Monday, April 14, 2008

Crediblity..... or the lack thereof.

According to the American Heritage Dictionary under credibility we find the following;

Credibility - cred·i·bil·i·ty
n.
The quality, capability, or power to elicit belief: "America's credibility must not be squandered, especially by its leaders" (Henry A. Kissinger).
A capacity for belief: a story that strained our credibility.


I was prompted to do the above exercise after hearing comments from Mssrs. Blankfein and Mack of Golman and Morgan respectively, pronounce the credit crisis in the late innings and close to over. This begs the question, Does anyone in the financial media have the spine to call them out on this? Better yet, why are we even soliciting their opinions on the subject? The only question that needs to be asked of these esteemed chieftains of American finance would be.... " given you never saw any of this problem coming how is it you are qualified to make this statement? or ... "given you claimed it all wasn't a problem or was contained to subprime how is it you are now qualified to make this claim? or even better given you claimed it was contained and wouldn't spread beyond the sector how on earth are you qualified to make this claim?

In conclusion Mssrs. Blankfein and Mack given we have not seen any write downs from credit card receivables, auto loans, and commercial real estate YET, how is it again you are in any position to make such an outrageous claim. Beyond pollyannic hope what facts are you basing this conclusion? Like I said... credibility.... or rather the lack thereof.

How is it the blogoshpere universe was all over this problem with their meager resources and yet the highly capitalised and intellectually overflowing firms of Wall St. haven't a clue?

Okay, can we finally dispense with the phrase kitchen sink quarter regarding banking writedowns once and for all. Have we not abused the phrase to the point it is laughable when used in any context at all? Wachovia coming back to the capital markets again for more capital. Anyone want to bet the over, firms like Citi Merrill et al will all be back to the trough? Yeah sure, late innings of the credit crisis for sure. Does it look good on em'? You bet ! I am biased? Kinda, I was short GoldenWest Financial GDW way back prior to the buyout. I wasn't crushed but took a loss on what I believed was a very sound decision. My mistake was not transferring my short to Wachovia. As irritated as I was at the abject lunacy of Wachovia decision to buy GoldenWest at the time, I am comforted at what has transpired. There is justice in the world in what goes around comes around. As painful as my loss on the short of GoldenWest was, it was microscopic compared to the pain it is inflicting on its Carolina parent.

The looming bankruptcy of Jefferson County got me to thinking of an episode of Kudlow of late where the very sharp Gary Shilling continued to recommend his long standing trade of being long 30 yr. U.S. treasuries. I know many have flocked to treasuries as a safe haven in all the turmoil. My concern is the collateral being pledged by the banks and brokerages. The Fed will now tell us what has been pledged due to their according to CNBC, not wanting to spook the market. Now I am no psychic but it doesn't take a NASA scientist to figure out what is being pledged, TOXIC CRAP, pure and simple! It seems maybe bond traders are starting to get concerned.

I have talked before about owning the debt of resource companies that have reserves of ore in the ground. Coal, crude, natural gas, timber, gold, silver, you name it. These developments in the various government debt markets have me believing this more and more each day.

I watch the regional banking spider (ticker KRE) but what I cannot help but notice is that Fifth Third, Sun Trust, and Comerica (just a few) made new lows today. I am trying to make out what is going on here, besides the obvious item of new lows being bad. These banks were supposed to have minimal exposure to the crap going on. I am leaning towards the idea that the economy is worse than even I think it is, but I will work on it.


Good Speculating to you all.

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 2 units US Gasoline Fund ticker UGA @ $51.25 stop at $47.84
Long 1 unit Ultrashort Dow ticker DXD @ $53.20 stop at $50.80
Long 1 unit Ultrashort Russell ticker TWM @ $74.80 stop at $72.40
Long 1 unit Ultrashort Nasdaq ticker QID @ $44.65 stop at $41.30
Long 1 unit Ultrashort Financials ticker SKF $102.20 stop at $95.80
Long 1 unit Ultrashort Real Estate ticker SRS $86.40 stop at $81.70
Short 2 units Daimler AG ticker DAI @ $86.20 stop at $88.05

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