DSB's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/192719/comments http://seekingalpha.com/article/123298-dr-doom-responds-on-wells-fargo?source=feed#comment-407360 407360 Sat, 28 Feb 2009 20:59:54 -0500 http://seekingalpha.com/article/123298-dr-doom-responds-on-wells-fargo?source=feed#comment-407347 407347
How much wealth (other people's money) have you destroyed? How much has Roubini saved?

You are an ass. ]]> Sat, 28 Feb 2009 20:14:01 -0500
How much wealth (other people's money) have you destroyed? How much has Roubini saved?

You are an ass. ]]> http://seekingalpha.com/article/99009-news-flash-to-bofa-s-lewis-demand-isn-t-problem-supply-is?source=feed#comment-277232 277232
"If you can’t stand the idea of seeing another, say, 20% on the downside, please stop reading at once and head back to CNBC.com."

Tom said this on 7/22/08, when the XLF was at $22.49. As of today, the XLF is 32% lower than when Tom made that call. THIRTY TWO PERCENT LOWER!!!

This thing is a mess, and Tom continues to avoid the heart of the matter. People who have listened to Tom have lost money, when 'smart money' was pulling out of financials. How can one be SO wrong, and not own up to any of it?

Tom, we would respect you a lot more if you would at least own up to your bad advice.

There is a real risk of failure in the system. It may be a small fraction of a percent, but the risk is still there, and it has increased over the last 3 months. It would be nice to hear Tom acknowledge this risk and issue a cautionary note.

Look at the SEC website to see what second curve capital owns. If Tom had thrown in the towel 3 months ago, it would have avoided MILLIONS OF DOLLARS OF OTHER PEOPLE'S MONEY down the drain. That is reckless.

Paulson even said today that there is more pain to come.

That is all.

/rant over
]]> Wed, 08 Oct 2008 17:28:44 -0400
"If you can’t stand the idea of seeing another, say, 20% on the downside, please stop reading at once and head back to CNBC.com."

Tom said this on 7/22/08, when the XLF was at $22.49. As of today, the XLF is 32% lower than when Tom made that call. THIRTY TWO PERCENT LOWER!!!

This thing is a mess, and Tom continues to avoid the heart of the matter. People who have listened to Tom have lost money, when 'smart money' was pulling out of financials. How can one be SO wrong, and not own up to any of it?

Tom, we would respect you a lot more if you would at least own up to your bad advice.

There is a real risk of failure in the system. It may be a small fraction of a percent, but the risk is still there, and it has increased over the last 3 months. It would be nice to hear Tom acknowledge this risk and issue a cautionary note.

Look at the SEC website to see what second curve capital owns. If Tom had thrown in the towel 3 months ago, it would have avoided MILLIONS OF DOLLARS OF OTHER PEOPLE'S MONEY down the drain. That is reckless.

Paulson even said today that there is more pain to come.

That is all.

/rant over
]]> http://seekingalpha.com/article/99009-news-flash-to-bofa-s-lewis-demand-isn-t-problem-supply-is?source=feed#comment-277115 277115 Wed, 08 Oct 2008 14:58:24 -0400 http://seekingalpha.com/article/92351-coming-bull-market-in-financials-a-few-items-portending-the-turn?source=feed#comment-238413 238413 Mon, 25 Aug 2008 10:39:34 -0400 http://seekingalpha.com/article/90899-mbia-s-momentous-2q-need-more-evidence-that-the-turn-has-arrived?source=feed#comment-230623 230623
www.businesssheet.com/...

What is your YTD? Based on your SEC filings, not so great.]]> Thu, 14 Aug 2008 17:07:05 -0400
www.businesssheet.com/...

What is your YTD? Based on your SEC filings, not so great.]]> http://seekingalpha.com/article/90156-financials-bottoms-happen-when-everyone-s-convinced-they-won-t?source=feed#comment-228093 228093
Your thesis hinges upon the theory that the market is a "Discounting Machine". This writeup questions the validity of that theory:
seekingalpha.com/artic...

