Briggsy

Sucker's Rally Approaching an End

The market is like a flock of birds or a school of fish. Over the long haul, they will follow the food. But in the moment, they simply go where they are headed. And together.

On Apr 14 02:39 PM Mad Hedge Fund Trader wrote:

> It certainly is overdone short term. Will someone please help me
> out here? Q1 is widely expected to be the quarter from hell, with
> earnings expected to plummet by 38%, and the market rockets 26%,
> the biggest hyperbolic move since 1930. Is there a disconnect here?
> I know I only got a magna cum laude in math in college, not the summa
> cum laude I deserved (my professor didn’t understand his subject
> and hated me for it). But is it possible that the market has gotten
> ahead of itself? Just a tad? Is the economy really going to have
> the massive bungee cord type recovery that the market is discounting
> here? Could we be setting up for the perfect sell in May and go away
> scenario, like we saw last year? I don’t get this. I await your comments
> in earnest.

Triple Leveraged ETFs

ETF share creation requires that you deposit a defined basket of underlying assets into the fund. Some or most of those assets might be too exotic or specialized for anyone to realistically get their hands on. And the value of such assets may be too volatile for anyone to know whether it's worth the trouble to turn them into ETF shares.

Update on Government Fiscal Policy

At least Obama is spending money to fix things instead of break them. Did the Republicans really think they could avoid universal health coverage by robbing the Treasury with their Iraq occupation?

Cramer Grilled on Jon Stewart

CNBC (and in particular David Faber) rather directly caused the run on Bear Stearns and Lehman. For Stewart to criticize CNBC for not blowing up the economy earlier is supercilious. As for his indignation that "This isn't a game!" how naive. Of course stock investing is a game. That's why certificates of deposit were invented. So you don't have to play it. Furthermore, Stewart just filibustered like a gas bag. Like some assistant principal scolding a misbehaved child. What nonsense.

The U.S. Financial Accounting Standards Board ((FASB)) will discuss mark-to-market guidelines at a board meeting Monday. The FASB says it will focus on "additional application guidance that would clarify how mark to market is used in illiquid markets." Earlier today, FASB chairman Robert Herz told a House subcommittee that new rules could be implemented within three weeks.

A simple alternative to mark to market is to write everything down to zero over 24 quarters.

Anything received back on the asset would be recognized as income ratably over 12 quarters. (Treated as financial reporting income, not for tax reporting. Most of what is coming back is return of principal.)

This takes all the judgment and monkey business out of valuation. It smooths the writedown in a predictable way and gives every quarter's aggregate writedown an opportunity to be offset by an aggregate gain engineered with a bias of twice the writedown rate.

The concept of regulatory capital needs an overhaul, and should be based on cash flow liquidity. If you can pay your operating expenses and cover all account withdrawals each month, you're still in business baby.

SEC Exploring Remedies for Short-Selling Manipulation

For those who question the value of allowing short sales whatsoever:

What if buyers want to buy but current shareholders do not want to sell?

Short selling provides liquidity by allowing buyers to enter long positions at some or any price or at a lower price than they might otherwise be forced to pay.

Three Reasons Why Investors Should Worry About Bank Nationalization

Banks can process the checks I write and safeguard my deposits. I will pay them a small fee for doing that. But their lending activity is just parasitic. Go to a lottery-based lending model operated by Treasury, perhaps with banks as dispensary agents. Lending without the mark-up. Fair. Risk distributed on the basis of chance, not upon some claim of superior business judgment or outright favoritism.

Why My Housing Plan Should Be Implemented - Now

The federal government buys houses and they become scattered site public housing. All the homeless will need a place to live.

Not Everyone Is Afraid

Red Lobster jammed full ALL DAY today with obese people waiting for overpriced undersized portions. Just a last hurrah before their credit cards get shut off?

Fixing Finance: Three Simple Suggestions

The author loves private banking too much. What is the best argument for private banking? Superior skill at allocating resources? Ha! An ongoing public lottery for loans (i.e. blind luck) would demonstrate better skill. While your waiting for your number to hit and your ration to be meted out, maybe you're saving a few quid of your own so you don't even need that loan.

Let us go to non-profit public banking ASAP, and let statutory cramdown authorization lead the way.

Can the Economy Recover in the Midst of a Consumer Confidence Crisis?

You get it fatcat. How short our memories are. We could have continued to cling to that fragile leveraged branch indefinitely. But $140 oil was too strong a breeze. And when the bough broke, down came baby cradle and all.


On Feb 03 10:59 PM fatcat wrote:

> The blame for the crash in consumer confidence can be placed squarely
> on the rise of gasoline to $4 per gallon.That was the beginning of
> the end for Joe Sixpack.
>
> Like 9/11 without the planes...

Memo to Bank of America's Directors: Shame on You!

Tom, why did you hold this stock all this time? Life is too short to endure such suffering. It seems you have more than money invested. Is righteous indignation the nectar of crusaders?

Would the New Legislation Kill the CDS Market?

The risk is not in holding CDS protection, but in writing it. Issuers like AIG are who have had their balance sheets destroyed. Enforcing sensible reserve requirements will curb the wholesale "minting" of revenues from this type of instrument.

The Heretics of Finance

Observe a flock of birds or a school of fish. Over time, they will follow the food. This is fundamental analysis. In the moment, however, they go in the direction they are headed. This is technical analysis.

Distressing Details of the UltraShorts

This is an excellent question. The only thing which keeps ETFs net-asset-value honest is the ability to create or redeem shares by delivering or demanding the defined portfolio content in exchange. With the ultra short ETFs, the holdings may be so esoteric and illiquid that this self-correcting mechanism is ineffective to keep share price tethered to NAV.


On Jan 23 06:01 PM Thomas J. Gordon wrote:

> Do people think there is a psychological component to these ultra
> shorts or are they only priced according to the value of the assets
> they hold? srs is an etf. It sits on the market and people can
> trade it. Those days in november when it went over 200 there were
> lots of people who thought the reits were done for and that they'd
> never borrow another dollar in the credit markets. Is that why it
> went over 200 and quickly fell back?