rss

More Sellers than Buyers

“The real story of the rescue. Save the euro, must save the euro. All the world’s central banks rush to save a fiat currency. If the euro should collapse, it would demonstrate the inherent vulnerability of a leading fiat currency. The central banks and the IMF have put up nearly one trillion dollars to bail out Greece, but more important, to show the world that fiat currencies are “safe” and here to stay. Remember, the business and power of central banks lies in their fiat, non-intrinsic money – money they can create at will). To hell with Greece, the euro, therefore, at all costs, MUST be saved. In all my market years, I’ve never seen such consternation and disbelief in market action, and I’m referring to last week’s crash. Headlined the Los Angeles Times on Saturday, “Stocks’ Plunge a Troubling Mystery.” From the NY Times on Saturday, “Origin of Scare on Wall Street Eludes Officials.” Front page of Barron’s — “Don’t Let Europe’s Problems Fool You. The Bull Market Will Regain His Footing.” The Saturday Wall Street Journal even viewed the crash as a God-given opportunity with a big black-letter headline, “Playing the Market Plunge.” Wall Street and the public are so all-fired bullish that they are calling the crash a mistake, a computer error, or even the stock market losing its mind. Nobody, it appears, accepted the crash at face value. I find the cynical reaction to the crash rather ominous. I’d call it total disbelief in the market. Behind the disbelief are the unspoken words, “The economy is good, Corporate earnings are improving dramatically. Therefore, the stock market must be advancing. The crash was a terrible mistake. The stock market has lost its mind. Buy the mistake, it’s a great opportunity.” A radio station called me and asked what caused the crash. I answered, “Four words — More sellers than buyers.” The interviewer seemed stunned. He paused for about 10 seconds and asked, “You mean that’s it?” I answered, “Right, when sellers overwhelm buyers in a big way, guess what? The market goes down in a big

Morgan Stanley probed by Federal authorities

May 12 (Reuters) – U.S. federal investigators are probing whether Morgan Stanley (MS.N) misled investors about mortgage derivative products it helped create and sometimes bet against, the Wall Street Journal said, citing people familiar with the matter.

Morgan Stanley arranged and marketed to investors pools of bond-related investments called collateralized debt obligations (CDOs), and its trading desk at times placed bets that their value would fall, the Journal said, citing traders.

Federal investigators are examining whether Morgan Stanley made proper representations about its roles in the mortgage derivative deals, the newspaper said.

Two particular deals — named after U.S. Presidents James Buchanan and Andrew Jackson — were scanned by the investigators, the paper said, citing a person familiar with the matter.

Morgan Stanley helped design the deals and bet against them, but did not market them to clients, according to the paper.

Traders called them the “Dead Presidents” deals, the Journal said. The firm made money on those deals, but any profit was far overshadowed by the $9 billion the firm lost on bullish mortgage bets in 2007, the paper said

citing a person familiar with the matter.

Morgan Stanley helped design the deals and bet against them, but did not market them to clients, according to the paper.

Traders called them the “Dead Presidents” deals, the Journal said. The firm made money on those deals, but any profit was far overshadowed by the $9 billion the firm lost on bullish mortgage bets in 2007, the paper said.

“We have not been contacted by the Justice Department about the transactions being raised by The Wall Street Journal and we have no knowledge of a Justice Department investigation into these transactions,” Morgan Stanley spokesman Mark Lake told Reuters by telephone.

Spokespeople for the Manhattan Attorney’s office and the U.S. Securities and Exchange Commission (SEC) declined to comment to the Journal.

Updated at 11:17/12th May/Baroda/India

Trading firms put their money on poker experts

Reporting from New York — Chris Fargis thought his big job interview was over. But when the partners at Wall Street upstart Toro Trading finished with their questions, they broke out a deck of cards and a green-felt card table. Mind playing a few hands of poker?

It was a final test, and Fargis was relieved. The 30-year-old never went to business school or even took a finance class. But he knew poker. He had made a living playing the game online for six years from his Manhattan apartment, betting on up to eight hands at a time.

Within a few days, Fargis — with no Wall Street experience — was offered a position trading stock options, a job that entails making multimillion-dollar gambles. His poker skills sealed the deal. (more…)

LyondellBasell Board Said to Reject Reliance Bid

RejectedMarch 1 (Bloomberg) — The board of bankrupt LyondellBasell Industries AF rejected a bid from Reliance Industries Ltd., owner of the world’s largest oil-refining complex, two people briefed on the matter said today.

Reliance, based in Mumbai, had raised its offer for a controlling stake in Lyondell to $14.5 billion, two people with knowledge of the offer said Feb. 22. Lyondell is based in Rotterdam.

Buying LyondellBasell would create a company with more than $80 billion in revenue and give Reliance chemical plants and two oil refineries in the U.S. and Europe. The chemicals maker had rejected a revised Reliance bid that valued it at $13.5 billion, the Wall Street Journal reported Jan. 8.

