Kevin Walmsley's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/304732/comments http://seekingalpha.com/article/173769-christmas-comes-early-key-retailer-cds-equity-relationships?source=feed#comment-764213 764213
I don't doubt there are a lot of people in the mall; I see them too. When you have 5 million more Americans out of work, they'll go somewhere to help pass the time. But that doesn't mean they're opening their wallets.

Today's retail comments were completely different from yesterday's. When the Sachs and the Pacific Sunwear and the Lowe's of the world tell me that they're looking at a very slow fourth quarter, I'll take their word for it.]]> Tue, 17 Nov 2009 15:09:10 -0500
I don't doubt there are a lot of people in the mall; I see them too. When you have 5 million more Americans out of work, they'll go somewhere to help pass the time. But that doesn't mean they're opening their wallets.

Today's retail comments were completely different from yesterday's. When the Sachs and the Pacific Sunwear and the Lowe's of the world tell me that they're looking at a very slow fourth quarter, I'll take their word for it.]]> http://seekingalpha.com/article/164565-is-another-october-surprise-in-the-works?source=feed#comment-702042 702042 Sun, 04 Oct 2009 01:25:43 -0400 http://seekingalpha.com/article/161429-pinning-the-blame-on-the-house-republicans?source=feed#comment-676876 676876
We should have wiped them out, and found real market pricing on the avalanche of crummy paper these crummy banks have on their sheets. Instead we've thrown good money after bad, with the added privilege of getting to pay it back over the next 30 years via higher taxes and lower standards of living. And if the Congressional Republicans tried to stand athwart these developments, then we need more like them, not less.]]> Tue, 15 Sep 2009 01:04:03 -0400
We should have wiped them out, and found real market pricing on the avalanche of crummy paper these crummy banks have on their sheets. Instead we've thrown good money after bad, with the added privilege of getting to pay it back over the next 30 years via higher taxes and lower standards of living. And if the Congressional Republicans tried to stand athwart these developments, then we need more like them, not less.]]> http://seekingalpha.com/article/149252-sentiment-positive-ahead-of-citi-earnings?source=feed#comment-591079 591079
That might be giving C more credit than they deserve. For the past three years, they have been famously clueless about what assets they even carry on their balance sheets, let alone on the many off-sheet vehicles.

Months ago, Congress and the FASB decided it would be prudent to let banks lie to investors, and to themselves, by not recognizing real losses. So, is natural that people are optimistic that they will meet their numbers, just as I could drop 40 pounds in one night if you let me fiddle with the scale.]]> Thu, 16 Jul 2009 17:29:19 -0400
That might be giving C more credit than they deserve. For the past three years, they have been famously clueless about what assets they even carry on their balance sheets, let alone on the many off-sheet vehicles.

