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  • Federal Reserve Can Do Little At This Time  [View article]
    Not sure about your point.

    Flow5 called a rebound off the June lows predicated on Fed intervention. It’s obvious that the market is rebounding this morning (Dow up 200+) off the June lows and the market participants are attributing the move to anticipated Fed “easing”.

    This move does not in any way change the position I expressed in my initial comments to this article.

    I view this move as a “dead-cat bounce”, meaning that, after this short-lived thrill is gone, the market will take out the year’s lows, eventually taking us back to 2008 lows. I also agree with the author that there is little that the Fed can do at this point to induce real economic growth which would lead to a sustainable market rally.

    Flow5 calls this market rally a "rebound" and I call it a "dead-cat bounce". Neither appears inconsistent with reality at this point.
    Jun 6, 2012. 12:31 PM | Likes Like |Link to Comment
  • Federal Reserve Can Do Little At This Time  [View article]

    I (as well as many others) value your comments for their unique and prescient insight regarding FOMC operations and other macroeconomic issues impacting the markets. (Although I must admit I don’t always fully apprehend them.)

    It looks like the rebound you predicted is beginning this morning (6/6/12) in earnest. It apparently comes in anticipation of an announcement regarding some form of Fed intervention, a position that you have also steadfastly held would occur this month.

    You have pretty much nailed this one...
    Jun 6, 2012. 10:15 AM | Likes Like |Link to Comment
  • Federal Reserve Can Do Little At This Time  [View article]
    Flow5: “Nothing has changed in the last 99 years.”

    Only if you mean that the mathematical relationship between the rate of change in money supply and the rate of change in nominal gdp; however, the FOMC can longer control that relationship in this environment in any meaningful way that will yield real economic growth. To the extent that anyone has not been convinced of that to date, they will be so convinced going forward.

    In the fall of 2008, the pseudo sciences collided – and, eventually, political “science” won over the “science” of economics. This is regrettable, if for no other reason, because market participants will lose confidence in politicians even more quickly than they will lose confidence in economists.

    Post 2008, the most critical component of FRB (Bernanke’s) monetary policy was to incentivize market participants to capitalize a higher level of risk assets – the “risk-on” strategy.

    Having placed a reasonable amount of confidence in Bernanke’s plan, many market participants fell for it – and got their respective asses handed to them. Superstars Bill Gross, John Paulson and Bruce Berkowitz are three that quickly come to mind.

    Bernanke’s “risk-on” strategy has failed, and because Bernanke IS the market, confidence in the market is vaporizing – along with investment account balances.

    Everyone relevant knows that each successive QE initiative becomes less effective; although not everyone has fully accepted it - because, like the FOMC, they have nowhere else to go and no way to get there.

    A “rebound sometime in June”, if any, will only amount to a dead-cat bounce.

    Notwithstanding academic mathematical relationships, the equities market will make a relatively quick retrenchment to 2008 lows, the scene of the most excruciating change in market dynamics of “the last 99 years”.

    Only this time there will no more “monetary morphine” to ease the pain.
    Jun 1, 2012. 11:25 PM | Likes Like |Link to Comment
  • Federal Reserve Can Do Little At This Time  [View article]
    None of the traditional metrics are relevant to the current dynamic, which is unprecedented at multiple levels.

    Bernanke IS the market and Bernanke's "risk-on" strategy has failed.

    The FOMC essentially has nowhere to go and no way to get there.

    The confidence bridge will continue to crumble next week, even among members of the once-vaunted plunge protection team, where today there were early signs of mutiny...

    So, a dead cat bounce next week at best ... maybe not even that.
    Jun 1, 2012. 08:24 PM | Likes Like |Link to Comment
  • A Near Term Bounce Is In The Offing  [View article]
    None of the traditional metrics are relevant to the current dynamic, which is unprecedented.

    Bernanke IS the market and Bernanke's "risk-on" strategy has failed.

    The FOMC essentially has nowhere to go and no way to get there.

    The confidence bridge will continue to crumble next week, even among members of the once-vaunted plunge protection team, where today there were early signs of mutiny...

    So, a dead cat bounce at best ... maybe not even that.
    Jun 1, 2012. 07:08 PM | 1 Like Like |Link to Comment
  • Bank Of America: Avoid This Sinking Stock Now  [View article]
    "I would say a pretty smart guy."

    Much smarter than Bruce Berkowitz and his coat-tail cadre of BAC backers (see below).
    Jun 1, 2012. 01:58 PM | Likes Like |Link to Comment
  • I Changed My Mind On JPMorgan And Jamie Dimon  [View article]
    ...simple : "People really LOVE getting off on blowing things way out of proportion."

    And there are those (like ...simple) who LOVE to over-simplify so they can pretend to understand risks that they do not.
    May 31, 2012. 12:47 PM | 1 Like Like |Link to Comment
  • I Changed My Mind On JPMorgan And Jamie Dimon  [View article]
    "I would personally recommend staying away from things that are too large for you to understand."

    Hey, ...simple,

    If you own or are contemplating owning JPM common, you may want to take your own advice.
    May 31, 2012. 10:58 AM | 1 Like Like |Link to Comment
  • Stocks Strengthen On Overseas Hopes  [View article]
    "Can anyone really explain why market went up today ?"

