Spiga

The “Dirty Little Secret” Of the US Bank Bailout


In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry"--namely, that "it has no intention of using the [government bailout] money to make new loans."

As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.

Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name.

Asked by one of the participants whether the $25 billion in federal funding will "change our strategic lending policy," the executive replies: "What we do think, it will help us to be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling."

Referring to JPMorgan's recent government-backed acquisition of two large competitors, the executive continues: "And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way, and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop."

As Nocera notes: "Read that answer as many times as you want--you are not going to find a single word in there about making loans to help the American economy."

Later in the conference call the same executive states, "We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side."

"It is starting to appear," the Times columnist writes, "as if one of the Treasury's key rationales for the recapitalization program--namely, that it will cause banks to start lending again--is a fig leaf.... In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation."

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash.

Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC.

What the Wall Street Journal on Saturday called the "strong-arm sale" of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury.

All of the claims that were made to justify the bank bailout have been exposed as lies. President Bush, Federal Reserve Chairman Ben Bernanke and Paulson were joined by the Democratic congressional leadership and Barack Obama in warning that the bailout had to be passed, and passed immediately, despite massive popular opposition. Those who opposed the plan were denounced for jeopardizing the well being of the American people.

In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would "help American consumers and businessmen get credit to meet their daily needs and create jobs." If the bailout was not passed, he warned, "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account.... More businesses would close their doors, and millions of Americans could lose their jobs ... ultimately, our country could experience a long and painful recession."

One month later, the bailout has been enacted, and all of the dire developments--banks and businesses disappearing, the stock market plunging, unemployment skyrocketing--which the American people were told it would prevent are unfolding with accelerating speed.

While Obama talks about the need for all Americans to "come together" in a spirit of "shared sacrifice"--meaning drastic cuts in Medicare, Medicaid, Social Security and other social programs--and the cost of the bailout is cited to justify fiscal austerity, the bankers proceed to ruthlessly prosecute their class interests.

As the World Socialist Web Site warned when it was first proposed in mid-September, the "economic rescue" plan has been revealed to be a scheme to plunder society for the benefit of the financial aristocracy. The American ruling elite, utilizing its domination of the state and the two-party political system, is exploiting a crisis of its own making to carry through an economic agenda, long in preparation, that could not be imposed under normal conditions.

The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses.

While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.


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Bill O'Reilly Attacks Barney Frank 10-2-08

the FED Balance sheet

The rise was all the more worrying as it came despite an extraordinary expansion of credit by the central banks. Analysts at BNP Paribas noted the Federal Reserve alone had expanded its balance sheet by an astonishing 49 per cent in the past three weeks, taking its assets to $1,390bn.
It also broke with tradition to lend to companies directly by buying unsecured commercial paper.

”This is very important, because it means that the Fed has crossed the Rubicon of unsecured lending,” said Stephen Stanley, chief economist at RBS Greenwich Capital.

IS THIS BLACK MAGIC?
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CME to start exchange to trade CDS

On Tuesday, CME Group and Citadel announced they would be creating an electronic trading platform for credit-default-swap contracts. The venture between the two Chicago firms is meant to launch within 30 days and would provide a fully integrated trading and clearing platform for the complex derivative contracts that have been one of the flash points of the credit crisis.

I'm not a fundamental analyst, but could this be a buy on CME?

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US Credit Rating, AAA in question?

“By keeping its stake in AIG below 80 per cent, as it did when it nationalized mortgage giants Fannie Mae and Freddie Mac 10 days earlier, the US government will be able to keep the company's finances off its accounts. But pressure is building on the pristine triple-A credit rating of the US government, the chairman of Standard & Poor's sovereign ratings committee said. The bail-out ‘has weakened the fiscal profile of the United States’, John Chambers said. ‘There's no God-given gift of a triple-A rating, and the US has to earn it like everyone else,’” according to The Independent.

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Commercial Real Estate and Las Vegas


The share price of General Growth Properties Inc., the Chicago real estate investment trust that owns two major East Bay shopping centers, dropped 42 percent Tuesday.
Investors are increasingly nervous that General Growth, the nation’s second-largest owner of retail centers with a portfolio that includes NewPark Mall in Newark and Southland Mall in Hayward, will not be able to pay off its loan debt of more than $3 billion that comes due in late 2009, especially now with the credit crisis.
Shares in the company closed at $4.50 on the New York Stock Exchange on Tuesday, a drop of $3.25. That’s the lowest closing price on General Growth stock since the company’s initial public offering 15 years ago.
The company also has several loans maturing in the next two months, including a $650 million loan to the Fashion Show mall in Las Vegas and a $250 million loan to the Shoppes at the Palazzo, also in Las Vegas. Both loans come due Nov. 28.
Since refinancing real estate debt has become almost impossible in the current financial climate, officials of General Growth have reportedly been considering a wide array of options to raise money, including selling off some of the more than 200 malls it currently owns.

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The Fed Credit Card, coming soon


Look out Visa, Mastercard; The Fed Card coming soon. .09% on balance transfers over 100K, morgages and unsecured credit cards, upside down car loans and more welcome. No payments for 9 months. No congressional approval needed. Iceland citizens are also welcome.
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Foreclosure vs. Battle Ground states

an interesting way to look at the election.

CLICK THE LINK

http://hotpads.com/search/election-2008#

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Market Bottom at Dow 9.5K

Although a retest may come, it looks like 2008 lows might have been booked. Although the insurance companies remain subject to more stock price drops, the overall market may have adjusted. The largest risk to US stocks now comes from the overseas banking and currency crisis unfolding. We are now long several names, including options on stocks such as AAPL and more.

With so much news coming out in the last few weeks, probably the most signficant is what is coming in the housing industry.


Reducing the principal on pay-option adjustable-rate mortgages so as to restore
equity that the borrowers have lost.
B of A said Countrywide wouldn't charge
the borrowers any fees to modify the loans, and it will waive prepayment
penalties for subprime and pay-option ARM loans.
The bank also will lay out
$150 million to help Countrywide customers who are already in foreclosure or are
at serious risk of foreclosure. And it will pay as much as $70 million to help
Countrywide customers who've lost their homes to make the transition to other
living arrangements.

I guess help is on the way. Also, the large exchanges are now moving forward to help create a way to move the CDS price discovery mechanism forward.

The credit derivatives markets will on Monday set the price tag for settling up
to $500bn of contracts related to Fannie Mae and Freddie Mac, the US mortgage
lenders whose seizure by the US government had the unexpected knock-on effect of
triggering defaults on derivatives deals.
This price – called the recovery
value – will in turn determine the payouts that have to be made by insurers and
banks that offered credit cover on the mortgage financiers in recent months.

Stay tuned... the street sweepers are now coming.


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60 Minutes Shadow Bank Special

Watch and enjoy the story


Watch CBS Videos Online

or just hit the link

http://www.cbsnews.com/video/watch/?id=4502673n

60 Minutes looked at one of the selling documents of such a security with Frank Partnoy, a former derivatives broker and corporate securities attorney, who now teaches law at the University of San Diego. "It's hundreds and hundreds of pages of very small print, a lot of detail here," Partnoy explains. Asked if he thinks anyone ever reads all this fine-print, Partnoy says, "I doubt many people read it." These complex financial instruments were actually designed by mathematicians and physicists, who used algorithms and computer models to reconstitute the unreliable loans in a way that was supposed to eliminate most of the risk.

