I was shocked today that the shares of both companies nearly
doubled today on a press release stating that Freddie Mac reported
a second quarter profit! I have examined the mark to market and
accounting shenanigans which the press have not. The companies have
manipulated the conservatory regulations related to
receivership to distort their liabilities vs. their assets!
The companies are as bankrupt as they ever were. What irritates me
is that I sold shares in the companies two weeks ago because I
thought they were a hopeless loss.
This leads me to the video that Matt recommended for viewing
this weekend. Prechtor developed a very sophisticated argument for
the 'herd' mentality in investing. He examined history in light of
news pronouncements and historical sentiment and lectured that all
of this pricing to past precendent and valuation based on
fundamentals is nonsense. It is the sentment of the moment or
the times which drives the investing herd and therefore price
momentum. The 'news' of the two mortgage companies is irrational
exuberance demonstrated. No one wants to be left behind so greed
nixes fear and there is a rush to jump on the train! That is
precisely what is driving this market higher. Fear that if you
don't invest now the price will be higher tomorrow. Is this not the
bubble herd instinct at play? The very irrational attitude that bid
real estate values to the moon and created the liberal credit
environment in which to play is now the same environment now
bidding equity values to the moon in the next bubble.
Indicating that the market is irrational and illogical. Set
aside your biases about the dominance of bull or bear and trade the
trends!
The lead article in the Financial Times today might support some
of your suspicions. The Chinese are deploying their Forex reserves
to target international opportunities. The official quoted stated
that the ostensible targets of such investment will be natural
resources and commodities plays, not Wall Street opportunities.
This could be disingenuous subterfuge. Maybe they are playing both
ends to the middle. The Chinese and the Americans are locked in a
dragon/tiger dance. The Chinese have been increasing, not
decreasing their purchases of Treasuries despite the call to arms
to marginalize the dollar. If they do not support the American debt
structure then their exports decline and unemployment is their
haunting devil. If they try to liquidate their dollar reserves they
will destabilize their own portfolio of wealth. And in the process
throw America into a depression, further exacerbating a downward
spiral in their exports.
It wouldn't surprise me that Geithner and Bernanke and their
Chinese counterparts have had discussions on how to support their
fears of runaway inflation. Supporting (manipulating) the American
stock exchanges through GS and JPM and others seems no less
tangible than the manipulation of the markets to support the
failing banks since March by the Treasury and Fed.
You say NOT to include pre market and after hours trading in the
systems. If the rcommended MA's are used to make trading decisions
for normal hours based on crossovers after market or pre
market, have you backtested this information on the course of price
movements in normal market hours?
Published: March 24
2009 19:24 | Last updated: March 24 2009 19:24
I am becoming ever
more worried. I never expected much from the Europeans or the
Japanese. But I did expect the US, under a popular new president,
to be more decisive than it has been. Instead, the Congress is
indulging in a populist frenzy; and the administration is hoping
for the best.
If
anybody doubts the dangers, they need only read the latest
analysisfrom the International
Monetary Fund.* It expects world output to shrink by between 0.5
per cent and 1 per cent this year and the economies of the advanced
countries to shrink by between 3 and 3.5 per cent. This is
unquestionably the worst global economic crisis since the
1930s.
One must judge plans
for stimulating demand and rescuing banking systems against this
grim background. Inevitably, the focus is on the US, epicentre of
the crisis and the world’s largest economy. But here explosive
hostility to the financial sector has emerged. Congress is
discussing penal retrospective taxation of bonuses not just for the
sinking insurance giant,
AIG, but for all recipients of government money under the
troubled assets relief programme (Tarp) and Andrew Cuomo, New York
State attorney-general, seeks to name recipients of bonuses at
assisted companies. This, of course, is an invitation to a
lynching.
Yet it is clear why
this is happening: the crisis has broken the American social
contract: people were free to succeed and to fail, unassisted. Now,
in the name of systemic risk, bail-outs have poured staggering sums
into the failed institutions that brought the economy down. The
congressional response is a disaster. If enacted these ideas would
lead to an exodus of qualified employees from US banks, undermine
willingness to expand credit, destroy confidence in deals struck
with the government and threaten the rule of law. I presume
legislators expect the president to save them from their folly.
That such ideas can even be entertained is a clear sign of the rage
that exists.
