I know buddy. We've done too many PM's to do have any personal disrepect for one another. I've always respected your point of view. We justly seemly agree to disagree. Can I stay at your place when I loose my house?:biggrin:
Doug
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wamu / bank failures?
- Thread starter queenlives
- Start date
I know buddy. We've done too many PM's to do have any personal disrepect for one another. I've always respected your point of view. We justly seemly agree to disagree. Can I stay at your place when I loose my house?:biggrin:
Doug
I think that Americans (and now that Ski isn't subject to American news cycles) have NO idea what is going on (sorry):redface:
This isn't a "one or two year thing" for America - this is BIG th edevaluation of the US currency, the fact that Bush has put the USA in a 10 Trillion Dollar hole, and the subprime fiasco, which was fueled by the "new" trend in corporate governance in the USA - (great fix for Enron Accounting).
I think selling bank stocks short a year from now will suck - and that the US is only beginning to go down - there's far to fall.
We sold approx 320 units in Vegas, most financed with 130% mortgages, although not many have defaulted, its a question of "yet" in my mind.
There has been a sea-change in lending methodologies and criteria (methodologies = faceless lending to strangers vs. the bank manager who dealt with your parents, criteria = Loan to value ratios and Debt service ratios that using the word "imprudent" is like saying Britney is "not quite MENSA material")
These changes will see consumers walking away from loans as the economy softens, and its gonna soften - the mistake that has been made is that the drop in consumer prices of semi and durable goods has come from cheaper imports at the cost of American Manufacturing and has shifted wealth and demand for "input materials" like steel, wood, wheat, oil, etc. into the developing world (china, etc.) where there has never been demand before. Basically the cost of inputs is going to increase (just like the cost of Flour has gone up three major times this year - unprecedented!) which, along with the massive budget deficit and national debt in the usa is gonna lead to killer inflation as there is a concurrent drop in real property values (traditional "safe havens") due to mortgage defaults.
If I were you guys, I'd buy gold!
(Look at us in Canada, our economy is booming, but manufacturing is getting killed, and our dollar hasn't risen, its your dollar that has lost 40% of its value since Bushie took over)
The American Public doesn't get it - too much Patriot flavored Coolaid and Jesus - just like when "Chrysler bought Mercedes" was all over the news - its the US economy thats tanking (and its hurting sectors in the rest of the world) , not the rest of the world going down along with America.
Sorry, long post - if you're reading this have your eyes glazed over, or did you skip to the end for the punch line?:wink:
This isn't a "one or two year thing" for America - this is BIG th edevaluation of the US currency, the fact that Bush has put the USA in a 10 Trillion Dollar hole, and the subprime fiasco, which was fueled by the "new" trend in corporate governance in the USA - (great fix for Enron Accounting).
I think selling bank stocks short a year from now will suck - and that the US is only beginning to go down - there's far to fall.
We sold approx 320 units in Vegas, most financed with 130% mortgages, although not many have defaulted, its a question of "yet" in my mind.
There has been a sea-change in lending methodologies and criteria (methodologies = faceless lending to strangers vs. the bank manager who dealt with your parents, criteria = Loan to value ratios and Debt service ratios that using the word "imprudent" is like saying Britney is "not quite MENSA material")
These changes will see consumers walking away from loans as the economy softens, and its gonna soften - the mistake that has been made is that the drop in consumer prices of semi and durable goods has come from cheaper imports at the cost of American Manufacturing and has shifted wealth and demand for "input materials" like steel, wood, wheat, oil, etc. into the developing world (china, etc.) where there has never been demand before. Basically the cost of inputs is going to increase (just like the cost of Flour has gone up three major times this year - unprecedented!) which, along with the massive budget deficit and national debt in the usa is gonna lead to killer inflation as there is a concurrent drop in real property values (traditional "safe havens") due to mortgage defaults.
If I were you guys, I'd buy gold!
(Look at us in Canada, our economy is booming, but manufacturing is getting killed, and our dollar hasn't risen, its your dollar that has lost 40% of its value since Bushie took over)
The American Public doesn't get it - too much Patriot flavored Coolaid and Jesus - just like when "Chrysler bought Mercedes" was all over the news - its the US economy thats tanking (and its hurting sectors in the rest of the world) , not the rest of the world going down along with America.
