The Credit Crisis Financial Stocks Short Journal

One more argument for 'CBs stay low for longer', courtesy of Pimco
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The chart that CBs have kept rates lower than what the 'Taylor rule' advised on this decade. This happened because inflation rates had came down quite a bit in the last 20-25 years so they wanted to remove tail risks of japanese deflationary issues

This time the problem is bigger than ever. In the 03-04 downturn never the CPI turned negative. Now its -2%, GDP deflator is negative and the core CPI will test the 03 low of 1.1% yoy pretty soon
 
Quote from Daal:

Jim Grant is a Fed basher, those people tend think their opinion on what the fed SHOULD do is what they WILL do. Did Jim grant predict fed funds would tumble from 5.25% to 2%?I bet he didnt, meanwhile Bill Gross and Paul Mcculey were back in Dec 2007(when the rate stood at around 4.25%) discussing a "2 handle on fed funds", back then this was unthinkable to most(commodities soaring, CPI soaring, gold flying). Did he then predict rates would go bellow 1%?I bet he didnt as well

Confront him with the fact that the fed raises the rate on average 14 months after unemployment peaks, he will probably come out blasting and say its a bad idea to wait that long. Well buddy, others people opinion are meaninless, the FOMC opinion is what matters

The last deflationary cycle(03-04) the fed took almost 9 months once the core CPI bottom to hike, so he is essentially arguing for inflationary pressure in 2010, which is ridiculous(And there is another dovish argument for the colection)
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I put that comment in there just as a comment, not to be argumentative. There are a few people in the investment community worth listening to all of the time - you're crazy if you don't think Jim Grant is one of them.

Yes, Grant tends to be hawkish, but let's be fair ... he makes his readers money (me included) and he's always worth listening to. Like I said, he's been ON POINT in 09 so far. His bullish analysis on MTG at $1.50 back in March was a thing of beauty and pretty much made my decade.

McCulley still needs to explain his "Greenspan has raised rates for the last time in his career" essay back when the FF rate was 1% and Greenie was about to jack it to 5%.
 
Quote from ralph00:

I put that comment in there just as a comment, not to be argumentative. There are a few people in the investment community worth listening to all of the time - you're crazy if you don't think Jim Grant is one of them.

Yes, Grant tends to be hawkish, but let's be fair ... he makes his readers money (me included) and he's always worth listening to. Like I said, he's been ON POINT in 09 so far. His bullish analysis on MTG at $1.50 back in March was a thing of beauty and pretty much made my decade.

McCulley still needs to explain his "Greenspan has raised rates for the last time in his career" essay back when the FF rate was 1% and Greenie was about to jack it to 5%.
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Well, I dont know much about the Jim Grant the trader, it seems that everytime I catch him on bloomberg or CNBC he is ranting about the government and that doesnt make me money.
As far as MTG goes, he might as well have named you any garbage stock and you would have made a ton anyway, they are all flying. I never researched MTG but I remember it being like MBIA, so chances are by the time UR reaches 10.5-11% it will be either be bankrupt or will dillute shareholders so I would caution you against proclaiming he is right(after all his V shaped recovery might be one of the reasons he recommended the stock)

And Mcculey said in his book that he thought Greenspan would not be reappointed again in 2004. IIRC he made his call in 2000
 
It looks like my caution of waiting for 980 SPX to be broken might have saved as the dip is getting bought, usually when I throw caution out of the window by not waiting for these sorts of technical weakness(usually the result of being too confident) it has cost me money. This time I avoided the mistake
 
Heres an strong argument for 'Fed stays low for longer' this one is actually devastating and might be the best one yet its the simpler. The Fed will only raise rates with rising inflation! Can anyone in their right mind argue that the fed hikes with CPI negative and core CPI close/below 1% simply because the fed 'thinks' they have bottomed?
They wont cach failling knifes, even after they bottom the fed will need to see some 'sustainability' in the move to make sure its not a head fake(like they did in 04). So the first hike will come 5-10 months after the first signs of inflationary pressure(And this could be conservative)

