He probably was, well, most likely if he was doing that crap he wasn't smart enough, just greedy.
Securities Arbitrage was a nice little interest rate play, much like the Yen Carry Trade.
He probably was, well, most likely if he was doing that crap he wasn't smart enough, just greedy.
Securities Arbitrage was a nice little interest rate play, much like the Yen Carry Trade.
Hey Legend:
What do you make of the market action on Thursday?
Seemed like irrational fear and panic, but after listening to commenators today, it seems like there may be a real risk of recession if the Fed waits too long to cut rates.
What do you think?
Is it just irrational fear and panic of the unknown, or is there really a true global financial crisis that hasn't fully manifested itself yet?
What do you make of the market action on Thursday?
Seemed like irrational fear and panic, but after listening to commenators today, it seems like there may be a real risk of recession if the Fed waits too long to cut rates.
What do you think?
Is it just irrational fear and panic of the unknown, or is there really a true global financial crisis that hasn't fully manifested itself yet?
I'll defer to Mr Killer . . .
But it is global. The European Central Bank 'injected' ?94.8 billion in short-term funds into the system to get rates back down yesterday and said it would provide unlimited cash to keep rates doiwn. It appears that no one will touch any commercial paper close to a mortgage-backed security. On the News Hour tonite a guy said people wouldn't touch 6% paper - and that's when the Fed jumped in. . .
The interbank rate in London jumped almost 10% from yesterday to today.
From a bank I'm lookin' at in Germany now - Oakland, Calif & a pension in Montana have some of their paper. Major German banks are bailin' them out and guarantteeing their paper.
To rally the banks, the lead regulator warned that they needed to head off the risk of what could become the country's worst financial crisis since the 1930s. The safety net for IKB consists of about ?3.5 billion, or $4.789 billion, available now to cover possible losses, plus a further financial backstop of ?14.6 billion to keep afloat IKB and the affiliate that invested in fixed-income securities.
Here's the link from the WSJ Online
"In a world in which trillions of dollars have been bet on the premise that low interest rates and record-low default rates would continue forever, "repricing of risk," as the administration likes to call it, is not some minor technical event."
"Although it has provided ingenious new mechanisms to finance the legitimate needs of businesses and householders and new ways for investors to hedge risks, it has also created opportunities for potentially destabilizing speculation. It is now common for the aggregate value of "derivative" instruments to be many times the volume of the stocks, bonds or commodities on which they are supposedly based. And often it is the trading on derivatives markets that now drives the trading on "real" markets, rather than the other way around."
"It is in the nature of the new financial order that it's hard to figure out exactly what everyone's role is. All the borrowers are lenders and all the lenders turn out to be borrowers, so nobody -- including regulators -- can quite figure out where the ultimate risks really lie."
"Australian analyst Satyajit Das makes the point that the main achievement of the new financial architecture has not been to spread risk so much as it has been to expand risk by vastly increasing the amount of borrowed money. Making loans to buy bonds secured by packages of other loans makes for big fees and exciting work for bankers. But as Das predicted last year in his book, "Traders, Guns & Money" -- and as we all discovered yesterday -- if the supply of credit suddenly dries up anywhere in the system, the elaborate new structure they've created can come crashing down on itself."
http://www.washingtonpost.com/...9/AR2007080902192.html
"Although it has provided ingenious new mechanisms to finance the legitimate needs of businesses and householders and new ways for investors to hedge risks, it has also created opportunities for potentially destabilizing speculation. It is now common for the aggregate value of "derivative" instruments to be many times the volume of the stocks, bonds or commodities on which they are supposedly based. And often it is the trading on derivatives markets that now drives the trading on "real" markets, rather than the other way around."
"It is in the nature of the new financial order that it's hard to figure out exactly what everyone's role is. All the borrowers are lenders and all the lenders turn out to be borrowers, so nobody -- including regulators -- can quite figure out where the ultimate risks really lie."
