THE DOT - if this turns orange or red be alert

Saturday, January 31, 2009

The January effect - a statistical confirmation of common sense for this year

In the second quarter many people might think how foolish they were to be so negative and how could they have missed such a great opportunity actually that just the other way round the likely rising markets in Q2 are the last exit to get rid of stocks before the biggest money distruction in history might start. By summer the last bullet of the bulls will be shot and all whats left will be hope that a miracle saves the day in Q4 of 2009. Governments will have spent trillions to bailout banks but as they have hundreds of trillions in obligations that will not do the trick. Fact is that wall street destroyed more money in 2 years than they made in a century allthoıugh that's not entirely true as they have swaped away prior losses by derivatives to later dates in hope to regather the lost money probably or rather be able to capitalise on unreal profits to pay out themselves undeserved bonus payments.

Excerpt from CNBC

The January Effect Looks Grim

"As goes January, so goes the year" is a common adage on the street. If that is the case, we are in for a tough rest of the year for the markets. As of Friday's close, the Dow [.DJIA 8000.86 -148.15 (-1.82%) ], S&P [.SPX 825.88 -19.26 (-2.28%) ] and Nasdaq [COMP 1476.42 -31.42 (-2.08%) ]were down 8.84%, 8.75% and 6.38% for the month respectively.

Historically, January has been one of the best months of the year for the Dow, S&P and Nasdaq and the likelihood of having an up year is consistent with the likelihood of having an up January. In fact, each of the major indices moves in the same direction that January moved over 70% of the time. Here are the details.

Dow (Since 1897):

  • January: Up 65.2% of the time, down 34.8% of the time
  • Full Year: Up 64.0% of the time, down 36.0% of the time
  • Full year moves in the same direction as January 72.3% of the time

S&P 500 (Since 1929):

  • January: Up 65.0% of the time, down 35.0% of the time
  • Full Year: Up 63.8% of the time, down 36.2% of the time
  • Full year moves in the same direction as January 76.3% of the time

NASDAQ (Since 1972):

  • January: Up 67.6% of the time, down 32.4% of the time
  • Full Year: Up 69.4% of the time, down 30.6% of the time
  • Full year moves in the same direction as January 75.7% of the time

All is not lost. The last time the year moved in the opposite direction of January was 2005, when January closed to the downside but the year finished with a modest gain. 2003 was even better; January closed down for all three indices but the year posted gains over 25%.

SPX technical update - the path is clear we have to test the NOV lows rather make new ones

So far 50 % of the S&P500 earnings are out and are down by 50% with the useless analysts expecting between 12-15% down after 4-5 down revisions they still do not get it right.
I think they should close the Harvard MBA program entirely as its just produces a bunch of overpaid morons. The earnings will be around 55-60 for 2009 best case that does put fair value around 500 assuming the 2010 situation will even be worse.
Lets get to the tech situation which is clearly headed south. We closed at weeks low after a spike up and we close on the lowest monthly basis yet in this bear market that are very obvious signals. The price action of 2002/3 is also quite clear about what will happen. We need to test the 2008 Nov lows and as a matter of fact make new ones to blow all those early bulls out in a second capitulation. Within 2 weeks we will break below 800 and drop to 700 within 4-6 weeks. The only thing we missed so far was to complete the Combo 13 count on the VIX but that might be a model problem as the parameters are not adjusted correctly ( I had expected another drop into the 35-8 are) but we just made a quick dip below 40. There is a diminished probability we might make that next week but last weeks price action makes me sceptical we can get there. A little upmove is likely next week but will turn down finally. Selling any strength is the right way to go until we hit those lows and finish wave 5 of 3 down.

Wednesday, January 28, 2009

The real heroe's of the society are those brave ex-Goldman executives who can even make money out of dead companies

Check out what sophisticated furniture a CEO of and bankrupt Investment bank needs to enjoy the bonus he never deserved. After he negotiated a package for himself and 3 former buddies from Goldman to join Merrill for the small sum of half a billion most of it were guaranteed bonus packages. This four gentlemen have had less than 1 year of Merrill service but managed to rip off more money than they earned at any year at Goldman ever for joining bankrupt Merrill.

http://www.cnbc.com/id/28796511?slide=1

John Thain's Decorating Spree, For Less

When John Thain became Merrill Lynch’s CEO in early 2008, he hired Michael S. Smith Design to revamp his office suite, spending approximately $1.22 million according to documents. By comparison, Smith is also Michelle Obama's interior designer for the White House, which is paying him only $100,000.

The following is what Thain paid for each item. Because Smith's company declined to provide images of the actual items, we've provided pictures of some penny-saving alternatives. So here are the next best things…

John Thain's Decorating Spree, For Less

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John Thain's Decorating Spree, For Less

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What are 1000 lawyers chained together at the ground of the ocean - a good beginning

That another indication that we have not seen the lows of the market as long as greed takes such paths the message is not received - what do this morons think makes them deserve that kind of pay while others have to do double shifts at minimum pay without health care.

