Eli probably has the best trading strategy for this week: close positions, wire money out of broker and into FDIC bank.
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FYI – futures continue to dive ~ midnight. Asia (Hang Seng way…y down) headed down as well. Not the expected reaction – the House Rips have come out in support. That was expensive I’m sure.
Ahead of an official bailout, from September 10th through September 24th, the Fed pumped ~$250 Billion of liquidity into the banking system through the Federal Reserve Bank “FRB” credit. The FRB credit spiked from $888 Billion to $1,135 Billion. This was an unprecented increase of more than 25% from levels in August and a month over month increase 5x larger than seen after 9/11.
http://econompicdata.blogspot.com/2008/09/no-response-to-25-increase-in-fed.html
Does the U.S. market (and futures) affect the foreign markets? Or, are they anticipating the U.S. cash market will take a dive when it opens Monday? The old cart and horse thing.
K, thanks for keeping us updated. Yet another indication of how tight credit has become.
George,
I think a little of both, with the US providing the leadership in both directions. For example, the US was up significantly on Friday, while the rest of the world closed down.
The futures are down now. My prediction: fade the big morning move is still in play. A big drop followed by the House passing the bill, followed by a rally.
Right now WFC and C bidding for WB. I wonder if FDIC will bankrupt them first, like WM?
Damn. The bulls don’t have many shorts left they can squeeze on bollocks news!!! LOL
Could we please have a rally here. Second half year recovery is in full swing now.
German DAX falling off the cliff:
http://www1.deutsche-boerse.com/parkett/DAX_chart_realtime.jpg
Hang Seng down 4%. Might be good for my little FXPs.
See you later, guys. I leave the technical analysis to you.
ahaha s&p down 22
dow down 181
rally hats!!!!!!!!!!!!!!!!
oh myyyy
WB down 65%
AAPL down 7 bucks.
why even have the bailout on a black monday that I have called for second week in the row now? tis not october yet. gosh.
Paul K — Roubini’s take on the proposed bailout is interesting; thanks for posting (the direct link is http://www.rgemonitor.com/roubini-monitor/cat/Uncategorized/) — in brief, he recommends applying
“public funds in ways other and more effective than a purchase of toxic assets: via public injections of preferred shares into these firms; via required matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; via suspension of dividends payments; via a conversion of some of the unsecured debt into equity (a debt for equity swap).”
In Roubini’s analysis, the Treasury’s bailout plan benefits the banks’ shareholders, whose risk capital should suffer from the banks’ reckless lending.
As the former head of Goldman Sachs, Paulson may have priorities that don’t reflect the nation’s interests. At some point rationality needs to return to the system, and if Paulson is not a credible broker, this is a major problem (getting down on your knees is not the kind of argument we need).
The combination of a bunch of oil guys running the White House for that industry’s benefit and a bunch of investment bankers controlling the Treasury and blackmailing the nation into bailing out their industry may be just the recipe for a continuing crisis.
In addition to the above, Roubine is also proposing to help distressed home owners, see http://www.rgemonitor.com/roubini-monitor/253653/we_need_a_new_holc_-_more_than_a_new_rtc_or_rfc-_to_provide_massive_debt_relief_to_the_household_sector_we_need_to_create_the_home_home_owners_mortgage_enterprise
The underlying problem is that the cake is shrinking, and everyone is fighting to retain their piece. So far I’m not seeing the level of solidarity and working together that is going to be necessary to create a long-term solution.
You need two things for a bailout to actually work: a genuine systemic rescue and a clear and united message to players domestic and foreign that the solution is the right one and will produce the advertised consequences. The Scandinavian parliaments and regulators devoted a lot of energy to communicating their rationale, and ascribe to this communication effort much of their success. The danger here is that the main players are too corrupt to arrive at a rational solution that can be credibly communicated and generate confidence.
European markets are in the basement — that alone is a powerful vote of non-confidence in the US system. Still, I expect the US markets to jolt up today. I’m staying out until the air clairs — it would be nice to have a decisive fall and to start playing the fall recovery.
K
Dax & ndx have retraced around 100%, s&p stayed above 1285 so far – we might have a basis here. I see lots of desparate (bull’s view: energetic) changes put in place to prevent a meltdown now. It would be ungrateful and outright stupid from Wall Street to crash the very instant it receives the nest eggs from the taxpayer.
WB is the last of the dropping major shoes and someone will be there to catch it – but not the shareholders.
Paul F;
Thanks.
Ms. Market is spanking those that drag their feet. This could be a great setup for the bounce back up.
