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Sunday, May 31, 2009

Whitney Tilson's new piece on mortgages

His latest 69 page piece, is a rehash of charts with no new information. (He does have a coupon though, for $1700 off the deep value conference in NY, as long as you register by June 30.)

The only interesting tidbit presented is this on page 55, where he talks about home prices in Sacramento.
http://moremortgagemeltdown.com/download/pdf/T2_Partners_presentation_on_the_mortgage_crisis.pdf

In that he said, "Home prices are stabilizing in Sacramento County due to more higher end homes being sold off."

It's nice that somebody finally recognized this fact.

But then again, you heard that here first, on March 23, in my piece entitled, "Housing math for the bears." I'll put it here again, so you don't have to bother clicking the link.

Since the bears didn't like the 666 bottom on the S&P 500, I'll give them some more math that they'll have a hard time swallowing.

As it quite evident now, the stock market, even to those who missed the lows, has bottomed. The stock market, is a forward looking indicator, and even though the news has been bad, this news is already discounted in prices.

(I suppose that statement just two weeks off of the low may have seemed just a bit foolhardy, but it is now obvious to anyone, that it was just forward thinking, that the bears didn't recognize.)

It's the same with housing.

And house prices, will now be going up, and these price increases, along with the rising stock market will get those who haven't bought, or who are contemplating buying a home, off of the sidelines, and it will help engender confidence in banks who love algorithms and models, but hate common sense!

Let's do the math. The numbers on the average home sale price came out today at $165,400. That my friends is the absolute low reading that you will see in this housing cycle, so get on board, or get run over by the train.

Now we also know, that the higher end homes are being foreclosed on also. Let's take a $1,200,000 home that goes into foreclosure and sells for $600,000.

(I'm glad that two months later, Mr. Mortgage meltdown, has realized that sales of higher end homes will increase the average price of homes. Now with interest rates going up, does he think that the average potential homeowner will be able to read his 69 pages and determine that prices are going up because of higher end sales? He won't. He'll buy.)

Now the average home sold for $165,400, last month, didn't it? So lets throw in a $600,000 high end foreclosure into the mix in a sample of 20 homes.

So we have:

19 homes at $165,4000=$3,142,600.
1 home at $600,000= $600,000.

So now we have 20 homes that now sell for $3,742,600. Divide that by 20 homes and you get
$187,130 versus this month's figure of $165,400.

An increase of 13.13%!

More bad numbers for the non-believers!

The housing numbers will indicate better times, even if housing hasn't changed.

(Housing numbers do indicate better pricing, despite the increase in the number of foreclosures. Now it may be a statistical quirk---In a few months, it won't be, as the quirks will be determined to be a trend.)

It's the same with the stock market. Higher prices attract buyers!

(Isn't that now happening in the stock market? Wasn't the first two weeks just a "fluke." Then the first month? Then just a bear market rally? Now it's longer than a bear market rally is supposed to last, and it's also higher than a bear market rally is supposed to be, and so are the stock markets around the world. And thewre is also a corresponding increase in credit in junk and investment grade. Did all of these folks not get Whitney's memo?)

How about it bears--how's your "conviction" level now?

Are we still heading into Depression II?

(Now even the bears have taken the Great Depression II off of the table. Why couldn't they recognize that two months ago? That's really easy, and it's answered by almost the same question. Why can't they recognize it now? It's pretty tough, if it will hurt your book sales!)

Being bearish will turn your intellectual argument into just common cents, and then you'll just contemplate what Thomas Paine said:

A long habit of not thinking a thing wrong gives it a superficial appearance of being right.

(Even if they need 69 pages to convince themselves!)


Because common sense is still in short supply on Wall Street!

I'll add just a couple more words.

As advertised!!

"Because that one's the truth"


In 1998, on Little Duck Key, almost next door to Papa John's house, was a huge Spanish Style house, that had the ocean on one side, the gulf on the other, and a pass thru in the back for the boat dock.

The house was being tossed in a marriage dissolution, and they had already come down from $1.5 million to a final offer price of $955,000.

So I thought I would be smart, and offer $885,000.

They never took my bid.

In the real estate heyday, the house changed hands at $4.1 million.

I never forgot that lesson.

Sometimes you just pay the ask.

This came to mind, because the founder of Papa John's, John Schnatter is doing a restaurant tour, and offering $25,000 to anyone that can find his original Camaro Z-28.

He sold his 1972 Z-28 in 1984, and purchased $1,600 worth of restaurant equipment, and started making his "better ingredients" pizzas.

The company today is worth over $750 million. It was a good trade.

It was a way better trade than one of my hometown cohorts who made his own trade about the same time. He sold his 1970 Dodge Hemi-Super Bee for a pound of weed. But instead of starting a business, he smoked it. And then ordered pizza!

That's the trade everyone still laughs about!

In Papa John's tour, he drives a replica of his car. Here's his words on what made his Z-28 unique:

"It had the split-bumper, sunroof, BF Goodrich tires with steel wheels, I swapped out the rear end with a Positrac differential — and now the speedometer reads 10 MPH over the actual speed. It had a velvet interior, unlike the vinyl one in this car, it didn't have A/C, and the ash tray in back is falling off."

Someone asked him, why he would want his old car back, given that he probably already has a nicer Z-28 than the one he lost.

His reply:

"Because that one's the truth."

It's a rainy day, and I'm going to have a Papa John's Pizza, and then see "Up" in 3-D with my daughter.

And pay the ask for the pizza.

The unstoppable bull market

Here's the conversion of the mutual fund managers to the bull market, much to the chagrin of the intellectual head fund managers that remain short. Do these guys really think that everyone will remain on the sidelines, just because they're short?

At first, the bears just laughed at those who danced with the bull.

Who's laughing now?

As Chuck Prince, Citigroup's ex head said, "We're still dancing!"

And now they are dancing over the bear's graves!


My daughter, the "designer"

I was in Orlando last weekend, and, early on Saturday night, I took a wrong turn in the pouring rain, and I ended up at Amway Arena, where I met some of the street "ticket brokers" who hustled me some Magic tickets, for Sunday's game. I should of guessed by the number of cars on the off night, that the market was saying the Magic would take the series from the Cavs!

So much for the Kobe-Lebron matchup!

But my daughter always likes to wear something new, whenever she goes someplace "special." So with a little help from Mommy, and some influence from here, she came up with the above outfit from the decade old ties bin in Daddy's closet.

A new outfit, from old clothes!

I suppose I should of forewarned her, that because of the current state of the economy, that creativity was supposed to be stifled, and that it wasn't permissible to enjoy life, and that the only things that would happen in the economy and in sports, were those things pre-ordained by the pundits and the press.

And that's the difference between sports and the stock market. In the stock market, pundits think their opinion matters more than results. In sports, we have different rules.

Those bearish should heed the sports pages.

The Magic is in, and the Cavs are out.

It's time for the bears to rid a different horse.

This stock market beast has a lot of magic left!

Saturday, May 30, 2009

Goolsbee's moon is the budget


At the confab sponsored by Vanity Fair at Bloomberg's headquarters last night, Obama adviser Austin Goolsbee said this:

"My budget is from the moon, Jack is from Mars, Joe is from Venus (Jack Welch, Joe Stiglitz) “We enter the government essentially in a hotel that is on fire. We’re throwing people from the windows into the pool to save their lives and this is the evaluation of the Olympic diving committee: Well, the splash was too big...The fact that we are here to bitch about the economy and about this policy and that and the budget forecasts for GDP growth are 1 percent too low, I’m thrilled, I’m overjoyed that we aren’t all out of our jobs and we prevented the Great Depression. That in itself is an overwhelming accomplishment."

