Stocks and investing thread

[Cknolls]

What does the world need? Lower mortgage rates.

 

What is the world getting today? Higher mortgage rates.

 

Treasuries and MBS are getting hammered post Fed.

[southsider2k5]

Dow finishes up 400

Sp finishes up over 50

NASD finishes up over 90

 

Wow.

[StrangeSox]

Dollar up, too.

http://money.cnn.com/2008/03/18/markets/do...sion=2008031815

[kapkomet]

http://www.investopedia.com/terms/v/vix.asp

By its very natures down days create volatility, because it is changed divided by total index price. When you go down, you are dividing into a smaller number, so the VIX goes up. When it goes up, you are diving into a bigger number, so the VIX usually falls. It is down from 35 to 26 in the last two days reflecting the big rally's of this week. So I basically bought a lottery ticket that we have some big off days in the next month.

I got the VIX part, why do you think they are going to "blow this thing up soon"?

 

[southsider2k5]

I got the VIX part, why do you think they are going to "blow this thing up soon"?

 

The fundementals aren't good, there really isn't any "good" news right now, and this is a huge rally in a legitmate Bear market.

[Cknolls]

The fundementals aren't good, there really isn't any "good" news right now, and this is a huge rally in a legitmate Bear market.

 

 

Right. As I have said before, the sharpest rallies occur in bear markets. Another fun Turn-Around Tuesday.

[Cknolls]

One step closer to nationalization.. OFHEO reduces capital requirements for GSE's. to 20% from 30%.

[Cknolls]

MER may take an add'l. 10-12 bliion in write downs.

[Cknolls]

A large butterfly just went up in MER betting the stock goes to $30 by APR. expiration. APR. 30 puts have traded 62,000 contracts against opewn interest of 19,700. Volatility is in the 200's.

[StrangeSox]

[Balta1701]

I found this WSJ piece on what appears to be a lack of an equity premium over the last 10 years to be quite fascinating.

Over the past 200 years, the stock market's steady upward march occasionally has been disrupted for long stretches, most recently during the Great Depression and the inflation-plagued 1970s. The current market turmoil suggests that we may be in another lost decade.

 

The stock market is trading right where it was nine years ago. Stocks, long touted as the best investment for the long term, have been one of the worst investments over the nine-year period, trounced even by lowly Treasury bonds.

 

The Standard & Poor's 500-stock index, the basis for about half of the $1 trillion invested in U.S. index funds, finished at 1352.99 on Tuesday, below the 1362.80 it hit in April 1999. When dividends and inflation are factored into returns, the S&P 500 has risen an average of just 1.3% a year over the past 10 years, well below the historical norm, according to Morningstar Inc. For the past nine years, it has fallen 0.37% a year, and for the past eight, it is off 1.4% a year. In light of the current wobbly market, some economists and market analysts worry that the era of disappointing returns may not be over.

 

Until last fall, many investors had viewed the bursting of the tech-stock bubble as a nasty but short-term setback. The market had resumed its upward march, reaching new highs in October. Then the credit crisis began weighing on stocks, as did the possibility of a recession. By March 10, the S&P 500 was down 18.6% from its Oct. 9 record close, nearing the 20% decline that signals a bear market. It has rebounded since then amid the Federal Reserve's efforts to stabilize the financial system, but it remains 13.3% below its October record.

 

Conventional stock-market wisdom holds that if investors buy a broad range of stocks and hold them, they will do better than they would in other investments. But that rule hasn't held up for stocks bought in the late 1990s or 2000.

Over the past nine years, the S&P 500 is the worst-performing of nine different investment vehicles tracked by Morningstar, including commodities, real-estate investment trusts, gold and foreign stocks. Big U.S. stocks were outrun even by Treasury bonds, which historically perform much less well than stocks. Adjusted for inflation, Treasurys are up 4.7% a year over the past nine years, and up 5.8% a year since the March 2000 stock peak. An index of commodities has shown about twice the annual gains of bonds, as have real-estate investment trusts.

