In defense of Cramer

Cramer is now the "new" Wall Street villain?

Do you want to know who the villains are? How about these fifteen names.

* Goldman Sachs
* Deutsche Bank
* Merrill Lynch
* Société Générale
* Calyon
* Barclays
* Rabobank
* Danske
* HSBC
* Royal Bank of Scotland
* Banco Santander
* Morgan Stanley
* Wachovia
* Bank of America
* Lloyds Banking Group

AIG's counterparties! They bought credit default swaps from AIG, because they knew the products they were pushing and holding were toxic. Anyone else that read the SEC filings, would of thought that AIG didn't have any exposure.

And if AIG didn't have any exposure, how was it that everybody else and their mother were buying insurance from them?

Because they packaged and sold the goods.

At least Cramer saw the meltdown coming.



And Cramer, on the Today show, said you should sell stocks, if you needed money for the next five years. Here was his explanation.



And Cramer, on his site www.thestreet.com has been promoting the return of the uptick rule, and the regulation of credit default swaps. Look at this commentary today regarding the uptick rule:

If you believe, as I do, that there is a major reconsideration under way of the rules that have come to favor short-sellers and quant traders, you have to be enjoying the incredible repartee of Eric Oberg and now Bill Furber on our site. These two gentlemen have taken the debate about "why we got rid of the rule" and "what does it mean" and have put it in the context of cold, hard facts and history that make you recognize that the rule wasn't irrelevant, and that the changes were less well-thought-out than many thought -- particularly those who believe that there is no reason whatsoever to get back to this.

Why does this matter so much? Because the issue is intertwined with the mark-to-market debate -- these two "rules" have destroyed more value than the whole subprime/Alt-A /bad CDO mortgages have combined.

The common stocks of banks have become the arbiters of the situation in the absence of the government taking control of the situation -- not the banks themselves. If they are the arbiters, the prosecutors -- runaway, rogue prosecutors -- are the abolition of the uptick rule and the concomitant approval of the ETFs that were meant for rapid trading in either direction, regardless of the destruction of capital and the amazing penalty that you get when you try to embrace equities and the capital-formation process
http://www.thestreet.com/p/rmoney/jimcramerblog/10472117.html

Here's part of that commentary. It's a paid link, but maybe they'll let it be for free!

Any market wants -- maybe even needs -- speculators to provide liquidity, so let's not go into the competing interest debate. However, the capital markets serve broader purposes than speculation; they are about capital formation so that we can build commerce, create products and services, employ people, pay taxes and enhance our society through the economy. The last decade or so, we seem to have lost sight of that broader purpose -- people speculating on homes, hedge fund proliferation, the prop trading desk more influential than the customer trading desk, people spending time figuring out if they "could" rather than if they "should." The markets should be about investing in our collective and individual futures, and allocating capital to businesses that can contribute to that future...

If bear raids become commonplace, why on earth would anyone want to be a public company? Of course, if we move to a strictly private ownership model, that may concentrate wealth in fewer hands, and the average American will not be able to participate in the growth of our economy. Of course, there may be less capital available to finance businesses, hindering our growth.

Because I think if we are going to reinstate the uptick rule, we need to understand why it is there in the first place. The intent was to create a circuit breaker so that fear did not overwhelm the markets into a negative downward spiral. So it was handled by a simple rule, where the buyer -- not the short-seller -- was the aggressor, therefore preventing a manipulation of emotions. But the rule was developed long before options, long before ECNs, long before decimalization, long before computer program trading, long before levered short-sided ETFs. The rule was done away with because it became too hard to enforce -- all sorts of exemptions completely emasculated (Cramer's term, but quite fitting) the rule. So rather than try to enforce something that wasn't working, they just gave up.
http://www.thestreet.com/p/rmoney/marketcommentary/10471441.html

And Cramer, also to his credit, got bullish this week.

It's just ironic, that now Cramer is being vilified, when he in fact, is trying to protect the investor!

But maybe, Cramer is being taken to task, because he's the only one that will still go on the Talk shows!

Heck, wasn't even Warrren Buffett on the CNBC hotseat Monday? How did the stock market do this week?

Anyway, all of these problems go away, with a rising stock market.

The public is ticked off and rightly so, because they are now finding out that Wall Street was rigged in favor of the bears.

Now it's being rigged in favor of the bulls, but everyone is to angry and looking for villains instead of looking for bargains on Wall Street!

But stocks aren't just Suze Orman cheap, they are blue collar cheap. Let me explain. Suze on her show the other day, advised a call-in who was worried about losing their job, to have 8 months of money tucked away just in case she might lose her job. Huh? A blue-collar stash is the twenty hidden in their wallet for beer. Who has eight months worth of money socked away for their rainy day in this paycheck by paycheck world? So what kind of advice is that?

It used to be that you would need a worthwhile stash in order to make some money in the market. Now things are so cheap, (and with the proliferation of options) and the opportunities in this market are so compelling, that even beer money can get returns, provided you make the right bets.

That's the opportunity this market provides.

Instead, everyone is looking for villians.

I'm just looking for the "Free Money!"

RIMM ready to rally-Ignore the analysts!

RIMM was downgraded to a sell and a $30 target by Think Equity today.

Are they kidding me? What planet are they on?

We saw GOOG take on hit on Eric Schmidt's cautious comments, and it closed Monday at 290, and now it is already up 33 points from that low.

The same with Apple. We heard cautious comments, and that stock was hit Monday down to 83. Now it's 96, with rumours of a new product introduction.

So now some joker at Think Equity is going to tell us that RIMM is a sell???

Give me a break.

RIMM traded heavy yesterday, and then only grudgingly rallied at the close. Now you know why. Nothing is done in a vacuum on Wall Street.

But this call, will let those that want to buy RIMM, in.

Just like stupid comments gave buyers a chance to buy AAPL and GOOG this week at bargain prices.

When a stock like RIMM is ready to turn, they reverse grudgingly, like it did yesterday, and then it looks good on the chart. The next day it reverses and then looks bad on the chart. That is today.

You need to buy it on that day.

And now you have help.

Think Equity downgraded the stock, to help you get it cheaper!

Take it!

"Vampire" found from the 16th century

The shrouds used to cover the faces of the dead were often decayed by bacteria in the mouth, revealing the corpse's teeth, and vampires became known as "shroud-eaters".

According to medieval medical and religious texts, the "undead" were believed to spread pestilence in order to suck the remaining life from corpses until they acquired the strength to return to the streets again.

"To kill the vampire you had to remove the shroud from its mouth, which was its food like the milk of a child, and put something uneatable in there," said Borrini. "It's possible that other corpses have been found with bricks in their mouths, but this is the first time the ritual has been recognised."
http://www.telegraph.co.uk/news/newstopics/howaboutthat/4984727/Vampire-discovered-in-Italy.html

Put the credit default swaps on an open exchange, and Wall Street will lose it's vampires also!

