Month: September 2008

Market Update – The Day After

Just a quick follow up to yesterday’s events (blog here).

Today did see buying come in, but as shown on the Google chart above, and on the market stats links that follow, there was an intaday reversal.  Notice how GOOG peaked around $425 and closed around $400.  See the shape of that candle?  Gap up open, rally to new high, then close back down near the open?  That’s a warning.

Updated charts of the securities I showed yesterday are displayed below.

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Quick Market Update – 90% Downside

Just time for a quick follow up to yesterday’s posts (here and here).

Show are four 4-year charts, starting the the Cubes (NASDAQ 100 ETF), followed by three other bellwethers: Google, the iShares FTSE/Xinhua China 25 Index, and the VIX (CBOE Volatility Index).  See below for charts and commentary.

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Nouriel Roubini’s Latest – Must Read

(NOTE: There are many more NR articles on this blog, going back to 2006, just use the search box at the top of the right-hand sidebar (or click here).  Here’s one from January.  I have been writing about the coming crisis myself since 2004, when I sold my co-op in DC and started renting, and also started liquidating my other real estate investments.  The asset and credit bubbles were obvious to all who had their eyes open and thought for themselves.  Sadly, most people do not think for themselves, maybe that’s why we have the term sheeple.)

The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever

The next step of this panic could become the mother of all bank runs…

By Nouriel Roubini
2008-9-29

It is obvious that the current financial crisis is becoming more severe in spite of the Treasury rescue plan (or maybe because of it as this plan it totally flawed). The severe strains in financial markets (money markets, credit markets, stock markets, CDS and derivative markets) are becoming more severe rather than less severe in spite of the nuclear option (after the Fannie and Freddie $200 billion bazooka bailout failed to restore confidence) of a $700 billion package: interbank spreads are widening (TED spread, swap spreads, Libo-OIS spread) and are at level never seen before; credit spreads (such as junk bond yield spreads relative to Treasuries are widening to new peaks; short-term Treasury yields are going back to near zero levels as there is flight to safety; CDS spread for financial institutions are rising to extreme levels (Morgan Stanley ones at 1200 last week) as the ban on shorting of financial stock has moved the pressures on financial firms to the CDS market; and stock markets around the world have reacted very negatively to this rescue package (US market are down about 3% this morning at their opening).

Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown…

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Ask Yourself One Question: Who Benefits?

  1. Who benefits from a “failed” (delayed) bill?
  2. Who benefits from getting to buy assets at lower prices?

The answer is not “nobody.”

Maybe that sounds like conspiracy theory, but make a big change in any direction in (pretty much) anything and some people benefit and some people don’t.  It’s just the nature of big changes.  The inflating and deflating of a bubble is no exception.

So who benefits from this parade of falling dominos?  Who wins, who loses?  The answer is known the same way it (pretty much) always is: Follow the money (and power): Those with it, are going to gather more of it.  The rest of us… not so much!

Cheers,
Chris

PS: As readers of this blog know…

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USA Bailout: So, How Much Is $700+ Billion, Anyway? And What Would Sweden Do?

UPDATE #1: See the comments to this post for updated numbers and links.

UPDATE #2: See updates and articles on my 2009-2-12 blog post. Also see this New York Times graphic: The tab is now $8.8 trillion, equivalent to the second largest economy in the world, behind USA at $13+ trillion.

The chart above shows the world’s largest economies (measured by GDP), ranked by size.  Assuming the US bailout is only $700 billion, the bailout is larger than all the economies highlighted in yellow.

Note: The bailout is actually already well over $950 billion if you count $150 billion stimulus package (checks to individual tax payers this spring), Bear Stearns, FannieMae, FreddieMac, and AIG.  If you add in the cost to bail out insured bank depositors and all the others who are lining up, it’s going to be well over $1 trillion. But let’s just call it $700-$800 billion for now.  How much is that?

As shown on the chart above (Wikipedia page here), it’s about the size of the Dutch economy, the 15th largest economy in the world (it shows as #16 on the list because the list counts the EU as #1). That’s a lot of “coffee”!

Remember, GDP (the “economy”) is the total value of ALL goods and services produced by ALL people and entities in a country in a year. All that money, down the drain.  Well, not actually down the drain, but into the pockets of those who profited on the way up (privatize the profits) and will profit and/or not lose as much on the way down (socialize the losses).  Nice.  Ok, I better nip that rant in the bud ’cause I gotta hop in a minute.

Real quick, lets say the bailout cost climbs to $1 trillion, how much is that? Larger than Mexican, Australian, and South Korean economies, getting close to the size of Inda’s and not far from Rusia, Brazil, and Canada.

