Category: Stock Market

"According to the findings posted to Cuban’s website, only 36 percent of all businesses included in the study that were allowed to reopen on May 1 actually chose to open their doors. Of those businesses, a staggering 96 percent failed to comply with all of the Open Texas guidelines. The shoppers observed that restaurants were more likely to comply with some requirements, like separating tables and asking employees to wear masks, than they were with guidelines like offering single use condiments or contactless payment." Definitely check out the full study.

If this trend continues as states reopen, it's bad news for the economy.

To mostly everyone, these staggering unemployment numbers don't feel real yet. People think this pandemic is just going to blow right over, and life is just weeks away from returning to normal. Optimism is especially high because those $1,200 stimulus checks are three times the amount of cash over 40% of American's have in their savings account on any given day. Plus, Unemployment is paying millions of people more than they regularly make at their jobs. A very large portion of Americans probably feel more "financially secure" right now than any other time in recent memory. Now, interest rates are almost 0% and people are deciding it's a great time to buy a car or house. However, as economic activity starts trending down from lack of public confidence in local governments ability to stop the Coronavirus, that financial security will evaporate extremely quickly.

People are ready to return to normal, and the market is reflecting that. We saw it in economic activity this last week with all the reopenings. However, The fact of the matter is a virus with a .5%-1% death rate is spreading rapidly, and it's going to have to infect 220,000,000 Americans before it stops, unless we stop it first. That's 1 person in every 10th family (assuming each family has 16 people across 3-4 generations) . This virus also does permanent damage to the lungs, heart, kidneys, and/or the central nervous system in 20% of cases, and will require lifetime treatment (1 in every 2 families).

We dont have adequate testing, not enough people are wearing masks, and Mark Cuban's study in Dallas showed less than 4% of businesses were following every public health guideline in their reopened economy. The longer people take to realize what's going on and react accordingly, the harder the economy is going to crash when they do. We're in the second inning of a nine inning stretch, and If businesses don't start following these health guidelines in the next two weeks, things are going to get really messy, and people will stay home on their own. It's a mathematical certainty.

Edit: I'm trying to explain the bubble our economy is currently in, and why it's about to burst. The stock market is tied to the economy (i know right?), and when people start pulling money out of their 401ks and missing credit card payments, markets will crash. What happens when all that stock companies bought back drops in value by 50%? What happens when credit unions start going insolvent?

I am trying to invest my money on an ongoing basis.

• I have divided my money into 10. I have 10R
• I analyze the stock market and decide the positions with high volume stocks daily.
• I have around 20 picks and shortlist them due to their daily candlestick patterns
• Every investment is at the size of R.
• I place a stop loss at r/10
• I place a take profit at r/200
• Every time I make a profit I automatically open a new position.
• I try not to leave the money in the market and close it before the day closes if I am profiting from the trade.

I would love to get feedback on this style.

Thanks, stay safe

PS: I do use an automation system to reopen the positions on an ongoing basis. Every time I lose 10 percent I do reevaluate my position.

I can't seem to understand. The difference between group and company FS

Here's an example:

Main company (A) owns 60% of subsidiary X, 40% of subsidiary Y and 100% of subsidiary Z. Does that mean that the group statement such as balance sheet and income statement includes combination of A, X(60%), Y(40%) and Z(100%)?

And does that also mean that the company statements are for main company A only?

Also for ownership accounting, there are 3 way. Creating consolidated subsidiary FS, the cost method and the equity method. Is it right to say that consolidated subsidiary is the same as the group financial statement?

Im 16 and learning about the stock market so i dont have a good understanding for economy, businesses and stock of any kind. As many of the sources ive read most suggested index funds as of an investment for average people. Correct me if im wrong but i see little to no benefit of index funds. First lets compare ivesting in index funds compare to investing in big, credible companies with a buy and hold strategy ie apple, tesla, amazon all of them has a high growth rate beat index funds by a large margin with low amount of risk since these company most likely wont go down by any means. Second the reason most go for index funds for its low risk but as far as i know bank saving account hold a 6.6 to even 8% with no taxes and less risk than index funds so whats the point of it ( i live in vietnam and this is a reference to vietnamese banks ) . I appreciate all the feedback and as my english is mediocre since im not a native woth little knowledge i would appreciate if you notes explain any technical terms but if not its ok ill google it .

