Today the Fed's FOMC meets to consider the stance on interest rates. Our models have been recalibrated and predict that the Fed will cut the rates by 25 basis points.
GS is on the rise opening at $241 and currently trading at $245.
Our models indicate the housing market will continue being a drag on the economy. Actually Target (TGT) and Wal-Mart (WMT) are new variable we have extrapolated and applied a Kalman filter to the data set and determined that BAC, TGT and WMT are accurate predictors of the consumer sentiment in the economy.
Our models show that California, Ohio are already in a recession with no relief in sight due to the slow down in the building market. Because of the multiplier effect housing has a disproportionate effect on the economy.
A recent article in the Atlanta Business Chronicle stated that 16 of the largest 50 businesses in Metro Atlanta were in the building trades. That is 32% of the businesses are associated with building and construction. Clearly if building slows in Atlanta, the economy will be severely affected.
Our models indicate that because building, residential and commercial, are so vital to the economy we have conducted a study where the results indicted that the building sector must go on regardless of the salability of the finished product.
Oil is up to $94.00 per barrel indicating that the dollars will weaken implying that the Fed will cut rates. As we have reported here in earlier posts, is that as the dollar weakens, import prices, i.e., oil, increases creating inflation in the U.S.
Because of the inflation threat, the Fed can lower interest rates only so far before inflation overtakes any benefits of the low interest rates.
Global Interest Rate Models:
We are developing a model where we will be able to accurately predict global interest rate policies and make accurate determination of the timing of the policies and take advantage of the policy forecasts.
Wednesday, October 31, 2007
GOIH Capital Markets: Fed's FOMC Meeting
Tuesday, October 30, 2007
GOIH Capital Markets: Update
We have during the last several days recalibrated our quantitative models pending the FOMC meeting on October 31, 2007. We will post tonight with our view of the market and our view pending the Fed's meeting on Wed.
We see a move by the Fed to lower the Fed's Fund rate by 25-50 basis points. Notice that GS has made a new high this week in advance of the meeting of $245. Which we believe is a proxy for the Fed's move.
We have developed several new predictive models for revenue projection of the S&P 500 industry sectors and option market strategies. We will begin posting later this week with the results of the new models.
We see a move by the Fed to lower the Fed's Fund rate by 25-50 basis points. Notice that GS has made a new high this week in advance of the meeting of $245. Which we believe is a proxy for the Fed's move.
We have developed several new predictive models for revenue projection of the S&P 500 industry sectors and option market strategies. We will begin posting later this week with the results of the new models.
Wednesday, October 24, 2007
Bank of America to cut 3,000 jobs
We see this as a sure sign to short BAC because the revenue generated from IB cannot be easily replaced since BAC cannot acquire anymore deposits because it is already at the 10% level.
Bank of America to cut 3,000 jobs
Bank to review investment banking unit, shake up management
By Alistair Barr, MarketWatch
Last Update: 6:42 PM ET Oct 24, 2007
SAN FRANCISCO (MarketWatch) -- Bank of America said late Wednesday that it is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Gene Taylor, head of Global Corporate and Investment Banking, will retire at the end of this year and be replaced by Brian Moynihan, who currently runs the company's Global Wealth and Investment Management business.
Most of the job cuts will be from Bank of America's (BAC bank of america corporation com
BAC) investment banking unit, it said. Those reductions represent less than 2% of the company's staff. Business Lending, Treasury Services and Capital Markets and Advisory Services, as well as supporting infrastructure, will be affected, the bank said.
Bank of America reported a 31% drop in third-quarter profit last week as trading losses and a hit from loans backing leveraged buyouts nearly wiped out the company's investment-banking income. See full story.
After that hit, Chief Executive Ken Lewis said the bank would probably cut back, adding, "I've had all the fun I can stand in investment banking at the moment."
Many other banks have also been hit hard by this summer's credit crisis, which caused mortgage markets and leveraged buyouts to grind almost to a halt. Merrill Lynch (MER
MER) reported its first quarterly loss in about six years on Wednesday after writing down almost $8 billion from exposures to collateralized debt obligations and subprime mortgages. See full story.
Bank of America is mainly a large retail bank and commercial lender. But it has been expanding into investment banking in recent years. On Wednesday, Lewis said the company wasn't pulling back completely from capital markets and investment banking.
Bank of America remains "committed to providing our commercial, corporate and institutional clients with the financial products and services they need to run their organizations effectively," he said in a statement.
Keith Banks, president of Columbia Management, Bank of America's asset management business, will replace Moynihan as president of Global Wealth and Investment Management, the company said. His successor will be named shortly, it added.
Bank of America shares slipped 30 cents to $47.48 on Wednesday. The stock is down about 11% so far this year
Bank of America to cut 3,000 jobs
Bank to review investment banking unit, shake up management
By Alistair Barr, MarketWatch
Last Update: 6:42 PM ET Oct 24, 2007
SAN FRANCISCO (MarketWatch) -- Bank of America said late Wednesday that it is cutting roughly 3,000 jobs and launching a strategic review of its investment banking business after recent poor performance from the unit.
Gene Taylor, head of Global Corporate and Investment Banking, will retire at the end of this year and be replaced by Brian Moynihan, who currently runs the company's Global Wealth and Investment Management business.
Most of the job cuts will be from Bank of America's (BAC bank of america corporation com
BAC) investment banking unit, it said. Those reductions represent less than 2% of the company's staff. Business Lending, Treasury Services and Capital Markets and Advisory Services, as well as supporting infrastructure, will be affected, the bank said.
Bank of America reported a 31% drop in third-quarter profit last week as trading losses and a hit from loans backing leveraged buyouts nearly wiped out the company's investment-banking income. See full story.
After that hit, Chief Executive Ken Lewis said the bank would probably cut back, adding, "I've had all the fun I can stand in investment banking at the moment."
Many other banks have also been hit hard by this summer's credit crisis, which caused mortgage markets and leveraged buyouts to grind almost to a halt. Merrill Lynch (MER
MER) reported its first quarterly loss in about six years on Wednesday after writing down almost $8 billion from exposures to collateralized debt obligations and subprime mortgages. See full story.
Bank of America is mainly a large retail bank and commercial lender. But it has been expanding into investment banking in recent years. On Wednesday, Lewis said the company wasn't pulling back completely from capital markets and investment banking.
Bank of America remains "committed to providing our commercial, corporate and institutional clients with the financial products and services they need to run their organizations effectively," he said in a statement.
Keith Banks, president of Columbia Management, Bank of America's asset management business, will replace Moynihan as president of Global Wealth and Investment Management, the company said. His successor will be named shortly, it added.
Bank of America shares slipped 30 cents to $47.48 on Wednesday. The stock is down about 11% so far this year
GOIH Capital Markets: Market Update
Merrill Lynch is taking it on the chin today after the conference call where the CEO was interviewed. Merrill will write off $8.4 billion in bad securities. MER is down 4.13% in trading.
WMT is down again today trading at $43.50. WMT is down from $47.59 in the last 10 trading days.
ETFC is down again today trading at $10.47.
AMTD down $18.49.
BAC down to $46.72.
C down $41.53.
The Dow is down 202 points
WMT is down again today trading at $43.50. WMT is down from $47.59 in the last 10 trading days.
ETFC is down again today trading at $10.47.
AMTD down $18.49.
BAC down to $46.72.
C down $41.53.
The Dow is down 202 points
GOIH Capital Markets: APPL, GOOG Positions Exited.
GOOG exited @ $670.00.
APPL exited @ $185.00.
We will re-enter these positions after the marker volatility subsides.
APPL exited @ $185.00.
We will re-enter these positions after the marker volatility subsides.
GOIH Capital Markets: Economic Report
Our quantitative models are indicating a short fall in tax revenue due to the subprime credit crisis. We programmed our models to search for an anomaly in revenue to taxing authorities and the results are as follows. Because the consumer is under a full scale assault, consumer discretionaries, where sales taxes are charged are in decline. See (Wal-mart) WMT and (Target) TGT estimates for growth. The consumer is restricting their purchases to consumer essentials, i.e., groceries and staples, where sales taxes usually not collected; hence taxing authorities are seeing a decline in revenue and will have to go into the debt market to raise short term financing.
Also because of the large number of foreclosures, property tax revenue is in a decline causing further pressure on taxing authorities.
GOIH Capital Markets: Investment Banking News
Merrill Lynch Posts Wide Loss,Discloses Bigger Write-Downs
By KEVIN KINGSBURYOctober 24, 2007 8:15 a.m.
Merrill Lynch & Co. swung to a wider-than-projected third-quarter net loss because of $7.9 billion in write-downs on collateralized debt obligations and subprime mortgages.
Merrill had warned earlier this month that it would post a net loss of up to 50 cents a share because of writing down $4.5 billion in collateralized debt obligations and subprime mortgages and recording a net $463 million on leveraged finance commitments.
But the CDO and subprime write-downs were much higher than that and even above that of some analysts who were projecting Merrill to record write-downs at or above $7 billion. CDOs are pools of debt instruments, such as bonds or loans, that are repackaged into different slices carrying various levels of risk, then sold to investors. The company previously noted it "significantly reduced" its exposure to those products during the quarter.
The investment bank reported a net loss of $2.24 billion, or $2.82 a share, compared with year-earlier net income of $3.05 billion, or a $3.17 share, which includes a $1.1 billion gain from merging its money-management operations with BlackRock Inc.
The period's results also included a $967 million, or $463 million including underwriting fees, of write-downs on loans related to leveraged buyouts. Merrill had said the write-downs were limited by "aggressive and effective risk management."
Chairman and Chief Executive Stan O'Neal said the company re-examined its remaining CDO positions "with more conservative assumptions," resulting in the write-down size soaring.
He added, "We expect market conditions for subprime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions. Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year."
1 MORE ON EARNINGS
• Cheat Sheets:2 Bone up on what to expect from major companies as they report quarterly earnings.
• Subpar Scorecard:3 How housing slump, credit crunch are hitting profits.MORE ON MERRILL
• Listen in on Merrill Lynch's third quarter earnings conference call4, 10 a.m. Eastern.
• Merrill Loss May Be Wider Than Projected510/24/07
• Page One: Merrill Write-Down Exposes Divide610/06/07
• Merrill Cleans Fixed-Income House710/04/07
In the third quarter, Merrill cut its exposure to CDO-related asset-backed securities by 53% to $15.2 billion from the end of the second quarter. U.S. subprime-related exposure was cut 35% during the quarter to $5.7 billion.
Outside of the impacts for the investment bank's fixed income, currencies and commodities business, Merrill had projected revenue rising at least 20% in its equity-markets, investment-banking and wealth-management operations.
Overall revenue tumbled 94% to $577 million. The firm's global-markets and investment-banking, or GMI, operations recorded negative revenue of $2.98 billion and a pretax loss of $4.44 billion because of the write-downs.
The weakness in Merrill's fixed-income business was highlighted with the ouster earlier this month of the company's global head of fixed income, Osman Semerci, as well as his deputy, Dale Lattanzio, co-head of fixed income for the Americas. The firm also showed the door to their former boss, Dow Kim, the former co-head of institutional securities.
Equity-market revenue climbed 4% to $1.58 billion and investment-banking revenue increased 23% to $1.01 billion on merger-advisory growth.
Revenue at Merrill's global wealth management business, which includes the company's retail brokerage and nearly 50% stake in investment manager BlackRock, jumped 29% to $3.54 billion as pretax earnings from continuing operations soared 70% to $953 million amid record fee-based revenue.
The write-downs follow those made in the latest quarter by Merrill's investment-banking peers in September. This month, the nation's largest retail banks also recorded billions of dollars in write-down and increased credit-loss reserves in part because of the summer credit crunch.
The result will be pressure on Mr. O'Neal, who ousted two top bond executives three weeks ago when the extent of the losses became apparent, to make further changes.
Among those whose roles in the losses are likely to come under greater scrutiny will be Co-President Ahmass L. Fakahany, who backed the appointment in mid-2006 of the bond-management team that generated the losses, and Chief Financial Officer Jeff Edwards, who played a role in oversight of the valuation and risk levels of the firm's holdings.
Mr. O'Neal's own job could be in jeopardy depending on the actions he takes to reassure Merrill's board, which met over the past weekend, that his understanding and management of the firm's risk levels has improved. At the end of July, with a midsummer credit crunch under way, he sent a memo to reassure Merrill employees that the firm's risk level was under control.
Tuesday, October 23, 2007
GOIH Capital Markets--AAPL 200,000 more @$182.76 total 400,000 shares.
GOIH Capital Markets--AAPL 200,000 more @$182.76 total 400,000 shares. Sell stop entered @ $181.25.
GOIH Capital Markets: Quantitative Finance Theory ---Apple and Google up sharply.
Our Quantitative Finance Group (QFG) correctly predicted based on our in-house developed stochastic models and based on a Monte Carlo dynamic programming using the results of a Game Theory simulation as the input variable the direction of both Google and Apple. Our simulation receives proprietary data from HS Econometrics & Financial Theory which we process through a filtering mechanism before input into our models.
Last Friday on the close we picked up 200,000 shares of AAPL and also last week acquired 600,000 shares of Google at an avg. price of $648.25 and Apple at $170.44 per share. In the premarket GOOG is trading at $661.75 and Apple at a new all-time high of $187.40
We have received an overwhelming number of questions concerning how we are able to correctly predict the macro and micro structure of the market. Our answer is our QFG group uses revolutionary techniques on the frontiers of knowledge in the fields of behavioral finance, economic finance theory, macro-economics, and dynamic stochastic econometrics.
