Financial News

[mr_genius]

I believe this is the right thread:

 

I encourage Chicagoans to please email the CAPB and request they strike down the new regulations aimed at Ubers black car service.

 

consider it done

Edited November 5, 2012 by mr_genius

[StrangeSox]

An Australian judge issued a strong ruling against Standard & Poors over the way they 'rated' MBS's.

 

http://blogs.reuters.com/felix-salmon/2012...y-cpdo-edition/

 

I haven’t read the whole decision, of course, but I have read the summary — and as someone who’s been writing about CPDOs for six years now, I can attest that Jagot’s summary is the single best one-stop shop for understanding what happened with these things. She concedes at the beginning that “the explanation unavoidably refers to complex concepts which are likely to be unfamiliar to those without specialist expertise in structured finance” — this is not easy reading, and if you don’t enjoy nerding out with such concepts, I would never recommend it to you. But if you are reasonably familiar with credit default swaps, Monte Carlo simulations, volatility assumptions, and the like, then I highly recommend you read Jagot’s summary: it’s utterly eye-opening.

 

There’s more, too. S&P also plugged into its model an assumption of 7% for something called roll-down benefit, or RDB. Every six months, the CPDO would exit its existing positions, and buy new positions in the index maturing six months later. In general, bonds which mature later have higher yields, so S&P assumed that on average, the new index would yield 7bp more than the old index. And that was an utterly crucial assumption. Never mind the triple-A rating: without the RDB, the CPDO couldn’t even get an investment-grade rating. It wouldn’t even be triple-B.

 

That was a reasonable assumption, at the time — in terms of the general slope of the yield curve. In general, corporate bonds do tend to yield about 7bp more if they mature 6 months later. But in assuming the 7bp figure, S&P completely ignored the fact that it was comparing apples and oranges: the components of the new index would not always be the same as the components of the old index. After all, the index was an index of investment-grade corporate debt, so if a company lost its investment-grade credit rating, it wouldn’t be included in the index any more.

[mr_genius]

Lol stock market is down big after the election

[bmags]

I initially read Sprint bought US Cellular but they just bought a bunch of their markets in the midwest. We still have US Cellular likely on our stadium.

[NorthSideSox72]

Lol stock market is down big after the election

Partially due to their preference for Romney. But more so, it is about the looming fiscal cliff and regulatory uncertainty, and the reality that Congress is still split, making it very difficult to get something done about it quickly. The markets want certainty.

 

[mr_genius]

The markets want certainty.

 

"you can't always get what you waannt"

[mr_genius]

Dow down another 120

Edited November 9, 2012 by mr_genius

[southsider2k5]

Dow down another 120

 

There is going to be a lot of selling for the next few months as people sell to be out of stocks by the time new tax laws will take effect.

[cabiness42]

There is going to be a lot of selling for the next few months as people sell to be out of stocks by the time new tax laws will take effect.

 

I moved my TSP money out of the markets a few months ago and now I need to figure out when to move it back in. How long does everybody think the post-election swoon goes before things correct?

[southsider2k5]

I moved my TSP money out of the markets a few months ago and now I need to figure out when to move it back in. How long does everybody think the post-election swoon goes before things correct?

 

Until the tax situation gets fixed long term. And without it being a huge hit to people's bottom line.

[NorthSideSox72]

I moved my TSP money out of the markets a few months ago and now I need to figure out when to move it back in. How long does everybody think the post-election swoon goes before things correct?

 

Talking with folks doing the trading, while there is some fear about higher taxes being a drag, the biggest factor is still the fiscal cliff. Until Congress and the President do something material to avoid it, the markets will stay down a bit.

 

If you are a long term investor, I wouldn't pull any money out of the markets at all right now. They've already corrected down anyway, and where they go from here in the short run is a big guessing game. Long run, they'll make some fixes because they have to, so you'll end up back up again. Therefore, again if you are a long term investor, pulling out now is probably not smart. Most people don't win that guessing game.

 

Until the tax situation gets fixed long term. And without it being a huge hit to people's bottom line.

 

I think that certainly is a factor, but I don't get the impression that targeted tax increases are going to cause any serious problems for the markets. If they can just come up with SOME type of plan to avoid the cliff, that will help things a fair amount. Then do the big work early next year.

 

The two big problematic factors would be if...

 

1. They go over the cliff

or

2. They kick the can down the road too far - like a year or something. That will constrict the markets and continue to add to the uncertainty.

 

[StrangeSox]

They can go over the "cliff" and then fix things the next day (or week or month) without catastrophic results. The CBO's estimated impact is assuming that the issue isn't addressed at all next year. It's a gradual slide, not a cliff.

[NorthSideSox72]

They can go over the "cliff" and then fix things the next day (or week or month) without catastrophic results. The CBO's estimated impact is assuming that the issue isn't addressed at all next year. It's a gradual slide, not a cliff.

And again, you are missing the point. First, he was asking about the MARKETS, which would have tumbled many days before the actual deadline if nothing is done. And may not recover for a while, depending on what is done when. Second, if they trip overthemselves during the early stages, they won't have much confidence in how they would handle the bigger changes, which would do even more damage in the markets long term.

 

[StrangeSox]

I understand your point that, in the short-term, it'll obviously be bad to go past the Jan 1. deadline without doing anything to change the laws. But it isn't an unrecoverable cliff as it's being framed in the national narrative. I used your post as a spring-board for my own annoyance, and that's not really fair.

