Saturday, September 27, 2008

Here you go

15 hours after my call on fail-out (reason #1):

The compromise legislation that seemed to be emerging Saturday "is not the proposal that we got from Secretary Paulson," Reid said.

Financial Meltdown

Now the most hard-to-believe part of the call, reason#3 in the list:
Bank of New York, State Street and Northern Trust.

I suggest you all to watch these banks very closely next week as I do not expect a news item on them until their stock prices are significantly decimated into the single digits shortly.

Bailout failure 'will cause US crash’


13 comments by xTrenders :

Daniel said...

NCC another I've been watching since Thur to bite the bullet. Traded it with WM.... (135 bil in liab). Not a small name either.

Registered: May 2007
Posts: 792
09-25-08 05:04 PM

Next to bite the bullet if WM keeps getting taken out IMO.

Trading the pair. Anyone see a weaker bank ATM?
Registered: May 2007
Posts: 792
09-26-08 10:02 AM

NCC getting smashed. -25% now"

I've been at this for nearly a decade, but your accuracy/mental picture of the markets is virtually untouched even by myself.

Absolutely love the blog. Keep up the good work here.

Atilla M. Demiray said...

NCC is where WM was a few days ago. It will be gone soon.

PCP said...

Might as well add the Belgian bank Fortis to that list of banks walking the plank. It is gonna be another interesting week.

TonyH said...

Hey Attila:

I think I prefer the bearish version of your calls. :-)

Don't know if it will be a gap down (bailout or not) or whether Mr. Market will need to load a few more weak hands with 'papers' and get the cash, but I do feel that the direction coming for the next few weeks is down, whether immediate or delayed.

Question: Do you have an opinion on homebuilders? Most of the talk focusing on financials lately (and for good reason). Recent numbers releases (company earnings, new home sales, jobless claims, tightening of lending, no money to lend) are by no means positive, yet, while $SPX is around its July low, XHB is 50% above the July low and last Friday it had a new 52w high. Something wrong with this picture/relationship?

Atilla M. Demiray said...

I think they just put an important top

TOL is a good short here

ARAK said...


Between STT, BK and NTRS, BK looks the weakest while NTRS is near its highs. Why do you think one of these major custodial banks would fail next week? Run on money market accounts?

I like BK ... rhymes with bankrupt :-) and seems to be the weakest of the three.

Atilla M. Demiray said...

STT is the worst looking

They hold large positions in NCC and WB.

Many STT clients had mortgage-backed securities used as collateral for their securities lending activities in the last 90 days.

ARAK said...

Wouldn't these STT clients have borrowed shares for shorting and therefore be in a position to repay STT in full?

PCP said...

The Brits just nationalized Bradford & Bingley.

NTRS warned of potential losses due to Lehman Brothers bankruptcy. The effects of WM, WB will be felt next week for sure.

If Paulson gets everything he wants by Sunday, I expect a pop and drop.

Atilla M. Demiray said...

That lending is not stock lending.


"State Street requests that the Commission not delay the issuance of the Final Rule or Collateral Orders under any circumstance. However, for the reasons set forth below, State Street urges the Commission to grant, either concurrently with the issuance of the Final Rule or Collateral Orders or on a date in the near future, the authority for any Qualified Institutional Lender (as defined below) to negotiate the types of collateral that may be pledged by U.S. Brokers in any securities lending transaction involving a securities loan by such Qualified Institutional Lender. A 'Qualified Institutional Lender,' as used in this context, means any institutional securities lender that either (i) is a qualified institutional buyer (QIB), as that term is defined under Rule 144A promulgated under the Securities Act of 1933 (1933 Act), or (ii) owns and invests on a discretionary basis at least $100 million in eligible securities as specified in Rule 144A of the 1933 Act.

State Street strongly believes that such further relief sought for Qualified Institutional Lenders is warranted because, among other reasons discussed more fully in this response letter, the collateral requirements prescribed by Rule 15c3-3(b)(3)(iii) interfere with the ability of Qualified Institutional Lenders (directly or through their securities lending agents, if applicable) to negotiate for, and accept types of, collateral that would generate more revenue and allow Qualified Institutional Lenders to better manage risk by constructing a portfolio of loans in which the collateral pledged is more closely correlated to the loaned securities.

State Street believes that Qualified Institutional Lenders should be able to make their own judgment as to what is in their best interests and should be able to structure the overall terms of the particular securities lending transactions in the most appropriate fashion without the imposition of an artificial constraint on the types of collateral that they may accept from U.S. Brokers, particularly given the process by which securities lending transactions are effected under State Street's securities lending program (State Street Program) and other comparable institutional securities lending programs. To that end and as discussed more fully in this response letter, State Street believes that the continued imposition of any such collateral requirements on the State Street Clients and other Qualified Institutional Lenders will interfere with the facilitation and promotion of efficient securities markets, increase costs for both the State Street Clients and other Qualified Institutional Lenders and U.S. Brokers, reduce competition, adversely affect the liquidity of securities markets, and result in certain securities lending transactions being shifted off-shore to foreign brokers or dealers.

State Street believes that the Commission can most effectively implement such further relief sought for Qualified Institutional Lenders by amending Rule 15c3-3 to exempt Qualified Institutional Lenders from the collateral requirements prescribed by Rule 15c3-3(b)(3)(iii), or, alternatively, by allowing the Commission's authority to be delegated to the Division so that the Division may issue exemptive orders so exempting Qualified Institutional Lenders (QIL Orders). If the Commission's authority is so delegated, State Street requests that the Division act promptly in issuing such QIL Orders."

Dan said...

Doubtful on the pop... Gonna be ugly IF they even get this out Sunday night. I guess congress won't even vote on it until Monday.

"There have been "dramatic improvements" to the original Bush-Paulson plan, according to a draft proposal CNBC has obtained from House Democratic leadership.

This draft calls for:

* Cutting in half the $700 billion requested and requiring congressional approval for future payments...... " ******


"Sen. Bob Corker, a Tennessee Republican who serves on the Senate Banking Committee, said lawmakers were encountering extraordinary voter anger.

Referring to his own Senate office, Corker said, "We had, I'm going to guess, 3,500 calls this week about this particular issue. I've had 95 calls in support of it if that gives you any indication." "

David said...

Is Bank of New York's symbol: BK?


Atilla M. Demiray said...