Months ago, Congress and the FASB decided it would be prudent to let banks lie to investors, and to themselves, by not recognizing real losses. So, is natural that people are optimistic that they will meet their numbers, just as I could drop 40 pounds in one night if you let me fiddle with the scale.]]> http://seekingalpha.com/article/149252-sentiment-positive-ahead-of-citi-earnings?source=feed#comment-591072 591072 Thu, 16 Jul 2009 17:25:50 -0400 http://seekingalpha.com/article/140694-looks-like-rising-big-trade-bets-on-genworth?source=feed#comment-527280 527280 ]]> Mon, 01 Jun 2009 19:20:04 -0400 ]]> http://seekingalpha.com/article/140718-monday-options-recap?source=feed#comment-527259 527259 Mon, 01 Jun 2009 19:11:10 -0400 http://seekingalpha.com/article/139476-design-a-country-rescue-package-here-comment-competition?source=feed#comment-516998 516998 1. Sell short the country's banks, homebuilders, and natural resources companies
2. Buy interests in credit default swaps, if any are available
3. Remind them that you're doing them a favor by providing liquidity in a market that's about to see it disappear
4. Enjoy the accolades of your investors, who are able to make money despite calamity]]> Mon, 25 May 2009 15:01:46 -0400 1. Sell short the country's banks, homebuilders, and natural resources companies
2. Buy interests in credit default swaps, if any are available
3. Remind them that you're doing them a favor by providing liquidity in a market that's about to see it disappear
4. Enjoy the accolades of your investors, who are able to make money despite calamity]]> http://seekingalpha.com/article/139202-new-jersey-s-pension-crisis-a-canary-in-the-coal-mine?source=feed#comment-515421 515421
Either way, people are going to be working longer than they had planned. In the first case because their benefits in inflation-adjusted dollars don't go nearly as far, in the second because their benefits are slashed. And considering that Social Security and pension indexing haven't come anywhere close to increases in longevity, that's a good thing. You shouldn't be able to retire at 55 on my nickel anyhow.]]> Sat, 23 May 2009 11:01:52 -0400
Either way, people are going to be working longer than they had planned. In the first case because their benefits in inflation-adjusted dollars don't go nearly as far, in the second because their benefits are slashed. And considering that Social Security and pension indexing haven't come anywhere close to increases in longevity, that's a good thing. You shouldn't be able to retire at 55 on my nickel anyhow.]]> http://seekingalpha.com/article/139209-update-on-u-s-debt-and-fed-assets?source=feed#comment-515417 515417 Sat, 23 May 2009 10:51:31 -0400 http://seekingalpha.com/article/138010-deal-for-world-s-largest-offshore-wind-farm-finalized?source=feed#comment-510716 510716
Hopefully twenty years from NOW, we'll be able to look back and realize how foolish it all was.]]> Wed, 20 May 2009 00:45:09 -0400
Hopefully twenty years from NOW, we'll be able to look back and realize how foolish it all was.]]> http://seekingalpha.com/article/133309-fas-faz-dangerously-crossing-the-ultimate-pairs-trade?source=feed#comment-479314 479314
But I'll make the case that the 8-handle on both FAZ and FAS are irrelevant. Taking a block position in each will result in the same amount of cash on both sides, but you can do that irrespective of relative price: just buy more of the cheaper ETF. So what has the YTD numbers looked like? Awful. FAS year to date is down 78.3%; FAZ down 42%. Just because they are now at price parity--whatever that is for instruments such as these--simply doesn't matter.]]> Mon, 27 Apr 2009 12:21:35 -0400
But I'll make the case that the 8-handle on both FAZ and FAS are irrelevant. Taking a block position in each will result in the same amount of cash on both sides, but you can do that irrespective of relative price: just buy more of the cheaper ETF. So what has the YTD numbers looked like? Awful. FAS year to date is down 78.3%; FAZ down 42%. Just because they are now at price parity--whatever that is for instruments such as these--simply doesn't matter.]]> http://seekingalpha.com/article/133325-options-trader-monday-outlook-global-pandemic-edition?source=feed#comment-479274 479274
The market has rallied strongly over past weeks on news that the banks are now able to lie about their financial position, with the blessing of regulators and the accounting community. Now GM surges on news that the common shareholder will experience massive dilution, courtesy of secret meetings between General Motors' management, union representatives, and the Treasury Department.

It's time to start using the term "irrational exuberance" again. Or, "certifiably insane exuberance". Maybe.]]> Mon, 27 Apr 2009 12:01:15 -0400
The market has rallied strongly over past weeks on news that the banks are now able to lie about their financial position, with the blessing of regulators and the accounting community. Now GM surges on news that the common shareholder will experience massive dilution, courtesy of secret meetings between General Motors' management, union representatives, and the Treasury Department.

It's time to start using the term "irrational exuberance" again. Or, "certifiably insane exuberance". Maybe.]]> http://seekingalpha.com/article/130412-book-review-financial-reckoning-day-by-william-bonner-with-addison-wiggin?source=feed#comment-458933 458933 Fri, 10 Apr 2009 11:29:57 -0400 http://seekingalpha.com/article/127372-geithner-s-doomed-bailout-plan?source=feed#comment-436569 436569
It's not that the bids for this toxic issuance is far below what banks are looking for. It's that there are no bids at all. Not at 50, not at 30, not at 25. For the government to swoop in and say they're going to be kiting more checks for the difference between the bid and the ask presumes that there's a bid in the first place. And there isn't. ]]> Mon, 23 Mar 2009 10:57:49 -0400
It's not that the bids for this toxic issuance is far below what banks are looking for. It's that there are no bids at all. Not at 50, not at 30, not at 25. For the government to swoop in and say they're going to be kiting more checks for the difference between the bid and the ask presumes that there's a bid in the first place. And there isn't. ]]> http://seekingalpha.com/article/126941-bank-stocks-rally-sustainable-or-bear-market-blip?source=feed#comment-433220 433220 Fri, 20 Mar 2009 05:38:34 -0400 http://seekingalpha.com/news/market_currents/post/20254?source=feed#comment-433217 433217 Fri, 20 Mar 2009 05:37:34 -0400 http://seekingalpha.com/article/126666-the-fed-must-be-crazy?source=feed#comment-431233 431233
It's hard to see just how buying $300 bn worth of Treasuries will help "free up" logjammed credit markets. Treasuries are the most liquid securities on earth; banks are holding them on their balance sheets not because they can't unload them, but rather it's more logical to park their cash there instead of lending it out. Now the Fed has just made, in one stroke, Treasuries much more valuable, so why should banks sell them?

