TxTim

11 Predictions for 2010

Old Trader, you are a sharp guy. I usually always like your perspective and the concise way you present it. However, the last sentence in your comment seemed cryptic to me. Does massage mean extend or continue? And, how does the printing of more fiat money make the dollar stronger? IMO the more the Fed prints money and concurrently purchases US Treas, Agency, and MBS the more of a box they get themselves into. If their purchase of US Treasuries does indeed make the dollar stronger then bond investors by definition are believing in a sham. Somehow I think they know better.


On Dec 30 05:45 PM Old Trader wrote:

> I'm not sure that the Fed will raise rates as soon as the author
> thinks. As long as they're focusing on "core inflation", they'll
> see little, or no need to tighten, and risk giving the economy a
> kick in the teeth, just as its attempting to struggle up off of the
> canvas. Instead, they'll massage QE, in an attempt to keep the dollar
> from swooning, again.

Are We Heading Toward a Market Crash by Jobless Recovery?

You forgot to mention energy independence. They've been talkin' about that one for a while, too. When looked at objectively, Congress is a joke, but not a funny one.


On Dec 18 10:29 AM Speakeasy wrote:

> Think about the fact that the USA is one of the wealthiest nations
> that has ever existed - yet over the past 40 years our infrastructure
> has gone to pot, our public education has gone to pot, our judicial
> system has gone to pot, our borders are no longer protected. For
> the past 40 years the politicians have run on the promise of better
> education - where is it? Its all a sham! In reality, the shadow powers
> that be have been raping our nation's assets, enriching themselves
> and selling the rest of us to third world status.

The Bubble Decade Is Far from Over

True comments indeed. The problem is that the wealthy elite are getting bailed out when the bubbles pop.


On Dec 14 08:00 AM duster wrote:

> Ah, from tulips to teacups, bubbles are an unavoidable consequences
> of human nature, greed and fear, striving to be better than the Jones,
> wanting instant gratification, whether the rich benefit more than
> the middle or poor is debatable I know plenty of stories of rich
> folk who bought into Calif housing, internet .com, etc. Remember
> a fool and his money? Truly wise men will think on their own and
> view things with skepticism, if its too good to be true, undoubtedly
> it is.

Greece: A Leading Economic Indicator?

Good comment as usual chap08. Let me point out that the third of your stated possibilities for Greece, exposes a soft underbelly of the EU...."Welcome to Nation Bailout World..." the pinnacle of personal responsibility abdication.


On Dec 14 08:05 AM chap08 wrote:

> Firstly, Greece can not conduct QE. Only the ECB can conduct QE in
> the eurozone. Secondly, what you are advocating is not actually QE.
> It is debt monetization. QE is a policy that is specifically designed
> to be reversed, debt monetization is not.
>
> Where you are right is in highlighting the dangers of the current
> policy. Raising taxes and reducing public spending will, as you say,
> deepen the downturn in Greece. This could then lead to further reductions
> in the tax take and so on in a downward spiral. The "get out" that
> usually applies in such circumstances is that the currency devalues
> and this boosts the economy through trade. Being in the eurozone,
> Greece does not have this get out. The possibilities for Greece are:
>
>
> - world economy drags them out of recession
> - Euro devalues
> - some form of debt forgiveness or wealth transfer within the eurozone
>
> - Greece somehow magics up a productivity revolution
> - Greece leaves the eurozone

Richard Russell: Downturn Will Be 'Vicious'

I think your comment is warranted but shouldn't we also acknowledge the unbelievable and glaring mismanagement of the automakers?


On Dec 09 08:38 AM User 489779 wrote:

> Are you sure you don't mean Ron Gettlefinger?

5 Reasons to Expect a Near-Term Selloff

Yes the market could go up another 60% but it wouldn't be based on anything fundamental. At least if you go to Vegas and make a bet at the sports book the outcome is determined by a real event--a game that was played or a race that was run in reality. In this market much of the values have nothing to do with real events or fundamental reality of risk and risk assessment. If you recall the cause of the crisis last fall was and still is on the doorstep of large US and Foreign Banks who underwrote, sold, and eventually bought and held a bunch of toxic MBS that impaired their Balance Sheets. When their solvency and liquidity came into question because of it, financial markets froze and the economy fell off a cliff. If you're so confident that everything is fixed, take a look at BAC's 3rd quarter 2009 call report and see if it is. Let me summarize the facts for you. Total Equity $ 258bln. Total Level 2 Assets $ 2.2 Trillion. Total Level 3 Assets $128 bln. Go long and catch a "hail Marry." You might get lucky. But it won't have anything to do with prudent risk management given the current financial and economic situation we're in. But maybe you have so much money it doesn't matter how much you lose.... Hey are you managing a big bank?


