The weekend has landed

[nymphcaster]

Interesting times.

 

The thing that concerns me, among other items, is that budgets are being cut beyond the original theoretical cuts. And I think those budget cuts last beyond a year and ultimately re-set at a much lower level, especially when housing prices and property taxes re-set in communities. This ia negative cycle. And I don't see is ending prematurely because people are bummed about it and gambling on equity prices as a side-show. Wages and comfort regarding wages directly relate to decisions to purchase property or spend money and the velocity of money. Wages are contracting. These means a negative credit cycle regardless of rates.

[cwd]

Regulators Seize Bank in Washington State

http://online.wsj.com/article/SB124183431681602979.html

 

 

Not much has changed. The not too big to fail banks are still failing.

[cwd]

Interesting times.

 

The thing that concerns me, among other items, is that budgets are being cut beyond the original theoretical cuts. And I think those budget cuts last beyond a year and ultimately re-set at a much lower level, especially when housing prices and property taxes re-set in communities. This ia negative cycle. And I don't see is ending prematurely because people are bummed about it and gambling on equity prices as a side-show. Wages and comfort regarding wages directly relate to decisions to purchase property or spend money and the velocity of money. Wages are contracting. These means a negative credit cycle regardless of rates.

 

 

Nymph, good to see you posting.

[Rationalize]

The divergence between the broad averages and the nadsack is definitely not bullish. I'm trying to stretch my memory, but I don't think that would happen in the first leg of a baby bull.

 

I don't know. Grasping at straws maybe.

Relative weighting of financials on said fraudex. No "stress test" specific bohnar for large nadsack techies.

[Rationalize]

Got some of the WFC secondary at 22,Wrote may 13 calls to lock in the gains when it was trading 24.Will keep almost 2 points.

 

It closed at 28 (who knew?),I left at least 15k on the table by writing the calls :angry: .But not taking chances with the bank stocks.I'm ok as long as WFC closes above 13 in 5 trading days.

 

Free money at op/ex

Would love to know how to "lock in the gains" with covered calls.

[cwd]

A different take on the stress test.

Based on the institutions for which data has been released by the FDIC, it is pretty clear in our latest stress test that the condition of the US banking industry is continuing to deteriorate and that we are still several quarters away from the peak in realized losses for most banks.

 

The key telltale in the Q1 FDIC data is that ROE degradation, not charge-offs, still leads the rising stress evidenced by the IRA Banking Stress Index. Remember that provisions are a leading indicator, while charge-offs lag the credit cycle. Once you see ROE performance improving, meaning a decline in the need to build loss reserves to buffer future losses, and charge-offs are the leading factor in our index, then you’ll be able to test the thesis that the worst is over for US banks and valuations are beginning to stabilize.Big Picture

[mdporter]

Interesting times.

 

The thing that concerns me, among other items, is that budgets are being cut beyond the original theoretical cuts. And I think those budget cuts last beyond a year and ultimately re-set at a much lower level, especially when housing prices and property taxes re-set in communities. This ia negative cycle. And I don't see is ending prematurely because people are bummed about it and gambling on equity prices as a side-show. Wages and comfort regarding wages directly relate to decisions to purchase property or spend money and the velocity of money. Wages are contracting. These means a negative credit cycle regardless of rates.

 

Are you talking about household budgets? Corporate budgets?

[mdporter]

On my drive home tonight from work I thought about one thing:

 

What happens to the economy when the trillions of stimulus end and have to be paid back?

 

These are the question that I am not seeing any answers to:

 

1. How can the money be paid back? With what?

 

2. How does the Fed withdraw all of its crazy credit lines to 2007 levels?

 

3. What happens to the money that the Fed sent overseas? This is the money they refused to discuss with Congress.

 

4. Is it possible that the economy can actually recover in spite of record debt levels?

[joe3pack]

just considering some possibilities. would appreciate it if any stoolies can help me hone some strategies.

 

if the bull is really, really back (please, baby horus, say it ain't so!) from its well-deserved time off, i would expect a retest of SPX 666 is in order.

 

whether we get a touchdown within muay thai range of 666 then bounce up in "boolz and roses" euphoria, maybe even get a third retest as in 2003, or tumble into the balrog-besmogged abyss into the 500s and below, i am prepared. if we go sideways for the next half-year, i am prepared.

 

i am less prepared if we don't even go sideways, id est, if we just keep on climbing. just hang out in cash and prepare to short? i don't even want to schwing (and forcibly daytrade) a long if we break above the SPX 200d--doesn't suit my risk tolerance.

 

and if resistance does move up, will it be the 50-week MA, currently @ 1015 (and declining roughly 10 points/week), which is close enough to the november high of 1008?

 

my tentative strategy is to wait out any breakout above SPX 943 or the 200d. and wait it out until SPX 1000, if i have to. no sense in trying to schwing a short during such a climb, because in the worst case scenario, the cowz might zoom to 1000 with little chance for bearish bets to settle in the green. conversely, any rally could fail within that range, and thereby establish a new resistance--new long trades would go sour. just. like. that.