In particular our staff has uncovered several errors in the traditional market metrics which are used to price most of the S&P 500 market sectors as well as most of the companies listed in the S&P 500 Index. These errors were most likely the source of the subprime credit crisis as well as most likely the source of several hedge fund implosions.
We believe there are fundamental errors in the models of most of the Wall Street investment banks quantitative finance systems which under a period of market stress, the models give inaccurate results, and the models are subject to manipulation.
The models contain several inflections points based on the current knowledge base in financial theory, and which when designed with those inflection points leads to inaccurate predictions under what would be statistically considered as a 4 sigma event, when in actuality the event is more likely a 2 sigma event leading the large investment banks to think their position is hedged, when the position is really exposed and subject to being manipulated by those that know where the inflection points are located.
We have staff trained in the above disciplines and we utilized the latest in advanced dynamic programming using the global economic markets as isolated variables for our models.
Our models are calibrated using a modified filtered data set derived from more than 10 separate sources primarily sourced through HS Financial Data and Econometrics.
We consult with tax specialists, economists, programmers, legal specialists, financial theorists, and psychologists that design and develop our quantitative models and make our market predictions.
Last Friday on the close we picked up 200,000 shares of AAPL and also last week acquired 600,000 shares of Google at an avg. price of $648.25 and Apple at $170.44 per share. In the premarket GOOG is trading at $661.75 and Apple at a new all-time high of $187.40
We have received an overwhelming number of questions concerning how we are able to correctly predict the macro and micro structure of the market. Our answer is our QFG group uses revolutionary techniques on the frontiers of knowledge in the fields of behavioral finance, economic finance theory, macro-economics, and dynamic stochastic econometrics.
In particular our staff has uncovered several errors in the traditional market metrics which are used to price most of the S&P 500 market sectors as well as most of the companies listed in the S&P 500 Index. These errors were most likely the source of the subprime credit crisis as well as most likely the source of several hedge fund implosions.
We believe there are fundamental errors in the models of most of the Wall Street investment banks quantitative finance systems which under a period of market stress, the models give inaccurate results, and the models are subject to manipulation.
The models contain several inflections points based on the current knowledge base in financial theory, and which when designed with those inflection points leads to inaccurate predictions under what would be statistically considered as a 4 sigma event, when in actuality the event is more likely a 2 sigma event leading the large investment banks to think their position is hedged, when the position is really exposed and subject to being manipulated by those that know where the inflection points are located.
We have staff trained in the above disciplines and we utilized the latest in advanced dynamic programming using the global economic markets as isolated variables for our models.
Our models are calibrated using a modified filtered data set derived from more than 10 separate sources primarily sourced through HS Financial Data and Econometrics.
We consult with tax specialists, economists, programmers, legal specialists, financial theorists, and psychologists that design and develop our quantitative models and make our market predictions.
Monday, October 22, 2007
GOIH Capital Markets: AAPL Beats estimates and rises 7% in after market.
GOIH Capital Markets: AAPL Beats estimates and rises 7% in after market. As we predicted AAPL beat the consensus estimates and is trading up about 7% in the aftermarket.
Our quantitative models using a proprietary algorithm developed inhouse by our quantitative finance group, will be integrated into the curriculum of the G1 Management Institute and the Quantitative Finance Curriculum.
GOIH is establishing a fixed income, currency, and commodities unit, (FICC) to trade off the proprietary algorithms developed by our Quantitative Finance Group.
AAPL is currently trading at $186.00 and GOOG is trading at $658.55, and GS is trading at $222.53
Our mark to market:10-22-07
AAPL: 186.00- $170.42 = $16 per share x 200,000= $3,200,000 profit.
GOOG: $658.55- 644.71= $13.84 per share x 200,000= $2.768 million.
Our quantitative models using a proprietary algorithm developed inhouse by our quantitative finance group, will be integrated into the curriculum of the G1 Management Institute and the Quantitative Finance Curriculum.
GOIH is establishing a fixed income, currency, and commodities unit, (FICC) to trade off the proprietary algorithms developed by our Quantitative Finance Group.
AAPL is currently trading at $186.00 and GOOG is trading at $658.55, and GS is trading at $222.53
Our mark to market:10-22-07
AAPL: 186.00- $170.42 = $16 per share x 200,000= $3,200,000 profit.
GOOG: $658.55- 644.71= $13.84 per share x 200,000= $2.768 million.
GOIH Capital MArkets--Options Market Activity
Our quantitative finance models focusing on the implied volatility of the options markets are showing a 6-8% up move in APPL after the announcement of earnings.
GOIH Capital Markets: APPL sell stop entered @$169.25
GOIH Capital Markets: APPL sell stop entered @$169.25
GOIH Capital Markets
Both GS and GOOG are trading up in the market today. GS is up from $213 to $223.86 and GOOG is up from $638 to $651.26.
We are monitoring AAPL for close of market movement.
Closely watch ETFC for a short position.
We are monitoring AAPL for close of market movement.
Closely watch ETFC for a short position.
GOIH Capital Markets: Market Overview
We picked up 200,000 Goldman Sachs on the open today @ $213.00 and will hold for short term trading profits. We added to our GOOG position as well as the AAPL position. Our models indicated that GOOG will trade to $770 and AAPL will trade to $220. Currently we are in GOOG for 600,000 shares GOOG is up $6.50 and AAPL is up $3.41 in trading today in a weak market. AAPL reports earnings after the bell today.
Volatility is back in the market making for an ideal trading environment.
We are hearing rumors that the credit markets are in for a major shock in the next 60 days.
Our models have identified several market sectors where based on proprietary algorithms indicate a market outperform in the current environment. Technology is especially strong and international exporting due to the weak dollar.
Volatility is back in the market making for an ideal trading environment.
We are hearing rumors that the credit markets are in for a major shock in the next 60 days.
Our models have identified several market sectors where based on proprietary algorithms indicate a market outperform in the current environment. Technology is especially strong and international exporting due to the weak dollar.
Saturday, October 20, 2007
GOIH Capital Markets: FOMC October Meeting
The FOMC meets again on Oct. 31, 2007 to assess the markets and determine if another rate cut is needed by the economy. If the Fed does cut rates as the market is pricing in with a 72% chance of a rate cut, then the dollar is going to fall further and oil and gold will rise further. With all of the favored financial sector firm reporting misses this week, i.e., BAC, C, JPM, MER, the same as in August when the credit crunch hit home, the Fed might move before the FOMC meeting as it did last time with a cut in the discount rate.
Something big is going to happen in the remainder of 2007. A major financial crisis is in the brewing and no one seems to know how to fix the mess.
Something big is going to happen in the remainder of 2007. A major financial crisis is in the brewing and no one seems to know how to fix the mess.
Bank of America's Miss Indicates Broader Economic Woes
The below article was sourced from Seeking Alpha: Philip Davis.
BAC missed!
Bank of America Corp.’s third-quarter net income fell 32% from a year ago as trading losses, write-downs on a wide variety of loans and soaring reserves for likely future loan losses undermined profit, financial results showed Thursday. The last of the nation’s top three banks to report results this week, the company chalked up big charges due to credit-related turmoil, suggesting that the problems in the credit market may yet be closer to the beginning than to the end.
Oh dear! As I mentioned in last night’s post, we saw this coming yesterday as C and FITB were signaling problems, even as I was incredulous earlier in the morning that the markets in general were glossing over the disastrous report by TMA.
The BAC report certainly indicates something is breaking down in our economy, as profits dropped 32% for the quarter as the bank had to double their provisions for credit losses to $2.03Bn. That’s a lot of money, people! While BAC may be able to find a billion dollars by simply turning over the cushions on the couch, I will say again that the regional and local banks are not likely to be as lucky and we may be looking at a series of misses in that sector.
22 analysts, who are paid big money to follow this bank for a living, had thought the bank would earn $1.05 a share, they were wrong by 22% (.82 was expected)! Not one of these Bozos has a sell on this Bank, which is trading just 5% off it’s all-time high.
This puts the Fed back on the table, which will send the dollar to new all-time lows (it finished yesterday at 78.09) and should reignite our gold plays, which we’ve been pressing during the recent downturn.
Oil should get a lift today on the declining dollar, but between BAC and the Beige Book, the majors have nothing to celebrate as the greedy energy industry has finally broken the consumer’s back and will now begin to reap what they have sown in the form of demand destruction.
BAC missed!
Bank of America Corp.’s third-quarter net income fell 32% from a year ago as trading losses, write-downs on a wide variety of loans and soaring reserves for likely future loan losses undermined profit, financial results showed Thursday. The last of the nation’s top three banks to report results this week, the company chalked up big charges due to credit-related turmoil, suggesting that the problems in the credit market may yet be closer to the beginning than to the end.
Oh dear! As I mentioned in last night’s post, we saw this coming yesterday as C and FITB were signaling problems, even as I was incredulous earlier in the morning that the markets in general were glossing over the disastrous report by TMA.
The BAC report certainly indicates something is breaking down in our economy, as profits dropped 32% for the quarter as the bank had to double their provisions for credit losses to $2.03Bn. That’s a lot of money, people! While BAC may be able to find a billion dollars by simply turning over the cushions on the couch, I will say again that the regional and local banks are not likely to be as lucky and we may be looking at a series of misses in that sector.
22 analysts, who are paid big money to follow this bank for a living, had thought the bank would earn $1.05 a share, they were wrong by 22% (.82 was expected)! Not one of these Bozos has a sell on this Bank, which is trading just 5% off it’s all-time high.
This puts the Fed back on the table, which will send the dollar to new all-time lows (it finished yesterday at 78.09) and should reignite our gold plays, which we’ve been pressing during the recent downturn.
Oil should get a lift today on the declining dollar, but between BAC and the Beige Book, the majors have nothing to celebrate as the greedy energy industry has finally broken the consumer’s back and will now begin to reap what they have sown in the form of demand destruction.
Friday, October 19, 2007
GOIH Capital Markets: 200,000 more GOOG on the close, 200,000 AAPL on the close.
GOIH Capital Markets: 200,000 more GOOG on the close, 200,000 AAPL on the close.
GOIH Capital Markets---The Return of Volatility
Volatility is back with a bang. The market is swinging wildly currently with a 300 pt loss. See Merrill Lynch (MER) down from $76 to $66 in the last 10 days. GS down from $238 to $219 in the last 10 days.....
GOIH Global Economic Analysis:IMF Badmouths The Dollar In Open Attack On American Middle Class
IMF Badmouths The Dollar In Open Attack On American Middle Class
Paul Joseph WatsonPrison PlanetFriday, October 19, 2007
Mirroring recent rhetoric from Alan Greenspan, Ben Bernanke and Henry Paulson, the IMF has publicly badmouthed the dollar, claiming it is “overvalued” despite the fact it has lost over half of its value against the Euro since 2001, and predicts its plunge as part of a broader strategy to sink the American middle class.
Countering the pleas of the French and other eurozone countries, who have been forced to beg Bernanke to restore some trust in the greenback as EU exports begin to feel the bite, the IMF has openly and enthusiastically given the green light for traders to continue to sell the dollar.
“The Fund thinks that the US current account deficit will remain close to 1.5 per cent of world output until 2012, raising the likelihood of a disorderly plunge in the dollar and protectionism growing over the next few years,” reports the Financial Times.
n their World Economic Outlook brief, the IMF brazenly states that the agenda in continually badmouthing the dollar is to exalt the Chinese Renminbi in order to contribute to “a necessary rebalancing of demand and to an orderly unwinding of global imbalances.”
In layman’s terms, this means lowering the living standards of the American middle class by tanking the dollar and sending oil prices skyrocketing towards $200, as part of the “post-industrial revolution” agreed upon by the Bilderberg Group. This would eviscerate the middle class and create a two-caste system based upon the Chinese model, where the super-rich live in opulence and the rest of the population are forced to struggle on the poverty line.
With the effects of the credit crunch hitting more and more lower level lenders, it is clear to see that the fallout is spreading and propagating a general decline. We are seeing the unfolding of an overall meltdown that represents a gutting of the United States by neo-mercantilist institutions bent on the formation of a new global monopoly.
The ceaseless bad-mouthing of the dollar in public is clearly part of an orchestrated move to destroy the U.S. economy and pave the way for the Euro to become the world’s reserve currency, eventually heralding the birth of the Amero - the currency of the North American Union.
Former Fed Chairman Alan Greenspan has also been active trashing the greenback over the last two months, in September stating that the Euro would replace the dollar as the global reserve currency of choice.
Also last month, Congressman Ron Paul slammed Federal Reserve Chairman Ben Bernanke for deliberately depreciating the value of the dollar to artificially bail out Wall Street while poor and middle class people lose their homes and have their living standards lowered
Paul Joseph WatsonPrison PlanetFriday, October 19, 2007
Mirroring recent rhetoric from Alan Greenspan, Ben Bernanke and Henry Paulson, the IMF has publicly badmouthed the dollar, claiming it is “overvalued” despite the fact it has lost over half of its value against the Euro since 2001, and predicts its plunge as part of a broader strategy to sink the American middle class.
Countering the pleas of the French and other eurozone countries, who have been forced to beg Bernanke to restore some trust in the greenback as EU exports begin to feel the bite, the IMF has openly and enthusiastically given the green light for traders to continue to sell the dollar.
“The Fund thinks that the US current account deficit will remain close to 1.5 per cent of world output until 2012, raising the likelihood of a disorderly plunge in the dollar and protectionism growing over the next few years,” reports the Financial Times.
n their World Economic Outlook brief, the IMF brazenly states that the agenda in continually badmouthing the dollar is to exalt the Chinese Renminbi in order to contribute to “a necessary rebalancing of demand and to an orderly unwinding of global imbalances.”
