Morning Call [7:57am ET] The biggest auditor of the biggest banks in the world, with over $1 trillion equity invested, is PricewaterhouseCoopers. Looking down their list of clients, with almost half of the top 15, I think 'too big to audit' should be the issue.
Rather than obtaining testimony this week just from Paul Volcker (today) and a few CEO’s of the largest banks (Thursday), I think the public also needs to hear from the independent auditors.
PwC’s preeminent client list:
• JP Morgan Chase 156.17B, world’s largest bank
• Bank of America 133.39B, world’s 2nd largest bank
• Crédit Agricole, world’s 9th largest bank; largest retail banker in France
• Itau Unibanco 91.02B, world’s 10th largest bank; largest in Brazil
• Goldman Sachs 78.72B, world’s 13th largest bank
• BNP Paribas, world’s 14th largest bank; largest in France
• Barclays 48.61B, world’s 15th largest bank
In addition to auditing 7 of the largest 15 banks in the world, PwC also audits many other important names:
• Intesa Sanpaolo, world’s 25th largest bank; largest Italian financial services company
• Westpac Banking Corporation 62.30B, largest bank in Australia by market cap
• Banco Bradesco 53.24B, 2nd largest bank in Brazil
• Lloyds TSB 14.31B, one of the UK’s largest retail banks
• Bank of China (Hong Kong), second largest commercial bank in Hong Kong
• Bank of Ireland, second largest bank in Ireland
• Banco Popular Español, third largest bank in Spain
• Commonwealth Bank, largest bank in Australia by assets
• BB&T Corp, major US bank
• Commerzbank, second largest bank in Germany
• Dexia, second largest bank in Belgium
• DnB NOR, largest Norwegian bank and financial services company
• Eurobank EFG, 3rd largest bank in Greece; 3rd largest Swiss private bank
• Fortis, in 2007 was world’s 20th largest business, now mostly insurance
• Nationwide Building Society, world’s largest building society (credit union)
• Macquarie Bank, largest investment bank in Australia
• SEB, major north-European financial group, headquartered in Sweden
• Standard Bank, South Africa's largest bank
According to a story in the Financial Times, the Volcker Rule put forth by President Obama is unlikely to be approved by Congress. Senate Banking Committee ranking member Richard Shelby (R-AL) is reported to have said that the Obama administration risks losing Republican support for the bill if they begin to “politicize” the issue. Well, since when is a 100% split down Party lines, advocated by Shelby, not politicized?
http://www.ft.com/cms/s/2/76c55844-0f4b-11df-8a19-00144feabdc0,dwp_uuid=...
On matters of such importance as a complete overhaul of the financial system and the regulation of capital markets, what the American public needs is to elect representatives to Congress who will debate freely and then vote according to the needs and wants of their constituents. What happens in DC is bought and paid for by banksters, and the public is fed up.
In a thorough debate on financial reform, I for one would like to hear from the public auditors of Humungous Bank & Broker (HB&B) just what the risks are to the shareholders, the public and to government.
According to wiki, “Investors, government agencies, and the general public, rely on the external auditor to present an unbiased and independent evaluation (of their clients)”.
http://en.wikipedia.org/wiki/External_auditor
As some of you know, I did obtain Chartered Accounting and Certified Management Accounting designations, departing the accountancy profession after five years in the Toronto head offices of KPMG and PwC Canada, two of the so-called Big Four auditing companies. That was a long time in the past, but my experience taught me that external auditors are also bought-and-paid for, but for the most part they are honest and have expert working knowledge of their clients’ operations and financial summaries. When it comes to auditing banks that are said to be too big to fail, we need to hear from the auditors.
Notwithstanding yesterday’s market events, technical analyst Colin Twiggs asks in his popular incrediblecharts.com blog the correct question, “Correction Or Reversal?”
The issue is that so many international equity markets are breaking technical support levels we now have to consider whether global market prices are undergoing a secondary correction in a Bull market or a reversal to a primary down-trend aka Bear market.
The problem is that a “Bear” can only be defined after the fact. Before the event, only the FOMC Hedge Fund and Goldman Sachs and a few of their closest allies might know. But, for the rest of us, all we can do is look at the patterns and indicators, and as we see it today, the picture is gloomy for the Bulls, i.e., investors and traders holding long positions.
According to Twiggs:
• The S&P 500 is testing support at 1080 after breakout below the trend channel. Twiggs Money Flow (13-week) bearish divergence indicates a correction, but reversal below zero indicates strong selling pressure. Failure of support at 1040 would warn of a primary down-trend.
• The Dow found support at 10000 after breaking through the lower border of the (rising) broadening wedge formation. Expect a brief rally followed by another test of support. Failure would signal a correction to 9000 — the base of the wedge. Twiggs Money Flow (21-day) breakout below zero would strengthen the (correction) signal. Recovery above 10500 is unlikely, but would indicate another advance.
• Fedex is undergoing a correction, with UPS and the Transport Average likely to follow — indicating that economic activity is likely to slow.
• The Nasdaq 100 (non-Financial) is testing support at 1750 after breakout below the trend channel. Failure would confirm the secondary correction signaled by bearish divergence on Twiggs Money Flow (13-week). In the long term, reversal below 1650 would indicate a primary down-trend.