Kailash, great comment
“As the former head of Goldman Sachs, Paulson may have priorities that don’t reflect the nation’s interests.” I’m missing an open debate whose interests the Fed is reflecting. A nationalisation and a clear cut between public and private institutions would be necessary first steps to rebuild trust. Next would be the introduction of binding law that protects private investors from randon actions by govt agencies.
TNX (Ten Year Treasury) is down only .79 basis points. I would have expected it to be lower if this was a crash.
Isn’t October usually the month when “bad” markets hit?
yes george that is what im thinking. october is on the verge. so we might be ok tilll then
I don’t suppose that anyone know what will happen to WB’s shares? Wipeout @$0? This bank could have survived with the bailout. FDIC says not a bankruptcy?
October “bad” markets? Thot so, too; however, Stock Trader’s Almanac says: “Best Dow & S&P month last 10 years; October is a great time to buy”.
Its rep is based on the crashes in 1929, 1987, 1997, etc. They say “October is a “bear killer” and has turned the time in 11 post-WWII bear markets.”
Probably a “great time to buy” because of such low prices, which contradicts their basic theory, and probably depends on whether they’re looking at the start or end of October.
Just wanted to throw this in, since everything is so clear and, obviously, this time it’ll be different!
SPX tested and broke through it’s 61.8% retracement level. Looking like it might go back up and test it again. That would be an ideal place to enter a short position I think if the rules hold that old support levels become resistance once broken.
Would you belive it – my Roadrunner internet went down 5 min before market opening.
I’m on dial-up. Can’t trade with this connection.
You can bet Time-Warner has heard from me!
WELL i’ll be.
apple got downgraded. WOHOOO BUY TIME
i am sorry your wachovia shares got “wiped out” paul. I hope you didn’t have much invested, i know a person that invested hundreeds of k’s into SOV and OUCH it was their reitrement money!!
oh well what shall i do with my free hour. i wouldn’t want to miss a good trading opportunity
Sold my FXP babies. Maybe a bit too early. But wanted to take the profits. It took ages till the order went through, btw. Will maybe buy back in the afternoon. Just in case they will go down again.
Damn. I sold too early.
Guys – however you feel like betting on market internals keep on eye on the credit markets. Aside from WB and European bailouts 3Mo Treasuries are tanking again today. IRX dropped 30% so far.
VIX is exploding. Is anybody here to support me? What is the meme of the day?
K,
It wasa a small position, so it’s not a big deal. My gains from JPM will offset part of it anyway. The more I read, the more it looks like the shares won’t be wiped anyway.
FDIC:
- not bankruptcy (WM the share wipeout was announced right away)
- taxpayers wan’t lose money (where have I heard that before…), but C takes the first $42 billion in losses, and FDIC takes the rest on $312B portfolio. If these are just mortgages, should be okay.
- WB keeps brokerage business: AG Edwards & Evergreen.
but you won’t get as much for it hence i called it a wipeout.
i have 30 mins anyone have any stocks in play right now? I feel like making some quick bucks.
K,
I figure my WB position is looking more likr the $700 Bailout: it will likely be huge loser, but I may still come out ahead. I’ll probably close it once the market stabilizes.
If there wasn’t that stupid shorting ban on financials I would buy UYG right now. See what this ban is doing to the markets?
K,
I bought some UNG (natural gas). It is at 52-wk low. It will either bounce up and test resistance or plummet down (or both).
Paul F;
Had I thought of WB on Friday, I would have bought.
My Roadrunner is finally “running” again.
Gold doing nicely today.
Silver down. but up 1.5% from early monign purchase price.
I think that there are enough loopholes that BAC, JPM, and C will make out on this. The bailout will try and prevent companies from sellling toxic trash for maore than they bought it for, but mergers and acquisitons (Countrywide, Merrill, Bear Stearns, Washington Mutual, Wachovia) are an exception.
Citi paid WB (not FDIC) $2.16 bilion, which is WB’s presetn capitalization. I can only assume that without it’s mortgages, WB had a positive book value before this infusion, so I don’t foresee a further drop in its stock. I’ll close my positon at >$2/share or at October expiration.
Big Moves = Easier Trades
We have a MACD cross and positive divergence on the SPX right now so if you bought when it was inthe 1170 range, then you might make a small profit from this. I doubt that the bottom is in though. The big test is that if the SPX can make it back up to 1183.. if it bounces off that or goes through it. That was previous support.
Guys Guys…ready to beat me down?
In apple at 108.50 using 1 min chart now watching 5.
as soon as i post this i want the price to skyrocket!!! no contratian!!