Sorry, long post - if you're reading this have your eyes glazed over, or did you skip to the end for the punch line?:wink:
WHAT? You're actually saying the devaluation of the dollar and the debt are causing this? Please explain the correlation you've just drawn here!
Steve, The financials are not all created equal right now, you investments depend on the institutions your buying (or shorting). WAMU's balance sheet is swiss cheese, I wouldn't touch that thing on the long side, but a short squeeze will kick your ass up and down china town... like Ski said, the Fed has 200 bps in their pocket and you better believe they're going to use them all before 2009 rolls around... I wouldn't touch WAMU without a good hedge unless you're a gamblin' man. You might want to consider buying 2-4 strike deep ITM calls and shorting the common (1-1), this is a decent hedged bet where you'll get a good return if WAMU falls off the map, and you'll stay alive if you get squeezed.
BAC, C and WFC are too big to go out of business... they have gov't bailout written all over them. If you're going long LEAPS, I'd go WFC (they don't have crazy exposure to all the crap paper). If you're going long common, you may as well take the yield on BAC. Either way, I wouldn't expect them to shine anytime soon. When WAMU, wachovia or nat city go under, the big guys will take a hit, which will probably be a good time to start building a long position if you don't have any skin in the game already.
Shorting the current cycle DOTM puts might be the best strategy if you want to play it close to your vest right now. Those bitches are expensive!
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Hold on! I'm not saying its the cause, I'm saying that the effect makes it impossible to "leverage" out of the situation, so the spiral is bound to continue. This whole thing was happening naturally as we see the developing world start to develop, what the US has done is stupid things that have altered the "slow change" course to a rapid slippery slope with little options for steering or a "soft landing".
In order to attract investment and fuel the economy the best traditional tools have been to give investors "Bang for Buck" ie. higher interest rates, which, with the US deficit at a record high, would increase the cost of Debt Service, which would either deepen the deficit or increase taxes, etc. which would help stall the economy.
When you're stressed about money the best cure is a vacation, which you can't afford cuz you're broke - if you get my analogy.
The reality is that you can't sell things at Walmart that are made in the USA and overall, free trade leads to equalization of wealth across the world. In order for the US to succeed it needed to play its strengths and bolster or re-engineer its weaknesses - instead Bush spent money like water (1 Trillion plus extra a year not counting the commitment to prescription drugs that will truly bankrupt America) instead of being a rich country that could afford to innovate and invest in technology and things it does best (which is a lot) to stay on the leading edge.
The devaluation of the Dollar is the world knowing this - not just me - its the symptom, not the cause - the growing National Debt and lack of any foreseeable action to change it is what's driving it.
Ask yourself this question though... why do we need to shrink the national debt when we're not even at optimal debt levels? If we can produce more capital on our debt than its cost (i.e. return is greater than debt service), then why would we want to put some type of plan in place to reduce it? Once our growth is flush with our debt service, then we'll stop expanding the debt and then it will be a real problem if it increases.
This whole crazy thing we call the financial system is completely dependent on the world's perception of the stability of our government, not on whether or not we can pay China back.
Think about this for a moment... the dollar is cyclical like any other market. The driver of liquidity problems has been the "collapse" of subprime and the housing market. Once we clean house and get washed out, we're back off to the races... our national debt won't mean a thing and the dollar will rotate. A downwards spiral is a matter of perspective... it is just a question of how far we are from the bottom right now and can liquidity be restored orderly (w/o big inflation) to prevent the points that SKI pointed out. If not, then we've got some falling to do like you said, but America does not care about saving face and we're very agile. Problems will be exposed, we'll move on, and the world will still have faith in the future of our economy.
That's the problem. I just spent the entire evening looking for any options that are reasonable and there are NONE that I could find. They are all pretty much priced so the underlying would need to go to near zero before they paid off. They have to be hedge placements because there is no way they are profitable positions.
I found lots of puts that went from a nickle to way past 10 bucks some even into the 20's but those plays are over. You are right about the short squeeze and it is the exact reason why I don't like to hold the stock.