That's the shortseller's brick!

Jack Welch unplugged

The price of GE stock has gotten to Jack Welch. You can feel his spit, across the Atlantic:

“On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy...Your main constituencies are your employees, your customers and your products.

“It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.
http://www.ft.com/cms/s/0/294ff1f2-0f27-11de-ba10-0000779fd2ac,dwp_uuid=c770f55e-0fac-11de-a8ae-0000779fd2ac.html

Jack's been hanging out with Alan G!

Jim Cramer on the Daily Show

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 1

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 2

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Interview Outtake Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

China is "worried" about Treasuries

China's worried? So big deal!

They should be worried about their own economy first!

Maybe that's why "China" is so worried!

The Chinese prime minister, Wen Jiabao, said the country was “worried” about its holdings of U.S. Treasuries and called on the United States to provide assurances that the investments were safe, and that China was watching United States economic developments very closely.

“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”
http://www.nytimes.com/2009/03/14/business/worldbusiness/14china.html?hp

If they are so worried, would they make statements like that???

Why doesn't China then go and sell some Treasuries, and take a piece of Sheldon Adelson's casino by financing the rest of his construction projects?

You got the buy recomendation on LVS (1.77) yesterday. Their debt was downgraded again by the imperial rating agencies, run by these kids with spreadsheets!

They might as well buy Sands, because people are ready to drink it!

People are so thirsty that in the absence of water they’ll drink the sand.

They don’t drink the sand because they’re thirsty—they drink the sand because they don’t know the difference.

As we edge through these trying times, once trusted information sources are being challenged. This has spread throughout the societal spectrum—from financial advisers to mainstream media to politicians—with accountability being demanded as a function of frustration.
http://www.minyanville.com/articles//3/11/2009/index/a/21558

So now, we can trust the rating agencies?

These Johnny-come-lately that downgraded Buffett yesterday?

Like Meredith Whitney and Roubini, these bears over-reached. So did the rating agencies.

http://aaronandmoses.blogspot.com/2009/03/we-go-higher.html

And in the mindset of the hedge fund that is short, they though that a downgrade of Buffett would incite more fear in the market.

More fear? What is left for people to lose? The only people that have their money are the bears, and now Mr. Market has set his eyes on them!

The only thing that a downgrade of Buffett will show, is that "fear" has now found a new place to call home, and it's at the rating agencies, but now, they are afraid of the dark!

But they couch the darkness in Buffett's "demise." If he dies, who will direct Berkshire to be able to buy any more businesses?

Who needs to worry about that? You can buy any business now, at the cheapest price you'll ever see.

If Fitch was in Vegas, at least they'd be honest. They'd have an over/under on the age of his death! But the only bettors allowed would be those with an insurable interest!

Does anyone really think credit default swaps would pass the eye of the Nevada Gaming Commission?

Then who in their right mind would listen to the rating agencies now?

Their downgrade, made them look irrelevant. Why doesn't Fitch just downgrade US Government debt at the same time?

But those with positions running against them will try with their downgrades.

Heck, Goldman Sachs even downgraded Wal-Mart this morning!

The hedge fund buyers for the TALF

Hedge funds of all sizes and strategies are expressing strong interest in the government's plan to unclog consumer-lending pipelines. Now they and other investors need to decide Friday if they will participate in the first round of borrowing through the Term Asset-Backed Securities Loan Facility, or TALF.

Some of the biggest hedge funds in the business have participated in calls and meetings with other hedge-fund managers, lawyers and regulators about the program. They include Harbinger Capital Management, Highbridge Capital Management, Elliott Management Corp., Paulson & Co., Perry Capital, Citadel Investment Group, Cerberus Capital Management and D.E. Shaw Group.
http://online.wsj.com/article/SB123690363713413941.html#mod=testMod

Does anybody really think that these hedge funds will adopt a bearish bent on the market, when they are feeding at the Government's free money trough, designed to unplug credit markets?

You had that story here, right before the rally that ripped out the shorts hearts!!
http://aaronandmoses.blogspot.com/2009/03/free-money-feeding-trough-is-spelled.html

And who are the investors in these hedge funds, feeding at the TALF free money trough? Pension funds!
http://aaronandmoses.blogspot.com/2009/03/talf-subsidy-pension-funds.html

These hedge funds have had talks with the Government all week, and we've had a rally that has ripped out the hearts of the shorts.

And we've barely gotten started!

Intuitive Surgical

Anyone see all the action in ISRG options?

And why would ISRG spend $300 million buying back stock, with half of that coming in an accelerated share repurchase program?

Look for more JNJ for ISRG rumours to come out again, with option players circulating the story. Last December, ISRG ammended their employee severance plan, to offers employees that were laid off within a year of a change of control, six to twelve months of severance.

An accelerated share repurchase plan, would offset that cost, because those shares bought wouldn't reflect the takeover premium that an acquiring company would pay.

So look for options players to try and get that story going, especially now that the stock looks good on the charts.

Berkshire Hathaway downgraded by Fitch

What hedge fund got in the ear of Fitch, with this Hail Mary Pass?

“Fitch views this risk as unrelated to Mr. Buffett’s age, but rather Fitch’s belief that Berkshire’s record of outstanding long-term investment results and the company’s ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett,” Fitch said. Buffett is 78.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ9MFr5s1PRk&refer=home

The rating agencies are now a joke. After rating sub-prime mortgages AAA, now everything is junk, and nothing is AAA.

Heck, in this environment if Exxon had another oil spill, Fitch would change it's outlook to "developing!"

Fitch is worried about Buffett's "derivative" exposure? Here's the other side of that trade!

Berkshire was paid $4.9 billion for $37 billion of put exposure-here's what that entails:

Berkshire is exposed to that number if the value of European, US and Japanese stock markets go to 0. A true doomsday scenario that, should it happen, essentially means the end of all economic activity as we know it.

So, someplace between "end of the world" and "normal economic activity" is where we end up.

Let's look closer. The question is: How much does Berkshire have to annually compound the premium received to pay off the contracts, if need be? In order to do this, some assumptions are necessary.

* I will use 17.5 years as the expiration, as it's the middle ground on the contract expiration and no further details are available.

* I have to assume equal index losses should they occur at the end of the 17.5 years as there is no details available as to the weighting of contracts in what years.

* I will also use the S&;P solely as the index the put are written in as it is the largest market by far and most likely contains the largest exposure.

Here are the necessary compounded annual rates of return necessary on the $4.9 billion in premiums received in order to pay off the bet, should the indices fall by "x" percent.

But, you say, what about the other question? What level were the indices at when the options were sold? We know the majority of them were entered into during 2007 (some in 2006 and 2008 with index levels lower than 2007). But, for the example, I'll say the S&P was at 1500 - about the high of the year.

