix Salmon - Market Movers - Portfolio.com
So what happens when all spreads become equal? Fire sale...
High correlation is one of those weird things which pops out of the financial markets when you get strange bedfellows such as a credit crisis combined with a very low corporate default rate. Just as currency futures don't predict the future movement of currencies (they're entirely a function of interest rates), the correlation figure doesn't really measure how likely a massively-correlated simultaneous wave of defaults is. Instead, it just kind of pops out when you get forced liquidations, like we're seeing in the CLO and CDO markets, where Everything Must Go.
Yuck...
I wonder what would happen if you click HELP for explanation? What do the red lines mean? Can't be good.
Mish has the scoop here.
I'm surprised that Washington, DC, doesn't show up in this grid. A 2000% increase in taxes could really cause trouble.
Wednesday, March 12, 2008
Big pimpin: How an information system helped nail Eliot Spitzer and a prostitution ring | Between the Lines | ZDNet.com
So whether you transfer $100,000 once or 10 transactions of $9,999, the Feds will have no trouble picking you out of a line up.
According to the Associated Press, this investigation began with a suspicious activity report on Spitzer. The Wall Street Journal reported that Spitzer’s transactions looked like they were kept below $10,000 to avoid federal reporting rules. This behavior to avoid the $10,000 threshold also helps the Feds find strange behavior, say 150 transactions between $7,000 and $9,000. The Journal notes:
I wonder how many other high-level government officials are waiting for something to come out of this... This kind of stuff has been going on for thousands of years.
The Credit Market tanks, the Fed releases $200 billion dollars in a TAF, and a more permanent auction "loan" against illiquid debts, the markets still struggle, and the news is focused on politics as usual.
Tuesday, March 11, 2008
Moving bad balance sheets to the US Government
The Fed's offering 28-day term lending with bad mortgages as collateral, in a $200 billion dollar temporary bailout.
Today's steps indicate the Fed is increasingly concerned about the investor exodus from mortgage debt, which threatens to deepen the housing contraction and the economic slowdown. While they fall short of the calls by some analysts for the Fed to make outright purchases of mortgage debt, the central bank left the door open to expanding the effort.
If the banks juggle this properly, doesn't it mean that treasuries show up in the balance sheet as opposed to bad debts?
Friday, March 07, 2008
US corporate bond spreads approach widest on record | Funds | News | Reuters
Once upon a time, CDS premiums were in the $30k to $50k range.
That was a long time ago...
Credit default swaps on Lehman Brothers'(LEH.N: Quote, Profile, Research) debt traded near 300 basis points, or $300,000 a year for five years to protect $10 million of debt, while Goldman Sachs'(GS.N: Quote, Profile, Research) swaps were around 215 basis points, the analyst said.
US corporate bond spreads approach widest on record | Funds | News | Reuters
Tuesday, March 04, 2008
Another bubble - Commodity funds?
Ever since GLD, USO, MOO, PBW, PHO, etc. have come on the market, I have noticed an increase in the prices of underlying commodities. Chicago Futures were the original market to play the commodities game, and because of the complexity of getting into the market the average investor didn't bother.
Getting into an ETF is as simple as point and click. It's easier than going to a coin dealer and buying gold. It's easier than trading futures on an exchange, even though some of the products do just that for you.
It is a proxy for speculation, and speculation can be quite different from reality.
So other than Ethanol artificially inflating prices, ETFs and commodity index funds appear to be doing the same.
The "culprit" is the new breed of commodity index funds. Each week over the last two months, between $5bn and $10bn of fresh money has been pouring into the Goldman Sachs Commodity Index, the Dow Jones-AIG Commodity Index, and other funds, according to a UBS study. Together, the indexes now hold $200bn.
Fears of a commodity crash grow - Telegraph
Let's just hope they get the double-short ETFs out fast enough to get the price of bread back down to a normal level.
The price of gold plummeted today. Perhaps $975 rounded is $900? Since you can't cut a bar of gold in half without losing some of its value, maybe this is the case.
Monday, March 03, 2008
BullRunner, following the Market
Gold hit $990/oz today before dropping back to $983... still on it's way to $1000?
Gold, sitting at $975/oz is getting dangerously close to my "1 month or so" $1000/oz call.
BullRunner, following the Market
I seem to remember bailing on gold at $700 in May of 2006, after getting in at $580. At the time I thought it was a good call, since the price of the metal plunged back to $590 before recovering. The metal became range-bound between $620 - $680 for almost 6 months in 2007, before the credit crisis boogeyman and the Bernanke put brought it up past the $800 mark.
Right now there's not a long way to go to $1000/oz... but my guess is that we round up just past $1k and then drop back to low $800 by May.
Based on the 1 year RSI we're way overbought here, for GLD anyway. Unless we see some more serious writedowns, that is...
But are investors too shellshocked to care about writedowns?
Hurt by the deepening credit crisis, Bank of America Corp. said Tuesday its fourth-quarter earnings fell 95 per cent, and Wachovia Corp. reported that profit tumbled 98 per cent.
http://money.aol.ca/article/us-banks-bgt/131728/
And of course, Buffett is bottom-feeding.
"We were getting calls on large portfolios," Mr Buffett said in an interview on CNBC yesterday. "People who were out on a limb financially are getting that limb sawed off."
