Saturday, June 27, 2009
Warning: Graphic language!
Wallstreetpro pulls the axe out this go around! This guy just cracks me up. There are actually many good points made in this rant.
Imagine if the rest of America actually woke up and paid attention to what was going on in this country economically? We would make Iran's protests look like a gay pride parade when you consider how many wingnuts we have over here.
Keep an eye on this interesting development around the GM saga:
"June 26 (Bloomberg) -- Nebraska and at least 37 other states formed a committee to oppose General Motors Corp.’s planned sale of assets to a company controlled by the U.S. government, according to a court filing today.
The states have said they oppose GM’s use of bankruptcy law to annul contracts with unwanted auto dealers. Their informal, or ad hoc committee may call witnesses at the hearing on GM’s sale set for June 30, including GM Chief Executive Officer Frederick Henderson and Harry Wilson of the Auto Task Force, the group said in today’s filing.
Detroit-based GM filed for bankruptcy on June 1 after failing to reorganize outside of court, reporting debt of $172.8 billion, more than twice its assets. Wilson said in a court filing this week that a swift sale of its most valuable assets to U.S. Treasury-funded Vehicle Acquisition Holdings LLC is needed to help avoid a “catastrophic and expensive meltdown in GM auto sales.” GM also faces objections to the sale from bondholders, consumers and steelworkers."
It looks like its going to be much harder for the government to shove the GM bankruptcy down our throats like they did with Chrysler.
The fact that 38 states are involved this go around makes this a whole different ballgame. All I can say is its about time! I think this will embolden the GM bondholders in terms of fighting this in BK court.
The radical socialistic approach of "saving" our economy must be stopped immediately! Perhaps we are all finally waking up before its too late!
I see a glimmer of hope.
Friday, June 26, 2009
I will be putting something up around possible hyperinflation this weekend. I will be quick today because I have a few thirsty friends that are dying to catch the end of happy hour.
Itulip posted a great piece today around Argentina's hyperinflation.:
Does the economy have the ability to withstand a pulling of liquidity by the Fed after viewing this chart?:
I am not sure they can afford too. Itulip makes some great points here. Volker had the opportunity to raise rates(pull liquidity) because he had the luxury of rising employment which allowed him more flexibility to inflict pain and crush inflation by raising the lending rates into the teens.
Our Fed is in a much different predicament. We need to ask ourselves: With soaring unemployment, does the Fed have the ability to inflict pain and market discipline at a time when unemployment is soaring to levels not seen since the 1930's?
When you pull liquidity you do a lot of damage to the economy because borrowing becomes much more expensive. The USA dipped into a deep early '80's recession after Volker pulled liquidity.
I am starting to question how we can ever do it today as we sit in a depression with soaring unemployment. We do not have the ability to take much more pain without imploding the economy.
As a result, you need to wonder if the alternative is to keep pumping the system with dollars which then creates a perfect backdrop for crushing inflation and potential hyperinflation!
More on this tomorrow.
Pretty boring day in the markets today. Must of been the Michael Jackson saga.
I mean come on folks, lets get our priorities in order! The death of the "king of pop" is much more important than the potential destruction of the US economy!
Don't even get me started.
Thursday, June 25, 2009
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"
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.
Wednesday, June 24, 2009
There was some major pain doled in the credit markets today as the Fed surprised almost everyone by actually announcing no new buyback programs.
Many bond traders tried to front run the Fed by piling long into treasuries before the Fed's announcement thinking that we would see another round of Ponzi spending via QE.
That was a BIG mistake. Take a look at the 30 year before and after the Fed's statement:
Ouch! I tried to warn everyone yesterday that the Fed loves to inflict max pain anytime you try and front run them. I am happy that I nervously held onto my TBT yesterday even though I was fairly confident the Fed would announce more spending. The only reason that I stayed in this trade is because I still believe the long term trend for yields is higher.
Needless to say, I am also pleased from a fiscal standpoint that the Fed did nothing today. Perhaps they are finally realizing that their QE policy was slowly turning into a highway to hell?
