Aryamehr

Cramer's Lightning Round - The Most Dangerous Stock for 2009 (12/23/08)

that you should follow everything they say but rather mull over all the logical facts using your education and experience in your ruminations. Cramer is no different than most analysts that make comments on TV, and the internet, they are all nothing other than sources of information that can be useful to those of us who understand this, however they are not prophets.

I listen to Cramer and most other pundits and people but I only listen for kernels that could lead me to compelling investments. They name a stock, I research the stock using fundamental analysis, I look at all the metrics understanding most are trailing twelve months, then I look into the short, intermediate and long term horizon with macroeconomic parameters and pick my stocks. I also consider Black Swan events that could happen.

One of my major picks is Citigroup. Reasons - their metrics are compelling and their fundamentals based on the Treasury’s coordinated decision with the Federal Reserve to essentially back all their debt and keep short term rates at 0-0.25% for a long period (up to 3 years). Under these circumstances all the big banks are going to make a killing. Just ponder this, the banks can now borrow money for a relatively long period of time at almost zero percent interest and lend it to their customers and pocket all the profits without paying the Federal Reserve. Ex. Citi borrows $10 Billion and lends it to its customers, ex. businesses, credit card holders, mortgage applicants etc. without having to pay any interest to the Federal Reserve for a long time, or until the economy starts manifesting an expansion. By this time the housing market will have bottomed.

Anyone that expected the economy to make an about face in the span of a week or a quarter is probably a moron. Macroeconomic events take time. The latency period between cause and effect is usually 18 months, so for TARP to manifest its positive effects it will mean that we will probably not see its full effects until the early part of 2010. What one needs to understand is the effects of TARP and its future progeny. The results will unequivocally be an expansion in economic activity however they will have inflationary side effects. This is usually the policy applied in most developing nations however the monetary policy of these nations is contained within their own borders. Our monetary actions affect the entire globe since our currency is the preferred currency used for international trade and hoarding national reserves.

The bubble in real estate was evident in 2004 and I liquidated everything then, however I was always fearful of one word that would gnaw away at my reserves; Inflation. My fears are coming to their fruition and the only place left to park your money appears to be the securities market. Mark my words, inflation is a latent tax that in the modern era compels one to be vigilant or else you will have little savings for your retirement. Mr. Buffet spoke my thoughts recently by stating, "Cash is Trash," it truly is Trash. If you take into consideration the Real Inflation rate, that is eliminating Hedonics from the governments formula, it is more than obvious that inflation has averaged at least 7% annually for the latter decade. Just use the rule of 72 and you will agree. If you agree with this then after paying taxes on the interest in your CDs or Money Market accounts you will probably net 2%. With inflation at 7% this would mean you are losing 5% on your money every year that you have it sitting in the bank. Owing to this using the rule of 72 that would mean within 15 years your money would be worthless. So can you tell me if there is a better investment other the stocks? I don't think so. If you don't like Citi then consider any of the remaining majors, such as, Bank of America? JP Morgan Chase? or Wells Fargo? Believe me the economy won't turn around until the banks turn around. Real Estate is secondary to the banking sector and that is why TARP essentially addressed the financial sector. I chose Citigroup because of its international exposure. Remember most of the future growth is going to be in the developing nations not in the West and this is where Citigroup’s strengths are apparent.

Last but not least we need to understand that we are the only nation in the world that has the privilege of being able to print a currency accepted anywhere in the world. I will leave you to ponder the consequences of abusing this power and the global ramifications if this is not done prudently.

Cramer's Lightning Round - The Most Dangerous Stock for 2009 (12/23/08)

"even the dull and ignorant they too have their story," however it does not mean that you should follow everything they say but rather mull over all the logical facts using your education and experience in your ruminations. Cramer is no different than most analyst that make coments on TV, and the internet, they are all sources of information that can useful to those of us who understand this, however they are not prophets.

I listen to Cramer and most other pundits and people but I only listen for kernels that could lead me to compelling investments. They name a stock, I research the stock using fundamental analysis, I look at all the metrics understanding most are trailing twelve months, then I look into the short, intermediate and long term horizon with macroeconomic parameters and pick my stocks.

One of my major picks is Citi. Reasons - their metrics are compelling and their fundamentals based on the gov'ts decision to rescue the major banks and the Federal Reserves policy of essentially promising to keep short term rates at 0-0.25% for a long period (up to 2 years). Under these circumstances all the big banks are going to make a killing. Think about it the banks can now borrow money for a relatively long period of time at almost zero percent and lend it to there customers and pocket all the profits without paying the Federal Reserve. Ex. Citi borrows $10 Billion and lends it to its customers, ex. businesses, credit card holder, mortgage applicants etc. without having to pay any interest to the Federal Reserve for a long time, or until the economy starts manifesting an expansion.

