Monday, November 16, 2009

Meridith Whitney Interview/Bernanke's Blunder

Good Evening Folks!

This is a must watch video from Meridith. Like me and many others that visit here, she has no clue why the market is trading where it is.

She also sees the same MBS nightmare that I have discussed recently. The Fed's MBS purchasing program is about to run dry and rates are going to soar when they do.

Like Meridith said: Who on earth is going to replace the Fed when it comes to buying these loans that are based on reckless lending standards?

FHA has learned nothing from Fannie and Freddie's bad lending practices that created the housing bubble. They continue to lend out money like a Ponzi machine. The only way this debt ever gets sold to the private sector is at distressed asset prices. This will then cause another cataclysmic round of losses for the banks.

The parabolic move in gold was also worth noting today. The world is continuing to lose confidence in the dollar. Bernanke MUST come out with an exit strategy or the dollar is going to continue to get slaughtered.

Gold soared after his speech because he spoke of no exit strategy. He continued to talk about cheap money and low interest rates.

His explanation as to why the dollar is selling off was ridiculous. He stated in his speech that he believes(and I don't really believe he thinks this) that the dollar moved higher late last year during the crash because the world ran to the US dollar with their assets in a flight to safety move. He then explained that once the crisis was over, the world moved out of the dollar and back into their normal asset classes. The dollar then sold off as a result.

HA! Yeah OK. Was that the real reason Ben? Or is the world starting to get spooked that the US is now carrying $12 trillion in bad assets and liabilities via various lending programs?

After Ben spoke about the dollar, the currency and the gold market chose option B from above and proceeded to shove Ben's "dollar talk"up his behind by selling of the dollar and pushing gold up to $1140. The market has a brutal way of calling all bluffs.

Despite the concerns around the US dollar, the markets continued to rise the "wall of worry" as Wall St bets on an economic recovery.

Meredith explains eloquently why this ain't gonna happen. The risk of a double dip recession is much higher.

Meridith's worries are right on target: Consumer credit continues to vanish almost as fast as the jobs in this country

MAking matters worse: The banks have realized that borrowing money from the Fed at zero rates and then buying longer term treasuries and pocketing the spread is very profitable and carries much less risk versus lending it out to the tapped out US consumer.

Can you really blame them? Who on earth wants to lend to J6P as they continue to lose their jobs and and sit in debt up to their eyeballs.

Enjoy Meridith. Double dip recession here we come!

Disclosure: Long gold via GLD and short treasuries via TBT.


getyourselfconnected said...

what, did they let you out early today? Good to read you.

Accrued Interest has a funny grab of the Euro/Dollar which dropped like a rock right at noon (on Bernanke's dollar words) but when they finallt read them 15 minutes later, the whole move was gone. Unreal, I mean who trades in 15 minutes time intervals?

Still licking my Indianapolis Colts comeback wounds. Cannot believe the Pats blew that game. At least it was an arse kicking for 48 minutes.

Jeff said...



I post when I can. Which hasn't been much lately. I will be back more regularly soon I hope.

That was the worst coaching decision ever!

What was Bill thinking.

Regarding the markets, what a crazy day. This thing has turned into a total casino.

Meridith looked dumbfounded at the price action. I know exactly how she feels.

getyourselfconnected said...

Oh man another one!

Bill B was thinking "my defense has been torched for 2 touchdowns in less than 6 minutes and I can end this game with a 2 yard gain." Pretty clear to me. At this point I wish the Pats would have punted, had the ball roll to the Colts 1 yard line, and then have Manning run a 2 minute drill for a 99 yard TD drive just to show everyone it was the right call to try and end that thing.

Re Meredith W;
I am in the same boat, but at least as stocks get a bid on easy money, gold and silver go up as well. Silver had a nice breakout today and I am liking how it looks right now. Loved it at $9 when I last loaded the boat I can tell ya!!

Jeff said...


Yeah I am loving the move in silver too! I own more silver than gold. Its a much safer way to nake money versus buying overvalued equities. I think the smart money is starting to think the same. I wouldn't be surprised to see a speculative meteoric rise in metals. The market loves bubbles. Why not create another one in metals?

Anonymous said...

good job jeff, thanks. agree with your sentiments regarding the dollar and the consumer. there seems to be an inflationary trend, but i think its deflationary. DOW vs gold, the DOW is in fact tanking. gold is money, or the defacto international currency, and money is more valuable in deflation. as a result, imo we are in speculative deflationary cycle led by hedges and Goldman, not mass real inflation.

Anonymous said...

no way rates go up like she says though.. just wont happen unless they want a dollar bubble which would collapse the US. Corporate america owns our politicians, and they wany a weak dollar; so does the treasury and wall street. Goldman has captured in essence the markets; therefore unless there is a temporary trade for quick profits off a strong dollar trend, we wont see high rates, ever. banks dont want to pay people for holding their money, when the banks can just create it through digital equity, debt, and new derivatives.

Anonymous said...

btw, just curious:

in today's market, what exactly is the difference between inflation and speculation?

Anonymous said...

There are very few analysts I actually think are credible on CNBC. Meridith and I also like Joe Battipaglia, they seem willing to call it like it is. Meridith has hit the nail on the head everytime with her banking calls and I think she is correct in wanting to know what the exit strategy is going to be. That is what has kept me on the sidelines as it seems to me we have reinflated the bubble and now the fed is stuck trying to fiqure out how to slowly let it deflate rather then a painful pop but even if it is slowly deflated it is still being deflated.

Jeff said...

Great thoughts all

Deflation is a threat but it is falling off my radar as I watch the Feds torch the currency.

I don't think there is enough political will to stop the dollar from falling.

Interest rates will rise in order to prevent rising inflation due to a depreciating dollar.

Rates cannot stay this low forever. Its basically created speculation that may have destroyed our economy.

Banks also don't mind higher rates when they are not in debt. Don't forget, they benefit as well. It would enable them to make higher yields for themselves on their cash holdings just like we can.

They can also lend money out at different spreads.

The problem right now is the banks are insolvent and they don't have the capital to pay the interest rates.

getyourselfconnected said...

If mortgage rates ever cross back over 7% say good night to any recovery. The huge majority of sales right now are first time buyers taking the $8000 credit as their downpayment for an FHA ultra low rate mortgage. Bump that rate up even a little and this suckers going down.

Jeff said...



Fha will blow up just like fannie did to because the loans are horrid.

Cheap money leads to bad lending and its not the answer to our problems. When not if rates rise as a result of our deficits housing will blow like get said above.

Jeff said...

I will have a big post tomorrow.

I have been on the road.

Check it out on Sunday!

getyourselfconnected said...

Where is this big post?????? LOL

How does Matt Cassel beat he Steelers? I hope Big BEn is ok, bad hit he took.

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