I wonder if this relates to the news about all the size 12 feet surfacing on Canada's coastlines.
If it was the right hand or left foot, the US could blame it on Iran.
But really, is the USD weakening, or is it just that the Yuan is tightening?
The PBOC has let the yuan rise much more quickly in recent weeks. The currency climbed as high as 7.1122 per dollar on Thursday, the highest level since it was depegged from the dollar in July 2005 and allowed to float within managed bands.
http://www.guardian.co.uk/feedarticle?id=7343736
Exchange rates probably have a lot to do with what's going on in world markets, and what's going on with the economy. Things are tough for Canadian manufacturers, especially the paper mills who have seen profits plummet.
"The dollar is by far the worst of all our problems," he told the committee Thursday
http://money.aol.ca/article/bank-economy-2nd-writethru-bgt/132524/
Amero, anyone? One solution to the strong Canadian dollar would be to place it in the same basket with Mexico & the USD, and maybe throw in Zimbabwe dollars.
Ameroz for all...
Saturday, March 01, 2008
BullRunner, following the Market
Gold, sitting at $975/oz is getting dangerously close to my "1 month or so" $1000/oz call.
We can see this with the price of gold, which is up $21.60/oz today. 10 year gold since June '07 has gone vertical. 60 day gold shows 3 distinct peaks, with a 4th peak forming. Point and Figure chart doesn't indicate any bottom. Are we on our way to $1000 gold in the next month or so?
BullRunner, following the Market
There's 20 days until the Taiwan UN referendum. Airstrikes in Gaza have buried the peace process. Iran meets Iraq for the first time. My thoughts are that market volatility and world politics will keep the price of gold at all-time highs.
Not to mention the abuse the USD has been receiving lately.
Here's JPYUSD=X. Looks like the YEN is getting stronger as the carry trade unwinds and oil sales are done in Japanese currency and Euros.
Here's EURUSD=X. Seems to be a pattern here.
Of course, the EUR isn't getting off too easy. Even though it's strengthened against the USD, the YEN is still beating it up recently.
Here's JPYEUR=X.
In other news, it looks like The Donald isn't getting his golf course any time soon.
The Scottish Government announced yesterday that the issue will be decided by a public local inquiry.
Finance Secretary John Swinney claimed the move will give all parties for and against the proposals for the Menie Estate near Balmedie in Aberdeenshire the opportunity to state their case.
They are even taking the Trump coat of arms into question.
The Court of the Lord Lyon invoked a law dating from 1672 which means Mr Trump must register a coat of arms.
A spokeswoman for Mr Trump said they were working with the court to register the coat of arms.
The businessman has been using the banner on promotional material and official clothing while mounting his bid to create the resort at the Menie Estate in Aberdeenshire.
Lyon clerk Elizabeth Roads said the use of the Trump International Golf Link Scotland design, which bears the Trump family name below a spear-wielding fist and a shield, was being investigated.
The person responsible for the current political fiasco is supposed to be Councillor Martin Ford, who voted against the deal due to environmental issues. He is apparently now a "non-person" and has lost any positions on committees he served.
That vote was annulled by the Scottish Government, a move which was unthinkable until last month.
Thursday, February 28, 2008
Daily Dose of Excel & Dollar-Cost Averaging
Volatility isn't always a bad thing.
In the volatile market, I have about $700 more in my account than if the market was steady. Either way the stock is $1.24, I was just able to buy more of it in the volatile market. It’s the underlying fundamentals of a company that determine its stock price over time, but the utter wackiness of investors that determine it in the short term.
I believe investment folk call it dollar-cost averaging when you invest the same amount of money periodically. What do you think? Should I rejoice at each downturn?
Monday, February 25, 2008
Subprime in pictures
DANGEROUS VISUALIZATIONS
In other cases, there may be good ways to visualize something but it is not clear that they should be visualized. The danger comes from the power of images to confuse the viewer or to distort data.
Provisional Theories
A scientist who is just beginning to work out a theory might create pictures simply to test out some ideas. The problem comes in when the quality of the graphics is better than the quality of the theory. Since it is so easy to construct flashy computer graphics, even half baked ideas are endowed with a believability beyond that which even the originator intends. Perhaps researchers should be encouraged to make low quality graphics on purpose for theories that are not yet well supported.
After reading Jim Blinn's (MS Research) paper on Visualization, I asked myself... what does subprime look like?
A major factor in the growth of CDOs was 2001 introduction by David X. Li of Gaussian copula models, which allowed for the rapid pricing of CDOs.
Of course! It's a pyramid! In the "before" photo, the green indicates the happy folks at the top. Red indicates some serious problems at the bottom.
The bottom seems to have fallen out of the "after" photo. Happy times?
Thursday, February 21, 2008
Miller Center of Public Affairs - Gerald Ford Speeches
This speech resonates today's economic woes. "We must Whip Inflation Right Now." from Gerald Ford, 1974.
"A stable American economy cannot be sustained if the world's economy is in chaos. International cooperation is absolutely essential and vital. But while we seek agreements with other nations, let us put our own economic house in order. Today, I have identified 10 areas for our joint action, the executive and the legislative branches of our Government.
Number one: food. America is the world's champion producer of food. Food prices and petroleum prices in the United States are primary inflationary factors. America today partially depends on foreign sources for petroleum, but we can grow more than enough food for ourselves.