Anyone suprised that WB failed this morning? Make no mistake they failed – like BSC or any of the future banks that will be taken-under. All this plan does is recap the large banks at the expense of the smaller. All losses will be backstopped by the taxpayer. C, with their leverage and shoddy portfolio, is in bad shape as well – but they will be given a clean slate by taking the distressed assets of their prey to the gov’t for a king’s ransom.
The writing’s on the wall – C, BAC, WFC, JPM – these are the chosen ones.
Research the Texas Ratio to find out which bank is next…
The economy is going under no matter what.
@K: AAPL will go down below $100. So be careful!
out of apple at 110 time to eat.
110-108.5= 1.5 *20= $30 -14 commission = $16. i don’t care just thought i’d share. i don;t want to be in class checkin on it am sure it’ll reach $115 today/
K;
WTG. That’s the way to do it.
Hey K,
that is a nice profit!!! You can buy a decent lunch with that
TWC (Time Warner Cable) is in the crapper. If I could short it, I would. I’m going to start trading it on the long side to get my subscription cost back.
questioning,
I’m surprised – as evidenced by me long WB position! Of course I knew that they were insolvent, but so are the big three. Also, don’t forget, that Goldman and Morgan Stanley also have MFB (Most Favored Bank) status with the US government.
The bailout has various taxpayer safeguards in it: warrants, Congressional oversight, price models, and the 5-yr clawback in it. Unfortunately, their effectiveness is controlled by the Secretary of the treasury of the United Banking System of America. Perhaps the 5-yr clawback that was put in this weekend will simplify this to a 5-yr $700billion interest-free loan…
A friend summed up the situation by commenting that we’re in an environment where “short sellers . . . are risking private money betting against badly run businesses and governments are risking public money betting in favor of badly run businesses. You don’t need a Ph.D. in finance to know which group of folks believe in truth and free markets. . . . You can expect to see all foreign banks move their toxic waste to their U.S. subsidiaries for delivery to Henry’s Helpful Handouts.”
- Fleckenstein on MSM
Look at the foreign banks that are in the process of buying in on the charity of the US Gov’t. Barclays, Mitsubishi are two…
While the overal economy will suffer, the bottom may be in on the chosen financials. Can you imagine the surge in C – based on the eventual ‘write-up’ on its profit from selling WB’s distressed assets (-42B based on their real-time valuations) to the gov’t (furture maturity value)?
Good morning all (West coast guy)
While I’m selling eveything today, was wondering if anyone had an opinion on purchasing Treasury bills/bonds in this upcoming financial decline? Good or bad? Thanks all.
I have a sneaking suspicion that warrents will only be issued if federal money is used in the backstopping of the purchase of the distressed banks… i.e. if more than 42B is lost by C on WB then the FDIC backstops; however, I think this legislation will be passed soon enough – allowing C to recoup those losses and then some…
Oversight is worthless without a veto power.
Are the price models are the “Mark to Maturity?” I’m not sure, but I’m fairly certain that the general public will not ba able to view those “models”.
I agree that GS is one of the chosen ones, I just don’t know how much upside they have with their current price and being limited as to how they can generate revenues as an actual bank.
http://www.nytimes.com/2008/09/29/business/29hedge.html?_r=3&ref=business&oref=slogin&oref=slogin&oref=slogin
Business model and days of the Hedge Fund might be over. Is this why the downturn today and potentially tomorrow?
Yet another message to Congress.
questioning, you can’t rely on the politicians alone, but if the spotlight is kept on this mess, you’ve seen what public pressure can do. My opinion is that this a great deal for the large banks no matter how you cut it. Without the deal their companies have a net worth less than this laptop, so I’m still not going long financials.
In terms of the taxpayer, I’m not sure whether this will be a big loser or not, but its miles away from Paulson’s sure-fire taxpayer reaming. Just have to wait and see.
eli,
Short-term treasuries are a sure loser: they can only go down in value from here. An FDIC bank account is a much, much better investment than Treasuries unless you are maxed out (>$100k per account).
Long term treasuries may win out, depending on how long this recession wil last. I would wait until we get a rally and treasuries drop in price before buying.
Jubak’s insight is right on target:
http://articles.moneycentral.msn.com/Investing/JubaksJournal/lets-not-rush-to-blow-700-billion-dollars.aspx
I agree – this is something that has to be done – or the majority of society will be back to bartering for goods and services. It’s just that the plan should be modified – similar to Mish’s ideas. Dictatorships arise from crises (not saying that it will happen, but if we don’t learn from the past, we are doomed to repeat it) and we are about to give Paulson unquestioned authority over the greatest economy in the world.
