The Credit Crisis Financial Stocks Short Journal

[Daal]

Quote from Daal:

The Senior Loan Survey is showing less banks are tightening credit but you ought know how to read this survey, thats additional tightening on top of the tight credit from the last survery so there is a second derivative here but not much else

Rosenberg claimed the survey was showing loosening of standards today in his letter. I shot him an email saying me might be incorrect since when the survey is above 0 its supposed to be net tightening and below net loosening, he said 'I see your point', we will see if he issues a correction tomorrow. But if the guy is bearish thinking banks are loosening imagine when he realizes that liquidity is still being sucked at a (un)healthy pace
http://www.foxbusiness.com/story/markets/economy/fed-loan-survey-isnt-positive-reported/

 

[Daal]

The consumer confidence report drove everything higher, interesting, the expectations index is up because the stock market is up a lot, so the stock market is using itself as a reason to rise, yet one more case where the green shoot is the green shoot theory itself.
http://1.bp.blogspot.com/_8rpY5fQK-UQ/Shxv1VF9-lI/AAAAAAAAG1c/xaBZmQbTOm4/s1600-h/cc.png

 

[Daal]

This 10y and 30y plunge and now the mortgage rate rise sets off a big problem for the fed, it could be counterproductive to do an emergency meeting since some of the sell off reflects concerns about the exit strategy and doubling down could spook the market, increasing purchases could actually lead to a sell off

At the same time their efforts to prop up housing and bank earnings fail with mortgage rates rising, they are in a tough spot

How this plays out?Hard to say, it looks like equities are topping out here, as they sell off, treasuries will get bid and people will forget this concern. It seems to me that its a little too early to be concerned about inflation and an lack of demand for risk free assets when US housing is still collapsing at a 20%+ annual rate and unemployment is rising sharply

 

[Daal]

Some implications for the rise in mortgage rates

http://www.fieldcheckgroup.com/2009/05/28/5-28-potential-consequences-of-55-mortgage-rates/

If this doesnt reverse it will be specially bad for BAC and WFC

 

[ralph00]

Yes, mortgage refinancings will slow, but they will make up for it in other ways - a steeper yield curve means larger profit margins.

LOL at everyone running around claiming that 3.70% is a disasterous yield on the 10 year. Have a little perspective please.

 

[Daal]

Quote from ralph00:

Y but they will make up for it in other ways - a steeper yield curve means larger profit margins.

How they will make up for the $172b net loss estimated for the 19 banks if the stress test scenario plays out?$534b($599b in losses minus purchase accouting adjustments)of losses against $363b in pre provision net revenue(which is a estimate created by the banks on how much they will make from the yield curve, trading and everything)

This an elephant in the room that no one is talking about, virtually all banks will have no earnings till 2011 maybe not even then, analyst estimates are nowhere near that(whitney maybe being the exception), and this is not 'priced in', people pay attention to analyst estimates, specially in financials where no one has a clue on how much they will earn

To be long garbage stocks is to think the stress test criteria was too tough

 

[ralph00]

I agree w/you on almost everything. Its important not to be too dogmatic about this stuff when trading though.

Rosie, Whitney, Roubini (all of whom I respect), can continue to pound the table for more pain while financials triple in value in the course of 8 weeks and bond yields go from 2.50 to 3.70. They'll still have a job doing whatever it is that they do. For those of us trying to make money in the markets, at best, we will have missed a massive money-making opportunity, and, at worst, we will have gotten wiped out.

 

[Cdntrader]

KEY is hitting new lows trying to raise their stress test cap.

http://stockcharts.com/charts/gallery.html?key

one to watch.

 

[Daal]

Quote from ralph00:

I agree w/you on almost everything. Its important not to be too dogmatic about this stuff when trading though.

Rosie, Whitney, Roubini (all of whom I respect), can continue to pound the table for more pain while financials triple in value in the course of 8 weeks and bond yields go from 2.50 to 3.70. They'll still have a job doing whatever it is that they do. For those of us trying to make money in the markets, at best, we will have missed a massive money-making opportunity, and, at worst, we will have gotten wiped out.

I have no problem with a short term bullish case based on momentum. I do have a problem with dennis gartman type of macro analysis, he gives out his opinion knowing full well that he is full of it and is just trying to reinforce his confidence in his portfolio and let his profits run as soon as markets tank he dumps that opinion.

The only bulls that I'm willing to listen to are the ones making a macro argument for a better economy and is WILLING TO LAY ODDS with his OWN money for that scenario(by selling OTM calls)

Momentum traders with trailling stops and reentry strategies certainly dont qualify and it looks to me the market has turned into a reflexive momentum casino

 

[Daal]

The ISM report was taken as a positive due the new orders being in the positive territory. This easly could be premature, the regional manufacturing reports show that they are slashing prices like there is no tomorrow, of course they will sell more, what else people expect

This national report doesnt show prices received only prices paid, prices paid has a big second derivative move, I bet it was larger than the prices received(because that is the case in the regionals report), so margins got squeezed and earnings hit, if this his happening with AAPL I bet the stock market won't be so happy if they said "we missed but we sold more ipods after cutting the price"