Re: The First Rule of Panic & 25 Things You Need To Know

On Jul 24, 10:25 am, Renli <oliver.rich...@xxxxxxxxx> wrote:
1. Do it first.

MISH'S
Global Economic
Trend Analysis

Mish is great and has a great blog. But, maybe you can put some
original material in as a contribution one of these days instead of
parroting?

You can look back where I was saying what Mish was saying and I did so
long before I knew about his blog or who Nouriel Roubini was or Reggie
Middleton or Tickerforum, or any of a slew of bearish sources.

Do some thinking and come up with your own analyses.

2. Paulson says the list of troubled banks "is a very manageable
situation". The reality is there are 90 banks on the list of problem
banks. Indymac was not one of them until a month before it collapsed.
How many other banks will magically appear on the list a month before
they collapse?

Wachovia is another troubled bank for reasons I've stated before. I
made good money shorting WB. I have been saying it's the next WM for
some time now.

4. Washington Mutual (WM), another troubled bank, refused to honor
Indymac cashier's checks. The irony is it makes no sense for customers
to pull insured deposits out of Indymac after it went into
receivership. The second irony is the last place one would want to put
those funds would be Washington Mutual. Eventually Washington Mutual
decided it would take those checks but with an 8 week hold. Will
Washington Mutual even be around 8 weeks from now?

No clue how anyone didn't know IMB was going under and why anyone in
their right mind would stay with WM. WM is cooked. They had been
reporting negamort as real earnings for years. You can look this ***
up; I pulled it out of one of their 10ks last year and reported on it
on this forum.

5. Paulson asked for "Congressional authority to buy unlimited stakes
in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after
he said "Financial Institutions Must Be Allowed To Fail". Obviously
Paulson is reporting from the 5th dimension. In some alternate
universe, his statements just might make sense.

He didn't mean FRE and FNM. What Paulson did was jawbone.

Right now, the major PDs are running game on the Fed and Treasury and
imperiling everyone in order to save themselves. Within the next 6
months to one year, the interests of the FRBNY and US T may become
directly contrary to what Wall Street needs in order to keep itself
afloat. As we speak, the actions of the USG are to provide cover for
the banks to deleverage in a relatively orderly fashion so that when
the rates spike and no further liquidity cover can be provided without
fatal damage to the dollar, that they will still survive. This is a
very dangerous game.

In response to this, banks like GS and LEH have in some cases levered
up even more in order to try to make back their losses using Fed
collateral and loans.

My ongoing thesis is that the Fed is becoming thinly capitalized and
it needs to manufacture support for the short end of the yield curve
in order to continue to lend. The only way I see this being able to
occur is to take down the equity markets. It's absolutely absurd to
think that in the face of Peak Oil and an indisputable global
recession onset that we're going to be able to simply "borrow" another
$2-5T against shrinking GDP without major increases in forward
interest rates.

The lightbulb realization that growth has hit headroom is what is
working its way through the debt markets. Recession at this point is
mandatory and a mathematical certainty simply because there isn't
energy to support current consumption patterns. Even the recent
selloff in oil is technical in nature, as is the recent rocket ride on
the financials issues. Look at the inventory data from the other
day...inventories STILL FELL, just not as much as forecast. Does
anyone think this is bullish? Until and unless inventories actually
rise for a prolonged period, we are on borrowed time. At some point,
there will be a real systemic supply problem; we are already seeing
the early stages of this in the form of fuel riots in every region of
the globe and their knockon impact on food prices, also the cause of
riots.

6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses
Makes Them Insolvent".

FNM and FRE were DESIGNED to be insolvent. They backstop shitty loans
that are KNOWN to be impaired in order to get people into houses that
they can't afford. The whole fuckin game was to build houses, houses,
houses, and extend the suburban design model. This will prove to be
fatally bad judgment. Think of all the capital expended on assets
that are BY DEFINITION nonproductive. What the *** does a house
produce in terms of exportable goods or anything saleable? It's sunk
cost, yet what we spent the last 10 years building a debt ponzi
around. Even at present energy prices, we will have to ABANDON much
of the furthest exurbias...this represents a 100% loss on capital.
Contrast to what a wind turbine erected for the same cost would
produce.