"Obviously they turned out to be wrong," Partnoy says. Asked why, he says, "Because you can't model human behavior with math."

Markets bottomed on Sept 29th..

I have a buy signal on the markets as of this AM. The financials indexes have retained the gains from July 20th and have not retested. They will start to lead on the upside. GS is showing incredible strength. This should be the low of the year. 2009 targets in this bear market are at DOW 8K.

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Most Famous Video of 2008

click to watch

http://video.msn.com/video.aspx?mkt=en-US&vid=54c2933e-b7a3-4743-876e-6e618359573f target="_blank"

Kennedy tried to stop TARP 2008


LOOK CLOSELY AT THE ABOVE BILL...

notice what is says at the top?

On June 4, 1963, a little known attempt was made to strip the Federal Reserve Bank of its power to loan money to the government at interest. On that day President John F. Kennedy signed Executive Order No. 11110 that returned to the U.S. government the power to issue currency, without going through the Federal Reserve. Mr. Kennedy's order gave the Treasury the power "to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury." This meant that for every ounce of silver in the U.S. Treasury's vault, the government could introduce new money into circulation. In all, Kennedy brought nearly $4.3 billion in U.S. notes into circulation. The ramifications of this bill are enormous.
With the stroke of a pen, Mr. Kennedy was on his way to putting the Federal Reserve Bank of New York out of business. If enough of these silver certificats were to come into circulation they would have eliminated the demand for Federal Reserve notes. This is because the silver certificates are backed by silver and the Federal Reserve notes are not backed by anything. Executive Order 11110 could have prevented the national debt from reaching its current level, because it would have given the gevernment the ability to repay its debt without going to the Federal Reserve and being charged interest in order to create the new money. Executive Order 11110 gave the U.S. the ability to create its own money backed by silver.

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our Forefathers Guaranteed us Something..

US Constitution.. 2.4

But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.


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Stopping a Financial Crisis, the Swedish Way

Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.

Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.

Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.

But the final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.

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McCain vs. Obama Housing Bubble

Watch this





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It's A Wonderful Life bank run

ok kids.. ive been busy trading stocks and all that good stuff. I'm moving so quick now that its hard to post the positions. I have to say this was one of the most interesting market weeks we've had in the last year. But i had to post this 9 minute clip for your viewing pleasure. I hopey you enjoy it!



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Obama is being Sued...

Well I HAD TO POST THIS..

1940 Nationality Act (Stanly Ann Dunam) moved to Indonesian married and lost her citizenship in the US, when Obama was 6 years old. School Records indicate nationality of Indonesia and he was listed as Muslim. His father might have adopted him at that time so he would have lost it. His Mom, when returning to the US did not retake an oath to the US, before a diplomat or judge etc. When Obama was 20 years of age, he traveled to Pakistan on an Indonesian passport. Produce a certified copy of this oath and a certified copy "birth certificate"from Hawaiian records (vault version) The obama website has a possible fake certificate that belongs to his sister. Points the the falseness of the documents include border patterns, measurements, overlays, etc. It shows that Obama was born in two different hospitals. Wayne Madston (reporter) investigate in Mombasa Kenya found a Kenyan birth certificate for Obama.

Philip J. Berg, Esquire stated in his lawsuit that Senator Obama:

1. Is
not a naturalized citizen; and/or

2. Lost his citizenship when he was
adopted in Indonesia; and/or

3. Has dual loyalties because of his
citizenship with Kenya and Indonesia.

Berg stated: “I filed this action
at this time to avoid the obvious problems that will occur when the Republican
Party raises these issues after Obama is nominated.

There have been
numerous questions raised about Obama’s background with no satisfactory answers.
The questions that I have addressed include, but are not limited to:

1.
Where was Obama born? Hawaii; an island off of Hawaii; Kenya; Canada; or ?

2. Was he a citizen of Kenya, Indonesia and/or Canada?

3. What
was the early childhood of Obama in Hawaii; in Kenya; in Indonesia when he was
adopted; and later, back to Hawaii?

4. An explanation as to the various
names utilized by Obama that include: Barack Hussein Obama; Barry Soetoro; Barry
Obama; Barack Dunham; and Barry Dunham.

5. Illinois Bar Application –
Obama fails to acknowledge use of names other than Barack Hussein Obama, a
blatant lie.

If Obama can prove U.S. citizenship, we still have the
issue of muti-citizenship with responsibilities owed to and allegance to other
countries.

Although I am not a political blog, since last fall, the
coming of Obama has been met with huge internal sketicism. Being a trader, I
could not see myself "BUYING" into Obama. Off the record, many have known my
position, and this public lawsuit is probably the begining of more troubles for
a candidate that i think stole a nomination from Hillary, the only thing that
really threatened the McCain chances on the other side of the isle. Stay tuned..


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Investment Banks, Real Estate and updates.

The recent technical higher high zig zag in the market shows the importance of why trading and using 3 day positions makes for profiting in this type of market.

The recent news of Merrill and its 23 dollar / share secondary and capital raise and the sale of bonds at 22 cents the dollar is showing signs of what a new CEO is all about. Citi is still holding back hoping for either higher pricing or movement higher in prices in the market. Those results can only come from stable home prices in the traunches most affected by this drilldown. Previous Mer secondary price offerings had to be repriced in order for the sov funds to write another check. This is actually the worst deal we will see this year for this type of transaction. We have just priced the risk for the year on these pools of investments. Even if real estate falls another 15 percent nationally, it appears this deal benefitted the buyers more then the seller in terms of forthcoming profits.

The new bond deal announced by the Treasury is more a press event then anything that can significantly stem the issue of lack of buyers. RE Agents are telling me sell-side is taking cash deals at lower offers then multiple offers at higher pricing that need financing. I think this will continue for the next 6 months as the FHA, Fed and the banks try to rekindle a new type of financing arrangement. Will we ever see 100 sq. foot deals in southern California? Not sure - but there is still alot of pain in the markets

Citi is next


Citigroup Inc. may follow Merrill Lynch & Co. by taking billions of dollars in losses on mortgage- related bonds, according to some analysts. Preferred-stock investors are making a similar connection between the companies.

The chart of the day shows the preferred issues sold by Citigroup, the biggest U.S. bank by assets, in January is tracking shares that Merrill issued three months ago. Lehman Brothers Holdings Inc. and JPMorgan Chase & Co. preferred shares are also included for reference.

All four firms sold these shares to raise capital after losses sparked by the subprime-mortgage market's collapse last year. Merrill will have a $5.7 billion hit from selling collateralized debt obligations to the Lone Star Funds investment firm at about 22 cents on the dollar.

Citigroup ``has been far less aggressive'' than Merrill in marking down CDOs, William Tanona, an analyst at Goldman Sachs Group Inc., wrote in a report today. ``They would struggle to obtain their prices in the marketplace.''

