Short-Term Advance Could Set Up Major Top
by Chart School - February 28th, 2010 11:13 pm
Short-Term Advance Could Set Up Major Top
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DiggJim O’Neill Redirects Greek Problems To The Wonderful World Of BRICs, Suggests A German-BRIC Currency Union (For The Sensational Journalists)
by Zero Hedge - February 28th, 2010 11:09 pm
Courtesy of Tyler Durden
Read the following from Goldman’s Jim O’Neill, take two tablets of hopium, and first thing tomorrow use REDI to buy 10 times your net worth in BRIC stocks – buy indiscriminately – they are all going up, up, up. Also don’t forget to buy some Man U leaps. After all with a hundred years of momentum behind you (and billions of dollars spent in lobbying to preserve the status quo) it is not as if something new can ever come out of left field (both literally and metaphorically). At least Goldman’s permabullish analyst has had the chance to read the Goldman Monthly FX Analyst report, which substantially dropped its $/BRL 3/6/9 month targets from R$1.60, R$1.65 and R$1.75 to R$1.75, R$1.85 and R$1.90. O’Neill notes: “it does appear [the Real is] overvalued” Needless to say, we were looking forward to this happening for quite some time. And as much as Goldman touts the BRICs, we are confident that our own creation, the STUPIDs, will be getting much more airtime over the next decade.
I am just back from -another- fantastic trip to Brazil-Rio to be specific……large part of it vacation, a couple of days at the end , business, and the main timing of it, was as a guest of the Mayor and his staff for a special BRICs conference Monday/Tuesday of this week, to help launch the opening of a new BRIC research centre at one of the local universities . I spoke on the opening panel with some well known important local figures, as well as a guest from Russia. There were a number of other panels that pursued aspects of the BRIC topic, including policy types from all the BRIC countries, ranging from the validity of their efforts to be a “joint force”, to environmental issues. Unfortunately, I missed most of these sessions as I had to earn my keep and visit a significant number of clients in Rio- which was also very interesting.
It is indeed, a tough life, but someone has to do it…It was such a dilemma that the event was held at the end of Carnival, and that the weather was over 40 degrees nearly every day, and I went to the Maracana again, and all sorts of other wonderful things…. It was quite a
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Swing trading virtual portfolio – week of March 1st, 2010
by Optrader - February 28th, 2010 10:54 pm
This post is for live trades and daily comments.
To learn more about the swing trading virtual portfolio (strategy, membership etc.), please click here
- Optrader
Some Thoughts on Fannie’s Horrible Year
by Zero Hedge - February 28th, 2010 10:49 pm
Courtesy of Bruce Krasting
Fannie Mae released it’s annual and 4th Q numbers after the close on Friday and during one hell of a messy snowstorm. FNM posted a loss of $16.3b for the quarter and $74.4b for the year. An unmitigated disaster. The timing of the release suggests that they were hoping that no one would notice how bad the last twelve months were. There was nothing particularly new in the most recent quarter, just more bad news. What is happening at Fannie is also happening at Freddie Mac and to a different extent at FHA. There are some trends that I think are worth noting.
It would be a gross overstatement to suggest that Fannie has found religion and is now committed to making ‘good’ loans versus ‘bad’ ones. In my opinion they still must tighten their lending standards if they expect to stabilize their credit losses. But they have moved to restrict lending to better borrowers. The process is ongoing, but the direction is becoming clear.
At this point all three of the D.C. mortgage lenders are pulling on the credit reins. It is obvious from the report the direction that has been taken. Significant additional measures have been announced by the Agencies that will kick in between now and June.
For those economists out there that are scratching their heads as to why they missed by a mile on their expectations of New and Existing home sales last month they need only look at this report for an explanation. It is harder to get a mortgage today than it was a year ago, It will be harder to get a mortgage in one month from today and even harder to get one six moths from today. For me the implications of this are very obvious. Broad RE values will have to go lower, high-end homes will suffer the most in percentage drops.
Consider the following slide.
A major issue for Fannie and the entire country is the REO problem. As of YE 2009 they had an inventory of 89,000 homes. Looking at the information provided one can add up the foreclosed properties from 2007-2009 (290,000) subtract the current inventory (86,000) and come up with a number of 200k homes sold in the past two years. And that number does not…
GGB Investors Demand 7% Minimum Yield As Greek Government Demands Bailout From Rich Expats
by Zero Hedge - February 28th, 2010 10:24 pm
Courtesy of Tyler Durden
The bond deal that was so very much rumored was going to get done in mid (and at most late) February, never really took off. The reason: with each passing day, investors (what little is left of them) are demanding a greater and greater premium, as the country now has less than 3 weeks of cash left at the current cash burn rate. And this is before even counting for €16 billion in maturities coming up through May. According to BusinessWeek the most recent expected benchmark pricing is in the 7%+ range: anything below that liekly will not price.
For now, the tensions over Greece haven’t locked it out of the debt markets, provided it’s willing to pay up, said Michiel De Bruin at F&C Investments.
