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| 2008/5/22-23 [Politics/Domestic/California, Politics/Domestic/911] UID:50024 Activity:nil |
5/22 http://tinyurl.com/3h2zvh (market-ticker.denninger.net) Good post re current events in commodity, treasury, and stock markets. To summarize: - The Fed balance sheet is contaminated with CDOs - Money is going into commodities rather than Treasuries - Rates are going up Several more points: - Expect the commodity bubble to drive inflation in the near term. - The commodity and equity bubbles will sweep up excess credit from bad banking practices. The subsequent blow-up (occurring over 3-12 months for the undesired chaotic crash, or 1-10 years for a controlled descent) will efficiently sop up this cash. - Guess who loses their bux on: (1) The building up of the commodity bubble (2) The reduction of said bubble http://www.thislife.org/Radio_Episode.aspx?episode=355 Excellent radio segment (.mp3) which talks about "giant pool of money" and where it goes (guess where this money is going now) \_ What's the difference between a CDO and a mortgage backed security? \_ MBS = Pool of mortgages. One structure is rated (e.g., all shares from an MBS are given a single rating, i.e., AAA). CDO = Pool of MBSs. Structure is sliced into different levels, each of which may have a different price and rating. each of which has a different price and rating. The lower tranches will have the lowest rating and eat any losses first, but have the highest yield. losses first, but advertise the highest yield. MBS and CDOs are both asset-backed securities (ABS). Now go listen to the MP3 and find out how Joe Schmoe was raking in $1M/year. \_ Funny how this guy rants and rails about Congress and does not mention the word "President Bush" even once. Where is our nations leadership during this time of financial crises? Oh, and what you call a "commodities bubble" I call the market functioning normally to get supply and demand in balance. Do you have any evidence that excess oil is starting to pile up anywhere? Copper? Coal? If prices are "too high" shouldn't that be happening? \_ He's a Republican who is likely to vote Democrat in November. Here's his anti-Republican rant from four days ago: http://tinyurl.com/5dsp98 "Commodities bubble" = (a) Hedge on the stock and bond markets (b) Huge pool of money needs to go somewhere (c) Certainly there is a supply/demand factor to commodities prices (d) Hedge on strength of U.S. economy, financial system, dollar He rants and rails? Okay. Good thing I'm here to summarize! |
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| tinyurl.com/3h2zvh -> market-ticker.denninger.net/2008/05/thrombosis-thursday.html Credit Bubble Stocks Thursday, May 22, 2008 Thrombosis Thursday For 'Da Bulls, that is. Well it appears that Moody's "mistake" is garnering more than a bit of attention. from US lawmakers: "US lawmakers on Wednesday urged the Securities and Exchange Commission to investigate a reported coding error that may have led Moody's Corp to incorrectly assign triple-A ratings to some complex European debt products. Paul Kanjorski, a Pennsylvania Democrat, said the matter deserves close scrutiny, especially if US investors were impacted." Whether US investors bought the products or not the failure to contemporaneously notify the marketplace when the "error" was discovered extended the credit bubble and had an impact, irrespective of whether one can assign a specific dollar amount to it. Connecticut's AG, in the meantime, isn't asking "if", he's looking at this from a more "ordinary" perspective - that is, whether there was fraud involved either originally or in covering it up: "'We have been aware of allegations that, in effect, there was a cover-up of these ratings inaccuracies and defects in the models applied to these complex structured securities,' Blumenthal said in an interview today. Funny how a State AG office is interested in the facts, while the US Congress plays footsie. Let's hope that Mr Blumenthal hasn't visited any high-priced hookers, lest his reputation and investigation get short-circuited as Mr Spitzer's recently did. appears to be gaining ground: "On April 30, the SEC sued Larry Langford, the former county commission president and now Birmingham's mayor, for fraud in allegedly accepting $156,000 from a local banker while refinancing the sewer debt. JPMorgan spokesman Brian Marchiony declined to comment for this article. The Federal Bureau of Investigation has raided financial advisers in California, Minnesota and Pennsylvania to get files. In January 2007, Charlotte, North Carolina-based Bank of America Corp. agreed to cooperate with federal prosecutors in exchange for leniency. Bank of America spokeswoman Shirley Norton declined to comment." I guess that making money the old-fashioned way (that is, stealing it) may have made a comeback - and these are the very same bankers that Bernanke and Company are "trying to help." So why did the market sell off by more than 200 points - for the second time in a week, based on "news" that wasn't news, and was in fact what people have been saying now for several months? That is, you have pump tards all over national television and in print trumpeting how its a "generational buying opportunity" in various sectors, "the market has bottomed!" Speaking of which, Dickey Boy Bove was on "Fast Money" last night and he admitted he might have been "a little bit early" on his "generational buy" call. he got very testy with me in email and we subsequently spent quite a bit of time going back and forth via email and well north of an hour on the phone. Well, I'd have called him again today, but you see, I can't. Punk Ziegel was acquired and the email address I had for him no longer works. In any event the bottom line is that now he seems to think that many of these "generational buys" in fact have more (hidden) losses that are going to blow up in their face. Gee, isn't that what I've been saying now for quite some time? I heard "I was early" on Fast Money but what