Thursday, June 25, 2009

The Fed's Games Continue


What a difference a day makes. The markets rose sharply today as the Fed announced an extension on the "government tit" credit programs:

"WASHINGTON (MarketWatch) -- The Federal Reserve announced Thursday that it was extending its credit liquidity programs until February 2010. "Conditions in financial markets have improved in recent months, but market functioning in many areas remains impaired and seems likely to be strained for some time," the Fed said. The programs had been scheduled to expire at the end of October. The extension allows the programs to remain in place during the end of the calendar year, sometimes a period of stress for markets. The Fed has set up an alphabet soup of programs essentially to take illiquid assets off the balance sheets of financial firms in return for liquid assets and cash to keep the private credit markets operating. Should the recent improvements in market conditions continue, the Fed "currently anticipate[s] that a number of these facilities may not need to be extended beyond February 1," the statement said. However, the programs could be extended again if necessary"

My Take:

Flip flop flip flop flip flop. The Fed pulled a "John Kerry" today and totally reversed its course from yesterday's statement. Yesterday the Fed appeared to be pulling back on spending as they announced no buybacks via QE. Today, the wallet was out once again as the Fed extended the corporate tit sucking into 2010.

Folks, I find this inconsistency from the Fed to be extremely frustrating. All of these games need to stop! Why in the hell was this announced today? Why wasn't it included in the Fed's statement yesterday? Last night I asked in the comments section why we saw such a huge bounce in futures trading last night. Now I have the answer.

The dollar sank and commodities rose on the spending announcement. I would have expected yields to rise in the treasury market as well but a successful 7 bond auction pushed yields lower. The bid to cover was strong. However, now that we don't know who the indirect bidders are, its impossible to tell what the FCB's participation was in this auction.

Just what we need: LESS TRANSPARENCY. Frickin criminals!

All of this manipulation and trading on news that's unannounced to the public must stop immediately. Investor's are going to walk away from this cesspool if the game continues to be rigged.

Can you imagine how many traders there are that are afraid to take any positions in the market right now because they are petrified of getting reamed by some type of market intervention?

You know what? I am going to start a poll on this bullshit. Please look for it later tonight and vote.

Cornered Animals are Dangerous!

Folks, the way I see it, the political and financial elite in this country are doing everything in their power to hide all of the losses hoping that confidence can be restored before this whole thing comes tumbling down.

IMO, that's a pretty stupid bet by the bulls. If you are short you must realize that the whole deck of cards has pretty much been stacked against you at this point. The Fed and Wall St are doing everything in their power to keep this market propped up. They have consistently shown you that they will try any trick in the book in order to do so.

This makes them in the short term a very formidable opponent. Their ability to lie, cheat and steal without any repercussions from the "rule of law" is something that I could never have imagined would ever happen in this country.

This being said, you gotta play the hand that your dealt. It is what it is! My reaction has been to run to the sidelines. I haven't added to any positions in a couple weeks. I have kept some things on but that's it. Right now I continue to sit in the same positions: Long gold, short treasuries, and short the SPY via long dated PUTS.

Until I can fully understand the new rules of the game I refuse to participate and add to any new positions. Cornered animals must be respected! The political and financial elite have a huge vested interest in preventing a collapse.

The Bottom Line

Expect the news spinning and green shoots talk to continue as this pressure cooker continues to build up.

What concerning to me recently is the fraud in this country seems to have risen to a whole new level as the economy continues to collapse.

Here are some examples of what I mean:


"Miami-Dade Circuit Court judge discovered more than 15,000 foreclosure cases filed this year haven’t been served. It’s the latest shoe to drop in a foreclosure crisis garnering nationwide attention, and an unwelcome discovery in the face of state budget cuts that produced layoffs for courts and clerks. The backlog is critical because cases where homeowners haven’t been served within four months are subject to dismissal. Civil Division Administrative Judge Jennifer D. Bailey made the discovery last month as she was taking stock of the circuit’s foreclosure load. She noticed 15,219 cases with no letters of correspondence, no answers and no motions to dismiss."

The Washington Post:

"A growing number of American homeowners are falling into financial limbo: They're badly behind on payments, but their banks have not yet foreclosed.

The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation's housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.

"It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight.

Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.

And even though a delayed foreclosure can be a blessing for some troubled homeowners, for others, it simply prolongs the financial distress, leaving them on the hook for the condition of the property. Even if they move out, they cannot move on.

"I have even begged them for a foreclosure," delinquent mortgage-holder Charlotte Jensen said. When she realized she couldn't save her Glen Allen home last year, she filed for bankruptcy, packed up her family and moved out. Nearly a year later, Bank of America has yet to take back the home."

Bottom Line Continued:

The fact that no one has forced the banks to eliminate their shadow inventories of foreclosures is absolutely disgusting to me.

Denial and "kicking the can down the road" will not lead us to the road to recovery. Its more like the highway to hell.