The Fed has been outstanding in telegraphing, in advance, where the problems in the economy are. There must be great concern that the Treasury market will be the next to fall. Given the fact that Treasury buyers from China, Saudi, and Japan won't be having any trade dollars to recycle back into buying US assets, the Fed itself is having to step up.

Keep selling.]]> Wed, 18 Mar 2009 16:16:36 -0400
It's hard to see just how buying $300 bn worth of Treasuries will help "free up" logjammed credit markets. Treasuries are the most liquid securities on earth; banks are holding them on their balance sheets not because they can't unload them, but rather it's more logical to park their cash there instead of lending it out. Now the Fed has just made, in one stroke, Treasuries much more valuable, so why should banks sell them?

The Fed has been outstanding in telegraphing, in advance, where the problems in the economy are. There must be great concern that the Treasury market will be the next to fall. Given the fact that Treasury buyers from China, Saudi, and Japan won't be having any trade dollars to recycle back into buying US assets, the Fed itself is having to step up.

Keep selling.]]> http://seekingalpha.com/article/124692-taking-advantage-of-leveraged-etfs-with-a-risky-arbitrage-strategy?source=feed#comment-418726 418726 Mon, 09 Mar 2009 00:39:49 -0400 http://seekingalpha.com/article/124782-2x-and-3x-etfs-are-not-the-best-long-term-hedges?source=feed#comment-418721 418721 I noticed this last year--I use a lot of inverse ETF's in my portfolio management, and noticed that the levered emerging market was actually underperforming the LONG ETF, even though the long ETF was down over 40% at the time. That's when I wised up and saw them for what they were--very good trading and hedging vehicles for the short-term, but terrible for a long-term holding.


On Mar 08 09:40 PM Douglas wrote:

> Can you give an example of an ETF where this value destruction occurs?
> I've tracked multiple indexes versus both ultra and ultrshorts and
> while yes, they do not track exactly on par with the index, the share
> price value increases over a long holding period? What am I missing?
>
> Thanks]]> Mon, 09 Mar 2009 00:34:49 -0400 I noticed this last year--I use a lot of inverse ETF's in my portfolio management, and noticed that the levered emerging market was actually underperforming the LONG ETF, even though the long ETF was down over 40% at the time. That's when I wised up and saw them for what they were--very good trading and hedging vehicles for the short-term, but terrible for a long-term holding.


On Mar 08 09:40 PM Douglas wrote:

> Can you give an example of an ETF where this value destruction occurs?
> I've tracked multiple indexes versus both ultra and ultrshorts and
> while yes, they do not track exactly on par with the index, the share
> price value increases over a long holding period? What am I missing?
>
> Thanks]]> http://seekingalpha.com/article/124623-berkshire-hathaway-proof-that-the-cds-market-is-irrational?source=feed#comment-418714 418714

On Mar 08 08:39 AM Jimmy Lathrop wrote:
A heavy volume of CDS bets
> against a company doesn't drive the share price down, poor performance
> of a company drives a stock down. Don't start crying about how CDS
> killed the mega-banks, we all know they are actually insolvent and
> it is only through accounting sleigh of hand and politicians needs
> for jobs post-office that keep them lurching forward.]]> Mon, 09 Mar 2009 00:22:45 -0400

On Mar 08 08:39 AM Jimmy Lathrop wrote:
A heavy volume of CDS bets
> against a company doesn't drive the share price down, poor performance
> of a company drives a stock down. Don't start crying about how CDS
> killed the mega-banks, we all know they are actually insolvent and
> it is only through accounting sleigh of hand and politicians needs
> for jobs post-office that keep them lurching forward.]]> http://seekingalpha.com/article/124623-berkshire-hathaway-proof-that-the-cds-market-is-irrational?source=feed#comment-418711 418711

On Mar 07 06:19 PM korba wrote:

> I don't have a complete undestanding of CDS. But, from the comments
> here, I sense that most people, not deeply involved in financials,
> are having a tough time understanding this. I treat this is as a
> negative for CDS.
>
> Recent finanical crisis are leading me to believe in the following:
> a financial transaction is reasonable as long as it can be handled
> by common public. If you can imagine implementing in a small village
> with people understanding it fully, it may be a good financial idea.
>
>
> CDS don't seem that way. They may look like innovative ideas initially,
> but in general, they seem like financial tricks.]]> Mon, 09 Mar 2009 00:19:07 -0400

On Mar 07 06:19 PM korba wrote:

> I don't have a complete undestanding of CDS. But, from the comments
> here, I sense that most people, not deeply involved in financials,
> are having a tough time understanding this. I treat this is as a
> negative for CDS.
>
> Recent finanical crisis are leading me to believe in the following:
> a financial transaction is reasonable as long as it can be handled
> by common public. If you can imagine implementing in a small village
> with people understanding it fully, it may be a good financial idea.
>
>
> CDS don't seem that way. They may look like innovative ideas initially,
> but in general, they seem like financial tricks.]]> http://seekingalpha.com/article/124517-silver-backwardation-prices-about-to-soar?source=feed#comment-418705 418705
I'll admit that silver has an investment utility as a precious metal that crude doesn't, but typically backwardation across the futures of any commoditiy is a precursor to a sell-off, not a rally. Be careful.]]> Mon, 09 Mar 2009 00:12:04 -0400
I'll admit that silver has an investment utility as a precious metal that crude doesn't, but typically backwardation across the futures of any commoditiy is a precursor to a sell-off, not a rally. Be careful.]]> http://seekingalpha.com/article/124623-berkshire-hathaway-proof-that-the-cds-market-is-irrational?source=feed#comment-418701 418701
It's amusing to watch posters who've only learned of credit default swaps in the past few months now militating for the government shutting them down. I presume they wouldn't seek to ban homeowners' insurance simply because premiums took off. What WOULD happen in the event of shutting down the CDS market is an immediate rise in the yields in the bonds of the issuing companies, as well as municipal governments. If you can't protect your fixed-income investment against default risk, you'll demand substantially higher yields. And higher yields raise the cost of capital to these companies, increasing the likelihood of their default.

The Law of Unintended Consequences, and all that. Be careful what you ask for. Maybe if BRK CDS premiums are spiking, the market is trying to tell you something that merely doing away with CDS's isn't likely to fix.]]> Mon, 09 Mar 2009 00:06:00 -0400
It's amusing to watch posters who've only learned of credit default swaps in the past few months now militating for the government shutting them down. I presume they wouldn't seek to ban homeowners' insurance simply because premiums took off. What WOULD happen in the event of shutting down the CDS market is an immediate rise in the yields in the bonds of the issuing companies, as well as municipal governments. If you can't protect your fixed-income investment against default risk, you'll demand substantially higher yields. And higher yields raise the cost of capital to these companies, increasing the likelihood of their default.

The Law of Unintended Consequences, and all that. Be careful what you ask for. Maybe if BRK CDS premiums are spiking, the market is trying to tell you something that merely doing away with CDS's isn't likely to fix.]]> http://seekingalpha.com/article/118537-meredith-whitney-needs-some-historical-perspective?source=feed#comment-376088 376088
Easy to say they're going to cap comp at $500K for all the TARP banks. But this is just indicative of what happens when you crawl into bed with the federal government in the first place. They paint with a broad brush. The American taxpayer is now a preferred shareholder in these companies. Do we really want their best managers to head to better deals, and take all of their clients and assets with them?

Seems so. How that's good for us is less obvious. As usual, the Law of Unintended Consequences will prevail.]]> Wed, 04 Feb 2009 16:50:58 -0500
Easy to say they're going to cap comp at $500K for all the TARP banks. But this is just indicative of what happens when you crawl into bed with the federal government in the first place. They paint with a broad brush. The American taxpayer is now a preferred shareholder in these companies. Do we really want their best managers to head to better deals, and take all of their clients and assets with them?

Seems so. How that's good for us is less obvious. As usual, the Law of Unintended Consequences will prevail.]]> http://seekingalpha.com/article/115686-geithner-s-baptism-of-fire?source=feed#comment-361931 361931
Halcon is right. Were he a Republican, his confirmation would be DOA. But why let something as silly and petty as refusing to pay taxes for years derail someone's ambition to run Treasury? Is it possible that this might not be a sign, that he isn't the guy for the job?