This
is also the background for the
“public/private partnership investment programme”announced on Monday by
the US Treasury secretary, Tim Geithner. In the Treasury’s words,
“using $75bn to $100bn in Tarp capital and capital from private
investors, the public/private investment programme will generate
$500bn in purchasing power to buy legacy assets – with the
potential to expand to $1 trillion over time”. Under the scheme,
the government provides virtually all the finance and bears almost
all the risk, but it uses the private sector to price the assets.
In return, private investors obtain rewards – perhaps generous
rewards – based on their performance, via equity participation,
alongside the Treasury.
I think of this as the
“vulture fund relief scheme”. But will it work? That depends on
what one means by “work”. This is not a true market mechanism,
because the government is subsidising the risk-bearing. Prices may
not prove low enough to entice buyers or high enough to satisfy
sellers. Yet the scheme may improve the dire state of banks’
trading books. This cannot be a bad thing, can it? Well, yes, it
can, if it gets in the way of more fundamental solutions, because
almost nobody – certainly not the Treasury – thinks this scheme
will end the chronic under-capitalisation of US finance. Indeed, it
might make clearer how much further the assets held on longer-term
banking books need to be written down.
Why might this scheme
get in the way of the necessary recapitalisation? There are two
reasons: first, Congress may decide this scheme makes
recapitalisation less important; second and more important, this
scheme is likely to make recapitalisation by government even more
unpopular.
If this scheme works,
a number of the fund managers are going to make vast returns. I
fear this is going to convince ordinary Americans that their
government is a racket run for the benefit of Wall Str*eet. Now
imagine what happens if, after “stress tests” of the country’s
biggest banks are completed, the government concludes – surprise,
surprise! – that it needs to provide more capital. How will it
persuade Congress to pay up?
The danger is that
this scheme will, at best, achieve something not particularly
important – making past loans more liquid – at the cost of making
harder something that is essential – recapitalising banks.
This
matters because the government has ruled out the only way of
restructuring the banks’ finances that would not cost any extra
government money: debt for equity swaps, or a true bankruptcy.
Economists I respect –
Willem Buiter, for example –
condemn this reluctance out of hand. There is no doubt that the
decision to make whole the creditors of all systemically
significant financial institutions creates concerns for the future:
something will have to be done about the “too important to fail”
problem this creates. Against this, the Treasury insists that a
wave of bankruptcies now would undermine trust in past government
promises and generate huge new uncertainties. Alas, this view is
not crazy.
I fear, however, that
the alternative – adequate public sector recapitalisation – is also
going to prove impossible. Provision of public money to banks is
unacceptable to an increasingly enraged public, while government
ownership of recapitalised banks is unacceptable to the still
influential bankers. This seems to be an impasse. The one way out,
on which the success of Monday’s plan might be judged, is if the
greater transparency offered by the new funds allowed the big banks
to raise enough capital from private markets. If that were achieved
on the requisite scale – and we are talking many hundreds of
billions of dollars, if not trillions – the new scheme would be a
huge success. But I do not believe that pricing legacy assets and
loans, even if achieved, is going to be enough to secure this aim.
In the context of a global slump, will investors be willing to put
up the vast sums required by huge and complex financial
institutions, with a proven record of mismanagement? Trust, once
destroyed, cannot so swiftly return.
The conclusion, alas,
is depressing. Nobody can be confident that the US yet has a
workable solution to its banking disaster. On the contrary, with
the public enraged, Congress on the war-path, the president timid
and a policy that depends on the government’s ability to pour
public money into undercapitalised institutions, the US is at an
impasse.
It is up to Barack
Obama to find a way through. When he meets his group of 20
counterparts in London next week, he will be unable to state he has
already done so. If this is not frightening, I do not know what
is.
Our sense of moral and economic outrage should propel us into
marching to the Washington monument and pitching camp. Hussman's
analysis is spot on. I would add that those 'unelected' formulators
of government policy are looking after the interests of their
cronies. Those who got us into this mess are being golden
parachuted to a safe landing on the backs of the American
taxpayers. The PPP of the Treasury and the 'investors' is more than
scandal. It is a guarantee of close and highly profitable
relationships with no recourse indemnification, limited
exposure to direct loss, and the lie that the taxpayer may
ultimately profit. How will we profit as a taxpaying union
when our currency is debased, our children's children's children
are up to the grave in debt from our profligacy, and the country's
assets are owned by the Chinese and the UAE? TALF, PPP, and all the
other acronnyms used to prop up the Wall Street barons at the
expense of the taxpayer-just say NO!
