alwaysdrawing
-
Posts
226 -
Joined
-
Last visited
Content Type
Profiles
Forums
Events
Posts posted by alwaysdrawing
-
-
Adding to puts on dental appliance makers, life insurers with large corp loan books that they can't mark to market without BK, and a few other companies trading at crazy multiples of past earnings.
Worst is still to come.
-
Another post begins with "I know some people enjoy learning about finance through popular films"...
It's just very condescending.
Better to have people posting false theories about the last major financial crisis in one liners, and telling Mr. Market to wake up because banks are trading as low as tangible book value before a depression.
Thanks for the enlightenment, clearly you are much smarter and better informed. I’ll just go back to watching the Big Short again to brush up on my finance knowledge. :-X
By the way, I liked what you said before the edit in this quote better. I think you're right, and I am wasting my time here.
-
GFC was a solvency issue. Lehman and Bear and other banks went down because the assets that they held, AAA-rated MBS/CDOs were worth 0 and they had a 5% equity buffer.
I know some people enjoy learning about finance through popular films, however 2008 was primarily a liquidity crisis.
The ultimate losses on AAA mortgage backed securities was only around 2.2%.
What happened was, then as now, MBS are used as repo collateral, and when banks don't trust that repo collateral can be sold for par (whatever it is ultimately worth is irrelevant), then they withdraw from the repo market. That is exactly what happened in the "repo crisis" of September 2019, and when the tale is written, that will likely be marked as the start of the second great financial crisis.
If a bank does not have enough capital at the beginning of the day to remain solvent, and cannot acquire it through repo (which settles around 10:30 AM), then they are bankrupt. If you notice markets have rough mornings until around 10:30 and then go up from there, it's because of the scramble for capital as repo settles.
Banks are giant complex machines, and their earnings power is based on their balance sheet, however when impairment hits bank balance sheets, they are giant leveraged towers with their legs getting knocked out from below. That's where we are now, and anyone who simplistically thinks that last quarter's F/S is an accurate reflection of what to expect here is sorely mistaken. I don't know if a major bank will fail, but the hits keep coming, and the Fed is acting like someone big is on the edge of failure.
-
By the way, these industry bailouts are cute, but I believe the plumbing of the financial system is currently majorly stressed.
The Fed buying commercial paper, forcing banks to borrow through the window, and re-opening their primary dealer financing are all major indications of huge stresses within the financial system.
I suspect one or more major banks is currently either insolvent or on the verge of insolvency, and the bailouts for cruise ships will seem quaint to what is needed to bail out a major financial institution (or more).
Nonsense.
The only bank that had issues in 2008 was C and now even Mr. C is in a far better position than 2008. Actually got some today for the first time ever.
You seem to know a lot about the banking crisis. I believe in 2008 Bear Stearns and Lehman Brothers also had problems, in addition to Citi.
https://www.nytimes.com/2020/03/16/business/fed-discount-window.html
Morgan Stanley was the first within the group to tap the Fed’s so-called discount window on Monday, according to three people familiar with the matter. Other banks, including Goldman Sachs and JPMorgan Chase — all members of the Financial Services Forum, an industry trade group — are expected to borrow as early as Tuesday, the people said.“While forum member institutions individually have substantial liquidity and multiple sources of funding, they believe it is important to lead by demonstrating the value of the Federal Reserve’s discount window facility,” the group said in a statement late Monday.
The eurodollar system is the backbone of the global economy, and we are in the midst of a eurodollar crisis. The bond markets are gyrating as much as the stock market, and it's all about collateral, collateral, collateral.
I don't have the bandwidth to get into the finer points of this on this forum, however the Fed is taking all of these emergency actions not because of the stock market, but because banks are fearful of lending to one another, and worried about their collateral (e.g. with Lebanon's default a week ago creating mistrust in the eurodollar counterparties). You could see this in repo in September, or FRA/OIS spreads widening, and more.
