Got this from a Financial Blogger I subscribe to. Some pretty good analysis and recommendations for those wanting to play Banking stocks and the US Dollar. Grim news in general...Could Washington Mutual be next?? Man, when will this mess end!
BTW, check out his recommendations as some of his insights are exactly what I've been feeling for the past few weeks.
The truth may be unthinkable, but the reality is undeniable:
Much of our nation's financial structure is collapsing, and our government's only response is phony money, bogus bailouts and a litany of false promises.
Ben Bernanke, Henry Paulson, the FDIC and the U.S. Congress say they can do it all.
They say they can save bankrupt brokers like Bear Stearns ... take over recently failed banks like IndyMac Bank and First National of Nevada ... prop up insolvent mortgage giants like Fannie Mae and Freddie Mac ... refinance millions of defaulting mortgages ... dish out hundreds of billions in tax rebates ... and still have enough cash in the kitty to cover the next round of financial collapses.
They say their unbridled money printing won't devalue the U.S. dollar.
They say their unlimited pledge to guarantee junk mortgage bonds won't sabotage the credit of the U.S. Treasury.
They say their blank checks to private companies won't rip off U.S. taxpayers.
They'd have you believe they can outlaw the cycle of boom and bust ... repeal the law of supply and demand ... even freeze the march of time.
In the real world, of course, no government in history has ever been able to do anything of the kind, and they know it.
In the real world, their "solution" is part of the problem, and they know that too.
They know that wealth is generated from work — not from the paper money they're printing. They understand the hazards of indulging the most daring debtors and rescuing the most reckless risk-takers.
They know darn well the fatal flaws of the course they've chosen. But they proceed to pursue it anyhow.
Why? Because, behind the façade of their feel-good happy talk and beneath the thin veneer of their Pollyanna optimism, nearly every single one of our leaders — including Bernanke and Paulson, Democrats and Republicans — is really a gloom-and-doom pessimist in disguise.
They are pessimists inasmuch as they have little faith in America's ability to confront hard times. They greatly underestimate our ability to cope and adapt. They think we can't handle the truth.
I disagree. In the Great Depression, our parents and grandparents faced the unthinkable truth and created a stronger country as a result. They confronted the truth again during World War II and helped create a better world in its aftermath.
I believe we can do that too. We have the resources. We have the knowledge. And we have the added benefit of hindsight. But before we move forward, we must admit five irrefutable facts:
Irrefutable fact #1: Ours is a debt-addicted society,and weeding out the bad debts is the first step toward true recovery.
Irrefutable fact #2: By far the biggest pile-up of debts is in mortgages — $14.7 trillion, according to the Federal Reserve's latest Flow of Funds report (see PDF page 64, Table L.4, line 9).
Irrefutable fact #3: Among those mortgages, a quarter to a third could go bad: Their terms are high risk for both borrower and lender. Their collateral is shaky. Most should never have been created in the first place.
Irrefutable fact #4: When bad debts go into default, there is no free lunch. Somebody has to pay the price. The only question is: Who?
Irrefutable fact #5: The overwhelming bulk of the bad mortgages were created to help Americans move into homes that were priced far above their means. But the only way to correct this problem is to let natural market forces drive home prices back down to much lower levels.
Do most of our leaders have the wisdom and moral fiber to confess to these truths? Not yet. But in the not-too-distant future, they will have no other choice.
Reason: America's housing marketplace is bigger than any government; its power, greater than any law. It is the single largest asset class in the world. It packs the most powerful forces of supply and demand ever assembled in history.
And right now, it's tearing down some of our nation's largest banks. Two examples ...
Washington Mutual In a Death Spiral?
Washington Mutual, America's largest savings and loan, is unfortunately, also one of the nation's largest subprime lenders.
A direct consequence: It appears to be in a death spiral, losing $3.3 billion in the second quarter ... admitting to losses of as much as $19 billion this year ... and probably on its way to losses of an estimated $26 billion.
That estimated loss is over four times its total market value as of Friday's close ... twelve times its yearly earnings in the best of times.
Can it get a new capital infusion to stave off failure?
Perhaps. But on April 8, Washington Mutual already got an injection of $7 billion from private equity firm TPG Capital. And now, less than five months later, an amount equivalent to TPG's entire investment has been more than wiped out with the plunge in Washington Mutual's shares — to a meager $3.82 on Friday.
What's worse, the TPG deal restricts Washington Mutual's ability to raise new, desperately needed capital going forward. And further impairing its ability to raise capital, Moody's announced that it is reviewing the thrift for a downgrade to junk status.
Here's the big problem: As of the latest reckoning, Washington Mutual has $214.6 billion in residential mortgages on its books. And among those, more than three-quarters are in non-traditional categories — option ARMs, subprime loans, home equity loans and multi-family mortgages. Less than one-quarter is of the traditional, single-family prime variety.
Just in option ARMs alone, Washington Mutual has $52.9 billion, one of the biggest such portfolios in the industry. Moreover, 62.5% of its option ARMs are in two of the hardest hit states — Florida and California.
Nonperforming assets are growing by an average of 36% each quarter. If they continue to grow at that rate, they could reach a whopping 6.7% of total assets by year-end.
Investors are pulling out. Rumors are swirling that creditors may be doing the same. Bankruptcy looms.
Wachovia Also Suffering Huge Losses
Wachovia, the nation's fourth largest bank with nearly $800 billion in assets, is also in danger. Its staggering $8.9 billion loss reported last week may be just the tip of the iceberg.
Its big blunder: The acquisition of subprime lender Golden West Financial for $24 billion at the very peak of the real estate market in 2006.
The net result for the bank: It's now stuck with option ARMs valued at $122 billion concentrated in California, the state with one of the worst mortgage default rates.
Net result for shareholders: Over $55 billion of their wealth has been wiped out since the acquisition — more than double the total purchase price of Golden West.
