Wednesday, November 7, 2007

The Ugly Stick



That is what I'll call today's candle on the chart above.

Recently, following a big down day, the index has rallied. I would enjoy another 50 point down day. This up / down / up / down stuff will drive a man to drink.

48 comments:

Andy said...

This up / down / up / down stuff will drive a man to drink.


If I may offer a slightly different interpretation. I'm a big follower of the MACD-Histogram as a measure of upward and downward momentum. If the MACD-H of the second price low is higher than the first price low (divergence), the downtrend is broken (check out and compare MACD-H levels on the 2 March lows, and the 2 August lows).

Some up down up down action (as opposed to a steep drop) will increase the odds that the MACD-H will be likewise higher when the Oct 22 low is retested.

This is one case where I'd rather the band-aid gets pulled off a little at a time rather than ripping it off. As for the drinking, well... any excuse I guess....

Anonymous said...

MVIS break down occuring, see ya in the 2's.

Sierra Water said...

If the Naz eventually breaks 2315, then we will be in a full blown secular "bear" starting in 2000.

Sierra Water said...
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Sierra Water said...
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Sierra Water said...

Wood,
haev you looked at a weekly chart on MVIS. It looks ugly, trading under the 50sma.

Woodshedder said...

Sierra, I sold half my position earlier today.


The offer still stands for you to do a post here explaining credit defaults and the trillions in derivatives.

newequity said...

He cannot prove there are trillions in derivatives out there because it isn't true. I guarantee it.

newequity said...

Also, It is just another scare tactic by the same idiots who have never invested money in the market because of fear. How could banks have trillions in derivatives each and manage them for this long without a blow up??? You are full of it Sierra.
Keep buying gold up here.

Eric said...

I bet it's nice to be short the qid today... I'm very jellous.

Not to answer for sierra, but I do know he is a big follower of jim sinclair, if you can find some of his interviews either on the web or on youtube.
I find that peter schiff has an unbeliveable handle on things.

When you can beat the S&P by investing in the Euro.. it should tell you something.

denial has gotten us this far..

It's interesting/unnerving to think that like weimar/Germany post WWI, it's hard for us to realize we arn't the big boy on the block anymore.. I hope we can get over it.

ducati998 said...

The data that "sierra" provided is accurate as it is provided from the;

"Comptroller of the Currency, Administrator of National Banks"

They see what doesn't appear on the Financial Statements.

While it is common knowledge that Banks have large Off-Balance Sheet exposures, quite the size disclosed is to say the least totally irresponsible.

jog on
grant

newequity said...

Did you invest in the euro back then or are you speaking with hindsight? It is easy to see now that the dollar is tanking but these same guys have been calling tops since DOW 10K. The US has matured no doubt.

Anonymous said...

Indices banking coin, fuck the sorts.

Anonymous said...

'shorts.

mdawsz said...

This is some white squall... whew... oh wait, the DJ and SPX are turning green.

mdawsz said...

Green squall?

Eric said...

Thanks Grant/Ducati(if the name is correct). I was curious where the numbers could be found.

The disagreement is what makes markets but hopefully we can be mature and civilised in our discourse.

I certainly wasn't trying to convince anyone of anything. I wanted to provide some pointers if someone wanted to look into it.

mdawsz said...

Eric, unfortunately Grant is unable to engage in a civilized discussion. He is unwilling to accept anything for face value and ultimately resorts to name calling and threats of violence, just wait until he challenges you to a rasslin' match.

ducati998 said...

eric,

My response was actually directed at "newequity".

It would seem that it is again "newequity" who is challenging the Euro trade if you will.

I am a reasonable chap.

jog on
grant

Sierra Water said...

