Thursday, September 18, 2008

Having No Trade IS a Trade! IFCN Wk 41 – Thu- Equity: $1,288.56

I find it amazing, and not at all comforting.

The ease with which the policy makers throw the “B” word around.

Billion dollar buyouts are glibly bandied about on the hour.

The Treasury has promised to buy up to $200 billion of Fannie and Freddie stock to keep those institutions alive. The Fed agreed to an $85 billion bridge loan to AIG, this week on Tuesday. The Treasury plans to buy $5 billion of mortgage-backed debt this month.

To get a handle on what a billion is----

A tightly-packed stack of new $1,000 bills totaling $1 billion would be 63 miles high. In comparison, jet planes fly at 30,000 - 40,000 feet (5.7 - 7.7 miles high).

A billion inches is 15,783 miles, more than halfway around the earth (circumference).

Back to the mess----

The 5 major troubled firms dealt with this week, alone, appear to have had more than $500 billion of what are termed “Level 3” assets as of the end of June 30. These assets owners say the values of these assets can only be determined through theoretical financial models because of illiquidity.

Sounds like Long Term Capital Management fiasco Number Two on top of the mortgage crisis.

What I believe will happen is the creation of a new version of Resolution Trust Corp., which was the 1990s fund to manage devalued assets from the late 1980's Savings and Loan Crisis.

On a different note, with the volatility and reverse moves experienced this week in the currencies, it will be virtually impossible for us to get any OneNightStand trades. I will put in the orders as usual, but with the extreme volatility I wouldn't blame anyone for not taking any trades until next week. The markets aren't shutting down anytime soon, and extreme volatility is usually worse than no volatility at all.

Counter-parties to all of the markets are running around like their hair is on fire.

Taking no trade is also a trade. Sometimes, the very best kind.

Have a good morning.

Current equity is 1,288.56.

Joel Rensink

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1 comment:

Anonymous said...

And to top it off, there's now another ban on short-selling financial companies. Only this time it's 799 stocks, not 19 or 20 like last time. And Hillary "I Only Short Cattle" Clinton is one of the instigators.

While gold and silver initially sold off, they're holding up pretty well this morning. I was hoping for a slightly larger drop to buy more. Maybe enough traders understand the implications of all this money-printing nonsense.

Personally, I may be looking to short stocks in a few more days--especially if the Dow or S&P hit a major resistance level. Markets should still be more powerful than all this manipulation in the long run.