While this is how it played out, as the crisis was unwinding, there were real fears that the CDS weren't going to get paid out and, for a few days, there were 11:59pm fire sales to prop up capital reserves.

That in turn depressed prices, heightened fears that another bank would collapse (more counterparty risk previously uncontemplated), and forced even more fire sales and rapid unwinding. The unwinding and death spiral was spreading beyond MBS before TARP and (more importantly) Fed Reserve stepped in and basically eliminated the counterparty risk of CDS. The losses on bonds/MBS positions were something most of the banks were always prepared to absorb (in that Lehman was an outlier). The counterparty risks (complete collapse of AIG and Lehman) were something nobody was really prepared for.

This is a very simplified but I think fairly accurate description.

PS: people/firms with cash on hand and weren't conflicted out scooped up tons of the MBS products and even the raw mortgages for dimes on the dollar and made out like bandits. Everyone knew the prices were well below fair value.

PS2: It's 100% standard for banks to have CDOs that hedge against the risks of their long positions. It's a big part of what allows them to take on more leverage.

Yup, this all sounds pretty accurate to me. My understanding is that investment banks (other than Lehman, whose book had issues well beyond just MBS) were generally reasonably hedged, but were exposed to both liquidity issues and systematic risks that were inherent to how they operated, independent of their specific positions or market view. Very little of what they do was done without effectively offsetting the risk in some way and it kind of had to be that way because they had very little actual working capital relative to the size of their book. Most of the major losses I'm aware of happened on the commercial side.

And yikes, just came back after a few weeks and Tooth is still spewing complete nonsense and predictably he's not taking any bets that he's sure he's gonna win. I'm going to make an effort not to engage with aggressively ignorant folks now.

Isn't it +6.555% and -8.2%?

Down like 2% ish

No, grizy's math is correct.

-32.9% Annualized
= 0.671 of previous GDP in a year
= 0.671 ^ 0.25 = 0.905 of previous GDP in a quarter
= -9.5% q/q

+26.20% Annualized
= 1.262 of previous GDP in a year
= 1.262 ^ 0.25 = 1.06 of previous GDP in a quarter
= +6.0% q/q

If you combine the two, 0.905 * 1.06 ~= 0.959 or -4.1%

Thanks! good to learn how it's done

How is the market/economy not cracking with no new stimulus? We were told the $600 extra federal was so essential and I believe the majority of people on UE aren't getting it now?

Will they pass a big stimulus before the election or will the Dems just wait it out at this point?

atlanta fed has Q3 improved at +28.9%, so over the past two quarters -3.6%

Will rising virus cases trigger a new bear market during this fall/winter?

Hope you're right, Shuffle. I'm loaded with longterm precious metals calls.

Yeah, I actually sold most of my GLD/SLV calls on Monday for that reason when it became obvious no stimulus pre-election. Still have a little bit of GLD/SLV calls, also still have a bunch of longer term miner calls as I'm expecting some big earnings. If gold spot can stay above 1850 indefinitely, miners feel like a pretty good play.

Seems like worst case scenario for markets/economy is if GOP wins the senate and Dems win WH. Then you will get the gridlock scenario where they only want to print enough $ to satisfy the markets on a quarterly basis.

If Dems win everything then they still have to kill the filibuster to pass the type of massive plan that will placate the markets for longer than a quarter or so.


It seems like we will probably just have some type of UBI/stimulus ongoing until 2022-2023 I would think.

Seems we're getting Biden + split congress, but Mitch appears to want to deal: https://www.politico.com/news/2020/1...ear-end-434047

McConnell has been pitching for his small relief package before too...
Though now I doubt he will go anywhere near as big as what they had on the table before.

Between no stimulus for the last 4 months and the rona spreading like wildfire, how is the market holding up and making ATHs this time around?

It isn't buying the thesis that the next 4 months are going to be "hell" or it just doesn't care?

It just doesn't care at this point since job numbers and GDP numbers are trending in right direction.

We've kinda mentally moved on from it.

The Federal Reserve and its unlimited printing press via the US Treasury?

Yes, the bond bubble has had air coming out of it for months as people sell bonds but the Fed's bond purchases are blowing air into it from the other side and keeping yields relatively stable. The people selling bonds are getting cash for those sales and using it to further run up the stock market bubble.

The end game is a currency collapse and an end to the government's ability to fulfill its current functions in society.

Yawn. Been hearing this for 10 years now.

This is one of those things that works and works and works until it doesn't and it breaks horribly and screws everyone over and suddenly it really is the end of the world as we know it. Just because QE has been working for 12+ years doesnt mean the United States can keep getting away with what they are doing if they keep pushing the money printing to the limits.

The fact that bitcoin and gold's price have been going up a lot recently is not a coincidence.

When the market retraced from S&P 2200 to 2400, there was a poll on here asking if the market had bottomed or not and it was something like 40-zip saying that it had not. Can't find the thread but was thinking about it just now as it appears the market is no longer remotely worried about the rona. Some olds gonna die, some poors gonna be stretched more and life goes on...

Bulls crushed the bears on the rona

I was on the bear side and ended up way wrong also, good learning spot so far.

The general idea of the economy going on better without 'worthless' small business has shifted my views somewhat as well. Candybar might have won some points there.

Disagree, the really easy money (at least for me) was made on the way down. I've been relatively flat since March and haven't really taken advantage of the pump, but March alone was good enough that it probably made my decade.

Obv the bulls won if you're looking at it starting near the bottom in March. The magnitude of money printing has been greater than expected, and for the most part since March, rona news has been extremely bullish: IFR turned out to be lower than most expected, and vaccines appear to be way more effective than feared. I'm guessing the meltup continues once the existential threat to the US on the political side gets cleared away.

Opposite for me. I was kinda neutral on the aggro positioning scale going into it, then ramped up to levered long in mid march. after getting back to flat in June has been a very good year since.

Yeah, I've been significantly less than 100% long since March which is rare for me. But in terms of dollar value I've been more long than I was pre-covid, so I can't complain. I probably would have had more balls if I was trading OPM

small businesses mean **** all to the "economy". Lenin has a quote about them which speaks to this but I cant really be bothered to look it up. And if they were worthless in 1920, its a fraction of that now.

but in this case, the small businesses failing and getting scooped up and gutted by the larger ones is actually great for the economy.

the rich get richer. overall wealth increases on paper. it just goes to the few.