Wood, I wish I had the brains to do a post on this, but I know very little in the big scheme. A very famous investor told me 4 years ago to look into OTC derivatives and thats how I found Sinclair via my research. There are many others who are talking about this situation on a daily basis who I listen to.
Sinclair talks a lot about the Weimar Republic as a good case study if anyone is interested. MDAWSZ, the stock market can go higher just like it did in the weimar republic for a period of time. The problem this time is the possible interoperability of the performance contracts of the major dealers of credit default derivatives. If one goes down, then there goes the town. This is not a one day event, it will last years and affect markets such as CA RE for 3-5 years. I am playing a generational bull in Gold, so know way am I selling an oz. I will play the stock market as it develops using TA as a guide. I covered 50 points on GOOG today as well as a trifecta on a float above the 5minute 50dsma on WB, C, and GRMN. I felt like a magician today, but that will probably change tomorrow as I am far from perfect.

ducati998 said...

The Scarlet Poltroon,

For an alleged member of the legal profession you engage yourself in ever increasing tangles of perjury.

Your perfidious character punctuated via pedestrian, perennial perjorative, must result in my peremptorily dismissing your petulant, philistine, plebian, bi-lateral sacroilliac's back to your own blog.

jog on
grant

ducati998 said...

Credit Derivatives;

Are best visualized as a PUT option on issued debt.

Citi lends me $100M, they are unsure whether I can pay them, so they purchase a credit derivative that pays off if I default.

The more likely it looks like I will default .....the higher the premium, the less likely....the lower.

They will also have written into the contract [credit derivative] contingencies.

Basically.....that's it.

jog on
grant

Woodshedder said...

Grant, so what's the risk with those in the current credit environment?

Also, who issues the credit derivative?

Sierra Water said...

There are 4-5 major dealers that represent 90%+ of the contracts outstanding. Merrill, Citicorp, Lehman, Goldman and Bear I believe.

ducati998 said...

woodie,

*Counterparty risk
*Primary risk


Counter-party risk.
If Citi issued a $1B loan and retained that loan on the Balance Sheet, they may hedge that loan via a Credit Swap with JPM.

They pay JPM in basis points for insuring their $1B exposure [cashflow out]

If the loan defaults, Citi lose $1B on the loan, but gain on their credit swap from JPM, who actually lose.

JPM, may however have hedged their exposure to Citi by buying or selling further credit swaps with Bank of America.....and so it goes.

Here is the problem, who actually is on the hook for that $1B loan?

Can they, if required, actually pay?

If not, then the collapse passes back through the system to someone who can pay.

With credit swaps at $11.7 Trillion, all you need is a fairly benign increase in defaults to bankrupt Citi, JPM, BAC etc assuming that their hedges fail somewhere in the system.

Primary risk.
Here Citi may have gone directional and not hedged their exposure, in essence providing the service of a financial insurance company.

From the data, Citi have a directional component in the billions. This may be due to choice, or, that they could not find a counter-party at the time. If a directional bet goes bad, can Citi's Balance Sheet bear the loss?

This wouildn't be a writedown, this would be a marked-to-market cash loss.......that might be enough to bankrupt them.

The complexity of the system multiplies the risk, as no-one knows who has what exposures, thus the current climate of distrust and malfunctioning credit markets.

Everyone is hoarding cash.....just in case.

jog on
grant

Woodshedder said...

Thanks grant. That's what I needed.

Sierra Water said...

There you go Wood.. Nice job Grant.

I am looking for a short term top here is Gold as we have hit the upper LR 3030 band twice. Those who are looking to add gold to their portfolios should have the chance here during the next week or so.

ducati998 said...

"Under FASB terminology, Level 1 means mark-to-market, where an asset's worth is based on a real price. Level 2 is mark-to- model, an estimate based on observable inputs which is used when no quoted prices are available. Level 3 values are based on ``unobservable'' inputs reflecting companies' ``own assumptions'' about the way assets would be priced.

ABX indexes, which investors use to track the subprime-bond market, are showing ``observable levels'' that would wipe out institutions' capital if the benchmark's prices were used to value their Level 3 assets, according to Janjuah.

The indexes have tumbled this year because investors expected rising numbers of borrowers to default on home loans, cutting the cash flowing to the bonds that package the mortgages.