The securities are valued at about 55 cents on Citigroup's books, according to Tanona. Bringing the valuation into line with Merrill's would imply a $16.2 billion writedown and about a $2-a- share reduction in earnings, the report said.

Oil is coming near support levels at the 115 / 120 level. There is no momentum on the upside yet so we might see another week of selling until we spike bottom to create our new trading range.

The new law supporting the Fannie/Freddie bailout seems to be helping investors squeeze out the spread between the 10 year fed note and the private debt.
S&P said on July 26 that it may downgrade the
subordinated bonds of Fannie and Freddie. A cut would affect $19.2 billion of
AA- rated debt, according to data compiled by Bloomberg. S&P affirmed the
AAA ratings of the companies' senior debt.

We Continued to add to long positions on yesterdays sell-off in finacials and will be looking to unload positions in the next few weeks.

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1.4 Trillion Govt Bailout...

http://video.msn.com/video.aspx?mkt=en-US&brand=&vid=85505af1-03bb-4dae-88bc-0f8ce2211251

What is fair, what does it matter

A tidbit from last weeks news:

Yet last week, regulators gave a nice boost to Wall Street and other members of
the financial club. Christopher
Cox
, the chairman of the Securities and Exchange Commission, devised an
emergency rule change for traders wishing to sell short the shares of 19
financial companies, including Lehman
Brothers
, Merrill
Lynch
, Fannie Mae, Bank
of America
and Citigroup.
The rule states that if you haven’t borrowed the shares you intend to sell
short, you can’t make the trade. It extends until July 29.
There are several
interesting aspects to this change. First, if the S.E.C. believes that shorting
without previously borrowing shares is a problem in the market, why not apply
the rule to all stocks? After seeing many of the 19 companies’ stocks shoot
higher after the plan was announced, executives at General
Electric
, the American
International Group
and MBIA, companies whose shares have also been pummeled
in the financial crisis, must surely feel left out of the fun.


“The banks are too big to fail and the man in the street is too small to bail,” said John C. Bogle, the founder of the Vanguard Group, the mutual funds giant, who is a philosopher of finance.

Such is life...

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China.. a strong buy here..


China ishares FXI, buying the August 140 Calls, FAHHH - 4 Dollars. The olympics.. YIPEEEEEEEEEE.... International emerging markets look to rally from here as well. Our final counter trend move up before the next MAJOR move down before the end of the year.

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Picked up LEH Aug 15 Calls

Picked them up around 3.7 - We'll see where we end up in the next two weeks...

I am also short term bearish on the oil complex, and going short here on any rally

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Going Long

Huge jump in Wells Fargo caused me to take out my short for a decent gain. Been picking up the XLF here and XHB for a short term long trade. We think we have reached a bottom in this cycle within the bear market.

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ABC - Millionaire, song of the week

RIP Indymac Bank



IndyMac's pitch for careers is not longer up, but is memoralized here in all its glory:

"Why Indymac
At Indymac Bank, we're all about performance. Working here is a great opportunity, but it isn't for everyone. We're a demanding, fast-paced, meritocracy where what you have helped achieved, and what you have helped Indymac to achieve, is what matters most. With over 8,000 employees across the country, our entrepreneurial spirit ensures that nothing is ever good enough, there is always work to be done, and the hardest workers and greatest achievers are the people who rise to the top. Indymac isn't for everyone, but if you want to work hard, add value every day, and be rewarded based on your merits, then Indymac just may be for you.

Indymac's success is built upon our six core values. Lots of companies have mission and value statements, of course, but Indymac's aren't lofty goals we hope to achieve someday. Rather, Indymac's values define our culture and serve as the roadmap to success in your career here. If you're serious about a career at Indymac, you need to understand our culture and values. What are our Everyday Values?

Since its incorporation, Indymac has grown to nearly $30 billion in assets and a market cap of nearly $3 billion. Indymac is always focused on the bottom line. We are committed to growing—becoming bigger, becoming better, and becoming more efficient and effective every day.

With a strong focus on building customer relationships and a valuable consumer franchise, Indymac is committed to becoming a top six mortgage lender in the U.S. by 2010, while maintaining annualized earnings per share growth in excess of 15 percent. The company is dedicated to continually raising expectations and conducting itself with the highest level of ethics."



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Fannie - Freddie weekend chat

The options movement of both GSE's are showing a worst case scenario at this point. If the goverment steps in with some remediative plan, its more then likely going to mean a complete wipeout of equity in these firms. the 7.5 and 10 strikes puts for the next few months are loaded with open interest. A small buy at the low of 6.75 and a covered call sale of the 10 dollar strike was managed today at 3 for a cost basis in the stock of 3.75 This was the only way that seemed worth a long position in the stock and locking in a profit. The only way i loose on this trade is if the stock breaches my buy price of 3.75 which i do not believe is likely. I do not see huge upside in the stock at any rate, so why not collar the profit?

It seems to me that the goverment is going to have to release another huge statement/package for these entities and the last thing headline the goverment needs is complete equity destruction, granted we're down to about 20 billion in combined market cap, we've already seen 100 billion destroyed on the long side with these two names alone. Credit spreads are starting to widen in short term goverment paper and something tells me a bailout is going to hurt the dollar and the US Goverments ability to borrow in the open markets down the road. That is a chilling proposition considering the DOLLAR IS BACKED BY DEBT!

Leh seems to have a different version of the same story, without the benefit of some kind of bailout. I think next week we should see a bounce beginning in the market from a goverment catalyst and its hard to say what names in the financial sector are worth buying. One thing is for certain, JP Morgan, Goldman are two guaranteed survivors. I will be looking to move into the XLF Aug 20 Calls this coming week. I have not been in GS since my trades last year.

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How low can we go?

For several years I have been posting what is now a real threat to the US economic system, "systematic risk". Please do a search on this site to find the posting.

Now the question becomes, where are we and when will this be over? A few things to keep in mind

1) The US lead the world in falling equity markets and rising debt spreads.

2) The US Dollar will continue to weaken against most other currencies.

Those trends have to break the downside. Our markets will probably stabilize as other parts of the world begin to deal with issues of systematic risk. Its all about capital and cash flow, in that order - and if you business doesn't have a strong #1 and a decent #2, you will either downsize big, get taken out or risk going bankrupt.

What do historical events suggest about our current fall?

The S&P 500 has had
eight previous bear markets since 1962, according to data compiled by Birinyi
Associates, a stock research firm based in Westport, Connecticut. Stocks have
fallen an average of 33 percent over 382 days during those retreats. The S&P
500's retreat from its peak has lasted 274 calendar days so far. The Dow has had
11 previous bear markets since 1962, averaging a decline of 29 percent over 322
days.


So we can expect another statistical 48 days average of a bear market before a turn. That could coincide with the shorterm Dow 10,800 target we have for this cycle to clear us for a base. But is this time different? The answer, we believe is YES. Becouse this is not 1962, or anything since. The major difference is the derivative destruction that is occuring behind the scenes, causing multiple securities and debt markets to undwind in ways not calculated by sophisticated modeling software.