This is the first time I've heard you vacillate. Don't lose
faith in your analysis. The onus of substance for a rally is on the
Bulls. The financials led this market rally and today they faded to
yesterdays levels. Meaning: no confidence in a sustained up market
advance. The Fed are grasping desperately for measures to establish
equilibrium and I believe the market will digest these measures as
futile in the short run and disastrous in the long term. I continue
to short the uptakes. Don't be mind faked by the press or the
administration. Keep up your excellent analysis!
I hope you'll let us know early on, long/short signals indicated
by your TS charts. Also would like to see the same with $RUT. You
guys are doing a great job...
Your charts show positive divergence. I think oil share
appreciation is disconnected to the overall market. Remember we're
discussing a cartel of price manipulation here. I expect the price
of oil to increase this year further exasperating recovery. Would
not be surprised to see DXO hit 10 by years end. I'm holding and
buying more on dips.
I've been waiting to cash out on my shares for a week. Very high
volume volitile ETF. Great when it's going in your direction. Will
see what happens today.
I agree with your opinion about the long term trend. Too
many are still thinking that the government is going to
rebirth the misery we are faced with. No one wants
to look at the in depth analysis to determine the future. We are
facing an implosion of historic proportions. The eternal optimists
are delusional. The pain is just beginng to
be felt....
The community is delayed by three days for non registered users.
Freddie Mac/Fannie Mae
Posted by geotex on 10th of Aug 2009 at 08:56 pm
I was shocked today that the shares of both companies nearly doubled today on a press release stating that Freddie Mac reported a second quarter profit! I have examined the mark to market and accounting shenanigans which the press have not. The companies have manipulated the conservatory regulations related to receivership to distort their liabilities vs. their assets! The companies are as bankrupt as they ever were. What irritates me is that I sold shares in the companies two weeks ago because I thought they were a hopeless loss.
This leads me to the video that Matt recommended for viewing this weekend. Prechtor developed a very sophisticated argument for the 'herd' mentality in investing. He examined history in light of news pronouncements and historical sentiment and lectured that all of this pricing to past precendent and valuation based on fundamentals is nonsense. It is the sentment of the moment or the times which drives the investing herd and therefore price momentum. The 'news' of the two mortgage companies is irrational exuberance demonstrated. No one wants to be left behind so greed nixes fear and there is a rush to jump on the train! That is precisely what is driving this market higher. Fear that if you don't invest now the price will be higher tomorrow. Is this not the bubble herd instinct at play? The very irrational attitude that bid real estate values to the moon and created the liberal credit environment in which to play is now the same environment now bidding equity values to the moon in the next bubble.
Indicating that the market is irrational and illogical. Set aside your biases about the dominance of bull or bear and trade the trends!
My old eyes would like
Blog Fixes - we'll work on fixing these tonight
Posted by geotex on 27th of Jul 2009 at 04:58 pm
My old eyes would like to see a larger font for the time signatures on the messages and the posters. Thanks.
Market Manipulation
sorry no charts...
Posted by geotex on 21st of Jul 2009 at 09:55 pm
The lead article in the Financial Times today might support some of your suspicions. The Chinese are deploying their Forex reserves to target international opportunities. The official quoted stated that the ostensible targets of such investment will be natural resources and commodities plays, not Wall Street opportunities. This could be disingenuous subterfuge. Maybe they are playing both ends to the middle. The Chinese and the Americans are locked in a dragon/tiger dance. The Chinese have been increasing, not decreasing their purchases of Treasuries despite the call to arms to marginalize the dollar. If they do not support the American debt structure then their exports decline and unemployment is their haunting devil. If they try to liquidate their dollar reserves they will destabilize their own portfolio of wealth. And in the process throw America into a depression, further exacerbating a downward spiral in their exports.
It wouldn't surprise me that Geithner and Bernanke and their Chinese counterparts have had discussions on how to support their fears of runaway inflation. Supporting (manipulating) the American stock exchanges through GS and JPM and others seems no less tangible than the manipulation of the markets to support the failing banks since March by the Treasury and Fed.
Stampede for the Bull?
Key Upside Levels to Note
Posted by geotex on 29th of May 2009 at 04:02 pm
Since all the bullish targets were just hit and exceeded does this mean the bulls have broken through the corral gate?
Uncertainties and Risks
Posted by geotex on 20th of May 2009 at 09:39 pm
From the April 2009 FOMC minutes:
Some participants
highlighted the still-considerable uncertainty about the
future course of the financial crisis and the risk that a
resurgence of financial turmoil could adversely impact
the real economy. In addition, some noted the difficulty
in gauging the macroeconomic effects of the creditising
policies that are now being employed by the
Federal Reserve and other central banks, given limited
experience with such tools.
