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Hello from your favorite Pessimistic Investor

Anything related to investing, including crypto

Edge

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- 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?)

My TA says you are exactly right. This is simply a counter-trend rally. Just a short term rally in the context of the longer term bear market downtrend. IMHO.
 
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randallg99

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Edge, I hope you are right. I am very bearish on the market right now and my conviction has me unhedged and exposed which is not how I typically manage the portfolios, but there are just too many negative indicators pressuring downwards.... the next round of financial quarterlies are going to spit out a lot of dirty laundry but the 64k question is how the market will react.

Easy Money - I was personally waiting for gold to hit low-mid 800's where it would have receded to make me comfortable to adding my already overweight position and quite frankly, the volatility in these markets will probably give me an opportunity to grab some at one point or another. gold has some violent swings and maybe I missed the latest opportunity, who knows.

oracle's disappointment is interesting, even I didn't expect them to come up short: one of the last rays of hope in this market (tech sector) is now following the many other contracting sectors thus furthering even more bleak and negative sentiment...
 

imirza

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Here are some of the stock market sites/blogs that I read on a daily basis.

Minyanville - Great commentary and insight from some excellent traders/market experts
Bill Cara - A true market wizard. The information he provides is priceless .
Stock Timing - Excellent technical information like money flows etc
Shark Investing - Rev Shark is the best trader I can think of.


There are some others that I follow too but, these to me are the most useful. There are other sites dedicated to stock picks and things like that but I am more interested in getting an overall picture of where the market is and where its likely heading so I can plan and trade accordingly.
 
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randallg99

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You didn't buy on this last big dip? Silver went from $21 to $16.xx in 2 days. I didn't buy any on this dip, wanted to see if it was indeed a dip. Its up to $18.xx today, but my spot average is hovering right about there so I'd like a little bigger spread before buying more.


we are getting pretty close...
 

randallg99

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the banks and investment houses get to live another day... (and thankfully) but at what expense???? dollar is down 15% vs Euro and 14% vs yen and there is some talk of even more rate cuts....

saving the dollar from collapsing has got to be the main priority since we have not seen the bottom of the housing market - (and I am in the camp that housing is only getting worse... no data shows any signs otherwise) ... the more the fed does to stave off a recession the more the dollar is at risk of collapsing.

and then we'll be wondering what the fed can do when the housing market does in fact bottom out...we've only scratched the surface with the crisis...


http://www.bloomberg.com/apps/news?pid=20601087&sid=aPDZWKWhz21c

Volcker Says Fed's Bear Loan Stretches Legal Power (Update4)
By John Brinsley and Anthony Massucci



April 8 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker questioned the central bank's decision to rescue Bear Stearns Cos. with a $29 billion loan, saying it was at ``the very edge'' of its legal authority.

``The Federal Reserve has judged it necessary to take actions that extend to the very edge of its lawful and implied powers, transcending in the process certain long-embedded central banking principles and practices,'' Volcker said in a speech to the Economic Club of New York.

Fed Chairman Ben S. Bernanke last month agreed to lend against Bear Stearns securities, paving the way for JPMorgan Chase & Co. to buy its Wall Street rival. Bernanke, who worked with Treasury Secretary Henry Paulson to broker the bailout, last week defended the move as necessary to prevent ``severe'' damage to financial markets.

Volcker, the Fed chairman from 1979 to 1987, had implicit criticism for U.S. regulators and market participants who allowed ``excesses of subprime mortgages'' to spread into ``the mother of all crises.'' The Fed's Bear Stearns loan was unusual, he said.

``What appears to be in substance a direct transfer of mortgage and mortgage-backed securities of questionable pedigree from an investment bank to the Federal Reserve seems to test the time-honored central bank mantra in time of crisis: lend freely at high rates against good collateral; test it to the point of no return,'' he said.

Wall Street Subsidy

Lawmakers, while praising the Fed and Treasury for averting a financial collapse, have also questioned the plan to subsidize Wall Street while the Bush administration resists using government funds to assist homeowners cope with the worst housing crisis in 25 years.

Volcker said the Fed's loan may send investors the wrong message.

``The extension of lending directly to non-banking financial institutions -- while under the authority of nominally `temporary' emergency powers -- will surely be interpreted as an implied promise of similar action in times of future turmoil,'' he said.

Volcker said the modern financial system has ``failed the test'' of the marketplace. When asked whether he predicts a ``dollar crisis,'' he said, ``you don't have to predict it, you're in it.''

The dollar has dropped 15 percent against the euro and 14 percent versus the yen in the past year.

$945 Billion in Losses

``What Chairman Volcker said in his remarks is that we need to make sure we are taking a look at the implications of the Fed decision,'' Glenn Hubbard, former chairman of President George W. Bush's Council of Economic Advisers, said in an interview. ``The question is: How do we then redesign regulation around a decision that bold?''

Volcker's critique comes as policy markers struggle to prevent the world's largest economy from contracting, a prospect Bernanke himself raised last week. The International Monetary Fund today said the global losses from securities tied to commercial real estate and loans to consumers and companies may reach $945 billion.

``The bright new financial system, with all its talented participants, with all its rich rewards, has failed the test of the marketplace,'' Volcker said.

As credit markets seized up, the Fed gave the 20 primary dealers in U.S. government bonds the same access to discount- window loans that had previously been reserved for banks. The central bank now auctions as much as $100 billion to lenders a month, and has cut the cost on direct loans to just a quarter- point above the overnight rate on loans between banks.

``The implications of these decisions, and the lessons from the unfolding crisis itself, surely deserve full debate and legislative review in the period ahead,'' Volcker said.

Fed's Response

The Fed has also lowered its benchmark rate six times since September to 2.25 percent from 5.25 percent, and traders anticipate it will cut by at least another quarter point this month to cushion the economy's downturn.

Volcker, 80, said the problems stemmed in part from trading of increasing complicated securities including derivatives that ``have taking on a trading life of their own,'' and said the turmoil ``adds up to a clarion call for an effective response.''

`There was no pressure for change, not in Washington which was spending money and keeping taxes low, not on Wall Street which was wallowing in money, not on Main Street with individuals enjoying easy credit and rising house prices,'' Volcker said.

