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U.S. Markets: Is it Time to Throw Caution to the Wind?

Yes , the investors are unconvinced .

The Administration , the Treasury and the Senates are making big plans in response to the rising foreclosures and depleting financial stocks .

It is notorious that " naked " short sellings intensify to a huge extent on the depletion of financial stocks especially that of the regaional banks .

SEC has revised the rules in policing " unlawful manipulation through naked short selling that threatens the stability of financial institutions " .

Such rules become effective tommorow , July 21 , 2008 and yet these rules don't protect regional banks .

Regional banks have very little exposure to the subprime and yet their equity were in general depleted about 60% in the last three months .

Such banks have originated a lot of mortgages for Americans when they establish their homes .

For instance , Regional Financial (RF) is a profitable local banking network , which has been dedicated in Charity and community works , in addition running their banking business .

The stock pricing for RF was depleted from $23 in April to $ 7 in July . The stock price came back some last week and yet it is at a 56% discount from that of April , 2008 .

One invested in such banks on a long term basis and not for a quick profit , would find oneself losing so much that one could not even afford his mortgage payments .

No wonder , foreclosures are on the rise .

SEC would help to stablize the financials in a meaningful way by protecting all banks from the " unlawful manipulation " .

I trust that SEC would extend this protection rule to all banks at the soonest .

Otherwise , it would be a disgrace and a snap in face of USA .

Historic Financial Collapse Underway?

The " learned " author suggested that Fannie / Freddie due to worth zero dollar while the US dollar should slide .

The author , impressed me that salvaging Fannie / Freddie , the two government sponsored entities ( GSEs ) is like a " crime " .

I heard one said that the recent foreclosures stem from two sources :

1 ) the subprimes alleged to be fraud related ; someone organized to inflat property values by fraudulent appraisals and then mortgaged same to banks under the names of individuals with poor credit ratings ; the walking away would reap good profits for the organized criminals while leaving the banks with huge expenses and over valued properties .

2 ) the severe drop in price of the financials since October , 2007 have left traditional investors broke and unable to make mortgage payments . Foreclosures thus extended to the real people .

The " naked " short sellers intensified the damages on the economy .

Judging from the history of loss incurred by Citigroup (C) , the subprime issue can be speculated as over or almost over ; loss from over 10B in the 4th Q , 2007 to the 2.5B in the 2nd Q , 2008 .

The main hurdle now is the foreclures inflicted with the traditional investors or the good guys who lost all by confronting the unreasonably sharp drops in bank prices since October , 2007 .

Say , Regional Finance (RF) , a profitable regional banking network which has little or no exposure to the subprime , went down from $ 23 to $ 7 from April to July or in just three months .

Oh , RF has about 1.5% non performing assets (NFA) which are lands good for home construction purposes .

The real estate maxim tells us that land by nature , appreciates in value . Such NFA is in fact valuable asset to the bank and the same leaps when the real estate market becomes normal .

Investing into the future and thereby invest in financials .

When financials go back up to a reasonable level , the good guys would have their savings back to update their mortgage payments .

As a result , foreclosures would be reduced and the real estate market would be back to its normal functioning .

Some article indicated that Fennie / Freddie were told by the US government to loosen up their policy in accepting mortgages at the time when the subprime problem had surfaced while banks then generally raised their standards .

Such " startegy " was an attempt by the US government to boost up the real estate market at the time .

That attempt failed for the loose rules would naturally , invite more fraudulent subprimes .

Fannie / Freddie ended up with mortgages that they would not accept under their own policy .

On viewing the year 2001 / 2002 downturn , Fannie / Freddie flared better than or comparable to strong pretigeous banks like Bank of America .

Fannie / Freddie have proven themselves to be effective and profitable when being allowed to use their own standards in assessing mortgage applications .

Even being handicapped , the combined loss to date for the two GSEs is about 10B which is about the same as what Citigroup has lost in its 4th Q , 2007 .

Such quantity of loss is obviously manageable under today's standard .

Freddie's CEO has repeatedly told the media that their retained earnings are sufficient to finance the GSE through this crisis .

The shoring up by the US government is more for gaining back public confidence since half of the US mortgages are guarenteed or owned by the two GSEs .

Yes , substandard policy attracts frauds and eventual mortgage failures .