In layman’s terms, this means lowering the living standards of the American middle class by tanking the dollar and sending oil prices skyrocketing towards $200, as part of the “post-industrial revolution” agreed upon by the Bilderberg Group. This would eviscerate the middle class and create a two-caste system based upon the Chinese model, where the super-rich live in opulence and the rest of the population are forced to struggle on the poverty line.
With the effects of the credit crunch hitting more and more lower level lenders, it is clear to see that the fallout is spreading and propagating a general decline. We are seeing the unfolding of an overall meltdown that represents a gutting of the United States by neo-mercantilist institutions bent on the formation of a new global monopoly.
The ceaseless bad-mouthing of the dollar in public is clearly part of an orchestrated move to destroy the U.S. economy and pave the way for the Euro to become the world’s reserve currency, eventually heralding the birth of the Amero - the currency of the North American Union.
Former Fed Chairman Alan Greenspan has also been active trashing the greenback over the last two months, in September stating that the Euro would replace the dollar as the global reserve currency of choice.
Also last month, Congressman Ron Paul slammed Federal Reserve Chairman Ben Bernanke for deliberately depreciating the value of the dollar to artificially bail out Wall Street while poor and middle class people lose their homes and have their living standards lowered
GOIHCapital Markets: Market outperformers---APPL, GOOG
Our quantitative finance models have found the following market outperformers in a severe down market. Both APPL, and GOOG are holding the line in the market today. We are loading up on GOOG and AAPL. Once the market correction is completed, both GOOG and AAPL will take off according to our proprietary models.
Our models indicate GOOG trading to $770 and AAPL trading to $220.
Our models indicate the call options on both GOOG and AAPL for 60 days with the current implied volatility.
Our models indicate GOOG trading to $770 and AAPL trading to $220.
Our models indicate the call options on both GOOG and AAPL for 60 days with the current implied volatility.
GOIH Capital Markets: Investment Banking News---Wachovia Joins BofA in Investment-Banking Dog House
October 19, 2007, 8:13 am
Wachovia Joins BofA in Investment-Banking Dog House
Posted by Dana Cimilluca
Wachovia Joins BofA in Investment-Banking Dog House
Posted by Dana Cimilluca
Charlotte may wish it never heard the words “investment banking.”
First, Bank of America, headquartered in the North Carolina city, reported abysmal results yesterday, dragged down by a trading blow-up at its investment banking unit in New York. Then today Wachovia, BofA’s cross-town rival, reported another bleak set of results, courtesy of a big decline in earnings at its corporate and investment bank (to $105 million, from $533 million in the third quarter of 2006).
Nearly $600 million of the losses at Wachovia are thanks to commercial and consumer mortgage structured products, a business that has hurt a number of the Wall Street banks — but which BofA has pretty much stayed away from. And Wachovia doesn’t seem as embittered with the investment-banking business as BofA chief Ken Lews. Wachovia noted in its earnings release its “strong advisory and underwriting fees largely from structured products, merger and acquisition advisory services, and equities underwriting.”
Still, it’s not hard to imagine there will be a reckoning in the form of job cuts at both banks.Indeed, the Charlotte Observer speculates that the third quarter was a “defining moment” for Lewis, who might want to focus on the company’s massive consumer banking operation and put aside his long-held — and expensive — ambition to become a player in investment banking.
GOIH Capital Markets: Etrade Financial: Crisis in the making
ETFC is a crisis in the making. According to our indicators ETFC is the worse performing financial firm in the S&P 500 Financial Index. ETFC is down again today currently trading at $10.95.
GOIH Capital Markets: GOOG position added to by 200,000 @ $648.50 for a total of 400,000 shares
GOIH Capital Markets: GOOG position added to by 200,000 @ $648.50 for a total of 400,000 shares.
GOIH Capital Markets: Stocks Point to Uneven Start.
Stocks Point to Uneven Start
A WALL STREET JOURNAL ONLINE NEWS ROUNDUPOctober 19, 2007 9:05 a.m.
Stock futures were mixed Friday after oil prices hovered near $90 a barrel and the dollar hit another low against the euro, though technology stocks could gain after Google's strong results.
About an hour before the start of trading, Dow Jones Industrial Average futures had fallen 50 to 13890. S&P 500 futures lost 6.1 to 1540.7, and Nasdaq 100 futures rose 3.75 to 2209.75. Changes in futures do not always accurately predict early market moves after the opening bell.
Crude-oil futures briefly touched a new high -- $90.02 a barrel -- in electronic trading as the weak dollar, Iraq supply fears and a bomb attack on the former prime minister of Pakistan all helped push prices higher.
The euro hit a new all-time high against the dollar Friday, breaking through the previous record, set a day earlier, as the U.S. currency remained under pressure. In morning European trading, the euro bought $1.4319 -- surpassing the mark of $1.4310 set Thursday -- before settling back slightly to $1.4306.
A WALL STREET JOURNAL ONLINE NEWS ROUNDUPOctober 19, 2007 9:05 a.m.
Stock futures were mixed Friday after oil prices hovered near $90 a barrel and the dollar hit another low against the euro, though technology stocks could gain after Google's strong results.
About an hour before the start of trading, Dow Jones Industrial Average futures had fallen 50 to 13890. S&P 500 futures lost 6.1 to 1540.7, and Nasdaq 100 futures rose 3.75 to 2209.75. Changes in futures do not always accurately predict early market moves after the opening bell.
Crude-oil futures briefly touched a new high -- $90.02 a barrel -- in electronic trading as the weak dollar, Iraq supply fears and a bomb attack on the former prime minister of Pakistan all helped push prices higher.
The euro hit a new all-time high against the dollar Friday, breaking through the previous record, set a day earlier, as the U.S. currency remained under pressure. In morning European trading, the euro bought $1.4319 -- surpassing the mark of $1.4310 set Thursday -- before settling back slightly to $1.4306.
GOIH Capital Markets: New Position in GOOG @ $650 for 200,000 shares
GOIH Capital Markets: New Position in GOOG @ $650 for 200,000 shares. Will hold for trading profits.
Thursday, October 18, 2007
GOIH Capital Markets: GOOG position exited @ $645.00 in after market
GOIH Capital Markets: GOOG position exited @ $645.00 in after market.
Profit 100,000 shares @ $15.00 per share= $1,500,000.
Profit 100,000 shares @ $15.00 per share= $1,500,000.
GOIH Capital Markets: GOOG Position--100,000 @ $630
We have a taken a position in GOOG @ $630 for 100,000 shares pending earnings announcement today. Sell stop entered at $635.00.
GOIH Capital Markets: Investment Banking News
NEW YORK -- Bank of America Corp. posted a 32% drop in third-quarter net income amid a dismal performance by its investment bank and higher reserves to cover potential bad loans.
The combination of more than $1.4 billion in trading losses in its investment bank and about $2 billion in provisions for credit losses pushed the Charlotte-based bank's third-quarter profits down to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier. Revenue fell 12% to $16.3 billion. It was the first time since late 2005 that Bank of America has failed to boost its year-over-year profits.
Bank of America's investment bank was at the center of the quarter's weakness. The trading losses, in addition to about $247 million in write-downs on the bank's portfolio of leveraged loans, essentially wiped out the division's profits, which fell 93% to $100 million. The losses were concentrated in credit and structured products. The investment bank also suffered from a slowdown in underwriting fees.
Bank of America was hardly alone in suffering from poor investment-banking results in the third quarter. Across Wall Street, banks took multibillion-dollar hits due to the diminished values of leveraged loans and mortgage assets that they couldn't get off their balance sheets, and in some cases their traders struggled to navigate choppy credit and equity markets.
Joe Price, Bank of America's chief financial officer, said that the trading losses were largely a result of hedges that didn't work as intended. Most of the losses stemmed from trades the bank was executing on behalf of clients, although the bank's traders also placed a "couple" of their own bad directional bets, Mr. Price said.
In Bank of America's giant consumer unit, which includes the nation's biggest credit-card business and bank-branch network, revenue was up 6.2% to $11.99 billion and earnings dropped 16% to $2.45 billion. Earnings were hurt by higher managed credit costs.
But weakening credit quality took a toll, as the bank was forced to set aside more funds to cover bad loans. Net charge-offs held basically steady, but non-performing assets -- troubled loans that could turn into charge-offs -- jumped to $3.37 billion, or 0.43% of loans, from $2.39 billion, or 0.32%, in the second quarter.
The combination of more than $1.4 billion in trading losses in its investment bank and about $2 billion in provisions for credit losses pushed the Charlotte-based bank's third-quarter profits down to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier. Revenue fell 12% to $16.3 billion. It was the first time since late 2005 that Bank of America has failed to boost its year-over-year profits.
Bank of America's investment bank was at the center of the quarter's weakness. The trading losses, in addition to about $247 million in write-downs on the bank's portfolio of leveraged loans, essentially wiped out the division's profits, which fell 93% to $100 million. The losses were concentrated in credit and structured products. The investment bank also suffered from a slowdown in underwriting fees.
Bank of America was hardly alone in suffering from poor investment-banking results in the third quarter. Across Wall Street, banks took multibillion-dollar hits due to the diminished values of leveraged loans and mortgage assets that they couldn't get off their balance sheets, and in some cases their traders struggled to navigate choppy credit and equity markets.
Joe Price, Bank of America's chief financial officer, said that the trading losses were largely a result of hedges that didn't work as intended. Most of the losses stemmed from trades the bank was executing on behalf of clients, although the bank's traders also placed a "couple" of their own bad directional bets, Mr. Price said.
In Bank of America's giant consumer unit, which includes the nation's biggest credit-card business and bank-branch network, revenue was up 6.2% to $11.99 billion and earnings dropped 16% to $2.45 billion. Earnings were hurt by higher managed credit costs.
But weakening credit quality took a toll, as the bank was forced to set aside more funds to cover bad loans. Net charge-offs held basically steady, but non-performing assets -- troubled loans that could turn into charge-offs -- jumped to $3.37 billion, or 0.43% of loans, from $2.39 billion, or 0.32%, in the second quarter.
For B of A’s Lewis, Investment Banking Is a 4-Letter Word
For BofA’s Lewis, Investment Banking Is a 4-Letter Word
Posted by Dana Cimilluca
For Ken Lewis, the investment-banking bash of 2007 has definitely come to an end.
Ken Lewis
Here is what Lewis, the CEO of Bank of America, had to say on the company’s conference call to discuss its third-quarter results about an acquisition or joint-venture deal to salvage the dismal performance at its investment-banking unit (where profit fell 93% to $100 million).
“I never say never, but I’ve had all the fun I can stand in investment banking at the moment.”
So much for the hopes of some investors that the company will make an acquisition (of a Bear Stearns, or a Lehman Brothers or UBS’s Wall Street unit) to once and for all get into the top tier of investment banks — and perhaps acquire some adult supervision for its trading operation along the way.
BofA is in an awkward position in investment banking. It still has a middling franchise, behind such puny rivals as Greenhill in the world-wide M&A business, for example (14th vs. 12th this year according to the Thomson Financial league tables). That even though it has spent years and hundreds of millions of dollars trying to build the business into a top-tier performer. To say nothing of the $1 billion tower it is erecting in midtown Manhattan.
Finance chief Joe Price last month said BofA would “continue to deliberately build our platform.” Now even that is in doubt, as layoffs loom large at the bank. For BofA’s investment bankers, the fun may be just beginning.
–With Valerie Bauerlein
Posted by Dana Cimilluca
For Ken Lewis, the investment-banking bash of 2007 has definitely come to an end.
Ken Lewis
Here is what Lewis, the CEO of Bank of America, had to say on the company’s conference call to discuss its third-quarter results about an acquisition or joint-venture deal to salvage the dismal performance at its investment-banking unit (where profit fell 93% to $100 million).
“I never say never, but I’ve had all the fun I can stand in investment banking at the moment.”
So much for the hopes of some investors that the company will make an acquisition (of a Bear Stearns, or a Lehman Brothers or UBS’s Wall Street unit) to once and for all get into the top tier of investment banks — and perhaps acquire some adult supervision for its trading operation along the way.
BofA is in an awkward position in investment banking. It still has a middling franchise, behind such puny rivals as Greenhill in the world-wide M&A business, for example (14th vs. 12th this year according to the Thomson Financial league tables). That even though it has spent years and hundreds of millions of dollars trying to build the business into a top-tier performer. To say nothing of the $1 billion tower it is erecting in midtown Manhattan.
Finance chief Joe Price last month said BofA would “continue to deliberately build our platform.” Now even that is in doubt, as layoffs loom large at the bank. For BofA’s investment bankers, the fun may be just beginning.
–With Valerie Bauerlein
GOIH Capital Markets: Market Overview
The market opened lower today based on the bad news issued by Bank of America (BAC) a Dow component. BAC missed its earnings estimates indicating a drag on consumer portion of the economy. BAC is the largest of the money center banks whose business model is tied to the retail consumer. BAC's earnings miss suggest as the other indicators suggest that the consumer is facing hard times and if Domino's Pizza reports that consumers are eating less pizza, the outlook is not bright. BAC reported over $717 million in trading losses in their investment banking division. BAC also added to loan loss reserves indicating more losses in the future. The earnings miss was reflected in the stock of BAC opening down sharply currently trading at $48.26. Given BAC trades with low volatility, the downward price is a tremendous blow to a Dow component.
Our GOIH's Quantitative Finance Group (QFG) has developed a proprietary Monte Carlo model based on the stochastic variables of housing starts, interest rates, an index composed of BAC, WMT, TGT, GM, HD, Crude Oil price, Dollar/Euro translation, and Dollar/Yen translation, as a predictor of economic activity in the domestic economy.
Our Quant staff is calibrating the model after the BAC earnings miss and we will have a list of investment opportunities based on the output of the model on Monday of next week, which we will report here.
