The Credit Crisis Financial Stocks Short Journal

David Rosenberg seems now to be reversing his call for the Bank of Canada to keep rates low for all 2010 and some of 2011

He cites some facts but after that sounded like he was giving up on his dovishness
"Never before has the Bank of Canada successfully embarked on a tightening course in advance of the U.S. Federal Reserve, with the level of nominal and real GDP below its pre-recession peak, and with the unemployment rate so close to the recession high. Then again, the policy hawks would undoubtedly retort that the Bank has never began a rate-hiking cycle with the level of the policy rate at an emergency 0.25% levels. Fair point."

This might be a risk in the US too, however as of Mar 03 2010 it seems a big consensus that the fed needs to stay low for an extended period, and that includes hawks like Richard Fisher, Bullard. So the lesson I take here is that I'm not willing to go for 2011 GEs until I get more clarity on the likelyhood the Fed might get out of emergency level rates but not to start a tightening campaign(a resonable decision AFTER they remove the extended statement, lunatics like Greenlaw thinks they can do it before)

Its important to remember that GE has actually an implicit bet on the OIS for 3 months after the expiration of the contract. The 2010 Dec GE is affected by policy expectations for Jan-Mar 2011. But I was careful in my choice and the GE Dec 2010 only has 1 FOMC meeting after the expiration
 
But lets face it, Canada did not had a banking crisis, they are not in a credit crunch. They are also a net exporter of commodities
 
As of Feb 22, US is still in a credit crunch

"Banking and Finance
Loan demand remained weak across the country. New York, Cleveland, and Kansas City reported decreased demand for most types of loans. Other Districts said loan demand was unchanged but soft. Richmond and Chicago noted that the weak economic outlook was holding back loan demand, and San Francisco said caution about hiring and spending plans was keeping businesses from seeking credit. However, Philadelphia and Richmond reported banks were receiving more inquiries from businesses about loans, and Dallas said contacts were hopeful that loan demand would pick up by the end of the year.

Most Districts indicated that banks remained cautious about lending. New York, St. Louis, and Kansas City reported somewhat tighter credit standards on commercial real estate loans, and New York noted tighter standards for commercial and industrial loans. In other Districts, credit standards were little changed but remained tight. Atlanta reported that banks had ample liquidity but were reluctant to reduce cash reserves. Chicago said a leveling in asset quality was causing large banks to become more interested in lending to prime borrowers, but strained balance sheets were holding back lending by mid-size banks. In the Dallas District, smaller banks reported that regulatory requirements were limiting their ability to expand real estate lending. Loan quality remained a concern but showed signs of stabilizing in some Districts. New York, Dallas, and San Francisco cited further declines in loan quality. In addition, banks in the Philadelphia and Kansas City Districts were reported to be slightly less pessimistic about future loan quality than in the previous survey."

This makes it likely the next Fed Senior Loan Survey will come in flatish with no significant change(although slighly better). In the last credit crunch it took the Fed 1-2 years after standards started to being eased for the Fed to put the first hike in policy rates
 
Quote from Daal:

The buyback is probably gone forever, that was one of the reasons that stock was holding up. If their marketing gets shutdown by the government they probably wont be able to enroll much in new people, it will also hurt their ability to sell their services(the revenue is probably headed lower for a long-time, although I dont know about the short-term). If the management were smart they would file chapter 7 and give the proceeds to shareholders but they will probably try to 'turnaround', this means this stock is headed to $0.

I could be wrong about the government being tough on them however, but I think thats likely
More...

Reggie's latest on PPD:

http://boombustblog.com/20100303133...-Story-of-a-Publicly-Traded-Ponzi-Scheme.html
 
I can't envision a scenario where eruodollars don't get hit pretty badly today ...

1. They've had a big run up in 2010, much of it coming in the face of a big move up in stocks - these things can't go up together for very long

2. All this talk about the snowstorms making a bad NFP number likely means that stocks should rally and bonds sell off on a bad number since its already been baked in and "its the snow's fault"

3. Possibly, all this talk about snow making a bad NFP number is just talk. The number comes in just fine and stocks rally and bonds get hammered because the job market is improving "even w/the snow".

4. Despite protestations to the contrary from some FOMC members, I still feel like the hawks have seized a bit of control over the debate about when to hike. Unless there is a serious deterioration in stocks or the economy or both, I think a hike is coming by late summer. At the moment, it appears that there isn't a force in the universe strong enough to make stocks go down in a significant manner. As for the economy, it will trudge along. The headline UE rate no longer bears any resemblance to reality, so I see no reason why the statisticians at BLS can't throw out an 8 handle sometime this summer.
 
Well, I just sold all my Jul ZQ 2010. EFF drifting up, 15 bps in yesterday's release and 16 bps today. I read in the macro man blog that there are some rumours the GSE will get kicked out of the fed funds market, this would make ZQ quite expensive at these levels as the EFF might drift back to 20-25bps. I will wait and see. Libor might get hit by that too
 
Trying to time market during NFP is like playing roulette blindfolded. Yes GE could do down, it could also go up, I dont have a clue what the number is nor how the market will react. I do know that my math says those 99 calls will be worth 70bps at expiration(now taking into account a 5bps addition to the EFF), almost 100% upside from here. I can stomatch some volatility in order to double my capital in 9 months but I will keep an eye in the libor-OIS to see if it stays stable, if it doesnt then I will consider exiting
 
I won't be trading GE today, I'm just saying what I think will happen. Also, the GE options have gotten destroyed over the past couple of days even though the underlying has just ticked down a few points.
 
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