greensleeves

Analyzing the Nasdaq Streak

Same deal with the down streaks, except the error is in the opposite direction. To get the right result for a seven week up streak you need truncate all of the streaks more than seven weeks at the end of week seven, include them with the seven week streaks, and run the subsequent performance for all of them. You could go through this for all periods, but it sounds like work. At least you should test it for one of the mid length up streaks - because I think your numbers are very wrong and the conclusion is incorrect.

Analyzing the Nasdaq Streak

I noticed that there are in your data five 11 week streaks and only two 10 week streaks. This means that your methodology is flawed if the question you are trying to address is: What is the subsequent performance of the NASDAQ after a winning streak of n weeks. An 11 week streak INCLUDES a 10 wk streak, a 9 wk streak, etc. At the end of a 7 week streak, we MAY be in a streak that ultimately ends after 7, 8, 9, or more weeks. You have eliminated all of the seven week streaks that were followed by more up weeks, therefore skewing the results toward the negative. This makes all of the numbers other than the one 15 week streak incorrect, and particularly the shorter week streaks. Maybe this was a typo, but the numbers to me (negative returns following the 5-6 week streaks make sense if you have a lot of longer positive subsequent performance eliminated)

Stress Test Leaks: Endgame Emerging

The average American has - collectively, trillions of dollars on the sidelines. Money market funds in the US had $3.7 trillion on April 28th (near a record high abnd 54% above 4/07 levels), banks held $1.1 trillion in cash (a record high). Hmmmmm, do you think we can find $10B of equity. For BAC - they can sell postions in BLK which has moved up 60-70% from lows, for $8B, and pick up another $5-10B from CCB if they needed. They had something like $18B in pre-provision earnigns in the last Q and reserve levels for all the banks are far higher than they have ever been.




On May 04 07:14 PM SEM wrote:

> "I wonder if Geithner isn’t moving the same way, thinking that a
> clean bill of health will let markets do the recapitalizing of most
> banks, allowing Treasury to keep its remaining TARP money for the
> really sick banks."
>
> Do we really believe that a thumbs up from treasury is going to get
> money flowing into the big banks? Sure- the news will appear on the
> 6:00 news, but the average American, or even the average investor,
> doesn't control the purse strings that will help the banks in question
> to raise the institutional capital that's needed.

Why This Rally Is Unsustainable

The youngster wrote - "A breakout of 875 on big volume would change things, possibly indicating the BS rally found a way to incite slow money to buy into the rally, perhaps bringing enough buying power in to confirm a sustained bull trend..."

Oh well, it didn't take long to blow this article outof the water, but at least you hedged with the comments above as a fallback. Of course, the bright ones are short the market, while more and more dumb money keeps pushing the market up and up to irrational levels. The financials are up so much that they are still the worst performing group in 2009, after being the worst group in 2008. Nosebleed territory.

The main problem with all this explanation of why the shorts were being forced to cover in March and April which drove up C, BAC and GE, etc. is that the short positions on these stocks went UP during this period. Through April 15 the short levels increased on these names vs the levels at march 13. That would include the days BAC traded above $11 - so that was not net covering. The facts just don't support this whole conspiracy theory. And against who exactly were they conspiring? Oh yeah, the clever ones.

The short positions are still heavily in place, but some are throwing in the towel now, others hoping for a chance late this week.

Bank of America Continues to Stand Strong

Thanks for writing this. I have been seeing the same thing over and over this week. It felt like something from Orwell earlier in the week. I read the headline on Tech Ticker "Citi and BAC Nationalization Inevitable". Then watch the video - which is of course some guy who has been in favor of nationalizing the banks for the last two years, feeling his oats. Together they praise Lindsey Graham for having the courage to admit the "fact that nationalization" is the only answer. Of course - reading Graham's comments, he doesn't say that. Further - he later said that he has not spoken with anyone from BAC and doesn't know what kind of shape they are in. (!!!)
Later in the week it was more like Kafka. Every few minutes a story surfaces, without any new info, reiterating "experts and media sources" statements that nationalization was "increasingly likely" I read an interview with Nouriel Roubini - who is late for the mtg because of "extraordinary media demand for his time", spewing his predictions as if he was the only reliable expert remaining. Then home to my Time who have put an article in about the need to natioanlize banks. All of it based on the projections of - Nouriel Roubini of course. Then they put big graphics in showing the health of the big banks as a meter reading - sickly to healthy. Making them appear sickly - but a close read reveals that they are not the actual bank numbers shown on the meters, but a future projection for 2010 based on Roubini's projections for massive future losses.