On Nov 30 01:29 PM LKofEnglish wrote:

> to date Bernanke and Geithner haven't even broken a sweat clearing
> their trades in the bond market. there is no way i'm standing in
> the way of this bull market because the assumption i made that interest
> rates would soar as the fed was forced to raise interest rates to
> defend a collapsing dollar have simply not materialized and appears
> not to be materializing in the forseeable future. most of the "bond
> guys" and pretty much everyone at this bad money site have been laughing
> at the green shoots crowd while they make millions and billions.
> sure haven't heard an apology from a single one of you perma-bears
> save for steve davis who i really don't think needs to apologize
> as a member of the arena. we're talking 60% you morons so why not
> go out and just shoot yourself instead? the fact that this market
> could rise ANOTHER 60% just has you all laughing--at what i can't
> quite figure out because obviuosly it's not at the bank that now
> has all your money courtesy of your elected leaders who percieve
> a "crisis." in any case don't count on your governnent to do the
> right thing--they're in the business of spending your money when
> not giving it to the people throwing you under the bus. somehow this
> works financially tho. i've always believed since the 90's that given
> the right public policies uncle sam really can turn water into wine,
> i just never thought they'd be able to sustain it for this long.
> with Dubai's collapse i don't see anything to stop this money printing
> and debt creation machine for some time.

5 Reasons to Expect a Near-Term Selloff

TraderRob, Razor sharp and spot on.


On Nov 30 08:45 AM TraderRob wrote:

> The mortgage reset is an issue which has received little attention
> thus far, but will become a headline issue as the ever expanding
> U.S. Fed balance sheet has no where to go but bigger amidst nationalized
> GSE mortgage trusts. No one ever talks about the difference between
> Fed "policy", as released through the rhetoric of the minutes, and
> actual Fed balance sheet fluctuations but the data shows a Fed financing
> more and more of the mortgage industry. The credit markets won't
> ignore the shift of non-performing debt from private to public balance
> sheets forever.

Bigwigs Debate 'Too Big to Fail'

I've read part of the most recent Fed minutes. It looks to me like the Fed is considering and will probably just keep most if not all the MBS (they are purchasing in the $Trillions) and let it all prepay or mature and collect as much of it as it can over the secular term. IMO there will be losses if this is done, aside from mark-to-market accounting, etc. I have perused the Federal Reserve Act of 1913 and can find no provisions or guidelines regarding requirements of profitability of the Fed other than some provisions to pay dividends on stock to members. Perhaps it is there, but I haven't seen it. My bet is that the Fed can eat INFINITE losses without consequences, something I expected for an all powerful central bank. Under these capabilities and the desire for the Fed to "save the financial system," it appears to me the Fed could simply be (and to a certain extent already is) a repository for all unwanted toxic assets. Why bother with a government designed, convoluted auction or other method to value toxic assets for the purchase of them from big troubled banks? The Fed can just buy them with freshly printed notes and stuff 'em in the closet. The problem is that the peoples' money get's handed directly over to the elite wall street banks and institutional investors that made the decision to buy and hold those toxic securities. Am I just way out on the fringe for considering this? What a phenomenal franchise big banking really is? I can't really participate in it as a stockholder either because all of the upside goes to the "elite" management at the top in the form of egregious bonuses and salaries (see BAC). Well, we should just be content that the big banks are made whole so our economy can survive and we can end up paying more for everything with a devalued dollar. We just need to work a little harder don't we…. I like being on this end of it, how 'bout you? TBTF is the lynchpin of underhanded banker theft.

Wall Street Breakfast: Must-Know News

I've read part of the most recent Fed minutes. It looks to me like the Fed is considering and will probably just keep most if not all the MBS (they are purchasing in the $Trillions) and let it all prepay or mature and collect as much of it as it can over the secular term. IMO there will be losses if this is done, aside from mark-to-market accounting.... I have perused the Federal Reserve Act of 1913 and can find no provisions or guidelines regarding requirements of profitability of the Fed other than some provisions to pay dividends on stock to members. Perhaps it is there, but I haven't seen it. My bet is that the Fed can eat infinite losses without consequences, something I expected for an all powerful central bank. Under these capabilities and the desire for the Fed to "save the financial system," it appears to me the Fed could simply be (and to a certain extent already is) a repository for all unwanted toxic assets. Why bother with a government designed, convoluted auction or other method to value toxic assets for the purchase of them from big troubled banks? The Fed can just buy them with freshly printed money and stuff 'em in the closet. The problem is that the peoples' money get's handed directly over the elite wall street banks and institutional investors that made the decision to buy and hold
those toxic securities. Am I just way out on the fringe for considering this? What a phenomenal franchise big banking really is? I can't really participate in it as a stockholder either because all of the upside goes to the "elite" management at the top in the form of egregious bonuses and salaries (see BAC). Well, I should just be content that the big banks are made whole so our economy can survive and I can end up paying more for everything with a devalued dollar. We just need to work a little harder don't we.... I like being on this end of it, don't you?

Another Crisis Looms Right Around the Corner

Genius...the game goes on doesn't it.


On Nov 25 12:08 PM flipspiceland wrote:

> If I decide to take $100,000 in credit lines at 0 per cent for 1
> year, and 'invest' it in Brazilian CDs at 4% and the dollar suddenly
>
> rises by 20%, why shouldn't I as a trader, get the wind knocked out
> of me? If someone is foolish enough to lend me that $100,000 with
> NO COLLATERAL, who's the patsy here?
>
> The Carry trade shouldn't worry anyone enough to panic, provided
> the banks who are lending this money are not taking their depositors'
> cash, and/or borrowing it from the FED to lend to me and then when
> I fail, to stick the rest of the population with the tab thru government
> sponsored bailouts.

