Trading was suspended in London this week for some vehicles issued by ETF Securities, because the funds relied on counterparty arrangements with AIG (Reuters). The dirty little open secret of levered and short ETFs, and many others, is that they rely on swaps to get that near-perfect tracking of their underlying indexes.
“LONDON, Sept 16 (Reuters) [...]
Is this a bear market? Are we in a recession? Let’s assume everyone can finally agree on those points. In that case, nobody should be looking for a bottom for at least another two years.
This is not 1987, nor 1998, nor 2004. Those short-term corrections did not entail full-blown global recessions and debt liquidations. They [...]
According to The New York Times Dealbook blog, the word is that nobody wanted the entirety of this gangrenous carcass without a complete Federal Reserve guarantee a la Bear Stearns, so the healthy parts are being carved off, while the Fed graciously trades some of its remaining assets for the fetid pieces:
Lehman Brothers will file [...]
Jim Bunning, a Repuplican from Kentucky on the banking committee, has been sounding like Ron Paul lately. Bloomberg has the interview:
“I sincerely believe that Henry Paulson and Ben Bernanke should resign,” said Bunning, a Republican from Kentucky on the Senate Banking Committee. “They have taken the free market out of the free market.”
“We no longer [...]
The Cover Story
It has become commonplace to lay blame for the greatest of asset bubbles on the inflationary policies of Sir Allen Greenspan and his employer. A typical critique goes something like this: For the last 20 years, every time the market started to liquidate bad debts and malinvestments (the junk bond bust, the [...]
S&P 500 in red, iShares Lehman 20+ year Treasury bond (TLT) in blue:
Source: Yahoo! Finance
Let’s look at the longer term view. It is remarkable how strong the old inverse relationship remains. Lower yields are NOT, repeat, NOT bullish for stocks! They are extremely bearish right now:
Source: Yahoo! Finance
The only explanation for this behavior that makes [...]
“if we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury…” Bill Gross, September Investment Outlook
This guy continues to disgust me. If Americans before him had held the notions about markets that he does, there would be [...]
Also, LEH is has agreed to sell all of its level III assets to the Tooth Fairy, but is providing 90% non-recourse financing:
If Tinkerbell defaults, Lehman’s successor entity will stick its hand down the crocodile’s throat and attempt to get it to regurgitate. The firm’s historical value-at-risk analysis shows that sticking your hand down a [...]
Bloomberg today has an interview of the Austrian-minded founder and manager of the Prudent Bear Funds.
Some take-aways:
Policy makers and central bankers are to blame for blowing this bubble.
“Institutions and foreigners no longer trust our structures, our insurance, our ratings, etc., therefore we’re in big trouble.”
“Over 18 months, this market will be down 50, 60, 70 [...]
Take a minute to chew on this interview of Jim Rogers by Keith Fitz-Gerald at Seeking Alpha:
(Rogers) “If you look back at previous countries that have declined, you almost always see exchange controls – all sorts of controls – before failure. America is already doing some of that. America, for example, wouldn’t let the [...]