Next: www.marketwatch.com/ne...


]]> Mon, 11 Aug 2008 16:05:30 -0400
Your thesis hinges upon the theory that the market is a "Discounting Machine". This writeup questions the validity of that theory:
seekingalpha.com/artic...

Next: www.marketwatch.com/ne...


]]> http://seekingalpha.com/article/90156-financials-bottoms-happen-when-everyone-s-convinced-they-won-t?source=feed#comment-227896 227896
www.reuters.com/articl...

"IndyMac is in a stronger position now because so many of its competitors have left the business, said Tom Brown, a former top-ranked bank-stock analyst who now runs hedge fund Second Curve Capital LLC. The New York-based fund has raised its passive stake in IndyMac to 5 percent from 2 percent, representing a total of 3.7 million shares"]]> Mon, 11 Aug 2008 12:52:29 -0400
www.reuters.com/articl...

"IndyMac is in a stronger position now because so many of its competitors have left the business, said Tom Brown, a former top-ranked bank-stock analyst who now runs hedge fund Second Curve Capital LLC. The New York-based fund has raised its passive stake in IndyMac to 5 percent from 2 percent, representing a total of 3.7 million shares"]]> http://seekingalpha.com/article/90156-financials-bottoms-happen-when-everyone-s-convinced-they-won-t?source=feed#comment-227877 227877
hf-implode.com/ailing/...

www.businessweek.com/b...

"I think we're really close, if not at the bottom, for the financial services industry," - Great call Tom, way back in November of 2007!
www.reuters.com/articl...

Way to read the tea leaves Tom:
“ Mr. Brown, whose hedge fund had owned 5 percent of IndyMac late last year, described Mr. Perry as an “eternal optimist.”
www.nytimes.com/2008/0...

And my favorite: Your recommendation to buy FMD on 11/30/07 when it was at $30.01/share. It is now at $2.90/share.
vinvesting.com/vic-nyc...

Please explain yourself.


]]> Mon, 11 Aug 2008 12:40:19 -0400
hf-implode.com/ailing/...

www.businessweek.com/b...

"I think we're really close, if not at the bottom, for the financial services industry," - Great call Tom, way back in November of 2007!
www.reuters.com/articl...

Way to read the tea leaves Tom:
“ Mr. Brown, whose hedge fund had owned 5 percent of IndyMac late last year, described Mr. Perry as an “eternal optimist.”
www.nytimes.com/2008/0...

And my favorite: Your recommendation to buy FMD on 11/30/07 when it was at $30.01/share. It is now at $2.90/share.
vinvesting.com/vic-nyc...

Please explain yourself.


]]> http://seekingalpha.com/article/89955-wake-up-america-youre-sinking?source=feed#comment-226065 226065 brighton.ncsa.uiuc.edu...

This is a story about the future, how people interact in the future, and how we become dependent upon technology to survive. At some point, things aren't so great & mediocrity and decay set in.

It was written in 1909, and it may take you a day or two - so print it out. ]]> Fri, 08 Aug 2008 11:30:12 -0400 brighton.ncsa.uiuc.edu...

This is a story about the future, how people interact in the future, and how we become dependent upon technology to survive. At some point, things aren't so great & mediocrity and decay set in.

It was written in 1909, and it may take you a day or two - so print it out. ]]> http://seekingalpha.com/article/88816-canadian-oil-sands-penn-west-energy-protected-on-the-downside?source=feed#comment-222500 222500
Who can't claim the 15% credit back in the US? I was unaware of that. Considering that MOST investors get the 15% back, and are not double taxed, then this is apples to appples vs. some other tax advantaged cash flow/dividend investment.

Second, how is the theoretical net lowered by a match in DUG? Would you please explain the numbers? Are you saying that the opportunity cost of the 50% position is eating into yield? I don't see how the yield gets knocked down to 5.5 or 6%.