The recovery will begin when these banks pull their head out of the sand and accept their losses. If they won't do it then lets get Congress to FORCE them to do it.

Doing nothing and ignoring the problem will only guarantee more pain and suffering.


CT-Hilltopper said...

Jeff, honey, I'm just sick of the whole f-ing thing.

These f-ing banks in Florida better be hitting their knees at night and thanking whomever they thank that I wasn't the judge that found all of those foreclosure cases where the homeowners hadn't been served within four months.

I would have contacted the banksters and told them that thanks to their foot dragging and ineptitude, 15,219 families in the state of Florida were going to receive free housing.

Once one judge does something like that, they won't do that shit again. The problem is no one had the guts to do it. No one wants to start trouble. Everyone is too "politically correct".


Jeff said...



You need to wonder. How long can they keep this game going?

Trading is going to be difficult if we continue to chop along here between 900-950.

Tough to make money in this type of market.

CT-Hilltopper said...

We can all STOP worrying!

All of our worries are over.

We can take our money our of the mattress. We can invest in any stock we choose. Everything is safe. I have it on the world's highest authority. Just ask him.

Dennis Kneale said this, and more, just before I found the remote and found something much more entertaining to watch.

My money is still firmly under my mattress. Dennis Kneale, one of the most irritating anchors ever to draw breath at CNBS, wouldn't get me to put my money back into this market if he set himself on fire.

What an ass. Since the only green shoots in the economy are coming out his ass, I guess that's appropriate.

And what's up with his "loser look"? Does Elvis Costello know that this guy stole his haircut and glasses? The Elvis look looks much better on Elvis Costello than on this loser, on Kneale, it looks annoying. The fact that he draws breath is flat out annoying to me.

Which puts him about on the same page as Steve "I'm not a real economist I just play one on TV" Liesman.

Don't get me started.

Jeff said...


I had to turn it off twice today. I just can't stand the constant pumping.

Its so blatantly obvious. I think many are choosing the mattress.

I just looked at my poll. 50% so far have voted that they are out of the market until this mess is cleaned up.

I will be interested to see where it closes next week.

Kneale makes me want to throw up as well. I trust him about as much as a realtor!

FA in CA said...

I share your anger guys.

The shit that's going on right now is completely ridiculous and what's more frustrating is to see how clueless the general public is.

Anyway, appreciate the work Jeff. Your blog is one out of about 10 that I keep track on a daily basis to help spread the good word to my clueless friends and clients.

Good luck out there. We're gonna need it.

Financial Advisor in CA

Avl Guy said...

Jeff, I enjpyed an afternoon matinee of Transformers...2.5 hrs of great "screen magic" CGI, aimless yet intense action, and flailing characters getting a pyrrhic "victory" in the end.
Beats watching the equivalent "pump show" on CNBC.
And this is the Hope-N-Change we worked for?

Jeff said...


Thanks a lot. Glad you are enjoying THTB.

I hope America wakes up and at least starts saving and paying off debt.

Anyone who doesn't prepare for this is going to be in a world of hurt.

Jeff said...


Hi stranger!

Great to hear from you. Glad you enjoyed the movie. I chose to flip over to Sirius and listen to Howard Stern interview a porn star.

It sure beat listening to Maria B. Losing Dylan R. has really hurt bubblevision.

Obama has brought change alright. we have gone from capitalism to socialism.

Sad. Great to hear from you tho!

theART said...

Three step process of becoming mortgage free and owning your home:

Step 1.

Stop paying mortgage, stuff the mortgage cash into mattress

Step 2.

Eventually when bank comes around and forecloses, buy the house back @ action for cent on dollar using the mattress cash.

Step 3.

Live in your home mortgage free.

Jeff said...

The Art


I thought the exact same thing today. I almost threw it in my post tonight but I got a little winded at the end.

Before this is all said and done I think you will see a wave of homeowners that just stop paying their bloated mortgage payments.

Why live on baked potatoes so that you can pay on an assets that's lost 50% of its value.

Walking away is sadly the best option for anyone owning a home that they can not afford.

Anonymous said...

Hi Jeff:

For some comic relief, here is a somewhat old skit by the "Two Johns" out of England about investment bankers and the current financial crisis. The skit might serve as a primer on the financial crisis for grade schoolers.

I watched it for the first time tonight. As Freud said, I believe, the essence of humour is truth.


Jeff said...


I love it.

That's a classic. Sometimes you do need to laugh at this situation because its so ridiculous.

Anonymous said...

bet you all voted for Obama and hope and change. you got it!

CT-Hilltopper said...

This is for the anonymous poster just prior to me.

You would have lost that bet.

At least you would have lost that bet on me.

My father always taught me to stay away from politicians who ran on "hope and change" because that meant that they had no platform.

I am not a Dem, not a Republican. I am unaffiliated. I refuse to have my name associated with either party. I don't think either has the country in their hearts anymore, it's just what's in it for them.

Just my two cents worth. ;)