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HOT TOPIC Hello from your favorite Pessimistic Investor

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randallg99

randallg99

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I am starting to enjoy my public journal.... maybe I should make a blog...

musings came to mind while driving with the family today ...

anyway, follow this-

1. data shows every spring has an increase in homes-for-sale inventory and it jumps approx 20%

2. recent loan tightening standards have eliminated the marginal buyers from the
marketplace. This is the $64k question: what percentage of buyers are now removed from the market just because of the recent tightening standards? My reasonable guess: 20%

3. highest rate of ARM re-sets are scheduled for 2Q 08... question here is: how many of them have rates frozen for five years as mandated by recent legislation? My guess: not enough, but I don't have this data.

summary: 20% more inventory, 20% less buyers, and more desperate sellers. If this plays out, then we will continue to see SIGNIFICANT drops in real estate prices through summer 08.

my devil's advocate is telling myself that job creation and wages are stable in conjunction with people able to carry mortgages higher than they are able to with credit card and other credit.... but this is a lot less likely.
 

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randallg99

randallg99

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At this juncture, my conviction is being realized. I wish I had more gold and silver exposure, but I am satisfied being out of all financials stocks except for agency mortgage back Reits.

The one single piece of economic stability that the bullish pundits were leaning on has shown some weakness with today's unemployment report but 5% is historically low, so no need to jump out of the window, yet... but remember, the one single component that justified the stability in the markets is now scrutinized by the world economies.... boy, oh boy the markets didn't like this shit bomb, did they?

The markets at first adjusted to the downward housing markets without realizing how large of an impact to the overall economy it has... but the nonchelon attitude was because the consumer is strong and they have absorbed $us90/bbl oil. But now, Visa and MC are recording record usage on cards thus debt levels from consumers is an unprecedented leverage point in history. Now oil is $100/bbl. Then the markets said, don't worry about liquidity crunch because banks will keep getting new funding and world markets will intervene and buy the US companies but hello, Citigroup has market value larger than vast majority of world governments... and who the hell wants to go down with sinking ships?

So then markets finally said, ok but the US unemployment is low. Yes, it's still low by historical standards, but in relation to economy, the unemployment level has to stay extremely low... bulls in this market are running out of things to say.

Unfortunately, this stock market will mirror the economic conditions in America...

Short term, today's sell-off is a nice buying opp for short term trading... but that's for traders to trade. Long term, this is a sign of things to come and keeping the eye on long term results has been working for me.

just quick ramblings....
 

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It really does seem to see that the Recession train is gaining speed. Some of my friends and acquaintances have been laid off.
 
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randallg99

randallg99

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It really does seem to see that the Recession train is gaining speed. Some of my friends and acquaintances have been laid off.
because it unemployment jumped 10%+/-, it leaves little room for the stock market's imagination as to how the economy will trend from here.

as entrepreneurs, we shouldn't be rattled by information like this, but rather we should be able to use this information to our advantage for investing in the real estate, metals and equities markets.... but there will always be people close to us who will fall victim to the economic circumstances. A brother in law is concerned his recent offer to work for Lehman will be rescinded while a friend working for a regional bank is concerned for his job security now that information linking its loans to subprime pools is surfacing.

but our focus should be on expanding our net worth irregardless of market conditions. There are always opportunities and our job is to find them.
 

phlgirl

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because it unemployment jumped 10%+/-, it leaves little room for the stock market's imagination as to how the economy will trend from here.

as entrepreneurs, we shouldn't be rattled by information like this, but rather we should be able to use this information to our advantage for investing in the real estate, metals and equities markets.... but there will always be people close to us who will fall victim to the economic circumstances. A brother in law is concerned his recent offer to work for Lehman will be rescinded while a friend working for a regional bank is concerned for his job security now that information linking its loans to subprime pools is surfacing.

but our focus should be on expanding our net worth irregardless of market conditions. There are always opportunities and our job is to find them.
Bravo, Randall! You know.... I don't even think we could consider this pessimistic. ;) I knew you had it in ya!

