Bill Cassill

Could We Be Witnessing the End of Sirius XM Stock Manipulation?

Naked shorts are one problem. The other big one just now starting to get attention is high frequency trading which currently accounts for between 50% and 70% of total market volume. What is HFT? It is essentially computer algorithms conducting trades with millisecond response times that play on small price moves in a stock. Others play on so called "liquidity rebates" of a fraction of a sent a share. This is BIG money for both the exchanges (think NYSE) for the colocation charges and the investment banks and hedge funds like Goldman Sachs with the hardware and software algorithms. Anyhow, this stuff has been used for the last few months to provide "support/liquidity" for the market as well as to screw the smaller as well as institutional investors with so called frontrunning or "peek ahead" orders although everyone denies that this is a problem. If you want to know more about this, check out zerohedge.com or themistrading.com and listen to Joe Saluzzi.

The Mac vs. PC Debate Was Never Clearer

While I have never used a Mac or an Apple computer, I can certainly understand the pricing argument given in the article. Sure you can get big juicy hard drives and high capacity RAM for a PC very inexpensively, but I also understand you get what you pay for. I can't tell you the number of RAM modules or hard drives I've replaced over the years, even ones that are "brand name." If you want a cheap computer, you will get cheap components that will fail sooner rather than later. If you want a real machine that will be relatively trouble free be, prepared to spend a little on quality components. Best of luck with that $200 desktop.

Bring Out Your Dead; Bank Zombies Will Eat Them

The problem is that as the credit losses continue to mount (credit cards, CRE, Alt-A mortgages, etc.), these banks will find it harder and harder to raise additional capital without going back to Uncle Sam begging for another handout. The game seems to have been to allow the banks to lumber along with all the garbage on their balance sheets hoping that at some point they will be able to dig themselves out of a rather large hole. I'm just waiting to see how long they can prolong the charade until they have to admit just how bad things really are for them.

The New Labor Market

There may be a silver lining to all of this, at least from an American point of view. As the aging baby boomers leave the workforce over the coming years, more skilled jobs should open up. There was a great worry within the last 4 to 5 years about the impact of the upcoming wave of retirements and what that would mean from a skills shortage within certain job categories like machinists and engineers. With a prolonged recession, we may not need as many, but with some people leaving the workforce as they age, there may be opportunity for younger workers with the right skills.

Dollar's Days of Dominance Are Over

I'm not sure what to make of all this. As a % of GDP, U.S. debt is no larger than any other first world economy. The size is certainly large. There is no argument with that. I do take issue with "the rise of Asia" rant that I see all over the internet these days. What no one seems to get is that the export model of economic growth is broken for all these countries. None of them (S. Korea, China, Japan, India, what have you) have made the transition to an economy driven by domestic consumption. Want to see where all of them are going to end up in the next 10 to 20 years. Just take a quick look at Japan with it's collapsing economy and aging population. China and India will both be facing the same issue in the not too distant future. As for all the "savings," most of those central bank holdings, not personal savings on the part of grossly underpaid workers. And let's not forget how the whole currency peg regime works. While we increase the supply of dollars, Chindia prints money every bit as fast to keep the exchange rate "competitive." I'm not as well versed on the India side of the equation, but China is in dire straits these days. With an export sector that has collapsed, they are attempting to "stimulate" their economy with more construction projects. Perfect. This in a country already with an oversupply of office buildings and residential high rises. Residential property values have collapsed by around 50% in some over heated markets like Shanghai. Almost a third of the stimulus money that has been loaned out to date has been used to speculate in the commodities market, hence the recent spike in commodities imports into China in the last few months. In the end, what you have is a country with lots of poor on the bottom and a few at the top who have made out like bandits. A large portfolio of bad loans that will never be repaid have been made by all the state run banks in giveaways to state owned enterprises and in loans to buy inflated real estate (and yes, the real estate bubble has been world wide). If the economies of the world manage to turn around soon, then things may work themselves out. However, if we have an extended downturn as some predict, I would not be looking to any of the Asian economies to pull themselves away from the abyss.

What Were Subprime Loans Modeled On?

Okay, I'm a little late to the conversation, but I'm going to throw my two cents into the mix here. It seems that some of the debate about CRA loans depends on personal views concerning social engineering. On one extreme are those who believe that government subsidies equals a handout to the unmotivated poor and is basically a tax on hard working Americans who pay their own way. On the other extreme, you have the lefties who have no problem in giving away other people's hard earned money.

