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!

Banks pay bonuses with workers life insurance

This has to be one of the stories that tells you exactly what these bankers are about. Let's get paid our bonuses, when our ex employees die!

From the WSJ:

Banks are using a little-known tactic to help pay bonuses, deferred pay and pensions they owe executives: They're holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries.

Banks took out much of this life insurance during the mortgage bubble, when executives' pay -- and the IOUs for their deferred compensation -- surged, and banking regulators affirmed the use of life insurance as a way to finance executive pay and benefits.
http://online.wsj.com/article/SB124277653430137033.html

You want job security? Be accident prone, or an extreme sport participant that cliff dives on the weekend and goes to Iraq for a vacation and these bankers will keep you around!

Bank of America's capital raise

BAC sold 825 million shares at $10 last night, and sold a total of 1.25 billion shares in their secondary, at an average cost of $10.77. That means BAC sold their 400 million shares in their ATM offering at a price above $13.

(825mmx10=8.25 billion)+(400mmx13=5.25 billion)=13.5 billion.

So if BAC opens at any price near yesterday's after hour action (and the lemmings will be wanting to play) you buy the cheap calls on BAC, because the shares, sold in the hole at 10, are not shares the public can price their share price against.

They are the shares sold at the ATM offering at 13.

And 13 will be a magnet for BAC common.

Because the ATM offering is the missing link in pricing!

And speaking of missing links, did anyone see Google's website today?

Or yesterday's press?

They now found our "missing" link. A lemur with dull fingernails and a thumb.

The above fossil on the left was the one that wasn't faked. The fossil on the right was the one that was. (The parts that don't "glow" are fake.) And the lemur is real.

A fossil that was found in 1983, split up and sold to two people, and part of the fossil was then faked. She "died" because of a broken wrist, that caused her to slip in subconsciousness and drown in a volcanic lake--and supposedly they can tell you whatever else she did for the past year of her life!

Heck, next we'll find that there was a pencil in her hand!

In fact, this find was considered to be the holy grail of fossils. The equivalent of finding the ark of the covenant.

But would anyone misplace the ark of the covenant for 26 years? And not know it?

A princess kisses a frog, and we get a prince and we call it a fairytale.

Give it 47 million years, and you call it science.

And get a Google logo to boot!

It's shortseller science!

Who leaked the BAC information?

I'll leave Denninger to comment on it:

From this chart it is clear that "someone" (or a handful of someones) knew of this offering before the market closed.

The volume that started showing up at 2:00 PM - to the downside - was VERY significant and the selling picked up bigtime going into the bell.

This sort of information leak and trading on it before it is disclosed is illegal.

What's even worse is that an hour after this news "broke" Bank of America still hasn't issued a press release on the matter...

Oh, and it gets better. What happened yesterday?

LONDON (MarketWatch) -- Bank of America was upgraded to buy from neutral and added to the conviction buy list at Goldman Sachs, which says the stock overhang should start to abate and that the bank may earn 25 cents a share during the second quarter, well above consensus estimates of a penny a share. "Our optimism is based on another solid mortgage and capital markets quarter, given observable activity levels since March," the broker said.

The stock overhang should start to abate?

I want to know who ran the book for this secondary and further, I want to know if Goldman was one of the firms selling into this.

What I do know, because I have a real-time squawk feed with commentary, is that Goldman was very quietly selling S&P futures in the back of the pit this afternoon.
http://market-ticker.org/archives/1051-WHERE-ARE-THE-DAMN-COPS-BAC.htm

It's obvious this news was leaked by the prints all over the market today. The banks, led the market lower, and when BAC traded down to $10.44 in the afterhours, someone decided to stock up on the financials that were being sold, and they bought them in size before the BAC secondary news was leaked.

The same hands that were probably shorting the same numbers earlier, and into the close!

The market always leaves it's footprints!

Now today, HPQ was trading down a couple dollars after reporting earnings. Anyone working at the paper companies will tell you that brown paper (cardboard) business has turned up substantially, but they are down on white paper. We know that HPQ makes their money on ink. So Wall Street will connect these dots even though they are wrong. Because anyone that works at a paper company, will also tell you that white paper business is now picking up because of Government paper for Census workers. So does that mean, that when white paper picks up, HPQ is selling more ink?

