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Long: GLD
Voltron's economics blog. Started in Iraq in 2007 as the "Gamblers Anonymous Support Group" email list.
Disclaimer
This is not an offer to buy or sell securities in any jurisdiction. This blog is for informational purposes only. I do not give legal, tax or accounting advice of any kind. I am not a licensed financial advisor. I make no representations as to the suitability of any transaction at any time. In fact, you should ignore everything I say.
Voltron's Current Forecast
Wall Street and the government are about to engage in battle and recriminations in the face of a massive wave of foreclosures. Wall Street will start yanking the leash, causing stock market crashes whenever the status quo is threatened.
The economy is fake and is dominated by fraud and criminal activity. The government is running several giant ponzi schemes.
The DOW/GOLD ratio will drop to 2.
The Fed's announcement that they are going to print a Trillion dollars and use it to buy debt is the proverbial "crossing of the Rubicon" The US Dollar is toast. I think the trigger will be some of the smaller holders of Treasurys (Singapore, for example) trying to dump their holdings before China does. This will cause a panic stampede out of Treasurys which will destroy the dollar.
Wells Fargo are liars. They have over 150 Billion in worthless home equity loans and a Trillion dollars in off-balance sheet liabilities.
Do not abuse leverage. The Fed is going to spend limitless amounts of money to pound interest rates and Gold prices into appearing "normal" when in fact they are on the verge of exploding. The tremendous volatility will shake out leveraged players.
Long: GLD
Calculators and Tools
Blogs I read
- Capital Account with Lauren Lyster
- Max Keiser
- Mortgage Lender Implode-O-Meter
- Naked Capitalism
- Zero Hedge
- The Big Picture
- Euro Pacific Capital
- Safe Haven
- MISH'S Global Economic Trend Analysis
- Nathan's Economic Edge
- Dr Housing Bubble
- Karl Denninger's Market Ticker
- Calculated Risk Blog
- Jesse's Café Américain
Education Links
Smartypants Hall of Fame
- Economist, Steve Keen
- Hedge Fund Manager, Hugh Henry
- Radio/TV Host, Max Keiser
- Stock Analyst, Ivy Zelman
- Fmr Options Trader/Philospher, Nassim Taleb
- Fmr Regulator, William K. Black
- Derivatives expert, Janet Tavakoli
- Fmr Hedge Fund Manager, Andrew Lahde
- Fmr Hedge Fund Manager, Dr. Michael Burry
- Investment Advisor, Marc Faber
- Short Seller, Jim Chanos
- Hedge Fund Manager, John Paulson
- Stockbroker/Economist, Peter Schiff
- Columnist: Damon Vrabel
- Investor, Jim Rogers
- Bank Analyst, Meredth Whitney
- Fmr Regulator, Brooksley Born
- Economist, Nouriel Roubini (NYU)
- Artist/Filmmaker, Paul Grignon
- Congressman, Ron Paul (R - TX)
- European Parliamentarian, Daniel Hannan
- Hedge Fund Manager, David Einhorn
- Hedge Fund Manager, Bill Ackman
Comic Relief (videos)
- NOMINT: Greek Crisis Explained
- Brits: Congratulations! You’ve Only Lost $1 Million Dollars!
- Daily Show: The banks can't lose
- Daily Show: Fat Fingers
- Ratigan: Financial Fraud For Dummies
- NPR: Bet Against The American Dream
- Daily Show: In Dodd We Trust
- The Onion: Money is an illusion
- "Fear the Boom and Bust" a Hayek vs Keynes Rap
- Mint.com: R U Unemployed
- Yes, Minister: A Conflict of Interest
- Colbert: Honor Bound
- Colbert: The Fed
- SNL: US-China Relations
- Daily Show: Dow 10,000
- Daily Show: High Frequency Trading Cash Cow
- Daily Show: Home Crisis Investigation
- Brits: The elephant in the room
- Daily Show: The bailouts are working!
- SNL: Bailout Skit (uncensored)
- South Park: The importance of saving money
- South Park: How the Treasury Dept works
- Subprime Mortgage Crisis Blues
- Brits: Subprime crisis (part 1)
- Brits: Subprime crisis (part 2)
- SNL: Conspiracy Rock
- For Kids: The Mississippi Bubble
Ways to make money when stocks go down
Option Trading Tools
Blog Archive
-
▼
2009
(456)
-
▼
June
(22)
- Where's the gold?
- There is no exit strategy
- Treasury to Auction $104 Billion In Debt Next Week...
- Wells Fargo options market activity
- China sells US bonds to 'show concern'
- Banks Can Still Be Insolvent
- Weird stuff going on
- Fitch Expects Home Prices to Fall through 2nd Half...
- Big Banks Suffering Losses As Subprime Mortgages G...
- WANTED: Money for Uncle Sam
- The dice are loaded
- Mortgage Rates Explode Upward
- Wells Fargo Rally Can't Last
- Option ARMs: you've still got a long way to go
- Here Comes Hyperinflation
- Wells Fargo not invited to the party
- Russia May Swap Some U.S. Treasuries for IMF Debt
- CHINA AIRS FEARS ON DOLLAR, DEBT
- Gross Says Diversify From Dollar as Deficits Surge
- Quick note
- The Big Collapse Could Be Very Near
- Discussion Archive
-
▼
June
(22)
201 comments:
1 – 200 of 201 Newer› Newest»Hi Voltron,
Todd & I love the comments you add to the articles. Certainly helpful as I bought puts against WFC, MER, and LEH before this run up. Therefore we are not in the money and reading your articles gives me some hope.
Thanks again,
Shelley
I recommend options that are very long dated (like year 2010). I know they are more expensive (therefore less leverage). The market is studiously ignoring the looming Alt-A crisis and will continue to do so as long as possible. In my forecast I mention that there will be a false bottom in 2009, between the subprime and alt-a peaks. I do not recommend waiting to buy puts or short positions because there is always a chance that the market will fess up early. Expect your options to go deep out of the money in 2009 and then cash-in in 2010. I your options expire before 2010, I recommend selling them and buying (fewer if necessary) 2010 options.
-Voltron
Thanks for running the site.
When you suggest buying 2010 puts, how do you decide the price to buy?
For WFC ~$29 do you buy Jan10 $15puts? or Jan10 $25 puts?
Dont know much about the underlying theory of buying in the money or far out of the money puts/calls.
thanks again!
(ps. different Todd from the first post)
I usually buy "at the money" puts. I.e. puts near the current stock price. The reason is because there is more "convexity" which you can think of as "optionality" (your position grows as you go in the money) or you can google the term for a more precise definition. As my options go deep in the money, I sell them and buy (more of contracts of) lower strikes. This is called "rolling down your strike"
Thanks for your response. We also bought into SRS at $112. Do you feel this is going to make a comeback this year?
Shell
SRS is a long term play. I'm hoping it goes up before the overall stock market crashes. Word on the street is that SRS is down because people are putting money in commercial real estate simply for lack of a better place! The ETF has limited loss like an option, but unlike an option never expires, so it's easy to stay "short".
