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Stock Market Gyrations and the Yen Carry Trade

You used a tremendous amout of verbage to articulate what I believe is an exaggerated picture of the threat the mortgage problem is to the future. Not to minumize the damage, I think there has been and is ongoing effective steps to contain the problem. We will have some more failures of institutions whose assets were too poor to find a buyer, but the majority will by giving away equity survive. The liquidity provided to the system is allowing credit worthy borrowers to buy up assets of troubled lenders at fire sale prices without having to sell their assets to generate the necessary funds. That minumizes the spread of the problem. Vic

Staying The Course Amidst This Relative Valuation Reversal

All this baloney about market neutral funds is just that. It reminds me of the economist who were predicting the economy on the basis of sophisticated matematical econometric models. It sounded great and ordinary human beings weren't supposed to question the erudite. As it turns out the predictions were a disaster and no one anymore gives that approach any credibility. We'll see how many of these hedges have successfully established market neutral positions. My guess is that it will turn out to be near zero and the investors in these funds will take a bath. Vic.

U.S. Markets In For Another Lashing

The Fed wasn't directly bailing out the lenders. What it was doing was making loans available to credit worthy investors who were buying the portfolios of the mortgage lenders at firesale prices. The mortgage lenders staved off bankruptcy by giving away equity and the providers of new capital were offered funds so that they could make these investments without having to sell other assets to enjoy the feast. W. Buffett is reputed to be one of the fat cats vulchers who are feeding on their corpses. Vic

Now Entering The Eye of the Market's Hurricane

The next leg of the storm will occurr when those who rushed to buy the stocks of the troubled mortgage lenders learn that the cash infusions that saved them from bankruptcy came at a very dear price and the fundamentals of the past no longer approximate the value of these companies. A second round of losses will follow when these firms are priced based on their new forward earnings potential. Vic

Investor’s Intelligence Survey Shows Highest Bearish Sentiment Since March 2003

All sentiment surveys are uselesss even given their accuracy (which is questionable given the diversity of the population). The typical person is easily intimidated by the media when it is hyping a problem constantly such as the current one of the mortgage lenders. The average man the street who is unable to give it a reasonable context is traumatized. That can provide the wall of worry which can be a positive for the equity market. Buyers are always availble if prices appear attractive and willing sellers are necessary. Vic

There's Just No Need For A Fed Cut

Reducing the Funds rate and injecting reserves into the system allows the Warren Buffett types who have the good credit to buy up the troubled mortgage lenders portfolios at 50 cents on the dollar without having to sell assets of their own to raise the money. That's what is going on now. The otherwise bankrupt lenders are getting their pockets picked by the vulchers who prey on the sick. I'm not saying I feel sorry for them. Some of the lenders are weathering this storm because they weren't leveraged to the hilt. By September the new money will have bolstered the lenders and the Fed will cut rates to prevent triggering more ARM failures because now they will be protecting the new W. Buffett type investors. People who are buying the stocks of these mortgage companies are going to find out that the fundamentals have changed. Vic

Five Reasons Why The Fed Won’t Cut Rates

Number 5 is the clincher. If we don't see some of these hedge funds taking bankruptcy, the whole thing will come back to haunt us sometime later in a more serious way. The mortgage lenders were leveraged to the hilt but the hedge funds doubly compound the risk by using risky mortgages as collateral. If those who play these games and the parties that make it possible aren't wounded in these events the whole economy is threatened. Vic

Boo-yah! Barron's Shorts Cramer

You give a good summary of the high points. I think there is a bit of manipulation going on in the TV program in spite of the claim that Cramer makes that he knows nothing in advance. Some of the calls are too juicy to be believable and seem to be feeding him a line he has ready to speel. I have a cynical outlook toward all these "know it alls" about the stock market's issues and think a truly informed and honest expert doesn't make a case that is impossible to make with any certainty and wouldn't want to cause a neophyte to lose his savings based on an educated guess. His Street.Com holdings are clearly a conflict of interest and CNBC's risky promotion of Cramer is a bit over the top. Vic