• The TSX Composite found support at 11000 after breaking below its trend channel. Bearish divergence on Twiggs Money Flow (13-week) confirms a secondary correction, but reversal below zero warns of unusual selling pressure. Expect retracement to 11600 followed by another test of support. Failure of 10800 would signal a primary down-trend.
• The FTSE 100 found support at 5200 after breaking its lower trend channel. Bearish divergence on Twiggs Money Flow (13-week) signals a secondary correction; but reversal below zero warns of heavy selling pressure. Failure of support at 5200 would confirm the correction, but reversal below 5000 would indicate a primary trend reversal.
• The DAX found support at 5600 after breaking its lower trend channel. Bearish divergence on Twiggs Money Flow (13-week) indicates a secondary correction; reversal below zero signals heavy selling pressure. Failure of support at 5600 would confirm the correction, while reversal below 5300 would signal a primary down-trend.
• The Sensex penetrated support at 16600, signaling a secondary correction. Bearish divergence on Twiggs Money Flow (13-week) confirms. Recovery above 17300 is most unlikely but would indicate another advance. In the longer term, failure of support at 15500 would signal a primary down-trend.
• The Nikkei 225 respected support at 10000, rallying to 10400 on Tuesday. Recovery above 10600 would signal an advance to 12000*, but Twiggs Money Flow (13-week) bearish divergence warns of a correction. In the long-term, reversal below 9000 would signal a primary down-trend.
• The Seoul Composite is headed for a test of primary support at 1520 after breaking below its trend channel. Twiggs Money Flow (13-week) bearish divergence confirms the secondary correction. Recovery above 1720 is most unlikely, but would signal an advance to 1940*. Failure of support at 1520 would indicate a primary down-trend.
• The Shanghai Composite Index broke below 3000 and its broad channel, signaling a test of primary support at 2700. Declining Twiggs Money Flow (13-week) confirms the signal. Failure of support at 2700 would signal a primary down-trend.
• The Hang Seng Index is in a primary down-trend after breaking support at 21000. Twiggs Money Flow (13-week) below zero confirms the signal. The index found short-term support at 20000 and is expected to retrace to the new resistance level (21000). Respect of resistance would offer a target of 19000*.
• The Australia ASX 200 found support at 4500. Expect retracement to 4800, followed by another test of primary support. Twiggs Money Flow (21-day) respect of the zero line from below would warn of a primary down-trend; confirmed if support at 4500 is penetrated. The All Ordinaries broke out of its long-term trend channel, indicating trend weakness. Twiggs Money Flow (13-week) bearish divergence on both the All Ords and ASX 200 confirms the secondary correction; reversal below zero warns of heavy selling pressure. Failure of support at 4500 would indicate a primary down-trend.
• The Baltic Dry Index reversed below support at 3000 and is headed for a test of primary support at 2100 — reflecting falling demand for bulk commodities, shipped primarily to Asia. Bad news for resources stocks.
I think you will find the Twiggs commentary interesting. You can find his work at: http://www.incrediblecharts.com/tradingdiary/2010-02-02_markets.php
As I see it, the cycle top is already in and the Bulls are fighting only against a rout on the downside – at least until they can position themselves against the Bear by selling stock positions and buying put options. Periodically, as we saw yesterday and likely again today, there is a bit of Quantitative Easing to relieve the selling pressure in order to permit an orderly deleveraging process to unfold.
So for today, it appears we will have higher prices for most equities, commodities and precious metals. But, the charts are telling us that it will not be a good time for a long time. So, I advise against chasing prices here.
CTA Trading Desk Report
Today was Day 2 of the reflex rally with prices rising from start to finish, once again finishing near session highs (S&P +1.30%). Driven by gains in the oil (USO +3.08%) and the industrial sectors (XLI +2.05%), the market has now rallied right back to the middle of the previously discussed initial resistance zone (S&P 1095, 1105, and 1115).
Tomorrow will provide a clearer picture of the near-term direction of stock prices. If the trend has truly turned down, one would expect prices to finish lower Wednesday; two consecutive low-volume rallies to resistance should be easy pickings for Bears if the primary trend has in fact turned down.
Given Friday's oversold condition of the stock market and the fact the first few trading days of each month tend to have a bullish bias, this rally has been no real surprise. However, volume has been conspicuously absent the past two sessions, casting doubt upon the sustainability of this rally. January was an outside month down, signaling a possible exhaustion of institutional buying power and demand.
A successful trader always has an open mind about the path of least resistance for equity prices. If all the pieces of the puzzle point to lower prices, but instead stocks begin to rally, then traders need to make in-flight adjustments.
Observation +trading plan +discipline =profits, over the long haul.
Have a great evening.
Comments
analogy
Might be of interest.
GARDEN ANALOGY… Some find analogies helpful, others find them annoying; but I think this one is pretty decent. I’m basically saying… to have a great garden, you need to continuously weed out your losers, and let your better plants flourish. The part that some people forget about is harvest time! You want to grab those fat tomatoes or prize orchids when they’re as good as they’re going to get. In other words, grab those huge profits before they shrink and disappear. After all, that’s the best way to impress your friends and family and bolster your own ego.