I am considering covering my March calls and rolling out a new batch at the money for October and buying lots of downside protection. ON MY ENTIRE PORTFOLIO!!!
I meant that I thought it might be good play to short some March puts here because the implied volatility is off the charts on WM (175% ATM). Maybe sell the 7.5/5 verticle put spread for $0.35. At 175% volatility you have an 80% chance of that spread going out worthless (max return) and a 25% chance of WM actually hitting the 7.5 strike. If you get hit at $0.35 you're max return on margin would be 14% and expected return would be around 6%... not bad for 11 days of nail biting (I wouldn't put it on for any less than $.35 though).
As for those puts going from a nickel to 20 bucks, those were just lottery tickets when they were purchased
... with an edge of course. Its just so hard to play a company like WAMU because they're in total limbo... its easier to just play their volatility rather than picking a side 'cause you know the underlying isn't going to calm down anytime soon.Ouch, buying downside protection in the form of puts is not going to be cheap right now! You might just want to consider trimming your positions when they rally if that's an option... exposure sure has been painful lately.
Are you saying that you're planning on shorting ATM WM April calls - naked style? If so, your dragin' an XXL pair of coconuts my friend! :biggrin:
You see what I mean?
The problem is you Americans are too bullish on your own CoolAid!
The market was going down BEFORE the subprime collapse, just like it was going down BEFORE 911 - you guys like to have a "reason" a point in time singular event to "blame" it all on.
The beginning of the decline was the drop in the American Dollar (best illustrated by looking at a chart of the Eruo and/or the increase in domestic gas prices)
You can afford to service Ten or Eleven Trillion? Sure, but the way you service it is through high taxes and it provides the government with very little money to stimulate the economy with - all the while the Boomers are going to be taking more government provided prescription drugs and using more medicare.
Its like you saying you can weather the bad economy 'cuz you borrowed 95% of what your house (was) worth and have the cash in the bank so you can eat at restaurants, and go on vacations - then your triplets get into Harvard and you need to pay tuition - Now What?
IMO, the power and cash from the US economy has been carefully funneled to Iraq, Haliburtun, Oil Interests, and Bushies to the tune of 10 Trillion - what a waste.
I'd rather the President got BJs EVERY DAY instead of being this corrupt - and when I hear the "we can afford the debt and still thrive" stuff I just see someone who doesn't understand how the world views America right now.
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Covert Nationalization of the Banking System
http://interfluidity.powerblogs.com/posts/1204920896.shtml
http://interfluidity.powerblogs.com/posts/1204920896.shtml
Its not nationalization - its helping the Bank Execs that got big bonuses for getting into the situation stay in place by passing them the money they lost from the government's pocket - ie. YOUR Pockets!
did you get the name Red because you are a closet communist??
you may hafta sponsor some of us at nsx est fest. if we make it to may....
OK! :biggrin:
Every American who comes to Est Fest gets two (Commie) Russian Vodka shots on me!:biggrin: :tongue:
I meant that I thought it might be good play to short some March puts here because the implied volatility is off the charts on WM (175% ATM). Maybe sell the 7.5/5 verticle put spread for $0.35. At 175% volatility you have an 80% chance of that spread going out worthless (max return) and a 25% chance of WM actually hitting the 7.5 strike. If you get hit at $0.35 you're max return on margin would be 14% and expected return would be around 6%... not bad for 11 days of nail biting (I wouldn't put it on for any less than $.35 though).
As for those puts going from a nickel to 20 bucks, those were just lottery tickets when they were purchased
Ouch, buying downside protection in the form of puts is not going to be cheap right now! You might just want to consider trimming your positions when they rally if that's an option... exposure sure has been painful lately.
Are you saying that you're planning on shorting ATM WM April calls - naked style? If so, your dragin' an XXL pair of coconuts my friend! :biggrin:
Those are the exact type of plays I was thinking of but I am limited by what scottrade has available. They keep promising me they are going to open up more option strategies but have not done so. I am getting ready to switch. I am getting really frustrated.
Some of these share I can not have called out. Well I could but I don't want them to be called.