To all short – I’m one of them too (I’ll wait for a bounce before I go with way OTM Jan puts on all the indices) – this proposal is not the final bullet that the gov’t/PPt can fire. Notice how they are structuring this – 250B now… with the ability to spring the remaining whenever they want…
I’m now closing in on David YTD.
But this is no fun anymore, tomorrow is hedge fund redemption day?
Agree w Eli and Matt. Stay safe folks. Don’t forget whiskey and cigarettes.
Thanks Paul, good advice
questioning,
The government has near unlimited power. However, the more they attempt to weild it in uncapitalistic, dictatorial, and arbritrary ways, the closer the US will edge towards a scary abyss.
Picture 2 years from now if
1) credit is still tight,
2) unemployment is higher,
3) inflation is higher, and
4) the government is losing money on MBS’s.
I am not saying that is what I think will happen, but it is well within the realm of possibility. While the transfer of wealth from the masses to the rich has been going on a while through backdoors, this one can’t be hidden.
While the PPT is not out of bullets yet, the public is starting to realize that the PPT is shooting at THEM, and if the PPT isn’t careful, the public may shoot back: literally. I don’t know for sure, but given the US’s population’s size, wealth, and liberal gun policies, we may have more guns in private hands than any other country in the world.
Goog below $400… either great opportunity or another sign of deflation.
“Da Boyz” really played this one smart. All the EOD buyers Friday… drive it down… wait for the bailout news… go long.
I should have had a V8.
I bot SSO EOD Friday. Gap down 2 bucks. Made it back from SSO/SSD scalps, so now I almost have a free ride in SSO’s Friday trade.
Use the Farce…
VIX hit 40 (now at 39.84).
3-mnth reasuries rates are at 0.65%: worried, but not paniced. They have been moving up all day.
Matt, I’ve noticed that you’ve been quiet while the market’s been open the last few days. Taking a vacation?
No BBT unil the deal is done. NCC is down to 1.97 – yummm.
Oil is taking a severe beating, down 7-8%, below $100 again. Goldman still hasn’t retracted their $150 call, as far as I’ve heard…
SSO 15 minute MACD trying to cross up. I’ve learned and got burned before waiting for confirmation.
I’m watching the SSO right now too George. Risky IMO.. Right now, I’m not sure if the bailout is going to pass or not. Initial reaction might be market euphoria.. but then what? And how long will that euphoria last?
Most of Asia and the Middle East (our money supply) hate it, but they can’t do anything right now as they hold so much USD that they can’t afford to adopt any anti-USD policies.. but sooner or later.. they are going to have to say “.. crap.. I’m selling.”..
Charlie;
Yes, risky. There are some nice lazy swings being made on the pairs so far. Risk will be lowered when or if 15 minute changes command.
I think that it is interesting to compare the way “socialist” Europe is handling Fortis and “capitalist” USA is handling their bank problems.
Welfare for the poor vs welfare for the rich.
Charlie – on Asian flows. True but what’re their options ? A reason for flight to Treasuries. It’s not just about how bad you current idea is but what better alternative are or aren’t available. Other than mattresses and if things get ugly a Chinese mattress will be less safe IMHO.
Nearing a intra double top on SDS 1 and 5 minute.
Positive divergence on the SSO 5 minute stochastic – can’t tell about the MACD although it has been moving up all AM.
House is currently voting on bailout.
CNBC is wondering if the bill is too constraining on Paulson (Dennis Kneale), and whether banks will opt in (Bob Pissani). Idiots.
Excellent example of a non-confirmation of the 15 minute on SSO. It may still come, but that is usually a volatile area.
Wow, anybody get a piece of that scalp?
PS, their was only 63 pub votes, so the Dems bailed. Now they are trying to get more Pub votes
The 5Min SPX chart looks like it’s tracking every vote, motion and speech. Who says politics doesn’t matter ?
Live C-Span count (Y/N/NV)
D 141 94
R 66 132 1
I
Tot 207 226
Not sure what amendment is up for vote. Not the overall bill. Would say though that all the duckies are NOT in a row.
Bismarck was sure right.
Paul F;
Yes. Dumb luck.
VIX still exploding. Unchartered territory. Sold my FXP babies way too early.
Perhaps a preview of things to happen if this does pass?
Geeze, the market is Flying!
I like volatility, but dayum.
Technicals thrown out the window?
Restless in Seattle = Clueless in Washington?
This thing may bounce around all week.