    Yes - more buying than selling. The Plunge Protection Team a/k/a TBTF institutions a/k/a Primary Dealers, as a condition of their Federal Reserve protection, are complying with the "risk-on" FRB mandate. And, they are bringing along the "greater fools", who will be the last to get the memo when the party's over.

    "Are we really cheering election polls in Greece vs. economic data in US ?"

    Of course not, and every thinking market participant knows it. Since 2H 2009, traditional economic fundamentals have impacted US equity prices less than at any other period in history.
    May 29, 2012. 05:22 PM | 1 Like Like |Link to Comment
  • With a record of poor shareholder returns, why do the TBTF banks (JPM, C, BAC) even exist, writes Sheila Bair. Capital markets certainly wouldn't finance such "unstable behemoths" if it weren't for their de facto government backstop. Jamie Dimon can provide a better return to shareholders by recognizing his bank is worth more in smaller pieces.   [View news story]
    Dr. V: "Will JPM now also be seized following this logic? If not, why not?"

    Short answer - JPM is not deemed to be "critically under-capitalized" as was WAMU at the time it was seized/sold.

    The FDIC may legally compel a bank's chartering authority to revoke a bank's charter, even while the bank is technically solvent.

    This is one of but several critical risk factors that are unique to bank common stock investments. Complacency with respect to such risk is not limited to European investors, but is wide-spread here in the U.S., even among certain highly regarded pros.
    May 28, 2012. 11:43 AM | Likes Like |Link to Comment
  • While JPMorgan's (JPM) CIO office was busy selling huge amounts of corporate-debt insurance in the deals that led to its $2B+ trading loss, a mutual fund elsewhere at the bank was busy buying it in the market. The plus: it shows that the asset management division is separate, as required. The minus: it could show that the bank is too big to manage.   [View news story]
    "There is never enough information with respect to these stories."

    True --- neither is there ever enough (public) information to make reasonably informed investment decisions regarding bank stocks.
    May 16, 2012. 01:38 PM | Likes Like |Link to Comment
  • "On the bright side," tweets Peter Tchir, "if JPM wanted to buy back $10B worth of shares, today would be a good day to start." On the other hand, "Next time an 'analyst' tells you to buy a big bank because it trades at a 'discount to book,' remember today and that book value is a joke."   [View news story]
    "What is the book value of derivatives at this moment?"

    That one's easy - whatever Jamie says it is.
    May 11, 2012. 12:48 PM | 1 Like Like |Link to Comment
  • Bank Stock Risks Mount: Sell In May And Go Away  [View article]
    Actionable info for those who will listen. Especially salient observations regarding BAC & MS, where the risks are demonstrably unmanageable over the longer term, if there is a longer term for these high-risk common stocks. These stocks (BAC & MS) are for high-risk trading only as no prudent investor would own these common equities with such impaired earnings quality and unknown balance sheet risks.
    Apr 26, 2012. 10:32 PM | Likes Like |Link to Comment
  • The Stock Market: Update On Increasing Risks And Possible Implications  [View article]
    Good article based on solid logic.

    Irresponsible political influence preempted prudential financial regulatory policy and enforcement, which resulted in uncontainable market disequilibrium (a/k/a the “financial crisis”) in 2008, causing the attendant financial system instability.

    Rather than address financial system instability with measures that would facilitate market equilibrium, policy makers chose to mask market disequilibrium with artificial financial stimuli.

    Market makers have attempted to mask market disequilibrium primarily by implementing fraudulent accounting rules and “quantitative easing” measures, as well as irresponsible asset purchases.

    (In addition, one of the most significant and under-reported measures undertaken to mask excessive market imbalances has been to implement unprecedented regulatory capital forbearance, which will inexorably lead to the nationalization of a significant segment of the banking industry.)

    By responding to the destabilizing effects of synthetic financial instruments with artificial financial stimuli, policy makers have succeeded in creating virtual financial markets.

    Regardless of the form or amount of artificial financial stimuli that policy makers employ to mask market disequilibrium, prudent investors will not be fooled.

    Market disequilibrium duration correlates directly with risk/reward disequilibrium.

    Only the “market makers” and the “greater fools” will seriously participate in this virtual market place.

    Now that virtual financial markets dominate, technical and fundamental analyses have even less predictive value than they may have had before.

    The inevitable “regression to the mean” will manifest itself with a market crash, as referenced in this article – but the timing is only as predictable as the next black swan event.
    Apr 20, 2012. 05:05 PM | 2 Likes Like |Link to Comment
  • The President's plan to chill supposed oil manipulation: Increase by 6-fold the surveillance and enforcement staff at the CFTC. Increase spending on surveillance technology. Increase civil and criminal penalties for manipulation from $1M to $10M. Give the CFTC authority to increase margins (presumably now only the domain of the exchanges). Crude +1.4% to $104.84.   [View news story]
    Politics – yes. Smart politics- no.

    Two of the most basic and fatal mistakes a politician can make are: 1) interfering with the “politically correct” as defined by the MSM; and, 2) interfering with the moneyed interests.

    Regarding #2, the Obama administration has been poking the energy industry in the eye from day one; and this may be the straw that breaks the camel’s back.

    Audacious arrogance - mixed with ignorant, incompetent or irresponsible policies – leads to the worst of outcomes…
    Apr 17, 2012. 12:41 PM | 2 Likes Like |Link to Comment