Matching your investment with a 50% position in DUG (i.e. for $100K invested in the basket, 50K goes into DUG - which yields ~2%) would cause the investment to be market neutral - extracting dividend yield. At that point, your yield is contingent upon whether or not the trusts lower distributions.

thx for your input. ]]> Mon, 04 Aug 2008 13:59:20 -0400
Who can't claim the 15% credit back in the US? I was unaware of that. Considering that MOST investors get the 15% back, and are not double taxed, then this is apples to appples vs. some other tax advantaged cash flow/dividend investment.

Second, how is the theoretical net lowered by a match in DUG? Would you please explain the numbers? Are you saying that the opportunity cost of the 50% position is eating into yield? I don't see how the yield gets knocked down to 5.5 or 6%.

Matching your investment with a 50% position in DUG (i.e. for $100K invested in the basket, 50K goes into DUG - which yields ~2%) would cause the investment to be market neutral - extracting dividend yield. At that point, your yield is contingent upon whether or not the trusts lower distributions.

thx for your input. ]]> http://seekingalpha.com/article/88816-canadian-oil-sands-penn-west-energy-protected-on-the-downside?source=feed#comment-222378 222378 Mon, 04 Aug 2008 12:29:34 -0400 http://seekingalpha.com/article/88816-canadian-oil-sands-penn-west-energy-protected-on-the-downside?source=feed#comment-222289 222289 Mon, 04 Aug 2008 11:33:05 -0400 http://seekingalpha.com/article/87871-what-can-go-right-for-the-financials-quite-a-bit-actually?source=feed#comment-219541 219541 Thu, 31 Jul 2008 14:40:17 -0400 http://seekingalpha.com/article/87095-u-s-dollar-shaking-off-risk-aversion?source=feed#comment-214592 214592
- New home sales were up, but so are foreclosrures (defaults) www.bloomberg.com/apps...

- The dollar strengthens as the velocity of money slows down (liquidity leaves the system)

- Inflation may drive the fed to raise rates, which will strengthen the dollar but kill banks.

- I believe the dollar was beaten down by the assumption that the Fed would continue to write blank checks. Once the FNM/FRE bailout happened, the fed's language implied that they would not bail out other institutions down the road. This gave dollar bulls clarity, considering that each bailout = weaker dollar in theory. Also, when the obligation of the Fed in regards to FNM/FRE was estimated to be 26B (and nowhere near 5T), the dollar continued to strengthen.

- Oil is a wild card. Iran tension will push oil up, wheras deflationary pressures (lack of demand) will send it down (strengthing $).

- Why isn't the market rallying more with such 'great' economic news today?

- Within the last 6 weeks, 4 major institutions have issued dire warnings for the US Banking system, and the government has taken extreme measures to prevent collapse. Is more to come? The dollar bottomed this year on the day BSC went belly up, which tells me that the Dollar is also correlated to the health of the derivatives market.

At the end of the day, there are several things that push the dollar around - including foreign monetary policy & macroeconomic events such as the amount of liquidity in the market, oil prices, and Gold. Not all of these are good things, so I wouldn't necessarily correlate dollar strength with overall economic strength.

]]> Fri, 25 Jul 2008 14:23:14 -0400
- New home sales were up, but so are foreclosrures (defaults) www.bloomberg.com/apps...

- The dollar strengthens as the velocity of money slows down (liquidity leaves the system)

- Inflation may drive the fed to raise rates, which will strengthen the dollar but kill banks.

- I believe the dollar was beaten down by the assumption that the Fed would continue to write blank checks. Once the FNM/FRE bailout happened, the fed's language implied that they would not bail out other institutions down the road. This gave dollar bulls clarity, considering that each bailout = weaker dollar in theory. Also, when the obligation of the Fed in regards to FNM/FRE was estimated to be 26B (and nowhere near 5T), the dollar continued to strengthen.

- Oil is a wild card. Iran tension will push oil up, wheras deflationary pressures (lack of demand) will send it down (strengthing $).

- Why isn't the market rallying more with such 'great' economic news today?