Then how much must the S&P grow between now and 16.5 years (I use 16.5 since 1 year of the contract has elapsed) in order for Warren to avoid paying off at all? Now, it should be noted that in 2008 at lower levels, Warren added to the contracts, which in reality, would lower the necessary index returns. But let's just use the most extreme example to illustrate, all contracts written at market highs.

The S&P must grow 4.5% annually for 16.5 years from today's 727 to eclipse 1500 and allow Warren to avoid paying off. Remember, this is "worst case" index contract inception number - the actual amount is lower.

What are the odds? Well, since Berkshire officially in 1965 became Warren's, he's grown value by 20% annually and the S&P has grown 8.9% annually.

Using those numbers, the S&P in 16.5 years sits at 2968, and Warren's $4.9 billion premium has been grown to $119 billion free and clear for Berkshire shareholders. If we assume sub-performance of 50% less than the historical averages for both, the S&P sits at 1491, Warren pays off a pittance (maybe a couple million), and has grown the $4.9 billion to $25.9 billion for Berkshire.

The reality is that this is just another insurance policy for Berkshire. In the event of a dramatic event, they pay off big. Anything less, they collect premiums.

The next time someone tells you about "Berkshire's huge derivative exposure," please send them here.
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=MY&date=20090312&id=9690782

Maybe Fitch needs to do some homework!

The media pairs trade

CBS 4.02
NYT 4.15

It's the race to 6, or 50% on each of these numbers.

Buy em both.

Hartford Insurance-A market proxy

HIG is like a triple levered upside ETF on the market. After 790 on the S&P, Hartford starts looking better with it's guaranteed investment products tied to stocks.

The April 7.5 calls are 1.05. They are a buy.

Take a look at the triple financial ETF, the FAS, and the July 7.5 calls at $1.15.

That's your financial pairs trade for those that love leverage!

Hexakosioihexekontahexaphobia strikes!

The fear of 666!
http://en.wikipedia.org/wiki/Hexakosioihexekontahexaphobia

The S&P hit it's low at 666.

The inflation-adjusted return of the S&P from the 1982 bottom, to the 2000 top was 666%.

The return from the Dow's low of the 1987 crash, to the 2000 high was 666%.

And now, 666 strikes again.

But this time, the fear has been struck into the hearts of the shorts!

And it couldn't happen to a nicer bunch! After all, weren't they the ones playing games with stocks while driving their prices down, all in the name of markets?

And then claiming Armageddon?

Today Madoff had his Armageddon, but if you want to really read why Armageddon isn't happening, you need to read Madoff's Armageddon!
http://aaronandmoses.blogspot.com/2008/12/would-madoff-have-made-good-treasury.html

But if that's too complicated, I'll just make it simple. Now maybe this is a bit tongue in cheek, but bear with me as I make my point. Armageddon is only mentioned in the Bible, so let's stick to that story. Armageddon only happens after the 7 year tribulation, and that only happens after the moon has to turn to blood red, and it has to happen in Israel, and on their days of feasts.

We need a lunar eclipse for that to happen. When do we have a complete lunar eclipse visible in Israel, (when the moon turns blood red) on Jewish Holy days? Try April 15, 2014, on Passover and The Feast of Tabernacles on October 8, 2014. Click the link below and it will give you the Jewish holidays.
http://world.std.com/~reinhold/jewishholidays.txt

Now click the link below, and you will see on the calendar that these are when we have the total lunar eclipses for 2014.
http://eclipse.gsfc.nasa.gov/SKYCAL/SKYCAL.html?cal=2014#skycal

After that, you have to wait a bunch of years, so what happened to Armageddon? Since there's a 7 year tribulation before it, it looks like we've missed it! Maybe the bears can now use the Mayan calendar, and claim the end of the world then!

Now when you use this reasoning with "biblical" things, it gets dismissed out of hand. But isn't that what the priests of finance did? Didn't they extrapolate the worst case scenarios in pricing of toxic assets and say that all the assets were worth what the least of them were? And didn't they deliver a clever story, with "supporting" evidence to "prove" their cause?

And then didn't they dress up their forecast with rocket scientists and PHD's, derivative models, and fancy formula's and proclaimed the demise of civilization as proclaimed on their spreadsheets!

Or at least the demise of civilization, until they can bring in their shorts!

So maybe I'm having some fun with 666. But at least, it's making some money. After all, weren't these some picks Monday morning?
http://aaronandmoses.blogspot.com/2009/03/time-to-get-busy-buying.html

WFC 9 --Now 13.95 up 55%
USB 9--- Now 13.76 up 53%
IP 4----- Now 5.86 up 46%
GE 7--- -Now 9.57 up 37%
AA 5 ---Now 5.98 up 20%
NOV 25--Now 29.57 up 18%

No hexakosioihexekontahexaphobia here!

The bulls proof of life!

Looks like some of the bears are getting run in on this market; on this new bull market that started at S&P 666.

And what the shorts don't realize is that confidence is a dangerous thing.

Think about that. If you are short, are you confident here?

And if you were a long suffering bull, would you be confident?

So who's buying?

How about those who haven't yet invested?

How about those short, that need to cover?

How about those underinvested, that need to catch up, with the coming stampede into stocks?

Look at oil today. The gyrations in that number were just traders gaming the USO. Yesterday, the bears took the drop in oil, as "proof" that we were heading lower.

Today it's the "proof of life!"

Maybe the bears should watch that movie.

When circumstances change, you have to change your strategy.

It's the proof of life!

Now Cesium 137, also has an album called Proof of Life, and everyone knows Cesium is radioactive.

But isn't $137 billion the amount of Wall Street bonuses paid out from 2004-2007?
http://dealbreaker.com/2008/01/in_defense_of_wall_street_bonu.php

Wall Street bonuses are now radioactive!

And the market bet is, that this market goes higher, or nobody get's paid!
http://aaronandmoses.blogspot.com/2009/03/market-bet.html

It's so easy, but the physicists on Wall Street can't figure it out!
http://www.137.com/137/

In fact, the New York Times had an article on these quants, just a couple of days ago, who now want to get back to physics, because Wall Street has now become unrewarding!

Here's that story, with the headline:

They Tried to Outsmart Wall Street

Asked to compare her work to physics, one quant, who requested anonymity because her company had not given her permission to talk to reporters, termed the market “a wild beast” that cannot be controlled, and then added: “It’s not like building a bridge. If you’re right more than half the time you’re winning the game.” There are a thousand physicists on Wall Street, she estimated, and many, she said, talk nostalgically about science. “They sold their souls to the devil,” she said, adding, “I haven’t met many quants who said they were in finance because they were in love with finance.”
http://www.nytimes.com/2009/03/10/science/10quant.html?8dpc=&pagewanted=all

The beast that can't be controlled? It's the beast that betrays only when you don't know what it portrays!
http://aaronandmoses.blogspot.com/2009/03/we-go-higher.html

Maybe these physicists should try to study "emotion" instead of numbers.

