The Credit Crisis Financial Stocks Short Journal

[Daal]

Bunning questions to bernanke
http://bunning.senate.gov/public/in...Store_id=3b088771-e7e3-4ade-94a8-bbe9d75cfe15

A few insights on fed policy(in particular that they dont care about gold). There is also this
62." According to the transcript of the June 24-25 FOMC meeting you said “Ambiguity has
its uses but mostly in noncooperative games like poker. Monetary policy is a cooperative
game. The whole point is to get financial markets on our side and for them to do some of
our work for us. In an environment of low inflation and low interest rates, we need to seek
ever greater clarity of communication to the markets and to the public.”"

Following this principle and Bernanke's speech last week, the statement today should be dovish in order to align the front end with what the Fed is forecasting

 

[Daal]

Quote from Martinghoul:

On the margin, as I have mentioned, I agree with your fundamental view, although I think it's a very very crowded trade, which is why I ain't in it...

However, I really have begun finding Rosenberg really annoying of late. I think he's very biased and can't admit when he's wrong. I find his view of the world unrealistic and too bearish. He truly sounds like a broken record and it's really grating. Just my opinion...

Frankly I'm not sure I understand the concept of crowded trade very well. What is a crowded trade and how does one measure it?The thing is the fed has already signaled 'extended period', yet the market is pricing in an almost certain hike by Jul 2010, I believe that is mispriced, so whoever is crowing this trade is not doing it right

Historically the IR markets have understimated the extend of which the fed eases and how long they stay there, running the numbers shows they are doing that again, so I'm not too worried about being in a non-contrarian trade

 

[ralph00]

A possible crowded trade might be puts on eurodollar futures.

The GE Dec 10 98 put sells for .275.

For this put to be profitable would require about 100 basis points of tightening more than is currently priced in - about 175 basis points of tightening in total between now and 12 months from now.

If one was interested in buying eurodollar futures, it would probably be a better play to wrtie this put rather than buying the future.

 

[Daal]

Quote from ralph00:

A possible crowded trade might be puts on eurodollar futures.

The GE Dec 10 98 put sells for .275.

For this put to be profitable would require about 100 basis points of tightening more than is currently priced in - about 175 basis points of tightening in total between now and 12 months from now.

If one was interested in buying eurodollar futures, it would probably be a better play to wrtie this put rather than buying the future.

The problem is the risk of an unstable libor if/when banks/housing go into problems again. This seems to be less of an issue now that banks are paying back TARP(I believe the money can be re-used by Geithner) and TARP has been extended to Oct 2010 but its still a risk.

I only short options when I'm sure beyond the shadow of doubt that I'm right, heck even then I'm paranoid and monitoring constantly.
The fed futures position already resembles shorting options to some extent, and I'm far more certain about no hike till Jul than I am about no hikes till dec plus no libor blowout

 

[ralph00]

Good interview w/Jim Chanos. The man who correctly could find nothing to short in Feb/Mar of this year is finding plenty to short right now - mainly Ford, Fiat, and anybody that supplies raw materials to China.

He calls China "Dubai times 1000, or worse".

http://www.marketfolly.com/2009/12/hedge-fund-manager-jim-chanos-shorting.html

 

[ralph00]

Norway hikes rates

http://www.marketwatch.com/story/norway-unexpectedly-hikes-rates-to-175-2009-12-16

Czech''s cut rates

http://www.marketwatch.com/story/czech-central-bank-cuts-interest-rates-to-1-2009-12-16

 

[Daal]

Other CPIs(that historically were better predictors of inflation trends) show that inflation is quite under control

 

[Daal]

Unanimous vote including folks like
Charles L. Evans; Jeffrey M. Lacker; Dennis P. Lockhart; Kevin M. Warsh;
signing for 'extended period'

 

[Daal]

Here's a contrarian indicator
http://www.nytimes.com/2009/12/17/business/global/17citi.html?_r=1&hp

Citi manages to pull the largest equity offering in US history. Thats when you know people have been a little irrational exuberant

 

[Daal]

The fact that the Fed is shutting down lots of liquidity facilities in Feb 2010 is hawkish. But it cant be much of a surprise, their usage was just going down and down. However the Term Asset-Backed Securities Loan Facility for CRE loans will be used up to Jun 2010 and for all loans will be used up to Mar 2010, so they will be under 'unusual and exigent' authority for a quite a while

It seems insane to me to think they can hike while using the special authority congress granted them, it would like asking for even more trouble that they already have. Congress could go mental