Good Morn! SKF - Glad I held on!

OUCH! Job report from the US.. BRUTAL!!!! 6.2% unemployment.

And what's interesting.. is they keep REVISING the previous months numbers DOWN!!!!!

Russia

Excerpt from WSJ online More News section:

Financial Times: Russia's central bank intervened heavily to support the ruble, as analysts said $21 billion of foreign capital might have been pulled out of the country as Moscow paid the price for its conflict with Georgia. The currency intervention was the first since the height of the war with Georgia at the beginning of August. Before the conflict the central bank's interventions in the market were aimed at stemming the rise of the rouble.

Heading out. Have a good day.

Hope everyone is doing well considering this nasty market. just wanted to check in.
i am still reading the blog everyday. just not invested.

Good morning.

Here are your Cara 100 Ratings Changes:

BBBY - Coverage Resumed at Friedman Billings with an Underperform Rating.

NUE - Coverage Initiated at Banc of America Securities with a Neutral Rating.

---------------------------------------------------

Hope that everyone is short the major indexes today. Oh, the humanity !

"Job report from the US.. BRUTAL!!!! 6.2% unemployment."

A fitting coda to the week of denial, deflection, and shadow puppetry going on in the Twin Cities.

I said in 2004 when Americans (with the help of some Ohio skullduggery) allowed Bush another term that we would get what we deserved. And we have.

If the American people don't wake up and vote these clowns out of office, we'll be that much more deserving.

Vad called it- gap down open, which may set up a green close...

from Trader Mike Blog

“Surely the market’s due for a bounce here”, I was thinking. But once I started looking through the charts tonight I changed my mind. I think there’s plenty of room left for even more selling. That’s because none of the major indices I track have oversold stochastic reading yet.

http://tradermike.net/

re: unemployment data

I wish it were ONLY 6.2%.

Here we are at an admitted 10+% and I am convinced that is skewed downward as well.

What the numbers never reveal is the diminished job quality. My son has a BS in statistics. His employer recently hired two "new" analysts, both with PhDs. (At least they are US citizens — Bill Gates has pushed for more visas to hire PhDs from India at entry level pay.)

Millions now working at one or more part time jobs —minus health insurance, 401(k)s, or any other benefits.

No, Phil Graham, this is NOT an imaginary economic problem. And the whining you perceive should become a shout!

What trickles down is what we used to shovel out.

Oh, for a candidate who knew something about day to day problems. But...What do horsemen know of tired feet?

And Bloomberg has a video up with Goldman's Hatzius forecasting unemployment at 6.75% by the end of 2009.

Bill, do you really think the GOP can manage to prop this thing up heading into the election?

jk484.....insightful post, nice job.

grantmi- so you're holding SKF and HNU.to? put a little bailey's in your morning coffee ;)

Cara 100 Update:

BBBY - Longbow Initiates Coverage with a Neutral Rating

WMT - Target Price Raised from $59 to $66 at Lazard Capital

Tell me the unemployment number didn't leak out early yesterday.

My thanks to Nemo, Northforker, Chickenpookie, and KarIN, for all the shared insights on deflation yesterday.

After nearly 50 years as a long term investor, I still tend to think that way. What I got from your comments and applied to the quote from Ritholtz on deflation is:

1. He may have been speaking in the moment (with inflation and deflation an on/off shorter term condition).
2. We are witnessing, as the dollar strengthens, those things measured in the USD falling in price.
3. And, of course, when our currency is weaker foreigners buy more here. (We become the "cheaper foreign source" our consumers were promised—whoopy! :-(

So, my longer term strategy is still intact: I'm heavy on cash, holding bullion bought over time (waiting to add) and still believe oil will be of more value than the dollar due to increasing number of users and falling production.

A lifetime of continuing inflation makes it hard to switch to a rapidly changing outlook. At my age next week's lunch menu is long term thinking — except for concerns over my wife running short when I'm gone and my kids whose future is not like mine at their ages.

Northforker,

If buying is in the longer term Treasuries then people must expect rates to fall further, or deflation to be of long duration.

Right folks?

Posted by: Grym at September 5, 2008 8:05 AM [link]

2nd_ave...

yup!! and some HGU.TO for some gold... too!!

Boooyyahhhh!!

Not sure I'd buy the green close. Probably bounce and fade. It's Friday and the news has been REALLY bad this week.

no way would i be buying the close...thinking about OEX calls at the open, though...

Pimco’s CEO had resigned:

“Bill Thompson, 63, a 15-year Pimco veteran, will retire from his co-CEO post at the end of this year. He says one reason is because he wanted to leave at the top.”

BH- LOL, haven't heard that one in awhile...the truckload of QID you picked up off the street in the thirties- hope you find buyers again soon in the fifties...

2nd,

'bout time these damn tech stocks started correcting. I'm looking for high 50's, maybe 60 for QID.

Regards

Bull, I'm sure Nokia is helping that QID position.

http://tinyurl.com/6r7a93

Congrats to those who were positioned for the meltdown in these markets. My consolation is that at least my online pals are doing ok.

Added UYG @ $20.20

We might have a rally today or are they going to sell the rallies?

I am long OEX, WGW, UYG...mostly cash.

Let's talk Credit. Easy money.

Have we noted that Prime delinquencies outpace Sub-Prime delinquents, and have for months now?

Have we noted that USA GDP growth was dependent upon new debt at a 4 or 5-to-1 ratio?

Have we noted that the easy money from the Fed lending windows has not been passed on to the "Joe Publics" (regular borrowers) of the world?

Can we quit talking about liquidity crises and start using the word solvency?

Have we noted the recent slim volume on the various markets over the last few weeks and the decreasing number of open commod's contracts?

This is credit contraction, and to my untrained nose it smells like deflation.

We've been accustomed to markets with mountains of hot money sloshing around. We know those days are over, right?

I'm trying to picture a market in which the mega-money players have less money with which to play, ie. Fewer tickets at the Big Horse Race.

I'm trying to picture an S&P with a 9 handle. And I'm thinking, unless HB&B figures out how to put 3/4 of China on the credit / debt treadmill, I'm also thinking we may run out of bubbles and things will like downright nasty in 2009.

do u think we will have a war?
I think so. Last night, i went to gym and met two guys. One guy was in unitform. another one was talking about on duty in 6 months? Maybe I am too sensitive. But if we found a lot of guys in unitform around, something is happening.

Interesting 9/5 "Is gold getting ready to bounce article" http://seekingalpha.com/article/94060-is-gold-getting-ready-to-bounce?source=d_email

According to Bill's simple RSI system, GDX has entered the accumulation zone. I will be a giant buyer when it generates a buy signal, and I will be using the options strategy he has described.

Steve - I am also watching GDX/GLD and using Bill's system. GDX just popped a tad outside the 32p/33c's I bought yesterday.

"Day traders and swing traders of the stocks will be waiting for the next flood of margin calls and resultant sell-off in the goldminer stocks. That could happen on Monday and Tuesday. We’ll have to wait and see." GG 30 puts earlier today. Nice to have opposing views.

Regarding those margin calls, looks like we just had a nice surge.

This is fugly.

Sheesh ... SLW hasn't been this low since March 2007. With no end of selling in sight!

From the set of scenarios I described yesterday:

"Some aadditional thoughts:
- if some positive news development occurs overnight and we get a gap up, it will only prolong agony and gap will be sold into;
- if bounce develops too early in the morning, it will be sold into;
- for a bounce to be sustainable and end the day in the green, we need gap down and early selling, desirably fast and with good volume"

So far the second is taking place. The longer this lingering drags out the less chance for a meaningful bounce today

number2son, I'm looking to see how SLW reacts around the $8.75 - $9.00 mark; I think there's some long term support there. I'll probably buy a small position to see if it holds. If it doesn't hold, whoa nelly.

I just pulled up a 5 year chart on SLW, Blowout. It's broken through a long-term trendline extending back to 2006.

I'm thinking of selling some puts myself.

So, this is the second day in a row where someone flipped the SELL-THE-MARKET switch at about 10:30 a.m.

I'm just getting killed in ESLR right now. The whole sector has been pummeled as bad as any other. ESLR is 20% in just a week and nearing its 52-week low. Days like this make you seriously reconsider your plan.

FCX ~ 69, any interest?

As Bill has said many times in the past, when the market heads down in earnest, they take everything down.

A furthering of the liquidity crunch will force more selling across the board, IMO. We're not there just yet, but that storm is fast approaching.

Vadym Graifer

Thanks for the insight. Hope you are correct. Heavy weighted in shorts [QID/TWM/SKF]

Dude, no kidding you have to re-evaluate your "plan". Most "plans" are doomed to failure under the best of circumstances. In this market, if you've got a plan worth following, why don't you share it with the room? Even if you know how to trade this market is butal. It's dog-eat-freaking-dog. Welcome to the jungle.

When eslr broke it's eight-fifty support yesterday ya HAD to exit that woofer, if you were too thick to take the hint of the succession of higher lows.

And 2nd, those books are startin' to look good on my bookshelf, aren't they?

Gold Futures' Dirty Secret: interesting article on Seeking Alpha

http://tinyurl.com/5g55al

JohnE, according to Bill's simple RSI system, the time to buy is when it emerges out of the accumulation zone. I don't know how long it will stay down in there while prices keep going down. Of course Bill has said this morning to buy the next extreme sell-off.

Thanks for the words of encouragement, sharkster. Didn't you know it's bad form to kick a man when he's down? ;)

But I follow the fundamentals of this company and sector closely and my plan was to hold these shares for over a year, at least. I sold some calls to hedge my position. And I'll continue to do so.

We'll see how that plan works out. But it's my plan and I'm sticking to it.

ESLR: was buiding a nice position near 8.56 when it broke through. Was a little late but took my licks and will wait for 7.52 or thereabouts.

Was forced to dump a few small positions when this wave swamped the boat. Cut your loses while they are small so you can live to trade another day.

I'm shopping for more FRO today, I like that dividend....

Energy is being cannibalized.

CP

There's little support for FRO until 43. As we've learned from the financials, divvys are never safe.

A dumb question. I understand how selling puts and using the proceeds to buy calls work. However, how is that materially different from just buying the shares?

Justin

Totally out of SKF at 119.92 — looks a bit too hesitant today

QT,

Energy is taking it on the chin, EXCEPT HNU.TO, the only strength I see on my monitor.

Blowout Preventer

My old employer RDS.A [Royal Dutch Shell]is about to become a penny stock. :-)

been short ambac...looks like theres more

ROM: Below January and July levels.....

jk484,

I've never bought on the futures market, but if the POG is being suppressed by artificial "paper-selling" on the futures market, couldn't folks buy a futures contract, hold on to it, and take delivery (getting the physical metal at the discounted (according to the article's thesis) price?)

Anyone here trade Gold back in the early 1970s? I didn't arrive until 1972, so you'll have to forgive the ignorance ;-)

Anyways, how's this sound--an early 1970s run up from approxmiately $30 to $200, then a spank down back to $100, and then the late 70's rocket launch that ended with $850 in 1980.

I know history never repeats, but it rhymes, so I'm really starting to consider that we could see $600 (or less) gold in the next year or so on the way to $2000 or higher (four or five years out?)

SteveC - GLD is a happy camper this morning, it's been trending up all week in a peculiar way. Maybe this is the beginning of the delink with oil? NYMEX gold is up very nicely. GDX has even turned around.

SLW bounce. Check out MATK. UAUA green. Do DD. My "plan" on wednesday was to take some profits out of QID. HMmmmmmm. Also sold TWM but added to SKF.
Just sold SKF and QID. My tech stock list is turning green.
peace

BP,

I don't do futures either.

the main point of the article is about how the gold market is manipulated by the central banks.

you could ask the author. there is a comment section at the end.

Kaimu has written a lot on this subject in the past. he might be able shed light on this

Just reread Bill's Daily Report for today. In the commentary and outlook he wrote....
"for a time, which will boost the precious metals a bit (temporarily), so today (on a bit of strength) will not be a good day to buy those precious metals."
Thank you Bill, I was checking out GLD vs GDX vs SLW as to which to reinvest my small gains. I need to read your words over and over before they sink in
Thanks for your words...I'll get it in time.
Thanks to all blog posters. Have a great weekend, I'm off to work (and in my mind Manyard G. Krebbs shouts WORK!!!!)
Protect principal.

Hmm silver got knocked again..

Another article from Seeking Alpha

Precious Metals Manipulation: Lawyers Prepare for Battle

Word on the street is that previously silent victims of precious metal manipulation are now, for the first time, grouping together to do battle in the courts of the United States of America. Class action lawsuits are being planned against the suspected manipulators of the gold and silver markets. What is the basis of the lawsuits?

http://tinyurl.com/5hczmk

FRO - 200 shares @$49.01 for a total 330 shares - The Div will pay my electric bill with change for duck food, mustard, & biscuits.

XIU.TO index bounce. Didn't break through Mar lows of $18.83 yet.

Low of the day?

$18.84

Currently at $19.07.

Where's it going?

flipped to long abk and profited nicely.

RE: GOLD

This blog recaps the year since gold broke out from its 15-month consolidation on Sept. 4, 2007:

http://tinyurl.com/2ktedf

It concludes:

"It looks as though the bulk of the correction is done in terms of price, though not in terms of time. Gold may need to creep along the bottom of its [weekly] channel for quite a while to form a base for the next rise to the top of the channel to challenge its March high."


Good luck and good trading!

Bill said "As I see it, traders with a three-year time horizon can buy Gold with a 7-handle and Silver with a 12-handle and do well over that period."

I see "handle" used occassionally and don't know what it means. Fill me in, please?

BirdDog,

The term handle refers to the first numeral in the stock, commod, ETF, etc's. price.

A "7-handle" means a price in the $700's.

I'm learning! I'm learning! Bought some AGU at close yesterday. Sagged this AM, bought some more near low, then set a price to sell all while driving to work, got in and was out with small profit. Thanks Vad, David, et all of you, as my knowledge furthers on how to ride the beast!

Silver at 12.07. Is this qualify as another extreme sell-off? You be the judge.

I'm waiting until next week.

Silver is getting crushed, yet gold seems to be fine. Curious.

Haven't been hearing much about Iraq lately. The administration seems to have changed it's focus to Russia, and now even Libya! One we are bringing the stick, and the other the carrot. Only mention it for any macro investing implications.

http://tinyurl.com/5twuhd

http://tinyurl.com/63h3p8

C- Mark! No. They're taking gold down too.. the bastards!!!

Ah there was the fake volatility surge by da boyz to stave off the margin calls.

im growing tired of these articles about gold manipulation and lawsuits.

these law suits will go nowhere much the same as lawsuits against barrick for the past 15 years have resulted in nothing affectual to the gold market. GATA, bless their hearts because some very intelligent people are affilliated with them but have done absolutely nothing of any material value to the gold market, if anything they claim things are getting worse, so how have they benefited us or our trading?

its been 3 years of nothing but cries of manipulation and that its the right time to buy jr. golds because they are being suppresed and are at rock bottom prices.

eventually if and when shares rebound, there will be no shortage of back-slapping going around for the broken clock writers who were right twice a day.

gold has supposedly been "close to bottoming" $150 ago. im not suggesting that because they were wrong their opinions shouldnt be counted. i am suggesting that the complete and utter lack of objective analysis in so many of these newsletter writers beyond TA and outright speculation is the only evidence of collusion and manipulation in the gold market.

Quite the rally off the Lehman rumors. Da Boys must be desperate!

Financials are holding up rather well so far this week. Seems like they washed out in July, although fundamentals keep getting worse.

Recent action in PM looks like margin call selling is finally the dominant driver. I'd probably start increasing my silver position at 11+ and then at 10+

Lehman rumor! Which one today??

Consequences of a Fannie Freddie Bailout
from the Daily Reckoning

THE REAL COST OF A FULL BAILOUT
by Don A. Rich

A recent study from the Congressional Budget Office (CBO) has zero credibility. It pegged likely taxpayer losses in the Fannie Mae and Freddie Mac bailouts at $25 billion. For those with a sense of history, it is worth remembering that the S&L bailout had a $160 billion price tag. The numbers diverge so far from reality as to be laugh-out-loud funny. Funny, that is, except that the CBO estimate demonstrates a willful disconnect with the actual consequences of federal government actions.

As demonstrated below, the real cost of the bailouts will easily exceed $1.3 trillion. In fact, the real cost is likely to range between $1.3 trillion to $1.6 trillion, and is not unlikely to reach $2.5 trillion.

Between 2001 and 2007, Fannie and Freddie purchased or guaranteed $700 billion of Alt-A and subprime loans. Given the default rates on these loans – and the fact that the price of the housing that is the ultimate security of the loans will, for reasons demonstrated below, fall by at least thirty percent – this alone implies a loss for Fannie and Freddie on the order of $210 billion.

Fannie and Freddie acknowledge already-impaired loans on the balance sheet of $19 billion, which they have used creative accounting to avoid deleting from the shareholder equity account. This means that Fannie and Freddie have a maximum of $64 billion in capital remaining.

Given the inevitable losses on the Alt-A/subprime portion of their portfolio, it must be the case that if the federal government, as it is doing, guarantees Fannie and Freddie's solvency, the difference between the loss and the capital to be made up by the government (i.e., the taxpayers) must equal, not $25 billion but $147 billion.

That alone would mean that the CBO is blowing smoke with their estimated cost figures, and if you think back to the S&L cost of $160 billion, this is not a surprising result. The real picture is so much worse that it is pretty obvious the CBO is flat out inventing figures just to get the politicians through November.

The real story is simple. We have witnessed the largest asset-price bubble in US history, making the tech-stock bubble seem like an overdone weekly rally.

When you look at the graph of the Case-Shiller residential real-estate index, an index dating from 1890 to the present and an index which measures the cost of housing in comparison to other goods, the first thing you see is that the 2001 to 2006 bubble stands out like a fifty foot saguaro cactus in a patch of daisies. There simply has never been

When you know what you are looking at – the biggest bubble in history – it is scary.

To be precise, the Case-Shiller Index in its entire 110-year history had never crossed 140 until the recent bubble. In 2006, it reached 210. Every single real-estate bubble in the past has at best been followed by a fall back to at least the 110 level in the postwar era, although the bubble preceding the Great Depression witnessed a fall to 60.

What this means is that in the best-case scenario, real-estate prices have to fall in the medium to long run by almost half.

Now consider Fannie and Freddie. Just looking at their portfolios on the balance sheet without the guarantees, let us accept (for no particular reason other than a desire that the reader sleep better at night) that real-estate prices only fall by thirty percent.

Well, since Uncle Sam is now committed to “doing whatever it takes,” that is a loss right there of $1 trillion. This commitment to keep financial markets open as usual is made in spite of the overwhelming evidence that what we have been taught is usual is in fact delusional, given that Fannie and Freddie own $3 trillion and change of mortgages.

The CBO is not fence-post stupid, so obviously just as in the S&L fiasco in 1988, they are outright inventing figures so that the politicians can slither into November and then announce, Whoops! our numbers were a little low.

The more realistic scenario is actually worse. Fannie and Freddie own and guarantee a total of more than $5 trillion in mortgages.

Given the long-run historically plausible equilibrium values of residential real estate as embodied in the Case-Shiller Index, that means that the taxpayer loss definitely reaches $1.3 trillion, easily ranging up to $1.6 trillion.

Unfortunately, that is the good news. The bad news is that if real-estate prices were to replicate the Great Depression (as would surely occur in the case that hedging instruments of Fannie and Freddie were to catastrophically fail due to counterparty failure – and given the absurdly low risk premiums on credit-default swaps at the height of the bubble, such an event cannot be considered unlikely) the Case-Shiller Index tells us that the loss to the taxpayers could exceed $2.5 trillion dollars.

I don't know what those people in Washington are taking to sleep at night after all their electorally driven accounting and finance exercises, but I can tell you what they will be doing to keep the government open for business: printing a whole lot of money.