Published articles indicated that the substandards were used by subsidaries of investment banks and not regional banks .

The two GSEs straddled into these substandards reluctantly on a demand by the government to salvage the real estate market .

One would trust that the two GSEs would be more than happy when being allowed to go back to their own lending practice proven to be effective and profitable .

The " learned " author accepts that the economy would completely collapsed should the two GSEs fail .

The shoring up of the two GSEs would avoid such collapse .

The author however , suggested that a complete collapse in economy would best serve the US people as oppose to the backers' claim that the US people would benefit when the two GSEs or economy being uplifted .

People do have difference in opinions .

Protecting Your Wealth and Profit During the 2008 Crash

The " learned " author recommended readers to long oil and short financials .

The author confirmed his spculations by quoting historical data .

By the same token , history also tells us that what goes up must come down while what goes down must rebound .

I read another article 10 minutes ago saying that USA government should " crack down on Wall Street traders who are driving up oil prices by buying huge quantities of oil just to resell at a higher price " ( the " " is a direct quotation from the article ) .

Further , many recent articles indicated that some traders drove down the financials by " naked " short selling ; that is , driving down the price of a stock by heavy selling on the same stock without the possibility of having the same stock ; thereafter , buys back the same stock at lower prices to make profits ; confusing but magical ! Making profits out of selling nothing .

The author suggested to readers that they should long oil and short financials .

Is the author asking readers to support the manipulative oil " traders " who are likely to be cracked down soon as well as to support the " naked " shorters where their activities are to be limited by Monday or tommorow ?

The author indicated that the oil stock (SOL) recently went up three times from his recommended entry point of $ 9 and thereafter gave back a good portion of those gains ; using up 300% to a now up 70% as told by the author , the updated lose back is 230% !!?

Should the government take action to crack down like what they are doing on the " naked " short sellers , the oil bubble is destined to burst .

The author pointed out that the shorting index (SKF) for financials went up 133% from May to July .

Oh yeah , the " naked " short sellers did a great job in depleting the stock prices of financials ; many traditional investors who stored their hard earned savings in the otherwise stable financials must have lost almost all .

However , the author then show readers that the updated data recorded only a 50% increase since May 1 .

Using 133% - 50% as told by the author , the shortings have decreased by 83% !!?

Are we looking at the rebounding of financials as shown by the data given by the author ?

The " naked " short sellers are supposed to be illiminated by Monday or tommorow ; are we going to have a continuous rebound or going back to the lower than lowest for financials ? One would know this answer by the end of this coming week .

The traditional investors would naturally hope for a continuous rebound .

They of course , would like to recover their hard earned savings so that they would be able to update their mortgage payments .

The coming back of the financials would certainly reduce foreclosures by giving back the savings to the general investors .

The spiral can go up when we manage to overcome the " destroyers " .

Just How Terrible Is Housing as an Asset Class? Roubini Weighs In

For an ordinary citizen in any country , marriage - have kids - a home -financially sound , are the the package that one trying to achieve at all times .

Home is the essential and a must to any family .

My " learned " author here suggested that the Administration ought to give up on helping the public to acquire a home because such attempts are proven bad investments .

Firstly , we are talking about people's homes and not investments .

Secondly , houses and land properties are the best investments in any sound economy .

The author pointed out that such is not true in USA .

I can see why by my experience in the stock market since August , 2007 .

Any middle class investing his / her hard earned savings into the supposedly " safe " bank stocks ended up losing all or became heavily in debts .

The once well to do family would not be able to pay their mortgage any more ; foreclosure is inevitable .

The subprime crisis became visible in August , 2007 .

The crisis as some article unfolded , might have been related to fraudulent matters - inflating appraisal on a house and then had some one with bad credit rating , mortgage the same house to a bank at a " price " well over and above the true market value .

I can see those financials relating to the subprimes would have a downward run in their stock value .

However , the short sellers by their concerted effort extended the downturns to regional banks which have nothing to do with the subprimes .

Many middle class who invested " safely " in the regional banks got hurt.

The vicious cycle naturally , spiralled into more and more home foreclosures .

The Administration saves the economy by shoring up Fannie / Freddie .

Those opposing to it apparently , work to a complete destruction of the economy of USA .