Another Crisis Looms Right Around the Corner

I've read a lot of your comments here on SA and like seeing your perspective. I'm not quite on the same page as you but...

Anyway, you seem to have a lot of knowledge about how things might play out in a total "chaotic colapse" type situation. Do you have personal experience in this? In other words, did you live in a country where this happened? Just currious.

I remember back in 1999 my eccentric aunt pleaded with me to read a book (don't remember the title) to prepare me for the chaos that would come from Y2K. In the very first chapter it suggested that a prudent person get all their fishing gear supplies in good working order to be able to fish the lakes and streams for food when the store shelves were empty. I'm a pretty good fisherman but it didn't take me long to figure out that if 2.5mm people in the Dallas Fort Worth metroplex were hungry and fishing the surrounding lakes and streams I'd be SOL. I closed-up the book, had a drink and said to myself, if it happens that'll be too bad but there ain't a damn thing I can do about it.

On Nov 24 10:51 AM User 353732 wrote:

> The US Regime, based on your essay, has become a serial economic
> mass murderer.
> How does one cope?
> There are typically only two ways.
>
> 1. Flee to a secure, gated, community: this means seek safety in
> assets whose intrinsic worth is preserved while the crimes continue.
> Monetary metals, oil, rare earths, and later food, fibers and timber,
> nuclear technology are such assets. This is only possible for a few
> people with the financial , analytical and execution resources to
> find, afford and reside in the gated community.
>
> 2. Organize private self defense groups to watch for and hunt down
> the serial killer. This requires middle class social and political
> will and fortitude. In late 2009 there is little prospect that such
> self defense groups can be formed with any effectiveness or, if formed,
> will not be instantly intimidated and disbanded by the hired goons
> of the US Regime.
> In time, however, this second option will become potent. It is far
> superior to cowering in gated communities or in fortified compounds,
> which is the trope of a failed civil society. Far better that civil
> society be restored by private, joint, action than mourn its demise.

A Tale of Two Markets: Overvalued Stocks and the Declining Dollar

That BAC has $160bln in level 3 assets as of 2Q09 is a fact not an assumption. We're talking about value here.

Because of this argument I looked up 3Q09. They report $124bln in level 3 assets and $2.2Trn in level 2 assets. Line that up with $258 billion of total equity on their Balance Sheet my friend and invest till your heart's content.


On Nov 23 11:45 AM Mrudula Shah wrote:

> Your view of fundamentals is apparently based on flawed assumptions,
> especially w.r.t. BAC's assets.. In my view, BAC will come out to
> be much healthier than analysts with flawed assumptions now think.
> Let me ask you one thing: Is Paulson less smart than you guys are?
> Why has he bet billions (and one of the top investments) of his fund?
>

10-Year Yields to Rise 220 BPS in 2010 - Morgan Stanley

Andrew,

I liked the way you phrased your comment. It's persuasive. But don't you think the Fed's game has some limitations...that it can't go against the market indefinitely (specifically QE). Maybe a more "wobbly" economy with some pain is not such a bad thing. Medicine is not always pleasant.


On Nov 23 03:48 AM Andrew Butter wrote:

> Will they or won't they?
>
> One thing is for sure no one is talking about yields going down.
>
>
> I suspect the Fed has painted itself into a bit of a corner by lending
> at 0% short term so people could trot down the road and buy Treasuries
> from Timothy at 3.5%, killing two birds with one stone... as Alan
> Greenspan would have said..."so to speak".
>
> Two risks about reversing that (a) the economy starts to wobble and
> (b) all the banks will be lining up for bail-outs again.
>
> I don't think yields will rise a lot, the Fed won't let them.

A Tale of Two Markets: Overvalued Stocks and the Declining Dollar

No I just think they are not buying on fundamentals which is basically the case for most of the market. If you like casino betting, go to Las Vegas. You can at least get free food, a comped room and see a lot of eye candy.


On Nov 22 11:37 PM Mrudula Shah wrote:

> I will believe if BAC goes down to-morrow and by the end of the week.
> If it stays about the same or goes up, would you think people who
> bought are just idiots?

10-Year Yields to Rise 220 BPS in 2010 - Morgan Stanley

I'm not so sure a 5.5% 10 year would be so fatal. In fact I think it might be more normal. Is a 7.5% 30 year mortgage for a "real" buyer seeking the utility of an affordable home so out of the realm...? Maybe a 7.5% mortgage will also take a larger share of a family's budget and redirect household spending away from weekly purchases of $ 20 blow-up swiming pools made in China and in the landfill within 2 weeks. Respectful of Bill's investment record, IMO his trade is a dance with the devil and has a reasonable chance of biting him. Holding long term "risk free" bonds will at some point have to reconcile the reality of many more printed dollars circulating in the system. MS is probably onto something.