Voltron,
Hate to hear you're back in Iraq. I am sure those guys over there will love your insight as much as the Gunfighters did!
Today, I read that the Fed increased emergency reserves it supplies to U.S. banks to $150 billion in May, from the $100 billion it supplied in April. The cheerleaders on CNBC state that all the investment banks and commercial banks will be fine since the Fed can print money if need be. This shocks me! Why collect our taxes if they can just print money? (J/K) seriously though, do you feel the Fed can pull this off?
Shelley
Yes, they can do it but it continues to trash the dollar which is why oil is so high.
Voltron
Tron,
I am trying to calculate the basis for a fund that was purchased in the early eighties. Do you know how I can determine the price of the fund back then and through the years since? Is there a good website? The company is not very helpful providing all of the transactions goign back that far so I am being forced to do this myself.
-Linus
Linus,
how much did you pay for it? That's your cost basis.
Voltron
Tron,
Would you post Nouriel Roubini's article The Systemic Effects of Countrywide Going Bust….
I am having a problem opening it.
Thanks.
Also - good call on Moody
Tron,
Back in April you recommended selling my short term puts to invest in long term puts. However, at that point in time my puts were out of the money by $40K, so I did not sell and was not able to invest anymore of our savings (without my husband killing me :) J/K). I recently sold the puts for a total profit of $7K. Now I am interested in buying those long term puts but am unsure what companies to pick. Lehman and Moodys have taken hits, and I am afraid it is too late to short them? any other good targets? How about AGO or PNC?
I know that any recommendations are not professional advice.
Thank you,
Shelley
I still think LEH, MCO and WFC have a long way to go. That will probably be it for my short plays for the foreseeable future.
I've been rethinking shorting in general. Checkout this post: http://cfcsux.blogspot.com/2008/05/rethinking-shorting-stocks.html
Voltron,
Hope things are going well in the sandbox. I'm in DC and just talked to BUSS.... am thinking of getting back into shorts of LEH, WFC, and maybe MCO. I'm kind of a simpleton and the dates on the posts on GASG are out of whack, so my question is what is your 3-6 month forecast on puts for those three companies. I've got post deployment money (a chunk of which i got from CFC of course) to work with.
Ed Jeep
I think the government will try and keep things afloat until the election, but may fail and certainly should pull the rug out before or shortly after the inauguration.
I've purchased call options on SRS, SDS and put options on WFC that expire in DEC08 or JAN09.
Voltron,
This is Buss's buddy Doug, aka Dirty. I met you at the field when you got back the last time. I'm wondering if you've though about a play on a pay-option loan melt down. From what I understand they are securitized differently than subprime and have yet to really fall apart. When I was in the loan business I saw poeple with these things constantly and they had either already recast or were about too. People are struggling to hang on and make the payments. One of the big makers of these was World Savings who was bought by Wachovia a few years ago. Can you think of anyone else with big exposure to these?
Dirty,
All the Alt-A lenders, like countrywide, and wachovia are already trashed. I'm short Lehman Brothers (owns securitized Alt-A) and Wells Fargo (HELOCs). Both have rallied, so It's probably a good time to short them.
Voltron
Dirty,
from Mr Mortgage 17 July: The largest Pay Option lenders in the nation are a ‘who’s who’ of troubled lenders such as Wamu, Wachovia, Countrywide, IndyMac, Downey Savings, First Federal, Bank United, American Home Loans and even Bear Stearns, Deutsche Bank and Lehman to some degree. However, the latter three served mostly in the ‘investor’ or ‘conduit’ capacity during the bubble years, and their exposure is currently limited to the whole loans and MBS’s they were unable to dump when that market seized in early Q2 2007 for this loan type. (The WORST Vintage -Voltron)
Voltron says, you can see most of these companies are dead or nearly dead already.
Thanks Voltron. Of all the lenders I was dealing with, Wells seemed to have their act together the most. That is to say that they had the loosest guidlines and are very aggressively persuing business. They are also about the only lender out there doing seconds and HELOCs. Hopefully it will come crashing down on them as the next round of foreclosures come. There's about an 8-10 months lag time after a large set of ARMs become adjustable untill the foreclosures from them begin.
Voltron,
Where to now?
-Linus
And thanks. Should have trusted you more but still happy.
I'm short Wells Fargo
I updated my forcast on the front page:
The nationalization of the banking system has begun. All banks are insolvent. Politicians are going to seize the advantage and pull the plug on Wall Street's life support.
We will either have a crash (preferable) or a 10-20 year slow maximum-pain slide like Japan did in the late 90s (more likely)
It's unclear if we will crash (deflation) before inflation takes over. It depends on how fast the Fed is on the trigger. Based on the Fed Chairman's academic work, I'm betting they'll be pretty quick, so it's possible there will be no market crash in the traditional sense of the DOW and S&P500 indexes going down; however, inflation will cause the purchasing power of those shares to implode.
The Fed and Treasury seem hell bent to keep doubling down in order to keep the market afloat for a few more months, most likely until the election of McCain or the inauguration of Obama.
The dollar's move up was a head fake. It's caused by the same stampeding idiots that caused these problems in the first place. Don't follow them. Expect the dollar to continue it's collapse and massive inflation. Borrow dollars which will be decreasing in value and buy hard or foreign assets.
Commodities may be the next bubble. They should fundamentally go up in dollar terms, but might overshoot because they will become the only performing asset and a safe haven. Enjoy the ride.
Treasuries are the biggest bubble of them all and inflation adjusted treasuries (TiPS) do not work because government fudges the numbers.
Commercial real estate is going to collapse.
Moody's bond rating service (MCO) is going to take the blame for the crisis eventually.
Wells Fargo's home equity loans are mostly worthless.
House prices will decline another 20% or so in San Diego. Barring external events, Manhattan prices will not go down much because they represent a good value compared to rents.
There may be a false bottom in 2009
The real bottom will not come until at least late 2010
Reasonably safe havens: DBN, DKA, DBU, GLD, DBC
Still short: WFC, MCO, IYR via SRS
Voltron,
Hello from lovely Yuma! Thanks for the info on LEH. I put in the limit order before I left but almost wish I wouldn't have if I would have know that it was going to drop so much in one day. Either way, It worked out real nice for me.
I'm out of almost all of my long positions now except for DBU, DBN, and APPL. How do you feel about SRS and the real estate market now? Still a good position?
I'm looking forward to seeing what happens around election time. What are your thoughts on oil right now and its affects on the oil companies?
I'm looking to get into some DKA, and somemore DBU and DBN...still a decent idea?
Hope to see WFC's wheels start to come apart too.
Hope all is well out there, fly safe and I'll have a cold one for you.
Voltron says: clearly all going according to predictions, so no need to change your positions.
http://www.housingwire.com/2008/09/16/wells-fargo-takes-another-hit/
Voltron,
Do you have a recomendation on a good entry point for MCO puts at this point?
-Dirty
So when do you short gooooold?