“We would consider participating in the new bond sale if there’s a good premium” over existing debt, said De Bruin, who helps manage $28 billion of assets as head of euro government bonds at the Amsterdam-based firm. “If they show progress on cutting the deficit, people will be more comfortable with Greek risk,” he said.
De Bruin estimates the country will have to pay a so-called spread of 30 basis points to 50 basis points more than the yield on its current 10-year benchmark bond, which traded at 6.38 percent on Feb. 26, according to data compiled by Bloomberg.
Not only that, but Greece has likely burned bridges with the last round of bond investors, who will think long and hard before giving Greece any more money.
Some investors in Greece’s five-year bond sale on Jan. 25 were allocated more notes than they wanted, and the securities fell when fund managers divested their holdings. The decline pushed the yield on the notes up 37 basis points, or 0.37 percentage point, according to data compiled by Bloomberg.
Another useful, if not too surprising revelation: the ongoing rating agency downgrade barrage does not need to lock out Greek bonds from ECB collateral – the cuts already may have already done necessary (and sufficient) damage. It turns out presumably sophisticated funds still make their investment decisions based on rating agency ratings.
Kokusai’s Global
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Step Aside Greece: How Gustavo Piga Exposed Europe’s Enron In 2001 – Focusing On Italy’s Libor MINUS 16.77% Swap; Was “Counterpart N” A Threat To The Author’s Life?
by Zero Hedge - February 28th, 2010 2:21 pm
Courtesy of Tyler Durden
It is not often that one finds smoking gun reports which refute all claims, such as those by EuroStat and Angela Merkel, in which the offended parties plead ignorance of the fiscal inferno raging around them, kindled by lies, deceit, and blatant mutually-endorsed fraud, and instead, now facing themselves in the spotlight of public fury, put the blame solely on related party participants, such as, in a recent case, Greece and Goldman Sachs. Yet a 2001 report prepared by Gustavo Piga, in collaboration with the Council of Foreign Relations and the International Securities Market Association, not only fits that particular smoking gun description, but the report itself was damning enough of another country, a country which used precisely the same off-market swap arrangement to end up with an interest expense of LIBOR minus 16.77% (in essence the counteparty was paying Italy 16.77% of notional each year as a function of the swap mechanics), in that long ago year of 1995. The country – Italy (for confidentiality reasons referred to in the report as Country M), was at the time panned as the Enron of the European Union due to precisely this kind of off-balance sheet arrangement by the Counsil of Foreign Relations. The counterparty bank: unknown (at least in theory, since the swap was highly confidential, and was referred to as Counterpart N), but considering the critical similarities in the structuring of the swap contract to that used by Greece in 2001, and that ISMA cancelled Piga’s press conference discussing his findings out of fear for the academic’s life, we can easily venture some guesses as to which banks value their recurring counterparty arrangements more than human life.
And only an idiot (here’s looking at you, EuroStat) would miss this striking revelation in the ISMA report made almost 10 years ago, envisioning not only Italy but Greece, which joined the euro on January 1, 2001: “Piga has unearthed some rather striking documentary evidence: an actual swap contract, indicating that one EMU entrant (who, owing to an agreement with the source of the documentation, will remain anonymous) used swaps to mislead other EU governments and institutions as to the size of its budget deficit, so as to falsely suggest compliance with the Maastricht Treaty.” Once all is said and done, and both the euro and the eurozone are forgotten history, it will…
Step Aside Greece: How Gustavo Piga Exposed Europe’s Enron In 2001 – Focusing On Italy’s Libor MINUS 16.77% Swap; Was “Counterpart N” A Threat To Piga’s Life?
by ilene - February 28th, 2010 2:21 pm
Step Aside Greece: How Gustavo Piga Exposed Europe’s Enron In 2001 – Focusing On Italy’s Libor MINUS 16.77% Swap; Was "Counterpart N" A Threat To Piga’s Life?
Courtesy of Tyler Durden
It is not often that one finds smoking gun reports which refute all claims, such as those by EuroStat and Angela Merkel, in which the offended parties plead ignorance of the fiscal inferno raging around them, kindled by lies, deceit, and blatant mutually-endorsed fraud, and instead, now facing themselves in the spotlight of public fury, put the blame solely on related party participants, such as, in a recent case, Greece and Goldman Sachs. Yet a 2001 report prepared by Gustavo Piga, in collaboration with the Council of Foreign Relations and the International Securities Market Association, not only fits that particular smoking gun description, but the report itself was damning enough of another country, a country which used precisely the same off-market swap arrangement to end up with an interest expense of LIBOR minus 16.77% (in essence the counteparty was paying Italy 16.77% of notional each year as a function of the swap mechanics), in that long ago year of 1995. The country – Italy (for confidentiality reasons referred to in the report as Country M), was at the time panned as the Enron of the European Union due to precisely this kind of off-balance sheet arrangement by the Counsil of Foreign Relations. The counterparty bank: unknown (at least in theory, since the swap was highly confidential, and was referred to as Counterpart N), but considering the critical similarities in the structuring of the swap contract to that used by Greece in 2001, and that ISMA cancelled Piga’s press conference discussing his findings out of fear for the academic’s life, we can easily venture some guesses as to which banks value their recurring counterparty arrangements more than human life.
