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Genesis
17 Comments
Precious Metals Manipulation: Lawyers Prepare for Battle
I've been saying this for a while over at Tickerforum - if you want physical gold or silver, then buy a futures contract for delivery (check with your broker to see if you can do it through them - you might need a different company than you currently use), deposit the cash, and take delivery.
End of problem - you own it for the price you bought it at, plus the handling and delivery fee (which is reasonable.) It goes to your clearing bank and you then make arrangements to pick it up or have it delivered to your physical possession.
There is no "juju" here - if you think the markets are manipulated and the price too low, there's your solution. Gold is more difficult to do this with than silver due to the higher price but if you want to swing around five-digit+ amounts of cash in silver you certainly can do it this way.
Forget the Moral Outrage: Just Restore the Mortgage Markets
"Justifyably"... Ha.
You do realize that by coming into Fraudy and Phony The Government has just declared all preferred issues "impossible" for any financial company from here on out, yes?
You do realize that this means that the door is SLAMMED SHUT for anyone else who needs money, yes?
You do realize that there are a lot of banks - investment and commercial - that are so far underwater you need Heliox at that depth, yes?
Now how does this all work out again?
Oh, and let's not forget - in January of 2009, there will be a new Treasury Secretary - who can reverse everything that was just done with the stroke of a pen!
You want to buy financials - or the broad market - tomorrow?
Uh, I don't think so.
More to the point, you've noticed Treasury yields tonight, yes? There goes half of the "benefit" from spreads tightening. Already. In the overnight hours.
Oops.
The short-bus riders are out tonight. Wait until people start to get their arms around the fact that the preferred issue market is closed, because any financial that has "creative" accounting for their "assets", as Fannie and Freddie did, is subject to having the same thing done to them.
Restoring Credibility to Ambac and MBIA
Mark-to-market losses will REVERSE?!
Based on what?
Tom, the marks taken by financials are not factual. They have ALL been inflated.
Have you seen "true sales"? Nope. Those recent IB sales? They're not true sales - they're self-financed, so what LOOKS like a 25 cent mark is really a nickel, as the financing is non-recourse and internal.
This sort of nonsense, along with just flat-out false marks in "Level 3" are fantasy material. They are not going to reverse - they will continue to deteriorate instead.
These firms all bet the farm in the early part of the decade on entering the CDO wrap business. It was a bad bet then and it still is.
Wrapping municipals is a good business 99% of the time as the premiums are inflated relative to actual default expectations but right now even municipals on balance are not safe. Yes, there are SOME safe munis, particularly general-obligation bonds in places that are not exposed to housing price declines, but for the rest, I wouldn't touch them with a 10' pole.
Disclosure: NO POSITION in these firms; I just know how to read a balance sheet.
PS: GAAP is even too generous in many cases. Non-GAAP is a farce. In the end it is about cash flow; if you can't cash flow the business you're dead, irrespective of what else you think you can do. This is coming from someone who saw the same game run in the 00-03 Tech Wreck and avoided all of it while many of my friends had their investment accounts destroyed.
Restoring Credibility to Ambac and MBIA
Please.
Where's the math? You know, how much of the book is CDOs, what their guarantees will require in payment, how much new business is written and how much of that results in RECURRING revenue?
For the unitiated (or too dull to research) municipal issues make a one-time payment at issue for the wrap. There is no recurring revenue. If the municipal issue revenue dries up, a major part of the income necessary to pay claims disappears.
The issue is in the non-municipal book, at least for now. Later (a year or two from now) it will be in the municipal book too. Anyone take a look at California's budget? Florida's? Oh heck, Birmingham AL?
Lots of these wraps will boom and require payments. Were the premiums charged appropriate? If not......
Again - show me the math. I'm not interested in a puff piece, which is what this is - it is utterly devoid of mathematical FACTS.
Yet it is the math that will determine the outcome here, not puffery and bluster.
Why is it missing?
Either the author is incapable of analyzing it, hasn't bothered to analyze it (in which case being long the stock is nothing more than gambling at the blackjack table), or HAS analyzed it, is trapped in a long position and is, in desperation, trying to pump the price so he can get out cleanly.
Which is it?
Is Countrywide Financial Headed for Bankruptcy?
It appears that bondholders have finally woken up. The only problem is that CFC was likely insolvent when assumed, BUT BAC's reason for wanting this deal was basically to "peel off" the servicing side, which has value, if it survives.
Well, how do you spell "fraudulent conveyance"? You can't just do that and leave the bondholders "holding the bag"; there is, however, a timely requirement on doing something about it.
Looks like some lawyers finally woke the hell up and said "heh, you know, if we sit on this long enough, we might get estopped. That's bad. Let's file now."
