They want to experiment with $1 tril. in taxpayers money?

The most puzzling fact of yesterday’s hearing was that Bernanke and Paulson had no clue what they were talking about and were contradicting each other at crucial points in their statements.

Paulson used the phrase “they needed to experiment with the process” - shame on you - is that all the former CEO of Goldman can offer in the expertise of the smartest people on earth? What happened to the “Masters of the Universe” - seems to be a one-way road. But most off all he is 2 years in office and has repeated constantly that things were under control - how about admitting to have made mistakes and humbling down?

Why are they saying this is the best plan in their opinion? So far, their opinions have only produced harm, why should it be now any better?

They have no idea how to do this but they want to pay higher prices and call it hold to maturity price. There is no such thing in asset-backed securities with 10k foreclosures on a daily basis. The underlying momentum is steep negative. To point out that the taxpayer may even make money on that is a statement the chairman of the FED should not make. That’s a salesman's approach to stress the profit potential. He since he claimed that he solely has the interest of taxpayers in mind, his actions are purely and obviously on a bailout attempt for Wall Street. Higher prices for their assets will raise their equity value but that will not lead to cheaper credits or credits at all for Main Street. The bankruptcy of banks will be avoided on the back of taxpayers.

It is strange how they try to sell their plan anyway:
• the first thing they need to tell the public is the amount of toxic assets in the system. That’s a figure they should and must have – but there is no mention of that;
• secondly, they should know to what degree the toxic assets have been marked down (that’s what Bernanke calls the fire sale price);
• finally, they should declare the premium they want to pay on those assets, which should be clear by this moment.

They make it look more confusing then it is for a good reason. They still try to cover up the mess they and the CEO's brought us into. Alone Citigroup has toxic stuff in the magnitude of $500 bil. and they have only marked down $50 bil/ so far. If they had marked it down properly, we would have the biggest bankruptcy in the history, dragging down all others with them. That has to be avoided but not the way these gentlemen try to do it and definitely not by rewarding any of this reckless thieves.

I am glad the FBI has (although astonishingly late) started an investigation.

Excerpt from CNBC:

The FBI is investigating four major U.S. financial institutions whose collapse…

But that’s more a cover up action, since if they dig too deep the implications of the results would cause huge trouble in a huge magnitude.

The train has left the station and a bailout needs to be done, but in case of LEH they had a particular strong opinion it was wrong to put taxpayers money at risk. That was 2 weeks ago. These people cannot be trusted by any means, including their so-called experts in the background, they have a 100% negative track record. Part of the bailout is to change the team to get credibility back and maximum transparency. As I said yesterday, no toxic paper from GOLDMAN at PREMIUMS, they only showed write downs of $5 bil. so far but have at least $50 bil. in tier 3 capital on the balance sheet. It has to made clear that no conflict of interest may play into the decisions of the Treasury.

EURTRY medium-term technical outlook

On the left hand, the weekly EURTRY, which is about to enter a severe upmove soon. The initial impulsive wave from 1.66 - 2.14 is the magnitude of wave 1 up and was countered by wave 2 down, almost back to the original starting point, which is the way big moves can build up in the early stage with the low at 1.70. Now we need to break the 1.85 resistance of the channel to get into higher gear of trending momentum, which is in a matter of 2-3 weeks. The magnitude of wave 1 is the minimum target point, but more likely it will be a 1.382 to 1.618 factor. Wave 1 had a 48 points rise, which gives a minimum target of 2.18, but more likely a 66 points upside with a target of 2.33. The time frame for this move is 4-5 months in accordance with the lows of the most equity markets in Q1 2009 (SPX around 1050 level) and XU100 heading for 28000.

The Turkish currency is still substantially overvalued, due to one of the highest interest rates in the world with high participation of Japanese housewives on one hand and smart Turkish investors having borrowed in Yen (famous carry trade) will be challenged. With a positive carry of around 18%, one can take hold out being long TRY, but a 66 point move equals 30% interest and takes away the interest you might have earned the last 2 years based on the current market price.

Buffett buys stake in Goldman

Well, now we know why Buffett praises Secretary Paulson - the story starts to make sense.