The Evolution of Monetary Policy: Age of the Bailout

In the years leading up to 2008 Wall Street had been celebrating massive gains; top finance executives were awarded up to $53 billion dollars in total compensation in 2007. Lloyd Blankfein, former CEO of Goldman Sachs, made $68 million himself. These profits were the result of financial innovations and financial derivatives, specifically mortgage backed securities (MBS). A mortgage backed security is an asset backed security which is secured by a collection of mortgages. The mortgages are aggregated and securitized so that investors can buy them and receive periodic payments similar to a bond’s coupon payment. Mortgage backed securities were doing so well in the years leading up to 2008 that lenders were running out of people with good credit to lend to. Everyone was buying and building houses so much so that the real estate market became a bubble and all the prices inflated.

At first everyone was celebrating the gains in housing prices, since price increases generally meant profits for home investors, mortgage brokers, and even big banks. Not too long after the party, the real estate bubble burst. Everyone was immediately impacted; mortgage giants, Fannie Mae and Freddie Mac, were on the verge of bankruptcy. Some of the biggest investment banks in the world, each having upwards of $10 trillion assets under management, such as Bear Stearns, Lehman Brothers, and Merrill Lynch were about to collapse. The whole financial sector was in shambles. “In a period of 18 months, Wall Street had gone from celebrating its most profitable age to finding itself on the brink of an epochal devastation.” Banks were heavily involved with mortgage securities. Most of these securities were financial derivatives which means they derive their price from an underlying asset. “Banks were creating increasingly complex products, many levels removed from the underlying asset.”

The first bank to really be shallow waters was Bear Stearns. Bear Stearns was a global investment bank whose main area of business was capital markets, wealth management, and investment banking. In 2008 Bear Stearns had roughly $13 trillion in derivative financial instruments, $2 trillion of which were in options and futures contracts. The company had a highly leveraged balance sheet with a lot of illiquid assets that were potentially worthless. Bear Stearns was the seventh largest securities firm in the world. Since their business was highly intertwined with other huge financial institutions, their potential collapse would be detrimental for the global economy.

U.S. Treasury secretary Hank Paulson knew that if Bear Stearns and Lehman Brothers collapsed there would be a domino effect across the financial sector and other huge financial institutions such as Citigroup, Merrill Lynch, and others would fail while consumers would start to lose confidence in the banking sector, more banks would be subject to bank-runs. In order to prevent the worst from occurring the U.S. Treasury Secretary put together a task force which included Jamie Dimon, CEO of J.P. Morgan Chase, Ben Bernake, Chairmen of the United States Federal Reserve, and Tim Geithner, Head of the New York Fed. After pondering possible loans and other solutions in order to rescue Bear Stearns, they deemed that there was no way to save Bear Stearns. This is not because of insufficient capital but because confidence had been lost in Bear Stearns. J.P. Morgan Chase ended up acquiring Bear Stearns for $10 a share, much less than their 52 week high of $133 per share.

After Bear Stearns fell the next bank about to collapse was Lehman Brothers. Lehman Brothers was the fourth largest investment bank in the United States. Its CEO at the time Richard Fuld blamed the declining stock price on short sellers. However the short sellers argued that the way Lehman viewed non-liquid assets such as mortgages was disturbing. Fuld refused to accept that the bank essentially had a bunch of junk mortgage backed securities on their balance sheets and tried to solve Lehman’s liquidity problem with more cash. He reached out to Warren Buffett to try and secure a loan, but Buffett said it was too risky. Richard even reached out to the U.S. government for a bailout, but Treasury Secretary at the time Henry Paulson refused to bail out Lehman with public tax payer money and instead said that the bank must secure funding from the private sector. Paulson gathered all the CEO’s of major banks and told them to come up with a solution for saving Lehman Brothers. Likely contenders to buy out Lehman Brothers were Bank of America and British bank, Barclays. However neither of which were willing to take on the Lehman’s real estate assets which were basically worth half of what Lehman was valuing them at. After failing to secure capital, or merge with another bank Lehman Brothers filed for chapter eleven bankruptcy protection on September 15th, 2008. Chapter eleven bankruptcy protected some creditors and most employees. In the bankruptcy agreement, Lehman Brothers’ shareholders paid the ultimate price and watched their fortunes from a year prior be worth a fraction of what they were.

