Bill Cara: Daily Report for Mon, Jan 14, 2008

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January 14, 2008

Daily Report for Mon, Jan 14, 2008

Precious metals are flying high this morning on the backs of more stimuli from the US Fed and Treasury.

Spot gold at 7:17am is up +13.50 to 909.20. Spot silver is up +0.21 to 16.44.

Crude (Feb futures) is up +0.785 to 93.475.

The Euro is up +0.0107 to 1.4887.

In Asia-Pacific, most markets closed before the Feb & Treasury rolled out their stimuli promotions today: the Nikkei 225 closed down -1.93 pct to 14110, the BSE 30 -0.48 pct to 20728, and the Hang Seng -1.48 pct to 26468.

The European bourses are up marginally: FTSE +0.10 pct to 6208, DAX +0.23 pct to 7735, and the CAC +0.32 pct to 5388.

Pump, pump, pump…

Comments & Outlook

Humungous Bank & Broker is in a world of hurt. Ergo, turning on Bloomberg this morning, I was not surprised to see a full court press by the US Fed and Administration. There were more “short-term” stimulus packages being discussed than I can ever recall.

DC now stands for Desperation City.

How bad is it? Do we really know how many units of HB&B are going to be left standing when the dust settles?

Reuters is reporting that UBS is bracing for a tough shareholder meeting on Feb. 27. Perhaps these lines from the article says why?

“UBS said it had decided against making a rights issue of shares to raise capital on the grounds of cost, complication and time.” (LOL)

“(The Company) has appealed to its shareholders to back a capital injection by the Singapore government and a Middle East investor but warned it still cannot predict how the sub-prime crisis will play out.” (No Longer Laughing)

The problem you see is that, with dubious assets on the books plus their off balance sheet liabilities that cannot be quantified, UBS doesn’t know if it is solvent. So it can’t go to the public shareholders to raise the new capital it requires. Doing so would also require clear representations of the assets and liabilities of the company. Nobody on the Board would agree to such a thing. Hence, UBS and the other bankers in the same situation, including Citigroup, Merrill Lynch, Bear Stearns, and many others, are being forced to sell 10, 20, 30.. percent of their capital to private foreign investors, preferably state-sponsored investment funds.

This is the G-20’s new game. I imagine it was cooked up by US Treasury Secretary Hank Paulson – the $700 million tax-free man who formerly was in charge of the HB&B Plunge Protection Team until the White House came calling.

Rather than looking bad by having to admit to domestic investors and taxpayers the extent of today’s crisis when doing the urgently needed capital raise-ups, HB&B and DC are going hat in hand to foreign sovereign wealth funds. In other words, it’s a case of “You scratch my back; I’ll scratch yours. In doing so, the People will put up the capital and we’ll stay in control by shutting down all talk of crisis. We’ll even tell the People we are doing all this for their benefit.”

LOL – well actually not because it’s a crying shame. Hypocrisy reigns.

Btw, how long can Circuit City (CC) stay plugged in? Sales are down and investors are walking away.

Just like HB&B, when the dust settles, how many retailers will be left standing? How many investors of real estate will be left holding the bag, ie, the leases of these failing retailers?

I suppose it’s also a matter of how high will the price of gold go.