Lets all hope so. What we now need to ask ourselves is this: Did the Fed just pause or did they finally realize that there is not an endless supply of money on the other side of the rainbow? Its a very important question that needs to be answered. Our whole economic system depends on it.
If the Fed has finally realized that the spending must stop then a deflationary collapse similar to Japan is highly likely. Without the Fed's endless money tree, the companies that are sucking off the government tit will suddenly be exposed for what they are: FAILURES.
The Fed recently said "no" to bailouts of California and the auto part manufacturers. Are these further signs that the Fed has decided to yell "NO MAS"? If it is then the market optimism will rapidly turn into a full blown panic as we see explosion after explosion via debt defaults and bankrupties.
Remember folks: The Fed and its balance sheet is the ONLY reason we didn't see this explosion last fall. If they have now been "neutered" its over folks. I have repeatedly warned that there is only so much money to go around. The Fed cannot spend forever despite the fact that they love telling you that they can.
This game of musical chairs will end like it always does.
The five year auction today was mildly successful despite CNBC's claims that the auction saw strong demand. The bid to cover was 2.57.
There was a lot of talk over on the ticker forum around changes regarding indirect bidders.
Apparently the FCB's and other buyers have been shifted into the indirect bidder side. As a result, it really skews the actual demand for bonds by indirect bidders. It makes it appear like there was more demand for bonds from these bidders than there actually was.
What a shocker, the Fed changed the rules.
They better knock this stuff off because Congress is slowly catching up to their fraudulent ways:
Folks, the Bernanke story has serious legs. Somebody wants blood. IMO its totally obvious that the Fed strong armed Bank of America into picking up that toxic mortgage garbage dump that we used to call Merrill Lynch.
The reason this is serious is because the Fed committed a serious crime. Millions of BofA shareholders suffered as a result of the Fed's forced takeover. BofA's stock has been down as much as 75% since the Fed "Soprano's" forced these two into a shotgun wedding.
Gee, do you think BofA shareholders might have solid grounds for a lawsuit here against the Fed and/or Ken Lewis? I can't wait to watch Bernanke try to explain this one under oath. Its about time that the banking thieves are thrown under the microscope after bankrupting America.
The bankers(including the Fed/Treasury) that created this mess all must HANG if Washington ever wants Wall St to regain their credibility. The pigmen simply CANNOT be given a free pass after pushing this country into an economic meltdown. There is NO other answer! Period!
There will be a revolt in this country if this never happens because this "hope rally" is going to die as this country continues to suffer in a depression. Once we hit the skids again, Americans are going to want blood.
It appears like they might get a taste of it soon as Bernanke goes down for the count.
Tuesday, June 23, 2009
Interesting. Lets take a look at the US dollar the last two days:
You know I had to laugh to myself the last couple days as I clicked through my daily reads. Yesterday, Everyone was screaming DEFLATION! DEFLATION! DEFLATION! as the dollar soared and commodities tanked.
Today after the the dollar virtually collapsed and gold rallied a tad, all I heard was INFLATION! INFLATION! INFLATION!
All I can say is what a wacky financial world we all live in! In my view, investor's are panicked no matter what side of the trade you are on. Everyone is freaking out: Bears, bulls, Inflationist's, deflationist's. No one is too confident in their thesis despite what they may tell you.
The way I read today's dollar move, the market still sees major slack in the economy as more bad economic data continues to pour out. As a result, they are guessing the Fed will continue to be more fearful of deflation. The market's trading thesis then concludes that if the Fed fears deflation, we should expect another Ponzi spending/QE announcement from the Fed tomorrow afternoon.
IMO, my guess is the "easy" Fed will spend a few trillion more $$ tomorrow since inflation is no longer a risk. (Yeah right).
I tell you what, I sure am going to be SERIOUSLY pissed if a loaf of bread is $20 five years from now after hearing the Fed tell me for two years that there is ZERO inflation risk.
Folks, as long as the currency is at risk to a total loss of confidence, inflation will always be a risk. If the Fed pulls liquidity on time then deflation will be the much larger risk. However, the Fed has always been late in pulling liquidity. I expect them to be even later on the liquidity pull this go around because the risk of deflation has never been so high.