Chairman Bernanke has the discount window open to any collateralization not worth the paper it is written on, so in effect he has the helicopters ready to drop hundred-dollar bills over Wall Street – as he once famously described the ultimate policy instrument of a fiat-money system.

Of course, if he does that, we will have to change his nickname from Helicopter Ben to Hyperinflation Ben, which answers the question of who picks up the tab of bailing out Fannie and Freddie: anyone owning dollars.

Produce a lot of something, and it becomes worth less. And given the losses at Fannie and Freddie, the taxpayer guarantee, and the ongoing initiation of Boomer retirement, only the inflation tax will work to pay for keeping Fannie and Freddie afloat.

Like it or not, we are about to enter interesting times, and it is too bad our supposed professional civil servants at the Congressional Budget Office have failed to tell the emperor the truth: that he is buck-naked bankrupt and getting ready to take a lot of people with him.

Our only hope is to (1) accept up front a twenty-percent fall in American living standards for a people living beyond their means for the past twenty-five years on the delusions made possible by fiat money, and (2) simultaneously discipline the creature from Jekyll Island, a.k.a. the Federal Reserve System, not to create new money just to prop up asset-price bubbles.

Regards,

Don A. Rich
for The Daily Reckoning

jk484 - Gold vault inventory - Comment on your article...

"The futures contract writer may not even know the gold or silver underlying his contracts really doesn’t exist. Only the vault owner really knows. CFTC would know if they bothered to do unannounced vault inspections, but they don’t do any. It has never once bothered to check a vault."

IMO - If the CFTC were to give advance notice of an inventory audit, the physical could be moved into place (JITD). Perhaps they would need a bulk ship(s) to accomplish just that!

Turn those machines off while DJI is green!

Financial -

I don't get it. While the street sells off, and finacial is acting like a safe heaven? Did I misread something or is it GOP in the works?

Vad - Thanks for you insight!

This week Don Coxe covers the manipulation that has taken place quite well.He is no tin foil hatter. Worth the listen, sounds pretty straight forward.

ALOHA !!

Let me ask ... if currency markets are manipulated and HB&B is up to their necks in fraud lawsuits and writedowns and chip makers are regularly fined for price fixing then do you suppose the gold and silver markets are manipulated? I just posted an article yesterday where the oil inventory reports are being investigated for "misrepresenting data" that benefits the "trading positions of those reporting"! WOW ... what a shock! Do you think CPI and GDP U6 are safe numbers? What is safe now?

Jeez, dr. cosa if everybody took your attitude we might have a banking crisis on our hands! HA!!! Some people lie down and take it and some people don't ... GATA doesn't! Its just that simple ... the powers that be are counting on the masses to lie down and take it! So far they are right! But the lawsuits are starting to flood in now so this just the tip of the iceberg.

Is it a shock that Barrick Gold has immunity from prosecution because they are an agent for the US Federal Reserve Bank(aka Blanchard Coin lawsuit)? NO ... that in itself says volumes about manipulation! If there was no manipulation then what was Barrick and JP Morgan so afraid about the discovery phase of the Blanchard lawsuit? If there was not manipulation then why would the judge order discovery sealed? Of course there is manipulation ... PLEASE-E-E-E!!!

Its Friday POG was up over $11 now its down. So far in this year 2008 the POG has either ended flat or down 90% ... that's 9 Fridays out of 10 the gold price is manipulated flat of down between NY open and 11amEST. Is that a coincidence? What other market has that track record?

So that brings me to my next question ... What big bank is close to failure now? Remember the USDX rally is based on the fact that the US banks and the US economy is BETTER than Europe and Asia. I can say this that at 2% the US FED has the worst track record for being tough on inflation than any other currency. That's NOT a "Strong Dollar Policy"! Why is Paulson quitting? Doesn't he want to stay and bask in the glory of saving the US Peso and the US Economy? He wreaks of Jeffrey Skilling like the US FED wreaks of ENRON!

So Goldman says sell MER ... A strange silence from LEH on their Asian savior? Now LEH wants to off load their crap into a spinoff so the LEH shareholders will benefit when the housing market turns around! HA!!! Is that it? Did the Koreans back out and now the spinoff tactic? A $32bil crap loan spin off? This is a tactic from the LTCM crisis in the 1980s!

Who will win the race to the bottom MER or LEH? I still say MER and maybe Goldman is on my side now! HA!!!!

By the way on FRO ... don't overlook their ominous debt! In a credit crisis DEBT BAD! DEBT BAD!!

IT ALL WORKS UNTIL IT DOESN'T !!!

CX seems ready to pop nicely.

ALOHA !!

I have to post this on behalf of the 58,000 US soldiers that gave their lives fighting the spread of Communism via the DOMINO THEORY!

Now we have Vietnam War draft-dodger Cheney over in Georgia yelling at the Russian's, "BRING IT ON BABY! BRING IT ON PUTIN ... YOU WUSS!" Palin and Obama's FOREIGN POLICY credentials are being challenged yet some how electing two draft-dodgers qualifies as great Foreign Policy experience! What is the success rate of the "experts" in US Foreign Policy that have given us Iraq and now Georgia?

The past US Foreign Policy "experts" including Henry Kissinger gave us this ... MISS VIETNAM!!!

READ ON:
Last Updated: Friday, 05 September, 2008

Miss Vietnam 2008 organisers admit mistake

VietNamNet Bridge – Newly-crowned Miss Vietnam 2008 Tran Thi Thuy Dung didn’t make any mistake, stated the organisers of the pageant at a press conference this morning.

Thank you, Vadym, for sharing with us your clairvoyant scenario about a gap down today and then a possible close in the green! I set up some "traps" for this scenario and they worked great! The buy to cover limit order on MER that I set at $25.2 was executed at $24.79 (for the shares I shorted at $28) and the sell limit order for SKF that I set at $122 was executed at $123.36 (for the shares I bought at $119).

i am reading for the first time bill's terms '7 handle' and '12 handle.' what does this mean? tx.

MikeNYC re CX - are you talking trade here?

CX was downgraded recently by credit suisse

rach3

you gotta scroll up and read. Answer is above.

Clairvoyant? LOL... anyway, glad to be of help David, good trading!

ALOHA !!

This is a sample of LEH bad commercial paper gambits they want to put into new $32bil bad debt spinoff for the benefit of their shareholders! I laugh every time I hear that term "for the benefit of their shareholders"! HA!!

The sheep are grazing on the Greg Norman designed 18hole golf course that is now dirt and weeds. Look at the huge McMansions out there in the desert of Bakersfield!!! Who was the idiot that got that project off the ground! Well, LEH holding the $235mil bag!

Go see the photos!

READ ON:
Baa, baa: Sheep graze at would-be McAllister Ranch golf course
By GRETCHEN WENNER, Californian staff writer
gwenner@bakersfield.com | Thursday, Sep 4 2008

McAllister Ranch has its first residents: a herd of sheep.

A young sheep looks up from its makeshift trough near the 18th tee at McAllister Ranch. The unfinished clubhouse of the Greg Norman-designed course is in the distance. The site is slated for public auction Sept. 12.

Nothing was happening at McAllister Ranch and the Greg Norman golf course on Panama Lane in this June photo.
Related Stories:

* McAllister Ranch auction postponed
* McAllister Ranch slated for the auction block
* McAllister Ranch developer defaults on $235 million loan
* Debts mount at golf course development
* Weeds grow at Greg Norman golf course

Blogs:

* See more pictures of the sheep on the Money Talks blog.

And they’re living on the Greg Norman-designed golf course.

It wasn’t immediately clear Thursday whether the critters were supposed to be there.

Calls to the Irvine developer behind the defaulted project, which is slated for public auction next week, weren’t returned Wednesday or Thursday.

The sheep seemed at home grazing dry grass and weeds near the 18th tee. A watering trough, fence and salt licks have been installed.

The multimillion-dollar course was to be the centerpiece of the 6,000-home upscale community planned 15 miles southwest of downtown Bakersfield.

The unfinished tract is now slated for possible repossession by Lehman Commercial Paper Inc. after the developer, SunCal Cos., defaulted on a $235 million loan in April.

Link: http://tinyurl.com/5b7fae

rach3

see.......

Posted by: Blowout Preventer at September 5, 2008 12:18 PM

Gold : Silver ratio just hit 66. That is very high relative to the last few years. The average is roughly 50. At that number Silver should be $16, or gold $625. Is Silver going up or Gold going down? Silver has just been slaughtered.

David 'rip van winkle' V- you're the only guy i know who can literally trade in his sleep...congrats..

Hey...some of us have sheep and others have wild pigs....it's a bummer when you are resorting to sheep for brush management instead of golf course maintenence and greens fees.

Anyone taken a look at TRC lately? How about the J.G. Boswell company? Good luck doing DD on that one....I'll bet they have a few of those projects...

SLV- plan to look into bullion next week, but wondering about inventory and premiums...

miners- personally, i have to wonder if prices get much better...taking 20% positions in GG and SLV...still holding a ST trade in WGW...

Barton Biggs on Bloomberg saying we are pretty close to a bottom.

Last time I thought he was full of it calling the bounce and sure enough, he was right.

We'll see...

Checking back in . . . looks like Vad called it right so far. . nice crystal ball . . we'll have to see what the last hr brings.

Like the fact small cap SMBL (mentioned last week) continues to show strength . . . just sold some in a conservative account after 15% gain, although retaining positions in a couple of IRAs.

NGas- notice the 'tropical storm wind speed probabilities' chart for Hurricane Ike now extends to New Orleans at 5% probability:

http://tinyurl.com/6zwmfy

1/3 position in SLV at 12.00 and 1/4 of SLW at 9.54, thinking the same thing earlier 2nd.
Traded the ROM for a small profit but I see now I was early and Vad is right....so far!

So far Joe Bastardi has been spot on the weather.
He still thinks it follows Hanna, but said the models are now including a small chance for the gulf and oil rigs. Worth watching but it will likely show itself over the weekend.....

FCX ~ 73.60, No takers @ 69 this morning

jk re CX:
Yes, a trade. The chart looks pretty grim, but I've been watching it the past few days and it just feels worth watching further. I don't think very much construction related is a good investment yet. But I just have hunch about a possible trade coming very shortly.

It has been very beaten down. Yet it has not behaved too badly in all the recent carnage.

But hey, I've been wrong before.

"Thank you, Vadym, for sharing with us your clairvoyant scenario about a gap down today and then a possible close in the green!"

I 2nd that. I picked up MA and RIMM near the bottom today.

MikeNYC - thanks

CX is has been on my watch list for while, don't want miss this one as I did with VMC under 50.

Vadym Graifer:
Beautiful call.

Can you come dowse a well for me? Find a missing girl from my neighborhood? Lift some heavy objects using only your surely advanced telekenesis? Start some fires with your brain?

On second thought, you just keep describing exactly what the market will do the next day, and at what time of day, and I'll take care of the rest of that stuff.

[Bill Cara note:

I'll second the opening and the last paragraph.]

The weekly chart of HNU.TO shows that this week almost looks like a hammer . . . almost.

I've had good luck buying on weekly candlestick "hammers", with a GTC purchase price being located in the bottom half of the current hammer's price range.

Sometimes hammer reversals gap up in the next sessions and never allow this type of trade. But, to be safe, I like to buy at the bottom of the handle and stop out if the price breaks the handle's low.

This may sound like gobbledy gook, but, when it works, it has been very good to me and minimizes downside stop loss when it doesn't.

I just sold the remaning few shares of UAUA at $12.30 (which I bought at around $12.30 a couple of weeks ago). If UAUA can't get up with the recent fall in the oil price, then I think the powerful upside is over for UAUA.

Vad - Thanks for insight, you are so correct
base on your post I double down my OEX call this morning
and It working out good
I am out of all oex call now
thanks again

I want to sell some out of the money puts to take advantage of the recent drop in commodities, but can't find any worthy options (SLV does not have options, SLW has only the $7.50 ones which won't give me much cash right away). Can someone suggest anything?

Thanks!

Mike,

my parole officer says I shouldn't do any of those things... sorry man.

I am not very impressed with the way this bounce developed. There was no happy rekless flamboyant buying, fireworks bursting... It was a bit labored, market was kind of saying "Fine, I'll bounce if I have to... there, happy now? Can I go home?".

Makes me think more selling is in cards next week.

Since my MER short was closed today at $24.79, I have just re-opened it again now at $26.22. Can't get Bill's words about MER being dead from ankles up out of my mind. :)

"Makes me think more selling is in cards next week."

You just made my weekend! Thank you "VG"!

:-)

Placing a buy to cover limit order on MER at $25.2 and going to take a nap. :) Good things usually happen while I am sleeping, as I notice lately. :))

David

You can always go out further in time for(ie.Dec) especially if the underlying equity price drops more.

Some of the fertilizers offer some decent prices, but I don't know if you are familiar how they trade.

Some of the fertilizers offer some decent prices, but I don't know if you are familiar how they trade.

Just to clarify: That's option put sale prices.

"Makes me think more selling is in cards next week."

OK, increasing my MER short by 50% at $26.80.

i have found art cashin to be a good voice of reason on short term trading. he believes this action is typical of what sets up to be a violent monday and tuesday with monday being the sell off and tuesday being a continuation of the sell off with a reversal intraday. assuming no intervention occurs before then, he may be correct.

here's a link:
http://www.cnbc.com/id/15840232?video=845498836&play=1

David,

"next week" is not necessary 7AM Monday, why rush? There is a weekend ahead, who knows what happens. We may gap up before new wave of selling hits...

You may have a very valid reason for this entry, am just making sure it's not solely on a base of one line by me :)

$XAU:$Gold at 0.16 - a major low per Tim Ord

In his book, Ord charts this ratio (plug it into stockcharts.com) and finds when the XAU (gold stocks) get below 0.20 vrs. the price of the metal, a significant bottom is near. Only 8 such botttoms since 1984! And, the ratio hasn't been this low since end of 2000, when the gold rally began!

I hope this is some consolation to others who are still holding juniors too illiquid to trade!

(email jockATbillcara.com, if you want to see Ord's chart from 1984 on this ratio.)

Donald Coxe's EXCELLENT free weekly audio commentary:

http://tinyurl.com/2htvq3

The perfect complement to Bill's coverage of price cycles is Coxe's thoughtful narrative of underlying macro themes. This week Coxe makes complete sense of Ben&Hank's market engineering on 7.13. (It took him too a while to sort it all out.)

7.13.08 was the largest market intervention since FDR closed the banks in 1933. (Where else have you heard or read this? nowhere!)

Giving Faulty & Fraudie access to Fed loans (for junk collateral) combined with the SEC's banning of shorts on key financial stocks took all risk out of financials, and guaranteed financials' rise starting Monday morning 7.15 through a massive short-covering rally. For funds to cover, hedgies were forced to sell speculative commodity positions.

With one stroke, this reversed the trade of long commodity futures while shorting financials (which many hedgies had piled into). This reversal solved 2 big policy problems: stopping commodity inflation in its tracks while pumping financials' stock prices to create conditions for their next needed round of equity raising.

For the first time, Coxe is thankful that Goldman Sachs guys were involved in this massive market intervention which simply HAD to succeed!

Coxe believes these measures will only prove effective until fears of further bank writedowns surface, when investors will once again lose faith in the financial system. (He believes financials are long-term in WORSE shape because of the intervention.) This next wave of fear is when gold will start to rise again.

Coxe sees US offshore drilling as inevitable (offering likely the best, and largest store of well-explored, economical oil in a safe jurisdiction in all the world) and providing a huge safe-haven for investors: the major US energy companies. (Stock prices of the majors never had factored in 145 dollar oil, so they never became overpriced relative to their commodity.)

Coxe also continues to believe that all strong commodity-related producers will continue to make money, and that - beyond perhaps a 1 year horizon - rattled investors will flock to the strength and straight-forward credibility of their balance sheets.

If you spend a half hour to listen to Coxe tell this story, I think you'll feel more confident that you understand where we are and where we are going in the markets.

God I hate the FED and US Treasury!!!

Looks like they are backing Freddie and Fannie!

SKF getting killed in AH!!!

"You can always go out further in time for(ie.Dec) especially if the underlying equity price drops more."

December $7.50 options on SLW have the asking price of 0.55 now, which would give me about 30% annualized return on the money I put away (if I am lucky to sell my puts at $0.55). It would be nice to find a better deal... At some point I sold UXG $2.5 puts with that offered me a 60% annualized return! The shares were given to me at around $2.1, but then UXG rallied to $2.48 and I sold the shares, essentially pocketing the premium on the original options. THAT was a good deal, so I am hoping to find something with at least 40% annualized return...

GS traders must be pouring over the details of the bailout plan - FNM and FRE are getting drop-kicked accordingly.

Is this exactly the market intervention Bill was mentioning today that will help put in the bottom in PMs?

The lights just flickered - I think the USD printing presses may have restarted.

If they take out the common shareholders of Fannie and Freddie!! Wait for the LAW SUITS to come! Oh boy!!! BIG TIME!!!!

My gut says this SKF down in AH.. is BS. Something doesn't look right on this!!

thoughts anyone!!

Grantmi:
Our foreign overlords have already warned the Fed not to let the equity in the agencies get eviscerated.

I'm guessing we get a huge rally Monday morning.

UYG & SKF has gained/dropped 10.5% at this writing. Perhaps this would prompt a gap-up open on Monday, followed by intense selling of financial and the like, per Vad's point?

MER was cut to Sell by GS today and no one is taking about it. Anyone trading in the AH?

screwed again on this skf
bastards

WOw.. Fannie and Freddie down now 27%.. and going down , down ,down!!

WOW! Something did happen in AH, and the $#%#$ Scottrade did not reflect it! The bid price on FNM was $7.04 AH, but Yahoo showed that FNM was down to $5.92 AH, so I placed a buy to cover limit order in Scottrade at $5.95 (for the shares I shorted at $6.88) and it got executed at $4.55! But then, my SKF is down AH and MER is up... It is weird to see that I "hedged" by SKF position and MER short with FNM short!

Grantmi,

This is my humble, or naive, opinion.

Depending on your time frame, I think this financial blip may catch wave come Monday, but the financial problems are far from over. Some Hedge funds folded because of foul/late bet on commodity. And now financial is a GOOD BET? Private equity KKR and Blackstone are buying LEH's good assets, but where do they get the money, the Chinese? Korean? Fed? I don't know. I thought PIMCO needs capital!

When hurrican Ike lands a week from now, energy will spike again. Just watch people take profits from Financial.

Even though energy and commodity bubble burst, growth may slow, but not stopped. I don't see China and India go back on their growth. The market will turn to commodity/energy when common folks are washed out and the money will flow in again, from the sideline by the big gun. I recalled Bill said that we are not done with the Commodity Bull ?!

I almost want to buy into SKF @ 106.50.

Disclosure: long SKF, short COF.

David,

My screen tells me that after hours @ 5:54pm:

FRE: 3.94 -20.20%
FNM: 4:85 -23.68%

"...traders with a three-year time horizon can buy Gold with a 7-handle and Silver with a 12-handle and do well over that period..."

Can someone explain what are 7 and 12 handles? Did a google search but came up with irrelevant results, thanks!

Zarf,

Gold in the 700's and Silver in the 12's

Zarf: Read the first posts at the top of the page.

I couldn't pull the trigger in After Hours on SKF at 106.8 ... and everytime I've bought it under 110 I've made good money.

Try this: http://tinyurl.com/5gx9n9

Nevermind, that didn't work as planned....

BirdDog,

The term handle refers to the first numeral in the stock, commod, ETF, etc's. price.

A "7-handle" means a price in the $700's.

Posted by: Blowout Preventer at September 5, 2008 12:18 PM [link]

Just bought some SKF at $106.9, as a replacement for the shares I sold this morning at $123.4. I think the AH frenzy might be an overraction.

