The Credit Crisis Financial Stocks Short Journal

It seems that people estimate that there are 7m additional foreclosures down the pipe in terms of shadow inventories. If the avg price is $200,000(this is just a guess). There is $1.4T in money supply that will be turned over to the banks at the foreclosure auction. Now that number is not accurate because there are costs in the process and some buyers might buy with credit financed by a bank(if its financed by a GSE I dont believe it expands the money supply unless its a bank who bought their bond), also 7m might be too high
To be conservative you can use a 50% figure. $700b, which is 8% of the M2 Stock and that is from foreclosures alone nevermind other forms of debt that are being paidoff
 
Buiter on EU defaults
http://www.zerohedge.com/article/bu...overeign-defaults-and-imfs-triumph-dogma-over

His bottom line there is that the result of austerity actually increases the incentive to default because it increases the primary surplus(decreasing reliance on debt markets funding) but increases debt(which makes default more juicy)

Its sorta like an unemployed lazy person who pays for his monthly expenses by borrowing from credit cards and lives well doing that, then that person stops being lazy uses some money to search for a job(austerity), when he gets it there is a HUGE incentive to default on the credit card debt because now the monthly expenses are being taken care of by the wages and actually can be cut further by defaulting and not having to pay interest payments

There is very little reason for these guys(Greece, Ireland) not to do it down the road, some people might run for office on that platform
 
Quote from Carl5:

Zerohedge tends to get technical which turns people off. Fraud today is technical.
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Yeah, it seems the their audience only love when they bash for the zillioneth time on Bernanke or GS. I like it when they publish good private research like that
 
Ding, ding, ding.

I especially like the fact that he apparently picked the summer bottom in stocks, but waits until after a 10% move in 3 weeks to write about it. He also shows that he has an idiotic political bias by saying that he rescinds this call if the radical Republicans take over Congress and pass laws that will kill the "2700-point Obama rally".

He also references my old college prof, Jeremy Siegel (calling him a respected market analyst :D). If you don't know Siegel, he's the guy who wrote Stocks for the Long Run at just about the time that stocks were about to become toxic for the long run.:p

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/23/AR2010092306290.html?hpid=topnews

Yes, it may finally be time to get back into stocks

By Steven Pearlstein
Washington Post Staff Writer
Friday, September 24, 2010; 1:53 AM

In early June 2007, while on my way to New England for my daughter's college graduation, I was reading through my usual pile of newspapers and decided I had seen enough evidence that a financial bubble was about to pop. After the plane landed in Boston, I made the first of several calls to mutual funds and brokers and sold all the stocks in the various accounts I manage for myself and my family.

It turns out it was a few months before the stock market peak, but as John Maynard Keynes once observed, it is better to be roughly right than precisely wrong. Since then, most of the money has been parked in money market accounts, one of which had the annoying habit of reminding us how little were were earning by mailing us a check for 56 cents each month.

Last month, as I was headed back to New England for a late-summer vacation, I happened to check my iPhone and saw that the Dow Jones industrial average had fallen sharply and was back near 10,000. I picked up the phone, called the funds and the brokers and put the money back into stocks - this time in shares of large, solid dividend-paying companies.

I'm not the first or the only person to reach this conclusion. A few days later, respected market analysts Jeremy Siegel and Jeremy Schwartz published a much-noticed essay in the Wall Street Journal arguing that dividend-paying stocks "offer investors more attractive income and inflation protection than bonds over the coming decade."
 
Quote from ralph00:

Buying more VXX calls on this moonshot up this morning.:cool:
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Why not buy SPY puts instead. It seems to me that the stock market is more inefficient
 
That's a good question. I'm still trying to get my arms around options pricing and such. By my newbie analysis, the VXX calls seems to offer a better risk/reward - I'm going to play with a small % of my assets and see if I can hit a couple of home runs/year.
 
Well, I bought some SPY Nov 2010 99.00 puts(0.66 avg price)
Playing 2 themes here
-The buy vol around bellow VIX 20 in the aftermath of the crisis
-Hussman research indicates economic misses will occur around mid Oct
 
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