IMO, we will likely see several head fakes from the Fed in terms of pulling liquidity as they try and juggle all of these monetary balls. What you need remember is, until the Fed actually pulls the trigger on pulling liquidity, both deflation AND inflation must stay on the table.
Markets are built on confidence. If a currency is destroyed by bad monetary policy there will always be a risk that people simply walk away from it. The scoreboard given the current circumstances should read "Massive Deflation" if we had a responsible Fed in Washington. The problem is we have anything but this. We have a Fed thats obsessed with deflation and it appears that they will do anything they can to stop it.
Lets hope the bond market puts an end to the inflationary risk by taking rates higher. I would much rather see deflation than inflation. Deflation causes bankruptcies. Inflation causes social chaos.
Today was the calm before the storm. The Fed ends its two day meeting tomorrow afternoon. I expect another Ponzifest spending announcement based on the way the dollar moved today.
From a trading perspective I would stick on the sidelines here. The Fed has a habit of providing maximum pain to anyone who attempts to front run their announcements. Not much else to report today. The markets were pretty quiet.
The "irrational exuberance" of green shoots has definitely appeared to have worn off. I think this bounce is over and if the Fed pounds the dollar tomorrow with another irresponsible QE announcement, we could see some unintended consequences from the bond market in terms of higher interest rates.
If the Fed stays neutral the market may take this as a positive. Either way, a significant move higher is unlikely as the market realizes the economy still sucks.
Stay tuned tomorrow. There should be much more to talk about.
Monday, June 22, 2009
Show Me The Money Jerry!
Any big movie fan remembers this classic line from Jerry McGuire. I think its a great question to ask the stock market right now.
According to the WSJ, money is flying to the exits in all investment categories:
Where is money going? As you can see almost all asset classes were down last week. Where is the capital flight runnign to? Its not diving into treasuries. The 13 and 26 week treasury auctions that were done today both saw very tepid demand.
The bid to cover was around a 2.7-1 on both auctions. That's the worst BTC since early April as seen below:
13 week auction:
Date/ Term/ Indirect/ Bid To Cover /Amount
6/22/2009 13-WEEK 28.6% 2.79 31,000,049,500
6/15/2009 13-WEEK 35.8% 3.42 31,000,359,800
6/8/2009 13-WEEK 34.9% 3.10 31,000,184,000
6/1/2009 13-WEEK 51.2% 3.57 31,000,101,600
5/26/2009 13-WEEK 24.4% 3.42 31,000,304,300
5/18/2009 13-WEEK 21.9% 3.42 31,000,218,600
5/11/2009 13-WEEK 26.7% 3.44 31,000,260,100
5/4/2009 13-WEEK 37.8% 3.24 30,000,150,100
4/27/2009 13-WEEK 23.1% 3.04 29,000,194,500
4/20/2009 13-WEEK 19.7% 3.12 28,000,119,600
4/13/2009 13-WEEK 27.7% 3.39 28,000,465,900
4/6/2009 13-WEEK 40.4% 3.43 30,000,635,900
36 week results:
6/22/2009 26-WEEK 43.8% 2.72 30,000,155,300
6/15/2009 26-WEEK 47.6% 3.08 30,000,355,100
6/8/2009 26-WEEK 49.2% 3.20 31,000,196,400
6/1/2009 26-WEEK 46.1% 3.14 31,000,441,700
5/26/2009 26-WEEK 36.4% 3.09 30,000,182,700
5/18/2009 26-WEEK 30.8% 3.30 29,000,115,200
5/11/2009 26-WEEK 27.5% 3.16 29,000,008,200
5/4/2009 26-WEEK 22.4% 3.03 28,000,185,000
4/27/2009 26-WEEK 35.8% 2.97 28,000,103,400
4/20/2009 26-WEEK 16.3% 3.11 27,000,383,900
4/13/2009 26-WEEK 37.0% 3.73 27,000,468,800
4/6/2009 26-WEEK 38.3% 3.33 28,000,337,400
Folks, the fact that the stock market sold off big on a day where the Fed struggled to sell SHORT term treasuries is a huge DANGER sign to me. Short term treasuries are usually a piece of cake to sell because they mature so quickly. Why did the Fed struggle to sell these on such a down day?