"Australian analyst Satyajit Das makes the point that the main achievement of the new financial architecture has not been to spread risk so much as it has been to expand risk by vastly increasing the amount of borrowed money. Making loans to buy bonds secured by packages of other loans makes for big fees and exciting work for bankers. But as Das predicted last year in his book, "Traders, Guns & Money" -- and as we all discovered yesterday -- if the supply of credit suddenly dries up anywhere in the system, the elaborate new structure they've created can come crashing down on itself."
http://www.washingtonpost.com/...9/AR2007080902192.html
1 out of 10. Nifty, more National Review propaganda. Like any propaganda, with a nugget of truth and a political agenda to mislead.
Yes, I am sure you made lots of money shorting LEH from $59.07, were able to continue to short LEH for over a year without either getting shaken out or wiped out through all of the volatility and probable margin calls of the last year, and still had any money left to short the stock in it's death throes...
And what I originally posted on this thread August 9, 2007:
"When pundits on tv says that subprime is "contained", I think they are saying that the direct economic effects of decreased consumption on the part of the unfortunate people being foreclosed on will be contained (i.e. it will be a drag on GDP, but not pull the whole economy into recession). Consumption of "rich" people, for whom the economy and stock market is still booming, more than offsets decreased consumption of those being foreclosed upon, thus subprime is "contained".
The panic you are seeing on Wall Street is because so many hedge funds, banks, brokers, insurance companies, etc. all around the world used cheap borrowed money and lots of leverage and bought up these crappy packaged mortgages. Because of the leverage employed, losses around the world could be huge (Cramer thinks $500 billion - and I don't know if he just meant within the U. S.), and because institutions aren't telling people what their true exposure is, there is this liquidity crunch everybody is talking about on tv.
BNP Paribas has suspended redemptions on it's three hedge funds overnight because it said it couldn't price these securities in the U. S. since Monday and the ECB apparently just started injecting a lot of liquidity into the banking system there.
Whether or not this "subprime crisis" will be contained or not, I think is too early to tell."
And what I originally posted on this thread August 9, 2007:
"When pundits on tv says that subprime is "contained", I think they are saying that the direct economic effects of decreased consumption on the part of the unfortunate people being foreclosed on will be contained (i.e. it will be a drag on GDP, but not pull the whole economy into recession). Consumption of "rich" people, for whom the economy and stock market is still booming, more than offsets decreased consumption of those being foreclosed upon, thus subprime is "contained".
The panic you are seeing on Wall Street is because so many hedge funds, banks, brokers, insurance companies, etc. all around the world used cheap borrowed money and lots of leverage and bought up these crappy packaged mortgages. Because of the leverage employed, losses around the world could be huge (Cramer thinks $500 billion - and I don't know if he just meant within the U. S.), and because institutions aren't telling people what their true exposure is, there is this liquidity crunch everybody is talking about on tv.
BNP Paribas has suspended redemptions on it's three hedge funds overnight because it said it couldn't price these securities in the U. S. since Monday and the ECB apparently just started injecting a lot of liquidity into the banking system there.
Whether or not this "subprime crisis" will be contained or not, I think is too early to tell."
Why don't you put a nice chunk of real money down shorting LEH and see how well you at market close this Friday?
I know I don't have the temperament to be a trader. It's easy to look at a chart retrospectively, then say I would have bought here and sold there, but when real money is on the line, somehow things change....
What if you didn't get out before the stock was halted at 3 PM yesterday, was worried the stock was going to $2 today (made up number), and panicked and sold at $0.30 in the aftermarket? (yesterday's intra-day range was about 0.19 - 0.26) Plus if you were on margin and the offical close was $0.30, you might have been taken out by a margin clerk anyways.
And even if you had got the direction right yesterday, would you have got nervous and sold at first slight reversal of price from your entry point?
edit: So, gapped up from 0.05 cents Thursday to open at 0.12 today, fell back to 0.08, and has been moving upward relentlessly all day, peaked at 0.25, and ended at 0.2151, for a nice 1 day potential loss of just 313%, if no margin had been applied.
I know I don't have the temperament to be a trader. It's easy to look at a chart retrospectively, then say I would have bought here and sold there, but when real money is on the line, somehow things change....
What if you didn't get out before the stock was halted at 3 PM yesterday, was worried the stock was going to $2 today (made up number), and panicked and sold at $0.30 in the aftermarket? (yesterday's intra-day range was about 0.19 - 0.26) Plus if you were on margin and the offical close was $0.30, you might have been taken out by a margin clerk anyways.
