Stocks and investing thread

[sox4lifeinPA]

Average gallon of gas now $3.09, just a penny below the peak of $3.10 (adjusted) from 1981, and 9 cents short of the all-time record of $3.18 set last May. Forecasters predict it will blow past that in the coming weeks.

 

 

can you explain why?

[Rex Kickass]

Unleaded gas futures are trading around $2.50 a gallon right now. This doesn't factor in cost of delivery, mark-up or anything. So assuming that Joe Pumpjockey got his gas at this price - and isn't paying for delivery, and isn't marking it up at all for his customers, he would still have to add in the taxes. In PA that's 45.1 cents per gallon plus any sales tax that might be assessed in addition to the regular fuel taxes.

[NorthSideSox72]

can you explain why?

People could write books about why. Basic overview of major factors, not necessarily in order:

 

--Overall high demand in the US and the emerging markets like China and India (though demand has softened a small bit lately, the overall multi-year trend is still growth, unfortunately)

--Regional instability in the major oil-producing areas builds some degree of fear into the price

--Shortage of refining capacity in the States and elsewhere

--Preception that the refining and delivery system in the States is not just narrow, but also old and vulnerable, such that a disruption (from weather, terrorism or even just mechanical problems) at any one place could suddenly drop supply to levels low enough to cause major problems

--The overriding knowledge that oil is in fact a limited, non-renewable resource

 

That's a start. There is of course more to it than that.

 

[NorthSideSox72]

People could write books about why. Basic overview of major factors, not necessarily in order:

 

--Overall high demand in the US and the emerging markets like China and India (though demand has softened a small bit lately, the overall multi-year trend is still growth, unfortunately)

--Regional instability in the major oil-producing areas builds some degree of fear into the price

--Shortage of refining capacity in the States and elsewhere

--Preception that the refining and delivery system in the States is not just narrow, but also old and vulnerable, such that a disruption (from weather, terrorism or even just mechanical problems) at any one place could suddenly drop supply to levels low enough to cause major problems

--The overriding knowledge that oil is in fact a limited, non-renewable resource

 

That's a start. There is of course more to it than that.

Almost forgot... the falling dollar is also contributing.

 

[Balta1701]

Hey, they're finally catching on to the mess they've created, about 3-4 years too late!

Overall losses from the U.S. mortgage market crisis could be up to $300 billion but financial firms and policymakers need to buy time to ensure an orderly work-out, the Organization for Economic Co-operation and Development said on Wednesday.

 

The OECD said the super fund being set up by Citigroup to pool asset-backed securities of ailing special investment vehicles -- thus preventing a further firesale of these assets -- was one mechanism for buying that crucial time.

 

"The super SIV idea clearly does provide a mechanism that gives 'time' for all the stock adjustment prices to work through," the OECD said in its latest Financial Markets Trends report. "Time ... is key to solving the turmoil."

 

But the Paris-based forum said the worst of the U.S. housing market downturn had not yet been seen and would continue to depress mortgage-related debt products and derivatives held by banks, hedge funds and insurance companies.

 

"We still have not hit the worst point in resets, delinquencies and ultimate losses on mortgages," the OECD said, adding some $890 billion of sub-prime, or poor credit quality, mortgages will have rates reset in 2008 -- with the peak expected about March.

 

The OECD said a hypothetical 14 percent loss on subprime mortgages being reset in 2008 could result in $125 billion in losses. If so-called Alt-A mortgages are included, cumulative losses in the $200-$300 billion range "seem feasible," it said.

[Balta1701]

Those who know more about the banking system may disagree, but I found this to be a useful summary of the banking shenanigoats that have helped exacerbate the lending mess over the past couple years. At least this author suggests that there's reason for the SEC to take a look, since a lot of this keeping risk off the books stuff sounds really Enron-ish.

[NorthSideSox72]

NSS72's investment pick of the day...

 

Come Monday, any of you stock and index pickers out there, I'd strongly advise you short the major non-luxury retailiers. Its really a perfect little storm of positives for them that will not hold up. Black Friday wasn't as bad as hoped, which gave them rise. But that Black Friday rush was partially boosted by much better weather than previous years, not to mention that Black Friday shoppers are highly price-motivated. A strong showing may in fact mean a weak overall holiday market. Add in the huge amounts of debt problems lately and the housing crunch... I think by early January, we'll see the retailers did worse than last year.

 

[southsider2k5]

For those keeping score at home, the Dow was down about 240 today, and has now entered official correction territory.

[NUKE_CLEVELAND]

For those keeping score at home, the Dow was down about 240 today, and has now entered official correction territory.

