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1200 Points of Light For Giving Tanks


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Either this is support or I close my position....

What looks like support on a leveraged fund may not correspond with real support on the underlying, where most of the eyeballs are.

 

Leveraged funds trend lower over time compared with their underlyings, and volatile markets accelerate the slippage.

 

FWIW I quit charting the leveraged funds and just use the charts of the underlyings instead.

 

Having said that, SDS could be the right move, I dunno. Went flat to see what Friday brings.

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Occurs to me that last comment may sound bizarre to some. So, assume SSO (2x SPX) and SDS (-2x SPX) both start at 100.

 

Assume SPX goes up 25% one day, and down 20% the next, for 0 net change.

 

SSO goes up 50% to 150, and down 40% to 90.

SDS goes down 50% to 50, and up 40% to 70.

 

Now assume the opposite, that SPX goes down 20% one day, and up 25% the next, for 0 net change.

 

SSO goes down 40% to 60, and up 50% to 90.

SDS goes up 40% to 140, and down 50% to 70.

 

Obviously, it's worse with 3x funds Wild BGU & Crazy BGZ.

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What do you think about it?

It's official: the Fed is monetizing government debt

http://www.newsneconomics.com/2008/11/its-...monetizing.html

 

Because a blogger said so! It must be true!

 

Please, please, please. Please tell me that you are not THAT NAIVE. PLEASE!

 

I cover this stuff in depth every day. Until the data is in, we just won't know how the Fed will fund this. I'd prefer to wait and see what the data says than to automatically presume that these purchases will be funded by outright monetization. Virtually everyone is saying that this means that the Fed is monetizing or will monetize. I suspect that the Fed may have no choice but to do so, but if they have more excess reserves coming in to their deposit accounts, they may not need to.

 

There are also a couple of factual misstatements in the blogpost. GSE debt is not government debt. Therefore it would not be monetization of Treasuries. There's some other fuzzy logic in there that I don't quite get.

 

About what you'd expect from a self avowed conservative :lol: :lol: :lol:.

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Finally got a close over 860, and crude over 54....VIX in freefall airgap zone on hourly chart..... looking more likely that IT trading bottom in...

 

as long as 855-860 area holds now on downside, will be buying dips....

I'm expecting S&P 666 on Inaugeration Day, followed by a sharp false hope bounce back to 799 one laSSt time before a slow grind down below 200 by early 2010.

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UNINTENDED CONSEQUENCES -- This post is important

 

One of the consequences of the "CRASH" in the high-yield debt market is that corporate treasurers have finally woken up and realized that they can tender for their debt from desperate institutional holders for pennies on the dollar.

 

This can provide a TREMENDOUS BENEFIT for companies to recapitalize the firm by extinguishing debt and thus delevering the firm.

 

Examples are beginning to pop up all over the place....Metaldyne, Station Casinos, Level 3 Communications, US Frieghtways, etc etc etc

 

The economic benefit of this action may be substantial for some or many firms.

 

An example may be helpful....

 

Say Company XYZ has $100,000,000 of 8.75% debt due in 2016 now trading at 20 cents on the dollar. Desperate institutional holders may be happy to GTFON at say 25 cents on the dollar. The company would typically have an IB contact large holders and solicit their interest first before making the tender.

 

Thus the company will go out and issue new debt with a $25,000,000 face or use current cash if available or tap a line of credit for the "refi"

 

The result from an accounting point of view is a $75,000,000 windfall to the firm because they retired $100,000,000 using $25,000,000.

 

Look for this trend to really take off and for many many firms to reap HUGE benefits as a result.

 

This has the potential to be more significant than any of the various alphabet Treasury/Fed crap done to date.

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