Voltron says: I am not short gold. I love gooooooooooooooooold!
I don't have options in MCO because I don't know when they will get their comeuppance.
Voltron,
What effects on the market do you see coming from the financial "rescue package" that Congress is reportedly going to consider passing in the coming days?
Thanks again for all the great gouge.
Ballson
This "rescue package" proposal is just another "double down" by the government that is false hope and will end up crushing the dollar. How many times has the government had to "double down" just in the last two weeks. This is nucking futs. I don't know the details. Of course, neither does congress. This whole thing is rushed and ill-conceived and like everything else the government does will immediately turn to shit. The government is printing money, buying failed companies and proceeding to run them like Amtrak or the post office. Remember, these are the people who supposedly did not see this coming who are now suddenly enlightened with a solution to an intractable problem? puhlease!
-Voltron
Tron,
What do you think will happen with SRS?
Voltron,
What do you mean when you say the options market may sieze up next week due to the SEC ban on short selling? Will there be no means to sell one's contracts?
Voltron says: check this post w.r.t. options
http://cfcsux.blogspot.com/2008/09/short-sale-ban-answers.html
re: SRS, see http://cfcsux.blogspot.com/2008/09/srs.html
Tron,
Do you recommend a limit order to prepare for the crash of SRS or are you waiting on Congress? Your thoughts? Basically, it is a good idea to start think to get out before it is worth nothing?
Fungus,
After seeing the reaction to this legislation, I think it will take a market crash to get it to pass. That will send SRS through the roof. I'm not putting in stops.
-Voltron
Tron,
What do you think about call options right now for apple?
Fungus
options are pretty expensive right now . . .
Interesting article on seeking alpha:
"One solution is to see value where others do not. Meredith Whitney, Oppenheimer’s superstar bank analyst told CNBC this morning, “Wells (Fargo) has the worst math of all of them.” She also expressed caution on Citigroup (C), “They have a revenue paradigm that does not match their expenses.”
This process is still just beginning."
http://seekingalpha.com/article/97839-banks-in-for-another-hit-on-tuesday?source=yahoo
So, where's the play now? I put a little in SRS at under 80, but mostly still in a convential portfolio thats a little heavy in a money market looking for opportunities. I looked back at some notes I took on LEH in May. Should have made that play. What am I missing now? Sell the index and mutuals and split to GLD? WFC? MCO?
Looking for your "golden" voice in the chaos.
Jason
Jason, Voltron says: short everything, buy gold. You can still use options and ETFs (such as SKF) to short financial stocks.
Mr Mortgage is righton about Wells. When I was still in the business just a few months agoe they were doing stated loans. They just called it "document relief". You type the details into their wedsite and if credit, etc. is good it gives you a list of what to turn in. They eventually did away with it. Now their main targets are FHA, reverse mortgages, VA and small ballance commercial.
voltron,
Having trouble keeping up with everything out here. Why such the gain in SRS on Friday?
Fungus
Voltron says: SRS should be $200 already
The gain in SRS happened friday because some of the REIT's they "short" got downgraded. One of them, GGP, is having problems getting financing and their CEO sold a ton of his shares dropping the stock from $14 to $7.50. These REITs took big hits earlier this year (stocks dropped in half and more) therefore they have not gone down much more since some investors do not think the malls, outlet malls and etc they own are worthless like lehman stock. still hoping it does goes to $200.
The malls aren't worthless, but the REITS are leveraged, just like a subprime mortgage borrower, so it doesn't take much of a decline in rents and the REITS are worthless.
Voltron-
I am friend of Buss', et al. Enjoy your blog--and even made a few bucks off of CFC.
Like an idiot, I gotout of WFC (WWR MD) a few days ago--for fear that the bailout would work and the options would be worthless---esp. in light of the WFC takeover rumors of Wacovia.
Wondering...shorting Wells seems to still be a good play. Do you think the MCO ride is over? What do you recommend for puts on MCO--the 2010 timeframe, as well.
Thanks, man!!
S/F
Chris Brewster
Voltron says:
I'm still short WFC. Wachovia buyout would help because usually the stock of the acquiring entity goes down. The biggest risk is that they are allowed to buy mortgages from Wachovia dirt cheap and turn around and sell them to the government for a quick profit. WFC's $85 Billion HELOC portfolio is worthless and is equal to their entire market cap.
Moody's, S&P and Fitch are the prime villains in this whole scenario. Moody's is completely undiversified. All they do is rate bonds . . . badly. The biggest risk is that the government will hire them form their "expertise" to sort out all of these mortgages they plan to buy. I'm still short MCO.
Tron
(from Ed Jeep)
This shit is incredible. I think we all want to know the following:
1. What puts do we buy next? Catch SRS on the way down for example,(buy a 09 55.00 strike or 12 115.00 strike?) or roll down strike on WFC (fold profits from 25 strikes on 10 strikes).
1a. Do we still anticipate some upswing volatility (where we can leverage lower put prices) or should we just buy puts as they are knowing they will increase over time no matter what...
2. Where do you recommend putting money when the market bottoms IOT catch the upswing when it comes.
Or, SCARY... do you think we wont go up for a long long time?
PS, thanks for putting this site up and tutoring us! I know so much more about whats going on right now due to you. And, I'm richer too.
Jeep
Voltron says:
I'm fully invested right now, so I'm not changing my positions much.
If you have cash available, SRS jumped down at the close, so it's still cheap.
I'm not buying options right now because the VIX is so high. If the government starts selling options to try and reduce market volatility (a long shot), then I'll buy some.
As I take profit from short positions, I move the money into gold and foreign stocks in anticipation of the inflation genie being let out of the bottle.
I'm researching what US stocks to buy down the road and I'm looking at MS, AAPL, EBAY, GOOG, also manufacturing, export and mining sectors.
I hadn't thought about rolling down my strikes. Again, with the VIX so high, I doubt I will find it attractive.
Voltron,
I'm a fan of your blog and find you extremely insightful (and profitable). What do you see as core investments for the near term (for one's portfolio) vs. short term plays to make a quick buck?
Hey anonymous,
read Voltron's above post... he pretty much lays it out.
anonymous II
Tron,
Is this summary accurate?
- While stock markets may be close to bottom, they have further to go, which will result in...
- An eventual capital flight to safety, the bond market (bonds and/or treasuries) and hard currency (good old savings accounts for most)
- This will cause a "bond market bubble" but will be exacerbated by...
- The coming inevitable inflation period, requiring a rise in interest rates, further hurting the bond market AND cash, and...
- The dumping of U.S. Treasuries by foreign governments (China)
- Beware of a commodities bubble (gold)
- The jury is still out on commercial real estate
- “Down the road” there will be many equity bargains
In your current forecast, you may need to start focusing on the 10-15 year slide of pain. Ouch! Also, are you suggesting buying 'hard or foreign' assets on margin? Thanks to two recent recessions, it appears that equity investors are pretty impatient when it comes to “down the road.” I wonder how far that’s really going to be.
See you in a few weeks.