What is really pissing me off is those lotto ticket plays I missed. I was so busy filling up on rental property and I KNEW the RE market and the lending was way out of whack. I NEVER even thought to look into buying some of those lotto tickets puts, lotto tickets with a really good chance of having the right numbers. Now the calls in the opposite direction are way too expensive to be considered a lotto ticket.
I wasn't thinking of buying puts but selling calls rather. I really can't have the stock called out because I don't want to pay on the gains. I bought back my march calls on XOM this morning and I am going to roll out the April calls on a spike today if we get one.
I was thinking of selling the October 120's on apple. That would net me ~20.00 a share and protect me down to 100. That 2.50 per share per month with is about 50% of the $ if I sold the position each month but a lot of downside projection.
I also bought back the MSFT 30's for march and rolled out the April 29's @ .83
Now the question is what to do with AAPL?
Yes, I understand the point you've been trying to make. Yes, the media likes to have a specific data point to blame... but I don't. American's are bullish in general because we view ourselves as resilient problem solvers and we're eternal optimists. Remember how quickly the financial system bounced back after 9/11?... that doesn't happen if you don't have faith in your own future.
We don't need the government to stimulate the economy. It helps smooth things out, but it isn't necessary (or welcome) in free markets. Do we need stimulation to avoid recession... sure, but think about what Volkner did at the Fed during Regan/Carter... he pushed us into a recession to trim the fat and held our heads underwater... then we came out of it and grew the most dis-inflationary tool in history at an unbelievably rapid clip... technology.
Do we have a real problem with Boomers? Hell yeah, we don't have enough producers to compensate for their consumption as they retire... talk about inflationary. So freakin' what, we have such faith in our markets that we don't let the fear of the future become self-fulfilling.
You're analogy about weathering the storm by borrowing money against assets is somewhat correct. Remember that you mentioned globalization... the growth of emerging markets will continue to bolster world economies and the US will participate. Do you think all opportunities to make money have gone away for Americans? No, the person who borrowed money against their home is smart because now they have capital to put to work when opportunities arise. The analogy is wrong in one major way though, America can afford the debt... you're example's middle-class family can not. They are not creating capital with the burden while America is. It would be more accurate to say that the family leveraged their home to buy a stamp printing business and the spread is +2%... they can live like that indefinitely and everybody will be wealthier because of it. Sustainability of the house of cards is what is important, if we fall then we ALL fall.
It is surprising how few people really understand the mechanism of debt, especially on a global scale.
Bush has been wasteful for sure and I do not support liberal republicanism (I don't want this to be political, but I'm on the far right in economic issues if you haven't noticed). Obviously Presidents can have an enormous impact on the future of our economy (think FDR and what a triumph he was for socialism), so I'm very pleased that during this rough patch we have a lack of leadership in the white house. To me, it is ideal to have the gov't stuck in red tape and self-promotion while the elegant invisible hand is at work fixing their mistakes.
Something that is fundamentally important to remember is that the business cycle does not have an academic explanation. There is no reason that bubble's can't go on forever, but it appears to be human nature to sprint and then rest ad infinitum. That means that the "why" behind economic expansion and contraction is sentiment based. When times are good, who cares who owes whom what, it really doesn't matter. When times are bad, those debts get called in and dooms-dayers preach that this time we're really in for it. Then what happens?... oh gosh, we're suddenly booming again and new money comes in the refinance old debt. It just keeps going, fueling higher and higher standards of living while occasionally having a setback (2 steps forward, 1 back)... I presume you know that there is no limit to wealth in this world.
It might also be important to take note that we still have net employment growth. It is slowing and that is why the Fed will keep cutting, but it is net positive... that is not the stuff of recessions. Doomsday theory just does not add up on net balance.
Scottrade is bad news for options trading. Interactive brokers is the best IMO, but optionshouse is very interesting with good prices for putting together option trades.
Yeah, the lotto tickets always feel crappy when you miss them, especially when you had a lot of conviction but didn't put it to use. I made a lot of money playing an income strategy where I put the residual to work in DOTM calls... I don't play it anymore, but it worked well for a time for me.
Ahh, I see... you're writing covered calls. Not my cup of tea due to the risk reward, but it does work well whenever we flatten out or dip, which are both more common than up days in this environment.
