Official Let's Make Some Money Off Stocks Thread
11-24-2008, 09:25 PM
#1673
Watchout for a market rally on the Paulson and Bernanke consumer financing announcement if you are short.
Wonder when we start to see some consequences to all these bailouts.
Wonder when we start to see some consequences to all these bailouts.
11-25-2008, 05:40 AM
#1675
Administrator
Thread Starter
^ that assumption is actually not true. The treasury isn't issuing cash, it's swapping assets. Commercial and agency paper for treasuries. The spread on those assets is really quite large and the Fed could end up with a HUGE profit, they are in effect taking all the banks profits.
Think about it. They are trading treasuries they pay ~3% on for higher yielding paper, on the order of 5-9%. That's pretty close to a 50% margin on debt.
The value of the dollar is related to inflation, not debt.
We already are, and based on recent greater understanding of how these bailouts are occurring, am more than a little concerned abou tthe consequences for the equities market.
There is more than one bailout at work. The first is TARP which swaps distressed assets of banks for treasuries. I talked about that before. Another is direct injection of capital by buying preferred shares in AIG, Citi and maybe soon GM, Ford and Chrysler. This second program is concerning because it's marking-to-market the assets values of these firms.
Citi for example has $850B in deposits and another $1.5ish trillion in other assets which are currently being valued at about $50B. Stepping in when the share prices get low, not when the balance sheet needs help is reinforcing the market valuation of those assets at being worth $20B or $3/share.
This drastic undervaluing of those assets is reinforcing this bear market and is going to continue to spill over into other companies and sectors. The market will continue to pressure these assets down until the gov't steps in and writes a put.
I expect to see the market, especially the financial sector, to lose almost all of it's value. This is a serious problem and Paulson and Bernanke need to stop watching the stock price and instead deal with the underlaying fundamentals of the balance sheet. Keep them from going under, fine, but don't make that decision based on the share price which means nothing. Investors are hunting for a price to put on these assets and when the gov't intervenes as an investor and marks-to-market a company's balance sheet they are feeding the animals.
They need to stick to the original TARP plan. This about face shift of direction away from swapping assets toward direct capital injection is a tragic mistake with both immediate and long term consequences. The equity market is dead. It will take years to undo the damage that is being done right now.
Think about it. They are trading treasuries they pay ~3% on for higher yielding paper, on the order of 5-9%. That's pretty close to a 50% margin on debt.
The value of the dollar is related to inflation, not debt.
Wonder when we start to see some consequences to all these bailouts.
There is more than one bailout at work. The first is TARP which swaps distressed assets of banks for treasuries. I talked about that before. Another is direct injection of capital by buying preferred shares in AIG, Citi and maybe soon GM, Ford and Chrysler. This second program is concerning because it's marking-to-market the assets values of these firms.
Citi for example has $850B in deposits and another $1.5ish trillion in other assets which are currently being valued at about $50B. Stepping in when the share prices get low, not when the balance sheet needs help is reinforcing the market valuation of those assets at being worth $20B or $3/share.
This drastic undervaluing of those assets is reinforcing this bear market and is going to continue to spill over into other companies and sectors. The market will continue to pressure these assets down until the gov't steps in and writes a put.
I expect to see the market, especially the financial sector, to lose almost all of it's value. This is a serious problem and Paulson and Bernanke need to stop watching the stock price and instead deal with the underlaying fundamentals of the balance sheet. Keep them from going under, fine, but don't make that decision based on the share price which means nothing. Investors are hunting for a price to put on these assets and when the gov't intervenes as an investor and marks-to-market a company's balance sheet they are feeding the animals.
They need to stick to the original TARP plan. This about face shift of direction away from swapping assets toward direct capital injection is a tragic mistake with both immediate and long term consequences. The equity market is dead. It will take years to undo the damage that is being done right now.
11-25-2008, 06:17 AM
#1676
[QUOTE=AZDavid,Nov 24 2008, 10:25 PM] Watchout for a market rally on the Paulson and Bernanke consumer financing announcement if you are short.
Wonder when we start to see some consequences to all these bailouts.
Wonder when we start to see some consequences to all these bailouts.
11-25-2008, 08:29 AM
#1677
I find it interesting that UBS upgrades Lennar (LEN) a day after another weak housing report. The stock has rocketed off its low of 3.42 last Friday to trade at 7.03 today.
On a positive note, homes that have been up for sale for months have begun to sell in my area. I am seeing more and more sold signs.
On a positive note, homes that have been up for sale for months have begun to sell in my area. I am seeing more and more sold signs.
11-25-2008, 10:24 AM
#1680
CNBC is in full blown rally mode. Everyone they bring on today is touting cheap stocks and saying we can only go higher from here.
I expect to see some major volatility at the close. Get your popcorn ready. I am hoping for a break of 8,000!
I expect to see some major volatility at the close. Get your popcorn ready. I am hoping for a break of 8,000!