Anyone that expected the economy to make an about face in the span of a week or a quarter is probably a moron. Macroeconomic events take time. The latency period between cause and effect is usually 18 months, so for TARP to manifest its positive effects it will mean that we will probably not see its full effects until the early part of 2010. What one needs to understand is the effects of TARP and its future progeny. The results will unequivocally be an expansion in economic activity however they will have inflationary side effects. This is usually the policy applied in most developing nations around the world, however the monetary policy of these nations is contained within their own borders. Our monetary actions effect the entire globe since our currency is the preferred currency used for international trade and hoarding national reserves.

The bubble in real estate was evident in 2004 and I liquidated everything then, however I was always fearful of one word that would knaw away at my reserves; Inflation. My fears are coming to their fruition and the only place left to park your money appears to be the securities market. Mark my words, inflation is a latent tax that in the modern era compels one to be vigilant or else you will have little savings for your retirement. Mr. Buffet spoke my thoughts recently by stating, "Cash is Trash," it truly is Trash. If you take into consideration the Real Inflation rate, that is eliminating Hedonics from the gov'ts formula, it is more than obvious that inflation has averaged at least 7% annually for the latter decade. Just use the rule of 72 and you will agree. If you agree with this then after paying taxes on the interest in your CDs or Money Market accounts you will probably net 2%. With inflation at 7% this would mean you are losing 5% on your money every year that you have it sitting in the bank. This would mean, using the rule of 72, that within 15 years your money would be worthless. So can you tell me if there is a better investment other the stocks? I don't think so. If you don't like Citi, how about Bank of America or JP Morgan Chase, or Wells Fargo. Believe me the economy won't turn around until the banks turn around. Real Estate is secondary to the banking sector and that is why TARP essentially addressed the financial sector.

Last but not least we need to understand that we are the only nation in the world that has the priviledge of being able to print a currency accepted anywhere in the world. I will leave you to ponder the consequences of abusing this power and the global ramifications if this is not done prudently.

China Continues To Consider U.S. Treasuries Its Best Option

China will do what they deem is good for China as any nation will do for the interest of it ruling elite. At this moment China is doing what any rational businessman or aspiring world power would do, which is to bring order to the financial markets. Chinese goods require a stable financial system that functions efficiently if it is to continue on its glide power into a giant economic super power. A failure in the current financial system would have dire consequences for all the Pacific Rim nations, hence China is compelled to make sure that this does not happen. We basically have only two real options; you either think the world has come to an end, which doesn't matter what you do, or you think rationally and assume that this is just another macroeconomic transitions. The only difference to this recession is that it is Global and predicated on bad financial policies in the West, especially the USA. Bad leadership begets bad policies. You can thank Mr. Bush, Greenspan and Paulson for the mess we are mired in.

Don't Blame Fannie and Freddie

Apropos and absolutely well said. Nevertheless, the onus of the problems lie with the Federal Reserve and the Current Administration. If the Federal Reserve was not prescient enough to see the ramifications of their low interest rate policies and the Bush Administration was inept in their understanding of Economics 101 or was too busy fighting an illigitimate war, how in God's great name can we even consider blaming the public. Anyone who has a rudimentary understanding of basic economics could see that the Real Estate Market was on the verge of a bubble in 2004, but the Administration had to prolong and buttress the Real Estate market lest they manifest the shortcomings of their Bushonomics (aka Voodoo Economics). Starting a war and lowing taxes does not balance the budget nor does it provide long term capital for the economy. However, in Bushonomics if you continue to inflate Real Estate values you increase Local, State and Federal revenues, which can give a cogent reason for the general public to think the Administration's Tax cuts were the cause, hence continue this flawed policy while the pary lasts. Now we can see how this administration's desastrous policies got us to where we are today.

When you have an uneducated President and a constituant base that believes in Creationism over Evolution, you can practically do as you please. All you need to do is ask for the public to have Faith! God will rescue us with our new prophet, Sarah Palin.

Freddie/Fannie Plans In Motion; Why Are They Being Underplayed?

The Gov'ts actions are a positive step in stabalizing the financial markets, however only a fool would consider this a panacea. Home prices will continue to fall until the economics of buying a home makes sense. When the cost of renting is 50% or less of the cost of your debt serving of a home, can you tell me why the average person on a fixed income should even contemplate the idea of purching? Until the calculus starts to make sense you can rest assured the housing market will have plenty of room to move down. To make matters worse is a Stagflationary environment. Nevertheless, this administration for once took a good step on behalf of the American people.

