Hello from your favorite Pessimistic Investor

[randallg99]

FRE and FAN are too close for insolvency and nothing else in the equities markets matters... everything else is just noise.

if these 2 companies fall, we will have undoubtedly the worst market crash in the past 79 years.

the Fed needs to pull a rabbit out of the hat. NOW... perhaps have the Fed simply buy all of the bonds... I don't know...

but I do know this: inflation and deflating US$ is all but certain now.... and there is not enough money to save all of the banks.

 

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[randallg99]

timber!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Congratulations to all of us for being the new official owners of Freddie and Fannie and the taxpayers will now own most of the American mortgages.


Kidgas - did you leave that GG unhedged?

 

[Edge]

Jim Rogers MIGHT be as pessimistic as Randallg. Pessismistic or not, I think it is a great interview.

Bloomberg News

 

[SteveO]

I can't really say that I put enough thought into this entire issue. It certainly looks like a serious problem though.

I care about the capital market for reasons of deal flow. Money needs to be available to keep my business moving along.

At this time, there has been some change in my business model. I take a little more time in looking at potential purchases. It is a welcome relief. It will become a serious issue if the money quits presenting itself. I don't think this will be the case though.

While this process is a drag and difficult for most investors, I see it as a cleansing cycle. Money was flying around so freely that deals were being done that did not make sense. The overbuilding cycle will slow to a crawl. This should help to beef up the the existing fundamentals as the market slowly corrects itself.

Thanks for keeping the discussion out there!

 

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[unicon]

RD says word "currency" comes from the word current, like electrical or ocean current. It means movement.

After 1971, the US dollar began moving to zero. Historically all currencies eventually go to zero.

We are in intense devaluation, while everything is contracting, lots wrong here.

The bailouts are throwing fire on the flame as Rogers says, I would agree.

The questions come down the the compounding effect of the downside and the capacity to solve the problem.

 

[unicon]

cash + credit = economy

Credit is contracting

Inflation is really devaluation of the dollar

Result is economy is sinking at an unidentifiable rate and correcting

More sinking than correcting (slowing will always focus on fundamentals/needs)

 

[kidgas]

[Kidgas - did you leave that GG unhedged?/QUOTE]

Randall,
See the stock collar thread where I answer and comment on the above.

 

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[randallg99]

AMEX missed big time in afterhours today.... my gut feeling is credit crisis has now officially stepped beyond the mortgage debacle.

I could be wrong... but it sure doesn't look like we are anywhere near seeing light at the end of the tunnel

R

 

[randallg99]

Try AAPL and GOOG. Expectations have been high for them but both missed. Tech stocks have held up rather well but now if they get crushed along with financials...

wachovia loses 8+bil???? this can't be for real... that's a huge hit for this entity

after the SEC lifts the shorting regulations, we will have seen one of the largest bear traps since the tech bubble

 

[randallg99]

WHAM BAM THANK YOU M'AM

hopefully this translates into a good stock performance.

I loaded up on OTM calls ... Sep 80s and 85s throughout the day.

interestingly enough, as well as their company is performing, CEO is concerned about American credit crisis



Fording Canadian Coal Trust 2008 Second Quarter Earnings Results: Financial News - Yahoo! Finance

Fording Canadian Coal Trust 2008 Second Quarter Earnings Results
Wednesday July 23, 8:50 pm ET


CALGARY, ALBERTA--(MARKET WIRE)--Jul 23, 2008 -- Fording Canadian Coal Trust (the Trust) (Toronto:FDG-UN.TO - News) (FDG - News) today announced its second quarter 2008 results. Cash available for distribution generated in the quarter was $420 million ($2.82 per unit) compared with $135 million ($0.92 per unit) in the same period of 2007. Distributions of $2.50 per unit were declared for the quarter compared with $0.65 per unit. Net income was $373 million for the quarter compared with $106 million.

