Stimpy

Liberals and Conservatives Agree: Proposed Oversight Bill Will Make Things Worse

It is worse than that even.

Visit losses on bondholders and creditors OF ANY TYPE and bank credit will seize up again.

LIBOR OIS will go back to the 500BP March wides.

Put that in your "V shaped recovery" pipe and smoke it...

Why Too-Big-to-Fail Shouldn't Be Codified

Well said, but the single biggest problem this legislation creates is that it contemplates visiting losses on creditors outside the normal BK proceedures.

Once you give the Gov't the ability to change Senior/Sub structures(like Chrysler) in banks they WILL STOP LENDING TO EACH OTHER AT 1/2% IN THE LIBOR MARKETS!

Is Saving Really for Suckers?

The lesson of the last 50 years of financial history in this country is that saving of any kind is fa suckaas.

Buy that big screen, rent that beachouse and put the rest in your nose.

The only people who make money in the markets are the guys who WORK in the markets.

The Secret Paulson-Goldman Meeting

Nothing to see here folks, move along

When Will the Money Printing Cease?

You are making more complicated than you need to.

remember 3 things:

1. Financial asset prices are not included in the measures of inflation, and (by extension):

2. Inflation hurts poor people.
Deflation hurts rich people. And lastly,

3. Democracy is another word for Intergeneratinal Transfer.

Can the Market Stay Irrational Longer than the Fed Can Stay Solvent?

Don't make the mistake of conflating the ABX indexes with the value of the securities they derivitize. The notional price of the ABX does not capture the pass through nature of the MBS. Using an extreme example, assume the MBS has repaid 75% of principal (current factor is now 25) at par and, as a result, the total pool losses are now concentrated (even more so with the foreclosure process clogged and the moratorium in place) in the remaining 25% of original balance. The price of the ABX index would reflect that concentration (almost zero for down-stack tranches) but would NOT be an accurate reflection of the life of loan cash flow returns to the holders of the securities on which the ABX is based.

There are also myriad technicals that overstate the losses given the almost pure hedge-fund short side participation in these "securities."

That is not to suggest that there are not meaningful losses in MBS -land regardless of borrower credit.

The effect on the banking system is just not as knee-jerk as it seems.

One lesson of the meltdown that may well emerge over time is that, what an asset is worth--even what the cash flows are--may be less importanat than YOUR ABILITY TO FINANCE THAT ASSET COME WHAT MAY.

Do banks have balance sheet losses they are sitting on?

Certainly.

The real question should be what NEW intermediation model we replace the failed non-bank securitization approach with in the years to come as the FED re-privatises the credit markets.

If it is, as I suspect, a handful of banks that are formally granted "too-big-to-fail" status in the form of a utility-model monopoly on credit intermediation; YOU DO NOT WANT TO BE SHORT THESE INSTITUTIONS--regardless of their current balance sheet problems.

Regulatory Reform: The New Geithner Plan

We are on a path towards a utility model of banking. Banks will emerge (as credit is re-privatised) as the central intermediary structure in our economy, replacing the non-bank securitizing model.

Banks will continue to use securitization (more of a covered bond model with clear, formal reps and warranties) as a balance-sheet optimization tool.

We will see a (Fed and Treasury sanctioned) evolution towards 5-10 large banks with virtually total market share.

These banks will be almost beyond profitable--in a very low risk sense.

The economies of scale they will enjoy will allow spread lending to sustain profits WITHOUT excessive leverage.

Credit velocity in the general economy will suffer (relative to the 2006 orgy-years) as a result, making equities of all kinds a less favorable asset class.

Banks will be the one exception; in a sense they will be taxing the rest of the economy for many years to come.

These regulations make much of this both clear and inevitable.

Buy the biggest banks and avoid all other stocks over tyhe medium to long term.

TED Spread's Low Levels Reflects Confidence in Counterparty Risk

BS

The TED spread measures nothing these days. The Government has socialized the credit markets with 24T in giveaways and guarantees.

All TED measures is the ongoing arb.

When credit is re-privatised (if) THEN spreads will matter again.