Anon,
Your summary is pretty accurate.
I'm actually trying to front run the impending gold bubble. It's undervalued right now. I'll sell it when it starts to show bubble characteristics (joe6pack buying gold) probably around 4000/oz.
I've been surprised by how much the foreign stocks have allowed themselves to get dragged down, so I will not be adding to my positions yet. Instead, as I get out of my short stick positions, I will be shorting bonds. I also wouldn't buy foreign assets on margin right now.
Check out my new post regarding commercial real estate:
-Tron
Tron,
How does the government plan to by shares of WFC affect your thesis there? Will they have become too big to fail?
-Dirty
Look what happened to the share prices of the banks that the government has "saved" . . . WM 0.00, FNM 1.10, FRE 1.25, BSC 7.38, WB 6.31
But you're right, the government is capricious, so I refer you to my new diclaimer
Voltron-
Wondering if you could provide me with some info, sensai? With respect to PST and TBT--there are not options for those funds. Would I be shorting govt. bonds by simply buying into those funds? Is the same true for SRS? If I just buy into the fund, not the options, but the fund, am I also shorting Commercial Real Estate?
I sold off all of my mutual funds and I have to park some money somewhere. I have short positions in WFC and will get into MCO asap. Was thinking of parking the money into PST and TBT, and also, maybe SRS.
As always, thanks a million, man.
S/F-
Chris Brewster
If you but PBT, TBT or SRS, you are short.
Right now, I'm still short the market (SRS, SDS, WFC puts and MCO) and long gold (GLD,DGP) and foreign stocks (DKA, DBU, DBN). When the DJIA breaks support at 8000, I'll sell my short positions and short bonds (PBT,TBT). I'll buy select US stocks against short others (long AAPL, short MSFT). I'm going to wait until Asia decouples from us, then invest in Asian stocks.
Tron
Jeep here... for the financially unwashed like me... "Breaks Support With" does that just mean "when the DOW goes below 8000" meaning thats a good mark for bottom. Is that what you mean? And you say you will then get out of short positions. Does that also include WFC - is that because the govt bailout has (for shorting purposes) essentially made WFC unattractive? Or because other options are simply more lucrative.
Also, how do you tell when Asia decouples. What does that mean and how does joe plumber like me recognize that?
Lastly, "I'll sell short positions and short bonds" do you mean you will sell short positions IN ORDER TO buy short bonds, or sell short positions and sell your bond shorting.
Thanks again for keeping this real for us. You are our fearless leader...
"Breaks Support With" does that just mean "when the DOW goes below 8000" meaning thats a good mark for bottom. Is that what you mean?
Voltron says: It'll probably go a lot lower than that but you don't know where the bottom will be except in hindsight. People who try to pick bottoms just end up with smelly fingers ;-)
And you say you will then get out of short positions. Does that also include WFC - is that because the govt bailout has (for shorting purposes) essentially made WFC unattractive? Or because other options are simply more lucrative.
Voltron says: I'll be getting out of my general short position (SDS). I'm waiting for specific negative news to come out before I get out of specific shorts (WFC, MCO).
Also, how do you tell when Asia decouples. What does that mean and how does joe plumber like me recognize that?
When asian currencies rise vs. the dollar
Lastly, "I'll sell short positions and short bonds" do you mean you will sell short positions IN ORDER TO buy short bonds, or sell short positions and sell your bond shorting.
I'm going to buy TBT, which is an ETF like SRS that goes up when bonds go down (=interest rates/inflation goes up)
http://www.fool.com/investing/dividends-income/2008/10/21/why-wells-fargo-really-wanted-wachovia.aspx
Why was Wells Fargo so eager to ante up a deal that was leaps and bounds sweeter than Citi was willing to pay? After all, Wells Fargo has a stellar reputation of keeping underwriting standards in check, so why would it want anything to do with a shoddy bank drowning in subprime mortgages?
Taxes. It was all about the taxes.
The day after Citigroup made its bid, the Treasury changed a tax rule that lets banks accelerate the losses and writedowns on banks they acquire against their own net income, offsetting the charges as tax write-offs.
Wells plans on writing off some $74 billion of Wachovia's $498 billion loan portfolio -- an insanely large amount that reflects just how poisoned Wachovia's books really were. With the new tax rules, it gets to use all of that $74 billion as a charge against its own net income, which means one thing: Wells Fargo's going to be a tax-write-off machine for years to come.
Just how much will it save? The Wall Street Journal, citing an independent tax analyst, estimates Wells Fargo could reap a tax savings of about $19.4 billion. To put that in perspective, the 0.1991 shares of its own stock Wells Fargo is offering Wachovia comes out to around $6.24 per share, or roughly $13.8 billion. Yes, Wells Fargo gets a $19.4 billion tax break for a company it'll pay just under $14 billion for (if the deal closed today).
In other words, Wells Fargo didn't pay anything for Wachovia: The IRS paid it more than $5 billion to take it. Who ever said you have to fear the taxman?
Thanks for the article on Wells. I very much doubt they are better off with Wachovia . . . but even if they are, their own HELOC portfolio is a poison pill.
Voltron! SRS is going nuts, man! Muchas gracious, senor! Interrogative: what do you consider a good target price?
Thanks as always,
S/F
Punky
I've always had 200 as a target for SRS, but really I'm waiting for some commercial reits to go bankrupt before I sell it.
Voltron,
I've noticed that the MCO $22.50 and $20.00 strike price puts expiring in Feb and Mar '09 have remained rather stagnant, despite the steady decline in MCO's stock price (down to $17.96 today).
Just curious why that is, even though they are in the money?
Thanks again for your guidance.
Ballson
Hey Voltron-
Like a dummy, I sold my SRS at 178 last week. I saw the huge two day spike and thought it might give back a little and I wanted to try to "ride the wave" a little bit.
Alas, it kept going up! So, my question---do you think the anticipated rate drop will cause SRS to give back a little; or, should I just get back in at 199 and keep riding it up?
Thanks, as always!
S/F
Brewster
Looks like MCO options are moving to me:
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=mco%3Dnx&sid=0&o_symb=mco%3Dnx&x=0&y=0
Maybe they don't trade often. I usually look at the bid and ask price for thinly traded options, not the "last price"
Anyone who had SRS sell orders in when it hit 200 is my hero.
Tron,
Can you explain your last post a little more about getting out of DBU/DBN short term.
Fungus
I just think I'll be able to get DKA,DBU and DBN cheaper in the near future. I'll be increasing my position, but I'm also thinking about trying sell what I have now and buy it back later. That may be trying to be too clever though.
Hey Tron,
And Howdy BUSS, dirty, ballsan, brewster.
My dad was asking about selling his underwater mutual funds, because once the december capital gains dispersments go out, there is a chance he will have to PAY taxes on an investment that carries a significant capital loss.
Is there likely to be capital gains this year? What happens to a mutual fund if there are capital losses during a year? Do they pass through to the owner of the fund?
Also, is this the kind of mutual fund redemption that could be material in the market come December?
