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LEVERAGING BANKRUPTCY!
A few more articles on CreditDefaultSwaps (CDS) ... old news now to
insiders and those in the industry.
Opinions vary on how much risk is still out there, what it totals up
to and who, exactly, is holding the parcel.
How much of the perceived risk is fear and how much is real the
markets are yet to show us... last weeks selldown in the US majors
that hold most of the CDS exposure may be the discounted value... the
problem is that they can't actually be valued at anytime ... further
declines in the market, and economic prospects, could trigger more
defaults.
Curious how JPM hasn't been hammered as much as C and BAC ...
haven't figure that one out yet.
Anyway... a couple of pessimistic reviews, an optimistic denouncement
and a factual report from the US regulator, amongst other things.
a) Credit Default Swaps: The Next Crisis?
Times.
Monday, Mar. 17, 2008
http://www.time.com/time/business/article/0,8599,1723152,00.html
b) The Next Banking Bomb?
CBS News Investigates: Credit Derivatives Comprise $54.6 Trillion Of
Risk Among Few Banks Left Standing
"Today, the same commercial banking heavyweights thought to be the
most safe, JPMorgan, Citigroup Inc. and Bank of America, hold 92
percent of all the disclosed credit derivative contracts, according
to the OCC".
http://www.cbsnews.com/stories/2008/10/10/cbsnews_investigates/main451
4163.shtml
c) Lehmans CDS's obligations...auction?.
Obligated parties may have hedged already?. WaMu and others yet to
unwind.
http://www.washingtonpost.com/wp-
dyn/content/article/2008/10/10/AR2008101003050.html
d) Depository Trust Clearing Corporation debunks speculation on
CreditDefaultSwaps market and claims "Lehman Credit Default Swap
Worries Overblown".
http://www.marketwatch.com/news/story/dtcc-addresses-misconceptions-
about-credit/story.aspx?guid=%7B7B5C1B13-9F34-44C0-971B-16EEF9FC0D64%
7D&dist=hppr
e) The official position ? from the Office of the Comptroller of the
Currency (OCC)
June30 ? scroll down for tables/charts on CDS exposure
http://www.occ.treas.gov/ftp/release/2008-115a.pdf
f) Archeological footprints in the sand???
http://globaleconomicanalysis.blogspot.com/2008/09/thoughts-on-credit-
default-swaps.html
(there wasn't anything on TV)
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "brian_z111" <brian_z111@xxx> wrote:
>
> Hello Ken,
>
> I agree that the community is a pool of trading experience if
people
> do want to share it..... the difficulty is confining it to trade
talk
> and not politics.
>
> > How has the turmoil in your local
> > economy/exchange/country influenced how you trade and what your
> >more recent
> > performance is? What are you doing or do you think you will
doing
> >in the
> > next days and weeks
>
> I have already flagged my opinion and some of what I consider to be
> appropriate strategies in previous posts, some going back quite a
way.
>
> a) value investing ... not my strategy ... another brilliant
> exposition by Buffet in the last two weeks ... right now some
stocks
> are at incredible value PROVIDED you really are buying FOREVER and
> you do have the stomach for the ride i.e. you really don't care
what
> the 'price' is doing because you are happy with the yield.
>
>
> I also posted some indications of the relative value of the
> Australian market ... this is fundamentally a US problem that Aus
was
> partly isolated from ... except for the longer term affects on
global
> economies ... refer to the following link (take the link, at the
top
> of the page, to the full PDF review to see detailed comment and
> graphs on why Aus financials are not going down the gurgler ...
small
> % of Aus mortgae market is in US equivalent to sub-primes ...
> delinquincy rates are low etc)
>
>
http://www.rba.gov.au/PublicationsAndResearch/FinancialStabilityReview
> /Sep2008/Html/financial_stability_review_0908.html
>
> The current crisis crystallised my view that investors should buy
> yield at the bottom and anticipate growth as the cycle matures to a
> new bull run.
>
> Note that in Australia payout ratios are high and earnings yield is
> often delivered as dividend yield along with tax breaks for high
> earners.
>
> Another difference is that in Australia superannuation saving is
> compulsory, in the form of payroll deductions ... large amounts of
> money are still flowing into Aus retirement funds ... it is sitting
> on the sidelines in the form of cash so when the market is deemed
to
> have hit the bottom their is sufficient cash in reserve to sustain
a
> good start to a new bull cycle.
