gabe borenstein

Dow and Then: 1999 vs. 2009

The 1999 rally was reflection of insane evaluations and expectations of the high tech sector. When the reality caught on ,the markets have imploded. The preceding monetary tightening only exacerbated the issue .The current rally is a reflection of unprecedented commitment by the FED ,the Congress and the Administrations(both) to deflect a major economic decompression in any sector. The combination of the global "market" bears which have failed to read the danger signs which were visible as early as 2005,continue to spew the bearish nonsense which does not address the current programs(bullish) in place. The U.S recovery is in the early cyclical stages and will continue to gain momentum in the period ahead.
The price of gold is a reflection of the medieval perceptions by some of the market gurus who will be proven wrong in the period ahead.

Citi's Underwhelming Bailout

The only thing that is underwhelming is the author of the article(s).
Writing nonstop criticism about the efforts to resolve some key issues without constructive solution is just a waste of time.
The problems are being addressed (Citi included).The only thing missing is a moratorium on the short selling (at least 6 months).
The constructive thing would have been if the author had issued the warning about impending crisis -I did in June of 2005 and on September 18/2007(Bloomberg TV interview).
Now ,the criticisism of just about every effort made to address various problems is a socially/economically destructive endevor.
For all of the destructive /critical nonsense printed here,the U.S economy is heading for a major rebound.

Earnings on Tap for Thursday, Fingers Crossed

For the record ,JP Morgan does not even have a fraction of the 90 trillion dollars exposure in the derivative market.
This distortion of facts ,continues to drive market fears.
The "stability aid" is the most effective plan that addresses issues to the point.
This program will show mega effects after it is fully implemented.
Another 50 bps cut would be helpfull.
Commodity price implosion should increase real disposable income.
Some incremental time is needed.
By the time Christmas arrives we should have a major stability on the way to a major rebound.
As I have stated earlier ,the only thing we should fear ,is fear itself-
and perhaps CNBC .
How can you expect impact from the program which is not implemented yet.
I will say this again,recession can be deflected but the market had priced the recession as a done deal.

Earnings on Tap for Thursday, Fingers Crossed

Given the magnitude of the market decline,the earnings are irrelevant to the market direction.
The market had discounted not only a severe recession(a doubtfull outcome within the context of the measures undertaken to address the debacle),but an economic Armageddon.
What really matters is the market psychology continuosly driven by distortions.
The 700 billion dollar "stability plan" is a 5 trillion dollar catalyst(40% 0f the GDP)which will create and contribute to a major economic/market rebound.
But first ,it must be implemented. As of this moment we have an effective plan which has not been acted upon.
Then what is the market responding to?
Media disseminated fears enhanced by the opinions of the record shorts.
Please note the record open short interest.
Is should be clear that the financial system will not be allowed to fail.
Once the process of direct liquidity injection begins ,the economic response will be quick and visible.
For all of the irrational fears ,the dollar maintains its recent strength and is likely to make further major advancements reflecting the global perceptions that the real relative risks lie outside the U.S.
This flight to quality (dollar)will result in explosive demand for the dollar denominated assets (equities and the real estate).
I have warned about the current risks as late as September 18 ,2007 during the Brian Sullivan interview (Bloomberg TV)during the FED time.
My fears were deflected by the market.Now ,everyone claims to have predicted the current debacle.
More importantly the" experts" continue to distort the risks .The point is that in the U.S all of the issues have been identified and are being aggressive addressed,however we must allow at least six weeks for the program to be fully implemented to elicit the response that investors want to see.
One more time,clearly the market had discounted the most pessimistic earnings estimates.At this point in time the only thing we should fear ,is the fear itself.
We need to ignore the critics who perceived inflation as being a the threat(until recently),and now are calling for recession.
One more aggressive easing in conjuction with the current measures could make a Christmas an enjoyable holiday that it should be.
By the second half of 2009 ,the GDP growth should attain 5%.

What is Hank Paulson Thinking?