Yeah, it’s that big…

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Carsonified Golden Ticket (and point of life)

Just a quick post after reading Ryan Carson’s “Golden Ticket” tweet and blog post about how to win an all-expense paid trip to one of these Carsonified events:

See the blog for details on how to enter and qualify. And please leave a comment here on my blog, which is what I need to qualify. Thanks.

More importantly, and whether you leave a comment for me or not:

If you are also participating in the contest, let me know (comment below or email me at http://buzzpal.com/contact). I am happy to drop by your blog and leave a comment for you. In fact, I really, really want to!  Why?

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Quick Updates: Stock Market, London, BuzzPal, Nouriel Roubini

2008-9-24 UPDATE: See here for pics and a complete debrief of me week in London.

Some interesting events since my most recent post (“The End of an Era“) and market update, when I said “it’s time to allocate some [brain] CPU and bandwidth, primarily for the purpose of monitoring the sentiment as it works towards its next extreme (and reversal).”

This is exactly what happened.  Unfortunately (for my trading), BuzzPal and I were in London for Seedcamp week, where we went to events, held meetings, and co-sponsored the first-ever TechCrunch Tech Talk, which was a smashing success and a great party, including after hours with some people you might recognize (see pic, below).

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The End of an Era

Just a quick post to note today’s taxpayer bailout of Fannie Mae and Freddie Mac, which was inevitable given the system of corruption, which has been discussed on this blog since its inception over four years ago, such as in this April 2004 post, where I said:

What we have here is the greed-fed denial of a flawed system whereby real estate sales people, mortgage brokers, appraisers, Fannie Mae, Freddie Mac, and investment banks are driven to originate volume, earn their fees, and pass off the risk to others. It’s a great game in a booming market, but after markets boom there is another phase that ain’t so pretty.

One day this will unwind and besides creating some surprised and upside-down homeowners and burnt bond and asset-backed securities investors there could easily be enough carnage to carry beyond Capitol Hill and to U.S. taxpayers. Could even be enough to make the S&L crisis of the ‘80’s look like child’s play.

The man who said it best, and who thinks and articulates most clearly, is Nouriel Roubini:

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Second (and last) Batch of Gotland Pics

www.chrisco.us

www.chrisco.us

www.chrisco.us
That art is kinda creepy, huh?  All “Silence of the Lambs.”

You know, they do have a lot of lambs on Gotland.  And those lambs are pretty jumpy.  You’ll see what I mean in a minute when you get to my “field full of black sheep” pic and see how they’re looking at me.  Of course, that could have something to do with the fact that I basically threw down a hockey stop when I saw them and pulled off the road to take their picture (hey, I love black sheep, and this was the best field of them I saw the whole time).  They jumped to attention from lying down and saluted.  I don’t think they blinked until we were well out of sight.  Maybe they were wondering if I worked with their “giver of life and taker of life”, their god, the farmer, who will be coming for some of them soon. “It puts the lotion in the basket.” I know that quote applies to a different time and place in the movie, but we can mash things up like that here. Cheers!

PS: Speaking of lamb, that’s what you see us grilling (actually it was mutton).

UPDATE: Here is the first batch of Gotland pics.  Below are the rest of the ones from this batch.

YouTube Clip: Clarice/Lambs.

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Quick Market Update

Just time for a quick post.  It’s been almost a month since my previous market update, which was me cashing out after the July relief rally and before our August vacation to Gotland.  Didn’t miss much (a last market gasp, then a quick death).

After vacation, I was busy all August with:

  • BuzzPal-related stuff (good stuff!)
  • planning trip to London for Seedcamp week (my schedule so far)
  • working on a real estate deal (my lot is back on the market after the buyers had to exercise their contingency — glad I countered their original offer and made the earnest money non-refundable)
  • some other stuff

Plus we were in a trading “no man’s land,” and everybody knows (or should know) that there’s no point in going into a “no man’s land” unless you like getting your balls blown off by land mines.

But things are getting interesting again…

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First Batch of Gotland Pics

www.chrisco.us

www.chrisco.us

www.chrisco.us

Susanne, Birgitta, Roy, and I had a great week on the Swedish island of Gotland.  We were based in the medieval city of Visby, staying in an apartment owned by Roy’s cousin and his wonderful family.  From Visby, we traveled all around the island, including to the tiny island of Fårö, which is where Ingmar Bergman made a home until his death last year.  By coincidene, our visit overlapped with Gotland’s annual Medieval Week fastival, which was really neat.  Now on to the pics.  Note: All of these were taken with Susanne’s Canon Ixus.  I’ll post the pics from our Canon Xti (400D) soon.

UPDATE: Here is the second batch of Gotland pics. Below are the rest of the ones from this batch.

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