To halt higher food prices, we must produce more food, and I call upon every farmer to produce to full capacity. And I say to you and to the farmers, they have done a magnificent job in the past, and we should be eternally grateful.
This Government, however, will do all in its power to assure him--that farmer--he can sell his entire yield at reasonable prices. Accordingly, I ask the Congress to remove all remaining acreage limitations on rice, peanuts, and cotton.
I also assure America's farmers here and now that I will allocate all the fuel and ask authority to allocate all the fertilizer they need to do this essential job.
Agricultural marketing orders and other Federal regulations are being reviewed to eliminate or modify those responsible for inflated prices."
Miller Center of Public Affairs - Gerald Ford Speeches
So what is the US doing to "Whip Inflation" today? Farmers are hoarding food speculating that higher prices will be coming soon. Higher prices are coming due to scarcity of foods. And the US, as the world's "champion producer of food" is turning that food into petroleum.
It has been over 34 years since this speech, and the cycle has returned in spades. Even the players are the same.
$60 billion in closed funds are left hanging
As banks are unwilling to take risks or leave capital on the table, investors in 'cash-equivalent' preferred shares receive no bids for their shares.
``You've got $60 billion in which the holders believed until recently they could liquidate on par on demand and suddenly that $60 billion is frozen,'' said David Kotok, chief investment officer of Cumberland Advisors Inc. in Vineland, New Jersey, which manages $900 million in assets.
If the ABCP market was $30 billion, then this is it's bigger brother.
Tuesday, February 19, 2008
Why I'm not trading right now... and why charts sometimes lie.
I have turned into somewhat of a technical analyst, though I still have a lot to learn about when to sell and how to control losses. Back in January of 2007 I bought USO at a dip low of around $42 that could have ended up being a $75+ gainer. At a financial conference, I pointed it out to the Metastock rep there, who called it one of the best calls he had seen.
I sold out at 14% so I wouldn't get greedy. Could have been almost 50%.
Along with stop gains, I believe in stop losses. Right before the crash in January, I put a couple of "stink stop" bids on a few of the stocks I owned. All of them were grabbed from me at the low of the day (all at losses), and by the next day they were all above what I had paid for them.
Intervention by the Fed at it's finest. Technical analysis of the charts would have told me we were in for a long ride down. Realistically I should have known that government intervention will skew results beyond what a chart can predict.
After that, I became a bit more disillusioned with the whole market itself. And this is the main reason why I don't feel like touching stocks any more. Because the market isn't acting right.
"If a stock doesn't act right don't touch it; because, being unable to tell precisely what is wrong, you cannot tell which way it is going. No diagnosis, no prognosis. No prognosis, no profit. It is a very old thing, this of noting the behavior of a stock and studying its past performances." - Jesse Livermore
Bill Cara: Cara's Commentary & Community Chat, Tues., Feb. 19, 2008, 7:57am ET
Of course, in this case, we know what is wrong. The loss of faith in global markets and financial institutions.
We can see this with the price of gold, which is up $21.60/oz today. 10 year gold since June '07 has gone vertical. 60 day gold shows 3 distinct peaks, with a 4th peak forming. Point and Figure chart doesn't indicate any bottom. Are we on our way to $1000 gold in the next month or so?
Oil also hit $100/barrel today, after various issues with Texan oil refineries and Venezuela.
BMO didn't do too well today after announcing writeoffs.
"Part of the problem is that they're just writing this off, writing that off,"said Chyanne Fyckes, chief investment manager at Stone Asset Management.
"I think if they had any idea about how bad it was, they would just go ahead and write it off and be done with it. But they're not doing that this time because they don't know what's going on and that's what I find very disconcerting."
I'm not sure that anyone knows exactly what's going on and how bad the current financial situation is with the banks. How do you value illiquid assets? What risks are you taking on if your risk models aren't accurate?
Saturday, February 16, 2008
Financial Alchemist: Importing Financial Web Data into Excel, part 2
For the technical analyst, Excel is the #1 tool in the toolbox.
A particular model I want to highlight is the EPS_Estimates_MultiSource_v5 that you can download from the files section.
Following trends in analysts’ EPS estimates can be a valuable tool. Research suggests that companies experiencing downward revisions will likely receive more in the future. This spreadsheet shows the trends in EPS revisions. In addition, the model tracks historical EPS announcements. This can be valuable information too, especially if the company has been surprising on the upside and estimates have just started to be revised upward. This may depict a situation where The Street hasn’t fully grasped the potential earnings growth. This may lead to an undervalued situation if there is evidence that growth is underestimated and not priced into the stock.
Financial Alchemist: Importing Financial Web Data into Excel, part 2
Thursday, February 14, 2008
Credit card rates for the bond markets?
I wonder if they will offer job loss insurance for $2 per month, or Air Miles on their bonds if they end up paying 14% credit card-style interest? We'll see in 2 weeks what this brings... but it doesn't look good.
Investors set prices for bonds by bidding for them at bond auctions approximately every month. If the bonds are perceived as risky, investors can demand a higher interest rate to buy them, and the interest rate rises. If they are perceived as so risky that no one wants to buy them and the auction fails, the bonds automatically rise to the maximum rate allowed for the person who previously bought them and is now stuck with them until the next month's auction.