Thanks for info on the site, and thanks to BUSS for 'introducing me to it last summer'.
Cheers Todd H.
I'm not a tax accountant, but my understanding is that you only realize a loss or gain if you sell the fund. If you have a loss and no other gains to offset it, you can deduct up to $3,000 of the loss from regular income and carry over the rest.
If one were to believe that the long bonds are going to drop, and that the dollar will drop too, what is the ideal way to approach that investment?
I know about TBT, to short bonds. If you want to short $$$ UBB has very little float, is it better to go long gold or another currency (FXY)?
Thanks again for all your info.
Todd
I meant UDN the inverse dollar ETF. btw.
I wouldn't worry about the small float. It's very easy for them to "create" new shares
Tron,
Unfortunately, I sold out of SRS a long time ago :( and have not been watching the market lately -so missed out big time. So any recommendations for jumping in now?
It's nice to see GLD moving up a bit even with the market flopping around like a fish...
To anyone jumping in now, I'm recommending 1/3 each of cash, gld and foreign stocks (Dka, dbu, dbn)
So does today's drop mean SRS is dead or do you think it's another buying opportunity?
bot more at 152
somewhat concerned about the dollar going down
Tron,
Do you pay much attention to the VIX? It has double-tapped a top at around 80, coming back down now. Possible sign we may be at or near a bottom for the S&P?
Tron,
What do you think about selling far oom calls (covered) ~ 250ish+ range for Dec expiration? Seems like a nice little return for 3 weeks of upside risk. Seems the only downside is the calls get exercised and we pocket 250/share but considering we're only on the hook until Dec 20... I guess you could consider having to keep SRS shares until at least dec 20 as add'l downside, but that's my plan anyway.
I do track the VIX, which is why I'm not buying options right now. Usually 40 signals a top, but that rule is out the window, so I wouldn't look for signals in the VIX right now.
I would not sell Calls in SRS
Tron:
In light of the last run to 290 we had in SRS, do you have a new price target? If not, when do you think it will be time to get out of SRS an into other positions?
Good article is WSJ (SRS)
http://blogs.wsj.com/marketbeat/2008/11/26/a-90s-flashback-for-commercial-property/?mod=yahoo_hs
TRON - welcome back to you and all the Scarface warriors!! Job well done!
I don't look for the price of SRS for my cue . . . I look at the dollar. You need to get out of SRS before the dollar goes to hell and all short positions get crushed.
Whoa - I bought SRS at 120 thinking it was a steal. Also am still big into WFC 2010 puts.
Collapse of dollar (and 'crush' of short positions) coming sooner than another decline in the DJIA?
Looking forward to hearing about your Sunday conference on Bonds and any adjustment to the 1/3 gold cash and foreign stocks.
Also: you think 1 oz. of gold will go to 4000 bucks? (earlier post)
I'm betting that there will be another leg down before the dollar collapse, but there's no way to be 100% certain. If I was, I'd bet the house.
why does the collapse of the dollar correspond to the collapse of the shorts?
thx.
T
or 'crushing' as you said it?
Tron,
Thanks for all of the info to date. Could you comment on what the trigger to buy TBT should be?
BURL
when the dollar collapses, the resultant inflation will cause all nominal prices to rise so you don't want to be caught short when that happens. Additionally, you are forced to hold dollars as margin against you short position. So unless you are shorting something ephemeral like financials, you are shorting something that probably has some real assets in exchange for fiat paper currency that has no intrinsic value. This has worked in the short run, but there is no fundamental reason for this to work in the long run.
TBT would be a great buy now absent the de-leveraging (panic selling) and panic buying of bonds by sheeple. Once there is capitulation in the stock market, it'll be time to get in. Expect a rough ride.
Tron,
What do you think about buying defense stocks right now, specifically Bell Textron (TXT)? I know you're focusing more attention on the bond market.
Semper Fi,
Francis
if they start buying out the curve they could drive rates as low as they want
???
I don't own Bell
Nate, The government is already way too far left on the curve. They'd have to sell the short end to finance it and that would cause more tangible inflation.
Anyone have any idea as to what happened with the market today? Other than the meaningless speculation from Yahoo finance?
Tron,
I found a great summary of the current Commercial Real-estate outlook at Calculated Risk. http://calculatedrisk.blogspot.com/search/label/CRE
This may be helpful for those who have taken a hit on SRS lately. I am all in and will be watching UUP closely.
Thanks all the info,
Rich
Gents
Spoke to a financial type yesterday, (leaving a major firm to form his own) and it was very interesting. DISCLAIMER: I am not a money guy and will probably screw some of this up due to ignorance. Voltron can probably decipher what I screw up. Among his thoughts:
1. Hysteria in market means that the only sure thing people view right now is US Treasuries. He says people literally all over the world are buying up US Treasuries, essentially at cost - the interest offered is very very low. People just want to know they can sometime get their money back. All this Treasury purchasing is in lieu of people putting their money into Municipal bonds or others, like Toyota even. Supposedly Rhode Island and Toyota bonds are giving almost 7% yield. But, nobody will bite. He says that while the treasuries continue to be low interest (reflecting high demand) and Munis and other traditional bond sales ARENT bought up (like now) inflation will still stay low. When they start buying everything again (signifying too much cash around) then inflation will result. This is somewhere in the future, maybe in 09 late.
2. UBS and BARCLAYS have greater liabilities than the Swiss and Brits GDP put together. European banks own 3.5 Trillion of the 4.7 Trillion of Emerging Market debt. There are two kinds of European banks: those that are insolvent and propped up by the government and those about to be insolvent and propped up. European banks are worse off than American ones. American banks are only leveraged 20 to 1 while European ones tend to leverage something around 80 to 1. There are no European institutions like the Treasury or Fed that will rescue insolvent banks in Europe. Their contagion and their failure will be much worse than ours. To wit, if you read the below, you will see that the US is bailing out these banks too.
http://edition.cnn.com/2008/BUSINESS/10/16/swiss.bailout/index.html
He said that he had no idea why BARCLAYS was still solvent since they were as bad as anyone but have thusfar shown 0 public signs of stress.
3. He was very positive and long on WFC. When asked about their 84 Bn in HELOC on California homes, he had a few thoughts. One, that the HELOC worthlessness all depends on how long the California market stays down and if the foreclosure rate keeps accelerating. At some point it will stop, and foreclosed homes might not make up a high percentage of the HELOCs. Second, he said the real indicator of WFC’s relation to the 84 Bn is looking in their 10Q or 10K which non traders can access online somehow. If the 84 Bn is off balance sheet, then that could spell trouble for WFC. If the money has been accounted for already, then they might have already dealt with the charges. He said that if puts do well on WFC it will be because of bad press on the Wachovia sale versus the HELOC issue. Same difference I say. Interesting background on the Wachovia sale (citigroup versus WFC) was that it was a pissing contest between Treasury and FDIC. Treasury set up the Citi deal but FDIC said, “guess what- not your job. That’s our thing. We say WFC). His comments on Paulson were roundly condemnatory. He is a trader and therefore thinks three days ahead and not long haul. Not very smart. Bernake did better and essentially ‘wrote the book’ on this very situation in a paper published in 2004.
