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The Myth of the Rational Market Replies |
rffrydr
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 Posted: Mon Jan 17, 2011 8:55 am Post subject: |
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The Grand Game: business has been following politics long before Tom Brown was conceived....and will long after he's gone:
| Quote: | US political sensitivity – BP’s largest asset exposure remains the US whose relations with
Russia have been better. We would not be surprised if certain US politicians raised
concerns about this transaction e.g. the largest supplier of fuels to the US military (BP)
now has the Russian government as its largest indirect shareholder. TNK-BP is already
25% of BP’s 2011E production. |
| Quote: | Some doubts about historic equity-linked alliances – Whilst we recognise the original,
reciprocal nature of this specific equity alliance (BP has always led the industry M&A for
ambition and transaction innovation), we are mindful of some very sterile one way
equity-linked oil industry alliances – IPIC / OMV, Pemex / Repsol YPF, ConocoPhillips /
Lukoil (being unwound) and Galp / Sonangol. We note that BP’s participation in
Rosneft’s IPO in 2008 failed to encourage the Russian government to stop Alpha-Access-
Renova from destabilising BP’s investment in TNK-BP. We also note that the IOC’s
(Exxon Mobil, BP and RD Shell) that took stakes in the PR China NOCs (PetroChina,
Sinopec, CNOOC) at privatisation do not really have much to show from those
investments, most of which have been sold. BP must prove its deal is different – so let’s
see where this deal may take BP and Rosneft in and outside Russia (note that BP’s press
release describes it as a global alliance). Rosneft’s key upstream domestic assets include
Yuganskneftegaz (W.Siberia), Severnaya Neft (Timan Pechora) and Sakhalin (with
Exxon Mobil and BP). Investors shouldn’t give it any benefits of the doubt. Instead, they
should remember how BP’s fortunes in Russia have risen, fallen and now rise once again. |
--except BAML on BP deal
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rffrydr
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rffrydr
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rffrydr
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| Posted: Sat Nov 13, 2010 1:02 pm Post subject: |
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Private Equity secondaries....marked now to "fair value".....'nuff said.
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rffrydr
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rffrydr
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| Posted: Wed May 26, 2010 11:46 pm Post subject: |
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Spotted in europe last week:
| Quote: | | ...In the more illiquid space, equity derivative desks and the funds that dabble in them are having something of a very bad week (and this time it's not Jerome Kervial's fault), with Dec 2015 Eurostoxx Variance Swaps hitting a high of 0.41. While not an expert, the idea that volatility can stay that high for 5.5yrs seems somewhat silly, given that it averaged about that for just ONE year, and only if you timed the Lehman Crisis perfectly! The Dividend future market also seems to be undergoing another wholesale haemorrhage, with Dec 2015 Eurostoxx Dividends trading South of EUR 85, around 9% lower than the Dec 2011s. Now that works out to be something like a 1.7% annualised fall in earnings per year in that period (caveat, not an expert) which, if a proxy for the change in Nominal GDP, is pricing in some sort of deflationary event. |
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rffrydr
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| Posted: Fri May 21, 2010 1:26 pm Post subject: |
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Back to PG:
A Broken Market
By Jim Cramer
RealMoney Columnist
5/21/2010 3:06 PM EDT
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This market just got walked down on nothing. Just another day where we see the futures just crushing the tape, taking it down without any bids. It is almost as if whatever systems are really out there these days are incapable of taking the other side.
If we had to analogize, let's use Procter & Gamble (PG - commentary - Trade Now), since that was the perfect example for the last time we were down here. So Procter, as I write this, is $61.12 by $61.14 -- that is, $61.12 to the seller and $61.14 to the buyers. Balanced market/
But suddenly some basket of stocks that includes PG comes in, and the $61.12 bid disappears, or is pulled, or is able to see the stock coming at it and then the next price is $59. There's nothing underneath that. So we can get a push down and a gap down and the market has become entirely inefficient. Bob Marcin talked about this lack of liquidity yesterday. If I didn't know better, I would say that the buyers are somehow able to detect big sellers and pull their orders instantly and that they can pull the orders underneath, too.