The big problem going forward: Wachovia has $231 billion in residential real estate loans on the books. But only 22% of these are classified as "traditional mortgages." Most of the rest are higher risk.
My Recommendations
Recommendation #1. If you haven't done so already, check the safety of your bank.
Yes, your deposits are insured by the FDIC up to $100,000. But there are still risks and inconveniences of getting stuck in a failed bank or thrift.
For example, if your principal is $100,000, your accrued interest could be at risk. And if your account is a business checking account with large uncashed checks outstanding, even though your book balance may be under the $100,000 limit, your actual bank balance may be over the limit. So those funds may also be at risk.
Even with your insured deposits, after a messy failure, there could be a significant delay in regaining access to your money. You will get your $100,000. But don't expect it to happen overnight. To get a free safety rating on your institution, follow these steps:
Step 2. Look for the green box to enter your information. Under "Bank Name," type in only the first word of your institution's name.
Step 3. To the right of your bank or thrift's name, make note of its rating: A is excellent, B is good, C is fair, D is weak and E is very weak.
Step 4. Use these general guidelines:
If your bank or thrift is rated B+ or better, we believe it's secure.
If its rating is between B- and C-, check it a few times per year to make sure it hasn't fallen below C-.
If it's D+ or lower, seriously consider switching to a safer institution, of which there are many to choose from.
Recommendation #2. Also consider moving most of your savings and checking to a Treasury-only money market fund. Treasury-only money funds are not insured by the FDIC. But I think that's a moot point because the investments they buy enjoy the direct guarantee of the United States Treasury, with no $100,000 limitation.
Recommendation #3. If you haven't done so already, dump any bank shares that you may own, whether at a profit or a loss. The recent Fed- and SEC-inspired rally was a gift — a last chance to get out at somewhat better prices.
Recommendation #4. Your investments, your business or your income may still be vulnerable to collapsing mortgages and other debts. For protective hedges, check Our Comprehensive List of Inverse ETFs and consult with your advisor or money manager to select the ones that best match your needs.
Lato, very optimistic there. Are you long the US economy or are you long the US equities markets? There is a HUGE difference. I don't think anyone can afford to be long the US economy in the Short Run with GM and Ford needing a bailout, Indymac already facing the slum-levels, Freddie and Fannie and ALL major IBs in the doldrums...In the long run, well things are still uncertain. How would the Iran scenario play out? How would OPEC's stance play out? What are the technicals? Nothing looks good here, son.
As for shorting Gold, you're lucky there. Its testing its support right now and if it goes below $885, then consider yourself in a winning position (until it tests 875).
BTW, do you even know what my soccer mom syndrome theory was??
however i am happy to see things going well today.
today i covered most of my gold shorts.. i still think there is more downside... oil has closed below 120.. that is very bearish for both gold and oil... i think 100 is the next stop for Oil.. but i wont short oil directly too volatile...due to politics and iran... still probably safer to short Nat Gas stocks and Gold Stocks.
samsara it feels strange talking to u without getting angry.
anyway i was very bearish on long term US economy. my outlook has changed recently. lets see how the elections goes and what new or any policy changes come into effect with new prez. already its almost guarenteed short term capital gain taxes will go up.
if the dollar doesnt rebound in 1 or 2 years.. i think US economy is doomed then..
maybe i have been reading too many gloom n doom books.. many such people have been predicting disasters even before the tech run up in 1990's began... in the end everything was fine..
as for OPEC they will keep pumping the oil to keep Customers happy. they still have some power to increase supply... no one knows what their real oil reserve capacity is.. but my guess is its probably enough for next 20 -40 years to keep prices relatively stable..
lets see what happens... i will be looking to nibble on some Gold, Oil, Nat Gas over next few months. i think this is just a correction for a long term commodity bull market.
Do you think today's market shows some hope for the U.S economy? the price of crude fell as low as $118 a barrel before settling at $119.17. NASDAQ, DOW, S&P rose today. so looks like we are gonna have some better lives here.
With oil falling, and the Fed citing economic growth in its statement has given hope to the consumer. I think It will definately inspire consumer to spend more.
so SAM SARA, do you think that U.S ECONOMY IS NOW MOVING UPWARD SPIRAL?????.
Here is an article, albeit a few days old, about an analyst from Oppenheimer and Co., Meredith Whitney who saw the abyss of the financial behemoth like Citigroup coming. On this one, she provides more insights into how deep the credit crunch (crisis) is going to run in the near future and the repercussions generated from it.
HAHAHAH lato idiot, how many times do I gotta tell you that your trading strategy makes me laugh as there just is no rationale attached to your impulse rather than just click the mouse and look at an outright chart. Your risk to reward ratios are virtually non-existant...You did a total of 16 transactions and your net profit was only 600 and change?? Just shows me that you're en route to being obliterated by the market pretty soon. BTW, how much is the spreads you're paying for the trades? Looks like you'll make the clearing house real rich folks. Finally, keep posting up demo accounts and yeah, while at it, see where your trading flaws lie.
I'd rather laugh than comment on your trading scenario and your statement above. Pls hide it from REAL traders like me since the cats here on sajha prolly have never traded before and you could act like you know it all in front of them...HAHAHA This is exactly the type of mentality that brings other suckers into the markets and we in IBs just make a killing outta these lil fries as the markets after all is a zero-sum game. How many times have I told you, you gotta hedge your positions instead of plainly taking outright trades. Hope you don't lose the shirt on your back.
As for all you believers in the US economy. more and more articles are surfacing asking the Fed and Congress to let the markets fall and let the public know the real extent of the problem within the economy. Only then will the economy correct itself from the current scenario of recessions and mini recessions we've been facing since 2001. As per these pundits, only we've identified the problem can there be a solution and right now, the band-aid being applied to a bullet wound is defn not the way to go. It'll just prolong the pain and the recession. Damn it, give us a Depression and get over with it, so we could rebuild bigger and better!!