That was his response when Jack Welch had this to say:

But I would say that Austan’s budget is from the moon. His plan for the next five years can’t happen. His growth rate can’t happen. We’re deleveraging the growth.

Meredith Whitney had this to say:

Unfortunately, what the government has done has been buying time. The green shoots have successfully allowed - or the idea, the notion that there’re green shoots, that things are improving, which the numbers support they’re clearly not, and I’ll say that in a second. Banks have been able to raise capital, buy them time, but by raising capital, they’re delaying the inevitable...

Look at the responses from this august panel when they were asked this simple question.

Does the panel expect the rate of return on U.S. government bonds to outpace the weight of return on U.S. stocks over the next 5 to 10 years?

Here's their responses:

WHITNEY: It’s tough. If you had asked me a couple of months ago before the massive equity rally, it would be an easier question, which would be no. It’s tough now, because as the stocks broke loose, the national stocks reach tops grossly overvalued, and treasuries are over valued as well. I’m - can I be agnostic on this one?

SARKOZY: You know, it’s - it’s not a real area of expertise, but both assets are - it’s tough to make an investment case for either. I guess I - I would be into very short-term treasuries.

STIGLITZ: Economists are not very good at trying to predict those short-term movements in markets. We’d be richer if we were.

WELCH: I’ll pass on that one.
http://www.vanityfair.com/online/politics/2009/05/jack-welch-gives-em-hell-at-vfbloomberg-panel.html

Not one person can recommend stocks over bonds?

From the panel of the "best and the brightest?"

No wonder the panel was called, "No Visibility Ahead: Predicting What’s Next"

Take stocks, and Goolsbee's moon over the panel!



Despite the bears attempts to end Obama's honeymoon!

A word on Friday's close


The bears just go crazy when we have these spikes into the close.

Heck, they even have all the numbers. 146,083 contracts on the "electronic" S&P in the last minute, and 91,774 contracts the minute after the close. Another 1,000 S&P's at the close, which is like another 5,000 of the e-minis.
http://market-ticker.org/archives/1072-What-Was-THAT-Friday-Market-Close.html

It's amazing how technical and in depth these bears get with their research, trying to defend a position that is just ass backwards.

Manipulation is just screamed by these folks.

"OMG--They printed a break-out on the charts! It's the Plunge Protection Team! It's Goldman Sachs. It's our Governmenet rigging the market. Manipulation! Where's the SEC?"

Oh please. Save it for someone who really cares.

And save the electronic ink for a story that's real.

The bear case isn't real. The market is. And people want in.

It's that simple.

And the market isn't rolling over, as advertised here. In fact, it's heading toward new highs next year. But it's first going to 980, and then 1040. And that move will be quick. Just like the move from 830 to 930 was.

And just like at 830, when we had the bears warning us that the next leg down would be starting, and then they dusted the same story off at 880, and soon we will hear that the next leg down will start at 980. And then 1000 will be resistance, and 10,000 Dow will stop this beast.

Oh please.

We are in a once in a generation bull market, and you think these numbers are going to stop it?

Come on, it will be like a hot knife through butter.

And it surely won't be a Fisher slog!

And Friday's story will soon be forgotten.

Just like people already are forgetting about Ms. Whitney's prognostications, while they watch Professor Roubini lose his credibility, and watch Whitney Tilson lose some book sales, and watch Peter Schiff's non existent new interviews, or James Simons rapidly depleting funds under management (now underperforming the S&P by 31%) or any other of these bears with their repeated gusts of folly, who somehow think the stock market is going to be correlated with their world viewpoint, despite the fact that these charlatans can't manipulate the markets with their views.

That's why the only ones who are so worked up about Friday's close are the bears.

The noose just got a little tighter!

Now why don't these bears think about the noose that is around portfolio managers that aren't yet invested in stocks. That are underperforming this market? Or are short?

How much pressure do you think is on them? How much sleep are they getting this weekend? How much tightness do they have on their chest?

Even the famed John Paulson was down in April, and he had massive gold exposure. Advantage Plus was down 5%. The Advantage fund was down 3.1%. We know that he picked up 100 million shares of BAC at 10 on the latest stock offering, so it's clear that even he is scrambling and shifting his portfolio. What else is happening to the other mere mortals in hedge fund land?

It's not a scramble, it's a custerf*ck!

Now the NASDAQ is already up close to 13% this year. Remember Bill Gross the other day telling us that we were supposed to get used to sub par returns in equities? Well the NAZ could tack on another 30% more this year, so now we are talking of returns north of 40%. Is that Bill Gross' definition of sub par?

Bill Gross is so stuck in mortgages that he couldn't even grasp that concept, even though there's a better than 40% chance of that happening. Why hasn't that been plugged into their variables? (And before you say that's ridiculous, just look at AAPL, GOOG and RIMM and their weighting in the index, and then look at next year's earnings estimates, and add 15% to them because the analysts are too bearish--and now we have 2011 numbers that will hit in 2010, and don't those earnings deserve a higher multiple?--So where do you think stocks are heading? And you want to say that Friday was a manipulation? It was just someone getting a head start on next week's action!)

And what will that do to those that are underinvested?

How tight will that noose then get?

And that's the new reality of this market.

Friday, was just a precursor of the things that are starting to come next.

And you can talk about the economy and housing and commercial real estate, and any other statistic you want, but it won't make you a red cent, or a thin dime on Wall Street.

Just like these same folks that come up with these supposedly intelligent and erudite arguments outlining the fraud committed by the "gangsters" on Wall Street who moved the markets a percent or two a couple of minutes before the close. (But boy, it was sure fine, when the "gangsters" could destroy companies and their stock prices. Where were these folks then? Weren't they thumping their chest? Now the only thing between their legs is a tail because they've been neutered!)

When all this move is, is capital being committed at the expense of the shorts pocketbook.

Again.

They just don't learn.

Just ask James Simons.

Or his investors.

It's no fun being a "gangster" when the "gangster" looking over your books has an unlimited pocketbook, and a different agenda than these shortsellers.

That's the variable these astrophysicists didn't identify!

And unlike the Cepheid type, they don't want the luminosity!

Let's revisit some posts

It's time to revisit some posts, since it's now apparent that the market is heading up again, and that the bears folly of predicting the next leg down, is quite frankly just wrong:

For those who said at S&P 830, that this was the start of the market rollover, I give you what I said on April 22:

Wednesday, April 22, 2009

The legs are following off the bear's stool

It's now patently obvious that Monday's downdraft was an orchestrated move by the bears to crack the market.

And it's now patently obvious, that we have already had the price and time correction in this bull market.


We corrected 5%; so that was the price correction.

And the time correction was one day.

The fundamentals of the economy are getting better, so we now have had the time correction, even though it was only one day, because the economy is healing that quickly.

And the correction that we had, that was manufactured by the bears, on the heels of the stress test pre-release by a white supremacist, means that the desperation of the quants that are short, and those not invested are at a fever pitch---just look at who they had to use!

So the legs of the stool that supported the bears are now broken. And now the bulls will extract every penny from the bears hides who remain short.

After all, it's a milking stool!

The leg of a financial collapse of the financials is gone--do suicides happen at financial tops?

The leg of bearishness from Goldman Sachs is now broken.

The leg of the next depression is now destroyed.

And that's what will happen to the bears, but in an inverse order.

This first leg up already has almost destroyed them, the second leg up will make them broken, and in third leg up they will finally be gone.

That's the stool of the bulls.

And the leg that the bears don't understand, is the leg of the stool that is going to get rammed into Mr. Benjamin N Dover's III posterior.