And, yes, this JAX/PITT game is driving me crazy!!!
 
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randallg99

randallg99

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I have refrained from adding to this thread because I don't like raining on anyone's party.

even though I have forseen the current mess, I have no crystal ball that can tell us where we go from here. the unraveling of the credit and mortgage markets occurred so fast, much faster than I even got my positions fully funded.

Most of the banks have taken their beating and their balance sheets along with their stock prices already reflect the initial wave of defaults. We will see where we go from here, but truthfully, the banks need to continuosly sell their souls to foreign equity firms before they can adjust and handle current conditions.

What happens going forward is most crucial. Smart money knew what happened was going to happen.... Banks are operating at a threshold unseen in many of our lifetime. If defaults continue to rise, the financial system will be tested even more.

By the way, the S&L crisis of the 80's/90's amounted to a $150bil+/- injection which pales in comparison to today's market.

and speaking of defaults, all indicators are pointing for the worse for home owners who are facing upticks in ARM resets and who need to sell into a high inventory.

so... brace yourselves. Buy low, sell high. ;-)
 
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randallg99

randallg99

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oh, no! another pessimistic bastard on the lam but this one has a camera for national tv!

but this is a question that one can ponder: can you imagine if Whitney is only half right??? and you have to hand it to her- she has been pretty good about hitting the nail on the head regarding Citigroups financials in the last year.

this question is that serious because if she is only half right, that means we are only in the 3rd inning and if Citi is bracing for another shit storm, you better believe that even more credit tightening will immediately follow... I dont care if you are the Dali Lama, business credit will be much, much harder to come by. Forget about housing industry, that will already have been taken out back and shot a hundred times over if this scenario comes to reality

Now, I am not all doom and gloom... here is some good news- there is more cash on corporate balance sheets than ever before in history of publicly traded entities.

But, here is the bad news- a lot of that `cash` is wrapped up in leveraged hedges ie swaps and nobody, even the jackals at Citi, Merrill or JP even admitted they dont know how much of their own investments are wrapped up. Last earnings season all of the big houses who got nailed were keeping calm faces while Dubai biz people was catching the sweat dripping down their backs... its mind boggling the private bailouts occurred because there just arent any such existing metrics that can measure the instruments they invested in.

I have been saying all along this thread and on a personal level with my peers that there are just too many external factors thats putting pressure on the big houses/banks and until the bond markets and US$ stabalizes... we really have to brace ourselves for some more fierce volatility and at this juncture, we may not have even seen anywhere near the worst of this crisis yet.

interested in others thoughts.
 

EasyMoney_in_NC

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And what happens to the metals market when (and if) the IMF decides to go ahead and release millions of ounces of gold into the market? Will there be a flock to Silver ($50+/ounce again)? Will there be a flock to bonds? back to the equities markets and just in time for a good run up right before the second wave of shee shee hits the fan from mortgage resets? Or right after that point which bring the equities market back from the brink of disaster? And what about the Presidential election......what will that do? This year is going to be a nasty roller coaster!
 
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randallg99

randallg99

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I spent about 30 min last night writing a synopsis of how I believe the markets will play out only to have the computer glitch on me and erase everything I wrote...

in summary, my conclusion is that anything that is entirely independent of American liquidity and resources will probably fare fine. Until the smoke from this credit crisis blows over, sforeign entities and gold will be extremely strong.

Easy Money in NC: if the IMF drops loads of gold into the market place, they would essentially be telling the world that our currency systems are a fluke and IMF's intentions are not to undermine what's already in place.... don't believe the conspiracies.

Great Bear: I am absolutely astonished at how well the Euro is performing against the dollar... this is probably setting up to be one of the most obvious shorts if your cajones can handle it... but WTFDIK?
 
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randallg99

randallg99

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our biggest fear in uncertain economic times is having the backbone of the economy breaking down... bank failures are still historically low due to legislation changes in the 1980's in response to the S&L crisis, but nontheless, the trend is taking shape and it's downright ugly.