And only an idiot (here’s looking at you, EuroStat) would miss this striking revelation in the ISMA report made almost 10 years ago, envisioning not only Italy but Greece, which joined the euro on January 1, 2001: "Piga has unearthed some rather striking documentary evidence: an actual swap contract, indicating that one EMU entrant (who, owing to an agreement with the source of the documentation, will remain anonymous) used swaps to mislead other EU governments and institutions as to the size of its budget deficit,…
TCW On Greece: “Let It Burn”
by Zero Hedge - February 28th, 2010 11:58 am
Courtesy of Tyler Durden
TCW, which incidentally is facing some pretty serious problems of its own lately, chimes in on Greece. Komal Sri-Kumar, Chief Global Strategist, is painfully realistic in believing that Europe should be much more worried about keeping the strength of the eurozone intact, and if that means jettisoning Greece, and devastating the euro, so be it. In fact, for an export-heavy Germany, this is precisely, as Zero Hedge has long been claiming, the end goal.
Ze Germans: “Only The IMF Can Help Greece”
by Zero Hedge - February 28th, 2010 11:42 am
Courtesy of Tyler Durden
Those banana-hugging Germans strike back, and by doing so, throw the rotten apple of the imminent Greek collapse straight into America’s back yard: in today’s edition of Handelsblatt, German politicians have said that only the International Monetary Fund is the right institution to save Greece from going bankrupt. While the increasingly irrelevant Greek rumor-spreader has been very busy over the past few days, getting Greek newspaper Ta Nea to announce that now Caisse des Depots has entered the KfW bailout syndicate, in an interview with German TV station ARD, Merkel said that not only is this yet more gibberish but that there is no legal basis for any of the rumored actions. So what will happen to Greece? Well, if former ECB Chief economist Otmar Issing has his way, Greece’s dirty laundry will end up being washed by American taxpayers, because you see Greece is just as much a member of the IMF as it is of the EU, or so the Germans claim.
Rough google translation from Handelsblatt:
Former ECB chief economist Otmar Issing provides a similar view: “My preference is that you turn on the IMF, since Greece is a member of the IMF, not the European Union“, said the current chairman of the Intergovernmental Commission for the financial architecture for information in this newspaper recently the Europe Committee of the Bundestag. The monetary union was not a state, Issing argued, but a community of sovereign states. If you could help Greece, other countries refuse to help little, “he said.
Not all that shocking, a Greek default (but, but, it is only 0.00001% of world GDP or whatever), it is now confirmed, would be the next Lehman:
A bankrupt government would meet not only the euro zone, but shaking the entire global financial system. After the video of Obama, Merkel and Brown said the spokesman for the U.S. president, Robert Gibbs, Obama was convinced that the EU would respond “appropriately and effectively” to the crisis. On the foreign exchange markets, the continuing uncertainty sparked a new wave of speculation against the euro. According to the U.S. inspection CFTC, the number reached bets on a falling euro share price, a new record. This year, the euro against the dollar has lost about ten percent of its
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Weekly Wrap-Up – Buffett’s Daring Derivative Deal Does Well
by Phil - February 28th, 2010 9:30 am
I was going to talk about Buffett’s annual letter to investors.
Fortunately, I procrastinated and other people did some detailed reporting like Ravi Nagarajan, Andy Fry, Scott Patterson and Joe Del Bruno – who does a great job of pointing out that Berkshire’s 4th quarter results were propped up by Buffett’s $1.05Bn gains in derivatives betting (something Buffett himself once called "weapons of mass financial destruction" but, as we well know – if you can’t beat them…), which accounted for 1/3 of Berkshire’s $3.06Bn profits.
Buffett’s biggest bet was selling a put against the S&P 500 back in March – a move I said at the time was BRILLIANT and Buffett himself now says about his own options trading: "We are delighted that we hold the derivatives contracts that we do. To date, we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts."
What did Buffett do? Exactly what we teach you to do here at PSW - he took advantage of an irrational move in the markets and SOLD INTO THE EXCITEMENT, getting a fat premium from some sucker that bet the S&P would not hold 666 5 years from now. Buffett effectively sold $5Bn worth of puts that expires worthless at S&P 700 between 2019 and 2027, putting $5Bn in his pocket and holding aside $1Bn in margin, which is how much he’s already ahead on the bet. Like a good options trader, he has a plan and he’s trading his plan, making sure his investment is on track and patiently letting time do it’s work as it eats away at the put-holder’s premium.
What about the risk? Well I can’t speak for Buffett’s stop-loss technique but we’re talking about a company that has (had) $40Bn in cash using their excess margin to make a $5Bn bet that the S&P would not stay below 700 for 10 years. Buffett and I both tell people – NEVER buy a stock (or sell a put against one) that you are not willing to own for 10 years. The S&P was 5% below at the time and would have had to drop, perhaps, 20% more to cost him $1Bn so let’s call the stop 550 on the S&P where Buffett risked 2.5% of his cash against a posible 400% gain on his $1Bn risk allocation over 10+ years. While it is true that if the S&P dropped 50% in one day Buffett would be…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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coordinator for PSW. She manages the Favorites backup site
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