4. Gold. He said to beware of gold certificates. If you really want gold, buy the gold. The problem is that many institutions that offer gold certificates actually leverage the gold in the same way that banks leverage cash: they don’t physically have everything they sell certificates for. There is no telling, when the axe falls, if they will be able to produce the gold they actually say they have. In essence, the same failures going on elsewhere could affect gold. Kruggerands and US Eagles are one option and if you have a lot of money, have a gold bar made for yourself in Switzerland.
5. He sees current DJIA floating on Christmastime and pre-inauguration distraction. People think the bailouts are working. However, bad news continues to come in every day and the indicators just get to a point that the real effects of them wont be even felt for another few months. He sees unemployment (real unemployment) reaching 10% or higher. DJIA Not where it should be. He sees 6000 again after the election.
Jeep
I have to disagree with the wisdom of investing in treasuries and I suspect many big holders (China maybe?)will want to get out of them. With the elimination of TIPS, there is no protection of your principle with super-low yields and the government deliberately adopting inflationary policies to stave of deflation. It looks like a guaranteed losing proposition to me.
As far as WFC goes, I think Voltron is on the money. People are "bullish" on them because they're not tied up with alt A mortgages that are defaulting left and right. Problem is that a lot of (I suspect) those $84B in HELOCs are against homes purchased with Alt A or sub-prime mortgages. California is a 0 default state. If you can walk away from your overdue million dollar mortgage why would you pay off your $800,000 HELOC afterward?
Buss
BUSS - I dont think the guy was advocating purchase of US Treasuries. He was simply painting the picture of the market now - many people around the world are so scared of anything that isnt a percieved 'sure thing' that they wont buy anything else. The inflation boogeyman in the closet is waiting. His idea is that it wont blossom till later - when the overprinting of money lets loose too much purchasing of bonds at too high interest rates. I think.
I think WFC puts are still on the money, believe me. Im not suggesting otherwise.
Ed
Based off of Fridays excitement in the currency market what immediate upcoming trends do you forecast in the currency markets this next week? esp gbp/usd and eur/usd, which are teetering on their next big move....
I take it I'm the only one still in SRS. Woops! Nice job to anyone who got out last week.
You're not alone in SRS.
Well... in spite of today's price movement, SRS apparently tops the list for buying on weakness. Too bad I just can't buy anymore on margin.
http://online.wsj.com/article/SB122946271981011693.html?mod=yahoo_hs&ru=yahoo
no you're not the only still in SRS. and I can top that, I am big into JAN 09 WFC puts.
I am also in BIG into SRS, and, sadly a chunk of what I have is at 280 a share. Oh well...I am buying more every time I get free cash.
I just think the worst is yet to come.
Brewster
I think the Fed realized they had one bullet left. It was more likely to do some good now than it was later, so they shot it. They're probably hoping it inspires confidence and restores spending patterns for XMas. My guess is that it wont. Even if this move inspires the market, which it likely will, there will be enough bad news caused by whats happened already - news that hasnt hit yet.... that will bring things back to reality. 09 is going to be a hard year no matter what they do. Big question is will the banks start lending. I doubt they will until another round of failures is over. Till then nobody really knows who is to be trusted. Even if they do start lending, is the end result a rise or level off in housing prices? I doubt it. Though we are weathering the Subprime storm, 60 minutes had a piece where they were talking about the default rates for PRIME LOANS are higher than ever. Still Alt-A and all the wierd ARMs to go, too. The current default rates extrapolated are themselves enough to send shivers down your spine.
Jeep
Just got back from post-deployment leave. I'll address some of the points and questions now.
Wells Fargo has not been taking large enough charges on their HELOC portfolio. In fact, they've been changing their definition of when a loan is in default to put it off. I agree that the Wachovia purchase is a disaster.
I trust the Perth Mint gold certificates because they do not loan their gold or use leverage, they are owned by Western Australia, they are audited and are insured by Lloyds of London. Having said that . . . I wouldn't put ALL my money there.
Sorry Kahuna, but I have no idea what currencies are going to do week to week.
Regarding SRS. Ultimately the disaster christmas sales will wipe out major retailers and crush commercial real estate. Doesn't sound so absurd now that the major automakers are bust.
Tron,
Now that I've read both of Peter Schiff's books what are you looking at WRT foreign countries/sectors/stocks? Are you buying them denominated in foreign currency through Euro Pacific or using ETFs, etc in dolllars?
Thanks,
Doug
Tron,
I know you talked about it a while back, but what are your thoughts on getting rid of DBN, DBU, etc. right now to buy back at a lower market.
Fungus
Interesting article...good support for SRS... not sure why it's on the "Australian Business WSJ" as it seems to me that this would be pertinent news here in the US, but whatever..take a look
http://www.theaustralian.news.com.au/business/story/0,28124,24826977-25658,00.html
Genius
One more good article...
http://www.mycentraljersey.com/article/20081220/NATIONWORLD/81220004
Question for Voltron...
I'm seeing a lot of talk on other boards concerning the already steep decline of GGP stock (some 95%) being one of the reasons for the low value of SRS. If other CR companies are in a similar situation, there's not much left to short in the way of CRE. What's your opinion on this theory?
Genius
Genius,
SRS does not have GGP anymore:
http://www.proshares.com/funds/ure.html?Daily%20Holdings=y&show=all
These indexes are designed to make money so they eventually drop losers.
I got out of SKF because the holdings were reduced to the top tier "too big to fail" banks. Eventually it that will be the reason i get out of SRS, but not yet!
Tron
Tron,
Thank you for your blog. I have been waiting for the so called santa clause/january effects rally to happen. It doesn't look like it came yet. Maybe it comes maybe it doesn't. Do you think that this so called holding pattern we are until obama is inaugurated sets up an good shorting opportunity?
Also would like your opinion on coal companies as a long play.
Nicasurfer
Maybe tron can translate some of this but to me it looks like another reason why SRS is destined to boom again. Driving around the Dulles, VA area and corridor reassures it. There is so many unfilled brand new office buildings everywhere with For Lease signs up.
-Spicoli
http://www.minyanville.com/articles/dow-jones-IYR-real-estate-INDEX/index/a/20339/from/yahoo
Gents
Anecdotal but interesting since it supports an after Xmas/Inaugural boom in SRS: Around Chicago the commercial real estate buisness is hit extremely hard. One firm is laying off half its people on 2 January. Lots of high hopes that a miracle from retail sales would reverse the trend (no new contracts in this particular firm for the last two-three months) and desire to let employees be worry free through holidays. But, the reckoning comes after the holiday grace period. The gents I spoke to expected this to be fairly common through commercial real estate in january.
Jeep
Tron,
Read a lot of the post from earlier. I am new to your blog and would really like to know if your views have changed on the ultra short etfs. These etfs seems to have had there day. Do you still reccommend srs? Also it seems that skf may be over also.