To contact the reporter on this story: John Brinsley in Washington at jbrinsley@bloomberg.net

Last Updated: April 8, 2008 17:50 EDT
 

randallg99

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2 articles here paint the big picture:

Banks are too understaffed and overwhelmed to pursue forclosure process... imagine that! guys- we are really headed for a shit storm...

the other article is highlighting retailers efforts in a "down economy" whether it's reorganizing or just downright slashing expansion plans....

my investment strategies:

1. RE = I have a broker who continuously scans neighborhoods I am interested in. I am now seeking cap rates of 20% and I am taking into consideration that lay-offs and wage contractions will affect rental prices in my area

2. Equities = I have increased significant positions in SKF and GLD. I am adding FDG

more to come.....

http://bloomberg.com/apps/news?pid=20601109&sid=aOluOO8Vy0gc&refer=home

Lenders Swamped By Foreclosures Let Homeowners Stay (Update1)
By Bob Ivry
data



April 4 (Bloomberg) -- Banks are so overwhelmed by the U.S. housing crisis they've started to look the other way when homeowners stop paying their mortgages.
The number of borrowers at least 90 days late on their home loans rose to 3.6 percent at the end of December, the highest in at least five years, according to the Mortgage Bankers Association in Washington. That figure, for the first time, is almost double the 2 percent who have been foreclosed on.
Lenders who allow owners to stay in their homes are distorting the record foreclosure rate and delaying the worst of the housing decline, said Mark Zandi, chief economist at Moody's Economy.com, a unit of New York-based Moody's Corp. These borrowers will eventually push the number of delinquencies even higher and send more homes onto an already glutted market.
``We don't have a sense of the magnitude of what's really going on because the whole process is being delayed,'' Zandi said in an interview. ``Looking at the data, we see the problems, but they are probably measurably greater than we think.''
Lenders took an average of 61 days to foreclose on a property last year, up from 37 days in the year earlier, according to RealtyTrac Inc., a foreclosure database in Irvine, California. Sales of foreclosed homes rose 4.4 percent last year at the same time the supply of such homes more than doubled, according to LoanPerformance First American CoreLogic Inc., a real estate data company based in San Francisco.
Reluctant Banks
``Some people stay in their houses until someone comes to kick them out,'' said Angel Gutierrez, owner of Dallas-based Metro Lending, which buys distressed mortgage debt. ``Sometimes no one comes to kick them out.''
Banks are reluctant to foreclose on homeowners for a variety of reasons that include the cost, said Peter Zalewski, real estate broker and owner of Condo Vultures Realty LLC, a property consulting firm in Bal Harbour, Florida.
Legal fees and maintaining a vacant property while paying the mortgage, insurance and taxes can add up to as much as 15 percent of the value of the home, and it may take months for the foreclosure to work through the legal system, he said.
``The end result is taking back a property that the bank will have to manage, rent out and or sell,'' Zalewski said.
In many cases, lenders also have to foot the bill for fixing up vacant homes that have been vandalized.
Empty Houses
Real estate broker Georgia Kapsalis is offering a home for sale in Birmingham, Michigan, a Detroit suburb, where the owner last wrote a mortgage check in July. He still lives in the house, she said.
``Some of the banks just don't want the houses to be empty, especially if it's in an area where there's a lot of theft or there are five other houses empty on the street,'' said Kapsalis, who works at Added Value Realty LLC in Livonia, Michigan, another Detroit suburb. ``They'll lose toilets, plumbing, appliances, everything. Banks are getting wise and allowing people to live there longer.''
Alexis McGee, president of Internet database Foreclosures.com in Sacramento, California, said she toured a property where the departing resident tried to make off with the outdoor air conditioning unit by sawing the metal legs off its concrete apron.
``People take what they want to take,'' McGee said. ``They feel that they're owed.''
Flooded Market
With home sales dropping and national inventories rising, the lenders have another reason to delay foreclosures, said Howard Fishman, a real estate investor based in Minneapolis.
``What are the banks going to do?'' Fishman said. ``They don't want the house. They have a mortgage for $1 million and the house is worth $750,000.''
In February, 5 million existing homes were sold on a seasonally adjusted, annualized rate, down 31 percent from the peak of 7.25 million in September 2005, data compiled by the Chicago-based National Association of Realtors show. More than 4 million existing homes were on the market in February, 53 percent more than the 2.6 million average of the past nine years, the Realtors reported.
``Excess inventories pose the biggest risk to the market,'' Michelle Meyer and Ethan Harris, New York-based economists at Lehman Brothers Holdings Inc., wrote in a report last month. ``As long as inventories are high, home prices will fall.''
New Foreclosures
Growing inventory pulled median home prices down to $195,900 in February, a 15 percent drop from the peak of $230,200 in July 2006, the Realtors said.
New foreclosures rose to 0.83 percent of all home loans in the fourth quarter from 0.54 percent a year earlier, according to the Mortgage Bankers Association.
The civil court in St. Lucie County, Florida, is getting about 44 foreclosure cases to file every day. That's the same number it averaged in a typical month in 2005, said Clerk of the Circuit Court Ed Fry.
``It's pretty overwhelming,'' he said.
Fry said he has 12 full-time employees and two temporary workers he just hired handling nothing but foreclosures. Still, the 50-page filings sit in cardboard boxes for three weeks before the court staff can process them, Fry said. Then it takes another two months to get a date on the court docket, he said.
Mortgage servicers, who collect monthly payments and are responsible for starting the foreclosure process, also were caught short-staffed, said Grant Stern, a mortgage broker and owner of Morningside Mortgage Corp. in Miami Beach, Florida.
`Moral Hazard'
``The most experienced people you can bring in are origination people,'' Stern said. ``But for a bank it's a moral hazard to have the same people who originated the loans now modifying those loans. That wouldn't be desirable. Once around is enough.''
The five largest servicers -- Countrywide Financial Corp., Wells Fargo & Co., CitiMortgage Inc., Chase Home Finance Inc. and Washington Mutual Inc. -- together manage more than half the home loans in the U.S., according to New York-based National Mortgage News, an industry publication.
While more than 100 mortgage originators have suspended operations, closed or sold themselves since the beginning of 2007, mortgage servicing units are expanding.
Chase Home Finance, a unit of New York-based JPMorgan Chase & Co. and the fourth-largest U.S. servicer, expects to spend $200 million more servicing loans in 2008 than it did last year, said spokesman Thomas Kelly.
Delayed Foreclosure
Kelly wouldn't say how many Chase borrowers have quit paying their mortgages and remain in their homes.
Efforts to keep borrowers paying their bills have slowed the foreclosure process, Mark Rodgers, a spokesman at CitiMortgage, a division of New York-based Citigroup Inc., said in an e-mail message.
``In a number of cases, we have delayed foreclosure proceedings to allow our loss mitigation teams additional time to explore potential solutions to keep distressed borrowers in their homes,'' Rodgers said.
Joe Ohayon, vice president of community relations for Wells Fargo Home Mortgage in Frederick, Maryland, a unit of San Francisco-based Wells Fargo, said trying to modify loan terms case by case adds time to the foreclosure process.
``Foreclosure is only a last resort after all available options for keeping the customer in the home have been exhausted,'' Ohayon said in an e-mail message.
Affordable Payments
Olivia Riley, a spokeswoman at Seattle-based Washington Mutual, said in an e-mail that the company's goal is to keep customers in their homes ``with payments they can afford.''
Representatives for Calabasas, California-based Countrywide, the biggest U.S. mortgage servicer last year, didn't respond to requests for comment.
Few mortgage companies will admit they allow homeowners to stay in their homes without paying their bills.
``No servicer will say you can live rent-free for six months, go ahead,'' said Paul Miller, a mortgage industry analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. ``Eventually, the servicers will clear these guys out.''
Homeowners usually get 90 days to resume paying before foreclosure proceedings begin with the filing of a complaint or notice of non-payment.
State laws determine the length of time between the filing and an auction of the house. In most states, it's two to six months, according to Foreclosures.com. In Maine, it can be up to a year and in New York, 19 months; in Georgia, it's as quickly as one month, and in Nevada, it can be 35 days, according to the database.
Borrowers in California who fight foreclosure can stretch the process to 18 months, said Cameron Pannabecker, chapter president of the California Association of Mortgage Brokers and president of Cal-Pro Mortgage Inc. in Stockton.
That doesn't take into account the woman he knows who hasn't made a mortgage payment in eight months and hasn't heard from her lender, Pannabecker said.
``Now she's afraid to mail in a payment for fear it'll come to somebody's attention,'' he said.
To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.









