Theory of Unintended
Consequences. (A collection of stuffs I got from the net- enjoy-
Lonevoice)
My
boss and I believe that those who lost money deserve it. Those who
held financial shares deserve their losses. They deserve the loss
for poor risk management, poor technical analysis and poor
fundamentals or lack of knowledge in buying the instruments that
they've done. However, here comes Hank Paulson and his team,
rewarding the sinners and punishing the innocent ones who did their
grunt work analyzing the companies that are bound to go belly-up. An
official from California public employees' retirement system called
shortsellers- greedy predators-. We'll see the ending.
Disclosure:
I am long EEM (the emerging markets fund) through call options.
Call options allow you to lose only the capital that you put in.
Nothing more, nothing less. Being defensive :) -Nix
If I had principles, I would have lost my shirt keeping shorts in
this massive short squeeze. I have no conviction ideas. I told my
boss, I am a disciplined trader, but that I didn't have principles.
He laughed . It's true, in this business, we are simply disciplined
traders. We will reinstate our shorts next time. Currently, I will
go long troubled companies in the financial industry, perhaps
intraday trading them due to massive short covering, but not as
conviction longs for position trading.
Read the best
commentaries I've heard from Wall Street active bloggers on the best
market manipulation ever :)
Here’s the deal. The problem was never
subprime. The problem was reckless and uninhibited gambling. That is
now being rewarded and repentance granted. All sins washed away. Ah,
but not without payment from someone to balance the books. You soon
will be getting the bill. Watch for it.
Comment by stockwatch -
Whew! All of the globes financial problems wiped
away in one day!
Comment by stockwatch -
Traders who have sought
to profit from the financial crisis by betting against bank stocks
were attacked on two continents on Thursday. -By Vikas Bajaj and
Jonathan Glater
In these unusual and extraordinary
circumstances, we have concluded that, to prevent substantial
disruption in the securities markets, temporarily prohibiting
any person from effecting a short sale in the publicly traded
securities of certain financial firms…is in the public
interest and for the protection of investors to maintain or restore
fair and orderly securities markets. - from news pages
Here’s the translation: As Republicans,
we’re all about free markets. Until they start to get messy and
then we’re not. Clearly, the folks at the SEC were very busy
last night and it should be even clearer to anyone who has even
cursory knowledge of the stock market that bad politics are getting
in the way of rational market behavior.
Short sellers may make for an easy target, but
that doesn’t mean it’s the right one. What about the
people — the executives and the directors — who were
making the daily decisions that drove many of these companies to the
brink (or in the case of Lehman, bankruptcy)? Shouldn’t they
shoulder at least some of the blame?
Here’s a radical idea: Let’s leave the
new rules to comedians like Bill Maher. That’s because coming
up with hastily put together new rules — not to mention new
forms that seem unlikely to address the real problem — makes
for both bad markets and bad politics.
-Michelle Leder
Welcome to USA - Where profits are privatized
and losses are socialized. - heard
this somewhere (just can't remember where).
There is no question
that we are going to spend a lot of public money to address the
current crisis. We have already put a very extraordinary amount at
risk. The question we should be asking is not whether or how much,
but to whom and for what. The financial crisis we are facing is a
symptom of a much larger economic and social crisis. Wall Street is
not the source of the pain. On the contrary, the financial sector has
been put this decade primarily in the service of hiding, literally of
papering over, unsustainable trends in the current account, income
distribution, human and physical capital deterioration, and the
sectoral composition of the American economy. The conventional wisdom
is that this is a financial crisis, and that so far "Main
Street" has been largely insulated from the catastrophe. That is
rubbish. The cancer is on Main Street, and the tumor has been growing
there for years. Wall Street provided drugs to hide the pain and keep
us going, palliative but not curative. What is happening now is those
drugs are wearing off. The American economy is fundamentally unsound,
and has been for some time. We would have noticed sooner, were it not
for financial methamphetamine conjured by mad scientists in lower
Manhattan from a whirlwind of foreign central bank money.
How can short-selling destroy a good company?
The simple answer is that it can't.
First of all, short-selling can't force down your
share price. Short-selling only forces down your share price if
buyers don't emerge to defend your share price.
Banning short-selling cannot protect a bad
stock. If nobody is willing to buy XYZ at a price higher than
$.02 a share, then the price at which XYZ will trade will be $.02 a
share (or lower). It doesn't matter whether you have short-sellers or
not.
What drives stock prices down is the lack of
people willing to buy them at the higher price. If the company has
sufficient value, there will be sufficient buyers.
-Arnold King
Great Articles (Some
are excerpts):
Wall Street Crisis Not Quite 1929
David Wessel
reports:
Is 2008 The Equivalent of 1929?
“It is not,” writes Berkeley
economist and blogger Brad DeLong, who
is an Obama backer.
“The most important reason it is not is
that Bernanke and Paulson
are both focused like laser beams on not making the
same mistakes as were made in 1929,” he writes on his blog.
Back then, the Hoover Administration and,
particularly, Fed misread the economy, and made a bad situation
worse, a case made definitively by Milton Friedman and amplified by
current Fed Chairman Ben Bernanke in his academic work
“They are also focused, but not quite as
much, on not making the mistakes made by Arthur Burns in the 1970s,”
DeLong adds.
In 1970s, then Fed Chairman Arthur Burns
misread the economy and is widely regarded to have bowed to political
pressure from Richard Nixon. He kept interest rates too low and
sparked the Great Inflation that ended only with the very high
interest rates imposed by a subsequent Fed chairman, Paul Volcker.
“And they are also focused, but not quite
as much, on not making the mistakes the Bank of Japan made in the
1990s,” DeLong adds.
The Bank of Japan misread its economy, the
consequences of a burst asset bubble and the devastating effects of
deflation, and is widely blamed for contributing to a decade of
stagnation.
“They want to make their own, original,
mistakes,” DeLong concludes.
Great
Charts from Bespoke Investment Group
Below
we highlight the percentage changes that global equity markets have
seen from their lows yesterday. As shown, Russia is currently
up 20.2% today. Yes, the country's bear market has reversed and
turned into a new bull in one trading day! Hong Kong is up the
second most at 18.7%, followed by China, Singapore and the UK.
Japan and Australia have seen the most muted
gains at 5% to 6%.
Massive
Shortsqueeze through market manipulation at work in Statestreet stock
(STT)
Contrast one day's
news article with the chart :)
News
article from WSJ (Sept 18,2008 145pm) from David Gaffen:
The
marauders, having burned through the wreckage of the investment
banking stocks, are now moving on to asset
managers and fiduciaries heavily involved in money-market funds,
where investors are worried about their holdings in these normally
safe assets.
The
stocks most heavily hit include State
Street
Corp., down 42% on the day to $37.96 a share, Genworth
Financial,
down 59%, Bank
of New York Mellon,
down 21%, and Northern
Trust
Corp., which has lost 16%.
G
reat
Pictures to note:
P
icture
courtesy from David Gaffen
Note:
While seeing that the dollar is literally being burned in the system
today, I am bullish the dollar against the Phillipine peso in the
long run (I.e. my view is that php hits to 49 first rather than 43 a
year from now mainly because of the deleveraging theme, and that USD
has bottomed out. Europe and UK have no room to hike rates and this
will cause an interest differential play. Arguing about my view
lengthily may be written for a different topic. Short term, of
course I am aware that the USD is being battered which provides me
one of the best entries to go long usdphp perhaps at 46, but i'll let
the market tell me the price.)