At the same time Lehman Brothers was crashing, insurance giant American International Group (AIG) and mortgage giants Fannie Mae and Freddie Mac were tumbling down cliffs of their own. James Lockhart, head of the Federal Housing Finance Agency (FHFA) issued a plan to make the two mortgage giants into a conservatorship as government sponsored enterprises. The two mortgage companies were now and still are U.S. government enterprises who facilitate the secondary mortgage market. The United States Treasury Secretary, Hank Paulson, as well as Federal Reserve Chairman, Ben Bernanke, both agreed with the housing agency's decision.

On the other hand, AIG executives were assuring everyone that the company was in sound financial standing. At the time, AIG had $1 trillion in assets and roughly $40 billion in cash. In addition, executives argued that they had an extremely profitable business supporting insurance on collateral debt obligations (CDO). A CDO is a financial tool that banks use to package individual homeowners, credit card, and auto loans into securities sold to investors on the market. CDOs at the time were mainly used to refinance mortgage backed securities.. Most of AIG’s business was traditional insurance products such as health, life, and home insurance. However during the real estate bubble the company began taking a lot of risks in the form of credit default swaps (CDS). A CDS is a financial exchange agreement where the issuer of the CDS will compensate the buyer if the buyer’s asset defaults (similar to investment insurance). Essentially investors were buying credit default swaps as insurance for their mortgage backed securities. Once the real estate bubble popped, everyone came to claim insurance for their MBS that just went bankrupt. AIG had over $500 billion in subprime mortgages on their balance sheet. Its officials were revaluing credit default swaps and losses started to pile up at AIG. By May of 2008 AIG had suffered a first quarter loss of roughly $8 billion, their largest loss ever. Hank Paulson knew that if AIG went bankrupt it would trigger the collapse of financial institutions that bought these credit default swaps.

As the MBS tied to the swaps defaulted, AIG was forced to come up with the capital to repay their investors. Shareholders started dumping their shares which made it even more difficult for AIG to produce the capital it needed. Even though they had the assets on their balance sheet to cover the losses, AIG could not liquidate them fast enough before the swaps were due. It was clear that they were about to go bankrupt. Hank Paulson and Ben Bernanke did not want AIG’s huge influence to hurt lower and middle class families since AIG sold lots bonds, annuities, and insurance products to these people. An AIG bankruptcy would’ve hurt lower and middle class families as well as the whole financial sector which owned credit default swaps issued by AIG. They were just too big to fail. So the Federal Reserve along with the U.S. Treasury planned a bailout of an $85 billion loan to AIG. To put that loan amount into perspective, “Eighty-five billion dollars was more than the annual budget of Singapore and Taiwan combined; who could understand a figure that size.”

The loan itself was not enough to calm the markets. Investors were left puzzled as to why the federal government would bailout one company and not the other. What were the rules for a bailout? Did Hank Paulson’s background as a top executive at Goldman Sachs have anything to do with the government allowing Lehman Brothers, a competitor of Goldman, to collapse? These questions forced Hank Paulson, Ben Bernanke, and Tim Geithner, president of the New York Federal Reserve Bank, to come up with a solution to calm confusion. Now with the whole financial sector on the verge of collapsing the Treasury and Federal Reserve came up with a fiscal policy to purchase toxic assets from nine of the largest financial institutions in order to stabilize them. The institutions include J.P. Morgan, Goldman Sachs, Morgan Stanley, Citigroup, Wells Fargo, Bank of New York Mellon, Merrill Lynch, Bank of America, and State Street Corp. The program to bail them out was known as TARP. However congress was not too attached to the idea of bailing out Wall Street. Republicans saw a bailout as socialism creeping into the United States, and Democrats saw it as Paulson bailing out his Wall Street buddies. Congress voted against TARP and the Dow Jones Industrial Average fell roughly 800 points that day.