And that's the next leg up in this bull market!

It's the bulls stool check!

Delivered express, C.O.D!

As Advertised!!

And for those bears that attempted to squash the market, two days later on April 24, with the last minute selling right before the close where they knocked the Dow down 150 points, and the S&P 15 handles only to have the market rally back 100 points in their face one minute before the close, who felt so self assured that this cover of an angler fish on the Economist would soon be deemed a classic for the bears pocketbook; how are you feeling today?

An anglerfish! A little dinky fish! I guess it is a classic--you guys can't shove the markets around anymore!

As Advertised!!!!!!!

Friday, April 24, 2009

No glimmer of hope for the bears

The bears keep trying to outdo one another with their cleverness.

Look at the latest issue of The Economist.

Paul Kedrosky highlights this on his blog saying, "Good cover on the current issue of The Economist."

The "light at the end of the tunnel"used to be an approaching train. Now we need to fear the anglerfish!

First we had Roubini's "yellow weeds" and now we have Kedrosky's "anglerfish" comments!

What the bears are missing though is balls, so they subconsciously latch onto this article!

This fearsome fish is all of two inches!

And it gets worse. When an angler fish mates, the male bites into her back, his body dies, and he shrinks down into just a couple of gonads, the size of a parasite!

The media used to be the parasites living off of the bears ideas.

Now we have another "fluff" piece, but this time the bears are the parasite as they've been neutered by the market.

But they are hiding in the media's shadow!

We have a couple of Type 6 stools!
http://aaronandmoses.blogspot.com/2009/04/dandelion-tea-bags-for-bears.html

Friday, May 29, 2009

Where's Whitney Tilson?

Didn't he just warn us last week that the market was going to roll over?

Looks like he's getting ready to be steamrolled.

Time to cut the price on his book, "More Mortgage Meltdown: 6 Ways to profit in These Bad Times."

Whoops. That's already been done!

So much for "Sell in May and Go Away!"

Next month will be "Buy in June--to the Moon."

How about the underinvested pension funds, that missed this rally?

Anybody think some of these folks bought at the close to pretend they had some positions?

Next stop 980, then 1040 on the S&P.

And this time, the rally broadens considerably!

Cramer: Time for a buying panic!

Let's say you're a hedge fund manager. You check your screens in the morning. You look around the world. And you know what you see? Green arrows everywhere. Markets up huge: Canada up 27%, Mexico up 16%, Brazil up 62%, Hong Kong up 26%, U.K. up 10%, China up 59% and just about every Asia market up gigantically.

Oh, and the Nasdaq up 11%.

Double digits everywhere.

And you realize, "Oh boy, am I behind."

There's only one way to pass the averages when they are galloping as they are now: Get longer than the averages. Buy stocks. Frantically buy stocks. Cover shorts. Find something in the Nasdaq to buy...

You do not think anything other than you are a cornered rat, desperate for performance. You see a rising tide in all nations and you wonder when it will wash up here and take you and your business with it.

The simple truth is that this spring, bull markets have broken out everywhere. Ever since the March 6 bottom the world had changed, and for the better. The depression ended.

No one has ever said you can't make money being long stocks in a recession, because recessions end.

They are ending worldwide.

You just don't read about it.

It makes real bad copy, particularly when the major outlets are populated with nothing but bears, who are unwittingly trying to discourage you from buying. And if you are a hedge fund, you plant that negative stuff every day.

But now it is the end of the month -- judgment day is coming. The world's bullish and buying.

You aren't.

Time to panic.

http://www.thestreet.com/p/_jcblog/rmoney/jimcramerblog/10506893.html

Banks try to halt derivative reform

Why wouldn't they? It's their biggest profit center. The banks don't even want to report the trades!

The battle lines are being drawn in the derivatives market, as Wall Street tries to pre-empt new laws that could drain a big source of banks' profits.

A group of banks and money managers will next week present a plan designed to help fend off some rules proposed by the Obama administration, which wants to reform trading practices in the market for over-the-counter derivatives.

Wall Street banks with large derivative-trading businesses have been outwardly supportive of greater regulatory oversight of the $684 trillion market. But behind the scenes, there has been hand-wringing over the details of certain proposals and discussions about how the industry can help shape the rules. Many bankers are against mandatory exchange-trading and real-time price reporting of trades.
http://online.wsj.com/article/SB124355213446564401.html

Fisher: The recovery will be a "very slow slog"

Do you want to see one of the worst forecasts you'll ever hear at an economic inflection point? Leave it to "eighth inning" Fed President of Dallas, Richard Fisher:

May 29 (Bloomberg) -- Federal Reserve Bank of Dallas President Richard Fisher said the U.S. slump will probably persist until next year as consumers restrain spending, while the outlook for inflation remains “meek.”

The economy faces a “very slow slog” to recovery, Fisher said yesterday in a speech in Washington. The recession “will moderate in the current quarter, and then we are likely to bounce along the bottom for a while,” with sustained growth doubtful before the end of this year, he said.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aiVBJZXD74Q0&refer=us

A very slow slog? What a funky foggy forecast. What planet is he on? He probably would of thought that the Chrysler bankruptcy would also last at least a couple of years. After all, isn't that what CNBC's fearless forecaster, Maria Bartiroma intoned just a few weeks back?

It's not a slog, when it's not your money!

And the recovery gets jump started by those who are using OPM! Just look at the markets! Even the Fed is.

In fact, look what the Fed sees in today's WSJ:

WASHINGTON -- Federal Reserve officials believe the recent sharp rise in yields on U.S. Treasury bonds could reflect a mending economy and a receding risk of financial catastrophe, suggesting the central bank won't rush to react -- even though some investors see danger in the government's rising cost of borrowing.
http://online.wsj.com/article/SB124355477324764533.html#mod=testMod

Now we know that on the Fed's last meeting, they couldn't see any inflation:

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
http://www.federalreserve.gov/monetarypolicy/fomcminutes20090429.htm

But didn't Barney Frank have to talk for Bernanke yesterday, and tell the world that he was on alert for inflation's shoots?

So why would it be any different with Fisher's "very slow slog" forecast?

Now we had a huge move in India's market last week because of the "elections." Now we see that India's GDP grew at a 5.8% clip in the latest quarter, far above the 5% estimates, and that the previous quarter's growth was also revised up to 5.8% from 5.3%.

Higher oil prices will also markedly help Russia's economy.

Brazil is already smoking, and China's stimulus is working. So why would our recovery be a "very slow slog?" The BRIC's are already in place!

Oh that's right. It's because 1 in 12 mortgages in this country are behind on payments, or in foreclosure.

That's also a stimulus.

1 out of 12 families will now be able to live in their homes for the next year, without making a payment, while the courts are bogged up with the foreclosure process.

Now what happens when these families look for a place to rent?

Do you think they'll be able to negotiate rates downward like Starbucks, who is demanding 25% cuts in rent?

But with no homes being built, and rates moving upwards, it will force homebuyers to make some decisions for once in their life, instead of walking around and kicking the tires of every home in their neighborhood.

And every housing bear, that tells you that prices are coming down from here, is just like the oil bears only three months ago, who were telling us that the oil in tankers, would preclude it from rising.

How well did that workout?

And with Fisher telling the world that the economic recovery will be a "very slow slog" the one thing that you can count on, will be that this forecast will be entirely wrong.

Because the recovery will be much faster, much stronger, and much more encompassing than these forecasts made by those in academia who couldn't see the one of the greatest crashes coming, who now, paradoxically, can't see it's recovery.

Even though everyone in the stock market here, and around the world can see it, except this nation of bearish bloggers!