Well, I hate to break this to everyone, but this country is full of social engineering and government giveaways. What about massive subisidies to agri-business, low interest student loans for college (or the G.I. Bill after WWII), the rebates to install energy efficient water heaters and solar panels to reduce electricity consumption, the fees that are added onto your garbage bill to get you to recycle, or the punitive consequences against those who don't wear seat belts. I could go on and on.

The judicious use of economic incentives can be used in a socially responsible way to improve the quality of life and incent people to make decisions that are good for the community as well as for themselves (e.g. like wearing seatbelts). Several years ago, Bank of America helped to revitalize downtown Charlotte, NC through low interest rate loans to get people to buy and fix up run down properties in the downtown area. Now instead of boarded up buildings and prostitutes, you have a place you would happy to take the family to.

Just my thoughts.

Wal-Mart and Offering Employees 'Strategic' Healthcare

For all the morons who outsourced manufacturing and off-shored back office operations, they will all get the big shock soon enough. You see what these businesses have not managed against is the exchange rate risk. While everyone is focused on how much money the US is printing, China, India, S. Korea, Japan and every other country in Asia with an export drive economy have been printing $$$$ every bit as fast in order to maintain their peg to the dollar. This purposeful currency devaluation is where much of their competitive "advantage" comes from. With China and others clamoring for a new reserve currency, don't expect the peg to last forever. The days of these folks exporting their way to prosperity has come to an end. When the pegs are eventually undone, those who have outsourced and off-shored will suddenly see their cost "savings" evaporate. When that happens, I'll likely laugh so hard I'll have an accident in my pants. The corporations who have worked so hard to destroy the American middle class deserve every bit of the catastrophe that awaits them.


On Jul 02 04:12 PM conceptwizard wrote:

> "Welcome to Wall Mart". The demise of the American Dream. Where "Made
> in China", rings through the isles in the land of the free. Wonder
> where your job went, take a run down to Wally World, take a walk
> up and down the isles and check the "made in" labels. Then realize
> what you have in your hand was made for about one tenth of what it
> cost to make it in the USA.
>
> Now nothing against China, they are just making their way like everyone
> else. But how do we compete on a world scale with such an imbalance.
> How do we sell US made cars in a competitive way. Or anything else
> for that matter. I dont know the answer but it seems to me if we
> are in a globalization arena then our wages are all going to have
> to go down to compete, so much for a union job. After all with all
> the people unemployed by the time this is over we will work for food.

The Rally That Never Was

How did the Bear Stearns bailout work?
We paid JPMorgan Chase to take them over (and prevent a collapse of that bank)

How did the AIG bailout work?
We bailed out all of the counter parties holding CDS's with AIG by paying full face value on the loss.

How did the Fannie and Freddie bailout work?
We bailed them out to cover the losses of the various sovereign wealth funds so they would keep buying U.S. Treasury debt.

How did all those government foreclosure avoidance programs like HOPE NOW work out?
There's a government program that works?

How did TARP work?
Get Congress to give you lots of money that you then pass along to all of your bankster buddies.

How will the PPIP work?
If this is the Geithner plan, I don't think it does work. My understanding is that no one is ponying up any money (or hardly anyone).

How successful was Bernanke with his market manipulations?
Very nice. Bernanke has helped his bank buddies sell additional shares at inflated prices to make up for self inflicted wounds.

How have all the forced mergers like BAC Countrywide and Merrill worked out?
Can anyone say "Zombie Bank?"

How helpful was the stress test?
Just helped to confirm that the chips are still stacked against the individual investor. Bought the banks a little additional time to try and earn their way out of this mess. Best of luck with that one.

Were all the toxic assets fixed just by changing mark-to-market or announcing PPIP?
Hahahahahahahahahahaha...

How did the first stimulus plan work out?
The vote is still out on that one. Need more $$$ for infrastructure (failing bridges, roads, and electrical grid).

How did the recent stimulus plan work out?
Same.

How cheap is the market based upon the crappy estimates we are supposed to believe?
Market is still overvalued relative to earnings. Of course, the market stopped listening to things like earnings and balance sheets a long time ago. Everything is liquidity driven.

Do you have good expectations for interest rates?
Up, up, and away...

Do you have good expectations for taxes being lower?
Federal maybe. Not state and local however. Too many budget shortfalls. Watch out for voters with torches and pitchforks.

Do you have good expectations for budget deficits declining?
Hahahahahaha! Well, actually we may get some budget cuts at the state and local levels since they cant' print money like Uncle Sam can.

Do you have good expectations for lowered government spending?
Not at the federal level.