Another one which may prove what I've been thinkng all along: Is the Fed and the Congress colluding with the various economic agencies here and cooking the books to produce better than expected economic data?? Looks like something similar to the Sarbanes-Oxley needs to be created for economic-data gatherers like the Fed and its subsidiaries too as the accoutants and economists there have gotten way too smart for their own good.
The best arbitrageur is one who's updated with what opportunity lies even in the remotest parts of the world and acts upon that scenario if it would even help make him/her a dollar richer. Here goes today's article that was quite insightful into matters we've been fed and over fed with daily. Hope it is interesting for those not in touch with world happenings.
I'll discuss the state of the markets shortly. First, I'd like to discuss the state of the world's future.
According to a long-term study just released by the U.S. Naval Services Department, a series of tipping points could dramatically alter the global prospects for economic growth and humanity — for the worse.
Right now, for instance, fully half the world is vulnerable to social instability resulting from rising food and energy prices, lack of water, failing state governments, and pollution.
102 countries are at risk of chaos. 46 countries, comprising 2.7 BILLION people, are at risk of armed conflict with lack of adequate natural resources as the root cause for many of them. Another 56 countries, with 1.2 billion people, are at risk of severe social instability.
There are now 14 ongoing wars around the world: Five in Africa, four in Asia, two in the Americas, two in the Middle East, plus the world-wide war on terrorism.And 37 countries face a food crisis due to increased demand, falling supplies, high energy prices, and global cereal stocks at 25-year lows. Nearly three billion people subsist on less than $2 a day.
Due to increased demand and with global cereal stocks at 25-year lows, many countries are facing a food crisis.
Some Other Facts to Consider ...
— The world population today is 6.677 billion people, growing at a rate of 1.16% per annum.
— The global economy had one of its best years ever in 2007, growing at 4.9% to $66 trillion in purchasing power parity (PPP). Global per-capita income grew a tad under 4%.
— Yet, high levels of extreme poverty have given birth to 40 new diseases, 1,100 epidemics over the last five years, and 20 drug-resistant diseases today, a record.
Worse, old diseases have re-emerged, such as cholera and yellow fever. And more than one-third of all child deaths occur in the first 28 days of life, mostly due to lack of clean, potable water.
— In total, 700 million people face water scarcity today. Without drastic investment of hundreds of billions of dollar, an estimated three billion people will not have adequate water supplies by 2025.
A scarcity of clean potable water will affect an estimated 3 billion people by 2025.
— The world will need 50% more food within the next five years, and 100% more by 2030.
— Democracy and freedom has declined over the last two years in one-fifth of the world's countries, while total military expenditures have hit $1.3 trillion per year.
— There are an estimated 20,000 active nuclear weapons in the world, 1,700 tons of highly enriched uranium, and 500 tons of separated plutonium that could produce nuclear weapons.
— There were over 150 reports of unauthorized use of nuclear materials per year between 2004 and 2007.
— Illicit trade, corruption, and cybercrime are estimated to cost global GDP well over $2 trillion per year.
— Global energy demand could double in just 20 years. Without major technological changes, fossil fuels will provide 81% of primary energy demand by 2030.
No matter how you look at it, the world has its work cut out for it if we are going to improve the future for our children and grandchildren, and for billions of people around the world.
Fortunately, there are some bright spots. Namely, three important ones ...
#1: Governments around the world are now becoming acutely aware of the problems the world faces. And, they are sharing their knowledge more consistently in international workgroups to solve crises.
#2: Super computers are now reaching levels that will be able to help solve problems at exponentially quicker rates.
A computer can now perform 1.144 thousand trillion floating point operations per second with the capability to support highly complex social, environmental, medical, and economic modeling that will allow more reliable predictions of future behavior and cause and effect relationships in virtually every field of study.
#3: Thanks to the Internet, a global "collective intelligence" is now forming on many of the issues confronting the world today. This enhanced global communication will speed the development of solutions through sharing of ideas and models.
I have faith. I believe we can do it. But getting there won't be easy.
Only massive, unprecedented investment will avert an energy crisis — by investing hundreds of billions of dollars in wind energy, geothermal, ground solar and space solar, and saltwater-based bio-fuels, and an equally massive investment in nuclear power plants.
And that's why I say ...
Natural Resources Will Clearly Remain In Long-Term Bull Markets
Given all the above, plus the fact that central bankers and politicians around the world will always opt for growth over recession — even if they have to print unlimited supplies of money — it should be awfully clear that the bull markets in natural resources are here to stay.
Indeed, according to my long-term studies and economic models, the prices of natural resources will continue higher for up to ten more years, reaching their peaks in the year 2018.
"What, has Larry lost his marbles?" you ask. "Gold, oil and many other commodities are getting crushed!"
Well, mark my words: The pullbacks you're now seeing in many natural resources are nothing more than normal, healthy bull market retracements. A chance for prices to consolidate, before heading higher.
Just take a look at any long-term chart of any commodity. You'll see what I mean. Every single one of them remains in a long-term bull market.
Also consider the following ...
So what if gold falls back to $800, or even $700? At $700, it's still nearly triple its price of 2000!
So what if oil falls back to $100, or even $70 a barrel? At $70 oil, it's still nearly 500% higher than it was in 1999!
Despite a current pullback in prices, the demand for oil and other commodities will explode higher.
Get the point? Even if commodity prices were to fall that much, which I do not believe they will, they would merely be making HIGHER LOWS, the classic definition of a long-term bull market.
Put another way, the world is getting used to higher oil prices, higher gold prices (a lower dollar), and higher prices for virtually every natural resource under the sun.