And any number but 666, would allow these quants with their equations to proclaim the start of something new.

But their subconscious won't allow them to believe, what is now clearly seen.

This market, now has "The Proof of Life!"

Even if it started with the number of the beast, that these physicists couldn't control!

Freddie's "mustard seeds"

Where's the mustard seed in Freddie's $30 billion loss?

Q4 impairments were $7.5 billion versus Q3 of $9 billion.

Q4 credit losses were at .25% versus .28% in Q3

House hearing on financial prosecutions up next week

WASHINGTON (Reuters) – The U.S. House Financial Services Committee will hold a hearing next week to ask key justice officials and regulators what they need to prosecute wrongdoers in the financial crisis, the chairman of the committee said on Thursday.

Barney Frank, a Massachusetts Democrat, said he had invited officials from the U.S. Justice Department, the FBI, the Securities and Exchange Commission, and all the bank regulators to the hearing.

"I'm not morphing into Joe McCarthy, but I am going to have them tell me what they need for criminal prosecutions and the civil recovery of funds," Frank told a conference of the National Community Reinvestment Coalition.
http://news.yahoo.com/s/nm/20090312/pl_nm/us_financial_congress_2


Looks like Congress doesn't want the public singing "The Big Ones Get Away."

GE cut by S&P to AA+ with stable outlook

It's such a stable outlook, the S&P had to cut it.

On March 19, GE Capital will give market participants more info.

In the meantime, you can buy the stock.

Wall Street's recovery

It's the bull market of the beast.

The low in the S&P was 666.

The low in 1982, on the DOW was 777 before it's 18 year run.

And when the market crashed in October of 1987, to the high in 2000, the S&P had moved 666%, and it took 3,141 trading days (pi).

So let's take the S&P low of 666.666 X 666.666% and we have a target of 4,444 in the S&P.

Since I was born at 4:44 AM, on this earth that spins around the sun at 66,666 miles an hour, I'll take those numbers.

But no one else will. The bulls flip to bears when the market stalls, just like a sober alcoholic goes back to his drink.

The bears can't go in the bull camp because their positions are contrary to it, and so is the news.

And like an alcoholic, who thinks a drink will make him feel better, they go back to their shorting ways, not realizing that the punch bowl for the bears has been taken away, and the market is on the road to recovery.

So I threw in some math, that only someone with "wet brain" would appreciate.

The market just got it's white chip.

It's not going into relapse yet!

The green chip comes in 90 days.

And that's when the bears will sober up!

Job seekers overwhelm jobs

We have 700 applications for a janitor in Ohio.

The FBI has 227,000 applicants for 3,000 jobs. People are looking for jobs with health care and retirement plans.

They are going to have to create some more jobs just to handle the overflow of all these people looking for work.

But retail sales are showing signs of life, while the job market remains moribund.

But you'll just get the job news, because bad news sells.

Even at market turning points.

Pension plans U-turn

Last year's stock market collapse left the nation's largest private pension plans with a deficit of more than $200 billion, a study released Wednesday said, which could force companies to invest more money in their plans when they can least afford it.

The nation's 100 largest corporate pension plans were underfunded by $217 billion at the end of 2008, holding only 79% of the assets needed to cover estimated long-term liabilities. That compares with an $86 billion surplus — 109% of estimated liabilities — at the end of 2007, according to Watson Wyatt, a human resources consulting firm.

A separate study released Wednesday by Milliman said the nation's largest plans lost an additional $54 billion in February.
http://www.usatoday.com/money/perfi/retirement/2009-03-11-pension-plan-assets-short_N.htm

Will Goldman "pre-announce"

We had Citi who said they earned $8.3 billion before writedowns, and JPM said that they were profitable, so when is Goldman Sachs going to pre-announce "good" earnings?

Isn't that the script of the banker's pump?

After all, Goldman's expense account have to be helping earnings.

Everyone's staying at Embassy Suites!

Staying at the Embassy Suites Hotel in lower Manhattan has its perks: The nightly manager's happy hour features free beer and popcorn. Flash a room key and earn a seat at the complimentary all-you-can-eat breakfast buffet and a 10% discount at the Chevy's Mexican-style restaurant next-door.

Some of the bankers aren't happy with the switch. "No one's supposed to complain out loud, but, let's face it, we're spoiled," says one Goldman employee. "They turned us into hotel snobs."

Now, Goldman's travel services directs its 20,000-odd out-of-town employees -- from partners down to junior analysts -- to the Embassy Suites in lower Manhattan. Nicknamed "Hotel Goldman" by employees, it offers them a special corporate rate of $250 a night. When Goldman people visit other cities, the company directs them to hotels at which it has negotiated rates.
http://online.wsj.com/article/SB123681699274602441.html

But so far, Goldman employees aren't working the hotel's front desk.

That's been outsourced!

MBIA's credit default counterparties sue

Representatives of about 15 financial institutions will meet Thursday with New York State Insurance Superintendent Eric Dinallo to complain about MBIA Inc.'s decision to split its bond-insurance unit into two companies, people familiar with the matter said.

The group includes many banks that feel disadvantaged by MBIA's move last month to separate its municipal-bond insurance business from its commitments to insure mortgage-backed bonds and other structured securities. The banks are counterparties to MBIA on derivatives called credit-default swaps that were written on securities they own, many of which have deteriorated since the onset of the credit crisis.

MBIA and New York State's insurance regulator -- which endorsed the restructuring -- are facing a growing backlash from banks, investment funds and other policyholders. These institutions were left holding contracts with a financially weaker insurer when MBIA transferred about $5 billion in capital from its main unit to another company that guarantees only U.S. municipal bonds. A spokesman for Mr. Dinallo declined to comment.
http://online.wsj.com/article/SB123681662421102255.html#mod=testMod

Sophisticated hedge funds were relying on MBIA's insurance as a counterparty?

Please!

Insurers want and need a bailout

The tumbling financial markets are dragging down the life-insurance industry, an important cog in the U.S. economy, as mounting losses weaken the companies' capital and erode investor confidence.

A dozen life insurers have pending applications for aid from the government's $700 billion Troubled Asset Relief Program, and the industry is expecting an answer to its request for a bank-style bailout in the coming weeks. The government so far hasn't said whether insurers will be eligible for the program.

The ramifications of a weakened life-insurance industry for the overall economy are significant. Life insurers are among the biggest holders of the nation's corporate debt. Together, they own about 18% of all corporate bonds outstanding, according to the American Council of Life Insurers, or ACLI, an industry trade group.

If life insurers stop buying bonds, the capital markets may not fully recover. In the fourth quarter of 2008, life insurers agreed to buy $3.3 billion in stocks and bonds through private transactions, down 63% from the previous quarter, according to a survey by the ACLI. Insurers have been putting more cash into safe havens such as Treasury bonds.
http://online.wsj.com/article/SB123681439092901753.html#mod=testMod

If they had Investment banks as counterparties, our Government would be falling over each other, giving them money!