Mr President Obama you need to kick some serious a.... decency needs to be reinstated and humbleness - if money is the only value that counts the culture and spirit of the Independence declaration did not get on the right track

excerpt

Bankruptcy Lawyers Seek $18.50 a Minute From Court (Update1)


By Lindsay Fortado and Linda Sandler

Jan. 28 (Bloomberg) -- Lawyers at Kirkland & Ellis LLP, home to former Whitewater prosecutor Ken Starr, are asking as much as $1,110 an hour for bankruptcy work while creditors are recovering less of their loans through company restructurings.

Kirkland requested a top rate equal to $18.50 a minute for advising Tronox Inc. in its bankruptcy, according to court papers filed Jan. 26. Chicago-based Sidley Austin LLP and New York’s Skadden, Arps, Slate, Meagher & Flom LLP also requested hourly rates exceeding $1,000 in the past two months in separate bankruptcy cases, as lenders’ recoveries are forecast by ratings company Moody’s Corp. to drop 22 percent in the recession.

Professionals’ fees in bankruptcy cases are growing at four times the rate of inflation, estimated Lynn LoPucki, a professor of bankruptcy law at the University of California, Los Angeles. Total fees paid for lawyers, accountants and other professionals in bankruptcies from 1998 to 2007 doubled, while the consumer price index rose about 25 percent, he said.

“As the economy gets worse, the bankruptcy lawyers are charging more,” LoPucki said. “It seems that each month one sets a new record for hourly billing rates. $1,110 is, to my knowledge, a record for the debtor’s bankruptcy counsel.”

Lenders’ average recoveries may shrink to 35 cents on the dollar as the worldwide economic slowdown deepens, compared with 45 percent of the face value of corporate debt in previous downturns, Kenneth Emery, Moody’s Investors Service Inc.’s director of corporate default research, said in an interview earlier this month. Bonds of newspaper publisher Tribune Co., which filed for bankruptcy Dec. 8, are trading at 1.5 cents on the dollar to 4.25 cents, signaling bondholders may get no more than the market value.

SPX tech and Astro update

Astrology is surprisingly helpful to determine opportunities. The assumption that the New Moon with Jupiter would kick off a rally worked perfectly so far and it will in 2 phases short term which we see right now and medium term which is still to come. Technically we broke out of a Head & Shoulder pattern today with a gap that's a classic and we have a target zone of 890-900 before we turn back down. The VIX is already on alert as it has a double 12 (Seq and Combo) and we need to go to our target zone at 38 probably even 35 to complete this leg and turn around to 60's as well. That is a close call now and should be followed with high alert. On Feb 5 Uranus will be exactly opposite Saturn again as it was on Nov. 4th that was as the last bigger upleg turned around as well. Our basic scenario still runs this week basically up and next week we should turn down again.

Dollar Index perfewct barometer of stockmarkets

The Dollar Index trades in a very close correlation to stock markets. We turned around briefly at the natural resistance for now but we need to rise to 90 before we can call it a high.As for the stock markets the green 9 counts with the support levels hold for now. Vix is today on yellow alert count rises to 12 and the Combo stands at 12 waiting to be finished. As soon as those 13's are in markets will be turning down again to test the Nov. lows finally and even make new lows.
The astrological signal of the New Moon with Jupiter worked perfectly but also the cyclical 90 days to Nov 22 nd low (which Insiide uses frequently).

Even 2 tril. would not do the trick - just delay the inevitable

Update - IMF raised its estimate for bank losses to 2.2 tril. after we have already reached the 1.1 tril. - these guys have no clue or they deliberately underestimate for disinformation. Roubini is closer with 3.5 tril just for US banks but in any case the TARP funds will just be a brief smoother not a solution at all. Citibank just to fix the toxic part of its balamce cheat needs the entire 700 bil TARP.

They are still shy to get to the 1 tril but that does not matter as also Japan did multiple packages so will America and all the other countries who dare to print money. Lets be real the debt has already swollen to dimensions which never can be repaid. What helps for now is that the borrowing is almost for 0 interest which is pathetic which smart investor would except 0 interest for a distressed entity. All the mutual funds handling bonds run into the same insane situation equity funds run into in 2006/7 buying stocks against all common sense. What can a 450 bil aid program do to a 14 tril economy that's 3 % and half of it will vanish as tax checks will go into debt repayments. It smooths briefly the pain for some but it can not turn around the momentum of a cyclical contraction. Ironically most of that money will flow back into banks which overpaid their employees for 2 decades. Most of the profits and hence bonus payments were not for real as they paid out money on bubble values. Now where we return to real values and the banks are basically bankrupt the taxpayers have to pick up the bill. At the end if you look hard from birds perspective a Harvard MBA entitles you to steal big time money from taxpayers pool legally and even worse as taxpayers will not be able to cover it so at some point America will default and the people who borrowed money to America will pick up the bill around 50% within America and mostly the nest egg money from main street with there 401's.