Thursday, May 28, 2009

The new credit card rules

Father Cutie joins the Episcopal church

The popular Miami priest, who was forced out for kissing his girlfriend on the beach, has joined the Episcopal church.
http://www.rantrave.com/Rave/Father-Cutie-Joins-Episcopal-Church.aspx


If you missed the story before, it's here:



Maybe if she was a non-consenting underage altar boy, he'd still be in the Miami rectory.

Sold my Gold

Sold it all.

Same with the gold stocks.

Sold them all.

On Wall Street, what we do know is that the billion dollar man, John Paulson has been loading up on gold.

"Paulson & Co., the hedge-fund firm run by billionaire John Paulson, increased its investment in gold and gold-mining shares in the first quarter, according to a regulatory filing. As of the end of the first quarter, Paulson was the largest holder of SPDR Gold Trust, an investment fund that buys gold bullion. The New York-based firm owned 8.7 percent of the fund, valued at $2.8 billion as of March 31, according to a filing with the U.S. Securities and Exchange Commission.

That position was established as a hedge, the company said in a statement, because its funds have a share class that is denominated in gold rather than in dollars or euros.

Paulson bought or added to several gold companies in the quarter as well. He purchased a 15 percent stake in Market Vectors Gold Miners ETF, a fund that mirrors the move in the Amex Gold Miners Index. That stake was worth $638 million at the end of the quarter.

Paulson also bought a 2.6 percent of Gold Fields Ltd., becoming the fourth-largest holder of the Johannesburg-based gold miner. The investment firm, which manages $26 billion, also bought an additional 2.4 million shares of Kinross Gold Corp. Paulson owned 4.4 percent of the Toronto-based gold producer and was its third-largest holder at the end of the quarter.

Paulson reported owning an 11.3 percent stake in AngloGold Ashanti Ltd., also based in Johannesburg, in March. (That's another billion and a half)

Paulson’s largest fund, the Advantage Plus Fund Ltd. returned 4.8 percent through April."
http://seekingalpha.com/article/138226-john-paulson-piles-into-gold-george-soros-sells-petrobras-and-potash

We also know that David Einhorn has been gobbling up gold, and he touted it in his speech the other night.
http://www.cnbc.com/id/15840232?play=1&video=1135311034

He also touted gold in a shareholder letter:

"To everyone's dismay, we believe that some of Grandpa Ben's predictions are playing out. Our current chairman of the Federal Reserve, Ben Bernanke, is an 'inflationist.' ... The size of the Fed's balance sheet is exploding and the currency is being debased... Our instinct is that gold will do good either way; deflation will lead to further steps to debase the currency, while inflation speaks for itself. We have bought gold, calls on gold, an index of gold mining stocks (GDX) and calls on higher long-term U.S. interest rates."

And we also know that a bunch of technical analysts now say that gold is ready to break out.

So I got rid of mine.

Every ounce, and every share.

I don't buy the story that gold is a hedge against inflation. I think it was a hedge against "deflation." Look who has been buying gold. Isn't it the end of the world types?

And inflation, in things we don't own, is now back. (Did anyone see that MT was able to push through a price increase in steel? How do the deflationistas explain that? They should buy MT instead!)

Now for balance, I had to include what the supposedly "smartest guys in the room" were doing, so I would be able to make a point, without quoting the nut jobs. Heck, I think we're heading into a massive economic boom, so why should I bring any more crazy talk into this blog already!

Because the hedge, against inflation, is not gold, but oil. (See the post below.)

And in an economic boom, our dollar rallies, and our interest rates go up, and that isn't a hospitable environment for gold.

The last time I sold any gold was in December 1999, when gold had made a move off of it's bottom of 252 up to around $320. I was buying a condo overlooking the ocean in Florida, so I sold some Pan Pac $50 commemoratives, and some kilo bars to pay for the trade. And it's tough parting with gold. When it's in your hand, you know it's money.

For three years, I didn't have to sweat a lookback on gold. Then in five years, they both tripled.

I think you'll have plenty of time to get in gold again, and the cheapest assets here in the US are Florida condos and stocks.

After all, PIMCO's Bill Gross came on CNBC today, and warned viewers that we were heading for substandard equity returns for years to come. (He didn't mention that the commodity trade by the indexers is now back on again either.)

So it's time again to put the money in something that the "smartest guys in the room" aren't buying, and selling what they are.

And if you want something to buy outside the United States, you can start with Arcelor Mittal (MT 33.30), instead of parking your gold in Luxembourg!

How are the oil bears doing today?


Yes, those who advertised $30 oil.

Where are they now?

Over here, we had a different story. We were shorting the double inverse oil ETF that makes money when oil goes down.

Did anyone short that at it's peak?

Besides us?

At least you had that story here!

Advertised, before it happened!

Friday, February 20, 2009

An oil play for oil bulls

The PowerShares double crude short play (DTO) closed at 231 after trading as high as 246 today.

The double shorts ETF's work, until the underlying assets start to show a bid, and then they drastically underperform.

The play then, is too SHORT this number if you like crude at these levels.

Look at the prices of the financials today. They have been obliterated. The financials, collectively are way lower than at any other time in this bear market. How about the price of the Ultra Short Financials SKF? It closed today at 188. Last time the financials broke, and when they were at much higher levels, SKF was at 303!

Look at the real estate stocks. They have been crushed also. How about the Ultra Short Real Estate (URS) that closed at 72 today. Where was this number the last time we were down, even though now we are at much lower levels? It was at 295!

So now that we have finally gotten a lower contango in oil, you can now SHORT the bearish ETF DTO that tracks crude, and that gives investors double the short return on oil!

When the trend gets choppy, these short ETF's are designed NOT to work. Look at what happened to SKF and URS!

So if you like oil at these levels, and with the flattening of the contango, you short the ETF that makes money when crude drops.

And just like the bearish financial ETF that didn't work, and just like the bearish real estate ETF that didn't work, you now have a bearish crude ETF that now won't work.

Especially now that it has already run in anyone that had shorted it.

So only the professionals are left to play in this playground!

Join them!

Bernanke's Quantitative Easing


Interest rates on the 10 year and the 30 year are seeking their natural levels. Bernanke played poker with the market, and he lost, and once again, Bernanke and his minions do not recognize what the market does already. Rates need to go higher.

3.73 for the 10 year, and 4.65 for the 30 year are approaching uncomfortable levels for the market, but wasn't the Treasury market the biggest bubble that we have ever had?

So why should rates only go to levels that are uncomfortable?

Markets always press their bets, and they go to ridiculous levels. Aren't stock prices at uncomfortable levels already for those that are short?

And didn't David rosenberg and all the other bears, who argued for lower equity prices, also argue for lower bond yields in this so called "deflationary" environment?

Now you are getting uncomfortable squared!

Thus those that are bearish, are the ones that are most alarmed with this action.

But isn't this the action you would see if the economy was getting stronger?

Now throw in some uncomfortably squared bears, puking up positions, and you get the action you see on the screen.

And the action in bonds is uncomfortable enough that Barney Frank comes on CNBC and alerts viewers that Bernanke was looking for signs of inflation.

When the oil market was spiking lat year, PIMCO had a fund that was buying up oil futures with both hands, excaberating the economic problems, and forcing bond yields down.

Now the shoe is on the other karmanic foot, and PIMCO is getting kicked.

So much for shaking hands with the Government!

That only works for the back door deals!

Wednesday, May 27, 2009

Nevada looking to allow institutions to up their casino ownership stake

Institutional investors can only own up to 15% of publicly traded casinos without a gaming license. Nevada is looking to grant waivers now for those with an ownership stake up to 25%.