In Citizens' case, that maximum rate is 14 percent.
Apparently nobody wants bonds due to the amount of risk involved if any of the insurance companies default. Over $10 billion worth of bonds failed to auction this week, which, according to the article, could cause rates to rise anywhere from 8-14% during the next auction.
It doesn't help that they lost their data during the last storm.
"For any of these, we're going to have financial data," she said.
Citizens has been unable to produce an audited financial statement since the 2005 storms because of problems with its computer system, and the group has been working for most of the past year on extracting the data and reconstructing it so that it can be audited.
Wednesday March 5, 2008 is the next full moon if you're superstitious. With the stock market (and now the bond market) the way it is, throwing dice, reading palms or dealing tarot cards are about the best ways to predict future prices.
Wednesday, February 13, 2008
Smoot-Hawley Tariff Act - Wikipedia, the free encyclopedia
Potentially one of the worst laws to pass in the US, extending the Great Depression, ticking off their trade partners (including Canada) and causing a general feeling of disgust at the protectionist measures being enacted.
This would be equivalent to a Great Leap Forward in terms of its effect on the population and the economy, or perhaps an injection of subprime and fraud into otherwise marketable securities.
The Hawley-Smoot Tariff (or Smoot-Hawley Tariff Act)[1] was signed into law on June 17, 1930, and raised U.S. tariffs on over 20,000 imported goods to record levels, and, in the opinion of most economists, worsened the Great Depression. Economists have now generally regarded this Tariff Act (i.e., tax increase on imported goods) as the greatest policy blunder in American economic history, coming as it did after the 1929-30 recession and preventing the economy from a full, natural recovery which had already started by the Spring, 1930. Many countries retaliated with their own increased tariffs on U.S. goods, and American exports and imports plunged by more than half.
Source: Smoot-Hawley Tariff Act - Wikipedia, the free encyclopedia
Plus Ben Stein's performance made Ferris Bueller's Day off...
... Bueller? ... Bueller?
The Bermuda Copper of 1793 - Introduction
Just like prison, you used to be able to barter with tobacco in Bermuda, due to the lack of currency.
Following the brief episode with "Hogge money" in 1615-1616 (see the Sommer Island section), Bermuda returned to the barter system with tobacco serving as the standard currency. During the 18th century, the tobacco standard was supplemented with Spanish silver and gold, and after 1761 some paper certificates were issued.
The Bermuda Copper of 1793 - Introduction
Hogge money were coins with a hog on the front and a sailboat on the back. Later, a low-grade, brassy copper coin was introduced, with a wash of silver that didn't mix with the salty climate and wore off. This reminds me of the red wash on some of the new quarters here in Canada.
What's so important about the first coins made in Bermuda? They were destined to go to the Americas, to be used as the first British coins for the New World.
Tuesday, February 12, 2008
Bespoke Investment Group: Correlation Ticking Higher in Current Market Environment
I threw up my hands a couple of weeks ago. Looks like others are doing the same.
So what's there to buy in markets like these besides the ultra short ETFs?
These figures confirm the basic idea that in bear markets everything becomes correlated because market participants end up selling all of it. Traders facing margin calls are end up forced to sell-off "quality" things, and others just throw up their hands and dump everything.
Source: Bespoke Investment Group: Correlation Ticking Higher in Current Market Environment
Stock screeners
No surprises here, but a good overview of some free stock screening tools.
Caveats
No free screener does the best job for every conceivable search. MSN Deluxe might offer the best chance over all but some of the others may do a better job depending on the search parameters specified. And it is quite possible for the same search criteria inputted into different screeners to return dissimilar lists of companies.
“Screeners seem like great tools for finding errors in databases,” quips Michael James Weiner, who writes the Michael James on Investing blog. While this may be a lesser problem for subscription-based screeners and the better free screeners, Mr. Weiner’s reservations do highlight the issue of data quality and timeliness. Another caveat, as Investopedia.com notes, is the inability of screeners to sort on the basis of intangible variables (e.g. the value of a brand name).
stocktickr blog » Blog Archive » Replay the Trading Day Using Automatic Screenshots
Here's how to monitor your trading day using IrfanView and some automated screen shots.
Compile these with Windows Movie Maker and you have a run through of your daily activities.
It's not just for trading....
IrfanView Software
You might be surprised to learn that there is a free software package that can do almost everything you need from automatically taking the screenshots of your desktop to replaying them. It is called IrfanView and it’s available as a free download for Windows. Once you’ve installed it, just start IrfanView from the windows start menu. From the Options menu, choose Capture/Screenshot. Here’s the screen that appears.
Source: stocktickr blog » Blog Archive » Replay the Trading Day Using Automatic Screenshots
Panic strikes the wheat market
Liquidity is a two-way street. Lack of sellers is just as bad as a lack of buyers... especially when you're selling short and need to close out a position.
This should have an interesting effect on food prices in the next few months.
Matt Pierce, Futures International Inc. says there is an absolute run on spreads right now. "It's the scariest thing I've ever seen on this floor," Pierce says.