David- so you're making money while awake also...congrats on locking in a $17 move while placing trades outside regular market hours...truly day trading paradise right now...

Hmm Bill talked about today a future "extreme sell-off in silver" and then later today we have silver down over 4% making new lows. Hmm... I'm getting my truck in gear, ready to back it up.

I am also tempted to buy into the SKF at $106.00, but I am not sure what to do right now, other than wait it out as I am sure they are headed down shortly, it just may be after a violent short covering rally.

The fact that Wells Fargo said they didn't need to raise any money, RAISED their dividend, and then issued almost $2 billion of preferred stock at 9.75% screams to me that we are going to see some big time losses this quarter in the financials. What bank can make money with a cost of 9.75% without using a lot of leverage?

Chairman Hank (no kin to Chairman Mao) has the difficult role of saving Frannie (Freddie Mac and Fannie Mae) without killing the banks. Rumors are that there is going to be a govt injection of funds into Frannie. The question is at what level of the capital structure (common, preferred, warrants etc), most likely a preferred. This would probably make the common stockholders toast (common goes to zero; pray your pension fund is paying attention). But if Chairman Hank comes at the preferred level, he has to be careful at what level of seniority he does because the largest shareholders of Frannie Preferred are other banks, so he could solve one problem and aggravate the banking problems.

By saving Frannie, it would probably help mortgage interest rates to come down, which would be a positive in the housing crisis. But I would think it would also put downward pressure on the US Dollar due to the amount of money that it takes to bail out Frannie. I think the market reaction would initially be positive that Chairman Hank took action on Frannie, but I think at some point people will realize how bad of shape the banks are in (ie more dead bodies floating to the surface as FDIC closes a few more), as many of the banks are looking at 9.5%+ at a cost to issue preferred stock which means they are close to being effectively completely shut out of the capital markets.

Long SRS and SKF.

bill also opined a week or two ago that GoldCorp would see its cycle low within 30 days...IMO, if you buy this month, how far off can you be? let's say you bought/buy GG/SLW/GDX this week/next week, and hold until 2010-> how pissed off would you be to have bought the week of 9/1/08 or 9/8/08 instead of, say, 9/15/08?

Chairman Hank may not be kin to Chairman Mao, but they are kindred spirits...both have the distinction of single-handedly destroying the economic prospects of an entire generation with a single policy decision- call it the Cultural Revolution or Paulson's Pride, each had/will have lasting effects that reverberate(d) well beyond their immediate time spans...

Mmmmmh, would be a tad risky investing in SKF over the weekend, methinks (perhaps poorly). If there's any intervention over the weekend, you'd be caught with your pants down and no lubricant.

What does Darth Vadym have to say on holding SKF over the weekend? :-)

"Chairman Hank may not be kin to Chairman Mao, but they are kindred spirits..."

I agree with you on that 2nd, as I meant that as an insult. Hank is mowing the grass while the house is on fire. Every day he lets these bankrupt banks continue business, the further they try desperate measures to recover which only digs us all a deeper hole. All I can say is that if they bail Frannie out, they better change all of the old management and forbid all lobbying expenses Frannie does.

I have always paid close attention to the credit markets and with Frannie needing to roll $200 bill by 9/30 I understand why he is doing what he is doing now. But what are the banks going to do as they need to roll about $800 bill in debt before the end of 2008. I am not sure they have that much lipstick on Wall Street. That is why I am hanging on to SKF.

re xau:gold
4 times in the last 25yrs it has been this low.
gold was nearly 400$ lower when the xau was at this level in 1996

Something will make this ratio pop as it allways has imho. The long term xau:usb chart comes to mind
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2984294

I guess those LARGE volumes on options calls on XLF in the $22 and $23 range early this week is looking smart now. Someone knew this was coming!

Mike Shedlock reports on Freddie / Fannie Bailout:

http://tinyurl.com/5lauaz

Grantmi--

Somebody traded those calls and now the truth is trickling out. Today after hours Fannie and Freddie got spanked and SKF took it on the chin.

Massive amounts of money changing hands--Thank Goodnes The MARKET IS AN HONEST PRICE DISCOVERY MECHANISM and no one is trading on inside info!

"What does Darth Vadym have to say on holding SKF over the weekend? :-)"

(Heavily evenly breathing) Well, I hate surprizes. And these days powers that be deliver them often. Some of heavy overnight blows at the beginning of my trading career led me into the land of extreme risk-limiting, also known as day trading. I hold overnight in rare and special cases, not as a business-as-usual. Even for folks who routinely keep positions longer, naturally volatile SKF in these super-volatile times, under constant threat of interventionism...

See, it all comes to good old risk-reward equation. Find yourself on a right side of a surprise, reward is huge; but it never comes without the other side of the stick. I know, life sucks.

If one's postion relastively to account size and risk tolerance is small enough to allow short-term pain - that's one way to manage risk. Mine is based on the idea "Can usually re-enter, seldom can re-exit". I control risk with bigger positions and shorter exposure to the markets, severely cutting down on time periods when I do not have control - specifically, overnight holds. Which is better? Incorrect question... no better or worse, there is one that suits particular trader.
(Stops breathing eavily and evenly. Titles crawl upward-bound, narrowing toward the top. Solemn music. Stars in the backlground)

Hey 2nd--

I hate to sound like a retail broker instead of a trader, but maybe a "dollar cost average" of GG/SLW/GDX wouldn't be the worst thing in the world?

re: SKF

There is so much evidence that the financials will be troubled for months yet that talk of a bottom is ludicrous. The trouble is spreading to other areas including prime mortgages. It seems to be a given that SKF will pay off in a big way, but...

A report by Marc Faber (Feb 2006) refers to Bernanke's willingness to resort to "non-standard" policy as in the Bernanke paper titled "Monetary Policy and Price Stabiliity" (1999) which offers alternatives such as:

"...extending loans to depositories, other financial intermediaries, or firms and households."

"By making the loan, the central bank turns an asset that may be illiquid for the lender into a liquid asset."

"...the Federal Reserve can purchase, it can accept as the security for the loan virtually any security that the Federal Reserve Banks themselves deem acceptable."

The latter it has already done.

With the Fanny and Freddie "solution" immanent, I fear what action the Fed may take without warning, that could render SKF worthless .

2nd_ave: not everything is so rosy for me and SKF. I sold only 1/5 of my SKF at $123 this morning, since the remaining 4/5 were purchased at $127... It looks like I'll be stuck with it for a while...

Grym,

If you're reading Marc Faber, you're getting some good perspective. If I were allowed to read only read Bill, Marc Faber, and Ian McAvity, I think I'd be A-OK. If I can "learn" as much as these guys have "forgotten," I'd be a happy camper.

[Bill Cara note:

Other than once receiving an email from Marc Faber, I can say I don't know him at all other than I think he's an effective analyst and excellent communicator. Ian McAvity I do know personally. His charting work is exemplary. Three little known facts: (i) he was the most popular guest on the Lou Rukeyser show in number of visits, (ii) he laid the groundwork for Frank Holmes to join US Global Advisors in San Antonio, and Frank left Toronto as a retail broker with a small dealer to take the job, where I think he's done a fabulous job for many years, and (iii) he recruited Ian Notley to join him on the technical analysis team of a broker-dealer firm in Toronto that was later merged into Dominion Securities, now RBC Dominion. For a few years, Ian and Ian were the best technical team of any firm in the world. Notley, as you know, was my mentor and his passing this year was sad. Notley was also a mentor to Martin Pring who also joined another forerunner firm in Southern Ontario that merged with Dominion Securities. What a phenomenal talent pool of technical analysts. Martin subsequently left to become analyst for Bank Credit Analyst (BCA) out of Montreal, living in rural Vermont before moving to Sarasota FL where he works on his own, still one of my favorite analysts. I know the power of mentoring; it's why I try to do my best in the time I have available.]

BP- absolutely...for anyone getting ready to allocate serious capital to the gold trade, dollar cost averaging would be a good approach...ditto for the ultimate exit, especially when you recall that the the bulk of the parabolic move to $800 in 1980 occurred in the final days and weeks of the move...

David,

We've all been there. No matter how good the cook, sometimes a stew stinks. The goal is just to be like the best cooks and simply "put the lid back on" (stop out of a bad trade) as quickly as possible.

A whole day of reading Bill's blog and all the great commenters here with so much good information... all without any political "snarling" at one another.

I like it.

Blowout, This guy was one of the biggest Gold bugs of that period , "Morton Shulman (25 April 1925 – 18 August 2000) was a Canadian politician, businessman, broadcaster, columnist, coroner, and physician." He published a book telling everyone to mortgage their homes an buy Gold on margin!!
Brian

[Bill Cara note:

In November or December 1980, when I was unexpectedly hired by Robin Younger, the COO of Dominion Securities, the morning after being unexpectedly invited as a guest to the DS officers and directors party, I was asked a single question by Robin: "Bill, we know you have a big influence in the medical field, but if you have any connection to Dr. Morty Shulman whatsoever, I'm afraid I could never make you the job offer I'm about to. Nobody on Bay Street will touch that man." I told him that I did not. In fact about three years later, I accepted an offer to write a column every third issue for Canada's The Money Letter when I ran into Dr. Shulman for the first and last time. I had made a complaint that Dr. Shulman was touting a wonder cure for what-not that my research turned out had been merely approved by the FDA via compassionate protocol, meaning it was acceptable to dispense to patients who were going to die anyway. Dr. Shulman pumped, and pumped that stock and then, in his traditional style, dumped it. The Ontario Securities Commission considered him personna non grata and he was much involved with their investigatory staff. At some point, somebody told Dr. Shulman what I had discovered about his so-called wonder drug and passed along to the publisher and editor of TML and he, apparently, exploded in a rage, vowing never to be published in the same pages as me. He did one every two issues and me every third, so we were bound to meet. But, after three months I quit in any event on the grounds that the editor was changing the text of my articles without my approval, even after warnings from me for three straight issues. So I walked away. Dr. Shulman, who had been an elected representative to the Ontario parliament and chief coroner for the Province was an extraordinary person, however, and quite a stock promoter. He had a big following, and did much in support of disadvantaged people. I look back now, and feel that, right or wrong, he was a helluva fighter for causes he believed in, sometimes crossing the line.
http://en.wikipedia.org/wiki/Morton_Shulman ]

The New York Times:
Government Preparing Plan to Seize Fannie Mae and Freddie Mac, Officials Say

Senior officials from the Bush administration and the Federal Reserve informed top executives of Fannie Mae and Freddie Mac, the mortgage-finance giants, that the government is preparing a plan to seize the two companies and place them in a conservatorship, officials and company executives briefed on the discussions said.

[Bill Cara note:

This is scary stuff. I wrote earlier that I anticipated a move by the present Administration to pull a stunt that would bail out Wall Street and, in doing so, smash the USD. Treasury Secretary Hank Paulson is the one person who is behind this, if its true, and more than any other person he is the one that Democrats and Republicans alike ought to fear. What he can do in the next two months could devastate the future wealth of your children and their children. He ought to be stopped by impeachment, which I have been saying for many months now.]

MSNBC.com

--------------------------------------------------------------------------------
Reports: Fannie Mae, Freddie Mac bailout set
Top execs would be dismissed and common stock diluted under federal plan
BREAKING NEWS
MSNBC
updated 6:41 p.m. PT, Fri., Sept. 5, 2008
The federal government has prepared a plan to take control of troubled mortgage giants Fannie Mae and Freddie Mac, several newspapers reported Friday night.

The Washington Post reported on its Web site that government officials had told the two companies that their top executives would be dismissed and government funds used to prop them up. The New York Times said the company boards also would be replaced.

The Times described the plan as effectively a government bailout that could cost taxpayers tens of billions of dollars and would be among the largest rescues in U.S. history.

Quoting unidentified sources, the Post said that the companies would be placed under a conservatorship and that the value of the companies' common stock would be diluted but not wiped out, while other securities, including preferred shares, would be protected by the government.

The Post and the Wall Street Journal reported that any infusion of capital would be done quarter by quarter. The Post said that was being done in an attempt to minimize the initial cost of the rescue.

Fannie Mae and Freddie Mac have seen their stock prices plummet as fears mounted they would soon need government support and that any bailout would leave stockholders in the lurch.

Washington-based Fannie Mae and McLean, Va.-based Freddie Mac hold or guarantee half the U.S. mortgage debt and are considered crucial to the mortgage market's continued operation. But the government-sponsored companies lost a combined $3.1 billion between April and June. Half of their credit losses came from so-called Alt-A loans, which were made to borrowers with solid credit but little proof of their incomes, or small or no down payments.

The Bush administration this summer unveiled a plan to provide unlimited government loans to the two companies and to purchase stock in them if needed for a period covering the next 18 months.

This breaking news story will be updated.

© 2008 MSNBC Interactive
URL: http://www.msnbc.msn.com/id/26567533/

--------------------------------------------------------------------------------

MSN Privacy . Legal
© 2008 MSNBC.com

Here's my materials related (sort of) idea for an option underwrite/overwrite trade:

CX - the more I look at the chart the more I see it ready to make a move up. 7 times earnings? Come on.

It bounced off new 3 yr lows a few days ago.

I think it was ready to take off two days ago, but the extreme market action pulled it back.

Closed at 20.30, +/07.

Sell the Oct 20 puts for a buck, getting the stock at a cost basis of 19. When it hits 21, sell the Nov. $22 calls.

These options are highly liquid. There's a large open interest, esp at 20 and 25.

Short interest 6x daily volume.

Caveat: I've been known to misread many a chart.

And, the market will probably make some extreme move Monday, negating my setup for CX.

Oh well. Maybe some other time.

Some very interesting commentary on gold...

For the third week in a row, gold has refused to take out its August 15th low, even as the euro has plunged to another new low and the US Dollar Index has made another new high.

At some point, people will begin to connect the dots that gold isn't "the euro" - and it isn't a weak dollar play, either. And that's when the gold complex is going to explode, including the gold mining shares that appear at present to be the most hated equity sector on the planet (even more than subprime mortgage lenders, apparently).

However, I should add that somebody sure seems to be buying the gold mining equities from the hedge funds that are coughing them up. The Rydex gold equity fund has seen an inflow equal to nearly 50% of its assets over the past 5 days, and I understand other gold equity mutual funds are seeing similar inflows. That's the biggest inflow in the face of falling gold mining stock prices that I can recall seeing in years.

http://tinyurl.com/69gbaa

Home builder and the rest of the financial surge today -- What was positive news? Hope is that the jobs numbers this morning clears the way for a rate cut

Question
FNM/FRE bailout
What will this do to the dollar? Weaken it or strengthen it?
Is this bailout bullish or bearish for financials as a group?
I think Fed and Treasury doing this to save Bill Gross
But Mr. bill Cross-be careful what you wish for....

fireworks,

the Mmarket Makers / "Smart Money" are pouring drinks and cranking up the Gold bandwagon. Since I'm not a member of The Club, I can't hop on this early, but I'll do my best to get in when the uptrend is a bit clearer and I have a chance to catch 66 - 75% of the upwards move.

vinod- there is one overarching positive to the (possibly margin induced) sell-off, right, which is we are getting what we wished for...i don't want to look back in ten years and regret not buying...not saying buy and hold, of course, but you have to buy when things get this bad...looking forward to the next few weeks...

BP- you can also catch over 100% of the move by buying the dips and selling and/or shorting the spikes...;)

I had to go batten down the hatches, looks like we're in for some stormy weather in these parts. Looks like FER/FNM shareholders got their gotcha's caught when the door slammed shut tonight... The brokers seem to have faired pretty well, wonder why?

Vinod
I would expect the bailout to weaken the dollar. If I recall correctly Fan/Fred have direct liabilities and guarantees of about $5 Trillion. Estimates I have seen could run the Govt up to $200 bil, but any estimate is contingent on how much more losses are incurred. The Mortg Bankers Asso report released to day showed new record delinquencies. But the logic says that govt is increasing it liabilities significantly.

FDIC just leased 5 floor of office space in Dallas recently. Their bank closure teams operate out of Dallas, TX. FDIC just closed Silver State Bank in Nevada today with estimated cost of $450-$550 mil to the FDIC. It appears the FDIC is preparing sandwiches and roadmaps for Bank United and Downey Financial soon.

I think it will be perceived as beneficial to homebuilders as the mortgage market is so tight right now (especially with GMAC announcing they are closing 200 offices this week). I am sure the financials will proclaim a new bottom is in, but it is hard to pay a mortgage without a job.

2nd,

True, true, true. Bottle that skill and sell it and you'll only have to trade for the "heck of it." ;-)

Vinod,

FNM/FRE bailout:

I am not an economist, thank God, so I can only tell you this: Government does not pay for anything. "The People" pay for everything.

Regardless of whether it is war, health-care overruns, unfunded future liabilities, etc. , when the Govt. is responsible for paying private liabilities, it weakens the currency, because they tend to create more money to minimize the burden of paying the bills.

How couldn't it weaken the currency? It has to be financed on an ever weakening balance sheet. The more money (on higher interest rates) that goes to pay interest and principal on non-performing assets, means your not investing in performing assets. Hell, we won't even have the luxury of choosing between guns and butter.

"..hard to pay a mortgage without a job."

Learner2- LOL...if only it were as hard to obtain a mortgage without a job...

Ike- 5-day track forecast cone now includes the edge of NOLA...

http://tinyurl.com/6bmnn9

From Bloomberg today....

"Companies in the S&P 500 are forecast to report profits in the fourth quarter that are 42 percent higher than a year ago, the biggest increase ever. Financial company earnings are projected to rise more almost five-fold, while income at mining and chemical companies may increase 35 percent."

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=apcAFrA5Cg.A

Someone picked up a cool 50 Million shares of SNDK today.

Re: SNDK

Apparently Samsung is making noises about acquiring the company, and Sandisk would neither confirm nor deny it.

"LOL...if only it were as hard to obtain a mortgage without a job..."

Too true, but they never make it hard for the sheep to enter the yard....once they pass the first gate they're half sheered.
People are being convicted of fraud, it was classic pump and dump. Afterall, "real estate always goes up", right? So we had the white collar fraudsters (bankers/appraisers/agents/originators) feeding on t-shirted shopping cart renter fraudsters (on foodstamps and welfare), and repackaging/reselling it to everyone else (going down the tubes).
Could all of the defaulting borrowers be in ninja loans, or aren't a lot of those loans something like Ed McMahon or higher end borrowers that were taken in by the same pumping? It doesn't appear to be about the individual loans, the real fraud was in repackaging/reselling those loans to purposely eliminate the chance of them coming back to haunt the originators....if only they weren't victims of their own scam.....

2nd_Ave,
"but you have to buy when things get this bad."

Do you mean commodity, gold? or Financial?

Ah, franklin, the "Glomar Denial" . . .

Great story behind the first mainstream use of the phrase "neither confirm nor deny."

Originally, neither confirming nor denying conveyed little to no information to anyone.

However, in the current cynical climate of today, whenever I hear a "neither confirm nor deny" I assume there's smoke to the fire.

How ya gonna dollar average gold? I thought all the 'end of the worlders' were already long 100%

procol,

the end of the worlders are always early. there's still some gold left.

GDX has spent 2 days in the RSI system accumulation zone now, while Bill reminds us to be vigilant for the "next flood of margin calls and resultant sell-off in the goldminer stocks. That could happen on Monday and Tuesday."

My re-entry is imminent and I will "write puts and buy calls and go long the stock" for GDX.

FNM/FRE bailout:

In a perverse way, how could this not be dollar positive? The dollar was forecasting a systematic failure, and now with the US government backing the presumed cause of the failure, the failure has been averted! FNM/FRE now don't need to roll over a bunch of debt that probably would have cost them 15%+.