What's more, as commodity prices pull back, demand will explode higher again. Won't you run off to the gas pump if you can buy gas again at, say, $3.25 a gallon versus over $4 today?
You bet you will. And so will millions of others. That will lead to a whole new surge in demand, from much higher lows for the price of gas. The same can be said for gold, copper, heating oil, soybeans, wheat, and corn.
What we have witnessed over the last few years — what I call Phase 1 of the greatest bull market in natural resources, ever — is merely the breakout phase.
From here on out, the world will no longer assume we have plentiful supplies of natural resources. Demand will continually rise in its own right, partly due to the ongoing and rapid emergence of countries all over the world, especially China and India.
And all the while, central banks everywhere will err on the side of inflation, by creating more and more money to chase fewer and fewer goods.
Stay the course with your natural resource investments. They have paid off, and they will continue to pay off.
to all ppl that believe in Doom n Gloom for USA economy
a good article in nytimes
for full article goto http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?_r=2&pagewanted=all&oref=slogin&oref=slogin
Dr. Doom
By STEPHEN MIHM
Published: August 15, 2008
On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund
and announced that a crisis was brewing. In the coming months and
years, he warned, the United States was likely to face a
once-in-a-lifetime housing bust, an oil shock, sharply declining
consumer confidence and, ultimately, a deep recession. He laid out a
bleak sequence of events: homeowners defaulting on mortgages, trillions
of dollars of mortgage-backed securities unraveling worldwide and the
global financial system shuddering to a halt. These developments, he
went on, could cripple or destroy hedge funds, investment banks and
other major financial institutions like Fannie Mae and Freddie Mac.
The audience seemed skeptical, even dismissive. As Roubini stepped
down from the lectern after his talk, the moderator of the event
quipped, “I think perhaps we will need a stiff drink after that.â€
People laughed — and not without reason. At the time, unemployment and
inflation remained low, and the economy, while weak, was still growing,
despite rising oil prices and a softening housing market. And then
there was the espouser of doom himself: Roubini was known to be a
perpetual pessimist, what economists call a “permabear.†When the
economist Anirvan Banerji delivered his response to Roubini’s talk, he
noted that Roubini’s predictions did not make use of mathematical
models and dismissed his hunches as those of a career naysayer.
But
Roubini was soon vindicated. In the year that followed, subprime
lenders began entering bankruptcy, hedge funds began going under and
the stock market plunged. There was declining employment, a
deteriorating dollar, ever-increasing evidence of a huge housing bust
and a growing air of panic in financial markets as the credit crisis
deepened. By late summer, the Federal Reserve
was rushing to the rescue, making the first of many unorthodox
interventions in the economy, including cutting the lending rate by 50
basis points and buying up tens of billions of dollars in
mortgage-backed securities. When Roubini returned to the I.M.F. last
September, he delivered a second talk, predicting a growing crisis of
solvency that would infect every sector of the financial system. This
time, no one laughed. “He sounded like a madman in 2006,†recalls the
I.M.F. economist Prakash Loungani, who invited Roubini on both
occasions. “He was a prophet when he returned in 2007.â€...................................................................
I think US economy is fundamentally sound. There is a healthy correction in housing prices and taming of credit markets. For investors these are good times if you have cash in hand to invest. In the long run stock market should rebound pretty well. I am not sure about the dollar but the decline should be steady. The continuation of globalisation might expose the poverty in US but it is an indespensable part of any economy. The upcoming presidential nominrr will be seen as a key to future direction.
Despite facing a stagnant housing market, and rising unemployment economic growth picked up to 1.9 percent in the spring quarter, aided by a boom in exports and a small boost to consumer spending from tax rebates.
Felt like coming back into this thread and see if my gloom and doom outlook were in line with the whole mess...Damn, if only I had shorted the markets like crazy then (when my anaysis was dead on target). LOLs All those who believed that the economy was still on a path to recovery back in July/Aug, I hope you now see that we are in a Depression like scenario and the economic indicators and forecasts we get readings/results on every day proves we are going to be stuck within this distressful quagmire for a LONG azz period in time. It helps in being an optimist at times but that was just a totally wrong time to be one.
In layman's terms (since everyone knows the Dow), Back in July/Aug when I started this thread, the Dow was around 11,900...It went down to 7,500 a few days ago. A loss of 37% in just span of 3+ months. The spiral is still enroute to continue downwards and as per doomsday analysts, by 2012, putting food on the table would be a bigger issue than buying gifts for the holidays. Not a good sign at all. As far as I observe, it looks like consumerism has seen the last of its days...Too bad for Detroit and the Banks who delved into a million other products instead of specializing and surviving.
Nevertheless, I still want to see a miracle happen and see the economy come skyrocketing from the nadirs it currently is in. Geithner's da man...Atleast, I hope he will turn out to be!!
Below is more reading for the cats on SB whom I told to invest in Gold around the beginning of last week for the long run...Hope you were there then. Looks like everyone's caught onto it now (and more will once they read the below article from today). Its too late to jump into the band-wagon now but still, try and buy it on dips. That would be the best way to still play yourslef into the game without losing out in the sidelines...As all traders prolly know that Being Right in your analysis and not being able to get into a trade that makes money is worse than being totally wrong about the trade and losing double.
Financial Mayhem to Fuel Gold's Next Surge? by Sean Brodrick
Dear Subscriber,
Last week, I wrote about how our oil-rich friends in the Middle East are buying gold hand over fist. It turns out they're not the only ones. The latest figures from the World Gold Council show a frenzy of activity in the most recent quarter.
And gold ended last week with a bullish move to the upside that set off "buy" alarm bells for technical traders around the world.
But you know what? I think the best is yet to come for gold. Because it's likely that the WORST is yet to come for the U.S. economy.
And these economic forces could send investors charging even faster into gold just as fundamental forces also align for a move much higher.