[FONT=Times New Roman,Times,Serif]Shopping Centers Take Hit
As Economy Socks Stores;
Cutting Prices (On Rent)
[/FONT]

[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By KRIS HUDSON
April 9, 2008; Page C10
[/FONT]
[/FONT]
Weak consumer spending is pushing struggling retailers close to or over the edge, and that is starting to hurt shopping-mall owners.
The latest retail casualty is Linens 'n Things Inc., a 500-store home-accessory chain, which is considering filing for bankruptcy-court protection as soon as this week. The chain, which went private in a leveraged buyout two years ago, is running short of cash, and its vendors have stopped shipping products, said two people familiar with the company.
For shopping-mall owners, it is a rude awakening from the boom times of the past few years, when consumers borrowed to furnish new homes. While vacancies should remain low, the slowdown means weaker rent growth for all mall owners and serious pain for the most heavily indebted landlords.
Stock investors are dismissing the weakness, driving up shares of retail-property owners 7.7% this year, though the sector fell 19.6% last year.
The list of weak retailers is growing by the day, including furniture seller Domain Inc., high-end jeweler Fortunoff Inc. and electronics merchant Sharper Image Corp., all of which have sought bankruptcy protection since January.
Mall mainstay Foot Locker Inc. closed 274 stores last year and anticipates 140 more closures this year. Jeweler Zale Corp. is closing 100 stores in the wake of disastrous holiday sales. Wilsons the Leather Experts Inc. is closing 158 of its 260 mall stores this year, and teen retailer Pacific Sunwear of California Inc. is closing its 153-store Demo chain.
Making matters worse, new construction will raise the total amount of retail space by 3.5% this year in the top 54 U.S. markets. But retail-sales demand, which has slowed with the economy, will justify only a third of that new space when it is completed, according to market-research firm Property & Portfolio Research Inc.
Problems with lenders are especially painful for retail landlords who bet that rising rents and falling vacancies would help them handle heavy debt loads.
Centro Properties Group, a debt-laden Australian real-estate investment trust that owns 682 shopping centers in the U.S., faces an April 30 deadline to present a plan for repaying $3.4 billion in short-term debt that it failed to pay on time earlier this year. The company recently attracted preliminary buyout bids averaging $1 per share, according to people familiar with the matter, far less than the 10 Australian dollars (US$9.27) per share it traded for last year.
U.S. mall REIT General Growth Properties Inc., while far more sound than Centro, nonetheless is seeking to refinance $6 billion in debt due this year and next. Company executives insist the REIT has many options, including equity sales and putting properties into joint ventures, to handle its debt obligations. It has funding in place for some of that $6 billion. But the deteriorating retail market isn't going to help.
In fact, conditions are likely to get worse. The International Council of Shopping Centers, a trade group, predicts nearly 5,800 store closures this year, outpacing last year's 4,600 and approaching the recent high of 6,300 in 2004. Several anchor tenants -- Wal-Mart Stores Inc., J.C. Penney Co. and Office Depot Inc. among them -- have slashed expansion plans and have delayed store openings.
While Linens 'n Things is expected to survive bankruptcy, any expansion plans likely have been shelved. The company is considering a so-called prepackaged bankruptcy, in which the company's creditors agree to a bankruptcy plan even before the filing in hopes of limiting the amount of time the company is in bankruptcy and helping improve the company's prospects upon emergence.
Deutsche Bank Securities analyst Lou Taylor forecasts that the average vacancy rate of public retail REITs will swell by two percentage points this year. Even with that setback, many REITs still will boast vacancy rates of less than 10% because of the gains they made during the recent boom. But such a decline would sap the REITs' growth in net operating income -- which averaged a 3.5% gain last year -- to something in the range of 0% to 1%, Mr. Taylor said.
The market shift has given tenants more bargaining power. In some cases, landlords are granting less-expensive rent or forgoing increases, covering more of tenants' costs in customizing their space or allowing struggling stores to move to smaller, cheaper space, among other options.
"The pendulum has swung from the landlord to the tenant," said Eric Termansen, president of retail brokerage Western Retail Advisors in Phoenix.
For example, shoe retailer Foot Locker, a top-10 tenant for most mall REITs, closed 26 fewer stores than it anticipated last year after reaching "some favorable deals with our landlords to keep some stores open," Chief Executive Matt Serra said in a call March 11.
John Johannson, senior vice president at property firm Welsh Cos. LLC, is allowing a national office-supply retailer to move from its 35,000-square-foot slot in a Welsh-owned shopping center in Minneapolis into an adjacent 25,000-square-foot space vacated by electronics retailer CompUSA Inc. Welsh didn't increase the retailer's rent and forgave the final two years of its initial lease in exchange for a 10-year extension. "We've satisfied a long-term tenant," Mr. Johannson said.
On the positive side, some retailers have plans to launch store concepts. Among the phenoms: Gilly Hicks by teen retailer Abercrombie & Fitch Co., Aerie by teen retailer American Eagle Outfitters Inc. and international upstarts such as Canadian sportswear retailer Lululemon Athletica.

 
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randallg99

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I am in complete agreement with this author.... this economy will be flipped upside down with a fork far up its a$$ if inflation continues to threaten economic output since now there is no more ammo to stimulate more economic activity... inflation must be kept at bay if economy slows down.

ah, but WTFIK????? My trades based on housing data, banking reports and economic activity affects my trading SKF and they are producing marginal results at best but the rest of my port is doing very handsomely (finally!)

my #1 holding (about 20%) of port is called SeaDrill (traded on pink as SDRLF) and I think as oil continues to climb (now bubbleheads are saying 150/bbl is realistic) the oil companies will be splurging like drunken sailors on exploration... that's where seadrill comes in.

here's the article:


By MARTIN FELDSTEIN
April 15, 2008; [WSJ] Page A19

It's time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage.

Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may raise interest rates. Such contractionary policies would reduce real incomes and exacerbate political instability.

The impact of low interest rates on commodity-price inflation is different from the traditional inflationary effect of easy money. The usual concern is that lowering interest rates stimulates economic activity to a point at which labor and product markets cause wages and prices to rise. That is unlikely to happen in the U.S. in the coming year. The general weakness of the economy will keep most wages and prices from rising more rapidly.

But high unemployment and low capacity utilization would not prevent lower interest rates from driving up commodity prices. Many factors have contributed to the recent rise in the prices of oil and food, especially the increased demand from China, India and other rapidly growing countries. Lower interest rates also add to the upward pressure on these commodity prices – by making it less costly for commodity investors and commodity speculators to hold larger inventories of oil and food grains.

Lower interest rates induce investors to add commodities to their portfolios. When rates are low, portfolio investors will bid up the prices of oil and other commodities to levels at which the expected future returns are in line with the lower rates.