Lehman has the equivalent of 159 percent of its equity in Level 3 assets, and Bear Stearns has 154 percent, according to Janjuah's note, titled ``Bob's World: Feast and Famine.''"

ducati998 said...

woodie,

No problem.....

sierra,
Good find on the data, I'd been looking for something like that via google.....hadn't had much luck.

jog on chap's
grant

Woodshedder said...

So as long as the banks don't call each other's bluffs, then everything will be alright?

Or, is there something out there that will force the level 3's to be priced?

I thought I heard that there is some re-pricing of L3s happening very soon, as required by a law? Did I dream that?

ducati998 said...

woodie,

Quite correct, FASB Rule 157 will come into effect soon, forcing L3 pricing to change.

Hence many Banks are starting to disclose and price [writedown] L3 assets currently.

jog on
grant

Eric said...

Grant, I made the mistake of not making directing the subject of the second part of my response, and was directing that to the Comment Thread in general. Just to remind people(including myself.) To maintain, civility.

ducati998 said...

woodie,

"So as long as the banks don't call each other's bluffs, then everything will be alright?"

No, not really.

The key lies in the ability of the borrowers to pay their debts, whether they be sub-prime mortgages or corporate debt incurred for sharebuybacks, M&A activity etc.

With earnings [as demonstrated this Q] falling, layoffs and unemployment rising....defaults are rising.

With rising defaults [the inability to pay] so two things happen;

*Loans are defaulted upon, causing losses to holders of that debt.

*Derivative contracts based upon that debt start moving [profit/loss] and the ability to honour those contracts becomes paramount.

Therefore who holds what and who can pay and who can't become rather crucial questions.

This currently is where we are in the cycle.

Defaults are rising, spreads are moving.......can the holders weather the storm?

The Fed is obviously concerned, 2 rate cuts to try and alleviate the pressure, or, allow some to refinance.

The cost....the US$ is dying on it's feet currently, but, better a weak dollar than a financial system collapse....that is 1931/32 great depression stuff.

jog on
d998

Eric said...

My il-understanding was that rule 157 came in on the 15th.. Though I should make sure.

I'm curious if the banks use the L3 Debt as part of their Fractional reserve. Meaning that once they mark it down, they have to replace it with other assets, or fear the bank regulators.

Just some head scratching Speculation here: I know that they can go to the discount window with AAA mortgage backed assets, and get liquidity.. So maybe the L1 assets count as part of their reserve.

With some of the L1 assets being marked down to AA or BBB(i guess) it adds additional pressure on their Liquidity, since they have to maintain their "Fraction"

But if I would look it up instead of trolling comments.

This thread is being Super Helpfull.

The other day I was kind of hoping the banks could sweep all this under the rug.... Creepy when I think that, and it doesn't help us to find a resolution to these problems.

Besides Default of a major financial institution. I think the larger problem IMHO may be that Europe and Asia won't loan us money any more, Either our governments via t-bills or our banks via CDOs.

Thanks All.

Eric said...

Grant,

I'm just opening up some thought on the conundrum that faces us, and not taking issue with you(because I think you phrase things very well).
The fed has 2 jobs,

1.protect "Main Street" from Depressions, and "Financial collapse".. This is not exclusive to the banking system, financial collapse can come from many directions.(I can't believe you can lose money being a bank.. and think Natural selection should apply if you do.)
2.Maintain Liquidity in the shell game that is our banking system, which furthers Number 1.(Keep the Wheels Greased)

My point is that they are there to bail out the depositors, and not the banks(this could be monumentally naive on my part.)

As one of the banking Committee members said today "please cut rates, and we have to protect the value of the Dollar." Which are near mutually exclusive tasks.

As Weimar was indebted to the world, they devalued their currency, in order to pay off the debt.
As Sarkozy said today, "our weak Dollar, has the potential of setting off an economic war"
As Asia contemplates dumping USD in favor of the Euro.
As Asia stops buying USD to purchase T-bills, in favor of Bund and British Bonds.(providing more less upward pressure on the USD)

As more and more talk of Trading Oil and other commodities in Euros.
(Creating more Selling and less Buying of Dollars).