I'm not saying it's for sure that Morgan Stanley or Deutsche Bank, or Bank of America, or whomever specific is in trouble, however when banks fear lending to other banks, the commercial paper market siezes up, and the Fed restarts programs that didn't work the first time, I believe we are in big trouble, and about to graduate from a health crisis with a minor stock decline, to a banking crisis and much worse on top.
-
By the way, these industry bailouts are cute, but I believe the plumbing of the financial system is currently majorly stressed.
The Fed buying commercial paper, forcing banks to borrow through the window, and re-opening their primary dealer financing are all major indications of huge stresses within the financial system.
I suspect one or more major banks is currently either insolvent or on the verge of insolvency, and the bailouts for cruise ships will seem quaint to what is needed to bail out a major financial institution (or more).
-
While some want millions to die fast to keep the economy moving, that seems like a bad idea to me (if it would even be possible without society breaking down).
https://www.washingtonpost.com/us-policy/2020/03/17/trump-coronavirus-stimulus-package/
Unfortunately, the economy is going to suffer in order to prevent that from happening. Hopefully the government can help the people--Mnuchin says up to 20% could be unemployed--however, I believe this will be unkind to common shareholders.
The White House’s new $1 trillion plan looks to effectively flood the economy with cash, and officials said roughly $50 billion of it would go toward helping the airline industry, which is reeling from cancellations. While Senate Democrats largely embraced the idea of direct payments to Americans — while saying such payments should be paired with other elements, such as the suspension of loan repayments — they rejected other pieces of the administration’s proposals, particularly any industry bailouts.“I am supportive of putting cash in the pocket of workers, families, consumers and small businesses because it will be spent, as opposed to massive corporate bailouts that could involve stock buybacks or other kinds of expenses that fail to stimulate demand,” said Sen. Richard Blumenthal (D-Conn.).
-
At the end of the day, I'm terrified of what's coming, I still think the market has wildly UNDER-reacted, and I have tried to help people see what's available.
if that's not too personal, what exactly are you so terified of? catching the disease? a society in temporary lock-down? something else?
Terrified of my family, friends and loved ones catching a horrible disease that kills people by depriving them of oxygen. Terrified of millions of global deaths.
Terrified of a depression hitting the economy as bad as 1929. Terrified that the economic instability around the world brings war.
-
Anyone looking at the Canadian banks? They are getting lucrative here. 6-7% dividend yields. Prices are back to 2006 levels.
Some of them are good put targets. ;)
-
I meant Uccmal but glad to hear your perspective too, always, so thanks. If you don't me asking, what's your total equity exposure then?
I'm around 50-60% cash, maybe 10% equities, and around 30% special situations or options. Generally my limits for options are much lower, but it's tough to keep it within limits when they keep going up (see attachment). I continue to rotate into more bearish names, and more asymmetric bets as I find opportunities.
-
If I weren't so heavy on airline puts as it is, think there is some value there. Already out with the beggar tin for $50 billion....at BEST gonna look like GM and still go BK because they are structurally unprofitable at these levels of flying, or anything close. We aren't bouncing back to "normal" flying for a long time. LUV gonna have 47 straight profitable years then bankruptcy.
I would be thinking bigger anyway--there is so much bailout money needed, there won't be enough to go around. Small business, banking, the oil patch, airlines, cruise ships, theme parks, Boeing, industrials, the car companies, junk bonds and their issuers, maybe the health and life insurers....plus all the people.
The employees who are getting fired are probably the ones most likely to get bailed out. Maybe the airlines shouldn't have plowed 97% of their FCF into buybacks, and lavished executives with huge bonuses. Good luck, even if you do get the bailout (which I hope they won't, regardless of my position).
Not sure if the above poster is referring to me be "Al", but if so, I do have some equities, and they are doing terribly. Down 40%+ in a lot of cases, and likely to fall further. Probably should pay more attention to them, but focused on what I perceive are 5-10 baggers available now.
-
Thanks for the response. I suspect that for anyone following this debate it would be useful to write down now and as precisely as possible the data that would cause you to start to change your opinion so you can avoid thesis creep in the future. (A bit of Tetlock's methodology.)
