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Tylerdurden
10-29-2007, 10:14 AM
By Edgar Ortega


Oct. 26 (Bloomberg) -- The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they're no longer as effective in damping swings in prices.
The exchange will stop prohibiting brokerages from entering some program trades when the NYSE Composite Index rises or falls more than 2 percent, according to a notice sent to member firms today. The so-called collars had been in effect since 1988 and were triggered 17 times this year, according to a filing with the Securities and Exchange Commission.
``Volatility is neither restrained nor enhanced by the imposition of the collars,'' the NYSE said in the SEC filing making the changes effective. ``The exchange is making this change since it does not appear that the approach of market volatility envisioned by the use of these collars is as meaningful today as when the rule was formalized in the late 1980s.''
The curbs applied only to some index arbitrage trades on stocks in the Standard & Poor's 500 Index executed at the Big Board. Brokerages weren't barred from turning to rival exchanges to complete those trades.
Increased electronic trading has also made arbitrage strategies a smaller piece of daily equity trading, the NYSE said in the filing. Index arbitrage strategies accounted for about 4.6 percent of the total shares bought or sold at the NYSE, according to data on its Web site.
The Dow Jones Industrial Average fell 22.6 percent on Oct. 19, 1987, its steepest one-day decline ever, according to the Stock Trader's Almanac. At the time, some analysts and regulators said index arbitrage trades handled electronically contributed to the drop.
During the final half-hour of trading, index arbitrage strategies accounted for about 3.2 percent of trading at the NYSE, according to the presidential report on the 1987 crash. Program trading represented a total of about 12.2 percent.
Brokerages will still be required to report program trades, defined by the NYSE as the purchase or sale of a basket of at least 15 stocks valued at a minimum of $1 million.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahZh1lKYXD8w&refer=home

Tylerdurden
10-29-2007, 10:15 AM
Going to be some serious rape soon..................

Milo Christensen
10-29-2007, 10:18 AM
Won't be no rich folks left after the fall. Nobody to raise taxes on. Hehehe.

Tylerdurden
10-29-2007, 10:21 AM
I know you guys think I am whacked but this is all part of the plan.
Total power can only come from a total collapse and the writing is on the wall.
All that will be left is to choose off sides and fight.
I sure hope that the faithful are right because we need divine intervention.

JBreeze
10-29-2007, 11:49 AM
It doesn't matter....the big boys already bypass the exchanges via "Dark Pools". Here is but one of many articles on the subject:

http://www.iht.com/articles/2006/12/04/bloomberg/bxexchange.php?page=1

The SEC, Treasury and the Fed seem to be more and more committed to opacity in financial markets....SIV's, "mark to model", plunge protection teams, etc.,

Tylerdurden
10-29-2007, 12:01 PM
It doesn't matter....the big boys already bypass the exchanges via "Dark Pools". Here is but one of many articles on the subject:

http://www.iht.com/articles/2006/12/04/bloomberg/bxexchange.php?page=1

The SEC, Treasury and the Fed seem to be more and more committed to opacity in financial markets....SIV's, "mark to model", plunge protection teams, etc.,

Thanks J, you always have something good to add.

JBreeze
10-29-2007, 12:10 PM
Here is another article, that, if true, is pretty scary to the individual trying to manage retirement funds, etc.

http://www.financialsense.com/fsu/editorials/deepcaster/2007/1026.html

At least the quotes from Warren Buffet at the top of the page are something that should be considered:

“…In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Warren Buffet, February 21, 2003

For me, Buffet seems to be a more honest source than Paulson, Bernanke, Greenspan, etc.

Kaa
10-29-2007, 12:12 PM
LOL. Derivatives are tools. Like any tools they can be used or misused. There's nothing inherently wrong with them.

Kaa

George Roberts
10-29-2007, 12:18 PM
http://www.iht.com/articles/2006/12/04/bloomberg/bxexchange.php?page=1



Perhaps you would benefit from reading from other sources. Both buyers and sellers get the same price. The only difference is in who pockets the commissions.

JBreeze
10-29-2007, 12:19 PM
Yup, Chalie Munger and Warren Buffet are idiots and you are a genius, showing the folks on the WB board the errors of their thinking.

Gotta go now, flu shots are available in 11 minutes at the community center. Whether they work or not, I'll take the risk:D

Tylerdurden
10-29-2007, 12:28 PM
LOL. Derivatives are tools. Like any tools they can be used or misused. There's nothing inherently wrong with them.

