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Have We Seen the Last of the Bear Raids?
WSJ / OpinionJournal.com ^ | March 26, 2009 | Andy Kessler

Posted on 03/26/2009 11:13:07 PM PDT by CutePuppy

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To: glorgau

These assetts need to be sold before the full effects of Obama’s tax and regulation policies are seen , then even the holders of these securities will be glad to get $0.30 for them when the payments stop coming in.


21 posted on 03/27/2009 4:58:12 AM PDT by Neidermeyer
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To: JasonC
Where you and your fellow travelers get this all wrong is that most of us don't even want folks in the business that the FED/Treasury are trying to prop up. These are a bunch of leaches on the productive part of the economy syphoning off enormous quantities of wealth for private pleasure and investing in things that are of little economic value.

We don't want folks trading CDS. They shouldn't even exist.

We "little people" don't want Geitner bailing out their asses. We want them tarred and feathered and their so-called banks sown under with salt.

22 posted on 03/27/2009 5:04:54 AM PDT by AndyJackson
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To: JasonC

PS the country is still head over heals in debt, at multiples of GNP that would have made your predecessor shills in 1929 mad with envy.


23 posted on 03/27/2009 5:08:04 AM PDT by AndyJackson
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To: JasonC
You can't just manipulate a $62 trillion market for derivatives

This is about the funniest piece of idiocy I have read all week long.

24 posted on 03/27/2009 5:09:13 AM PDT by AndyJackson
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To: CutePuppy
In a typical bear raid, traders short a target stock -- i.e., borrow shares and then sell them, hoping to cover or replace them at a cheaper price.

Short sellers in the market serve a purpose. They sniff out over valued stock and help prevent bubbles from being created. Generally, it is a good thing, when done legally.

What the author fails to explore here is illegal naked shorting. Traders selling shares that don't exist and that have no intention or ability to deliver. Trades that never settle. In effect, stealing shareholder value right in plain sight.

25 posted on 03/27/2009 5:12:54 AM PDT by IamConservative (I'll keep my money. You keep the change.)
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To: JasonC

“banks believe these assets are extremely undervalued”

......That’s because they are......

The collateral is good, the paper is bad. The solution requires separating the assets from the broke holders of the paper. The banks need to be able to eliminate the middle guy holding title and directly own the asset.

The poor must go back to renting. The property must be forclosed or title given to the Bank and the former owner becomes a renter


26 posted on 03/27/2009 5:21:04 AM PDT by bert (K.E. N.P. +12 . John Galt hell !...... where is Francisco dÂ’Anconia)
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To: IamConservative
What the author fails to explore here is illegal naked shorting. Traders selling shares that don't exist and that have no intention or ability to deliver. Trades that never settle. In effect, stealing shareholder value right in plain sight.

Correct. Any crook would love to be able to sell a non-existent item, receive payment for it, fail to produce it, and yet go unpunished for the act. This goes on thousands of times a day on Wall Street.

27 posted on 03/27/2009 5:25:00 AM PDT by snarks_when_bored
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To: snarks_when_bored
Any crook would love to be able to sell a non-existent item, receive payment for it, fail to produce it

A short seller doesn't get paid anything until he delivers the stock.

28 posted on 03/27/2009 5:31:04 AM PDT by Toddsterpatriot (Havoc has been back since September. Or was it April?)
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To: Toddsterpatriot

Technically, the trade remains open. In fact, the naked short sellers are increasing the value of their already established short positions, and so each naked short sale that helps to depress the price of the stock pays off for the crook.


29 posted on 03/27/2009 5:43:12 AM PDT by snarks_when_bored
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To: snarks_when_bored
each naked short sale that helps to depress the price of the stock pays off for the crook.

Only when they finally deliver the shares.

30 posted on 03/27/2009 7:27:04 AM PDT by Toddsterpatriot (Havoc has been back since September. Or was it April?)
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To: CutePuppy
Xactly...
31 posted on 03/27/2009 8:11:47 AM PDT by JasonC
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To: politicket
Um, bank debt is at 50 cents. They have a confidence problem much, much bigger than the cash flow opportunity. Clearing the decks of future marks, then showing 1-2 quarters of all upside earnings, is what they need to get people to notice that high leverage on a positive number works rather well, and that they will recover equity the old fashioned way, by earning it. They don't want another 6 months bouncing along the floor at stock prices of $2 as populist idiots wail for their nationalization. Trust me. Now, if they think they can just post huge earnings directly, great, they will. That's fine. The point of the whole thing is to bring the *bid* for these asset classes up. That helps even those that keep it; it cuts their marks.
32 posted on 03/27/2009 8:16:29 AM PDT by JasonC
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To: Mad Dawg
Which was the best time in the history of the world to buy in. Also, we aren't shrinking the money supply by 30% this time, and world trade isn't collapsing 95%. This isn't remotely the great depression.
33 posted on 03/27/2009 8:17:48 AM PDT by JasonC
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To: bert
Well yes, there is a large workout needed. The right thing is to first recreate whole loans. Securitized, tranched ones do not have a single lender who can make calls on short sales and the like.

