patrick.net

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.

Geez BAI, you just slashdotted itulip. :)

I urge all those buying GLD and IAU to seriously look at options across the border. If you don't want to deal with the problem of actually shipping money across the border, Canadian funds provide the best choice, and the gold they hold are sitting in Canada, audited by a 3rd party every year, unlike GLD.

While I consider GLD and IAU best tools to set up position, they are not really your safe harbor, not exactly. People buy gold because they are wackos (which I am) who believe in the remote possibility of a financial meltdown, or very high inflation for at least a few years. But if you are going to join the rank of wackos, go all the way, try to buy in the form as physical as possible. The biggest payoff of buying gold is a financial Armageddon, and as we approach the increasing shades of Armageddon, only physical will benefit the most.

CEF has been around for over 20 years, it is a closed end fund doing nothing but storing gold and silver. They don't buy and sell according to redemptions, they hold a fixed amount of PM. They have gone through the secular bear market without folding, and that says something about them. GTU is their sister fund that only stores gold, with a much lighter volume. You can buy shares in both and consider yourself with PM storage sitting in Canada.

Couldn't you buy AU bullion and simply drive it over the border into Canada? Once there, stuff a safe deposit box?

BAI,

If you scroll down on Itulip just a little further you'll see:

"MacDonald's offers cheap burgers made from Mortgage Brokers"

I like the Bernanke Burger and Paulsen Paddy myself.

"the equivelant of financial "martial law""

We passed that mile-marker back in June of '07.

Dennis

did I do that? It seems dead! :-)

DinOR
I love the Paulson "quotes"

I mentioned this awhile ago and some folks dismissed it out of hand. Not a told you so I'm pleased with, but it is what it is.

Meltdown contagion. Higher education collapse, at least the weaker institutions.

US banks abandoning student loans

One of America’s leading banking associations has given warning that the United States faces a growing educational apartheid as some lenders withdraw from student loans amid new evidence that the credit crisis has spread across all types of borrowing.

That's no good news, unemployed, frustrated high school students with a dim financial future but uninhibited libido will quickly find themselves in organized or disorganized crime.

NVR,

We'd heard several weeks back that Michigan and other states were having difficulty getting loans placed and kids couldn't get loans. I really don't get it. This was "free" money for the banks b/c it's all gov. guaranteed.

So they were willing to do it as long as they didn't really loan the money and were able to just collect the interest?

It should go without saying, but please nobody endeavor to *smuggle* out any PM up your ass. Metal detector will surely go off, and you will certainly run into some problems.

*NOT SMUGGLING ADVICE*

What about BullionVault.com?

The biggest payoff of buying gold is a financial Armageddon, and as we approach the increasing shades of Armageddon, only physical will benefit the most.

So it seems offshore allocated gold is the only real option, huh?

When the next batch of orders from China come over, expect at least 20% jump in price.
OO, There was a discussion over on CR yesterday about new employment laws going into effect in China. Some folks were citing a 30% increase in COGs from manufacturers. Have you seen these new laws mentioned in the "foreign" press?

"expect at least a 20% jump in price"

The Horror.

So I should go down to Wallyworld today and buy up all the junk I need for the next year or so?

IF US is not buying, China has no pricing power regardless of costs.