I'll get to some of those fundamentals in just a bit. First, let's look at what Washington's insane clown posse is doing to make gold look good.
I Remember When a Trillion Dollars Was Real Money
1) The Fed Pledges $7.2 Trillion of YOUR Money. Bloomberg News reports that the U.S. government is prepared to lend more than $7.4 trillion — approximately half the value of everything produced in the nation last year — to rescue the financial system, which has been in cardiac arrest since the credit markets seized up.
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How much is that? The pledged money is equal to $24,000 for every man, woman and child in the country. And $2.8 trillion of that has already been spent, according to Bloomberg.
Now brace yourself for the bad news ...
2) The Government Has Already Spent $4.3 Trillion Bailing Out Wall Street. According to CNBC, as of last week, the Federal government had already spent $4.3 trillion in bailouts, from $900 billion for the Term Auction Facility ... to $112 billion bailing out AIG ... to $540 billion backing up Money Market funds ... to $700 billion for the Treasury Asset Relief Program (TARP), and more.
$4.3 trillion — that's more than America spent on World War II, adjusted for inflation. And it's all going down a black hole created by Wall Street bankers.
The Federal government has already spent $4.3 TRILLION in bailouts and has hardly made a dent in the financial crisis.
All that money has to come from somewhere. Investors are stuffing their money into Treasuries with no yield, and the government still has to go out and borrow more. The U.S. Treasury is on course to borrow $1.5 trillion this year, and it's still not enough! Next year's budget deficit will easily top $1 trillion; more than double this year's deficit.
The overall impact of what the bailout will cost ultimately should be very negative for the U.S. dollar ... and that should be bullish for gold.
3) Wall Street Is Probably Going to Need $Trillions More! The financial crisis is really the death of a thousand cuts. Let's take the Citigroup fiasco as an example. You may have heard that Citigroup is getting a $20 billion equity injection on top of the $25 billion it got in October.
But Citi will also carve out $300 billion in troubled assets, which will remain on its balance sheet.
The first $37-$40 billion in losses on those assets will go to Citi.
The next $5 billion in losses will hit Treasury.
The next $10 billion in losses will go to the FDIC.
Any more losses will go to the Fed.
These assets are crap-tacularly bad, so basically Uncle Sam is on the hook for another $260 billion in assets, in addition to the $45 billion in liquidity poured onto the desert of Citi's balance sheet.
And do you notice that the clowns on Wall Street are balking at giving Detroit a $25 billion bridge loan to save America's auto industry (and prevent a chain of dominos as all of the Big Three's suppliers, finance units and vendors go belly up) but Citi — a zombie of a bank that is probably lurching towards failure — gets $45 billion without even a debate.
That brings me to point #4 ...
#4) Obama's Administration: More of the Same? Treasury Secretary Hank Paulson has set the bar pretty low as he limbos past barriers of logic and fairness to bail out his fat-cat friends. So you might think that the new administration, and Obama's nomination for Treasury Secretary, New York Fed President Tim Geithner, would be a welcome change from the crony capitalism at work now.
By embracing Geithner, President-elect Barack Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner and Ben Bernanke. News reports have already documented the ties between GS and AIG, and the backroom machinations by Paulson to get the deal done. This scheme to stay AIG's resolution cannot possibly work and when it does collapse, Barak Obama and his administration will wear the blame due through their endorsement of Tim Geithner.
Read the whole thing. If Whalen is right, the crisis of confidence already shaking the financial markets is nothing compared to the tsunami of trouble that will follow.
Is Tim Geithner – President-Elect Obama's choice for Treasury Secretary – a welcome change or more of the same?
And What If the Doom-Sayers Are Wrong?
I'd be happy — very happy — if financial calamity is averted. But then we'll still have to deal with a system thrown off balance by trillions of dollars in newly created money. The hundreds of billions of dollars in a new stimulus package for Main Street — Obama's job #1 when he gets into office — will be icing on the inflationary cake. Once you start flooding money into the system, it's very difficult to know when to stop. We are in deflation now, sure, but I think government-fueled inflation is sure to follow.
That Brings Us to Gold And the Dollar
The U.S. dollar has its problems, but so far it has been winning a beauty contest in a leper colony. Emerging markets are falling into a ditch. Europe's economy is in the tank — Germany's business climate has dropped to the lowest level in over 15 years — and the European Central Bank will probably lower its benchmark interest rate by at least 75 basis points at its next meeting on December 4.
So far, the U.S. dollar has not been shaken by the massive amounts of bailout and stimulus money that Washington is throwing at America's problems. But again, $7.4 trillion is real money. And the financial world may be waking up to the fact that, no matter how many hundreds of billions of dollars you throw at companies like AIG and Citigroup, it's good money after bad.
Last week, the euro/U.S. dollar currency pair barely budged even as stocks sold off sharply. This is a change from recent months, when the euro had come under pressure as equities sold off.
I don't think the mighty U.S. dollar's bull run is over. But the U.S. dollar could move lower as it consolidates its recent gains.
And downward pressure on the U.S. dollar would only add to upward pressure on gold, powered by fundamentals.
Gold's Fundamentals Are Shining Even Brighter
I covered some of those bullish fundamentals last week, including new and massive buying in the Middle East, rising demand for gold in China in the first six months of the year, and a downward trend in global gold mine production.
And just last week, we got the latest third-quarter figures on global gold demand from the World Gold Council. Here are some of the highlights ...
Global demand rose 18% to 1,133.4 metric tonnes from 963.3 tonnes a year earlier.
In dollar terms, the jump in demand was even bigger. Dollar demand for gold reached an all time quarterly record of $32 billion in the third quarter, a whopping 45% higher than the previous record ... set in the second quarter.
Identifiable investment, which includes purchases through exchange traded funds and of bars and coins, climbed 56% year over year to 382.1 tonnes.
