patrick.net

The media and most everyone are forgetting several important bigger picture factors in this whole BSC mess. First, We haven't even seen the bulk of ARM resets yet. If the subprime collapse was the precipitating factor for what we're seeing today, what happens when Alt-A starts failing? Second, everyone glumly worries about fire sales of MBS and other securitized products leading to huge markdowns on the values of these securities. Well, HELLO! These securities are in fact worth jack sh-it, since they are full of toxic loan crap. So, why keep pretending???

skibum,

don't forget our lovely option/ARM reset after Alt-A.

Wall Street banksters have to pretend, if they stop pretending, they will be left penniless. At least pretending wins time. You won't want to see them suffer from a cliff-dive in standard of living, will you?

If the subprime collapse was the precipitating factor for what we’re seeing today, what happens when Alt-A starts failing?

I''ve 'heard' that said scenario leads to WaMu going poof. Or being 'bought' by someone (Wells?) for a pittance.

This BSC mess is happening now simply due to lack of liquidity. Short term repo money evaporated. Uncertainty as to future ARM performance is already factored in, the suckers have long left the room (exception for US taxpayer of course). Future ARM resets do not *matter* in this current environment, the wheels of our securities market have grounded to a halt. Nobody knows what these things are worth, and no one is willing to invest capital in them until they become relatively known quantities.

There simply is no secondary market for mortgage backed securities. And when a secondary market does arise from the ashes, it will not be like the one we once enjoyed.

OO :

Today's market action stinks big time. If this was indeed PPT or some Fed induced manipulation, then it's going to end badly. If they kill the shorts with any fake rally, they will simply remove the floor beneath the market. But given their past history, another pathetic attempt to push the day of reckoning wouldn't surprise me at all.

Does anyone find it comical that Dow is up over 100 pts?

I wonder if foreign holders of large amounts US dollars are jumping in for bargains after they see a drop.

Stuck,

DOW is the most manipulated index, because that is what the sheeple care about the most.

When US indices lose their credibility, that is when huge capital flight will start. At that point, USD will unfortunately see a total collapse. Investment is all about confidence in the market, in the system, if that confidence is breached, there will be no market, period.

Headset,

My knee-jerk reaction was to say, "At these prices? and then I was going to make an argument that holders of foreign dollars ould do well to wait.

Then it occured to me, that handing US dollars back to the US while the Fed is doing all of the heavy lifting to prop up the equity markets is pretty smart.

I would not be at all suprised to see a ton of buying coming from Japan and China, two huge holders of dollars. Spend 'em today, cause tomorrow they won't be worth much.

So after decline, the smart foreign bag holders jump in, and they buy till the price is higher than open? That sounds like a lot of ultra-smart foreign bag holders.

Foreign USD bag holders get stuck with the USD toilet paper not because they are dumb, but because they have no choice. They are either reliant on US consumers (which becomes a smaller reason for them to continue being the bag holder), or cannot get rid of the USD fast enough (oil money). If Middle East and China stop injecting fund directly into US financial institutions at a bulk discount price, don't expect them to buy in the open market. Japan has already started dumping USD since early 2007.

I find it hard to believe that the inexplicable rise in DOW is not a concerted action by Fed & Co.

Sovereign Wealth funds have very strict mandates, they are not allowed to day trade.

oo,

The stock market is SO manipulated, it's not even funny. I can't even try to begin to understand the depths and complexity. Without even invoking an official "PPT", the Hedgies provide such a huge volume of trades that they can probably collude very easily and manipulate the market. Of course that would be a monumental scandal, but it seems plausible to me. the average joe trader on etrade or ameritrade is hopeless against this system.

At this point, today's market moves do not surprise me one bit. As you or someone else pointed out, it's only setting us up for an even larger fall down the road. But by then, all the insiders will have "cashed out."

I find it hard to believe that the inexplicable rise in DOW is not a concerted action by Fed & Co.

JPM, a DOW component, is up 10%.

And DOW is a priced-based, as opposed to a capitalization-based, index.

Spend ‘em today, cause tomorrow they won’t be worth much.

Why buy businesses when you can buy resources?

I know I am sounding like the resident Fed basher. Or may be I am already.

But I just want to point out that the same Fed which is getting SO freaking creative in helping to "stabilize" the finance system - yes the same Fed - did absolutely nothing when the whole mess was building up. They willingly IGNORED all signs, warnings and decided to not "interfere" with the free market.

