Charlie Stromeyer Jr

On Ben Graham, Bank Stocks, Jason Zweig and Tom Brown

I like this piece, and have a question:

A popular trade in Brazil about a month ago was to go long the preferred shares of Petrobras while simultaneously shorting the common shares. This was a very successful trade, but would it qualify as a "related hedge"? Thanks.

Disclosure: I engage in related hedging, trading Brazilian equities, and am long many financial companies but few here in the U.S.

Jason Zweig on Graham and Bank Stocks: 'The Un-Intelligent Investor'

najdorf, please read this piece on why economists look at the prices-to-rents ratio:

www.frbsf.org/publicat...

Financials: How - And When - We Reached the Bottom

Thanks for your answer, Swiss_Buffett, which I agree with.

Disclosure: One of the board members of a company that I advise is a manager at State Street in Boston.

Bespoke's Financial CDS Index

Thanks for posting your CDS index. Because I don't trust the ratings agencies, I have been watching CDSs and CDOs since early June 2007 via markit.com and bloomberg.com.

Disclosure: No current positions in either CDSs nor CDOs.

Jason Zweig on Graham and Bank Stocks: 'The Un-Intelligent Investor'

Sorry, I made a typo. Actually, the total credit default swap (CDS) market doubled in size every year from 2000 to 2007 (which doesn't include the growth of the total collateralized debt obligation (CDO) market.)

Jason Zweig on Graham and Bank Stocks: 'The Un-Intelligent Investor'

Good article, and here is a question:

Do you happen to know if Graham ever invested during a massive credit crunch? For example from 2002-2007 credit derivatives grew about 5X, and also Libor/OIS spreads are now higher than they were in March 2008. Would Graham have known that stocks historically bottom before the credit markets bottom?

Additionally, I can think of about 11 reasons home prices should continue lower but you don't have to take my word for why they should go lower - you can just look at what futures on home prices are pointing to.

VIX Isn't the Best Gauge of Marketplace Volatility

You are correct, George Spritzer. Just so you know, CBOE will be releasing some new volatility indices but I can't remember when.

News Flash: Major Market Turns Aren't Announced In Advance

I agree with Jimmy Lathrop and other commenters that Tom Brown should be better able to defend his thesis, however, I don't want Tom to go away and stop posting bullish comments because, as a professional money manager, I need to try to understand BOTH the bullish and bearish arguments so that I don't end up getting caught on the wrong side of a trade.

Also, I forgot to mention that OpCo's Meredith Whitney is both smarter and prettier than Tom Brown. Additionally, it would be helpful if Tom could tell us something useful about credit derivatives exposure.

Disclosure: long smart blonde chicks and short Tom Brown. Actually, I sold my SKF position this morning for a quick two day gain of 11% because I was wrong that today's economic data would be worse than expected (but at least I am willing to admit that I was wrong and flexible enough to adapt to change).

News Flash: Major Market Turns Aren't Announced In Advance

I agree with Portfolio Manager about his financials picks. Also, throughout the world, there are great financial firms. For example, I have been long Climate Exchange Plc (on the London Stock Exchange).

However, be wary of the U.S. financials with crappy managements. These managers are the true morons.

News Flash: Major Market Turns Aren't Announced In Advance

DSB makes a good point. Also, both Wilbur Ross and Moody's have predicted that junk bond defaults will soar which means that the banks will be taking big losses in the future on their credit default swaps:

www.bloomberg.com/apps...

Disclosure: Sold my IXG shares for a 17% gain and went long shares of SKF because I expect the economic data tomorrow to be bad.

News Flash: Major Market Turns Aren't Announced In Advance

Tom, I sincerely doubt that anyone intelligent will follow your bullishness until you can address this question:

Given that many CDOs and other crap are still tied to home prices how can the financials make a long term bottom before there is some more compelling evidence that home prices have started to bottom? Thanks.

Disclosure: Long IXG the iShares Global Financials since early Wednesday morning but ready to sell at any moment.

Financials Have Bottomed? Readers Say We're Nuts

Tom, I appreciate that you are willing to defend your case, but could you or someone else please help me to understand this question:

Many CDOs and other crap are still tied to home prices, so how can the financials make a long term bottom before there is some more compelling evidence that home prices have started to bottom? Thanks.

Financials: How - And When - We Reached the Bottom

User 225887 or anyone else, do you agree with some analyst whose name I don't remember who said that in terms of business recovering that first the trust banks will recover then the commercial banks and then last the investment banks?

Financials: How - And When - We Reached the Bottom

You make some good points, DSB. I myself don't trust the ratings agencies which is why I try to follow credit default swap spreads as a sign of potential trouble.

Also, according to the Bank for International Settlements (BIS), at the end of 2007 just in the OTC derivatives markets there was $596 trillion in outstanding contracts which was 8x the total value of all exchange traded financial contracts.

Until Tom Brown can convincingly explain why there won't be more blowups with derivatives then we should be skeptical that a bottom for the financials has finally occurred.

Financials: How - And When - We Reached the Bottom

Historically, during a major credit crunch the stock market bottoms before the credit markets start to recover which may be another reason to be bullish. (On Wednesday morning I went long IXG which is the iShares global financials ETF but I am ready to sell at any moment).

My question is how much credit derivatives such as credit default swaps (CDSs) are tied to commercial real estate (CRE) prices? I am asking because U.S. CRE prices are having a significant decline.