 

Stocks also underperformed other investments during the 1930s and the 1970s. During both of those periods, stocks would rally strongly, only to fade. It took well over a decade in each case for stocks to move lastingly upward.

[Balta1701]

Remember a couple months back, we had that big discussion thread where a lady had purchased a $100,000 BMW with a credit app. that seriously overestimated her income? Seems we've got a leaked memo coming out of Chase, no idea how widely it was used, suggesting that for some people, even at a major bank, those sorts of things might well have been standard policy over the past few years.

A newly surfaced memo from banking giant JPMorgan Chase provides a rare glimpse into the mentality that fueled the mortgage crisis.

 

The memo's title says it all: "Zippy Cheats & Tricks."

 

It is a primer on how to get risky mortgage loans approved by Zippy, Chase's in-house automated loan underwriting system. The secret to approval? Inflate the borrowers' income or otherwise falsify their loan application.

 

The document, a copy of which was obtained by The Oregonian, bears a Chase corporate logo. But it's unclear how widely it was circulated or used within Chase.

 

Bank spokesman Tom Kelly confirmed that the "Cheats & Tricks" memo was e-mailed from Chase but added that it does not reflect Chase corporate policy.

 

"This is not how we do things," he said. "We continue to investigate" the memo, Kelly said. "That kind of document would neither be condoned or tolerated."

 

The March e-mail was sent by Tammy Lish, a former Chase account representative in Portland. Chase fired her days after discovering she had sent it.

 

"I did not write it," Lish said. "It was sent to me by another (Chase) rep in another office along with some other documents that were more step-by-step customer training documents."

 

...

The document recommends three "handy steps" to loan approval:

 

Do not break out a borrower's compensation by income, commissions, bonus and tips, as is typically done in a loan application. Instead, lump all compensation as the applicant's base income.

 

If your borrower is getting some or all of a down payment from someone else, don't disclose anything about it. "Remove any mention of gift funds," the document states, even though most mortgage applications specifically require borrowers to disclose such gifts.

 

If all else fails, the document states, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want," the document says. "Do the same for assets."

 

Chase's Kelly said the bank has never encouraged any of the suggestions in the memo.

Edited March 28, 2008 by Balta1701

[Balta1701]

Investment firms borrowing an average of $32 billion from the fed per day over the last week.

[Balta1701]

According to CNBC, the Treasury Secretary told the NY Fed Chair that the Treasury Department would in essence take care of any losses that the Federal Reserve took on the Bear Sterns bailout package.

 

So there you have it. When you take out a bad mortgage and lose your house, I'm sorry, there's nothing we can do. When you run a company in to the ground, don't worry, the taxpayers will take care of it, feel free to move on and run a couple other companies in to the ground. As long as you sell your stock when the price is high, you're set.

[NorthSideSox72]

According to CNBC, the Treasury Secretary told the NY Fed Chair that the Treasury Department would in essence take care of any losses that the Federal Reserve took on the Bear Sterns bailout package.

 

So there you have it. When you take out a bad mortgage and lose your house, I'm sorry, there's nothing we can do. When you run a company in to the ground, don't worry, the taxpayers will take care of it, feel free to move on and run a couple other companies in to the ground. As long as you sell your stock when the price is high, you're set.

As I've said before, while I am OK with them helping Bear Stearns out of a hole, I think their needs to be real consequences for the executives when this happens. This is what other civilized capitalist countries do, and the US should as well.

 

[Balta1701]

As I've said before, while I am OK with them helping Bear Stearns out of a hole, I think their needs to be real consequences for the executives when this happens. This is what other civilized capitalist countries do, and the US should as well.

Well, depends on how you define consequences. The execs holding stock lost a lot, but there are still people walking away with several tens of million dollars in shares and termination fees. Did they break any laws? With as lax as the regulatory environment in this country currently is, I'd say that's highly doubtful. The consequences are that they're no longer billionaires, just multi-millionaires.

[NorthSideSox72]

Well, depends on how you define consequences. The execs holding stock lost a lot, but there are still people walking away with several tens of million dollars in shares and termination fees. Did they break any laws? With as lax as the regulatory environment in this country currently is, I'd say that's highly doubtful. The consequences are that they're no longer billionaires, just multi-millionaires.

