outtafavr

Defaulting in Plain Sight

I'll tell you how to find the 24T and more. Toss in agency debt, and agency guarantees of non-agency paper. There are many many tentacles.


On Sep 23 12:54 PM SW Richmond wrote:

> Thanks Steve, it appears I have grabbed the wrong number, $23.8 Trillion,
> when I intended to use $12.8 Trillion. I've checked my documentation
> for $23.8 Trillion and have found it nowhere. The independent documentation
> for the $12.8 Trillion is here:
> www.bloomberg.com/apps...;sid=armOzfkwtCA4
>
>
> I apologize for the error. I cannot explain how $23.8 Trillion got
> subbed. The article needs to be corrected to include the correct
> number, $12.8 Trillion, and the point made about leverage is no longer
> mathematically correct. I stand by my assertion that we have defaulted,
> the difference only being one of degree.

Defaulting in Plain Sight

At some point, this ponzi is no different than any other ponzi. The entire scheme depends on the faith of the players. Once the pyramid gets too big and the juice coming into the base fails to liquify the entire pyramid, it collapses.

This scheme has already failed. The borrowing, bailing, and guaranteeing is but an act of desperation, attempting to revive the scheme, but sections of the pyramid are not nourished and are dying. Although the players that provide funding are patiently waiting, pure faith is the only thing keeping the house of cards together.

Although on a smaller scale, I have seen this movie before. Once the handwriting on the wall is clear enough, faith disappears. The end is sudden. It's like finding out about Santa Claus. Once you know, you know. And you can never go back to where you were before the moment of enlightenment.

Why I Am Shorting Treasury 30 Year Bonds via Treasury Futures

The market for this product is not free. Auctions of this product are manipulated and the manipulators readily acknowledge their wrongdoing, carrying out their crime on a grand scale. How can you justify any positions, long or short, in such a lawless environment?

Everybody Hates Leveraged ETFs

Bob Pisani just explained everything about leveraged ETFs on CNBC. Thanks to his explanation, I now completely understand them and I think the government should make them illegal.

Leveraged ETF Ban Spreading Like the Flu

Maybe this is a sign of a market top. Big conservative brokers no longer ALLOW their customers to get on board leveraged bear funds for the ride back up. LOL

Fixing the Leveraged ETF Mess

The new buzzword is decay. It used to be diversion. These are words that are used to describe ETF losses you incur when the market doesn't go your way. Losses happen to virtually every portfolio. Stock prices can be irrational. Markets move against you no matter how correct your predictions may be. Somehow, these words are only applicable to losses in leveraged ETFs. According to the math geniuses that diagnose ETFs as toxic, leveraged ETFs all go down no matter what markets do. They just decay. Like rotten tissue, bad to worse, to worse than worse.

Over time, these ETFs are going to prove themselves worthy of holding, but not for the faint of heart. Little girls who believe in the boogie man and ETF "decay" should invest elsewhere.

More on the Dangers of Leveraged ETFs

Extreme volatility has distorted these ETF's performance. I would describe it as a mathematical phenomenon. But volatility is also a zero sum game. Calm waters, somewhere in the market's distant future, will allow these ETFs to perform as they were designed. I expect that future performance to compensate for the poor performance witnessed to date. While I make no predictions about the timing of what I'm talking about, it could certainly take years and maybe many years. Thanks to our author and other town criers like Cramer, very few investors will be on board for the entire ultrashort journey. I think it will be a fruitful journey and I, being a very patient and diligent investor, intend to ride it out. That is, unless City Hall shuts us down amidst all this hysteria about the dangers of an obviously risky investment.

Short Sales: An 18-Year Low

The chart and the quotation imply that STOCK VALUATIONS are at an 18 year low. How does the author extrapolate that short sales are at an 18 year low from this?

