Good critical thinking example by Dan Duncan

1. Check the facts
2. No TA analysis without thorough historical view AND clear fundamental explanation

Full text:

Full text:
“Indeed, rather than investigating these common aphorisms, if you trade on them at face value, you will be disappointed. Unless you thoroughly data verify and prove/disprove ANY AND ALL Wall Street myths, rules of thumb, or standard trading phrases, you are going to a) develop a false belief system and 2) that will eventually lose you lots of money.”

Barry, you’re just as guilty when you throw out the standard technical analysis B.S. with no underpinnings. Hell, just last week you were noting the significance of the dreaded “outside down day”…Oh no!

Taking the Dreaded Outside Down day as an example (one of many—like Head shoulders, MA crossovers and on and on.)–and your time-tested advice to “data verify”…

Just what exactly is the significance of the Outside Down Day? [And please, no garbage narratives...just the facts.]

1. How often are outside days (up or down) followed up by a move in the same direction? Could you give us a little feedback on this…you are a part of Fusion IQ, after all, so it couldn’t be too difficult.

2. Would the results of #1 be affected by the enactment of a reasonable stop-loss plan? [It is so damn annoying when people make market calls and then take credit for a particular call even the trade would have been stopped out by a normal enforcement of a stop loss protocol.]

3. Any ideas as to how long the affects of the Outside day will last on a particular market movement..ie should the trader stay in trade for 1 day or should the occurrence of an outside day mark the beginning of a long term trade?

4. If you don’t know the answer to #1 (let alone 2-4), why on earth are you mentioning the occurrence of an outside day as if it has any significance whatsoever? If you do know the answer, wouldn’t your readers find it interesting?

5. Finally, and most importantly: Are you impressed by my willingness and desire to “thoroughly data verify and prove/disprove ANY AND ALL Wall Street myths, rules of thumb, or standard trading phrases”?

in reference to: The Myth of Sideline Cash | The Big Picture (view on Google Sidewiki)

Off-balance sheet accounting

Off-balance sheet exposures have to be brought back on the balance sheet from 1/1/2010 (FAS 166 and FAS 167)

Japan export 12% of GDP

US only 6%

in reference to: Yen Rises to 8-Month High on Speculation Japan Won’t Intervene - Bloomberg.com (view on Google Sidewiki)

Lots of (good?) fund statistics here for free

According to its data, total money market fund
1. Curent (09/23/2009) : 3.482T

Context:
1. Market high vs low
* 01/14/2009: 3.920T
* 03/11/2009: 3.904T

Remember the "cash-on-the-side-line falacy"

in reference to: ICI (view on Google Sidewiki)

Mark-to-Market does not impede banks forclosing houses

Per Chuck Ponzi:
Jace,

I’m wholly aware of the changes to MTM, which have little to do with bank processing REOs. Unfortunatly you must have heard this from someone else or read the FASB statement incorrectly, or misunderstand the interplay between banks, regulators, and accounting pronouncements. Luckily, Economics is not my forte’, as my undergrad is accounting with an MBA.

Let’s do a banking 101:

1. Accounting realization has little to do with captitalization requirements. Indeed, one can regonize losses on accounting without impinging on capitalization requirements. FASB governs recognition on Financial Statements only. Most banks maintain several asset ledgers, and accrue for asset non-performance without individual write-downs. This is the essence of MTM.

2. Capitalization requirements are set by banking regulators (FDIC), not by FASB. Write-offs do not directly impair individual assets (which are reviewed by banking regulators).

3. MTM has previously only applied to “held for trade” securities, and not for “held to maturity”. The new rules are largely the same as the old rules; unless the bank is actually trading the loans as securities, mark to market accounting is irrelevant. Individual assets are not impaired until substantial doubt arises that the value has declined when it comes to held-to-maturity loans. Most Alt-A and Option Arm loans are not securitized so MTM does not apply. This is why Golden West and Wells Fargo are able to largely avoid write-downs despite having significant recognized/unrealized revenue assets that made their balance sheets look great. However, regulators only concern themselves with performing/nonperforming assets in computing capitalization. The world could be going to hell in a handbasket and the company could be underreserving and as long as the bank had performing assets, the regulators could do nothing.