The system will survive (for a while longer) and in the mean time other countries haven't announced any support of their soon-to-fail debt agencies, and thus they will still be facing an upcoming systematic failure. The dollar should rally up to 90-95 over the next few months on this news.

I can't even tell which parts I was being sarcastic about now...

Let's see if I can take yet another ride on DBA. :) Placing a buy stop limit order on DBA, stop $33.50 and limit $34.

KarlN -- this kind of a bailout of FRE/FNM is not a surprise, as it was definitely possible and the Treasury has indicated that they won't let FNM/FRE fail. So, I don't think dollar is moving higher because of this bailout.

Hi!

Foreword: thanks to all the friends here for wonderful support. I am getting ok, gradually up to speed. Am coming into the office once per week, and phasing in. Will be fullly up to speed by years end.

Now, trading:

An event such as the nationalization (aka "conservatorship") of Fannie and Freddie will carry generational consequences. Russian Central Planners would not have done better. Time will tell if this was an excellent or a lousy decision. It is not up to us traders to make that analysis. It is only up to us to trade it profitably.

This is the kind of thing that directly impacts the market's psichology, and therefore, a major change in perception of where value is stored will now be underway.

You do not change the direction of an oil tanker overnight.

But price series over the last few days and some media comments such as Gross's "opinion" have been signalling:

- An short term top for the USD (which was overbought)
- A short term bottom for Gold (which is oversold)
- A short term bottom for Oil (which is oversold)

Sorry, I do not see equities recovering significantly at this time, other than some media spun rallies, which are to be sold.

So, I guess it will play out for the coming 2 or 3 weeks, untill the downside accelerates again.

Now, unfortunately, and unlike what the media will make you believe, this is not the end of the problem, and conditions for banks will remain dry dry dry cominf into the end of the year.

The Bear market is not over, by any stretch of the imagination, even if the media tries to sell otherwise with the spin that "all problems are solved with freddie and frannie on Uncle Sam's and his children's back").

So, as a trader, and as previously mentioned, I will use the retracement in gold (not expected to exceed 900), to sell and sell short as soon as the rally fades.

More down side in all asset classes will come by October / November untill a more sober bottom can be reached.

Finally, as usual you read it here first:

- Bill made a smart comment that long term investors (3 yrs plus) could consider gold in their portfolios in the 700s handle

- Bill also gave you a heads up and suggested that Gross's comments could carry USD negative news.

Thank you again Bill.

Cheers!

http://tinyurl.com/6555va

Saturday Morning Coffee: Fairy Tale Theater

maromatics,

glad to hear you are doing better.

Not to forget this is Election year, as Bill has mentioned above

"There will be, I believe, some help for Wall Street from the White House in the next 60 days. That ought to shake the present USD strength, and start the precious metals rally."

so my guess is this down turn probably starts some times after the election.

god forbid, Dubya might start a war with Iran right the election to settle an old score and to show the bad Russians how tough he is.

I don't think he'll care what happens to the market since he has nothing else to lose

wish you speedy recovery maromatics

take care and have a good weekend to all

see you monday

re: CAUTION for SKF and financials in general

More info on Bernanke's methods...

The article I mentioned late yesterday is available as a pdf —
www.gloomboomdoom.com/gbdreport/download/GBD0602.pdf
(sorry, could not tiny this)

Also recently referred to —
__ http://tiny.cc/9CKPY

WASHINGTON -- The Federal Reserve is considering contingency plans for expanding its lending power in the event its recent steps to unfreeze credit markets fail.
Among the options: Having the Treasury borrow more money than it needs to fund the government and leave the proceeds on deposit at the Fed; issuing debt under the Fed's name rather than the Treasury's; and asking Congress for immediate authority for the Fed to pay interest on commercial-bank reserves instead of waiting until a previously enacted law permits it in 2011.

I assume we can use Bernanke's plans to our benefit if he in fact resorts to these actions, but it may happen suddenly without warning. (New Years Eve, or better yet, the next morning ;-)

Nemo,

I called vadym at home, collect, during his dinner just to get the answer to that question:)

A question for the room re: the Freddie/Fannie bailout....They're not REALLY gonna wipe out the shareholders, right? They're just SAYING that to get mom and pop to sell to Mr. Big Bucks Trader Guy (one willing to hold overnight) so that, on the day of the announcement, the share prices of both stocks can triple. Because as we all know, a stock can't go up unless enough of the stocks's been shaken from the retail investor. Once all those little apples are in the right bucket, THEN the stocks can go up.

[Bill Cara note:

I don't see the retail shareholders being the issue here. This is all about not having Fannie & Freddie declared bankrupt so that the top 50-60 banks don't have to immediately write off about $500 billion in capital losses, which must be immediately replaced by new capital when nobody wants to invest in them. In the past year, the Sovereign Wealth Funds (Mom & Pop from foreign lands -- China, Singapore, Kuwait and UAE) have invested about $44 billion in 9 HB&B deals, and the average loss is something like -40%. How long can that go on? The small US and foreign banks that Wall Street does not control are ok. They never gorged themselves with worthless paper, and most of them have the reserves to lend. So no credit crunch there, although their margins are tighter as interest rates are pushed below what they should be. The big banks and dealers are the culprits and they absolutely need Fannie and Freddie saved. It's that or go from bank to bankrupt. What pisses me is that US legislators are so corrupt as to push the Wall St agenda. Solution: Fund a new agency to buy all the good loans of hard-working Americans and foreign investors who are paying their mortgage debts on time. That new agency would replace Fannie & Freddie in a heartbeat. Then after half the top 50-60 components of HB&B pre-announce their demise, the other half will step up to the plate and buy the distressed assets. The next day it would be business as usual. The only losers would be the creeps on Wall Street who (i) created this problem, and (ii) were stupid enough to buy it and/or support it. The failing banks have legitimate assets and successful career people working there. Those assets will command top dollar and the top people will move on to terrific jobs. In maybe three years, employment in the banking, dealing and insurance industries would be greater than today or last year, when it was higher than today. America would be on a roll. But, what is happening with the Fannie and Freddie bail-out is a catastrophe for the average American -- the biggest rip-off in world history by miles. Somebody has to stand up and scream ENOUGH IS ENOUGH. The Treasury Secretary needs to be impeached; the Fed put under control; a new Securities Act legislated that eliminates conflict of interest (and self-regulatory organizations that permit it); and the SEC has to be made independent of politics and the Administration and given more power to arrest and prosecute. If you think that's too tough; without it, you ain't seen nothin yet with the coming collapse of the US economic and financial systems. Mr. Moral Hazard is not going to be around to be held accountable. That's for sure. Will McCain or Obama do the right thing for America? Ha! They are both already bought and paid for. The solution lies in the voters who elect representatives to Congress.]

c3- i was referring to the recent sell off in commodities/energy/gold...many here have been waiting (or 'wishing,' if you will) for these kinds of prices on XOM/ECA/SU/PTR/SLW/GG/etc and now we have them...so as traders, all of the 'negative' price movement (and the negative news behind them) is of course an overaching 'positive,' no? these are the best of times for those wanting to buy, as the early nineties were the best of times for those wanting to buy real estate in the bay area...

zooming out to a ten-year perspective, you can apply the same thinking to financials/real estate/emerging markets and the ultra shorts the posters on this blog have been playing, 'wishing' as it were for steep drops and now getting them...and not forgetting to reverse the trade for what will normally be a much longer trade to the upside...

all of this was a response to vinod's comment [referring to bill gross] about being careful what you wish for...my thinking was most of the players here are able to benefit from gross getting what he wished for, OR from the unexpected consequences of getting what he wished for ;) if 'we trade prices,' then we benefit only when prices move, and i don't think you'll be seeing these kinds of opportunities much longer...

shark- waiting to hear the response you received calling Vadym at home, collect, during his dinner ...

was glad to hear from me.

now how about fannie/freddie? they're not trading like a government bailout is about to wipe them out. so what's the straight story?

shark - If the GSE's are taken over by government, what will the new ticker be, same as old? It's tempting, but the risk vs reward factor is outside my comfort zone at this point.

maromatics,
Glad to hear from you
“- An short term top for the USD (which was overbought)
- A short term bottom for Gold (which is oversold)
- A short term bottom for Oil (which is oversold)”
Base on what I heard on Friday you may be correct on USD and GOLD
But oil may go under 100 and may be more

If FNM/FRE make our currency weak than weak currency makes a country week

I wonder when inflation data will begin to reflect commodities (crude) fall, and why it is only indirectly factored? My belief is consumer prices tend to increase immediately with increaseing cost of manufacturing, while they lag falling costs.

I'll bet kaimu's shipping expenses haven't reflected falling oil prices, and probably have only just stabilized.

they came up with a good name for the baddest hurricane of the season, the "I" of the hurricane, Ike Spikes, don't like Ike, yIKEs (that's for you, n2s)...10-20% probability of tropical winds in NOLA...

http://tinyurl.com/64adk9

vinod - If USD rolls over, then oil wil reverse accordingly. It's an inverse relationship. Maybe time to jettison (or hedge) oil shorts until/if/when USD gets back on track.

Oh, boy. I wish I could say thank you, 2nd. My son is going back to NOLA tomorrow as Tulane reopens this weekend.

If he has to evacuate again, it will be for the final time.

It's been a lousy month for this N2S. Natural and personal disasters to contend with, the Fannie and Freddie debacle to chew on, and now Ike.

Good grief, this sucks.

OK, THATS it!!, I've HAD IT with HANK PAULSON and these people destroying AMERICA, and doing it only because they can and the POPULACE is kept in DARK watching this TRIVIAL B.S. between the Candidates.
I know a person who can make a Great VIDEO for Youtube, etc, lets say 4-6 minute video on MR MORAL HAZARD and ALL this stuff we know but 99% DONT..
I will approach him on it and would need everyone's help with suggestions and making it VIRAL. Figure if we can get a Video that threads the neeedle quickly with emotion and fear via music and truth, we can spread it FAST.
Ist, I will ask him to make a 30second "PREVIEW" that will entice curiosity too

Video - I like tar and feathers - These present a very figurative image.

Government - Like fire, it is a dangerous servant and a fearsome master. - George Washington

Foreign stock markets vrs. US = way DOWN

Brazil, the strongest overseas market, down 28% vrs the S&P500! Australia down 22%. Canada down only 13% from its top vrs. S&P.

UK started south 5 weeks ago
Japan, 8 weeks ago
Brazil, 10 weeks ago
Korea, 4 months ago
Hong Kong, 8 months ago

Moves seem generally greater than the 10% appreciation of the US dollar index.

Plug in the following ETF's into stockcharts: EWU, EWJ, EWZ, EWY, EWH, EWA, EWC. Use the format EWU:SPY to see a chart of the ratio between two markets. Dramatic!

If no US sectors are moving up, and if foreign markets are moving down vrs. US, there is indeed nowhere to hide until fears re-emerge of bank writedowns! And then the place to hide might just FINALLY be gold!

By stockcharts, I meant stockcharts.com

You can see my cross-market comparisons for yourself

Maromatics,

Thanks for dropping in and share your though. Hope you are feeling stronger everyday, uh to fade the market?!

2nd - thanks for the reply. I guessed that's what you're referring to. However, I often wonder, commodity stocks move sometime with the commodity and sometime with the broader market. If "the" bottom isn't in, commodity would be a better choice than the corresponding stocks in the near term?

Vad - just got your book two days ago and just loved it! My next stop is Bill's book. Great wisdome and please keep that coming!

Have a great weekend!

Fortell and Hind Sight on GSEs:

Here is the conclusion of an article by William Poole on "The GSEs: Where Do We Stand?". Notice the very last statement.

"Conclusions

Since the GSE accounting scandals emerged in mid-2003, one thing has remained rock-solid: The GSEs have continued to borrow at yields only slightly higher than those of the U.S. government, and noticeably lower than those available to any other AAA-rated private company or entity. In other words, despite the vast recent accumulation of knowledge about the significant risks run by the GSEs, as well as their inability (or unwillingness) to manage these risks, investors in GSE debt securities appear unmoved. Upon reflection, the lack of market discipline evident during this crisis period is striking—like a dog that did not bark. This fact indicates to me that there still is a significant problem with the GSEs that needs to be fixed.

The obvious answer to why the dog did not bark is that the so-called “implicit guarantee”—that is, the belief by investors that the U.S. government would not allow the GSEs to default on their debt obligations—has not been removed. Indeed, the talk of increased GSE regulation and the failure of structural-reform legislation to become law may actually have reinforced the belief of many that, overall, the government is perfectly happy with the situation as it is. The GSEs remain politically powerful, if less strident than they were a few years ago.

Three essential reforms are needed to eliminate the GSEs’ threat to financial stability. First is a limit on their portfolio growth; second is an increase in their minimal required capital; third is satisfactory bankruptcy legislation so that, should the worst happen, federal authorities can deal with the problem in an orderly way.

Freddie Mac apparently does not expect any significant increases in constraints on its operations. Funds that could have been used to build capital to better protect taxpayers have instead been used to increase common stock dividends. Freddie set a quarterly dividend of $0.22 in the fourth quarter of 2002 and has increased the dividend every year since. As of the fourth quarter of 2006, the dividend stands at $0.50 per quarter, more than twice its level four years earlier. Fannie Mae cut its dividend in half in early 2005 to build capital, but I’ll hazard a guess that once it starts issuing regular financial statements the company will increase its dividend rather than build capital further.

I began this speech noting that the Federal Reserve has a responsibility to maintain financial stability. That responsibility includes increasing awareness of threats to stability and formation of recommendations for structural reform. I do not believe that a GSE crisis is imminent. However, for those who believe that a GSE crisis is unthinkable in the future, I suggest a course in economic history.

Here is the link to the article -
http://www.stlouisfed.org/news/speeches/2007/01_17_07.html

(Sorry, I don't know how to shorten it. Help?)

Article on GSE's by William Poole -

This was published on Jan. 17, 2007.

CP,

Whatever the new ticker symbol for fanny and freddy — it will be a four-letter word to me .

Bill Cara,

Would you be kind enough to comment on the affect the Fannie May & Freddie Mac bailout will or could have on the current market. Will it spark a big rally upwards, lastings days or maybe weeks? Or will the market continue it corrective decline downwards?

I understand you do not have a crystal ball but your insight into the market's next move is uncanny.

Thank you,
Kim

Sharkster,

He answered the question in the blog!!!

OMG! US taxpayers are smacked again! And if this FRE and FNM debacle doesn't devalue USD and bring commodities price up, then what's it gonna take?

Jock,

In real terms:

iBovespa Jan 1 2007: 54,383 (US$21,221)
iBovespa Jan 1 2008: 62,815 (US$34,704)
iBovespa Sep 6 2008: 51,940 (US$30,096)

Bovespa performance in USD:
Since Jan 2007: +41.8%
Since Jan 2008: -13.2%

SPX performance:
Since Jan 2007: -14.1%
Since Jan 2008: -12.3%

While in 2008 the performances are comparable measured in USD, anyone who had invested in Brazil would far, far better off since 2007: +41% in Brazil vs -14% for the SPX.

In Jan 2007, in USD bought 2.13 R$. Today it buys only 1.72. The US market is an illusion. Those who own real estate properties (or even stocks) which have on top of it lost face value, imagine their real losses.

Brief tombstone post to document my expensive lesson on not listening to the market.

1. This is an election year. Incoming party needs lower oil prices, and it came to pass. Got this one right.

2. Chairman Hank Paulson got authorization to spend money on Frannie (Fannie+Freddie). When does a govt official get authorization to spend money and doesn't. Answer is he always spends the money the only question is when. Take one 45 degree angle slap to the head so as not to forget.

3. I could see mortgage rate spreads over US Treasuries increasing. Then an article appeared that China was selling some GSE (Govt Sponsored Ent aka Frannie) to reduce their exposure. This was China sending a message to Chairman Hank to do something. Chairman Hank wants (desperately NEEDS) lower mortgage rates and knows he has to ease China's GSE concerns to get them. I also knew that Frannie had to refinance about US$200 bill before 9/30/08. Must drive wooden matches under each of the fingernails and lie naked on a fireant nest for 30 minutes to think about why I saw this coming but chose to increase my shorts of the XLF.

4. I watched as the price of XLF increased 5 consective days, several on days which the SPX went down hard. If the SPX is crashing and Financials are increasing, the prices are trying to tell me something. And then have Bill Gross come out and scream what the govt had to do. After having read about a third of Bill's book and lurked on this website for years, I am now going to have to light those matchsticks under my fingernails.

4. In my defense I was so busy
a. Listening to the credit spreads banks blow up.
b. Seeing the loan delinquencies make another record jump, noting that the AltA and Prime loans are now increasing the most.
c. Noting that Wells Fargo said they didn't need anymore money and then issuing preferred stock at 9.75% AFTER raising their dividend.
d. Watching retail sales fall crash and the CMBX indices blowout, knowing that the banks are sitting on truckloads of this paper.
Allow myself the water to douse the matches.

I didn't lose a lot as I was practicing disciplined risk management. But as I look back on it now, I can't believe that I could get my big head so far up my ash that I didn't see this coming. This lesson has much of what Bill has been saying wrapped up in it. As he says, proof of concept. Another example of why I tell my wife Bill Cara is a gift from God. Now to get something for these fire ant bites.

c3,

thank you for warm words. happy to hear you found it useful. Having read Bill's book I am sure you will enjoy it very much. High integrity and deep knowledge, relied in a very sincere way.

"waiting to hear the response you received calling Vadym at home, collect, during his dinner ..."

Honest warning - Russian is the richest language on Earth when it comes to swearing... and I have mastered this aspect of it to a very high degree (very big grin)

CP- try 2PAC as an appropriate ticker for the (combined) GSEs:

http://tinyurl.com/9c6sm

"...shot four times in a drive-by shooting in Las Vegas, and died six days later of respiratory failure and cardiac arrest..."

does that not sound like what's happened to FRE/FNM holders?

Vad- next time you need to do it in english, b/c shark thought you were glad to hear from him...

..or should i say FRE/FNM gamers?

hahaha.....

still can't figure out, does Bill mean the fannie/freddie shareholders are GOING to get killed, or are NOT going to get killed? Sounds to me like he means NOT going to.

Ackman's plan:

http://seekingalpha.com/article/94198-bill-ackman-s-letter-to-paulson-on-restructuring-plan

September 5, 2008 The Honorable Henry M. Paulson, Jr. Secretary United
States Department of the Treasury 1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Re: Fannie Mae/Freddie Mac Restructuring

Dear Secretary Paulson:

We understand that a Treasury plan for Fannie/Freddie (“the GSEs”) may
be announced this weekend. We thought you might find useful some further
thoughts on potential GSE solutions.

As you are likely aware, we had previously distributed a proposed
restructuring plan for the GSEs. In that plan, under a prepackaged
conservatorship, equity interests would be extinguished, subordinated
debt would be exchanged for warrants, and senior debt would be exchanged
for new senior debt and common equity in the newly recapitalized
entities. The government would write a put to the new common equity
holders which would expire in three years.

It appears, however, that the GSEs may need help more quickly, and
conservatorship may not be triggered until the GSEs are formally
determined to be undercapitalized. As such, in the event the government
needs to inject capital immediately, we suggest you consider the
following transaction (“the Transaction”).

In order to minimize risk to tax payers while being equitable to other
constituents, we suggest that the Treasury consider purchasing senior
subordinate debt in the two companies in an amount sufficient to address
their capital needs in the short to intermediate term. This senior sub
debt would be junior in right of payment to the outstanding senior
unsecured debt and senior to the outstanding sub debt, preferred stock,
and common equity. We refer to the outstanding sub debt, preferred and
common stock as “the Subordinate Securities.”

