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Friday, December 11, 2009

Friday brainstorming - part 1

1. Nice decoy from Goldman taking 30 executives which may match a total of 1 bil out of the 16 bil after they have diluted their employee numbers by all free lancers who are not receiving bonus by 4000 people.
The fact remains although moron Geithner said again yesterday that making a haircut was to complicated ( that's really bullshit - rather one of the most simple exercises to say you get only 60% ) - I am pretty sure if Goldman had had same exposure with Lehman they would still exist - that the Goldman bonus pool is purely financed by AIG plus without the full scale FED trading presents and backstops Goldman would be bankrupt. All the skills at core Goldman could not do that one on its own hence no bonus for anyone.

2. No bear market has within the last 100 years turned around before it was on a PE basis at 8 or below except for the recent one which turned around at the evil 666 (SPX) with a PE of 13.5 and as I have stated a few times with a crazy occurrence ( manipulation prove) that at the low we had an ISEE of 220 ( 220 calls for 100 puts ratio - no capitulation could end like that). To some degree nobody will really complain ( a few bears might) as it stopped the capitulation short of full scale cleansing. Currently we trade 22 times trailing earnings ( approx. ) and for the insane case of 80$ for 2010 even 13.5 PE which is not cheap as well, taking the middle ground of 65$ at 16PE which is rather rich for a zero interest world. Not considering that this earnings are based on reality as financials make 14% of the SPX and have heavily inflated and massaged earnings. The other special effect on earnings comes from a weak Dollar which produced a severe fraction of the bottom line for many SPX firms. There are many one time effects which can not be sustained as the 2year/30year spread is at an extreme 3 decade high which is dangerous for the financing of US debt going forward if the Dollar does not rally. It is also crucial for the banks that the curve will get less steep as they must be losing money on the trade since the spread got wider constantly ( FED should have massive losses). Therefor it will come handy next year to let markets drop as the Bonds will benefit and the Dollar will rally so they can unwind those positions. One day we will wake up and see how big losses are on the FED MBS purchase programs but that is another story right now it helps the banks to unload their toxic stuff at artificially high prices That's the other fraud the FED is operating right now and will cost the taxpayer a few hundred billion which will not show up in the TARP(where it was supposed to before Paulson screwed the funds purpose) which is why Obama can now claim that the bailout did cost less- he is a real snake oil salesman.

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