Another potential crisis is about to awaken and be a dark cloud on top of the current problems as the baby boomer generation is nearing point of retirement which will basically bring many countries into default as they can not cover their health care and retirement claims - that is like a decade away which sounds like a lot of time but thats not true as they will be aware of those risks and try to save the day by consuming far more moderate - which they should do as nothing can be taken for granted anymore going forward. The problem is rather debt driven capitalism is a structure which has to default at some point and in history it always did and the only way out was war.

The 'bad bank' is not a good idea anymore as those so called toxic assets are unlimited in size initially it might take 3-4 tril. but at the end of the day it will be double digit trillions as more and more assets get toxic. Now the extend of mortgage related is easily close to 10 tril add the credit cards and car loans which are a different game as there is no tangible asset at the end of credit card debts only the hope that the owner gathers income and can repay. You see where I am heading too. We have had exactly that experience with Japan only that they were kind of isolated and the rest of the world could deal with it. Now there is no rest of the world as the problem is on a global scheme except China which runs into different problems on their own.
No white knights to bail out and lets keep in mind Japan dealt with it for 20 years now and lets see where they stand. Stocks almost at the lows due to their zero interest policy for 2 decades they have an artificial high currency which strangles their export driven economy even more and debt levels they likely might never be able to repay.

The dilemma is now that the rating agencies will undergo the same misbehaviour the used for mortgages and do not value government debt at equivalent appropriate levels. No country deserves a triple A at current state and even double A should be in question for some. Only this time no one will dare to criticize them for that miss evaluation.

Except


Stimulus Bill Near $900 Billion

WASHINGTON -- The U.S. economic stimulus package neared $900 billion in the Senate, as President Barack Obama wooed Republicans ahead of an expected House vote Wednesday.

The rare trip by a president to Capitol Hill revealed the urgency in Congress and the White House over a cure for the souring economy. More than 70,000 layoffs were announced this week and fresh data showed unemployment last month rose in all states.

The day was marked by Democratic deal-making. The Obama administration indicated it would agree to a $69 billion Senate proposal to shield tens of millions of middle-income Americans from the so-called alternative minimum tax, a priority of Iowa Sen. Charles Grassley, the top-ranking Republican on the Senate Finance Committee. The panel later folded the change into the Senate bill.

Who Gets What

[stimulus]

See how some of the major stimulus spending will be shared by the states.

Tuesday, January 27, 2009

VIX tech outlook

The VIX daily clearly indicates that our assumption that the next days are up is confirmed. The wave up is finished and we have to retest the lows or at least produce 3 lower lows to yesterdays. Its more likely that we drop below 40 again briefly to test the gap once again before the VIX will rise above 60 again. The New Moon / Jupiter effect should carry the market a few days and the little window dressing effect for January as some will try to diminish the January effect which is not important at the end of the day. All big bear markets turn around at severe cheap value levels and we are far away from that as Dividends are also down to record levels and keep falling the overvaluation of stocks keeps rising. Big sell offs are due hence buy volatility in weakness as its supposed to go higher again.

Monday, January 26, 2009

Caterpillar tech outlook - an icon proves the overall evaluation

CAT has entered wave 5 down and we need at least 3 weaker weeks to get into the zone in an overall time frame of 6 weeks. I start to wonder as Martin Armstrong's model suggests Mar 19th as the crucial date which fits into the equation might mark the lows of wave 5 of bigger 3. CAT has to drop below 30 and rather below 25 to complete this decline. We still might see a short term bounce from the 31/2 support area short term but selling rallies is the right thing to do here especially around the 35/6 gap area. As the VIX index is hinting clearly to my assumption I made weeks ago we need to go below the 40 once again to complete the down count sequence as well.

NDX tech update -Tech outperforming since Jupiter ,n Aquarius

NDX has been in a tight trading range for almost 2 weeks 1130 - 1200. Its a kind of right shoulder pattern and we will likely go up to 1250 before testing the 1130 support again. If that turns out to develop as suggested the break below the 1130 neckline will trigger follow through selling to 1000 once again. That scenario is the basic script as the SPX and DOW even have to make new lows in Q1. So far 25% of the SPX have reported and earnings are down by 51% without financials down 10%. Thereby financials are always early in the agenda of reporting and the earnings momentum will decrease going forward as the job cut momentum is just picking up and consumption which accounts for 70% of the US economy will be shrinking sharply and hopefully the Obama admin will force a more faithful reporting standard as the current one inflates earnings anyway by 10-15%.

Some astro insights what markets will do

The excerpt beneath can not explain the whole picture as it is to complex but I will try to add some information. The Solar eclipse is a special one as it is exactely on Jupiter which is a very positive energy but 3 pattern put a hold on the effect which will still play out at some point but with a delay and tainted. First the SE is exactly in a 135 degree to Saturn which puts a negative spin on it The same Saturn is at the same time in a 150 degree to Neptun which it also was during the inauguration ( deception, betrayal). Second Saturn will switch from that to a second opposition to Uranus on 5th Feb we had that last time on election day and markets crashed thereafter to the Nov. lows. Last but not least the Mercury retrogade will delay any positive effects basically but as Venus runs through negative angles of the big T-square developing has also a negative spin. All together it confirms my technical analysis that we need to retest the lows again in the coming weeks before the second sucker rally can start - eventually from lower lows to higher highs.