"The Trust and Elk Valley Coal had an excellent second quarter," said Boyd Payne, President of the Trust. "The global steel industry is currently in good shape, our operations worked well and we were able to get our product to the ports and onto ships. Coal prices are well up over last year and are starting to reflect higher 2008 coal year pricing, though a stronger Canadian dollar against the U.S. dollar and some carry over of 2007 coal year sales tempered average prices for the quarter. Looking forward, we will benefit more fully from higher 2008 coal year prices over the next three quarters. Also, while sales were strong for the quarter, we still expect Elk Valley Coal to sell between 23 million and 25 million tonnes of coal in 2008, which will be dependent on a number of factors including rail service and mine performance."

"Costs continue to reflect inflationary pressures, however," added Payne. "Our cost of product sold is running at approximately $45 per tonne, which is up considerably from last year. Our production costs are trending to the higher end of our expectations on rising input prices, notably diesel fuel. While transportation costs are currently at the lower end of what we anticipate, they are up sharply from last year largely due to price participation in some of the port loading rates. Coal price increases have outstripped the pressure on our costs and the improved operating margins have contributed to the Trust being able to distribute a record $2.50 per unit for the second quarter."

Payne continued: "In our current market place, global steel market fundamentals are strong as is evidenced by high steel prices and improved operating margins of steel producers. We are, however, keeping an eye on the credit crisis and on the U.S. economy to get a feel if they start to materially impact the global economy."

 

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[Rawr]

My earnings are out in 5 days with a 'crisis - free' product. I am still going to watch it - any advice on how to set up stop loss when earnings come?

Also, talking about missed opportunities - LVS (another "crisis resistant") fell to 30's a few days ago. I knew there was no chance it would stay there- but decided to stay put.

 

[kidgas]

Rawr,
I would consider buying puts especially if you are sitting on paper profits. You could even buy in-the-money puts so that you are getting intrinsic value and paying less for time. For example, let's say that you own a stock at 60 that you got at 50 with earnings coming out next week. In today's environment, there is certainly the risk that the stock would decline. If you look at the 65 or 70 near term (Aug) puts, they may be trading about 7 or 11.50 respectively. You have paper profit to afford the time value of $2 or $1.50 per share. So, say you buy the $70 puts. The stock does well following earnings and spikes to 73. You just made 13/share on the stock and you could sell the puts for $1 (but lost 10.50 on the puts). Your net is 2.50/share. It looks miserable compared to the 13 you could have had. However, if the stock drops to 45, you sell the puts for 26 and your net is 11/share (made 26 on puts and lost 15 on stock), but you protected your paper profit.

The biggest risk for loss is that the stock doesn't move at all and you lose the time value paid for the puts. This would be higher heading into earnings and when earnings were over, that value would decline. You would still have the intrinsic value that you could get back when you sold. Just my 0.02.

Randall,
Best of luck with FDG.

 

[randallg99]

FDG is being acquired at a very undermarket price. man, this really sucks a$$! a $100 stock by peer evaluations is being sold at a 15-20% discount. No sense holding through the acquisition... too many Canadian tax ramifications to worry about.

I sold all of it this morning... nice jump in price and I made a nice return, but I was really looking for a perfect mix of cap appreciation and income.

 

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[TheGreatBear]

We could abolish mark-to-market accounting. That'd allow the banks to obscure their losses till a more favorable time when property prices are higher.
You could also have the cash flush industrial/non financials buy up banks . Corporate America is sitting on like a trillion or more of cash.

Hell, we just did!http://www.bloomberg.com/apps/news?pid=20601009&sid=a4O4VjK.fX5Q&

 

[randallg99]

this is where the shit storm gets real bad... at least mortgages have just a little bit of recourse...

buying SKF



Citigroup Loses on Credit-Card Securitizations as Payments Lag
2008-08-04 04:01:00.210 (New York)


