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.