Excerpt

This week, personal and collective ruminations are guided by several equally intense astral patterns. (1) We're still in the first Mercury Retrograde phase of 2009; it lasts until February 1st. When Mercury retraces its path, we get a chance not only to comb through the details of whatever is already in motion, and but also to reconsider and perhaps readjust our attitudes and approaches. This particular retrograde also permits a recalibration of expectations, personal and collective (2) There's a solar eclipse on January 26th, an event that tends to warp time, so don't be surprised if you're feeling out of sync, either minutes ahead or hours behind. During a solar eclipse, the Moon overshadows the Sun, an event that symbolizes unconscious desires dominating conscious ones. Often information previously hidden by the bright light of day is suddenly revealed, so be prepared for several surprises.

But that's not all. (3) On February 5th, the second opposition between Saturn and Uranus will be exact and separating. This is a similar signature to the first exact opposition on Election Day, and it is likely to translate into more manic market fluctuations. Please do not confuse the Dow with the Tao. Financial markets are never a measure of ultimate worth. And as Lao-tzu advises in Tao Te Ching, "Chase after money and security and your heart will never unclench."

Red Flag I put on Buffett months ago - its gettin wor

I wrote months ago that Buffett makes weird calls and has positioned himself for disaster. His astrology confirms that the once famed investor goes for a rough ride. The worst is yet to come as in aprox. 1 year he will have a disastrous period which could wipe out his fortune. He is low on cash and has 40 bil in index short puts ( eventually he is long the market) - what he always waned of as the weapon of mass destruction 'derivatives could turn out to be his destruction as well. He bets that as the point those options are due he will be fine ( although by statistical means he likely will not be alive - he is 79 and Options start to expire within 20 years). The amazing thing is the timing as he wrote those puts near the highs and at low premium levels due to low Volatility. He is now low on cash and basically the remaining cash is only hypothetical as he needs that as an risk cushion for his derivative exposure. Once we settle by valuation means he has basically no cash left at the lows of Nov. and eventually markets need to go down as a fair value is rather at half of today's levels at current circumstances. Dow can also drop to 1000 in the next years which will bring his equity into negative territory. As the VIX was around 80 that bet might have made sense as the markets were anyway much lower as well - its a bit weird that he made such bets for many reasons. On the other hand that is exactly what Nick Leeson did to cover up some of his losses and we remember what the result was. The only thing which can save this options from disaster is Hyperinflation as the nominal value of stocks would rise with it although worthless in real terms and to some degree that was already the case and part of the rally from 2003 to 2007 as the money supply was already extreme high and with low rates. That created an artificial rally created again by Greenspan together with all the stupid stock buy backs. That was even a bigger scam than the one of Madoff as people were put into the illusion they were getting richer with even the house prices in some areas going through the roof. Hence use the rally we will see in Q1 to get rid of holdings if you are an investor and especially if your retirement is depended on that money (SPX might get as high as 1000 - if you see that sell and never look back). I will alert you as the time comes.


Excerpt 1

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=49971&t=01003216687383103284

Buffett Writing Index Puts

April 29, 2008 – Comments (7) | RELATED TICKERS: BRK-A , SPY , KO

This is the put buffett wrote its on page 47 of the latest 10-k link here.

"Equity Price Risk (Continued)
Berkshire is also subject to equity price risk with respect to certain long duration equity index option contracts. Berkshire's maximum exposure with respect to such contracts was approximately $35 billion and $21 billion at December 31, 2007 and 2006, respectively. These contracts generally expire 15 to 20 years from inception and they may not be settled before their respective expiration dates. The contracts have been written on four major equity indexes including three that are based on foreign markets. While Berkshire's ultimate potential loss with respect to these contracts is directly correlated to the movement of the underlying stock index between contract inception date and expiration, the change in fair value from current changes in the indexes do not produce a proportional change in the estimated fair value of the contracts. Other factors (such as interest rates, expected dividend rates and the remaining duration of the contract as well as general market assumptions) affect the estimates of fair value reflected in the financial statements. The carrying amount of these liabilities was $4.6 billion at December 31, 2007 and $2.4 billion at December 31, 2006. If the underlying indexes declined 30% immediately, and absent changes in other factors required to estimate fair value, Berkshire estimates that it could incur a non-cash pre-tax loss of approximately $2.3 billion."

To me these look like a barrier option with a time constraint, e.g. a put that only that is only active if the price of the index hits a certain strike price within a certain time frame, (like the S&P has to move down 30% in a 1 week period) from what I hear from people Buffett got a bunch of investment banks together that were really scared about a market crash, and wrote the put. Which is smart because if the markets moved more than something like 10% they would shut down trading and we have never seen a one day crash of more than 22.5%. He got something like 4 bil in premium.