Your worst nightmare is that
Sold SRS 32.80
Posted by geotex on 20th of Apr 2009 at 04:04 pm
Your worst nightmare is that you're stuck with US!
Mechanical Systems
EOD Mechancail Systems Page Real Time
Posted by geotex on 16th of Apr 2009 at 05:40 pm
You say NOT to include pre market and after hours trading in the systems. If the rcommended MA's are used to make trading decisions for normal hours based on crossovers after market or pre market, have you backtested this information on the course of price movements in normal market hours?
URE
URE
Posted by geotex on 9th of Apr 2009 at 04:33 pm
Cashed out with a fine profit! Always a new trade in the coming week...
Short Covering
SSO/SPY Short Killing Me
Posted by geotex on 24th of Mar 2009 at 09:22 pm
I'm holding my shorts. The market will retrace and we'll be rewarded.
When Hope Goes Astray
Posted by geotex on 24th of Mar 2009 at 09:10 pm
Successful bank rescue still far away
By Martin Wolf
Published: March 24 2009 19:24 | Last updated: March 24 2009 19:24
If anybody doubts the dangers, they need only read the latest analysis from the International Monetary Fund.* It expects world output to shrink by between 0.5 per cent and 1 per cent this year and the economies of the advanced countries to shrink by between 3 and 3.5 per cent. This is unquestionably the worst global economic crisis since the 1930s.
One must judge plans for stimulating demand and rescuing banking systems against this grim background. Inevitably, the focus is on the US, epicentre of the crisis and the world’s largest economy. But here explosive hostility to the financial sector has emerged. Congress is discussing penal retrospective taxation of bonuses not just for the sinking insurance giant, AIG , but for all recipients of government money under the troubled assets relief programme (Tarp) and Andrew Cuomo, New York State attorney-general, seeks to name recipients of bonuses at assisted companies. This, of course, is an invitation to a lynching.
Yet it is clear why this is happening: the crisis has broken the American social contract: people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists.
This is also the background for the “public/private partnership investment programme” announced on Monday by the US Treasury secretary, Tim Geithner. In the Treasury’s words, “using $75bn to $100bn in Tarp capital and capital from private investors, the public/private investment programme will generate $500bn in purchasing power to buy legacy assets – with the potential to expand to $1 trillion over time”. Under the scheme, the government provides virtually all the finance and bears almost all the risk, but it uses the private sector to price the assets. In return, private investors obtain rewards – perhaps generous rewards – based on their performance, via equity participation, alongside the Treasury.
I think of this as the “vulture fund relief scheme”. But will it work? That depends on what one means by “work”. This is not a true market mechanism, because the government is subsidising the risk-bearing. Prices may not prove low enough to entice buyers or high enough to satisfy sellers. Yet the scheme may improve the dire state of banks’ trading books. This cannot be a bad thing, can it? Well, yes, it can, if it gets in the way of more fundamental solutions, because almost nobody – certainly not the Treasury – thinks this scheme will end the chronic under-capitalisation of US finance. Indeed, it might make clearer how much further the assets held on longer-term banking books need to be written down.
Why might this scheme get in the way of the necessary recapitalisation? There are two reasons: first, Congress may decide this scheme makes recapitalisation less important; second and more important, this scheme is likely to make recapitalisation by government even more unpopular.
If this scheme works, a number of the fund managers are going to make vast returns. I fear this is going to convince ordinary Americans that their government is a racket run for the benefit of Wall Str*eet. Now imagine what happens if, after “stress tests” of the country’s biggest banks are completed, the government concludes – surprise, surprise! – that it needs to provide more capital. How will it persuade Congress to pay up?
The danger is that this scheme will, at best, achieve something not particularly important – making past loans more liquid – at the cost of making harder something that is essential – recapitalising banks.
This matters because the government has ruled out the only way of restructuring the banks’ finances that would not cost any extra government money: debt for equity swaps, or a true bankruptcy. Economists I respect – Willem Buiter , for example – condemn this reluctance out of hand. There is no doubt that the decision to make whole the creditors of all systemically significant financial institutions creates concerns for the future: something will have to be done about the “too important to fail” problem this creates. Against this, the Treasury insists that a wave of bankruptcies now would undermine trust in past government promises and generate huge new uncertainties. Alas, this view is not crazy.
