Rakesh Saxena

Will the Counterparty/Systemic Risk Relationship Undermine Banks?

Mark, "eating away" was the phrase I was looking for. Thanks - Rakesh


On Oct 04 07:56 PM Mark Bern wrote:

> Excellent article! You have hit upon the question that has been swept
> under the proverial rug by Wall Street, the Fed, and the Administration.
> Ignoring the problem does not fix the problem. However, that is the
> primary action that has been taken by our leaders in hopes that it
> may go away or miraculously fix itself. It is, as you pointed out,
> as systemic risk that won't go away. The web needs to be untangled
> and chips fall where they will so that we can deal with the real
> problem underlying our economy. As long as it is kept hidden, eating
> away at bank solvency over time, it will continue to be a major drag
> on any recovery. Without attending to the root of the problem, we
> will be mired in a slow growth envirionment with inadequate credit
> availability to sustain the level of new business formation needed
> to create positive employment.
>
> We must go through some pain and recognize the losses on worthless
> (or near worthless) assets for the delveraging process to accomplish
> the necessary cleansing of the economy. Without that step, we will
> just continue to hobble along, with the government taking on more
> and more debt against the future, making recovery to an economic
> environment of real growth impossible.
>
> Thank you for trying to keep us informed of what really matters.

Will the Counterparty/Systemic Risk Relationship Undermine Banks?

Thank you Swashbuckler.


On Oct 04 04:29 PM Swashbuckler wrote:

> Rakesh----Welcome back to SA. I always look forward to your posts.
> Here's hoping you are doing well and will be able to continue posting
> here for a long time.

What, If Anything, Are CDS Spreads Telling Us?

Fabian hug: You obviously don't read English very well. I am not suggesting that you base any strategy on the CDS marketplace; I am only pointing to what signals you can derive. Ignore them at your own peril. But do try to upgrade your writing skills so that you can write something sensible. - Rakesh


On Mar 10 09:48 AM fabien hug wrote:

> Sorry Sir but this is a load of crap. No volumes, no counter party,
> no disclosing of participants, no nothing and we should base our
> investment strategy on that! Great.
> Now, some of these non-disclosed geniuses are willing to pay money
> to protect themselves against a default of the US gvmt or even a
> default of GE! Did you ever thought about who is going to fork the
> bill when such default occurs? AIG or UBS or Merrill-Bofa?
> To me it sounds like oil $ 200 before Xmas, nothing more.

The NPV Test: A Line in the Sand on March 4

Yes Proximo, a big group of so-called "value investors" who have been believing everything dished out by Wall Street (and CNBC) are now blaming everybody but themselves. They are still blind to the reality. And, to make matters worse, they don't want to deal in facts, even at this late stage. Many thanks - Rakesh


On Feb 19 11:13 PM PROXIMO wrote:

> The way comments are running today, I'm waiting for a poster here
> to advocate capital punishment for short sellers.

The NPV Test: A Line in the Sand on March 4

Dear Poor Dude: You and "apppro" are scaring me. Can we settle at 25% on the windfall profit tax before your suggestions turn into a movement, like Obamanation? Many thanks - Rakesh


On Feb 19 11:15 AM Poor Dude wrote:

> I like the idea of a windfall profits tax on all gains made from
> short positions! Except I'd probably make it 80 or 85 percent, instead
> of only 65 percent. Our government will need that money to shore
> up the banks being decimated by the short sellers. Needless to say,
> we don't need laws which reward people for destroying the nation's
> (and world's) financial systems and economies. Those people need
> to be punished, not rewarded.

The Geithner Dossier: Is There Really Money to Be Made Now?