Excerpt from the WSJ:

Warren Buffett's Berkshire Hathaway announced plans to invest $5 billion in Goldman Sachs Group Inc., which recently agreed to change its structure to a bank-holding company from an investment bank.

In addition to the $5 billion from Berkshire Hathaway, which comes in the form of perpetual preferred shares, Goldman will raise at least $2.5 billion in common equity in a public offering.

Berkshire Hathaway will have warrants to buy another $5 billion in common stock. The perpetual preferred stock will have a dividend of 10%.

"We are pleased that given our longstanding relationship, Warren Buffett, arguably the world's most admired and successful investor, has decided to make such a significant investment in Goldman Sachs. We view it as a strong validation of our client franchise and future prospects," said Lloyd Blankfein, Chairman and chief executive of Goldman Sachs, in a prepared statement.

"Goldman Sachs is an exceptional institution," said Mr. Buffett, chairman and CEO of Berkshire Hathaway. "It has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance," he said.

I think Mr. Buffett tries hard to keep MARKETS UP. Goldman is not worth more than 100 going forward, as a bank it’s a different leverage game and they were mainly a Prop. Trading house. They still have the information infrastructure that is better than any competitor so far and they try to make sure it stays that way with Rubin and Volcker close to Obama. So why buy now at a premium with troubled times ahead? He made a call around 1250 a few weeks ago, claiming markets were at a good value. His cash position is melting substantially, he bought for roughly $10 bil. in the last two weeks.

Last time Mr. Buffett bought a powerhouse of Wall Street in trouble (Salomon Bros.), he had quite some trouble getting out of there alive. That turned out to be a piece of Citigroup later, which is in deep trouble again with Mr. Rubin (former secretary of Treasury and CEO of Goldman) as Chairman of the Board being responsible as well. Mr. Buffett has earned the great reputation by making wise investments and being a prudent citizen but has he changed his attitude the last weeks? On TV, he criticized the payment schemes of Hedge Funds with 15-25% profit participation, which I find strange since he founded an investment pool on the same principle in 1956 until 1969, earning him a 25% profit share after a 6% bechmark with an average profit of 29.5%. In 1969, he turned it into Berkshire and seems to have not taken the profit share anymore. His astrology shows that he has the making to earn a fortune but I also can see that starting in one year, he will run into trouble for 1-2 years by a Saturn/Saturn square and going forward Pluto will cause big trouble in the following years and he might loose serious money in the upcoming crises between 2009-12.

We should expect 2 takeovers of banks - one by Goldman and one by Morgan Stanley in short order. Goldman could be interested in Wachovia as well since a former ally (their CEO is an ex-Goldman and Treasury Undersecretary) may give good insights of the value and make a smooth deal possible. The other option might be a bank Mr. Buffett holds an interest in. Wells Fargo might be the target for Goldman but those deals will be done on a stock basis, not cash, that’s why the stockprice of Goldman needs to go up as well. In the end, the stake in Goldman will rise for Mr. Buffett and that’s not a good idea, with more trouble ahead for banks in the years to come.

Guess what? They are already ON THE HOOK.

"Guess what? They are already on the hook", said Secretary Paulson. Chairman Bernanke said that taxpayers could even make money once the economy recovers and just minutes before that he claimed he is an expert on the depression. Is this the Muppet Show? Then it should be aired at a different time and different channel.

I heard that “experts” are evaluating these toxic things. I wonder where the guys have been hiding so far or are we producing a breed of experts who are genetically created in some labs right now I do not know of?

Furthermore, Bernanke said the marks are already at fire sale prices. Who made him the expert? But anyway, his intention is to buy above the fire sale price. This reverse auction thing is complete bullshit – it’s going to be done by Wall Street, who wants prices high so that they can manufacture the lowest price to be accordingly. That’s neither a smart nor a smooth process for taxpayers. These guys have screwed up everything so far and right now it does not sound any better.

Mr. Paulson, the only people confusing permanently things are the SEC, the FED and the Treasury!

God bless the world with these guys in charge. What will come upon us is not a pretty sight to behold.