An interest rate-induced rise in the price of oil also contributes indirectly to higher prices of food grains. It does so by making it profitable for farmers to devote more farm land to growing corn for ethanol. The resulting reduction in acreage devoted to producing food crops causes the supply of those commodities to decline and their prices to rise.

Rising food and energy prices can contribute significantly to the inflation rate and the cost of living in the U.S. The 25% weight of food and energy in the U.S. consumer price index means that a 10% rise in the prices of food and energy adds 2.5% to the overall price level. Commodity price inflation is of particular concern now that the CPI has increased 4% in the past 12 months. Surveys indicate that households are expecting a 4.8% rise in the coming year.

In lower-income, emerging-market countries, food and energy are generally a larger part of consumer spending. A rise in these commodity prices can therefore add proportionally more to the cost of living in those countries, and therefore depress real incomes to a greater extent than in the U.S.

Government actions to dilute these effects by increased subsidies on the prices of energy and food add to the government deficits, reducing the national saving available for investment in plant and equipment that would otherwise contribute to faster economic growth.

The rise in the U.S. inflation rate, and the adverse effects in emerging market countries, might be defensible if lower interest rates could significantly stimulate demand and reduce the risk of a deep recession. But under current conditions, reducing the federal funds interest rate from the current 2.25% by 50 or 75 basis points is not likely to do much to stimulate demand.

The current conditions in the housing industry and in credit markets mean that a further lowering of interest rates will have a smaller impact on demand than in previous recessions. In previous recessions, lower rates stimulated aggregate demand by inducing increased home building. But with the massive inventory of unsold homes – up 50% from a few years ago – a further cut in the fed funds rate would have little effect on housing construction.

Moreover, lowering the fed funds rate has not brought down mortgage interest rates. While the fed funds rate is down three percentage points from this time last year, mortgage interest rates are down by less than 0.5 percentage points.

The dysfunctional state of the credit market means that many individuals and businesses are unable to get credit. Lowering interest rates will not stimulate demand for those who cannot get credit.

Economic recovery will require resolving the difficult problems of the credit markets, dealing with the millions of homeowners who may now be tempted to default on mortgages that exceed the value of their homes, and reducing the risk that the ongoing decline in house prices will push millions of additional homeowners into a vulnerable, negative equity condition. A lower fed funds rate will not solve any of those problems.

Mr. Feldstein, chairman of the Council of Economic Advisers under President Reagan, is a professor at Harvard and a member of The Wall Street Journal's board of contributors
 

randallg99

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it's been about 6 months since I started this thread and we are about several hundred billion dollars of write downs and infusions later.

I played my cards right and there is absolutely no way I could have ever expected the huge bail outs our government and Fed chairman have instated and if it weren't for these dramatic and huge infusions, the world financial system may very well have collapsed.

the average person has absolutely no idea what happened on wall street in march, and the probably rightfully shouldn't give a shit since they had no idea how the mess infested itself in the first place

so here we are a few months later....

these write downs have provided the most unbelievable opportunities for these banks/investment houses have seen in decades.

they were granted clean balance sheets courtesy of Ben and co. while they hold onto the assets that may actually create fantastic returns and really surprise us all....

imagine this in simple layman's terms: you rack up a shitload of credit card debt buying fancy dinners so you can list them as goodwill assets on your balance sheet only to turn around and default on them. Gov't allows you to "erase" them from your sheets, yet these potential clients you once wooed were written off may come back and create a return on your investment....

speaking in accounting purposes, this is like hitting the (insert obscenity here) motherlode like never before...


but things have to change first - the rising trend of defaults has to stabalize and the levels of reserves banks must carry will have to increase... and this is what I wrote to a colleague who has been more bullish than most:

you know... I was just thinking clearer about this even though my
portfolio takes a lot of the risks into account ... oil is over 116 and
average gallon is 3.50... I really think the banks have a lot more to fear
when commercials can't make good on their payments indirectly due to
massive increases in food and utilities... and layoffs are still
prominent.

listing pros vs. cons and here's a real quick synopsis for the economy:

pros:
weaker dollar does a few things:
-forcing imports
-deflating deficit
-spurs foreign investment in USA
shake out weak hands out of market place
stock market is very forward thinking (but irrational)


cons:
$ at 26 yr low vs yen and european currency (Euro is only 10-15yrs
old)
oil at highs
food at highs
layoffs increasing
housing inventories increasing
housing prices deflating
commodity prices increasing including gold ( I don't know if low $
preempts gold pricing or if higher gold is traded in anticpation of lower
$)
bonds are pricing a lot of risk in the markets
unemployment is still increasing
fed government is the USA's largest employer
US debt levels continue to rise despite lower $

unknown: the speculation of trillions of $ worth of swaps have still
to be determined how much damage they can do to the economy if they
default... seems like layers and layers of BS

I also think there is a slight euphoria that is taking place as it
should because of election year, but unless fundamentals in the system
change, we will resume downward trends after November
 

randallg99

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so the fed cut another 1/4 today... and 2 dissented leading us to believe that those votes were more concerned about inflation (strength of the US$) than the health of the economy.

a couple of points to ponder: with the population rate higher than 0.6%, the economy is effectively contracting and is 10k job increase really all that comforting? the real number comes out this friday, and quite frankly the 10k increase is not enough to buck the downward trend we've been seeing.... so we'll see.... and the beige book has been horrid as of late.

I really believe that at least 2 or 3 of the following things must happen soon to avert a serious downturn in the economy:
1. energy prices absolutely and positively have to drop and drop significantly
2. food pricing has to drop
3. credit defaults have to slow down/stabilize
4. interest rates at retail level need to reflect drastic rate cuts (banks are hoarding the spreads now)
5. real estate values need to at least stabilize (unlikely since inventory just had a huge jump this month)
6. US$ needs to find support as imports are costing more
7. wages need to catch up with the recent massive jumps in costs of living

now, I think a couple of these things will happen to the benefit of our economy but the 64k question is how will the masses contend with inflation

economic cycles typically run several years so any calling for bottoms now is very premature...we just need some of the trends to reverse.... and this is not to say we won't be able to make money in the markets
 
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The detail is all great but in order to simplify there are some things that the big picture has locked in what our government must do - They operate a gigantic Balance Sheet.

Think of Productivity as the Income Statement.

We have accrued massive debt and accelerated our standard of living off that debt for the last 20 years. Third world countries have supported the acceleration. Third world countries have increased their standard of living through producing product and services for the US. They have been the producers as we have turned into consumers.

The United States is spending so much that they cannot raise interest rates, they must be lowered to nationalize the debt. This is getting wealthy the easy way, but exhausts credibility internationally.

In other words the years of hard work by americans that have built the balance sheet has been leveraged along with technology and finance (structuring) to milk it for all its worth.

Leverage is not a bad thing but we have run out of debt issuing capacity.

To get rid of that debt it must inflate

They can ease the pain to the individual american by getting them as much cash as possible through home re-financing, one time $600 rebates, less tax, etc

The result is real wealth is no longer created at same historical speeds and hard working international countries are creating the real wealth

There is only one way out, hardship. Getting back to superior production

Getting back to superior production for the United States is not impossible as an infrastructure is already in place, but the new economy demands a new international responsibility and hidden costs.