- Within the last 6 weeks, 4 major institutions have issued dire warnings for the US Banking system, and the government has taken extreme measures to prevent collapse. Is more to come? The dollar bottomed this year on the day BSC went belly up, which tells me that the Dollar is also correlated to the health of the derivatives market.

At the end of the day, there are several things that push the dollar around - including foreign monetary policy & macroeconomic events such as the amount of liquidity in the market, oil prices, and Gold. Not all of these are good things, so I wouldn't necessarily correlate dollar strength with overall economic strength.

]]> http://seekingalpha.com/article/86784-news-flash-major-market-turns-aren-t-announced-in-advance?source=feed#comment-214466 214466 www.bloomberg.com/apps...

Poof, there goes your theory about defaults not rising. I'll see your Sean O'Toole quote, and raise you a Rick Sharga:

"Falling home values, led by states such as Nevada and California that have the biggest default rate, have prompted RealtyTrac to almost double the projected number of foreclosures this year to about 2.5 million, said Rick Sharga, executive vice president for marketing. "

----------
"Even so, there’s been no shortage of signs lately that the worst of the credit crunch is past, or soon will be. As we’ve talked about here for awhile, new delinquencies among the loans that make up the ABX subprime mortgage index have been declining for months, while delinquency roll rates have been improving. Lower delinquencies now mean fewer defaults down the road. Bingo! End of problem in sight."

]]> Fri, 25 Jul 2008 12:27:07 -0400 www.bloomberg.com/apps...

Poof, there goes your theory about defaults not rising. I'll see your Sean O'Toole quote, and raise you a Rick Sharga:

"Falling home values, led by states such as Nevada and California that have the biggest default rate, have prompted RealtyTrac to almost double the projected number of foreclosures this year to about 2.5 million, said Rick Sharga, executive vice president for marketing. "

----------
"Even so, there’s been no shortage of signs lately that the worst of the credit crunch is past, or soon will be. As we’ve talked about here for awhile, new delinquencies among the loans that make up the ABX subprime mortgage index have been declining for months, while delinquency roll rates have been improving. Lower delinquencies now mean fewer defaults down the road. Bingo! End of problem in sight."

]]> http://seekingalpha.com/article/86784-news-flash-major-market-turns-aren-t-announced-in-advance?source=feed#comment-213628 213628
I agree 100% that you can't simply wait for an "all clear" to call a bottom. At the same time, when there are so many atypical risks to the system, you would need a time machine to make the call you did on Tuesday. I only know one guy with a time machine. Najdorf, "Trying to get ahead of them exposes you to huge market risk and prediction risk" is right on the money.

Tom, in my opinion - the real risk in our markets is unknown. We will know more when we have more data, however, things like WFC extending it's window for delinquent debt before it has to report the loss suggests (to me) that there is a lot that we still don't know about the current rates of defaulting debt. In the last 5 weeks, 4 major financial institutions have warned that the US Banking system is in severe distress (and to take cover). In the last 2 weeks, there has been a ban on short selling certain financial stocks, BAC has decided to allocate $3.6B (of taxpayer money?) to support their share price, and Jamie Dimon has said that prime losses could triple from here. (ap.google.com/article/...)

Your logic is sound in a vacuum, however I feel that you are ignoring several inputs to the equitation that affect your thesis, and that the risks associated with these inputs must be taken into account.

Is the risk/reward tradeoff "worth it" at this point, even if valuations are great & the rate of defaults has slowed down? What about commercial defaults as small/medium businesses leave their spaces?

Have the banks written down enough? That is the Trillion dollar question.
]]> Thu, 24 Jul 2008 14:22:16 -0400
I agree 100% that you can't simply wait for an "all clear" to call a bottom. At the same time, when there are so many atypical risks to the system, you would need a time machine to make the call you did on Tuesday. I only know one guy with a time machine. Najdorf, "Trying to get ahead of them exposes you to huge market risk and prediction risk" is right on the money.