On Feb 22 01:00 PM BF wrote:

> Wow! What a heated issue... Has anyone noticed the strong similarity
> to this nationalization issue and politics itself? There's no gray
> area allowed for discussion. There are two sides and one is right,
> the other is completely wrong. Hence the volatility in this stock.
>
>
> Let's take this issue back six months ago when we had a conservative
> administration/media screaming - let the free markets work themselves
> out. What happend to that battle cry for conservatice agenda? Why
> all of a sudden are the conservatives desperatly pleeding for the
> 'socialist' government to nationalize the banks? From the eyes of
> a moderate, it makes complete sense. The bitter republican guard
> wants to see the Obama Administration fail miserably, and show more
> signs of a socialst government. Whether it is present in their minds
> while arguing these issues is not apparent. But, that's what they're
> silently screaming. They've already headed towards the hills because
> these SLOGANS are so vivid in the minds of the extremists. They believe
> the end of the world is near, and the largest bank in the U.S. will
> go down too.
>
> Oh, and let's talk about this budgest issue... I didn't want to pay
> for my country to invade Iraq in the first place. But, I would waste
> a dollar on my neighbor. What's the problem with conservatives? Most
> are deeply religious, yet they're willing and ready to 'protect'
> America by invading another country to which we STILL have not found
> the premise for invasion. What sort of paradox are our own extremists
> setting here? Don't kill the fetus, kill the Muslim. Don't interfere
> in business, but you'd better nationalize those banks by-god. My
> head spins everytime I watch fox news. A few weeks ago when Obama
> took away the war on terrorism, Hannity labeled it Obama's War -
> That was pulled recently. MY GOD PEOPLE, are you that brainwashed
> with the media?
>
> I'm a trader that's long BAC (from the bottom), and I don't intend
> to jump ship until something materially negative comes along... I'm
> even expecting the same sort of negative earnings results for this
> quarter as the past two, with respect to 'percentage worse' than
> the estimates. This level of pessimism is extreme to say the least.
> I even think the overall economy could wither away into a depression.
> But, the fundamental problem with all of this thinking is to say
> that GM and BAC are even on the same level. GM may have more jobs
> (inflated union pay if you ask me), but BAC is so integral to the
> way we as Americans live, it would be almost impossible to outright
> nationalize this bank in the near term without having deeper reprecussions
> than simply helping it limp along through government loans. Look
> at your corner bank, it's a BAC. Look at that big tower in your town,
> it's a BAC. Look at the credit card in your wallet, it's a BAC.<br/>
>
> Anyone shorting this stock at these levels is playing with far more
> fire than anyone buying this stock at these levels.
>
> I'd like to add another impact of news upon this stock. Friday evening,
> In after hours traing it hit 4.24 at about 6:50ET. Then at 7ET Kudlow
> came on. At the very first moment of the hour the headline below
> said something along the lines of Bank Nationalization Imminent.
> He had two guests on who were both talking about nationalization
> as if it was a matter of fact. Within 15 minutes it was trading down
> to 3.96. Then, of course back up to 4.02 by the end of the session.
> I was amazed by how such a bold statement by the Press Secretary
> didn't even come up in the Kudlow conversation with the Sect'y emphasizing
> his entire speech by saying "I don't think I can make this anymore
> clear, the President believes a private banking system is the way-to-to."
>
>
> Have people lost their minds in pure pandemonium, fear, and the thought
> of virtual chaos? I think so...
>
> At open, I'm selling all of my puts, and riding this to political
> resistance. Not technical, not media, but political resistance. That's
> the only thing that can stop this stock now.
>
> Please anyone who types up these vague pessimistic statements about
> the banks on these websites. Please quantify for me how bad these
> level three assets are in a post armageddon world instead of pricing
> them at armageddon. Or better yet, just say the exact figures...
> I could go for real numbers here instead of hearing people puke up
> the same information I get from extremists like Larry Kudlow - Fear
> Monger LLC. You've got private capital yearning for the opportunity
> to buy these assets because they're so cheap - in an already horrible
> market. What does that tell you?
>
> Just like this last post, you've got a guy who says people are walking
> away for a bank - that has thousands of locations, by saying people
> are walking away from BAC because of the horrible service... Are
> you kidding me? I go into BAC all the time, and it's the same exact
> service I would get at any bank... THINK ABOUT IT PEOPLE.