The issuance of senior sub debt is permitted under the GSE legislation
and under the existing terms of the outstanding debt and equity
securities of the two entities (please see the attached memo for further
details). As a condition of Treasury’s purchase of senior sub debt, the
GSEs would defer the interest payments on the outstanding sub debt
(which can be deferred for as much as five years), and the dividend
payments on preferred and common stock. All of the Subordinate
Securities would continue to remain outstanding according to their
existing terms.

The new senior sub debt should have a market-based coupon and Treasury
should receive low-strike price warrants (penny warrants) for a
substantial portion, i.e., 49% of the two companies. The coupon and
warrant structure should be as close to fair-market-value terms as
possible. The ultimate determination of fairness would be the
willingness of non-government investors to purchase the Transaction
securities on the same basis as Treasury. As part of the Transaction,
the GSEs would deleverage their capital structures by paying down senior
debt from the free cash flow generated by their core businesses further
improving the position of the new senior sub debt.

The benefits of the Transaction are as follows:

• The Transaction can be accomplished under the existing terms of the outstanding GSE securities without any required consent other than from the GSEs.

• The new security would be senior in right of payment to the existing sub debt and preferred stock minimizing the risk to tax payers while providing substantial support to the outstanding senior debt that has been deemed implicitly guaranteed by the government.

• The new debt interest payments would be tax deductible, reducing the after-tax cost of capital to the GSEs, particularly when compared with preferred stock.

• In the event the outlook and performance of the GSEs and their assets were to improve dramatically, the senior sub debt could be redeemed, distributions to the Subordinate Securities could resume, and their values would increase accordingly.

• In the event that the GSEs’ fundamentals continued to deteriorate and they became undercapitalized, the GSEs could be placed in conservatorship. In
conservatorship, their balance sheets could be restructured along the
lines of our original plan or another plan with the Treasury’s senior sub debt treated preferentially to the Subordinate Securities, again minimizing risk to the tax payer.

• The Transaction would be fundamentally fair to all constituents and would respect the existing terms and corporate hierarchy of all outstanding GSE securities.

• The Transaction would minimize moral hazard issues for sub debt, preferred, and common stock investors.

Most importantly, we believe there are serious negative implications for
other large financial institutions in the event the Treasury were to
bail out Subordinate Security holders. The Treasury and OFHEO have done
substantial research on the benefits to capital market discipline from
large financial institutions’ issuance of subordinate debt, and the
destructiveness of the government implicitly or explicitly guaranteeing
such obligations.

See: Report to Congress “The Feasibility and Desirability of Mandatory
Subordinated Debt”, Board of Governors of the Federal Reserve System and
United States Department of the Treasury (December 2000), available at:
www.federalreserve.gov/boarddocs/rptcongress/debt/subord_debt_2000.pdf

“Subordinated Debt Issuance by Fannie Mae and Freddie Mac”, Valerie L.
Smith, Office of Federal Housing Enterprise Oversight, OFHEO WORKING
PAPERS, Working Paper 07 – 3 (June 2007), available at
http://papers.ssrn.com/sol3/papers.cfm" abstract_id=1000264;

“Signals from the Markets for Fannie Mae and Freddie Mac Subordinated
Debt”, Robert N. Collender, Samantha Roberts, Valerie L. Smith, Office
of Federal Housing Enterprise Oversight, OFHEO WORKING PAPERS, Working
Paper 07 – 4 (June 2007), available at:
http://papers.ssrn.com/sol3/papers.cfm"abstract_id=1000240 &rec=1&src
abs=1000264;

(Due to its length, this URL may need to be copied/pasted into your
Internet browser's address field. Remove the extra space if one exists.)

“Subordinated Debt and Bank Capital Reform”, Douglas D. Evanoff, Federal
Reserve Bank of Chicago, Larry D. Wall, Federal Reserve Bank of Atlanta,
FRB Atlanta Working Paper No. 2000-24 (November 2000), available at
http:// papers.ssrn.com/sol3/papers.cfm"abstract_id=252754.

To the extent the Treasury were to bail out the GSEs’ subordinate debt –
which was: (1) never implicitly guaranteed by the government, (2) always
rated below Triple A by the rating agencies, and (3) held by investors
who knowingly took on the risk of loss in exchange for a substantial
credit spread above the GSEs’ senior debt – it would endanger the
systemic benefits from subordinate debt issuance for every highly
leveraged banking institution in the world and the capital markets at
large.

Furthermore, we do not believe that the Treasury can purchase GSE sub
debt, preferred stock or common stock without incurring an immediate
loss to tax payers because of the enormous amount of existing debt
senior to these instruments. At a market coupon or dividend yield (to
the extent that one were to exist), any debt issued pari passu to the
existing sub debt, or preferred stock issued pari passu or even senior
to the existing preferred stock would require a yield that would be
uneconomic for the GSEs. No third-party investor would purchase these
securities regardless of their terms in light of their junior position
in the GSEs’ capital structure.

Please note that Pershing Square and affiliates own CDS on the
subordinate debt of the GSEs. We also note that nearly all participants
in the capital market debate on the GSEs are either long or short the
outstanding GSE securities.

We are contemporaneously releasing this letter to the public in the
interest of market transparency.

Respectfully,

William A. Ackman

http://tinyurl.com/Gross-should-be-punished

http://tinyurl.com/China-In-Need-of-Capital

nemo, I like the comment to Ackman's letter (or Bill Gross's cry for that matter):

"I don't know why it disgusts me that everyone is jockying for position and saying "Save me! Forget everybody else and just save me!"

This "bailout" is astonishing. Can Paulson really be impeached? How can that be accomplished?

ALOHA !!

Okay FRE/FNM ... Isn't anyone following the trail of tears? First we have cry-baby PIMCO and next some very angry words of warning from the Chinese who are essentially telling Paulson(Mr. CHINA)either make US whole or we'll make the US financial system a HOLE! That was a direct threat and Paulson has no choice in the matter. When you have your major creditor dictate the terms you better listen! This is a direct result of sending China our manufacturing. How else did you think all this would turn out?

NOTHING about WALL STREET is an isolated incident. The strings run for miles. Now we have a situation where 70mil baby-boomers retirement were riding on FRE/FNM so what happens to all those union pension funds and 401ks and the insurance companies funding annuities who all depended to some degree on the safety of FRE/FNM? The US Pension Guaranty Fund will not save us ... The US government is quickly finding out what Russia found out back in the 1980s ... NANNY STATES FAIL! This government cannot guarantee everyone and avoid the consequences of so many failures. Had Paulson not dome what he is doing now there would not be a US financial system on Monday! You can't have that in an election year! Even OBAMA backs Paulson's plan! HA!! What choice do these idiots have? This is the consequence of US Voters voting in this two party aristocracy for the past 90 years! Do you think there are no consequences to the monetary strategy of spending yourself to prosperity?

What of the toxic derivative positions that FRE/FNM have? Does anyone believe the "master minds" of these two companies did not try to leverage their way out of trouble?

TIP OF THE ICEBERG ... comes to mind!

M3 and total credit lags on average 12-18 months, M1 and M2 less ... in other words the inflationary effects of these many bailouts won't come due until later next year after the elections are over and the US Voter has forgotten what and who. By that time the US government will need another scapegoat and I believe it will be a military one ... say ... IRAN or PAKISTAN! Perhaps our government will be lucky enough to have another 9-11 before then! Historically speaking, nothing kills off economic woes of the masses better than a good old fashioned WORLD WAR! Bush tried the "WAR ON TERROR" but that one lacks credibility as a "real war"! OBAMA ... got any ideas?

Kaimu -

US might need a foreign scapegoat in the next 2 months, if the election doesn't shape up for McCain. Would Cheney hesititate to create another provocation? NO, he would view it as his last greata patriotic act - keeping the strong, resolute Republicans in office!

If that fails, they could always have Obama taken out. I can't believe the Repubicans would give up power. They have the ability to control events, and I believe they will use it.

Si02 - who would impeach Paulson? At neither convention was the credit mess even mentioned, much less laid at Paulson's doorstep.

I think they'll move NOW to nationalize Faulty and Fraudy, and give immunity to past managements, extend HB&B's access to Fed borrowings.

There is a risk that Pres. McCain might actually act like a maverick (for once)!

I will bail you out
You bail me out
We will not bail out that guy with his little home

Si02 - investing in Brazil vs. US

No doubt Brazil returns have been the best in the world looking backward. I'm interested in July 14 looking forward.

Historically, when US equity markets go down, emerging markets go down more. This seems to be happening again. (i.e. no de-coupling)I suspect Brazil will now dip farther and faster than the US.

However, after the global wash-out is over (2010? 2012?) Brazil may well be the world's best performing market for the ensuing 30 years.

Unlike Russia, India or China, Brazil has respect for law, a functioning democracy, an excellent managerial class, major companies which have operated and grown for decades, a large internal market, AND a growing global role as food, metals, and energy superpower.

Gehhhh! no way! Fannie and Freddie.. LIED!! Get out.. I can't believe this..

************************

--------------------------------------------------------------------------------

September 7, 2008
Loan Giant Overstated the Size of Its Capital Base
By GRETCHEN MORGENSON and CHARLES DUHIGG
The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced as early as this weekend, came together hurriedly after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.

The details of the deal have not fully emerged, but it appears that investors who own the companies’ common stock will be virtually wiped out; preferred shareholders, who have priority over other shareholders, may also wind up with little. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.

http://tinyurl.com/lieing-sacks-of-Shat

kaimu - In addition, let's not forget to mention those who instrumented the outsourcing to China of American manufacturing.

Group:

I have been trying to get an idea of what the market might do Monday and the days and weeks that follow, because of this bailout. I would very much like to hear what everyone here in the group thinks or may have read about what to expect this coming Monday.

This is from Mike's Morgan Quick Notes Behind Enemy Lines. Note Mike's Dark & Lighter Side predictions

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Paulson's Grand Scheme

It is anyone's guess what he is going to do. I've heard from contacts around the globe, and everyone seems to be wondering . . . but for the most part, everyone agrees Paulson is going to reward his fraternity Pals from Goldman Sachs and provide guys like Bill Gross and Wilbur Ross with a huge bail out . . . and even bigger profits.

There appears to be two ways of looking at this.

1 - The Dark Side - Paulson is going to provide a bail out that will cost the taxpayers hundreds of billions, but he will do it in pieces and hide the real story until he is long gone. The scheme will be so enriching to his Pals, that the market will rally hundreds of points on Monday, as Paulson's Pals force the market higher to give the world a false sense of security. Paulson does not care about the public, the taxpayer or the how this effects the world. He is simply under too much pressure from his Pals, and guys like Bill Gross who have buried retirement accounts and pension funds in toxic waste. In the end, it will all blow up in our faces, but Paulson will be long gone and the traders reaping the profits on Monday will be selling to the unwitting masses that will be wiped out a year or two down the road. Think 1929 on steroids.

In fact, this group believes Paulson has already cut a deals with John Mack, Vikram Pandit, Bob Steel, Jamie Dimon, Lloyd Blanfein, Bill Gross, John Thain and their counterparts throughout the Goldman Sachs controlled financial world to invest in Fannie and Freddie alongside the Fed. What escapes the public eye, is that eventually these investments fail . . . and the only losers will be the public. Guys like Gross, Mack, Dimon and Paulson's Pals in high positions at the major financial institutions will be long gone when the fall out destroys the American dream, economy and the very fabric of who we are.

2 - The Lighter Side - The alternative thinkers believe the markets will come down hard on Paulson, beginning with the Asian markets and following through to Europe and America. In fact, they believe the markets have been waiting for this for moment. These folks note that Fannie and Freddie were up sharply when the bail out was first announced Friday, but they turned down and fell sharply. Unfortunately, we can't say the same for the financials and the builders, so I am thinking this group is going to come up short. After all, the two groups that should be 50-75% lower, rose sharply on the news. That's where these thinkers start to think twice. The Plunge Protection Team may have been juiced up over the weekend with some foreign thugs, and Paulson might just overwhelm this group as well.

In this group, about half think Paulson will prevail with his PPT on steroids, while the other half believe the markets will react violently on Monday and finish sharply lower . . . even if they don't start out that way. The hard core group that want to see Paulson pummeled, believe it will start ugly and end ugly. Some even believe the markets will be forced to close and Paulson will resign before finishing his term. Since my clients are on the short side of the market, I like this group . . . but I believe Paulson has already indicated he is going to pull a scheme to reward his Pals.

Criminal - That is the only way to describe what we are witnessing. And the criminals get bolder by the day. For Bill Gross to come out with the commentary he has injected this week, is simply outrageous when you consider what he has been saying and doing for years. And for Paulson to have gained so much power, while still making back room deals with his Pals, is sickening. Our politicians basically gave this one man control over the destiny of the United States of America . . . with no back stop to control his bazooka.

Not Just Fannie and Freddie - What the financial world seems to have forgotten, is the problems don't stop with Fannie and Freddie. First of all, this bail out only involves about half of the US mortgages, and it doesn't even come anywhere close to preventing it from happening again. Second, we are witnessing the demise of the free market system, where we are protecting the greedy bastards at the top, but throwing the system and the financial future of everyone else to the wolves. The right thing to do, would have been to follow the money and go after the thieves. Even Cuomo made it clear he was only in it to secure his spot as Governor of New York.

Doing the right thing was never an option. We saw that in July, when instead of locking up his buddies for violating the short selling rules, Paulson decided to test his control over the world's financial markets.

Since Paulson will not do the right thing, the next best thing to do would be to let Fannie and Freddie fail along with the banks. Yes, there would be global pain, but it would be a lot less than what we will experience by trying to protect a few thousand greedy bastards like Paulson and his Pals. I want to say something creative right now, but all I can think of is . . . God Save Us.

Kim, that was a good read. The author also calls Paulson the Thief of the Century. In a sense this is a unique moment in history. We may about to be witnesses to the greatest robbery of all times (or as Bill puts it more politely, the greatest transfer of wealth).

As for what will happen. I'm inclined to favor the dark side. However, it does not matter. If it goes up I'll go long. If it goes down, I'll go short. There will be time. Right now I am lucky to have taken profits Friday and more or less holding a straddle position. This will be violent one way or the other.

Have the you folks called your elected members of congress today to tell them they cannot let this happen? It's not by complaining in a blog that this will be stopped.

"Unlike Russia, India or China, Brazil has respect for law, a functioning democracy, an excellent managerial class, major companies which have operated and grown for decades, a large internal market, AND a growing global role as food, metals, and energy superpower."

Jock: This may come true, but they will eventually suffer the same disease we have. It's the natural progression of human desires (power and greed).

nemo - It took the US a good long while to develop its disease. I suspect Brazil will take at least 30 years to become fat, dumb and happy !

national, political type 2 diabetes ...

I'm not sure Jock: I think we've just cycled around again from 1929 and Joe Kennedy and his buddys

n2s- what timing, i guess that's life...NOLA is now well within the 5-day track cone, and Ike is back to a Cat4...i suppose starting classes Monday at Tulane is no different than finishing out a quarter at UCSF following Loma Prieta, or having classes at Berkeley disrupted by demonstrations and riots...

jock- i like that analogy...complications of untreated type 2 include impaired circulation, nerve damage, kidney failure and blindness- you can see signs of impaired functioning, apathy, impending failure, and flat out blindness in all of our political and financial institutions today..

Colin Twiggs' latest:

http://tinyurl.com/54qccl

note the comments re Technology...Bull Hunter well-positioned..

shark-

http://tinyurl.com/5a5lrq

" A capital infusion by the Treasury could harm investors in the firms' common and preferred stock in the near term, but may ultimately prove a boon to shareholders if the companies rebound, analysts said.
"If the companies are stabilized and the crisis passes, the stock will be worth a lot," Peter Wallison, former general counsel to the Treasury and a frequent critic of the firms, argued."

" Less certain is how the Treasury plan would affect the firms' stockholders. Under a conservator, as opposed to a receiver, shareholders are typically not wiped out, analysts said.
However, if the Treasury does not inject capital, the conservatorship might be a precursor to receivership, argued Wallison. In that case, the government might purchase the outstanding shares at a fraction of their market value.
Alternatively, the Treasury could recapitalize the firms via a new class of shares with priority over the existing shareholders. Then, it might shut off dividend payments to common and preferred shareholders to preserve capital in the firms.
Such an approach could help to limit taxpayer losses and "moral hazard" - the risk that a federal bailout would spur more risky behavior.
Yet it would send the firms' share prices plunging to near-zero values for at least the time being, Gerald Hanweck, a banking professor at George Mason University, said."

Last night some buddies were over drinking and after having knocked back quite a few, said "I'm not sure if we're drinking to celebrate the end of the worst two weeks of political conventions in memory, or to forget the last years of the current presidency"... We kept on drinking.

Probably both, but here's to you and your buddies!

Question -

Remember Northern Rock that got nationalized in England? Anyone know what happen to it, its equity holder and such?

PERHAPS Paulson is just a hitman, but not the culprit. The situation was probably established long ago (since Greenspan time). Is it POSSIBLE that there are many evils out there and the moral hazard is just one of lesser evil? And that Bill Gross, GS, and others happen to be shrewed enough to hide behind millions of pension fund holders, besides the foreign creditors implicating the matter?

I guess the real important thing is, what are we to do come Monday, and the next few weeks?

Union strikes Boeing
Walkout by 27,000 assembly line workers shuts aircraft maker that holds key place in job market and economy. Customers await new plane.
http://tinyurl.com/5abplm

Not going to be good for Boeing's stock

Hugo and Vlad tweek the giant's nose again! - per BBC:

On Saturday, Venezuela's Rear Admiral Salbatore Cammarata Bastidas said four Russian ships and 1,000 Russian troops would take part in exercises in Venezuelan territorial waters from 10 to 14 November.

"This is of great importance because it is the first time it is being done (in the Americas)," he said in a statement quoted by the AFP news agency and local media.

This might just be KRY's last best hope! -

OK, I found was I was looking for! I am placing a sell limit order for ESLR $7.5 October puts at $0.6, and if these puts are exercised, the ESLR shares will comprise 20% of my portfolio (I already have 4% of my portfolio in ESLR, which I started buying recently at $8.9, after moving in and out of ESLR profitably a few times already). Since 60% of my portfolio is currently in gold/silver miners&explorers, I figured that exposure to Solar energy would offer some semblance of diversification.

The reason for choosing ESLR (FCX was another candidate): ESLR is basically at a 2-year low now, down 56% from its high 6-months ago, while the fundamentals for this company look great, as I have learned from reading their latest quarterly statement.

If the shares are sold to me at $6.9 (after accounting for the options premium), that would be a bargain. If the options I sell expire, then the capital I put away to back up these put options would earn about 90% annualized return, which is also a bargain! Looks like a great deal either way, so now all I need is for ESLR to go down on Monday so that somebody would in fact buy my puts. :)

Placing a buy stop limit order on SWC, stop 7.15, limit 7.2. It looks like the 5-year support at $6.X has held, and soon SWC should have yet another spike up.

ALOHA !!

Jock ... What the Ruskies and Hugo are doing to the USA in our own backyard is the same thing Bush and Cheney have been doing to Russia in their backyard over in Georgia and Poland! How COLD WARish is that? HA!! TIT FOR TAT until KABOOM-M-M!!! Remember the COLD WAR broke Russia with the last straw being Afghanistan. The USSA now is like Russia was back in the 1980s teetering under the multi front wars of economics and distant occupancy that makes Empires crumble rapidly. America has never been this vulnerable and I believe Russia and China will without doubt take advantage of the current situation for as long as they can. It is in their long term best interest from a political power point of view to cripple America financially. If they cripple America financially then they cripple America militarily. AN ARMY TRAVELS ON ITS MONEY! They are in the driver's seat and the last best thing America has going is its status as World Reserve Currency and a AAA/Aaa sovereign rating which is now up for grabs with the latest FNM/FRE bailout. Will the US FED have any room in the bailout lifeboat for LEH and MER? If you have a printing press then the lifeboat can be inflated to the Queen Mary2! But all that cuts both ways as all past Empires have discovered.