By Bradley Keoun
Aug. 4 (Bloomberg) -- Citigroup Inc. reported its first loss
since at least 2005 on credit-card securitizations, signaling that
risks may be growing in a business that generated $3.5 billion of
revenue in the past three years.
The biggest U.S. credit-card lender lost $176 million in the
second quarter packaging card loans into securities, the company
said in an Aug. 1 regulatory filing. The New York-based bank
completed fewer deals and was forced to mark down its own $9
billion stockpile of the debt instruments and other stakes the
company amassed while selling them to investors.
Led by Chief Executive Officer Vikram Pandit, 51, Citigroup
manages about $202 billion of credit-card loans worldwide, about
$111 billion of which have been turned into securities and sold,
according to the filing. Delinquencies on the securitized portion
have jumped by 16 percent since the end of last year to $2.16
billion as of June 30, Citigroup said. The firm's results may
portend similar losses for rivals.
Banks and other card issuers ``are predicting higher net
charge-off rates across the credit-card industry,'' said Meghan
Crowe, a Fitch Ratings analyst who tracks credit-card issuers
including American Express Co., Capital One Financial Corp. and
Advanta Corp. ``Things have been worse than anticipated.''
Citigroup spokeswoman Shannon Bell declined to comment.
Job losses and higher food and gasoline prices have squeezed
consumers, causing more of them to fall behind on bills and
damping a market for credit-card debt that has so far withstood
the collapse of the mortgage-backed securities industry. Wachovia
Corp. analyst Glenn Schultz predicted in a July 18 report that
loan charge-offs by credit-card securitization trusts industrywide
may climb to 7 percent in coming months from 5.6 percent
currently.

Funding Costs

Charlotte, North Carolina-based Bank of America Corp., the
second-biggest card lender, had about $2.9 billion of interests in
securitized card loans as of March 31, according to a regulatory
filing. No. 3 JPMorgan Chase & Co., based in New York, had about
$2.9 billion of so-called subordinated interests, according to a
filing.
On July 18, Citigroup posted an overall $2.5 billion net
loss, mostly stemming from writedowns on mortgage-related
securities including so-called collateralized debt obligations,
which are bonds backed by other debt. The bank also reported
higher costs to set aside money to cover bad consumer loans.
In its Aug. 1 filing, Citigroup said that ``higher funding
costs and higher credit costs flowing through the securitization
trusts'' were the primary reasons for an 11 percent revenue
decline to $2.93 billion in its North American credit-card
business.

Shrinking Pool

In the year-earlier period, credit securitizations produced a
$243 million gain. Net gains from securitization of credit-card
loans totaled $1.27 billion last year, $1.08 billion in 2006 and
$1.17 billion in 2005, according to the firm's most-recent annual
report, filed in February.
Like other banks, Citigroup packaged credit-card loans into
securities so it could tap into the pool of fixed-income investors
looking for bonds not tied to corporate debt, municipal bonds or
mortgages.
That market has slowed, according to data compiled by
Bloomberg. In July, banks and securities firms issued $2.1 billion
of credit-card securities, the lowest monthly volume in two and a
half years. The industry issued $6.8 billion of them in July 2007.
Banks' interests in securitized credit-card loans are
vulnerable partly because of the way the deals are packaged,
according to Fitch's Crowe. Security holders typically are granted
senior interests, meaning they stand first in line to get repaid
if loan losses climb or the instruments default. Banks often
retain the junior interests, meaning they're first to absorb the
losses.
``These guys hold the lower pieces,'' Crowe said, declining
to comment on Citigroup specifically.
Citigroup has about $6 billion of ``trust-issued securities''
backed by credit cards, according to the Aug. 1 filing. The bank
said it has another $3.1 billion residual interest in credit-card
securitization trust cash flows.

 

[randallg99]

we will continue to see slugs of bad news from the financial sector, but that doesn't mean we won't make money in the markets.... one of my largest holdings is starting to get significant exposure... this is a long term investment and should fare well as long as demand for oil remains strong.

Tue Aug 26, 2008 2:41am EDT

* Seadrill second-quarter results * Thursday, Aug. 28 * Pretax profit seen more than tripled to $180 million