How about if we just write about the positions we take and discuss how the market isn't factoring in the appropriate data and place our bets in the market?
I don't want there to be deaths, and I don't want to be right about the mistakes that the US has made. I hope the change in weather will kill the virus, but I see the evidence that it won't from places that are already warmer than it will get here in the US.
At the end of the day, I'm terrified of what's coming, I still think the market has wildly UNDER-reacted, and I have tried to help people see what's available.
-
I'm also interested in orthopa's point: For those who believe the US response was "too little, too late" to avoid overloading hospitals a la Italy, by what date (or range of dates) should we start to see overloaded ICUs in the apparently most troubled areas, e.g., Seattle and NYC?
Approx every week cases double, and it takes about a week until people are hospitalized, so once you reach a large enough threshold of cases, each week gets progressively worse. Going from 1 case to 100 takes around the same amount of time as going from 100 to 100,000 (unmitigated), and the problems become much large in that 100 > 100,000 progression.
If the estimates I've seen hold, that threshold is hitting right about now with around 20,000 estimated US cases as of a few days ago. Clusters will become large enough to impact large city health systems once you have a few thousand cases in the area, and I'd expect in less than 7 days you'll start seeing a crush of patients in Seattle and NYC, and the situation will likely get worse each week from there.
Thanks for the quick and precise response. What contrary data over the next 7-21 days would cause you to change your opinion?
Note that I'm using ICU overload in an attempt to find an objective measure in light of the lack of testing in the US (though I understand that an ICU visit could be 14-28 days days after infection, so if you see ICU overload, then you likely have even bigger problems in the near future unless significant containment measures were instituted weeks earlier.)
If we don't start seeing deaths spike soon, I'd be surprised and would re-assess. Every country hit has been following similar trajectories, so it's within my 90% confidence interval that we will start to see an increase of cases along that trajectory (which is likely a significant undercount), and because the most serious cases will be the ones identified, I'd expect to see a high mortality rate.
-
Another crazy morning. I guess everyone saw this coming but still, to see bank stocks drop 1/5th in a day is something I've never experienced before.
Everyone saw this coming? Like who on this MB bought puts or shorted the market on Friday??? You guys have all been buying the dip when you should have been selling into any strength.
I have been short (via puts), and added on Friday, and throughout the week last week, and continue to do so.
-
I'm also interested in orthopa's point: For those who believe the US response was "too little, too late" to avoid overloading hospitals a la Italy, by what date (or range of dates) should we start to see overloaded ICUs in the apparently most troubled areas, e.g., Seattle and NYC?
Approx every week cases double, and it takes about a week until people are hospitalized, so once you reach a large enough threshold of cases, each week gets progressively worse. Going from 1 case to 100 takes around the same amount of time as going from 100 to 100,000 (unmitigated), and the problems become much large in that 100 > 100,000 progression.
If the estimates I've seen hold, that threshold is hitting right about now with around 20,000 estimated US cases as of a few days ago. Clusters will become large enough to impact large city health systems once you have a few thousand cases in the area, and I'd expect in less than 7 days you'll start seeing a crush of patients in Seattle and NYC, and the situation will likely get worse each week from there.
-
Buying some puts on life insurers with large amounts of corporate debt on their balance sheet.
Also bought some bank puts.
-
Here is a thread about the current situation in Seattle. So it begins. This was foreseeable a week ago.
Please take more action now to help prevent this from happening all over the US and the world.
https://twitter.com/scott_mintzer/status/1239290389963714562?s=20
Tweet taken down. Crossed my fingers it was all untrue.
This is a reminder to be scrupulous with our sourcing during this time. If disinformation is an issue during the good times, this would be a fantastic opportunity for disinformation.
Yet another reason that members of this board, a lot of whom have known each other for years could contribute to analyzing the situation for the common good. It's pretty amazing how close my estimates came to what has happened. Many people I know through this board also were very accurate in their forecasts. Let's get on the same side of the table and work together.