Etrade (ETFC) is down again today based on horrible earnings. The market is punishing ETFC for their business practices.
Wednesday, October 17, 2007
GOIH Economic Report:Beige Book Summary
Beige Book Summary
The following is a district by district summary of economic conditions from the beige book report.
Boston: Mixed business conditions continued. Manufacturers generally reported solid demand growth, except for housing-related items. Retail results were varied. Residential real estate markets remained soft. Commercial real estate kept getting better on the rental side but softened on the investment side. Contacts mentioned price increases for selected inputs.
New York: The economy expanded at a moderate pace. Price pressures remained steady. The labor market has generally been stable and tight. Manufacturers report ongoing expansion in early October. Retailers indicated sales were on or below plan; New York City said sales have been relatively strong. Housing markets were mixed, with Manhattan firm and New Jersey and other areas soft. Office markets in the New York City area were steady to stronger.
Philadelphia: Business activity expanded in September. Manufacturers reported increases in new orders and shipments. Residential real estate demand remained weak. Firms reporting on labor costs generally noted a continuing trend of moderate increase in wages but several said increases in health care benefits costs were large. Firms reported increases in input costs and output prices in September.
Cleveland: The economy continued to grow but at a slower pace due mainly to weakening manufacturing output. Most homebuilders had a slight uptick in sales. Commercial construction was steady. Retail sales were flat to declining. Demand for business and consumer lending was steady or had increased slightly, reports showed. The mortgage market remained sluggish. Oil production was up slightly.Richmond: Economic activity continued to cool as housing market weakness persisted. Home sales remained sluggish and demand for mortgages softened further. Retail sales continued to pull back. Dry conditions curbed crop yields and delayed winter plantings. Assessments of other sectors were more upbeat. Hiring moderated, but factories added workers.
Atlanta: The economy remained mixed. Merchant sales were described as modestly higher. Vehicle sales improved for some fuel-efficient models but other sales were generally disappointing. Tourism reports were positive. Home sales and construction kept declining. Manufacturing slowed. There were indications of tighter mortgage lending standards and higher foreclosure rates. Florida contacts noted the overall pace of hiring had slowed. Reports on prices were mixed. Drought conditions hurt crops.
Chicago: The economy expanded modestly. Consumer and business spending rose. Residential construction fell. Household lending declined. Labor market conditions were mixed. Manufacturing growth held steady.
St. Louis: The economy expanded moderately. Reports from manufacturing contacts were generally positive and contacts indicated the services sector kept rising. Home sales and construction remained weak. Commercial real estate markets continued to be positive. Lending at a sample of small and medium banks rose from mid-June to mid-September.
Minneapolis: The economy grew modestly. There was expansion in tourism, services, manufacturing, energy, mining, and agriculture. Consumer spending and commercial real estate growth slowed. Residential real estate weakened. Employment growth was mixed. Overall wage increases were moderate. Prices rose for diesel fuel but fell for gasoline and lumber.Kansas City: The economy expanded at a more modest pace. Consumer spending slowed, but tourism remained solid. Manufacturing growth slowed. Residential real estate weakened. Commercial real estate was solid. Energy activity remained strong. Contacts anticipated record farm incomes with high prices and bumper crops. Bankers reported softer loan demand and tightened credit standards amid weaker loan quality. Most price pressures eased slightly. Contacts reported less intense wage pressures and labor market growth has moderated.
Dallas: The economy decelerated in September and early October. It is digesting a reassessment of lending standards and slowdown in homebuilding and residential real estate but there is little evidence of significant effects to the broader district economy. The settling of financial markets spurred some optimism. Manufacturing decelerated. Energy activity and commercial construction were robust. Consumer lending softened.San Francisco: The economy continued expanding during September and early October but showed signs of further deceleration relative to July and August. Price inflation was modest except for substantial increases in food prices. Sales by retailers grew but the pace of growth slowed slightly. Tighter lending standards took a toll in housing markets. Banks noted slower growth in overall lending.
The following is a district by district summary of economic conditions from the beige book report.
Boston: Mixed business conditions continued. Manufacturers generally reported solid demand growth, except for housing-related items. Retail results were varied. Residential real estate markets remained soft. Commercial real estate kept getting better on the rental side but softened on the investment side. Contacts mentioned price increases for selected inputs.
New York: The economy expanded at a moderate pace. Price pressures remained steady. The labor market has generally been stable and tight. Manufacturers report ongoing expansion in early October. Retailers indicated sales were on or below plan; New York City said sales have been relatively strong. Housing markets were mixed, with Manhattan firm and New Jersey and other areas soft. Office markets in the New York City area were steady to stronger.
Philadelphia: Business activity expanded in September. Manufacturers reported increases in new orders and shipments. Residential real estate demand remained weak. Firms reporting on labor costs generally noted a continuing trend of moderate increase in wages but several said increases in health care benefits costs were large. Firms reported increases in input costs and output prices in September.
Cleveland: The economy continued to grow but at a slower pace due mainly to weakening manufacturing output. Most homebuilders had a slight uptick in sales. Commercial construction was steady. Retail sales were flat to declining. Demand for business and consumer lending was steady or had increased slightly, reports showed. The mortgage market remained sluggish. Oil production was up slightly.Richmond: Economic activity continued to cool as housing market weakness persisted. Home sales remained sluggish and demand for mortgages softened further. Retail sales continued to pull back. Dry conditions curbed crop yields and delayed winter plantings. Assessments of other sectors were more upbeat. Hiring moderated, but factories added workers.
Atlanta: The economy remained mixed. Merchant sales were described as modestly higher. Vehicle sales improved for some fuel-efficient models but other sales were generally disappointing. Tourism reports were positive. Home sales and construction kept declining. Manufacturing slowed. There were indications of tighter mortgage lending standards and higher foreclosure rates. Florida contacts noted the overall pace of hiring had slowed. Reports on prices were mixed. Drought conditions hurt crops.
Chicago: The economy expanded modestly. Consumer and business spending rose. Residential construction fell. Household lending declined. Labor market conditions were mixed. Manufacturing growth held steady.
St. Louis: The economy expanded moderately. Reports from manufacturing contacts were generally positive and contacts indicated the services sector kept rising. Home sales and construction remained weak. Commercial real estate markets continued to be positive. Lending at a sample of small and medium banks rose from mid-June to mid-September.
Minneapolis: The economy grew modestly. There was expansion in tourism, services, manufacturing, energy, mining, and agriculture. Consumer spending and commercial real estate growth slowed. Residential real estate weakened. Employment growth was mixed. Overall wage increases were moderate. Prices rose for diesel fuel but fell for gasoline and lumber.Kansas City: The economy expanded at a more modest pace. Consumer spending slowed, but tourism remained solid. Manufacturing growth slowed. Residential real estate weakened. Commercial real estate was solid. Energy activity remained strong. Contacts anticipated record farm incomes with high prices and bumper crops. Bankers reported softer loan demand and tightened credit standards amid weaker loan quality. Most price pressures eased slightly. Contacts reported less intense wage pressures and labor market growth has moderated.
Dallas: The economy decelerated in September and early October. It is digesting a reassessment of lending standards and slowdown in homebuilding and residential real estate but there is little evidence of significant effects to the broader district economy. The settling of financial markets spurred some optimism. Manufacturing decelerated. Energy activity and commercial construction were robust. Consumer lending softened.San Francisco: The economy continued expanding during September and early October but showed signs of further deceleration relative to July and August. Price inflation was modest except for substantial increases in food prices. Sales by retailers grew but the pace of growth slowed slightly. Tighter lending standards took a toll in housing markets. Banks noted slower growth in overall lending.
GOIH Capital Markets: Consumer Spending Decline
Food Costs: Domino's Pizza (DPZ), the nation's largest pizza chain, missed on both revenues and earnings Tuesday. Why? Let's go to the company's CEO: "Unprecedented cost pressures and a weak consumer environment negatively impacted our domestic results in the quarter, which made striking the right balance between increasing prices, while operating in a period of declining traffic, very difficult."
GOIH Commentary:
As we have repeatedly posted here the consumer is feeling the pinch and is not spending as much. If pizza sales are down what does that bode for autos and other consumer discretionaries?
GOIH Commentary:
As we have repeatedly posted here the consumer is feeling the pinch and is not spending as much. If pizza sales are down what does that bode for autos and other consumer discretionaries?
GOIH Capital Markets: Market Overview
Our models indicate both the Dow and Nasdaq to open strong today after the Dow components reported higher earnings today.
However, the recent reports by the Treasury indicate that housing is still a drag on the economy.
Our quantitative models indicate that most of the earning power being reported is based on currency translation, i.e., the weaker dollar. Adjusting for a normalized dollar our models indicate negative growth which will eventually be priced into the market.
We have designed a new quantitative model for currency translations and are designing a new currency derivative to monetize illiquid currency positions in the international market.
The currency derivative will utilize international financial theory, trade deficits, and exchange rates as the stochastic variables to price a forward contract on illiquid positions for monetization.
However, the recent reports by the Treasury indicate that housing is still a drag on the economy.
Our quantitative models indicate that most of the earning power being reported is based on currency translation, i.e., the weaker dollar. Adjusting for a normalized dollar our models indicate negative growth which will eventually be priced into the market.
We have designed a new quantitative model for currency translations and are designing a new currency derivative to monetize illiquid currency positions in the international market.
The currency derivative will utilize international financial theory, trade deficits, and exchange rates as the stochastic variables to price a forward contract on illiquid positions for monetization.
Tuesday, October 16, 2007
GOIH Capital Markets: Commentary on the housing markets.
GOIH Capital Markets: Commentary on the housing markets.
As we have reported here in earlier posts, we stated that until the housing market turned around the broad economy would not respond.
Apparently Treasury Sec. Paulson feels the same way by his comments below:
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
In his most somber assessment of the crisis to date, Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”
As we have reported here in earlier posts, we stated that until the housing market turned around the broad economy would not respond.
Apparently Treasury Sec. Paulson feels the same way by his comments below:
“Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy,” Paulson said in a speech delivered at Georgetown University’s law school. “The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth.”
In his most somber assessment of the crisis to date, Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”
GOIH Capital Markets: Housing Industry Declining--Paulson Says Housing Is LikelyTo Adversely Affect Economy.
Paulson Says Housing Is LikelyTo Adversely Affect Economy
Treasury Secretary EndorsesStandards for Mortgage Brokers,Expects More Declines in Housing Starts
By DAMIAN PALETTAOctober 16, 2007 12:47 p.m.
WASHINGTON -- U.S. Treasury Secretary Henry Paulson offered a sobering view Tuesday of the pressure the housing market was having across the country, saying the decline stood "as the most significant current risk to our economy."
Mr. Paulson even acknowledged that problems in credit, mortgage, and housing markets were much more severe than anticipated.
"The ongoing housing correction is not ending as quickly as it might have appeared late last year," he said in a speech to Georgetown University Law Center, according to prepared remarks. "And it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet." (Read the full text of Paulson's remarks.)
Housing prices have flattened or fallen in many parts of the country, as homeowners with adjustable rate prime and subprime mortgages have found it increasingly hard to make their monthly payments. The market's problems have impacted everyone from low-income homeowners to huge Wall Street banks.
Mr. Paulson and his senior aides have found themselves on the front lines of the effort to both stabilize jittery credit markets and help borrowers prevent foreclosure, a difficult tight rope walk as they try to prevent "bailing out" risky investments.
Months ago, Mr. Paulson and other Treasury officials sought to downplay the mortgage market's problems and its possible contagion. Tuesday, Mr. Paulson said problems were likely to persist.
"The problem today is not limited to subprime mortgages as the number of homeowners having trouble making payments on prime mortgages is also increasing," he said.
Mr. Paulson said the housing correction was having a "real impact on our economy," citing how annual housing starts have fallen off more than 40% since early 2006. "It looked like housing construction had reached a bottom in the first half of this year, but starts have declined again since June and data on permit applications and inventories of unsold homes suggest further declines lie ahead," he said.
The Bush administration has historically favored market discipline as a major motivating force, but Mr. Paulson said Tuesday that an enhanced regulatory role was likely necessary to prevent problems from reoccurring.
He said policy makers "need to make some changes in our laws and rules in order to prevent some of the excesses and abuses of the last few years from happening again."
Treasury Secretary EndorsesStandards for Mortgage Brokers,Expects More Declines in Housing Starts
By DAMIAN PALETTAOctober 16, 2007 12:47 p.m.
WASHINGTON -- U.S. Treasury Secretary Henry Paulson offered a sobering view Tuesday of the pressure the housing market was having across the country, saying the decline stood "as the most significant current risk to our economy."
Mr. Paulson even acknowledged that problems in credit, mortgage, and housing markets were much more severe than anticipated.
"The ongoing housing correction is not ending as quickly as it might have appeared late last year," he said in a speech to Georgetown University Law Center, according to prepared remarks. "And it now looks like it will continue to adversely impact our economy, our capital markets, and many homeowners for some time yet." (Read the full text of Paulson's remarks.)
Housing prices have flattened or fallen in many parts of the country, as homeowners with adjustable rate prime and subprime mortgages have found it increasingly hard to make their monthly payments. The market's problems have impacted everyone from low-income homeowners to huge Wall Street banks.
Mr. Paulson and his senior aides have found themselves on the front lines of the effort to both stabilize jittery credit markets and help borrowers prevent foreclosure, a difficult tight rope walk as they try to prevent "bailing out" risky investments.
Months ago, Mr. Paulson and other Treasury officials sought to downplay the mortgage market's problems and its possible contagion. Tuesday, Mr. Paulson said problems were likely to persist.