What most people do not know or at least talk about is that Buffett obtains most of his stock holdings through selling puts. He got most of his Coca-Cola Holdings this way as many other's. Since he is kind of constrained to buying large cap companies most of which have options traded on them that have decent volume he sells a lot of puts. Also through my own research I know that puts on larger cap companies tend to expire worthless more often than puts on mid cap companies. Also in options theory puts are more expensive than calls in general. There are several reasons for this the main one being that if you want to short a stock you have the pay the dividend's to the person you sell the stock too also you have to pay interest on the borrowed shares, hence puts in theory are more expensive than calls. This kind of works itself out because stocks tend to drop 5x faster than they rise (don't get my started talking about options lol)

Excerpt 2

http://blog.investraction.com/2008/05/buffett-crosses-over-to-other-side.html
Berkshire Hathaway Inc. said Friday its first-quarter profit fell 64 percent because it recorded an unrealized $1.6 billion pretax loss on its derivative contracts, and its insurance businesses generated lower profits.

Berkshire reported net income of $940 million, or $607 per share, in the quarter ended March 31. That's down significantly from the net income of $2.6 billion Berkshire generated a year ago.

Berkshire's chairman and CEO Warren Buffett warned shareholders in his annual letter that the derivatives could make the company's earnings volatile. But he predicted the derivatives will ultimately be profitable.

...

Including the derivative losses, Berkshire's net investment losses in the quarter totaled $991 million. A year ago, the Omaha-based company recorded a $382 million investment gain.

Berkshire's derivatives fit into two major categories. Berkshire will have to pay on some of the contracts if certain U.S. entities default on their credit. Most of the other derivatives will only be paid if the certain stock indices are lower in 15 or 20 years than they were when the contract was written.

Berkshire has received $2.9 billion in premiums on the credit-default derivatives and $4.9 billion on the stock index derivatives.

Berkshire said its operating earnings are a better measure of how the company is performing in any given period because those figures exclude derivatives and investment gains or losses. Berkshire reported $1.93 billion in operating earnings during the first quarter, which was down from $2.21 billion in operating earnings a year earlier.

Berkshire's insurance group, which includes Geico, reinsurance giant General Re and several other firms, contributed $181 million to net income from underwriting new policies. A year ago, Berkshire's insurance companies generated a $601 million underwriting profit.

Buffett has said he expects insurance profits to fall during 2008 because increased competition has driven premium prices down, and a catastrophic loss could further hurt insurance profits.

Emphasis mine.

Now I don't think you should hold Buffett to his word. This is a business where being fickle is a good thing. When circumstances change, you change. Buffett probably meant his mass destruction statement when derivatives were being sold with no idea about risk. But today when risk is priced in, derivatives are much more attractive for a value investor.

Berkshire's business itself is partly insurance. Insurance, I believe, is like a derivative, and that is in effect what Buffett has done - insurance on certain credit not defaulting, and insurance on the index not falling over twenty years.

Not that it is a good idea because I have no idea what twenty years will do and would never write the insurance. You can only come out in two ways - looking like a hero, or totally bankrupt. There's no "in-between". And the number of events, or "black swans" that can happen are ridiculously high - high enough to bankrupt you.

Take the put option Buffett has written on stock indices. Assume a 50% fall from here. He has received about $4.9 billion in premiums. For example a Dow Jones Index put at 12,000, over 20 years, he might get around $1165 per unit, and since they've said around $4.6 billion total premium received, means around 4 million shares which translates to a strike value of $48 billion. Margin requirements for such options are typically $2.5 billion (at 5% margin). That means for an equivalent put option, the margin required is $2.5 billion, for an exposure of $48 billion. If the index falls 50% anytime in the next 20 years, there will be a mark to market loss of $24 billion (though the option cannot be exercised until 20 years later). This $24 billion will be required as a maintenance margin, cash that the company can't technically use. Right now the company has around $36 billion, but if the stock markets hit lows, the cash may be required to purchase or bail out companies - the way Buffett has traditionally grown. Not having that avenue is horrendous - and this is just one index option written - there are other things that require margins (insurance, CDS etc.)

It may sound like a 50% loss is not quite forthcoming or in the horizon, but who can ever see these things? I would want to be on the buy side of that equation, using short term puts as a hedge instead. Far more predictable, and controllable and loss protected.

And that's just the index puts. There are credit derivatives, which assume no credit defaults by the underlying companies. What if that doesn't pan out?

Coming to the rest of the highlighted items. Note carefully - operating income has gone down. Insurance business has gone down in 2007, and is expected to be worse in 2008. Businesses like Amex, Wells Fargo et. al. are due for a subprime hit, and the residential problems will hit the furniture/carpeting businesses. Life isn't going to be easy the next few years.

In a lot of ways, this is huge change in outlook for one of the world's most admired investors. We must wait and see how well he reacts. One lesson though: Do not believe what Buffett says is what Buffett will always do. Because in this business, people change - and for good reason.