OSLO, Aug 26 (Reuters) - Norwegian oil driller Seadrill (SDRL.OL: Quote, Profile, Research, Stock Buzz) is expected to report more than tripled pretax profit for the second quarter due to rising rates for its rigs and a gain on a rig sale, a Reuters analyst poll showed on Tuesday. Second-quarter profits before tax are estimated to have risen to $180 million on average from $55 million a year earlier, the poll of 21 analysts showed. Estimates ranged from $150 million to $222 million. Analysts expected a gain of $80 million to be booked in the second quarter after completion of the sale of the West Titania rig. Bermuda-registered Seadrill Ltd, controlled by Norwegian shipping magnate John Fredriksen, is scheduled to report earnings on Thursday, August 28. Soaring oil and gas prices have spurred petroleum exploration and production around the globe, lifting the oil services industry. The company has said it expects a strong rig market over the coming years, assuming no fundamental drop in oil prices. Seadrill aims for a significant increase in revenue in 2008-2009, when 11 new rigs are expected to start work. Following are analysts' estimates for Seadrill's results in the second quarter of 2008 and the full years 2008 and 2009 (figures in millions of dollars, EPS in dollars):

Estimates for second quarter 2008: Mean Median High Low No. Yr ago

Operating revenue 480 476 558 428 21 374
Operating income 208 204 237 190 21 77
Pretax profit 180 174 222 150 21 55
Net profit 153 150 200 122 21 42
EPS 0.38 0.38 0.50 0.31 21 0.11
Dividend per share 0.52 0.60 0.70 0.20 7 0.00
NRI 80 80 80 80 21 0
Price target 183 185 216 147 17 n/a

Estimates for full year 2008: Mean Median High Low No. Yr ago

Operating revenue 2,171 2,172 2,360 2,002 20 1,319
Operating income 749 748 854 664 20 489
Pretax profit 797 799 991 670 19 387
Net profit 682 675 823 549 20 466
EPS 1.71 1.69 2.06 1.38 20 1.18
Dividend per share 2.53 2.10 8.64 0.55 12 0.25
NRI 255 255 255 255 20 180

Estimates for full year 2009: Mean Median High Low No.

Operating revenue 3,609 3,622 4,013 3,080 16
Operating income 1,640 1,659 1,885 1,417 16
Pretax profit 1,416 1,412 1,724 1,150 16
Net profit 1,213 1,220 1,525 978 16
EPS 3.04 3.06 3.82 2.45 16
Dividend per share 3.24 2.67 10.00 1.50 10

NOTES: - Data for Reuters Nordics earnings polls compiled by Inquiry Financial Intelligence. For more details on the data, please click on www.ConsensusEstimates.com. - "No." denotes the number of estimates. - EPS = Earnings per share. - NRI = Non-recurring items.

- The following investment banks and brokerages participated in the survey (share recommendations in right-hand column):

ABG Sundal Collier Buy
Arctic Securities Buy
Carnegie Outperform
Credit Suisse Neutral
Danske Bank Accumulate
Deutsche Bank Buy
Fearnley N/A
First Securities Neutral
Fondsfinans Buy
Glitnir Buy
Handelsbanken Capital Markets Accumulate
HSBC N/A
Kaupthing Buy
Merrill Lynch N/A
Natixis Reduce
Nordea Strong Buy
NRP Buy
Orion Securities Buy
Pareto Strong Buy
SEB Enskilda Buy
UBS Sell

(Anders Bjornsen and Richard Solem; Editing by Quentin
Bryar)

 

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[andviv]

Based on this information, collection companies that go after debtors, credit counseling/consolidation companies and others working on the same issue will do well. Do you know of public companies out there that dedicate to this?

 

[randallg99]

Based on this information, collection companies that go after debtors, credit counseling/consolidation companies and others working on the same issue will do well. Do you know of public companies out there that dedicate to this?

1st of all - how about them apples???? SDRL announced earnings and basically has potential to be the biggest bagger I have ever owned. Gladly it's my largest holding.

and onto the question - I have no idea if there are public companies that do this work.... I looked into this field myself a couple of years ago when I was looking to fund another business. It turns out to be kinda crazy... the "debt collectors" in many cases actually bought the default loans (credit cards, auto, etc) at a fraction of the book value only to collect that market value plus all of the late fees and recurring interest... not a bad deal if you're a good collector and you're liquid....

Is anyone here involved in debt collecting?

All that said- I still think my response to another thread sums it up.

Wait until the government takes over select banks, cleans up the balance sheets, forgives dead loans, and sells those banks on the cheap. owning these cash cow, clean, incredible performing banks via takeover bids thru stock or bond ownership will undoubtedly and vastly enhance net worth....