Where do we see the rest of the future? 2009 will be a very bad year for consumers and companies with negative cash flow and no reserves. The thin will die, and the thinning will be ready to die a corporate death. Now lets compare where equities could go.. based on a list of worst bear markets (which is what i believe we shold be comparing this current trend to)


Its very difficult to read but this list is a bit easier to understand. Image above is borrowed by Political Calculations.

1901-03
Fall in the Dow: 46%
Losses recovered by: July 1905

1906-07
Fall in the Dow: 49%
Losses recovered by: September 1916

1916-17
Fall in the Dow: 40%
Losses recovered by: November 1919

1919-21
Fall in the Dow: 47%
Losses recovered by: November 1924

1929-32
Fall in the Dow: 89%
Losses recovered by: November 1954

1937-38
Fall in the Dow: 49%
Losses recovered by: December 1945

**Disillusionment among the business community was by then so strong, however, that the New Deal was abandoned soon after. (words to the Obama Supporters)


Fall in the Dow: 45%
Losses recovered by: December 1982

What does this mean? It can take an average of 6 years to recover to the previous highs. We're close to completing year number one. But in this cycle, i would give it three years from the bottom to get back to the old highs.

The average drop was over 35%, which means we could enter the Dow 9K range in 2009.

Midday Equity close of short position

May 20th 2008, we initiated a short on the overall market, SPX/OEX and select positions. Today we have closed those positions at 2K dow points lower! We are still holding on to WMT and Wells Fargo Shorts, among a few others and riding this bounce with select financials. The market has completed most of its head and shoulders top, although we needed another 3% or so drop to complete the right shoulder perfectly. WE still advise selling into strength any positions as we get ready for another drop later in the year which may mark the final corrective move in this cycle before the market goes sideways for another 6 months. Trend is down, rally is a trade long.
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How you avoid Hiring Americans

Watch this video and tell me what you think?



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Sperm Banks, Blood Banks, next in line at Fed Window

I wanted to start this post by reiterating we are short the equities markets. We are reshort WMT at 58 with a stop right over that (Sept 50 puts long) as well as holding our OEX/SPX option shorts from around Dow 13,000. We are buying SLV index on the Amex and neutral/bearish on crude with no trade on. From our previous post, a short term spike in the dollar may come from a quick tip up in rates from the Fed. Now on to the entertainment! I also wanted to put Wells Fargo on the short list as well. This stock is going to make some new lows in the next 3 months. Level Three to Fed... but how to recycle it? Those outstanding equity lines are going to come home to "Roast".

Its enjoyable to read the press that isn't making major headlines to see what is going on. Some great reprints from an article

"The Federal Reserve is just days away from completing the financing for its
bailout of Bear Stearns Cos., after which the central bank will have another big
decision to make: how to account for it.

"Flip through the footnotes to
the Fed's latest annual report, and you'll come across an open secret. The Fed
doesn't follow normal accounting rules, as promulgated by any of the major
standard-setting boards. Rather, the Fed writes its own, in a document called
the Financial Accounting Manual for Federal Reserve Banks.

"If you ever
wanted to design an accounting regime to help a bank cook its books, the Fed's
would be perfect. This doesn't exactly inspire faith in the U.S. financial
system, at a time when a good example might help a lot."

Foreigners that
buy U.S. assets and finance the Current Account Deficit need to have faith in
the U.S. financial system to continue buying... The Fed's not exactly giving
foreigners a reason to buy U.S. assets, are they now?

WELL im tired...

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The Fed, what will it do?

Take this for example:

Three-month Libor is now 2.80%, or 0.96 percentage points above the effective
market rate that generally tracks the Fed's target. That spread, a measure of
banks' willingness to lend, is actually higher than it was in December when
signs of credit risk were more widespread as a lengthening line of banks have
announced multi-billion dollar writedowns. The gap was very narrow, at about
0.06 point, until August and credit crisis really took off.
As long as the
Libor rate is so much above fed funds, the U.S. central bank is unlikely to
tighten, said William O'Donnell, U.S. government bond strategist at UBS
Securities.


Although it is true that the consumer is not seeing the true benefit of falling shorter rates to steepen the yield curve and bring branks a spread to strengthen balance sheets - I do see something happening.

The Fed will move, in the next 60 days... raising the rate .25 bps. And leaving it alone until 2009. The Fed must telegraph a stance stronger then jawboning, that they are serious about stopping the inflation spiral, becouse into 2009 - that would mark two quarters of higher inflation, and thats perma inflation. The dollar drop started this move in vengence around the world. We must be the currency to stem it.

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Brokers threatened by run on shadow bank system





WELL:


By 1999, the Gramm-Leach-Bliley Act rolled back Depression-era restrictions,
allowing banks, brokerage firms and insurers to merge into financial holding
companies that would be regulated by the Fed.

The Fed has lent
between
$8 billion and more than $30 billion each week directly to brokerage
firms since
it set up its new program in March. Most experts say this source
of emergency
funding is unlikely to disappear, even though it's scheduled to end in September.

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Ross Perot Launches Public Information Website

PerotCharts.com Illustrates that We Are Running Out Of Time to Stop Deficit Spending

Ross Perot, business leader and former presidential candidate, announced today the launch of “PerotCharts.com,” a public information website that contains objective, factual information about the current economic crisis in America. The site is being launched as an alert and appeal for American citizens to inform themselves about federal government spending. Perot said, “The U.S. national debt reached $9.4 TRILLION on April 30, and it is increasing by more than $1 billion every day. We are leaving our children and grandchildren with debt they cannot possibly pay.”

http://perotcharts.com/challenges/

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ModelVanity.com launches Model Shoot Expo at MV Studios in Southern California, USA

Model Vanity Expo is a series of photo shoot workshops with select photographers to help new and established model talent develop a unique portfolio of images at no cost. This private event offers talent multiple settings and safe surroundings.

RIVERSIDE, Ca. USA, June 19, 2008 / -- IP MicroMedia LLC web property ModelVanity.com (website in development) and Model Vanity Studios today announced a partnership to launch a first of a kind “Model Vanity Expo”. The partnership promises new and established models the chance to work with multiple, selected photographers in the presence of sponsors who may select talent for upcoming projects.

"We are excited about providing all established and new models this great opportunity to showcase their talent and realize their modeling potential," founder Oscar Toscano stated. "Opening our private studio in Riverside, Ca. to this unique casting and offering talent and select photographers a chance to work under our expertise in a nationally known studio lot is great experience and networking opportunity."

“We are using this event as a proving ground for our model shoot expo concept. New and existing talent can come and pose in more diverse surroundings then any “Mansion” or “lot” with talented photographers. There is a four thousand square foot, two story studio building, outdoor water gardens and unique structures and several auto and custom bike props to choose from. All models (glamour, fashion, fetish, bikini, import, Gothic, non-nude) are encouraged to attend this event. We are also providing skilled makeup and hair dressers. Ladies should bring several wardrobe changes to show off all the looks they posses.” added Oscar Toscano.

In addition, several sponsors will be on hand to review talent for potential future modeling opportunities. Authorized media and Spanish television stations will also be on hand to cover this event. Models will receive limited edition Model Vanity Clothing as well. The event concludes with a dinner sponsored by TiosTacos.com at 5pm. After party to follow.

