Apr
16
An Inconvenient Truth, from Jeff Watson
April 16, 2010 |
Notice how the volcano, the GS charges, earnings season, and all things come at an inappropriate time, just like the big San Francisco Earthquake. What will be interesting is the manner in which the market digests the news and might offer predictive value.
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The GS charges may be just one tremor amongst many regarding the ‘CDO-fraud’ Quake.
If Propublica had been following the Magnetar Trade story for weeks/months already, who knows how many other blackholes, supernovas, quakes and tremblors (I mean other HFs, IBs, CDO structurers and managers) the SEC may be investigating as well…
http://www.propublica.org/feature/the-magnetar-trade-how-one-hedge-fund-helped-keep-the-housing-bubble-going
Sec Tres Geithner seems to have parachuted into Meet the Press for Sunday as well. Deemed an “exclusive” by NBC news. Questions abound for me.
It may take some time just like the earthquake did. If you look at options trading, they hit an extreme in 2004 on 1/20 and fell 22 points the next day which was a new moon. We fell 20 points two day’s after hitting an extreme on the new moon. 2004 held up pretty well for a month or so after interest rates and oil became relatively weak. Various length growth rates show oil and interest rates have become relatively weak again. I had thought we were further into the 2004 cycle but the interest in buying calls relative to puts suggests we’re still pretty early when comparing to that year. 2004 looks like they had 4 volcanoes go off around the peak in options. http://www.volcano.si.edu/world/find_eruptions.cfm
It does seem we are only early into the cycle.
I read this little book last year:
“How I Caused the Credit Crunch” - by Tetsuya Ishikawa
http://www.politics.co.uk/reviews/culture-media-and-sport/review-how-i-caused-the-credit-crunch-$1288349.htm
Had a rough time going through this rather badly-written book, but it at least provides an inside account from the perspective of a CDO structurer and manager.
And it provided some laughs and a fine puzzle trying to match up the funny fake names the author used in describing the HFs, IBs, CDO structurers and managers involved. Especially the very enthusiastic and substantial CDO sponsor mentioned in the book.
With the Propublica ‘Magnetar Trade’ story and now the GS-nee-Paulson charges, some of the pieces of the puzzle are being filled in.