Remember no company based in America can have a credit rating higher than the sovereign credit rating of the country from which they are headquartered. Haliburton ... was that the real reason you left America? Cheney probably already has a penthouse sitting on top of the Haliburton headquarters in Dubai complete with a WiFi defibrillator!

Look, if past history accounts for anything then our leaders will push FNM/FRE and this entire mess onto the US Taxpayers in such a way that the bill does not come due until our kids inherit it! This is FIAT at its best ... Did anyone notice the real role of FNM/FRE? To buy up mortgages so that banks would be free to make more loans. If the banks are not in constant "loan mode" then the whole system crumbles! Banks are in the leveraging business! That's highly inflationary to home prices and explains why real estate investing has been so lucrative for so long and why people bought into the idea that real estate always goes up! Well, as it turns out that was "stinkin' thinkin'", because what really is happening over the decades and why a new home isn't $1,800(cost of new home in 1908) any more is because it is not house prices that always go up but the purchasing power of a US Peso that has always been going down! The AMERICAN DREAM is founded on currency debasing. Well, DREAMS like that can only become NIGHTMARES because debt is never repaid and the ensuing inflation spiral feeds upon itself. Think about it. All any home in the USA is a bank tool for loans and a revenue source for government. Where is the benevolence? Nothing is ever paid off! Sure I own a property where I have no mortgage, but when I sell there is a 99% likelihood that my property will be bought with another loan from Bank Of Hawaii! The debt cycle keeps running forever ... from one generation to the next. No wonder the banks and the politicians want you to buy into the AMERICAN DREAM ... it keeps them in power! Well, unless your Senator Charles Rangall, then you are exempt from interest!!!

These bailouts of US Banks and FRE/FNM are highly inflationary because there is no commodity backing this latest paper blast(bazooka terminology)! Printing money to repay bank losses based on greed is absurd and is about as morally hazardous as it gets! It creates a "who's next" mentality ... Certainly GM and F deserve bailouts if PIMCO gets one! We're essentially funding errant human behavior at his point, which is really all that is backing global fiat anyway! "Faith and credit" of the ______ government!(Fill in the blank with any country's name!) It has nothing to do with free markets any more and the oft quoted "forward seeing" markets! How can markets see past their nose with all this fraudulent data and bank pimping going on? I mean, Bernanke said a few weeks ago right in front of the US CONgress that FRE and FNM are fine and dandy ... now they aren't! CPI is 4.4% ... U6 is 6.1% ... GDP is 3.3 ... Turns out FRE and FNM are not okay because of the "way" they do their accounting and have moved losses into Q1 of 2009 so that right now in 2008 they look good(capitalized). That reminds me of another large entity and how they do their accounting ... WHO? The US government that's who! They never account for the here and now, the financial consequences are always pushed off into the future for other generations who currently cannot vote because they're too young! FUTURE SHOCK ACCOUNTING not GAAP ... Generally accepted by who? HA!! Two sets of books?

We need another BOSTON TEA PARTY!

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

vinod, learner2, nemo,

I don't believe FNM/FRE takeover makes any material difference to the financials, but will most likely be perceived as a benefit by the market initially.

This is all just too irrational for me. I'll see which way things are going around 10AM EDST.

I totally agree with Bill's Sep 5, 9:36 comments. Our nation is being run by an unelected oligarchy with either a clueless or complicit Congress and White House. Much worse than a military coup that you could at least shoot back at.

Grym:

I'm on board with that. Kaimu-do you channel Mencken?

Regarding Ike, another storm that will come in over next weekend. How much you want to bet they open up oil trading on Saturday.

kaimu,

My protests of what NAFTA's passage would initiate were as useless as anything any of us can do about the current situation.

I've watched my city lose 10,000 manufacturing jobs, (my clients),
seen my youngest son's income drop to 1/3,
my eldest is in danger of losing his job to India,
my state, Illinois, is among the most in debt, highest in unemployment,
and now my nation going to hell.

I have always viewed Bush as a programmable lightening rod by those who run the government. His speeches are a lot like Catty Kathy, the doll with a three sentence vocabulary.

War is the eventual "solution" in all of history's examples. Like the financial action for those "too big to fail," war is always "unavoidable."

NPR reported on US missile strikes and insurgency into Pakistan Saturday.

"what timing, i guess that's life...NOLA is now well within the 5-day track cone..."

2nd: Yep, so now it's about managing risk. We just rescheduled the flight for Wednesday. Right now, it's projected path is for the western Gulf. But I'm going wait to be sure. By Tuesday night we'll all know where Ike is really heading.

In the meantime, I'll pray for the people who can't avoid its path.

David: I like your plan for ESLR. I'd do the same if I weren't already fully invested.

Hi has anyone use fidelity as his 401K broker. I am stuck to fidelity now. The only way to get out is quit my job and transfer to my own IRA account.

Last night, i was checking fidelity money market website. It says it invests 25% of money in non FDIC bond market in order to achieve higher yield. I am very concerned now. I don't know how much fidelity invests in F&F bond. I hope they invest the rest of 75% in US treasury bonds. I think I will get screwed eventually. But there is no way out.

apollo7- all of my accounts (including retirement) are with Fidelity, and if I had my choice of retirement account brokers it would still be Fidelity...I've been with them since the early eighties, and the integrity of the company and the people who work for them have been impressive...I honestly don't think you have a problem..

apollo - the only reason to use 401k is if your employer has some form of matching contribution (which is pretty rare these days). Just open a rollover IRA account at the broker of your choice and move your 401k savings to it.

...i've also used at various times in the past trading platforms at Schwab, TD Waterhouse, and Wells Fargo...in terms of customer service and willingness to correct errors (adjusting transactions) there is no comparison, Fidelity has always done the right thing...they even called me once in the early nineties correct several weeks of (higher) trading commissions that should have been lower due to a higher volume of trading...

...another example- i placed a market order for FXP last winter during a highly volatile session..it took almost two hours to post, which was reflected in a higher price...i emailed Fidelity, they noted the time stamp on the order, and immediately adjusted the purchase price down by the appropriate amount, which to the best of my recollection was about two dollars...

Anyone watching Paulson deliver the coup de grace? What does this mean for tomorrow? Last week, it seems we had sell the rumor. Will we now have buy the news? Seems unlikely, but, then, two years ago, this whole thing seemed unthinkable.

...Unthinkable, except, that is, by Bill. Thank you, Bill, for preparing us all, long in advance, for these dark, yet interesting, days.

Apollo7 - F&F debt is SAFE as Treasuries

That's what the rescue is all about. That's why Bill Gross piled into F&F debt. More yield, but now with the explicit backing of the Treasury.

Only our overseas creditors would be "stupid enough" to doubt that!

Bob Chapman's Latest Comment

This past Thursday, when the Dow received a 344+ point haircut, or should we call it a brush-cut, some in the media wondered why this huge loss had occurred? Well, pardon us, but could the root cause be that the doomed US financial system has now moved past the event horizon of a super-massive financial black hole, which was recently created by the gravitational collapse of the Subprime Death-Star's constituent mass of fraud and deceit when its internal furnace, fueled by the fusion of toxic waste bond tranches into sucker-dupe real estate derivatives, finally burned out, thanks to the advice of analyst Meredith Whitney at Oppenheimer & Co.? Aided by the privately-owned Fed and our corrupt Treasury, which want to bail out all the Wall Street fraudsters, as well as all the foreign currency manipulators who are fat with the dollars they robbed from us through free trade and globalization, at taxpayer expense (of course), while simultaneously inflating us into oblivion with an ocean of money and credit created out of nothing, our financial system has moved past the point of no return. That point of no return lies at the event horizon of a financial singularity so massive that it could take two to three years for it to cross the distance from the event horizon to the complete and utter destruction waiting at the center of the black hole. Our pitiful financial system will be bent and contorted in tortuous, agonizing movements all the way to the hell that awaits it at the menacing ball of darkness which lies straight ahead, anxious to grip it in one last deadly embrace. According to the laws of financial nature, the only things that can escape the gravity of this financial black hole are gold and silver. This is one lesson in financial physics you had better learn well and quickly. A failing grade could result in poverty and all the misery that goes along with it.

If you're still looking for the cause of the stock market's decline, consider the real estate market. From its peak in June 2006, to June 2008, two years later, the S&P/Case-Shiller Home Price Index shows that the median price of a house has dropped from about $226,000 to about $180,000. That's roughly a 20% loss in nominal value. But that does not take into account inflation, which has run at about 11% on average over that period in real percentage terms, as opposed to official percentage terms which we all know are totally bogus. So that means, in terms of 2006 purchasing power, that $180,000 can only purchase what $143,000 could purchase in 2006, and the total loss in real estate purchasing power value, ala 2006 dollars, has been almost 37%! You don't hear that from the fane-stream media! Since the total value of the real estate market in 2006, based on Fed figures, was $19.8 trillion, we have a total loss of real estate purchasing power over two years of roughly seven and a quarter trillion dollars, or if you prefer, $7,250,000,000,000!

That's over half of our entire freaking GDP as estimated for our current fiscal year - NICE GOING, MORONS - what will you do for an encore?! And we are only half way to the bottom! Soon, over a period of about four years ending in June, 2010, we could see an entire year's worth of US GDP wiped out! As the Extremely Mad Mogambo Guru (EMMG) would say: "We're all freaking doomed (WAFD)!!!" This destruction of real estate values was of course planned for the sheople by the Illuminati in another one of their "cutesy" little rip-off schemes to impoverish the US middle class. The only problem for them was, they could not off-load all the toxic waste on their sucker-dupe clients before the whistle was blown by Ms. Whitney, and these inane, neocon nitwits grossly underestimated the toxicity of the fraudulently contrived derivatives they pawned off on their clients as AAA paper in a Ponzi-scheme made possible by the repeal of Glass-Steagall by Slick Willie and his fraudster friends. Now most of the Illuminist fraudsters are insolvent, and like it or not, they are going down with us! We will provide you with the names, addresses and phone numbers of the many responsible parties when the time comes so you can show them your "overwhelming sense of appreciation!"

Well, if the subprime derivative losses and the reduced real estate market values are not enough to convince you, then how about our unemployment statistics, which in reality are double to triple the ludicrous figures we got from the Bureau of Lying Statistics, whose fiction writers tell us that we lost 84,000 jobs last month, and that the rate of unemployment is 6.1%, a five-year high. When was the last time you heard any kind of news announcement relating to a massive rehiring of workers, or the massive creation of new, good-paying jobs? What we get instead are reductions to the number of jobs lost by creating government jobs that will be eliminated as fast as they are created as tax revenues tank, by not counting those unfortunate souls who have run out of benefits, by creating jobs out of nothing (like we create money and credit) using the Birth-Death Model, by not counting reductions in pay for those that are rehired, known as underemployment, and by not counting job losses suffered when full-time jobs are reduced to part-time jobs. The bogus figures we get from our government are a joke. They are laughable. But even the official figures stink. This state of affairs on the employment front provides plenty of reasons to sink the stock markets. The stock markets are dependent on consumer spending for growth, spending which is being shut off like a water spigot as more and more people join the ranks of the unemployed. Try freeing up enough money to spend on discretionary consumer goods with the meager proceeds of an unemployment check! Good Luck! And now those with lucrative jobs are standing in the unemployment lines with the peons as the economy gets hit across the board. Why do think all those mortgage loan defaults are creeping into the prime, jumbo and option ARM loans? One out of every three Americans will be unemployed when our economy bottoms out over the next two to three years! Put that in your pipe and smoke it for a while. Buy gold and silver now, while you still have the income and assets to do it, or get sucked into the black hole!!!

Hey look, over there. It's a bird. It's a plane. No, it's "super-dollar," and his side-kick, "super-yen!" Yes, they're faster than a Wall Street derivative salesman, more powerful than a negative lease rate, able to make precious metals wilt in a single bound, as they fight to maintain fraud, injustice, and the Wall Street way! The cartel has pulled out all the stops. They have massively fudged CPI, GDP and unemployment in order to support the dollar.

They have used the super-yen to give the stock markets another case of yellow fever by hitting the yen carry traders, in order to cause the specs to cough up their gold and silver positions to meet margin calls, and to cause a flight into the perceived quality of treasuries to support the dollar. The yen has strengthened from 110.516 yen per dollar on 8/15/08 to 106.311 yen per dollar on 9/5/08, and the yen's rise against the euro has been nothing less than spectacular, as it has strengthened from 169.358 yen per euro on 7/28/08 to 151.549 yen per euro on 9/5/08, meaning that it now takes about 18 fewer yen to buy one euro than it did only five weeks ago - whew! That yen strength has decimated Euro Zone carry traders and has acted as a large counterbalance against precious metals, which have risen by leaps and bounds against the euro as the metals are normally priced in dollars. These yen machinations have pushed foreign markets down to force foreigners to sell their assets and use their foreign currency proceeds to buy treasuries, which can only be bought with dollars, like oil, in order to draw more dollar support. They have also, over the course of the past month, boosted open interest in USDX futures by nearly 20,000 contracts, with the most recent contract count standing at 50,630, which is very high. They have hammered oil from 147 to 106, thus curtailing the use of petrodollars to purchase euros, which has sent the euro plummeting, along with EU economies, whose central banks, the BOE and ECB, have recently colluded with the Fed to keep rates the same, dooming their economies to rampant inflation and supporting the dollar, while insuring lower European export prices for US consumers to keep the EU exporters more competitive.

They even put a short-squeeze on the specs and their naked shorts on the Maleficent 19, thus hitting oil, precious metals and other winning commodities positions to cover margin calls, and never mind that you could still illegally naked-short every other company with impunity. This hit oil big-time, and it caused a large hedgie, that was insanely long in oil, to fail, and the net result was to drain away petrodollars to prevent the OPEC nations from converting them to euros, thereby weakening the dollar. OPEC nations like to go shopping in the EU, which is where they greatly prefer to spend their money instead of spending it in the US, and hence their desire to convert their petrodollars into euros. In addition, the repo pool did overtime to produce treasuries for purchase by the liquidating specs and the bank's that took in all their margin call money, thus absorbing the dollars flushed out by the oil takedown and keeping those dollars from being sold off or from being pushed directly into the system, which would have produced dollar weakness and would have exacerbated inflationary pressures.

The central bank collusion continues as the short squeeze is put on the dollar shorts a while longer. We have scum-bag incumbents to save, don't you know? When we sneak past 80 on the USDX, and drop below $100 per barrel on oil, we think the manipulation will likely be over, and the whole situation will reverse with an explosive vengeance. We, however, simply do not see how this charade can be continued for two more months. We see some big players moving in to intervene very soon. Russia and China know they have the Illuminati where they want them. They have stood by and watched as the Illuminists have carelessly painted themselves into a corner with profligate creation of fraudulent debt while exporting our jobs and our inflation overseas. The Illuminati have gutted the US economy, destroyed their financial and military bases of power, and made enemies out of more nations than we can keep track of anymore through bullying and violence. The Illuminati have sold us, and themselves, into the hands of the enemies, which they themselves have created, fostered and financed. It has to be the stupidest thing we have ever witnessed, and the Russians and Chinese must be standing in stunned, stupefied silence, thinking to themselves: "It couldn't possibly be this easy! All we have to do is stand aside and do little more than sell some treasuries, and we win."

They must be flabbergasted that the dopey Illuminists have played right into their hands. The members of the Sino-Russian alliance will from this point forward be on their best behavior as the elitists continue to try to provoke them into wars to weaken them and level the world playing field, and the whole world will stand by in wonder trying to figure out why the Russians and Chinese have become such rational and fair players. It is hilarious in a way that even tops the comedy acts we call political conventions. Rothschild and Rockefeller must be mortified.

Can you imagine that our government, despite what must be mounds of contrary evidence, is saying that Russia was the aggressor in Georgia? Have these people no shame? World opinion is going to quickly turn against us, even more so than it has already. People around the world are sick of this crap, and they are going to get together to do something about it. You can rest assured about that. We are about to get some major payback for allowing the Illuminati to rape, pillage and burn their way around the globe with barely a whimper coming from us.

Investors, both public and private, amateurs and professionals, are sick of the markets acting irrationally. Throw all your black box fundamentals out the window, as reality is now whatever the cartel says it is. This growing aggravation with schizophrenic markets might also account for some of the market weakness we have seen lately, just as Jim Cramer suggested. Until the SEC and the CFTC start doing their jobs and start acting like regulators instead of elitist bootlickers, we could see a complete abandonment of these markets. We see a point at which only physical sales will be used to determine commodity prices. You want it, you pay for it according to the physical market, meaning the spot prices in the spot markets, which will no longer consider action in the casinos when determining prices.

You had better empty the gold and silver from the COMEX cupboard, or you specs are going to continue to get reamed over and over again, ad nauseam. When will you figure out that these markets are rigged and that the government tells the commercials everything about your trading positions? The commercials bought precious metal (PM) longs from the specs behind everyone's back on the private OTC after scaring the specs off with large purchases of short positions on the public COMEX. These longs then serve to cover their ever-growing number of shorts. They know where all your stops are. The CFTC and/or the COMEX tells them. Then comes more huge short sales on the COMEX as the cascade of spec losses mount while they get vaporized by their idiot black boxes, and the commercials' shorts are making them a fortune. They then buy some longs or cover their shorts slowly as they work off their inventory of shorts at a profit, using sales and leasing to tamp down any overactive rallies. Then comes the sudden short-covering rally, and soon they are selling their OTC longs back to their spec dupes for even more profits, after which they go back to the casino at the COMEX to start the cycle all over again with massive short-selling. One definition of insanity is doing the same thing over and over again and expecting different results. Can we get a witness here!

Physical gold and silver everywhere through private dealers are totally gone or very scarce, yet prices are going down. Why? Because you left the COMEX cupboard full, and as long as they have that gold and silver to work with they can continue to paper you to death. Get a freaking clue, people! Pay cash for the COMEX gold and silver. You have the money. Use it, or they will continue to hand you your derriere on a platter. Gees Louise. And stop funding the ETF's. Their holdings are being leased against you. Use the money you have invested in the ETF's to bankrupt the COMEX gold and silver hoards and stop playing into their hands. You people have massive redemptions coming up if you don't produce soon, so time is of the essence. You are going belly up if you continue to roll over and play dead for these reprobates like some sort of pet dog. Move it!!!

All the shenanigans and machinations will soon end when we come upon the next big shoe to drop. Be it a war, a major bank failure, the nationalization of Fannie and Freddie, the breaking of OPEC dollar pegs, or a huge treasury sell-off by some very angry nations, it will be GAME OVER for the cartel. Take advantage of these wonderful bargains in gold, silver and their related shares now, because this is the last time you will ever see prices like this again. The cartel has blown The Big Sting Two. Their stocks, bonds and derivatives are tanking by the minute, and they are out of time for a big stock rally because the data has turned against them and they can no longer hide behind false statistics. These morons have been set up by China and Russia for the biggest bear rally in bond and treasuries of all time, and they are giving them every reason to sell treasuries and GSE paper. Meanwhile, seasonal support for the metals will keep them well-bid and the cartel will not be able to break them. It is now just a matter of waiting for the next major catastrophe, and then clean up with gargantuan profits. Forget the wall of worry that the elitists are fraudulently trying to build around precious metals, and keep focused on the big picture. Go long and stay long, and enjoy watchin these reprobates squirm as their precious system explodes and goes down in flames like the Hindenberg.

FRE/FNM- looks like bond holders win, shareholders lose...

just listened to Hank's announcement. Still looking for an answer to the following Q I raised last week. Text has been revised to include latest info on Fannie and Freddie.

What happens to treasury yields when the Government now explicitly, not implicitly, guarantees all this shit that Fannie and Freddie have issued? The logical conclusion is that Fannie and Freddie paper gets bid up – dramatically! Really, let’s look further.

