DEFCON 4: TradeKing's view of the Fed

Asset ideas:

I actually funded, albeit modestly, my TradeKing account. Believe it or not I may speculate in AIG. Citi may be too late for speculation.

Don't get me wrong, such moves are just good bets with good odds. No real investing going on, in the true sense, unless my horses come in. Then, I am a great investor.

Below is the commentary from TradeKing's blog where the writer compares Washington to the military being in DEFCON 4.

I want to make a little investment based upon the notion that holding cash is stupid, and as I can't afford much gold, I may as well try to outrun the dollar. To my mind, AIG and Citi will not fail and their stock prices are so low, you are at the bottom. This is the time honored blood-in-the-streets investment approach.

The companies will not fail because the government won't let them. The government, which used to mean "we," are major stake holders in the companies. Congress and the prez want to proclaim they run things, not preside over massive collapse - and lose their seats.

There is no hint of letting them die, in fact Bernake assured the American people on 60 Minutes he would not let the big banks fail. OK, I take him at his word and since he can just hand over money, I see Citi as safe from bankruptcy. If not, one less day at the track.

AIG's Liddy told Congress he see a repayment to Congress in two to three years. He mentioned the "bonuses" were promised to individuals to keep experts around to sell toxic assets. They did - to the tune of 1 trillion. Again, I don't see AIG failing, now, as it is sort-of nationalized and on the way to recovery. Mr. Obama has pooh-poohed all the hysteria about taxing bonuses because he doesn't want the private investors to back away from dealing with the Reich, not because it was illegal. With each day, AIG gets better, rather than worse.

Colin suggested a bret on Ford is a good idea. Another near bankruptcy price. So, are the odds good it will not fail (If it doesn't then it will go to up, at least, 10 time today's cost)? Recall, Ford did not take money from the feds. This means something. Also, as it does during every recession, the market will come back. Cars die and they are essential products. Cars last longer these days, but commerce will pick up. At some point, the pent up buying will be let go. To my mind, then, there is a play here, but I will look closely. Who knows if it is long term.

I may buy a gold mine, as well. That is a good leverage position.

TradeKing blog:

(Updated: 4:30pm CT) The FOMC statement appears to have been written in DEFCON 4 status. A new term lending facility has been announced. It will accept even less credit worthy collateral than the previous multitude of term lending facilities do. They are in panic mode as well they should be. NOT ONE WORD IS WHISPERED AS TO ANY IMPROVEMENT IN ANY SECTOR OF THE ECONOMY SINCE THE LAST REPORT. The only thing the Fed has done in over a year is to open one lending facility after another and print more money to fund them. Oh wait, I'm lying.

They have also continued to say they are and have been optimistic during this same time period. Optimism, confidence and continued bungling in the financial laboratory do nothing for our economy. This "in for a dime, in for a trillion" game is insane.

In previous posts I told you this next item was coming. The first breath of air has just been injected into the next bubble. The T Bill market to be exact. One, potentially more lethal than any Ben has attempted yet. Mark my words. This could be devastating. Ben and his bunch of bananas have announced they will produce another $1trillion out of thin air. $300B of this will be used to purchase Treasury Bonds. The other $700B will be used as a BAILOUT for our esteemed financial institutions. Ben, the caped crusader, doesn't have the balls to call it a bailout, but a rose is a rose is a ...

Do you really believe they will stop at $300B for T Bills when they get the ball rolling?


My take on this:
Why would the Fed find itself buying long term T Bills? Because foreign interests have been selling more of and buying less of the U.S. debt (specifically, Treasuries) they hold. Why are they doing this? Because the ever increasing trillions of pretend dollars that sprout at the Federal reserve gives them well founded doubt that the U.S.will be able to honor its debt going forward. Would you trust someone who owes you money if they were unable to quit borrowing in order that they could continue on an un ending spending spree?

From todays calculatedriskblog.com excerpts from a long post. Well worth the read:
Bernanke's Grand Experiment Continues
Bernanke Has Failed
[Please note that Bernanke has already failed. "It" (deflation) has arrived. And deflation has arrived in spite of the fact that Bernanke has slashed rates to 0%, instituted numerous lending facilities that have all failed, squandered $trillions in taxpayer money, and has already implemented phase II (or do I mean phases 2 through 20) of his plan, that being the "offer fixed-term loans to banks at low or zero interest, with a wide range of private assets as collateral."]... [Note the losing battle Benanke is fighting: attitudes. The Fed has become the lender of only resort as opposed to the lender of last resort. Bernanke cannot force banks to lend nor can he force companies to hire or if they do hire the wages that will be paid.
Wage destruction continues unabated, and if Bernanke does succeed in driving prices higher, he just might ask himself, how anyone is going to pay the bills.]

AIG

I just wrote a long response to email comments upon an article in the Business Review, which I add below. Actually, the response is to mass stupidity as demonstrated by the article and one comment in particular. I don't think you need to read the piece, but if you are interested: here

I really need to stop all this activity, but it there is no longer any place to hide. I will get back to what to do to prepare, as a topic. Right now, I am making maple syrup.

Oh, on that note that gun manufacturer' are out of inventory. There is a hot used gun market. If you want to see a crowd, this weekend in Saratoga Springs is the gun show. Apparently, some people are paying attention. (It is a fascinating show.)

Also, I don't think people understand the what is going on. They are playing one game, not aware of blatant disinformation and subversion all around, which is a nice trait in a safe world. This is not a safe world.