Dollar Goes Down Along with Bailout Plan

Dollar Bears:

Have you ever thought of borrowing dollars and spending them as taking a short position against the dollar? Isn't there an expectation of easily acquiring dollars later to use for repayment? Can what we see now be a bit of a short squeeze going on as debtors sense present and future difficulty in acquiring dollars?

Your only hope is that "Helicopter Ben" helps 'em out. Otherwise, this could be the mother of all short squeezes unraveling.

Rethinking Fannie, Freddie and Mortgages

This is an excellent article. The author is a very brave man. In discussing the reason for Fannie/Freddie's existence, he refers to housing being subsidized by taxpayers. There's more to it than that. The GSEs were used to manufacture a hot economy. So many jobs were created in the process of building and selling all those houses. This was all done with cheap money borrowed by the government in disguise as GSEs, blazing a $10 trillion path to nowhere. For 70 years everyone was fooled. The giant "DEAD END" sign is now visible to many, including David Merkel.

Allowing the GSEs to fail would cause immense pain to the economy and our financial system. Short term pain would turn into long term gain and result in a much more rapid return to prosperity and overall financial health. This society could never be courageous enough to cause any pain for itself. The GSEs, the government, and the economy, all being one in the same, are destined to die a very slow agonizing death.

Roubini Attacks Bailout, But Misses Boat on Regulation

I mentioned socialist and class envy, and the next two posters appeared in that exact order! Awesome fellas! Thanks for your misguided input!

Roubini Attacks Bailout, But Misses Boat on Regulation

I'm afraid there is no way to dismantle the current system in an orderly fashion. The system is currently on life support and I believe there is substantial risk that the end may involve significant disruption.

Meanwhile, the socialist/class envy/every man a king/utopians (User 256999 this is you) remain at the helm. Even Dr. Roubini is afraid to take them on, but Michael Shedlock is not.

Many thanks to you, Michael, for your excellent analysis. Hopefully, those who construct the next system will have similar insight into America's sins of the past.

The True Nature of Fan and Fred

Only time will tell which side is ultimately correct about FNM and FRE. Recent history has not been kind to FNM/FRE proponents. The bitterness in the responses of "DCBill" and the other GSE shills remind me of a female bison defending her calf's dead bloated carcass from hungry wolves.

25 Ways to Tell a Banking System Is Unsound

Norm, your soothing comments about what deposits are "at risk" and which are not must be based on the value of bank collateral and the strength of the economy to create and support jobs, so fine Americans like yourself can keep that mortgage payment current. I personally believe the collateral and the economy will no longer live up to your expectations in an environment where banks no longer sling the easy money, like there's no tomorrow. Reckless lending is what created those spectacular asset prices and the robust economy. Welcome to tomorrow.

Fannie and Freddie: When the GSEs Go, So Goes the Dollar

To the author, I would just state that lower bond prices/higher interest rates will attract capital to the US, boosting the dollar. The credit crisis is about a shortage of capital in our markets at prevailing interest rates. Adjusted for risk, returns are negative, resulting in the flight of capital, a weaker dollar due to exchange imbalances. When rates rise to levels that adequately compensate for risk, capital will flow into this country once again, credit markets will be functional again, and the dollar will be strong again. The problem is that a substantial adjustment to our rates will be necessary, the sooner the better. The government's only strategy is to delay the inevitable.

BS Detector, you need to study pyramids, ponzies, and multilevel marketing schemes. The collateral you have so much faith in has an inflated value because of the $5 trillion FNM and FRE threw at it over decades past. That money is gone. The base of the pyramid just gets bigger and bigger. Another $10 trillion will be needed to keep the triangle intact. Where will that money come from? New issuance of agency/treasury(same thing?) debt? Please see my first paragraph above. Without dirt cheap interest, low/no down payment mortgage loans available from FNM/FRE/Uncle Sam, how much will all those precious US dwellings be worth?

islandcreek, so much for your experience and perspective. This time it is indeed very different. For your sake, I hope you are one of the very very few Americans with some money in the bank.