And even if you had got the direction right yesterday, would you have got nervous and sold at first slight reversal of price from your entry point?
edit: So, gapped up from 0.05 cents Thursday to open at 0.12 today, fell back to 0.08, and has been moving upward relentlessly all day, peaked at 0.25, and ended at 0.2151, for a nice 1 day potential loss of just 313%, if no margin had been applied.
(copied and pasted from my original 8/10/2007 post)
"Goldman and Lehman ain't going out of business.
Markets are very volatile and I get the impression that it's very dangerous even for professional traders.
If you think you are going to short these stocks and make money, you are going to get your head handed to you!!!
Smarter move would be to invest in a mutual fund with true deep value or contrarian growth style and whose shareholder base doesn't have a lot of fickle, hot money in it.
Dollar cost average down on days the market tanks, don't worry about fluctuations in mutual fund price over the short term, and be very very happy in 5+ years for now.
Mutual funds that come to mind are Selected American Shares (SLASX or SLADX; large value fund that has expertise in financials), or Vanguard Capital Opportunity VHCOX / Primecap VPMCX (these are contrarian growth managers who have a record of outperformance over long periods of time). I'm sure there are lots of other quality candidates, though it is probably wise to stay away from financial sector funds because they don't have much maneuveurability if markets rotate away from favoring financials.
Time and compound interest are wonderful things, so even if these funds aren't the best performing funds on the market, if they can minimize downside risk - basically capital preservation, they can outperform the market in terms of how much money you have down the road, even if they aren't on the cover of Money Magazine, etc. as best performing funds for a given year. e. g. if a fund were to drop 50%, gain after that has to be 100% just to get back to baseline."
So, LEH gapped up from 0.05 cents Thursday close to open at 0.12 today, fell back to 0.08, and has been moving upward relentlessly all day, peaked at 0.25, and ended at 0.2151, for a nice 1 day potential loss of just 313%, if no margin had been applied.
AIG and WM were both up over 40% today.
I am not a trader, but at least I am still in the game. How many short sellers got wiped out today?
And margin clerks probably aren't interesting in hearing your complaints about how they changed the rules overnight...
"Goldman and Lehman ain't going out of business.
Markets are very volatile and I get the impression that it's very dangerous even for professional traders.
If you think you are going to short these stocks and make money, you are going to get your head handed to you!!!
Smarter move would be to invest in a mutual fund with true deep value or contrarian growth style and whose shareholder base doesn't have a lot of fickle, hot money in it.
Dollar cost average down on days the market tanks, don't worry about fluctuations in mutual fund price over the short term, and be very very happy in 5+ years for now.
Mutual funds that come to mind are Selected American Shares (SLASX or SLADX; large value fund that has expertise in financials), or Vanguard Capital Opportunity VHCOX / Primecap VPMCX (these are contrarian growth managers who have a record of outperformance over long periods of time). I'm sure there are lots of other quality candidates, though it is probably wise to stay away from financial sector funds because they don't have much maneuveurability if markets rotate away from favoring financials.
Time and compound interest are wonderful things, so even if these funds aren't the best performing funds on the market, if they can minimize downside risk - basically capital preservation, they can outperform the market in terms of how much money you have down the road, even if they aren't on the cover of Money Magazine, etc. as best performing funds for a given year. e. g. if a fund were to drop 50%, gain after that has to be 100% just to get back to baseline."
So, LEH gapped up from 0.05 cents Thursday close to open at 0.12 today, fell back to 0.08, and has been moving upward relentlessly all day, peaked at 0.25, and ended at 0.2151, for a nice 1 day potential loss of just 313%, if no margin had been applied.
AIG and WM were both up over 40% today.
I am not a trader, but at least I am still in the game. How many short sellers got wiped out today?
And margin clerks probably aren't interesting in hearing your complaints about how they changed the rules overnight...
Smart trader, or lucky gambler?
I guess only long term returns over time will tell...
(compound rate of return, starting with fixed initial amount or principal, and incorporating all profits and losses as basis for future trades). That is, if you lose 50% on your first bet, you then have to make 100% on next bet just to break even (not even deducting transaction costs and and the constant drag of capital gains taxes).