Tom, in my opinion - the real risk in our markets is unknown. We will know more when we have more data, however, things like WFC extending it's window for delinquent debt before it has to report the loss suggests (to me) that there is a lot that we still don't know about the current rates of defaulting debt. In the last 5 weeks, 4 major financial institutions have warned that the US Banking system is in severe distress (and to take cover). In the last 2 weeks, there has been a ban on short selling certain financial stocks, BAC has decided to allocate $3.6B (of taxpayer money?) to support their share price, and Jamie Dimon has said that prime losses could triple from here. (ap.google.com/article/...)

Your logic is sound in a vacuum, however I feel that you are ignoring several inputs to the equitation that affect your thesis, and that the risks associated with these inputs must be taken into account.

Is the risk/reward tradeoff "worth it" at this point, even if valuations are great & the rate of defaults has slowed down? What about commercial defaults as small/medium businesses leave their spaces?

Have the banks written down enough? That is the Trillion dollar question.
]]> http://seekingalpha.com/article/86718-financials-have-bottomed-readers-say-we-re-nuts?source=feed#comment-213545 213545 Thu, 24 Jul 2008 13:01:27 -0400 http://seekingalpha.com/article/86718-financials-have-bottomed-readers-say-we-re-nuts?source=feed#comment-213460 213460 Thu, 24 Jul 2008 12:18:52 -0400 http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211847 211847 Tue, 22 Jul 2008 17:36:13 -0400 http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211713 211713
Go to ibankcoin.com for some reality. Do not let children near the computer.

]]> Tue, 22 Jul 2008 14:48:50 -0400
Go to ibankcoin.com for some reality. Do not let children near the computer.

]]> http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211677 211677 Tue, 22 Jul 2008 14:06:25 -0400 http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211666 211666 Tue, 22 Jul 2008 13:49:24 -0400 http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211662 211662
Either way, this means that if you are in the highest tax bracket, let's say 45% of your income goes to taxes. That means that for the first 5.4 months of the year, 100% of your labor goes to the government. Of that 5.4 months, 2.26 months are spent on the military. So, 2.26 months out of the year, 100% of your work goes towards military spending and military debt obligations. For high wage earners, every hour of every day you work until the end of March goes towards war. HOOAH!

www.nationalpriorities...

en.wikipedia.org/wiki/...

www.truthandpolitics.o...

www.salem-news.com/art...




]]> Tue, 22 Jul 2008 13:45:12 -0400
Either way, this means that if you are in the highest tax bracket, let's say 45% of your income goes to taxes. That means that for the first 5.4 months of the year, 100% of your labor goes to the government. Of that 5.4 months, 2.26 months are spent on the military. So, 2.26 months out of the year, 100% of your work goes towards military spending and military debt obligations. For high wage earners, every hour of every day you work until the end of March goes towards war. HOOAH!

www.nationalpriorities...

en.wikipedia.org/wiki/...

www.truthandpolitics.o...

www.salem-news.com/art...




]]> http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211625 211625
To rattle off a few:

- We have never before had such a major crisis of confidence in the ratings agencies. Their job is to accurately asses the risk of loss, and assign a rating to that probability. They rated securities that were so complex that they didn't have any history on which to base their assumptions. The loss of credibility is crippling the market. Trust/Credibility is the glue that holds the world together. When someone don't know for sure whether to trust a propsective purchase, they rely on a 3rd party to recommend (a friend, an agency, references, etc). This is what the ratings agencies have done for decades, this is what makes the Ebay feedback system crucial to their business model. It is also why the world hasn't questioned the Dollar for 60 years. When trust is broken, the system will remain broken until trust is restored.

- The government hasn't had to back a major financial institution in crisis during ANY of our lifetimes, to my knowledge. This is egregious, possibly illegal, and in theory it dilutes the dollar. It takes credibility away from the fed and our currency - however if it was/is not done, we might be in a much worse situation today. Going forward, the fed will be limited in their ability to bail out institutions.

- Our economic strength is tied to our military strength insofar as .60c of every tax dollar goes towards the military. As the dollar weakens, and the tax base shrinks due to economic contraction, how are we going to maintain our global military campaigns. If we aren't the toughest kid on the block (aside from nukes), it becomes a lot harder to throw our weight around.

