Market Sniper

Wall Street's latest get rich quick scheme: Securitizing life insurance policies.

They won't squash it Dave! Think about this. Who are the counter parties on this one? The walking dead like AIG, etc. Payoffs only as good as the insurence companies writting the policies. Do people have short memories or what? Here it is again. A system is in trouble when more money can be made gaming the system than doing something productive.

Wall Street Securitizing Life Insurance Policies. Seriously.

Look who the counter paries are. The walking dead like AIG! Some real short memories out there!

Meanwhile, Geithner would not rule out a new middle-tax class to get the economy back on track and reduce bulging deficits. "We're going to have to do what's necessary," he said.

He assured me as well, YH. What do you expect from a ganster government trying to run what has become a gangster economy? LOL

Sector Update for Aug. 2

Thanks, Doc! Also of immediate concern for this bear market rally is, again, we are seeing a bearish divergence between the 10 Day Moving Average Advance/Decline Line vs. the S&P 500. Should think we get a minor pullback (possibly swift and shallow) before an advance into the ultimate highs for this rally sometime in the fall.

Mortgages: More Support for Principal Reduction

What is NOT addressed is what happens as the market continues to slide, and slide it will. We are not even close to market clearing prices as yet. As the sub-prime meltdown moves to a prime mortgage meltdown. We have at least two more HUGE waves of foreclosures coming. So you do principle reductions for those under water now. They should be further under water later. What? Another round of principle reductions? The little bounce we have supposedly seen is for the absolute bottom rung of properties. How many 2 bedroom 1 bath cracker boxes are there? There is absolutely NO move up market as the higher end properties continue to crash. Also, what does pricipal reductions due to the leverage on the lenders' balance sheets? Could trigger even more and larger bailouts, bank failures, etc. We should all agree, there are NO easy solutions to this and it should get worse, much worse shortly.

PennyMac, the distressed-mortgage investment trust run by Stanford Kurland and other ex-Countrywiders, raised $320M of a planned $400M in its IPO, after selling 16M shares at $20.

Something just smells about this. Here is a guy who scored big with Countrywide, who is basically a fraudster and made a lot off that fraud. Now he gets to reap the benefits as a vulture fund. Hope he losses all his money and all the investors' money in this smelly deal. Good thing this country is a kind gentle country. Another place or another time, this guy and his old boss would have been planted long ago.

Zubin Jelveh says Paul Wilmott's logic on high-frequency trading is off - not every trading strategy is as disastrous as portfolio insurance. "The algo is acting like the middle-men we're all quite familiar with. It seems to me that it's now up to institutional investors to be as inventive as the sell-side algos and figure out a way not to get gamed."

Instead of creating something such as customer/client service (lord forbid!), we got paper shufflers now in microseconds! This is all part of the basic problem. When it is more profitable to game the system than produce anything, this is what happens. Leads inevitably to systemic failure and collapse. Keep it up, boys. Your cooking your own pigs. Meanwhile, everybody seems to think that a few "fixes" a few more regulations, etc. will solve the basic problem. It will not.

The End of the End: Much Needed Perspective on 'Recession Is Over' Debate

More outstanding work. A little fundamental balance to all of this "happy feet" talk. We are in the eye of the hurricane. Would expect the market to move up some more into the fall. When your in the hurricane's eye, you look up and the skies are clear.

Buffett: We're in the middle of a (scary) movie. I don't know how long it will play, but I do know it has a happy ending. America works.

Do NOT give up hope. The movie really has no ending. Before this is all over, we will get the chance to retake this country. We will get the chance to return to Founding Principles. It will be difficult, just as the founding of this country was no walk in the park. Stand ready when the time comes. Soon, everyone will have a choice to make.


On Jul 26 11:35 AM djn21 wrote:

> I think by the end of the movie, America won't be America anymore.
> While America did work, it may not get a chance to work thanks to
> its own government and people. America isn't really America anymore.

Global Markets in Review: Are Markets Discounting Bernanke's Scenario?

Great article! Personally I believe we are now in the eye of the hurricane. The worst is yet to come. No growth engines to be found anywhere and there is no such thing as a "jobless" recovery. Highly reminiscent of 1930..recovery is just around the corner-Herbert Hoover.

Book Review: Trading Options at Expiration, by Jeff Augen

KCN..a majority of my option trading also is with premium capture strategies. However, there is a place for options strategies at expiration and Augen has defined them fairly well. Not worried about these strategies getting "out" and diluting the setups. If they did, it would just create further opportunities. LOL


On Jul 26 01:16 AM sethmcs wrote:

> Seems to me that the potenial for gain is low and the risk is high
> trading options just prior to expiration. Not much time to undo a
> bad trade. I prefer to sell options and let the darn things expire.
> Either I keep the premium or buy/sell the stock which I wanted to
> do anyway only at a more favorable price. I have read some heavy
> duty books on theortical pricing models for options and they have
> been helpful to understand different strategies but I tend to trade
> on covered calls and puts sold after a sell off.

What to Do About 'What-If' Gold?

I love it. The gold is going "up" crowd vs. gold is going "down" crowd. Gold is money. It does not go "up" or "down". Just convert your fiat to money every chance you get. It does not listen to craven politicians and criminal central bankers. Gold is deaf. Paper listens to everybody. gold goes "down" means you get to buy more of it when you trade in your fiat currency of choice for it. Does not matter if gold "goes" to $35 or $15,000. Buys you the same as it did 200 years ago. Can you say that for your fiat currency? No you can not.

What Really Led the Rally? Weighting by Sectors

Some observations: Since the July 13 low, measured by SPY, every day has had a higher low. This is not letting in some of the bulls looking for an entry on a pullback. This structure is very different from the rally off the March 9th low where we had a couple of days advance followed by a short pullback, another couple of days advance, followed by a short pullback. The structure is different this time. Also, ALL 10 of the S and P sectors are now above the 200MA. This leads to the following conclusions: 1)This advance will go higher than most believe (most probable); 2) pullbacks will be extremely short and shallow (probable) or 3) when the pullback comes, it will be hard and sharp (least probable). That is a short term perspective. The long hard wave down in price should come in late fall.

Book Review: Trading Options at Expiration, by Jeff Augen

I found this little book to be a gem. Using one of the strategies at March expiration, made a nice amount doing long RIMM straddles on expiration day. As to his "motivaton" for writting the book. Mainly for peer recognition? Doubt it was for the money he might make writting the book. Augen is an extremely sucessful trader. Disclosure of strategies that will cease to work? Doubt that as well. Most traders do not have the discipline to follow a strategy consistently. Looking forward to his next tome coming out in October about day trading option strategies.

At least some one had the good sense to bail out CIT Group (CIT): The administration "took a tremendous risk by allowing CIT to head toward the door. It is lucky that CIT had one last chance to stay alive. The economic recovery might not have survived its demise."

Oh come on!!!The fate of Western Civilization rests on CIT??? Ya right. Like the modified loan program for underwater homeowners, extending more credit to a bankrupt on the steps of the bankrupcy court will NOT save them. Throwing good money after bad.