OJO Zafado

Bernanke's Statements: Blatant Lies or Wishful Thinking?

As far as the " ragmatist" thinking...
` The US makes up about 5% of the worlds population and currently uses about 26% of current world oil production. Based on what has happened in Mexico and Russia where declines in production have occurred and what seems to be the inability of OPEC to SIGNIFICANTLY increase production there is less oil production for more demand. This is of course unsustainable long term. Marginally increasing domestic production will not off set the unsustainable nature of the US's oil consumption. The ANWAR is oil that we will eventually get but by then other oil wells will have peaked. The real problem with the US oil crisis is that the oil is a non replaceable resource with real intrinsic value. The US dollar on the other hand is no longer a paper fiat currency. Paper has been replaced by "electronic funds" transfer. A hundred billion here in TFAs and few hundred billion there in TRCAs, a few hundred billion to replace the money not raised by taxes to pay for Medicare and SS. Hundreds of billions shipped overseas to stock the shelves of Wal-Mart and supply the refineries of Exxon-Mobil. Hey might as well throw in a few trillion for "liberating" IRAQ. America has created a worldwide credit crisis and huge world inflation by flooding the world with their paper/electronic money. The solution is an obvious one and will not come about until thousands are dying of heat exhaustion and hypothermia here in the US. Nuclear power is coming back and big time. In the meantime coal fired power will bridge the gap. The only technical challenge then will be to the transportation segment of our economy. As long as the nation clings to the idea that more domestic production of oil is a solution when it is no long term solution at all then things will just get worse for our economy and the valuation of a US dollar. Ben the Dollar Slayer will eventually go away and resign in disgrace just as so many of his CEO buddies at the worlds major banks have fallen on their swords. It is hard to predict when the nation will be ready for more reality and less O'Reilly. Dummya and his band of henchman can indeed proclaim, "Mission Accomplished!!!". Globalization is now a reality . Dozens of US companies and thousands of US citizens now have great viable businesses and jobs while hundreds of businesses and hundreds of thousands of decent jobs have been eliminated. We have created the greatest concentration of wealth in the last 100 years. It is the same old story for the Republican Party. Be careful what you wish for...

Banking Sector: 'Buy When There's Blood in the Streets'?

SW Rich has defined the new paradigm. Slowly I turned inch by inch step by step, We have not yet seen two consecutive negative TIC reports in the last year or so. It seems that Ben the Dollar slayer was being too cute with his remarks on linen fiat currency. Recently we have seen hundreds of billions of "dollars" created by the Fed electronically. $75 billion here for some TFAs a couple hundred billion there for some TRCAs to the ECB, SNB, & BOE. Hey no problem Ben has saved the taxpayers money by not printing the linen, but instead creating it with a few key strokes to the computer and a "press SEND". Electronic money! We are the ones who flooded the world with dollars to fill the shelves of Walmart and supply the refineries of Exxon-Mobil. "They" are just not playing fair converting those dollars to assets with intrinsic value after we also slimed "them" with subprime CDOs, SIVs and other junk debt. UBS is a Swiss or German bank. They are the ones leading the pack admitting to over $40 billion in write downs ..so far. It is not a US Bank that is losing the most. The Chinese have gotten crushed in US treasuries even as rates hit new lows. Now they spend more US linen on stocking their Strategic petroleum reserve than buying new US treasuries. It became a perfect storm when the advent of the ETF allowed any John P Public with $500 to open a Scottrade acct, to own GLD, SLV, USO,UHN, KOL,UNG, DBA,MOO etc, You name it if it has intrinsic value you can now own some of it in lieu of the US$. We are seeing the slowly I turned stealth run on the dollar. Now rates are moving quiclkly higher and there are some other major slobs, probably some CD holders getting the short end of the trade in PST & DXKSX. There are just not enough chairs when the music stops. I may still end up drawn like a moth to the flame buying some WB if it trades below $23. It will be an interesting Summer market. Either a stronger move higher based on some vague "Change" enthusiasm or the typical Summer doldrum market that anticipates a rearranging of deck chairs in Nov. It seems that it will be not of much consequence to those shivering in the cold next Winter who becomes the new "Leader of the Free Money World".

Charge-Offs Hammer Banks

Preferreds are cratering? UBS-D is moving consistently higher these last weeks even as they lead the pack so far admitting to over $40 billion in write downs of US subprime debt. The C-F is 2 1/2 above it's 52 wk low. The JPM-W is trading around par and has also been quite steady. We see little movement in the(BAC) FBF-N standing it's ground nicely at ~$21.50. The MJH has not done that well over the last week but has not been crushed either. The BAC-E has been beaten down but will likely move higher as the rate adjusts thru the gap, to the new higher interest rates. The WB S was stubbornly trading above par until it came in the last couple days. It is true that there is huge dilution going on in the common shares of these banks. Still the quality of the subordinated debt of the 4 largest banks seems quite good. Most common shareholders do not fully comprehend what is being done to them! The banks have even been issuing converts. Selling the common share holders on the idea that this is married to the stock performance. That may be but if the stock goes nowhere the convert preferreds still get the 8% which takes away cash resources to support the common dividends. Without dividend increases the common will underperform the market. I own no WB preferreds but do own preferreds of the other 4 majors as well as Morgan Stanley,USB,TWC ,AES, FNM and Goldman Sachs. The spread between the yields on med/long term similiar quality corporate bonds is so huge as to make barbelling out at these +7.5% yields worthwhile. Especially with stuff like FBF-N and HJJ with near term call dates where calls are likely to be made for a 3-4 point gain. I also own a position in the DXSKX as a hedge against what went on the last few days in the bond market. You could do a less restrictive trade in the ETF PST. The time is not that far off now when 4-7 year maturity corporate bonds will be worth buying for a bond ladder once again. In the meantime every market dislocation brings opportunity. With the GSE FNM-P yielding an adj +6% and 15% tax qualified, why buy much lower yielding bonds that are not tax qualified unless for a tax sheltered acct? FNM-P has also been performing fairly well recently. I agree with the author and would steer clear of both MER and WB as well as Lehman. The C on the other hand has a large global platform that ultimately will return it to profitability. Not before Meredith Whitney's prediction that the common dividend will be eliminated. That may indeed be the time to add some more C preferreds. FITB seems perhaps a little stronger than might be indicated. It is just not in a part of the country that seems likely to have the strongest rebound if indeed theree is an up turn in the economy in 09. The slime continues to creep!