Grateful for your thoughts
SKF is over but not SRS. If you look at the holdings
In the "bull" versions, you'll see SKF has mostly "too big to fail" banks. I think SRS is being manipulated down by hedge funds.
I wonder the affect of the President-elect's proposals for massive govt. spending will do. I have some cash coming in...wonder what folks are thinking....should we hold off on buying more SRS, in that it might go down more before it goes back up.
Tron--do you think it is time to get into PST and EBT?
Thanks
S/F
Brewster
The new stimulus plan can only mean inflation. The Fed has given up on Milton Friedman style monetary stimulus and is committing itself to classical Keynesean fiscal stimulus. When to get into TBT . . . that's the $64 trillion question.
Voltron,
Do feel like this recent pull back is a shortterm buying opportunity? With option expiration on friday and obama being inaguarted do you feel like we could rally for the next threedays?
Nicasurfer
Nicasurfer,
maybe, but I'm not that clever. I don't trade short term. Medium term only.
Tron
Hey Voltron...
I noticed that the spikes in SKF in 2008 almost mirror exactly the spikes in SRS. I'm not much of a chartist and I know these are two different "industries", but I find it curious that SRS has recently broken away from a somewhat proportional trend. With the renewed lack of confidence in banks, shouldn't there be an even more renewed lack of confidence in commercial real estate? Where the hell are these CRE companies going to get their refinancing needs? Perhaps SRS is about to take off again.
Genius
Voltron,
You asked me the other night what are some of the other boards I read concerning SRS and SKF. This one has an interesting prediction about tomorrow. Let's see if he's right. The link....
http://www.crashmarketstocks.com/
Funny thing about all these sites... it's like reading tea leaves. Not looking for any one particular prediction... I'm more interested in genereal sentiment as so much of the market these days seems to be emotional.
Genius
Genius,
The only reason they diverged is because of the strange plunge SRS had, which I think was due to hedge funds, as I've discussed earlier.
-Voltron
Has anyone seen the "Scariest Chart Ever"?
http://seekingalpha.com/article/115525-the-scariest-chart-ever?source=front_page_most_popular_articles
There is also a good article regarding Treasuries on the East Coast Economics link that seems to bode well for future investment in TBT and PST.
Hey Voltron... do you read the blogs at www.mint.com? Specifically, "The Real Unemployment Rate" blog?
Genius
Thanks genius, mint.com is a good aggregator feed. Most of the feeds I look at are still housing centeric, but there are bigger issues now, such as unemployment, so I'll keep my eye on it.
I've been using the shadow statistics for corrected data.
Check out this article, folks. It offers support (like we needed any) on Voltron's belief that DOW 6000 will be a reality...
http://finance.yahoo.com/news/11-ETFs-For-The-Dow-6500-etfguide-14237084.html
S/F
Brewster
Since you are getting out of your short positions due to possibility of WFC popping, what about going long WFC?
No way I'm going long WFC. According to creditsights, they are bankrupt 3-4 times over. I did buy MS . . . at $8.
Hi Voltron, thanks for the blog!
I've seen a lot of blogs lately talking about the fact that GLD may or may not actually own any gold bullion. Do these guys have a point, or are they just blowing smoke? Isn't the point of GLD to track the price of gold? Supposedly GLD now owns, or at least has interests in, over 1000 tons of gold. Are interests in that gold enough? How high do you think GLD will go? Thanks again.
Spears
There are lots of ways to "own" gold and they all have inherent risks. If I decide I want to buy gold and I'm concerned the price will go up before I can get it in the form I want, I'll buy GLD to lock in the price. I'll then buy gold through europacific capital's perth mint program and sell my GLD.
Tron,
Regarding waiting for WFC to bounce back on more 'irrational exuberance' and then get back into puts, what do you think is the risk that the govt nationalizes troubled banks (which WFC is or soon shall be).
What would nationalization, in whatever form the govt comes up with, do to the put price? Would that mean we shouldnt @#%$ with it?
Thanks again man....
Jeep
Nationalization will most likely crush the stock price, because the way they do it is the government buys newly created shares which dilute the existing shares. If it gets back up to 20, I'll short it again.
Regarding your most recent post
on the gov't stress test assumptions... you seem to think that unemployment will go [much] higher than 10.4%? Or that the housing price decline has a lot further to go?
My real concern is unemployment now. It's turning into a self feeding crisis. People won't buy or borrow if they're worried about job security. How high do you think unemployment will/can go?
Genius
I'm not an economist, I have no idea how low unemployment will go. A lot depends on what the government does and how they fudge the employment numbers. The Soviet Union had full employment, but that was meaningless because the jobs were unproductive. But as a former risk manager, I can tell you that to assume the consensus forecast as the worst case scenario for a stress test is insane.
Voltron,
Can you expand a bit on your new put play on gold/oil and the S&P500? i.e. time horizon, strikes, etc? Schiff is still bullish on gold, no?
Thanks
Are you still long SRS?
I'm still long SRS. Peter Schiff and I are bullish on Gold. I'm buying long dated out-of-the money options on SSO, SCO and GLL. They are basically a lottery ticket.
How far out is 'long-dated'?
Thanks,
T
As far as I can get as long as there is reasonable liquidity.
puts or calls on those?
and did you mean GLD vice GLL?
Puts on SSO, SCO and GLL.
So, let me try to get this straight:
You're still bullish on gold, hence the rip-ups in GLL.
You're bullish on oil, hence the rip-ups in SCO.
Still bearish enough on the S&P500, even at this level, to buy rip-ups in SSO?
the S&P options are at-the-money because I plan on being out of all my short positions when the DOW gets close to 6000.
The other options are out of the money and I will increase my positions as we head towards inflation.
Voltron,
In view of your last post stating that you plan on being out of all your short positions when the DOW gets near 6000, what guidance do you have regarding SRS? At what point should we close out or SRS positions? When the Dow breaks 6500?
Thanks,
Ballson
tron: curious to know what trading platform you use.
I plan on holding SRS until there is a panic in commercial real estate and the holdings of IYR are trading around $12. I will bail out of all short positions if the dollar or bond market craps out.
I use Morgan Stanley to execute trades, I pay for realtime quotes on yahoo finance and I use portfoliort on the iPhone.
Voltron, greetings from Okinawa. How do you recommend that we profit from this treasury bubble that you and Warren Buffet talk about? I noticed you took PST and TBT off of your "Reasonable safe havens". What about shorting some funds that are long on US treasuries such as EDV (Vanguard's extended duration treasuries fund) or PLW (powershares treasuries ETF)? See you in June brother,
Dix
I took TBT and PST off my safe haven list because I had not bought any yet and I think people were assuming I had.
Besides, I've had it with these leveraged ETFs.
yeah, shorting one of those Treasury ETFs could work, but I'm not going to anticipate the inflation. Right now we are still deleveraging the economy. When inflation comes, it will be around for a while.