You’re actually incorrect on your assumption that the 600M “loss” showed up on the books because under MTM, only tier 1 assets were completely marked to market. Hence, we saw Lehman Brothers (not a bank) implode while Wells Fargo and Citibank did not (banks). Banks don’t go bankrupt, they go insolvent. Companies do not go insolvent, they go bankrupt. There’s a subtle but key difference. Insolvency is determined by banking regulators, bankruptcy is petitioned for by the company when its debts exceed its assets.

I’m not meaning to be rude, but your view is the 100K foot view without understanding the basics of how the system works. I’ll break it down simply:

We’ll assume that a bank is insolvent. That is determined by nonperforming assets vs. capitalization ratios and a whole lot of assumptions. Indeed, Wamu had shown huge amounts of income on Option-Arms prior to being deemed insolvent, though one could argue that the FASB treatment of accrued interest on Neg-am products is less than spectacular and I would agree. (I’d rather see corresponding liability or contra-asset booked than revenue, but I digress).

So, regulators see non-performing assets an(d?) order the bank to foreclose and sell those non performing assets. (adhering to applicable laws and moratoria). However, the FDIC has been charged to forestall foreclosures (thanks, Sheila!) and local moratoria in California have largely hampered the ability of the regulator to force the bank to foreclose and liquidate. Contrary to popular belief, banks cannot “sit on inventory” because the regulator would normally not let them do that unless their boss (Sheila) told them to. Largely, though, the delay in processing foreclosures has largely been because of inept management and poorly prepared staff. Just ask someone who has gone through a short sale!

So, in short… you said I was wrong, when in fact I am exactly correct in the basis of the model (admittedly there are some unknowns that I pulled out above, and there might be more), but Mark to Market and Capitalization Requirements are reason for MORE foreclosures, not less.

Chuck Ponzi

in reference to:

"Jace,
...
Chuck Ponzi"
- bubbleinfo.com » Blog Archive » Poll: Will There Be A Flood? (view on Google Sidewiki)

FDIC tight the screw on CRE?

Bond Girl:
"Not sure how true this is, but a banking acquaintance said that the FDIC is trying to get banks to change their valuation on some performing loans (he wasn't specific, but it was in the context of a discussion on CRE) to be more conservative. Says banks are pretty upset about it."

Terry:
"A loan may be performing but still have a significant risk of impairment - true, banks did not have to revalue a loan until it defaulted, but this mark to market move is happening."

jasap:
"Friend of mine is a community bank director. She said they are trying to force them to mark to market all the CRE loans. Which will put them under."

More evidence:

http://www.fincriadvisor.com/2009-09-27/CREconcentrations

http://www.costar.com/News/Article.aspx?id=67A183B2278C8088B2C11F65A68C3284

in reference to: Freddie Exec Compensation, Bandos, Market and more | Hoocoodanode? (view on Google Sidewiki)

#unemployed per job openings

1. 2.4M full-time permanent jobs were open
2. 14.5M people officially unemployed
3. Ratio = 14.5/2.4 = 6.04
4. Unemployment (U3): 9.7%

Context:
1. Ratio highest since the government began tracking open positions in 2000
2. 2001 recession worst: 2:1
3. Early 2009: 4:1

**Job opening decline since the end of 2008
1. 47% manufacturing
2. 37% in construction (large drop should have happened already by the end of 2008)
3. 22% retail
4. 21% in education and health services
5. 17% in government

Job opening decline since Dec 2007 (begining of this recession)
1 .45 percent in the West and the South
2. 36 percent in the Midwest
3. 23 percent in the Northeast.

in reference to:

"Linux"
- Read it here 1st: Truest Picture of Excess Labor Supply | The Big Picture (view on Google Sidewiki)