Recession Watch 2008
New recession worry: Bank failures
Economists: Market turmoil is top threat
Wall St. casts wary eye on economy
Housing relief bill: It ain't over 'til it's over
Income, spending higher than expected

NEW YORK (CNNMoney.com) -- As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising.
The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.

FDIC Commissioner Sheila Bair among regulators set to testify Tuesday at a Senate Banking Committee hearing on the state of the banking industry.

Experts say the 76 banks now under scrutiny are likely only a small part of the problems now looming over the banking sector.

Jaret Seiberg, the financial services analyst for policy research firm Stanford Group, said it appears that regulators are expecting about 200 bank failures in the coming year or two. If that occurs, it could rival the flood of bank failures seen during the S&L crisis. In 1989, the nation saw a post-Depression era record of 206 bank failures.

And Seiberg says even more than 200 troubled banks are likely to be purchased before they reach the point of failure.

"Many of these banks are highly dependent on construction lending, and that's the area of lending that is likely to come under the most stress," he said.

The FDIC stresses that not all those banks will fail. In fact in 2007 only three banks failed, even though 50 were on the watch list at the end of the previous year. So far this year, one bank - Douglass National Bank in Kansas City, Mo. - has failed.

Still, the head of the FDIC is looking to hire 25 staffers to deal with an anticipated increase in failures, a move that would increase its staff by 11%. Among those it hopes to hire are recent retirees who worked through the S&L crisis.

The banks most at risk for failure are generally smaller ones, not the huge global banks hit by billions in writedowns from subprime mortgage problems.

Smaller banks are big players in the business of construction loans made to homebuilders - loans that were backed by new homes now worth a fraction of the original estimated value.

In the past six months, the number of construction loans that are 30 days or more delinquent has spiked, according to Foresight Analytics, an Oakland, Calif., economic- and real-estate-research company. Its figures show 7.5% of single-family construction loans were delinquent in the fourth quarter of 2007, more than double the 3.1% rate as recently as the second quarter.

Matt Anderson, a partner with Foresight Analytics, said that it is the small- and mid-size banks, those with assets of $10 billion or less, that find themselves most at risk. Their construction loans outstanding equaled about 115% of their primary supply of capital as of Dec. 31, compared to the big banks for which construction spending represents only 43% of capital.

Anderson said even non-residential developers who have not been hurt by the downturn in housing could see their funding spigot turned off.

"The demise of smaller lenders probably won't have as noticeable impact on the national level, but in a lot of local markets around the U.S. it will be felt," Anderson said. "In the short-run, for folks that may have a viable projects, it could mean those projects will go under as well."

Dean Baker, co-director of the Center for Economic and Policy Research, agreed that it will be the smaller banks in markets with the greatest economic weakness that will fail, and that will only compound the troubles in those areas, even if customers don't lose their deposits.

"It's one more downdraft," he said. "For certain areas, Detroit, Cleveland, some of the areas where the housing bubble burst, it could be real bad news. I don't see the bigger banks rushing into those areas to provide credit."

Bernanke's high-wire act
But even if the big banks are somewhat protected from problems with construction loans and the risk of failure, it doesn't mean their balance sheet problems don't pose a threat to the economy.

In fact, Seiberg and some others say that tighter capital among the nation's major banks poses an even greater economic threat than hundreds of small bank failures.

Huge writedowns have caused losses at No. 1 bank Citigroup, No. 1 thrift Washington Mutual and leading mortgage lender Countrywide Financial the fourth quarter.

Federal Reserve Chairman Ben Bernanke told a Senate panel last week that while he doesn't expect the rising tide of bank failures to reach the major banks, he is worried about the need they face to raise additional outside capital.

"They have enough now certainly to remain solvent, and to remain well above their minimum capital levels," he testified. "But I'm concerned that banks will be pulling back and not making new loans and providing the credit which is the life blood of the economy."

Seiberg agreed that potential tightening of capital among the major banks is a far more serious threat to the economy than even hundreds of small bank failures.