Tron, you said you are shorting Treasuries. How are you doing it? You said Leveraging is out so I assume you are not using TBT.
I bought 2011 puts on TLT
Tron,
Swanny here from lovely Al Udeid. I see that you posted changing your position. In the short term, going long, and buying calls??
What would you recommend for this huge FED infuse??
Thanks,
SWANNY
ATM, ITM, or OTM puts on TLT?
Commercial real estate is still at risk. Is SRS no longer a good way to play it?
I'm out of all my short stock positions and I'm buying gold and shorting treasurys. I'm also buying at the money 2 year puts on treasurys.
Commercial Real Estate's problems are goin to be inflated away by the Fed.
Voltron,
Is now the time to load up on TBT and PST?
Thanks.
Cave and Buss
Disgregard, missed your earlier comments. Sounds like puts on TLT is your recommendation, any other preferred moves right now? Thanks.
Cave and Buss.
Voltron - How far out are you shorting Treasuries?
Voltron - How far out are you shorting Treasuries?
Jan 2011
Are you selling WFC short or are you buying puts?
BTW, you're one of the few blogs I check everyday! Your insight is appreciated.
I'm just short. Options were too 'xpensive
Tron
As I read the headlines out there, I'm just shaking my head.. how in the blue %&# can anyone believe banks are going to be profitable considering what's on the horizon. Whatever... let's talk about some risky moves. What do you think about FAZ after a month or two? (3x short the Russell 1000 Financial Services Index)
Genius
I can't recommend that kind of leverage. I've made great returns by picking the losers in financials and choosing my leverage on a case by case basis. If I had invested in SKF, I would have LOST money!
They do have 2011 put options on FAS and they aren't that expensive. I'll be looking into that on monday.
So to get a full understanding you have exited srs?
Yes, I'm out of SRS. I exited all of my shorts although I've shorted WFC again. I'm much more concerned with inflation now.
I managed to way outperform SKF by picking individual financials to short with leverage. I may try and research and pick individual commercial real estate companies to short with leverage or just short IYR (without leverage), which would have made money.
The reason why I didn't do that in the first place is I already know a lot more about finance and financial companies.
It's just a matter of having the time to immerse myself in CRE.
Check this out on Wells Fargo. Volton--you belief that Wells is full of crap is backed up!
http://www.bloomberg.com/apps/news?pid=20601087&sid=avymhMJShuAs&refer=worldwide
S/F
Brewster
Thanks for the heads-up Brewster
http://www.theonion.com/content/video/treasury_department_issues?utm_source=a-section
Hi Gerard,
Friend of PE. Great blog.
Question: Is it possible to calculate (or estimate) the new price of a bond index fund based on a future change in market interest rates?
PMac,
Usually a bond fund will have a known "duration" which is more or less the average maturity of the bonds in the fund.
The duration has a multiplier effect.
The bond price moves opposite the interest rate.
Percent price change = - Duration x interest rate change x 100
This works well for small movements.
For large movements, you have to consider compounding and convexity and then you knee deep in greek letters and hieroglyphics. Very thick books have been written on this topic.
Voltron: Any thoughts on AXP?
Thanks.
Also, as I understand it, the convexity is such that price sensitivity is higher when interest rates are decreasing and less sensitive when they are increasing.
I am trying to figure out how much up side there may be to shorting tresuries vs. other opportunities.
Also weighing options vs. short sell. I've seen your take on leverage. It's helpful. Thanks again.
PMac
Sorry, I don't follow AXP.
This article suggests that the printing of money and bond sales/bubble will likely continue to broaden and worsen as our deficits increase. I think its more fuel for the fire to short TLT. Anyone care to take a look and check my thinking?
http://www.bloomberg.com/apps/news?pid=20601109&sid=anA.WOxto6qQ&refer=home
Agreed
Tron
Time for FAS puts? 2011s just went down 50% today. Also, WFC up 4.50? Puts getting affordable there, too.
Are these symptoms of an 09' "false bottom"?
Jeep
The break even for WFC or FAS puts is not compelling to me. These are not symptoms of a false bottom, just a jolt from Warren Buffett flapping his gums.
Tron
I'm short WFC! Any advice?
I'm short too. Hang on. Unless hyperinflation comes before wells caps out.
EXCELLENT, EXCELLENT ARTICLE THAT GIVES LOTS OF BACKGROUND AND SUPPORTS ALL THE MOVES BEING ADVOCATED ON GASG.
The Quiet Coup
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
by Simon Johnson MAY 2009
THE ATLANTIC MONTHLY
The URL for this page is http://www.theatlantic.com/doc/200905/imf-advice
World...You Just Got Hustled
Voltron,
I'd like your thoughts on this article when you have time. One of the scariest that I've read only because it makes sense.
http://seekingalpha.com/article/136769-a-summary-of-q1-bank-earnings-world-you-just-got-hustled
In short, the author's conclusions would seem to validate a lot of your own assertions regarding our governments "all in" mentality. This past quarter, some are scratching their head over bank "record profits". The consensus is WTF? How? Well, thank you taxpayer... you funded it through AIG (among other creative accounting changes). However, if it doesn't work and we can't get the Ponzi scheme going again, then we're seeing gold going "parabolic", meaning 15-20K an ounce isn't out of the question. What do you think?
Genius
Good link, Genius. I wouldn't want to be caught short stocks when the dollar collapses. I also don't think it would be "suicide" for china to forsake it's treasury investment...it would be suicide for them to double down over and over.
I'm a believer that we're in a bear market rally and that financials are full of $h!t, but just to fully understand the other side of the trade, why are so many people presumably smarter than me saying the worst is over?
Probably because the folks that are presumably "smarter" than us are scared sh*tless and know that the only way out for "them" is to get the Ponzi scheme going again. See link in above post.
Genius
Jesus!
Try reading NATION READY TO BE LIED TO ABOUT ECONOMY AGAIN post first and then read WELLS FARGO:THE FEDS GOT IT WRONG - right afterwards, and you will have trouble distinguishing the comedic nonsense in the Onion with the real statements (though just as unreal and nonsense!) Wells Fargo is putting out!!!!!
We're in for big trouble when reality and outright political satire are made of the same basic building blocks.
Thats it. Buying Gold! Already into TLT!
Jeep
Talking heads say the worst is over, because they want to pump and dump their stock.
Tron,
Any thoughts on diversified emerging markets (BIK, VWO). Up quite a bit. Overbought?
PMac
Tron,
I'm thinking of opening a Europac acct - how has your experience been and would you recommend them? What are you thoughts towards weighting US equities vs. Intl in a given portfolio?
Thanks
I don't have a brokerage account with Europac (I have to trade through my old employer) but I do have a gold account. No problems.
Diversified emerging markets . . . hmm I'll have to think about that one. I know my developed world foreign stocks are almost back up to where I bought them (which was at the worst possible time) and the huge dividends keep rolling in.
too complex for me to understand completely, but good article that explains one theory of why TLT is declining this last week.
http://online.barrons.com/article/SB124351952511562631.html
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