Sunday, December 14, 2008

Back At My Post

I am back from the land of beauty that is Colorado. The majesty of it's peaks is breathtaking and truly gives one perspective. The skiing conditions were fabulous and a wonderful time was had by all. I cannot recommend a visit highly enough.

I never was the brightest bulb in the room but negative yields on T-bills spells deflation pure and simple. I have no idea how one can argue otherwise but such is how markets are made. Note the bid to cover ratio was north of 4 which means the feds could have sold 4X as much as they did. If I were advising them, I would sell as much as possible while they can, kinda how Ford mortgaged everything when they could, before the window closed on all of them.

Congratulations to Gary Shilling who continues to pound the table on treasuries and the deflation theme. I want to be short treasuries via the TBT's as this debt issuance and curve manipulation by the Fed will end in tears but will bankrupt many who fight it as it runs its course.

The United States Government, the ultimate sub-prime borrower.

The Fed wants to issue it's own paper, backed by.... you guessed it, hot air. I wish the marks who line up for that all the luck in the world as they will most assuredly need it.

I notice that some, even in government if you can believe it, are starting to get a clue as to what Goldman is. This Bloomberg article details how Goldman is advising clients to bet against Muni bonds it has underwritten or as one politician put it....

It’s “disturbing” to advise investors to bet against the financial health of a state whose bonds Goldman helps sell, Assemblyman Gary S. Shaer a Democrat who chairs the Financial Institutions and Insurance Committee, said last week in a letter to Chief Executive Officer Lloyd Blankfein.

To which I would say to assemblyman Shaer, Hello... McFly !!

For the record, I wouldn't touch muni bonds with a ten-foot pole but I'm sure many are and will, via advice from their friendly broker, with their preferential tax treatment and generous looking income. But like the famous quote says, I am more concerned with the return of my capital than
on it. Govern yourself accordingly.

The auto bailout dead but the administration set to step in. Yup par for the course, Pandit and the rest of the viper bankers don't have to leave their office or break a sweat with a business plan yet get hundreds of billions thrown at them while the big 3 auto chiefs grovel on both knees for chump change in comparison. Mark my words, this tye of action is sowing the seeds of civil unrest, guaranteed.

This article outlines, that according to the Office of the Comptroller of the Currency, 36% of borrowers who had their loans modified in the first half of 2008 RE-DEFAULTED after just 3 months. After 6 months that number jumped to 56%. This should be a blaring bull horn telling you something about the situation? Hint, it's not good. It also has nothing to do with being resilient, apologies to Hank Paulson.

Hedge fund valet boyz freezing client redemptions and not just run of the mill valet boyz but the upperclassmen of the lot. Nothing but cannibals, the lot of them. They would eat their young for a 10 figure bonus.

Speaking of hedge funds , what can one say about the Bernard Madoff fiasco. Oh yeah I know what is perfect for this occasion courtesy of former President of the United States Andrew Jackson addressing the bankers and financiers of his day....

"Gentleman, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in thebreadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families and that will be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out. "

I will say this though, all of his clients are ACCREDITED investors which translated means they should have known better as in when its too good to be true it more often than not is. Which reminds me of the famous Gordon Gekko line of "a fool and his money are soon parted, that's assuming they were lucky enough to get together in the first place."

Okay now couple this news with word the Fed has refused a request by Bloomberg to disclose the recipients of the $2 trillion in largesse and in particular what assets the Fed has received as collateral. You just cannot make this stuff up.

Housekeeping notes;

I was stopped out of my CRM short position on Monday this week passed at $32.65 for a gain of just over $23 points on 1 unit.

I was also stopped out of my AAPL short on Monday as well at $100.60 for a gain of just over $10 points on 1 unit.

Good speculating to you all and never forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:


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