And now these insurers have learned from AIG. Threaten systemic problems if they don't get the money. We won't buy bonds!

But where's the 401K bailout?

Geither's house for sale at above market price

Now we can rest assured that Geithner's bank plan for toxic assets is the same as his house.

Get someone to buy your assets at an above market rate!

Geithner's Coldwell Banker broker says "it is vey well priced. He wants to sell it fast."

Another broker disagreed. Scott Stiefvater, said that sales are so slow, that you don't know how low it can go, but "people are making offers that are 20 to 30 percent below the asking price."
http://www.newsday.com/news/local/wire/newyork/ny-bc-ny--geithnershouse0309mar09,0,6227294.story

It's listed for $1.635 million. He paid $1.602 million for it in 2004.

Zillow.com, the real estate pricing service also has a different idea of the house value. They estimate it to be worth $1,374,000, with a bid of just above a million dollars. Sell it fast? Only if favors are included!

• Zestimate: $1,374,000
• 30-day change: $28,000
• Value Range: $1,044,240 - $1,483,920
• Last updated: 03/09/2009

http://www.zillow.com/homedetails/charts/33049632_zpid,5years_chartDuration/

So Timmy wants people to overpay for his house.

Maybe he can get some hedge fund manager that is going to participate in the TALF program to buy his real estate, with an above market offer!

And then get a loan through Countrywide, with Chris Dodd's help!

Lay-offs even hit Sesame Street

The recession has spread from Wall Street to Sesame Street. The home of Elmo and Oscar the Grouch announced on Wednesday that it would eliminate a fifth of its 355-strong workforce as market turmoil ate into its income and assets.

Sesame Workshop, the 41-year-old non-profit educational organisation behind the Sesame Street television programmes, toys and community projects, said on Wednesday it was “not immune to the unprecedented challenges of today’s economic environment”.
http://www.ft.com/cms/s/0/429acec0-0e6e-11de-b099-0000779fd2ac.html

Come on, now we are having layoffs at Sesame Street because their portfolio took a hit? Even educational TV marks the bottom!

Remember "Lazarus come forth!" raised the dead.

So tomorrow we'll hear "Forbearance, come forth!" and the market will rise!

Why "Lazarus?"

Isn't this bull market "The Number of the Beast?"

http://aaronandmoses.blogspot.com/2009/03/we-go-higher.html

And in Heinlein's The Number of the Beast, don't the characters visit the fictional world of Lazarus Long?

http://en.wikipedia.org/wiki/Lazarus_Long

And isn't that what most prognosticators would call this new bull market?

A work of fiction?

But would Lazarus Long be short?

The bears are running scared

Today was a perfect day of consolidation. The bears tried knocking the stocks down, but no one cared.

Psychology is changing.

The bull may look timid, but that's because it's just getting started, and it's going to be big. The horns and snorts come later!

A few days ago, people were petrified about the downside. Now you have people scared about missing the turn; the turn that no-one believes in!

And they are scared because no-one is positioned for the turn!

Hedge funds are sitting on cash, money is parked in treasuries and cans of spam.

And no-one is in equities.

And this is the market, where no-one wins.

So we go higher!

Here's what the bull will look like later!

Jamie Dimon: "Get over it"

"I know mortgage investors may take issue with modifications but they should get over it," Dimon said at a U.S. Chamber of Commerce conference in Washington. He was responding to concerns that some mortgage investors may file suit if some mortgages are modified.

"It's a rational plan, good for loan servicers, good for investors and good for homeowners and good for the markets," Dimon said.
http://www.marketwatch.com/news/story/dimon-obama-plan-alter-loans/story.aspx?guid=%7BC4B85B61-C72C-4598-95EF-AD6D3DE5CFFC%7D&dist=msr_1

Why is Jamie playing ball?

Why do some hedge funds not want to buy the TALF?

The hedge funds, like Mr. Dimon don't want anyone looking over their books!

The government's $1 trillion program to spark consumer lending hit another roadblock when investors balked at signing an agreement required to participate in the program, arguing that it gave Wall Street dealers and the Federal Reserve too much power to look at their books and reject them from the program.
http://online.wsj.com/article/SB123673596626290901.html

And neither does Jamie Dimon. Did you miss this release Monday evening?

Citibank, Bank of America , HSBC Bank USA , Wells Fargo Bank and J.P. Morgan Chase reported that their "current" net loss risks from derivatives — insurance-like bets tied to a loan or other underlying asset — surged to $587 billion as of Dec. 31 . Buried in end-of-the-year regulatory reports that McClatchy has reviewed, the figures reflect a jump of 49 percent in just 90 days.

The disclosures underscore the challenges that the banks face as they struggle to navigate through a deepening recession in which all types of loan defaults are soaring.
http://news.yahoo.com/s/mcclatchy/20090309/pl_mcclatchy/3184724/print

But aren't the counterparties hedged with their derivatives? Isn't that what we heard from Fannie and Freddie? Whoops--Freddie came out with "earnings" today--A loss of $24 billion and another $30 billion needed from the taxpayer:

Freddie Mac, still suffering from the lax mortgage-lending practices of the housing boom, reported a loss of $23.9 billion for the fourth quarter and said it will need a $30.8 billion injection of capital from the U.S. Treasury.

Where did this loss come from?

Freddie blamed the losses on rising mortgage defaults and declines in the value of derivatives used to hedge against interest-rate risks and other securities.
http://online.wsj.com/article/SB123680408920799901.html#mod=testMod

So bring out the "populist rhetoric" but just don't scrutinize our books!

Diver fights with shark

"The shark made a roll and looked like it was going to charge us so I just went ahead and took the conservative route and put a shaft through its gills...

He said: "Once I shot it in the gills I felt a moral obligation to finish the job.

"I didn't want it to go on any longer than it had to. I shot the fish like I would do any other fish and worked it up closer and did my best to kill it as humanely as possible.

"I speared it in the gills which I knew would kill it and from that I tried to put a shaft into its brain as quickly as possible.

"I shot it six times in the head with a spear and I wasn't having much luck – it was a slow drawn out process.

"Sharks are so resilient and so tough from millions of years of evolution they are just survivors.
http://www.telegraph.co.uk/earth/wildlife/4972492/Diver-grapples-with-12ft-tiger-shark.html

Reminds me of the bear market. It's tough to kill!

But unlike sharks, bears are scared of higher prices and Government intervention!

Chinese exports plunge

Chinese exports plunged 25.7 per cent in February compared with a year ago, much higher than analysts had expected, as the global economic crisis began to take its full toll on the country’s export sector.