I really like AAPL. When I value it using value based calculations (as opposed to growth based), I think its worth about $10 points more. Which means that I don't see it having a lot of downside from here. Even though you can't value aggressive growth stocks like they were classic growth, I think the current environment warrants it. If they make their numbers, and they always under-guide so the should have no problem, then they're at $160 by the end of the year - that is with their current PEG of 1 which is low as ass for growth stocks ($180 is more realistic if they hit their numbers). I think they're a good stock to trade under. This march I have a bull put credit spread under them at $100 (don't want it to go lower than this)... they have consolidated around $120 so it looks as though it will hold (we shall see). The only thing is, I think they could come down to $100 before buyers got really aggressive, so if I were building a position, I'd buy down on $15-20 increments. The straight covered call strategy actually looks pretty good if ATMs are $20 (I haven't checked this). That gives you great upside potential and downside protection all the way down to, what I think, is a buying floor in the short term. Again, not my strategic choice, but this one doesn't look too bad on those terms.
It's time to pay the piper. There will be 1 big winner for every 10 big losers, and there will be a lot of big losers to go around.
I'm watching options pricing carefully but for now I'm heavy* SKF. Typically trying to call the bottom is futile, but if you call it too early in this climate I think you will get crushed beyond recognition. There is a chance we could be talking about these same issues two years from now, that's a long time to hold 3 dollar ABK and 15 dollar CITI. If you get in to bullish options too early [not including spreads/ladders]..
If you play the commodities game at all, on days when the market gets crushed, big money is being taken out of gold/plat/silv while the price of the gold per ounce remains intact [sell the winners to pay for the losers]. What I've been doing over the past 6 months [and this morning] is riding that strong reversal that always occurs if* the real price is sustained during the downturn.
I'm watching options pricing carefully but for now I'm heavy* SKF. Typically trying to call the bottom is futile, but if you call it too early in this climate I think you will get crushed beyond recognition. There is a chance we could be talking about these same issues two years from now, that's a long time to hold 3 dollar ABK and 15 dollar CITI. If you get in to bullish options too early [not including spreads/ladders]..
If you play the commodities game at all, on days when the market gets crushed, big money is being taken out of gold/plat/silv while the price of the gold per ounce remains intact [sell the winners to pay for the losers]. What I've been doing over the past 6 months [and this morning] is riding that strong reversal that always occurs if* the real price is sustained during the downturn.
I know those Octobers won't tandem enough for me that's why I don't want to sell them.
Redshift - we should get together for a beer and talk about this - I'm like you - but I call myself a Libertarian - I wish the government would pave the roads, pay for the police and provide a social safety net and let Adam Smith's ghost do all the rest!
Sadly, I think you're a little too bullish on the USA - ultimately all will improve, but in the court of world opinion Bush has f-ed the dog really hard and the ABCP fiasco hasn't bolstered the average American Banker's status - which will translate into some USA bashing from all sides for a while.
Sadly, I think you're a little too bullish on the USA - ultimately all will improve, but in the court of world opinion Bush has f-ed the dog really hard and the ABCP fiasco hasn't bolstered the average American Banker's status - which will translate into some USA bashing from all sides for a while.
A beer would be nice! I'd actually consider myself a libertarian as well, but I'm not sure that you're allowed to call yourself one considering you want a gov't controlled social safety net. :tongue: :wink: :biggrin:
I completely agree that I'm more optimistic than most, probably the contrarian in me and my age bias - I'm not old enough to have experienced much of the recent history I use in my own analysis. To formulate my opinions, I rely a lot of data and draw correlations statistically. I try to map the data I collect to historical periods for which I have not lived through, just empirical evidence of what occurred.
However, I'll tell you the biggest underlying reason I think we will turn around quickly and not enter recession... the average corporation can borrow money at +2-5% spread to their earnings yield. That means that most companies can borrow money privately and it will be extremely profitable for them just to buy back their own stock with it. You can't have a recession unless that spread turns negative (the Fed stops cutting) or the availability of private capital runs dry (more cash hording)... if that happens then look out below!