Source: Panic strikes the wheat market
Sunday, February 10, 2008
As inflation grows, product packaging shrinks, and gas mileage goes down
This sounds like a recipe for disaster... a machine that you need to feed with land, seeds, fertilizer, hay, water, electricity, steel, building materials, food, food-byproducts, natural gas, oil, gasoline, trucks, electricity, and pumps, not to mention the printing costs for all the currency required to sustain this endless cycle of consumption. All this will drive a steady influx of jobs back into the farming industries, while driving existing farmers to increase yields and burn out their lands. It will increase drivers to adopt "eco-friendly" cars due to tax breaks and marketing, while causing many to adopt more frugal lifestyles or face financial ruin due to skyrocketing food costs.
Will it create the next dustbowl effect, as Australia is currently experiencing?
"This energy loss leads to a 2% - 3% decrease in miles-per-gallon vehicle fuel economy with 10% [ethanol]."[7] Essentially, drivers will not be able to go as far on each gallon of ethanol as they currently do on gasoline.
Source: Ethanol: Bumper Crop for Agribusiness, Bitter Harvest for Taxpayers
This sounds like a problem invented by governments and the so-called "renewable energy" associations, or lobbyists. Will it be solved by them too?
What could go up in price?
- Cereal
- Wine
- Ethanol and Washer fluid
- Gas
- Alcohol
- Tobacco
- Corn
- Water
- Fertilizer
- Anything made with wheat
- Anything requiring animal feed (cows, pigs, sheep)
- Sugar and anything made with it
- Milk and anything made with it
This really starts at the bottom of the food chain and works its way up into the global economy very quickly. Farmers will sit on their harvests as long as possible, in order to capture the skyrocketing costs of their commodities. The real estate (shelter) bubble burst - Is the food and water bubble upon us?
EU Economic Forecasts in a couple weeks
Watch for these to affect world markets. The last forecast?
"Autumn economic forecast 2007-2009: growth moderating"
Thursday 21 February: Interim Economic Forecasts
The news:
The Commission will publish its interim economic forecasts updating the outlook for GDP growth and inflation in 2008 for Germany, United Kingdom, France, Italy, Spain, the Netherlands and Poland as well as the EU and Euro area aggregates.
The background:
Interim forecasts are published in February and September between the major spring and autumn forecasts for all Member States and all variables, including national debts and budget deficits.
The next fully-fledged forecast comes out on 28 April 2008.
Source: EUROPA - Rapid - Press Releases
Friday, February 01, 2008
More ways of holding energy - Aluminum foil?
My wife thought I was a bit crazy to be grabbing a couple Costco-sized boxes of aluminum foil last time we went. I figured the price of food is going up more over the next few months, so starting with something that preserves food would work out well. Looks like following and trading stock charts can apply to the real world.
``Aluminum is the one to watch at the moment,'' said David Thurtell, an analyst at BNP Paribas SA in London. ``Aluminum is often referred to as solid electricity'' because it requires so much power for production, he said.
Aluminum production consumes 15.5 megawatt hours of power per ton compared with about 4 megawatt hours for a ton of copper, said Goldman Sachs analyst James Gutman in London.
Source: Bloomberg.com: Commodities
I noticed AA when reviewing P/E for the large DOW stocks... theirs has steadily declined up until the Jan '08 crash.
Realistically it is probably 40% of costs that are electricity, less tax benefits and such. That's still not bad if you want some solid electricity... and it's a conductor if you want to give it a charge.
But watch out for recycled Aluminum foil... it only takes 5% of the energy from it's parent.
"Aluminum for delivery in three months fell $15 to $2,695 a metric ton as of 3:17 p.m. on the London Metal Exchange. The 6.7 percent gain this week would be the biggest since November 2001.
Copper declined $85 to $7,265 a ton. "
Forget Gold, I'm going to go find a ton of copper someplace...
Safe Haven | The Double Whammy of Geopolitical Gold Games
One way to earn income with a fluctuating gold and silver. Hold and short.
Lending money necessarily involves risks: the borrower may default. But if you don't give up physical control, then you will escape the monetary debacle unscathed. Because of the imbecility of the managers of the paper dollar standard there exist durable risk-free profit opportunities in holding monetary metals in the balance sheet. The trick is: covered selling. That's possible because the price of monetary metals has been allowed to fluctuate. The price fluctuation of a monetary metal, like the flow-and-ebb of the oceans, represents energy. Energy that can be harnessed. Energy that can be harnessed only by those who understand monetary economics.
Source: Safe Haven | The Double Whammy of Geopolitical Gold Games
Wednesday, January 30, 2008
Shocked Investor: The Illusion of the DJIA - Updated
Interesting stats on how the skyrocketing price of Gold could really be just an illusion for people in Canada. Any gains realized in USD translated to CAD could be quickly lost.
Sounds like CAD is a hedge against US-based inflation, the common reason for buying gold as a hedge? So instead of buying gold, you should stock up on cash? I'm a bit confused... that's not how it's supposed to work.
Consider also the appreciation of gold in 2007. While the price of an ounce of gold has gone up by 18% in USD and by 11% in Euros in 2007, it has not appreciated at all for those investors in Canada and Brazil
Source: Shocked Investor: The Illusion of the DJIA - Updated
When Money Market funds are paying out more than a 1 year GIC you know there are issues with the markets... and it's going to get worse before it gets better. Today's MM rate - 4.21%... and the spread should go higher when Canada's central bank follows it's US masters and chops rates a bit more.
