The Economy, stupid

[NorthSideSox72]

I hadn't looked at the markets all day until just now. Bit of a shocker.

Not really. After 5 days straight of technical rallying, this was bound to happen.

 

[Balta1701]

Not really. After 5 days straight of technical rallying, this was bound to happen.

A fascinating tidbit I learned pre-election from a Daily Show guest was that prior to October, 5 of the 10 largest percentage gains in wall street history happened during the Great Depression.

 

The problem is not that the market doesn't go up significantly during these sorts of times. The problem is that it becomes a roller coaster. I believe you can probably make graphs that show market volatility going up significantly during economic down times, and we're facing some severe down times over the next year or two.

[StrangeSox]

Not really. After 5 days straight of technical rallying, this was bound to happen.

 

I meant for me personally. I hadn't thought about the markets since early last week.

[kapkomet]

T-Bills officially hit zero percent today - and actually went negative for a short time. So what that means is, insitutions are ACCEPTING the fact that they are going to lose money in the short term and they're ok with losing a little rather then losing much more.

 

This is one of the more scary things that have happened. It also takes the private instituiuons right out of the market place - since the government just has to print more money, more and more will just go to them for their financial needs.

 

We are witnessing the death of the insititutional free markets right before our eyes.

 

 

[NorthSideSox72]

We are witnessing the death of the insititutional free markets right before our eyes.

Kaperbole? Is that you?

 

[Balta1701]

KB Toys files for bankruptcy. Merry X-Mas!

[mr_genius]

KB Toys files for bankruptcy. Merry X-Mas!

 

They went bankrupt back in 2005 too.

[jasonxctf]

I think Bally's Total Fitness has filed BK 3 times in the past 6 years now too.

[mr_genius]

woooo!

 

Dow up +350 today

 

probably go down 400 tomorrow though

Edited December 16, 2008 by mr_genius

[NorthSideSox72]

woooo!

 

Dow up +350 today

 

probably go down 400 tomorrow though

Go VIX Go!

 

[southsider2k5]

An interesting phenomenon has developed over the last week or so in the crude oil. It seems no one out there has the financing and/or money to store, crude oil. Because of this there is about a 7.00 per barrel difference between the Jan contract which expires today, and the Feb, which still goes another month. Apparently the 1000 barrels times the $35 per barrel price of the contract is too high for people to get financed, even though they could sell the next contract for $42 or about a 30% profit in a month. There is also a lack of available storage place left because crude demand has fallen so quickly, and people have stored so much of it waiting for demand and prices to come back up.

[southsider2k5]

They just announced that the auto companies are getting 13.5 billion dollars out of the TARP fund.

[NorthSideSox72]

An interesting phenomenon has developed over the last week or so in the crude oil. It seems no one out there has the financing and/or money to store, crude oil. Because of this there is about a 7.00 per barrel difference between the Jan contract which expires today, and the Feb, which still goes another month. Apparently the 1000 barrels times the $35 per barrel price of the contract is too high for people to get financed, even though they could sell the next contract for $42 or about a 30% profit in a month. There is also a lack of available storage place left because crude demand has fallen so quickly, and people have stored so much of it waiting for demand and prices to come back up.

That's very interesting. I have to admit, I was well off on the oil bottom - I figured it would dip into the 50's, but stabilize in the 60's. Now its dipping into the 30's.

 

That said, talking to some traders, this price level of oil seems way oversold. Maybe the storage issue you mention is part of that. If that's the case, I think you'd see an extra-steep spike in price soon, because there is less "cushion" in the supply now. Also, if some problem were to occur in the supply chain, it would have a much more immediate and severe effect, if there is a lot less oil being stored.

 

[southsider2k5]

That's very interesting. I have to admit, I was well off on the oil bottom - I figured it would dip into the 50's, but stabilize in the 60's. Now its dipping into the 30's.

 

That said, talking to some traders, this price level of oil seems way oversold. Maybe the storage issue you mention is part of that. If that's the case, I think you'd see an extra-steep spike in price soon, because there is less "cushion" in the supply now. Also, if some problem were to occur in the supply chain, it would have a much more immediate and severe effect, if there is a lot less oil being stored.

 

Actually it sounds the opposite, there is WAY too much supply. This bottom might last a lot longer than I thought. A contango crude market really means there is a ton of extra supply. If demand is that low, the supply just gets pushed back further into the calendar until either the supply falls under demand enough to eat up the glut, or that demand starts to rebound enough to eat up the extra supply. Heck I read the other day about a supertanker floating off of some country holding 50 million gallons of oil because there was no where to sell it.

[NorthSideSox72]

Actually it sounds the opposite, there is WAY too much supply. This bottom might last a lot longer than I thought. A contango crude market really means there is a ton of extra supply. If demand is that low, the supply just gets pushed back further into the calendar until either the supply falls under demand enough to eat up the glut, or that demand starts to rebound enough to eat up the extra supply. Heck I read the other day about a supertanker floating off of some country holding 50 million gallons of oil because there was no where to sell it.

That's sort of what I was getting at - too much supply now, combined with no desire/ability to store, so we've been plummeting. So when we reach a certain point, where we are much closer to direct throughput of supply, the price is likely to bounce more severely. A hard bounce if you will.

 

But as you say, with demand so low, that bounce may be pretty far off into the future. Its just that there may not be much flexibility to handle when the demand does increase.