All the talent attending this event will be featured on our site with the best images on display from all participating photographers. Online visitors can learn more about the models and cast their vote for their favorite girl at ModelVanity.NET.

“We have experienced a huge response since we announced this event from talent throughout the area. Over 150 candidates requested to attend this event from every ethnic type, but we are limiting attendance to 30 girls this time, “commented Oscar. “We are still reserving two more spots for one male and one female model that would like to attend.”

The event will kick off at 9 am. with a workshop for all photographers attending. “Using Adobe Lightroom in your digital work flow” will teach basic meta data techniques. A small discussion on ways to earn money from photography will conclude the mini workshop. Presentation is sponsored by ProImageVault.com. Photographers attending are invited to bring reflectors, strobes, or any gear to make the most of our 6 hour event!

Well equipped photographers who wish to attend can register at:
ModelVanityStudios.com

About IP MicroMedia LLC
IP MicroMedia, based in Southern California (with contributors in Mexico City, Miami, San Antonio and Las Vegas), owns ModelVanity.com (MV), a site currently in development. IPMM develops web properties, syndicates event content, and provides AV services for clients on-site. Web 2.0 brands include ModelVanity.com, TodoExito.com, ProImageVault.com, PrintedPix.com, Photofinder360.com, OfficialCoverage.com, Onmoney.NET, Senorita15.com, MotorSportMotion.com and more. More at IPMicroMedia.com

















Ip Micromedia Llc Featured
ModelVanity.com Launches Model Shoot Expo At MV St...
June, 2008 @ 1888PressRelease.com




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Media Alert, IP MicroMedia LLC web development

















Ip Micromedia Llc Featured
ModelVanity.com Launches Model Shoot Expo At MV St...
June, 2008 @ 1888PressRelease.com




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The US Fed trying to Stem a Flood of Barings and BCCI deals




The G8 Summit in Japan was more focused on worldwide inflation and the riots insuing then any talk of the dollar. World Leaders everywhere are starting to feel the wrath of the populace who is falling further behind economically.

The Fed stance is now to combat inflation. If they dont move rates up soon, the market is going to crush the dollar further, so the US has once again managed to put itself in an interesting position. However i think that the Cheap dollar is a policy, in order to "recalibrate external debt" and cheapen the cost of servicing existing debt.

If the world does not quelch the inflation issue (and stop lying about inflation figures) soon, and i mean within another 4 months.. inflation is going to become imbedded in the economy. This is not going to be good and will take us to the next level down and my 2010 doomsday scenario.

Long Term, still bullish on Oil!

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Secretary Paulson Kissingers the Middle East


"I am committed to promoting policies that enhance the underlying competitiveness of the U.S. economy and ensure that the dollar remains the world's reserve currency," Paulson said in a speech to the U.S.-U.A.E. Business Council, which was the final stop on a four-day tour to the Middle East to reassure regional leaders that the U.S. still welcomes their investments.

"I have met with many leaders from the Middle East who ask if the United States really continues to welcome foreign investment," said Paulson. "Some here worry about growing protectionist sentiment in the United States, and they also worry specifically that U.S. sentiment toward Middle East investment has been permanently affected by the Dubai Ports World case.

"We reject measures that would isolate us from the world economy," Paulson said.

TRANSLATION: THE US NEEDS YOUR BILLIONS.
The value of bank stocks in aggregate is about where it was at the height of the Bear Stearns Debacle. And Kudlow talks about GoldiLox?

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Looks like Everyone is SHORT Oil...

according to Schaeffer... the put side is overloaded...

LINK

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Getting ready to trade oil

Putting on my speculative trading hat, i am seeing I nice short opportunity in the crude complex. How to trade? I might use the puts on IXCRJ. Ishares, S&P Global energy has some 150 June puts available in the 8 dollar range. BS models show small pure premium pricing here, so i might enter this trade in the AM. Longer term, I am still bullish on Crush as per the previous post for several reasons, but here is one that is from MSN news.

Exxon Mobile has falling production, on a near and long term range. All true. There were short-term, one-time reasons for production to fall in the first quarter of 2008. But don't conclude that ExxonMobil's problems are limited to that quarter. All the evidence argues that the company will report lower oil and natural-gas production for all of 2008, even though new projects are scheduled to come on line in the second half of the year. Looking just at oil, the company's production will not grow at all through 2012.

The company also reduced its projections for annual production to 4.5 million barrels of oil equivalent a day in 2012 from the 4.8 million barrels a day in 2011 that it projected a year ago. Just further evidence that ExxonMobil has a production problem.

Granted you have Indian, Chinese, and Russian companies entering the fray to help stem that tide, but it seems as though they will be busy servicing the local growing markets first, markets that are not even 10% of the lifestyle of America.

Shorts. Bearish MOVE in Markets

AAPL looks like an interesting short here, so do puts on the OEX. PPI numbers interesting. I'm very short term bearish here. 200 MA is too much resistance, and this is a gap down. Looks bad.

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$300.00/bl Oil After 2010


I'm becoming more bullish on the complex and the CRB index. We're going to enter a period of exponential growth in the price of crude not seen since the days of Dot Com IPO's This problem may prove to be the camel that finally breaks the US consumer.




The Export Land Model
To understand the importance of exports when discussing peak oil, ask yourself the question, "What's more important: the fact that global oil production is falling ... or that the oil-exporting nations are cutting off their exports?"

The #3 Source of Oil to the US Is About to Go Offline
Mexico provides about 14% of the oil the US imports. On any given day that makes it either the #2 or #3 leading source for US oil imports after Canada and Saudi Arabia. Given that the US currently imports close to 70% of its oil needs, the Mexican oil is critical.

But here's the thing. Using straightforward ELM calculations, Jeffrey Brown is confident that Mexico will ship its last barrel of oil to the United States -- or anywhere else, for that matter -- about 6 years from now, in 2014. In a recent interview with Brown, I asked about this forecast.

"Mexico was consuming half of their production at peak in 2004. And if you look at the '05, '06, '07 data, they're basically on track, on average, to approach zero net oil exports no later than 2014," he confirmed.

Of course, the US is completely unprepared to replace this source of oil, especially considering the growing stresses on global oil supplies causing by ballooning demand from emerging markets. That means the international competition for available supplies is only going to get more desperate in the months and years ahead.

Coincidentally, while this report was in preparation, on April 30, 2008, PEMEX, Mexico's national oil company, announced it would be unable to fulfill this year's scheduled oil export obligations to the United States ... falling short by about 11%, or 184,000 barrels a day.




POST DONE

Kuwait has a 70% Govt Surplus.. Thank the Fed

Check out this video
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When more debt Won't do it

Fleckenstein:

Faber points out a major concern: The debt-burdened U.S. economy may have reached "zero hour" -- that being when a dollar of new debt has no incremental positive impact on U.S. gross domestic product.

For the past 30 or 40 years, it's taken increasingly larger amounts of debt to increase GDP. From 2000 to 2007, total credit market growth was $21 trillion, and nominal GDP growth was only $4 trillion. We have reached the stage where a dollar in debt produces only 20 cents or so in economic growth (versus about 90 cents produced in the 1960s).


