Friday, May 8, 2009

Stress Tests

The point of these stress tests seems to have been to put the government's imprimateur on the financial strength of major US banks to enable them to raise DEBT in the public market without government backing. Theoretically, doing stress tests AFTER a major recession has hit is rather dumb. After all, reserves are designed to be used in recessions, not created. In recessions one wants banks to have already been strong enough to survive and lend. For example, even a AAA entity will certainly look worse financially in a severe economic trough than it did before the downturn.

But Timmy and presumably Ben wanted to reassure lenders TO BANKS [sic] that the banks are strong and even in a further leg down can survive. This is because they want to extract the government from the position of guaranteeing bank debt, money markets, and on and on. This makes sense, but of course we all know now that prior accounting rules, regulations and capital rules did not look to the future, but to the past. Banks could go to the market's casinos to play and trade and try to pad the pay of their internal hogs.

Hence the stress tests were done and we now "know" that some are fine and some need capital in the form of common equity. I think this crisis also puts the lie to preferred stock as core equity (whatever you call it) for a bank. The point is that cutting a preferred stock's dividend would be a sign that bank is likely insolvent, while cutting the dividend on common stock is not seem that way: it can be seem as bolstering current operations.

So in the future, I'd think government regulations will force banks to hold much more capital as common stock and cut back on preferred stock. By the way, in the 1990 recession, Elmer decided that preferred stock was a great source of capital for banks. Sighhhh.

For investors, all else being equal, this means lower growth rates for banks as the common equity base will be larger. What banks need to do is cut the pay of huge numbers of their bankers, particularly traders, who really make money using and risking the stockholders' money. Stockholders much be better compensated for the risks they bear.


A minor dip yesterday, but this morning futures are up. I really want a good sized pullback, preferably a lot more than a one day wonder. I'd like a good two week, three wave A-B-C pullback to some support level or some Fibonacci level. I want to get back to 150% long at a point of lower risk.

To accomplish this, I have cast my best market drop voodoo spells:
1. I publicly ( and honestly) proclaimed the recession is over - a very bullish call.
2. I bought a fine new car - an SUV really. Very decadent, but Mrs. B wanted it.

This should infuriate the market gods and cause a sizable pullback. I await it with plenty of skim to invest. I guess this will also test whether the market gods read this blog ;) If they do, they will propel the market much higher to frustrate me.

Word of the Day

"Subserve" - verb, transitive [$10]
Subserve means 1. to serve as an instrument or means of; 2. to promote the welfare or purposes of.
Sentence: Timmy's stress tests subserved the governments desire to extricate itself from extensive bank debt guarantees.

Le Mot du Jour

"Sommer" - verb, regular -er conjugation.
Sommer means (transitive) to command or enjoin [~ qn de faire qch -> to command or enjoin somebody to do something]; (intransitive) to add.
La Phrase: (adapted from Le Monde) L'administration d'Obama somme quelques grandes banques se renforcer leur capital.
Sentence: The Obama administration is commanding some large banks to strengthen their capital.


Bud said...

Bman i am all in favor of executive compensation being tied to the long term growth of the company...........but shouldn't shareholders decide??

i think shares given to executives cannot be sold for a minimum of 5 years......that will solve most of the problem

Bud said...

preferred stock is not a source of G decided that ???

mr G is very very very smart guy.......i wonder if back then guys challenged him on that

Bud said...

american banks are not in trouble cuz of 'traders'

liar loans and the crappy mortgages were the source of the problem.......and ceo pay linked to short term hikes in the sock price

trading desks were perhaps the only profit centers for banks this last year

Bud said...

recession is over ??? well i just look at the earnings reports from this Q.........revenues down across the board

the good news is american companies are getting lean and mean and cost efficient

Bud said...

fibonnacci ?? 3-wave A-B-C pullback ?

that sure doesn't sound like 'buy and hold'......uhhhh....sorry.....'buy and reallocate'

it sounds very beefer like........well done Bman.........short term trading (timing) a very very profitable way to go

mfl59 said...

an SUV??? oh my Bunkerman...does the word of Al Gore mean anything to you?

Bud said...

home run derby last night at the house that HGH built

6hr......tampa teed off on yankee pitching......pettitte......up the dosage on the HGH son......mariano looks like a real good pitcher......batting practice pithcer that is


PS.....evan longoria the best 3rd baseman in baseball.....NO DOUBT!!! much yankess still owe A-fraud?? .....250million

LET'S GO YANKEES !!!!!!!!!!!!!!!