"This economy lives and dies on credit," he said. "If the megabanks are stuck with billions in leveraged loans eating up precious space on their balance sheet, they won't be able to originate new loans. That's bad for everybody."
 

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randallg99

randallg99

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my understanding is that you can have protection by keeping 100k in separate accounts within each institution, but I could be wrong... by the way, I want to stress that bank failures are very hard to come by and it's not the end of the world as we know it however, if the trend continues with liquidity problems a gov't bailout is absolutely and positively (and unfortunately to those who are responsible with their money) inevitable.

some good reading today... anyone take a glance at beige book report?

repeat after me:

S-T-A-G-F-L-A-T-I-O.... ugh... say it... N

2 key elements of our economy require our attention when investing on a macro scale: agriculture (food) and energy - both of which continue to climb in price

also, loan quality deteroriating continues thus verifies that the liquidity mess is not going away anytime soon

prices going up and wages staying flat... this has got to change soon otherwise rate hikes will be in the cards sooner than we had hoped.

http://www.federalreserve.gov/FOMC/BeigeBook/2008/20080305/fullreport20080305.pdf



here's an article from Atlantic Monthly that kinda sums up my conviction all along:

http://www.theatlantic.com/doc/print/200803/subprime

an excerpt:

>>>Arthur C. Nelson, director of the Metropolitan Institute at Virginia Tech, has looked carefully at trends in American demographics, construction, house prices, and consumer preferences. In 2006, using recent consumer research, housing supply data, and population growth rates, he modeled future demand for various types of housing. The results were bracing: Nelson forecasts a likely surplus of 22 million large-lot homes (houses built on a sixth of an acre or more) by 2025—that’s roughly 40 percent of the large-lot homes in existence today.<<<
 
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randallg99

randallg99

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You actually have to keep $100k at a completely seperate bank if you want it to be FDIC insured. Each bank can only insure you for $100k total.

- Hakrjak
thank you - and you are correct
http://www.fdic.gov/deposit/deposits/insured/basics.html

[FONT=arial, helvetica, sans-serif]How much insurance coverage does the FDIC provide?[/FONT]
The basic insurance amount is $100,000 per depositor, per insured bank.
The $100,000 amount applies to all depositors of an insured bank except for owners of certain retirement accounts, which are insured up to $250,000 per owner, per insured bank.
Deposits in separate branches of an insured bank are not separately insured. Deposits in one insured bank are insured separately from deposits in another insured bank.
 
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randallg99

randallg99

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This goes into the `you have got to be kidding me` category .... if you have online barrons subscription and invest in financials and bonds, this is one article you dont want to miss.... 4 week free subscription for those who want to try it... I enjoy it on the weekeneds.

using conservative estimates, Fannie is on the hook for a lot more than meets the eye... like I have been saying, we havent seen the worst of it yet and Barrons uncovers a lot more than I even realized. There is no need for the Joe6pack to worry though, (except he may not enjoy some of the current tax benefits later) because Fannie is not going bust because Uncle Sam will make sure of it.

but then at what expense do all of the bailouts cost and take from us who have been responsible with our money? taxes will have no choice but to go up regardless of winner of 08 election.


http://online.barrons.com/article/SB120493962895621231.html?mod=9_0031_b_this_weeks_magazine_main
 

EasyMoney_in_NC

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You actually have to keep $100k at a completely seperate bank if you want it to be FDIC insured. Each bank can only insure you for $100k total.

- Hakrjak
Thats not correct. If you look at the FDIC statement, it says "per depositor". That means as a married couple you could have $200k as long as the depositor is different (husband vs. wife and visa versa).

Every bank I have money at have told me the same thing. In fact you could have more than that (if you wife goes for it). You could solely have an account with up to 100K and your wife could as well (without the other one being on the account). Its all in the setup. My wife doesn't like the idea so I have multiple banks :bgh:
 
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randallg99

randallg99

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The Feds could just let the GSEs die out ;).