"The problem today is not limited to subprime mortgages as the number of homeowners having trouble making payments on prime mortgages is also increasing," he said.
Mr. Paulson said the housing correction was having a "real impact on our economy," citing how annual housing starts have fallen off more than 40% since early 2006. "It looked like housing construction had reached a bottom in the first half of this year, but starts have declined again since June and data on permit applications and inventories of unsold homes suggest further declines lie ahead," he said.
The Bush administration has historically favored market discipline as a major motivating force, but Mr. Paulson said Tuesday that an enhanced regulatory role was likely necessary to prevent problems from reoccurring.
He said policy makers "need to make some changes in our laws and rules in order to prevent some of the excesses and abuses of the last few years from happening again."
GOIH Capital Market: Market Overview
The market is trading down for the second day in row after the announcement of the Super Fund to bail out the large money center banks, i.e., JP Morgan, Citigroup and Bank of America. The super fund is being labeled a no brainer for the smart money. The consensus is why will anyone invest in toxic waste packaged as new toxic waste?
It is GOIH Capital Markets' position that this is a prelude to a full government sponsored bailout similar to the Resolution Trust Corporation in the 90's.
Without a government guarantee on the debt that will be issued to purchase the toxic waste no one will buy this junk. That's how we see it.
It is GOIH Capital Markets' position that this is a prelude to a full government sponsored bailout similar to the Resolution Trust Corporation in the 90's.
Without a government guarantee on the debt that will be issued to purchase the toxic waste no one will buy this junk. That's how we see it.
Monday, October 15, 2007
Dollar Hits a New Low vs. Euro
Dollar Hits a New Low vs. Euro
By JOANNA SLATER in New York, JOELLEN PERRY in Frankfurt and ALISTAIR MACDONALD in LondonSeptember 13, 2007; Page C14
The dollar hit its lowest mark on record against the euro, as the threat of a U.S. recession sank in among investors around the world.
The U.S. economy's weak state has created a double dose of pressure against the dollar.
Investors have become increasingly convinced that the Federal Reserve will respond to the deteriorating U.S. growth outlook by cutting short-term interest rates when officials meet in Washington next week. Rate cuts reduce returns on U.S. fixed-income investments relative to investments elsewhere in the world.
Moreover, seeing the U.S. growth outlook deteriorate, investors might shift their money to places where the outlook for stock returns is greater.
"The path of least resistance is down for the dollar," says Adnan Akant, a currency specialist at money manager Fischer Francis Trees & Watts. "I don't expect it to turn into a crisis, just a good old-fashioned dollar decline of 5% to 10%."
The weakness could be good news for investors in U.S. stocks with lots of sales overseas -- like McDonald's or Coca-Cola. But it also has its drawbacks, like inflationary pressure and the potential for a drop in foreign appetite for U.S. investments. In Europe, it could hit exports.
Yesterday in New York, one euro hit an intraday high of $1.3914 and finished the session at $1.3906, the European common currency's highest level since its 1999 launch. It was up from $1.3836 a day earlier.
Since the start of this year, the dollar has weakened by 5% against the euro. But the latest slide marks a stark turnaround from the dollar's performance in the past few weeks.
By JOANNA SLATER in New York, JOELLEN PERRY in Frankfurt and ALISTAIR MACDONALD in LondonSeptember 13, 2007; Page C14
The dollar hit its lowest mark on record against the euro, as the threat of a U.S. recession sank in among investors around the world.
The U.S. economy's weak state has created a double dose of pressure against the dollar.
Investors have become increasingly convinced that the Federal Reserve will respond to the deteriorating U.S. growth outlook by cutting short-term interest rates when officials meet in Washington next week. Rate cuts reduce returns on U.S. fixed-income investments relative to investments elsewhere in the world.
Moreover, seeing the U.S. growth outlook deteriorate, investors might shift their money to places where the outlook for stock returns is greater.
"The path of least resistance is down for the dollar," says Adnan Akant, a currency specialist at money manager Fischer Francis Trees & Watts. "I don't expect it to turn into a crisis, just a good old-fashioned dollar decline of 5% to 10%."
The weakness could be good news for investors in U.S. stocks with lots of sales overseas -- like McDonald's or Coca-Cola. But it also has its drawbacks, like inflationary pressure and the potential for a drop in foreign appetite for U.S. investments. In Europe, it could hit exports.
Yesterday in New York, one euro hit an intraday high of $1.3914 and finished the session at $1.3906, the European common currency's highest level since its 1999 launch. It was up from $1.3836 a day earlier.
Since the start of this year, the dollar has weakened by 5% against the euro. But the latest slide marks a stark turnaround from the dollar's performance in the past few weeks.
IMF Chief Says Dollar Has Room to Fall
IMF Chief Says Dollar Has Room to Fall
By BOB DAVISOctober 15, 2007 8:48 p.m.
WASHINGTON -- After a week of saying the dollar had fallen too far recently, International Monetary Fund chief Rodrigo de Rato now says the dollar has more room to fall over the next several years.
Over the "medium term," which is three to five years in IMF parlance, "we still see room for further depreciation," Mr. de Rato said. The euro, he said, is "very near" its equilibrium value.
Mr. de Rato first said the dollar had fallen too far last week in an interview with the Financial Times. He repeated that in Madrid and in a session with The Wall Street Journal. He said he was referring to the decline of the dollar compared with a "weighted" average of currencies over the past several years. The dollar gained slightly against the euro after his remarks.
Mr. de Rato's comments set off a series of meetings within the IMF as it struggled to get its message straight before Friday's meeting of finance ministers from the Group of Seven industrialized nations: Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S. The alignment of global currencies is likely to be discussed in the wake of the global credit crunch and U.S. interest-rate cuts.
Mr. de Rato is especially under scrutiny. His remarks about the dollar being undervalued could look as if he were siding with European officials who worry that the strength of the euro, compared with the dollar, is undermining European exporters. Many in the Spanish media speculate that Mr. de Rato, a former Spanish economy minister who is resigning at the end of this month, is gearing up to run for prime minister. Mr. de Rato denies that he will seek office in Spain.
At a breakfast with reporters yesterday, Mr. de Rato repeated his remarks that the dollar's drop had been "quite substantial." However, he then added his projection that the dollar still had room to fall. IMF officials say his remarks were meant to more accurately convey the fund's view of the dollar and didn't reflect any pressure from the U.S. Treasury or European finance ministries. "There's still some depreciation to come in the medium term," said the fund's chief economist, Simon Johnson.
Mr. de Rato's clarification underscores the difficulty that even experienced financial officials have in dealing with questions of currency. U.S. Treasury officials consistently say they favor a strong dollar, but they do nothing to defend the currency as it falls in value. They declined to comment on the issue.
In effect, the U.S. government depends on a steady decline of the dollar to narrow the nation's current-account deficit. If that deficit remains too wide, many economists worry, it could ultimately lead to a crash in the dollar.
The U.S. and Europe also have been pushing China to let its currency rise in value against both the dollar and euro as a way to minimize "global imbalances" and give a lift to U.S. and European exporters. Mr. de Rato repeated the IMF's view that the yuan "should have more flexible movement," which he said was in China's interest because it would "allow for strong growth and strong domestic consumption."
By BOB DAVISOctober 15, 2007 8:48 p.m.
WASHINGTON -- After a week of saying the dollar had fallen too far recently, International Monetary Fund chief Rodrigo de Rato now says the dollar has more room to fall over the next several years.
Over the "medium term," which is three to five years in IMF parlance, "we still see room for further depreciation," Mr. de Rato said. The euro, he said, is "very near" its equilibrium value.
Mr. de Rato first said the dollar had fallen too far last week in an interview with the Financial Times. He repeated that in Madrid and in a session with The Wall Street Journal. He said he was referring to the decline of the dollar compared with a "weighted" average of currencies over the past several years. The dollar gained slightly against the euro after his remarks.
Mr. de Rato's comments set off a series of meetings within the IMF as it struggled to get its message straight before Friday's meeting of finance ministers from the Group of Seven industrialized nations: Canada, France, Germany, Italy, Japan, the United Kingdom and the U.S. The alignment of global currencies is likely to be discussed in the wake of the global credit crunch and U.S. interest-rate cuts.
Mr. de Rato is especially under scrutiny. His remarks about the dollar being undervalued could look as if he were siding with European officials who worry that the strength of the euro, compared with the dollar, is undermining European exporters. Many in the Spanish media speculate that Mr. de Rato, a former Spanish economy minister who is resigning at the end of this month, is gearing up to run for prime minister. Mr. de Rato denies that he will seek office in Spain.
At a breakfast with reporters yesterday, Mr. de Rato repeated his remarks that the dollar's drop had been "quite substantial." However, he then added his projection that the dollar still had room to fall. IMF officials say his remarks were meant to more accurately convey the fund's view of the dollar and didn't reflect any pressure from the U.S. Treasury or European finance ministries. "There's still some depreciation to come in the medium term," said the fund's chief economist, Simon Johnson.
Mr. de Rato's clarification underscores the difficulty that even experienced financial officials have in dealing with questions of currency. U.S. Treasury officials consistently say they favor a strong dollar, but they do nothing to defend the currency as it falls in value. They declined to comment on the issue.
In effect, the U.S. government depends on a steady decline of the dollar to narrow the nation's current-account deficit. If that deficit remains too wide, many economists worry, it could ultimately lead to a crash in the dollar.
The U.S. and Europe also have been pushing China to let its currency rise in value against both the dollar and euro as a way to minimize "global imbalances" and give a lift to U.S. and European exporters. Mr. de Rato repeated the IMF's view that the yuan "should have more flexible movement," which he said was in China's interest because it would "allow for strong growth and strong domestic consumption."
A Bailout for Citigroup?
October 14, 2007, 11:02 pm
A Bailout for Citigroup?
Posted by Dennis K. Berman
GOIH Commentary:
It appears that Wall St. was again saved by the market from having to realize the losses sitting on their books. The major banks hold billions in illiquid securities in SIVs off balance sheet debts. The banks use the off balance structure to avoid having to tie up regulatory capital, i.e., banks have to set aside a portion of their capital base as a reserve against any potential losses resulting from their investments in the SIVs if the assets were kept on the balance sheet.
Because the market has frozen up the banks cannot refinance the SIVs and would have been forced to bring the assets in the SIVs back on their balance sheet forcing the allocation of reserve capital against losses in the SIVs.
The structure of the Super Conduit will prevent the banks in group from having to set aside risk capital as a reserve against losses in the SIVs. It's rumor Citibank has more than $100 billion in SIVs and having to bring back that amount onto its balance sheet would caused a lockup in its ability to fund its operations and continue to makes loans to businesses and individuals.
___________________________________________________________
When does an “improvement in liquidity” represent a “bailout”?
We’ll be studying the details of the new “superconduit” when they’re expected to be released on Monday.
But in the meantime it’s hard not to look at the current details — ably scooped by Journal colleagues Carrick Mollenkamp, Deborah Solomon and Robin Sidel — as a big Treasury-blessed assist for Citigroup.
Consider that an estimated 25% of the total $400 billion SIV universe comes from Citigroup-affiliated SIV funds. And that Citigroup-affiliated funds have already sold $20 billion in assets.
At its most simple, the superconduit is a means by which a large collection of banks can keep “reasonable” pricing on some of their affiliated securities. And it is this pricing that is the key to the whole operation.
It’s obvious they won’t be priced at market rates because there’s not much of a market to begin with (and why the superconduit exists in the first place).
But where exactly do they get priced? To whose benefit? And by which standard?
Even without specifics, it’s clear that Citigroup has the most to gain from this operation. And it’s clearly bad if the balance sheet of the country’s largest bank were frozen for months on end as it poured money into contractual unwindings of SIV positions.
Liquidity syndicates were what helped save the day during the Panic of 1907. Given the partial return of investors to the LBO credit markets, there is plenty of reason to hope that investors will once again be buying SIV-related paper in the months ahead.
But until that time, four main points still remain oustanding:
* How much pricing confidence can be created in a market when banks are in essence buying paper from themselves?
* Might the mere existence of the superconduit create more doubts about the financial sector, stoking even more panic than the amount it was meant to quell?
* How will the banks structure their public relations to answer the simple question: Are they throwing good money after bad?
* What responsibility will be taken by the bank CEOs who blessed the rush into these structures in the first place? In other words, how will Citigroup CEO Chuck Prince explain this on Monday morning?
A Bailout for Citigroup?
Posted by Dennis K. Berman
GOIH Commentary:
It appears that Wall St. was again saved by the market from having to realize the losses sitting on their books. The major banks hold billions in illiquid securities in SIVs off balance sheet debts. The banks use the off balance structure to avoid having to tie up regulatory capital, i.e., banks have to set aside a portion of their capital base as a reserve against any potential losses resulting from their investments in the SIVs if the assets were kept on the balance sheet.
Because the market has frozen up the banks cannot refinance the SIVs and would have been forced to bring the assets in the SIVs back on their balance sheet forcing the allocation of reserve capital against losses in the SIVs.
The structure of the Super Conduit will prevent the banks in group from having to set aside risk capital as a reserve against losses in the SIVs. It's rumor Citibank has more than $100 billion in SIVs and having to bring back that amount onto its balance sheet would caused a lockup in its ability to fund its operations and continue to makes loans to businesses and individuals.
___________________________________________________________
When does an “improvement in liquidity” represent a “bailout”?
We’ll be studying the details of the new “superconduit” when they’re expected to be released on Monday.
But in the meantime it’s hard not to look at the current details — ably scooped by Journal colleagues Carrick Mollenkamp, Deborah Solomon and Robin Sidel — as a big Treasury-blessed assist for Citigroup.