Bud said...

you guys see joe scumbag torre last night?? he was in tears


and why not......he can't suck on manny's cock for the next 50 surprise that as soon as manny plays for scumbag torre......he starts juicin

joe torre a f'ng douchebag......and a faggot

Bud said...

he's baaaaaaaaaaaaaaack

A-fraud is back !!!!! my baseball season begins today......of course......the pussy dodges the redsox and the rays.......orioles pitching staff more to his liking

PS....when will peter gammons stop apologizing for A-fraud ?? " A-fraud is glad to get the distractions behind him and play the game he loves "

distractions ??? huh ??? you mean like intentionally sticking a needle in his ass so he can hit more home runs and make more money......yeah...a distraction indeed much the yankees still owe A-fraud ?? 250 million

LET'S GO YANKEES !!!!!!!!!!

mfl59 said...


Bud said... apologies to theo epstein

theo the smartest and cleverest gm in baseball........what a brilliant trade.......jason bay new yankee killer

well played theo....well played indeed

Bunkerman said...

uh Bud ... those earnigns are from the Q ended March 31. It's May 7. I mean over "now".

Bunkerman said...

Uh ... who do you think took down all those pieces of craps from the subprime CDO, that killed LEH, MER, BSC, etc ->>> the trading desks.

Bunkerman said...

In my lexicon, Al Gore means Cluster FUBAR.

Bunkerman said...

In French: Al Gore est foutu dans la merde au-dessus de la toute reconnaissance. Al Gore, c'est une grande tête de nœurd; c'est un grand salaud.

South Park got him perfectly.

mfl59 said...

Bunkerman, the man invented the internet and won a Nobel Prize for his impeccable research on global warming....what more can one man do?

Bunkerman said...

lolol ... being correct would be a start. And not a lying "chatte".

Spin-em said...


Spin-em said...
ohhhh its ok that hes on another team NOW...pffttttt what a 2 faced double standard cockblock swilling douchebag u are.....


Spin-em said...
NOW we know why BIG PUSSY sucks since Manny left ..Manny was shooting him in the azz on Yawkey Way......nonono..Red Sox are clean..I think sooo.....gimme a fn break


Spin-em said...
doesnt even admit it.....LMAOOOOOOOOOOOOO..

he is even a bigger scumbag than i fact......Manny may be the biggest scumbag in the history of scumbags

....i know a place where 40,000 douchebags cheered at his next home run

now we know why Manny hits so many 3-run home runs

Manny is a liar......a juicer.....a phony.....Manny....what a f'ng scumbag so are the fans that thought he was clean..look in the mirror AZZHEAD!!!


mfl59 said...

were you and Gore cronies in an eating club at Harvard?

Spin-em said...

$2.45 /gal coming to a station near you.....if thats what it takes so be it ..high gas a good sign..good for bunkerboyz

Bunkerman said...

sheesh, mfl I wasn't in one of those preppy clubs.

Btw, they are called "eating clubs" at the preppy bastion, Princeton. At Harvard there is another name: "Final Clubs"

Al Gore, rich son of a Senator, probably was.


Bud said...

rich son?? uhh went to Harvard......super expensive school

i suppose you were a 'rich son' too

Bud said...

Bman i don't want no dip or ABC pullback or whatever you call it

i want the forces of light to jam this market higher like they have been since march 6

PS....GS goin to 200??

mfl59 said...

Boy I am throwing a lot of junk at you shown a good eye by not taking big cuts at these pitches...lmaooooooooooooo

Bunkerman said...

well, you get an F, Bud.

I was a middle class son of small town veterinarian, started work at age 8 cleaning up puppy S*** to save $ for college.

Had partial scholarship, term time jobs & loans to pay the bills.

went to a "high school" not a "prep school".

Sheesh, vous êtes triple andouille !

Bunkerman said...

I have to smash those out those to maintain my dignity as a common man, mfl ... but Bud believed you ... il est espèce andouille.

Bunkerman said...

hmmm don't insults sound / look better in French ;)

I can't wait to get German insults and curses :)

Bunkerman said...

job losses fall. Hmmmm perhaps I am right this time.

mfl59 said...

awesome job creation...all by the federal government hiring census takers....that should really jumpstart GDP

mfl59 said...