It has to be a continuous process, however, if you really want to be good at it. Times like this are good for intensifying your efforts on both weeding and harvesting; but you shouldn’t forget this responsibility, even in the best of times.
One of the challenges is deciding when your vegetables or flowers or marijuana (or whatever) are ripe enough to harvest. That’s what our trend & consistency numbers are there for. Buy when you find the good ones (including any other data you like) and sell (harvest) when those same numbers top out and decline… definitely by the time the trend turns negative.
I currently have some plump tomatoes with 100%+ gains over the past six months. In some cases the trend/consistency values still look pretty good, so they may get even juicier. For others, it really looks like harvest time… since the peak has passed. Meanwhile, I’m always weeding out the weeds. These are most often purchases that had great trend/consistency numbers, but the timing was wrong. They were approaching their (at buy-time, unknown) top already. In cases like that, the price may drop quite a bit before consistency, then trend numbers drop to “time to sell” levels. A strategy of “sell when there’s a drop of XX% from a recent top” is a good supplement to monitoring trend/consistency.
I think that the reason that this analogy doesn’t follow through neatly for investors, is that with a garden you can see what’s happening much easier than with stocks. You can observe the petals on the flowers, the size of those tomatoes or the height of your marijuana bushes. It’s less readily obvious when you’re looking at a spreadsheet full of numbers. Hopefully, one day we’ll have graphics where you can actually have your stock trend/consistency numbers represented as a visual of the ripeness of that tomato, and you’ll be able to see when it’s past its prime without looking at the numbers.
Cara 100 Ratings Changes
Good morning.
XOM - Bank of America/Merrill moves Exxon Mobil to Buy from Neutral, suggesting that “the impact of recent deal uncertainty unwinds from here”.
materiallity
The accounting doctrine of materiality should be looked at very closely. I’ve heard of too many audit findings being ignored because the partner in charge said that the finding wasn’t “material.”
Preparations when "the cycle top is already in"
Bill,
When the market is oversold and exhausted like last year March end/early April, it was a good time to look for quality names and start nibbling. This seems easier to do for me than work with the fact that we have reached the other extreme where the market has topped out and will roll-over, perhaps very slowly. What preparations do you do for the next few months of trading: mindset wise do you actively looks at overbought equities using the RSI-system and short them? Actively buy index PUTS? Or start piling into the short ETFs?
Not sure how to trade a top ... any words of advice?
Re: analogy
Chance! Welcome to the board.
Bob
Technical Analysts at UBS see
Technical Analysts at UBS see makets moving towards an oversold bounce; Advocate buying Gold
- See most short-term momentum signals pointing to an oversold bounce
- Maintain expectation that upward move is seen in first half of Feb
- See limit to short term pop as 1120
- Medium term view is that current downard trend is the first leg of major tactical correction
- Medium term low indicator remains 1040
BGU/End of month effect
Got stopped out of BGU for a loss on Friday, shoulda left the stop off or even put a BOC order in. Oh well.
Seeing the EOM effect IMO. Carrying 40% cash. Probably put short positions on by Monday's close. Otherwise, just sitting on my hands, watching the circus.
SPY
Looking at SPY puts at 105, June and Dec. 2010.
Also: GWG.V and RES.V
ANDERSON
ALOHA !!
Lets all recall just how PriceWaterhouse and KPMG got so much bigger. Mainly the implosion of Arthur Anderson from the Enron scandal. That shows you just how far large accounting companies are willing to bend the law.
I believe the American Accounting industry has some serious defects. All one has to do is look at the constant rule changes FASB and the lack of "real" accounting principles! I mean come on, what is NON-GAAP? Where is a standard that applies to all companies, large and small?
Its like the US tax system, which favors large corporations. Check out the tax brackets for corporations if you do not believe me. The tax brackets for corporations in America punishes the small business owner the most at a time when revenues are the least.
Here is a link to Arthur Anderson who went from 85,000 employees in 2002 down to 200 now! Where did the other 84,800 "talent" go to? Hummmmmm?????
LINK: http://en.wikipedia.org/wiki/Arthur_Andersen
"The Andersen indictment also put a spotlight on its faulty audits of other companies, most notably Waste Management, Sunbeam and WorldCom. The subsequent bankruptcy of WorldCom, which quickly surpassed Enron as the biggest bankruptcy in history, led to a domino effect of accounting and like corporate scandals that continue to tarnish American business practices.
So I ask you who was auditing Bear Stearns and Lehmans and WaMu and Merrill and the other 235 banks that failed since 2007?
Paul Volcker’s Prepared Testimony on Prop Trading Proposal
http://bit.ly/cciVvf
Show starts at 2:30 ET today
"Third, I want to note the strong conflicts of interest inherent in the participation of commercial banking organizations in proprietary or private investment activity. That is especially evident for banks conducting substantial investment management activities, in which they are acting explicitly or implicitly in a fiduciary capacity. When the bank itself is a “customer”, i.e., it is trading for its own account, it will almost inevitably find itself, consciously or inadvertently, acting at cross purposes to the interests of an unrelated commercial customer of a bank. “Inside” hedge funds and equity funds with outside partners may generate generous fees for the bank without the test of market pricing, and those same “inside” funds may be favored over outside competition in placing funds for clients. More generally, proprietary trading activity should not be able to profit from knowledge of customer trades." -Amen
thanks bill
Cool analysis, thanks for the perspective. I was wondering what was holding things up, why stuff looked so much like other rallies we've seen - low volume, yet persistent upward pressure. The big volatility early this morning I guess was an attempt by bears to take control and it failed.
