February Stock Talk !!

Smaller companies that issued unregistered securities last year may be
in for a bumpy ride this week. That's because on Friday, changes that
the Securities and Exchange Commission made to Rule 144, which governs
unregistered securities, go into effect, which could lead investors to
dump billions of dollars worth of shares and send some companies'
daily trading volumes to never-before-seen levels.

https://www.financialweek.com/apps/pbcs.dll/article?AID=/20080211/REG/...

NEW YORK (Reuters) - Fear that a hobbled banking sector may set off another Great Depression could force the U.S. government and Federal Reserve to take the unprecedented step of buying a broad range of assets, including stocks, according to one of the most bearish market analysts.

That extreme scenario, which would aim to stave off deflation and stabilize the economy, is evolving as the base case for Bernard Connolly, global strategist at Banque AIG in London.

In the late 1980s and early 1990's Connolly worked for the European Commission analyzing the European monetary system in the run up to the introduction of the euro currency.

"Avoiding a depression is, unfortunately, going to have to involve either a large, quasi-permanent increase in the budget deficit -- preferably tax cuts -- or restoring overvaluation of equity prices," Connolly said on Monday.

"If conventional monetary policy is not enough to produce that result, the government may have to buy equities, financed by the Fed," Connolly said.

Legal changes would be needed to give the Federal Reserve and the U.S. government the authority to buy stocks. Currently the Federal Reserve can buy only debt issued by the Treasury, as well as U.S. agency debentures and mortgage-backed securities.

While Connolly already sees some parallels with the 1930s, he expects that a more pro-active central bank and government will probably help avert a repeat of that scenario today.

The build up of a credit bubble in recent years was similar to the late 1920s run-up to the Great Depression, he said.

yes, i know.

Wall and I sold our IDMI yesterday, therefore it will go to 10, within 2 days. 

In written testimony for a subcommittee of the House Committee on Financial Services, MBIA said that short sellers like Mr. Ackman, founder of the hedge fund Pershing Square Capital Management, have worked hard to undermine market confidence in the bond insurers.

MBIA said lawmakers should help restore confidence in the bond insurers, because their failure could have far-reaching effects on the U.S. and global economies.

In testimony that specifically targets Mr. Ackman, MBIA wrote that the House Subcommittee on Capital Markets should work with the Securities and Exchange Commission to curtail “the unscrupulous and dangerous market manipulation activities of short sellers,” trying to undermine market confidence in MBIA to drive the company’s share price to nearly zero.

It said the practice and dissemination of “half-truths and misleading information” should be “investigated and curtailed,” and called on Congress to work on the matter with the Securities and Exchange Commission.

MBIA also included as an appendix a timeline of actions by Mr. Ackman, and to a lesser extent by other short sellers.

Mr. Ackman, who is also expected to testify before the committee Thursday, has persisted in challenging MBIA’s AAA credit rating for more than five years, saying MBIA hasn’t been forthcoming about backing risky financial instruments such as those based on loans to the least creditworthy homebuyers.

And his efforts have not gone unrewarded. Mr. Ackman’s Pershing Square delivered a return of 22 percent to its investors in 2007, thanks in part to its bets that the stocks and bonds of MBIA and Ambac would fall, Bloomberg News reported.

The war of the words comes as the three major U.S. credit rating agencies are deciding whether MBIA has enough funds to keep its AAA rating.

Investors fear that a chain reaction of losses might rock the financial industry if even one big bond insurer were to lose its top credit rating. The concern is that MBIA and Ambac, which have guaranteed more than $1 trillion in municipal, corporate and mortgage debt, will not have the capital they will need to pay out claims as defaults rise.

Many big banks and investors that hold mortgage securities guaranteed by the companies would have to write down the value of those investments if the insurers lose their top ratings. Those losses could total tens of billions of dollars for some banks.

But Mr. Ackman’s public warnings have been particularly galling to MBIA and other bond insurers as they come at a time when the financial firms themselves at the center of the subprime storm.

Mr. Ackman, however, had at least one backer in his corner. MarketWatch columnist Herb Greenberg roundly chastised MBIA for calling on Congress to rein in Mr. Ackman’s practices.

“[R]ather than accept the reality that it caused its own problems with bad business and actuarial decisions, MBIA is complaining to Congress about the guy who blew the whistle, Mr. Greenberg wrote. “Seems that rather than crucify him, they should give him the Congressional Medal of Honor.”

Estrada studied 15 major global stock markets for periods ranging from 31 to 79 years, with the full data encompassing more than 160,000 trading days. What he found is "less than 0.1% of the days considered" actually matter to long-term returns, which means that "the odds against successful market timing are staggering."