[Jetlag]

You never know what's going to turn first

 

[Jorma]

Noland

 

As always for the commentary go down the page to the header The Dynamically-Hedged Economy II

 

http://www.prudentbear.com/index.php/credi...ew?art_id=10224

 

 

The system is again rocked by yet another Bubble-related convulsion: today, it’s the self-reinforcing unwind of bearish bets and systemic risk hedges. Washington’s unprecedented measures to intermediate risk and boost marketplace liquidity have spurred a self-reinforcing wave of bearish positions and hedges liquidation. This dynamic has had a major impact in the Credit, equities and, seemingly, more recently in the currency and commodities markets. I would add that this unwinding process tends to generate liquidity throughout the marketplace. And, let’s face it, there is nothing like a big short squeeze to get the animal spirits flowing on the long side. Most will interpret these dynamics bullishly. I would caution that we are witnessing only the latest variant of Acute Monetary Disorder and destabilized markets.

 

The more bearish anal cysts argue that current economic underpinnings do not support surging stock and debt prices. Of course they don’t, but that’s not really the key issue. Rather, the question is whether the return of liquidity and securities market inflation will stoke sufficient confidence (from both spenders and lenders) to spur sustainable economic recovery. Here I must lean heavily on my analytical framework.

 

In the short-run, I have to presume that major financial sector and market developments will work to stimulate the real economy (as they have repeatedly in the past). At the same time, it’s my view that the economy today is unusually susceptible to an artificial and fleeting recovery. The unwind of bearish hedges will at some point have run its course, concluding a period of major artificial liquidity generation. Moreover, I question the sustainability of the Government Finance Bubble (fiscal and monetary) overall.

 

The markets are setting themselves up for disappointment. I would posit that the more energized the markets and economy the greater the amount of Credit issuance that will need to be absorbed by the markets (debt and currency). So far, it is mainly Treasury yields that are rising. Government Finance Bubble dynamics would seem to dictate, however, that agency debt and MBS yields could provide the key to both artificial economic recovery and inevitable disappointment. And I would not expect a sinking dollar to support agency securities or Treasuries.

[Jorma]

and FNM lost $23 billion last quarter but will ask us for only $19 billion. In other government finance news I saw a story about FDIC which I could not understand. Congress passed or is working on a $100 billion "line of credit" for them, that might actually be $500 billion. WTF? Line of credit with who? That is for the bank takeovers and PPIP. Anyway more Noland.

 

This morning Fannie Mae reported a worse-than-expected first quarter loss of $23.2bn. In just three quarters, Fannie has reported losses totaling $77.4bn. No worries, however. Fannie’s debt spreads this week tightened another 12 to 31 bps (down from November’s 159bps) and Fannie MBS spreads narrowed an additional 9 to 83 (down from November’s 232bps). Despite unprecedented losses and massive capital shortfalls, the GSEs have nonetheless become major players in the unfolding Government Finance Bubble. An insolvent Fannie requested an additional $19bn of government assistance.

 

Today from Fannie: “In March, Fannie Mae provided $93.3 billion in liquidity to the market through Net Retained Commitments of $5.4 billion and $87.8 billion in MBS Issuance… March refinance volume increased to $77 billion, nearly twice the refinancing volume reported in February and our largest refinance month since 2003. We expect that our refinance volumes will remain above historical norms in the near future… Fannie Mae began accepting deliveries of refinance mortgage originations under the Making Home Affordable program in April 2009.”

 

Fannie’s “Book of Business” (retained mortgages and MBS guarantees) expanded at a 12.3% rate during March to $3.144 TN (largest increase since February 2008). Fannie MBS guarantees grew at a 15.4% annualized rate during March to $2.640 TN. The $31.4bn increase in guarantees was the largest in 13 months. The company’s “New Business Acquisitions” jumped to $92.8bn from February’s $53.8bn and January’s $28.8bn.

[Jorma]

Tim G explains it all. Note near the end when he says "Our hope is, with these actions today, banks are going to be able to get back to the business of banking." there is some laughing from the audience. The press I suppose.

 

He is talking about the stress test results. The WSJ is reporting and it's being picked up all over that the banks 'negotiated' the totals down about 50%. Some test.

 

I wonder why they would want to do that, go back to the business of banking? GS made $3 billion last quarter and was it BAC that made a billion. Why bother doing normal banking if you can make it trading and with accounting?

 

http://www.politico.com/singletitlevideo.h...tid=22475771001

[Jimbo]

WERE IN THE CHAUNCEY GARDINER PHASE

 

"Who in the media started the "green shoots" nonsense? Comparing the market/economy to a plant is idiotic. Plant's can't lie and hide crap in their balance sheets. laugh.gif "

 

Predictions of concrete statistical recovery have been replaced with broad gardening terminology

[MrHanky]

Would love to know how to "lock in the gains" with covered calls.

They don't want us to "flip" secondaries or IPO's.So the only way to hold them for a bit and still lock in my profits is to sell deep in the money calls for the next expiration.I locked in 2 points of profit on a pretty big chunk of stock with almost no risk to the downside.

 

If you are a constant flipper of the deals offered,they will cut you off from further deals.Just playing it safe in the new "bull market".