Retail investment blasted off. It rose 121% to 232 tonnes in the third quarter, with strong bar and coin buying reported in Swiss, German and U.S. markets. Gold inflows into ETFs surged to a record 150 tonnes. Gold ETFs added to their treasure troves at a rate that was 7.5% higher than the second quarter and up 31% from a year earlier.
Jewelry demand gained 7.6% to $18 billion. Jewelry demand in India soared by 65% in dollar terms. The Middle East, China and Indonesia all saw jewelry demand in dollar terms rise by 40% (10% to 15% in tonnage terms).
Sales to India, the world's largest gold consumer and jewelry buyer, jumped 29% to 249.5 tonnes from 190.8 tonnes. Meanwhile, demand increased by 18% in China and 15% in the Middle East.
If there was a party pooper for gold, it was the United States. U.S. demand for gold jewelry dropped 9% in value and 29% in tonnage terms. Great Britain also saw its demand slacken by 5% in value and 26% in tonnage terms.
In all, global consumer demand for gold rose 31% from a year earlier to 250 metric tonnes.
So we have this combination of forces: Powerful fundamentals on the one hand, and the potential for more financial chaos on the other. Put them together and you can see that gold could go much higher.
Gold's fundamentals and the potential for more financial chaos make the yellow metal your best bet for profits going forward.
I'd expect some overhead resistance around $900 an ounce. If gold can break through that level, it could be on a rocket ride for the New Year.
Add Some Leverage To Your Gold Picks
Gold's path higher will not be a straight line. In fact, I expect some corrections that could knock the yellow metal right on its shiny butt. But that's short term. Longer term, gold should march higher.
The way things are going in Washington, I like physical gold, and silver, too. Certainly, with the holidays around the corner, gold is the gift you don't have to make excuses for ... and, as the old timers remind us, it can always pay your way to sneak past the border guards.
Last week, I talked about two funds that hold physical gold, the SPDR Gold Shares ETF (GLD) and the Barclays iShares Comex Gold Trust (IAU). They are fixed at 1/10th the price of gold, minus a small amount to account for fees.
That means if gold is trading at $800 an ounce, you can buy the GLD or the IAU for about $80. And they are backed up by gold bullion in a vault.
To them, I would add the PowerShares DB Gold Double Long ETN (DGP). It targets TWICE the return of the Deutsche Bank Gold Index, or basically twice the short-term percentage move in gold.
In these fast and furious markets, a leveraged fund is not for the faint of heart. But it can give you extra firepower for when gold takes off to the upside.
USD still in speculation to get stronger due to the even worse state the the EU is in...One thing that still defies all fundamentals: Why is the JPY still so damn strong? IMO, the massive interventions that the Japanese Reserve Bank did back in the days is coming to haunt them now...Its the US Feds' turn now to save Detroit and artificially inflate the JPY so that Toyota/Honda/etc would not appeal as much financially anymore to the global car buyers. As in theories, anything's possible in this current depression scenario we're mired in, so I surely cannot rule even the whackiest theory that anyone may have being wrong.
Dear Subscriber,
Fortunately for us, U.S. banks loaned only $500 billion to emerging markets over the past few years. Japanese banks loaned them less; only $200 billion.
But European banks loaned them a whopping $3.5 trillion — five times more than the U.S. and Japan combined. Amazingly, the loans to those countries were so large they're the equivalent of a whopping 21% of their Eurozone's total GDP, according to Bank for International Settlements. And when you look at individual countries, the numbers are even larger:
In Sweden, banks loaned an amount equal to 25% of that country's GDP ...
Swiss banks loaned the equivalent of 50% — fully HALF — of Switzerland's total GDP ...
And Austrian banks loaned an amount equal to 85% that nation's GDP — with 80% going to the countries in Eastern Europe that are now suffering the greatest economic pain of all!
Now, these emerging markets are being squeezed mercilessly. Investors are fleeing. Credit is as rare as hens' teeth. Exports are slumping and income is vanishing. In fact, not one but TWO major crises are now hammering these emerging nations:
First,sinking exports. Over the last few years, the historic economic growth in emerging markets like Ukraine, South Korea, the Czech Republic, Poland, and others was driven almost entirely by demand for their exports from the U.S. and Europe.
Now, with the U.S. and Eurozone economies sliding, that demand has started to evaporate. And because these countries have little domestic demand to drive their economies, they've suddenly been thrown into a struggle for their very survival.
Second, plunging oil. As the economic crisis has slashed oil prices by nearly two-thirds, oil-producing emerging nations — Russia, Venezuela, Ecudor and others — are suddenly starving for cash to pay their bills.
Combined, these two events are now conspiring to set off a chain reaction that will bring the biggest creditors to these emerging markets — such as Europe and the UK — to their knees.
Tiny Ecuador: The Canary in the Coal Mine
When the history books are written, two key dates will be cited as moments when critical warnings were clearly telegraphed, duly recorded and promptly ignored until it was too late:
Key Date #1: Thursday, November 13. Nineteen days ago, the government of Ecuador failed to pay interest on bonds it had sold to investors. Citing plunging oil revenues, the government postponed its interest payments for a full month.
Key Date #2: Monday, December 15. Thirteen days from today, Ecuador must make those interest payments plus interest for the month of November. If it fails — if Ecuador defaults on its government bonds — it could be the first domino in a chain reaction of government debt defaults that will sweep the globe.
Is Ecuador a big player? Of course not. But it's merely the first one.
As you read this, governments throughout Asia and Europe are facing similar circumstances: Foreign demand for the products they produce is virtually non-existent ... their own citizens are unable to buy the products their factories produce ... and even oil producing nations are starving for cash as energy prices crater.
Russia is now begging China for a $25 billion loan to save its cash-strapped energy companies. Its foreign currency reserves have plunged $122.7 billion — a full 21% — in just 3 ½ months. Foreign investors are stampeding for the exits.
