Wednesday, April 2, 2008

End of the Day.

Given today's circumstances, with Fed sticking its nose in our markets, the government sticking its nose in our phone calls all in the name of stability, the following quote compliments of Ben Franklin, which we have all seen before carries extra meaning. "Any society that would give up a little liberty to gain a little security will deserve neither and lose both. "

Listening to Bernanke's testimony and given our societal need to be coddled comforted I am convinced the Fed's mandate from in Bernanke's words, ' to ensure market stability and full employment'. Someone answer me the following question. Where was the Fed in the previous tech and most recent housing bubbles? Yes I know Greenspan thinks bubbles are only visible in hindsight, which by the way will go down in financial lore as one of the most imbecilic quotes ever, right up with the best of all time.

Seriously if we are to believe this mandate, why are they not there, as a long past economist whose name I forget used to say, to take the punch bowl away just as the party gets going. If they did in fact act responsibly when the panic was to the upside, like raising margin requirements on stocks in a bubble, or raising reserve requirements in a credit mania, or perish the thought mandate down payments on a home?

Harry Macklowe the famed real estate investor who recently had the GM building in NYC foreclosed on by lenders which was part of his empire, is a glowing example of this last issue, skin in the game. Everyone is complaining that strawberry pickers in California bought $750K homes and the like but why is no one complaining when Mssr. Maclowe amasses a $7.3 billion commercial real estate portfolio with 55 million down. For those without a calculator that's a down payment of 0.00753% or 7/10ths of 1%. Ahh yes the Fed is just what we need to ensure stability and employment.

Or like Bear Stearns with 13.4 Trillion, yes trillion resting on purportedly 80 billion or 0.00597%. Wow based on these numbers Mssr. Maclowe had 30% more skin in the game, go figure.

Mark my words this meddling by the Fed is going to make things more drawn out and much worse in the end. I cannot wait for the architects of the JPM/Bear deal to get on the Hill to explain what went on. But above all don't tell us about the paper that's been pledged as collateral because the truth of what toxic garbage it truly is might upset market stability.

I was filled on 2 units long of the US Gasoline fund ticker UGA at 51.25. I will place my stop at $47.84

Any society that would give up a little liberty to gain a little security will deserve neither and lose both. Good speculating to you all.

Open Positions:
Long 6 units Currencyshares Japanese Yen ticker FXY @ $88.55 stop at $91.40
Long 2 units Ultrashort Financials ticker SKF @ $102.20 stop at $98.70
Long 2 units US Gasoline Fund ticker UGA @ $51.25 stop at $47.84
Short 2 untis Daimler AG ticker DAI @ $86.20 stop at $88.05

1 comment:

Anonymous said...

Anyone wonder why the powers that
be decided BS can't fail? One possibility: The CDS's they held were backing a high volume of "negative basis trades" allowing banks the ability to create low capital requirement VIE's. A CDS failure would require them to pull those VIE's back to their books and create a huge capital shortfall.