I didn't hear is that myself, Merideth Whitney and others who have consistently said that he is absolutely full of crap were in fact right. Oh, and "early" on Wall Street is code for "I was wrong", but its the coward's version of that phrase. Oil blew off Wednesday while Treasuries blew up, at least to a minor degree. At least when you buy a barrel of oil, you know you're getting a barrel of oil! When you buy a Treasury Bill or Bond, are you getting that, or are you getting a cyanide-laced balance sheet at The Fed that threatens to detonate and take down the value of your holdings? The Fed has intentionally contaminated its balance sheet, debasing the stability of US Treasury debt, and then Congress is surprised when, instead of flying to safety in Treasuries, people look for a different option? I'm not surprised at all - the obvious dislocation this can cause in things like oil prices ought to be clear to anyone with an IQ larger than their shoe size. Congress spent another day attacking "speculators" and generally making lots of noise about high oil prices, but none of these idiots has bothered to think for more than 30 seconds about what is really going on here. It is about the fact that Mr Bernanke, aka "The Wizard", has debased the former "safe haven" for money, that is the Treasury market through his "alphabet soup" games, and Paulson and Congress have done their part by blowing $450 billion in stimulus checks and housing bailout proposals. The result of all of this is that people are now looking for somewhere else to run to when threatened by fear in equities, and right now that "somewhere else" is OIL! This is what happens when Ben and Congress try to save their banking buddies from having to take their marks and eat their losses. you simply can't toss around nearly $1 trillion all-in without seeding horrifyingly bad consequences throughout the economy, and to think you can do this sort of thing without creating dislocations far and wide is the height of arrogance. To Congress: Get off your butts, go into the restroom, and look in the mirror for your villain in regards to oil prices. Now add in Congress' $450 billion between the housing and stimulus bills and voila - $1 trillion of economic dislocation comes to the fore, all centered in the Treasury market. The consequence of this is that when the equity markets get jittery the money can't go into Treasuries as it judges them unsafe. Congratulations Senators and Representatives - you created the mess you are now bleating about, and not one of your so-called "witnesses" had the balls to stand up and tell you the truth. Should the concept of "Treasuries are no good when in search of safe harbor" gain traction the bond market dislocation that I have been warning about will occur with cataclysmic results. Vesuvius is rumbling and spitting smoke while Congress and Bernanke are living in Pompeii having a party. Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANICAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. |
| www.thislife.org/Radio_Episode.aspx?episode=355 companion version of this story appeared on NPR's "All Things Considered." Ira talks with NPR business and economics correspondent about two gatherings he attended. One at the Ritz Carlton and one at a community college in Brooklyn. The first was an awards dinner for finance professionals who created the mortgage based financial instruments that nearly brought down the global economic system. The other was a non-profit conference for people facing foreclosure. Ira explains that today's show lays out how the finance guys and the people facing foreclosure are connected by a chain of middlemen, and that together, they all brought about the current housing and credit crisis. This American Life producer Alex Blumberg teams up with NPR's Adam Davidson for the entire hour to tell the story - the surprisingly entertaining story - of how the US got itself into a housing crisis. They talk to people who were actually working in the housing, banking, finance and mortgage industries, about what they thought during the boom times, and why the bust happened. And they explain that a lot of it has to do with the giant global pool of money. |
| tinyurl.com/5dsp98 -> market-ticker.denninger.net/2008/05/weekend-edition-politics.html Virginia Republican Tom Davis has pretty much set forth reality for the Republican Party in November, and its not pretty. While there are some annoying typos reminiscent of some of my writing when I'm in a hurry to get something out there, the facts remain what they are, and they're not good. Let's look at some of the "internals" from this memo: * Jobs and economic growth have emerged as the #1 issue, at 23%. Both are in fact caused by exactly what I have outlined repeatedly in The Ticker! In fact, if you look at the last week's five tickers you will see that this theme and meme is right there in front of you. It is a compendium of reported news and lays out for anyone who gives a good damn the outright fraud that has become pervasive in our government and capital markets. The Republican Party is not only complicit in this fraud they are egging it on at this point, desperate to see it continue through November lest it blow up in their face. Tom Davis is well-aware of this but he doesn't put that out in public in his paper, because should he sound the "siren call" the collapse may occur before the grenade can be passed. What Tom Davis should understand is this: The Republicans have no winning position that can be formed from trying to placate people with "happy talk" instead of facing reality. The economic impact of this fraud is going to happen and happy talk will not change the outcome. If McCain wins (which I seriously doubt) then he will preside over the blast and that will be the end of The Republican party. If Obama wins the blast will occur in early '09 as the current administration will stop being able to act when the July recess comes along, yet Obama won't have done anything yet before it all comes apart. The Republicans