Another way to tighten the noose on the neck of the shorts targeting these companies.

The banks now want to "purchase" what they are selling!

The big banks are lobbying the FDIC for another handout, with their "Legacy Loan" portfolios.
http://online.wsj.com/article/SB124338836675757049.html#mod=testMod

In a nutshell, the banks, now want to purchase their own bad loans, instead of doing a daisy chain, by purchasing other banks marked down bad loans, while selling them theirs.

Their argument?

They'll be inclined to sell some loans at a loss, if they can share in the upside of the loans they are purchasing, especially if they are getting government financing.

Especially, since they know which loans they are selling!

It's the JPMorgan/WaMu plan. Mark down the assets to sell them, and then mark then up when they find the loans aren't as bad as they think.

Roubini sees some light at the end of the tunnel

At the end of April, Roubini said:

I see the economy contracting all the way through the end of the year, going from minus 6 to minus 2, not plus 2. And next year the growth of the economy is going to be very slow, 0.5 percent as opposed to the 2 percent–plus predicted by the consensus.
http://www.rgemonitor.com/blog/roubini/256863/the_crisis_and_how_to_deal_with_it

Yesterday, speaking in Korea, Roubini now says this:

"The contraction is still occurring and the recession is going to be over more towards the end of the year rather than in the middle of the year."

"A more sober analysis suggests we're closer to the bottom; there is light at the end of the tunnel, but it's going to take a while longer, and the recovery is going to be weaker than otherwise expected."
http://www.nytimes.com/reuters/2009/05/27/business/business-uk-korea-roubini.html?_r=1

Now he sees some light at the end of the tunnel. On April 8, when this bull market was just a month old, he was calling Cramer a buffoon, and Roubini said the latest surge is just another bear market rally following the pattern of other rallies after the government intervened. He expects the market will test the previous low because of worse-than-expected macroeconomic news, disappointing earnings and because banks will fail after the stress tests come out.
http://www.huffingtonpost.com/2009/04/08/roubini-cnbcs-jim-cramer_n_184532.html

On March 9, when the bull market started, Roubini said we would be stuck in this mire for another 36 months, and the odds of a Depression were 66%.
http://www.cnbc.com/id/29598949

Amazing what a 40% rally in the stock market does to those who predict doom!

Now I'm only highlighting the good professor, because you'll soon see this story played out everywhere, as this bull market shatters those who placed their faith in fear.

Now if the Professor of Doom, who has been rather intractable in his bearish viewpoints can see a little bit of light, don't you think it's starting to even become obvious for those that aren't so predisposed to look at the dark side?

It may enough be obvious enough for Meredith Whitney!

Tuesday, May 26, 2009

Another bogus headline

Anyone see this Reuters headline today?

U.S. economy at risk of double-dip recession

WASHINGTON (Reuters) - The U.S. economy appears destined for several years of weak growth and high unemployment that leave it vulnerable to a recession relapse after the massive dose of government stimulus wears off.

While tepid growth looks likely to resume late this year and build modestly into 2010, the credit bust has left households and businesses unable or unwilling to borrow and spend as freely as they did before the crisis.
http://www.reuters.com/article/idUSTRE54P2ZC20090526

Double dip? This was covered two weeks ago. And this Reuters news is analysis?
http://aaronandmoses.blogspot.com/2009/05/brown-shoots-and-double-dip-crowd.html

That headline makes as much sense as those who now say we are now heading into the 5th and final leg down of this market. It's just Poppycock.

This economy, and this stock market, will reward the most outlandish bull, and the most bullish economic forecasts. It's not a market, or an economy for the timid.

This market will give no quarter to the bears, no quarter for the pessimists, and no quarter for the professors and their statistics of gloom.

It will also give no quarter to the deflationistas, and no quarter to anyone who thinks our Government paper is worthwhile holding.

So short PIMCO, Peter Schiff, Whitney Tilson, Nourel Roubini, and Blackrock Bob Doll's conservatism and any other money manager of the same ilk, and go long Pollyanna.

Because that's how you are going to make money.

Today, this stategy will be known as reckless.

Next year, it will be deemed prescient.

The market already recognizes the fact, and recognizes that Q3 will be the start of the boom. You don't need long winded appraisals of how long it will take for this economy to mend, or need to heed any of these bearish prognostications.

Because if we were going down, how come the market couldn't get through 880?

And why is it that nobody wants our Treasuries, despite Bernanke's Quantitative Easing? Wouldn't people buy our paper if we were still sliding headlong into deflation?

Has anybody figured out that just maybe, the market is right? And that it foresees the coming economic boom?

Everyone is still so worried about Armageddon, that they think the bond market is going to implode, because the world won't want our currency.

That will be a first.

A country in an economic boom, with a currency nobody wants!

The bond market, doesn't need any help, on it's way to it's own implosion. That will happen quite nicely by itself, and those in the deflation camp, will soon come to that rude awakening.

You are already seeing the massive shift out of bonds into stocks, by the rocket scientists that run our nation's money.

They're buying because their jobs depend on it!

Now if we see this behavior by those who run money; why is it that we somehow think that the unemployed won't find new jobs?

Didn't we just see that 21 states had their unemployment rates go down?

Oh, but wasn't that supposedly a statistical quirk caused by the too proud college kids, who wouldn't say that they were unemployed?

Whatever.

What do these bears think? That all the nation's grads hang out in LA?

Maybe they should just listen to some old Led Zeppelin. They can start with No Quarter.

They choose the path where no-one goes.
They hold no quarter, they hold no quarter.
Walking side by side with death
The devil mocks their every step

This market is the devil's bird thrown at the bears!

So much for the handwringers!

What happened?

Weren't we supposed to rollover?

We couldn't even get through 880 on the S&P. But then again, I would be remiss if I didn't bring that up, because that's what I advertised!

Now this weekend, we had some folks make a big deal about North Korea. Didn't these same folks do that just after April Fool's day?
http://aaronandmoses.blogspot.com/2009/04/beast-needs-to-be-fed.html

And didn't the market scream after that?

Oh that's right. Then we had Mike Mayo warning us about the banks. And then we had warnings that NY City was going to be a ghost town because of taxes. And then we were warned about foreclosures.

Did any of that make you any money?

Did any of that happen?

What happened to consumer confidence? Why is it going up?

Oh that's right. Now the bears have a new clarion call.

Give us time--and give us years!

It's like the Republican's after last year's election. Wait until 2012--Boy will we have the ticket! Or Dick Cheney's recent chirping!

None of it matters, unless you're a pundit.

It's the same with the market.

The pundits don't matter, because they're not in the game of buying and selling stocks.

They're in the game of buying and selling advice!

Now the next dip will be next year. What happened to this year?

I said before, and I'll say it again.

If these bears can't even get us through 880, how in the name of Lucifer are you going to get down to retest 666 again?

But that's the simple math that their algorithms can't understand because the laws of science don't differentiate between the past and the future. But real life does!

The other day, one of my daughter's friends dropped one of my gigantic mammoth molars and it broke when it hit the floor. If this happened on Wall Street, these bears would be sitting there waiting for the pieces of the molar to jump back together!

So if this universe is subject to the laws of thermodynamics, then isn't Wall Street? What would be more chaotic? The market continuing to run, or a revisit of the lows?

We know the shorts haven't covered, and the longs aren't invested, so why would it be any different here?

And why shouldn't stocks go higher?

After all, aren't we in an inflationary universe?

Morgan Stanley's target on the banks


This came out last week, but I though it was worth a re-visit.

Especially since the banks have cookie-jar "windfalls" to help them!