- The derivatives market has never been this big. A 70+ Trillion system of complex IOUs between financial institutions rests on a foundation of rapidly defaulting debt. During the credit crisis of the early 90's, it was around 9 Trillion. Think of an inverted pyramid. This is why BSC failure would have been catastrophic, as they held up around 8% of this system of IOUs (from what I recall).

- The savings rate in America is flat. This is going to get worse as prices inflate, and people (with all that 'money sloshing around on the sidelines') are going to hoard $ in anticipation of worse times ahead. When the velocity of money slows down, demand falls, companies go out of business, and people baton down the hatches. What will increase the velocity of money? Growth. How do you grow? There must be demand, prices must not choke people out of markets, and there *MUST* be liquidity in the system.

$120/bbl oil has already done damage. Companies have already laid people off in anticipation of hard times ahead, with two quarters of high energy prices putting a thumbscrew on margins.

Nothing goes up or down in a straight line. The fact that the Financials staged a rally 2 business days after the 3rd largest bank failure in US history tells me that people aren't educated as to the real risk in the system right now. It tells me that hopeless optimism persists, justified by "valuations," history, and a blind eye to the storm that the world is in right now.

Don't get me started on Europe, which suffers from a housing crisis very similar to ours.

Fix the defaults, fix the world. Save the cheerleader.]]> Tue, 22 Jul 2008 13:02:56 -0400
To rattle off a few:

- We have never before had such a major crisis of confidence in the ratings agencies. Their job is to accurately asses the risk of loss, and assign a rating to that probability. They rated securities that were so complex that they didn't have any history on which to base their assumptions. The loss of credibility is crippling the market. Trust/Credibility is the glue that holds the world together. When someone don't know for sure whether to trust a propsective purchase, they rely on a 3rd party to recommend (a friend, an agency, references, etc). This is what the ratings agencies have done for decades, this is what makes the Ebay feedback system crucial to their business model. It is also why the world hasn't questioned the Dollar for 60 years. When trust is broken, the system will remain broken until trust is restored.

- The government hasn't had to back a major financial institution in crisis during ANY of our lifetimes, to my knowledge. This is egregious, possibly illegal, and in theory it dilutes the dollar. It takes credibility away from the fed and our currency - however if it was/is not done, we might be in a much worse situation today. Going forward, the fed will be limited in their ability to bail out institutions.

- Our economic strength is tied to our military strength insofar as .60c of every tax dollar goes towards the military. As the dollar weakens, and the tax base shrinks due to economic contraction, how are we going to maintain our global military campaigns. If we aren't the toughest kid on the block (aside from nukes), it becomes a lot harder to throw our weight around.

- The derivatives market has never been this big. A 70+ Trillion system of complex IOUs between financial institutions rests on a foundation of rapidly defaulting debt. During the credit crisis of the early 90's, it was around 9 Trillion. Think of an inverted pyramid. This is why BSC failure would have been catastrophic, as they held up around 8% of this system of IOUs (from what I recall).

- The savings rate in America is flat. This is going to get worse as prices inflate, and people (with all that 'money sloshing around on the sidelines') are going to hoard $ in anticipation of worse times ahead. When the velocity of money slows down, demand falls, companies go out of business, and people baton down the hatches. What will increase the velocity of money? Growth. How do you grow? There must be demand, prices must not choke people out of markets, and there *MUST* be liquidity in the system.

$120/bbl oil has already done damage. Companies have already laid people off in anticipation of hard times ahead, with two quarters of high energy prices putting a thumbscrew on margins.

Nothing goes up or down in a straight line. The fact that the Financials staged a rally 2 business days after the 3rd largest bank failure in US history tells me that people aren't educated as to the real risk in the system right now. It tells me that hopeless optimism persists, justified by "valuations," history, and a blind eye to the storm that the world is in right now.

Don't get me started on Europe, which suffers from a housing crisis very similar to ours.

