Did you ever notice that the word " Mortgagor " (a debtor in a mortgage) is followed in Oxford's dictionary by Mortician? That is but one of the great ironies we now find ourselves in. For the second time there was a great tip off in yesterdays rally that it would fail. It was something I pointed out a while back the unusual SURGE of VIX into a rally when usually it would be receding. It has proven VERY wise to look at this divergence and there are so many who like to kick the VIX around and call it useless ( I count myself in this group last year) but indeed the old index still has some kick left in it. What is happening? It's hard to get a feel for it but we have a real meltdown on our hands. We know this by the public pow wow with Bush last week and then the press conference about other crap today to ask questions about this, Paulson making himself available to Maria yesterday etc. There has been scrambling on behind the scenes the type of scrambling last seen with LTM capital. Ironically the situation just became a whole lot more real and worse today because of the ECB move to inject funds into the system. Quite simply they appear to have panicked. There was a GREAT plan here to stall out this crunch long enough for most funds to get the action off their main books, an unwinding of the unwinding if you will, to achieve that we have been lied to. That's ok, I was expecting that and Ben B well he did a pretty good job at the meeting if you ask me and if you noticed he was stingy at the spigot today. The Fed usually supplies the cash today anyway he just upped it quite a bit it was sneaky and non panicky. Our European friends just wet themselves at the first moment they realized that they did not know what is going on in there OWN banks! ... And indeed this is the real problem these banks have taken into their fold Quant outfits who manipulate leverage and just muck around enough to get themselves in big trouble when the market stops acting as it has been. More volatility well Duh we have been hearing that for so long don't use it now against us!- to mask the impact of 300 point falls-- sure percentage wise it isn't what a 300 point fall was in 87' but still folks it's THREE HUNDRED FREAKIN' POINTS! I'd very much like to have the word " volatility" banned from the airwaves at this point. It's a crash sort of feeling folks I'm not going to lie to you- made all the more scary because it's being managed by this administration. A failed war a stock market blow up a recession and good by George W what a freakin mess. These mortgages that are resetting> well in Europe they must be based off the LIBOR and their LIBOR-- the rate in which banks loan money to one another went up 1 1/2% points OVERNIGHT. Think about that folks! You go to bed with a 5.5% sort of mortgage and wake well over 6%! Now we get the leakage that we have been trying to contain to just the rich people and the hedge funds and now is when the ugly specter of Gov regulation lifts it's head... and that's how crashes are formed. What we need now is time, a whole lot of it- a full month. A month from now Hedge funds, at right about this same time of the month, will report their solvency to there shareholders-- the most likely outcome is a whole swath of trouble including banks and other financial institutions at that time. Then a rate cut. .... Which brings us to the point WHY CAN'T EVERYONE STAY THE HELL OUT OF OUR HOUSING MARKET!!!! We hear nothing but how backwards ass the United States has become both in the manufacturing world and with our lazy dollar... that we are no longer the engine of the world that it's all China and Europe blah blah blah Well why the hell then are they in our freakin' housing market? We need to feel additional pain now because European banks were investing in OUR bad quality loans...don't they have deadbeats of their own over there? Here I crawled out of the sand dune I have been hiding in & rushed home today because these last hours have been so exciting supposedly... and it didn't seem so great to me- in fact it seemed real bad. These rapid advances in the last half hour of 50, 100, points do you really think a human being was making those trades? My god only a super freak like myself buys up until the last second of the day- these are programs going off. Computers talking to each other. I wasn't on the floor today and I haven't checked in yet with anyone who was but this felt to me like an all day sell affair, calm and relentless... like an ocean. Real selling. Anyway we called for back n filling and a sideways market into sept/oct but the back n' fill has been more like rapid reverse strike someone peel out and drive into a huge hole. It's been chaotic and wobbly and we are surly now closer to the big event if there is one out there than ever before.... Roll your eyes folks as I do when they prattle on about the strong economy and earnings strength... we have had great S&P earnings for 5 years without really going anywhere why is that going to change now? Especially with all this fear and loathing. Maybe that last bit will save us there are just so many ways to go short now- these ETF's that are specific to the industry-- like S&P financial short or Retail short, these Rydex funds-- the amazing growth of these funds-- the Rydex Financial short ETF represents 1/2 a billion dollars new money short for god's sake, does this act as a balancing lever somehow preventing the worst outcome?...I've been working on this theory for a while and it's not nearly ready for print but the roll of ETF's both in creating or preventing a big crash might be the REAL BIG story when all the dust settles. Computers are just computers. How quickly we learn to rely on them. Quants out of college with their neatly pressed slacks