Wednesday, October 27, 2010

Sedition and Tyranny

As I was reading Chris Whalen's piece Triple Down: Fannie, Freddie and the Triumph of the Corporate State today from over at Institutional Risk Analytics, which you can view here and I would strongly recommend you do so, I asked myself the following:

At what point do participants in the markets acknowledge what seems to be patently obvious? At least to me anyway.

This is not the first time I have wrestled with this question. I asked myself the exact same question during the dot com bubble as outfits with peanuts in sales traded for market caps in the billions. That voice in the back of my head called self-doubt kept creeping back in reminding me of historical admonitions that the market is a leading indicator, that no one is smarter than the sum total verdict of the market. 

But then again, if the market is such a great leading indicator, why was it so wrong at such critically important junctures throughout history as most recently evidenced by the Nasdaq top in 2000 and the housing bubble top in 2007?

I won't get the answer to that question today, if ever but when I read pieces like the one from Chris Whalen today, with his insight and reputation (for Wall St. seems to really dig that part in people), and think that ever so slowly the extent and depth of the ponzi is becoming public. It must now be so obvious to even the dimmest and most hardened cheer leading apologists among us?

Either way I implore you to please, if you haven't already done so, read Whalen's piece. Here are a couple of paragraphs from it that really struck me:

"Forget Treasury Secretary Tim Geithner lying about the relatively small losses at American International Group (AIG), the fraud and obfuscation now underway in Washington to protect the TBTF banks and GSEs totals into the trillions of dollars and rises to the level of treason. And the sad part is that all of the temporizing and excuses by the Fed and the White House will be for naught. The zombie banks and GSEs alike will muddle along until the operational cost of servicing bad loans engulfs them. Then they will be bailed out -- again -- or restructured."

"Thus we go back to the low-income borrower, who is forced by the GSEs to pay for private mortgage insurance that will never pay out. The relationship between the GSEs and the MIs is identical to the "side letter" insurance transactions between AIG andGen Re, and come to think of it, the AIG credit default swaps trades with Goldman Sachs (GS) and various other Wall Street dealers. In each case the substance of the transaction is to falsify the financial statements of the participants. And in each case, the acts are arguably criminal fraud. And in the case of the zombie banks, the GSEs and the MIs, the fraud is being actively concealed by Congress, the White House and agencies of the U.S. government led by the Federal Reserve Board. Is this not tyranny?"

I highlight these 2 paragraphs not only because they are powerful but also because of Chris's choice of 2 words, sedition and tyranny.

Regular readers know I have been railing, almost daily, against the orchestrator's of the ponzification of our financial system. Chris Whalen of IRA is now using the words tyranny and sedition. Max Keiser of has called the criminals in charge financial terrorists. 

Maybe there is hope for us yet.

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

Open Positions:
Long 1 unit Direxion Large Cap 3X Bear ticker BGZ @ $19.34
Long 2 units Direxion Small Cap 3X Bear ticker TZA @ $60.30
Long 1 unit Direxion Emerging Mkts 3X Bear ticker EDZ @ $60.50
Long 2 units Direxion Financial 3X Bear ticker FAZ @ $19.65
Long 2 units Ultrashort Xinhua China ticker FXP @ $42.45
Long 1 unit Ultrashort Real Estate ticker SRS @ $49.10
Long 2 units Direxion Tech 3X Bear ticker TYP @ $52.60
Long 1 unit ishares Barclays 20yr Treas ticker TLT @ 92.15 stop @ $98.74
Long 2 units U.S. Dollar Bull ticker UUP @ $22.56 stops @ $21.94/$21.44
Long 1 unit Powershares Gold Double Short @ $9.07 stop @ $8.67
Short 1 unit Apple ticker AAPL @ $312.25 stop @ $315.37
Short 2 units Caterpillar ticker CAT @ $77.75 stop @ $81.71
Short 1 unit American Express ticker AXP @ $40.37 stop @ $41.81


Anonymous said...

Karl Denninger of has been screaming about this for some time and he too re-posted Chris's commentary in one of his notes today. If you have not caught his blog, it is worthwhile reading.

Harleydog said...


yes I read Karl and he has been all over this.