I fear, however, that the alternative – adequate public sector recapitalisation – is also going to prove impossible. Provision of public money to banks is unacceptable to an increasingly enraged public, while government ownership of recapitalised banks is unacceptable to the still influential bankers. This seems to be an impasse. The one way out, on which the success of Monday’s plan might be judged, is if the greater transparency offered by the new funds allowed the big banks to raise enough capital from private markets. If that were achieved on the requisite scale – and we are talking many hundreds of billions of dollars, if not trillions – the new scheme would be a huge success. But I do not believe that pricing legacy assets and loans, even if achieved, is going to be enough to secure this aim. In the context of a global slump, will investors be willing to put up the vast sums required by huge and complex financial institutions, with a proven record of mismanagement? Trust, once destroyed, cannot so swiftly return.
The conclusion, alas, is depressing. Nobody can be confident that the US yet has a workable solution to its banking disaster. On the contrary, with the public enraged, Congress on the war-path, the president timid and a policy that depends on the government’s ability to pour public money into undercapitalised institutions, the US is at an impasse.
It is up to Barack Obama to find a way through. When he meets his group of 20 counterparts in London next week, he will be unable to state he has already done so. If this is not frightening, I do not know what is.
Comment on the J. Hussman analysis
The Treasury Plan could bankrupt the FDIC
Posted by geotex on 23rd of Mar 2009 at 08:23 pm
Our sense of moral and economic outrage should propel us into marching to the Washington monument and pitching camp. Hussman's analysis is spot on. I would add that those 'unelected' formulators of government policy are looking after the interests of their cronies. Those who got us into this mess are being golden parachuted to a safe landing on the backs of the American taxpayers. The PPP of the Treasury and the 'investors' is more than scandal. It is a guarantee of close and highly profitable relationships with no recourse indemnification, limited exposure to direct loss, and the lie that the taxpayer may ultimately profit. How will we profit as a taxpaying union when our currency is debased, our children's children's children are up to the grave in debt from our profligacy, and the country's assets are owned by the Chinese and the UAE? TALF, PPP, and all the other acronnyms used to prop up the Wall Street barons at the expense of the taxpayer-just say NO!
Topsy/Turvey
Any worrying bullish flags on the 60 min SPX chart?
Posted by geotex on 19th of Mar 2009 at 09:56 pm
Matt,
This is the first time I've heard you vacillate. Don't lose faith in your analysis. The onus of substance for a rally is on the Bulls. The financials led this market rally and today they faded to yesterdays levels. Meaning: no confidence in a sustained up market advance. The Fed are grasping desperately for measures to establish equilibrium and I believe the market will digest these measures as futile in the short run and disastrous in the long term. I continue to short the uptakes. Don't be mind faked by the press or the administration. Keep up your excellent analysis!
TS Signals
SPX 6 min chart.png my 6 min SPX from TS, nice ...
Posted by geotex on 17th of Mar 2009 at 12:35 pm
I hope you'll let us know early on, long/short signals indicated by your TS charts. Also would like to see the same with $RUT. You guys are doing a great job...
DXO
DXO opinions
Posted by geotex on 9th of Mar 2009 at 08:54 pm
Your charts show positive divergence. I think oil share appreciation is disconnected to the overall market. Remember we're discussing a cartel of price manipulation here. I expect the price of oil to increase this year further exasperating recovery. Would not be surprised to see DXO hit 10 by years end. I'm holding and buying more on dips.
SRS
I held SRS over the weekend and am tempted to ...
Posted by geotex on 2nd of Mar 2009 at 10:21 am
I've been waiting to cash out on my shares for a week. Very high volume volitile ETF. Great when it's going in your direction. Will see what happens today.
Dollar Indexes
Dollar Indexes
Posted by geotex on 3rd of Feb 2009 at 12:49 pm
Thanks, Guys!
Dollar Indexes
Posted by geotex on 3rd of Feb 2009 at 12:15 pm
What are the ETF's for long and short the US dollar?
Scalping
unless you believe we started
Posted by geotex on 31st of Jan 2009 at 08:55 pm
I agree with your opinion about the long term trend. Too many are still thinking that the government is going to rebirth the misery we are faced with. No one wants to look at the in depth analysis to determine the future. We are facing an implosion of historic proportions. The eternal optimists are delusional. The pain is just beginng to be felt....
BB
Bob Brinker
Posted by geotex on 16th of Jan 2009 at 10:50 am
Brinker is a buy and hold relic. I've lost money taking his approach as have a lot of people. I would consider his advice a contrary indicator...