 

 

Until this credit mess is resolved somehow I see far more bad days ahead than good ones. One thing the market is waiting for, I think, is the December Fed meeting. If they get another cut I think we'll retrace a lot of the ground lost.

[southsider2k5]

A rate correction is already factored into this market for at least the Dec meeting.

[Cknolls]

For those keeping score at home, the Dow was down about 240 today, and has now entered official correction territory.

 

 

Why? because its down 10%? Where did that stat come from and who says that is the official CORRECTION?

[southsider2k5]

Why? because its down 10%? Where did that stat come from and who says that is the official CORRECTION?

 

Historically 10% down has always been the definition of a correction. The 10% figure starts at the highest point of the bullmarket that was going on at the time. The high of the current bull was 14164.53 meaning the 10% correction mark was a little bit under 12750.

 

A bull market would be declared with a 10% rally from the lowest close during this correction.

[southsider2k5]

So the Dow has bounced back strong from the correction. We are up over 3% for the last day an a half, or about 400 points. Crude Oil is also down about $5 in the last two days, with gasoline down a HUGE 10 full cents.

[Cknolls]

Historically 10% down has always been the definition of a correction. The 10% figure starts at the highest point of the bullmarket that was going on at the time. The high of the current bull was 14164.53 meaning the 10% correction mark was a little bit under 12750.

 

A bull market would be declared with a 10% rally from the lowest close during this correction.

 

 

But according to DOW THEORY we have been in a bear market since JULY. Why? Because last week we finally took out the lows in the DJIA. That was the only thing stopping a Dow Theory sell signal because the transports had already made a new low a couple weeks ago. So once they both make new lows you have to go back to their highs to find where the bear market started, and that would be in July.

 

I just think this 10% number can be interpreted the same way people interpret when we are in a recession.

 

I'm still $25 bid for C. And CFC is going to zero. Dow 12K if the Fed lowers rates 50 bps. All they will be doing is pushing the contagion further out on the curve.

[kapkomet]

The Fed better not lower rates by that. Not again. I think they were wrong to do it in the first place, let alone three times.

[southsider2k5]

The Fed better not lower rates by that. Not again. I think they were wrong to do it in the first place, let alone three times.

 

They will. Its already priced in and anticipated. Start thinking about the Feb meeting, because this one is fin.

[NUKE_CLEVELAND]

But according to DOW THEORY we have been in a bear market since JULY. Why? Because last week we finally took out the lows in the DJIA. That was the only thing stopping a Dow Theory sell signal because the transports had already made a new low a couple weeks ago. So once they both make new lows you have to go back to their highs to find where the bear market started, and that would be in July.

 

I just think this 10% number can be interpreted the same way people interpret when we are in a recession.

 

I'm still $25 bid for C. And CFC is going to zero. Dow 12K if the Fed lowers rates 50 bps. All they will be doing is pushing the contagion further out on the curve.

 

 

How can you say we have been in a bear market since July when the Dow and S&P ran to new highs back in October? No. I may not be the most educated man when it comes to investing but I think this market finally got washed out early this week and has bottomed. Speaking of Countrywide and a few others that have been destroyed lately, who is to say they won't get a takeout bid down at this level? At 9 a share I could easily see them getting bought, especially since they've been cleaning up their books.

 

P.S. Im really, REALLY glad I bought my Goldman when it was down at 205 a few days ago.

 

Edited November 28, 2007 by NUKE

[Cknolls]

How can you say we have been in a bear market since July when the Dow and S&P ran to new highs back in October? No. I may not be the most educated man when it comes to investing but I think this market finally got washed out early this week and has bottomed. Speaking of Countrywide and a few others that have been destroyed lately, who is to say they won't get a takeout bid down at this level? At 9 a share I could easily see them getting bought, especially since they've been cleaning up their books.

 

P.S. Im really, REALLY glad I bought my Goldman when it was down at 205 a few days ago.

 

 

 

I am simply saying that according to the DOW THEORY, we have been in a bear market since July. CFC is running out of money. They have borrowed over $52 billion dollars from FHLB in Atlanta. The only way they can attract money and originate new mortgages is to hand out over 5.50% on a 6 mo. cd. That is insane right now. Oh, and their dividend should be a goner too.

 

 

 

The sharpest rallies occur in bear markets. This will not stick. I believe you have to sell the rallies instead of buy the dips.

Edited November 28, 2007 by Cknolls

[NUKE_CLEVELAND]

I am simply saying that according to the DOW THEORY, we have been in a bear market since July. CFC is running out of money. They have borrowed over $52 billion dollars from FHLB in Atlanta. The only way they can attract money and originate new mortgages is to hand out over 5.50% on a 6 mo. cd. That is insane right now. Oh, and their dividend should be a goner too.