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Housing Bust Recovery in 1930s

Its refreshing to revisit a past not even my parents knew...27 dollar a month payments!



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ALT-A Starting to Crumble...


Has anyone taken a look at IndyMac Bank recently??? IMB Ticker. Wow. Looks like we have subprime number two coming on strong...
Check out this analysis from the Mortgage Guy...



Basically, the dollar volume and size of loans is bigger then Subprime, and its going the same way. 2009-2011 is the major nuclear winter of resets for these mortgages......End of post

Dow 13K, Oil 125, and Economic Bright Spots


Its been a while since i posted. A few updates. First off, Walmart is doing great! A stop out of the short from last fall produced a small loss. Google went on a tear and i should have spread the calls to May/June for the continued upside that i did not participate in. And the financials have bounced but are lagging. More rough waters ahead, with Bank of America's call on losses from equity lines mounting as one example. Lets go to the charts!

Looking at the Dow Jones, it looks like there is alot of resistance at the 13K level. The broader market is alot stronger then the major indices in many sectors, and the home builder index seems to have made a major bottom. We have a period of softness ahead, as the indicators are not confirming the recent rally. The idea that capital spending will help offset the failing consumer also seems to be helping the general economy. And what about Crude? We're about near the 133 level we figured we might get to into the summer months. But 200 is coming into 2010. The dollar seems to be making a bottom here, as we become the worlds 2nd carry trade defacto. Reversals may happen, but we should see a continuation of all the above into the late summer/fall.

All out of BSC

From the block timespan daily buy at AVG 3.75, i sold a block of Bear Stearns at 8, another at 13, and the rest is gone here at the under 11 mark. Always have open orders ready ahead of the rips. I placed mine around the 7.99 level, 12.99 level... (to get ahead of the block orders at the round numbers) Why did i post this specific set of trades? To prove the wisdom of the street and my technical signals never fail. I see the market pausing at this level. We might have one more rip to 13K and a failure and drop down to lower levels. The fundamentals of the economy are about to get worse, t... and generally things look crummy... Its time to rid the economy of waste and get lean and mean again. I've been hammering alot of code lately so my mind is fried. More posts later. My XHB is holding its own.. stop under technical support. GLD is a buy on big dips...

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Sold a bunch of the LEH Calls 19ish

Out at 19.. the highest pricing was in the 24's... almost a triple from above 7 but the market technically looks a bit soft. Going to keep a few more and see if LEH rips over 50.

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OUT April 430 GOOG Calls

Sold all the GOOG calls at the 46 Range... from 21... OVER A DOUBLE... I'm going to look at OEX Puts with some of the proceeds here. This market is at the high end of the rev range for this cycle..

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Bear Stearns revised deal


Well another chunk of BSC goes out at 13. I'm going to keep the rest of this position just in case another pop ensues. This original block was picked up at 3.75 avg. My LEH trade is completely stalled out, even though the options popped into a triple after the purchase we made. I'm unloading some here. Goog is doing great, finally rallying with this strong market. Looks like 12,600 on the dow is a bit too much for this rally. Another pop and it might be time to short a few things again. The majority of the reporting of this deal was negative, yet the technicals kept showing me that there were higher prices ahead. Dont listen to noise, use the charts as your guide, especially during times of volatility.

Tops take longer to form then bottoms.

The US may need the IMF

There is so much bearish data coming out, i'm inclined to retract my previous statement that we may have made the low for the year (by a 50% chance). It seems that now entire governments (including our own) are having a hard time raising cash. Dejure revisits De facto...

Asian, Mideast, and European investors stood aside at last week's auction of 10-year US Treasury notes. "It was a disaster," said Ray Attrill from 4castweb. "We may be close to the point where the uglier consequences of benign neglect towards the currency are revealed."

The share of foreign buyers ("indirect bidders") plummeted to 5.8 percent, from an average 25 percent over the last eight weeks. On the Richter Scale of unfolding dramas, this matches the death of Bear Stearns.

Rightly or wrongly, a view has taken hold that Washington is cynically debasing the coinage, hoping to export its day of reckoning through beggar-thy-neighbour policies.

The Fed's emergency actions are imperative. Last week's collapse of confidence in the creditworthiness of Fannie Mae and Freddie Mac was life-threatening. These agencies underpin 60 percent of the $11,000 billion market for US home loans.

With the "financial accelerator" kicking into top gear -- downwards -- we may need everything Ben Bernanke can offer.

We can no longer exclude a partial nationalisation of the American banking system, modelled on the Nordic rescue in the early 1990s.

Is this the moment when America finally discovers the meaning of the Faustian pact it signed so blithely with Asian creditors?

As The Wall Street Journal wrote this weekend, the entire country is facing a "margin call." The US has come to depend on $800 billion inflows of cheap foreign capital each year to cover shopping bills. They may have to pay a much stiffer rent.

As of June 2007, foreigners owned $6,007 billion of long-term US debt. (Equal to 66 percent of the entire US federal debt). The biggest holdings by country are, in billions: Japan (901), China (870), UK (475), Luxembourg (424), Cayman Islands (422), Belgium (369), Ireland (176), Germany (155), Switzerland (140), Bermuda (133), Netherlands (123), Korea (118), Russia (109), Taiwan (107), Canada (106), Brazil (103). Who is jumping ship?

The Chinese have quickened the pace of yuan appreciation to choke off 8.7 percent inflation, slowing US bond purchases. Petrodollar funds, working through UK off-shore accounts, are clearly dumping dollars amid rumours that Gulf states -- overheating wildly -- are about to break their dollar pegs. But mostly likely, the twin crash in the dollar and US agency debt reflects a broad exodus by global wealth managers, afraid that America is spinning out of control. Sauve qui peut.

The bond debacle last week tallies with the crash in the dollar index to an all-time low of 71.58, down 14.6 percent in a year. The greenback is nearing parity with the Swiss franc -- shocking for those who remember when it was 4.375 francs in 1970. Against the euro it has hit $1.57, from $0.82 in 2000. Against the yen it has smashed through Y100. Spare a thought for Toyota. It loses $350 million in revenues for every one-yen move. That is an $8.75 billion hit since June. Tokyo's Nikkei index is crumbling. Less understood, it is also causing a self-reinforcing spiral of credit shrinkage throughout the global system.

Japanese investors and foreign funds are having to close their yen "carry trade" positions. A chunk of the $1,400 billion trade built up over six years has been viciously unwound in weeks. The harder the dollar falls, the further this must go.

It is unsettling to watch the world's reserve currency disintegrate. Commodities from gold to oil and wheat are taking on the role of safe-haven "currencies." The monetary order is becoming unhinged. (never doubted Dr. Ron Paul)

Few noticed last week that the Italian treasury auction was also a flop. The bids collapsed. For the first time since the launch of the European Monetary Union, Italy failed to sell a full batch of state bonds.


These are indeed historic times

So much news...or fluff?

Some thoughts on what is ahead, even after the Fed and the GSE promise 2 trillion in liquidity to the housing debt markets.