The point is, you really don't know. But Wall Street always pretends they have an information edge, when the edge they have, as we have seen in BAC is not of the intellectual side, but that of the inside!

But if you want to take a look at technology, take a look at VMW. This stock hasn't been able to come in at all the past week, irrespective of the market's action.

It trades as though someone on the inside has an edge.

BAC afterhours action

800 million shares at 10, finishing stock offering.

WSJ on bank losses

I'll save you the trouble of reading 100 bearish blogs, because they'll all lead with this story in the WSJ:

Commercial real-estate loans could generate losses of $100 billion by the end of next year at more than 900 small and midsize U.S. banks if the economy's woes deepen, according to an analysis by The Wall Street Journal.

Such loans, which fund the construction of shopping malls, office buildings, apartment complexes and hotels, could account for nearly half the losses at the banks analyzed by the Journal, consuming capital that is an essential cushion against bad loans.

Total losses at those banks could surpass $200 billion over that period, according to the Journal's analysis, which utilized the same worst-case scenario the federal government used in its recent stress tests of 19 large banks. Under that scenario, more than 600 small and midsize banks could see their capital shrink to levels that usually are considered worrisome by federal regulators. The potential losses could exceed revenue over that period at nearly all the banks analyzed by the Journal.
http://online.wsj.com/article/SB124269114847832587.html#mod=testMod

You can read the paper, or you can read a chart. Which one will make you money?

If the WSJ story is true, then why, are the Markit indexes for commercial mortgage backed securities rocking?

Banks to pay back TARP

A week ago Friday Egan-Jones, the Chicken Little's of finance, (with no disrespect to Moody's and FBR, Meredith Whitney, and Mike Mayo and all the other Nervous Nellies and Cassandras) said that Morgan Stanley was woefully underfunded.

To the tune of $40 billion.
Egan-Jones contended in a note to its clients Friday afternoon that Morgan Stanley needs around $40 billion in new capital in order to stand on its two feet without the help of the government.
http://dealbook.blogs.nytimes.com/2009/05/08/egan-jones-takes-dim-view-of-morgan-stanleys-health/#more-59349

Now today Morgan Stanley has applied to to pay back the TARP money.

So much for Egan-Jones analysis.

Maybe they haven't been sleeping on "The Warren!"

Moody's downgrade of Japan

Oh my! Let's go and hide in the bomb shelter! Moody's speaks and no one listens!

If you don't already know by now that Moody's is an absolute joke, you now know it today. A trillion in reserves, but Moody's gives them a downgrade.

Check the Reuter's headline:

TOKYO (Reuters) - Moody's Investors Service stripped the Japanese government of its last triple-A foreign currency credit rating on Monday in a move that could revive market speculation about the creditworthiness of other rich nations, especially the United States.

The two-notch downgrade to Aa2 from Aaa was a token censure for Japan which has almost no foreign currency debt exposure.
http://www.reuters.com/article/newsOne/idUSTRE54H2RW20090518

Look what Zero (H)edge had to say (btw this blog has some of the best information out there, but just don't trade on it! Use it to understand the bear's mindset!)

With US CDS having been hit by a massive short covering wave, and recently trading in the 30s, a downgrade would potentially have a catalytic event on this manifestation of risk, and as such the upside/downside of the US CDS, which had traded at 100 as recently as 2 months ago, may be a prudent analysis.
http://zerohedge.blogspot.com/2009/05/moodys-lowers-japan-aaa-foreign.html

Maybe that's why we had the late selling on Friday. Everyone always knows ahead of time what Moody's is planning on doing.

But that's not this year's game!

But what were CDS on the US doing at 100 basis points in the first place?

Heck the VIX averaged 75 not more than a few months back. Anyone think it's going back to there?

So why would stocks go back down?

You've already answered the question.

They're not!

The rubber band market

"Guaranteed to blow your mind
So high you won’t come down"

So much for the selloff--Pollyanna's back!

Bears with no teeth!

Who said that Dumb and Dumber were spotted on Wall Street?

Whatever happened to the .4% decrease in retail sales that supposedly was the death knell of this economy? Lowes' upticks, and now the consumer is alive!

But did you listen to these bears?

Did you blow out stock on Friday at option expiration at the close?

Heck, I even parted with some Potash at 107 Friday--and it wasn't because I thought it was going down. I needed that money to spread around all the stocks that got cheap again! Someone had to buy what Wall Street was selling!