 

 

My mistake.

 

Im not denying that CFC is really in deep doo doo but unless it goes belly up ( which I don't think will happen ) then someone like BAC might make a bid.

 

Also have you heard the rumors about Citi and BAC doing a merger? I dont lend them a lot of credence but it is helping stir things up today.

[NUKE_CLEVELAND]

The sharpest rallies occur in bear markets. This will not stick. I believe you have to sell the rallies instead of buy the dips.

 

 

If you would have said that last week I would have agreed. The bears tried to knock down the market yesterday about 2:45 or so and failed where they had succeeded in several previous days. I think they have shot their load, at least for the near term.

[kapkomet]

They will. Its already priced in and anticipated. Start thinking about the Feb meeting, because this one is fin.

50 BP?

[NUKE_CLEVELAND]

50 BP?

 

 

If some really gi-normus piece of bad news comes out between now and the 11th you can bet on it. Barring that I think we get another quarter point.

 

[Cknolls]

In a speech at the University of Rochester, Plosser said the Fed cannot resolve the cause of the tension in financial markets, uncertainty over the value of complex securities tied to subprime and other mortgages and who holds these derivatives.

 

"It is important to recognize that the Fed cannot resolve this price discovery problem. The markets will have to figure this out," Plosser said in his prepared remarks.

 

"Arbitrarily lowering interest rates or providing liquidity to the market does not provide the answers the market seeks," Plosser said.

Indeed, rate cuts might only delay the painful process, he said.

Philadelphia Fed President Charles Plosser strongly suggested that he is not in favor of an additional rate cut at the next policy meeting on Dec. 11.

 

 

The only problem is: Plosser does not have a vote for the meeting.

 

 

 

SO why lower rates???

Edited November 28, 2007 by Cknolls

[Cknolls]

JPMorgan (JPM) estimates that Bank CDO Losses May Reach $77 Bln.

 

Losses on collateralized debt obligations at the world's biggest banks may double to $77 billion, JPMorgan Chase & Co. analysts predict. Losses marketwide on CDOs linked to U.S. mortgages will reach about $260 billion, the New York-based JPMorgan analysts, led by Christopher Flanagan said in a report.

 

"One of the benefits of securitization is the offloading and global distribution of risk," the JPMorgan analysts wrote. "Ironically, this is now a capital markets hazard, since no one is sure where subprime losses lurk."

 

Bond insurers including Ambac Financial Group Inc. and MBIA Inc., which have "taken few reserves," own CDOs that have had $29 billion in losses, JPMorgan estimated.

 

As of the November 11 2007 10-Q MBIA had $6.96 billion in working capital.

As of the November 09 2007 10-Q Ambac had $5.65 billion in working capital.

Assuming JPMorgan is correct (or even in the ballpark), a combined $29 billion in losses makes the guarantees of those companies essentially worthless.

 

These may be the first in a long line of bankruptcies to occur from the Greenspan money train.

[Balta1701]

Well, here's what a guy with a vote is saying.

In a speech to the Council on Foreign Relations in New York, Kohn said renewed financial market turbulence of recent weeks "partly reversed some of the improvement" of the last two months. He warned that "should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses."

 

When the Fed made its rate cuts, Kohn said he was taking into account "some restraint on demand" from the wider spreads and tighter lending standards that would inevitably result from the turbulence and "discourage some spending."

 

Now, he said, the question for the Fed is "whether concerns about losses on mortgages and some other instruments are inducing much greater restraint and thus constricting the flow of credit to a broad range of borrowers more than seemed in train a month or two ago."

 

If that turns out to be the case, the Fed should not worry excessively about the so-called moral hazard problem and "hold the economy hostage to teach a small segment of the population a lesson."

 

While lowering rates did and will "reduce the penalty incurred by some people who exercised poor judgment," Kohn said, "these people are still bearing the costs of their decisions."

 

One of the major uncertainties is the term interbank lending market -- the market in which banks lend to each other for terms longer than the overnight or few-day Fed funds market.

 

"Conditions in term markets have deteriorated some in recent weeks," according to Kohn. The spread over Fed funds has widened and if it's because banks are worried about a liquidity shortage pushing up rates, that's somehing 'central banks should be able to address.' The Fed's term open market operations announced Monday were aimed at addressing that problem.

 

However the Fed is "limited in its ability to restrict the actual Federal funds rate within a narrow band," and its discount window lending is restricted in effectiveness by the stigma many banks still attach to using it.

 

Stock futures rose further on Kohn's comments. Economists are divided over the efficiency of the Fed rate cuts, with some saying the central bank should pump liquidity as needed, rather than provide the markets with a one-way bet on the interest rates and endangering the economy.