It's completely beyond me how anyone can have any faith in these double talking SOBs. Please note. Nothing, NOTHING here is being done to save the general public. It might be the outcome, intended or otherwise, but the primary goal is to save the banks and the bankers. PERIOD.

The sooner you grasp that, better for you.

I have to believe that we are now past anything the PPT could manage even short-term. I think we're on our own from here on out. Asking HF's to work together seems contra to everything HF's stand for?

Asking HF’s to work together seems contra to everything HF’s stand for?

Exactly. HF's are the heroes of cowboy capitalism.

When they are not crybabies, that is.

I'm by no means attempting to poo-poo the notion that the PPT exists. They have worked against me and my positions on a number of occasions, defying all logic.

I don't know what their capacity or depth could possibly be but it would seem (again) obvious that their resources at this point would be strained to the breaking point. Shoring up a 200-300 pt. sell off is one thing, plugging the damage being created by the re-set chart goes beyond the imagination.

HARM Says:
Greenspan or Hitler

They are both b*stards of the first order, but at least one of those guys had the decency to off himself... the other guy still shows no remorse for the destruction he has wrought.

Greenspan sees many casualties from crisis: report Mon Mar 17, 5:02 AM ET

There will be many casualties from the unfolding financial market crisis, which will lead to a large-scale overhaul of international banking regulations, codes and risk management, former Federal Reserve Chairman Alan Greenspan said.

Writing in the Financial Times, the former Fed chief said much of the financial system's risk-valuation models failed, not because they were too complex but because they were "too simple to capture the full array of variables governing that drive global economic reality."

"The crisis will leave many casualties. Particularly hard hit will be much of today's financial risk-valuation system," he wrote.

While insisting that current risk management models and econometric forecasting methods remain "soundly rooted in the real world," he said risk management can never be perfect.

"It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response," Greenspan said.

He added, however, that he hoped one of the casualties from the worst U.S. financial crisis since World War Two would not be the spirit of broad self-regulation within financial markets.

Although he said the Basel II international banking regulatory framework would almost definitely be revamped and financial institutions' financial models would need to be re-drafted, Greenspan warned against over-regulation.

"It is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition," he said.

Greenspan article at FT.com: http://www.ft.com/cms/s/0/edbdbcf6-f360-11dc-b6bc-0000779fd2ac.html

Yeah, "over-regulation" is our biggest fear right now. Thanks Al. We'll keep that in mind.

DinOR Says:
What are the earliest known references to the MBS/CDS meltdown we are now seeing. Seems to me SP and a few others made comment on it during late 2004

I don't really remember when I first realized the edge of the cliff towards which we were headed... but being _that_ prescient is practically indistinguishable from being plain wrong. :-)

Luckily, I was too lazy to go out and start shorting stuff back then, or I would have lost a ton of money before things actually turned south.

Peter P Says:
What is putting pressure on gold price?

A couple of factors - Yen at 96 is a major suspect. The other possibility is that gold is being liquidated to cover margin calls on illiquid securities.

[Not any kind of advice. My advice is usually free, but you might pay dearly for following it.]

OO Says:
Why will someone pay more than $2 for BSC if a benchmark deal paid $2 in stock for the same darn thing?

Rumors that Joe Lewis' Tavistock Group is planning to mount a counter offer to take BSC private for $ 400M. It didn't make sense to me why he would do that (since he may not be eligible for the 30B gift from the F'ed), but that may be it?

northernvirginiarenter Says:
There simply is no secondary market for mortgage backed securities.

The market _is_ there, just not at the price the sellers can accept. Sellers are hoping to find a sucker who will pay the pretend valuation - just like bay area housing.

Duke says: Another thing to think of is this: How solvent is the Fed? I think they have 800 billion.
I've been using using OPNs (other peoples numbers) and saying that the Fed will have 300 to 400 billion dollars left when all announced measures have taken place. Not sure "they" are right as I now think some "double count" the increase in TAF and repos (by not subtracting out the existing balances).
Starting out
here it looks like the Fed holds ~710 billion in US Treasury securities + ~$90 billion in gold, currency, and "other assets" .

$800
- 40 (increase in TAF from $60 -> $100)
- 40 (increase repos from ~$60 -> $100)
- 200 (TSLF)
- 30 (JPM special lending facility)
--------------------------
$490 billion left
- ? (opening the discount window to non-depository primary dealers)

So it looks like we'll have ~1/2 a trillion dollars for the investment banksters to blow through at the new and improved discount window. Set your phasers on stun; shoot to kill.