Fridays have been good down days. Maybe we have another melt up week until then.
Bank lending study
The conclusion of the Multinational Banks January 2010 Senior Loan Officer Survey of Credit Suisse: Weak Loan Demand [not bank policy], Consistent with Fed Data
• The Federal Reserve released its quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices. The January survey indicated that loan demand from both businesses and consumers weakened further in 4Q09. The survey results coincide with trends evident in the Federal Reserve loan data which reveals weak demand across loan categories, particularly Commercial and Industrial (C&I). Overall, the Fed data reveals that weak December growth trends are continuing into January. In addition, the survey indicated that while lending standards remain tight, the net percentage of banks that tightened standards and terms for most loan categories continues to decline. More specifically, for most loan categories, the net percentage of respondents that tightened standards in 4Q09 was close to neutral. The exception in the survey related to Commercial Real Estate (CRE) portfolios, in which a large fraction of banks responded that they continue to tighten credit standards on CRE loans. Demand remains weak in the C&I and CRE loan categories, while there were mixed signs in consumer portfolios. Interestingly, the survey also focused on three specific issues affecting the industry, including delinquency trends on C&I loans, change in policies surrounding CRE, and the general outlook for credit quality across loan categories in 2010.
• C&I standards were little changed in 4Q09. In general, the net fraction of banks that reported a tightening of C&I lending standards was considerably below recent surveys. Some of the largest domestic banks reported an easing of loan terms to large and middle-market firms including terms on loan maturities and loan spreads. Those institutions that eased standards cited more aggressive competition from other banks and nonbank lenders as an important reason for the shift. Additionally, a majority of banks that eased cited improved or less uncertain economic outlook as a reason for easing. Conversely, a moderate percentage of smaller domestic banks continue to tighten terms on loans to firms of all sizes, reporting reduced tolerance for risk and uncertain economic outlook. At domestic banks, C&I loan demand weakened again this quarter, although to a lesser degree than previous qtrs. Weaker demand was attributed to a decline in customers needs for financing for plant/ equipment or inventory/receivables. Based on Fed data, C&I loan growth remains the most challenged loan category, down 17% y/y in 4Q09. Fed data for the first few weeks of January indicates continued weak C&I trends. In response to a special question, approx. 65% of banks reported higher delinquencies on loans to small firms than on loans to large and middle-market firms.
• CRE lending continued to tighten. A considerable fraction of banks reported tightened standards on CRE loans, as well as weaker demand in 4Q09. In response to a special question, a large net fraction of both domestic and foreign banks reported having tightened a range of terms on CRE loans over the course of 2009, most notably tighter spread of loan rates over cost of funds, debt-servicing coverage ratios and LTV's. Based on Fed data, CRE loans were up 2% in 2009, down from 9% growth in 2008. The trends in January reflect continued weakness in CRE growth.
• Lending standards on residential real estate remain tight; demand remains weak. Standards on residential real estate remain tight, although a small net fraction tightened standards in 4Q09 on prime real estate loans. Although a somewhat larger net fraction reported tightened standards on nontraditional residential real estate loans in 4Q09. A moderate net fraction of banks reported weaker demand from prime borrowers for residential real estate, while nontraditional mortgage demand weakened further from last quarter. Based on the Federal Reserve data, residential mortgage loan growth was sluggish, up 2% y/y in 2009 (consistent with 2008), but substantially lagged the low-teens y/y growth rates posted in 2006 and 2007. While demand for home equity lines of credit were lower, the survey reveals that only a small fraction of banks reported tightening of terms in 4Q09.
dont be fooled by fools gold!!
gold's move while seemingly bullish yesterday and early today has gotten the hairs on the back of my neck standing on edge.
im torn b/w a solid move up in the face of only minor dollar weakness, yet the miners continue to be the canary in the coal mine.
volume is weak on the upswing but strong on downfills, miners today are over all fairing poorly while gold is staying above 1110.
of concern is golds attempt at $1120 and fall back towards 1114, at this time of day in my experience if gold doesnt bounce back quick for a new daily high, ive found we tend to fall the rest of the day w/ an ugly close and a repeat tomorow.
so my feeling is that gold either moves up strong from here or there is trouble.
Re: Bank lending study
A further note, I believe the data presented here shows that the current Obama $30 billion small business job creating bank lending program is same old same old from DC -- mostly posturing. What is likely happening here is that Obama has found another way to piece off "friends" of Congress with more taxpayer money. The nonsense never stops.
Cara 100 Ratings Changes (Final)
XOM - estimate tweaked at Barclays. XOM 2010 EPS estimate raised five cents to $5.95 on strong sales growth projection, 2009 maintained at $3.90. Reiterate $92 price target and Overweight rating.
XOM - estimates upped, target cut at UBS. XOM estimates were raised through 2010. Company is seeing lower corporate costs and tax rate. On the other hand, the target was lowered to $72. Neutral rating.