March 24 (Bloomberg) -- Forget lower interest rates. For the Federal Reserve to keep the financial markets from imploding it needs to buy troubled mortgage bonds from banks and securities firms, say the world's biggest Treasury investors.

Even after cutting rates by 3 percentage points since September, expanding the range of securities it accepts as collateral for loans and giving dealers access to its discount window, the Fed has been unable to promote confidence. The difference between what the government and banks pay for three- month loans doubled in the past month to 2.03 percentage points.

The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans, said Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co. While purchasing the some of the $6 trillion mortgage securities outstanding would take problem debt off the balance sheets of banks and alleviate the cause of the credit crunch, it would put taxpayers at risk.


Bill Gross handles alot more money the many of us

BSC, block sell @ 8

Well, it was over a double in a day... so we sold a chunk. The GS numbers were good, for those still short from out 238 short, yesterday/today is the covering - to go long etc.

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Shorts getting crushed....

There is a 50% chance that we just saw the low of the year yesterday. The economy will keep failing and the XHB and XLI are an accumulate. Our positions are up very strong this AM. We'll hold these "trades probably two more days...."

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Bear Stearns, a stock turned option...

Having never had a position in BEST, im taking up some of this stock as a long under four dollars. I see this as an option with a floor at two, or a risk of 50% loss with the ability for some upside. There may be other suitors in the works who may take a look at this stock or the pieces. Quant breakup value is over 7 billion, but has leverage of over 30 billion which the FED just made good for 90 days. Its a day of bull speculation. And a low for the next few months in the market. Tremendous dow resistance at 12,200.

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April 430 Calls GOOG

Taking a stab at these calls here at the 20 Range... this is a spec buy! Buyer beware....

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Lehman Calls...

Taking a long position in some LEH april 25's @ 7ish. This is a gamble BIG TIME, I just dont see how the Fed's could allow TWO banks to go down in the SAME MONTH.

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Bear Stearns the "Countrywide" of JP Morgan?


The lack of conviction breaking 12,200 in the last hour of trading yesterday left me with great concern. After the tremendous drop the technicals seem to be showing an extended oversold condition.

The problem with these choppy markets is that we can end up having a crash on a Monday opener. Balance sheets and counter parties are all on the defensive. I suppose the market participants wanted to squeeze BSC for a white night takeover. The question is, what will happen to the paper. April 20 puts have been active. Perhaps that will be the takout price. So much for buyers at 100. I was especially bearish on BSC, their funds are the ones that imploded first back in August 2007. I'm still buying bottoms, and finding some April calls that look interesting on the Naz Comp. Perhaps a hard 1000K dow crash is what we need, a intraday test of 10K, to wake up the penguin and get these call girls in check...

Intermediate Low in Markets...

Our proprietary technical indicators have shown a blow off low in the markets, we were strong buyers of index option positions in todays low. Other leading bear index indicators, such as the XHB have shown higher lows in this last instance of selling pressure. HOV and some of those stocks seem to be forming bases here. We still have the fall to get through for an indication of where the final low is in this market, but if you have been short, this is the area to close the positions and look for short term long plays.

Fundamentally, this has been a tough market to trade if your not a technicial. The Goverments continued involvement is akin to the LTC 1998 currency crisis of international goverments years ago. As we have stated for years, the goverment and central banks will DO EVERYTHING in their power to not see the markets collapse or systematic risk. The patient is still sick, we are overal still bearish as there is more time to deal with the problems that are yet to come, AND the international slowdown that is starting to happen. Keep in mind international markets and the dollar hit oversold levels this week as well. 100 yen is major (intervention) support for the dollar. Look for reversals in the dollar, crude, and gold in this time zone. Now back to our trading screens.

Bull v Bear Dow 12,100




Its been many years since i last sat watching the ticker tape (tick by tick). Today I watch it with special interest. As bearish as I have been for the last few years with equities and the financial markets in general, what is taking place today is especially important. Technically, if we loose 12K (dow) and start the momentum down, more chaos will ensue.

Those trying to find a bullish case for the markets ARE CRAZY. WMT's numbers are strong only becouse the tapped out retailer is buying down. And eventually, (when the tape has already turned - buy rumor, sell fact) Walmart will turn in softer numbers. Many financials, as well as many of the commodities and the dollar are very close to transition numbers. If the market falls, it will break the dollar below the prized 100 yen, which will spike up oil and gold et al. even higher... and depress the situation even further

Credit Spreads are very wide and many of today's headlines are indicative of how bad things are currently (and not getting better)

Household net worth falls 3.6% in 4th quarter.
Household equity in their homes fell to a record low 47.9% of home values. This year, for the first time ever, the bank or lender owns more of the house than the occupant does. Household assets fell by $308 billion to stand at $72.1 trillion, while liabilities rose $226 billion to $14.4 trillion. (ONM - The problem with pricing assets is they are only worth the price someone can borrow to take on title)

Visa looks to Go IPO (ONM - The bank cash out...)

and generally the spreads on commercial vs. govt paper are as wide as they have been at any time in recent past... If we break on the downside, look for a retest of the intraday 11.6 Dow support level to come quickly.. Otherwise we may go sideways another month with a rally and then another smash down into the summer early fall session. We either die here or hold this level for the next 45 days before a new low is made.

PPT is really working overtime to keep these technical levels.... VERY HARD And my guess is that those NFP numbers are going to be as cooked as a Thanks Giving turkey.

Where is Ron Paul when you need him? I supposed the the penguin deserves a novice like Obama



Markets, Elections, and the Dollar


GOOG is now down 33% from its high, the tech stocks are off the highs, all indexes are testing major support, and Hillary Clinton beats Obama. So what is next for the market?

I still stand by my predictions that 2009 will host the worst part of the beginning of a global economic change not seen in several generations. We should see our markets crash into the fall of 2008 and my Dow target before 2009 is below 10K.

There is a global chaostan exploding in the world by many who are profiting from the current bull market in commodities. From the Middle East to South America, things are geting HOT.

A disturbing fact not being talked about in the media is the price of Diesel Fuel. Once the cheapest fuel, a gallon of the D is costing over 4 dollars a gallon in many parts of the country, that is higher then Super Unleaded. Everything runs on Diesel that needs to move anywhere, from ships to trains and heavy machinery and trucks.

And the CPI figures are finally shooting into levels not seen for a decade. All while the Fed pushes on a string.

And why does the Fed cut, risking the dollar value? Because we are now at Systemic Risk - the very breakdown ONmoney discussed many posts ago. If people don't borrow, the Ponzi crashes, its that simple. Crushing the dollar makes the debt worth less (and more manageable for those oversees investors that are loosing out). It also give our exports a chance to rebound and help GDP figures.

That is more important then dollar value at this point. Citi is for sale, our banks are in turmoil and the petro dollars are coming back to buy chunks of the good ol US of A. Corp.

Fed says bank loan standards now tighter



The Fed's January senior loan officer survey, which policy-makers had in rough form when they decided to lower benchmark interest rates by a half-percentage point last week, showed also that demand for loans weakened among businesses and households over the last three months.


As the housing market collapsed earlier in 2007 and prompted a spike in mortgage delinquencies, the U.S. central bank has worried that tighter credit would choke off consumer and business spending, amplifying any deceleration of the broader economy.

