Rhody Trader

For those who might be thinking that without the shorting stocks are going to be less open to major rapid declines, I present today’s chart for National City (NCC). Rumors that the FDIC was going to seize the bank knocked it down about 50% today, and of course NCC is on the no-short list, so it can’t have been short sellers in the stock doing the damage.

It’s going to be interesting to see what the after the fact research by the academic sorts has to say about the impact of the no-short rule in regards to volume and volatility.

Here goes:

Apparently US consumers have built up about $850 bln in credit card balances. Why not just have the federal government pay that all off? It’s a bit pricier than the Paulson plan, but think of the benefits!

• We immediately improve the financial standing of the majority of adults in this country.
• The financial system is massively liquified, easing the current crisis.
• There would be tens of billions in savings on interest charges.
• Consumers will have a clean slate to start consuming again.

OK. Clearly this plan has some moral hazard and other fiscal issues. It would be enormously popular, though.

I’ve been reading Mark Zandi’s new book, Financial Shock A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis. This is one I received for free as part of the Amazon Vine program (free stuff as long as I write reviews of them). It attracted me as a potentially worthwhile resource for folks who want to learn about the background of the current market crisis. There’s the obvious issue with the book coming out now when the whole situation still hasn’t been resolved, but other than that I’m seeing some pretty good stuff. When I’m done I’ll post a full review.

I’ve tentatively been put on the schedule for the Traders Expo. Things will get firmed up later, but the plan is for me to present at the one in Los Angeles in June. There are ones before that, but they weren’t ones I could commit to at this stage because of other potential schedule conflcts.

This should be interesting, though. I’ve spoken to plenty of student and other groups before, but this will be my first Expo experience.

If you’ve ever been to one of them, let me know what you think.

I came across this awesome looking computer workstation in a recent post on ProBlogger.

This is about the coolest set-up I’ve ever seen. I’ve been lobbying at work to get them for everyone. Everyone loves it, but I’m not holding my breath, though.

I tried doing a search for this set up. While I did find some workstations based on a similar general concept, I couldn’t find this specific model.

Anyone ever seen it anywhere?

I’m sure it’s not cheap, but it looks ever so comfortable. Might need a few additions, like a beverage holder. Wouldn’t hurt to have some pedals built into the footrest to allow for a little aerobic workout while you’re surfing the web or blogging.

A guy can dream, right?

The Financials are down like 8%. Those darn shorts must be back in there driving prices lower.

Oh, wait. There are no shorts.

Doh!

The other day it was suggested to me that I check out Zeitgeist - The Movie. I was told it’s a real mind trip. Haven’t had the chance to watch it yet, but I’m looking forward to making the time (2 hours). The trailer is interesting. If you follow the link you can watch the trailer (first video) and the movie (second) right from that page.

Have you watched it already? What did you think?

I don’t know how this bailout, RTC type mortgage bailout plan is going to be structured, but I had a thought this morning on my way into work.

My big concern, as so many others are expressing, has been that if the Treasury is going to put $500 bln into the market then we’re talking about a lot more government debt and money sloshing around. That means more stress on the taxpayer and the gov’t budgetary structure, and inflationary implication due to larger money supply. That would mean higher interest rates and obviously higher costs of consumer goods.

Ironically, this plan has the potential to really push mortgage rates higher.

Oh, and we’re still going to have tighter lending standards because we still have bankers who have been burned.

Here’s the thought I had about how at least some of this stuff could be avoided. Rather than the Treasury, through whatever instrument/vehicle, buying mortgage securities we go a different route. We create a trust (or whatever you want to call it) into which all the mortgage instruments go, and that the banks who put the securities in are given shares based on the value of those securities. The final result is the banks all own the trust.  They have the mortgages off their books, and it’s replaced with the shares in the trust – which I suggest should be publicly tradable so the banks can sell them to raise cash if needed. The value of those shares would be based on the principle value of the mortgages, so they would be repaid based on the return of that principle. The government, in turn, gets all the interest payments as it’s part for setting the thing up and running it.

The question which is left, of course, is valuing those securities and how to allocate shares. The valuation question is going to be an issue regardless, so no matter when the Treasury buys them on my idea of share allocation is employed (or some other), the valuation thing will have to be sorted out.

The point of my plan, however, is that if we go this route we can avoid the Treasury having to issue hundreds of billions in new debt, and moreover being in a position to earn income from the deal to help offset potential losses from the Fannie/Freddie takeover or whatever.

Thoughts?

The other day I posted a screen shot of what was happening in Treasury yields. They were falling rapidly. Now things are going the other way even faster.

These moves are some of the largest I’ve ever seen, even going back to the days when I was a fixed income analyst. To give you an idea of what these moves mean, a 4 point move in the Treasury Bond futures contract is worth $4000.  The Eurodollar contracts are up 30+ ticks. That’s a move of more than $750 on a contract, on what is the most actively traded futures contract (1 million plus volume per day).

Following up from my post yesterday (The Fed AIG loan and takeover – they’re getting it wrong!), here’s another example of people who should know better getting it totally wrong.

“Once again the Fed has put the taxpayers on the hook for billions of dollars to bail out an institution that put greed ahead of responsibility and used their good name to take risky bets that did not pay off,” said Sen. Jim Bunning, R-Kentucky, a member of the Senate Banking Committee. (from CNN).

Come on! A member of the Banking Committee can’t get it right? Obviously, this is political, but it’s also misleading the public.

And here’s an example of the media seemingly taking a nothing statement and drawing a conclusion I just can’t see in regards to a question John McCain was asked about how relations would be with Spanish president Zapatero under his administration (they are strained now):

During an interview in Miami earlier this week with Spanish-language station Union Radio, a reporter asked McCain whether, if elected, he would receive Zapatero in the White House. McCain answered, “Honestly, I have to analyze our relationships, situations, and priorities, but I can assure you that I will establish closer relationships with our friends, and I will stand up to those who want to harm the United States.”  (from Time)

The article author went on to say “Ouch”, obviously reading into McCain’s statement that he would not receive Zapatero. Where does that interpretation comes from? I read McCain’s response as a typically non-committal response of the sort you always hear from candidates.