Gap filler
possible reversal play in FSYS and into earnings early March.
NLS
I started a position in this a little too high the other day at $2.65, but I'm going to be adding some more. I really like this potential turnaround. Their balance sheet is excellent after selling off their commercial business (they're now focusing exclusively on selling directly to the public) and after getting a big tax refund. After these two events I believe they now have about $30 Million in cash and no debt with a market cap of $70 Million. While I don't see this getting back up to the 20's again, I think it could go to $6 to $8/share, which would be quite a move from today's prices.
Re: Bank lending study
Bill,
Thank you for this report.
"Weaker demand was attributed to a decline in customers needs for financing for plant/ equipment or inventory/receivables."
Anecdotal evidence from my corner of the mortgage market suggests the actual 'demand' for RE and CRE/CRI loans is skewed by an experience that the well is dry. For example, a regional bank accepted TARP but has the tightest lending standards in town while much touted on Bankrate.com for 4 star soundness rating. The money is simply not flowing to where it's needed. These institutions only prosper when money is moving yet Banks are the biggest squatters. They have the gall to complain when a business hunkers down.
How long can we prop up this system?
Low general volume today on this spike higher
i would not be leaning either way on today's action.
feels like late 2009 all over again today.
Market visuals
There are some nice market visualization tools available from various vendors, but I like the free tools Finviz provides.
After a quick glance at their “Market Archive” map, one can readily see that stocks have been mostly down on Thursday/Friday….up on Monday the last two weeks in a row and on Feb. 01 the block for Basic Materials, Gold, Oil & Gas was almost entirely green. http://tinyurl.com/yjn43eh
Another nice visual is their “Market 3D” map. Once the entire map loads on your screen (may take several seconds), you can mouse over any one of the blocks to view a recent chart.
http://tinyurl.com/yzobgvc
Re: Bank lending study
No it doesn't the business of Washington is politics...period. Political solutions always win out over practical operational solutions.
Re: Bank lending study
ALOHA!!
And there you have defined the basis of our monetary system, which is essentially the worst of the "human condition"! Who here would not be tempted to write as many 999999999999 as possible on a blank check? OPM is the fuel for DC and NYC ...
We have a system with no limits and no brakes. The complete opposite of what the US Constitution called for.
Re: Market visuals
Thanks Fox. I had not seen the 3-D before. Interesting to note the large grouping of 3% gainers clustered in the homebuilding sector. (had to scroll all the way down)
i cant watch the Paul V stuff
by the time his plans are put into law as a watered down version he will be 200 yrs old.
back to prices.
A cycle top? What cycle
As I see it, the cycle top is already in ...[BC]
As I see it, my charts are telling me just the opposite. That makes a market I guess. The S&P just had a breakout today at 1100 for a minimum target of the previous top while the DJ INDU's is struggling with tough resistance in the 10,200-10,300 zone but once that is done with, the target upside is above the previous top. Also, it had a breakout at 10,250.
The probabilities are quite low that we have reached a cycle top when we did not yet have had a up economic cycle yet...! Commodity markets (as illustrated by the Canadian index) has had a standard 8% correction.
I could be wrong, of course, but I would not argue with this market.
SPY
Moving my trade in SPY from SPY 1,097 back to cash at close. Timing was not the greatest...
Re: A cycle top? What cycle
Tell that to everyone who bought AAPL on the iPad news. :)
Dow back testing resistance?
or will it power through?
http://bit.ly/9nkGMm.
Fannie/Freddie mysteriously left off the US Budget?
OK, I realize these august institutions are supposedly NGO's. But $6.3 Trillion is missing from the bottom line. Shouldn't those expenditures be on the Budget?
Given Barney Frank is yapping mightily about shutting them down...what constitutes a 'goverment agency' these days? Can Barney Frank shut down a private business?
And let's not forget AIG...Kaimu are you seeing what I'm thinking?
Goldman's gold trader this am......
" One of the key reasons for the support ( last weeks ability of the market to hold the $ 1080 level ) has been the re-emergence of the physical retail buyer, paticularly in China. I was in Asia last week and it was clear that Chinese commercial banks were seeing strong interest below $ 1,100, and expect demand to be strong again this year from the domestic market. The Middle East also seems to be stronger than expected for the start of the year "... from Fleckenstein Capital, Feb. 2, 2010
Re: Fannie/Freddie mysteriously left off the US Budget?
As Obama said regarding Timmy's unpaid income taxes, "I'm sure it was just an honest mistake."
On the other hand, they are called "congressional oversight committees". (Perhaps "overlook" is more appropriate.)
Another win for the BAD guys.
Obama’s Budget Has One Small, Missing Piece…. For $6.3 Trillion Dollars
Zero Hedge (01 Feb 10)
What's with Neutral Tandem (TNDM) @ $15.17
Small cap making "tandem"..??.... switches for wireless communications:
* RSI7 peaked 79.2 @ $23.6 on 1/5/10...now 9.7 and dragging near bottom.
* IPO late 2007 around $18. Chicago based. Was over $30 June/July 2009.
* No debt and lots of green value price points on Finviz, including PEG of .54.