The market way to do all that is for operators with capital to buy up all tranches cheap, paying only cents for the subordinate ones to be sure, and then do deals with the senior class to recreate the original loan portfolio. Next step, triage that portfolio, all the performers repackaged and sold. All the non-performers go to workout people who can expedite all the collateral churn side of things, where right now the banks are swamped and securitization hair gums everything up.

If there were only one lender and the pols would stop monkeying with the foreclosure laws thinking they can make it all go away by just not letting anyone at the collateral, then it'd be RTC easy. But neither is true. That being the case, it may wind up that it has to be Fannie and Freddie doing the first step of the above, with public backing. Hopefully indirectly (Fed buying their debt etc).

34 posted on 03/27/2009 8:23:39 AM PDT by JasonC
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To: JasonC

At last.... a reasoned, succinct analysis that I can understand describing a solution.

.....The right thing is to first recreate whole loans....

Does this mean to separate out the individual loans from the tranches? Or, does it mean that the original loan has been somehow split and needs to be reassembled?


35 posted on 03/27/2009 9:06:49 AM PDT by bert (K.E. N.P. +12 . John Galt hell !...... where is Francisco dÂ’Anconia)
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To: CutePuppy
Andy Kessler says that "all of this is just a bear raid";. This demagoguery will sell books, which is part of Kessler's MO. Short selling is cathartic. The most accurate thing Kessler says is that short selling forced writedowns quickly rather than being papered over for 5 to 10 years. That hasn't happened yet, but let's hope it does. Nevertheless, it demonstrates that Kessler understands the value of short selling. As for bear raids, they work until they don't, at which point the raiders can lose their stake.

CEOs like Jeffrey Immelt like to blame market manipulators, in another era it would have been "the Jews", but the damning truth is that he used his shareholders' money to overpay for assets and assume risk for insufficient premiums. He is blaming speculators for his mismanagement, or worse.

What really happened was that over a decade, credit was extended and risks were assumed with other people's money without any underwriting standards, creating $10 trillion or so (that's everything) of unrecognized losses. Certain events exacerbated this, such as an extra trillion when Spitzer took Greenberg off the case so that Cassano could run wild.

There is nothing wrong with an unregulated CDS market. The root of the problem is other people's money. A case in point is that Wall Street firms somehow managed to survive, or morph, for a century or so until they went public. No sooner did that happen than somehow they became dens of bad underwriting and became supplicants to the public purse.

The market was exacting its own solution until government started to meddle. Stupid government action can be played by free market actors, and that is what is happening. No outrage here.

My solution? Let nature take its course. However, post Bear Stearns, post AIG, post reason, that is not going to happen. All we can do is nip at the heels of the demagogues.

36 posted on 03/27/2009 9:14:02 AM PDT by Praxeologue
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To: JasonC
I'm not sure I understand what you're saying. Of course the REAL Bottom of mid 1932 would have been a great time to buy in. But the rallies of late 1930 and 1931 could have been devastatingly deceptive.

SO I'm not sure now if we've made it to the 1932 moment or if the current gyrations are more like those of 1930-1931.

Also, while I agree that it is not YET anything like the Great Depression, I fear that Obummer and Co. are doing their level best to recreate the 1930s. They certainly are bringing the same big government we're the brightest and best attitude to the problem.

37 posted on 03/27/2009 9:44:02 AM PDT by Mad Dawg (Oh Mary, conceived without sin, pray for us who have recourse to thee.)
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To: JasonC
Um, bank debt is at 50 cents.

Um, not according to the Goldman Sachs report that flew across my desk few days ago. Banks are not carrying their debt on their balance sheets marked at 50. None of them.

38 posted on 03/27/2009 10:51:24 AM PDT by politicket (1 1/2 million attended Obama's coronation - only 14 missed work!)
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To: JasonC
Instead of saying "debt" in my previous post I should have said "toxic assets". Debt infers the liability side of the balance sheet.

Banks could still sell their toxics assets at 50 like you describe, but they won't. That would require them to take huge write-downs that they're not willing to suffer. They'll just sit on it instead - or buy their own debt and stiff the taxpayer throught the FDIC's non-recourse loan.

39 posted on 03/27/2009 10:57:46 AM PDT by politicket (1 1/2 million attended Obama's coronation - only 14 missed work!)
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To: politicket
or buy their own debt and stiff the taxpayer throught the FDIC's non-recourse loan.

How would buying their own debt "stiff the taxpayer"?

40 posted on 03/27/2009 11:15:00 AM PDT by Toddsterpatriot (Havoc has been back since September. Or was it April?)
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