Allow me to answer: "Houston we have a problem":
The problem is we are are trying to selling $165 billion of treasuries almost every week! Where in the hell is the money going to come from that can soak up all of this excess supply?? Is there a money fairy that someone forgot to tell me about?
This gets back the the liquidity issue that I discuss on here often. There is only so much money to go around in the world folks. China's total reserves amount to $2 trillion. This includes their massive treasury holdings. They can't continue to fund $100 billion Ponzi spending week after week after week by the USA! They don't have the money to do it! Neither do any other FCB's.
Stock market collapses almost always occur when the liquidity runs dry. This is EXACTLY what happened in 1987. What this means is there isn't enough money in the market that can successfully prop up this massively bloated credit/stock bubble.
I think the reason you saw equities collapse today was because the money that is typically used in stocks was needed over in the credit markets so that we could sell the masssive boatload of treasuries today. The Fed cannot keep this game going on much longer folks.
You can't pay $10,000 worth of bills when you only have $100 in cash. This is the best analogy I can come up with. The money simply isn't there to sustain what we are trying to do. The Fed cannot keep this game going for much longer.
The Bottom Line:
Moving forward I see a massive crisis in confidence developing. Investor's are running from the markets because they are not confident their investment's are safe. As a result, the money sits on the sidelines in banks, and also IMO, more and more commonly under the mattress.
Folks, I gotta be honest, the market is absolutely scaring the crap out of me right now. I see no "safe haven" anymore. I don't even think treasuries are a safe bet at this point.
I think a hedging strategy with your investment's makes a lot of sense here because you don't know where the next confidence crisis is going to develop.
We have already seen mini crisis in many asset classes. I expect this to continue. This is why I have diversified/hedged myself into a variety of asset classes.
I will share some thoughts here but keep mind that this is not to be considered investment advice:
IMO, if you are long commodities or metals as protection against inflation via a collapsing currency, you should be short the market as a hedge. This strategy has worked nicely for me recently. Another nice hedge is to short treasuries if you own a lot of treasuries on the long side.
Cash in the bank is also a must here. Below the FDIC limits of course.
The reason I am doing this is because I could see several crisis developing down the road:
- We could very well see a deflation crisis. If this develops you want to be short equities and long the dollar.
- You could also see a currency crisis as we continue this Ponzi government spending. As a result, I would own some metals as a hedge here because inflation would be a large risk. If you are "all in" on the US dollar and it collapses under the weight of bad policy making by the Fed you are totally screwed! This is a possability! We all know how bad the Fed has reacted to this crisis to date. QE anyone?
"BTW, a quick side note here on the dollar. The FOMC announcement on Wednesday is huge
from the US dollar perspective. If the Fed continues to huff and puff in an attempt attempt to
blow up this bubble via more massive QE announcements, the dollar could get crushed.
It could also soar if the Fed sits back and shows some restraint. Keep a close eye on this
when the FOMC comes out in a couple days."
I also could see a banking crisis. As a result, have some cash in your house IMO! This economy is a "house of cards" and if it comes tumbling down you will need some cash to hold you over.
Lastly, I am also afraid of a treasury market crisis that would hit in the form of a bond market dislocation. Shorting some treasuries as protection would seem to be a very prudent decision if a large part of your nest egg is hiding in them.
I realized a while ago that diversification and protection in a variety of different assets classes and strategies is the only way to survive this market.
BTW, stay tuned for an announcement here if you are curious about different investment strategies. I have something in the works. E-mail me at firstname.lastname@example.org if you are curious.
Hold on tight folks. I see a hurricane forming on the horizon.
Sunday, June 21, 2009
One more video. I can't wait for former CNBC announcer Dylan Rattigan to start his new show on MSNBC.
It sounds like he plans on turning up the heat on Wall st and this historic fraud. I think its becoming more and more clear as to why this guy left Bubblevision. It was a clear conflict of interest. Dylan wants the truth while CNBC prefers to pump and support the fraud.
I loved this teaser. Go get 'em Dylan!