* Insiders have been unloading their cheap options since a year ago.
* Cramer backed off on Jan 20; “I was wrong,” due to increased competition.
No position here but is it value or just another tech stock with no moat?
Volcker Rule
Having trouble tracking down the full Volcker testimony today. As I understand, it was in front of the Bank, Housing, and Urban Affairs committee. I usually find these on c-span but no luck. I found a small snippet on You-tube
http://www.youtube.com/watch?v=RbZG0V3V1EQ
Early in the video, Volcker was pressed hard on whether his rule would have prevented the AIG crisis, since it wasn't a deposit-taker. He stumbled and then basically agreed it wouldn't have. No! It would have. Thing is, the banks were major purchasers of the risky product FROM AIG, so yes, it wouldn't have prevented AIG doing business with others, but it would have put restraints on banks participating in that dubious market; a market which ultimately stressed the whole financial system. So, with those restriction on banks, the AIG crap-product market would have been smaller and less toxic to the system.
Also there is a hilarious exchange in which Volcker basically threatens to come back and haunt the senators in the future at the next crisis if they don't enact his Rule. :)
Anyway, does anyone have a link to the full testimony today? Maybe I missed it at c-span.
Cheers
CARRY ON
ALOHA!!
In 2008 the Fed Funds rate dropped from 5.25% to .25%, 500 basis points. During that time the USDX rose from 74 to 89. Why? Was it the belief that lower rates would re-stimulate the real estate bubble and consumer lending and margin trading again? Or was it so the US Treasury could sell cheap debt? Or was it the JPM and GS free money syndrome?
The RBA recently announces holding rates at 3.75% and the AUD/USD drops from 90 to 88. In order to rally the AUD the RBA should have dropped rates to 0.25%, like the US FED did in 2008. Then the AUD would reap the benefits of the "carry trade" ...
The infamous carry trade, which I still can't find definitive numbers on, is selling the AUD in fear of lower rates thereby squeezing their arbitrage. Yet the supposed USD carry trade is safe as long as the Fed Funds Rate stays at 0.25%. If all the prominent currencies, like the AUD, drop their rates then where will the carry trade go to? GOOG? RIMM? GLD? Can carry trades operate on a spread of less than 25 basis points? Less than 50? Less than 100? What's more think about what happens when the Fed Funds Rate is forced to move off all time lows. The closest the Fed Funds Rate came to this level was in the 1950s at 1%, nearly 60 years ago. I am doubting the US Treasury can afford a 20 year BOJ run as the per capita exports are just not there. Did the BOJ ever have 17% unemployment(10% official) during that 20 years? Did the BOJ ever have to conduct wars on multiple fronts during that 20 years? Did the BOJ run up $101TRIL USD worth of internal debt prior to their 20 year recession? Did the BOJ start out their 20 year drought with bankrupt auto makers and insurance companies and derivative laden banks? What would the US FED Balance Sheet look like after 20 years of "quantitative easing"? The US FED bought 48% of the US Treasury Notes and Bonds exceeding two year maturities. In order to revive the US FED Balance Sheet rates need to rise so the US FED can remove the excess money supply. Yet with rates rising the US Treasury will have to sell much more expensive debt. So who wins here? Is it the US Treasury or the US FED? Who owns who in America?
There is no "store of value" left in currencies run by Humongous Deficit and Debt(HD&D) dominated governments. And what global politician over the past fifty years has not promised the "moon" to voters in order to get re-elected only to turn around after the election and hand the "moon" to the bankers?
By the way ... in Hank Paulson's new book he claims Obama was easier to deal with than Bush or so he says in an interview I read. I am not buying the book ... Why hand this con man more millions ...
Fed Funds Chart: http://tinyurl.com/y86f7gs
...............
.. http://www.gold-eagle.com/editorials_08/thomes0519...
Re: CARRY ON
Stephen, thanks for all the hard work... I have a feeling Santelli is reading what is written.... baz
Re: Volcker Rule
http://bit.ly/9OerKE
Enjoy. I couldn't get through it.
Re: Volcker Rule
Thanks NYUG
Ascent of Money
Apologies if this has been posted here already (perhaps even by me?). We've all digested so much information during the last few years it all starts to blur together. Watched this last night and found it entertaining: PBS's "The Ascent of Money". You might call it a "Guide to Investing Pitfalls" :)
Part 1: http://www.youtube.com/watch?v=y3MHFe7PX2g
Part 2: http://www.youtube.com/watch?v=Y7N9JuZxQcY
Part 3: http://www.youtube.com/watch?v=Xg5Ct0ejdOY
Part 4: http://www.youtube.com/watch?v=fYJ3RXJb_NQ
Part 5: http://www.youtube.com/watch?v=VJPzbo8qkH4
Total viewing time: 50 minutes
Commodity liquidity ... Tudor
http://www.lbma.org.uk/docs/conf2003/2c.matthewsLB...
Kaimu... I think you might like this one....
... http://www.wikio.com/video/2638541
5.1M Homes Projected To Be Worth Less Than 75% Of note by Jun
Benjamin Koellmann paid $215,000 for his apartment in Miami Beach in 2006, but now units are selling in foreclosure for $90,000. “There is no financial sense in staying,” he said.
http://bit.ly/9Wh0Is
Nasdaq 60 min chart,
Nasdaq 60 min chart, http://bit.ly/dvOl1u.
