But not to worry - those that walk on water will save us. Wait, that was yesterday's line. I assume Geithner did not levitate over the Atlantic as he told us how he would save us based on the market reaction. Oh well - just give it a few days/weeks and we'll have more Kool Aid thrown at us; it's hard to remember "facts" when so much red liquid is spewn on a daily basis.
Until them, enjoy the view below. And get your (your children's, your grandchildren's, their grandchildren's) pocketbooks ready. You have a lot of "investing" in mortgages to do. And don't forget the hedgies will be leveraging off your great grandchildren's tax dollars so they can make a killing. [Jan 9: Wall Street Journal - U.S. to Use Hedge Funds to Loosen Credit] Profit for them, sludge for you. "Free markets" and all.
- The risk is that this fund will provide hedge funds and other private investors an opportunity to buy toxic debt whereby they benefit from any potential upside while all the downside risk is taken by the government (taxpayers), i.e. more privatized gains and socialized risks.
8 comments:
Mark, just curious what your thoughts on shorting the leveraged etfs in general were? I know you have spoke about this topic, but wanted to focus specifically on shorting the levered ones.
We know that funds like EEV and SRS price decay is a constant force on their NAV. Wouldn't shorting a basket of leveraged (especially the triples) etfs almost be a guaranteed profit?
Wez, it would appear they are all heading downhill over time. The problem with your theory of "eventually" is you can see some of these jump 50-60% in a few days or indeed 100%+ has been the case from time to time.
So if you start with X and lose 100% you won't have anything left to wait for "eventually". But if you are asking me in a general time decay fashion - yes, they are like leaking options... on each iteration of a move they jump less high.
Good point. I was trying to figure out how to profit from this concept. LEAP puts on them might work, but you pay a shit ton of premium. LEAP puts on the inverse levered ETFs would be a no brainer if we ever see a bull market again.
Also, you probably have covered this, but I'm noticing you are shorting stuff now, has your portfolio situation changed so that you can now do this? I've always thought your short calls were awesome.
Wez,
Outlined changes here
http://www.fundmymutualfund.com/2007/07/portfolio.html
I went to a new tracking system early Jan of this year
I wish I could of done it fall 2007 when I started to really start naming names - many of those down 70-90%+. Now its a lot more tricky since so many things are down 80% :) Been throwing in some short term scalps more than anything since we have not had one of these multi week rallies since I turned over to the new system.
Mixed results so far on the short calls since the market is so whippy reacting to news of this or that... technicals don't mean much when CNBC has a breaking news announcement.
Ha! Yeah I love to hear from CNBC et al how today's retreat was because Geitner's plan was vague. It was even more vague Monday and Tuesday during the rally!
But some folks were hoping and betting that money would be dropped in their laps, and mark-to-market would be done away with. And now that it doesn't look quite as certain that the common stock holders will get a free ride they're bailing back out. And HAL9000 joins the party selling off whole sectors in unison because.... well, just because.
I'm a speculator in my own way, but this whole baloney of complaining when the government doesn't rain free money on your investment thesis is really sad and pathetic.
As an aside, much as I don't like this whole "trial balloon" system, it sure beats picking a bad strategy and committing to it. Because although many analysts can be heard saying that investors want some certainty and stability, many of those same investors are really asking "how can I game and arbitrage this for big returns at the govt's expense". Is it possible this back and forth may be something of a blessing in disguise, helping to exhaust the most wildly speculative players?
Makes me wonder who is really losing money in all this volatility. Is it perhaps the fittest of the hedge funds and daytraders cannibalizing the rest? I think it unlikely that pension fund managers are the ones running in and out of COF. Err... At least I hope not.
Repent thy sins, for S&P 820 is nigh....
Right on cue...
"Why Geithner's Graveyard Touch Might Be Healthy"
http://tinyurl.com/b3cvrw
Could not of said it better Peter
When the market doesnt get its personal bailout they cry and whine and cry. It is pathetic really.
I don't know what they expected from Geithner other than all their problems to go away by magic. Well I do know - they want trillions of bad assets bought at inflated prices so its gone from the "free market" and stuck on balance sheet of grandkids. Short of that, they cry about no solution being good enough.
Very few are monetizing this volatility - you can see hedge funds had the worst year ever last year. Its too fast of an environment other than for the quants and some macro guys. Old models and sign posts have not worked at all.
So everyone seems to be turning into a daytrader. Mutual funds and pensions are sitting on the side of the road with 3 blown tires. Not the environment for them.
Peter that actually was a good piece. From US News and World Report of all places. Stop placating the market. Placate the system and the common folk. The market will eventually come along.
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