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#16 phatbubble

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Posted 21 September 2009 - 08:17 PM

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Quod Severis Metes

Your life is the sum of a remainder of an unbalanced equation inherent to the programming of the Matrix. You are the eventuality of an internal anomaly, which despite my sincerest efforts, I have been unable to eliminate from what is otherwise a harmony of mathematical precision. While it remains a burden assiduously avoided, it is not unexpected, and thus not beyond a measure of control. Which has led you, inexorably, here.
You haven't answered my question.
Quite right. Interesting. That was quicker than the others.

#17 Rationalize

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Posted 21 September 2009 - 09:44 PM

What a tedious trading day. I wish the volatility would come back.

Lever up.

Same result. :ninja:
PARTY! NORTH KOREA! SATURDAY NIGHT! BYOF (bring your own food)

#18 Rationalize

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Posted 21 September 2009 - 09:48 PM

Widget did a heckuva job on Friday. 5 hr cycle sell signal in the afternoon, followed by a negative divergence at the late high. The yellow oscillator sell signal suggested an 8-10 day cycle top developing. The down phase is still in force on that. The touch of the blue channel lines suggests a 5 hr cycle sideways up phase, with another downdraft this afternoon likely.

Did this work out as expected?

I'm a little bit suspicious as to the efficacy of "Mr Widget".

Comments please...
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#19 Sudaca

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Posted 21 September 2009 - 10:08 PM

This is what I was talking about the other day, but regarding EM... now it also applies to HY:

High-Yield Bond Buying Starting to Get 'Ridiculous' (Update2)
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By Pierre Paulden

Sept. 21 (Bloomberg) -- Investors are buying bonds from the lowest credit-quality issuers without restraint, according to Citigroup Inc.

Yields on high-yield, high-risk debt have narrowed by 80 basis points relative to benchmark rates in the past two weeks, Citigroup anal cysts John Fenn and Jason Shoup wrote in a Sept. 18 report. Last week, 13 companies, including casino owner MGM Mirage and video chain Blockbuster Inc., sold more than $6.5 billion of bonds, they wrote.

€œThese are the kinds of dynamics that cause strategists to wake up in the middle of the night and go for a long run,€ the New York-based anal cysts wrote. €œWe understand investors are not supposed to fight the cash, but this is starting to become a bit ridiculous.€


http://www.bloomberg...id=aqIgdLswlZeg
Thanks, David

#20 Jimbo

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Posted 21 September 2009 - 11:26 PM

THE HOUSING OPTION MARKET - THE STRANGLED HOUSING MARKET - OR THE BUBBLE EXPLAINED


The housing market in America was and is not a market in housing. The borrower does not buy the house the BANK does.

Americas housing market is really a market in housing options.

When Banks lend at 100% buyers are not buying a house - they are merely buying - or should I say they are being given a free call "option" to buy a house.

They are getting a free call option on all the potential price appreciation on the house - a free option given to them by the lender.

They are also getting a free put option on the house - as they can just walk away if the house goes down in price.

All price appreciation was immediately heloced out - this keeping the price of the option of all future appreciation at zero and also keeping the price of the put option at zero.

Lending is an option pricing issue - the banks vastly underpriced the call and put options they were giving out for free.

The banks were basically transferring there shareholders capital to the home buyer - who received vastly under priced options and cashed those options in for a fortune by releveraging the house - HELOC et al.

Therefore housing "buyers" note the inverted commas as they are not housing buyers at all - they are housing option buyers- will behave and will continue to behave like option traders trading a commodity like oil or natural gas, - until lender the sellers of housing options - price housing options at the market clearing price.

All the valuable housing put options are now being exercised.

The housing "buyer" borrower will as shorty says now go and "buy" a house and get another free call and put option from a lender and start the process all over again

Buying a put and a call is called a "strangle" strategy.

The US housing market has been effectively strangled from an option point of view..


"The long strangle involves going long (buying) both a call option and a put option of the same underlying security. Like a long straddle, the options expire at the same time, but unlike a straddle, the options have different strike prices. The owner of a long strangle makes a profit if the underlying price moves far enough away from the current price, either above or below. Thus, an investor may take a long strangle position if he thinks the underlying security is highly volatile, but does not know which direction it is going to move. This position is a limited risk, since the most a purchaser may lose is the cost of both options. At the same time, there is unlimited profit potential."


And what was the cost of implementing this strangle strategy - the cost of buying the put/call options - for real estate traders (the borrowers and de jure "buyers").

The cost was ZERO!!!!
timoleon

#21 Charmin

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Posted 21 September 2009 - 11:35 PM

What do you get when you have a horizontal floor/ceiling meet and a trending floor/ceiling meet and a gap down?
IWM
http://www.StockShar..._1253590416.png
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#22 Rationalize

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Posted 22 September 2009 - 12:33 AM

...
And what was the cost of implementing this strangle strategy - the cost of buying the put/call options - for real estate traders (the borrowers and de jure "buyers").

The cost was ZERO!!!!

Nope. The interest cost could be seen as call premium, and there's no gain on the put.

And besides, a dong strangle buys volatility.

RE spec d-bags weren't donging volatility.

They were .. well .. non-recourse levered dong RE...

No gain on the down side. Just no recourse.

Think: Dong zero coupon bond + Dong FOP call, with the discount to face.
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#23 Yaryman

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Posted 22 September 2009 - 02:09 AM

Thank goodness the recession is over, otherwise this could be a problem.

Your home loan is under water, so we is going to raise your payment.

Wonder how that turns out?

#24 Jimbo

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Posted 22 September 2009 - 04:18 AM

NON RECOURSE LOANS - OR THE STRANGLED ECONOMY

"No gain on the down side. Just no recourse"

The gain on the put -on the downside is not having to repay the full amount of your mortgage debt.

Non recourse loans are loans with imbedded put options.

Its like borrowing to buy shares and then buying a put option on those shares.

If the shares go down in value you can use the gain on the put option to come out even when you sell the shares at a loss to repay the loan.

The put options is real.

Millions of americans are now exercising that put option to get out of their debts for free - improve their net asset position.

Its called foreclosure.

Of course americans dont see any current cash from this like when they cashed in their call options through the magic of HELOC and went on a chinamart spending spree.

But what cashing in the put option is doing is massively reducing the debt levels of those who are being foreclosed on.

Their debt is being wiped out - and debt is a claim of their "future" income -

Which means they will now be able to use that future income - to buy things with - instead of paying back inflated mortgage debt.

You must look at the whole picture of past, present and future income and not any one of these in isolation.

Loose bank lending leads to massive levels of cheap strangle options being given away to borrowers which leads to asset price volatility - first upwards and then downwards.

This leads to a massive transfer of wealth from bank shareholders and taxpayers to the strangle option owners.
timoleon

#25 Jimbo

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Posted 22 September 2009 - 04:37 AM

WHY FORECLOSURE IS GOOD FOR THE ECONOMY

The massive reduction in mortgage payments that foreclosure means will free up income to allow consumer spending to recover.

Therefore a high rate of foreclosure is absolutely essential for a recovery of the american economy. :ninja: :ninja: :ninja:

And any Government efforts to delay or slow down foreclosure will delay the recovery.
timoleon





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