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mr freddo

mr freddo
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  • Government Bond Yields Could Go Lower [View article]
    I wish I would have believed you earlier today. With the announcement from the Fed on buying treasuries, the bond market has rallied and TBT, the ultrashort treasury etf, dropped like a stone. I closed my personal position and booked a smaller profit than I had when the market opened.

    The old saying "don't fight the Fed" certainly applies for today at least.

    I found it interesting that gold rallied so furiously from its early drop. Any theories out there on that? Was the Fed move viewed as inflationary by gold traders?

    Mar 18 03:33 PM | 4 Likes Like |Link to Comment
  • What, If Anything, Are CDS Spreads Telling Us? [View article]
    Thank you Mr. Sexena for your insights. I have added you to my watchlist and look forward to your articles as I believe that while most of us don't really understand the CDS market, you do.

    What I do know and have been saying for some time, is that the CDS market is what makes this crisis different than any other in history. So looking backward as most economists like to do, is less valuable than it may have been in the past.

    What the CDS market has done is it has linked all or most of the worlds financial institutions together so tightly that the fall of one creates so much systemic risk that it cannot be allowed to fail. While we survived the Lehman Bros bankruptcy, we learned that another such bankruptcy could bring down the entire system.

    Given your excellent track record, I would like to know where you believe this crisis is headed. It seems that there are 3 possibilities long term:

    1. We muddle through.
    2. The US goes broke trying to backstop the world's financial systems and throws trillions of good money after bad. A world wide decades long depression occurs and we all end up wearing barrels for clothing and living in tent cities.
    3. We realize soon that the whole system is doomed and so the US lets the system crash and burn but prepares a plan for building a new financial system. Things are very bad for 5 years but we emerge from the carnage with a well regulated, less dangerous financial system.

    While I am hopeful for Number 1, and fearful of Number 2, I wonder if Number 3 is the best route to pursue for our country and the world.

    Last question for you: Since bonds are suspect and equities look bad to you, where should the average investor be parking their money?
    Mar 18 01:45 PM | 3 Likes Like |Link to Comment
  • Failure of Bond Market Highly Positive for Gold and Silver [View article]
    You are preaching to the choir here Mr. Cooper. And I especially like the picture of American Eagle gold and silver coins that you include here. Aren't those coins beautiful works of art?

    On the downside, it appears that the traditional jewelry buyers from India have reduced their gold buying significantly. This is having a dampening effect on gold.

    While we are in crisis mode, I believe that you have the new buyers of gold picking up the slack for the Indian market. As the crisis eases, gold may drop a bit as the new investor buyers trade back into equities.

    But once inflation picks up, gold will gain in strength as investors pour out of bonds and into gold for inflation protection and the Indian gold buyers come back to the market.

    So, over a 4 year horizon, gold should perform well. I keep a percentage of my portfolio in gold and silver ETF's as insurance.
    Mar 17 08:25 PM | 5 Likes Like |Link to Comment
  • Why AIG Wasn't Allowed to Fail [View article]
    Yesterday I was outraged over the bonuses. But today I thought it was interesting how AIG revealed the bonus amounts of $165 million and the counter party payments of over $100 billion on the same weekend. Naturally, the bonuses got everyone riled up but they are less than 2% of the counter party payments.

    I reference the Spitzer article that appeared today:

    We the people now own 80% of AIG. I'm not sure that is ever going to be worth much. If we had not stepped in, we are told that the entire system would have come crashing down.

    Wouldn't it have been a better deal to let AIG fail and then back up the counter party losses, if requested, with equity infusions? Instead of owning 80% of crap, we would have positions in all of the major financial institutions in the world. Or they could have turned down the infusions and taken their losses.

    As Spitzer notes in his article, when Hank Paulson comes to the rescue of AIG, he knows that he is really funding his old pals at Goldman to the tune of $12 billion.

    It was interesting how all this was handled. Very secret. Can't disclose counter parties. Well now we know why.

    I was in favor of rescuing AIG at the time because, as Felix points out, we saved the system (so far). But this is really to smell so bad now.

    I know that there are a few positions open at the Treasury department. Given the smell of TARP and the AIG bailout, maybe we should consider Bernie Madoff for the open position. He may have the most relevant experience in terms of how to handle these multi billion dollar ripoffs.
    Mar 17 07:59 PM | 12 Likes Like |Link to Comment
  • Penn West Energy: Too Good to Be True? [View article]

    Thanks for the analysis. Those dividends come in monthly don't they? I have stock in Reese Energy which will soon be acquired by PWE. It's a small deal but your article is timely for me as I may become a shareholder soon.
    Mar 16 09:16 PM | 4 Likes Like |Link to Comment
  • How to Not Pay the AIG Bonuses [View article]

    I agree Mr. Salmon. Just don't pay the bonuses. Let the employees sue if they believe that they really deserve their day in court. That would be quite a spectacle. I can only imagine how much fun Jon Stewart would have with that.
    Mar 16 05:34 PM | 10 Likes Like |Link to Comment
  • Ashamed of AIG [View article]

    I agree with much of what you have written here. The board of directors and senior management should be terminated immediately. All bonuses should be suspended and not paid. New management should be put in place immediately. If employees want to walk, let them. After all who needs these guys?

