Here are the most read stories on the Bloomberg over the last week with selected excerpts (and my comments, if any, in italics).

As of 30-Mar-2008 at 21:32:14:

1. Citigroup Fires Prime Brokerage Group Co-Heads, NYT Reports

“Citigroup, which has cut 4,000 investment banking jobs, will probably fire 2,000 more employees by the end of March — about 10 percent of the investment bank’s workforce, the Times said.”

Lots of job anxiety apparent on the Bloomberg given these top two most-read stories.

2. Wall Street Firms Cut 34,000 Jobs, Most Since 2001 Dot-Com Bust

“Even the black cars that shuttle bankers and traders home from their Manhattan offices are seeing demand for their services dwindle, and the firms may have to fire some drivers, said Battalia Winston’s Bennett. ”

The “knock-on effect.” And how often is Merrill Lynch now running their helicopters between NYC and Princeton?

3. Buffett Shows Schwarzman Berkshire’s Free Money Beats LBO Model

“The retreat by investors from all but the safest government debt has driven up LBO financing costs. The amount of extra yield investors demand to hold speculative-grade bonds over U.S. Treasuries more than tripled to 7.97 percentage points yesterday from 2.41 percentage points at the start of June.”

From feast to famine and the search (in vain) for new financing.

4. Harvard Endowment Will Be Overseen by Jane Mendillo

“‘The Harvard portfolio is well positioned to benefit from some of the things going on in the market right now,’ Mendillo said in a telephone interview. ‘Often out of these turbulent times significant money-making opportunities do arise.’”

Another Swensen disciple?

5. Taleb Outsells Greenspan as Black Swan Gives Worst Turbulence

4000-word piece… I assume this will appear in Bloomberg Markets magazine.

6. Lunch Lady Suffers as Banks Prepare $2 Trillion in Lending Cuts

“The tightening is apparent to Peter Djuric, a mortgage broker in Chicago who has 28 customers waiting for approvals on loans. Applications are taking a month or more for lenders to process, compared with an average of 10 days last year, he said.”

… or an average of 10 minutes at the top. :-)

7. Dimon `Pulled the Trigger Fast’ to Win Bear Stearns

“Dimon learned the art of deal-making from his mentor, Sanford ‘Sandy’ Weill, with whom he built what is now Citigroup into the largest U.S. bank. Weill, now 75, hired Dimon in 1982 after reading a term paper he wrote as a Tufts University undergraduate analyzing Weill’s deal-making.”

Dimon ass-kissed his way into his first job? Look, anyone who can buy a dollar of assets for a quarter, and be backstopped by the Fed while doing it, is going to “pull the trigger fast.”

8. Citigroup Estimates Cut by Oppenheimer’s Whitney

“The bank cut its dividend for the first time after reporting a loss of $9.83 billion, or $1.99 a share.”

I bought Citi long ago (and added to it occasionally) for its dividend and have been absolutely buried in the stock. One mean friend calls me regularly to ask, ‘How’s your Saudigroup investment going?’ And I immediately reply, ‘You mean my CITICgroup investment?’ (I assume the Chinese will end up owning the Citi, not the A-rabs.)

9. Bear Stearns Chairman Cayne Sells His Entire Stake

“Cayne sold 5.66 million shares at $10.84 apiece on March 25, according to a regulatory filing today. The value of his stake plummeted from almost $1 billion last year when the shares peaked at $171.50.”

10. What Wall Street’s CEOs Don’t Know Can Kill You

“When extremely smart people have found extremely complicated ways to make huge sums of money, the typical Wall Street boss has seldom bothered to fully understand the matter, to challenge and question and argue.

This isn’t because Wall Street CEOs are lazy, or stupid. It’s because they are trapped. The Wall Street CEO can’t interfere with the new new thing on Wall Street because the new new thing is the profit center, and the people who create it are mobile.