I was expecting the Fed to disappoint with a .25 cut, but as soon as they chopped .5 off the rate I ditched my short holdings, which have been ticking me off ever since the last emergency cut. Basically the Fed, now sitting at 3%, seems to be determined to chop until they either hit zero or positive market sentiment returns. Somehow I think 0 is in the cards...
With China revaluation of the Yuan, (currently at 7.19 per USD according to Yahoo, give or take the bank spreads) it appears that this could be a contributing factor to US inflation. As China fights inflation with an increasing Yuan, this would deflate the value of their USD holdings and increase the costs of exports. Wal-Mart is going to have a tough time trying to put smiley faces on increasing import costs, though it could be good for export businesses in the US (think manufacturing?)
It seems as though the middle of the teeter-totter could break at any moment, with 2 - 500 lb gorrilas sitting on each side. According to some articles, this decrease, if it hits 6, could pose a danger to China's staggering economic growth, though it's a lucky number in Chinese.
"The number six, liù, is considered to be a very auspicious number because it is a homonym of the word for "flowing" or "smooth," liū. This is the reason why the Western ominous number combination 666 does not get the hairs on the back of Chinese people to stand up. The "devil's number" is a particularly lucky one in the Chinese language, as it sounds close to the words meaning "things are going smoothly." People often pay extra to have this string appear in their telephone number. Basically, it seems that the more times a lucky number is repeated one after another, the more potent will its fortune-bringing effect be."
This can't be good for offshore companies...
In other news, or in more of the same news... more downgrades.
Bond insurers' possible downgrade spurs market angst seems to indicate that another wave of writedowns are going to hit the market next month. However, after reading more about mining stocks and various concerns about South African stakes, plus the skyrocketing price of gold, I see that there could still be some upside to the gold miners in Canada.
Though short term, it doesn't look that anything's got upside, except for some highly-manipulated small caps.
Somebody was on the right side of the trade with Kelly Services.... 200 shares traded, up 31% today. Damn market orders...
Of course, if you are on the Ultrashort side, you had a 9% gain in FXP today... but the word "ultra" is probably just another way to say "weapon of mass destruction" in your portfolio, unless you're a day trader with a good eye for trends and a good ear to the ground for emergency rate cuts...
Saturday, January 26, 2008
Microsoft Massage v1.0
Microsoft Massage v1.0 is the latest entry to their financial product line. Run against a balance sheet, and it will point out the best way to move the numbers to please investors and analysts, causing stock prices to increase.
With respect to the earnings bump reported on Friday by Microsoft, Honeywell and Caterpillar, traders are not fooled by results that are boosted as a result of huge share buy-backs.
To show how earnings are increased via financial balance sheet restructuring rather than from operations, look to the number of outstanding shares as reported by Value Line:
MSFT
2005: 10700 mil shs
2006: 10062
2007: 9380
2008: 9000eHON
2005: 829.48 mil shs
2006: 800.59
2007: 745.00
2008: 745.00eCAT
2005: 670.87 mil shs
2006: 645.81
2007: 635.00
2008: 615.00eDespite higher internal rate of return from operations, these corporations were buying back treasury stock in the open market at cycle-high prices. As I see it, these companies seek to boost their per share profit in order to derive higher management bonuses and/or to rationalize extreme compensation.
It’s a case of everybody has to get theirs as soon as they can get it.
Source: Bill Cara: Daily Report for Sat, Jan 26, 2008
Note: There is no such thing as Microsoft Massage, though it could be a good idea. Contracting the money supply (or in this case, the share supply) increases the value of the stock, even though corporate assets are being used to buyback shares at top value. This is probably not the best way to deploy capital, but when you're a cash cow like Microsoft it probably doesn't matter a whole lot what you do... especially when you now have a profitable gaming system, and a bigger bonus to spend on cheap games from the Microsoft store.
Wednesday, January 23, 2008
Minyanville - NEWS & VIEWS-Article
Five Things You Need to Know: President Bush, Congress Weigh Economic Stimulus Package Targeting Economic Stimulus Package
Pam Martens: How Wall Street Blew Itself Up
Interesting peek behind how the current financial crisis may have been started... and by whom.
The private company that would become Wall Street's ticker tape for pricing exotic credit instruments (derivatives on subprime mortgages and credit default swaps) started out as Mark-it Partners in 2001, the brain child of Lance Uggla while he was working for a division of Toronto Dominion Bank, TD Securities.
Tuesday, January 22, 2008
A Wile. E. Coyote moment... Super Genius no more?
Yes, there are problems with the markets. Yes they are big problems. Is the media milking this? Probably. The media likes big problems. Is it an opportunity? Nobody will know for probably 2-3 years at least.
It's the Wile. E. Coyote moment. The ha-ha point at which the cartoon character runs off the edge of the cliff, looks down and realises there's nothing there.
Except it's not so funny when it's your savings in freefall. Since the beginning of the year, equity markets have looked and decided they didn't like what they saw down there. Having run in mid-air for months, convincing themselves that the stock market could shrug off the credit crunch, they've had a rethink.
Source: Not selling in October is no reason to sell shares now - Telegraph
Sunday, January 20, 2008
Downgrade will hurt CDO markets
The $450 trillion CDO market seems to include a lot of double-triple-quadruple counted numbers. $27 trillion is still a lot of money. If we're talking about this being the worst recession since the Great Depression, we're looking at defaults of at least 12.7% or $3.43 trillion?