Outrageous - the Bush admin. had over a year to figure it out

It is unbelievable. They (the Bush administration) do not even admit to have made mistakes and now, one year later suddenly $1-2 tril. have to be spent, that is 20% of the outstanding debt of the USA that has to be paid overnight on back of the taxpayer. They had all the time in the world and, as I write, Mr. Bush says this needs to be done in order to have a “good” bailout. He should be prosecuted for inappropriate execution of office. Now they put pressure on the Congress to get their “ideal” bailout pushed through.

I would have bailed out all of the companies, including LEH, and asked for a bill, which takes a reverse penalty on all CEO's wrecking companies with irresponsible leverage and risk. Hence, the bonus money would have to be returned to the company from the management. Secondly, why was it ever possible to have a 30+ times leverage? Mr. Cox needs to be fired and even prosecuted and Mr. Greenspan was the architect of this deregulation process. That is a separate but not to be neglected issue. Someone needs to be severely punished and that should not be the taxpayer from Main Street.

Bernanke had to urge or even force the banks to make equivalent capital raising moves, thereby being transparent to shareholders. He supported (along with Cox) FALSE STATEMENTS MADE TO THE PUPLIC by leaving them the freedom to be unfaithful. He had one year to do so and now on September 23, it is suddenly urgent. Doctor Bernanke, to make an intransparent bailout we have to take the time it takes. I think markets can wait a few days and, as I know astrology, the bailout under Mercury retrograde will be a bad one. Looking from the distance, these events are to be read in history books. The current administration will be blamed for leading the country and the world into a depression and are responsible for the biggest asset destruction in history. The next government (who ever it is) will just be under fire and trouble shooting with no chance to stop it. A historical event has been triggered and we are still in the early stages, unfortunately.

Markets are and will also drop because people will pull out money in any case since markets are valued too high by 50%. Some people know that but do not say so, since unwinding hundreds of billions or even trillions of dollars takes time and they want to sell on high levels. The bailout will not change the indices from going down.

Technical Update

The downside correction yesterday was a bit steeper than I thought and that is a bit troubling, since some price patterns and price actions, which I have learned to recognize over the years, are giving alerts about the upside stability of this market.

That also is, as I learned, a basic problem of Mercury retrograde - normal patterns do not work as well for a little while. Some indicators are deeply on the oversold side. Just to give one example, on Friday, the ISEE had a 66 and the 10th day, MA is dropped below 100 at 94, which marks a low for a few weeks usually. All the classic daily momentum indicators are oversold too.

Contradicting are the monthly charts, which create sell signals and are far from being oversold. As I stated in an earlier post, this is not a real low by many means. We had a mini capitulation but not the real one. Even by common sense you can figure that out. Markets are far from any discount levels, the SPX with single digit PE valuations are 50% away, long only funds are cautious but not in a panic and the pension funds and insurers still hold high level of equity - in 2003 they sold out. Coming back to current price action, the current down wave is, in many respects, in the middle of unfolding. Since all markets are correlating we have conflicting signals. The aspects that helped the bull market are back on - a falling Dollar, hard commodities rise, which includes oil.

The NDX closed the week lower still in downside momentum and we might test the lows once again before the upside consolidation takes on. This is and was not only a sucker rally, it was government manipulation, which is even worse - they tried to produce a desperate circuit breaker.

I’m going to stick to my guns this week and next have basically an upside bias, since the effect of the final bailout plan with window dressing will bear some positive momentum short-term. Going into earnings season, Q3 looks technically ugly and we will go lower.

The troubling aftermath of Mr. Paulson's bailout

The dilemma, which obviously will trouble the idea, is that a fair market value will throw the banks in jeopardy - they tried to avoid that all the time, that's why we are in this trouble. The fact that the FED and SEC was not powerfully urging this diligence could only have been to avoid mass bankruptcy and therefore failure of the whole system.

All they can do is to take the assets at far higher prices and get a equity share of the firm as an equilibrium, still throwing taxpayers money into risk (high risk). Or straight forward buying the toxic ones far above fair value, locking in humongous losses for taxpayers

I know it's not productive to comment on the past and I am repeating myself but those gentlemen had all the oversight and insight and all they could do is a last second cliff-hanger-let's-screw-the-US-market move. There will be huge harm for the US markets, which will be felt for years and is bad for the taxpayers, since interest rates will go up due to loss in faith in the US market. The bill is not only the bailout fund – it's far higher and solely the responsibility of Paulson, Bernanke, Cox and Bush. This is the same Bush WHO VETOES HEALTH CARE PROGRAMS FOR $50 BIL. FOR CHILDREN. A huge squad of special FBI and prosecutors should investigate the conversation and memos between the bank supervisors and the action taken while sliding toward the cliff. I think there is nothing that makes any of these men to be heroes, just by the common sense. I really do not get why some parts of the media try to paint this picture, although it's incorrect from any angle.