Bank of America Continues to Stand Strong

You say "some form of nationalization "seems more likely than not." I am assuming this is based on reading blogs, and the comments of two or three senators, while ignoring the president, treasury secretary, the history of our country and the principals of free enterprise. Don't you ever step back and ask - what has actually happened here or been said that isn't just someone's opinion, or "unidentified sources". The only thing you can see is the market reaction - falling stock prices. The motive behind all of this massive blog/rumor/media blitz has been to drive the stocks down. There would be some big winners if nationalization were to happen. Short sellers are the obvious, and the shorts are all over this, but there are also speculators in the credit default markets working the phones and the internet. They are commenting on this site I am sure. Lots of hyperbole - and they someone like you to believe. But you offer no reason why it is likely - after hearing there are no plans by the treasury, the president is strongly against it, and the banks clearly against it.





On Feb 22 08:18 PM Mr. Ed, Jr. wrote:

> Two points:
>
> Nobody cares about the subpoena except grandstanding politicians
> and the media who cover grandstanding politicians.
>
> "Nationalization" is being argued in many corners as though it is
> an all-or-nothing deal. That is, either complete government takeover,
> or the government keeps out. But there is lots of room between "all"
> and "nothing". Our current executive and legislative branches are
> run by people who firmly believe that "government is the answer".
> It is not their nature to just let the marketplace "work things out".
>
>
> Complete nationalization is politically difficult in this country.
> But some form of nationalization seems more likely than not. They
> will just camouflage it with convoluted explanations and a name that
> has the word "Temporary" in it somewhere. And it will likely not
> wipe out shareholders, so that the politicians can effectively refute
> charges of nationalization-- and get re-elected, of course. But there
> will be little doubt that the government is in control.

Bank of America Continues to Stand Strong

They aren't "negative people", they want nationalization for various reasons, and are playing an amazingly effective rumor proliferation strategy to create this sense of panic and urgency. The short positions on the big banks have been high but jumped up recently. With a company like BAC, they need to cover with the stock at around .22x book, since the risk to these short positons is much higher than the potential upside unless thay can somehow create a panic and spread the fear of nationalization - hoping either to cover on the stock being down, or have the gullible sheep like Lindsey Graham listen to them, along with their chosen guru Nouriel Roubini - and say "gee look at how low the stocks are , maybe we aught to nationalize the banks" After which everyone of these guys is shouting from the rooftoops that "finally Washington (no just one dumb-ass senator) was now in favor of nationalizing.


On Feb 22 10:38 AM jasonjim wrote:

> These negative people who advocate nationalization of BAC never seem
> to give up do they, nor do they analyze thoroughly the ramifications
> of what could happen to their institutions and their country if it
> were allowed to happen. It would be an unmitigated disaster, that
> is what it would be. Who in government, for instance, would run BAC
> if it was nationalized---perhaps Barney Frank? Or would the government
> hire Ken Lewis on contract to run it, assuming he would accept, which
> I don't think he would. What a farce!

Fed Model Update: Stocks Are Cheap Compared to Bonds

I used to have a chart by Graham & Dodd showing the "fair" relationship between growth rates and P/E for stocks, and it had several lines, one for each of several rate environments. It seems to me that the real equity risk premium now is high - meaning risk adjusted returns will be better in stocks. The valuations are highly dependent on future growth rates, not 2008 rates, but the market is focusing on these. I'd also point out that the SPX would need to increase about 100% ( not 50% as you say) to get to the predicted value of the Fed model. But I guess that isn't important since as we now know from prior comment - stocks are risky and therefore way too expensive. In fact the US stock market is the most expensive in the world!