The Iraq investment in freedom is an intangible investment question at this time and is highly leveraged. The costs are current but the long term change in human behavior may pay off 100 fold in the future.

In the mean time our international buying power will decrease

Our growth must slow as financing is exhausted and politicians do not have the discipline (past, present, or future) to delay gratification. Paradoxically the war spending may actually force the day of reckoning sooner, and face reality sooner.

The US is now walking a thin line in nationalizing as much debt as possible, this is a macro decision and all other detail will probably be moot.

No one knows what level of damage will result, but growth will slow for along time.

The only exception would be some combination of major technological breakthrough (world shaking) and/or a massive injection of behavioral discipline.
 

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Leverage is not a bad thing but we have run out of debt issuing capacity.
...
To get rid of that debt it must inflate.


thanks, Unicon.... someone "gets it" around here

I really gotta say that it really (insert vulgarities here) sucks to be on the right side of the trade only to have the most historical precendent set against it.... (the bailouts)

and you are right about our debt.... but the vicious cycle will continue if inflation does occur... since all trends are pressuring the dollar we will have no choice but to reduce our debt to ease the tax burden. But the process takes a long time and potentially excruciating on the tax payer before the debt is alleviated.

Any curbing of spending by the consumer will further dampen hopes of a quicker recovery...
http://www.msnbc.msn.com/id/24567996/

all trends are still pointing down and unless some drastic changes with the US$ occur, we will continue to face a lot of uncertainty

That said, I bought Fording Coal (FDG) ahead of earnings a couple of weeks ago to play global expansion

and it's prudent to hedge large gains at this time possibly with use of options - see the collars thread by Kidgas - and it's also prudent to keep available cash - I am 45% cash at this time.

Regards
 

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thanks, Unicon.... someone "gets it" around here


Regards

...and the rest of us simply don't?

I don't have any issues with your information. Not sure about the approach though.
 
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To myself playing the market now is difficult unless you are studying it very closely. Being on the "Right side" of trades is treacherous to a fundamentlist. I believe most intelligent players are in predominate cash today, it is only logical. There are so many variables hitting the market now (indicators).

Rk states cash + credit = economy

Lots of cash out there, but credit has been contracting even with low rates. We are contracting overall not expanding at the previous rates.
 

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...and the rest of us simply don't?

I don't have any issues with your information. Not sure about the approach though.

SteveO- apologies if offense was taken and there honestly isnt't any ill intention.

there are a lot of very bullish folks out there and of course, long term I am bullish as well but as investors in equities aka paper assets, we have to realize that it's going to take significant amount of time before the credit recovery works its way to the retail level...
 

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No problem Randall. I read your comment as that a select few get it but most of us don't. Thanks for clarifying.
 
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For all the economist on this board. Check out the following charts. Scary .....

BOGNONBR_Max_630_378.gif

This chart shows how much money was left in the Federal Reserve Banking System
reserve accounts in aggregate across the Federal Reserve system when member banks
drained funds from reserve accounts during previous crises versus this one.

BORROW_Max_630_378.gif

This chart shows how much money was borrowed from Federal Reserve Banking System
reserve accounts in aggregate when member banks drained reserves from the
Fed system during previous crises versus this one.

These are directly from the St. Louis Fed's web site.

Check out the web site here http://research.stlouisfed.org/fred2/series/BOGNONBR and hers http://research.stlouisfed.org/fred2/series/BORROW

Also (for a interesting read) go to John William's Shadow Stats site.

I think we (economically) are now the closest we have yet been to the pre 1929 conditions. Of course, this time, the dollar is simply a fiat currency and not pegged to gold, meaning there is nothing stopping the fed from printing their way out of debt. Can anyony say "hyper-inflation".

What to do? I am now mostly in Swiss Franc's, gold, reverse financials (SKF), reverse real estate (SRS) and some money markets. (Still own a lot of H & M, which I have had for about (5) years though). I am looking at some real estate, but in Uruguay (land and/or flats to rent) and other countries.
 

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Whoooo, I like it when charts say what words cannot, interesting!

Conceptually one cannot make decisions based upon a "prediction of doom" but one must always respect the numbers and in times like these thats all I want to see, not talk. Digging out real numbers takes work.

To clarify above inflation is a byproduct of nationalizing the debt and paying it off with cheap dollars at low interest.

Transfer of wealth in the United States went from Bear Stearns to the guy who shorted the real estate market. From leveraged home owners to financially patient fundamental investors. From want based consumers to excess cash holding producers.

Just heard houses in Detroit and Atlanta going for $5000 to $10,000 apiece and tax assessors have them appraised at 100,000. Puts whole counties in a dilema in how to appraise house for tax purposes. Example of one home selling for 175K then 300k to over 500k then dropping to $51k. I have had run ins with tax assessors when the reaccessed my property up over a million the last period when nothing fundamental changed (no significant rent increases). They think they are quaranteed a living when everything is going south.
 

randallg99

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RJP: great charts, thanks and +++... the Fed's answer to this is dusting off the money-printing machine and letting the press run 24/7. While these helicopter drops of cash have saved our banking system thus far, the influx of cash has not hit the retail level.... as consumers, we are still waiting for the loose financing tactics that once made us able to buy anything that remotely had value. Ultimately, we know what happens when there are too many dollars floating around... and honestly, it won't be pretty while commodities remain high.



Unicon hits a very important element regarding taxes. Our government will have no choice but to raise taxes regardless who wins the November election... history shows one party being spend thrifty while the other being more taxing.... either way, the American tax payer is basically screwed since the tax receivables continue to plummet while wages remain stagnant and expenses/deductions creep higher. There aren't too many options for our government when the budget is announced.

regarding real estate taxes: as foreclosures increase with no buyers in line to pick them up, the municipalities have no choice but to jack up RE taxes on those who have met their obligations forcing the rest of the economic activity to suffer as a result.

... what the deficits continue to mean is that more money will be needed to be raised via muni bonds, t-bills/treasuries. Unfortunately, there is not much value found in them at this time since the returns are piss poor... what about corporate bonds? who wants them if they're rated by agencies who blessed subprime pools with AAA and then to top it off, they are insured by companies who are one blow-up/default away from being defunct!

for a long time, my goal was to sock much of my net worth into bonds and live from the payments but I just can't see that as being a viable option at this time due to the expensive price bonds are today and the enormous amount of uncertainty regarding the burden of debt undertaken by the gov't....
 
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For all the economist on this board. Check out the following charts. Scary .....

BOGNONBR_Max_630_378.gif

This chart shows how much money was left in the Federal Reserve Banking System
reserve accounts in aggregate across the Federal Reserve system when member banks
drained funds from reserve accounts during previous crises versus this one.

BORROW_Max_630_378.gif

This chart shows how much money was borrowed from Federal Reserve Banking System
reserve accounts in aggregate when member banks drained reserves from the
Fed system during previous crises versus this one.

These are directly from the St. Louis Fed's web site.

Check out the web site here http://research.stlouisfed.org/fred2/series/BOGNONBR and hers http://research.stlouisfed.org/fred2/series/BORROW

Also (for a interesting read) go to John William's Shadow Stats site.