I just had this sudden urge to download disco inferno... burn baby burn... but then I realized that they would only tax me more to fund this scheme our government conveniently calls "helping the masses"
 
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randallg99

randallg99

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everyone saw the bailout coming... I didn't think it was going to be this exstensive (and actually very smart)... collateral qualifications changed and fed loans extended 4 weeks... the ace in the hole are going to be the outcome of the treasury auctions and the sentiment is that they will not have problems unloading

but folks, this is EXPENSIVE !!!!... make no mistake about this: the banks aren't paying for this bail out... we will all be saying buh-bye to the tax breaks we've been enjoying.

I was actively on computer all day yesterday and sold a significant part of my portfolio into yesterday's strength, daytraded SKF a few times for a nice monthly income return and am again 45% cash of all ports I manage. I contemplated selling my NLY iinto yesterday's strength, (damn it, I shoulda, coulda...) but am holding for the income.

head fakes are brutal

on personal note, I hope we see a turn around in financials and economy. This bailout is one of the biggest steps our government can possibly take (IMO) that can prevent prolonged recessionary periods, but all in all I really don't see many of the other indicators changing... while agencies remain intact, the rest of the credit institutions are left to their own devices unless lending practices loosen to the perilous levels that got us in the mess.

My focus is shifting a little bit from the financials ability to keep liquid (thanks, Uncle Sam) to the derivatives market. Buffet made a speech in yr 2002 about the dangers of the underlying mkts and unbeknown to most, this derivative market has exponentially expanded to sustain usa economic growth since 2001.

we really need a dramatic reduction in price of oil/gasoline/energy and an increase in wages along with more valuable US$ before a recession can be entirely avoided.

lastly- payback is a bitch for Spitzer... (wall street needs more people like him) but don't mess with Greenburg (AIG) ... but now I really want to see what a 5k per hour hooker looks like!
 
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randallg99

randallg99

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we haven't seen desperate measures yet.... when the fed runs out of bullets, look out below... dollar at 12 yr low vs. E and Yen....

I really wouldn't want ben's job today


Bernanke May Run Low on `Ammunition' for Rates, Balance Sheet
2008-03-17 15:42 (New York)


By Scott Lanman and Rich Miller
March 17 (Bloomberg) -- Federal Reserve Chairman Ben S.
Bernanke may be running out of room to pump money into the
financial markets and cut interest rates to rescue the
economy.
The Fed has committed as much as 60 percent of the $709
billion in Treasury securities on its balance sheet to
providing liquidity and opened the door to more with
yesterday's decision to become a lender of last resort for the
biggest Wall Street dealers. The central bank has cut short-
term rates by 2.25 percentage points since September and will
probably reduce them again tomorrow.
``They're using up their ammunition on the liquidity and
overnight interest-rate fronts,'' said Lou Crandall, chief
economist at Jersey City, New Jersey-based Wrightson ICAP LLC,
a unit of ICAP Plc, the world's largest broker for banks and
other financial institutions.
Traders today cemented bets that the Fed will cut its
benchmark rate by an unprecedented 1 percentage point when
policy makers hold their regular meeting tomorrow. Yesterday,
in emergency decisions, the Fed lowered the separate rate on
direct loans to commercial banks by a quarter-point, to 3.25
percent, and opened up lending at that rate to securities
firms.
The action comes on top of Chairman Ben S. Bernanke's
other balance-sheet commitments totaling as much as $430
billion through other auctions, repurchase agreements and $30
billion in financing to help JPMorgan Chase & Co. purchase
Bear Stearns Cos.

`Capacity Issue'

``There's a limit to how much the Fed can do,'' said
Brian Sack, a former Fed research manager, and now senior
economist at Macroeconomic Advisers LLC in Washington.
``They've been incredibly aggressive with their balance-sheet
policies over the past several weeks, and that has very
quickly put this capacity issue in play.''
The actions mean the Fed, and consequently U.S.
taxpayers, are assuming additional credit risks. It may also
put the central bank closer to the unwanted position of
affecting private asset prices, ``a line that they've been
reluctant to cross in the past,'' Sack said.
The federal funds rate has remained at 3 percent since
the Fed's last action, a half-point reduction, on Jan. 30.
In the most dire of circumstance, the Fed could go so far
as to cut its benchmark rate to zero, promise to hold it there
and flood the financial system with more than enough money to
ensure that happened, under a strategy known as ``quantitative
easing.''

