They Get the Joke

April 30, 2010

Two weeks ago, I summarized the legal corporate murder racket thusly:

You can put any financial business into bankruptcy by denying them credit.  And you can deny any company credit by buying enough protection in the CDS market.

Today, as I  checked out my favorite places to cruise for business news/gossip, I caught a post on the unofficial biggest thorn in Wall Street’s side, Zero hedge.  In it, pseudonymous Tyler Durden let fly with the musical question:  Did Paulson have a $2 billion Bear Stearns CDS short in late 2006?

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Trading Gremlins

April 30, 2010

They’re back!

Those pernicious gremlins that watch me trade.  I’m sure you know them, too.

If I want to buy a stock, they flash an attractive price on my screen, only to snatch it away before I can enter the buy order.  If I add a few pennies to my bid, they dangle the stock just a bit higher for the next ten minutes, only filling my order if I really, really won’t chase it.

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I’ll Be Listening

April 29, 2010

I tried to add to an already-oversized ANH position today ahead of the conference call that starts an hour after the close.

I have a suspicion that their low leverage and preference for ARMs will serve them better than expected in what was a tough quarter to trade.

Certainly the buyouts by Freddie in March, and the coming buyouts of bad loans by Fannie over the next few months will hit their book value a little, but the market seems to be forgetting that they assumed a faster prepay rate than has actually occurred.

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Dendreon Payoff

April 29, 2010

It finally happened, after years and tens of thousands of deaths that might have been delayed or avoided.

But as late as two days ago, the Dendreon bears were still getting their reporter mouthpieces to put out negative press, as usual, without thinking about what they were printing.

Why is it that so many people reporting on investment topics print stories they get without finding out whether the story makes sense?

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Tail Wags Dog – Again

April 28, 2010

Today is the launch of the Primex index of credit default swaps on prime “jumbo” mortgage-backed securities.  This index was ready to go in late 2007, but got delayed after the damage its junkier cousin, the ABX, did to the dealers, and to the MBS issuers.

Reading the commentary on the launch, I found myself muttering “What kind of economic theory would say that existence of a liquid, visible hedge instrument should make the value of the underlying market sector decline?”

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amREIT Lesson

April 27, 2010

My friend Dan, a veteran of the last round of amREIT wars, posted a nice piece that reminds us that humility is sometimes the most important lesson the market teaches us.

With permission, I repost it here.

Is Any One Bear Smarter than the Market? —

A long long time ago in a place far far away (that I would prefer to forget), there were two agency mREITs. The first REIT was very conservative in its projections and stated the risks to the strategy very clearly.

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The Biggest Lie

April 27, 2010

It’s hard to pick the biggest lie when the room is full of politicians and investment bankers defending their actions.

My personal nomination is for Mr. Sparks (head of mortgages at Goldman) with this gem:

“At the time we did those deals, we expected the deals to perform.”

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