Stock Market Resiliency

[ICanSleepWhenI'mDead]

History may not repeat itself, but it sometimes rhymes.  I'm not predicting that we will get the worst case scenario that the article below describes, but if you've read about the underlying causes of the last financial crisis that precipitated the "Great Recession," you can see the potential similarities:

 

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/?utm_source=pocket-newtab

 

Anybody have any thoughts (probably the wrong audience for financial insights) about how to track info on the level of CLO defaults?  I forget the guy's name, but they made a movie about the guy who made a boat-load of $$$  by making contrarian investments after realizing that CDOs were likely to fail even though the average consumer couldn't conceive of the idea that house prices could drop.  Conventional wisdom is often much more conventional than it is wise.

[K-9]

12 minutes ago, ICanSleepWhenI'mDead said:

History may not repeat itself, but it sometimes rhymes.  I'm not predicting that we will get the worst case scenario that the article below describes, but if you've read about the underlying causes of the last financial crisis that precipitated the "Great Recession," you can see the potential similarities:

 

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/?utm_source=pocket-newtab

 

Anybody have any thoughts (probably the wrong audience for financial insights) about how to track info on the level of CLO defaults?  I forget the guy's name, but they made a movie about the guy who made a boat-load of $$$  by making contrarian investments after realizing that CDOs were likely to fail even though the average consumer couldn't conceive of the idea that house prices could drop.  Conventional wisdom is often much more conventional than it is wise.

I think that’s Michael Burry. 

[Jauronimo]

8 minutes ago, ICanSleepWhenI'mDead said:

History may not repeat itself, but it sometimes rhymes.  I'm not predicting that we will get the worst case scenario that the article below describes, but if you've read about the underlying causes of the last financial crisis that precipitated the "Great Recession," you can see the potential similarities:

 

https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/?utm_source=pocket-newtab

 

Anybody have any thoughts (probably the wrong audience for financial insights) about how to track info on the level of CLO defaults?  I forget the guy's name, but they made a movie about the guy who made a boat-load of $$$  by making contrarian investments after realizing that CDOs were likely to fail even though the average consumer couldn't conceive of the idea that house prices could drop.  Conventional wisdom is often much more conventional than it is wise.

I really don't see the similarities.  The housing market crash was a perfect storm of bad incentives, loose lending, and the revival of arcane derivatives known as credit default swaps.

 

There was rampant fraud in the mortgage industry on top of no standards for sub prime lending.  Mortgage originators didn't care about the quality of the paper they wrote as they had larger regional banks ready to buy anything they had to offer who similarly didn't care because Fannie and Freddie accepted everything without question. Fannie and Freddie didn't care because they were doing their American duty in growing the American economy (more houses means more consumption of other goods) and they were just going to slice and dice the mortgages up into CMOs and sell them all to some moron in Germany.  Making matters worse, AIG guaranteed all of these dog**** CMOs 10x, 100x, and 1,000x over since they were so confident none would fail. Easy money to collect your monthly fees.  AIG was guaranteeing something like $440 billion in CMOS. 

 

Distressed business loans seemingly have some actual lending practices adhered to.  I am not an expert on distressed debt but I don't think lenders have a CLO end-buyer who is as gullible and inept as our favorite GSEs Fannie and Freddie.  Again not an expert, but I from what I understand no one in their right mind is writing Credit Default Swaps after 2008.

 

K-9 is right.  Michael Burry among others was highlighted in The Big Short after convincing AIG and banks to offer him CDSs (these products were not available at the time) and made a killing.  The bad news is that unless you're an institutional investor with certain licenses these securities are not available to you.  You can short the banks I guess.  

[Augie]

I remember when the primary question in the residential lending world stopped being “will we get our money back?” and turned into “how quickly can we pool it and sell it?” 

 

There was a restaurateur in Hilton Head I would not lend $5k for a used car.....but we lent him $500k+ for a new house because someone was willing to buy it.  He never made the first payment, but it took over a year to get him out. Madness was rampant. I don’t see this as being that. But what do I know???

 

 

.

Edited September 4, 2020 by Augie

[Niagara Bill]

1 hour ago, Jauronimo said:

I really don't see the similarities.  The housing market crash was a perfect storm of bad incentives, loose lending, and the revival of arcane derivatives known as credit default swaps.

