Fat Arby

Sell the News, Buy the Rally

time is wasted when waste is being exported to china

A Look at the Cycle of Market Emotions

maximum financial opportunity - for puts

What's Wrong with this Economic Picture?

ambac is slowly digging its own grave, as is countrywide
how can this possibly lead to consolidation/recovery...

Leap Year Trading Slightly Negative on Average

I have a theory about this; it's very interesting because, although new to options, I got C R E A M E D in the February series. I mean, I couldn't have given enough money away to my neighbors as I lost to options! This month, options go one week longer, so options have that much longer to establish some sort of position! I mean, two 1/2 or something trading weeks in Feb vs Five weeks in March! It's like getting a free month so there's a lot of activity and the bulls have a tough time keeping prices up so the puts start to gain momentum. That's my take on it, anyhow; Besides, it may be a geo-economic event, like a lunar eclipse and solar flares and the harvests or something, go figure...

Inflation, Growth and Fed Failures

remember ..the future...
look into Elliot Wave analysis. It's right up your alley
Also, Richard Duncan. He's a great economist with great historical insight into Bernanke's blah blah blah
Basically, we're becoming the next Japan..

Wall Street Research & Your Money: What is the Answer?

Whereas analysts hold a lot of power, there are just too many issues surrounding holding stocks and hoping they'll appreciate.
My approach is to take a macro approach; In a housing downturn, don't hold any housing-related stocks. Of course, on the micro economic level, if I'm vested in options, I stand to lose a bunch because the rallies leave my contracts worthless. But on a longer term, why go against the trend? If you want things to hold, try metals, or the soft commodities (I can say that now that I didn't do it; h/s =20/20) but I prefer to buy puts on these slimy things.
eLSE, get 'married' to them, though on slow moving stocks it's a bit more difficult. the money flows when the stock goes, or so it seems...

U.S. in 2008: A Chance to Learn From Japan's Lost Decade

Hey, talk about the influence of Bernanke on japan's ministry of finance. If you havent' yet, look up Richard Duncan's text. Bailing out banks is an expensive proposition.

We're Range-Bound, But It Doesn't Feel Like It

buybacks help when there's bearish sentiment but the fundamentals haven't really changed that much. when companies start posting writedowns, cutting dividends, and taking out more loans (or even simply refinancing with cheaper government money, i.e., govmint cheese), buybacks will only have a more profound effect because Bears will only punish the stock harder.
A great example is Countrywide. I've been following it since the summer when it was cracking. I had a large sum of capital back then so I'd short it and make some money. However, almost every single time I was short they'd announce some sort of deal with B of A or with paulson and his merry band of nonsensical economists and I'd take a huge paper loss.
However, my instincts proved right and I subsequently bought to cover for a profit. At the time I had no experience in options, but so it goes.
So, as the stock gets pummeled, it looks for a way out and takes out more loans or sells off more assets, puts it all back into the market, and , what happens when they run out money? The Bears will just take it down further!
I contend that this stock is headed for the guillotine, no matter what forms they file with the SEC or how much B of A is willing to put in.
It's like the bailout of Ambac/MBIA. If , say, I owed you money but then I asked you for a loan, but you too owed me money, then, in reality, there's no money there to loan. If these banks think that they can save their own portfolios by loaning out YET more money to a company that owes them money, say for vehicles gone sour, it will likely end catastrophically.
However, and I've said this before, don't expect them to just keell over and die. They'll try anything from drugs to whatever it takes to keep them afloat, even if the end is bloody and gruesome rather than civil and cordial.
So, then, I hope you believe that this credit crisis is a symptom of the over extension of credit and that at some point it all comes to a halt. This exact same scenario has happenned in the past and this type of irrational credit creation is the same EXACT thing that was happenning in 1927 to 1929. Manufacturing was overxtended but the credit machine kept churning out credit and refinancing despite the poor fundamentals. Unemployment WAS rising and corporations WERE starting to struggle yet it was all kept afloat by the overxtension of credit. I'm not predicting a 75% crash by any means; there's collars in place for that to happen in ONE day, but it IS likely that at some point this year there WILL be a crash.
Politics can also play a part; First African-American candidate for prez WITH a kENNEDY legacy? First female candidate? If one of 'em gets murdrd, there goes the stock market!!!
The 'whites' will simply NOT take a girl or a black on top. It's doomed to fail unless some BAD guys get taken out in the meantime.
word@!

Chart of the Day: Stock-Bond Divergence

Barclays Capital has published a research reported entitled "Counterparty risk in credit markets" which estimates the likelihood of simultaneous default by a counterparty and a reference entity. The analysts conclude that expected aggregate losses to protection buyers in that scenario are at the lower end of the scales discussed. But that there are other concerns beyond losses to protection buyers, such as loss of mark-to-market gains and gap risk in other OTC derivatives.

The report calculates that based on spreads on 25 January this year, the cost of counterparty risk in spread terms ranges from 9 basis points for protection bought from a double A counterparty on a triple A credit to 120bp for protection on a B+ rated credit from an A- counterparty. This analysis ignores the benefits of collateral arrangements and netting.

The same methodology based on credit spreads from one year ago produce a much lower cost of counterparty risk - ranging from 1bp to 7bp.

The report goes on to analyse the impact on the financial system of a failure by a major credit derivatives counterparty. Barclays Capital calculates that if a counterparty with $2 trillion of CDS contracts outstanding defaulted, it could result in losses of between $36 billion and $47 billion for the institutions' counterparties because of the likely re-pricing of credit spreads following such an event. However, netting could significantly reduce these losses, say the researchers.

Chart of the Day: Stock-Bond Divergence

When CDX IG9 rolls into the new series on 20 March, CDX IG10, many of the high-beta and high-spread financials and monolines are likely to come out of the index, say analysts at Bear Stearns in a research report this week. This will leave IG9 as the preferred vehicle for expressing risk in monolines, mortgage insurers and financials, particularly since trading liquidity in those single names could be thin, they say. The analysts add that insurance CDS could drift wider than the major banks (80-120bp) and inside the brokers (160-180bp). Only AIG, Prudential and XL are at this level, they say. Thus, there is considerable room spreads to widen in Allstate, Hartford Financial, Liberty Mutual, Metlife and Travelers at least until they report first quarter earnings in late April, they say.