However, the government also announced a strong increase in fixed asset investment in the first two months of the year, which economists said was a sign that fiscal stimulus measures were starting to have an impact.
http://www.ft.com/cms/s/0/94035f16-0dec-11de-8ea3-0000779fd2ac.html

Who needs Chinese junk?

Buy Bank of America

Buffett said this Monday morning on CNBC about banking:

BUFFETT: The spreads have never been wider. This is a great time to be in banking, you know, if you just get past the past and they are getting past the past.

Wall Street doesn't buy into it. Wall Street is wrong. Look at BofA's net interest income the last three years:

12/2008 13,106

09/2008 11,642

06/2008 10,621

03/2008 9,991

12/2007 9,164

09/2007 8,615

06/2007 8,386

03/2007 8,268

12/2006 8,599

09/2006 8,586

06/2006 8,630

03/2006 8,776

BAC is trading at $4.79. Does that price reflect the widening spreads that Buffett spoke about?

Look at the calls on BAC. They are way too cheap. The May 5's are only $1.31, and the April 6's are only .59. You have a double and a triple in these numbers within the week. (I'm not advertising the March calls, because I own them.)

For once, Bank of America's advertising is correct.

It's the Bank of Opportunity!

For Wall Street and Main Street!

The "market" in Ben Stein

Ben Stein had a very good article in the NY Times Sunday, on ways to fix the market. I said it was painfully obvious that Ben Stein's solution was correct. (But then again, I've watched Ferris Bueller's Day Of way too many times!)



The entire story is at the link, but the Reader's Digest version is below:
http://aaronandmoses.blogspot.com/2009/03/formula-for-market-rally.html

REIN IN A RULE Immediately end the near-universal applicability of the accounting rule formally known as FAS 157.

REVIVE A RULE End “naked short-selling” and bring back the “uptick” rule.

ADD A RULE Don’t allow speculators with no insurable interest to buy credit-default swaps on bonds.

And I suggested another rule.

ADD ANOTHER RULE
If the seller of CDS Insurance cannot make the payment when default occurs, the buyer takes the hit.

And then I said, "That's the formula for a gigantic market rally! It would clean up all the gaming of the financial system, and make credit default swaps insurance, instead of just a "prop" bet!"

Today we had that gigantic rally. And we had the whisperings of changing mark-to-market accounting, and the bringing back of the uptick rule.

But I said there was a "market" in Ben Stein. Look what Joe Weisenthal, of Clusterstock (which is really a great site and a must read on the markets) had to say about Ben's ideas:

It's not really breaking news that Ben Stein's NYT column is a joke, but it's still surprising how warmed and ridiculous the ex-game show host's ideas can be...

Seriously, it's as though he went out of his way to suggest the three ideas that have been thoroughly debunked. Each is cosmetic, and none address any of the problems facing the financial system. Maybe he's finally going to throw in the towel.

Beyond his paucity of anything interesting to say -- which consistently embarasses the NYT business section -- there's something insidious about this idea that the only issue here is confidence.
http://www.businessinsider.com/ben-stein-runs-out-of-ideas-2009-3

Which side were you on?

I only bring this up, because it may prove difficult, for market participants to change their viewpoints on this market.

You can write something clever and wrong, but bearish, and it will get passed around like reefer at a stoner party. It doesn't matter if it's right; it only matters if it is bearish.

On the other hand, you can write something bullish, and be very right, and you'll lose half your readers.

To me, that shows the pervasiveness of the bearish mindset of the professional investor. (I don't mention mutual fund managers, because they are like Obama's team. They don't read blogs!)

Now I'm sure Mr. Weisenthal's piece on Ben Stein's piece was passed around by these professional bears. But did it do them any good?

At turning points, you need to change.

Yesterday, Buffett, when asked about shortsellers, said that he didn't care if they shorted his stock. He said, it would just bring in more buyers. When he was asked about the prices of WFC or USB he said he "didn't care."

Those who bought credit default swaps and those who shorted Berkshire had an opinion change today.

The stock was up 11,649 dollars!

That's the market we are in.

You can change your mind, or the market will change it for you.

But not before it extracts some pain from your wallet!

We go higher

I'd put another giant bull on the top of this piece, but you got that yesterday.

http://aaronandmoses.blogspot.com/2009/03/time-to-get-busy-buying.html

And you got a huge move in stocks!

This weekend, Barron's warned us about Dow 5,000.

If stocks do get to a P/E of 10, the S&P 500 could drop as low as 500, a decline of more than 25% from current levels, and the Dow Jones Industrial Average could drop toward 5000.

http://online.barrons.com/article/SB123638337231157995.html

So what. We go higher.

Roubini warned us that the Dow would hit 5,000.
http://www.freerepublic.com/focus/f-news/2202859/posts

So what. We go higher

Meredith Whitney warned us that we will have a $4.7 trillion contraction in credit card loans.

Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.
http://www.reuters.com/article/newsOne/idUSTRE52921M20090310

So what. We go higher.

Trot her out on CNBC and let her pump the bear case.

So what. We go higher.

Now Roubini and Whitney, aren't the bloggers in the "cottage industry" of bears that I talked about yesterday, but wouldn't a new bull market meaningfully impact these bears? After all, who needs "Dr. Doom" if what we need is "Dr. Boom?"
http://aaronandmoses.blogspot.com/2009/03/market-bet.html

Moody's warned us today about the new "lepers." They have now published a list of "Bottom Rung" companies that are more likely to be first to default.

So what. We go higher.

Moody's estimates about 45% of the Bottom Rung companies will default in the next year. Combined these firms have more than $260 billion in bond and bank debt. A default ranges from filing for bankruptcy to a distressed debt-exchange to missing a debt payment.
http://online.wsj.com/article/SB123664643956778537.html

Lepers? Give me a break!

Leprosy is a bacterial pathogen that attacks the nervous system and the receptors for pain. Lepers have sores and disfigurements because their system breaks down, and they can't feel any pain from their cuts and bruises. Left untreated, the sores become greater. If you want to read about leprosy, and the "gift" of pain, you can start here.
http://www.amazon.com/Gift-Pain-Paul-Brand/dp/0310221447

So Moody's is now going to tell us that these companies on the bottom rung that are on the default list are unaware? That they don't already feel the pain? When you feel pain, you can do something about your situation.

And right now, the whole country feels the "gift" of pain.

Which means that this leprous "bear market" is now over!

Now in "biblical" times, the leper was cured instantly.

Matthew 8:3 "...And immediately his leprosy was cleansed."

But it doesn't happen that way in the stock market. Here, the cure starts with leaks. Leaking of government intentions to participants in the stock market, and by changing psychology.

Yesterday, the market remembers Warren Buffett on CNBC and Jack Welch on Morning Joe, but they forgot the big gun in the market, Paulson & Co. who tacked on $500 million the last few weeks with his position with Rohm & Haas.

Most people, (myself included) thought this deal wouldn't happen with Dow Chemical at $78. Conditions had changed much in the world since the deal was first announced. But the deal was done, and Paulson and the Haas family get a preferred stake in Dow Chemical.