 

There was rampant fraud in the mortgage industry on top of no standards for sub prime lending.  Mortgage originators didn't care about the quality of the paper they wrote as they had larger regional banks ready to buy anything they had to offer who similarly didn't care because Fannie and Freddie accepted everything without question. Fannie and Freddie didn't care because they were doing their American duty in growing the American economy (more houses means more consumption of other goods) and they were just going to slice and dice the mortgages up into CMOs and sell them all to some moron in Germany.  Making matters worse, AIG guaranteed all of these dog**** CMOs 10x, 100x, and 1,000x over since they were so confident none would fail. Easy money to collect your monthly fees.  AIG was guaranteeing something like $440 billion in CMOS. 

 

Distressed business loans seemingly have some actual lending practices adhered to.  I am not an expert on distressed debt but I don't think lenders have a CLO end-buyer who is as gullible and inept as our favorite GSEs Fannie and Freddie.  Again not an expert, but I from what I understand no one in their right mind is writing Credit Default Swaps after 2008.

 

K-9 is right.  Michael Burry among others was highlighted in The Big Short after convincing AIG and banks to offer him CDSs (these products were not available at the time) and made a killing.  The bad news is that unless you're an institutional investor with certain licenses these securities are not available to you.  You can short the banks I guess.  

Do not forget the role Bill Clinton's administration played and Fanny Mae and Freddy Mac.

The US us the single biggest socialist programs in the world with those two government organizations.

 

[Jauronimo]

34 minutes ago, Niagara Bill said:

Do not forget the role Bill Clinton's administration played and Fanny Mae and Freddy Mac.

The US us the single biggest socialist programs in the world with those two government organizations.

 

The buildup of the housing bubble spanned 2 administrations.  While Clinton played his role in loosening lending standards to build a new homeowner society the bad behavior continued under GWB and by the later stages of the game private institutions were beating the GSEs and government regulated lenders at their own game.  Enter Bear Sterns and Lehman. There's enough blame to go around.  I don't think laying it all on Clinton is fair.

 

https://www.cbsnews.com/news/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/

[Niagara Bill]

1 minute ago, Jauronimo said:

The buildup of the housing bubble spanned 2 administrations.  While Clinton played his role in loosening lending standards to build a new homeowner society the bad behavior continued under GWB and by the later stages of the game private institutions were beating the GSEs and government regulated lenders at their own game.  Enter Bear Sterns and Lehman. There's enough blame to go around.  I don't think laying it all on Clinton is fair.

 

https://www.cbsnews.com/news/fannie-freddie-and-the-cra-are-not-responsible-for-the-financial-crisis/

Fair, you likely know more than I do...use to stay in hotel across from Lehman in NYC Times Square

[Jauronimo]

1 minute ago, Niagara Bill said:

Fair, you likely know more than I do...use to stay in hotel across from Lehman in NYC Times Square

I'm no expert but the subject has fascinated me since I read The Big Short.  Great book and surprisingly decent movie too.  

[JohnC]

On 6/11/2020 at 6:39 PM, Niagara Bill said:

Do not forget the role Bill Clinton's administration played and Fanny Mae and Freddy Mac.

The US us the single biggest socialist programs in the world with those two government organizations.

 

You are way off the mark. Fannie Mae was founded in 1938 and Freddy Mac was established in 1970 by congress. They predated Clinton's administration. In addition, both fall in the unique category of having a public/private structure to both entities. So to call them the biggest socialist programs is grossly inaccurate

 https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Pages/About-Fannie-Mae---Freddie-Mac.aspx

 

The biggest socialist-like programs this country has is medicare and social security. And it should be noted that an overwhelming number of  Americans favor these programs. 

[Niagara Bill]

40 minutes ago, JohnC said:

You are way off the mark. Fannie Mae was founded in 1938 and Freddy Mac was established in 1970 by congress. They predated Clinton's administration. In addition, both fall in the unique category of having a public/private structure to both entities. So to call them the biggest socialist programs is grossly inaccurate

 https://www.fhfa.gov/SupervisionRegulation/FannieMaeandFreddieMac/Pages/About-Fannie-Mae---Freddie-Mac.aspx

 

The biggest socialist-like programs this country has is medicare and social security. And it should be noted that an overwhelming number of  Americans favor these programs. 