>
> On top of that Aus interest rates are at 6% and have room to move
> plus the economy is basically sound.
>
> Against this is the fact that right now we have gone past
nervousness
> to 'rabbit in the headlight' fear ... no one can predict what can
> happen in that environment or what people will do.
>
>
> So there are some great long term opportunities for very brave
> investors but you have to do the analysis on the earning streams of
> companies to estimate their stability into the future.
>
>
>
> My own response:
>
> I made these decisions a long way back .... not to hold foreign
> accounts .... not to be an 'investor' .... not to rely entirely on
> mechanical trading .... not to be a long term trader ... to trade
> short as naturally as I trade long ... not to impose my theories on
> the market but to let the market dicate trades to me (based on the
> charts)... not to have an inflexible attitude about what my trading
> style should be .... to take into account the news of the day, both
> in general and specifically with reference to sectors or companies
of
> interest.
>
> In the short term the only adjustment I have made to strategy is to
> move away from short term trades (a few days) and move towards
> intraday ..... I was aleady biased to intraday trading anyway but
> more than ever at the moment....
>
> DO NOT HOLD OVERNIGHT OR WEEKEND POSTIONS
>
> ... an afterhours political decision can kill you.
>
> I am in cash every night.
>
> Gold and oil are extremely volatile so that makes for a good
intraday
> payday ... the negative there is that volatility can kill you if
you
> are on the wrong side of it..... once again prices can leap over
> stops.
>
>
>
> The state of the markets:
>
> What I am watching now is the situation in Europe ... it seems to
> have peaked around Iceland ... Iceland can't afford to buy its way
> out of trouble but it looks like other nations are helping out ...
> Russia lent a few billion Euros ... Holland lent them the money to
> guarantee the retail deposits of Dutch accounts with Icelandic
> banks ... UK about to do the same.
>
> So, unless there is anymore shocking Euro news there may be an end
in
> sight for Europe.
>
> Unfortunately all roads lead to Wall Street.
>
> I find the view of economist Jubak credible i.e. that the sticking
> point is the carry forward debt of Lehman's ... unknown owners at
> this stage ... refer to the link below for a video discussion ...
> Lehmans CreditDefaultSwaps auctioned last friday establishes debt,
> for holders of approx 91 cents/$ ... to be cleared by the end of
> October ... the companies holding that debt should be known before
> then.
>
> [scroll down to "Is It The End OF Financial World?" video]
>
> http://moneycentral.msn.com/investor/home.asp
>
> I also agree with Noriel Roubini's recent comments (I posted a link
> to his RGE Monitor site before) ... IMO Govt's didn't act radically
> enough, or with enough haste, but it is easy to be an armchair
critic.
>
> All the best with your trading.
>
> brian_z
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Ken Close" <ken45140@> wrote:
> >
> > I realize that this is off topic, but this list has two
> characteristics that
> > make this post potentially interesting as well as relevant.
> >
> > We have members from all over the world, representing
participants
> and
> > citizens in many, many countries.
> >
> > We also have members who trade differently using different
> securities and
> > different approaches.
> >
> > My question is: are you making money in the current volatile
> economic
> > climate and if so how? How has the turmoil in your local
> > economy/exchange/country influenced how you trade and what your
> more recent
> > performance is? What are you doing or do you think you will
doing
> in the
> > next days and weeks (as it changes so frequently, who knows what
> months will
> > bring)?
> >
> > I realize we seldom talk about anything but coding and user
issues
> with the
> > AB program, but could we have a departure for a moment, at least
in
> this
> > thread, to comment on how you see the near term future in your
neck
> of the
> > (woods) world, and what you are doing about your trading and/or
> investing.
> >
> > I personally am heavily hedged, ie, own high percentage of
inverse
> funds,
> > along with one position in a top performing and so far, slower
> losing mutual
> > fund (OAKBX) as well as a few stocks that are truly buy and
hold.
> Down
> > about 3% year to date and would have been positive if I had
> unloaded other
> > long (hedged) positions sooner.
> >
> > Any comments?
> >
> > Thanks,
> >
> > Ken
> >
>
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