The Yen Carry Trade Isn't Dead

I found your article interesting and informative for one who is unfamiliar with currency trading. Given all the press recently to the carry trade I have been curious to understand it better. Can you recomend a book or other publication that would be informative for someone who would want to know just how to participate directly in currency speculation? Could I, for instance, just go directly to a Japanese bank and borrow, say Yen, or would they loan to me dollars that they are holding? The question is, exactly how would I proceed. This is academic of course. Vic

The Yen Carry Trade Isn't Dead

I found your article interesting and informative for one who is unfamiliar with currency trading. Given all the press recently to the carry trade I have been curious to understand it better. Can you recomend a book or other publication that would be informative for someone who would want to know just how to participate directly in currency speculation? Could I, for instance, just go directly to a Japanese bank and borrow, say Yen, or would they loan to me dollars that they are holding? The question is, exactly how would I proceed. This is academic of course. Vic

Why Isn't the SEC Protecting Shareholder Rights and Confidence?

The SEC is ignoring the failure to deliver rules for stock shorting allowing hedge funds to countfeit stocks and pocket the proceeds. Add to that the other items you list and tell me what it is that makes you continue to have respect for the people in charge who are the SEC. It seems to me that's it's rather obvious that it's the Wall St. "Crowd" that they protect, not the public. Anyone want to give me an argument that I'm wrong? Vic

Why Isn't the SEC Protecting Shareholder Rights and Confidence?

The SEC is ignoring the failure to deliver rules for stock shorting allowing hedge funds to countfeit stocks and pocket the proceeds. Add to that the other items you list and tell me what it is that makes you continue to have respect for the people in charge who are the SEC. It seems to me that's it's rather obvious that it's the Wall St. "Crowd" that they protect, not the public. Anyone want to give me an argument that I'm wrong? Vic

A Different Perspective On Ben Stein's "Chicken Little" Analysis

Using the total value of all housing is the wrong context. Most people don't think of their house as an investment, it's their home. The people who are speculating on the hot real estate market and the builders who thought it would go on forever and got caught with a lot of borrowed money in land and unsold homes are only a fraction of the total of home values. The problem, if it is confined to real estate, will be behind us by this time next year. If on the other hand we start seeing hedge funds failing and dumping all sorts of investments to avoid bankruptcy then we've got a problem that will effect everyone and everything and won't be a short term episode. Vic

Using Your Intelligence to Analyze the Markets

Not having ever invested a nickle in the home builders or the big mortgage (banks) I hadn't looked at the balance sheet of any of them. Yesterday I saw the CEO of TMA make his pitch on CNBC so afterwards looked up the financials of it. It was surprising to me that they operate with such a thin margin of capital and yet were paying a husky dividend. This company could have been very sound with a better management, but now it appears to me the only way to avoid bankruptcy is to give away equity to potential lenders. It didn't take a big event to bring this whole episode about. It was simply the weakness that was designed into the vehicles used to create the artificial demand for home ownership. It was like providing new car loans for teen agers to attend high school. They'd like to have them but it's irresopnsible to make it possible. WW

Using Your Intelligence to Analyze the Markets

Not having ever invested a nickle in the home builders or the big mortgage (banks) I hadn't looked at the balance sheet of any of them. Yesterday I saw the CEO of TMA make his pitch on CNBC so afterwards looked up the financials of it. It was surprising to me that they operate with such a thin margin of capital and yet were paying a husky dividend. This company could have been very sound with a better management, but now it appears to me the only way to avoid bankruptcy is to give away equity to potential lenders. It didn't take a big event to bring this whole episode about. It was simply the weakness that was designed into the vehicles used to create the artificial demand for home ownership. It was like providing new car loans for teen agers to attend high school. They'd like to have them but it's irresopnsible to make it possible. WW