Keep selling short.]]> Wed, 21 Jan 2009 11:13:08 -0500
Halcon is right. Were he a Republican, his confirmation would be DOA. But why let something as silly and petty as refusing to pay taxes for years derail someone's ambition to run Treasury? Is it possible that this might not be a sign, that he isn't the guy for the job?

Keep selling short.]]> http://seekingalpha.com/article/115246-foreign-governments-dumping-u-s-assets?source=feed#comment-360299 360299

On Jan 19 02:22 PM Whippet wrote:

> To avoid the leverage trap on TBT, you can buy at the money (115
> strike) LEAPs puts for Jan 2011 on TLT. For about $23.50, your breakeven
> would be at $91.50 but I would sell them long before then if you
> really think the Treasury bubble will burst within the next 6-12
> months. I'm preferring to go long TBT and sell one-month calls on
> it (a few dollars out of the money) to hedge risk. The leverage
> trap doesn't kill you too bad with this one because its volatility
> is relatively low, and selling calls makes up for this.]]> Mon, 19 Jan 2009 18:32:04 -0500

On Jan 19 02:22 PM Whippet wrote:

> To avoid the leverage trap on TBT, you can buy at the money (115
> strike) LEAPs puts for Jan 2011 on TLT. For about $23.50, your breakeven
> would be at $91.50 but I would sell them long before then if you
> really think the Treasury bubble will burst within the next 6-12
> months. I'm preferring to go long TBT and sell one-month calls on
> it (a few dollars out of the money) to hedge risk. The leverage
> trap doesn't kill you too bad with this one because its volatility
> is relatively low, and selling calls makes up for this.]]> http://seekingalpha.com/article/115246-foreign-governments-dumping-u-s-assets?source=feed#comment-360294 360294
Consider this: spendthrift Middle Eastern governments, along with Russia and China, are accustomed to humming along on a giant sea of exports to America, and using that cash for their own spending, and to support our capital account.
Now, the prices they commanded for crude have collapsed, the Chinese exporters are getting murdered, and the flow of green is drying up. They've now turned to selling dollar-denominated instruments not because of their concerns of US creditworthiness, but because they represent the one asset they do have that can be turned into spendable cash in a big hurry.
Just my take. It would be interesting to see where, specifically, the foreign selling is coming from.]]> Mon, 19 Jan 2009 18:27:37 -0500
Consider this: spendthrift Middle Eastern governments, along with Russia and China, are accustomed to humming along on a giant sea of exports to America, and using that cash for their own spending, and to support our capital account.
Now, the prices they commanded for crude have collapsed, the Chinese exporters are getting murdered, and the flow of green is drying up. They've now turned to selling dollar-denominated instruments not because of their concerns of US creditworthiness, but because they represent the one asset they do have that can be turned into spendable cash in a big hurry.
Just my take. It would be interesting to see where, specifically, the foreign selling is coming from.]]> http://seekingalpha.com/article/114995-what-will-happen-to-all-that-money-the-government-s-making?source=feed#comment-356977 356977
Private investors are mirroring what millions of households are: cash is king. Paying down debt is paramount, and consumption is a luxury we can no longer afford, while the asset side of everyone's balance sheets are being annihilated. As inconvenient as that fact is to most bulls, the trend is undeniable.]]> Thu, 15 Jan 2009 17:02:07 -0500
Private investors are mirroring what millions of households are: cash is king. Paying down debt is paramount, and consumption is a luxury we can no longer afford, while the asset side of everyone's balance sheets are being annihilated. As inconvenient as that fact is to most bulls, the trend is undeniable.]]> http://seekingalpha.com/article/114983-where-citigroup-went-wrong?source=feed#comment-356968 356968
Citigroup went wrong when it embarked on a strategy to become "too big to fail". By doing so, it became too big to succeed. The Titanic sank because no ship should have been sailing at full speed through iceberg-choked oceans. It did NOT sink because the wrong captain was sitting in the chair.]]> Thu, 15 Jan 2009 16:54:48 -0500
Citigroup went wrong when it embarked on a strategy to become "too big to fail". By doing so, it became too big to succeed. The Titanic sank because no ship should have been sailing at full speed through iceberg-choked oceans. It did NOT sink because the wrong captain was sitting in the chair.]]>