I think we (economically) are now the closest we have yet been to the pre 1929 conditions. Of course, this time, the dollar is simply a fiat currency and not pegged to gold, meaning there is nothing stopping the fed from printing their way out of debt. Can anyony say "hyper-inflation".

What to do? I am now mostly in Swiss Franc's, gold, reverse financials (SKF), reverse real estate (SRS) and some money markets. (Still own a lot of H & M, which I have had for about (5) years though). I am looking at some real estate, but in Uruguay (land and/or flats to rent) and other countries.

OK, I really want to understand these charts, but I need some help.

Chart 1: The y-axis says (Billions of Dollars). Is this really US$ or is it the $ amount of securities (treasury bonds, notes) it has on balance sheet? Also, what is the significance of that number now being negative?

It is my understanding that the Fed is currently swapping treasury bonds for mortgages and they are depleating the treasuries on their balance sheet at a mind boggling rate.

What happines when they are out of treasuries to swap? My understanding is that they can either create inflation by buying more treasuries, or they sell their gold supply. Option one would be bullish for gold and commodities but bearish for the dollar, the other option would be bearish for gold and commodities and create a stronger dollar.
 

randallg99

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Chart 1: The y-axis says (Billions of Dollars). Is this really US$ or is it the $ amount of securities (treasury bonds, notes) it has on balance sheet? Also, what is the significance of that number now being negative?

As a rule, the Fed supports/protects the banking system by having actual funds on hand in the form of cash in US$ which is unleveraged (supposedly) . the reality is that when funds are depleted, the Fed has the ability to print the money to make up for the short fall. The Fed can also issue notes/Treasuries to make up for the shortfalls.

the bolded part is the serious 64k question that some of us are freaked out about.... our government is running out of money! the disastrous consequences other countries have dealt with have had their economies fail... our govt will need to do several things to build their equity strength- sell more notes (but there are only so many people able and willing to buy them - print more money which leads to devalued dollar - sell gold, but the govt does not have enough gold to sell to offset the shortfalls as the gold standard that was lifted a couple of decades ago eliminated the need for the govt to stockpile anymore - and finally, raise taxes of which can have exponentially negative effects in a slowing economy.


It is my understanding that the Fed is currently swapping treasury bonds for mortgages and they are depleating the treasuries on their balance sheet at a mind boggling rate.

yep. our Federal Treasury now has an indirect vested interest in the mortgage business. This manuever may or may not be the smartest move ever but what happened is that the Fed is now becoming involved in private enterprise which threatens impartiality.



What happines when they are out of treasuries to swap? My understanding is that they can either create inflation by buying more treasuries, or they sell their gold supply. Option one would be bullish for gold and commodities but bearish for the dollar, the other option would be bearish for gold and commodities and create a stronger dollar.

this is a hypothetical scenario... deducing from the charts above we assume the Fed has no choice but to both sell more treasuries (there have been several `emergency treasury auctions` in the past few months of which the Chinese govt is the largest buyer as they have been for years) ... this increases the Feds debt load but will raise their cash levels.

the other option is to simple print more money which devaluates the existing currency and then inevitably leads to inflation.

if I were the Fed, I would realize that having the cash on hand is much more important than fighting inflation....
 

randallg99

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here's a commentary below that highlights and corroborates much of my very own sentiment except the author below is much more eloquent than me.

in my own view there is only so much stress the monetary system can sustain while resource costs increase and dollar values decrease....

CREDIT BUBBLE BULLETIN
A new inflationary epoch
Commentary and weekly watch by Doug Noland

Crude oil closed on Friday above US$126. The most vitally important commodity in the world has now posted a stunning year-to-date rise of better than 30% and has now doubled in the past year. It is worth noting that during the 10-year period 1996 through 2005 crude averaged about $29 a barrel. It's now at four times this level - and running.

I don't believe it is mere coincidence that crude has posted about a 30% year-to-date price surge at the same time as international reserve positions have expanded at about a 30% annualized rate - to a stunning $6.769 trillion. Over the past four-and-a-half years, official international currency reserves have ballooned an unprecedented $3.921 trillion, or 138%.

During this period, crude prices surged almost 300%. Chinese reserves ballooned more than four-fold over this period to $1.68 trillion; India's reserve position tripled to $303 billion; and Brazil enjoyed a four-fold increase to $189 billion. After beginning 2004 at $73 billion, Russian reserves have almost reached the half trillion mark ($493 billion). And in just the past year, reserves of Organization of Petroleum Exporting Countries reserves have inflated 42% to $490 billion. To be sure, the world is awash like never before in excess "liquidity" for which to bid up prices of critical tradable resources.

Especially since the US Federal Reserve's credit system bailout, anticipating heightened global monetary disorder has been a key Credit Bubble Bulletin theme. The ongoing relevant question: how much would (in particular) China, India, Russia and Asia be willing to pay to procure adequate supplies of food and energy for their populations and economies? The obvious answer is "we have no way of knowing", but the market is becoming increasingly cognizant of the reality that today's massive international reserve positions provide virtually unlimited purchasing power. The bidding war has begun in earnest, in what increasingly appears a new inflationary epoch.

The CRB Commodities index closed on Friday at an all-time high, sporting a year-to-date gain of 19% and one-year rise of 37%. The Goldman Sachs Commodities index, also ending at a record high, has gained 28% so far this year and 68% over the past 12 months. During the past year, soybeans have gained 85%, corn 72%, and wheat 68%. Prices for iron ore, steel and hard commodities have experienced similar price inflation. Gasoline prices are up almost 40%, natural gas about 50%, and heating oil about 90% over the past year.

A second important theme also emanated from the Fed and administration's desperate measures to sustain the US bubble economy: one upshot of this gambit would be stubborn current account deficits and resulting ongoing growth in the increasingly destabilizing global pool of speculative finance. Not only do China, India, Russia, OPEC and others today enjoy ample reserves to bid up the price of global necessities, the leveraged speculator and sovereign wealth fund communities remain awash in financial resources that embolden huge speculative positions in various energy and commodities markets - essentially "front-running" real-economy purchases. It's turning into a battle royal - and a prime dynamic of a new inflationary epoch.

Perhaps others recall the commercials that seemed to run nonstop on CNBC during the 1996/97 Asian crisis: Make easy currency trading profits from the collapse in the Thai baht, Indonesian rupiah, the Malaysian ringgit, and the South Korean won. I remember thinking at the time how repulsed Asian policymakers must be at the thought of retail US speculators shorting their currencies, while their citizens and economies suffered through such devastating financial, economic and social upheaval. Some leaders did spew vitriol and point blame at the hedge fund speculators. Yet the bottom line was that these policymakers and their broken systems were basically powerless to mount any response against speculation or other forces unleashed on them, not to mention the International Monetary Fund and other Western policy strongmen.

Powerless no more
The Asian and emerging economies "block" are anything but powerless today. To be sure, surging food and energy prices these days spur the most serious social unrest since the "Asian contagion" of the late 1990s. The head of the Asian Development Bank last week warned that "soaring food prices" were hitting a billion poor Asians "very hard". The so-called "silent famine" became louder this week after a catastrophic cyclone ravaged Myanmar. Rice prices (in Chicago) jumped another 7% and have more than doubled over the past year.

