In Barron's this weekend we have:
- Up and Down Wall Street's headline is "No Safe Haven."
- Streetwise's headline is "Resist That Urge to Call the Bottom."
I'll give Barron's a headline "Be Long or be Wrong."
Stand aside, and miss the action, until you will hear this maxim. "First the market proves it, then Wall Street reports on it for a fee."
Now if the whole world seems to think that you can't make money on Wall Street, what were the markets doing up over 10% this week?
And if the only ones left standing on Wall Street or selling advice, were those peddling doom, then do you think that those buying their advice or listening to their screeds weren't acting on it?
Why do we have such a vocal crowd complaining that the Government is meddling into markets?
These are the markets that these individuals are short in.
Do you think they are just "vicariously" short?
Or do you believe the fantasy tales that the shorts are only reflected in the bi-weekly short interest tables?
This naked shorting was the biggest ponzi scheme since Madoff!
Now the other day, we saw that Harbinger Capital was one of these fine institutions that wanted to participate in the TALF program.
Now I wrote about Harbinger the day before he and Soros and Simons were called up on Capital Hill.
Let's look again at the NY Post article about him on October 5, 2008.
While most traders who make their living betting financial sector stocks will decline have been forced to the sidelines in recent weeks because of the Securities and Exchange Commission ban on shorting, one trader who foresaw weakness in Wachovia in the spring has managed to book a $2.5 billion profit on a single trade on the ailing bank, The Post has learned.
Philip Falcone, of New York-based Harbinger Capital, rang up the incredible profit by shorting a whopping 117 million Wachovia shares at $30 back in May after his top analyst and investment chief pointed out problems with the Charlotte, N.C.-based bank's mega-billion dollar Option ARM loan portfolio.
You even have a nice picture of him!
Now the entire short position, as reported by the short interest figures in Wachovia, at the end of April 2008 was only 117.4 million shares.
The short interest only increased 3 million shares the next two weeks when he supposedly put on this position.
So where were these shorted shares? Why didn't they show up?
After all, he only made $2.5 billion dollars on it. Don't you think he would get a decent locate if you were legitimately making $2.5 billion dollars?
Let's check his prime broker and see. Whoops! His prime broker was Lehman Brothers!
Now if we can't find his shares, that he shorted, on a $2.5 billion dollar trade in the short interest figures, how are we going to find all these smaller trades?
Oh, but rest assured, the gumshoes at the SEC are hard at work. During the week of his testimony, the SEC charged some trading firm, with violating the then-existing "uptick" rule by selling stock to depress prices and then buy back the stock.
These traders supposedly made $2.4 million.
$2.5 billion, versus $2.4 million. What's $2.476 billion between friends?
How long do you think it will take, for all these shorts to get bullish, and to unwind some of their bets? And if Cramer and Buffett were taken to task this week, what will happen to these guys who have profited from the same collapse of the institutions that have hurt Main Street?
So we get their metamorphis into the good guys. But first, they need to clean up their books.
So now you know why the TALF was postponed a few days. It wasn't that these hedge funds didn't want to buy the Government's merchandise.
They just didn't want the Government looking over their books!
So now, JPM gets to package the TALF funds, and sell them to the hedge funds, and get the go between fee, so the Fed's don't look at the hedge funds book.
And then JPM gets to use it's asymmetrical information advantage with the Fed's blessing!
And you still want to believe that these Investment banks won't be able to attract capital at competitive rates without FDIC backing?
This week we had Obama, Summers, Pandrit, Dimon and Lewis pumping the economy.
Sunday night, Bernanke's coming to 60 Minutes, and he'll be flexing the Fed's muscle to the nation, and giving his version of the pump.
And if that doesn't work, the Fed's next step will be to use handcuffs.
What else can they do?
Bring in Schwarzenegger for his version of "The Pump?"
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