 

ETA: Regarding these traders saying it was oversold, that does seem different than what you are saying. Not sure why they see it that way, they know more than I do.

 

[southsider2k5]

That's sort of what I was getting at - too much supply now, combined with no desire/ability to store, so we've been plummeting. So when we reach a certain point, where we are much closer to direct throughput of supply, the price is likely to bounce more severely. A hard bounce if you will.

 

But as you say, with demand so low, that bounce may be pretty far off into the future. Its just that there may not be much flexibility to handle when the demand does increase.

 

ETA: Regarding these traders saying it was oversold, that does seem different than what you are saying. Not sure why they see it that way, they know more than I do.

 

As I understand it, from a technical/chartist standpoint, it is oversold. From an economist standpoint, this might be the beginning.

[Balta1701]

As I understand it, from a technical/chartist standpoint, it is oversold. From an economist standpoint, this might be the beginning.

So what you're saying is, it's time to add energy companies to the TARP fund list?

[southsider2k5]

So what you're saying is, it's time to add energy companies to the TARP fund list?

 

Well I guess since everyone wanted to tax them when they were up, the right thing to do would be to bail them out when they are down?

 

[southsider2k5]

So they managed to settle the Jan contract at 33.87 in Crude, so if you had the $34,000 to take delivery, plus the warehouse space to hold 1000 barrells of crude oil for a month's time, you could have sold the Feb futures contract today for somewhere around $42.50. All told you would have made about an $8500 profit or about 33% in a months time on the trade.

[Balta1701]

In some detail, the NYT spells out the Bush administration's key role in pushing the inflation of the housing market and their failure to respond or restrain it. Just an example of their details:

Mr. Falcon’s report outlined a worst-case situation in which Fannie and Freddie could default on debt, setting off “contagious illiquidity in the market” — in other words, a financial meltdown. He also raised red flags about the companies’ soaring use of derivatives, the complex financial instruments that economic experts now blame for spreading the housing collapse.

 

Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”

 

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

 

At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin D. Raines, then Fannie’s chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.

 

So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Mr. Raines told Mr. Falcon.

 

Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.

 

His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged.

[kapkomet]

Everything bad is always George W. Bush's fault. We know after 8 years. What's beautiful is, everything is going to be George W. Bush's fault well after he's gone and not Obama's fault.

 

[SoxFan562004]

Everything bad is always George W. Bush's fault. We know after 8 years. What's beautiful is, everything is going to be George W. Bush's fault well after he's gone and not Obama's fault.

and it will probably be the exact same news sources who say you can blame none of Bush's problems on Clinton

[lostfan]

So I got my quarterly report from BP, and good god did my stocks take a s*** in the last quarter.

[southsider2k5]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

 

Madoff Fund Operator De La Villehuchet Found Dead in New York

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By Saijel Kishan and Katherine Burton

 

Dec. 23 (Bloomberg) -- Thierry Magon de La Villehuchet, who ran a fund that invested with Bernard Madoff, was found dead at his Madison Avenue office today, a New York City police officer at the scene said. The death appeared to be a suicide, he said.

 

De la Villehuchet, 65, was a founding partner and chief executive officer of Access International Advisors, according to a marketing document. Access invested $1.4 billion with Madoff, who was arrested on Dec. 11 for allegedly running a $50 billion Ponzi scheme.

 

Access’s LUXALPHA SICAV-American Selection invested solely with Madoff, the company said. Access said last week that it was working with lawyers to assess the situation. No one answered the phone at the company today. A call to his home wasn’t returned.

 

To contact the reporters on this story: Saijel Kishan in New York at [email protected] Burton in New York at [email protected]

[Balta1701]

Here's a bit from the wall street journal showing once again, using actual data, that the idea that the community reinvestment act caused the housing bubble (basically the argument that we shouldn't have forced lending to minorities) is simply wrong.

A pair of economists from the Federal Reserve Bank of San Francisco added another piece of evidence to the case that the 1977 Community Reinvestment Act wasn’t the cause, or even a major contributor, to the subprime mortgage debacle.

 

In a paper focused on California that was presented at a Fed conference on housing and mortgages in Washington, D.C., Elizabeth Laderman and Carolina Reid say the data “should help to quell if not fully lay to rest the arguments that the CRA caused the current subprime lending boom by requiring banks to lend irresponsibly in low and moderate-income lenders.” Fed governor Randall Kroszner made a similar case earlier this week.

 

Among the specific findings in “Lending in Low- and Moderate-Income Neighborhoods in California: The Performance of CRA Lending During the Subprime Meltdown”:

# Overall, lending to low and moderate income communities comprised only a small share of toal lending by CRA lenders, even during the height of the California subprime lending boom.

# Loans originated by lenders regulated under CRA in general were “significantly less likely to be in foreclosure” than those originated by independent mortgage companies that weren’t covered by CRA.

# Loans made by CRA lenders within their geographic assessment areas covered by the law were “half as likely to go into foreclosure” as those made by the independent mortgage companies.

# 28% of loans made by CRA lenders in low income areas within their geographic assessment areas were fixed-rate loans, compared with 18.2% of loans made by independent mortgage companies in low income areas.

# 12% of the loans made by CRA lenders in these areas were high-priced loans, a technical definition of subprime, compared with 29% of the loans made by those lenders outside their assessment areas and 52.4% of loans made by independent mortgage companies in low-income areas.