will still get the lion's share of the blame and be a minority party for 40 years, just like they were before the Gingrich Revolution. If the economy and markets totally come apart before the election (the most likely outcome) then The Republicans are doomed as we will have a filibuster-proof Senate with certainty. If you doubt this outcome, look at consumer sentiment - that is a documented leading indicator of behavior over the next six to twelve months, which just happens to coincide at this point with the period leading to the elections. The sentiment numbers have never been wrong in predicting consumer behavior over the next six to twelve months. The ONLY winning position for The Republicans is to force ALL of the fraud out into the open RIGHT NOW and thus force The Democrats into a corner - do they "pile in" or do they try to obfuscate and stall in which case you can pin the tail on THEM as the ones that are ripping off The American Public. The answer for the Democrats to such a challenge will be to obfuscate, as they are the ones in power in Congress. Chris Dodd and Barney Frank are insanely vulnerable on this point right now, as housing is front-and-center in this crisis but The Republicans control the executive and thus can bring the hammer down on the fraudsters whether Dodd and Frank like it or not. This means that The Republicans must do all of the following right here and now if they want to win in November: * The Executive must indict all of the fraudsters they can find. All the investment bank CEOs who put together toxic mortgages into securities knowing they were going to blow up would be a good start. Angelo Mozillo is, of course, the poster boy for this and indicting him (while largely symbolic in terms of real impact) would really get the ball rolling. Homeowners, brokers, appraisers and Realtors who participated in the fraud must be indicted and prosecuted, both civilly and criminally, with the intent of both restitution when possible and punishment for all involved. This means that you must be prepared to filibuster in the Senate, and actually do so. If that doesn't happen these two institutions will blow up. In "More On The Banking System" I detailed Freddie's exposure to just the self-identified ALT-A and subprime paper and showed how it exceeds their available capital. Freddie also has a huge amount of "Fast and Easy" exposure they are calling "prime" but it really is not; If you don't get it off their balance sheets it will detonate with disastrous results, and anyone in Washington who voted for their "modernization" without fixing this will get tagged for it. The easiest and soundest way to accomplish this is to push for a Federal Law that bars any mortgage written with less than 20% down or greater than 36% DTI. Exempting FHA/VA from the down payment limits (but not DTI caps) is appropriate if both of those programs are limited to homes that sell for no more than 75% of the average price. This fulfills the FHA and VA program mandates to provide affordable housing to the lower tier purchaser while not allowing them to be abused by speculators and the more-wealthy. The House and Senate both have the ability to issue subpoenas and force hearings, and you must exercise that power liberally until all of the bad paper is forced out into the open and the losses are taken. Put these bankers under oath and find out exactly what paper is in the TAF, the TSLF and in Bear Stearns and how it has been valued - in public hearings. The 80% of Americans who did not participate in or benefit from the fraud form the voting block that can win this election - if they can be coalesced. You can only do that by showing that 80% that you are not only stopping it now but will continue to after November has passed. Either The Republicans take this approach here and now - before the July 4th Recess - or they will lose in November. This is the only voting block that is both big enough and that Republicans have a way to coalesce which can change the outcome. Lest you think I'm some Democrat "hack" trying to throw Republican election chances, here is proof that I am not: I want to vote Republican in November. Fail and I will vote for change, because The Republicans have presided over the worst fleecing of Americans in 225 years. Arguments that "they'll be worse" are not going to work; you have to show us, here and now, that you will in fact stand for "law and order", not just make promises that will be immediately broken after the election is over. There are millions of Republicans just like me out here, and we're the people you need, not the corporations who have robbed us all. Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANICAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. |
| market-ticker.denninger.net Credit Bubble Stocks Monday, March 17, 2008 Boooooooooooooommmmmm! CNBC started running their Asia coverage last night as the markets pretty much literally fell apart. For once, Americans got to hear some truth - from people not in America. Specifically, claims that "its all the shorts fault", and "The Fed could actually make money on the BSC backstop", along with all sorts of other nonsense. And I might - just might - find a lucky shamrock and some fair Irish Maiden may suddenly appear next to me this evening and ravish me all night long. Of course it is far more likely that this will happen in my dreams..... Can I just watch Asian and European CNBC coverage all the time? At least they tell the truth some of the time, instead of being a cheerleading squad herding Joe Six Pack straight towards the cliff, below which there is...... Exciting, dangerous, and for some (myself included) insanely profitable. Not my best day ever in the futures, but in the top 5 - and it was the overnight session. I quit chasing it around 10:00 PM as the odds of yet another "surprise" started to go up to unacceptable levels. The Fed is out lying again too, although yesterday they were playing the part of Bully instead. Never mind that the right move was clearly to