JPMorgan's "WaMu windfall"

May 26 (Bloomberg) -- JPMorgan Chase & Co. stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income...

When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses...

“One of the beauties of purchase accounting is after you mark down your assets, you accrete them back in,” Cassidy said. “Those transactions should be favorable over the long run.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aYhaiSOq_Tbc&refer=home

So was WaMu insolvent, or not? Oh that's right. We already answered that question!
http://aaronandmoses.blogspot.com/2009/05/does-anyone-really-think-that-elizabeth.html

Obama visits Vegas

Obama will try and drum up some convention business on Vegas with his visit here today. Three weeks ago I dumped WYNN at 50, so now it's worth a revisit.
http://aaronandmoses.blogspot.com/2009/05/wynn-rocks-as-advertised.html

I think it's a play again, as this number moves on psychology and short squeezes.

Sunday, May 24, 2009

Peter Schiff talks but no one cares

This year, though, Schiff's TV bookings are down 75% to 85%, says his younger brother Andrew, who handles p.r. for him. About the only things written about him lately have been negative--the result of financial blogger Michael (Mish) Shedlock's pointing out that Schiff's investment recommendations were money losers in 2008. How could a bear have managed to lose money last year? Schiff was blindsided when global investors piled into dollars and U.S. government bonds during last fall's panic. But that rush to safety has already abated, and over longer periods, Schiff's decade-old strategy of steering clients out of U.S. securities and into commodities and overseas stocks has been a big winner. His investment record surely can't be the reason for his fall from media grace.

No, the main issue with Schiff seems to be that he hasn't changed his tune--and it isn't a pleasant tune to listen to. He thinks the "phony economy" of the U.S. is headed for even harder times. He believes that the crisis-fighting measures coming out of Washington are merely delaying the inevitable, debasing the dollar and loading future taxpayers with huge debts.
http://www.time.com/time/magazine/article/0,9171,1900233,00.html

The same fate will befall Meredith Whitney and Nourel Roubini, and the latest reincarnation of the bear seeking publicity, Whitney Tilson.

MaryAnne, The Professor and Gilligan!

Saturday, May 23, 2009

Friday, May 22, 2009

Abu Dhabi's Ferrari World Park


Someone thinks oil's rise isn't just a blip with these plans.

The shipping stocks

I'm in all of these names at lower prices, so I'm talking my speculative book.

EXM had a big earnings beat yesterday, PRGN had nice earnings, and OCNF just finished their ATM offering.

And since DRYS always hits the market with another ATM offering whenever it's head gets above water, it shrinks the available supply of stocks you can invest in.

And judging by the Baltic Index, it's not the only place supply and demand is getting favorably aligned.

Temasek attempts to justify a stupid sale


About time some one calls them on the carpet. These sovereign wealth funds had so much money, we thought they were like Thurston Howell III!

Now we have someone else to go with Cramer's renaming of Nouriel Roubini "The Professor" and Meredith Whitney "MaryAnne." Change their names, and then their views really start looking silly.

When Singapore's Sovereign wealth fund invested in Merrill, they said they were long term investors unaffected by short-term swings in the market. They dumped BAC at over a $4 billion loss at an average price of $7.

Two weeks ago, they said they sold BAC at 7, because there was little potential.
http://aaronandmoses.blogspot.com/2009/05/temasek-sells-entire-bofa-stake.html

Now they say this:

"We may choose to divest an investment, even at a loss, to optimise our risk or portfolio exposures, or if there are better opportunities elsewhere or later."

Where are the better opportunities? Selling BAC is so completely stupid, it is almost incomprehensible. If BAC is a sell, they might as well put their entire portfolio into cash.

Their strategy is just more gobbleygook:

"Ultimately, the aim is to ensure that our portfolio delivers returns that are higher than the cost of capital employed on a risk-adjusted basis, or what we call Wealth-Added."

You can read the entire nauseating letter here:
http://www.straitstimes.com/ST%2BForum/Story/STIStory_379983.html

And yesterday, we heard that he has company. Whitney Tilson (since the Professor and Maryanne seem to be in hiding), who of course, is pumping a bearish book, said he is also short BAC.

The "Savant of sub-prime" doesn't know Jack!
http://aaronandmoses.blogspot.com/2009/05/yesterdays-selloff.html


But it looks like we have now found Gilligan!

Moodys-USA remains AAA and stable

What was the panic about yesterday again?

Thursday, May 21, 2009

Euro displaces the dollar in Russia

Traders are now saying that the Euro makes up over 50% of Russia's currency reserves, and the dollar now makes up less than 40%. That seems logical.

We know that as of January 1, the Euro made uo 47.5%, and the dollar was 41.5%.
http://www.marketoracle.co.uk/Article10755.html

On October 1 of last year, the dollar had made up 49% of Russia's reserves, and the euro was at 40%.

So in six months, the positions have reversed.

Last year, Russia bought $80 billion worth of Treasury debt.

And since PIMCO is stuffed with mortgages, that will soon have yields like Treasuries, it looks like Gentle Ben needs to find another buyer, or get a bit more aggressive with his QE, if he wants to continue his con!

Maybe Bernanke can call Blackrock!

And maybe PIMCO's Gross, can change his position on loan modifications, before Mr. Market gives Bill a big case of performance anxiety, and hits some more bids!

After all, Bill's been telling clients "shake hands with the Government is and has been our motto."

He might now need a rubber glove!

Bernanke's bids get hit!

Quantitative easing (QE) is now an abject failure, as Central Banks around the world, are hitting Bernanke's bids.

As W.D. Gann said, "Imagination often leads us into the wrong path!"

It looks like some Central Banks would much rather own gold than fiat paper!

Couple this failure, with the below letter--Alan Grayson's --The Federal Reserve Transparency Act-(which got an endorsement from ZH), and you finally had people selling bonds!
http://action.firedoglake.com/page/content/graysonletter/

I'd love to see some transparency into the Fed, but I just don't think that would be possible. How much junk is really on the Fed's balance sheet? And how much of this posturing are we really supposed to take from this crooks in banking, who continually give out billion dollar handouts to their buddies?

And what's with these bankers talking about exit plans? They can't exit anything yet--but let's pretend they can!

Did anyone see the Bank United seize by the FDIC? And the $5 billion written off, and the hush money that went to the buyers to keep their mouth shuts?

It still makes me sick to see these bankers pretending they are the paragon of virtue, when their success is directly attributable to taxpayer largess, forced upon us, without choice, by Geithner, Bernanke, and every other banker.

But that's the hand we have to play. And that's the real moral hazard. It's not the guy with a mortgage that may get some help from the banks, but these Money Center and Investment Bankers getting the help from the Federal Reserve and Treasury. Did anyone notice how Goldman came in today to save the larger banks and credit cards companies from any more selling by upping them to neutral from cautious?

But it's tough to fight city hall-especially when both parties are in each others pockets--doing pocket pool banking!

And every once in awhile, you have days like this, when people actually think for a moment, that this house of cards is going to be exposed, and the world will dump our dollars and bonds.

But then, that invisible hand sweeps in and takes offers!

And what is, isn't, because the economy, will eventually rescue the bankers charades! (I guess I'm ranting because I own the regionals that aren't getting fed at the Fed's trough!)

But here's Grayson's letter.

Bring Some Accountability to the Federal Reserve

Letter endorsed by:

Dean Baker, Center for Economic Policy Research
James K. Galbraith, University of Texas and Senior Scholar of the Levy Economics Institute
Bob Borosage, co-director, Campaign for America's Future
Tyler Durden, Zero Hedge
Bill Black, Associate Professor of Economics and Law University of Missouri-Kansas City
Jane Hamsher, Firedoglake
Glenn Greenwald, Salon

US PIRG
Public Citizen
A New Way Forward
Consumer Action

Dear Colleague,

I write to ask you to co-sponsor HR 1207, the Federal Reserve Transparency Act, which would give the Government Accountability Office the authority to audit the Federal Reserve and its member components, and require a report to Congress by the end of 2010.