Dow Chemical followed Paulson's script!
http://www.reuters.com/article/innovationNews/idUSTRE51457E20090205

It's easy to hold your position, when you know the other side's intentions.

But maybe, there was another "stabilizing" factor involved.

Wouldn't this deal help the psychology of the market?

Today, we heard that the government is considering revising mark to market accounting for banks, and considered bringing back the uptick rule.

Now who was the most profitable bear on the market? Wasn't it John Paulson the $3.7 billion dollar man? What if he would change his views?

Maybe he had some revelations with his meeting with Dow Chemical, Rohm and Haas, and the government meddlers!

In any event, we saw big buying, and big buying in size, throughout the day.

And the most crowded trade is too be short.

Today was the start of the unraveling of the short bet, and the beginning of a new bull market.

And it started at S&P 666, the number of the beast.

It's going to be a hell of a bull!

Wall Street's $18.4 billion of bonuses

A great story and summary over at Vanity Fair of Wall Street bonuses and misdeeds!
http://www.vanityfair.com/politics/features/2009/03/wall-street-bonuses200903

Sheila Bair is now "on board" for bank handouts

Sheila Bair now wants the government to take the bank's toxic assets:

The government's plan to strip banks of troubled assets could force some firms to record large losses, but the painful purge would help restore confidence in the banking system, according to Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.

Bair said yesterday that the effort might require more money than the $700 billion Congress has approved to aid the financial industry, but she added that taxpayers would probably reap an eventual profit on the asset purchases.

She said the greatest challenge was persuading banks and taxpayers to accept the necessity of the costly program.

"This takes courage to do, but if we don't do it, history shows that this kind of mechanism -- recognize the losses, get at the root of it and move on -- this is how you jump-start the economy. The other option, just to park those assets on the balance sheet, I don't think that gets us very far," Bair said in a discussion with Washington Post reporters and editors.

The government plans to partner with private investors to buy troubled assets, in part by providing financing at low cost. Bair and other federal officials said discussions were ongoing about the appropriate extent of the federal subsidy. A larger government contribution would allow investors to pay higher prices, limiting the losses that banks would record but also exposing taxpayers to greater risk.
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/09/AR2009030902627.html?hpid=topnews

You don't even need to comment!

The bad bank aggregator, or public-private partnership is just the bad bank TALF!

TARP has largest weekly drop ever

For the week ended March 6, 2009, the aggregate Ethisphere TARP Index is down $20.7 billion for a total loss of $123 billion to date, out of the original investment principal of $306.1 billion (now including all companies receiving TARP funding, not just capital purchase). To date, each taxpaying household has lost $1,082 of its investment.

http://ethisphere.com/ethisphere-tarp-index-report/

And Bernanke won't tell us where the other bailout money goes!!

Give us today, our daily bread

Depression cooking with Clara, made it on the #1 financial blog on the Internet today.
http://globaleconomicanalysis.blogspot.com/2009/03/deflationary-depression-returns-to.html

She tells stories about the depression, and gives depression era cooking tips. She's a sweet old lady, and she has quite a following on www.youtube.com .

Scroll through the comments on her videos and you'll see surprising, wonderful things.

In fact, I'm going to go and bake some bread!

Henry Kravis and the $28 million dollar chair

Henry Kravis paid $28 million for this chair!

http://www.economist.com/books/displaystory.cfm?story_id=13226433&fsrc=rss

Now we know why we need private equity.

Someone needs to over-pay!

Put King Henry in charge of buying the bank's toxic assets.

And quick!

Dow buys Rohm & Haas for $78

Financing comes from Berkshire, Kuwait, a credit line, and a preferred investment in Dow Chemical from the Haas family and Paulson & Co.
http://finance.yahoo.com/news/Dow-Reaches-Agreement-to-prnews-14587278.html

An extremely surprising outcome in today's environment. ROH shareholders got what the original merger agreement promised.

It almost seems as though the deal was done at the price to instill confidence in the markets!

Maybe someone learned from the original $2 takeunder of Bear Stearns!

Kass vs Buffett!

Today's column parodies Warren Buffett's Oct. 16, 2008, New York Times op-ed, "Buy American. I Am."

The portions in italics are meant to represent what Mr. Buffett's updated thoughts might be if the editorial were rewritten today, four and a half months after its original publication:

By WARREN E. BUFFETT
Published: October 16, 2008
Omaha

By DOUGLAS A. KASS
Published: March 9, 2009
Palm Beach

The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

I grossly underestimated the scope of the world's economic problems in October. I suppose when ignorance is combined with leverage, I, in particular, should have better anticipated the consequences we now see today. No longer have the leaks turned into a gusher; they have become more like a hurricane or a tornado in proportion. The accumulated loss of business and consumer confidence coupled with an acceleration in the declines in stock prices have translated into a classical negative feedback loop, which has worsened the fundamental backdrop well beyond what I and most others had expected. Indeed, I expressed a more cautious view in my letter to Berkshire Hathaway investors last Saturday.

So ... I've been buying American stocks. This is my personal account I'm talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100% in United States equities.

While I expanded my personal holdings of U.S. stocks during the fall and increased Berkshire Hathaway's exposure to equities since October 2008, over the short and maybe even intermediate term, I was clearly premature in going all-in. In retrospect, back in October I bought too many expensive suits that, at the time, looked cheap to me. I failed to recognize the scope of the world's economic weakness and the depth of the problems in our financial system.

Why? A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation's many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records five, 10 and 20 years from now.

What I have learned from my investment experience over the past few months is that public opinion poll is no substitute for thought; sentiment is always trumped by fundamentals. In my October editorial, I expressed an investment strategy -- namely, being fearful when others are greedy and greedy when others are fearful -- which had worked brilliantly for me and others in previous cycles. It was a simple principle that has resulted in profits well beyond my wildest dreams, but this time the strategy ended up being more of an act of a simpleton! Buying the dip, at least at the level that I identified as providing me (and Berkshire) with value, proved wildly unsuccessful against the backdrop of a Black Swan event in equities. With the benefit of hindsight, this time the fear on the part of seasoned and unseasoned investors had validity and the economic damage incurred over the past six months will have a lasting impact.

Let me be clear on one point: I can't predict the short-term movements of the stock market. I haven't the faintest idea as to whether stocks will be higher or lower a month -- or a year -- from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

My October entry point in buying stocks was poor. I failed to consider what I had previously written in the past about market timing and investment strategy. Firstly, "Don't try to catch a falling knife until you have a handle on the risk." Secondly, I paid too high a price for the value I received in buying stocks and the degree in which I went all-in is another example that I should have practiced what I preached (and wrote!) -- that is, "short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children." Thirdly, I forgot my first rule of investing, which is "not to lose", and I also forgot the second rule, which is "not to forget the first rule."

