Matter of fact if you think about it default(as far as mortgages go) actually puts more pressure on M2(in the short-run) than paying the debt. That is because paying it monthly gradually decreases M2 and raises bank reserves while in a default, that total decline in M2 will be less(perhaps half, in a 50% recovery) but it will be lumped in the short-term therefore put more pressure on the central bank to do something to counter that
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The Credit Crisis Financial Stocks Short Journal
- Thread starter Daal
- Start date
This is an important point because if there is indeed a large stock of homes that need to be foreclosed then there is a large decline in M2 that has not happened. When that happens the Fed will be forced into more asset buying and likely not move the Fed funds rate
I need to find some figures on how many additional foreclosures are likely and the avg price of the homes to make some kind of calculation on the plunge in M2 that will result from that
I need to find some figures on how many additional foreclosures are likely and the avg price of the homes to make some kind of calculation on the plunge in M2 that will result from that
Those original GE Dec10 99 calls look like they're going to go off the board pretty darn close to 0.75. I no longer own any of the Dec10 calls, as I swapped those out for the further out months long ago, but this trade has been the gift that keeps on giving.
Turns out that the brief little panic over LIBOR blowing out in the spring was a great buying opportunity - maybe the last we ever get in this trade as the interest rate curve has settled into 'zero rates forever' mode.
I haven't checked, but you'd probably have to go out to 2013 to find the GE 99 calls for sale in the low teens.
Turns out that the brief little panic over LIBOR blowing out in the spring was a great buying opportunity - maybe the last we ever get in this trade as the interest rate curve has settled into 'zero rates forever' mode.
I haven't checked, but you'd probably have to go out to 2013 to find the GE 99 calls for sale in the low teens.
I'd say the best point to buy was in Jan 2010 after the Dec 2009 front end plunge. During the EU crisis there was a real chance libor wouldn't come back or would keep going up. In fact I'm still staying away from them because the world might look very different if a couple sovereigns go down and the I believe they will
Yeah, that was an outstanding time to buy. I clearly remember the last 2 weeks of 2009. There was zero volume in the markets and stocks went up every single day and the front end (prices) ticked down every single day. By Dec 31st, the GE calls had dropped to very low prices for no reason at all. I bought a few more on the first trading day of the new year, but not enough. They took off in January, and except for the brief LIBOR blip, have never looked back.
I maintain that there will never again be such a great buying opportunity in these contracts.
I maintain that there will never again be such a great buying opportunity in these contracts.
I have been impressed by the quality of this blog lately
http://www.themoneyillusion.com/
The guy who writes is quite knowledgeable when it comes to Fed policy. Just ignore the political bickering he does every once and a while
http://www.themoneyillusion.com/
The guy who writes is quite knowledgeable when it comes to Fed policy. Just ignore the political bickering he does every once and a while
Statement was more dovish than expected. Essentially they are saying inflation is too low, which is leading people into the QE trade like mad. I wont be buying the contracts at this point. 20bps of upside seems a little too low
But on the other hand the Hussman research indicates economic deterioration should intensify around mid October, so its a tough situation to be in
But on the other hand the Hussman research indicates economic deterioration should intensify around mid October, so its a tough situation to be in
Inflation barely changed from the previous meeting(core CPI at 0.9%). the alternative measures from the Cleveland Fed barely changed, the Core PCE last figure is from July. They must be looking at inflation expectations instead of the figures. Which brings up a point I made a while ago, expectations are not well anchored, they are bouncing around like crazy during this crisis
They were one of the key reasons why didnt do QE before but now it looks like they go no choice
They were one of the key reasons why didnt do QE before but now it looks like they go no choice
It seems that every asset on the planet is screaming upward in price (at least if you price it in USD). Reminds me of the action in the late winter early Spring before all hell broke loose. Something has to give. Before or after the election is the question.
I bought some Dec VXX calls today and some Dec AUD puts today. Both well out of the money, both being given away. I stand to lose a few basis points if current trends continue. If something like what happened this spring occurs again, I could make 5, 10, 20, 40 times my money.
Some nice charts here ...
http://ibankcoin.com/flyblog/2010/09/21/treason-at-the-federal-reserve/
I bought some Dec VXX calls today and some Dec AUD puts today. Both well out of the money, both being given away. I stand to lose a few basis points if current trends continue. If something like what happened this spring occurs again, I could make 5, 10, 20, 40 times my money.
Some nice charts here ...
http://ibankcoin.com/flyblog/2010/09/21/treason-at-the-federal-reserve/