By any measure we all know that with inflation at the highest levels we have seen in decades and with our balance of payments deficit showing no signs of abating, that both the ten year and the long bond should be priced to yield at least 6%. Maybe more.

So why hasn’t this happened before the “solution” to the Fannie/Freddie problem was announced? It’s partly because of the $300 Billion or so of Auction rate securities that are still “out there”.

At a 6% yield, a 30 year 4.5% coupon would be worth about $800. Almost all of the Auction rate securities are backed by long term stuff that trade at some spread off of the treasury markets. Liquidation of this stuff needs to be done at levels that do not inflict too much pain on their originators. This requires low long term rates.

The auction rate market is busted. Probably forever. All of the $300 billion of assets backing these things must be liquidated. Somehow the Treasury and Fed has kept long term rates at levels that helps price the underlying assets higher than they would otherwise be priced. (This applies to all other long debt also.)

The assets underlying this paper, some of which is of dubious quality, are going to get “bid down” under any circumstances. If long term treasury yields were at 6% they would get bid down another 15 – 20%. Bankers can not absorb another $40-60 Billion hit in addition to all the other problems they have.

The halls and walls in NY are full of people working overtime to place the underlying securities with long term investors (where they should have been sold in the first place).
This process is probably moving at a good pace, thanks partly to the low level of interest rates and the recent strong dollar. After this process is finished, and as soon as more of the other bogus shit is moved offshore, I believe rates are due to make a big run. This means bond prices drop, maybe significantly.

Can anyone tell me why I should not buy TBT, the UltraShort Lehman 20+ Year Treasury ProShares ETF? This is an Inverse interest rate ETF that I have been watching since its introduction and I think it tracks treasuries as good as can be expected.

If the market soars tomorrow, will gold get crushed? Time to buy?

wabrew,

Much appreciated insight.
I think you'll find many community members here are watching TBT as well as DXKSX and RRPIX.

i would not make any assumptions about which direction prices (short bonds/long bonds (TLT), financials, USD/gold, even oil/NGas) take monday...i have starter positions in WGW/SLV/GG, as well as a 60% position in HNU.to, but given the reverse logic of the market recently (which may be related to forced sales in some sectors), the only way to know what market reaction will be is to wait for monday's open...

A lot of big banks own FNM/FRE preferreds. With the dividends removed, this can't be good news for the banks.

Wabrew - TBT in a downtrend, with no end in sight. A great antidote to one's fundamental expectations is focusing on those charts, IMHO.

Best to buy when TBT has put in a bottom, and suggested an upmove.

ksobo, not only banks, but pension funds.

Thank you everyone for your answer. It really gives me a little comfort now.

It would be interested to see which way Asia and Europe markets interpret this news, in addition to short squeeze on financials.

Jock - you are right. TBT is an inverse proxy for the price of the 20 year treasury. So..... it looks terrible on the chart.

Thats exactly the point. Can you imagine any scenario that will give us lower long term rates (higher bond prices) in the next 1-2 years? Short term - sure- with this latest treasury bail out short tem rates could go lower. But I am betting the yield curve points up, maybe way up, at this time next year.

Obama's personal security -

There was remarkably little mention of the arrests in Denver of people plotting to assasinate Obama. Since then, no news reports I could find (searching Google news) of any resulting increase in security arrangements.

Yet, as events move towards the election, there are ever greater risks of better organized, better-financed attempts upon his life.

FRE/FNM

http://tinyurl.com/6bcdmy

"...losses only added to the misery that has already wiped out approximately 80% of the companies' share values this year. And the takeover plans, while leaving Fannie and Freddie able to continue operating, would leave the remaining shareholders with nearly nothing, diluting the companies' common stock but not wiping it out."

i would seriously consider positions in FRE/FNM if/when they become available at prices near zero...

Hi All,

Have you ever thought our future tax rate would be? I have done some research through irs.gov.
you can view our historical tax rate at here.
http://www.irs.gov/taxstats/article/0,,id=175910,00.html

It is very interesting. I suggest everyone takes a look at it.

In 1982, the top tax bracket is 50%. At what income level? $85,600. I guess some of you will get shocked.

But in 1970's, if your AGI was above $200,000, guess how much is your tax rate? 70%!!!!

Is it scary?

Let us say the government bails out every one, nationalize every one. What do you think of your tax rate?

apollo7- 85,600 was a lot of money in 1982...it would be equivalent to about a quarter million dollars today, so a 50% (marginal) rate sounds reasonable...keep in mind also that the 70% rate you quoted undoubtedly only applied to any income above 200,000 in the seventies (with amounts of your AGI up to and including 200,000 taxed at lower, but progressively higher, rates)...

2nd_ave, that is true. but equivalently today's 250k is only subject to 28%.
And if you look at the table, in 1981, 50% will tax at 215.6k. But in 1982, taxable income immediately dropped from 215.6k to 82.6k.

I am expecting our tax rate will do the same thing. Suddenly, most of us will find we are insolvent due to the tax hike. Most Americans are living on pay cheque to pay cheque these days.

I still think it is scary.

Does anyone have thoughts on what's going to happen on monday to the Bank short ETF's like SKF!!

Curious to get everyones take. I took a hair cut in AH on Friday. Reading the Yahoo message board.. some think that SKF is going to TANK because of this BAIL OUT!!!!

thanks

Yahoo is notorious for it's pumpers and dumpers. Did you see a single rational explanation as to why the Financials should be bought? The system is a mess (thus the need for a bailout).

2nd,

re: bond holders win, shareholders lose...

I seem to remember in the interests of avoiding a conflict of interest, most government appointees (Fed Chairman, Treasury Sec., etc) put their investments into government bonds.

Hmmm.

apollo,

I believe during WW2 tax rates were in the 90+% range, which is why many executives became "$1 per year men" — I'm sure they got some kind of deferred compensation, however.

I expect to see a lot of creativity in taxing. This country is essentially bankrupt and in real need to borrow more from —?

c3 asked, "Remember Northern Rock that got nationalized in England? Anyone know what happen to it, its equity holder and such? "

"It seems unlikely that compensation will be paid for some time" from below:

Outstanding loans of Northern Rock shares
Background
1.
All Northern Rock shares were acquired by HM Government on 22 February under the Banking (Special Provisions) Act 2008. From 25 February, they could no longer be settled within Euroclear UK and Ireland. Euroclear UK and Ireland stated that, “Any open transactions in the Shares will require both ‘seller’ and ‘buyer’ to agree bilaterally any action required in respect of their mutual contractual rights and obligations. Each party should therefore contact directly their counterparty. Under these circumstances, Euroclear UK & Ireland, as operator of the CREST system, will not introduce any exceptional processing to accommodate closure of these open transactions.”
2.
The Act provides for an Order to set up a compensation scheme under which an independent valuer will assess any compensation which may be payable to holders of shares transferred to HM Government. The compensation will be paid to those on the register immediately before the transfer. The Order came into force on 13th March 2008. For any outstanding securities lending transactions, borrowers will make a manufactured payment to lenders in respect of any compensation received in relation to former Northern Rock shares.
3.
It seems unlikely that compensation will be paid for some time. The following stages will/might be required (i) competitive process to select valuer (ii) valuer makes assessment (ii) HMT and other interested parties can request a revised assessment (iv) HMT or other interested parties can refer the assessment to the Financial Services and Markets Tribunal.

ISLA recommendations to market participants
ISLA believes the following recommendations represent the consensus views of the major borrowers and lenders in the UK market, although individual firms are free to negotiate other arrangements bilaterally.
•
Borrowers and lenders should agree between themselves the number of Northern Rock shares that were on loan at the time of the transfer to HM Government.
•
The former shares might still have value depending on any compensation paid to former shareholders. Where securities loans are outstanding, their valuation is important in order to ensure that counterparty risk is minimised: a high valuation exposes the borrower to potential counterparty risk on the lender if it provides too much collateral; a low valuation exposes the lender to potential counterparty risk on the borrower if it receives too little collateral. A valuation should be agreed bilaterally by lenders and borrowers. ISLA understands that most market participants are using the value of Northern Rock shares immediately before they were transferred (90p) but some are using lower prices (eg based on the grey market) or 0p.
•
By bilateral negotiation, lenders and borrowers may agree to ‘cash out’ positions (ie the lender agrees to terminate the loan in return for a cash payment) based on an agreed price for the former Northern Rock shares.
•
If positions are left outstanding, the fee on such ‘loans’ should be set to zero from a date agreed between the parties on the basis that the former shares have ceased to have value to the borrower.

International Securities Lending Association
30 March 2008
http://www.isla.co.uk/docs/ISLA%20guidance%20on%20Northern%20Rock.pdf

Grym- "following the money" works every time ;)

Grym: "I believe during WW2 tax rates were in the 90+% range, which is why many executives became '$1 per year men' "

Many executives became $1 per year men so they could influnce government war expenditures in favour of their respective businesses.

Government Takes Over Control Of Fannie Mae And Freddie Mac
9/7/2008 3:19 PM ET

http://www.rttnews.com/ArticleView.aspx?Id=703564

I'm not sure how this will affect the US, but it is not a plus, I'm pretty sure.

"On Monday we will sign an agreement with President Cristina (Fernandez de) Kirchner that will officially launch the use of reais and pesos in our trade exchange," Lula told Argentine newspaper Clarin in an interview.

"We are going to abolish the dollar as a currency in our trade."

_ http://tiny.cc/W5DlR

Bonds - Keeping an eye on BWX and TLT...

Ike Tracks into the Gulf Oil Complex
http://tinyurl.com/5wv5ss

Paulson's Statement on Freddie and Fannie with a Nearly Simultaneous Translation

http://tinyurl.com/6c76fj

Bidrec - thanks for the follow-up.

OldGoat - FNM/FRE - Well, it looks I'll be dumping DXO, cause now the USD is headed back in the crapper on this news....

Now that Uncle Sam official owns FNM/FRE, any chance of tax refunds headed to delinquent mortgagees being revoked and applied instead to the outstanding government "debt?"

I'm seeing the Dow, SPX, and Ndx futures up about 2% at 6pm est on Bloomberg TV.

2nd
Will buy FNM/FRE Monday. Will hold them for one hour to 24 hours
Movement of 10cent to 25 cent in stock is the way to make money?

dow future UP 220

ksobo2000,

I hope so. And I hope the market LOVES the FNM/FRE news. I'll be patient, because I need one more good short before I seriously start thinking about going long in anything other than a day trade.

FNM/FRE bailout and the $USD effect:

Time to start watching RYWBX?

http://tinyurl.com/5erj5r

[Bill Cara note:

Agreed. Aren't these exciting times? The fun part to me is that as more people get knowledgable, they get more involved, and the chat here becomes much more interesting. I only wish I had more time to read my own blog. But, my wife says I need to get a life!]

Is it Sanyo or Samsung that is rumoured to be buying SNDK?

Looks like IKE is going hit Holguin head on. It is a gorgeous place with really nice people. We can only hope for no suffering there tonight, but unfortunately major devastation is possible. Map: http://tinyurl.com/65732a

Bill,
Great WIR Report, again. I'm sitting 97.5% in cash just drooling at the opportunities you are pointing out.

[Bill Cara note:

Thank you. What I am doing at this very moment is drooling over Sarah Brightman performing Symphony on Public Television. Fannie and Freddie can disappear for now. Sarah and Chris Thompson singing Phantom is what life should be about. Tomorrow, I'll think about putting some cash to work. Time to Say Goodbye!

http://www.youtube.com/watch?v=DMZdpkS5OBI&feature=related

http://www.youtube.com/watch?v=0XXAG_rOjMk&feature=related

http://www.youtube.com/watch?v=TkySiWkevZU&feature=related

http://www.youtube.com/watch?v=7gtp3POWgB4&NR=1

Plug your noise-cancelling head set into the computer mic and watch this. This is what I do when I blog stuff like the WIR. A couple hours later, I can't remember much of what I wrote. Such a high. Best experience in life. ]

BP - Tax Refunds - Liable to be repaying mortgage losses for many years to come, unless perhaps filing for personal bankruptcy affords them some protection....

Japanese Yen actually declines against US$ right now.

fannie freddie,

IMO- doh!

Maybe in about 10 years the entity will be worth more than what the treasury paid for it? actually be an asset... actually be able to give the USA balance sheet some reprieve....
We can only hope but instead the gov will sell and let crooks make out like bandits again.

futures are all up at the moment:

S&P500 up 29.60, gold up 12, oil up 2.11, NGas up 0.22...

Great WIR Bill. Many, many thanks to you.

Au - Looks like maybe we've got a moon shot here...

vinod- if i can buy FRE/FNM for pennies on the dollar, then aside from trading i plan to buy a few thousand shares for the six-year-old...who knows, maybe it will pay off big for him...

futures... UP... up big time... wow... why.... huh...

S&P 500 1,270.70 +29.60

2nd,

I think that is a great idea, it should pay off...
risk: will the US be a third world country when it comes time to cash in the investment?

norm, my man...think positive...

"We can only hope but instead the gov will sell and let crooks make out like bandits again."

who's going to be selling tomorrow, and who's going to be buying? i would take a look at which side is panicking and think about taking the other side...if you take advantage of the opportunities, you can join in on the highway robbery...

While Bill seeks to avoid the tragedy and comedy, I rather enjoy the drama I'm witnessing while learning to trade. Having a rough draft of the screenplay enables me to chime in on major verses.

2nd,

your absolutely correct... I have no disagreement with you whatsoever.

a part of me wanted them to fail.

I believe that we just put a band-aid on an artery that will eventually burst. IMO- i would rather have a smaller artery burst than one that keeps getting bigger and sicker when the band-aid goes.

If it works out, this might be the best investment the treasury ever made. assuming housing rolls over someday soon and underlying asset prices actually start to increase (time will only tell). they could end up looking "smart".

i would also take a look at likely short-squeeze candidates...and FRE/FNM qualify->if i were short and they drop at the open, i'd be closing out my positions, so prices may not necessarily go into free fall...

commodities are also overdue for a bounce...if i were short i'd be thinking about the possibility that any forced sales are nearing an end, and in addition getting out of Ike's way...

Didn't Bill mention something about an opportunity after monday/tuesday last week?

He might have been referring to miners or something but agreed that there should be opportunity.

WAMU outs CEO... news flash

and to repeat an earlier post, i would make no assumptions about the direction of prices until tomorrow's open...how many times have we gone to bed with futures colored deep red only to wake up to bright green? it happens all the time, especially when expectations and consensus levels are high...

the headline writers are starting already- 'killer ike'...http://tinyurl.com/5wup7u

..make that 'bright green numbers'...

2nd,

Yeh. I always thought if you follow the drive-buy shooters closely, you have less of a chance of getting shot at. I hope the shooter is easier to spot tomorrow.

c3- i did opine earlier that 2PAC would be an appropriate ticker...talk about an ambush...

WAMU - There's another one you might pick up as a penny stock and leave for your children. It's on my failure list, but might just squeak through....

CP- the problem with WM is it's not a GSE...the newly combined FRE/FNM is guaranteed not to fail, it's just a matter of how inexpensively one can pick up the stock/how long it takes housing to recover...

Nice links Bill (Sarah Brightman). When I'm not looking at charts, I'm watching/listening to music. Discovered this gem last night:

http://www.youtube.com/watch?v=ytW8Su59gI0

Enjoy.

Mmmmmhhh. NLY should be a good bet tomorrow...

DV (Darth Vadym) hasn't chimed in of late.

checking in with the parole officer...best traders all have one ;)

except for vinod..

shanghai is unimpressed...which may be an intra-day buying opportunity...

http://tinyurl.com/3belnq

2nd - Do you already have some GSE? With the explicit guarantee, it should take a moonshot en la manyana, WAMU is likely to advance in sympathy. Regardless, when a stock is hammered to a pulp and no one wants to buy, doesn't that present a rare opportunity?

Asian Markets are absolutley rocking at the open on the FNM/FRE news...will it carry through the night into the Americas?

CP- (a) no position right now...(b) actually, most analysts expect a sharp drop in the GSEs in light of equty dilution-> of equity...(c) exactly, if panic occurs in the direction of selling, then i would look at buying...

Quick Question

Where can one find these S&P futures numbers that are being posted here tonight.

Thanks

Kim,
try http://www.bloomberg.com/markets/stocks/futures.html
For e.g., DJIA futures are up +246 as I compose this. Personally, I find the futures either useless or actually contrarion.

UAUA- check out the serious buying in UAUA the past two weeks:

http://tinyurl.com/6xduzb

if 'Ike Spikes' oil back to 120 and UAUA drops back into single digits, may (once again) be a great buy...

Mackinaw

Thank you

Get yourselves a bucket nearby:

"I thought this was a very elegant approach," said attorney Thomas Stanton, author of two books on Fannie and Freddie and a lecturer at Johns Hopkins University. When it comes to who gets paid first and who gets hit last, he said, "taxpayers are going to be above preferred shareholders. The Treasury has really worried about protecting taxpayers."

"...taxpayers have some reason to feel good about the plan.

Indeed, protection of the taxpayer "is clearly one of the driving motivations in what the Treasury did," said Brian Gardner, a political analyst with Keefe, Bruyette and Woods."

Said [Bill] Gross, "I think the plan will likely make a profit for the taxpayer."

Someday soon I will provide a good narrative on "THE PLAN", if the group hasn't already seen it.

USD still falling...

CP- "someday soon" reminds me of judy collins' version of the ian tyson song...

which reminds me of her under-rated 1970 album Living, and the beautiful Song for Judith (Open the Door):

Sometimes I remember the old days
When the world was filled with sorrow
You might have thought I was living
But I was all alone

In my heart the rain was falling
The wind blew and
The night was calling
Come back, come back, I'm all you've ever known

Open the door and come on in
I'm so glad to see you my friend
You're like a rainbow coming around the bend
And when I see you smiling
Well, it sets my heart free
I'd like to be as good a friend to you
As you are to me

There were friends who could always see me
Through the haze their smiles would reach me
Saying okay, saying good-bye, saying hello
Soon I knew just what I was after
Was life and love, tears and laughter
Hello, my good friend, hello my darling
What do you know

Open the door and come on in
I'm so glad to see you my friend
You're like a rainbow coming around the bend
And when I see you smiling
Well, it sets my heart free
I'd like to be as good a friend to you
as you are to me

I used to think it was only me feeling alone
Not feeling free to be alive to be a friend
Now I know we all have stormy weather
The sun shines through when we're together
I'll be your friend right through to the end

Open the door and come on in
I'm so glad to see you my friend
You're like a rainbow coming around the bend
And when I see you smiling
Well, it sets my heart free
I'd like to be as good a friend to you
as you are to me

Frannie Part I
As a person who is long SKF and SRS and SPX puts, in my opinion, we will have another great shorting opportunity. The Nikkei is up 438 about midday through their session and the S&P500 futures are up 36 points.

Let me summarize MY understanding of this Frannie deal. First, understand that there is so much crap on Frannies Balance Sheet that hip boots are not high enough, you must have waders (they come up to your armpit).

Let me give a sample of the fine job FNMA had done in the recent past from their 3/17/05 8K.

"Fannie Mae (formally, the Federal National Mortgage Association) has determined that it will not be able to file its Form 10-K for the year ended December 31, 2004 by the March 16, 2005 due date or by March 31, 2005 and, accordingly, Fannie Mae is not requesting the fifteen-day extension permitted by the rules of the Securities and Exchange Commission.

Fannie Mae is not able to file a timely Form 10-K because Fannie Mae has not completed its financial statements for 2004. Also, as previously announced, Fannie Mae has determined that its previously filed interim and audited financial statements for the periods from January 2001 through the second quarter of 2004 must be restated and should no longer be relied upon."