Consider that an estimated 25% of the total $400 billion SIV universe comes from Citigroup-affiliated SIV funds. And that Citigroup-affiliated funds have already sold $20 billion in assets.
At its most simple, the superconduit is a means by which a large collection of banks can keep “reasonable” pricing on some of their affiliated securities. And it is this pricing that is the key to the whole operation.
It’s obvious they won’t be priced at market rates because there’s not much of a market to begin with (and why the superconduit exists in the first place).
But where exactly do they get priced? To whose benefit? And by which standard?
Even without specifics, it’s clear that Citigroup has the most to gain from this operation. And it’s clearly bad if the balance sheet of the country’s largest bank were frozen for months on end as it poured money into contractual unwindings of SIV positions.
Liquidity syndicates were what helped save the day during the Panic of 1907. Given the partial return of investors to the LBO credit markets, there is plenty of reason to hope that investors will once again be buying SIV-related paper in the months ahead.
But until that time, four main points still remain oustanding:
* How much pricing confidence can be created in a market when banks are in essence buying paper from themselves?
* Might the mere existence of the superconduit create more doubts about the financial sector, stoking even more panic than the amount it was meant to quell?
* How will the banks structure their public relations to answer the simple question: Are they throwing good money after bad?
* What responsibility will be taken by the bank CEOs who blessed the rush into these structures in the first place? In other words, how will Citigroup CEO Chuck Prince explain this on Monday morning?
Big Banks Mulling $100 Billion Fund to Limit Credit Crunch
Big Banks Mulling $100 Billion Fund to Limit Credit Crunch
by SA Editor Judith Levy
A group of the world's biggest banks, including Citigroup, JPMorgan and Bank of America, is discussing pooling up to $100 billion for an emergency fund that would buy at-risk mortgage securities to take pressure off the credit markets. The talks began three weeks ago at the instigation of the Treasury Department. The object of the fund, tentatively called the Master-Liquidity Enhancement Conduit, or M-LEC, is to avert the necessity for bank-affiliated funds to dump huge portfolios of mortgage-backed securities onto the market.
That event could inflate borrowing costs, force more major write-offs at banks, trigger significant investor losses, and conceivably send the U.S. into recession. SIVs (structured investment vehicles), which buy mortgage securities assets from banks and finance the purchases with commercial paper, must sell the assets if they cannot sell the paper -- and investors, spooked by the implosion of the subprime mortgage market, have almost completely stopped buying SIV-affiliated paper. "This illiquidity has become an enormous problem for companies that specialize in originating mortgages and then bundling them to sell as securities," said San Francisco Fed President Janet Yellen last Tuesday.
The banks are faced with the prospect that about 30 SIVs will simultaneously unload billions of dollars' worth of mortgage-related assets and send prices into a downward spiral. "We are coming off the greatest lending bubble...in U.S. history. We will feel its impact for a very long time," said Robert Arnott, Chairman of Research Affiliates LLC.
by SA Editor Judith Levy
A group of the world's biggest banks, including Citigroup, JPMorgan and Bank of America, is discussing pooling up to $100 billion for an emergency fund that would buy at-risk mortgage securities to take pressure off the credit markets. The talks began three weeks ago at the instigation of the Treasury Department. The object of the fund, tentatively called the Master-Liquidity Enhancement Conduit, or M-LEC, is to avert the necessity for bank-affiliated funds to dump huge portfolios of mortgage-backed securities onto the market.
That event could inflate borrowing costs, force more major write-offs at banks, trigger significant investor losses, and conceivably send the U.S. into recession. SIVs (structured investment vehicles), which buy mortgage securities assets from banks and finance the purchases with commercial paper, must sell the assets if they cannot sell the paper -- and investors, spooked by the implosion of the subprime mortgage market, have almost completely stopped buying SIV-affiliated paper. "This illiquidity has become an enormous problem for companies that specialize in originating mortgages and then bundling them to sell as securities," said San Francisco Fed President Janet Yellen last Tuesday.
The banks are faced with the prospect that about 30 SIVs will simultaneously unload billions of dollars' worth of mortgage-related assets and send prices into a downward spiral. "We are coming off the greatest lending bubble...in U.S. history. We will feel its impact for a very long time," said Robert Arnott, Chairman of Research Affiliates LLC.
GOIH Capital Markets: Super Conduit
Why are these large banks setting up this off balance sheets structure to purchase toxic papers? The answer is if these banks had to take the assets back onto their balance sheets would require the banks to set aside reserves against the eventual default of the assets. If the banks are setting aside $85 billion, this can be leveraged 10:1 giving the buying power of $850 billion. Assume if the banks had to set aside 10% of the $85 billion would require reserve capital of $85 billion which it is doubtful if the banks could set aside this amount. There wouldn’t be any capital left to loan to businesses and individuals. Effectively shutting down the market and the large banks.
GOIH Market Overview--10-15-07
Our models indicate the market to open lower today based on oil closing above $85 per barrel and the Dollar weakening against the Euro to 142.21 and the Yen 117.84 showing some strength.
We have received several questions regarding the dollar weakening and the effect it will have on the ordinary consumer. We will attempt to answer that question as follows.
There is a delicate balance between the value of a currency and the purchasing power of that currency. The dollar is in an especially good position as the reserve currency of the world, i.e., most major assets are priced in dollars. What this means is the Asian and European countries that import oil and other major commodities must sell their currency and purchase dollars to pay for the imports. Thus this strengthens the dollars relative to the other currencies. However, because the U.S. imports so much more than it exports, the world is flush with dollars, thereby negating the reserve currency benefit the dollar would experience without the trade deficit.
Actually the trade deficit has caused so many dollars to be available for purchase that there is a silent movement to take the dollar off as the reserve currency status and make the euro the reserve currency.
What effect would this have on the economy?
If the euro replaces the dollar as the reserve currency, this means that to pay for its imports the U.S. importers would have to sell dollars and buy euros further weakening the dollar relative to other currencies causing a further spiral in relative value.
Because the largest import into the U.S. is oil, just pricing oil in euros would have a major shock to the consumer as the dollar would fall to 2.0000 to the Euro creating inflation on the imported goods going past 20%. The Fed's hands would be tied and would have to raise interest rates to futilely attempt to tame inflation which it would lose the fight as the costs of the import would continue to rise as the dollar continued to fall.
What would cause the Euro to overtake the Dollar as the reserve currency for the purchase of major resources?
Our economic models predict if the U.S. trade deficit continues to increase flooding the world with dollars that purchase less, the parity point being when the Euro spread relative to the dollar reaches a rate of change greater than the government’s inflation number the run on the dollar will begin and the end will be in sight.
Once the dollar is not longer the reserve currency, the ordinary consumer will be working for peanuts as their wages will not be aboe to afford anything of value.
We have received several questions regarding the dollar weakening and the effect it will have on the ordinary consumer. We will attempt to answer that question as follows.
There is a delicate balance between the value of a currency and the purchasing power of that currency. The dollar is in an especially good position as the reserve currency of the world, i.e., most major assets are priced in dollars. What this means is the Asian and European countries that import oil and other major commodities must sell their currency and purchase dollars to pay for the imports. Thus this strengthens the dollars relative to the other currencies. However, because the U.S. imports so much more than it exports, the world is flush with dollars, thereby negating the reserve currency benefit the dollar would experience without the trade deficit.
Actually the trade deficit has caused so many dollars to be available for purchase that there is a silent movement to take the dollar off as the reserve currency status and make the euro the reserve currency.
What effect would this have on the economy?
If the euro replaces the dollar as the reserve currency, this means that to pay for its imports the U.S. importers would have to sell dollars and buy euros further weakening the dollar relative to other currencies causing a further spiral in relative value.
Because the largest import into the U.S. is oil, just pricing oil in euros would have a major shock to the consumer as the dollar would fall to 2.0000 to the Euro creating inflation on the imported goods going past 20%. The Fed's hands would be tied and would have to raise interest rates to futilely attempt to tame inflation which it would lose the fight as the costs of the import would continue to rise as the dollar continued to fall.
What would cause the Euro to overtake the Dollar as the reserve currency for the purchase of major resources?
Our economic models predict if the U.S. trade deficit continues to increase flooding the world with dollars that purchase less, the parity point being when the Euro spread relative to the dollar reaches a rate of change greater than the government’s inflation number the run on the dollar will begin and the end will be in sight.
Once the dollar is not longer the reserve currency, the ordinary consumer will be working for peanuts as their wages will not be aboe to afford anything of value.
GOIH Capital Markets: The Fed to the rescue...Private banks to make a bundle
Apparently the Treasury met privately with the large money center banks during the mist of the crisis and has arranged a private solution for the credit crunch. The banks will set up a super off balance sheet vehicle to purchase paper from sellers at basically pennies on the dollar. Probably most of the paper will come from their own inventory and get the junk off of their books before it goes radioactive, i.e., a total write off. Expect to see this paper repackaged and resold again to the same investors as a different instrument. That's our take on the deal.
An excerpt of the WSJ article is included below:
When it began discussions with the banks last month, Treasury made clear that a government-backed bailout or any publicly financed rescue effort was "not on the table," and that it wanted to facilitate a private-sector response, this person said.
Under the proposed rescue package Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. will set up a fund, or "superconduit," to act as a buyer of last resort. It will pay market prices for SIV assets in an effort to prevent dumping.
J.P. Morgan and Bank of America don't have SIVs, but they plan to participate because they would earn fees for helping arrange the superconduit, whose lifespan, according to people briefed on the plan, is expected to be about a year. The superconduit can buy assets from any bank or fund around the world.
Details are still being worked out but the oversight committee of the three banks will set criteria for what the new fund, to be called the Master-Liquidity Enhancement Conduit, will buy. For now, it is unlikely the fund will buy assets underpinned by subprime mortgages due to concern that they would constrain it, people familiar with the matter said. Subprime mortgages are those aimed at borrowers with shaky credit.
The plan means that some banks now stand to profit from the problems their industry helped create. Citigroup, J.P. Morgan and Bank of America, for example, will be paid fees for providing the financial backstop to the fund. In addition, the broker-dealer arms of the banks could be paid for helping the new structure raise capital. Bank of America highlighted the opportunity to generate fees in discussions leading up to the final plans, people familiar with the matter said.
An excerpt of the WSJ article is included below:
When it began discussions with the banks last month, Treasury made clear that a government-backed bailout or any publicly financed rescue effort was "not on the table," and that it wanted to facilitate a private-sector response, this person said.
Under the proposed rescue package Citigroup, J.P. Morgan Chase & Co. and Bank of America Corp. will set up a fund, or "superconduit," to act as a buyer of last resort. It will pay market prices for SIV assets in an effort to prevent dumping.
J.P. Morgan and Bank of America don't have SIVs, but they plan to participate because they would earn fees for helping arrange the superconduit, whose lifespan, according to people briefed on the plan, is expected to be about a year. The superconduit can buy assets from any bank or fund around the world.
Details are still being worked out but the oversight committee of the three banks will set criteria for what the new fund, to be called the Master-Liquidity Enhancement Conduit, will buy. For now, it is unlikely the fund will buy assets underpinned by subprime mortgages due to concern that they would constrain it, people familiar with the matter said. Subprime mortgages are those aimed at borrowers with shaky credit.
The plan means that some banks now stand to profit from the problems their industry helped create. Citigroup, J.P. Morgan and Bank of America, for example, will be paid fees for providing the financial backstop to the fund. In addition, the broker-dealer arms of the banks could be paid for helping the new structure raise capital. Bank of America highlighted the opportunity to generate fees in discussions leading up to the final plans, people familiar with the matter said.
GOIH Capital Markets: Biogen (BIIB)-----Takeover Arbitrage
GOIH Capital Markets: Biogen (BIIB)--200,000 position opened @68.00---Takeover Arbitrage
Earlier we posted here we thought that BIIB was a takeover play by Carl Ichan. Turns out we were right. BIIB put itself up for sale over the weekend. We picked up some BIIB, 200,000 shares in the aftermarket on Friday based on our indicators @ $68.00. Our sources see BIBB going for up to $150.00 per share.
Earlier we posted here we thought that BIIB was a takeover play by Carl Ichan. Turns out we were right. BIIB put itself up for sale over the weekend. We picked up some BIIB, 200,000 shares in the aftermarket on Friday based on our indicators @ $68.00. Our sources see BIBB going for up to $150.00 per share.
Thursday, October 11, 2007
GOIH Capital Markets: Economic Analysis Group
We are preparing a comprehensive analysis of the financial effects of the exportation of manufacturing and service jobs, and the wealth effect created by this exportation. We will dissect an equity investment scenario for what we believe is a new paradigm shift in the allocation of labor resources.
GOIH Capital Markets: Economic Analysis of Immigration on the U.S. Capital Markets.
We have received a request to perform an economic analysis of immigration on the U.S. capital markets and a portfolio selection with increased immigration and decreased immigration. The report will be posted here on our blog 3 days after delivery to the client. This is our first paid assignment and we are developing models for the prediction and analysis of various social and economic phenomena.
Retailers Lower Forecasts After Sales Reports
As we have reported here the retail consumer discretionaries are struggling with lower sales due to the consumers' uncertainty of the economy. As we reported we see this Christmas season very weak even with the lowering of interest rates by the Federal Reserve. Interest rates are not the driving force for consumer spending; stability of the income stream is the fundamental variable for consumer, not the S&P 500 Financial Services firms.
Retailers Lower Forecasts After Sales Reports
By MICHAEL BARBARO
Retailers are in for a rough fall.
Across the board, big chain stores reported bleak September same-store sales this morning. As a result, more than a dozen retailers, from Nordstrom to Target, warned of lower-than-expected profits for the third quarter.