staring open mouthed at the screen as the computer doesn't know what to do. How could it? You are investing with phantom dollars ,creating indexes filled with air. Nothing is priced to market. >Indeed that will change and in that greater sense the great discounting and living organism that it is the market... could it be in the throws of cleansing itself right now? Of kicking to the dirt a lot of these unregulated hedge funds.. in short doing what the SEC could never do... clean house. This is the BIG hope from my point of view. But we have some of the greatest minds going under and so that's a real warning to us all and especially to you folks in business school... computers are just computers what you do has to make sense in the real world. Morally and monetarily. If all these assets become worthless overnight what does that say about the institutions that have been cultivating and mothering them??... and then not even understanding the danger they were in? It's a new low for corporate governance but the great irony is it IS the regulated banks that look to me to be the real losers here... in other words I'm not worried about the boys and gals at the major brokerages or the bigger Hedge Funds- they are not so levered here as to have have NO counter risk measures... they do, it's these big dumb banks I wonder if they do.... Here's a last thought because I'm rambling but whatever happened to approaching a financial institution and taking out a mortgage with them? That's right surprise folks! Banks have tons of cash and don't need to be farming out these mortgages in extra silly excessive basket products... all that needless risk taking in an EFFORT TO AVOID RISK! Another HUGE irony folks! >This tinkering and repackaging- it started out as a way to disperse risk; However, this but all too quickly became just another high yield scam...it looks like unfortunately, in the big financial picture, more of the same: white folks with too much time on their hands and money in their pocket decided to up and ruin the world. Again. Greed. Pure and Simple. ~ stoney
ETFs draw a record $13.2 bln in weekly inflows Marketwatch - August 10, 2007 2:45 PM ET >> I thought this was interesting. Related Quotes Symbol Last Chg IWM Trade 78.59 +0.90 SPY Trade 145.01 -0.38 Real time quote. SAN FRANCISCO (MarketWatch) -- Some $13.2 billion of net inflow has gone into exchange-traded funds in the U.S. during the past week through Thursday, according to TrimTrabs Investment Research. That represents about 4.2% of all assets held in U.S. stock funds and is the biggest weekly inflow of 2007, according to Vincent Deluard, a TrimTabs analyst. "It's huge, and almost all of it is coming into futures-related ETFs," he added. "That typically comes mainly from hedge funds." The fund with the heaviest inflow was SPDRs (SPY). It took in an estimated $4.6 billion in assets. The next biggest beneficiary was iShares Russell 2000 (IWM), with almost the same inflow. "At these levels, there's no way we're talking about individual trading accounting for so much activity," Deluard said. "This much volume indicates bullish sentiment among the institutional traders. The smart money is clearly betting that the market has bottomed this week." Another $4.3 billion was pulled out of U.S.-based mutual funds in the week. "These are more retail people following performance," Deluard. "So they tend to be much more tied to short-term market dips and improvements." Early in the week, markets rallied, noted Charles Biderman, TrimTabs' chief executive, reporting that stock mutual funds actually generated net inflows at that point. But the situation changed dramatically later in the week. On Thursday, some $5.7 billion in outflows was recorded by the Sausalito, Calif.-based investment research firm. That wiped out the gains from early in the week. "We're still seeing retail investors, who don't have access to the same types of information as institutional investors, reacting to equities' most recent moves," Biderman said. "If markets continue down, as they have been more recently, we'd expect to see more outflows." So far this year, bond funds have been the big winners. Before last week, U.S. bond mutual funds enjoyed a net inflow of $94 billion in 2007. But in the past five trading days, through Thursday, those had turned negative. TrimTabs said weekly totals are around $1.6 billion in outflows. "Already, halfway through the year, we've seen record bond-fund inflows," Deluard said. In the previous annual record period, U.S. bond-mutual-fund inflows were $60 billion in 2006. "So far, that allocation decision hasn't proved to be very smart. The average bond fund is down 2.1% in 2007," Deluard said. International stock funds are also seeing strong inflows. For the year, some $94 billion of net inflows has gone into foreign-focused mutual funds. At the same time, about $17.5 billion has gone into international equity ETFs, according to TrimTabs. In the past week, inflows to international stock mutual funds amounted to $500 million. ETFs had slight outflows. "The smart money is going back into the U.S. stock market," Deluard said. "The activity of smaller investors is still too unclear to call a trend at this point." European stocks are attracting most of the individual investors' attention, he added. "Emerging markets stocks had been more in favor in the past," Deluard said. "They've slowed down since the February sell-off in the marketplace." Emerging markets are still producing relatively decent returns, largely due to the still-slumping dollar, Deluard said. "Institutional investors realize that most of international equities' outpeformance is coming from currency appreciation," he added. "They seem to be channeling more of their assets into the U.S."