Lyondell was formed in a 2007 deal financed with $22 billion in debt in which it was bought by Basell AF, a unit of Len Blavatnik’s Access Industries Holdings LLC. Creditors have said the buyout crippled one of the world’s largest polymers, petrochemicals, and fuel companies, causing it to seek bankruptcy.

Lyondell spokesman David Harpole declined to comment.

A few news books in Our Library

● Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)
By Jack Schwager
Excerpt via publisher, Wiley
Many investors seek guidance from the advice of financial experts available through both broadcast and print media. Is this advice beneficial? In this chapter, we have examined three cases of financial expert advice, ranging from the recommendation-based record of a popular financial program host to an index based on the directional calls of 10 market experts and finally to the financial newsletter industry. Although this limited sample does not rise to the level of a persuasive proof, the results are entirely consistent with the available academic research on the subject. The general conclusion appears to be that the advice of the financial experts may sometimes trigger an immediate price move as the public responds to their recommendations (a price move that is impossible to capture), but no longer-term net benefit. My advice to equity investors is either buy an index fund (but not after a period of extreme gains—see Chapter 3) or, if you have sufficient interest and motivation, devote the time and energy to develop your own investment or trading methodology. Neither of these approaches involves listening to the recommendations of the experts.

● Who’s the Fairest of Them All?: The Truth about Opportunity, Taxes, and Wealth in America
By Stephen Moore
Review via The Washington Times
Stephen Moore’s latest book, “Who’s the Fairest of Them All?: The Truth About Opportunity, Taxes, and Wealth in America,” fairly sets our liberal friends straight on the issue that seems to be confusing President Obama and the general American public a lot — economics and, in particular, tax policy. Mr. Moore, the senior economics writer for the Wall Street Journal’s editorial page, formerly president of the Club for Growth and a fellow of the Cato Institute and Heritage Foundation, has an encyclopedic knowledge of the tax fights of the 1980s. He condenses that nearly three decades in public policy in a slim 119-page volume that is an accessible and thorough guide to understanding economic growth. He understands that if we don’t learn the lessons of the past, we’re bound to repeat the follies, and so he has taken aim squarely at their chief originator, President Obama. While Mr. Obama may think of himself as Snow White — “the fairest of them all” — when it comes to taxing, he’s really Dopey, treating the world as if the Laffer Curve didn’t exist, as if food stamps and unemployment insurance actually grow the economy. (more…)

Facebook CEO will donate most of his wealth

Well, if Mark Zuckerberg’s image wasn’t already bolstered enough by his recent appearance on 60 Minutes, today’s announcement might help polish it a bit more.

Zuckerberg is one of 17 of the latest billionaires to sign the Giving Pledge, a joint effort from Bill Gates and Warren Buffet to encourage wealthy individuals “to commit to giving the majority of their wealth to the philanthropic causes and charitable organizations of their choice either during their lifetime or after their death,” according to the organization’sweb site. The Wall Street Journal first reported the news early Thursday morning.

“People wait until late in their career to give back. But why wait when there is so much to be done?” said Zuckerberg, according to a press release. ”With a generation of younger folks who have thrived on the success of their companies, there is a big opportunity for many of us to give back earlier in our lifetime and see the impact of our philanthropic efforts.”

First officially announced by Gates and Buffett in June of this year, The Giving Pledge touts a list of 57 billionaires who have pledged to give a majority of their wealth away over the course of their lifetime.

Dustin Moskovitz, a co-founder of Facebook and #290 on the list with $1.4 billion, has also agreed to join Zuckerberg in signing. Other names new to the list include ex-AOL CEO Steve Case and investor Carl Icahn.Mr. Icahn ranks 24th on this year’s Forbes 400 list, at an estimated net worth of $11 billion. Zuckerberg, whose soaring second-market shares valuation of Facebook stock brings his estimated net worth to $6.9 billion, is new to this year’s Forbes 400 list at #35.  Gates and Buffettcontinue to top the list at #1 and #2, $54 billion and $45 billion, respectively. (more…)

Mark Cuban Calls the Stock Market a “Platform for Hackers”

The following article from yesterday’s Wall Street Journal is a great follow up to my post from yesterday, Computers on Wall Street are Buying and Selling to Themselves!.  Mark Cuban, who wrote software himself, may have a bit more knowledge on the matter than some D.C. prostitute regulator, so I am sure they have contacted him to get his thoughts on the matter.  As I have said for years now, when the public loses all faith in their “leaders”(corporate and political), they lose faith in the system itself.  No economy can ever dynamically grow and increase standards of living absent a belief in the rule of law.  This is precisely why the U.S. will never be a strong, vibrant and upstanding society again until we take out our own trash, rather than pointing fingers abroad and blasting drones at civilians from 10,000 feet.

Key quotes from Mark Cuban on the computer dominated stock market:

I came to realize that the stock market no longer knew what business it was in. I wrote a blog that basically said that the markets for equities of all kinds had evolved to a platform for hackers.

As far as narrowing spreads, that’s absolutely true, but in absolute terms what does it translate into? For the individual investor it might save them a quarter a month. So what? Relative to the risk that’s the worst tradeoff in the history of tradeoffs (more…)