I have not seen anything like this before, even in the hideous days of 2008. The buyers just seem to be able to dodge the sellers perfectly, so the sellers end up with horrible prices and the market fails to function.
It is as if the book is a mile wide and a millimeter thick and the millimeter is able to be pulled simultaneously with the sell order.
The SEC should be examining this phenomenon, but they never seem to see how the market really works. They don't have the savvy to see that the buyers are able, somehow, to disappear when a big basket order comes in and there's nothing underneath the $61.12.
I don't get it.
But I know it's wrong. And I know that until this issue is cured we are going to have a ridiculous market that can't handle these baskets, which, by the way, are heavily related to the double and triple ETF and the e-minis. |
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rffrydr
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| Posted: Fri May 14, 2010 3:37 pm Post subject: |
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Rating agencies
Published: May 14 2010 15:10 | Last updated: May 14 2010 20:41
| Quote: | In the secular world of business and finance, rating agencies bring religion to the terrifying process of making and losing money. Many investors believe what Moody’s, Standard & Poor’s and Fitch have to say. Plenty – institutions with their own research teams, say – don’t. But just knowing they are there gives hope to those who sold themselves to the profits-devil a long time ago.
How else to explain the confusion surrounding the role of rating agencies in the financial crisis? On Thursday, the US Senate approved an amendment to the financial reform bill that seeks to address a common accusation: that the agencies were being paid by the very banks issuing the structured products requiring a rating. To be sure, this is potentially a conflict of interest, resembling the relationship between accountancy firms and the companies whose books they sign off. But the real mystery is why the market does not correct these conflicts. |
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rffrydr
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| Posted: Thu May 13, 2010 4:40 pm Post subject: |
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The CFA conference in Boston kicks off with this little ditty, a theme I've been singing for some time:
http://ftalphaville.ft.com/blog/2010/05/13/229601/eyes-fixed-firmly-on-the-rearview-mirror/
| Quote: | ....This new system, made more attractive for would-be imitators by China’s robust recovery from the global slowdown, undermines free markets in several ways. Many of these state-owned companies and investment funds are as opaque and inefficient as the state bureaucracies to which they ultimately answer. This inefficiency—and the problem that political motives often trump economic objectives in their decision-making—lowers the trajectory of global economic growth.
In addition, Western companies and investors operating inside China, Russia and other state capitalist countries are discovering that once domestic companies develop the technical, management, and marketing expertise to begin to compete with outsiders, governments can use a variety of legal and administrative tools to favor the locals. Assumptions about openness to foreign investment in these countries must be continually revisited. Finally, multinationals operating in Africa, Latin America and throughout the developing world now find themselves competing on an unprecedented scale with Chinese and other state-owned companies armed with substantial material and political support from their governments.
In other words, those who believe in free markets can’t afford to look in the rearview mirror. Not with so many obstacles blocking the road ahead. |
SWFs are not the Bull's best friend. 
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rffrydr
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| Posted: Fri May 07, 2010 9:32 am Post subject: |
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Trade Bots--they are not the enemy. This is yet another legacy of the Greenspan era embrace of market magic. Hardly flawed, these trading systems perfectly accentuate a world "awash in liquidity" tightening spreads, continual bids and all-around efficiencies. But take that world away....and what is left? The Bots 
http://ftalphaville.ft.com/blog/2010/05/07/222911/blame-the-trading-bots-again/
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rffrydr
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| Posted: Thu Apr 29, 2010 4:24 pm Post subject: |
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Oil slick at 2'Oclock...quick, start taking "bids." Pentagon steps in sparing Mississippi commercial traffic-- which is market-based. --All just another example limits of market mechanism.
http://www.nytimes.com/2010/04/30/us/30gulf.html?hp
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rffrydr
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rffrydr
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| Posted: Mon Mar 01, 2010 10:22 am Post subject: |
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Maybe file this under "Reform," but when the IMF gets around to the big questions you know it runs deep:
http://www.economist.com/business-finance/displaystory.cfm?story_id=15546440
One of the ways we know an idea is a myth is that it freely embodies its own contradictions. What is left of the Greenspan era is melting....melting.
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rffrydr
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