Throughout Asia, nervous policymakers are wasting little time in reacting to surging prices, hoarding and supply constraints for rice and other basic foodstuffs. As this crisis unfolds, the various policy responses and courses adopted by countries throughout this region will have a decisive influence on the general global economic and inflationary outlook. One might think in terms of polar-opposite effects to the "disinflationary" forces that arose from this same region during much of the nineties.

Responding to public outrage over the perceived role commodities speculation is having on food prices and heightened general inflationary pressures, the government of Indian Prime Minister Manmohan Singh has suspended futures trading in soybean and cooking oil, sugar, rubber and other commodities. India has scrapped import tariffs on many commodities, while banning the export of rice, wheat, edible oils and cement. The government is also pressuring steel and other industries to limit price increases. Politicians in India and throughout Asia will come under only more intense pressure to deal with rapidly mounting inflation pressures. Various forms of intrusive government prices controls are gaining in popularity.

China, the Philippines, Thailand, Malaysia and Vietnam have all over the past several weeks moved aggressively to secure additional food supplies. China, in particular, appears to have significantly bolstered its global efforts to procure agricultural and energy resources. It's a fair bet that spiking prices for food, energy and commodities in general will have major trade and geopolitical ramifications - while our policymakers' attention is fixated on problem mortgages.

Wealth redistribution is an inherent facet of credit and asset bubbles. And I would argue that this inequitable wealth-transfer gains momentum progressively throughout the life of an inflationary boom. As such, various degrees of angst, contempt, unrest and "blowback" are inevitable. I've had particular disdain for former US Federal Reserve Board chairman Alan Greenspan warning us of the risks of trade frictions and "protectionism". These are, after all, the predictable consequences of a bursting US credit bubble.

It would now appear that spiking prices, hording, and supply shocks (emerging most acutely in the Asian inflationary tinderbox) throughout the agricultural, energy, and commodities markets have the potential for initiating a period of problematic trade tensions, dislocations and acute geopolitical uncertainty.

And it is not only government policymakers grappling with today's new reality: the extreme uncertainty with regard to pricing and availability of critical resources. Industries throughout the US and global economies now confront a fundamentally altered environment, where the future prices and supply of scores of key inputs can no longer be taken for granted.

For many, the whole idea of "just-in-time" inventory management has become a luxury no longer affordable. Moreover, recent media accounts have illuminated the problems suffered by farmers and grain elevator operators due to recent dislocations in commodities derivative trading. Financial derivatives markets, having functioned well in the commodities arena for the most part for years now, will play a destabilizing role in a new era of acute supply/demand imbalances and disruptions.

In particular, one can expect today's unfolding dislocations in energy trading to inflict bloody havoc on scores of businesses, industries and derivative players alike. Many (such as the airlines) that have previously been somewhat hedged against future energy price gains were more recently left largely unprotected because of the perceived exorbitant cost of hedging programs. And those derivative players on the wrong side of runaway price gains are today scrambling to hedge exposures and mitigate mounting losses.

Changed psychology
Importantly, whether it is in derivatives or in contracts for the future delivery of actual resources, those in a position to provide supply are today much less willing to lock themselves into future commitments. Psychology has changed and changed profoundly. The entire market landscape has been radically altered for key commodities and resource markets, and the ramifications for general inflationary trends are significant.

I am compelled to again contrast today's inflationary forces to other recent bouts of acute pricing pressures. When emerging credit bubble forces fueled the NASDAQ and technology bubbles, inflationary effects were largely isolated in technology stocks, high-yielding telecom/tech-related junk bonds and leveraged loans, and a booming tech industry. This bubble incited huge increases in demand for technology products, yet this demand

http://www.atimes.com/atimes/Global_Economy/JE13Dj01.html
 
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anyone have any good news to report after the Fed released their minutes?

so, our esteemed Fed anticipates higher inflation and unemployment, no more rate cuts, no bottom to the housing mess...

here comes stagflation and mark my words- the Fed will cut again despite claiming they wont no matter how much the economy contracts.

hedge on, amigos!
 

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FINALLY!!!! Moody's getting what they deserved... a lot of bad bad things unfolding on wall street leaving financials yet even in more vulnerable position...

and buh bye MBI and ABK... kinda sucks this is unraveling during a liquidity crunch leaving a lot less confidence in the entire realm but they just happen to be the root of the problems.

will write up a storm later... I got me a baby coming reeeaaaal soon.

R
 

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I have a few moments to kill... the commodity run is still very very strong and will be for as long as inflation is a threat. and folks, even the king of our treasury system admitted very freely that our system is facing inflationary pressures just this week.

there is one thing kinda scaring me: we are getting a large wave of bullishness from commentators, magazines and "experts" alike calling for 5 baggers from GM and C among others whose fundamentals are still positively and absolutely terrible

what does this mean? If there's anything I can pound the table on, it will be this very fact: if we're gonna make serious money in the markets it will be much, much easier investing outside of the USA.
 
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I will probably take on a bigger cash position by the end of the week. some pretty bad developments brewing can potentially send negative shock waves through the markets.... I have said earlier in this thread some 6-8 months ago that Swaps are going to take a chunk right out of our a$$... well, I think we better grab some gauze pads real fast....


http://www.nytimes.com/2008/06/18/business/18bond.html?_r=1&ref=business&oref=slogin

this is very, very bad news for the "safest investment" vehicles out there... munis are going to be taken out back and shot....

>>>On May 12, for instance, MBIA promised to contribute the money to the subsidiaries within 30 days. “This contribution is consistent with our previously announced capital strengthening plan and is intended to support MBIA Insurance Corporation’s triple-A ratings and existing and future policyholders,†the company said.

But the 30 days have come and gone with no contribution from MBIA. Last week, the company noted that “the landscape has changed,†and said it instead wanted to use the $900 million to start a new insurance subsidiary, letting the existing unit wind down its operations.
<<<

....

>>>But Joshua Rosner, an analyst at Graham-Fisher in New York, said, “It seems to me that if Jay Brown insists on putting the money anywhere other than at the insurance subsidiary or through a new subsidiary directly under it, he is making a very clear statement that he no longer believes in the viability of the insurance company to meet its obligations.â€<<<



============================

and here's another indicator for a bad moon on the rise... it doesn't take an einstein to figure out there's a serious problem that's about to hit the fan.... Goldman Sachs even admitted in their earnings call that financial woes are here to stay but were rather vague when it came to swaps.

http://www.telerate.com/article/newsOne/idUSN1543260720080615?sp=true

>>>The meetings were held with more than a dozen companies led by investment bank Goldman Sachs Group Inc. The companies -- which account for the bulk of business in the $60 trillion market -- met to help set new rules for credit default swaps trading, including the establishment of a clearinghouse.

Credit default swaps are privately negotiated transactions used by companies to hedge against default risks. Over the past decade, the market has grown exponentially, from about $1 trillion to $60 trillion.