A few days ago, leaders from 21 nations, the International Monetary Fund (IMF) and three other international organizations attended an emergency, two-day summit to address the catastrophe among emerging nations. Japan pledged $100 billion for emergency loans to the governments of South Korea, India, Indonesia and other economies and urged other potential donor nations to do the same.
Now, as these once-emerging countries sink into depression, those loans are beginning to go sour. European banks are ALREADY getting hammered for huge loan losses — and investors who own their shares are ALREADY getting slammed. My forecast: You're going to see ...
Huge loan defaults in emerging markets like Ecuador, Hungary, Ukraine, and Argentina ...
Massive losses and even outright failures among Europe's largest banks ...
Panic selling on stock exchanges throughout the Eurozone ...
A massive flight to safety — OUT of euros ...
Windfall profits for investors who know how to profit from the euro's plunge.
Thank you Samsara bro for bringing out this topic.
Firstly, the bail out has hit staggering $8.5 Trillion according to the Bloomberg. Yea so please don't be stuck with the initial $800 billion dollars.
Finally some people are now waking upto the reality. I was called a kook and conspiracy theorist back when I was supporting Dr. Ron Paul who was running for president. I was on top of my lungs asking my American counterparts to vote for Dr. Paul and help him abolish the Federal Reserve, to bring back the Gold Standard and eliminate the debt based fiat currency like Dr. Paul wanted. The root cause of the current crisis is none but the Federal Reserve.
Long time ago I understood the Money Mechanics of the private central bank - the Federal Reserve, how they create money out of thin air, loan that money to the U.S government and collect the interest rate through our INCOME TAX but the Principal always remained as a debt and all these money goes back straight back to the International Bankers who owns the Fed. I learned that how Fed can inflate and deflate the economy by controlling the Interest rate and the price (ironically my brainwashing Kenyesian Economics degree taught me that it was all good and that Fed was a Government Institution.). Until Bretton woods, the U.S still had currency backed by Gold but scumbag Richard Nixon unilaterally closed the Bretton woods system in 1971.
Now, they are setting a Global Central Banking System and possibly a one world currency, just another step toward the one world government. Everything has been engineered. Nothing was coincidental or accidental. You just have to look back and study how the Great Depresion of 1929 was orcastreted. Please don't go and read wikipedia to find out what happen in 1929. I suggest you read "The Creature from Jekyll Island" for the real insight. International Bankers and their minions will fulfill their dream of New World Order.
Yes, Gold and Silver is the real money, not the fiat dollar. Buy gold. The U.S dollar will go down the drain within few years like in the Weimar Republic and Zimbabwe. The Iranians just bought some 75 billion worth of gold !! Saudis are into it.
Martial law and the Police State is the beginning of the end in USA. How many of you know that 3000 U.S soldier is currently deployed within USA under NorthCom and that additional 20000 U.S soldier will be deployed for Homeland Security within 2011, violating the Posse Comitatus Act. Obama is promising 1 million civilian army ! They all know about the impeding riots that will hit the streets of US, once the people wake up what's going on in this country. USA is turning into third world country. Atleast we Nepalese are accustomed to living in such world.
I am not in a position to invest in gold. I will probably be standing on a food ration line in Manhattan in 2012, unfortunately.
Please watch this very important video that I posted. Good luck and good night !
Nassy Nas, my free market brother in arms (not of the pics u post though ). Yeah, 700Billion in economics terms would defn be more than that. Taking the money multiplier into effect, it could be 9 times as much and some economists say that the MM effect could be as high as 11. That means we can expect the bail out to exponetially rise to the tune of around 6.3 to 7.7 Trillion!! And now with the auto-industry bailout looming we can expect the Real figure to easily topple 10 Trillion!!! BTW, Congress will surely pass the auto bailout...It's just a matter of WHEN. Who on earth would let millions of jobs in the auto industry and the businesses that depend on this industry to flounder? Detroit alone is expected to lose around 1.1 million jobs if the Big 3 files for bankruptcy protection.
More woes for the EUR and good news for our Nepali brethren who send remittance back home...The USD though over-bought in the short term, I believe that it still has all the technicals to support its uptrend and continue gaining steam as per its current momentum (the trend has clearly changed now). Just 4 months ago, 1 USD = 62 NPR, today, its 80 NPR. At this rate, a 90 is not an impossible target anymore. Read the below and manage your USD shorts or it could bite you in the azz hard!!
There's been a strong move against the U.S. dollar this week. But am I envious of the euro right now? Definitely not.
Technically the dollar is extremely overbought. So I expect a decent, near-term correction upward in the euro. However, according to my analysis, the euro is set to weaken substantially against the U.S. dollar over the next several months.
That view is based on three long-term global economic themes in place that should continue to hammer away at the Eurozone economy and expose the flaws in the European Exchange Rate Mechanism.
Threat to the Euro #1: Certain emerging European economies, not already part of the European Monetary Union (EMU), are looking at the euro and kicking themselves.
Why?
Before a country can adopt the Euro, it must gain acceptance into the Eurozone.
They didn't make the effort to adopt the euro as their currency of choice.
You see, a country must first gain acceptance into the Eurozone before it can adopt the euro.
And back when everything across emerging markets was all hunky-dory, acceptance would have been relatively painless. Growth wasn't a concern. Yet emerging nations stuck with their existing currencies, which had no trouble maintaining or even gaining value.
But times are changing. Global demand is waning. And some economies in Central and Eastern Europe are wailing for help. Their lopsided growth model — over-reliant on global capital and under-reliant on domestic demand — is keeling over on them. And their currencies can't support the unexpected weight.
Here's a comment from someone who agrees with me: Andras Simor, president of the Hungarian Central Bank, said recently, "Hungary's scope for interest rate cuts is limited because of the risk of a very significant devaluation of the forint."