It is this kind of philosophy that creates political friction instead of political cohesion.
It is this kind of thinking that misleads the Main Street America into thinking that this is only a rescue of the Wall Street.
It is this kind of ignorance that calls a collateralized "loan" as a program that will lead to a higher taxes.
The main street America needs to understand that potential turmoil will inflict the most severe economic pain on the average American.
It will create a massive unemployment potentially reaching 30%.
It will wipe out 401Ks and will freeze savings temporarily as the banking system may cease to function.
An average American (Main Street) has negative savings and the highest per capita debt in the history.
If the stabilization program is not passed,the middle class America will be a class of beggars.
The consequences will radiate globally.
Pass this stabilization plan ,and you will provide 5 trillion dollars "economic jolt" that will jump start the economy and the market.
Since the Stabilization "loan" is collateralized ,the cost to the tax payer may be zero or negligiible.
It is a cost effective program especially when compared to the Armageddon alternative.
So who am I to make these claims?
I have predicted these events in June of 2005 in an interview with Mark Gilbert (Boomberg -London).I don't recall any experts supporting that view.
Who am I?
I have predicted the current risks in an Iinterview with Brian Sullivan ( Bloomberg TV) on September 18,2007 during the FED time.
Now ,I will say the following: we are at incredibly important crossroads.
Address the issues by passing the bill (700 billion dollars) and U.SA will enter a new phase of prosperity.
Do nothing ,and Armagedden will sound like Nirvana.
You don't have to accept my conviction ,but I will be right.

Vikram Pandit, 'COO' of Citigroup

Don't blame Mr.Pandit for trying to resolve the financial issues that the Citi faces.He inherited a financial institution subverted by the inability of the rating agencies to properly quantify the subprime related risks.He is addressing the problems created by the FED'S past policies which had driven the FF to 5.5 % driving the broad spectrum of rates higher.Higher rates had undermined U.S economy-the deceleration that had followed had destabilized the capital (non -treasury)markets ,especially the sub -prime related "structured "products. I have warned about these issues as early as June of 2005 in an intereview with Mark Gilbert(Bloomberg -London) and again on the Bloomberg TV(Brian Sullivan) on September 19,2007.Now that the FED is trying to get ahead of the curve by aggressive easing and systemic liquidity injection into the market ,the economy and the markets should stabilize.In fact all of the "repriced" sub prime products will have significant gains in the period ahead .Fiscal 140 billion dollar "jolt" will add a trillion dollar stimulus ,allowing for a multiplier of 7.
Mr.Pandit's systemic but slow?approach will work as the market/economic rebound will allow him to make more objective decisions as opposed to critical emotionalism vented against him. Citi will become a leading giant again and Mr.Pandit will prove to be an effective CEO in the period ahead.

Summer in the Citi - Fast Money Recap (5/2/08)

Perhaps it is time to focus on the broad market instead of perceived "singular"opportunitie... FED's aggressive easing to date ,will provide a broad market and economic momentum -but we need to allow for the lag.The fiscal stimulus is significant upward momentum enhancer as well .Using a multiplier of seven,the 140 billion dollars "rebate" ,becomes a significant trillion dollars stimulus.Between the two "jolts"and with some more accomodation from the FED ,we are heading for a major rebound. The record leveraged commodity speculation should not be confused with inflation.In real cyclical inflationary environment,the housing prices would be increasing at least with the rate of inflation.
Let's just focus on the broad stock market rebound and not waste time with individual picks .

Sell in May, Go Away - Fast Money Recap (4/30/08)

Quite a few predictions most of them unenthusiastic.From the Macro perspective ,the stock market had performed quite well.For all of the recessionary predictions(not a reality especially if the FED cuts rates 100bps more),the stock market did quite well.Since the FED comprehends that the economy functions well as long as financial insitutions function well ,it became an active participant in the J.P Morgan -Bear merger ,but more importantly it signalled to the markets/investors that no financial institution will be allowed to fail.True,the record open short interest in the market and specifically financial sector is responsible for irrational bearish attitudes.Psychology is not an economic reality.The monetary and fiscal policies in place ,with some further accomodation from the FED (and allowing for the lag)will contribute to a major economic rebound in the period ahead and will contribute to unprecedented rally in the U.S equity markets .The financial sector will lead that rally.Socio/economic events/upheaval in the emerging markets will result in the record demand for dollar denominated assets(U.S markets and real estate).Commodity inflation?there are no signs of demand pull inflation which would be a cause to worry.The cost push inflation that we are witnessing to date ,is a function of a unprecedented leveraged speculation.In order to resolve this phenomenon,all of the relevant exchanges(NYMEX,Comex) should impose a 100% margins on trading and unprecedented price implosion will follow allowing the FED to focus on the real iisues.To the skeptics ,I would like to point out that some 28 years ago Comex imposed 100% margins on the precious metals ,causing the silver to tumble from fifty dollars to six.So much for commodity inflation.Ther issues/problems .I have been warning about since june 2005(Mark Gilbert- Bloomberg interview,Brian Sullivan Bloomberg TV) are behind us..For all of the pessimism the U.S markets and the economy are on the verge of a major rebound.