Kaa


Coming from such a total tool, I can see what you meanhttp://www.woodenboatvb.com/vbulletin/upload/images/icons/icon10.gif

Tylerdurden
10-29-2007, 12:29 PM
Yup, Chalie Munger and Warren Buffet are idiots and you are a genius, showing the folks on the WB board the errors of their thinking.

Gotta go now, flu shots are available in 11 minutes at the community center. Whether they work or not, I'll take the risk:D

I would say watch out for the mercury but at our ages what does it matter?

Kaa
10-29-2007, 12:58 PM
Coming from such a total tool, I can see what you meanhttp://www.woodenboatvb.com/vbulletin/upload/images/icons/icon10.gif

Ah yes, the deft retort :-)

I recommend you add Yo mama jokes to your repertoire...

Kaa

John of Phoenix
10-29-2007, 01:09 PM
Like Trump once said, "If you owe the bank 50 grand and can't pay, you have a problem. If you owe the bank 50 million and can't pay, the bank has a problem."

And when the banks have problems guess who bails them out. WE do.

Derivitives (options, futures, etc.) provide tremendous leverage to both make and lose money. It's that leverage that Buffet doesn't like because it puts the entire economy at risk. I'm with Buffet.

Gary E
10-29-2007, 01:42 PM
So.. if you believe it's all going to He!! in a handbasket... are you short?...
Do you Know how to short??
Do you know when to short...
"they" know how...and when

George Roberts
10-29-2007, 02:01 PM
Used to be people on both sides of a transaction would use a derivative to insure against loses due to price changes.

Now a lot of people simply bet on the price change.

All gamblers lose to the house over time.

JBreeze
10-29-2007, 02:56 PM
Well, it was the typical community clinic.....2 supervisors and 1 nurse. Preloaded syringes? Hell, no.....she drew them up, one at a time! If we did that for the 15,000 doses of encephalitis vaccine due to a kid dying in 1999, people would still be in line waiting for their shot:(

George.....if the transactions through the dark pools bypass the normal exchanges, how are they reported? Will I see the transactions in the volume data of a stock, or industry? Are historical volume data retroactivly adjusted for such transactions? If less than 5% of the total outstanding shares, will it ever be reported? To whom? When? So much for transparent markets, eh?

Gary E.....I'm certainly not as astute as you, but have been shifting the securities in my portfolio, looking at long term puts, and doing OK with precious metal stocks and other commodity stocks as the dollar tanks. Got any good ideas? But something more important - How was the NC fishing trip? I was hoping you would post a report!:)

Tyler....you have BOS (balls of steel):D. I get tired easily, make a comment or two with links, and let people think what they want. In general terms, I agree with you that the worldwide financial markets seem like a house of cards, but I'm an outsider without reliable sources of info. But I do distinctly remember the downturn around 1990-1, when some major financial stocks sh!t the bed, and a lot of homeowners were severly hurt. Conditions seem even more risky today.;)

George Roberts
10-29-2007, 03:09 PM
"so much for transparent markets, eh?"

You demand too much. If you don't like the way the markets are regulated, get out of them.

There are a lot of other options.

Tylerdurden
10-29-2007, 03:17 PM
"so much for transparent markets, eh?"

You demand too much. If you don't like the way the markets are regulated, get out of them.

There are a lot of other options.


That statement would fly if the markets did not impact the rest of the planet. It does, so your statement crashes and burns just past the numbers.

JBreeze
10-29-2007, 03:17 PM
George:

I'd love to get out.....but for the wage earner, where retirement dollars are often tied up in 401Ks, 403Bs, or similar vehicles, choices are limited.

Fortunately for me, I'm not totally stuck with these choices. But I feel for people who are.....and that's a large portion of the US population!

Tylerdurden
10-29-2007, 03:21 PM
Market.view
Is Merrill the tip of the iceberg?

Oct 28th 2007
From Economist.com
If so, who is the Titanic?





IS THERE such a thing as panicky resilience? That might be the best way to describe the mood in stockmarkets. The S&P 500 index ended this week up a steely 2.6%. Yet nervousness is everywhere, with the flimsiest of rumours sending share prices sky-rocketing or lurching. Markets leapt on Wednesday after someone whispered that the Federal Reserve was about to announce an emergency rate cut. It was nonsense. The next day AIG, the world’s largest insurer, tumbled by 8%, before recovering, on unsubstantiated fears that it would suffer a whopping loss on its $33 billion of subprime mortgage-related assets.
While some investors have clearly been getting carried away, the crisis in credit markets is far from over—and may be about to get worse. One depressing indication of this was a vast, $8.4 billion writedown this week by Merrill Lynch, an investment bank.