From Dumb and Dumber hitting bids!

So what happened to all those that said the market was rolling over?

What happened to the "Sell in May and go Away" crowd? Where are they?

Where are those guys?

Where are the folks that said we were at an "inflection point" in the markets and the economy?

Who got that memo?

What happened to Duncan Niederhauer who last month warned us that this rally wasn't real?

Today he said he likes the "consolidation" that the market has undergone!

It's the same story. But at least you didn't get that tainted version here!

And if we can't even break 880 on the S&P; so how can we possibly revisit the lows?

And now, we are heading to 980, just as advertised:
Let's look at some simple numbers. At S&P 830, I said we were at the second leg up. So we went up 100 points. Does anybody not think the next target is not 1000? The easiest way to get to 1000, is to get under 900 first. That's Wall Street's version of Jack Nicholson--"The easiest way to get over a girl, is to get under someone else!"
http://aaronandmoses.blogspot.com/2009/05/bears-futile-attempt-to-re-assert.html

And that's this market.

And it now should be a given, that this market, hit a once in a generation low.

So Wall Street wants us to believe that we are going to revisit these once in a generation lows!

And we also hit a once in a generation low in bond yields. And that little rally that we had, was it.

And what will happen to prices when some of these portfolio managers decide to shift some money from bonds into equities?

They haven't even had their committee meetings yet!

Maybe they should take a good long look at Pollyanna.

Because Pollyanna is Wall Street's new Goldilocks!

And when Goldilocks, finally enters the building, Wall Street, will already then be at all-time highs!

And the bears will just be another children's story.

Because this ain't no country for old men!

Goldman upgrades BAC

Their BAC target goes from $7 to $15, and BAC goes on their conviction buy list.

Goldman touts their mortgae business as a reason for the upgrade.

I'm on the same side with Goldman.
http://aaronandmoses.blogspot.com/2009/05/refinancing-boom.html

Sensex adds 17%

India's market was up 17% on gains in the ruling Congress party.

Another BRIC in the wall for the bulls.

Buffett's restructured derivative bet

Buffett's $37 billion derivative bet on the market now pays off if stocks bounce 15% over the next decade instead of 70% over the next 18 years. According to Becky Quick, Buffet told her that changing the terms didn't cost him a penny.

According to the NY Post it did:

In recent weeks the chatter along the derivatives "rat line" has been full of rumors about the new Berkshire trades. According to traders active in the options pit, when Berkshire sought to restructure its bets (essentially buying back the multi-decade options it was short and selling new, shorter-duration options that are closer to current stock price levels) it could do so only by paying a heavy cost, since the original positions were so deep in the red.

According to these sources, this restructuring was accomplished on a "dollar neutral" basis, meaning that Berkshire didn't have to pony up cash to do the trade.

Like a gambler doubling down on credit, Berkshire instead purportedly sold a significantly larger number of short-dated contracts than the original transaction -- meaning that the potential risk of loss to Buffet and his shareholders over the next 10 years has actually increased, but only if the markets were to decline from current levels and remain there.

Sources also say that Berkshire was squeezed more on the pricing this time around since the company's credit is not quite as pristine as it was two years ago.
http://www.nypost.com/seven/05172009/business/digging_deeper_169651.htm

Whatever the story, it looks like the pricing for Armageddon insurance has moved materially lower.

Goldman to repay TARP with "AIG" money

Ah, the fungibility of money. Charlie Gasparino in the Daily Beast:

Based on the stress tests, Goldman Sachs and JP Morgan were deemed to be among the strongest of the big banks; unlike Morgan Stanley, Bank of America, and Citigroup, both Goldman and JP Morgan were not required by regulators to raise capital levels. Since that time, officials at Goldman and JP Morgan have been pressuring regulators to allow them to repay the bailout money that was granted from TARP.

Another person close to the situation says people at JP Morgan feel comfortable they have convinced both the Treasury and Fed that they should be allowed to repay the money along with the first group of banks that will be allowed to do so; that announcement, these people say, could be made as early as next week.
http://www.thedailybeast.com/blogs-and-stories/2009-05-15/payback-time-for-goldman/

Last month, Blankfein had this to say:

Because Goldman Sachs is now receiving money from the federal government, Blankfein says, the compensation issue is on the "forefront" of the executives' minds.

