stretcho44

Stress Tests Show Citi, BofA Need More Money

Converting Preferred to common is simply moving TIER 1 Capital to TCE. The benefit is a reduction in dividend payments on preferred shares and that is the real practical extent of this benefit.

The Friedman Billings Ramsey estimates were based on more extreme estimates of unemployment than the Treasury used that may or may not occur.

Chart of the Week: VXV and the Risk of Systemic Failure

Little attention has been paid to the Oct 17, 2008 suspension of the naked short exemption for options market makers and what impact it would have on volatility indices. When the option market maker had to pay for borrowing shares for shorting to hedge option positions they held, it disrupted the equilibrium of the option market. They had to set higher premiums ("fear") and that created a rush to options trading to take advantage of these riches.

Notice the date when the VIX exploded upward. Oct. 2008.

The Up-Tick Rule Reimplementation Is Bad for Markets

The uptick rule is just one attempt to throttle abusive, manipulative short selling. I don't think their is any magic in one throttling mechanism over another but anyone who thinks prosecution is an efficient deterrent to anything is being dishonest. "Greed" has a short memory and is very creative at developing new, creative mechanisms. In a society with vaults in banks, magnetic detectors and security cameras in retail stores, and locks on every front door, you suggest that rumor spreading (and other short abuses) have ended because of one prosecution?

Your article is quite self-serving and you are part of the problem that uptick-type rules are designed to protect us from.

Citigroup: The End Draws Near

Naked shorting has been classified as "securities fraud" and stopped as of Oct. 17th. The options market maker exemption was closed which is why option premiums have been so high since mid-Oct. and VIX at record levels. It is not "fear" so much as the extra cost the options market makers have to recover when locating and paying the fees for borrowing shares to short.

The problem is the lack of an UPTICK rule allows massive, concentrated short selling that cascades when long sellers have to sell too. It might not be an "uptick rule" but there really needs to be some mechanism to throttle the short selling rate.


On Nov 22 12:02 PM Emerald wrote:

> Financially, Citi can survive. Short sellers are on the rampage and
> naked short sellers should be put in jail! Paulson has chosen to
> leave his job early and should be fired immediately for incompetence.
> Bush just left the country in a crisis. Reinstate the uptick rule
> and provide Citi a bridge loan. Otherwise, Citi's failure will show
> us what the "new" great deprssion will look like when the government
> institutes a national bank holiday through the end of January 2009.

Citigroup: The End Draws Near

Naked shorting has been classified as "securities fraud" and stopped as of Oct. 17th. The options market maker exemption was closed which is why option premiums have been so high since mid-Oct. and VIX at record levels. It is not "fear" so much as the extra cost the options market makers have to recover when locating and paying the fees for borrowing shares to short.

The problem is the lack of an UPTICK rule allows massive, concentrated short selling that cascades when long sellers have to sell too. It might not be an "uptick rule" but there really needs to be some mechanism to throttle the short selling rate.


On Nov 22 12:02 PM Emerald wrote:

> Financially, Citi can survive. Short sellers are on the rampage and
> naked short sellers should be put in jail! Paulson has chosen to
> leave his job early and should be fired immediately for incompetence.
> Bush just left the country in a crisis. Reinstate the uptick rule
> and provide Citi a bridge loan. Otherwise, Citi's failure will show
> us what the "new" great deprssion will look like when the government
> institutes a national bank holiday through the end of January 2009.

Congress Offers Big Three Automakers Help, Makes Demands in Exchange

It will be interesting to see who sold the Credit Default Swaps for GM. The data on dtcc.com/products/deri... shows that there is a $3.3/b net position on GM defaults documented through DTCC. DTCC thinks that they have 70% of the market for CDS so $3.3b losses for those writing the CDS will be close.

Ban on Short Selling Could Have Negative Consequences for Options Market

The SEC has exempted market makers from the no shorting rule for financials but they still must locate shares to short. They are not exempted from the naked shorting ban. The naked shorting ban was implemented in SEC 2008-204 which was not affected.

CBOE Put-Call Ratio Indicates Negative Outlook

How can you tell the difference between put buying and put selling?

A growing number of people are writing in the money or at the money put options to buy shares at a lower effective price. The excess put premium over the intrinsic value reduces the effective price I have to pay for shares. This kind of put volume is bullish not bearish.

I have watched stocks under attack by short sellers who cannot get shares to short sell in the money call options. Their call volume is not bullish.

Taking the ratio may give some indication but there is an increasing amount of noise in the ratio. This noise makes it less reliable.

Crystal River’s Q2 Write-Downs Could Bankrupt the Company

Most disappointing is that a trial lawyer could forget his "short RWT common stock and long RWT put" position and not include it in the disclosure. The RWT article was written last week and there are even links to it in this publication. It has to be pretty fresh in Greg Weston's mind since he is making tons of money from the results of that article. Lawyers don't miss those kind of facts.

The pattern of 3 very negative Seeking Alpha articles on small companies where he holds a short or long put position is the most revealing pattern of all.

It may not be but it has the appearance that the prime motive is personal gain.

Newcastle, RAIT Financial: The Long Case for REITs

Fair Value adjustments for liabilities is an improvement that will soon be required of all U.S. companies the way it is for foreign companies today. FASB will soon require it. Migration has been underway since 2002.

The application of Fair Value does not imply any need to repurchase the liabilities. It does however give a much better current value of the company when comparing asset values that are required to be marked to market value.

The NCT $1.3bn from the sale of assets was used to pay down liabilities. The liabilities were not paid off at face value. The liabilities were paid off at market value.

REITs: Still Some Bargains Out There

Greg Sukenik does not even need to attend RAIT Earnings Call to get his data. The only Earnings Call that I could see that he has ever attended is IRETS call at the end of February. From the Q&A at the IRETS meeting, it did not seem like he had read the hand out material. IRETS has traded between $9.00 and $11.00 for the last 5 years and is yields 6.5%. I would be curious why he chose this company of all companies having conference calls. It may explain why there are so many errors in his reports.

REITs: Still Some Bargains Out There

This article is Greg Sukenik interviewing Greg Sukenik. The fact that Greg Sukenik was the author of his own interview makes everything in this posting suspect.

The Zacks ratings Greg published in March for RAS said he expected RAS to earn $1.30 for 2008. This means he expected they will be paying 90% of the $1.30 or $1.17 this year in dividends. At the current RAS $7.50 price, that is a dividend yield of 15.6% for the year. The $5.00 2008 target he set for RAS would imply a dividend yield of 23.4%.If RAS performs like CEO David Cohen has said several times, RAS would continue the dividend at $1.84. At $1.84, the dividend yield for a $7.50 stock price would be 23% and at your $5.00 target would be 36%.

If RAS makes the $214M in fees Cohen estimated, the dividend would be higher than the $1.84.

If management numbers were met, buyers today would get a 23% return. If your much worse forecast happens, then the 15% dividend yield seems like a pretty good for the 6 months.

Greg also forgot to add a stock position disclosure to the end of the interview.

Accounting Antics Lift I-Bank Earnings - Barron's

This practice will become the standard as the GAAP and IFRS standards converge.

The other side is when the debt is securitized and simply passed through to other investors. The asset has to be marked to market which books a loss but the liability could not until the recent FaS Rule 159 became effective. Mortgage REITs have large negative EPS simply because the of the writedown of only one side. When FAS 159 is applied the book values of these companies take a good positive jump. They have their problems and risks but as a group have a 25% short interest, yield 20% in dividends and will show a large jump in book value when Q1 earnings are released.

In this case, FAS Rule 159 makes a lot of sense.