The US economy left the notion of producing anything many years ago
because producing counterfeit things (paper) was more profitable. We
are a nation of derivatives and rake, fees and schemes. And we sank
the "profits" therefrom in consumer merchandise and housing...this is
completely dead-end consumption, but the same pattern holds true all
over the western world.

China built a productive economy up around manufacturing junk to be
consumed here. There is so dramatically much overcapacity in housing,
industrial production of crap, and a lot of "luxury" items that many
are suggesting with a straight face that we should just bulldoze it
all to get the supply overhang cleared. WTF does that tell you about
Raygunomics? The western economic philosophy became about "living in
luxury" rather than producing useful things.

7. Paulson says Fannie Mae and Freddie Mac are "essential" because
they represent the only "functioning" part of the home loan market.
The firms own or guarantee about half of the $12 trillion in U.S.
mortgages. Is it possible to have a sound banking system when the only
"functioning" part of the mortgage market is insolvent?

They only function because the "US Taxpayer" aka our ability to accrue
additional debt is thus far relatively unimpaired though there are
some ominous rumblings out of the treasuries indices as well as the
CDSs on our debt. For the first time ever, the swaps market is
implying a less than AAA rating on UST paper. This market is
forecasting an impending impairment on our ability to issue new debt.
That is what the TLT and swaps markets are saying and they are the
canaries.

9. The SEC issued a protective order to protect those most responsible
for naked short selling. As long as the investment banks and brokers
were making money engaging in naked shorting of stocks, there was no
problem. However, when the bears began using the tactic against the
big financials, it became time to selectively enforce the existing
regulation.

The only people who GET to naked short are these very banks. Retail
joes cannot engage in this. I could rattle off a slew of tickers for
which you can't get shares to short and the brokerages called in all
short positions. I exercised a put option on FED at a 12.5 strike and
was forced to cover by AMTD at 4.84. They didn't ask...they told. A
margin call notice popped up on my account screen telling me thou
shalt close this position by 2p EDT or else. And my exercise
constituted the acquisition of somebody else's short position, that's
all. They called them in.

10. The Fed takes emergency actions twice during options expirations
week in regards to the discount window and rate cuts.

Twice? They've done it in about half the opexs in the last year.
Tuesday in opex week is a good time to close any short position
especially if the technical indicators are anywhere near oversold on
financials.

11. The SEC takes emergency action during options expirations week
regarding short sales.

12. The Fed has implemented an alphabet soup of pawn shop lending
facilities whereby the Fed accepts garbage as collateral in exchange
for treasuries. Those new Fed lending facilities are called the Term
Auction Facility (TAF), the Term Security Lending Facility (TSLF), and
the Primary Dealer Credit Facility (PDCF).

They did these during opex too. Do the math.

13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs
(GS) and Merrill Lynch (MER) all have a huge percentage of level 3
assets. Level 3 assets are commonly known as "marked to fantasy"
assets. In other words, the value of those assets is significantly if
not ridiculously overvalued in comparison to what those assets would
fetch on the open market. It is debatable if any of the above firms
survive in their present form. Some may not survive in any form.

14. Bernanke openly solicits private equity firms to invest in banks.
Is this even close to a remotely normal action for Fed chairman to
take?

Worse, the Fed is a SHAREHOLDER in banks, holding BSC's crap paper in
an LLC on its own balance ***. The Fed is fucking acquiring assets
that are non-USG in direct violation of the law.

19. Bank of America (BAC) agreed to take over Countywide Financial
(CFC) and twice announced Countrywide will add profits to B of A.
Inquiring minds were asking "How the hell can Countrywide add to Bank
of America earnings?" Here's how. Bank of America just announced it
will not guarantee $38.1 billion in Countrywide debt. Questions over
"Fraudulent Conveyance" are now surfacing.

I hold puts on AGO, who guarantees a bunch of CFC debt. Suffice it to
say they did very well the other day when AGO shed 43% of its market
cap.

21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI)
fell from $70 to $5. Sadly, the top three rating agencies kept their
rating on the pair at AAA nearly all the way down. No one can believe
anything the government sponsored rating agencies say.

MBI and ABK have subsequently been cut all the way to AAA.

Nevermind that the swaps mkt had been pricing them half a dozen levels
into junk for some time. This is another thing I posted on here on
RMA.

What cannot be paid back will be defaulted on. If you did not know it
before, you do now. The entire US banking system is insolvent.

Is this materially different from what I have written on several
occasions?

Trav
.

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