Excerpt 3


Saturday, January 24, 2009

Financial system has mutated to a black hole

Freddie and Fannie will cost taxpayers easily 1 tril and not the stated 100 bil each in the article. Its not only that they have over 5 tril. of the housing market in their books - just a guess but I am sure they also own plenty of derivatives beyond the basic mortgage lending which will have to be settled someday.
AIG,Citi and BAC accumulated almost 1 tril in aid. guarantees as Roubini said thne US financial system has roughly 1.4 tril capital all together just to put it into a context and he expects 3.5 tril in losses. I think that number is far to small 30% of the 12tril mortgage is subprime and Alt-A consider that wiped out plus we also will have in the remaining sectors around 25% to go down plus the home loans that only adds up to 8-10 tril. but we also have big time corporate loans credit card etc. we have trading in trillions of dollars of losses on top of that. Its easy to get a double digit trillion number as a realistic but bad scenario.
Its only a matter of time until people will realize that and stop trusting any state guarantee's as they are as worthless as were the confirmations by CEO's from Lehman Bear Stearns or iconic Mr Thain,Paulson and Bernanke that the situation is under control.
Geithner was confirmed in a post he cannot fill in the interest of the people but as it was intended for special interest groups like the Bilderberger and the people who actually stand behind them like the Ford's. Obama's mother and Geithner grandfather worked for the Ford foundation - so have a wild guess what happens when Ford asks for rescue.
Obama makes some populistic noises from the oval office as he shut down Guantanamo and condemned the behaviour of Thain refurbishing his office for 1.2 mio - that is just 'Wiener Operette' as I call it just theater for the public as a rock star has to keep up his image. The fact that he hired Geithner to run The treasury department proves that he is not serious at all but that the Senate had an overwhelming vote for him proves that the whole state is rotten. Most despicable guy is Senator Schumer who is a lobbyist for the 2Rothschild-gang' and praised Mr g
Geithner
as the fittest man to do the job. That's like he would praise Mr. Geithner to replace 'Jack Bauer'

The banks will suck money out of the system until the government will have to default themselves or the other scenario which will come at some point is a WW3 scenario to make a 'fresh start'. That sounds cynical I know but the rules of the gane change immediately in war times and its an ideal distraction and dist ruction. The most efficient way to use resources as America has the strongest army but no money left to buy goods at some point. The next best thing is to take what you need and secure your own well being in times of distress you do not need to excuse yourself. I think that Obama may believe in his words to some degree but the people beyond him who made him president do have a different agenda

Freddie Seeks Up to $35 Billion From U.S.; Fannie May Follow


By Dawn Kopecki and Jody Shenn

Jan. 24 (Bloomberg) -- Freddie Mac, the mortgage-finance company under federal control, needs as much as $35 billion more in federal aid, and Fannie Mae may soon ask the U.S. Treasury Department for rescue funds as well.

Freddie, which took $13.8 billion from Treasury in November, said in a securities filing yesterday that its fourth- quarter operating losses will again drive its net worth below zero. The McLean, Virginia-based company also said it settled a dispute over Washington Mutual loans with JPMorgan Chase & Co.

The request for funds comes as the Treasury faces increasing demands from U.S. financial companies, including Bank of America and Citigroup Inc., that are coping with the fallout from a slumping housing market and a deep recession that’s driving foreclosures to record levels. Treasury officials pledged in September as much as $100 billion to Fannie and Freddie each to ensure their solvency.

“Their losses are going to be much higher than anyone anticipated,” said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia. “The more and more that people are digging into these portfolios, they’re finding out the more and more these guys were doing subprime and Alt-A loans and classifying them as prime.” Alt-A loans were made to borrowers with little or no income verification or to those with credit scores slightly above subprime.

Freddie and Washington-based Fannie are the largest sources of mortgage money in the U.S., owning or guaranteeing a combined $5.2 trillion of the $12 trillion home-loan market.

The companies have posted five consecutive quarters of losses totaling $68.4 billion combined. The Federal Housing Finance Administration seized their operations in September amid concern from regulators that the government-sponsored enterprises may fail in the worst housing slump since the Great Depression.

Fannie’s Plans

Fannie, which hasn’t yet drawn on the Treasury backup funds, said in November that it may do so after it reports fourth-quarter results next month. Fannie also said at that time that $100 billion may not be enough to keep it afloat. Treasury agreed to pump money into the companies if the value of their assets drops below what they owe on their obligations.

“Given that they have $4.5 trillion of risk out there, $100 billion is a drop in the bucket,” Miller said. “Given the fact that their risk profile on these loans is greater than they led everyone to believe, greater than $100 billion in losses on each institution would not surprise me.”

Friday, January 23, 2009

OIL tech update - low confirmed

When I made the call for the low in OIL ,I also called for a retest if that which is the regular ideal scenario by the way ( I just thought it would come rather in FEB. Important though for a prolonged upside after the first thrust up was a close above 50 which did not happen. Well as we have confirmed by today's close the low we are now on our way to first 60 and 75/80 thereafter but that's a matter of plenty time as we are still in month 7 down but in 2 weeks will enter 8 which could do the trick also in the time perspective. As stocks are not finished yet we can also expect some side ways zigzags before we close above 50 on a weekly pattern which will kick off more upside potential. So its a patience game but the forward curve in oil does reflect that already and everybody who can get hold of tankers buys spot and sells forwards to lock in the arbitrage profit which kind of keeps some future supply overload but I still assume the kick off of the humongous aid programs will help to absorb that. Its also a political situation as Putin got all the Jelzin oligarchs down on their knees and as long as Oil stays low he can push forward his asset regathering program that's why Russia might be interested for oil to stay down until he got his agenda done. Nevertheless I stick to my guns buy weakness in Oil as it has some room to the upside this year.

