The Credit Crisis Financial Stocks Short Journal

ES Chart Daily


Market came back in the close(What a huge surprise)
ES still havent lost that trend line nor the 20MA

 

Looks like Henry Paulson memoir will come out next month('On the Brink: Inside the Race to Stop the Collapse of the Global Financial System'). I might buy this, I have a theory you can get an edge in hugely liquid markets by reading policymakers books. Bernanke's book certainly helped(and still does) me to hold a large position in fed futures, I dont think the marginal fed futures buyer has read his book(People refer to him as a depression expert but I'm not sure people fully understand his position and implications for fed rates). The Greenspan memoir helped quite a lot to understand how central bankers think and how the fed works

Paulson might not came back to the government pretty much ever again but one can get some insights. Maybe I will find out how is the behind the scenes FDIC, or some obscure authority the Treasury has, or how treasury secretaries think. I need to pickup the Robert Rubin memoir too

 

Any luck getting quotes or making trades on short sterllng options through IB?

I also notice that Hendry is loading up on calls on short term Aussie rates. Those curves are pricing in 300BP of tightening in the next 2 years. If rates stay flat he'll do very well. If rates actually do the unthinkable and come down, those calls will increase in value 100 fold.

 

I've found the quotes at
http://futuresource.quote.com/quotes/options.jsp?s=L Z0-EIR&r=L-EIR
the red icon gets the options for each contract. They seem to be offering a bit better odds then eurodollars however I'm sure thats enough for me to give them a shot
-I know much less about the UK economy and the BOE
-They had rates at 5.75% in Nov 2007 and 5%(!) at Sep 4 2008. They dont seem as dovish
-BOE meets every month(instead of 45 days like the fed), they will react faster in case the data improves a lot

It might still be worth giving a small lotery shot just in case. We will see if I find something regarding the RBA

 

Here are the RBA futures and options
http://futuresource.quote.com/quotes/quotes.jsp?s=IB-SFE=1&t=future,index,forex

Even though IB offers free data on the Sydney Futures Exchange I wasnt able to find the symbol for them. And I looked hard, if you know let me know

 

Well turns out the best macro funds have the same trades on as I
http://www.elitetrader.com/vb/showthread.php?s=&threadid=174941

Clarium and Tudor are bearish in US stocks(Although it seems Clarium will express that view buying the USD, I have no idea why they would do that). Apparently Tudor firm skeptical of even 2.3 GDP growth in 2010

Zombie banks:

“Some critical initiatives have been cut short,” Tudor said. “As a result, toxic assets remain on balance sheets and credit growth is likely to be subdued for a long period.”

"Banks are reporting better earnings because they haven’t been forced to account for their losses yet", Clarium’s Harrington said.

“We haven’t fixed the problem,” he said. “We’ve just slowed down the official recognition of it.”

“Despite every effort by government in North America and Europe to avoid deflation,” Horseman wrote, “the current numbers suggest they are losing the battle.”

Horseman, with $4.1 billion under management out of London, was investing in long-term U.S. Treasury bonds. The firm believes interest rates will stay low for longer than the market expects, benefiting the asset class.

Maybe thats even better than shorting stocks. Rosenberg reports that the 10y yield has never bottomed before unemployment peaked, although I would like to take a look at the data.

 

His statement doesnt seem accurate


Since the secular fall in interest rates started in early 80's it has been true that yields dont bottom before the UR. Maybe I should be buying lotery calls on the 10yUST

 

Here's why I dont believe Paulson and Bernanke 'allowed' Lehman to fail like is conventional wisdom
-Bernanke wrote in his book that the failure of a large european(austrian IIRC) bank lead to a series of global runs in 1930 and he laid the blame on that incident the start of the global banking crisis of that period. This guy would save LEH as fast as he could, he didnt need Paulson's approval. The same way he doesnt need the Treasury authorization to implement fed rate cuts. The Fed's board did not approve a loan to LEH because of low quality collateral(IIRC the vote was unanimous). BSC had low quality collateral that the fed thought it was good, it wasn't and they learned from that
-Paulson complained many months before LEH's failure that he didnt had the legal authority to deal with the crisis(therefore it wasnt some 'lame excuse' like Soros claims)
http://www.vanityfair.com/politics/features/2009/10/henry-paulson200910?currentPage=1
-The only authority Paulson had was to use the currency stabilization fund($50b), the hole in Lehmans balance sheet is said to be higher than that. He might also have thought "We will need to go to congress anyway, I can bend the law and use the CSF to bail them out then congress will just rip me again and I dont get the authority"
-LEH had no buyer and Treasury no TARP money

That link is quite interesting, apparently some guy interviewed paulson for a long time but was not allowed to release until paulson got out

 

The Paulson statements after the failure with stuff like 'Moral hazzard is something I dont take lightly' 'I never thought LEH should get taxpayer money' are likely to be lies told just to calm the markets to make it seem "everything is under control, no need to panic". He was afraid of saying "We have no authority to deal with the crisis, all IBs could fail at any moment and we could do nothing". He wanted to give the impression that there was a pilot in the airplane when there was none in order to calm people
Why I think that?Because that interview I posted shows he had a different view before the bankruptcy

 

Speaking of lack of buyers, a big green shoot and ES is getting crushed. ISM mfg quite likely rose due prices received dropping inducing new orders to respond, this national index doesnt report prices received but its what is happening in regional reports. Simply no inventory rebound was reported, they are still being trimmed. It seems there are more inventories being rebuild in economist's forecasts than in the US economy