The loan officers's survey showed that one-third of domestic institutions tightened their lending standards for business loans in the last three months, a larger fraction than in the previous poll in October.

A significant number of banks said they had tightened price terms on business loans to all types of companies, including raising the cost of credit lines and premiums charged on riskier loans.

Meanwhile, significant numbers of banks tightened their lending standards on all types of mortgages. More than half of banks said they had tightened lending standards even on loans to borrowers with strong credit.

Reflections of the Fed Cut, SoGen Rogue Trader


Last weeks cut by the fed of 75 bps was a surprise. The So Gen Panic selling and unwinding proved to be part of the reason. But this sort of action proves that more icebergs lie underneath the financial waters.

The monoline insurance companies like Ambac and MBIA are in worse shape than most realize, the counter-party risk in the $45 trillion Credit Default Swap market is much worse than we realize, and the exposure by various banks to their problems is much larger than currently understood. The Fed understands this, and realizes that they have been behind the curve but need to catch up.

Quoting from a recent note from Michael Lewitt:

" 'MBIA's total exposure to bonds backed by mortgages and CDOs was disclosed to be $30.6 billion, including $8.14 billion of holdings of CDO-squareds (CDOs that own other CDOs, or mortgages piled on top of mortgage



MBIA was being priced as a weak CCC-rated credit when it issued its bonds last week; it is now being priced for a bankruptcy. MBIA's stock, which traded just under $68 per share last October, dropped another $3.50 this morning to under $10.00 per share.

'The bond insurers' business model is irreparably broken. In HCM's view, it will be all but impossible for these companies to raise capital at economic levels for the foreseeable future and certainly in enough time to work out of their current difficulties. The performance of MBIA's 14 percent bond issue will prove to have been the death knell for this business. The market needs to come to the realization that the so-called insurance that these companies were offering is not going to be there if it is needed. The fact that these companies were rated AAA in the first place will remain one of the great puzzles of modern finance for years to come.'
MBIA is still rated AAA. Ratings downgrades are just a matter of time. Banks that raised $72 billion to shore up capital depleted by subprime-related losses may require another $143 billion should credit rating firms downgrade bond insurers, according to analysts at Barclays Capital. Barclays' estimates are based on banks holding as much as 75% of the $820 billion of structured securities guaranteed by bond insurers. (Source: Bloomberg)

As the downgrades on various mortgage assets and the CDOs continue to increase, the ability of the monolines to deal with the problems is going to come under increasing question. The losses at major banks could be much worse than $122 billion if they are downgraded to the same junk level that ACA was.

And that is just the credit default swaps (CDSs) from the monolines. What about the trillions that are guaranteed by banks and hedge funds? There are a total of $45 trillion CDSs outstanding.

if we get another 50-basis-point cut, then it means the Fed is responding to concerns about the credit crisis. And we will get another cut the next meeting and the next until we get down to 2% or below.

A 50-basis-point cut takes the rate to 3%. It they had cut the rate by 1.25% next week, the market would have collapsed. And it is not just the Fed that is concerned. Add to all this Europe is Dropping again.

ONE story of Profit from the Subprime Meltdown


Jeff Greene Buys 'Palazzo,' Scores $500 Million Gain; Erotica and Bowling Lanes. Well as thousands are loosing their homes across the country, there is one man who decided to bet the current crisis would unfold.

As Johnathan Karp of the Wall Street Journal reports; Relaxing at his 40,000-square-foot mansion, Palazzo di Amore, Jeff Greene reflects on a stellar 12-month run. He snatched the estate out of receivership for $35 million in a bidding war. He got married in a spectacular wedding here with boxer Mike Tyson as his best man. And he is up more than half a billion dollars on a bet that the housing market would crater.

He may have lost a friend in the process: John Paulson, a hedge-fund manager who devised what proved to be a wildly profitable strategy for betting against risky mortgages.

It was the spring of 2006, and Mr. Paulson, seeking investors for a new fund, gave Mr. Greene a peek at his plan. Mr. Greene didn't wait for the fund to open. He beat his friend to the punch by doing the same complex mortgage-market trade on his own.

"He never told me: 'Don't do it,'" Mr. Greene says. Mr. Paulson won't discuss the matter.

"Jeff lives on the edge. He made a fortune, lost a fortune and made it back," says Fred Sands, a Los Angeles real-estate developer who got to know him through late-night parties Mr. Greene threw at his Malibu and Hollywood Hills homes. The latter pad is known for its pillow-lined penthouse den, the Moroccan room. His soirees attracted an eclectic crowd, from Paris Hilton to Mr. Tyson.

For the artwork in Mr. Greene's new Beverly Hills mansion, money is one motif. A dark metal rendering of a dollar bill hangs over the bar.

Eroticism is another. In the east wing are two huge erotic paintings that Mr. Greene waited to hang until after his September wedding there.

The September wedding at his estate was Mr. Greene's first, and he pulled out all the stops. Guests sat beside a long reflecting pool, wandered marbled halls snacking on hors d'oeuvres, dined around the fountain in the motor court and boogied on a revolving dance floor in the 24-car garage. In late December, the party moved to Mr. Greene's yacht off the Caribbean island of St. Barts.

Yet two years ago, an undercurrent of concern about the economy had begun to trouble him. Recalling the pain of losing his first fortune, he consulted a range of smart people in search of a way to hedge his bets. One was Mr. Paulson, whom he'd met decades earlier in New York's Hamptons, the same playground of the affluent where he later met Ms. Chan.

Mr. Paulson was convinced the market for risky "subprime" home loans would implode. He outlined a sophisticated securities trade he was crafting for a new hedge fund. It involved derivatives -- contracts whose value shifts with some other asset's value -- and would need an investment bank's participation. The bank would have to be convinced that a mere individual, as opposed to an institution, qualified to be a counterparty in such a transaction. Mr. Greene says he asked Mr. Paulson, "Can I do this trade myself?" and was told, "You'll never get approved."

Banks did turn Mr. Greene down at first. But after he produced enough paperwork, Merrill Lynch & Co. and J.P. Morgan Chase & Co. agreed. He was the first individual either bank had approved for this type of trade, involving what's called an asset-backed credit-default swap, say people familiar with the matter.

Mr. Greene dived into the riskiest type of the trade by betting on derivatives backed by a single pool of subprime mortgages. He says he analyzed lots of mortgage bundles before placing his bets. But, belying the financial sophistication he aims to project, he adds: "A lot of this stuff is anyone's guess."

Mr. Greene says his positions rose only a little until the spring of 2007, when troubles at a lender rattled the market. In recent months, he has cashed out some positions, locking in $72 million in profit, according to financial records. As of early this month, his positions at Merrill Lynch and J.P. Morgan were up about $466 million combined. Because the market for the riskiest derivatives is thin, Mr. Greene says, he is waiting for better pricing before he sells more.

His hedge-fund friend, Mr. Paulson, didn't want other investors duplicating his trades. "When I mentioned to him that I had already done some of this on my own, he kind of was surprised and seemed to be upset," Mr. Greene says, adding that Mr. Paulson didn't allow him into his new fund.

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