Or will the swaps end up cancelling each other out?
This has grown to be a huge market: The total value of all CDS contracts is something like $450 trillion. Because buyers and sellers of insurance usually create multiple "policies" as they attempt to control risk, that number includes a lot of duplication. Real exposure, says the Bank for International Settlements, may be only 20% of that, or $90 trillion. Some studies have put the real credit risk at just 6% of the total, or about $27 trillion. That puts the CDS market at somewhere between two and six times the size of the U.S. economy.
The CDS market has been a good place to make money in the past few years because default rates in the junk-bond market have been historically low. The default rate for all junk bonds declined to 1.7% in 2006. That's the lowest rate since 1996. With defaults that low, sellers were paid insurance premiums but didn't have to cough up much in return.
But that default rate started to rise in 2007, climbing to 2.6%. And Standard & Poor's projects the rate will climb to 3.4% by October. At that rate, 56 bonds would go into default in 2008, compared with 14 in 2007.
That level of default isn't likely to inflict too much damage on the CDS market. The historical rate for defaults by corporate junk bonds has averaged 5% a year since 1980. But the default rate has run as high as 12.7% in previous recessions.
Source: The next banking crisis on the way - MSN Money
Or will the swaps end up cancelling each other out?
This has grown to be a huge market: The total value of all CDS contracts is something like $450 trillion. Because buyers and sellers of insurance usually create multiple "policies" as they attempt to control risk, that number includes a lot of duplication. Real exposure, says the Bank for International Settlements, may be only 20% of that, or $90 trillion. Some studies have put the real credit risk at just 6% of the total, or about $27 trillion. That puts the CDS market at somewhere between two and six times the size of the U.S. economy.
The CDS market has been a good place to make money in the past few years because default rates in the junk-bond market have been historically low. The default rate for all junk bonds declined to 1.7% in 2006. That's the lowest rate since 1996. With defaults that low, sellers were paid insurance premiums but didn't have to cough up much in return.
But that default rate started to rise in 2007, climbing to 2.6%. And Standard & Poor's projects the rate will climb to 3.4% by October. At that rate, 56 bonds would go into default in 2008, compared with 14 in 2007.
That level of default isn't likely to inflict too much damage on the CDS market. The historical rate for defaults by corporate junk bonds has averaged 5% a year since 1980. But the default rate has run as high as 12.7% in previous recessions.
Source: The next banking crisis on the way - MSN Money
The economy slows down with its ships
As the price of oil goes up, so does the cost of shipping. Reductions in shipping speeds mean a slower time to market, which should ultimately cause shortages for products and hence increase the cost of goods. With a 1 1/2 day lag in receiving goods, just-in-time manufacturing companies could have a harder time.
"Slowing down by 10 percent can lead to a 25 percent reduction in fuel use. Just last week a big Japanese container liner gave notice of its intention to slow down," he added.
Source: Slower boats to China as ship owners save fuel - Yahoo! News
Saturday, January 19, 2008
Stock Market Trading & Investing Analysis
Are we in a bear market yet? Naaaa... it's way worse than that.
We're going to need to start talking in marine terms pretty soon. This one's a whale.
The possibility of an up close this week certainly did not come into being. Weekly price charts of major US Stock Market Indexes show major devastation from last weeks trading and overall breadth for the week was as bad as it’s ever been in any of the last downside week’s over the past few months. Only 10 of the 273 sectors we tracked had better than 0% breadth, that’s just nasty! This suggests lower lows to come or at least serious testing of the lows made this week.
Friday, January 18, 2008
Ambac downgraded, cities seen at risk
Dominoes are falling...
Since late last year, when the agencies first raised the prospect, analysts have suggested any move to cut Ambac or MBIA below "AAA" could be disastrous. The concern is that downgrades will lead to a reduction in the value of portfolios at dozens of financial institutions, said Donald Light, a senior analyst at Celent LLC.
"Bond insurers are the lynchpin holding together valuations of portfolios of all kinds of financial institutions," Light said.
Source: Ambac downgraded, cities seen at risk
Could be a time to pick up another few shares of Berkshire Hathaway.
Wednesday, January 16, 2008
Tuesday, January 15, 2008
Capital Link Shipping | Baltic Exchange (Baltic Dry Index: BDI) Charts
If this was a depth finder I would say that we hit the bottom in October and are taking on some serious water.
So the is price of moving things getting cheaper, or is demand just drying up?
Baltic Dry Index
Stock Charts
Capital Link Shipping Baltic Exchange (Baltic Dry Index: BDI) Charts
Saturday, January 05, 2008
Robbing Peter to pay... Peter?
I'm having a hard time understanding the results of the 'Slosh Report' URL link to the right under the Links list. According to this, the Fed injected 124.8 billion into the markets on Friday, where only 12.25 billion was accepted. A similar situation happened on Thursday, where $101 billion was injected and $10.5 billion accepted. Things feel much different than they did on January 4, 2007, though there is only $4 billion more sloshing around than last January 4.
This article tries to explain what the mysterious Fed really does with short-term liquidity, and what it is really doing... namely Jaw Boning.
The Fed – “Hocus Pocus – it's the same money!”