As Financial Institutions Beg for a 1% decrease in the Target rate, Pushing the Bond Rate on "Par" with "documented" inflation, Then making the possible 7% return on the high risk CDO's at .90-.25 cents on the dollar, much more attractive. Thereby making them Liquid.

Will our financial system collapse because of the weak dollar? as Our continued Federal and consumer Debt is refused in Europe and asia? That debt being hereby paid off either by the U.S. citizenry, or by further inflating the currency. Will that then provide a further downturn in our economy?

(pardon me if I'm super exhausted, and possibly only providing fractured thoughts.)

This is what provides the "Razors Edge" that we currently walk.

Near Hyper-inflation on one side, and Market and economic Pain/global Recession, on the other.

I don't have the answers, Hopefully "Uncle Ben" can navigate this mine field.

All I have are questions.

Including "Do I want a $20 Cup of Coffee, and $5.00 gas and Dow 20,000?" or do I want "dow 10,000. $2.00 gas and $3.00 coffee?"

Are the bank Write-downs Deflationary? or are they Null ed out with the deflating housing Defaults?

Is there a middle ground?


Also.. Is the USD more a reflection of the Health of our economy than it is a measure of the supply of Dollars? or is the supply of dollars a reflection of our economy?



Personally, I'm such an Amoral asshole, I don't give a shit, and just don't want to be the guy left holding the bag.

Thanks again...

ducati998 said...

eric;

With regards to the Fed Open Market operations and the assets accepted.

In theory, the Fed can accept whatever it deems acceptable, they after all are somewhat opaque.

In reality, they do not seem to be accepting a great deal of Mortgage Backed paper.

From October 18 to November 9 [today].....

MBS
Submitted........$541.05 Billion
Accepted.........$55.202 Billion

So we can see that only some 10% has been accepted.

Of course that does not necessarily follow that this will always be the case.

As far as providing reserves for Capital & Liquidity Ratio's, the answer would be ....I very much doubt it....those reserves should be on deposit at a Fed Bank.

The FDIC is responsible for depositor funds up to $100K, therefore diversify bank cash.

China & the US$ as the Reserve currency of the world are quite large topics and funnily enough I will touch on them at the weekend on "Fly's" blog.

Eric said...

Interesting....

I can't believe how much I love this shit.. it's just fascinating.

I must need a hobby or something.

Thanks again, for your time.

ducati998 said...

eric,

The problems relating to the financials are far from over, and any calls on a "bottom" could be premature at this point.

The current problems originate from the ratings agencies, FITCH, MOODY's STANDARD & POORS who provided at a price AAA ratings to Junk Bonds.

There is more to come. From the WSJ;

"As of Nov. 1, S&P had lowered ratings on 381 tranches of residential mortgage-related CDOs. It still had a "Credit Watch negative" on 709 CDO tranches, meaning the bonds face a good chance of a downgrade.

Fitch has 609 CDO tranches on negative watch and plans to act on them by later this month. Through the end of October, Moody's said it had downgraded so far this year 338 CDO tranches worth $13 billion, backed primarily by mortgage-backed securities. It was still reviewing for downgrade another 734 tranches worth $48 billion.

Moody's says it hopes to finish its current crop of CDO downgrades in the next few months. Further downgrades could happen depending on the rating firm's assumptions about the underlying economy, where the outlook could be changing fast."

jog on
grant

Eric said...

Grant,

Apparently you want to keep this going. So I'll throw some stuff into the mix... more food for thought.

I'm not a dip buyer of financials. The Write downs, as I understand are a quarterly thing. So in Q4 more "white Hot Billion Dollar Action". The Financials are like the mortgage lenders.. the ones that make it through without going out of business are a good buy here, in a 10 year time frame, But it's like playing russian roulette.
The value of the majority of "questionable" ABP, Currently IMHO could be as high as .80 to the Peso/dollar. Problem is its value is in a downtrend, and will bottom with housing... so sometime in 2008-2010. And you can only speculate on how bad the bottom will be. If you listen to Peter Schiff .05 to the dollar could be the bottom. I'm not that bearish, But I wouldn't catch that Knife, one could liken it to catching a Motorized saw blade.