Do you have good expectations for house appreciation?
Jesus. It'll take 5 for housing prices to begin to stabilize.

Do you have good expectations for lowered foreclosures?
Have you seen the coming tsunami of option ARM resets in the next two years? After you've looked at it, get back to me.

Do you have good expectations for low unemployment?
No. Only going higher.

Do you have good expectations for wage rates increasing?
Can we all say "wage deflation?"

Do you have good expectations for private equity deals getting refinanced?
Of course, when the vulture capitalists smell blood and a good deal.

Do you have good expectations for credit card debt reductions?
Yes, I do. When the banks finish taking all of their charge-offs because people cannot afford to pay.

Do you have good expectations for commercial real estate, aka CMBS?
In Seattle and Bellevue Washington near where I live, 75% of recently constructed condos are still unsold...and no one is buying...in new, expensive high rise buildings. Can anyone guess how this will turn out?

If the US has bottomed, has Europe?
The US has not bottomed. Europe is screwed more than we are.

Do you expect the dollar to stabilize or not crumble?
The dollar will be fine despite everyone's bitching. It's a race to the bottom for everyone because of borrowing and quantitative easing. Want to know how the Chinese maintain their peg to the dollar? They have to print money just as fast as we do.

On Jun 26 12:36 AM Rokjok777 wrote:

> lengthy list on HedgeFolios asks some great questions:
>
> How did the Bear Stearns bailout work?
>
> How did the AIG bailout work?
>
> How did the Fannie and Freddie bailout work?
>
> How did all those government foreclosure avoidance programs like
> HOPE NOW work out?
>
> How did TARP work?
>
> How will the PPIP work?
>
> How successful was Bernanke with his market manipulations?
>
> How have all the forced mergers like BAC Countrywide and Merrill
> worked out?
>
> How helpful was the stress test?
>
> Were all the toxic assets fixed just by changing mark-to-market or
> announcing PPIP?
>
> How did the first stimulus plan work out?
>
> How did the recent stimulus plan work out?
>
> How cheap is the market based upon the crappy estimates we are supposed
> to believe?
>
> Do you have good expectations for interest rates?
>
> Do you have good expectations for taxes being lower?
>
> Do you have good expectations for budget deficits declining?
>
> Do you have good expectations for lowered government spending?<br/>
>
> Do you have good expectations for house appreciation?
>
> Do you have good expectations for lowered foreclosures?
>
> Do you have good expectations for low unemployment?
>
> Do you have good expectations for wage rates increasing?
>
> Do you have good expectations for private equity deals getting refinanced?
>
>
> Do you have good expectations for credit card debt reductions?<br/>
>
> Do you have good expectations for commercial real estate, aka CMBS?
>
>
> If the US has bottomed, has Europe?
>
> Do you expect the dollar to stabilize or not crumble?

The Rally That Never Was

Logicalthought,

I certainly understand your logic. A 40% move is clearly impressive. However, the bigger question is whether the rally is truly sustainable. Even during the Great Depression, there were short term rallies in the stock market only to see the indicies go back down again. The only point I am trying to make is to be careful. I certainly wouldn't be putting all of my liquid assets into the market as part of a big upside bet. If you have some money to gamble with, by all means have at it. The market is all about risk tolerance. Just don't be a gambler. The upside is that whatever direction the market decides to head in, there is certain to be movement volatility. That is probably where your real opportunity is, even if the market only trades sideways for awhile.


On Jun 25 07:14 AM logicalthought wrote:

> >>a real rally is not in the works<<
>
> Hey, I'm as bearish as the next guy (and probably a lot more so),
> but to call a 40%+ move off the lows "not real" strikes me as kind
> of silly. If you put $100 in the SPY in early March and sold the
> shares for $140, was the money "real"? And if you shorted $100 worth
> at the March lows and you now have $60, are the losses not "real"?
> If you want to call it an unsustainable, "bear-market rally" (which,
> in fairness, you do say in the article), that's fine. But if you're
> playing for "real money" then it (was) certainly a "real rally".

With a breathtaking $9.5T in cash on the sidelines, don't discount the possibility of a mega-rally, and mega-inflation.

This is a bear market rally. The fundamentals are just not there. With rising unemployment and continued credit losses in the financial sector, I just don't see this coming. Plus if you look at the 100 day and 200 day EMA (see my blog post on this), the start of any bull rally has been signaled when the 100 day line crosses and goes above the 200 day line. This has been a consistent bull market indicator (for the S&P500 at least) for the last 20 years. We're not there.