Pressure on Treasury

The Fed's actions ``absolutely'' put more pressure on the
White House and Treasury Department to take further action
that would restore ``credibility'' in the mortgage process,
said Scott Pardee, former head of foreign-exchange operations
at the New York Fed.
The Fed's other programs include as much as $200 billion
in lending of Treasuries to primary dealers in exchange for
debt that includes mortgage-backed securities, announced March
11 and provisionally set to begin March 27. Earlier this
month, the Fed increased the size of separate funding
auctions, to $100 billion in March from a previously announced
$60 billion.
The central bank also said March 7 that it would make
$100 billion available through repurchase agreements, where
the Fed loans cash in return for assets including mortgage
debt.
JPMorgan Chief Executive Officer Jamie Dimon yesterday
agreed to buy Bear Stearns, the second-biggest underwriter of
U.S. mortgage securities, for $240 million, less than a 10th
of its value last week. In order to strike a deal before the
opening of Tokyo trading, the Fed agreed to help JPMorgan
finance up to $30 billion of Bear Stearns's ``less liquid
assets.''

Bernanke Measures

The moves yesterday were Bernanke's latest steps to
alleviate a seven-month credit squeeze that's probably pushed
the U.S. into a recession. The dollar tumbled to a 12-year low
against the yen and Treasury notes rallied. U.S., Asian and
European equities slumped.
The Fed has lowered its benchmark overnight rate five
times and the discount rate seven times since the middle of
August, when the collapse of U.S. subprime mortgages started
to infect markets around the world.
Opening up lending to firms other than commercial banks
represents a shift in the Fed's 94-year history. The so-called
primary dealers include firms that are units of commercial
banks and several that aren't, including Goldman Sachs Group
Inc., Morgan Stanley and Merrill Lynch & Co.
Bernanke is likely to find new ways to do whatever it
takes to keep markets running and revive economic growth,
Pardee said.
Regarding the Fed's moves so far, ``that shows you how
bad the market situation is, and it also raises the question
of whether the Fed needs help from Congress or the
administration,'' Sack said.

--Editors: Daniel Moss, Jeremy Torobin

To contact the reporter on this story:
Scott Lanman in Washington at +1-202-624-1934 or
slanman@bloomberg.net;
Rich Miller in Washington at +1-202-624-1937 or
rmiller28@bloomberg.net.

To contact the editor responsible for this story:
Chris Anstey at +1-202-624-1972 or canstey@bloomberg.net.
 
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randallg99

randallg99

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CITI ABOUT TO BLOW UP... Trading halted
they didn't blow up... whew!

but, they did use every last penny available of their credit line to pay off matured debt...

unless Ben drops more money from a helicopter or Dubai wants a bigger stake, Citi might be on the chopping block.

interesting - will Citi's fallout, along with Countrywide and Thornburg's demise, only a few big guns will be left playing the mortgage game... little left to the imagination what can happen with mortgage markets going forward
 

imirza

Contributor
Jul 29, 2007
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they didn't blow up... whew!

but, they did use every last penny available of their credit line to pay off matured debt...

unless Ben drops more money from a helicopter or Dubai wants a bigger stake, Citi might be on the chopping block.

interesting - will Citi's fallout, along with Countrywide and Thornburg's demise, only a few big guns will be left playing the mortgage game... little left to the imagination what can happen with mortgage markets going forward
CIT Randall not C . CIT Group and CitiGroup are 2 different companies. If trading was halted in C I would think the market would drop atleast 500 points.
 
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randallg99

randallg99

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CIT Randall not C . CIT Group and CitiGroup are 2 different companies. If trading was halted in C I would think the market would drop atleast 500 points.
and then I was wondering why SKF was going down so I investigated further.... thanks for clearing this up.

you are right about C collapsing.... that would represent a serious failure in our system.