SPX tech update

SPX defends the 805-15 area so far as expected but its only a matter of times that it breaks to the downside. As we have a new moon on Monday and a very positive one as its i exact conjunction with Jupiter and is a solar eclipse at the same time we have a mixed signal situation. Early next week should be positive in any case but the week thereafter should bring renewed selling pressure again. We need to test the lows and actually make new ones to throw the bulls out who thought they had it right calling the low. Thereafter from more appropriate levels we will see the Obama saves the world rally (which will not happen). Sorry for repeating this mantra over and over again bit Roubini and Edward from SOCGEN got it right we need to adjust much more before we have a good value buying point and that everyone should be able to see but its more a matter of not wanting to see it probably.

Thursday, January 22, 2009

Firing Thain is not enough - Lewis needs to be fired and Thain has to return all bonus payments

Thain (ex Goldman CEO) was fired today after he had obviously given misleading information about Merrill's risk exposures. That needs to be prosecuted since taxpayers are picking up that bill. He is so unbelievable greedy and unethical that he was even fighting for a 10 million bonus at the end of last year. Outrages is also that he spends in a bankrupt bank who only survives with massive taxpayer aid 1,2 mio last month for the refurbishment of his office space - he must be out of his freaking mind but Lewis let him do that and was so stupid to buy Merrill at a premium although at current BAC stock prices that was not a real premium unless you sold them right away. He acquired Coutrywide and Merrill and destroyed 10's of billions and still has his job - what else can he make wrong to prove he is not fit for the job. That is true for most executives at wall street as reality proves.

Merrill Ex-CEO Thain Agrees to Leave Bank of America (Update3)


By Josh Fineman and David Mildenberg

Jan. 22 (Bloomberg) -- John Thain, who engineered the sale of 95-year-old Merrill Lynch & Co. to Bank of America Corp. in September, was ousted after Merrill’s $15.4 billion loss forced the lender to seek more money from the U.S. government.

Thain, 53, “agreed his situation was not working out and that he should resign,” Bank of America spokesman Robert Stickler said in an e-mail today. His exit ends Thain’s tenure with the Charlotte, North Carolina-based bank less than a month after Merrill’s takeover was completed.

Thain negotiated the sale with Bank of America Chief Executive Officer Kenneth Lewis, 61, whose credibility was undercut when the brokerage reported a record fourth-quarter deficit. Lewis, who considered backing out of the deal when he learned of the extent of Merrill’s losses last month, went ahead at the insistence of U.S. regulators who provided a new $138 billion aid package.

Lewis “is by no means in his job in any secure way,” Gary Townsend, president of Hill-Townsend Capital LLC in Chevy Chase, Maryland, said in a Bloomberg Radio interview. “Ken Lewis has his issues.”

Shares of Bank of America, down 53 percent this year through yesterday, slid 8 percent to $6.16 as of 2:09 p.m. in New York Stock Exchange composite trading.

Lehman Collapse

Thain, who had headed Bank of America’s wealth management and corporate and investment banking divisions, will be succeeded by General Counsel Brian Moynihan, the bank said in a statement. Moynihan, 49, ran global corporate and investment banking at Bank of America prior to the Merrill takeover, and had also served as president of global wealth and investment management.

Senior Merrill executives Robert McCann and Greg Fleming resigned less than a week after the transaction was completed on Jan. 1.

Trading chief Tom Montag, 52, who was hired by Thain from Goldman Sachs Group Inc., will stay with the company, according to Stickler, the Bank of America spokesman. Montag will continue to run global markets, and will now report to Lewis and be a member of the team that sets company strategy.

Wednesday, January 21, 2009

SPX tech update

The market hold on the daily 9 counts as indicated yesterday and defended the current support levels which was likely for now. The missing part is though that we could not complete the 13 count yet for the BKX but that will come next week I assume. The strong part besides financials with a valid fundamental background is the Oil complex as the low settles in. The little inaugurating rally is due soon but with little upside scope though. Anything above the downchannel resistance would be a surprise right now. Only after hitting the new lows that might be possible. People are again carried away by hope as the facts especially in the financial area are unbearably bad. Neither Obama or anyone else can stop the bleeding all they can do and already do işs to print money which has no value basically to cover the losses but that will come at an expensive price later this year.