The Federal Reserve System operates as the central bank for the United States, managing the economy’s money supply and overseeing the banking system. Until recently, the Fed has not picked winners and losers when distributing money, nor has it brought credit risk onto its balance sheet. It has slowed or stimulated the economy by raising or lowering interest rates. Since March 2008, however, the Fed has resorted to using its emergency powers to pick winners and losers, and to take massive credit risk onto its books. Since last September, the Fed’s balance sheet has expanded from around $800 billion to over $2 trillion, not including off-balance sheet liabilities it has guaranteed for Citigroup, AIG, and Bank of America, among others. The bank is also ‘monetizing’ the debt of the United States Government by purchasing massive amounts of agency and Treasury bonds. An audit is the first step in bringing this unaccountable system under the control of the public, whose money it prints and disseminates at will.

The Federal Reserve is an odd entity, a public-private chimera that controls the US monetary system and supervises the banking system. The system is governed by a Board of Governors, with twelve regional reserve banks that serve a supporting role. While the Governors are appointed by the President with confirmation by the Senate, the regional Reserve Banks have boards of directors chosen primarily by private banking institutions. Right now, for instance, the CEO of JP Morgan, Jamie Dimon, serves on the Board of Directors of the New York Federal Reserve Bank, as did Goldman Sachs Director Stephen Friedman.

This creates striking conflicts of interest and unseemly appearances in the management of what is ultimately the public’s money. Consider:

  • JP Morgan’s CEO was a board member of the New York Fed even as he negotiated on behalf of JP Morgan with the New York Fed for a $29 billion bridge loan to allow his company to take over Bear Stearns.
  • New York Fed and Goldman Sachs board member Stephen Friedman purchased 37,300 shares of Goldman Sachs stock in December at the same time as Goldman received permission to convert to a bank holding company regulated by the Federal Reserve. Friedman at the time was also overseeing the selection of a New York Federal Reserve President to replace Tim Geithner, and the New York Fed ended up hiring another alumni from Goldman Sachs.
  • According to the bank’s website, the two “class B” directorships of the New York Fed that are supposed to represent the public are vacant.
  • Enron’s Jeff Skilling was on the board of the Dallas Federal Reserve Bank.

Criticism of banker influence and control of our monetary system is not new. However, the urgency of the financial crisis and the actions of the Fed picking investment bank winners and losers have changed the nature of the criticism. The Senate just passed a non-binding resolution requiring more transparency at the Federal Reserve in its Budget Resolution.

Still, neither the GAO nor the Federal Reserve Inspector General has audited the books of the Federal Reserve or its regional banks. The Financial Services Subcommittee on Oversight and Investigations held a recent hearing with Federal Reserve Inspector General Elizabeth Coleman. In that hearing, Coleman could not tell me who had received over a trillion dollars in Fed lending, what kind of losses the bank had suffered on its $2 trillion portfolio, appeared unaware that the Fed engages in trillions of dollars in off-balance-sheet commitments, and was not investigating the role of the Fed in allowing the collapse of Lehman Brothers. Coleman’s responses were so remarkable that when the video of this exchange was put on Youtube, it was watched more than 350,000 times.

Furthermore, the Federal Reserve has refused multiple inquiries from both the House and the Senate to disclose who is receiving trillions of dollars from the central banking system. The Federal Reserve has redacted the central terms of the no-bid contracts it has issued to Wall Street firms like Blackrock and PIMCO, without disclosure required of the Treasury, and is participating in new and exotic programs like the trillion-dollar TALF to leverage the Treasury’s balance sheet. With discussions of allocating even more power to the Federal Reserve as the ‘systemic risk regulator’ of the credit markets, more oversight over the central bank’s operations is clearly necessary.

The net effect of recent actions has been to isolate financial policy-making entirely from democratic input, and allow the Treasury Department to leverage the Federal Reserve’s balance sheet to spend money it cannot get appropriated from Congress. The public does not know where trillions of its dollars are going, and so has no meaningful control over the currency or this unappropriated “budget”. The extraordinary size of these lending facilities combined, the extreme secrecy, and the private influence is a dangerous seizure of Congress’s constitutional prerogative to appropriate public monies and control the currency.

An audit of the Federal Reserve may not be sufficient to control this sprawling system or bring it back into balance, but it is a start. The public has a right to know to whom the US government is lending trillions of dollars. Dancing around this issue with technocratic terms like ‘increasing liquidity’ is preventing a full and long overdue public debate on the role of the Federal Reserve and the influence of private banking interests in the governing of our economy.

I encourage my colleagues to support H.R. 1207, so that we can bring some transparency to our banking system and allow the public to have a real debate over the fundamental direction of our nation’s political economy.

Macke's rant

S&P warns Britain on debt

LONDON -- Ratings agency Standard & Poor's shocked investors Thursday with a formal warning that the United Kingdom must get its finances in order or lose its coveted triple-A credit rating, underscoring the monumental challenges the country faces as it seeks to dig its economy out from under the wreckage of the financial crisis.
http://online.wsj.com/article/SB124289673880242719.html#mod=testMod

The rating agencies continue to try and show us they are still full of "piss and vinegar." You'd think they just got off the space station!

HOUSTON — At the international space station, it was one small sip for man and a giant gulp of recycled urine for mankind.

Astronauts aboard the space station celebrated a space first on Wednesday by drinking water that had been recycled from their urine, sweat and water that condenses from exhaled air. They said "cheers," clicked drinking bags and toasted NASA workers on the ground who were sipping their own version of recycled drinking water.
http://www.usatoday.com/tech/science/space/2009-05-21-space-urine_N.htm

Greenspan's senior moment

It looks like today Greenspan remembered that he was still PIMCO's pimp. Last week, he was talking up housing, and that the worst of the economy is behind us.

May 12 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said that the decline in the U.S. housing market may be bottoming and it’s “very easy to see” financial markets continuing to improve.

“We are finally beginning to see the seeds of a bottoming” in the housing industry, Greenspan said today during a conference of the National Association of Realtors in Washington. The U.S. is “at the edge of a major liquidation” in the stock of unsold properties, which may help to stabilize prices, Greenspan said.
http://www.bloomberg.com/apps/news?pid=20601103&sid=af__GYb21Pz4

That wouldn't help PIMCO's bond positions, so the "consultant" came to a new conclusion today, and the Maestro is now singing a different tune; albeit one aligned with the bond house.

May 21 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.

“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”

"We're on the edge and if this thing doesn't get resolved quickly I'm worried,"
http://www.bloomberg.com/apps/news?pid=20601087&sid=a25ocYh4V5vI&refer=home

Wednesday, May 20, 2009

Zero Hedge aggravates Wall Street again

The SEC is now going to be looking into Wall Street's "dark pools" of liquidity, and the (IOI's) Indications of Interest notifications:

The Securities and Exchange Commission's top trading executive laid out a series of broad concerns about dark pools in the U.S. equity markets. His comments signal a potential shift in the SEC's attitude toward non-displayed liquidity executed in alternative trading systems.

