Bear market is here?? (worst than 87 crash)

Discussion in 'Wall St. News' started by a529612, Jul 27, 2007.

  1. hhahahah..
     
    #31     Jul 27, 2007
  2. "The sky is falling......The sky is falling......"


    Amazing what a simple market correction will do to chicken littles who don't trade for a living.

    This move down was much expected and is a set up to move equity markets to all time historic highs. The fed isn't going to raise rates and M3 is going to keep the markets floating higher.

    In the meanwhile, all the chicken littles can keep on short selling and screaming "The sky is falling......The sky is falling......"
     
    #32     Jul 27, 2007
  3. According to one study, the market (IOW, the influential players or "one percenters") does what damages the most.

    So, if the majority of participants were conditioned to buy on every dip for four years....
     
    #33     Jul 27, 2007
  4. Brilliant and intelligent reasoning - my hats off to you.

    Unfortunately, you are coming from a rational point of view, which means that you are expecting others to behave rationally too.

    Nonetheless, my hats off to you....
     
    #34     Jul 27, 2007
  5. toshiba

    toshiba

    This is just the beginning of the real bullmarket.
     
    #35     Jul 27, 2007
  6. thanks.

    but consider this.

    -lets say total subprime outstanding debt is 3 trillion.

    -lets assume 100% of all subprime debt bought at the top (likely not true) with 0% down (not true as well) cash collateral.

    -lets assume 30% default rate. lets also assume 70% collection rate (ie on $100k home, bank collects $70k).


    3.0 * .3 * .3 = 270 billion in total losses in all of 3 trillion in subprime tranches. That means real risk is 10c on the dollar for the entire batch - in other words, 90c on dollar would be appropriate price for this debt, not 40c. 1000bp appropriate cdx value.

    Likely the real liabilities will be less. Lets say more realistically there is a 15% default rate on all of this debt, collected at a 20% discount to purchase price (assuming not everyone in the subprime bought the perfect top, and there is a little cash collateral in these loans).

    Thats:

    3.0 x .15 * .20 = 90 billion $ worth of risk, or 300 basis points of appropriate risk premium.


    Boy if GS is shorting all those CDXs right now... they will be sitting on a goldmine.

    Any smart hedge fund is buying this debt underpriced by 5000-5700 basis points !!!!!

    what a killing it will be.
     
    #36     Jul 27, 2007
  7. The market goes up hard and fast and people scream "it's a bull market, it's a bull market". In contrast, when it goes down hard, "the bear market is here, the bear market is here". Meanwhile, most of the traders, aka lemmings are getting chopped and stopped to death.

    It's never obvious, never, which is exactly why most forecasters look like fools when calling tops and bottoms.

    ....and if they get it right ? You know what, they had a 50% chance to do so :)
     
    #37     Jul 27, 2007
  8. Trouble is they mixed the good with the bad as CDOs and hocked it all off supposedly with "excellent" subprime ratings. Now the CDO's are turning to S H I T and the bankers can't work out which are good and bad therefore must all be bad so price it accordingly.

    If a risk free bond is currently 5% what should a "risky" bond be priced at?

    A=5%

    B=6%

    C=8%

    D=infinity as it is worthless

    Never mind about the risk as we have CDO insurance and other derivatives to protect the CDO holders....

    Did you see the treasury 10 year collapse (yield) yesterday, the only other event that could do that in one day would be a 9/11 equivalent. The move wasn't your mom and pop at work....big boys have the fear.....which by the way cannot be programmed into an algorithmic black box. Black Box doesn't see, smell, or hear fear! :)
     
    #38     Jul 27, 2007
  9. Boy, guys like you are the real reason I still like to throw a glance or two to ET these days.

    I don't feel qualified enough in my current drunk state to comment your post right now´, but I'll do so when I'm sober.

    Keep up the brilliant work :cool:

    Regards from northern europe
     
    #39     Jul 27, 2007
  10. So much great input here...
    I haven't found my final opinion yet, but thank you so much for writing that thoughtful post :)

     
    #40     Jul 27, 2007