Anything he does to slow them down increases the risk that his most lucrative employees will quit and join another big firm, or start their own hedge fund. He isn’t a boss in the conventional sense. He’s a hostage of his cleverest employees.”

Another widely-read piece by Michael Lewis.

Back at the end of January 2007, I wrote this post:

“I’ve lined up the price of the Shanghai Composite to correspond with the peak of the Internet bubble (as represented by the IIX). When bubbles burst it ain’t pretty, and people who are paying the wrong price for Chinese stocks are going to learn an expensive lesson.”

After I wrote that, the Shanghai Composite proceeded to rise straight up, doubling in the following nine months. Oops! But as we all know, the Chinese stock market topped in October, and now the comparison with the old Internet bubble may be on target.

Here are up-to-date charts of the TEd (3-month Treasury Bill/Eurodollar) Spread. Here is the last 30 days which gives an intraday view up to and through the Buried Stearns debacle.

Click to enlarge

This is daily chart for the last two years to give a little perspective.

Click to enlarge

Starting in April, I am going to offer a “performance guarantee” to subscribers of the trading ideas generated by the Box. Here’s how it will work: if the “with the trend” ideas do not produce a cumulative, positive R result for the month, as I account for those results, then subscribers will receive a full credit towards receiving the next month’s ideas. Does that make sense? Are you excited? Go ahead and subscribe, what do you have to lose? :-)

UPDATE (May 1, 2008): PERFORMANCE GUARANTEE REVOKED; SUFFERING FROM OVER-CONFIDENCE BIAS WHEN I OFFERED IT. :-)

A look at another recent idea, a short in the Regional Bank ETF (KRE), generated by the Box:

Everything is clear: entry level, initial protective stop level, targets, risk management. You get it all, no guesswork. Simple, straightforward set-ups that offer decent risk/reward — beautiful.

Price has closed beyond the 1x initial risk level, so the initial protective stop should be moved to breakeven, making this trade a scratch at worst.

Friday evening UPDATE: KRE continues to go kre…unch.

Here’s a look at my currency monitor within LaunchPad. You can see that I’ve embedded a scrollbar in the chart and can quickly look through all the currencies in the linked quotesheet to the right. It’s pretty slick. On the bottom I have a news ticker for the symbol I’m looking at. (Assuming you can read Chinese, note that the Chinese translations of the Bloomberg headlines appear up to 20 minutes behind the English ones.) The Chinese Yuan is rapidly approaching 7.0000 — still grossly undervalued of course.

Click to enlarge

This paragraph from the Office of the Comptroller of the Currency’s Quarterly Report on Bank Derivatives Activities gave me a chuckle:

“While bank supervisors normally have concerns about market or product concentrations, there are three important mitigating factors with respect to derivatives activities. First, there are a number of other providers of derivatives products, such as investment banks and foreign banks, whose activity is not reflected in the data in this report. Second, because the highly specialized business of structuring, trading, and managing derivatives transactions requires sophisticated tools and expertise, derivatives activity is appropriately concentrated in those institutions that have made the resource commitment to be able to operate this business in a safe and sound manner. Third, the OCC has examiners on-site at the largest banks to continuously evaluate the credit, market, operation, reputation and compliance risks of derivatives activities.”

It’s worth noting that they’ve mindlessly copy-and-pasted the same paragraph in the quarterly report for years now… and their use of that awful phrase, “resource commitment,” is a sure sign they don’t know what the hell is going on. Safe and sound? Spare me.

Here’s a recent idea from the Box, a long in SWN:

I’ve admitted that March has been a sort of crummy month for subscribers, down around 3 or 4 R, but if SWN runs a little bit here maybe the R return on the month will look better. We’ll see.

UPDATE: Subscriber “Anthony” informs me that SWN will split tomorrow, so make sure you replace your existing stop-loss orders if necessary.

UPDATE: SWN had another good day on the 26th so the initial protective stop moves to breakeven … this is just the kind of trading idea I like to offer subscribers: a clean, clear chart and a “with the trend” set-up that gives decent risk/reward.