Mr. Paulson acts like a lobbyist for Wall Street and, even more specifically so since some of his moves gave Goldman clear advantages. He rejects the idea to cap the income of CEO's thtas why the bailout package is not finalized yet. My feeling is very clearly that a conflict of interest makes him an inadequate person to deal with the situation since he let LEH fail to bailout all others out now - that stinks. He acted when Goldman hit the 80 mark. Bernanke hides in the background anyway and is simply not fit for his job. He may have the intellectual capacity but not the guts to act. President Bush has been hiding most of the time since this happened within his administration. He will enter history books with some of the poorest scores but, more importantly, he made it possible to make the biggest present to the terrorists he says he is fighting. They must be bursting in laughter that the Americans wiped out their biggest accomplishment on their own and are now driving the country into deep recession.

Strange that Mr. Buffett praises the gentlemen so much they do definetely help him out with his engagements and investments but he makes more and more obscure calls - bewildering to me.

OIL (Nov) technical outlook for week 22nd Sept.

Oil is in progress of wave B up and 120 is the target for this or next week. To trigger more short covering, we will have to break above the 110 resistance, which is only a matter of time. The 57 Dollar down move will be retraced by a 50% or even 62%. Compared to all other prior corrective waves, this one has much more momentum and still it's only a corrective wave. Expect resistance around 110 for this week with a probability to break to the upside late this or early next week. We have an overall correlation with a weaker dollar and stronger hard commodities going forward.

The NDX technical outlook for week 22nd Sept.

The NDX performed obviously weaker last week (financials) and closed lower on a weekly basis after defending the crucial 1600 medium-term support. First, we need to close the gap/lap to 1699/1718 on the downside. The 170 point move will give back half to 62% before resuming the uptrend, which would be around 1690 respectively1665. Although the overall trend remains down medium-term (6 months), we have now set the lows for this leg and an upside consolidation is due. The weaker sector will be Tech, though since we can expect a bleak CAPEX quarter and everyone starts to price that in. The upside should be capped around the 50 day MA at 1840 for this upleg.

a principle point on this blog

I started to write this blog, since I have gathered a lot of knowledge and experience over the last 22 years in this field and want to share my insights. Even if it may sound not exactly humble, my hit-rate in making market calls is far above average. Just read back the performance on this blogs and you might get an idea of that. Why do I say that? The idea behind my blog is to guide you with your investments and give you some information outside the mainstream point of view (as well as for me to blow off some steam by communicating to other professionals in this business).

Markets are not fair and are basically manipulated against most claims. One obvious example, you always see market moves but find no news or reason behind it until days later you find out what might have moved it. This is also true for the most professional people in the market, only a small elite has access to this information and will never share it, since it's basically illegal to do so.

When human greed and urge for power is the main source and motivation of actions, people do not care about rules. They are basically made to keep a disadvantage on the other players anyway.

So what I am trying to help to do is to create a source which gives everybody back a winning edge, since some analytical tools are beyond the influence of manipulating forces, which are only possible to a certain degree. Technical analysis, sentiment and astrological patterns are a powerful source as an advisor to help making good decisions. Put on top of that your common sense and make the effort to think it through yourself – regardless of what the media is trying to sell to you - and you have a good chance to be ahead of the curve.

Since I will commit more and more time to this going forward and already do the more intensive analytical part, I am considering to generate some income, since this type of in-depth analytical interpretation of events takes quite some time to write, edit and post. So in one way or another, I will have to change the access to this blog with either a fee for a membership or by putting up adverts.

What I would appreciate hearing is your feedback on what parts of this blog you find most valuable and would like to have in more explicit detail. My idea is to create a technical area and a macro area.

Thank you in advance for your effort and feedback and I hope you could all benefit from and enjoy reading the posts.