More food for thought:

When I said "FASB Rule 157 was in effect on the 15th." I meant the 15th of November( which I just confirmed)
I also heard that as some of the paper is downgraded, some of the holders will have to sell it. Specifically funds that, as part of their Charter, can only hold AAA paper. This will get an actual "Market" value placed on some of it. And it could be .10 on the dollar.
I imagine that should happen within the month.

I expect more market denial, and no end of year rally, and either a test or capitulation down to 12800. If X-mas doesn't look like something out of Dickens, I suspect a rally to the mid 13500.(I only put this paragraph in because I thought it would be fun to talk about this Christmas being something out of dickens, which I don't anticipate.)

Bullish Psychologically for the market today was that the consumer confidence didn't make us skip a step today(Trading up or neutral on bad news can be a small indicator of a Near bottom.)

I'm very suspect of the talk of "Short Covering" in the dollar, I honestly suspect that it's not that people are "Selling the Dollar" but that the people that usually "buy" the dollar aren't keeping it Propped up.
There is a divergence between the Euro and the market at the "Dow top" in October...(the market starts falling, and the Euro keeps going up).. Maybe I'm making to much of it, but it's interesting.

I'm not tempted to go long this market Until Rule 157 comes in.

I could be wrong.. and am generally more wrong than right, but it's my money to lose. Maybe we test march? I've consistently underestimated this downside move.

Bearish for this move, is that we havn't seen Panic Yet, and we havn't seen enough sell off of the Materials names.

My original Call for a Bottom indicator is when Dylan Ratigan Cries on T.V..... But he has become down right Bearish... Maybe when we push the last Bull into the Sea?... But I don't know who that is.... jerry bowyer? Maybe we should start a pool.

Thanks Again.

Eric said...

Gary Shiller(on Kudlow)just said that the write downs would affect the Reserve requirements of the banks... I was agreeing with you, but now I'm thinking I need to look into it again.
It doesn't make sense that the banks have to take the AAA paper to the Discount Window if they can use it as their reserve... Unless they need the liquid cash? there is something I'm missing???

In theory the reserve requirements must be at the centeral bank or in the vault. sounds like there is a possibility that the Paper is "in the Vault"
My thinking is that this provides even more volitility when it's marked to myth at .95 to the Dollar, then loaned out on at 9/1. Then marked to market at .50. Meaning that there is 90 billion in Excess Credit out there, and that is just Citi.... I can't imagine that it's not a smaller fraction of this. At 500 Billion(as speculated at) that is 4.5 trillion in credit that has to be..Re-Fractionalised??.

Of course that is what a "Credit Crunch" is. Credit that can't be extended, because it already has been..

worth checking into, But this could account for the "across the board" bond purchases today.

More questions for me to head scratch about over the weekend... but I should jog...

:)

Cheers.

Woodshedder said...

Eric, you should feel welcome to comment, question, bust chops or whatever, about whatever you want, as much or as often as you would like.

Good comments on this thread, for sure. I'm learning a lot.

ducati998 said...

eric,

Possibly I misunderstood you. L3 assets cannot be USED as capital or liquidity reserve ratio's.

However if ASSETS decrease via writedowns due to marked-to-market then LIABILITIES will proportionately INCREASE.

This would then necessitate an INCREASE in the capital & liquidity ratio's via cash or treasury notes [90 day paper]

MBBS are inappropriate due to DURATION risk and mismatches.

jog on
grant

ducati998 said...

eric,

Regarding the holding of AAA paper, correct, many Pension Funds, Insurance Co's, Bank's, will be forced via regulatory requirements to sell downgraded paper.

This is of course what happened in the S&L crisis.

jog on
grant

Eric said...

Wood(ie)-
Thank you so much for your... Allowance?/Tolerance?. These are legitimate Conundrums/Questions that I pose to the "market of Ideas".