"remember, our country is increasingly populated by people who are not only not invested in our financial success, theyre not even invested in our culture."

You know, I think there is some truth in this. A Chinese parent at my kids' school was talking about the weekend Chinese immersion class her daughter is taking. She quickly explained that it is for ABC kids, "American Born Chinese." Not Chinese-American. American Born Chinese. Maybe it is just a difference in phrasing, but ABC seems to imply Chinese kids who happen to be in America, as opposed to Chinese kids who are growing into being American kids of Chinese heritage.

RE: Chinese immersion class

I have no problem with that if schools are private-run.

Seems like nothing happened over the weekend doesn't it?

I don’t know what their capacity or depth could possibly be but it would seem (again) obvious that their resources at this point would be strained to the breaking point. Shoring up a 200-300 pt. sell off is one thing, plugging the damage being created by the re-set chart goes beyond the imagination.

Probably silver and I vibrate at different frequencies. I just cannot feel silver.

It certainly feels different.

http://youtube.com/watch?v=niVjE5m4v2o

Eliza,

perhaps you should happy that this Chinese parents is wasting her child's brain power and time on Chinese immersion class because it will prove completely useless. Well, if your kid is in the same class with her kid, your kid will have one more casualty below him/her on the forced curve.

Chinese are just very pragmatic people, they do the weekend immersion class not for patriotism (to China) but for potential profit. I heard so often among the Chinese community that they think China will become some sort of superpower so learning Chinese is a way not to be left out. Similarly, lots of elite Chinese kids in China are going to English immersion classes, every day (not only during weekends), so that they won't be left out. If China goes poof, I assure you lots of these Chinese immersion thingy will fold.

I am not sending my kids to Chinese immersion class not because I am not patriotic to (US or China, or one way or another), but because I think China will go poof so that I don't want to waste my kids' time. I may send my kids to Russian immersion class though.

Chinese are just very pragmatic people, they do the weekend immersion class not for patriotism (to China) but for potential profit.

If one thinks China will become a superpower, should he just invest in resources that China needs and lacks?

China is so full of liabilities, aka people.

I was trying to learn Russian and I could almost order a piroshki.

(But I almost ordered vodka instead of water.)

If one thinks that China will become a superpower, one should move his ass over to China and start building connections now.

If one thinks that China will be a flash in the pan, then invest in commodities to take advantage of their hastened rise because it is much easier to get out of commodities than Chinese stocks.

OO

Why do you think China will go poof and how exactly will that work?

But I almost ordered vodka instead of water.

I thought "vodka" was Russian for the word "water".

NVR,

too big of a topic to discuss on a blog. In short, it cannot replicate what the US had prior to its rise, namely, it doesn't have the same resources per capita, same group of self-selective immigrants, a good political and economic framework. There are very few countries in the world that can emulate the American experience, the best that China can do is Japan, but it won't even achieve that.

The next candidate to replace the US is more likely either Russia, or a fairly ignored country, Australia (which will take a bit longer for the population size to catch up). Population is the easiest thing to solve, if you have a good piece of land, lots of resources, and a good social framework, you can pick and choose the youngest, brightest and hardest working immigrants from all over the world. A country stuck with a big, complacent population who are not brave enough or capable enough to leave their homeland, and therefore facing depleted resources has no chance of becoming a superpower.

Guys, I'm reading some of your posts regarding foreign food shortages and our weakening dollar. I came to a pretty scary realization. Oil prices are high because foreign countries are willing to pay the price, they have stronger currencies and we fuel their economies. This could easily transfer to food. The last thing we want is to be competing with foreign currencies for our own food supply. American food companies will choose to sell to whoever can pay more, just like oil companies do.

OO, that's interesting about buying ahead. I was just thinking futures might be something to educate myself on.

Malcom :

I expressed similar thoughts regarding the food in the previous threads and DennisN put it best "We are Saudi Arabia of food". The competition for oil, water and food will keep getting intense. Nothing we can do about it.

I really want to invest in companies that own agricultural land in US. There are hardly any. So I am stuck with the choices like MON which right now seem way overpriced.

Thx Skibum and Stuck!
I've been slaving away deep in rennovations. It's a money pit at present...but I'm happy. I'm gonna hunker down and wait out the recession.
There are times I feel this world has gone crazy. My landlady was such a horrible person--glad to be rid of her. But thanks to this blog ---you guys helped me survive my almost 3 years as a renter!