(And to show even more of my ignorance... my wife used to work for CIT in NY and I should have known before posting ...And to really show my ignorance, I used to do biz with CIT who factored my goods)


ya know... moody's and s&p are still all screwed up... from a bloomberg article:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ay3NuM5_IvHU&refer=home

>>>S&P cut CIT's short-term rating one level on March 17 to A- 2 from A-1 and the long-term rating to A- from A. Moody's cut its short-term rating on CIT one level to Prime-2 from Prime-1 and lowered the long-term ratings to A3, its fourth level of investment grade, from A2. The ratings firm said it may cut the long-term ratings further<<<

wouldn't have rating agencies seen this coming?
 
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randallg99

randallg99

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179
92
NJ
went to starbucks with family today to get mind off things only to find doom and gloom in the ny times.... maybe the contrarian in me should start getting bullish on the economy, but unfortunately miracles dont exist on wall street (or Pennsylvania Ave)

here are negative trends the current economy is still contending with-
US$, unemployment rates, wages, price of oil and commodities/natural resources, housing markets/foreclosures and $ of amount of bailouts.

http://www.nytimes.com/2008/03/23/business/23how.html?_r=1&hp&oref=slogin

important article to read if you manage money for yourself or others.

click on the charts - and excerpts here highlight the sentiment... while I am personally content with how the Fed averted a systemwide bank failure, I am at the same time more concerned than ever because the risk is not just exposed only to the mortgage markets, but tied in with all forms of credit.

>>It is the private trading of complex instruments that lurk in the financial shadows that worries regulators and Wall Street and that have created stresses in the broader economy. Economic downturns and panics have occurred before, of course. Few, however, have posed such a serious threat to the entire financial system that regulators have responded as if they were confronting a potential epidemic<<


>>These products are virtually hidden from investors, analysts and regulators, even though they have emerged as one of Wall Street’s most outsized profit engines. They don’t trade openly on public exchanges, and financial services firms disclose few details about them.

Used judiciously, derivatives can limit the damage from financial miscues and uncertainty, greasing the wheels of commerce. Used unwisely — when greed and the urge to gamble with borrowed money overtake sensible risk-taking — derivatives can become Wall Street’s version of nitroglycerin.

Bear Stearns’s vast portfolio of these instruments was among the main reasons for the bank’s collapse, but derivatives are buried in the accounts of just about every Wall Street firm, as well as major commercial banks like Citigroup and JPMorgan Chase. What’s more, these exotic investments have been exported all over the globe, causing losses in places as distant from Wall Street as a small Norwegian town north of the Arctic Circle.<<<
 
OP
OP
randallg99

randallg99

Bronze Contributor
Aug 9, 2007
1,390
179
92
NJ
just a couple of quick musings-

-durable goods expected a rise of .7% but is DOWN 1.07%... accounting for population expansion, we are undoubtedly in a contracting economy. this is a very, very big indicator regardless of how little media attention it gets.

- case-schiller home index is showing a bad moon on the rise. the headlines about Feb#s are total bullshit once disected

- right now as I type, I believe we are in a head-fake - or bear rally which typically gets fugly short term (what are the TA traders and others thoughts?)

- a lot of larger banks have sustained downturns with the help of the Fed and thankfully so, but I am seeing absolutely no media coverage about potential long term effects on capital markets being skewed to the point of artificial support levels as a result. If that turns out to be the case, then we are in for a very long depressed economic period and big ben will have become the biggest outlaw since jesse james if hes not run out of the country first

- regional banks have not made headlines, but as housing market continues to decline, the

- credit crunch getting tighter = just found out from a friend that E-trade HELOC is requiring 700 FICO scores


at this time, I am not a buyer of gas as I planned for this time of year (shoulder season.) I would probably venture to say that shorting oil is a prudent step since all indicators are continuing to trend downwards.

lastly, but not least I will be using both hands to buy gold and silver if we start hitting some short term dips at slightly lower levels.

currently 50% cash and totally missed out the entire upside run this past few sessions so what the eff do I know?
 

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