Inflation is mainly lead by wages, rents and credit. So Jim Grant by saying 'Fed hikes next year' is essentially saying "I expect the economy to add lots of jobs(more than 150K monthly) in the next year and the UR to fall, I'm also quite bullish on rents and think RE markets will get a bit tight, all these vacancies will fill up, I'm also expecting banks to lend a lot, Fed Senior Survey is about to put a big reversal and think their souring balance sheet assets and lack of creditworthy borrowers is a overhyped story'
 
The CPI might actually be on the more positive side as the effects of yoy commodity minibubble comparisions are played out. So its possible it will turn up earlier as commodities stage run ups in 2010. The thing is, everybody knows the fed doesnt give a shit about commodities

Plus we seem to be on a micro bubble in commodities as the green shoot and V shaped bid are keeping them higher than they would otherwise be
 
Notice Greenspan hiked rates in 1994 with falling inflation. He wanted to get ahead of the curve and was playing a 'new strategy' with the FOMC of antecipatory hikes(Mentioned the 'relative tranquility of the situation' as a reason to play around). Well in 2004 it was just the opposite, he waited for the core CPI to go from 1.1% to 1.9% which took about 7-8 months in order to hike. The fed wont be playing video games with the printing press once inflation is close/below 1%
 
Quote from Daal:


As far as MTG goes, he might as well have named you any garbage stock and you would have made a ton anyway, they are all flying. I never researched MTG but I remember it being like MBIA, so chances are by the time UR reaches 10.5-11% it will be either be bankrupt or will dillute shareholders so I would caution you against proclaiming he is right(after all his V shaped recovery might be one of the reasons he recommended the stock)
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LOL. You seem to have an obsession w/being right over making money.

I would say when a stock goes up more than 5x in a 5 month period, it was a pretty good recommendation. Nobody said to buy MTG and put it away in a drawer for the grandkids - it was a trade made on the fact that markets were discounting an end to the financial world which wasn't going to happen. While you were loading up on XLF puts at Dow 7000, some of us were taking the other side of the trade - not because we are green shooters, but because we recognized that even in bear markets and shit economies, stocks can have massive rallies. IF MTG goes to 0 in a year, it will still have been a good recommendation. When I write a check for 4 years of my both of my kid's college tuition w/the money I made off MTG, it won't matter what the unemployment rate eventually went to.

Back to my original comment, which, in your defensiveness, you distorted beyond all meaning ... Gross is a big player in the market. There is no way he is ever going to show you all of his cards. He's bright and he's interesting, so read away. But remember, everything he says/writes needs to be taken w/a grain of salt.

Disclaimer: I currently have no position in MTG!
 
Quote from ralph00:

IF MTG goes to 0 in a year, it will still have been a good recommendation.
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What is Jim grant track record of picking market bottoms and short-term trading(Which is what you are congratulating him on)?One of the best market timers I know consistently got this bear market wrong because it would get FAR more oversold that what history suggested. So I bet if Grant had gave you a financial pick he liked back in Sep you would not be as happy, in a rising market any idiot can stock pick
 
Quote from ralph00:

You seem to have an obsession w/being right over making money.
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Thats because I dont always count on having monster high beta rallies to bail me out my longs in bankrupt companies

Look, check back in the journal I went long XLF one day before short sales were banned because the market was oversold.

I made 20% overnight, do I go around patting myself in the back?No, because I got LUCKY, I will likely NEVER see that action again in my life time. Same thing with 50% in 5 months and garbage stocks quadrupling. Even total idiots, knew the market was oversold back in feb/mar.
I went long SPY in late FEB. Got bearish as the market neared the 20% mark as it had never breaken that point, largest rally had lasted 2 months. Did Jim Grant predicted the largest rally in US stocks history?I bet he didnt, virtually no one did, what was the open interest of 900-1000 ES calls back on Mar for Jun/Ago expirations, the total count of people who predicted this can be counted in one hand probably
 
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