It's early but just got my first bottom feeling in. 3:29 Fri. Lets be honest this has now become a test case for the Fed. Rather than ride to the rescue when something actually happens they are pre empting the situation with a flood of money because Europe jumped the gun. What does this mean? There is probably a smoking gun- a big fund or a big bank in trouble and that entity is probably in europe. That's my take. However harrowing this rush to prop up the market by the Fed is and however it plays into poor Ben B's helicopter persona... the simple fact is -if there turns out to be NO smoking gun... Well he may bluff us out of this mess! Bottoms are groped at. Probed and sometimes penetrated viscously. It's tough to gage a bottom some are real "V" like, some are nice N' round. Some are jiggly some are wiggly some are firm and some are some are just plain awesome! If this is one today it's a calm one, it's a placid bottom, a feeling of exhaustion of sellers sort of bottom... those can be good one's. The question is have we had the spike down now and we can shoot out of the gate monday? Or do we need one more scare? Call me stoned but I think we shoot out of the gates Monday unless barron's or the Journal uncovers something massive. ~ stoney
Well I'm feeling a tad bit calmer for the first time in a week or so. This what you don't know stuff is harrowing for investors. I thought this was interesting: Has All The Air Come Out Of The Rumor Mill Favorites? Posted by Eric Savitz Catching up my reading this afternoon, I was perusing a piece from earlier this week by Cowenâs Arnie Berman, who noted that software has been âone of the uglier tech sub-sectorsâ since the marketâs July peaks. He notes that âmany stocks that have long been grist for the private equity rumor mill have taken it on the chin lately.â In particular, he noted the recent declines in shares of Verisign (VRSN), Symantec (SYMC), BEA Systems (BEAS), and Cadence Design Systems (CDNS), along with âperennial data networking also-ranâ 3Com (COMS). And heâs right. Since mid-July, Verisign is down about 14%, Symantec is off 11% and BEA has dropped almost 20%. Cadence is down almost 17% since early June. 3Com is down 26% since late May. Now, Iâm not entirely sure what to make of this, but all five of those stocks are showing green this afternoon. Which bring me to the headline on this post: maybe thatâs an indication that the takeover premium that had inflated many stocks has mostly been eliminated. In todayâs trading: Verisign is up 2 cents at $29.15 Symantec is up 37 cents at $17.86 BEA is up 4 cents at $11.31 Cadence is up 20 cents at $20.17 3com is up 13 cents at $3.54
Look at CHTR if you want to see the takeover premium coming out of a stcok to the point where it can be quantified.