 

[randallg99]

dudes, dudettes. what happened to SDRL??? great earnings and outlook but the world economy apparently crashed this week????

 

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[Edge]

dudes, dudettes. what happened to SDRL??? great earnings and outlook but the world economy apparently crashed this week????

I don't know, maybe a "sell the news" story.

I notice you buy a lot of OTC and thinly traded issues. Have you ever thought about pairs trading? Simply finding the ETF that represents the industry and selling the ETF short while simultaneously holding the companies stock long? Basically you investment becomes the amount you long investment outperforms the ETF. Might help flatten out some bumps by incorporating more liquid ETFs with your portfolio.

You probably know where I am going next with this. Once you become familiar with the ETF products that represent your portfolio, you can use the options on those ETFs to manage the overall risks of your portfolio. A lot of the stock in your portfolio don't even offer options. If they do, they are so thinly traded that the bid/ask spread doesn't make anyone any money besides the market maker.

 

[randallg99]

Edge, when I free up some time I will work on this strategy. Everytime I want to reduce exposure to these thin traded pink sheets, the ask/bid drops instantaneously and I learned a couple of lessons this week.

On that note, I don't think we have seen the worst of the financial crisis... at this rate, it won't be long before the Chinese don't wanna hold the $ anymore...

U.S. Treasury Credit-Default Swaps Increase to Record, CMA Says
2008-09-09 15:21:50.140 GMT


By Abigail Moses
Sept. 9 (Bloomberg) -- The cost of hedging against losses on
Treasuries rose to a record on concern the U.S. government faces
higher liabilities because of its rescue of mortgage companies
Fannie Mae and Freddie Mac, credit-default swaps show.
Contracts on U.S. government debt increased 3.5 basis points
to a record 18 basis points, up from 6 basis points in April,
according to CMA Datavision prices for five-year credit-default
swaps at 4 p.m. in London. Credit-default swaps on German
government bonds cost 8 basis points and Japanese bonds 16.5
basis points.
The Treasury committed to invest as much as $200 billion to
prevent a collapse of Fannie and Freddie, protecting investors
owning more than $5 trillion of their debt and mortgage-backed
securities. The U.S. budget deficit will grow next year to $438
billion, the Congressional Budget Office said today, making it
harder for President George W. Bush's successor to either cut
taxes or increase spending.
``The bailout of Freddie Mac and Fannie Mae is weakening the
balance sheet of the U.S. and that is causing a deterioration of
credit worthiness,'' said Mehernosh Engineer, a credit strategist
at BNP Paribas SA in London. ``The market is anticipating there
might be more bailouts.''
The government's top Aaa credit rating is not at risk
following the takeovers, according to Moody's Investors Service.
The amount pledged by the Treasury doesn't reflect the
government's assessment of potential losses.
Credit-default swaps, contracts conceived to protect
bondholders against default, pay the buyer face value in exchange
for the underlying securities or the cash equivalent should a
country or company fail to adhere to its debt agreements. A rise
indicates deterioration in the perception of credit quality; a
decline, the opposite.
Contracts on Treasuries are quoted in euros and a basis
point on a credit-default swap contract protecting 10 million
euros ($14.2 million) of debt from default for five years is
equivalent to 1,000 euros a year.

--Editors: Michael Shanahan, Paul Armstrong

To contact the reporter on this story:
Abigail Moses in London +44-20-7673-2118 or
Amoses5@bloomberg.net

 

[randallg99]

after reading up on AIG, I think we are on the brink of a meltdown.... I have said it a few times and I don't want to sound like the broken record but it's coming.

I am trying to liquidate everything, but I am getting slammed.

 

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[kidgas]

randall,
Thanks for the post about US Treasury CDS. You can bet that things are going to get worse. I am relying on my puts to cover me for the most part and retain much of my capital as stocks decline. It should be interesting to note that it is getting harder and harder to get physical gold and silver. Apmex has a much smaller selection than in the past few years on bullion and Kitco is paying a premium for American Eagle silvers. Things are indeed Pessimistic. Although, it shouldn't be much longer until it is time to wade back in. Remember that it took 25 years for the Dow to pass its 1929 high, but only 5 years to break even for those that kept dollar cost averaging.