I too am learning and am doing my best to maintain an Aristotelian/zen perspective.... and only bust balls in what I intend to be a most respectful way.

Grant-

I'm sure it was I, who misunderstood. I'm a little confused about the phrase "L3 assets cannot be used as capital or liquidity reserve ratio", I suspect a typo, that I can't quite navigate"

It seems Most Probable, that there is a difference between Bank Capital, and bank Reserve Requirement... Maybe I'm wrong, But if all Capital were part of the Reserve Requirement, when Citi Builds a huge building in Manhattan for 3 Billion, and Pays Cash for it, the building then becomes and Asset... Then is used against Liabilities to generate the number "Capital".. But that would defeat the spirit of The Reserve requirement being: "On deposit at the Central Bank, or in the Vault" (Like I say though, Sometimes I'm monumentally Naive).

Though there is a differentiation between Reserve Assets and ... What I'll call "Material Assets".. What you are saying is that a Liability is a Liability, and it is then Subtracted from the asset column of the ledger, and Therefor must be reduced from the "Reserve Assets".

To simplify MBBS can't be used as "Reserve Requirements"(unless converted to cash at the discount window). But the Write-downs do count against the "Reserve Requirement" as a liability to the balance sheet.

Therefore the Write-Down is applied(at 9/1) against available Credit liquidity.. Causing the "Credit Crunch"...

add the derivative headwind
to the "mark to model". The Jpmorgan write down was .60 to the dollar?
Using .60 as the model for a Total Bank 500 billion write down? 4.5 Trillion loss of Credit liquidity at .60 Cents(40% write down=500B). or Trying to be optimistic .90(10% write down =1.125 Trillion).
The S&L Crisis was 150Billion.. Inflation adjusted to today=250 billion.

At the .60 to the dollar model(500B in total Write downs) This is twice as bad as the S&L Crisis(inflation adjusted S&L is 250Billion.)
At .90 to the dollar it's half as bad.(150Bilion(ya, my math is off)

If you substitute the 500B with Sierra's 100-200Trillion.... This gets ugly. Optimistically at .90 cents for all of it at 100 Trillion. We get a 10Trillion write down... Which is 40X as bad.
80X as bad at 200Trillion.

100-200Trillion in the .60 model is 160X to 340X as bad as the S&L.

Don't let that scare you, there is many a slip between cup and a lip.
This Model is just me playing with numbers.

It's funny though... based on my lame ass math.. This problem is somewhere between half as bad as the S&Loan, or 340 Times as bad.
+/- 1500% Margin of error.

But one would have to add the "Headwind" of the Derivative issues.

To summ up, this is either a 6 month recession... Or Epic Depression/Collapse of Free market Capitalism.

I just hope everyone is enjoying this as much as I am... I am definitely busting my own balls, and no one else's.

If I had to bet on just one thing, it would be that in the next 2 years we see dow 11K.


In the next 2-4 weeks we will know a hell of a lot more.

But I do believe in the Resilience/survivability of the Human Animal and it probably won't be as bad as some expect, no matter how bad the numbers are.

Thanks Again, I haven't had a story problem like that since University.. And I think I failed.

Thanks again.

I can't believe how much I love Economics.

It's official.. I need a Hobby.

ducati998 said...

eric,

The Reserve maintained at the Fed must be cash, or cash equivalents, viz treasury notes [90 day paper]

The reserves are to provide a capital cushion against bank runs by depositors, not to provide reserves against defaulting loans.

Defaulting loans require reserves to be set up on the Balance Sheet to provide for expected losses.

NPL's [Non-performing loans] have been rising and exceeding by quite a margin the reserves set against them.

This is weakening the Balance Sheets of all financials currently.

If the derivatives become a major problem, we may well see some major bank go under.

Bear Stearns and Merrill already require a merger or capital infusion to survive....so it has already started.

How far it may go is the question.

Bernanke knows how bad it is, he really didn't want to cut rates, but had no choice.

jog on
grant

Eric said...