The laws should be changed. Here is an example - if you so thoroughly screw up your company, as a C-level executive, that the government has to step in and spend money, then guess what? All compensation you receive after that point is subject to seizure by the government to cover the costs of your mistakes. You also would be subject to lawsuits by employees and shareholders effected by your decisions (which is already partially true). Any stocks, options or phantom shares you hold are subject to same.

 

Now, that doesn't cover everything, but its a start.

 

You could also lace this in with bankruptcies. Backruptcy law should put executive compensation beyond existing pure-salary levels at the very bottom of the pay-of pile if a company enters bankruptcy.

 

[southsider2k5]

According to CNBC, the Treasury Secretary told the NY Fed Chair that the Treasury Department would in essence take care of any losses that the Federal Reserve took on the Bear Sterns bailout package.

 

So there you have it. When you take out a bad mortgage and lose your house, I'm sorry, there's nothing we can do. When you run a company in to the ground, don't worry, the taxpayers will take care of it, feel free to move on and run a couple other companies in to the ground. As long as you sell your stock when the price is high, you're set.

 

Would you rather see the banking sector go under?

[Balta1701]

Would you rather see the banking sector go under?

Wouldn't it be entertaining to find out?

 

I'll give the standard, boiler plate, communist democrat answer on this one for now. If these financial institutions and investment banks are going to be bailed out by the taxpayer like banks, then they ought to be regulated like banks, have similar disclosure requirements to banks, be required to provide some measure of funding for insurance like banks, etc.

[StrangeSox]

Would you rather see the banking sector go under?

 

Doesn't this just tell banks "Hey, don't worry about how much risk you take. If it turns out ok, you'll make billions. If not, we've got your back!"

[NorthSideSox72]

Wouldn't it be entertaining to find out?

 

I'll give the standard, boiler plate, communist democrat answer on this one for now. If these financial institutions and investment banks are going to be bailed out by the taxpayer like banks, then they ought to be regulated like banks, have similar disclosure requirements to banks, be required to provide some measure of funding for insurance like banks, etc.

 

Doesn't this just tell banks "Hey, don't worry about how much risk you take. If it turns out ok, you'll make billions. If not, we've got your back!"

 

I think you guys have to seperate the executives who run the firms and the firms themselves as entities. The firms employ thousands not to mention provide liquidity and stability to the markets - they need to have a safety net. The executives who leapt off the buildings, on the other hand, need to be held accountable.

 

[Balta1701]

I think you guys have to seperate the executives who run the firms and the firms themselves as entities. The firms employ thousands not to mention provide liquidity and stability to the markets - they need to have a safety net. The executives who leapt off the buildings, on the other hand, need to be held accountable.

Steven nails it. Your house is going in to foreclosure and the government won't bail you out? Go buy a house worth about $10 billion, so that if your house goes under, the fed will have to bail you out because its so big that it provides a major impact on the economy.

 

[Cknolls]

It's fairly apparent over the last week that the stock market can't see the forest for the trees. IF everything is so wonderful..why did HSBC have to be

8 1/8% for $2 billion in preferreds. The credit market STILL senses the issues, while the stock market doesn't see it. FOR NOW..

[southsider2k5]

Wouldn't it be entertaining to find out?

 

I'll give the standard, boiler plate, communist democrat answer on this one for now. If these financial institutions and investment banks are going to be bailed out by the taxpayer like banks, then they ought to be regulated like banks, have similar disclosure requirements to banks, be required to provide some measure of funding for insurance like banks, etc.

 

Being very familiar with this stuff, it is coming. There is a real push to get ALL financial institiutions regulated by one government sector. The system we have now is from the 1930's and obvious doesn't work. Its a real mess.

[StrangeSox]

Being very familiar with this stuff, it is coming. There is a real push to get ALL financial institiutions regulated by one government sector. The system we have now is from the 1930's and obvious doesn't work. Its a real mess.

 

In your opinion, is more government regulation the way to go here?