[southsider2k5]

Talking with folks doing the trading, while there is some fear about higher taxes being a drag, the biggest factor is still the fiscal cliff. Until Congress and the President do something material to avoid it, the markets will stay down a bit.

 

If you are a long term investor, I wouldn't pull any money out of the markets at all right now. They've already corrected down anyway, and where they go from here in the short run is a big guessing game. Long run, they'll make some fixes because they have to, so you'll end up back up again. Therefore, again if you are a long term investor, pulling out now is probably not smart. Most people don't win that guessing game.

 

 

 

I think that certainly is a factor, but I don't get the impression that targeted tax increases are going to cause any serious problems for the markets. If they can just come up with SOME type of plan to avoid the cliff, that will help things a fair amount. Then do the big work early next year.

 

The two big problematic factors would be if...

 

1. They go over the cliff

or

2. They kick the can down the road too far - like a year or something. That will constrict the markets and continue to add to the uncertainty.

 

It depends on where they put long term dividends and stock profits at. If they push them to near 40% as has been talked about, you will see a massive amount of selling before the plan goes into place. You'll see the money trickle back in, but it will be over years, and not days/weeks, like you will see it leave.

[StrangeSox]

There is absolutely no chance that the House passes a bill that raises those taxes even higher than they were under Clinton.

[southsider2k5]

There is absolutely no chance that the House passes a bill that raises those taxes even higher than they were under Clinton.

 

For Dividends it what the President wants to see happen.

[StrangeSox]

There is absolutely no chance that the House passes a bill that raises those taxes even higher than they were under Clinton.

 

[StrangeSox]

I haven't read anything from Krugman in months but here's his (political) take on what Democrats should do:

 

So President Obama has to make a decision, almost immediately, about how to deal with continuing Republican obstruction. How far should he go in accommodating the G.O.P.’s demands?

 

My answer is, not far at all. Mr. Obama should hang tough, declaring himself willing, if necessary, to hold his ground even at the cost of letting his opponents inflict damage on a still-shaky economy. And this is definitely no time to negotiate a “grand bargain” on the budget that snatches defeat from the jaws of victory.

 

In saying this, I don’t mean to minimize the very real economic dangers posed by the so-called fiscal cliff that is looming at the end of this year if the two parties can’t reach a deal. Both the Bush-era tax cuts and the Obama administration’s payroll tax cut are set to expire, even as automatic spending cuts in defense and elsewhere kick in thanks to the deal struck after the 2011 confrontation over the debt ceiling. And the looming combination of tax increases and spending cuts looks easily large enough to push America back into recession.

 

Nobody wants to see that happen. Yet it may happen all the same, and Mr. Obama has to be willing to let it happen if necessary.

 

So what should he do? Just say no, and go over the cliff if necessary.

 

It’s worth pointing out that the fiscal cliff isn’t really a cliff. It’s not like the debt-ceiling confrontation, where terrible things might well have happened right away if the deadline had been missed. This time, nothing very bad will happen to the economy if agreement isn’t reached until a few weeks or even a few months into 2013. So there’s time to bargain.

 

He and other liberals advocating for the "let the tax cuts expire and then come to the table with a Democratic plan on Jan. 1" route may be underestimating what would happen if they took that course of action, but surrendering once again and making ineffective tax cuts for the rich permanent and cutting entitlements as part of some "Grand Bargain" to avoid a tangentially related situation would be awful.

[southsider2k5]

Until Obama backs down, remember David Axelrod was just on TV yesterday say that that President won with a platform of raising taxes on the rich, it is going to be a legitimate market fear. You can't just discount the President's words because they have knocked the market down 5% in two days.

[southsider2k5]

Until Obama backs down, remember David Axelrod was just on TV yesterday say that that President won with a platform of raising taxes on the rich, it is going to be a legitimate market fear. You can't just discount the President's words because they have knocked the market down 5% in two days.

 

And don't forget, with the fiscal cliff out there, all Obama has to do is veto an agreement, and he gets his tax increases, if he really wants them.

[southsider2k5]

http://www.businessweek.com/news/2012-11-0...-pre-2013-moves

 

An investor who sells $100 of stock with a cost basis of $20 in 2012 would see proceeds -- after capital gains taxes -- of $88, according to an analysis by J.P. Morgan Private Bank. Next year, if Congress doesn’t act, earnings from the sale would drop to $80.96 if rates rise to 23.8 percent. That means the stock price would need to rise by at least 9 percent for an investor to be better off selling in 2013.

[StrangeSox]

And don't forget, with the fiscal cliff out there, all Obama has to do is veto an agreement, and he gets his tax increases, if he really wants them.

He gets his tax increases, but nobody wants what the CBO is projecting if absolutely nothing is done for the entirety of 2013. He can get his tax increases on Jan. 1 to strengthen his bargaining position and then go with the Congressional Democrats back to the table.

[southsider2k5]

He gets his tax increases, but nobody wants what the CBO is projecting if absolutely nothing is done for the entirety of 2013. He can get his tax increases on Jan. 1 to strengthen his bargaining position and then go with the Congressional Democrats back to the table.

 

Which is still a plausible way to get these tax increases and take thousands of points out of the stock market.

[StrangeSox]

Do you think the entirety of the Bush cuts should be made permanent?