In contrast, Wal-Mart Stores raised its third-quarter profit forecast because of cost-cutting, but its September sales figure came in slightly below expectations. Its shares were up almost 4 percent in early trading.
Retailers cited several factors for the overall downturn — a tight credit market, a poor housing market, warm weather and strong performance in September 2006, which made this year’s performance lackluster by comparison.
Those clouds are unlikely to lift before the crucial holiday shopping season, which is predicted to produce the slowest growth rate in five years.
But there will probably be some upside for consumers: retailers are expected to dangle deep discounts to clear fall merchandise in time for the holiday season.
Over all, stores reported a 1.6 percent sales increase in September, below an estimated 2.3 percent gain, according to Retail Metrics, a research firm.
The firm’s president, Ken Perkins, called it a “precipitous decline.”
Sales fell 4.6 percent at J. C. Penney, 2.7 percent at Macy’s and 2 percent at American Eagle Outfitters.
Wal-Mart, the nation’s largest retailer and a bellwether for the industry, said sales rose 1.6 percent, but it said that “customers remain concerned about their finances, especially the cost of living.”
The chief executive of J.C. Penney, Mike Ullman, sounded a similar theme, describing “well-chronicled issues affecting the housing market.”
Several retailers said they would report worse-than-forecast earnings as a result of sluggish sales, including Kohl’s, J.C. Penney and American Eagle Outfitters.
Retailers Lower Forecasts After Sales Reports
By MICHAEL BARBARO
Retailers are in for a rough fall.
Across the board, big chain stores reported bleak September same-store sales this morning. As a result, more than a dozen retailers, from Nordstrom to Target, warned of lower-than-expected profits for the third quarter.
In contrast, Wal-Mart Stores raised its third-quarter profit forecast because of cost-cutting, but its September sales figure came in slightly below expectations. Its shares were up almost 4 percent in early trading.
Retailers cited several factors for the overall downturn — a tight credit market, a poor housing market, warm weather and strong performance in September 2006, which made this year’s performance lackluster by comparison.
Those clouds are unlikely to lift before the crucial holiday shopping season, which is predicted to produce the slowest growth rate in five years.
But there will probably be some upside for consumers: retailers are expected to dangle deep discounts to clear fall merchandise in time for the holiday season.
Over all, stores reported a 1.6 percent sales increase in September, below an estimated 2.3 percent gain, according to Retail Metrics, a research firm.
The firm’s president, Ken Perkins, called it a “precipitous decline.”
Sales fell 4.6 percent at J. C. Penney, 2.7 percent at Macy’s and 2 percent at American Eagle Outfitters.
Wal-Mart, the nation’s largest retailer and a bellwether for the industry, said sales rose 1.6 percent, but it said that “customers remain concerned about their finances, especially the cost of living.”
The chief executive of J.C. Penney, Mike Ullman, sounded a similar theme, describing “well-chronicled issues affecting the housing market.”
Several retailers said they would report worse-than-forecast earnings as a result of sluggish sales, including Kohl’s, J.C. Penney and American Eagle Outfitters.
GOIH Capital Markets--Retailer Survey
The retailer stocks today reported sales and earnings and most are down in afternoon trading.
Target (TGT) down about $1.00 weak sales.
Wal-mart (WMT) up on inventory management and margin stability.
Kohl's (KSS) down
JC Penny's (JCP) down 7%
Target (TGT) down about $1.00 weak sales.
Wal-mart (WMT) up on inventory management and margin stability.
Kohl's (KSS) down
JC Penny's (JCP) down 7%
GOIH Capital Markets: APPL postion was exited at $168.45
We exited our position in APPL at $168.45 from an entry point of $128.00 for a $40.00 profit on 200,000 shares = $8,090,000
GOIH Capital Markets: Subprime Mortgage Article
The United States of Subprime
Data Show Bad LoansPermeate the Nation;Pain Could Last Years
By RICK BROOKS and CONSTANCE MITCHELL FORDOctober 11, 2007; Page A1
Data Show Bad LoansPermeate the Nation;Pain Could Last Years
By RICK BROOKS and CONSTANCE MITCHELL FORDOctober 11, 2007; Page A1
As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.1
High-rate mortgages accounted for 29% of the total number of home loans originated last year, up from 16% in 2004. About 10.3 million high-rate loans were made in the past three years, out of a total of 43.6 million mortgages. High-rate lending jumped by an even larger percentage in 68 metropolitan areas, from Lewiston, Maine, to Ocala, Fla., to Tacoma, Wash.
To examine the surge in subprime lending, the Journal analyzed more than 250 million records on mortgage applications and originations filed by lenders under the federal Home Mortgage Disclosure Act. Subprime mortgages were initially aimed at lower-income consumers with spotty credit. But the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
Banks and other mortgage lenders have long charged higher rates to borrowers considered high-risk, either because of their credit histories or their small down payments. As home prices accelerated across the country over the past decade, more affluent families turned to high-rate loans to buy expensive homes they could not have qualified for under conventional lending standards. High-rate loans are those that carry interest rates of three percentage points or more over U.S. Treasurys of comparable durations.
The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe.
2 DEVELOPMENTS
Get news and analysis3 on the cooling housing market from the Developments blog. Plus, share your thoughts on risky loans in a blog forum4.
The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years.
"We had an aggressive home-mortgage industry trying to get people into homes they couldn't afford at a time when home prices were very high. It turned out to be a house of cards," says Karl Case, an economics professor at Wellesley College. "We're in the early stages of the cleanup."
The Journal's analysis indicates that some major subprime lenders, such as Washington Mutual Inc.'s Long Beach Mortgage unit, began scaling back or tightening their standards a year or more ago. But commercial banks and thrifts filled the void, helping to sustain real-estate markets that might otherwise have begun cooling.
The data suggest that financial suffering is likely to persist in many parts of the U.S. where subprime lending had surged. Many loans at risk of going bad have not yet done so. As much as $600 billion of adjustable-rate subprime loans, for example, are due to adjust to higher rates by the end of 2008, which means that more and more borrowers are likely to fall behind.
Last September, Darla Ball, a printer and copier saleswoman, purchased a $460,000 home in Las Vegas using an adjustable-rate subprime loan with an initial rate of 8.2%. At the time, she says, she expected to refinance before her interest rate resets to 14% next year, which will raise her monthly payments to $8,000 from $3,700. But in the past year, she says, prices of comparable homes in her subdivision have fallen to $310,000, which means she would not qualify for a new $460,000 mortgage, unless home values go back up to that level, an unlikely scenario. She says she has stopped paying her mortgage and is trying to negotiate with her lender. "I'm going to lose my home anyway," she says, "so why pay?"
Fort Myers, Fla., is known for its boulevard lined with palm trees, bankrolled years ago by its most famous snowbird, inventor Thomas Edison. These days, the city is fast earning a reputation as an example of the deepening U.S. mortgage crisis. The area's median sales price for existing homes is down 22% since December 2005. Foreclosures are running at an all-time high. And there is no end in sight.
Between 2004 and 2006, more than $8.5 billion in high-rate mortgages were made in the Cape Coral-Fort Myers metropolitan area. The loans encouraged borrowers to stretch more than ever, which helped inflate real-estate values. Two of every five home loans made in the area last year carried high rates, more than twice the 2004 rate.
The Journal compared the fastest-growing high-rate loan markets to the rankings compiled by foreclosure-listing providers RealtyTrac Inc. and ForeclosureS.com. In Stockton, Calif., for example, high-rate loans accounted for 33% of total home-loan volume last year, up from 13% in 2004. During the first half of this year, the Stockton area had 8,169 foreclosure filings, or one for every 27 households. According to RealtyTrac, of Irvine, Calif., that makes Stockton the nation's foreclosure capital.
Seven of the 10 large metro areas now struggling with the highest foreclosure rates -- including Miami, Detroit and Las Vegas -- saw borrowers barrel into high-rate loans much faster than the country as a whole. In a forthcoming study in the Journal of the American Planning Association, Daniel Immergluck, an associate professor at Georgia Institute of Technology in Atlanta, found a similar pattern between foreclosures occurring in early 2006 and cities with high subprime lending in 2003.
There are some less gloomy signs, too. Last year, the number of new high-rate loans fell 2% to about four million, after jumping 88% in 2005. That reflects the collapse of some of the most aggressive lenders and tightening credit standards of others. Slowing home sales have put the brakes on loan demand, and borrowers have grown more wary of mortgages with teaser rates and other gimmicks.
Yet last year's data show that even as the housing market was weakening, some lenders still were eager to make riskier loans. Banks and thrifts grabbed 52% of the market for high-rate loans last year, up from 44% in 2005. SunTrust Banks Inc., of Atlanta, long known as a conservative lender, more than doubled the number of high-rate loans made by its mortgage unit. Smaller banks such as First National Bank of Arizona, part of First National Bank Holding Co. of Scottsdale, Ariz., also revved up their riskier mortgage lending last year.
Joel Gottesman, chairman of First National's mortgage division, says much of the jump reflects borrowers who got second mortgages. The bank has since scaled back that business, he says. SunTrust's increase reflects that it "was comparatively late getting into this area," says a spokesman. He added that the jump was heightened by changes in interest rates.
Higher-income home buyers began using such loans for larger purchases. Among borrowers characterized in the data as white with annual income of at least $300,000, the number of high-rate loans jumped 74% last year, the numbers show. The average high-rate loan grew 10% to $158,000 last year, compared with a 1% rise in the average size of all home loans. The 2006 data include records from 8,886 lenders nationwide, which generate an estimated 80% of U.S. home mortgages.
The high-rate loan data likely understate the potential peril posed by mortgages with low teaser rates. Under federal rules governing disclosure, some subprime teaser loans do not show up as having high rates. Lenders weren't required to report loan-pricing details until 2004.
The relaxation of credit standards by home lenders has been years in the making. The Community Reinvestment Act, a 1977 federal law, prodded banks to extend more credit in communities where they operated. That warmed many of them to lower-income and minority borrowers. The Federal Housing Administration, a New Deal-era mortgage insurer targeting buyers with little or poor credit, began losing market share to aggressive subprime lenders. These commercial lenders usually charged higher interest rates but promised less paperwork, faster approval and no-money-down loans that seemed more affordable to many borrowers.
Ambitious lenders such as Seattle-based Washington Mutual's Long Beach Mortgage, which between 2004 and 2006 made $48 billion in high-rate loans, used armies of outside brokers to push subprime loans into the suburbs. (A company slogan: "The Power of Yes.") The result was a mortgage bonanza that reached every racial and ethnic group, income level and geographic area.
By 2005, a list of subprime-lending specialists compiled by the Department of Housing and Urban Development had grown to 210 lenders, from 141 in 1996. Their combined loan volume grew tenfold during the same period.
"Old industrial cities like Philadelphia have a poverty problem, and that's why people had to use subprime loans," says Kevin Gillen, a research fellow at the Wharton School of University of Pennsylvania. But in pricey areas such as Miami, where the high-rate market share jumped 25 percentage points from 2004 to 2006, subprime loans didn't have a downscale reputation. They were seen as the answer to sky-high housing costs. "They are different groups, but subprime served both of them," Mr. Gillen says.
It used to be that high-rate borrowers weren't allowed to stretch as much as conventional borrowers on loan amounts, a reflection of their higher credit risk. But as home prices rose throughout the U.S. in the early 2000s, lenders grew more willing to let high-rate borrowers get bigger loans as measured against their annual incomes. In 2005, borrowers who got high-rate mortgages to buy one- to four-family homes were loaned 2.1 times their reported annual income, on average, according to the data. That was 4% higher than regular borrowers.
Kristine McMahon has a six-figure income as a mortgage broker and lives in a four-bedroom home in East Hampton, N.Y., valued at more than $2.7 million. Yet Ms. McMahon, who works for Manhattan Mortgage, chose a subprime loan for herself when she refinanced last year to turn some of her home equity into cash. Ms. McMahon says that at the time of the refinancing, a conventional lender would not allow her to take out as much cash during the refinancing as her subprime lender, New Century Financial Corp., which is now operating under bankruptcy-court protection. Ms. McMahon chose a subprime loan that carried a fixed-rate of 6.45% for the first two years before turning into an adjustable rate. She plans to sell the house before the higher adjustable rates kick in.
Lenders also extended more "second-lien" mortgages -- many of them "piggyback" second loans that borrowers used to cover down payments. Such second-lien loans climbed to 22% of all mortgages last year, up from 12% in 2004. Piggybacks are considered far more likely to default than a standard mortgage.
Lenders did little to discourage speculation by real-estate investors, which contributed to rising home prices. Last year, 13% of all high-rate home loans were for properties not occupied by owners, up from about 9% in 2004, the data show. Experts say such properties are higher foreclosure risks than homes lived in by their owners.
Who will be left holding the bag for mortgages that go sour? Wall Street bought lots of subprime loans and packaged them into securities for sale to investors. The data show that lenders shifted even more of their riskiest loans to investors as the boom began to fizzle.
About 63% of high-rate mortgages originated in 2004 were sold that same year, compared with 68% of all home loans, the data indicate. Last year, about 73% of new high-rate loans were sold, compared with 67% of all home loans. Last year, the average high-rate loan carried an interest rate that was 5.6 percentage points higher than a Treasury security of comparable maturity -- up from 5.3 points in 2005 and 4.8 points in 2004.
In the hardest-hit areas, the numbers could batter borrowers, lenders and builders for years to come. This year, through July, the rate of mortgage-default and foreclosure-auction filings in Lee County, Fla., where Fort Myers is located, was second-highest in the U.S., according to ForeclosureS.com. The inventory of unsold homes has swelled to about 15,000, and some investors who had hoped to flip houses at a profit are walking away from sales contracts for purchases they don't want anymore or can't afford.