Last week, the Fed executed the first of its highly publicized “term auction” transactions. As I noted in A Little Acid Test for Fed “Liquidity” last week, the Fed had $53 billion in repos outstanding on Friday December 14, fully $39 billion of which were due to expire last week. This ensured that the Fed would initiate new repos of a similar amount. The acid test was whether the term auction repos would represent a) new liquidity, or b) just a different way of rolling over the same money. Last week, we learned the answer to that question is b.
You can follow along using the Fed's actual data using this link:
http://www.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
What is the saying, "the US sneezes, the world catches a cold?" I will be a bit more concerned when China happens to sneeze. There are a lot more people in China. Perhaps true liquidity is coming from non-domestic sources.
Thursday, January 03, 2008
Kenya: Tribal Rage Over Disputed Election - washingtonpost.com
Sudan's regime of terror
After watching "The Devil Came on Horseback" about the killings and mass exodus of people in Western Sudan & Darfur, it really got me thinking again about situations that are happening today in the Eastern hemisphere. Many people in the West really don't know how isolated we are from the daily atrocities and staggering poverty that is overseas. The US media is focused on an election where candidates are focused on Iraq, save a few who are proposing some ideas that all troops could be pulled out of Iraq and redeployed to Sudan. With a March 2008 timeline, this probably isn't going to happen any longer, though the UN should at least send in a few helicopters & Rambo to get some order and protect the refugee camps.
The current US administration is doing something to Sudan. They are cutting economic ties.
Investment Funds and Human Rights
President Bush signed legislation on Monday that makes it easier for mutual funds and private pension funds to sell their investments in companies doing business with Sudan.
No mention of how this will affect jobs and the people over in Sudan. However China holds large stakes in Sudan. Specifically PetroChina, a company formerly owned by Warren Buffett, who got into some serious hot water over the holding. Berkshire made $3.5 billion selling its shares in October... coincidentally when the Darfur bill was going through the house. Maybe this bill will affect China a bit?
Poor Warren (and Poor Charlie) seem to get hit regularly with organizations that disagree with their investments, like opponents of Planned Parenthood. In the case of that investment, they shut down their shareholder donor program. This would have cut out a lot of funding for the 3,500 or so organizations that were affected by the program.
Berkshire class B stock was up around $5000/share in December. It's revenue was $98 billion dollars. That put it at #53 in the list of GDP by country, ahead of Kuwait. It will probably be much larger this year. 2008 could be a value investors dream year if things keep going the way they have been since last August.
Berkshire doesn't show up in the Sudan Divestment Stock Screener any more, though there are over 500 funds with ties to Sudan. Realistically, any funds on the stock markets of the world will have things in their closets that they don't want you to see. Some more than others...
Even Warren's friends Bill & Melinda are having troubles investing all their capital without hitting regimes with poor track records for human rights. A "miniscule" $22 million, or around 6% of their $38 billion endowment was invested in companies related to the Sudanese government, which they dropped like a hot potato after a New York Times article.
Bill steps down this year from Microsoft to focus his efforts on the foundation.
A charity close to me is Room To Read. I am a book fanatic, and probably have about 5 books on the go right now. I am regulated to a quota of no more than 10 book purchases a week by my better half.
The statistics below are almost as mind-boggling as Berkshire's revenues, and it all started from a single ex-MSFT'ie who was upset over how stupid it is that children don't have access to books.
Since our inception in 2000, Room to Read has impacted the lives of over 1.3 million children by:
- Constructing 287 schools
- Establishing over 3,870 libraries
- Publishing 146 new local language children's titles representing over 1.3 million books
- Donating over 1.4 million English language children's books
- Funding 3,448 long-term girls' scholarships
- Establishing 136 computer and language labs
They focus mainly on Asian countries, though they have started moving towards Africa.
Books or Guns
It seems almost that a campaign is being put in place to bring disorder to countries outside of the West, and therefore bring the emerging market funds back into domestic hands, at the expense of the people. Hopefully the policies of governments and world organizations will somehow take into account that human capital is worth a thousand times more than venture capital, and these funds should be put to work maintaining social and economic benefits for the people who need it the most.
Toronto, Canada: I am African and I love Kenya dearly. I pray and hope that it survives intact the current unrest. Do you think Kenya will survive this? What will happen to the bouyant economy after the violent upheaval? Will Kenyans continue to enjoy the good economy that is one of Africa's best?
Kenya: Tribal Rage Over Disputed Election - washingtonpost.com
Do you think that roving blackouts in Iraq could cause the situation there to continue to destabilize? How about bombings in Afghanistan? During the great blackout the Eastern Seaboard experienced a few years ago, even homeless people directed traffic, and people ate ice cream and drank beer in the dark. Something tells me we don't understand how isolated we really are from the "real world".
In 3 days of 2008, 42 people have died in Afghanistan. Over 300 people have died in Kenya. Last year 84 people were murdered in Toronto. This was a record. It should not be that scary for the general public though, since 80% of all the victims knew their killers. Of course 20% is not a number to sneeze at, though with 5 million people you're odds are probably greater to win the lottery. Not that any of these people should have become statistics in the first place...
Unfortunately 100% of the people in Darfur know who their killers are too, though perhaps not the indirect ones.
The list of travel warnings continues to grow.
Subscribe to:
Posts (Atom)