The most striking (and overlooked) aspect of this was that it involved mostly securities that only a few months ago had been considered platinum-plated: collateralised-debt obligations (CDOs), or tranched pools of mortgage-backed securities, that were not only rated triple-A, the highest level, but had also received extra credit enhancement, making them “super senior”. Until recently it was assumed that such well-protected paper could not lose its value. No longer. Worryingly, hundreds of banks, insurers and hedge funds around the world hold such securities. Fooled by false alchemy, they face a terrible reckoning.
Woefully slow at first to act, rating agencies are now falling over each other to downgrade these securities. This week Moody’s marked down a big batch of CDOs, some of them highly rated. This caused another plunge in the ABX indices, which are used to bet on subprime-backed bonds. One index of AAA-rated securities fell to just over 80 cents on the dollar. Those reflecting poorer-quality paper languish below 20 cents.
Fears are growing that the rating agencies could soon be forced to downgrade one of the so-called “monolines”, companies that insure corporate bonds and structured products. MBIA, the largest of these, has just reported its first-ever quarterly loss after cutting the value of its own mortgage holdings and setting aside money to pay clients who had wisely taken out cover on CDOs.
http://www.economist.com/images/columns/2007w43/CGA255.gif
If one of the monolines were to lose its cherished AAA rating—a prospect that no longer looks far-fetched—huge numbers of securities would be adversely affected, since they cannot have a higher rating than the company insuring them. Moreover, monolines will have to raise more capital if a sizeable chunk of their holdings falls below investment grade, as looks painfully possible. That would not be easy to do in current market conditions.
There may be worse to come for the banks, too. Analysts think that Merrill may have to write down another $4 billion, or more, in the fourth quarter. Its peers, such as Morgan Stanley and Bear Stearns, may also find that things get uglier, since their third quarters did not include September, a particularly rough month, since they report earlier than Merrill.
Amazingly for a bank that earlier this year was notching up record profits, Merrill is in play. Its beleaguered boss, Stan O’Neal, is reported to have suggested a merger to his counterpart at Wachovia, a commercial bank. Merrill's board, which met over the weekend to discuss the crisis, was said to be nearing a consensus that Mr O'Neal's position was no longer tenable. The directors were no doubt swayed by the 8.5% rise in the bank's share price on Friday, when rumours that Mr O'Neal would be shown the door first surfaced.
Now that the rating agencies are downgrading CDOs as well as the underlying mortgage-backed bonds that they reference, it seems all but certain that banks and others will be forced into another round of markdowns. Many banks cut the value of their super-senior CDO holdings to around 80% of face value at the end of the third quarter, according to one market participant. But since the Moody’s downgrades, those securities have been trading closer to 20-50% of par.
It is possible that banks end up going too far, and have the pleasant task of marking assets up at some later date. No one can be sure, because structured assets are devilishly difficult to value. For now, auditors are urging the banks to be conservative, and to mark the assets to a “market price” that reflects recent trades, even if there have only been a couple of these. Investors worry that the banks will look for ways to obscure the true value of their holdings, in the hope that prices rise before their cover is blown. Hence the widespread scepticism over the so-called Super-SIV, a bank-backed fund of up to $100 billion that will buy securities from structured-investment vehicles (SIVs), off-balance-sheet entities that have come unstuck in commercial-paper markets. This is seen by many as a mechanism to shuffle assets rather than establish a fair price for them.
As long as prices remains uncertain, confidence will remain fragile. It could take a year or more to sort the mess out. Meanwhile, banks and other buyers of exotic instruments can expect a rough ride. Indeed, spotting mispriced securities seems to be the financial world’s latest parlour game: Royal Bank of Canada was this week forced on to the back foot after one of its traders told a newspaper that it had mismarked government-agency and corporate bonds. The bank vigorously denied the accusation and sacked the employee.
With the outlook, and balance sheets, so murky, it is no wonder that investors are shooting first and asking questions later. As the sagacious Warren Buffett put it this week, one of the lessons they are now learning is that “not only can you not turn a toad into a prince by kissing it, but you also cannot turn a toad into a prince by repackaging it.”



http://www.economist.com/finance/displaystory.cfm?story_id=10048962

George Roberts
10-29-2007, 06:31 PM
JBreeze ---

For retirement purposes, 401K, SEP, and Simple - whichever works out best taxwise ...

For the longest time I worked for myself and now I work for my wife.

It is very easy to invest in whatever we wish. I simply tell my wife , the plan administrator, to add an investment to the plan. She calls the investment firm and asks them to add it to our options.


It is a shame that more employers are not so accommodating.