Dear ETFDesk: Yes, some of the smaller banks are perhaps "long" candidates at some point over the next few months. Re other ETFs (PGF & PFF), they just don't fit into the focused short window which is currently dominated by the five names cited. Short trading in this environment of daily news (and an abudance of spin) needs to be extremely targeted in order to maximize profits and curtail risks. Good website! Many thanks - Rakesh


On Feb 11 11:06 AM ETFDesk dot com wrote:

> Great thought and analysis. I tend to think KRE might also be a good
> play- althought risky, I like the smaller banks, can't wait to see
> where they come out in a year from now. etfdesk.com/fundDetail...
>
>
> Any thoughts on PGF and PFF?

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear SeekingTruth: FYI, the reason for the term "state capitalism" is that it means big government and strong alliances with big capital (i.e. via the infamous lobbysts). The "socialism" component is irrelevant, since the system does nothing sustainable for workers; we should not confuse the government's alliance with trade unions with real rights and welfare for the poor and underpriviliged. This term, state capitalism, has its roots in pre-War Italy and Germany, and in the Soviet Union under Stalin. I have sent in an article today putting state capitalism in perspective. Many thanks - Rakesh


On Feb 07 10:19 AM SeekingTruth wrote:

> Rakesh, Your term "State Capitalism" strikes me as most apropos in
> describing our current direction. A term I have used for years is
> "Quasi Capitalism-Socialism" but I think your term is more succinct
> and "telling".
>
> Thanks again for a job well done and for a new highly descriptive
> and appropriate term.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear Proximo: In theory, and if rigid accounting standards are applied, the value of private equity in the banks is almost zero. A blanket nationalization is the only logical answer. However, it is apparent that the government will continue developing a trial-and-error policy, in the hope that the stimulus packages will cause an economic turnaround in late 2009. That is the reason why I see a good trading situation, as long as you maintain a bearish bias. Many thanks - Rakesh


On Feb 07 11:39 PM PROXIMO wrote:

> Rakesh--If you happen to see this post--a question for you---Could
> you at some point comment on your impression of the endgame for shareholder
> equity in any of the major banks , if they are nationalized? Total
> wipeout of the equity or something less? Or does it simply depend
> on multiple variables? Thanks much for your articles.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Yes Fitz919: What you are speaking to is a "de-leveraged" scenario where a rational approach is taken to the real business of banking in society. I'm afraid, both of us are simply being left on the sidelines (helpless observers) as the government starts on a dangerous trial-and-error exercise. Many thanks for your comments. - Rakesh


On Feb 06 03:40 PM Fitz919 wrote:

> It's time to create new banks. I mean it...brand new banks. Banks
> that write 4% fixed rate mortgages. Banks that offer auto loans at
> 5%. Banks that have Credit Cards that are permanently capped at 7%.
> Banks that don't have toxic assets, and don't create them. Banks
> that pay interest on savings and checking accounts no matter what
> the balance.
>
> There are lots of unemployed people who have the skills and integrity
> to run these new banks, and with the old banks dropping like flies,
> there will be lots of accounts which will need a new home.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear Seeking Truth: The problem is that since too many analysts, fund managers and traders have a vested interest in keeping the system alive, nobody is asking (demanding) for transparency. As far as "buckling your seat belt" is concerned, yes, you are entering a new era of socialism and state capitalism--you can't bail out over the side. Many thanks - Rakesh


On Feb 06 04:55 PM SeekingTruth wrote:

> This seems a lot like war, where everyone fights for what they have
> in it to fight for, whether it be great or small, and I suspect there
> were very few bankers on the beaches at Normandy.
>
> Listened to Mohammed El- Erian give a very plausible and intelligent
> appeal for massive bailouts across the board, and I couldn't help
> but be impressed by his appeal and well crafted and modulated delivery.
> But this doesn't , however, make it the right thing to do. He clearly
> has a vested interest in keeping the status quo well established
> by all possible means and has the ability and foresight to make any
> adjustments necessary along the way to preserve his and his corporations
> wealth.
>
> So where does that leave the rest of us? In the rumble seat of course,
> where we can be along for the ride but are clearly not doing the
> driving, and if the driver is an idiot and takes it
> over a cliff, we're going along with him. Buckle your seat belt,
> or maybe bail out over the side if you dare.

