Spiga

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.

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