.... The question is have we had the spike down now and we can shoot out of the gate monday? Or do we need one more scare? Call me stoned but I think we shoot out of the gates Monday unless barron's or the Journal uncovers something massive. ~ stoney Well that was last week's question and answers and it looks like Stoney might guide you through another scary period. Today will be crucial not to fade.... Stay tuned... Inflation numbers loom LARGE this week the slightest whiff of Increased inflation will tank us the slightest whiff of receding inflation will ignite the rate cut hop rally! ~ SI
... well here we are 3:00 and it's got that weird feeling again can we put a monster move on into the close? >Things are quiet too quiet if you ask me. I'm leaning towards No. Too much ecomic stuff on the calender this week, I was hoping for a hundred point better day today... Funny how the news ran with the Fed today: "Stocks Move Higher After Banks Add Liquidity." Yea minutes after the opening bell the Fed announced $2 billion in overnight repurchase agreements but that's less than usual. The Fed's "repo" follows a move by the Bank of Japan to put $5 billion into the markets and an addition by the European Central Bank of $65.3 billion; the ECB added more than $200 billion last week. The moves, following similar injections by the Fed last week, appeared to placate Wall Street for now and allowed it to look ahead to a week of fresh economic data. Since Thursday, the Fed has added $62 billion in liquidity. >That's not bailing out anyone that's just insuring banks can get access to funds... it's a bit of a charade but it's working brilliantly so far. Really the Fed took money OUT of the system today which one could interpret as Ben just doesn't see what the big deal is. And I agree. The last time the Fed repurchased as little as $2 billion in one day was on Wednesday, April 18. It made a one-day repo of $1.5 billion on May 10, but that was preceded by a separate one-day repo of $5.0 billion earlier that same day. ... But it also sets us up now for a BIG fall should the Fed have to come back in with a large amount. That to me would signify big trouble and an out of hand situation. So we have drawn a line in the sand today folks whether you realize it or not. It's not getting much pub but the Fed's small response today is being watched by the big time players- it was a subtle signal that it's ok to buy. Now it gets interesting... The GS news is certainly good news but how can you lose so much in half a month? I don't see how we don't get serious regulation out of hedge funds after this. The regulation that follows will have to be watched carefully. Big crashes are often triggered by such events. Events already in the system> the ability to short on a downtick rule being allowed- I don't know, I don't think that's a big problem, but we are all avoiding something big. As the floors have gone 75% computer-driven these computers don't always act right. Some of these furious closes I suspect are entirely computer originated- the first impulse to buy doesn't even come from a human anymore and such events as slow Aug and vol are not modelled in, much less a mortgage debt crisis. Perhaps to the downside too- the computers may be even bigger sissies that us humans, they appear to dump everything labeled within such and such sector indiscriminately- off with the financial's head's! Done. Blip. What are we left with? Well it's tough to avoid the fact that every single person interviewed on the market has said the same thing Big Cap Growth that sells into overseas markets... it's a drum roll. My job is to always take the other side and be contrary.. I'm feeling I can't fight this one. It's a narrow race to the top now folks. A new high with far fewer stocks participating and then the bear emerges <The 18.2% solution.> Keep this important fact in mind. If the Bush tax cuts expire as planned in 2010 the tax rate will reach 19.2% of GDP. Federal tax as a percent of the economy reached 20.09% in 2000 before the great bear. And in 6 recessions of recent past all but one occurred when the Fed Tax exceeded the average of 18.2%.... We are under that average now but creeping up... Also lets not overlook that corporate earnings of 8% quickly become 3% when you factor out currency gains and buybacks on most of these companies... IBM is kind of leading the way, it's interesting they really do represent America, their business structure based on services and software... quite a well run company to think of all the stock I sold at $55 in the 80's!!! It's funny back a just a little bit ago the yield was really spiking on bonds and QUITE a few derivative accounts were stretched and about to blow up at that 5.3% level... all this hysteria and flight to quality has given them time to unwind- I wonder if, in the long run, that blowup would of been even worse for stocks... Back to changes in the system> we have the downticks/short we also have a pilot program ongoing, where a client's whole portfolio can be used as collateral not just the stock in question... around the edges these are small tweaks but taken together can we blame some of this correction on those that control these markets, NYSE, SEC etc.? This pilot program is just being used at 8 firms but it's 8 firms that primarily serve the hedge fund community!... Now huge accounts can borrow much more... it all adds to this 10X leverage mentality that it seems everyone was taking lately. And THAT's precisely what's been broken here! That's good. But in the ripple effect of the blast, small caps are unable to regain their footing and all companies that rely on borrowing and that's quite a few-- their costs are going up and their ability to raise prices into this " global " community they all want sell into... well that's highly questionable. And that's BAD. One last thought: why can't more companies be like the mutual fund Bridgeway? Each year 1/2 of net profits goes to charity. Individuals who work there are allowed to give their own $20,000 last year $8 mil was given away. The CEO John Montgomery limits his own compensation to seven times the lowest paid employee! That's genius, imagine being the coffee boy there I bet he's making $100K! If all of corporate America would use this model we could have a 0% Income Tax on Corporations! Think about that! I've run the numbers in a basic way but 1/2 of Net adds up with big companies like GE and we could expand the charity write off to include municipal works- the bridges and roads we so desperately need to repair and our taxes would come down too. ~ stoney
Couldn't hold that little upside today after the injection...gave most of it away basically in the last portion of the day. ECB claims the markets are "normalizing" but I'm still not convinced yet; there's some shaky ground in there.