Financial Bailout Remains a Work-in-Progress, Chaos-in-Motion

Dear David: Yes, you make a key point---nobody appears to have actually read the complete stimulus package, bits and pieces apart; and nobody can offer any cogent analysis of the road map which the stimulus targets. A troubling scenario indeed. Many thanks - Rakesh


On Feb 06 10:59 AM David Braunstein wrote:

> How can anyone expect anything good to come out of a stimulus package
> that no one has read, not even the President. How can we imagine
> that if our lawmakers do not even read the stimulus bill that they
> could possible look at it critically? Yes, I beleive they have good
> intentions, but "the road to hell is paved with good intentions."
> Rakesh, imbedded in your comments is the real solution to our economic
> problems. Hard work, good intentions and rigorous analysis.

Derivatives Alert: Explosive Risk Is Still Unrecognized

Dear HBWOW: The $640-700 trillion number is what the regulators are working with in their efforts to bring the OTC derivatives under a clearing house umbrella, and does not include CDS trades. On a related note, my review of the filings of the major banks shows that the number has merit. But you are correct--exact figures should be disclosed, they exist and Washington should recognize the problem. Without precision in this area, these bailouts are indeed bandages, or simply shoot-from-the-hip strategies in the hope that the economic will turn, sooner rather than later. Many thanks - Rakesh


On Feb 03 09:36 AM HBWOW wrote:

> Where did you get the estimated $640-700 trillion number? It seems
> that no one has a definitive number by bank, broker, mutual fund,
> etc. of what the "real" exposure is. I am amazed that the government,
> particularly Mr. Dodd and Mr. Frank as well as the public CPA firms
> and government regulator examiners seem to have overlooked this monster
> problem. Aren't these people accountable?? It looks like the bailout
> monies to date and being argued in Congress now, are merely a bandage
> being applied where major surgery is really needed.

Derivatives Alert: Explosive Risk Is Still Unrecognized

Dear Seeking Truth. In my view, a proper and complete nationalization is perhaps the best answer. But I'm not sure that there is enough will in Washington for that. What we are likely to see is a trial-and-error process, starting with the second half of that $750 billion package (2008) and followed by the Bad Bank legislation. The problem is that the stimulus proposals so far are really predicated on hope that the economic conditions will change, i.e. the "finger-in-the-dyke" strategy. Many thanks - Rakesh


On Feb 02 11:33 PM SeekingTruth wrote:

> Rakesh, Thanks for helping us understand and better appreciate the
> threats from an exceptionally complex and murky area of finance.
> Your articles cut through some of the fog and cast some light on
> the treacherous and rocky road streching out before us.
>
> In my limited view, nationalization of the banks appears almost certain
> (the Sweden model?), but do we have the will and the skill to do
> it without chaos? Based on today's available information, what are
> your views on the probable success or failure of this process? <br/>I
> will continue to look forward to your excellent publications.

Derivatives Alert: Explosive Risk Is Still Unrecognized

Sure Ishortyou. Transparency is the first requirement. And a thorough examination of counterparty credit risk is the second. Many thanks - Rakesh


On Feb 02 10:25 AM Ishortyou wrote:

> those contracts need to be transparent and traded in a transparent
> market, bets that are made on them need to be also transparent, specially
> when the financial sector is involved, the casino era is over.

Derivatives Alert: Explosive Risk Is Still Unrecognized

Yes User169185, these banks are "bobbing" around, like the good old penny stocks. A trading approach is required in the lower-priced ones, with a strong bearish bias, entering and re-entering positions ever so often. Many thanks- R


On Feb 02 08:28 AM User 169185 wrote:

> Totally agree with you. I am very short JPM and WFC. Aren't you worried
> though about this "bad bank" and "ring fencing" that will be announced
> next week? Time is our worst enemy as the new administration is the
> same as the old - delay the bad news for as long as possible.