Proposal for Fed to Become the Next AIG

I noticed that as well, Phil.

It doesn't mean what is being suggested, at least on the surface.

What it DOES show is an explosion of derivative activity (equity and credit) starting in Sept of 2007 concentrated almost entirely among US and foreign depository institutions (see columns 19 and 21).

While this is not a "smoking gun" in the sense Tyler is suggesting (the data specifically excludes direct Gov't and FED holdings which are accounted for elsewhere at the Dept of Commerce filings), it is not out of the realm of possibility that it is happening anyway--though less transparently.

First of all, FED intervention at this point in the crisis makes TOTAL SENSE.

If things were as bad as we have been led to believe, why would ANY form of emergency (13-3type ) intervention be left off the table as a stabilization tool?

Is there a more effective/effcient "lever" of public confidence in the sytem than strategic credit spreads when Quantitative Easing becomes the last line of defense and the Mongols are at the door?

(hint: only the Dow Jones)

What the data does seem to suggest is that, during a period of massive de-risking in the derivatives markets (when counterparty risk created a global seize-up) depository institutions (who deal with the FED) managed to ramp up hedges using synthetics to offload balance sheet risk to SOMEONE.

Who would be taking the other side of these trades when credit became a one-way street in the winter of 2007?

If it was the FED or the Treasury, how would a synthetic long position (insurance sold) be accounted for? Would it even need to be?

Remember AIG didn't need to show any positions either until their own counterparty risk forced a mark.

If the Government was the seller, would any one question the counterparty risk?

PS: Anyone who doubts FOR ONE SECOND that the Government could hide market inetrvention for years should spend 5 minutes on the Treasury TIC website.

Jackson Pollack couldn't have done better.








On Aug 22 11:04 AM Philman wrote:

> Why do you believe that the referenced document reflects Federal
> Reserve holdings? The guide to these numbers describes them as follows:
>
>
> "The Treasury International Capital (seekingalpha.com/symbo...)
> reporting system collects data for the United States on cross-border
> portfolio investment flows and positions between U.S. residents (including
> U.S.-based branches of firms headquartered in other countries) and
> foreign residents (including offshore branches of U.S. firms)."<br/>
>
> How does that convert to the Federal Reserve creating derivatives?
> If I am not seeing something here, please advise.

Big Finance vs. Consumer Protection: Partisan Politics Sheds Some Light

WHO RUN BARTERTOWN??????

FDIC Guaranteed Notes Thaw Credit Markets

But how can they become obsolete? You can't "unbreak" a dish. Sure, the FED can let these programs expire as the market remains convinced that, if necessary, the FED will put them back in place. Isn't that just a continuation of the guarantee?

The ONLY question for investors right now should be: what do the credit markets look like after the smoke clears.

If they are truly private, risk will price correctly and stability is possible.

If they reamain quasi public (with or without balances outstanding in the TGLP, TALF, CPLF etc) , risk is mispriced and the system will continue to crash over and over.

Conference Board Indicators: Recession Likely Over, Recovery Has Begun

Good news: "Recovery has begun!!!"

Bad news: It will be 1% growth for decades. And at 1% growth, much of the S&P doesn't generate enough cash to pay it's debts...

Six Signs Economy Is Turning the Corner

great data, wrong conclusion

Goldman Sachs Still One of the Strongest in Its Industry

Would you count Stephan Friedman as an "insider," Tom?
"Some sort of conspiracy theory" indeed.

Goldman Sachs Still One of the Strongest in Its Industry

Goldman is no longer a Company that can be researched or recommended in any traditional sense.

There are clearly ties to the Government that are not understood or well articulated.

While it is tempting to believe this makes Goldman even more attractive, the reverse is probably just as true--what you don't know can REALLY hurt you when the pitchforks come out and the towns-people are at the gates wanting answers.

This aside, there aplenty of reasons to question the earnings power of this Company given the sea-change in financial-land, not the least of which is genuine concern about anti-trust issues down the road.

If you like the conditions that would take Goldman higher (and it is already expensive), Morgan or others would be cheaper, and mpre importantly, SAFER ways to play it.