patrick.net

Yes.

And here I was about to post on the IRS issue when I ran into this sidetrack. Funny, almost. I could write all night about constitutional law, financial stability, self-sustainability, ad infinitum, ad nauseum.

Think I'll stick to the topic (sorry, yawn).

Let's see if I get this.
1) Bernanke floods the country with dollars trying to avoid a financial collapse.
2) Paulson says: Yo, dude, when Ben is done, I'll figure out something.
3) Bush says "We'll get through this. Let's just not be radical."
4) Pelosi runs around the Capitol screaming. Reid follows here, but is not sure why.
5) And the IRS says:
"Gimme my Money. Ah wants my money. Ah wants it now.

Can't wait for those Philly subprimes owners "saved" just to get their IRS bill.

What a plan for financial rescue. Moe, Larry and Curly couldn't have done it better.

I love government. As long as they're governing somewhere else.

Bless us all,
Jack

Merrill Lynch valuing auction rate securities at par, account holders stuck with illiquid positions in any event.

CNN

Merrill Lynch & Co., taking a different tack from UBS AG, told its brokers Monday afternoon that most clients’ holdings of auction-rate securities will not be priced at a discount in their March statements.

In a conference call with Merrill brokers, a Merrill official said the firm would continue to use third-party pricing services to value auction-rate securities and that most of the securities will be priced at par.

# DennisN Says:
Since when is going INTO being a Realtor (R) a reasonable career choice?

Low barrier to entry, any jackaxe can become a realtor. And most do.

How about that Lehman Brothers (LEH) $4B convertible *preferred* stock offering with a conversion price equivalent to $49.87/share?

You know what I think? I think the the *common* stock holders will not be happy when all is said and done.

Wait, I get it. This is the same deal as when BofA bought $4B of preferred stock in CFC, with a conversion price of $18. What is CFC worth on the open market today? That's right: $6.

By applying some some sophisticated math (the details are left as an exercise for the reader), I conclude that LEH will be worth $16-17 sometime in the next few months.

NOT INVESTMENT ADVICE.

NVR,

Merrill's decision to doctor client account statements reflecting "par value" will definitely be the last straw for a number of their best clients. They're basically using the brokers as a buffer between them (and some very angry institutions)

Here's the problem for Merrill: What broker will give a rip about a non-compete agreement or temporary restraining orders when the "investments" are illiquid ANYWAY! "Great, whatever. We'll set up an RIA firm, take the portion of the account that IS liquid and leave YOU to hold and explain "par value" securities!"

Hey guys, don't sweat it. Didn't you check the Patrick front page today? Everything is coming up roses from now on.

DennisN,

Uh, yeah, but today it is a bit hard to figure out which news is April Fools and which is real :-).

DinOr and NVR

I don't understand this Merrill thingy. If they can choose to show values higher than their competitors, why doesn't everybody do it? Why does UBS show declining value according to the article? Does it not put UBS at a competitive disadvantage?

DinOR are you serious that brokers can choose to remove themselves from the equation?

looks like we are going to be done with 2nd quarter rally in one day.

BAI,

Good questions, when Merrill chose this path it certainly makes it more difficult for other firms to come clean about the situation. This also shows an erosion in Merrill's leadership position.

Brokers can and will remove themselves from the equation by simply leaving the firm, starting their own taking the better clients with them and leave their old firm holding the bag. In the industry this is called "dead money". Since it's equally useless to all parties involved. From a compliance standpoint the "defectors" would just as soon see it left behind.

Given today's pathetic volume and up so much on absolutely no news on mostly financials, it is quite obvious this is a coordinated effort.

Expect Wall Street to fight back hard. This is a crisis of confidence, and they will do anything to restore confidence. But whether they will defy the law of physics or not (in the short term), it will be you and I paying for it.

What does technical analysis say about rallies on low volume ?

Gold went sky diving right after I went to bed. It is useless to have 24/5 access to the market when the actions happen while I sleep. :(

OO, do you think it is time to accumulate gold again?

My hedging is failing because I am too afraid to execute trades. Pathetic me. :(

But whether they will defy the law of physics or not (in the short term), it will be you and I paying for it.

How can we profit from it?

Technical analysis doesn't apply to this type of situation.