"We view Fort Myers as likely the worst housing market in the country," J. Larry Sorsby, executive vice president and chief financial officer of Hovnanian Enterprises Inc., complained last month. In March, the Red Bank, N.J., company took a $93 million pretax charge because of the mess in Fort Myers. Last month, it slashed prices on certain homes there as part of a three-day, nationwide "Deal of the Century" sale.
Next week, foreclosure auctioneer Hudson & Marshall of Texas Inc. will try to unload about 70 houses in or near Fort Myers that were taken back by lenders. Low-ball bidders who miss out will have plenty of second chances: More than 300 other foreclosed homes in Florida are for sale in the auction.
GOIH Capital Markets: Market Overview
Our models indicate the market will open higher today and trade in a narrow range. Volatility is dramatically down after the peak in late August. Because of the low volatility, economic data is the market catalyst and earning news drives trading. The Dollar-Yen carrying trade is gaining favor again with the Dollar strengthening to 112.42 to the Yen. However, the Dollar is still very weak relative to the Euro and other major currencies. Meaning higher import price, in essence we are importing inflation which caused by the Fed’s rate cuts, depresses the Dollar. As we have reported in earlier posts, the Fed is in a tight spot concerning interest rates: cut too much and built in inflation rises due to the falling Dollar, cut too little, the economy slows down causing recession. A tough choice, juggling many balls at once.
Republican Presidential Debate on Tuesday was covered by our economic analysis team. Our consensus view is that Romney was the clear winner with Giuliani a close second.
We rate the candidates as follows for the odds of winning the nomination:
1. Romney 4:1
2. Giuliani 6:1
3. McCain 10:1
4. Thompson 13:1
We feel if Romney is the candidate he would favor Wall Street, i.e., financial sector would rise. GS, MER, LEH, BAC, JPM, C
If Giuliani we feel defense stocks will rise strongly. Lockheed, Raytheon, etc.
We are constantly asked why does it matter where the Dollar trades relative to other currencies.
The answer is that because of the huge trade deficit the US has with Japan, i.e., the relative amount of imports to exports, Japan has a huge surplus of Dollars as reserve foreign exchange and has to invest the Dollars some place usually in treasury bills and the stock market. Tending to support the market with recycled dollars.
Dow stocks will rise today based on the retail news of WMT.
Wal-Mart (WMT) up however, same store sales flat, i.e., growth came from opening new stores.
Target (TGT) down on weak sales.
Republican Presidential Debate on Tuesday was covered by our economic analysis team. Our consensus view is that Romney was the clear winner with Giuliani a close second.
We rate the candidates as follows for the odds of winning the nomination:
1. Romney 4:1
2. Giuliani 6:1
3. McCain 10:1
4. Thompson 13:1
We feel if Romney is the candidate he would favor Wall Street, i.e., financial sector would rise. GS, MER, LEH, BAC, JPM, C
If Giuliani we feel defense stocks will rise strongly. Lockheed, Raytheon, etc.
We are constantly asked why does it matter where the Dollar trades relative to other currencies.
The answer is that because of the huge trade deficit the US has with Japan, i.e., the relative amount of imports to exports, Japan has a huge surplus of Dollars as reserve foreign exchange and has to invest the Dollars some place usually in treasury bills and the stock market. Tending to support the market with recycled dollars.
Dow stocks will rise today based on the retail news of WMT.
Wal-Mart (WMT) up however, same store sales flat, i.e., growth came from opening new stores.
Target (TGT) down on weak sales.
Wednesday, October 10, 2007
Global 1 Installs New CEO and Implement New Business model and Business Plan.
Global 1 Installs New CEO and Implement New Business model and Business Plan.
Atlanta, GA October 10, 2007 (Business Wire) Global 1 Investment Holdings Corporation (OTCBB:GOIH), www.gobal1inc.com, www.global1invest.blogspot.com discusses strategic initiatives, acquisition plans, funding and growth ideas.
New CEO:
GOIH has installed a new CEO, W.E. Tucker. Mr. Tucker brings 20 years of experience in the media and entertainment industry. Mr. Tucker will guide the company forward on its new business model and business plan.
Business Model and Business Plan:
GOIH has created a blog located at www.global1invest.blogspot.com where we post ideas for profitable trading strategies. The blog has been a tremendous success and we have received many requests for us to expand the blog. As part of our new business plan we are setting up a separate company to actually trade on the ideas we publish in the blog using the Quantitative Finance Group’s ideas developed in-house.
G1 FNN
AS part of the business model which Mr. Tucker will implement, is the extension of the blog into print and video media via G1 Financial New Network and the establishment several funds to trade on the strategies we develop.
We complete the registration of 50 million in preferred shares
We have completed the first step in becoming an Institutional Investor: we have registered with the SEC on Form 8-A 50 million shares of Preferred Stock of GOIH with a par value of $10.00 per share allowing us to raise up to $500 million (USD). This new stock has been registered for listing and trading on an exchange other than the OTCBB. We are currently seeking trading listings in several countries.
Regulation S Offering:
The new Preferred Shares will be offered via Regulation S and Rule 144A to raise capital to fund our external counterparty company G1 Structured Credit Corporation and our financial services platform. G1 is has designed several fixed income derivative products for the real estate and entertainment sectors that guarantees an investor a return of principal investment as well as a guarantee on the coupon, i.e., interest.
Global Private Equity Fund for Acquisitions:
The acquisition of a company with cash flow in the financial services sector to integrate into our platform and the issuance of G1 $2.150 Billion Global Investment Notes to build an internationally publicly traded private equity fund to make acquisitions in the financial services, entertainment and real estate sectors are our goals. We have designed an integrated financial services platform consisting of an investment banking operation, a real estate lending operation, and structured financial products operations. Together these operations give us the ability to raise capital and fund our projects internally.
Disclaimer: This disclaimer is incorporated by reference as if fully set forth herein in this as well as all media releases on GOIH behalf. The statements contained in this released are forward looking and may or may not occur due to forces beyond the company's control. The risk factors contained in our public filings are incorporated by reference into this media release. An investment in GOIH is speculative and market forces beyond the company’s control can have an adverse effect on an investment in GOIH.
Contact:Global 1 Investment Holdings Corporation.W.E. Tucker, 404-222-7344investor_relations@mindspring.com
Atlanta, GA October 10, 2007 (Business Wire) Global 1 Investment Holdings Corporation (OTCBB:GOIH), www.gobal1inc.com, www.global1invest.blogspot.com discusses strategic initiatives, acquisition plans, funding and growth ideas.
New CEO:
GOIH has installed a new CEO, W.E. Tucker. Mr. Tucker brings 20 years of experience in the media and entertainment industry. Mr. Tucker will guide the company forward on its new business model and business plan.
Business Model and Business Plan:
GOIH has created a blog located at www.global1invest.blogspot.com where we post ideas for profitable trading strategies. The blog has been a tremendous success and we have received many requests for us to expand the blog. As part of our new business plan we are setting up a separate company to actually trade on the ideas we publish in the blog using the Quantitative Finance Group’s ideas developed in-house.
G1 FNN
AS part of the business model which Mr. Tucker will implement, is the extension of the blog into print and video media via G1 Financial New Network and the establishment several funds to trade on the strategies we develop.
We complete the registration of 50 million in preferred shares
We have completed the first step in becoming an Institutional Investor: we have registered with the SEC on Form 8-A 50 million shares of Preferred Stock of GOIH with a par value of $10.00 per share allowing us to raise up to $500 million (USD). This new stock has been registered for listing and trading on an exchange other than the OTCBB. We are currently seeking trading listings in several countries.
Regulation S Offering:
The new Preferred Shares will be offered via Regulation S and Rule 144A to raise capital to fund our external counterparty company G1 Structured Credit Corporation and our financial services platform. G1 is has designed several fixed income derivative products for the real estate and entertainment sectors that guarantees an investor a return of principal investment as well as a guarantee on the coupon, i.e., interest.
Global Private Equity Fund for Acquisitions:
The acquisition of a company with cash flow in the financial services sector to integrate into our platform and the issuance of G1 $2.150 Billion Global Investment Notes to build an internationally publicly traded private equity fund to make acquisitions in the financial services, entertainment and real estate sectors are our goals. We have designed an integrated financial services platform consisting of an investment banking operation, a real estate lending operation, and structured financial products operations. Together these operations give us the ability to raise capital and fund our projects internally.
Disclaimer: This disclaimer is incorporated by reference as if fully set forth herein in this as well as all media releases on GOIH behalf. The statements contained in this released are forward looking and may or may not occur due to forces beyond the company's control. The risk factors contained in our public filings are incorporated by reference into this media release. An investment in GOIH is speculative and market forces beyond the company’s control can have an adverse effect on an investment in GOIH.
Contact:Global 1 Investment Holdings Corporation.W.E. Tucker, 404-222-7344investor_relations@mindspring.com
GOIH Capital Markets: Market Overview----10-10-07
Based on our indicators the market is set to open lower today after the run up on Tues. after the Fed released the minutes of the FOMC meeting in Sept. The various commentators don not agree on the meaning of the Fed's 50 bps cut and some are a little unnerved concerning the rate cut. Our indicators and models predicted a move by the Fed of between 25-50 bps, so we were not unprepared for the move by the Fed.
The market is moving ahead rapidly now it appears that the Fed will not allow any major failures to financial institutions or any of the large brokers. The rate cut aided the financial sector disproportionally as well as the exporters, which is good for the manufacturing base. Cap. Ex should increase with the increase in exports as well as foreign investment in the US should also increase with the decline of the dollar relative to the other major currencies.
The Yen carry trade is alive and well as the dollar has strengthen against the Yen now to 117.24. We hold a position at 114.23 Yen and the position increases in value
The market is moving ahead rapidly now it appears that the Fed will not allow any major failures to financial institutions or any of the large brokers. The rate cut aided the financial sector disproportionally as well as the exporters, which is good for the manufacturing base. Cap. Ex should increase with the increase in exports as well as foreign investment in the US should also increase with the decline of the dollar relative to the other major currencies.
The Yen carry trade is alive and well as the dollar has strengthen against the Yen now to 117.24. We hold a position at 114.23 Yen and the position increases in value
Tuesday, October 9, 2007
GOIH Capital Markets: Market Overview--10-09-07
We have received several requests to explain what is the quantitative finance models we use and how are they calculated?
The proprietary models we use to make market forecasting and predictions are based on quantitative economic and financial theory. Our models are developed in house by our Quantitative Finance Group (QFG) using the latest in economic and financial theory and application of that theory.
We have staff trained in statistical analysis, finance, economics and psychology. We believe these disciplines provide the theory of which we formulate our model for forecasting and provide a competitive advantage.
Purdue University
Carnegie Mellon
GA Tech
New York University
Boston University
Graduate Programs in Quantitative Finance.
The above list of universities offers graduate programs in quantitative finance for interested parties.
GOIH is preparing an educational institute for the individual investors who wish to learn of the techniques use to forecast the markets.
_____________________________________________________________________
The market is set to open higher today on no fundamental news or economic data. Google has cracked the $600.00 mark for the first time and we are developing an option strategy for Google trading at $617 and Apple $171, we are in Apple at $128, and Goldman Sachs at $172. Volatility is down under 20 indicating lack of fear and greed is creepy back into the market.
We are designing a model where fear and greed, stochastic variables, will feed a model of the market and predict trading opportunities. The model will be part of our proprietary behavioral finance strategies unit.
We earlier posted that we were designing a portfolio based on a model of political decision making and the trading opportunities underlying the political decisions. After the CNBC candidates forum today we will test the model and post our analysis.
CNBC will host the republican candidates for a round table discussion of the economy at 4:00 pm today. We will cover the event and report back with our economic analysis of what was said and trading strategies for the comments made.
We are exiting our position in KO after it was down graded, as well as our position in MCD and taking the profits.
We will post the trading profits realized from the trading of these stock later today.
We have several strategies we are currently developing designed by our quantitative strategies group using a new model of the global economy.
The proprietary models we use to make market forecasting and predictions are based on quantitative economic and financial theory. Our models are developed in house by our Quantitative Finance Group (QFG) using the latest in economic and financial theory and application of that theory.
We have staff trained in statistical analysis, finance, economics and psychology. We believe these disciplines provide the theory of which we formulate our model for forecasting and provide a competitive advantage.
Purdue University
Carnegie Mellon
GA Tech
New York University
Boston University
Graduate Programs in Quantitative Finance.
The above list of universities offers graduate programs in quantitative finance for interested parties.
GOIH is preparing an educational institute for the individual investors who wish to learn of the techniques use to forecast the markets.
_____________________________________________________________________
The market is set to open higher today on no fundamental news or economic data. Google has cracked the $600.00 mark for the first time and we are developing an option strategy for Google trading at $617 and Apple $171, we are in Apple at $128, and Goldman Sachs at $172. Volatility is down under 20 indicating lack of fear and greed is creepy back into the market.
We are designing a model where fear and greed, stochastic variables, will feed a model of the market and predict trading opportunities. The model will be part of our proprietary behavioral finance strategies unit.
We earlier posted that we were designing a portfolio based on a model of political decision making and the trading opportunities underlying the political decisions. After the CNBC candidates forum today we will test the model and post our analysis.
CNBC will host the republican candidates for a round table discussion of the economy at 4:00 pm today. We will cover the event and report back with our economic analysis of what was said and trading strategies for the comments made.
We are exiting our position in KO after it was down graded, as well as our position in MCD and taking the profits.
We will post the trading profits realized from the trading of these stock later today.
We have several strategies we are currently developing designed by our quantitative strategies group using a new model of the global economy.