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30%. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor's best friend. It lets you buy a slice of America's future at a marked-down price.

It is clearly different this time. I should have heeded my advice that "if past history was all there was to the game, the richest people would be librarians." I should have paid attention to my Depression reference because there is a growing risk that the current economic downturn might morph into just that! In the past, stocks have anticipated an economic upturn in advance; in this cycle, stocks may not respond positively until it is clear that public policy has gotten traction and is reflected in better visibility of economic stabilization/recovery.

Over the long term, the stock market news will be good. In the twentieth century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

Chains of habit are too light to be felt until they are too heavy to be broken. In the investment world, the rearview mirror is always clearer than the windshield. I have to begin to reassess whether my favorite holding period should still be forever. Maybe my investment relationships should no longer last a lifetime.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

My stock selection has been poor and I have been too concentrated. I, too, have been exposed as swimming naked when the market tide went out over the last six months. I failed to properly analyze the risks of a number of my investment purchases. This is particularly true in my large involvement in financial stocks, as the moats I envisioned that protected their business franchises have flooded, reflecting the commoditization of financial products. Equally important, I materially miscalculated and overestimated the values of my financial holdings' assets, including American Express, Wells Fargo and U.S. Bancorp, to name a few. To borrow from Gertrude Stein, "There was little there, there." Stated simply, in my investments, I thought that I had found one-foot bars that I could step over, but they turned out to be ten-foot bars that I couldn't leap over!

Today people who hold cash equivalents feel comfortable. They shouldn't. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

I should have been more risk-averse. The depth of the world's economic problems suggests that deflationary forces will be with us for some time to come. Inflation has been delayed.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky's advice: "I skate to where the puck is going to be, not to where it has been."

Perhaps in recent years I enjoyed the investment process more than the proceeds and rewards. Maybe I should not have made some of these decisions on my own. Maybe I should have sought advice from industry specialists or from analysts who had expressed concerns that the foundations of our credit markets, our economy and the world's stock markets were increasingly on shaky ground.

I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: "Put your mouth where your money was." Today my money and my mouth both say equities.

I have put both my foot and my money in my mouth. I went on investment "tilt" and ended up being the patsy at the poker table. I should have taken my own advice when I said that "it takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."

-- Warren E. Buffett is the chief executive of Berkshire Hathaway, a diversified holding company.

-- Douglas A. Kass is President of Seabreeze Partners Management, Inc. the General Partner of Seabreeze Partners Short LP and Seabreeze Partners Long/Short LP.

http://www.thestreet.com/p/newsanalysis/investing/10469192.html

The market bet

Either we turn here, or the public will soon find out every back door deal that our Government has done with the financials, and every back door pay deal where upper management has stolen money from the shareholders.

And if stock prices don't start going higher, we'll soon have every pension, and insurance company in this country on the ropes, and soon every American will be sweating their pensions.

And if the economy doesn't soon start to turn, unemployment will ratchet markedly higher, and the seeds of social unrest will blossom faster than this financial crisis has developed.

But to even talk about what could go right, would label you as a poisoned pollyanna.

We have a new cottage industry that has grown up, disparaging anything that has a viewpoint, that doesn't embrace Armageddon.

It seems that every Wall Street shill, that has lost their bonus, stock portfolio, or mistress, has now decided to use their talents warning the world that financial calamity will now befall the rest of this country, provided of course, they can be compensated chronicling this country's fall into the abyss of the coming depression!

There is no question, that we face unprecedented times, and that unprecedented amounts of money have been lost, and the wealth of the people have been taken away.

But Wall Street seems to forget that wealth is not measured by how much you have or lose, but by how you handle what you have or what you have lost. That's the wealth that can't be taken away.

And unlike Wall Street, Main Street has already recognized this fact, and they have developed a steely resolve to make things better.

They are the people that aren't worried that their neighbor may be getting some help, because that person, that is getting the help is their neighbor!

The sooner Wall Street recognizes and embraces this simple truism, the sooner we can get out of this mess.

Or they can have their own Armageddon.

That's the bet.

Where did all the oil bears go?

What happened? I thought oil was going to 30?

Anyone check the price on the double crude short, DTO? It's at 173.

Two weeks ago, I mentioned this as a short at 231 as a play on oil. That's 58 points-and counting!
http://aaronandmoses.blogspot.com/2009/02/oil-play-for-oil-bulls.html

Now that contango has narrowed, and we may start approaching backwardation, even the double oil bull, DXO at 2.55 can make coin.

Time to get busy buying!

Didn't anyone listen to Buffett this morning? The spreads in the banks will be enormous.
WFC at 9
USB at 9

How about industrial companies?
IP at 4
GE at 7
AA at 5

How about steel?
X at 17
NUE at 32
AKS at 6

How about oil?
COP at 36

How about a spec in coal?
PCX at 3

How about drilling?
NOV at 25

There is a lot of action in a lot of names, but everyone has their bearish blinders on.

Take them off, and you can see sunlight!

China fills up their oil reserve

China picked up 100 million barrels of oil when the price was down to fill it's strategic oil reserves.

Supposedly.

Why would China tell the world it's state secrets?

Here's the story:

BEIJING, March 9 (Reuters) - China has filled all four of its state-owned emergency oil reserve tanks to the brim and should now invest in oil tankers to add more to inventories while oil prices are low, a senior industry executive said on Monday in a rare acknowledgement of Beijing's secretive oil inventories.

Coupled with data last week showing a one-third rise in commercial crude oil stockpiles last year, the admission suggests that a large share of of China's oil import growth last year was pumped directly into storage, and could be relied upon quickly to soften any demand recovery or if prices should rise.

It also backs up speculation that the world's No. 2 energy user has been making good use of oil's $100 price fall to boost supplies while demand falters in an unfolding economic crisis.

China Shipping (Group) Co President Li Shaode told Reuters on Monday that he had proposed that the government use some of its foreign exchange reserves on floating oil storage...

The first set of China's strategic oil reserves, which can hold about 100 million barrels, were built over the past two years, but data on their status is considered a state secret and information about their operations or tank levels is scarce.
http://www.reuters.com/article/rbssEnergyNews/idUSPEK20879620090309

NY Times completes sale/leaseback of headquarters

The NY Times raised $225 million with a sale/leaseback of it's headquarters. It gives the Times $200 million after you take out the $24 million in lease costs for the next year.

Some breathing room for "The Gray Lady."

The financial tab so far: $50 trillion

Falls in the value of financial assets worldwide might have reached more than $50,000bn, equivalent to a year’s global economic output, the Asian Development Bank will warn on Monday.

Asia has been hit disproportionately hard, the bank will say, in a report that warns of many Asian stimulus plans lagging behind those of the leading global economies.
http://www.ft.com/cms/s/0/3f9a2bd8-0c0e-11de-b87d-0000779fd2ac.html