Uh huh.
This could get to be a lot of fun.
Freddie and Fannie, Agonistes
My view on these firms is that they've been a "short to zero" for more than a year. Disclosure: No position.
CNNMoney’s ‘Depression Comparisons Misguided’ Shows It’s Imminent
Inflation drives up the cost of credit.
Get out your handy HP12C (anyone who is active in the financial markets should have one) and tell me how much purchasing power you lose if a 30 year mortgage loan goes from 6% to 8%. Use a "maximum affordable P&I" of $2,000/month.
Oh hell, I'll do it for you.
At 6% you can take out a loan for $335,251.
At 8% you can take out a loan for $274,384.
This is a real devaluation of purchasing power of about 22%, and that was with only a rise to 8% on the 30 year fixed.
If it goes to 10%.....
You can't inflate out of this when purchasing power is defined by the cost of long money.
Back to 1998: Lessons from the G7 Then and Now
America, you see, has lost its desire to care.
'Fedization': Bear's Rescue Presents a Major Moral Hazard
The Fed has specifically enumerated powers and limitations laid out in The Federal Reserve Act of 1913.
Nowhere do I see the ability to provide what amounts to a bribe (the "backstop", or "no-recourse"... loan), nowhere do I see the right to establish fictional persons for the purpose of moving liabilities off balance sheet (the LLC), and on and on and on.
And since Treasury and, if reports are believed, President Bush, signed off on this, they're complicit in a violation of their oaths of office.
Ergo, its time for America to stand up.
financialpetition.org does exactly that. It asks Congress to look into this cluster**** and determine if indeed the Constitution or law was violated and, if so, well, you know what comes next.
Continuing the Jim Cramer Truth Watch
Too late - the market was closed.
Cramer has made so many bottom calls followed by Armageddon calls the next day that there is no point to him being on TV other than to screw you raw.
Anyone that believes a hedge fund manager wrote Jim Cramer is welcome to believe his line of BS.
Bear is not a depository bank.
Can The Fed Inflate Its Way Out of Housing, Credit Mess?
A few days ago I published my "07 look back and 08 look forward" at market-ticker.denninge... where I essentially laid out the same prognostication, with a LOT of background.
Comments I've received include that "its hard to read".
Well, yeah.
But the herd doesn't want to hear it, and that will be their undoing. The "to the moon Alice" folks keep believing because, well, so far it has worked.
Why?
As you noted, its a matter of consumers and others being willing and able to borrow, and others being willing to lend.
Unfortunately now all the collateral that's worth anything has been pledged, along with a lot of worthless collateral or that pledged at
FAR beyond its "fair value."
Now the deflationary downstroke comes. Whether we like it or not, when you pump asset values beyond their intrinsic reality, the debt that leverages off it will default. There is simply no other alternative.
And as debt defaults, deflation happens. This too cannot be avoided.
Buckle up folks - this is the fun part of the ride....
Is Countrywide Financial the Next Enron?
Forget it.
Marks on their paper? Who has any clue? Certainly not I. Anyone care to bet how much is "marked to myth"?
And buying back your own stock - with debt - when you know the market is going to shit is one of the most outrageous things I've seen a firm do. Of course it supported the price so Mozillo could unload HIS shares.
How about all the bagholders stuck with theirs?
These guys are a potential zero candidate.
Why Today's Wall Street Is Like the Sinking of the Titanic
Just don't buy food, education, energy or medical care.
If you, do, well, inflation is running from 10-20% annually and has been FOR THE LAST FIVE YEARS.
Oh, how come Banks can ignore Sarbox and not only "mark to myth" but also run off-balance-sheet conduits and SIVs hidden behind subsidiaries - even though they guaranteed them - yet it is neither listed as a liability NOR is it counted against their regulatory capital?
Ooook.
Anyone remember how things end when the order of the day is rampant fraud?
I do seem to remember a time in late 1999 and early 2000 when the same games were played, and I do seem to remember a fine firm called "ENRON" that was stuffed full of that same crap?
Is the S & P Expensive?
You might try squaring it with the fact that 70% of GDP is consumer spending, then tell me again how the "E" is going to be positive when "its not so good for those who rely mostly on income."
That would be the people responsible for the sales that make the "E" part of the P/E happen, right?
Nine Reasons The Fed Can't Save Stocks
We're 5% off all time highs! Priced-in? Like hell.
Recessions - on average - whack THIRTY PERCENT off equity values. We're down 5. What's next?
This ain't hard to figure out. The people who "powered the market up" by buying after Bernanke's hanky-panky on OpEx last month are going to be quite unhappy with how this turns out in the coming months.......