I guess only long term returns over time will tell...
(compound rate of return, starting with fixed initial amount or principal, and incorporating all profits and losses as basis for future trades). That is, if you lose 50% on your first bet, you then have to make 100% on next bet just to break even (not even deducting transaction costs and and the constant drag of capital gains taxes).
I haven't been doing too badly in this market. Not saying I am an uber-trader, but I have my own reasons for making moves.
Meaningful individual positions (5%+ of your total net worth for each position/bet you make), as say a professional mutual fund manager of a diversified 20 stock "focus" type mutual fund who has most of their net worth tied up in the fund they manage would deploy, or just dabbling with "mad money" that you can easily afford to lose?
LLPFX (true value 20 stock focus fund): http://quicktake.morningstar.c...untry=USA&Symbol=LLPFX
VHCOX (diversified contrarian growth fund): http://quicktake.morningstar.c...untry=USA&Symbol=VHCOX
SLADX (diversified fund with heavy financial exposure): http://quicktake.morningstar.c...untry=USA&Symbol=SLASX
These funds, and lots of others I suspect, don't have a special secret formula, just plain old time, compound interest, and a healthy respect for capital preservation.
If you start studying growth over time graphs, you will also see that these types of funds tend to go down more than the market during downturns (loading up on currently out of favor dogs that will still be fundamentally sound over time), then significantly outperforming the market when the next sustained upturn in the market does eventually occur. Marty Whitman's Third Avenue Value Fund (TAVFX) is getting totally clobbered in this market right now (he's got a big slug of financial exposure, including mortgage insurers and real estate companies, but is also a true expert on bankruptcy), and this sustained downturn will hopefully allow him to reload and hit his long term absolute target of 20% compound average annual return (!!!) over the life of his fund (12 - 15% average annual return over time is hard enough, but attempting to achieve an absolute average annual return of 20%; that's insane, like what a really good hedge fund might try, or at least one that respects the fact that reckless risk can totally wipe you out and actually still exists 10 - 20 years down the road). A lot of value funds might look to purchase shares at 60% of private market value, with intrinisic value realized over 3 - 5 years, while Whitman may be looking to buy at 50% or less (basically buying when others think the company is going to go bankrupt), and realizing those latent gains over a longer time period.
edit: Also just realized you bought the actual stock, not shorted it. Your maximal loss was 100%; if you shorted the stock, your potential losses would have been limitless.
LLPFX (true value 20 stock focus fund): http://quicktake.morningstar.c...untry=USA&Symbol=LLPFX
VHCOX (diversified contrarian growth fund): http://quicktake.morningstar.c...untry=USA&Symbol=VHCOX
SLADX (diversified fund with heavy financial exposure): http://quicktake.morningstar.c...untry=USA&Symbol=SLASX
These funds, and lots of others I suspect, don't have a special secret formula, just plain old time, compound interest, and a healthy respect for capital preservation.
If you start studying growth over time graphs, you will also see that these types of funds tend to go down more than the market during downturns (loading up on currently out of favor dogs that will still be fundamentally sound over time), then significantly outperforming the market when the next sustained upturn in the market does eventually occur. Marty Whitman's Third Avenue Value Fund (TAVFX) is getting totally clobbered in this market right now (he's got a big slug of financial exposure, including mortgage insurers and real estate companies, but is also a true expert on bankruptcy), and this sustained downturn will hopefully allow him to reload and hit his long term absolute target of 20% compound average annual return (!!!) over the life of his fund (12 - 15% average annual return over time is hard enough, but attempting to achieve an absolute average annual return of 20%; that's insane, like what a really good hedge fund might try, or at least one that respects the fact that reckless risk can totally wipe you out and actually still exists 10 - 20 years down the road). A lot of value funds might look to purchase shares at 60% of private market value, with intrinisic value realized over 3 - 5 years, while Whitman may be looking to buy at 50% or less (basically buying when others think the company is going to go bankrupt), and realizing those latent gains over a longer time period.
edit: Also just realized you bought the actual stock, not shorted it. Your maximal loss was 100%; if you shorted the stock, your potential losses would have been limitless.
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