Tuesday, March 18, 2008

The Sun Came Out

Yes, the world did not end yesterday and the sun came out. I actually experienced a sunny day yesterday here at the bunker, the first in many weeks. So Mrs. B and I took the dogs for a four mile walk.

While away, the forces of light turned back the forces of darkness in the markets, which closed flat to down a bit. The worst did not happen as the design and powers of the Fed were used effectively by Battleship Ben with an assist from Hank Paulson in hammering out a takeover of BSC by JPM. JPM rose 10%.

Today the Fed meets again and a substantial interest rate reduction is expected. I reiterate that over time, these rates cuts mean substantial savings for consumers and banks. The consumers save money on floating rate mortgages and on home equity loans. Small business and small company loans linked to the Prime Rate save money. Commercial banks, particularly those with consumer deposits, will have larger profits as their net interest income grows.

Now that the liquidity issues of investment banks are settled, the fear mongers point to credit derivative books.

Now a "derivative" is not the same as a loan or even a CDO. Loans are not zero sum games, but for every "long" derivative there is a "short". So those pointing to large derivative books as certainly having large losses simply don't understand the nature of the beast. Properly managed, an investment bank or a commercial bank "should" be running a "flat" book of derivatives, making money on a small spread of offsetting risks. Now the monoline insurers or some hedge funds by nature run a directional book, meaning they have one-sided derivative positions not offset by others. We've been through the monoline risks. The hedge fund (beefers = big, evil funds") might have big losses, but who cares ?

So unless an investment bank or a commercial bank was "stupid", they should not have large net losses on credit or similar derivatives. I suppose the fear arises that they are or were stupid. Maybe. I guess we'll see this week if some investment banks were "stupid".

So what else will the fear mongers bring up to fan fears ?

For now, market action seems to point to real buyers picking up cheap stocks slowly. We know of some big names doing this. GE stock chart sure looks better as it closed over its 50 day moving average .

Today I sell move gold & silver. The money will go to buy stocks as I see good buys.

Words of the Day

"Milieu" - noun [$10]
Milieu means environment, setting
Sentence: This seemingly endless bearish milieu for the stock markets might soon change as the Fed policies take root and produce results.

"Ennui" - noun [$10]
Ennui means a feeling of weariness and dissatisfaction
Sentence: Bunkerman's ennui is growing at the endless fearmongering on Babblevision; he turns off that channel and Blabberg, too, more and more every day.

"Manichaean" - noun and adjective [$10]
Manichaean means (noun) 1. an adherent of a religious system of 3rd - 5th century representing Satan in a state of everlasting conflict with God; 2. a dualist; (adjective) of or relating to the foregoing.
Sentence: The excessive monies in trading oriented hedge funds makes the markets appear more and more like a manichaean, commodity-like system rather than an investment, asset based system.

23 comments:

Bunkerman said...

core yoy PPI 2.4% no big deal.

Bunkerman said...

GS good earnings ... I guess they must be the devil making $$$ in armageddon.

LEH ditto.

Bunkerman said...

I guess I'm a market manichaean ... beefers vs. the investor ;-)

mfl59 said...

this guy Joseph Granville is a nut..."I am the only one who shorted a subprime stock at the exact top"...."I am the only one who called the exact top of the Dow on 10/7"....grow up, sir...

Bunkerman said...

He's a showman from decades ago. A BS artist.

mfl59 said...

Bunkerman what are you looking for from your boy Ben today?

Bunkerman said...

I'd like either 100 bps or 50 bps + signal to buy FNMA, etc outright.

Bunkerman said...

Just got back from my last gold+silver sale.

Going to sheep herding in 10 minutes. Then back at about 3:30.

:-)

Bud said...

'BS artist'

huh????

if anyone disagrees with the Bman he always resorts to name calling.........granville nailed the subprime stocks last summer......who cares what he did 'a decade ago'

there is a writer here who has been bullish on the financials as they have been chopped in half..........is he also a 'BS artist'????

Bud said...

hamilton vs burr indeed

pistols or kinves????


lmaoooooooooooooooooooooo

Bud said...

did they reinstate the uptick rule???

mfl59 said...

If Ben goes 100bp does he have any bullets left? noone knows if there are more shoes to drop....

he's going 50bp....and beefers will absolutely hammer gold and silver....

Bud said...

50 bps.........market tanks and then rallies hard rest of week into next

and huge dollar rally


i think he shud do 50............but it looks like 100bps comin

mfl59 said...

Bud you are bullish sir?

Bud said...

lmaooooooooooooo


that sounds like a setup


PS..........where is the Bman? i wanna ask him if this is 1920s type manipulation??

mfl59 said...

lmaoooooooooo....well played sir

Frosty said...

Fed forth and goal failure the norm...poor play calling, trick plays and razzle dazzle in the red zone...run the good old fashion sneak, 100 bps and level the discount window...bears might otherwise have a full feild drive in them.

mfl59 said...

lmaooooooo...are you telling Ben its not the time for the fumblerooski?

mfl59 said...

the head of the FDIC called Ben a hero....lmaoooooooooooooooooooooooo

mern said...

NEW YORK (CNNMoney.com) -- Americans are worried about the economy, and inflation tops their list of concerns.

Ninety-one percent of respondents to a recent poll said they are somewhat or very concerned about the rising rate of inflation, according to a national CNN/Opinion Research Corp. poll released Tuesday. And 86% said they are worried about jobs.

is that stagflation?

Bunkerman said...

Back ... hmmm my absence from my office worked again :-)

Bunkerman said...

hmmm I wonder if my last big gold+silver sale at about 11AM got the top ?

Frosty said...

paint brushes at the ready boys...I have a roller in one hand and an airless spray gun in the other...just doing my part to save wall street jobs, commen men all.