There is a global confidence crisis brewing, which may cause HUGE capital flight out of the US, and out of the banking system. With all the big names like UBS, LEH, MER, C etc on the verge of collapse and numerous writedowns, the Wall Street need to uphold investor confidence in whichever way they can.

If there is no capital, if you and I pull our money from stock market, from mutual funds or from bonds (because of scandals like ARS) and stick all of them into Treasury and PM, that will threaten the very raison d'etre for Wall Street.

So there will continue to be some completely mindless and comical rallies on very thin volume staged by the major IBs. This is not just for trading profit, this is fighting for survival.

Dinor

Thanks for some interesting insight into Merrill situation, any idea just how much of this stuff they pawned off on suckers and what percentage of their client base are bagholders?

I see the market continuing to deteriorate forward for these AR securities as there is nothing to bring liquidity back into that market. No realistic scenario to unstick the thing short of government intervention on the buy side. Ugly situation.

There are probably lots of folks that don't understand they no longer have access to this short term "cash". I know I would not be real happy if I were one of them.

I get concerned that it seems the general operating assumption of the powers that be and industry players is that these markets...as well as the credit markets as a whole....will magically resolve themselves and become liquid again. Nobody really wants to talk the actual conditions that might bring liquidity back. Everyone is simply so content to live in this utter fantasy. It's rather shocking.

Nothing happening here folks, nothing to see, everybody move along.

Can't you write some simple macro to set off an alarm when certain financial events happen?

:confused:

How does one do the "confused smiley" on this board?

Peter P

You cannot profit from these staged rallies, because
1) this is against fundamentals
2) you don't know when these comical moments will happen or if they can hold till market closes.

I am putting in order for physical gold tonight and I am interested to see if the order will go through or I will be stuck without a confirmation like last time.

Do you still remember that 3 months ago, Treasury "lowered" the limit of savings bonds from $30K a year per person to $5K? Why?

The reason is, they don't want a bank run. They want you to either put the money in the bank, or buy Treasury (hopefully long-term) so that while you are stashing your money away, you are also bringing down the mortgage rate for the FBs.

What the powers are doing right now, from a big picture point of view, is to limit the attractiveness of other avenues for your money, and convince you to stay within the casino (US stock market) that it controls.

Confidence is very very important for US to soften the impact of the upcoming deep recession/depression. The major Chinese trading companies have started to refuse USD as the trading currency. The made-in-China goods that are currently marked down by retailers (and hence serve as evidence of deflation by Mish) are leftovers inventory from the last batch order. Many Chinese factories simply shuts down without fulfilling its order if the contract requires them to ship a certain volume for the next few months, because they will be operating at a loss.

When the next batch of orders from China come over, expect at least 20% jump in price.

Do you still remember that 3 months ago, Treasury “lowered” the limit of savings bonds from $30K a year per person to $5K? Why?

The reason is, they don’t want a bank run. They want you to either put the money in the bank, or buy Treasury (hopefully long-term) so that while you are stashing your money away, you are also bringing down the mortgage rate for the FBs.

What the powers are doing right now, from a big picture point of view, is to limit the attractiveness of other avenues for your money, and convince you to stay within the casino (US stock market) that it controls.

Why am I getting stuck in moderation again? Unpatriotic comments?

Do you still remember that 3 months ago, Treasury “lowered” the limit of savings bonds from $30K a year per person to $5K? Why?

The reason is, they don’t want a bank-run. They want you to either put the money in the bank, or buy Treasury (hopefully long-term) so that while you are stashing your money away, you are also bringing down the mortgage rate for the market.

What the powers are doing right now, from a big picture point of view, is to limit the attractiveness of other avenues for your money, and convince you to stay within the casino (US stock market) that it controls.

Confidence is very very important for US to soften the impact of the upcoming deep recession/depression. Major Chinese trading companies have started to refuse USD as the trading currency. The made-in-China goods that are currently marked down by retailers (and hence serve as evidence of deflation by Mish) are leftover inventory from the last batch order. Many Chinese factories simply shut down without fulfilling their contractual order if the contract requires them to ship a certain volume for the next few months, because they will be operating at a loss.

When the next batch of orders from China come over, expect at least 20% jump in price.

What the powers are doing right now, from a big picture point of view, is to limit the attractiveness of other avenues for your money, and convince you to stay within the casino (US stock market) that it controls.