Freddie/Fannie Plans In Motion; Why Are They Being Underplayed?

The pundits are blowing this way out of proportion, as though everyone in the US was going into foreclosure. Well it couldn't be further from the truth, however this does not mean that the mortgage industry is not in trouble. The facts indicate that approximately 10% of american households are in default on their mortagages, however that does not mean that their homes are worthless. On another note one should realize 98% of FNM & FRE Asset Backed Securities are not Sub-Prime. The problem we have is Sentiment, we have gone from "irrational exuburance" to "irrational pessimism" which is usually one of the effects associated with too much partying; thanks to the Bush Administration and the Federal Reserve of the so called maestro Alan Greenspan (lol). You would think that Mr. Bush and Mr. Greenspan were in a conspiracy to destroy America, however I would like to think not, but this is the result you get when you elect a Dunce for the White House and allow a senile old man to run the Federal Reserve. Even a high school graduate could see that rediculously lax lending standards and artificially low interest rates were eventually going to create a bubble of unpresidented proportions. What is dumb founding is that how the Administration and the Federal Reserve allowed this to take place. What in God's great name were they smoking?

Now the solution! Unfortunately we are all going to end up paying for it if we want a strong dollar and an America that continues to lead in the 21st Century. Our leadership requires that we maintain three very important pillars: a strong dollar, a strong military and a relatively cheap access to natural resouces. If we allow FNM & FRE to fail it is unequivocal that the dollar will be seriously challenged and cheap foreign money will no longer be available, hence exacerabing the current financial crises. This in turn will have far reaching geo-polical ramifications for the decades to come and we can not afford to allow this to happen. The first step the Fed needs to take is make both institution appear to be solvent and liquid by unequivocally manifesting their support by guaranteeing their ABS and strictly enforcing the checks and balances necessary to make sure these entities do what they were originally mandated to do; facilitating funds for mortgages under specific strict guidelines.

The gov't is wholly to blame for pushing the GSEs into their current malaise. Were it not for the Administrations own selfish needs to show growth to support their Tax Cuts, I don't think we would be where we are today. The astronomical increase in wealth from Capital Gains in Real Estate caused an economic boom that had absolutely no economic foundation, however in the interim it was a reprieve for the enept Yale graduate, Mr. Bush. It gave the appearance that his tax cuts were the forces behind the growth during his administration, when we all know otherwise. Unfortunately for him and his cronies they would not get another reprieve to con the American public into electing another inept administration. When an entire nation is involved in real estate speculation, outsourcing important jobs, fighting unnecessary wars and cutting taxes for the rich, how can you expect any long lasting positive results.

Fannie, Freddie Common Stock Is Now A Call Option

It is unequivocally obvious that the main culprits behind the financial crisis are at the very top of the food chain; Mr. Bush and the Federal Reserve of Mr. Greenspan. The GSE's only facilitated what was asked of them and they used the full lattitude of their madate to effectively do their business. Now that the Fed and Mr. Bush's profligate actions have manifested their ominous facets everyone is trying to point the blame for the financial crisis on the GSE's. Don't forget that the GSE' s played a very important role in stabalizing the mortgage industry and facilitating mortgages to remote areas that would have been difficult or virtually impossible to acquire without them.

Owing to the aforementioned and more, the powers to be had no alternative but to change their implied support to explicit support of these enterprises.

Remember, what happened to Chrysler and why the gov't bailed them out? The results of what happened to their stock after a little while should manifest what will probably happen to the GSE's.

Patience is more rewarding than ingenious.

Fannie, Freddie Common Stock Is Now A Call Option

If the Federal Gov't allows Freddie or Fannie to go bust, especially when they know damn well they are partially responsible for their malady then you can rest assured attracting foreign money at incredibly low interest rates is going to get much harder. Owing to this I beg the question on how in God's great name are we going to service our national debt? Our nation unfortunately doesn't have a natural propensity to save and if foreign capital dries up the only alternative left, short of very high interest rates, would be to print more money, hence depreciating the real value of the dollar at an accellerated pace.

FRE & FNM have 45% of the mortgage debt of this country and they currently facilitate 70% of originations. Their role in the U.S. economy is priceless and replacing them with another institution would be far too costly for the gov't or nation as a whole. The solution to their problems is simple, just cut the dividend and wait for the market to correct itself. Which we all know will happen within 18 months.