My friend trying to tell me he made out with Becky Quick at a Rutgers fraternity party...


Bunkerman said...

it's raining bank stock offerings.

Bunkerman said...

bears on the rack again ...

maverick said...

lil Beck definite college spinner candidate

Frosty said...

Suppose you were an idiot and suppose you were a member of Congress. But I repeat myself.
-- Mark Twain

very nice quote today jim...let's modify just for you, make it more applicable.

Suppose you were an idiot and suppose you were a member of the tank. But I repeat myself.

mfl59 said...

Bud make sure you put those "82's" into the computer...I'm not going to come down to Florida only to get sandbagged.....

Bud said...

is johann santana the best pitcher in baseball ?? he in the top3 for sure.........0.91 era

let's see now..........brian cashman said no to him at 120million in a 2007 economy...........but in a 2008 crash economy he spends 165million on that fat pig cc sabathia

well played cashman....well played indeed

LET'S GO YANKEES !!!!!!!!!!!!

Frosty said...

Bunky...very fine post today by the way...speaking of fine, Mrs. B would look good in an Azure.

Bud said...

big match on sunday with a friend of mine.......i haven't played him since last summer

he normally gives me 4 a side and still crushes me......i haven't told him about my 'new' game

should i tell him ?? nope.......let him gimme 4 a side..........and i'll have him 'surrendering' by the 12th hole

'disguised as a pga pro'

maverick said...

bring your foot wedge

Bunkerman said...

yes, frosty ... but no space for three dog crates & other gear in that.

She picked out a Mercedes GL450.

mfl59 said...

i see we learned ethics from "jim" ....or that other tall Asian guy for that matter...

"FBI sting operation as we speak"


Bunkerman said...

I was trying to get her to go with a Honda Odessey minvan


Frosty said...

Honda Odessey minvan...that is a great idea...Mrs B and I will require beaucoup jack once you are gone.

Bunkerman said...

oh she's happy - of course I bought the Mercedes

I was subtle, as a long married man knows how to be.

Bud said...

mercedes ??? what the F Bman !!!!

you are going to single handedly put an end to this rally.........the forces of light have been doin a magnificent job......oh well

GS goin to 200 ???


Bunkerman said...

so far my voodoo looks weak ... I think the gods read this blog


Frosty said...

'big match on sunday with a friend of mine...should i tell him ?? nope"

what a dirt bag...never can have enough slimmydouche pals...if ya get behind just slip a grenade in is bag, he'll never know what hit him.

Bud said...

well gentleman...........what an incredible week of the year so far ( and i'm gettin wacked today) a matter of week since august 2008.........i'll have to check

how did i do it ?? well.........i'm stupid.....remember........i am merely a ping-pong player

so i look for professional just kept feeding me winner after winner after winner after winner..........

merci jim !!!!!!!!!!!!!!!

Frosty said...

"Breadth is very good and the DJIA is up about 100 points as I write, but I'm sure not seeing that much strength on my screens." that a joke...he must need new screens...74 150' lcd's not enough I guess...thx jim

Bud said...

l'aquarium de requeins est en fue !!!!!

PS.......please get that for me in the kraut language Bman on monday

Spin-em said...

what a dirt bag...never can have enough slimmydouche pals...


"that's what "friends" are forrr"

"good one bob"

Spin-em said...

golf is an "on your honor" game but can we really be surprised..pffttttt douchebag indeed.......SAYS IT ALL THOUGH


Bunkerman said...

sorry Bud ... I would, but I'm very early in learning German. Maybe in a month.

Vous êtes un lêche-cul.

mfl59 said...

Bunkerman how do you say "yellow bastard" in French?

Bud do you know?

Bunkerman said...

bastard is "salaud" (masc.)
Yellow is "jaune"

so yellow bastard is "salaud jaune"

He is a y___ b___ =

Il est un salaud jaune.

Or, [name], c'est un salaud jaune.

Bunkerman said...

Beautiful day here - I'm off.

Enjoy the weekend.

I think I'll crack open a beer. I've got some brats made by a European homemade sausage place to cook up tonight.

Beer & brats ... mmmmm.

Spin-em said...

Have a great time Bunk and all the bunkerboyz

giving 4 a side is more than honorable......not telling him ur hcp?.....well sir....your a lyin bitch no better than Manny or Aroid