Bo Peng

31 Comments

    • Added Liquidity Part of the Problem, Not the Solution [view article]
      No, Fanny and Freddie were not clean from subprime crime. I don't want to divert this thread into a postmortem of GSE's (many) ills. My point is, subprime and Alt-A were only a small portion of their asset pool. If things hadn't gotten ugly in prime, the conservatorship would not have been necessary. Oct 06 09:56 PM
    • Added Liquidity Part of the Problem, Not the Solution [view article]
      Update: Fed is apparently getting ready to lend directly to lower rings of the money supply chain. It's a de facto admission of failure of the blind liquidity injection to the banks, exactly as I said above. I'm very tempted to suggest Fed start lending mortgages directly -- it would've been funny if it weren't so sad.

      Banks are flooded with cash. But such short-term liquidity cash is of no use to most of them. What they need is capital injection. How many will fail before Paulson gets around implementing the bailout plan? It would've been so much faster if the government would follow Buffet's GS model.       Oct 06 07:47 PM
    • Mark-to-Market vs. Mark-to-History [view article]
      StateofConfusion, I strongly disagree with banning shorting. It helps improving market efficiency and keeping companies honest. The positive feedback created by massive shorting will be, and have been, limited as long as the company fundamentals are good.

      Naked short is another story. It creates float out of thin air. Stock is like currency for the company. While you cannot control directly how others value your currency, you at least must have control over its supply. How would you think if country XYZ starts selling massive amount of phantom USD and keeps on it?       Oct 06 01:22 AM
    • Mark-to-Market vs. Mark-to-History [view article]
      Margin call is an interesting question since it conceivably has the same negative effects as Fair Value Accounting.

      For individual brokerage accounts, it's simply not feasible to do individualized analysis. There're just too many cases. A cross-the-board rule is the only option. For big accounts such as hedge funds and bank clients and counterparties, it is feasible to do per-case analysis and make per-case decisions on whether to issue margin call or not. In fact, banks do this all the time for their biggest clients and counterparties.       Oct 05 02:57 PM
    • Mark-to-Market vs. Mark-to-History [view article]
      Shiv, mark-to-cost is a no-go IMO. It's even more misleading than mark-to-model. It's just too unrealistic and can lead to many abuses. Mark-to-history, on the other hand, still relies on market price, with only two necessary adjustments:

      1. Time decay -- cashflows since historical prices, other known changes such as pre-payments and defaults, shortened time to maturity.

      2. Forward discounting

      Balance sheet cannot leave any wriggle-room for "professional judgment", otherwise what you get is professional abuse.

      I agree with your other points, though.       Oct 05 01:48 PM
    • Mark-to-Market vs. Mark-to-History [view article]
      User 272508: The perceived investor's insistance on simplicity of company reports is an assumption that's never been verified. If it's a harmless myth, then I have no problem. But it's harmful if it reaches a point where simplicity becomes over-simplification. Investors will need, and indeed WANT in my case, to deal with reality rather than some artificially simplified "one number".

      The divergence of the two numbers, mark-to-market vs mark-to-history, should be a warning signal. If mark-to-history is much lower, it means the company's assets have appreciated a lot recently. While it's a good thing for now, investors (and management) should give it a second look. If mark-to-history is much higher, investors will need to scrutinize it and decide whether mark-to-market is meaningful.

      More importantly, the comparison of the company-specific divergence and the market provides a gauge for assessing the company's assets and exposure.

      As to tax, my opinion is that it should be based on realized gain/loss only. Neither mark-to-market nor mark-to-X is relevant.       Oct 05 01:36 PM
    • Mark-to-Market vs. Mark-to-History [view article]
      User 272508: The perceived investor's insistance on simplicity of company reports is an assumption that's never been verified. If it's a harmless myth, then I have no problem. But it's harmful if it reaches a point where simplicity becomes over-simplification. Investors will need, and indeed WANT in my case, to deal with reality rather than some artificially simplified "one number".

      The divergence of the two numbers, mark-to-market vs mark-to-history, should be a warning signal. If mark-to-history is much lower, it means the company's assets have appreciated a lot recently. While it's a good thing for now, investors (and management) should give it a second look. If mark-to-history is much higher, investors will need to scrutinize it and decide whether mark-to-market is meaningful.