Lee, referring to the Fed-led rescue of investment bank Bear Stearns by JPMorgan Chase & Co, said, "It was one thing to bail out Bear Stearns without any comments from the public. Now the Fed is trying to bail out or benefit 17 of the largest financial institutions behind closed doors.
"<<<
 

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for those who can stomach my babbling:

anything that has been leveraged, lent against, collateralized is now facing much higher rates of defaults and/or risk of siezure.

if one were to make money in this stock market, bond and real estate environment, it takes a serious wad of cash and a set of cajones Nixon would envy....

now, does that mean that we can make money in this market? yes. we can make loads. we are witnessing a meltdown a several asset classes when occured in the past proved amazingly profitable for those who knew what they were doing.

it also proved disasterous for those who didn't know jack and kept high exposures.

history is in the remaking.

R
 

randallg99

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I will probably take on a bigger cash position by the end of the week. some pretty bad developments brewing can potentially send negative shock waves through the markets.... I have said earlier in this thread some 6-8 months ago that Swaps are going to take a chunk right out of our a$$... well, I think we better grab some gauze pads real fast....


http://www.nytimes.com/2008/06/18/business/18bond.html?_r=1&ref=business&oref=slogin

this is very, very bad news for the "safest investment" vehicles out there... munis are going to be taken out back and shot....

>>>On May 12, for instance, MBIA promised to contribute the money to the subsidiaries within 30 days. “This contribution is consistent with our previously announced capital strengthening plan and is intended to support MBIA Insurance Corporation’s triple-A ratings and existing and future policyholders,†the company said.

But the 30 days have come and gone with no contribution from MBIA. Last week, the company noted that “the landscape has changed,†and said it instead wanted to use the $900 million to start a new insurance subsidiary, letting the existing unit wind down its operations. <<<

....

>>>But Joshua Rosner, an analyst at Graham-Fisher in New York, said, “It seems to me that if Jay Brown insists on putting the money anywhere other than at the insurance subsidiary or through a new subsidiary directly under it, he is making a very clear statement that he no longer believes in the viability of the insurance company to meet its obligations.â€<<<



============================

and here's another indicator for a bad moon on the rise... it doesn't take an einstein to figure out there's a serious problem that's about to hit the fan.... Goldman Sachs even admitted in their earnings call that financial woes are here to stay but were rather vague when it came to swaps.

N.Y. Fed's private OTC actions under fire | U.S. | Reuters

>>>The meetings were held with more than a dozen companies led by investment bank Goldman Sachs Group Inc. The companies -- which account for the bulk of business in the $60 trillion market -- met to help set new rules for credit default swaps trading, including the establishment of a clearinghouse.

Credit default swaps are privately negotiated transactions used by companies to hedge against default risks. Over the past decade, the market has grown exponentially, from about $1 trillion to $60 trillion.

Lee, referring to the Fed-led rescue of investment bank Bear Stearns by JPMorgan Chase & Co, said, "It was one thing to bail out Bear Stearns without any comments from the public. Now the Fed is trying to bail out or benefit 17 of the largest financial institutions behind closed doors."<<<


more rumors circulating about investment brokerages going on the chopping block.... probably won't close doors now that foreign(mostly asian/mid east) money is circling US assets like hawks...
 
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randallg99

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the third page of this article is what keeps me in "defensive mode"

>>>Lehman's filings indicate it has about $6 billion of CDO exposure. About a quarter of them are rated BB+ or below. These low-rated arcane, illiquid bonds-made-from-other-bonds are worth maybe 10 cents on the dollar. That indicates a loss of at least $1 billion. There are likely additional losses looming in the other three quarters of the portfolio. <<<


a $1bil realized cash loss is the last nail Lehman before it go 6 feet under.... selling assets may be a solution, but there are just not enough liquid buyers

and guys - what about the Goldman Sachs? or Merrills? or

the Fed really needs to do whatever it can to avoid a swap implosion

good article, if interested:

Inside the turmoil at Lehman - Jul. 2, 2008
 

randallg99

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I pasted this response from another thread... very appropriate here....


Default Re: Fannie Mae and Freddie Mac plunge

Originally Posted by andviv View Post
So, 1. what does this mean? 2. dollar keeps losing value? more inflation? 3. how does this affect me?
4. Why shouldn't I be buying Fannie and Freddie's shares if they fell that much? 5. Isn't it kind of a "safe"bet as the government guarantees their existence?

1. in layman's terms, $75bil is a shitload of money. Fre and Fan just had to raise $25bil recently and that wasn't an easy task.
2. yes and yes. faith in US stability and fiscal policies is depleting thus investors are seeking haven in other investments besides the US$... US asset devaluation will continue until this type of carnage stops because the gov't has no choice but to keep the money press running 24/7
3. your increasing taxes will compensate the mess that the capital markets brought unto themselves and in very short summary: inflation is all but assured thus interest rates to counter inflation will rise
4. unless there is a floor and if radical changes in accounting standards don't pan out as the article implies, then you will probably have made the buy of the century if housing market has in fact stabilized. I am in the camp that the housing market will continue to put stress on the mortgage backs
5. yes, it's a "safe bet" in the sense it won't bankrupt. but dude, even a Fed bailout won't stop it's share price from plummeting to $1



Originally Posted by phlgirl View Post
I find this one more shocking (thanks for bringing it to our attention - had not seen this yet).

IndyMac to stop most mortgage loans, cut 3,800 jobs - Yahoo! News


NEW YORK (Reuters) - IndyMac Bancorp Inc (IMB.N), one of the largest U.S. mortgage lenders, said on Monday it will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer "well capitalized." ............


I find it really hard to believe that FASB would adapt a new standard, which would cause such distress in the American economy. I am no expert on the subject but I just can't see that happening. Perhaps I give to much credit to the other Accountants of the world.

What do you think the impact will be?

did you see afterhours quote? 50 cents. I don't even have a keyboard symbol for the cent sign...

the new accounting procedures are designed to prevent the very events unfolding in the markets this year but obviously have unfounded consequences.... agreed that the timing could have been a little better, but our government is really up against the wall.... there is a risk that Lehman might go under and the gov't will absolutely have no choice but to save it.... there's a lot of handwriting on the wall that says in big, bold red letters that the gov't has a lot more money to spend to stop the mess....

So more importantly, this kind of radical accounting change is designed to alleviate the US Gov't from having to bailout FRE and FAN... raising the 75bil using private placements/notes hopefully eliminates an actual tax payer sponsored bailout

ultimately, I am not sure if I hope for this or not, but right or wrong, it's a realistic scenario that investment bankers (not Fan or Ind.) like Goldman, Lehman, Merrill, Morgan, etc will be scrutinized and somehow realigned to fit under the Dept of Banking and Insurance jurisdiction.

I am for one in favor of this extreme change to prevent large financial collapses from occuring, but this counters my conservative view in the sense that the gov't should not be the safety net at the expense of the masses who pay taxes... and then I don't want the gov't to be wearing stripes and a whistle....

now, onto the gov't sponsored entities like FRE, FAN and IND- they should have had extremely conservative positions to begin with and should have never allowed their leverage to stretch as far as it has.... personally, this bothers me, the fact that a gov't sponsored organization is allowed to take risks using tax payer money is truly an atrocity.

going forward, they will be under a microscopic scrutiny but it's awfully late in the game to start changing the rules.... these reforms should have been made LONG before I first started the pessimistic investor thread a long time ago

but then again it's always being a quarterback sitting in my cushiony leather sofa at 5am feeding my 1 month old....

R
 

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