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  • biddermon_ca biddermon_ca Aug 9, 2011 8:26 PM Flag

    What's changed

    America credit rating still downgraded, interest rates still 0-.25%, hugh deficits and out of control spending, Europe's problems still front and center, unemployment still 9.1%, Obama still in the whitehouse, Harry Reid still in charge of the Senate, etc....why all the optimism in the market.

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    • I repeat...

      America credit rating still downgraded, interest rates still 0-.25%, hugh deficits and out of control spending, Europe's problems still front and center, riots in the streets, unemployment still 9.1%, Obama still in the whitehouse, Harry Reid still in charge of the Senate, etc....why all the optimism in the market.

    • Thanks for the perspective. Much appreciated.

    • <<...I don't know a single person who was thinking a rate hike was on the horizon...>>

      I don't know anyone personally who I would trust to have a knowledgable opinion on that topic, so I use Treasury futures instead. That lets the market tell me what market participants think. You can get active futures quotes on a 2 year out far into the future, and those shifted significantly after the announcement.

    • 10 year 2.25%, encino sherman oaks condo conversions, do 'em for $100,000 per unit, say previously listed for $500,000 and sell them for $300,000 per unit.

    • I trade STD when I think it gets mispriced. It is one of two banks that have big developing market exposure, but get dragged down as European banks. The other one I like a lot better is little known in the US, but it trades here on the pinks on very little volume. It's Standard Chartered (SCBFF).

      I don't think I ever mentioned Standard Chartered here because I hate banks in general, and people would think I was crazy, but it's actually one of the five core stocks in my retirement account. It's the one bank in the world that I would (and do) own. Not recommending it. I don't ever recommend anything. Just explaining taht I tend to add and subtract from my Standard Chartered position rather than STD.

      STD definitely has more South American exposure, but it also has more European expsoure, last I looked. When I play Brazil I actually do it with home builders.

      In response to your question about who might become one of the major European banks, I have no idea. The Germans banks may simply increase their domination in the end.

      One outside possibility is that a strong developing country makes a play on European banking. China is in an interesting spot here. They would like to help their largest customer (Eurozone), but people who think they will bail out Europe directly are crazy. They aren't stupid.

      China is griping about US devaluation of the dollar and its effects on Treasury real returns for foreign holders. Look at what China's Treasury holdings are doing and you get a clue that they would like to invest their dollars elsewhere. They've been buying foreign equity assets, but mostly commodity assets: energy, agriculture, mining, etc. Eventually, I expect them to buy other equities outside the commodity space. If they want to help their biggest customer why not buy one of the big banks at distressed prices and pump in a bunch of capital. That makes a lot more sense than buying Euro sovreign debt directly to me.

    • <<<why all the optimism in the market.>>>

      I'm not sure either. Stocks went down from 2:15 to 3:00, when I left for a meeting. I got back to my office around 5PM and the market was up 400 points.

      I read the statement. It says the economy is getting worse (duh), and we'll probably keep ZIRP for at least two years (duh, did anyone think he was going to raise rates?). That's it. No mention of QE3 except to say that they were keeping their options open. Am I missing something? Why did the market rally so hard? I've a feeling it could have been bogus, but who knows.

 
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