Hey, I don’t envy those folks trying to hammer this out. Maybe Bernake said, “okay, if you don’t believe me, just shoot it down and watch the market reaction”.
George, yup, techincals out the window – about 2-3 weeks ago.
Basically, there wasn’t enough Pub support, so the Democrats didn’t like the politics. Once it was clear that it wasn’t going to pass, that is what casued the crash, so it wasn’t a “sell the news” preview of things to come if it did pass.
Of course, if we already lost WB, WM and Leh without a nuclear meltdown, then how big a problem is this?
It is becoming clear that the “Fat Cats” in Washington don’t have investments in the market. These political games could be hazardous to our country’s health.
Okay, I’ll hush and make another trade.
One note: observe the stocks that took a big hit immediately, but then recovered. These are the stock you should be buying. The ones that dropped and haven’t recovered are the ones that should be sold.
Hey Frank, back up the dump truck… a little more… a little to the left, easy now… o.k., stop. Now, dump’er into SSO.
Ahhh, that’s enough, we’ll save some to burn and keep warm tonight.
Actually, the stochastic and MACD are okay. The stochastic can’t be beat.
Excuse my ignorance, but you folks getting totally out of the market, are you not going to do any kind of trading or investing? Or, are you just moving the bulk to safe instruments?
Thanks
You guys throwing yourselves into this market? I’m 85% cash and nervous as a cat in a room full of rocking chairs.
Feel like it could go 1000+ points (on the dow) in either direction this week.
Paul F;
My “dumb luck” didn’t make any profit – kept me from losing with my position in SSO.
Just to clarify.
Well maybe this’ll be a wakeup call. Henry and Ben weren’t kidding and tried their best. Look at the vote. How ironic that a R president and Tres Sec proposed the most massive intervention in post war history, got stronger backing from the opposition party and were roadblocked by their own party. This’ll settle the election IMHO.
Now the hope has to be that all the people who weren’t paying attention will start flooding their representatives with “WTF – pass the damm thing” e-mails real soon now before this gets really serious.
Had friends phone calls and e-mails within minutes. Listening to C-Span the callins had people in tears – along with the Ron Paul supporters chanting let them all burn in hell and cleanse their evil. Almost literally.
I’m all cash right now. Had a small short position Friday, but closed it out the same day in anticipation of the bailout. Looks like I missed the boat, once again.
I’m actually quite surprised this thing didn’t pass. We’ll see how happy everyone is that their representative listened to them (and voted against it) when they find out their 401(k) just loss 10% because of it.
Dblwyo;
That’s some sad stuff there. I hate this for our country. It’s a helluva mess and we need to do something – try something – make an attempt.
The Great Economic Experiment is unfolding before our very eyes.
Guys,
Interesting going from this point forward. IWM and SPY have made new intraday lows. I think that is a good technical indicator: one less anchor to pull us down later. If we do get another bill passed this week, then I think we will get a rally until November.
Even if we don’t get a bill, there will always be that possibility out there, which has to make bears a little cautious: they don’t want to get caught again like on Thursday (9/18).
I have to agree.
Here’s how I would sum up the bailout: I don’t like it, I’m not sure it will help, but I don’t see it making things much worse. After all, $700 billion is a drop in the bucket if we’re in a depression. The downside risk if we do nothing is far greater than if we do something – anything.
ICE down over $15. It will make a heck of a comeback with any type of momentum reversal.
what the he double hockey sticks!
down over 500pts? if it doesn’t reverse today I think I will get a small position somewhere just for the heck of it. weve always seen these drops turn into gains but this might be different. sawomething told me to withdraw some cash and so half a K (yes half of me) will go into a safe if it makes it home. just preparing for the worst and hoping for the best like everyone else. glad I closed my apple position by following technicals
-K
Basically, I don’t think we’ll plunge, but we will probably keep creeping down until a bill is passed.
I also can’t believe that the bill was put on the floor before the votes were guaranteed.
George – if you’ll permit me another “wry” (as in wrung-out) observation my early religious training from which I went apostate into business was in economics.
To all my friends over the years who argued it was unproven and unprovable my reply was and is au contraire….economics is the largest-scale experimental science there is…short of mucking around with the ecology.
Consider this another laboratory experiment and us the lab rats.
After we get over the WTF reactions now might be a really good time to contact your Congress person and Senator and saying something like “quit screwing around and vote for this damm thing unless you’ve got a better idea”.
Dblwyo;
I’m with ya on that one!
anything worth trading right now for the next 40 mins?
just got on a real computer
whoops -700!!! YAY?