 

[randallg99]

randall,
Thanks for the post about US Treasury CDS. You can bet that things are going to get worse. I am relying on my puts to cover me for the most part and retain much of my capital as stocks decline. It should be interesting to note that it is getting harder and harder to get physical gold and silver. Apmex has a much smaller selection than in the past few years on bullion and Kitco is paying a premium for American Eagle silvers. Things are indeed Pessimistic. Although, it shouldn't be much longer until it is time to wade back in. Remember that it took 25 years for the Dow to pass its 1929 high, but only 5 years to break even for those that kept dollar cost averaging.

looks like AIG is the first big storm in the swap markets to be exposed.... it'll get uglier.... when China and other countries stop buying treasuries, the music will come to a screeching halt. Hopefully the fed can produce enough liquidity without jeopardizing the $'s value.


very interesting that it took only 5 years to break even....

my thoughts are to go into the disaster zone 75-90% cash for a cherry pick fest.

the key is to know when the blood is REALLY in the streets.... many of the news items seem to be bad, but we know that the odds of deteriorating financial markets are increasing by the day

 

[andviv]

my thoughts are to go into the disaster zone 75-90% cash for a cherry pick fest.

If the dollar keeps dropping and there are big probabilities of more money being printed hen why is a good idea to hold dollars? Cash is losing values as well, isn't it? (not trying to be an smarta$$ here, just trying to understand the logic on these moves). I guess the theory is that assets will lose value way faster than the dollar will, right?

 

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[kidgas]

andviv,
That is correct. The assets (stocks, RE, etc) will lose value faster than the purchasing power of the dollar, and you can pick up real assets at discounted values. The trick is figuring out which companies will survive a major shakeout.

 

[randallg99]

thanks for answer kidgas- and one more thing: as bad as the US$ is holding up, much of the world currency is entirely unpredictable.... I rather not play the currency game and hedge against the US$ via foreign stocks...


and big news tonight - it's lights out for Lehman... this is very bad for US equity markets.


When I invest in stocks/bonds or I plan actions for my business, I try envisioning myself in the future looking back to today to help me determine my decision making.

with this concept in mind, let's go to year 2015 and look back to 2008. There have been more problems and negative news this year than any other probably since the depression. Since 9/11/2001, we have had several calamities within the markets...

most recently, in this year alone, we have had bond reinsurers almost go out of business. I mean can you imagine municipal bonds failing payments? that was a very realistic scenario until the Fed interjected.

Bear Sterns bellied up.

Freddie and Fannie are no long just sponsored entities, but rather now they are government owned. we, usa taxpayers, are proud owners of Freddie and Fannie. Not only that, we are fulilling every obligation (bond pymts) while screwing equity holders.

Today Lehman filed bankruptcy! guys - nobody wanted to buy it because there is too much "bad stuff" that offsets what ever is good.

Merrill Lynch is on the brink of being bought out for peanuts. At least bank of american will have some redemption for the countrywide fiasco

AIG is conducting one of the largest sale of assets in recent history

Wachovia, Wamu and dozens of regionals are borderline insolvent.

default swaps and obligations are still the big elephant in the room that no finger can place a number on...

guys, this isn't amounting to millions or billions... all of the funds that the US gov't is going to eventually lay out could amount to hundreds of billions.

cash is king. I'll sleep better tonight knowing liquidated last week but I am so unsure of when to buy back in... I want to look back and say this was the week we hit bottom and I go all in, but I am afraid that's not the case....

 

[kidgas]

If you are going to get into anything, I would advise owning puts. The problem with all of this is that if things get bad enough, even cash won't help you. Then it comes down to owning physical gold or silver, canned foods, bottled water, etc. Hard to imagine such a scenario, but I wouldn't have predicted losing Bear or Lehman one year ago either.

 

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[kidgas]

I guess the Lehman news explains why gold is up Sunday night.

 

[Russ H]

BofA just bought Merrill Lynch:

Bank of America to buy Merrill for $29 a share: report - Yahoo! News

-Russ H.