So it's no surprise to me why the average Hungarian citizen would rather be holding the euro instead of the forint.
The specter of the Central European countries being inducted into the system has many worried, including me.
Some analysts have looked at the recent clamoring by Central European economies to adopt the euro as a sign the Eurozone is becoming a safe haven.
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True. Relative to Central Europe, the larger countries in the Eurozone are safe. But, this excerpt from a recent story carried in Bloomberg sums up the dilemma the Eurozone is facing:
"The dilemma for the European Central Bank (ECB) is that, while the desire to join the euro region is greater, qualifying is becoming harder: Membership requires countries to meet targets for inflation, budgets, currencies and interest rates — a tall order in the middle of a recession.
"Allowances have been made before. Greece assumed membership in 2001 on data that proved to be fudged. Inflation rebounded in Slovenia after it joined last year.
"'The consequences of similar compromises would be greater now,' says Paul Donovan, an economist at UBS AG in London. 'Enlargement would expose the euro area to more bank failures and make it harder to manage a one-size-fits-all monetary policy.
"'While smaller countries outside the euro are more willing to join as a result of the crisis, the rest of the euro zone may be less willing to contemplate their admittance,' he says.
"'A widening gap between the region's weakest and strongest economies would add to concern about a breakup. Harvard's Feldstein says individual nations could still leave the euro bloc if they find monetary policy too tight or fiscal rules too onerous.
"'The global economic crisis provides a severe test of the euro's ability to survive in more troubled times,' he wrote in a column last month. He said the growing gap between interest rates on German bonds and on those of more heavily indebted Italy suggests investors 'regard a breakup as a real possibility.' The gap, or spread, has more than quadrupled in a year to 1.4 percentage points."
No doubt acceptance into the union is the best path for developing nations of Central Europe. But acceptance of these countries and the impact on the euro are quite another thing.
Threat to the Euro #2: Eurozone's Banks Overexposed to Risk
Even without the additional baggage of adopting Central European developing countries, Europe is already tied tightly to them through its huge exposure throughout the zone's banks.
Among Eurozone member countries, Austrian banks happen to be the most overexposed to emerging market loans. In fact, their current level of exposure sits around a staggering 85% of their GDP.
I don't think the global economy will find a way to rebound quickly. That means this massive exposure has the potential to wreak havoc on Austrian banks ... as well as those in a similar but somewhat less severe position.
Austria recognizes the kind of trouble they could be in for, so they may look to the EMU for assistance. But not all members may want to come to Austria's aid.
So while it's a major concern, the EMU lacks credible cross-border policies to handle such problems. And should EMU officials flounder, they could end up reading requests from members asking to get out of the deal.
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The result: An unstable monetary union that absolutely cannot be good for the euro.
Threat to the Euro #3: Rattled Consumers Will Need Some Serious Time to Heal ...
The fallout from the credit crisis is making people think twice about handing over their hard-earned cash. Part and parcel to the downfall of Emerging Market growth models is the developing trend (in the developed world) towards saving. Gone are the days when consumers were willing to dish out cash for any old item.
Households are being hit on all types of investments they've made, including real estate, stock purchases, insurance, etc. This undermines consumer wealth and hugely influences confidence and behavior.
There's little doubt consumers are pulling back on their spending rather quickly. The numbers are there to prove it. And there's a major divergence that proves a change in attitude. Even while disposable income has been rising at a healthy pace over the last couple quarters, consumption is falling. As an economist would say, the marginal propensity to consume is declining.
The reserve currency most often benefits in a deflationary environment.
This is why I believe the fundamentals globally won't change quickly. The frivolous spending and insatiable appetite for stuff won't return after a few banks get plucked out of the water, or the Big Three get a handout, or people start slaving over superfluous bridges and aqueducts. Rattled consumers need time to lick their wounds. And deflation is currently the bigger near-term threat.
The reserve currency most often benefits in such a deflationary environment. This is why I expect we'll see the U.S. dollar benefit and the euro suffer.
What are your first memories of when Nepal Television Began?
TPS Re-registration case still pending ..
Basnet or Basnyat ??
nrn citizenship
Sajha has turned into MAGATs nest
Nas and The Bokas: Coming to a Night Club near you
डीभी परेन भने खुसि हुनु होस् ! अमेरिकामाधेरै का श्रीमती अर्कैसँग पोइला गएका छन् !
3 most corrupt politicians in the world
अमेरिकामा बस्ने प्राय जस्तो नेपालीहरु सबै मध्यम बर्गीय अथवा माथि (higher than middle class)
if you are in USA illegally and ask for asylum it is legal
Travelling to Nepal - TPS AP- PASSPORT
निगुरो थाहा छ ??
ढ्याउ गर्दा दसैँको खसी गनाउच
Poonam pandey - death or suicide?
Doctors dying suddenly or unexpectedly since the rollout of COVID-19 vaccines
काेराेना सङ्क्रमणबाट बच्न Immunity बढाउन के के खाने ?How to increase immunity against COVID - 19?
lost $3500 on penny stocks !!!
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Nas and The Bokas: Coming to a Night Club near you
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Dear Subscriber,
). Yeah, 700Billion in economics terms would defn be more than that. Taking the money multiplier into effect, it could be 9 times as much and some economists say that the MM effect could be as high as 11. That means we can expect the bail out to exponetially rise to the tune of around 6.3 to 7.7 Trillion!! And now with the auto-industry bailout looming we can expect the Real figure to easily topple 10 Trillion!!! BTW, Congress will surely pass the auto bailout...It's just a matter of WHEN. Who on earth would let millions of jobs in the auto industry and the businesses that depend on this industry to flounder? Detroit alone is expected to lose around 1.1 million jobs if the Big 3 files for bankruptcy protection. 