James Brigagliano, co-acting director of the SEC's Division of Trading and Markets, said dark pools could impair price discovery by drawing valuable order flow away from the public quoting markets. "To the extent that desirable order flow is diverted from the public markets, it potentially could adversely affect the execution quality of those market participants who display their orders in the public markets," he said. Brigagliano added that anything that "significantly detracts from the incentives to display liquidity in the public markets could decrease that liquidity and, in turn, harm price discovery and worsen short-term volatility."
http://www.tradersmagazine.com/news/-103787-1.html

Last month ZH had this to say:

"The same "liquidity providers" that have been discussed previously in Zero Hedge, are also in dark pools to make sure trading costs are shifted from observable to less observable or not directly observable. Observable trading costs are the difference from VWAP, open price or arrival price + commission and spread costs. Less observable are bid/ask drift before a dark pool print. For example if I put an order to buy 100k shares of IBM to POSIT, UBS, or GS (especially the latter two where prop traders are more than happy to get right of first refusal on the bid/offer if they so desire) the stock might move up about 10 cents (not an actual observation) and than print my block. Within 15 minutes after the print, the stock is back to being 10 to 15 cents lower. Example of non-observable cost is P&L reversion. In the IBM example, I put an order to buy 100k shares to POSIT. The stock does whatever it would have done anyway and within 30 minutes my block is printed during regular crossing session. In the next trading day, the first 30 minute VWAP will be about 10 to 15 cents lower. So if I buy IBM on POSIT on a regular basis, on average, I can pay 10-15 cents less just by buying the next day on open market. If we factor in higher crossing networks commissions (mostly invisible, charged via net markups), the promise of a free lunch become the reality of very expensive lunch.

Obviously, mutual and pension fund traders have high alpha, they need access to expensive liquidity provided by GS principal bids desk, crossing networks and other means where trading costs are allocated via the "back door" and do not affect buy side traders' bonus scheme payouts. And obviously, teachers, firefighters and the police along with 401(k) investors are on the receiving end. What's new?"
http://zerohedge.blogspot.com/2009/04/dark-pools-role-in-liquidity-provision.html

Last week, Merrill Lynch threatened legal action against ZH, to take down some posts that David Rosenberg of Merrill Lynch had written, because Mother Merrill, ostensibly didn't want Rosenberg's bearish views promulgated in an up market amongst those that didn't pay for Merrill's research.

Now they are looking at dark pools. A few months back, I had my own take on these "convictionless" traders and their dark pools.
http://aaronandmoses.blogspot.com/2009/03/maria-bartiromas-conviction.html

It's nice to see Wall Street getting some more exposure that they don't want!

The search for alpha

Paulson & Co has accumulated major positions in gold. But I used the strength in it, to sell FCX at 50, and to sell the rest of my fertilizer stocks. They've had a good move, and the selling the last hour was enough for me to book some nice profits.

I put the money into some of these cheap shippers (avoiding DRYS though--too much inventory overhang), as a derivative play on commodity price increases, as I go where the most leverage is available in this market, and into some of the cheaper gold plays as a leveraged play on reflation. Unlike these institutions with unlimited dollars, I need to get the most bang for my buck.

Every time we have a pullback, the world seems to think the market is just going to roll over. I don't think that's going to happen. What we do see, however, is a bit of a roll-over in some of the extended financials. Of the majors, I'm only playing BAC, as I think that number still has some good upside, unlike WFC, JPM, COF, AXP and GS, which are still extended, and are still sells on any rallies. I advertised my sales on these numbers on May 7, and I still think they have a little more downside work left.
http://aaronandmoses.blogspot.com/2009/05/goldman-pimps-capital-one.html

These numbers will give you another chance to get in, as the bears now have some new faces to pimp their case, and today, Whitney Tilson wants his day in the spotlight. Did anyone see the nonsense on CNBC on him today? The so-called "subprime savant?" Now he's giving baseball analogies on timing on housing and commercial real estate. Last I remember, Richard Fisher from the Dallas Fed was the last guy to give baseball analogies. How did that work out?

The only thing that has changed on Wall Street is that a ton of stock was issued in these numbers, and these players will gravitate to those plays that they can goose the most. So we always have this rotation. That's all these pullbacks are.

Traders are looking where they can make the most money, as quickly as possible, and this market is setting up very good trading opportunities. But so many people freak out when any of these groups have any weakness, that they miss the action under the surface.

And all it is, is traders looking for alpha!

Remember this story?

Nouriel Roubini said this just a few months ago, when he told the world the banks would be nationalized, and be toast in six months in this article in the WSJ:

"Nouriel Roubini is always dressed in black-and-white...

So, will the highest level of government be receptive to the bank-nationalization idea? "I think it will," Mr. Roubini says, unhesitatingly. "People like Graham and Greenspan have already given their explicit blessing. This gives Obama cover." And how long will it be before the administration goes in formally for nationalization? "I think that we're going to see the policy adopted in the next few months . . . in six months or so."

That long? I ask. "Six months from now," he replies, "even firms that today look solvent are going to look insolvent. Most of the major banks -- almost all of them -- are going to look insolvent. In which case, if you take them all over all at once, you cause less damage than if you would if you took over a couple now, and created so much confusion and panic and nervousness."
http://online.wsj.com/article/SB123517380343437079.html

If successful predictions are any indication of the college girls interest in the good Dr., I would suspect there is going to be a little less vagina's on his "Wall of Doom."
http://aaronandmoses.blogspot.com/2009/04/roubinis-last-crack-at-fame.html

And a little less interest in his work.

Wall Street's Bogus Math $61 Oil and $940 Gold=Deflation


Our stock market is up 37% from their lows.
Emerging markets are up 50-80% off their lows.
Junk bonds have also had a massive move.

Yet the pundits tell us we still have to worry about deflation!

The last time commodities ran, it wasn't a demand issue, but a Wall Street rig. Money was going into something tangible, because our paper currency supposedly wasn't going to be worth anything, so the money had to go into commodities. And it was an easy argument to make, because hedge funds could control the prices on the margin.

So why would it be any different now?

And why then, would we still have deflation in housing, when the two most visible components of future inflation, oil and gold are moving higher?

Doesn't that shift psychology?

So who's agenda then, is the deflationary argument? Isn't that those who are short?

House deflation is over, and asset inflation is on the rise.

Deal with it, and you'll make money.

If you really want to know how to profit, it's very simple.

Sell every one of your last Government bonds, to everyone of these deflationista shills, and take all that money and put it into equities.

And this isn't a new idea.

Your New Year's resolution should of been to sell every bit of Government paper you had. At least it was here.
http://aaronandmoses.blogspot.com/2009/01/new-years-resolution-sell-your.html

And to buy every share you can at 666. At least it was here.
http://aaronandmoses.blogspot.com/2009/03/hexakosioihexekontahexaphobia-strikes.html

Hexakosiohexekontahexaphobia has now morphed into performance anxiety!

So now Wall Street will have a light bulb going off in their head, and they will now trumpet this as a new idea!

So what else is new!

These astrophysicists use so many second and third and fourth derivative equations, that they can't see what's in front of their face, because they're looking for the missing link that will give them the keys to the market.

They just end up chasing their own tails.

But unlike the Lemur's tail; they're chasing the fat one!

Window of Opportunity??

We hear that all these companies need to raise funds now, because they have this window of opportunity.

Are all these folks sharing a bong with Meredith?

On April 21, she said that was the window of opportunity for the banks to raise money.
http://aaronandmoses.blogspot.com/2009/05/their-opportunity-was-last-two-weeks.html

Must be a big window!

Here's the real window of opportunity.

The capital raise by the banks is the last window that the bears will have to cover, or the last window that these under-invested longs can take down some stock.

But that's the window of opportunity that they won't talk about on Wall Street.

Because that's the only window that's true!

And Wall Street is so myopic that they can't see through to the other side!