Brainstorming Tuesday – part 1
1 Defcon 1 for longs as I put out the red alerts the last 2 weeks the picture gets overall more fragile as even ‘good news’ start to get ignored and we have strong after hour selling action. The tricky part will be as stated earlier that the move in Sep will be limited due to a big anticipation but the overall correction ( new lows) will take its course over the next 6-9 months.
Repeat after me: There is nothing wrong with buying all day, gunning into close, then dumping insane volume after hours… There is nothing wrong… etc
2. The dimensions of the OTC derivative markets nuke potential is described by the simple fact that some banks make outstanding profits on broking them ( the usual suspects Goldman, JP Morgan etc. ) but will not be the ones who clean up the mess after the next explosion. If Obama does not make a bold move as exactely this instruments caused most of the current 1.5 tril of official losses he even did not understand the problem ( every second grade can work that out ) or he is a manchurian candidate. Since he made it through Harvard on his own merits we can assume he has the intellect.
Wall Street Stealth Lobby Defends $35 Billion Derivatives Haul
Aug. 31 (Bloomberg) — Wall Street is suiting up for a battle to protect one of its richest fiefdoms, the $592 trillion over-the-counter derivatives market that is facing the biggest overhaul since its creation 30 years ago.
Five U.S. commercial banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank of America Corp., are on track to earn more than $35 billion this year trading unregulated derivatives contracts. At stake is how much of that business they and other dealers will be able to keep.
“Business models of the larger dealers have such a paucity of opportunities for profit that they have to defend the last great frontier for double-digit, even triple-digit returns,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics, which analyzes banks for investors.
The Washington fight, conducted mostly behind closed doors, has been overshadowed by the noisy debate over health care. That’s fine with investment bankers, who for years quietly wielded their financial and lobbying clout on Capitol Hill to kill efforts to regulate derivatives. This time could be different. The reason: widespread public and Congressional anger over the role derivatives such as credit-default swaps played in the worst financial crisis since the Great Depression.