Grant,

To Respond specifically, I don't think they can come up with a Model for how bad it's going to get.(Point being, all we have are models at this point, and no one(uncle Ben) Actually "Knows". When they say, they don't know how bad it's going to get, I think that's honest, since the unknown variable is the number of defaults. All they know is how the bad Current NPL's are.

I'm sure someone has run a mathematical model of the Accelerating defaults with some end Using 2008-2012 as an end of the "Housing Correction". But that is still some Nasty Chinese(no insult to the Chinese) math.

Let me just...
Q3 Write downs= 2x(Bear Stearn's and Citi write downs=20 Billion)= so 40 billion this quarter. Using an optimistic 1 year exponential model over the period of 1 year (Roughly 1/2 and exponent, i you catch my quickie fast food modeling method)

1 year model(.5(40b+E+1)
((Q3 2007= 40B)
+ (Q4 2007= 80B)
+ (Q1 2008= 80B)
+ (Q2 2008= 40B))
= 240 Billion in write-downs in a 1 year correction

2 Year Model:

((Q3 2007= 40B)
+ (Q4 2007= 80B)
+ (Q1 2008= 160B)
+ (Q2 2008= 360B)
+ (Q3 2008= 360B)
+ (Q4 2008= 160B)
+ (Q1 2009= 80B)
+ (Q2 2009= 40B))

= 1.28 Trillion


This still has me on the floor...

... And My thesis is:

The problem is somewhere between:

(( 1/2 The S&L Crisis)
+
(The Derivative issues))

and

(The end of Free Market Capitalism)

... Is that Hyperbole? or can it be quantified as Some fraction or multiple of Great Depressions?

I'm trying to stop myself from spending the weekend building a derivative model, and referencing it to the one I've currently built.

Also, if one generated a "normal" model of the Treasury purchases for the period of oct 26 - nov 15th. subtracted that from the actual purchases, you could look at that number as this quarters total "Write-downs", Maybe assume we will get 4-16 quarters of that in some form of exponential model.

My original Thesis when I became aware of this "Issue" was that the Numbers were "Unprecedented", and that the Housing Recession was Quantifiable worse than anything we have seen since the 1950's Post the WWII building Boom(Also, noted is that those numbers still aren't showing a "Bottom")

The Conclusion I drew was that once you get past 1-2 decades, the Economic Variables get too complex. And With so few sample "Recessions" to use as a Reference(12 some odd Recessions this Century). Without using some modern economic reference quantifying the issues becomes complex, Modeling this Crisis vs the potato famine, or Vs. some 13th Century Caste system recession, Just seems Futile.

My, current expectations are for a once every 3 decade(Major/Epic) Recession. Similar to the Mid 70's, Paralleling similar Geo-Political metrics:

(post Vietnam-Post Iraq)
(1973 oil embargo-Peak oil)

This could very well be an; every 3 decade or once per Century, Cyclical business cycle.

or

a mild/Mustard burp of a recession.

I'm often wrong, and never surprised when I am.

Ok, Time for the Weekend...

Thanks again.

Seriously Creepy, is that I would Drool at the opportunity to spend 3 days with the smartest people I can find, building Financial Models, to try and game this out.

Maybe we just let the market decide, and see if/when we hit 1430/12800... Maybe we get a bounce back to 13400

I wonder if there is some Nerdy-economic club in my area.

Eric said...

Grant!, Grant!!, Grant!!!
Sorry this is the only way I have to contact you, I'm hoping you still have this tagged, But maybe not.

What do you think? is this GE fund that is giving 96. cents on the dollar, is that fund one that had some downgraided AAA assets, that had to get liquidated?
Also, some reports of some Private Equity, or somone who was buying some of the mortgage assets? Was this the person who purchased the GE assets?
I figured I'd look into it, and get your opinion?

Thanks.

Don't you have a blog or something?

Woodshedder said...

Eric, ducati has been posting over at ibankcoin.com in the peanut gallery.

However, please don't stop visiting here! I know my updates have been lame recently, but I've been super busy!