"And since money is fungible, we're very, very careful how we spend the money and how it appears that we're spending the money," Blankfein says. "It certainly affects our behavior, and you know something — it should affect our behavior."
http://www.npr.org/templates/story/story.php?storyId=102887296

The Government doesn't want people looking over Goldman's books, and Goldman doesn't want anyone looking over their shoulder, so they'll pay the TARP money back, but still have $37 billion of FDIC guaranteed bonds on their books that they've been able to sell, allowing them to have low cost funding for their positions.

But no one asks the question to Goldman, that is asked of Slippery Simons. Why is it that Goldman's public hedge funds perform so poorly, but Goldman's prop desk doesn't?

So give the TARP money back-STAT!

The SEC visits Slippery Simons

According to Zero Hedge, assets under management for Slippery Simons RIEF fund, with the $100 billion capacity, is now down to just $5.4 billion.

Now the SEC is sniffing around, wondering why Medallion's investors returns, are always so much better than his institutional clients.

The complete story on Slippery Simons is here:

http://zerohedge.blogspot.com/2009/05/is-there-more-than-meets-eye-at-rentec.html

And five months ago, you had it here, before the WSJ and CNBC picked up on it!

http://aaronandmoses.blogspot.com/2009/01/james-simons-fuzzy-math.html

We'll soon see what the keyhole sees!

Goldman raises casino stocks price targets

The target on MGM went up from $1 to $6.50-what a joke.
The target on LVS went up from $4.50 to $8.25--another joke.
The target on WYNN went up from $26 to $39.

Just another bearish analyst that was wrong, that is dragged, kicking and screaming, to a more bullish viewpoint. And protesting the entire way.

Why couldn't Goldman help investors out when the first two numbers were under $2?

A bearish macro viewpoint!

Free Viagra for the unemployed

Pfizer has it's own stimulus plan. Unemployed and without health care, Pfizer will give free drugs for a year to anyone who had been using some of their 70 prescription drugs for at least three months.
http://www.pfizerhelpfulanswers.com/pages/misc/Default.aspx

Temasek sells entire BofA stake

Singapore's sovereign wealth fund, dumped all of it's Bank of America shares, losing $4.6 billion. When they invested the money in Merrill Lynch in December of 2007, they said it was for a long term investment.

Their reason for selling at $7:

"..little potential in Bank of America shares. If one sees the results of the stress tests in the U.S. and analysts' reports on Bank of America, the picture is not bright."
http://online.wsj.com/article/SB124236495798923123.html#mod=article-outset-box

If they are making investment decisions based on analyst reports and stress tests, then they deserve to lose their money.

Brown shoots and the double dip crowd

So much for the market meltdown that supposedly was going to occur!

So much for all the shorting in the insurance stocks--now they are going to be getting TARP money. I'll probably even get a chance to advertise my FAS trade this morning in a couple of days!

And what is with the "brown" shoots and the "double-dip"crowd?

We haven't even yet gotten out of the recession-so how is it possible that we are at an inflection/inflexion point in the economy or the stock market?

The economy is still in the "less worse" stage, while the bears are getting deeper in the "less worth" stage.

And that's why they cry and complain about "brown shoots" and "double dips." They use that terminology, because you can't find many fools, like the guy on CNBC this afternoon, who said we were going back to 666. These bears so desperately want a pullback, that they are already on their knees. It just makes it easier for the bulls to kick them in their teeth!

But more and more, less and less people are buying the story of a re-test of the lows. So they confuse the issue, with brown shoots, Venus fly traps, angler fish, and now the oh so scary double dip!

And since these bears, didn't understand who Dumb and Dumber were, maybe I'll help them with a little explanation.

Do you want to know what chance we have of retesting the lows? It's the same odds Lloyd Christmas was given.




And didn't we already find out that the bears had already marked the bowls on Wall Street?
http://aaronandmoses.blogspot.com/2009/04/dandelion-tea-bags-for-bears.html



And didn't the bears think they could knock off the "Government owl?"
http://aaronandmoses.blogspot.com/2009/04/wells-fargo-to-earn-3-billion-for.html

Just like Lloyd and Harry. They popped champagne corks and knocked down the "Snow Owl" at the Aspen ball.

The market owl, though fought back.

Because Snowy Owls feed on lemmings!