let Bear go down. But that would expose the truth - there are trillions of dollars in interlocked derivatives, none of which have been marked to anything but dreams and lies, and were they to be forced to actually have to be paid off via specific performance the dominoes would begin to fall. The final "washout" will eventually come, and by delaying this day The Fed is in fact doing much damage to our economy and nation. They "sticksaved" with the surprise "Burn the Shorts" OpEx morning discount cut. In point of fact none of these "sticksaves" will solve the problem because the problem is that there is no truth in the balance sheets of these financial institutions and until there is, we will not find the bottom, nor be at the end of this mess. As I have repeatedly said we can do this the difficult way or the easy way. The easy way is for The Fed and regulators to force all these banks to mark their "assets" to the market and eat whatever may come, take all off-balance sheet games back onto the balance sheet, and clean house. The difficult way is for confidence to continue to evaporate and these "bank runs" - what dumped Bear Stearns into the Hudson - will continue, firm by firm, until we find out the hard way. The problem with "The Hard Way" is that if The Fed and regulators choose this path we could literally see most of our large financial institutions taken to the woodshed and cleaned out just as Bear was, because there is no reason for investors and creditors to trust people when they have reason to believe they are lying! A warning to those who think this is a "buying opportunity" - what happened to Bear Stearns could quite easily extend to virtually EVERY SINGLE MAJOR INVESTMENT AND NATIONAL BANK WITH "MARK TO MODEL" AND "MARK TO LIE" EXPOSURES. This is precisely why what The Fed has been doing since AUGUST is foolhardy and ultimately self-destructive to its own balance sheet. Had Bernanke stood up in AUGUST and told The Street that he was NOT going to keep providing whiskey to the drunks having DTs until they DETOXED we would have had a huge washout in the equity markets back then, but we would know where the bodies are and confidence would be orders of magnitude higher than it is now. The Fed now has hard proof that their strategy - that is, every time the market starts to collapse there is some sort of "sticksave" intervention, rather than addressing the root cause of the problem, has FAILED. It CANNOT SUCCEED because the fact of the matter is that this is not about liquidity. It is about solvency and LIES, which The Fed is ENABLING, just like a drunk's spouse continues to enable the boozing by refilling the fridge with beer whenever it gets empty! You'd think that "Mr Student Of The Depression" would know that the root cause of The Depression was precisely this - that people lost confidence in the system and simply said "no mas!" Once those with REAL MONEY - not credit - decided they were not going to lend until they knew where the bodies were the bankruptcies began and continued relentlessly until everyone who might have gone broke actually did! The reason is simple - the question is capitalization - NOT LIQUIDITY. Without KNOWING what the VALUE is of these "things" are which are on bank balance sheets there is no way to know what sort of capitalization a bank or other institution actually has! And since Bear Stearns has now proven to either not known itself or lied just three days before they blew up, until we get clarity nobody is going to believe anyone else's pronouncements about THEIR capitalization! Congress should step in and exercise its lawful right to force The Fed and regulators to do the right thing here and now, but it won't until and unless you, and hundreds of thousands of people like you, step up and start hollering loudly at our lawmakers. I have written three separate petitions on this matter and spent a couple of thousand bucks faxing lawmakers. But this is more than just about you - your 401k, your IRA, your retirement, never mind that they're all going to go straight in the toilet. to our government, as is already becoming apparent via failed treasury auctions, our government's ability to spend beyond its means - $400 billion worth in the current fiscal year - will instantly evaporate. It is also about your children and grandchildren, and what is likely to be served up upon them as a direct and proximate result of apathy by those who can speak up and stop the madness. To put this in perspective there is roughly $8 trillion in national debt that requires service every year. If the cost of that funding is 5% a year the cost is $400 billion. Should foreign investors continue to flee that cost could more than double, instantly wiping out the ability to fund 15% of The Federal Budget - for instance, all of Medicare's funding ability could disappear overnight. Or even better, spend $500 and go out to Washington DC, or to a campaign event, and tell all of them up front that this issue must be addressed right now, not after the election. We absolutely must force transparency into our financial system - today. Get the "stagflation" or "hyperinflation" nonsense being paraded about by many "pundits" out of your noodle right now. We are in the middle of a huge deleveraging and all of the excess credit that has been created over the last 10 years is disappearing in a poof of electrons. That is the definition of DEFLATION and The Fed is powerless to stop it so long as they continue to allow the lying and obfuscation to continue. If not, I hope you like living in this sort of fashion, because its coming - for a second time, and for the same reasons it happened the first time - to a town near you. Links to this post Over 30,000 unique visitors have read the ticker in the last 30 days. Legal Disclaimer: The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions. NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANICAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES. The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility. |