Confidence is very very important for US to soften the impact of the upcoming deep recession or depression. Major Chinese trading companies have started to refuse USD as the trading currency. The made-in-China goods that are currently marked down by retailers (and hence serve as evidence of deflation by Mish) are leftover inventory from the last batch order. Many Chinese factories simply shut down without fulfilling their contractual order if the contract requires them to ship a certain volume for the next few months, because they will be operating at a loss.

When the next batch of orders from China come over, expect at least 20% jump in price.

Maybe "Mish" is a 4 letter word?

Patrick, I've got several comments stuck in moderation, and I was just copying and pasting different paragraphs to see which one triggered the sanction. Please just delete them all.

For what its worth, I stuffed the tax-deferred mattress with some more IAU and SLV -- much nicer to buy in these conditions rather than under duress (like say, when Bear went down). It appears that the Alt-A tsunami should be making land fall soon. Will be interesting to see if the market has already priced it in. Keeping my eye on the Fed balance sheet to see if we're outta the woods. Nice to see that the Treasury is willing to step up and forBEAR the JPM/BS Fed loan and become the bagholder of last resort -- we're all subprime now. FYI, that credit line is currently at zero, so, no worries. :-)

EBGuy,

GTU is a steal compared to IAU and GLD. I have followed GTU for about 3 years before it went public. It is managed by the same people who manage CEF, which has been in business through the worst period for PM and still prevailed.

GTU is actually selling at a discount right now, which means you buy gold at below market price. When I first bought GTU, I was able to get it at a discount of -10%. The drawback is its volume, but if you believe in a secular bull market for gold, volume will be taken care of later in the game. GTU and CEF also have lower management fee than GLD and IAU.

CEF used to have a much lower volume as well. I still miss the good ole days when you can buy CEF at 5% discount to gold and silver price.

Let's take a look at today's news.

1. UBS writes down 18B.
2. Deutsche Bank writes down 4B.
3. Manufacturing activity still contracting.
4. Construction spending still slowing down.
Finally, read this news
http://biz.yahoo.com/ap/080401/us_banking_jobs.html
Celent: 200,000 US Banking Jobs at Risk
...
And Celent's estimate does not include the securities industry, which currently employs some 800,000 people -- more than it ever has, after a multiyear hiring spree, Marenzi said.
...
"What we haven't seen are big mega-layoffs -- tens of thousands of people in a large company," Challenger said. "It just feels to me there are big ones coming."

What does stock market do ? Go up 3%. Something is terribly amiss here. Either we all bears are wrong about stock market - which usually recovers way before the economy does - OR some major manipulation going on.

Hopefully, it's neither and just a typical bear market rally.

we’re all subprime now

Damned. That's a cool statement. ;)

You cannot profit from these staged rallies, because
1) this is against fundamentals
2) you don’t know when these comical moments will happen or if they can hold till market closes.

This is why 3-minute charts and 15-minute charts are useful. Why carry a position overnight? ;)

I un-moderated two of your comments, OO.

There is no way out of this without a worldwide governmental nationalization of the major private and quasi private banks and the institution of the equivalent of financial "martial law". This will be last step before complete meltdown and reset.

Anyone here that is interested in moving liquid assets offshore now is the time. I can't imagine any scenario in which capital flight is not halted by our overseers. They will restrict the movement of capital and lock everyone down tight once the majors fold.

Unimaginable you say? Completely uncharted territory here, this is not simply just another hum drum financial crisis as some would like you to believe.

I'm unsure as I've not tried it myself, but does physical gold set off those airport metal detectors if happen to have a few medallions up your lower GI tract?

should be: Before GTU went public in the US, it was traded on TSX prior to that, and US buyers can pink slip it OTC.

An explanation for the rally from iTulip

http://www.itulip.coms/showthread.php?t=3726

Today the GSEs Fannie Mae and Freddie Mac merged with the Federal Reserve Bank, the US Treasury Department, Goldman Sachs, Citigroup and JP Morgan Chase to form Gosbank USA. The DJIA rose 280 points on the news.

does physical gold set off those airport metal detectors

I don't know for a fact, but all my training in physics/EE says it certainly should.

Is there anyway to chemically compound AU into a non-metallic substance?

StuckInBA,

No offense but I think the real surprise there is that these people have remained employed THIS long! Most of us wrote them off along with the dry wall installers at the end of '05.