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Reinko
328 Comments
FDIC Won't Run Out of Money, But WaMu May Be Toast
All the money the FDIC spends is borrowed money via newly issued Treasuries. And by the way: maturing Treasuries are not paid with tax money but with fresh new Treasuries.
As long as there are sucker investors out there that think it is a sound investment, this circus will go on and on.
The real problem is: There are no reserves anywhere in the system.
Nowhere, it is all revolving loans & more Treasuries.
It's Time For a U.S. Sovereign Investment Fund
Ha ha, that is a great idea!
Just like the FDIC fund that is funded with (still) AAA rated Treasuries...
Armageddon Postponed
Stuff like this only postpones the logical outcome; but as long as the mental dwarfs from this administration think they can steer it into an 'orderly downward path' they will keep on taking more obligation.
Under the Dubya watch debt in the total financial sector has grown bigger than the entire US gross domestic product and it's exponential growth is a multiple of the GDP growths.
It is only high school math, where you learn exponential functions for the first time, that you can see: this will explode.
In case anybody is interested; yesterday the FED had a new Z1 release and one of the tables is here:
www.federalreserve.gov...
Look in the one last column; total fin sector debt. (As far as I know it, only publicy traded debt is in that flow of funds. So in reality it could be even worse but I cannot proof that.)
U.S. Records Another Huge Current Account Deficit
I quote from your comment:
As a result, the net capital income from abroad nearly matches that paid to foreigners on their investments in the US.
But the latest TICS data for July say: Monthly net TIC flows were negative $74.8 billion.
Source link:
www.ustreas.gov/press/...
I do not know about August but the recent developments on the financial markets make it likely not much better.
For the rest: The article is not bad but the writer must dig deeper in order to understand a more complete picture of the financial system and the economy of the USA.
Every body knows the USA lives beyond her means and every body knows obesity rates are climbing year in year out.
Yet, no body sees the easy to understand relation between them and that is not my problem but a problem for the USA citizens to solve...
Market Nosedive Pushes Dollar Down
Top government agencies are working to supply themselves with much needed liquidity Wednesday, as they scramble to raise capital to salvage crumbling financial institutions on Wall Street. The U.S. Treasury Department is working to raise $40 billion through the sale of cash management bills, which it will then send to the Federal Reserve as they attempt to salvage the swiftly disappearing bedrock of Wall Street.
Comment: For over four years I am studying the US financial system, today I found another thing I knew nothing about:
What are cash management bills exactly? If you can sell that stuff at a 40 billion a day pace, that stuff is very interesting.
__________
For the rest: Good currency actions observed, gold was hammering hard and I hope the food prices like wheat, soya, rice and grain stay under control. If not:
More decoupling is needed...
The Fed Stands Firm
A US $ run from 1.60 to 1.42 or 1.41 on the €/US$ pair in a very short time.
Rate differential is as next:
USA: 2.00% (and far too high given local economical things)
Europe: 4.25% (and far too low given local economical things)
Beside this, inflation in the USA is higher than in Europe.
Real interest rates in the USA are negative, in Europe we hang around zero but the ECB constantly refuses to restore long time positive rates.
All in all: In 2010 the €/US$ pair will be above 2.00 (but you never know it in the currency markets, you never know it with those Chicago boys!)
What Should the Government Do About AIG?
Lehman is gone and thus the CDS markets are stirred a bit (CDS are credit default swaps, it is just a small 62,000 billion or 62 trillion US$ market).
Have you guys & girls still never looked at this nice total derivative stuff from the Basel based Bank for International Settlements?
Here is the link:
www.bis.org/statistics...
Does it not clearly say that Dec 2007 total contracts is 596,004 billion US$ so since it is not Sept 2008 total contracts are well above 600 trillion?
As a comparison, the US gross domestic product is about 14 trillion a year. Anyone trying to understand the present 'credit crisis' problems must think twice: The USA banks hold the overwhelming stuff of this 600 trillion joke...
That explains why AIG suddenly needs 70 to 80 billion US$ in order to deal with a 'sudden' liquidity crisis.
Use your brain and not your ass to write articles!
AIG Borrows From ... Itself
Total derivate positions on credit default swaps are 62,000 billion US$.
Now Lehman has gone this market is stirred up a bit and the sudden liquidity needs for AIG are rather likely related to the problems on the CDS markets.
The next days will bring more wisdom to this, for the time being Forbes has a very good article on this:
www.forbes.com/home/20...
Suddenly 70 to 80 billion needed? It all has the smell of derivatives...
AIG Is Toast
The last hurricane is not much of a problem: That simply belongs to the old ways insurance companies have worked and if it is ok they have the reserves to deal with stuff like that.
Also: They need 70 to 80 billion fast so CDS stuff is a far more likely culprit compared to evil hurricanes.
AIG: The Cramer Conspiracy Theory
Dumb beyond belief and a big mouth.
The only thing we miss is: He is not obese... (That is a true anti American thing, may be he is a secret supporter of al Qaida because that explains his investment advices.)
August Retail Sales YoY Increase Powered by Food and Gas
Value indices are very simple, you do not have all that Paasche or Laspeyres stuff that come along with the price and quantity indices.
So life is simple to understand: How did the census bureau filter out the prices? Do they have some deflator just like we have with the GDP?
Do they use core inflation or do they have a wider estimate of price climbs and if so; is it a consumer price deflator or a wide economy deflator?
I think the title of this article says it all:
August Retail Sales YoY Increase Powered by Food and Gas
Question: Do you really believe more goods and services are transported if food and gas are truly filtered out from the statistics?
Market Rewind: Deleveraging Continues
My favorite way of deleveraging is looking at market cap compared to 'balance assets' from financial firms.
By all means this way of measuring leverage is still climbing month in month out for the entire US financial sector.
So the 'real deleverage' still has to set in just like the Americans still not understand you have to look at the 'real GDP growth' and not at the funny comics as delivered by the US government.
And, just by the way, why are there still no articles on this website around the total debt position of the US financial sector?
The FED says it is above one GDP and can please anyone explain to me how the financial sector can pay back an amount of debt above one US GDP?
Smart insights are welcome.....
Lehman: Dead Firm Walking
Today it also came to light that the FDIC fund of 40+ billion is only an 'accountancy fund' meaning all paid premium for bank fail insurance is already spend. Thus every commercial bank that goes down is instantly paid for with borrowed money.
To make stuff even more funny: This week it was observed that insurance against a default of US government debt was only 18 basis points. This means it costs only 1.80 US$ a year to insure 1000 US$ of government bonds...
So I will follow the Lehamn stuff with intense interest; will the domino theory take hold?
Commodity Roundup: What To Be Bullish On Now
Now we only observe a correction on that detail.
Ok ok gold and silver markets are taken down so severe that the relation with supply and demand is broken down completely.
The good thing is: Now we know that it are the futures that drive the market (read: there is still too much money into the system).
So the next time Treasury clown Paulson states the opposite we can start throwing rocks at him...
Financials in Turmoil? Someone Forgot to Tell These Eleven Pennsylvania Banks
All you need in a bank is one or more senior bankers that say "We do not participate in weird stuff".
And then the weird title of this article: Someone 'forgot' to tell it to these banks... After my humble opinion these banks did see what was coming far better compared to those big Wall Street banks.
Lets leave it with that.
This all does not take away that the entire US financial sector could easily see another decline of 50% in combined market cap.
And when you combine total wiped out market cap from the 11 worst performing banks to these 11 best performing banks, the picture is clear: Well deserved market cap destruction wins it from the smart long time bankers...