SPX tech outlook for this year

We have a striking parallel to the 02/3 low building process right now which is very tempting but will not work out finally. So far the price action is very similar we are trading in a 750 -950 channel the first thrust down was in panic manner as it was back then. Now we are heading for the second test which will be a bit lower.
Lets look at the different parts we got there in half the time compared to 2000-03 and we dropped below the 200 month MA and stay there ( that is very important). The fundamental background is different we have the worst fundamental background in 100 years - yes as a matter of fact is worse than 1929 since the banks around the globe (western countries) are bankrupt but also over financial institutions have been wiped out and only survive to unprecedented bailouts measures by various governments. The potential of up to 800 tril. in derivative losses ( they will be triggered ) are threatening to kill the entire system and governments. The credit crunch caused by the basic default of the financial system has brought the entire industry to a grinding halt as the cash flow can not be financed any more and the consumers are aware that they not only do / or may loose their jobs but also their life savings hence consumption will be reduced dramatically. The huge aid programs by various governments will spark a straw fire of economic activities. But we have evidence with Japan that such measures do not change the tide of a necessary correction.
At some point in this quarter we will have the bottom or to put it into wave terms as we are in wave 5 of 3 down currently a bigger wave 4 correction up is due afterwards. Big wave 5 down I do expect for the 4th quarter and that should trigger a breakout of the 750 - 1500 trading range we had for 9-10 years. So after the lows are set this quarter around 700-50 we might get a test of the 200 month MA at 1000 to turn back down again.

No to Geithner !?- I wonder seriously why Obama nominated him in the first place

Starting from a apparent incapability to supervise investment banks and make good calls on bailouts (Lehman - Merrill) all bad idea's finally by some tax rule violations as the man to head also the IRS - that are no go's. More troubling as he is not a candidate anyway is why Obama thought he should be nominated - he might have made a compromise some there with someone but that is exactely what he claimed in his speech yesterday he claimed should end right now. We need integrity to start with and some of Obama's choices are far away from that approach (Summers,Geithner and Emanuel are poor choices).

Geithner is a part of the Bilderberger (Ford foundation) as Obama's mother worked for the Ford foundation as his grandfather was the director. That are obscure coincidences. More importantly he worked as undersecretary of the Treasury under Rubin which are part of this disasters problems as they implemented the lack of oversight and the increasing dangerous liberalization of banks which is one of the major problems these days. Effectively Geithner is part of the created problem as he helped to let it happen and even supported some of the measures which are now a disastrous problem.

Excerpt Wikpedia

Geithner was born in Brooklyn, New York.[citation needed] His father, Peter F. Geithner, is the director of the Asia program at the Ford Foundation in New York. During the early 1980s, Peter Geithner oversaw the Ford Foundation's microfinance programs in Indonesia being developed by Ann Dunham-Soetoro, mother of President Barack Obama, and they met in person at least once.[2] Timothy Geithner's mother, Deborah Moore Geithner, is a pianist and piano teacher in Larchmont, New York where his parents currently reside. Geithner's maternal grandfather, Charles F. Moore, was an adviser to President Dwight D. Eisenhower and served as a vice president of Ford Motor Company.[3] Geithner spent most of his childhood living outside the United States, including present-day Zimbabwe, India and Thailand, where he completed high school at International School Bangkok.[4] He then attended Dartmouth College, graduating with a B.A. in government and Asian studies in 1983.[5] He earned an M.A. in international economics and East Asian studies from Johns Hopkins University's School of Advanced International Studies in 1985.[5][6] He has studied Chinese[5] and Japanese.[7


Geithner Faces Senate on Taxes, Economy Rescue Plans

By Robert Schmidt and Rebecca Christie

Jan. 21 (Bloomberg) -- Timothy Geithner faces a grilling in Congress over why, after underpaying his taxes, lawmakers should trust him with a $700 billion rescue fund as Treasury secretary in the worst economy since the Great Depression.

The Senate Finance Committee today is likely to demand answers on issues ranging from Geithner’s tax troubles to his solutions for broken U.S. financial markets. While few lawmakers question Geithner’s ability given he is president of the Federal Reserve Bank of New York, the missteps with the Internal Revenue Service give him an extra hurdle to clear before an expected Senate vote this week to confirm his nomination.

Market turmoil and the recession so far are outweighing senators’ concerns about the tax returns of the man nominated to rebuild the U.S. economy. In remarks prepared for delivery at the hearing and obtained by Bloomberg News, Geithner makes no mention of his taxes and calls for “reform” of the Troubled Asset Relief Program and quick action to revive the economy.

“There’s no doubt about his qualifications,” said Charles Grassley of Iowa, the senior Republican on the Finance Committee, who says he remains troubled about Geithner’s late payment of almost $50,000 in federal taxes and penalties. “There’s no doubt in a time of recession like we’re in now, where the secretary of the Treasury plays such an important role, that he fits in.”

Urgency

Adding urgency to Geithner’s confirmation is a renewed slide in bank shares. The Standard & Poor’s 500 Financials Index, down about 36 percent since the beginning of the year, yesterday reached the lowest since March 1995. Among the worst recent performers have been Citigroup Inc., which dropped to a 17-year low yesterday, and State Street Corp., which fell 59 percent.

“The ultimate costs of this crisis will be greater if we do not act with sufficient strength now,” Geithner said in the copy of his remarks. “In a crisis of this magnitude, the most prudent course is the most forceful course.”

Geithner said the financial system needs to recover from a “catastrophic loss of trust and confidence.”

About Me

I am a professional independent trader