This blog is produced by David Merkel CFA, a registered representative of Finacorp Securities as an outside business activity. As such, Finacorp Securities does not review or approve materials presented herein. By viewing or participating in discussion on this blog, you understand that the opinions expressed within do not reflect the opinions or recommendations of Finacorp Securities, but are the opinions of the author and individual participants. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security or other instrument. Before investing, consider your investment objectives, risks, charges and expenses. Any purchase or sale activity in any securities instrument should be based upon your own analysis and conclusions. Past performance is not indicative of future results. Finacorp Securities is a member FINRA and SIPC.
At my blog there are two main purposes: teaching investors about better investing through risk control, and tying all of the markets into a coherent whole.
Subscribe in a reader (comments)
Well, that’s what I get for putting forth my guess. The FOMC statement is here, and will get hyper-interpreted. I don’t think it says anything significant. When the minutes come out on October 9th, there should be greater clarity. Until then, the market will have some bumps and jumps as Fed Governors give speeches.
Copyright David Merkel (c) 2007-2010
Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, or in my writings at RealMoney is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here or on RealMoney is meant to be formal "advice" in those areas. Consult a reputable professional in those areas to get personal, tailored advice that meets the specialized needs that David can have no knowledge of.The Aleph Blog is proudly powered by WordPress
Entries (RSS)
and Comments (RSS). Design by Salatti.NET
September 18th, 20074:16 pm at
I think an obvious question is will this cause aggressive short covering in some of the smaller cap financials. FMD (student loan facilitation business); CCRT ( subprime/smaller accounts creidt cards); PRAA ( purchaser of defaulted debt and collections). PRAA and CCRT had almost 50% of the float short in August! I never understood the PRAA short on a credit markets basis. (I own all of these). It would make sense to me to cover the short of an IMB; I don’t know if I would buy it when larger (and in all probability) higher asset quaility institutions can be found. In the real world it will take several years to clean-up the residential mess and it would make sense to stay away from institutions that will need to make sales of forclosed residential/developed properties. As an aside I am an investor of “low end” properties in Central Iowa; price point about $75,000 (we buy real trash and clean up/rebuild). Banks have turned off financing to our buyers and I’ve become a landlord! I think we have a year before these buyers can borrow again.
September 18th, 200710:40 pm at
Dave,
I can’t resist anymore… told you so!
lol
but seriously, the market was telegraphing this with blinking red lights, church bells, spinning neon signs and a megaphone
September 18th, 200711:57 pm at
You win, Babak. Good job, and yes, I got it wrong. The numbers you cited were the right way to view it this time, rather than the statistics I used.
Paul, the question to ask on any financial company is how exposed are they to any likely credit losses in a scenario where residential real estate reprices 15% lower. I would be skeptical on IMB. CCRT is a coin flip to me, and I would expect PRAA to be okay, but I really don’t know any of the names that well.
September 19th, 20071:50 am at
Authers at FT.com writes: “The Fed did this for reasons of game theory. They did not want to cut rates at all. But the credit squeeze meant they had to act. Therefore, the logic went, it made most sense to act drastically and take the market by surprise. That maximised the chance for their action to have the desired effect.” I don’t particularly buy that. Rather I thought they should have lowered 25bp at the previous meeting and subsequent events supported that view, so 50bp now is for 25bp then and 25bp now. Still, I was surprised by that they believed in 50bp now, so I’d like to know what statistics you guys are saying would have predicted this.
September 19th, 20076:17 pm at
I agree on IMB which is why I have avoided it; too tough for me. In the past at least credit card defaults and unemployment rates are related; CCRT also had excess capital deployed in a leveraged CDO fund so who knows the final tally on damage. It would have been better spent on a dividend or share buyback in hindsight. David; I have redoubled efforts reveiwing baalnce sheets; great advice given to me by you earlier this year and I won’t forget it! Thanks