I never suggested Clinton created Fred and Fanny, but he did recreate their targets. Medicare is socialistic if you believe your citizens are not equal in their need for medical assistance,  regardless of income.

Fred and Fanny makes the US government the largest land holder or guarantor of land in the country, perhaps the world. US mortgage documents make the holder of the mortgage the land holder until it is paid. In most countries the mortgage holder does not control the property unless default then they must apply to gain control.

Thus in the U S people can walk away from the property, in most countries if you walk away you still owe the loan repayment.

Social security is less socialist since people actually contribute through a tax. 

 

[JohnC]

2 hours ago, Niagara Bill said:

I never suggested Clinton created Fred and Fanny, but he did recreate their targets. Medicare is socialistic if you believe your citizens are not equal in their need for medical assistance,  regardless of income.

Fred and Fanny makes the US government the largest land holder or guarantor of land in the country, perhaps the world. US mortgage documents make the holder of the mortgage the land holder until it is paid. In most countries the mortgage holder does not control the property unless default then they must apply to gain control.

Thus in the U S people can walk away from the property, in most countries if you walk away you still owe the loan repayment.

Social security is less socialist since people actually contribute through a tax. 

 

I'm not saying this to disparage your comments. But I have no clue what you are saying.  

[KD in CA]

As the 'second wave' rumblings start to gather steam and the business bankruptcies ramp up, I'm thinking we'll have a second big market dip coming fairly soon.

[K-9]

16 minutes ago, KD in CA said:

As the 'second wave' rumblings start to gather steam and the business bankruptcies ramp up, I'm thinking we'll have a second big market dip coming fairly soon.

Don’t worry, Wall Street will realize another socialist windfall to keep their over-inflated and artificial values propped up.
 

Meanwhile, in the real world...

[ICanSleepWhenI'mDead]

I thought this article presented an interesting perspective on current stock market trends/issues:

 

https://www.vox.com/business-and-finance/2020/7/9/21314119/stock-market-day-trading-reddit-dave-portnoy-barstool-robinhood?utm_source=pocket-newtab

 

Even if the people interviewed/mentioned represent a small share of market volume, it's a window on current market psychology among retail "investors."

[T&C]

What is weird to me... and I'm glad, thought the place would bottom out altogether... is that my 401K is actually Up 2% since Jan.1 of this year. Same matched contributions, everything. 

[Bill from NYC]

On ‎6‎/‎11‎/‎2020 at 8:02 PM, Jauronimo said:

I'm no expert but the subject has fascinated me since I read The Big Short.  Great book and surprisingly decent movie too.  

I am not sure why that movie didn't get more notice. Not only was it informative, it was very funny and well acted.

[Irv]

NASDAQ and S&P 500 at all-time highs.  DJIA less than 100 points off the all-time high.  Absolutely incredible given the pandemic situation and potential for a left-wing President.

[RochesterRob]

1 hour ago, Irv said:

NASDAQ and S&P 500 at all-time highs.  DJIA less than 100 points off the all-time high.  Absolutely incredible given the pandemic situation and potential for a left-wing President.

  That's just one aspect of what is going on.  Listening to a radio report yesterday that 90 percent of restaurant owners nationally are facing or will face losses within the next couple of months which will close their businesses.  Consider that a very substantial number of Americans have no direct or indirect investment in the stock market.  That their retirement will come from the sale of their business or other assets.  A disruption such as a pandemic will take years to sort itself out and formulate a strategy to deal with it.  

[K-9]

3 hours ago, Irv said:

NASDAQ and S&P 500 at all-time highs.  DJIA less than 100 points off the all-time high.  Absolutely incredible given the pandemic situation and potential for a left-wing President.

Not surprising in the least even with the pandemic given the fed has injected $2.3 TRILLION (with a T) into the economy, including $1.5 TRILLION of liquidity directly to Wall Street investment banks. It just goes to show how effective the federal government can be when it comes to stemming financial disaster. Ironically, it’s given to the biggest proponents of limited government intervention. I wish we would inject as much into demand-side policies as well. 

Edited September 2, 2020 by K-9

[T&C]

Yesterday was great, today was a total meltdown.