A Stock Market Rebound Closely Linked with Economic Data Surprises

[GRG55]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

One covered in battery acid?

That might be the best answer of all...

My point is that even at a "conservative" 10:1 leverage [well below recent norms for the banks] a deposit bank is still "insolvent" in the event of a run - and that's why the regulators will remain on the hook to protect the banking system.

[GRG55]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

And another great piece from Zero Hedge on one of my favourite subjects:

http://zerohedge.blogspot.com/2009/0...provision.html

It's really funny to watch the Wall Street boys eating each others (of course Government Sachs boys will be the last pythons left and they will have their belly full). There are too many leeches and to few fish left for all the parasites ;)

You'll break out laughing once again when you read this. It brought tears to my eyes...:rolleyes:

http://jessescrossroadscafe.blogspot...on-dollar.html

[MLM]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

I think you're confusing liquidity and solvency here (not that you'd be alone these days). A run on a bank, if the bank's assets (loans) are good, is a liquidity problem. Assets + equity that isn't worth the amount of deposits the bank holds is a separate problem -- and great reason for a run on the bank.

Hmm, makes me want to recheck that I've cleared out my checking accounts.

[GRG55]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

You'll break out laughing once again when you read this. It brought tears to my eyes...:rolleyes:

http://jessescrossroadscafe.blogspot...on-dollar.html

And right on que [drum roll, please]

Goldman Sachs Raises $5 Billion to Repay TARP Funds

April 14 (Bloomberg) -- Goldman Sachs Group Inc., buoyed by better-than-expected earnings and a 54 percent gain in its stock price, raised $5 billion in the largest stock sale this year to help repay $10 billion in government rescue funds.

The bank sold 40.65 million shares at $123 each, 5.5 percent less than yesterday’s closing price, the New York-based company said today in a statement. The price was the same as when Goldman Sachs last sold shares in September. Until last week, the stock hadn’t closed above $123 since Oct. 6...

[Supercilious]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

You'll break out laughing once again when you read this. It brought tears to my eyes...:rolleyes:

http://jessescrossroadscafe.blogspot...on-dollar.html

Yeah They crowded all their losses in December and made a time travel over that month. You have to admire them. They are so inventive they are always ready to put on the table a new scam.... or a new president, Treasury Secretary, Barney Franks etc.

That might be the best answer of all...

My point is that even at a "conservative" 10:1 leverage [well below recent norms for the banks] a deposit bank is still "insolvent" in the event of a run - and that's why the regulators will remain on the hook to protect the banking system.

That is completely wrong. A bank even at 10:1 may not necessarily be insolvent and in danger in a bank run. Read here:

http://www.bloomberg.com/apps/news?p...d=aANXHOD12Q2A

In today’s crisis, Hoare [of C. Hoare & Cobank] has so far benefited, lifting deposits to about 1.8 billion pounds during the last 12 months. That’s mainly because it’s an “exclusive franchise” for the rich, said Simon Maughan, a financial analyst at MF Global Securities Ltd. The bank’s history has no relevance to the wider banking market, Maughan said in an e-mail. Hoare accepts his bank serves a niche, and it has missed out on historic opportunities to expand.
Hoare & Co. is an unlimited liability partnership, which means the family’s personal wealth, including Alexander Hoare’s solar-panel-topped residence and 50-foot yacht, can be seized if the lender collapses. That gives clients confidence, Hoare said.
“Everything apart from the shirt on our back is at risk,” Hoare said. “It keeps you jolly nervous.”

Of course the non fraudulent banks are exclusive franchises for the rich. Proles like me an you have access only to the usual fraud holes

[GRG55]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

I think you're confusing liquidity and solvency here (not that you'd be alone these days). A run on a bank, if the bank's assets (loans) are good, is a liquidity problem. Assets + equity that isn't worth the amount of deposits the bank holds is a separate problem -- and great reason for a run on the bank.

Hmm, makes me want to recheck that I've cleared out my checking accounts.

Ordinarily I would agree with you.

However, let's start a run on a bank today, and then count how many minutes it takes to move from a "liquidity event" to an insolvency event...

[Supercilious]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

Another great piece from Zero Hedge on the quant debacle. I'm putting here only a quote:

http://zerohedge.blogspot.com/2009/0...ng-market.html

The Quants' Role In Perpetuating Market Distortions

Posted by Tyler Durden at 9:10 AM
A relevant long-term proxy for the increasing presence and relevance of quant trading in equity markets is the widening volatility (width) in the advances-to-declines band (observed via ADLN in Bloomberg, or TICK for intraday breadth movements).



[...]

What this chart shows is that vast systematic volumes of quant strategies in various time frames have become a destabilizing factor due to a convergence of strategies. In the end, the only way to win is to buy stocks that go up and sell stocks that go down and all strategies, no matter how many PhDs portfolio managers are involved, and so quants had to be in the same stocks, at the same time, swinging the market widely under their own weight. The bigger funds took the lead and the goal of smaller ones become to figure out what bigger guys will do the next day.
[...]
Quant funds followed the credit cycle and technology progress, and as computers became cheaper and credit/money got mispriced, quant funds developed into a dominant force. August 2007 was billed as a once in a 1000 years event that will never repeat. It did, though not as devastating, but painful nevertheless... And will repeat again quite soon.

Just what does the science of astronomy or physics have to do with uncertain, emotional markets? Why should the past repeat and why should large, highly leveraged positional bets be allowed on that premise? How is that any different from AAA CDOs constructed from sub-prime RMBS. Rating agencies made flawed assumptions, and now the prop risk managers allocating the bulk of the trading capital for the de jour hot quant manager, are making comparable mistakes, disguised as "assumptions" yet again.

Yup it's cupola models deja vu all over again. People who don't understand probabilities are going at it again. It doesn't take an Einstein brain to figure where is the fallacy of their thinking.

And of course it will be blamed again on physics, math and astronomy PhD's when the main culprit is a mix of ignorance and greed.

[phirang]

Re: A Stock Market Rebound Closely Linked with Economic Data Surprises

This rally has dinged me, as I was in the sheeple trade, being short some insurers and commercial real estate.

personal observations:

1) beta rally: the worse beta, the better rally. can we say, "farfigpanicshortcovering"?

2) margin calls: people are getting them LEFT AND RIGHT

3) Fail to deliver: LOTS of people finding it VERY hard to short stocks - across all brokerages, including the "pro" ones like TOS or Interactive etc. Lots of buy-ins, but fortunately, not in ROS(shout out to symbols!)

4) PPT: I've ALWAYS been PPT-skeptic, but now, it CLEARLY exists. If you don't believe it, please look at the KIM, SPG secondaries. The Fed/Treasury want the banks to dump CRE paper as much as possible PRE STRESS TEST, and so getting some equity bagholders (pension money, probably - didn't bother to check) was the way to do it. Run the secondary, and then upgrade everything to "generational buy" and either let secondary buyers dump or not.

In either case, the bank gets the debt reduced.

Oh, and if you think it's not a bear market rally, WMT and BKC disagree. GOOG was also weak, too.