I think 2220 will be strong resistance. And the 2300 area really strong resistance. So unless you want those 20 points, I prefer to wait for resistance and add some puts or a 1x reverse etf.
Also watch for a lower macd peak. we have already have a lower highs in place. as well as if it can get above the zero line on macd.
Shareholder Influence
One of the issues that has been raised recently is that shareholders and Boards of Directors have failed in their duties. e.g. to reign-in excessive compensation geared towards short-term, rather than long-term performance.
About a year ago, I posted a "Flow of Funds" document, from some Fed Agency, that showed a marked and long-term trend away from private holdings of equity to institutional holders.
I wonder if we are witnessing a structural failure of the share-model of company ownership - that is, shareholders holding management responsible - as the investing public moves away from holding individual stocks, to holding index ETFs, and such.
What I mean is, take it to an extreme: If all shareholders sold their company stock and invested through ETFs, who represents you, the index ETF holder, at meetings against management? Does Vangaurd attend stockholder's meetings and rail against management excesses for that small 2.7% holding in e.g. BA in their ETF? I know I don't, as a holder of various ETFs.
Pension funds continue to attend, and press management a bit, but there's nothing quite as effective as a seething pitch-fork mob for affecting change...
Just a thought...
Re: Ascent of Money
Watching now.
I notice with debit cards, I hardly use paper money the past 12 months. As i hold this dollar bill in my hand, it almost seems unfamiliar, like a bill from another country. hm.
that's a odd feeling.
Re: Ascent of Money
ALOHA !!
NYU ... If you think real paper money seems unfamiliar then try this ...
Imagine the feeling of running up $120BIL USD in debt on Monday, Feb 1st, which generated a one day $71BIL USD increase of the Public Debt at $12.293TRIL USD! Another day like that and the DEBT LIMIT is virtually gone! How much tax revenue came into the US Treasury coffers? $22.7BIL ... And how much was spent(outlays) on Monday? $81.3BIL USD ... So without that $120BIL USD debt issue the US Treasury would have been nearly $60BIL USD short on Monday, one day! In the Obama State of the Union he proposed a $20BIL cut in spending ... He and his proposals would be a big hit at the Beijing Improv! What a waste of time to even mention $20BIL ...
What got spent up? Tons of military expenditures and Medicare. Some $15BIL on Medicare and some $9BIL on military and $31BIL on US Treasury redemptions and a slew on HUD and Education and Unemployment, totaling another $5BIL +!!
So you have $1 USD in your hand. It seems foreign, like another country. I wonder how long it would take the average US Congressman to count to one billion? I think if I asked Barney Frank to count to one billion he would refuse and tell me its ridiculous. So then why is it he and his cohorts find it so easy to spend one billion? One mouse click? Two? Three? The consequences are all but forgotten after the clicks. Every thing in America is swept under the rug ... Out of sight ... out of mind!
Re: Kaimu... I think you might like this one....
ALOHA !!
baz22: Thanks, but I can't watch videos as they take too long to buffer ...
Re: Ascent of Money
Hi Kaimu.
Its truly sad. it makes waking up to go to work for the dollar even more painful.
Every time i ride the train into Manhattan i wonder why I do it? It's not that i don't like an honest day of work, or the lack of desire to succeed. It's just this disturbing feeling of servitude to a system that is taking away more and more everyday, leaving me with nothing.
It also makes it harder to invest in a new family business and create jobs. Is it all for nothing? are we all just dead men walking into an abyss of currency devaluation and debt slavery?
oops, look at the time. its 12:49AM here in nj. i better get some sleep so i can go clock in tomorrow for my 8 hours of sweat.
Volker
The question he did not answer but the one I ask is this. IF the prop desks were leveraged 40 to 1, from whom did they borrow the other 97.5%? Seems to me that commercial banks, insurance companies and foreign banks were on the hook for potential losses. Why couldn't the I-banks make good their calls? Because it would have stiffed the FDIC banks. So, depositer money WAS at risk. Ask why GMAC, Goldman, GE have bank charters and why did the FDIC raise the guarantee from $100,000 to $250,000? To prevent a national bank run!
So, prop desk trading in derivitives were NOT part of the problem? Can you insure the life of someone where you have no beneficial interest? If you could, you might have larceny in your heart. RIP Bear Stearns. Oh, and where is the marketplace for these instruments so I may see if my broker is solvent? Ah, and the FASB tells me that, well you know, we can't really value anything because in the future they may CHANGE! If I kept my books like that I would be in prison.
Lastly, there is NO inflation. But there is a 100% decline in interest received on saved money. You know. The people that saved and invested and rely on decent returns to supplement their retirement incomes... My poor old Dad. WWII vet who payed and played the honest game all his life now cannot make ends meet because the interest on his meager $50,000 savings is nil. He owns his home and an 89 Ford Tempo which he uses to go to the grocery and church. He doesn't even know what the internet is nor does he care but hedonic adjustments have robbed him and millions of others of income needed to pay for food, gas, utilities, taxes, insurance and the other basics of life. This is shameful. This is why I have NO respect for my government.