I’m a huge Robert Cray fan and Some Rainy Morning is a great album. Here’s one of my favorite tracks from it, “Little Boy Big.” You don’t walk away from a good love….

Robert Cray — Little Boy Big (7.6MB)

So it’s all said and done
And you promised you wouldn’t do it again

Now where are you going?
You knocked on someone else’s door
And you jived and you told some great big old lies about it
Don’t you think they know you?

Why, when something goes wrong
Do you walk away from love
Just like it was nothing?

You hide, and then you move on
You don’t walk away from a good love
Nooo, little boy big

Now she begged and pleaded with ‘ya
Tried and she tried and she tried everything that she could

Could you feel it?
You got one more go round this time, little fella
You better take hold to it if you can
You know you’ve got to

Can you feel it?

You hide, when something goes wrong
Even if it’s just a little thing
That throws you off

Why can’t you be strong?
You don’t walk away from a good love
Noooo

Why, when something goes wrong
You turn your back on love
Just like it was nothing

You hide, and then you move on
You can’t walk away from a good love
Noo, little boy big

No, no
La, la, la, la, la, la
La, la, la, la, la, la, la, la
Little boy big

With your hands in your pocket
You walk down the street singin’

La, la, la, la, la, la
La, la, la, la, la, la, la, la
Oh, little boy
Little boy big

JPMorgan Raises Bear Stearns Bid to Woo Shareholders

“JPMorgan Chase & Co. quadrupled its offer for Bear Stearns Cos. to $10 a share and struck a deal to buy 39.5 percent of the company without a shareholder vote, making it unlikely opponents can block the takeover.”

“Crippled by customer withdrawals” is just another way of saying it suffered a bank run. BSC has had a good five days, but don’t ask about six day returns.

Click to enlarge (Bear Stearns (BSC), 30-minute Chart)

I’ve finished compiling the charts for the annotated chart book for December, January, and the early trades in February. Once I finish writing the notes to all the charts, I’ll be ready to distribute it for free to current and prospective subscribers. I’ve only included charts for the “with the trend” trades, and beginning in April will no longer even mention the countertrend setups. Reviewing the numbers for February, and looking at how badly the countertrend setups have performed in March, I’ve decided to drop them altogether.

I will include the original spreadsheets for all trades, “with the trend” and countertrend, for December through March in the annotated chart book. Starting in April, I will no longer record the countertrend trades in the spreadsheet to save my time and energy.

Subscribers have had a crummy month in March. So far this month, out of 56 ideas only 19 have been with the trend. We’re down 3 or 4 R on these “with the trend” trades on the month following the ABC Stop Method, which is nothing to write home about. Nevertheless, I think subscribers appreciate having decent ideas and a solid framework for short-term trading. This has been a tough market to release a swing trading newsletter into, and I think everyone understands that. You can review the spreadsheet for all trades in March here.

I’ve been thinking hard about this stop trailing business and have decided on handling it in three different ways:

1. Plan A - Keep the Initial Protective Stop in place until the Target Zone is hit and then start trailing;
2. Plan B - Move the Initial Protective Stop to Breakeven once the 1x Initial Risk Level is closed beyond, then don’t trail the stop until the Target Zone is hit;
3. Plan C - Move the Initial Protective Stop to Breakeven once the 1x Initial Risk Level is closed beyond, then begin trailing the stop once the 2x Initial Risk Level is hit (this is the old ABC Stop Method).

Here’s the original setup in AES with all the key levels.

Here’s the annotated chart. The solid red line is the Initial Protective Stop level. The solid blue line is the Entry level. The dotted black line is the 1x Initial Risk level. The dashed black line is the 2x Initial Risk level. The lime green box is the Target Zone. All the charts in the chart book look like this. Following Plan A or Plan B or Plan C in this one wouldn’t have made a difference — you’d be sitting on a solid 3R gain.