      More importantly, the comparison of the company-specific divergence and the market provides a gauge for assessing the company's assets and exposure.

      As to tax, my opinion is that it should be based on realized gain/loss only. Neither mark-to-market nor mark-to-X is relevant.       Oct 05 01:36 PM
    • The Bailout Pork Effect: Short Term Rally, Long Term Disaster [view article]
      Zooey, I think I made it abundantly clear in the first paragraph that the debate about the rescue plan cuts across traditional party lines. It's not even about fiscal policy. It's about the insatiable greed of the establishment vs self-interest and independence of the people.

      YR Dog, today's market showed that it's smarter than I gave it credit for. It actually appears to be thinking longer term. The short term outlook is further complicated by the mess in Europe, where banks are in even deeper trouble than here. But the report of Europe's disappearance is greatly exaggerated, just as when Bernanke told Schumer et al "if we wait until Monday, there won't be an economy for us to save" (I'm paraphrasing from memory) two Fridays ago. US, Europe, BRIC, we're all in this together. Financial crisis can often hurt economy, but for a financial crisis to become an economic CRISIS, it takes extraordinary ignorance and neglect. I never believed the world would allow the current financial crisis to become a real economic one, even before Paulson started talking about his plan.

      Maybe we will have a recession. Maybe we already have if you use the real inflation to adjust GDP. But, in this particular case, it hardly matters to the question of inflation. The surge of capital created by this Bailout Pork Package will drive up inflation even in a recession.

      I'm sticking with commodities for at least a few more months.       Oct 03 10:22 PM
    • How Does an Oil Crisis Impact the Dollar? [view article]
      Kathy, I have a hypothesis: there's a significant amount of USD carry trades, shorting USD and longing other ccys and/or commodities. The drive behind this trade is simple: negative real interest rates in the US currently.

      I suspect this has been a significant factor keeping USD down and commodities up for the past few months.       May 24 10:53 PM
    • Dollar's Fall Could Be Limited as Fed Signals Rate Pause [view article]
      One word: dollar carry trade. May 22 05:21 PM
    • NYSE Short Interest Back Near Record Highs [view article]
      I've seen quite a few sucker's rallies. This is by far the stupidest one. May 22 05:19 PM
    • Options Trader: Wednesday Outlook [view article]
      The sucker's rally over the past few weeks and the drop in VIX have been beyond me. Glad to see some rationality and reality are creeping back. May 08 12:25 AM
    • Fed Leaves Markets with a Lack of Closure [view article]
      With the tremendous moral hazard created by the Fed in haze over the past few months, they've lost the ability to lead. It doesn't really matter much what they did or say now. They've reinforced the Greenspan system of "no risk-taking will take due risk if you're too big to fail" and the bar on "too big to fail" has lowered.

      The commodities bubble has already been fueled by the Bernanke Fed. If its burst is not "too big to stop", just wait for the next try. No lesson will be learned and risk taking will soon lever up, until we get really screwed and even the Bernanke Fed can't bail us out.       May 02 12:26 PM
    • Fed Delivers a Steep Yield Curve: A Bull’s Best Friend [view article]
      Babak, are you serious? A steep yield curve is bank's best friend. It could be interpreted as expectation of long-term growth or that of long-term inflation (with or without growth), take your pick. Any correlation between a steep curve and growth is accidental.

      The curve had been flat or inverted for years before the current crisis. Yet it'd been a bull market all along.

      Look, dude, the poor unwashed are confused and beaten down enough already. Please have mercy. Don't sell them falsehood and scam them more.       May 02 12:10 PM
    • Macroeconomic Warning Goes Unheeded [view article]
      With the open scam of understating inflation and thus overstating "real" (my ass) GDP, Fed is effectively USING inflation to fight recession, on paper. The monetary policy has lost its real content and become a number manipulation game.

      If one used any reasonable inflation adjustment factor as opposed to the openly scandalous "core (my ass) CPI", GDP growth would have been negative since Q4-07, in line with reality.

      But with the current number-gaming, we have and will continue having inflation AND recession without realizing it.

      The stupidity is mind boggling.       May 01 06:58 PM
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