I am a dutiful son and yes, Pop will be able to pay his bills. Yet I wonder how many moms and pops will go wanting because ZERO interest rates favor only the Banksters balance sheets.
The incestious cabal of thieves and bankers (same thing) are still being coddled by congress. Are they stupid or just bought? Either way, we need a civilian RICO statute. Racketeers should be in jail, not roaming congress and Wall Street!
Sorry for the diatribe but I just sent a check to my Dad to cover his RE taxes for last year. It's not the money, it's the principle I object to.
Britain admits to being on the edge of an abyss much deeper
than what has been suggested until now.
The headlines says it all:
"Britons have been warned they are facing a sharp squeeze in disposable income, rising unemployment, and a fall in house prices both this year and next."
http://www.telegraph.co.uk/finance/economics/71402...
"The paper, which will pave the way for a full defence review after the election, makes clear that Britain can no longer afford its current military operations and planned equipment programmes and faces “hard choices”"
http://www.telegraph.co.uk/news/newstopics/politic...
Prices of bananas and other household staples soar
http://www.telegraph.co.uk/finance/newsbysector/re...
Squeezed on every front. How long before Obama works it out and those weapons being made for the front lines no longer outweigh the millstone of debt hung around taxpayers necks. How will citizens, investors and the market react when this dirty laundry is hung out for all to see? (no need to ask how politicians will react, this is a given)
On the lighter side of things, watch an idiot from Macquarie bank being filmed live surfing for girlie photos while his colleague is giving an interview (images aren't identifiable, but it's clear that his boss will dispute those figures he was researching :)
http://www.youtube.com/watch?v=H9wJspZGreI
Australian men are so hopeless ;)
Landry Bowties
http://ronsen.blogspot.com/2010/02/landry-bow-tie....
Something to watch...
Re: Bank lending study
Agreed. We need customers with money or financing, not to be saddled with loans! Typical Economic Hitman (ECH) Approach.
Re: Ascent of Money
think about moving away...
Re: Ascent of Money
NYUGrad said:
"It also makes it harder to invest in a new family business and create jobs. Is it all for nothing? are we all just dead men walking into an abyss of currency devaluation and debt slavery?"
Now you're talking my interest! Philosophy 101 - what is philosophy for? I've heard it described in reference to two questions. "What is it all about" and "how can we further improve our community". Well, if the answer to the first question is "nothing", one might want to find another response to the second!
One of the too numerous titles I'm trying to wade through is by the ever humorously intelligent P.J. O'Rourke and his take on Smith's "The Wealth of Nations". He also takes time to outline the prequel to this important document in the book, which was "The theory of Moral Sentiments". A usefully updated commentary on important foundational ideas.
Re: Ascent of Money
philosophy is the computer program that runs your brain. It is how you perceive reality and execute within that perception.
Re: Shareholder Influence
Mackinaw,
How right you are.
It was my observation over a forty year period of working on corporate annual reports with local management and as a shareholder in some of these same companies that individual shareholders gradually lost virtually all influence on the managers and the boards.
As institutional holders and mutual funds became the largest owners management realized they had no need to cater to any shareholders' objections at annual meetings. I first saw this in the late 1980s when a CEO got a 10% bonus in a year the company's earnings were down more than 23%.
I saw the same faces at many of the meetings I attended. The CEOs of the various companies served on the boards and compensation committees of the others. They all played golf together at the same clubs and in at least one case their kids intermarried.
This corporate/business incestual relationship is very similar in design and effect to the Goldman Sachs/governmental agency and congressional/lobbyist ones which control our markets and economy from the top down.
For over two decades they "right-sized" and "downsized", acquired and divested, and eventually "off-shored" thousands of jobs. The advent of the stock option — originally proposed as a way to increase board and management incentive to increase shareholder value — sucked the companies dry. Cut jobs— get a stock boost and sell those commission-free shares.
Four of our formerly major employers (over 10,000 well paying manufacturing jobs) have all left the city through mergers or have moved operations to other countries. All the CEOs made $millions and publicly shed crocodile tears when expressing the anguish they felt at letting people go.
My city is now officially at over 17% unemployment and Illinois is among the worst overall.
Re: 5.1M Homes Projected To Be Worth Less Than 75% Of note ...
NYUGrad,
I don't know Benjamin Koellmann, but if I had been present when he was eying that Miami condo in 2006, he could have saved himself a fortune.
I did what I could do. I only wish it was more.
http://www.billcara.com/archives/2006/05/hey_bill_...
Re: What's with Neutral Tandem (TNDM) @ $15.17
Good morning. new here. Enjoy the wonderful discourse.
Illni
Unfortunately have too often seen value in TNDM as a longer hold.
Huge short interest and it appears they are pileing on here. A couple of weeks ago TNDM confirmed guidance w/ Revs. Midrange, profit top of range. The low cost options being sold by insider-IMHO-is crushing any short covering. Earning 2-16 and I would suspect some covering sometime next week, perhaps into 18-20 area. Also, Peerless vs. TNDM in court may be waying on stock. Any incite would be appreciated.
Enjoy the day.
India tightening regulations to prevent HBB money laundering
http://www.blonnet.com/iw/2010/01/24/stories/20100...