Finally, I just like the picture above. Let us say it represents the coming mega tsunami. Yeah, that's the story.

I read the comments to the above and am moved to respond to the rampant stupidity being given voice today. Mr. Campo says the government - we - own AIG, so "we" should be able to do whatever we want. A thought so simplistic and erroneous defies explanation in a country more than 200 years old built upon Anglo-American law, especially after two millenia of the study of logic.

Socialism requires an ignorant, or in our case dumbed-down, populace. The Obama/Cuomo game about being peeved at bonuses is childish and they know it; this is callous posturing for the unsophisticated voters who give them power.

Don't you recall Cuomo senior?

If you are grunting: "Yeah, what the hell are they getting bonuses for?" Then you are among the manipulated drones.

The inmates run the institution.

Here is the reality: AIG screwed up and in our system should have been allowed to die. The shareholders are not innocent - they are the owners who dind't stop the recklessnes because they were greedy. Just about everyone was greedy. In a sense that is normal. see Federalist Papers #10.

In our mommy culture, no one is supposed to suffer the consequences of their actions. If you can't pay for the lunch you thought was free, then attack the store owner.

When a company goes bad it is the fault of the owners who vote for the Board.
However, AIG was so large and so involved with government-related back-room stuff, like Congress' pension, the government in its gutless, self-serving manner, decided to save it.

The current Treasurer of the U.S. under Obama worked the deal and WITHOUT STRINGS sent AIG money to CONTINUE business. "We" didn't buy it. That action is fine if your goal is to just save the company - there was no buy in and no hooks, like any low-level investment banker would require. The government is run by dilattante amateurs.

To now pretend to be amazed by AIG continuing to run and follow the law, would be laughable except so many people cheer the false outrage.

Mr. Obama should come to the front of the stage and nationalize businesses, as he wants, and not play a coward's game of subversion. Be an honest Marxist, like Bernie Sanders of Vermont. This subversive attitude is enough to reject anyone in any business, unless you are part of the subversion.

So, AIG had a contract with people who made it money. The company is providing them with their contractual compensation, from what the CEO says. Is this hard to fathom?

If Geithner did not want this to happen, he could have let the company go bankrupt, have a court vitiate contracts, then move in. He didn't. Either on purpose or he is stupid. If he were executing Mr. Bush's directive, just say so.

Duh.

Why don't we tell Rodriquez he is making too much money at third base (I agree, but its not my business) and cap his salary at, say, $500,000, the magic amount according to the socialists.

Julia Roberts certainly doesn't deserve $20 million per picture. How about $500,000? If you are shocked - why?

You inherently know we are a society held together by mutual respect for contracts. This is not what Mr. Obama wants, if you believe his outrage. Your Anglo-American respect for work and contract is being destroyed by government which is pointing at a part of society and inciting socialist/fascist outrage.

As to AIG, it became the largest insurer because of Hank Greenberg, who built it from ground up. (He is pissed at the bonuses, too.)

Anyway, Greenberg was replaced by the Board of Directors because NY Attorney General Spitzer went to the media and claimed he was going after AIG and Greenberg. He didn't, when Greenberg called his bluff and would not pay extortion money, but it appears the new CEO ultimately permitted the bonuses be signed. So, whose fault is this? Why is government always given a pass for its, frankly, evil?

Now, NY's mouth, the man who installed the people and philosophy that crippled Fannie MAe and Freddie Mac, says he demands the names of those who earned the bonuses. If that doesn't scare the hell out of the vast majority of us, then it is time for rational people to investigate New Zealand.

What right does he have? For what end other than getting idiots worked up? What is he going to do, take it away from the employees who earned it? Confiscation? There is no logic to it other than he is either inciting people to socialism or playing the lowest form of demagoguery.

This is exactly the same as saying teachers get too much, so let's take it away. He won't do that because teachers vote socialist, as they are voting for their own salaries. There is no longer any pretense that the Democratic party is now America's socialist party.

What we are seeing is class warfare - tell the vast majority of people that you are going to take money from those who earn a great deal and give it to the masses, as controlled by Big Brother. Sounds good to the low-brow, but anyone who managed to avoid a public school education and avoid mass media sees this game for what it is. See - Grachii brothers in ancient Rome. Terence said, "There is nothing new under the sun," in Latin, of course.

I hope some readers can come to understand how their unsophisticated anger is being used to strip them of their rights.It is as simple as that.

However, I think we have gone over the cliff and the "masses," as we have become, will just vote themselves money by taking it from those they don't like (i.e. can't compete with.) This is true "democracy" as the Greeks called mob rule. They feared it.

By the way, can you name anyone in control of our country who ever worked in a real business or met a real payroll?

If you want to understand how socialistic group think destroyed Europe read Hayeck (http://hayekcenter.org/) and Hoffer (http://www.quotationspage.com/quotes/Eric_Hoffer).

Europe only recently has realized, as the Supreme Court Chief Justice in Canada recently said, that equal access to care does not mean equal access to a list.
Get their lead books, if you recall what books are, as they are among the most important thoughts you will read - at any time.

Otherwise, you will vote for someone who promises no tax increase for 95% of us while removing things like a mortgage deduction, as is propsed now.

Once lost, freedom is seldom regained. This will be especially true where we have an huge Big Brother tracking everyone and taxing everything.