Fix the defaults, fix the world. Save the cheerleader.]]> http://seekingalpha.com/article/86180-financials-how-and-when-we-reached-the-bottom?source=feed#comment-211499 211499
I agree that the Financials are undervalued by traditional metrics, however I don't expect to see a bottom until a few things occur (which we probably won't be able to ascertain until after the fact):

1) Defaulting debt returns to normalized levels

2) We have a ratings agencies overhaul, which will allow IB's to trade paper as freely as before they lost trust.

3) Oil falls & remains below $130

4) We have clear indication that unemployment has stopped increasing, CPI is 'contained'

5) We have 2 consecutive quarters without a large/mid sized bank encountering problems.

As 10+ years of inappropriate growth, which has obligated the govt. to back more paper than they are technically able, there must be a proportionate contraction based on the true valuations of not only the foundational collateral, but every derivative link in the chain above it (leverage). We have seen some of this, however this unwinding is very complicated, and the derivative debt spawned from this foundation is in the Trillions of dollars. The level of risk inherent to the market right now is higher than I think most people realize. I have heard quite a few 7 figure heavy hitters defend the JPM/BSC deal as having avoided catastrophe. If you have time, peek behind the curtain to see the moving parts of these statements...

Also, something to note is the velocity of money. Let's assume the above leads to a contractionary environment... As the VM slows (people & businesses unable or unwilling to spend for a variety of reasons, including difficulty in taking out loans), banks will lose out on a lot of transactional business. On the other side of the coin, they still have massive cashflow obligations that they support.

If inflation persists, and grows, big time pressure will be (is) on the fed to raise rates. Remember, they conducted emergency rate cuts in order to keep the banks from failing. When that wasn't enough, they just gave them money. The root of WHY, is defaulting debt - which is the crux of the matter, as articulated by Hank Paulson on CNBC the other day. If they have to raise rates, they kill banks.
]]> Tue, 22 Jul 2008 10:58:43 -0400
I agree that the Financials are undervalued by traditional metrics, however I don't expect to see a bottom until a few things occur (which we probably won't be able to ascertain until after the fact):

1) Defaulting debt returns to normalized levels

2) We have a ratings agencies overhaul, which will allow IB's to trade paper as freely as before they lost trust.

3) Oil falls & remains below $130

4) We have clear indication that unemployment has stopped increasing, CPI is 'contained'

5) We have 2 consecutive quarters without a large/mid sized bank encountering problems.

As 10+ years of inappropriate growth, which has obligated the govt. to back more paper than they are technically able, there must be a proportionate contraction based on the true valuations of not only the foundational collateral, but every derivative link in the chain above it (leverage). We have seen some of this, however this unwinding is very complicated, and the derivative debt spawned from this foundation is in the Trillions of dollars. The level of risk inherent to the market right now is higher than I think most people realize. I have heard quite a few 7 figure heavy hitters defend the JPM/BSC deal as having avoided catastrophe. If you have time, peek behind the curtain to see the moving parts of these statements...

Also, something to note is the velocity of money. Let's assume the above leads to a contractionary environment... As the VM slows (people & businesses unable or unwilling to spend for a variety of reasons, including difficulty in taking out loans), banks will lose out on a lot of transactional business. On the other side of the coin, they still have massive cashflow obligations that they support.

If inflation persists, and grows, big time pressure will be (is) on the fed to raise rates. Remember, they conducted emergency rate cuts in order to keep the banks from failing. When that wasn't enough, they just gave them money. The root of WHY, is defaulting debt - which is the crux of the matter, as articulated by Hank Paulson on CNBC the other day. If they have to raise rates, they kill banks.
]]> http://seekingalpha.com/article/86110-strongest-june-quarter-in-apple-history-doesn-t-satisfy-the-street?source=feed#comment-211447 211447 Tue, 22 Jul 2008 10:09:40 -0400 http://seekingalpha.com/article/77037-oil-to-200-fundamentals-don-t-support-it?source=feed#comment-167039 167039
so sorry. ]]> Tue, 13 May 2008 16:19:01 -0400
so sorry. ]]>