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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: LTK007 who wrote (83983)	7/21/2007 11:59:47 AM
From: Sunny Jim	Read Replies (1) \| Respond to of 110194

Very interesting read, Max. What are the "derivatives that are overweight the short side? Are they just simple puts? If so, would we see that in the put volumes? Thanks

To: LTK007 who wrote (83983)	7/21/2007 12:14:46 PM
From: Real Man	Read Replies (1) \| Respond to of 110194

Very interesting, and true - they did remove the uptick rule sec.gov Compliance date July, 6, 2007

To: LTK007 who wrote (83983)	7/21/2007 2:43:38 PM
From: Giordano Bruno	Read Replies (2) \| Respond to of 110194

Let's not forget Sy Harding :) RED FLAGS ARE STILL FLYING IN DEBTLAND! July 20, 2007. A couple of weeks ago I wrote that it's been a long-time observation that the number of Initial Public Offerings (IPOs) is always at high levels near stock market tops. That made me wonder if it was therefore significant that IPO activity reached a record in the first six months of 2007, with $132.2 billion in new offerings, a 23% increase over the same period last year. It is also a fact that the peak in IPOs is frequently marked by a giant deal that doesn’t go so well. So I wondered if Blackstone Group’s huge IPO, which failed to attract follow-on buying, was also a signal of a top for IPOs. And I wondered if Blackstone’s subsequent ostentatious purchase of Hilton Hotels, with a 32% premium over Hilton’s trading price, might signal a top for leveraged corporate buyouts (LBOs), which have been supplying so much liquidity to the stock market. And there were indications in both areas this week that the good times for IPOs and corporate buyouts might indeed be ending. The Blackstone Group IPO continued to look like a poor deal for those who bought into it. Having gone public at $31 a share, and as is typical, surging up to $35 the first day the shares were available to the public, the stock immediately headed south. It plunged further this week and is now selling at just $26, 25% below its close on the first day of public trading. Two new high-profile IPOs struggled this week. The offering of MF Global Ltd by its owner giant hedge-fund Man Group, plunged 8% in its first day of trading. In London an IPO offered by hedge fund Third Point LLC was delayed Thursday after it failed to even sell out its initial offering to institutions, raising only $525 million of its $690 million target. In that other area, leveraged corporate buyouts (LBOs), even huge deals have been easy to put together over the last 12 to 18 months. But I warned in this column two weeks ago, “Liquidity in the form of the easy money that has been making it all possible is drying up. Banks and other lenders, under pressure from regulators, and their own belated awareness of the risks they have been taking, are becoming more cautious, raising interest rates, and tightening lending standards.” An indication that leveraged buy-outs may indeed also be peaking could be seen in the problems encountered this week by a couple of high profile LBOs. New York hedge-fund Cerberus Capital Management is buying out Chrysler in a $40 billion deal. And Kohlberg Kravis Roberts & Co. is acquiring Alliance Boots, a drug store chain in England , for $18 billion. The way these deals usually work is that a bank, or more often a group of banks, commit to financing the deals. They then re-sell the debt to investors in the form of corporate bonds or corporate debt obligations (CDOs). But the banks on these two deals anyway are unexpectedly running into problems finding investors to buy the debt. They are being forced to sweeten the terms by paying a higher interest rate on the bonds, and even then face delays in getting them sold. A few months ago the banks would have said this is the deal, take it or leave it, and investors would have scrambled to get their share. Now the heightened awareness of the risk in the debt/credit bubble is making investors more wary, more risk-averse, and the deals are getting harder to finance. It puts banks in a potentially precarious position. At the present time banks are sitting on commitments of roughly $220 billion in LBO deals in the U.S. , and $50 billion in Europe . If they have trouble re-selling the debt to investors they can get stuck with it themselves, a risk exposure not intended when they committed to finance the deals. It’s expected they will be able to make most of their current commitments by offering to pay higher yields on the debt, cutting into their anticipated profit. But you can be sure that the times they are a’changin’ in the land of easy money. It also happened this week that Bear Stearns announced that its two hedge-funds, which shocked the stock market by coming close to going belly-up a few weeks ago, are virtually worthless. And that in spite of the extra billions the banks put in to try to rescue them and protect their loans. As you probably recall, those hedge funds hold highly leveraged positions in mortgage-backed securities, which have been dropping in value as home-owner defaults on mortgages rise. The announcement sure did nothing to assuage growing concerns regarding the record level of all types of highly-leveraged debt, be it in home-mortgage-backed securities created in the housing bubble, or corporate debt obligations created in the craze to finance leveraged corporate buy-outs. Sy Harding is president of Asset Management Research Corp., publisher of The Street Smart Report Online at www.StreetSmartReport.com and author of 1999’s Riding The Bear – How To Prosper In the Coming Bear Market!

To: LTK007 who wrote (83983)	7/21/2007 4:36:11 PM
From: Real Man	Read Replies (1) \| Respond to of 110194

There is another way of looking at this - the uptick rule really seems to be a hurdle to arbitrage, since no such rule exists in the futures markets. sec.gov Overall, there seems to be some protection against large declines. Collar Rule Under NYSE Rule 80A, if the DJIA moves up or down two percent (2%) from the previous closing value, program trading orders to buy or sell the Standard & Poor’s 500 stocks as part of index arbitrage strategies must be entered with directions to have the order executions effected in a manner that stabilizes share prices. The collar restrictions are lifted if the DJIA returns to or within one percent (1%) of its previous closing value. The 2% collar rule threshold is set by the NYSE at a point level that is calculated at the beginning of each quarter. For example, on April 1, 2007, the average value for the DJIA for the preceding month (March 2007) was used to calculate a point level (rounded to the nearest 10 points). This resulted in the 2% collar rule threshold being set at 180 points.

To: LTK007 who wrote (83983)	7/21/2007 7:08:53 PM
From: stan_hughes	Read Replies (2) \| Respond to of 110194

We're on the same page about the dark pools, max -- Message 23614546 When the institutions succeed in going underground, there won't be a bona fide public auction market for individual investors anymore, just a lot of OTC-style price rigging between players inside the banking/finance oligopoly I initially thought dark pools were some kind of rent-seeking scheme designed to set things up so they could fee the access to it, but I'm starting to believe it's more evil than that -- I'm against anything that takes price discovery information off-line where only the chosen few can see it