    Mar 16 05:28 PM | 12 Likes Like |Link to Comment
  • AIG's Blackmail Note [View article]

    My favorite quote:

    "Insurance is the oxygen of the free enterprise system."

    I don't doubt that much of what AIG says is true. Their demise would be a calamity for the financial system. The question is:

    1. Are we headed there anyway so why not save our taxpayer money to help build the newer, saner, more regulated system.

    2. Why can't the government force a prepackaged type of bankruptcy to break free from some of these boneheaded employment contracts.

    Maybe that is throwing the baby out with the bath water but it is completely unacceptable to reward these executives in any way for a job well done when they blew up the company and the financial world with their outrageous behavior.

    Why don't we just breeze a tax change through congress that says if you work for AIG and you received a bonus, your tax rate on the bonus is 100%.

    Also, for shame Mr. Paulson, for shame. You engineered this TARP bale out with great secrecy and now we know why. It should have been called CRAP for Crony Asset Protection act.

    Mar 16 05:01 PM | 13 Likes Like |Link to Comment
  • Jeremy Grantham: Reinvesting When Terrified [View article]

    Thank you Mr. Grantham. I believe that you are correct in your assessment over the long haul. I was wondering how you were able to get a fair market value of 900 given that earnings have declined rapidly and current estimates may still be too high.

    Mar 16 02:34 PM | 11 Likes Like |Link to Comment
  • Citigroup Is Heading into the Single Digits [View article]

    I enjoy reading some older articles to see if the author has made good calls or bad calls. I must say Mr. Saxena that you have done very well these past 4 months. On the Citi call you were right on the money. Single digits? It broke the buck!
    Mar 16 01:46 PM | 5 Likes Like |Link to Comment
  • Derivatives Alert: Explosive Risk Is Still Unrecognized [View article]

    Thanks for the informative article. It has been my belief that derivatives are what makes this downturn different from any other. Your focus on counter party risk is right on the mark. That is why I believe that the Treasury Dept is unwilling to allow any more bankruptcies to occur. They fear that it will bring down the entire financial system which, in my opinion, may happen anyway.
    Mar 16 01:38 PM | 5 Likes Like |Link to Comment
  • The Unwinding Is in Full Swing [View article]

    Thanks for the article which provided a solid historical perspective. When the market hit 6500, I wanted to throw in the towel and switch to your safe recommendation of TBills. That is a bullish sign. Many of my non professional friends have thrown in the towel and put their remaining money in CDs.

    Another bullish sign is the number of bears out there versus the bulls. With the market advances last week, we are starting to see the slightest hint of bullishness.

    No doubt these advances will be tested and I still don't have any confidence that the derivatives market has been defanged. But I pray that you are correct and that the apocalypse has been put on hold.
    Mar 16 01:28 PM | 8 Likes Like |Link to Comment
  • AIG Suddenly Takes the Full Disclosure Route [View article]

    I am in agreement with prudent investor. A judge should be able to invalidate these ridiculous bonus contracts. As a former CEO familiar with bonus structuring, I find it unbelievable that there weren't clauses in the contracts that invalidated or at least reduced the payments in the event of severe financial distress.

    $100 million bucks for the division that blew the company up? Yes, we really don't want to lose any of those talented players.

    Mar 16 01:04 PM | 8 Likes Like |Link to Comment
  • Firming Commodity Prices Would Indicate Economic Stabilization [View article]

    It appears that China is taking advantage of the downturn by buying commodities and industrial metals all over the world. It seems like only yesterday that the incredible expansion being undertaken in China was endangered by soaring commodity prices.

    As Irishscot2 mentioned, in the current environment, mining and drilling projects are being cancelled or postponed, reducing the future supply and creating the scenario for future scarcity and dramatic price increases once the infrastructure projects kick in and the world economy starts to recover.

    I agree with the author on gold as a solid hedge against inflation. Because it gets so much attention though, I think other metals like copper may see faster price appreciation once the stimulus and recovery kicks in.

    Mar 16 12:52 PM | 6 Likes Like |Link to Comment
  • AIG's Not Very Transparent List of Counterparties [View article]

    I am surprised that we haven't yet seen angry mobs storming AIG headquarters and ransacking the offices.

    The disclosures identify what many Seeking Alpha commenters have already guessed at. The bailout money went to financial institutions that played the game and should have gotten burned properly, or not if they were adequately hedged.

    On top of the disclosures, we now have the bonus fiasco. How much of this can the average tax payer take? How much bonus money would AIG be paying out if it had been allowed to go bankrupt? There should be some way to void these contracts.

    I don't know of any other situation in capitalism where you work for a company, succeed in blowing it skyhigh, and then get your bonus. Who wrote these contracts anyway?
    Mar 16 11:58 AM | 6 Likes Like |Link to Comment