From 5/24/06 Washington Post:
Fannie Mae engaged in "extensive financial fraud" over six years by doctoring earnings so executives could collect hundreds of millions of dollars in bonuses, federal officials said yesterday in a report that portrayed a company determined to play by its own rules.

Regulators at the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight, in announcing a settlement with Fannie Mae that includes $400 million in penalties, provided the most detailed picture yet of what went wrong at the congressionally chartered firm.

They portray the District-based mortgage funding giant -- a linchpin of the nation's housing market -- as governed by a weak board of directors, which failed to install basic internal controls and instead let itself be dominated and left uninformed by chief executive Franklin Raines and Chief Financial Officer J. Timothy Howard, who both were later ousted."

Using the above to references and the fact that FNMA later paid over $30 mil to get rid of Franklin Raines and crew (with full retirment benefits), you can quickly grasp that it is probably conservative to bet that there are huge losses to recognized over there. To be continued in next post.

Sarah Brightman...nice to be introduced to her music! Sarah & Allesandro are magnificent together. Some don't like the drums but the whole package makes it perfect. Phantom is great as always & didn't know Antonio Banderas could sing like that.

Also, very nice lyrics 2nd from Judy Collins.

Frannie Part II

So what is the order in which losses will be allocated?

Common Shareholders absorb first losses
Junior Preferred Shareholders absorb next losses
Senior Preferred Shareholders absorb next losses
Once the above are at zero, then the unsecured junior debt holders absorb the next losses.

Chairman Hank and the Treasury is coming in at the most Senior Preferred Shareholder. So that leaves the Common Shareholders to absorb the first losses and I would predict that the common with go to zero, once the losses are recognized (whether that is next week or next year is anyone's guess under todays accounting standards). Then the junior and senior shareholders will absorb the losses. The Treasury has only promised to keep Frannie solvent which means they could have $1 positive of senior preferred stock.

So I can see why the stockmarket may rally hard on the wonderful news that the mortgage market is stabilized (and maybe rates may fall a little). But once they realize what the pecking order of loss absorbtion is, AND THEY DETERMINE THAT THE LOSSES ARE BIG, then the Rut Roh moment happens and then we sell off and hit new lows. Remember last time Chairman Hank got approval for the backstop funds for Frannie, the bank stocks went screaming higher and then have pulled back some.

Keep in mind that many many US banks hold Frannie preferred stock, so that if it goes to zero, it will aggravate the banking crisis. Remember that FDIC just leased 5 additional floors of office space in Dallas, TX. Hmmm, wonder why?

This is just my opinion. HB&B is out full force pimping this as great and the bottom is in. (Goldmans Sachs and Lehman Bros report earnings/lack thereof next week). I would expect many a lawyer to get rich over this as many mutual funds and pension funds hold Frannie common & preferred stock and at what point did their fiduciary responsibility to sell it occur?

Forgot to mention,

Bill called the moving average crossover of $GOLD in the WIR; well, the 50EMA did drop under the 200EMA and the 50SMA dropped below the 200SMA.

So, we'll see a little more bearishness in $GOLD before traders take in the implications of the Fed's FRE/FNM, and then $GOLD starts really scooting up?

http://tinyurl.com/5zauao

"The list of big losers is long:

Bill Miller, the Legg Mason mutual fund manager, was Freddie Mac's largest shareholder as of July 31, with 12% of the company's stock.

Others Freddie investors include Capital Research & Management of Los Angeles, with a 10% stake as of June 30, and AllianceBernstein and Pzena Investment Management, both of New York, with 6% and 5%.

Holders of Fannie common shares include AllianceBernstein, with 12% of outstanding shares, and Capital Research and Dodge & Cox, of San Francisco, each with 11%, according to data from LionShares.com."

The market futures are up about 2.5% now, and I think this is an XLF short selling opportunity. Even though the market can rally for a few days based on these news, this would be a fake rally. Consider the following excerpt from Paulson's speech:

"Conservatorship does not eliminate the outstanding preferred stock, but does place preferred shareholders second, after the common shareholders, in absorbing losses. The federal banking agencies are assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac. The agencies believe that, while many institutions hold common or preferred shares of these two GSEs, only a limited number of smaller institutions have holdings that are significant compared to their capital.

The agencies encourage depository institutions to contact their primary federal regulator if they believe that losses on their holdings of Fannie Mae or Freddie Mac common or preferred shares, whether realized or unrealized, are likely to reduce their regulatory capital below "well capitalized." The banking agencies are prepared to work with the affected institutions to develop capital restoration plans consistent with the capital regulations."

So XLF should talk after these news, since the major banks are holding A LOT of FNM/FRE preferred stock.

What am I missing here? Why would XLF rally after such news? It is hard to believe that the recent XLF price reflected the possibility of FNM/FRE defaulting on their debt -- everyone knew that the government would stand behind their debt. So what UNEXPECTED good news is the market cheering to???

David

David,

Good point. Here is another "conspiracy" theory - Gov is allowing the "small, regional" banks to fail, ala small folks to absorb the loss who have little leverage, while rescuing big banks to placate the big guns domestic or foreign. I wonder which of the two will be considered a "huge" negative impact to the financial system - LEH or MER? Will FED cut a deal with GS to take on MER since JPM and BAC have dipped into their fare shares?

WB went up the most on Friday AH, over 12%.

Goldman may not shine this quarter when they report next week. This can't be good for XLF.

http://tinyurl.com/5qye6d

Posted by 2nd_ave: "who's going to be selling tomorrow, and who's going to be buying? i would take a look at which side is panicking and think about taking the other side..."

How are you going to figure out which side is panicking, 2nd? I would love to learn how to do it myself...

WB is on my list of survivors, primarily due to their revenue stream.

David,

I think the reason the market would rally is that it perceives that the risk of systemic failure of the banking system has decreased.

There is no fundamental reason to rally, but that has never stopped HB&B from having one. Keep in mind the biggest most violent rallies are short covering rallies in Bear markets. I think we are going to get earnings warnings after earnings warnings this month.

We make take a big hit to SKF in the next day or two, but I think the big upside is near. The earnings estimates for Q3 and Q4 are way too high.

The reason why the market might be rallying:

"While not a cure-all, the bailout is still a step in the right direction, industry observers say. It will at least "keep the lanes in the mortgage freeway open," said Greg McBride, a senior financial analyst at Bankrate.com, possibly putting the market on the road to recovery.

If mortgage rates fall, that will attract more potential buyers into the market, which, in turn, will help to prop up home prices, he said.

He expects mortgage rates on a conventional, 30-year fixed-rate home loan to fall over the next few weeks as the dust settles on the bailout. Rates, which now average 6.35 percent, could fall as much as half a percentage point, he said.

Brokers hope the government will eliminate or reduce fees that the pair have been charging lenders to gird against increased credit risk and losses from mortgages they buy. Those rising fees are squeezing out some borrowers because lenders typically pass them along through higher mortgage rates or higher upfront costs."

I was thinking of placing a buy limit order on SKF at $100 for tomorrow, but now I am thinking that it might be best to wait until tomorrow afternoon to see if the initial rally dissipates, and if not, then wait for a few days until it does dissipate before buying more SKF.

As Bill said, risk management is the key to success. Even though I think that chances are very good for the market to open high tomorrow and go down from there, I'll try not to be greedy and will wait until tomorrow.

If the S&P starts to rocket some 30+ points, I will start scaling into more shorts and puts. Heck we still have the credit card crisis, the auto loan crisis, the option-ARM crisis, and the state and local revenue crisis (sales taxes are dropping and property tax declines will really start to bite as tax rolls are finalized and next year's will be even worse, as well as declining corp tax revenues). If SKF makes it below $100 tomorrow I will consider it a blue light special.

David, What is it that traders always do when panicking? They sell!!!

Lerner2 - I ugree, nemo is ugree too.

ALOHA !!

ON LYING AND FREDDIE
Do you guys understand that those in charge of a failing financial system HAVE TO LIE! If they told the truth the system would fail that much sooner and would create more obstacles for HB&B rather than less. The more the public is kept in the dark the more time and room to maneuver HB&B has. Look at the HB&B goons who are now running FRE ... the CARLYLE GROUP ... whats their experience in banking? Now we have Goldman Sachs running the US TREASURY and the CARLYLE GROUP and MBIA in charge of 1/4 of all US mortgages.

ON CARLYLE GROUP
One of their past brushes with banking ...
Carlyle Capital Corporation

In March 2008, Carlyle Capital Corporation, established in August 2006[12] for the purpose of making investments in U.S. mortgage-backed securities, defaulted on about US$ 16.6 billion of debt as the global credit crunch brought about by the subprime mortgage crisis worsened for leveraged investors. The Guernsey-based affiliate of Carlyle was very heavily leveraged , up to 32 times by some accounts, and it expects its creditors to seize its remaining assets.[13] Tremors in the mortgage markets induced several of Carlyle's 13 lenders to make margin calls or to declare Carlyle in default on its loans.[14] In response to the forced liquidation of mortgage-backed assets caused by the Carlyle margin calls and other similar developments in credit markets, on March 11, 2008, the Federal Reserve gave Wall Street's primary dealers the right to post mortgaged-back securities as collateral for loans of up to $200 billion in higher-grade, U.S. government-backed securities. [15] On March 12, 2008, BBC News Online reported that "instead of underpinning the mortgage-backed securities market, it seems to have had the opposite effect, giving lenders an opportunity to dump the risky asset" and that Carlyle Capital Corp. "will collapse if, as expected, its lenders seize its remaining assets."[16] On March 16, 2008, Carlyle Capital announced that its Class A Shareholders had voted unanimously in favor of the Corporation filing a petition under Part XVI, Sec. 96, of the Companies Law (1994) of Guernsey[17] for a "compulsory winding up proceeding" to permit all its remaining assets to be liquidated by a court appointed liquidator.[18]

The losses to the Carlyle Group due to the collapse of Carlyle Capital is reported to be "minimal from a financial standpoint".END

More on the who's who of this GROUP ... So it looks like the Bush Family will pick over the best parts of FRE ...

The Carlyle Group is a global private equity investment firm, based in Washington, D.C., with more than $81.1 billion of equity capital under management.[1] The firm operates four fund families, focusing on leveraged buyouts, venture & growth capital, real estate and leveraged finance investments. The firm employs more than 575 investment professionals in 21 countries with several offices in North America, South America, Europe, Asia and Australia; its portfolio companies employ more than 286,000 people worldwide. Carlyle has over 1200 investors in 68 countries.

The firm has employed political figures and notable investors. Some of these figures, such as former US President George H. W. Bush and former US Secretary of State James A. Baker III, have generated controversy stemming from allegations of conflicts of interest.END

As you can see CONFLICT OF INTERESTS are 100% embedded in US MARKETS and the US GOVERNMENT. What has happened to AMERICANS is that Hank Paulson just pulled the ultimate "TAXATION WITHOUT REPRESENTATION"! Who represents us average citizens in Washington DC? Its not our elected leaders ... ITS NOBODY!!! Only Wall Street gets representation ...

ALOHA !!

Now lets look at Herb Allison and FANNIE ... He now heads FNM and is another US FEDERAL RESERVE BANK insider. If you go to the US FEDERAL RESERVE website you will find TIAA-CREF all over the place serving functions as advisers and members of committees. Look into Herb's past and WOW ... there's MERRILL LYNCH!!! What a shock that HB&B is now going to pick over the FNM carcass! And then there's his tie to John McCain ... NOT OBAMA!

ON HERB ALLISON
Herbert M. Allison, Jr. (1943) was chairman, president and CEO of TIAA-CREF from November 2002 to 2008. Previously, he had been with Merrill Lynch from 1971 to 1999, where he was president and COO during the latter part of his tenure.

He served as national finance chairman for U.S. Senator John McCain's 2000 presidential campaign. He also served as president and CEO of the Alliance for Lifelong Learning, a joint venture of Oxford, Stanford, and Yale universities, from 2000 to 2002. Allison serves on the advisory boards of the Yale School of Management and the Stanford Graduate School of Business. He is the chairman of the Business-Higher Education Forum, and is on the board of directors of The Conference Board. He is a member of both the Business Roundtable and the Financial Services Roundtable. Additionally, Allison served on Governor Pataki's New York State Commission on Education Reform and has been named to Governor Spitzer's New York State Commission to Modernize the Regulation of Financial Services.

Allison holds a B.A. (1965) from Yale University and an M.B.A. (1971) from Stanford University.

Mr. Allison joined TIAA-CREF in 2002 after a 28-year career at Merrill Lynch & Co., Inc., where he last served as President and Chief Operating Officer until 1999.

His professional career began with Merrill Lynch in 1971. He first served as an associate in investment banking in New York and also held posts in Paris, London and Tehran. He became President and Chief Operating Officer and a member of the Board in 1997. During his tenure there, Mr. Allison ran both the Investment Banking and the Corporate and Institutional Groups. He also served at various times as Head of Human Resources and as Chief Financial Officer.

After leaving Merrill Lynch in mid-1999, he served as National Finance Chairman for U.S. Senator John McCain's Presidential Campaign.

In 2000, Mr. Allison accepted a leadership role in a start-up academic organization, the Alliance for Lifelong Learning, Inc., a joint venture of Oxford, Stanford and Yale Universities. There, as President and Chief Executive Officer, he ostensibly helped build an online learning forum for adults that provided the highest quality college-level courses. However, the Alliance for Lifelong Learning web site is now a misleading link farm and there is no obvious evidence of its still existing or ever fulfilling its stated mission.

Mr. Allison is chairman of the Business-Higher Education Forum and serves on the Advisory Board of the Yale School of Management as well as the Advisory Council of the Stanford Graduate School of Business. He is on the board of directors of The Conference Board and the board of trustees of The Economic Club of New York. Governor Spitzer recently appointed Mr. Allison to the insurance working group of the New York State Commission to Modernize the Regulation of Financial Services.

He is also a member of the Business Roundtable, the Financial Services Roundtable, the Committee Encouraging Corporate Philanthropy, the Council of Graduate Schools Advisory Committee, the Harvard Graduate School of Education Visiting Committee, and the Federal Reserve Bank of New York's International Advisory Committee.

He previously served as Chair of the Vietnam Education Foundation, as well as on the Boards of the United Negro College Fund and the New York Stock Exchange. In addition, he served on Governor Pataki's New York State Commission on Education Reform.

Mr. Allison earned a B.A. in Philosophy from Yale University. Following a four-year tour of duty in the U.S. Navy, including service in Vietnam, he earned an M.B.A. from Stanford University.

Currently, he is a director of Time Warner.

On September 7, 2008, Mr. Allison was chosen to head the Federal National Mortgage Association, as part of an emergency federal conservatorship of the financial institution caused by the housing market crisis. The FNMA, often called Fannie Mae, is the financial institution created during the New Deal as a governmental financial institution, but that was subsequently privatized, that provides liquidity in the market for mortgages by guaranteeing consumer home mortgages.END

YOU GET WHAT YOU VOTE FOR ...

IT ALL WORKS UNTIL IT DOESN'T!!!!

$100bil here ... $100bil there and I guarantee you $200bil is chicken feed when the real numbers come in! Remember these are the same guys that told us the IRAQ WAR would only cost $1.78bil! Guess who QUIT at the GAO and guess who is quitting after JAN 2009?

M3 lags 12-18 months! What is the total US Taxpayers bank bailouts now? add em up ... we're already pushing $1tril and the ink has hardly dried on Hank's latest seizures! So when crude prices push into $200 territory by this time next year remember this stuff!

ALOHA !!

Now this bit from the Cunning Realist who has a way of summing things up and giving some historical perspective. WOW ... check out that 2008 Republican platform on free markets! IS THAT EVER A JOKE! I feel like this is the USSR and that Republican platform statement is in PRAVDA!

WOW look at what comrades Bush and Cheney have to say about free markets! HA!!!

READ ON:
Sunday, September 07, 2008

My Sagacious Barber

We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all.

-Republican Party Platform, 2008

"Laws shouldn't bail out lenders. Laws shouldn't help speculators."

-President Bush 5/19/08

"The fact is, the markets work, and they are working. And people - some of the big companies obviously - have taken risks. Risk means risk. And there's an upside as well as a downside in some of the choices they've made. We have to be careful not to have this set of developments lead us to significantly expand the role of government in ways that may do damage long-term for the economy. We don't want to interfere with the basic, fundamental working of the markets."

-Dick Cheney 11/26/07

"What exactly is our opponent's plan? What does he actually seek to accomplish, after he's done turning back the waters and healing the planet? The answer is to make government bigger"...

-Sarah Palin, Republican National Convention

While I was sitting in his chair a couple of weeks ago, my barber leaned close and said he had a stock tip for me. He said he had just bought some Fannie Mae. When I told him I didn't think that was such a great idea, he scoffed at my pessimism, confidently claiming that "the government will never let it go under." He grew up in Russia during the 1970's, so he knows a good government guarantee when he sees one. And as of Friday he was up nicely on his Fannie stock.

Unless he cashed out already, we'll see what happens to his investment this week. The news about the taxpayer takeover of Fannie and Freddie is both momentous and unsurprising. To the extent it's the latter, I don't have much more to say that I haven't said before. In one sense, the timing is outrageous: just before an election, and right after an inconveniently bad week for the stock market. But for fans of accountability, the timing is good. Far better now than after Inauguration Day. This way, at least the responsibility is clear, and the Kudlows of the world won't be able to spend the next few decades blaming the Democrats. In a perfect world, any political party that presided over this sort of debacle would wander in the wilderness for years or be permanently discredited. Instead, the incumbent party finds itself within a few percentage points of being rewarded with a third term in the White House. If Americans decide to give it that third term, they'll deserve everything they get -- not only financially but, as I've said before, in terms of national security/physical safety.

Who will pay for this? Nominally, every taxpayer. But in real terms and disproportionately, the prudent will pay via inflation. Did you sit patiently on the sidelines during the past few years while building your savings? The unstated message of these bailouts and interventions is as damaging as it is clear: participate in the next bubble. Buy into the "ownership society." (The cheapening of that important concept has been one of the worst big-picture effects of this era.) You're prudent at your own risk, because when the bubble pops you'll be forced to participate whether you like it or not. If people really understood what was going on here -- essentially a system of "soft slavery" in which an ever-increasing amount of one's daily labor subsidizes Wall Street and the speculator class via inflation and the socialization of risk -- they'd be in the street. Of course very few do understand it, which is what policymakers count on.

In the long run, the best way to protect yourself from this madness is to shun the U.S. dollar in favor of other currencies and gold. The nations that have had the gall to do that during the past few years -- Russia, Venezuela, and Iran among others -- constitute an existential threat to Bailout Nation. How much longer can we allow that? It's not too hard to see where all this is going, is it?END

ALOHA !!

In the WIR Bill mentions this in relation to the USDX rally ... "the $USD will likely continue to rally with higher highs and higher lows" ...

Well here is that same USDX rally from a very different "angle" ... This is the ANGLE WITH THE DANGLE! This is the USDX rally nobody wants you to see or understand! Higher highs and higher lows indeed ...

We are now seeing total money and total credit surpass the worst levels of the last forty years and we have an economy that is dependent 70% on consumers and 100% on the benevolence of communist regimes which our leaders antagonize by the minute each day! Unemployment is more like 12% than 6%(just double the PRAVDA numbers) and inflation is more like 10%! Housing will continue downward and tax revenues will plunge. Our people have massive debt and no savings and virtually our entire financial future is riding on a rigged stock market! The entitlements(SS/MED)are completely broke and require a $92.4tril reserve injection just to break even, according to US FED governor Fisher. Now lest add FRE and FNM to the fire and who's next? Does anyone doubt that this is NOT the end of US Taxpayer bailouts?

NOW LOOK AT THIS CHART ... This is a chart the US FED and the US TREASURY definitely want hidden. Why else would they cancel M3?

Link: http://tinyurl.com/6eyybw

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...