Sadly, I agree with you about Bush and unfortunately McCain is cut from a similar "just right of center" cloth. The front runner Dem's populist [and communist] rhetoric is REALLY scary to me, and I'm really surprised more American's haven't called them out on it. It is strange to me that so many people think that Bush is what the Republican party is all about. But yes, our political future does look bleak. However, since we're in the middle of elections, our politicians will be tied up for a while and they'll keep their hands out of the economy... I think that is really great during this slow growth period.
If you're ever in Arizona, drinks are on me!
Yup, I'm definitely not trying to be a big winner right now. Just either a small winner or small loser.
Calling the bottom is impossible and these problems will drag out if we don't purge. That's why if you were going to long banks, I'd take the yield on BAC common and not mess with the options.
Interesting gold play. I've been doing something similar with oil. A bad tape or even a very small decrease in oil prices really hit the oil stocks hard. Then when oil prices spike they make big moves. I've been buying ~6% moves down and selling ~6% moves up since February... and there have been a lot of these cycles.
What does a Canadian from Ontario know jack about the USD?
I used to live in Ontario, most hate filled people towards American's I have ever met. It was mind boggiling to see how jelous these people were. I bet Toronto is over joyed at America's current finanical woes. You guys can keep your 50% tax system and your BS communist health care.
I used to live in Ontario, most hate filled people towards American's I have ever met. It was mind boggiling to see how jelous these people were. I bet Toronto is over joyed at America's current finanical woes. You guys can keep your 50% tax system and your BS communist health care.
Wow
You're not hostile are you? I'm sorry that girl you slept with in Toronto gave you VD, but thats not "all" Ontario's fault!:tongue: I'm not jealous, and neither are my friends - most of us either have or had businesses in the USA - myself, I've had two businesses in the USA - the larger one had offices in: NYC, Atlanta, St. Louis, Chicago, Minneapolis, Detroit, LA, SanFran, and Houston - you can hardly call me a "hater"
Although, I did decide to keep my family and permanent residence in Canada - it must have been the BS heath care and the knowledge that I could never become President that kept me from changing citizenship (even though I was in the USA 3 days a week on average):tongue: We Canadians are actually PISSED OFF that America has bought the Bush BS and blundered both economically as well as socially (ie. wiretapping, holding prisoners without due cause, and coming out strong against gay marriage and in support of abstinence and "Creationism")
Not only does it embarrass us as the North American Citizens we want to be, but since when you guys get the sniffles, we generally get ready for a cold, it scares us to imagine you are becoming unquestioning xenophobic zombies who say things like:
UPDATE Re: wamu / bank failures?
interesting article http://www.marketwatch.com/news/sto...CB889}&tool=1&dist=bigcharts&symb=WM&sid=5337
the first thing our new business account bank (they've been our personal bank since '85) tried to do was get us to sign up for a heloc. we declined. haven't used our mortgage holder's heloc, don't need one here, either.
today's financial announcement seems to me like it'll have a short-term bump effect, but that won't save us from what's coming down the pike.
cash rules.
interesting article http://www.marketwatch.com/news/sto...CB889}&tool=1&dist=bigcharts&symb=WM&sid=5337
the first thing our new business account bank (they've been our personal bank since '85) tried to do was get us to sign up for a heloc. we declined. haven't used our mortgage holder's heloc, don't need one here, either.
today's financial announcement seems to me like it'll have a short-term bump effect, but that won't save us from what's coming down the pike.
cash rules.
Re: UPDATE Re: wamu / bank failures?
The plan seems promising, it'll allow the banks to clean up their balance sheets a bit over the next 30 days. Then when a rate cut comes in, it'll give them more margin - really takes a lot of pressure off. Anything that helps to get the wheels turning again makes a big difference to banks who are facing solvency problems.
Steve, I hope you played the long side of the squeeze on WM, you'll probably get a couple days out of it. :smile:
Not when money's cheap. :wink: :biggrin:
The plan seems promising, it'll allow the banks to clean up their balance sheets a bit over the next 30 days. Then when a rate cut comes in, it'll give them more margin - really takes a lot of pressure off. Anything that helps to get the wheels turning again makes a big difference to banks who are facing solvency problems.
Steve, I hope you played the long side of the squeeze on WM, you'll probably get a couple days out of it. :smile:
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