Removed the text from my post, and I apologize for posting a rumor. Looked to be credible from an MD, but clearly not.
-
Didn’t that recent bill proposed by the House eliminate pretty much all fiscal responsibility to employees for big business?
I'd view it as the Dems got 90% of what they wanted, and gave up some small concessions.
How much payroll tax was cut (the primary GOP policy aim)?
There isn't a bazooka big enough to fix this, and I can't believe the Dems would use it to bail out big business. Checks to every household maybe....but shareholders???? Good luck.
Household QEs would bail out many real businesses by increasing demand -- exactly what was required pre-crisis.
How much stimulus money would it take for you to go on a cruise? Or an airplane? Or to a restaurant?
Money won't solve this problem, even if it solves some of the secondary issues.
-
Didn’t that recent bill proposed by the House eliminate pretty much all fiscal responsibility to employees for big business?
I'd view it as the Dems got 90% of what they wanted, and gave up some small concessions.
How much payroll tax was cut (the primary GOP policy aim)?
There isn't a bazooka big enough to fix this, and I can't believe the Dems would use it to bail out big business. Checks to every household maybe....but shareholders???? Good luck.
-
Exactly--healthcare infra. Maybe subsidize delivery boys with sterile gloves on for groceries/restauarant to keep those places in biz. Problem is that Trump-Pelosi relationship has soured, but in a crisis might be repairable.
Why would the Democrats bail out Trump here? The Dems will pass whatever they think will help, and the GOP will take it or leave it, and then face the voters.
Anyone who thinks big business shareholders are gonna get bailed out by the Democratic controlled House in an election year...please write puts.
-
unless you are already 100% cash, how can you prepared for that?
Cash, treasuries, long term puts.
-
Won’t happen in a fiat world - there simply isn’t the political will to accept it, even if it takes UBI with printed money to stop it.
Post your bets at 930
-
At this rate I'm wondering what's the probability the markets will be shut for a while. Politically I can see Trump wanting to limit the damage, and reopen in 6-8 week when things are on the upswing. I don't know the potential downstream impact would be though when trillions of dollars are tied up and can't be used.
I am preparing for that possibility.
-
I really hope this is not true...
If we expect that infections in the United States are recent (ie. orthopa's theory about millions having this for months is false), then sudden increase in ICU patients/mortality will be seen 2-3 weeks from when people caught the infection. That means it will first happen in Washington State, then NY northern suburbs/parts of CA....then other places throughout...
It's only Mar 15th and most infections in U.S. likely are new...
Yes, the experts are right. This is going to be awful.
-
The Fed is scared because liquidity is drying up, as banks are scared to lend to one another.
They need to get banks to lend, but banks are not because they don't want to be holding the bag during a bank failure. That's why repo and swaps markets are going crazy.
The Fed is firing their last bullet because THIS IS ALREADY A FINANCIAL CRISIS. Corporate debt markets have already frozen up, and new issues are barely getting priced, and things are only getting worse.
We are looking at the biggest financial crisis in our lifetimes, and it will make 2008 seem like a mild recession.
Coronavirus
in General Discussion
Posted
NYC hospitals have started to become overwhelmed, as well as many cities in Europe.
I have now revised my expectations that the US will have much worse spread outcomes than Italy, as the US has been much less proactive, and spread is likely continuing in an exponential way further along the curve. Italy was starting to slow by 100,000 cases, however the US is still traveling on an exponential path. Millions of cases, and incredibly high CFRs are likely.
The economic damage will be much larger than I previously thought as well--depression is now my base case. I am also not convinced the plans currently being written by the GOP will pass, though my confidence is much lower reading the political tea leaves. I think the struggle to pass the small $8 billion bill indicates there will be a lot of fighting once the numbers get to the trillions.
Moreover, I expect any industry bailouts to work similar to GM in 2008-2009, where within months, the bailed out company finds that it must still declare bankruptcy, as conditions will not become economic for some time, and they require re-structuring.