Paulson, Bernanke, and Geithner went back to the drawing board. Now desperate for a solution Paulson decided to follow the advice of his assistant Neel Kashkari, which was to purchase equity in the nine largest banks in the United States. Paulson reached out to Sheila Bair who was the head of the Federal Depositors Insurance Corporation (FDIC) and told her about the Treasury Department’s new plan. Sheila agreed to increase the nine bank’s coverage limit.

Without wasting any time Hank Paulson, Treasury Secretary of the United States, called all the nine executives together for a meeting at the NY Federal Reserve. “It was the first time – perhaps the only time – that the nine most powerful CEOs in American Finance and the people who regulate them would be in the same room at the same time.” Without knowing what the meeting was about, the CEO’s of all nine banks had shown up. To stress the severity and seriousness of the meeting, Paulson had brought along with him the Chairman of the Federal Reserve, the president of the NY Fed, and The head of the FDIC. Paulson unveiled his plan to purchase up to $250 million in preferred stock in the leading banks in order to stabilize them and restore confidence. He strong armed all of them into taking the deal even though a few of them claim that they did not need the capital, such as Wells Fargo and J.P. Morgan. He also informed the banks that the collapse of Lehaman Brothers will spillover into other banks, Merrill Lynch was of most concern. Paulson agreed to let Merill get bought out by Bank of America in order to save them. They were sold to Bank of America for $29 per share or $50 billion far from their 52 week high of $88 per share. The banks had agreed to the deal and so did Congress on October 3rd, 2008 President George Bush signed the TARP program into law. The program normalized the big banks and brought back investor confidence in Wall Street.

The following year, President Barack Obama introduced legislation that would transform the whole financial regulatory system. This act was known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. One specific provision known as the Volker rule forbids banks from making speculative investments that do not benefit their consumers. This type of overhaul has not been seen in the U.S. financial system since the Great Depression of 1929. In regards to the subprime mortgage crisis, the United States’ Congress, Treasury, and Federal Reserve acted appropriately however they should have acted more quickly and effectively like Jerome Powell’s Federal Reserve has during the COVID-19 crisis.

Some say because of the catastrophe in 2008 and the lessons we have learned, the U.S. The Treasury and Federal Reserve acted the way they did in 2020. Thus far, they both have combated the current financial market crisis with immediate action. If the Federal Reserve and Treasury could’ve bailout Bear Stearns, Lehman, AIG, and Merrill Lynch the way that they bailed out Boeing, that would have been the best case scenario. In March of 2020 Boeing Co. the airplane manufacturer went to Washington with its hands out begging for a bailout. The company had spent $50 billion on stock repurchases within the past year and now was asking for a $60 billion bailout. Instead of giving the company a direct handout, the Federal Reserve boosted liquidity in the credit markets by purchasing corporate bonds, thus, Boeing was able to secure $25 billion from private investors via the corporate bond market and withdrew its original request for a government bailout. Despite the 33 million unemployed, many people are applauding Jerome Powell and Steven Mnuchin for quickly passing emergency monetary policy measures. Like 2008, these policy measures have insulated the financial markets from total ruin.

Author: #$%^#^%, Economist

Editor: @#$%!^&*, Attorney

Any constructive criticism, feedback, and opinions are greatly appreciated.

I'm not even a beginner investor but I been reading sites like MarketWatch, BusinessInsider lately and I'm curious on the media coverage of this rally.

A month ago these sites were full of posts about how the rally was a classic "bull trap" and the lows would be revisited.

This coverage dried up and it was all bullish posts. Then last Friday (May 1st) when the DOW closed 622.03 lower at 23,723.69 all of a sudden they were full of posts again about how this was a tipping point and it was about to start falling again.

This week which has been 4 days of climbing, these "bear" leaning commentaries seems to have dried up completely.

I get that no-one knows what will happen, but I'm curious what the selection process is for the articles on these sites.