Premature Benulation?
While few expect the Fed to announce a rate cut tomorrow -- make no mistake about it... the market wants calming commentary from Bernanke.
FWIW: Today was the single best day for the financials since 2002 and the 4th largest move of all time.
Remember the most basic law of all laws - The Law of The Jungle. The weak will be eaten and the strong will survive. Always have -- always will.
Wells Fargo is walking the talking points...
1. Bumped their rates from 6.75% to 8.% on their 30 year Jumbo Loans.
2. And today -- announced a huge stock buyback.
Goldman and Wells Fargo are strong... they will survive and they most assuredly will eat the weak.
Did you see the CNBC interview this evening with WSJ Reporter Charlie Gasparino and frequent CNBC guest host Vince Farrell ? They were talking about how Bear Stearns was hung out to dry in retribution for their failure to join forces with the rest of the Wall Street Investment banks in the LTCM bailout.
Offshore traders who lets just say... "are loyal to the mothership" were fixing their crosshairs on Bear Stearns weeks ago, as were the boys from Merrill.
I will repeat:
"The script for how all of this will play out... has already been written."
Once again... you must refuse to be spoon fed "inside the box" thinking and analysis.
What's "inside the box thinking and analysis?"
Here's an example:
This chart came from John Mauldin's newsletter. It was reprinted and sent out by Agora today in their newsletters:
The inside the box mindset see's this as proof that the bottom in housing and the mortgage meltdown is still 12-18 months away... and opines continued massive carnage to the markets is neigh.
Those who are willing to shake the box up a bit and look at the numbers from outside the box... see that the Fed has a bread crumb laden path of when to begin cut rates - to forstall all those adjustable mortgage resets.
Coincidentally - the timing could not be better given the ususal 6 month lag effect of rate cuts -- which would align perfectly with the 2008 Elections.
-- whodathunkit?
Now I know... everyone thinks that the Fed will not cut rates because of inflation teetering over 2% and if they do - they'll lose credibility.
Credibility?
The Fed is a PRIVATE BANK.
Let me repeat that in case you didn't understand.
THE FED IS A PRIVATE BANK
Do you really think given the removal of M3, that they're really worried about losing credibility by cutting rates with inflation over 2%?
And what about 18 of the 20 largest central banks who are all inflating their money supply at rates greater than 10%?
Funny we don't hear about the imminent collapse of the Australian Dollar? It's central bank is inflating at 14%. And how about Russia? Bomming market, rich in resources and inflating at double digit rates.
Fact: Central Banks have never quit inflating. They inflated all through the 20 year bear market in gold. And no one ever repriced gold in those 1980 dollars during that timeframe either. Nor will they.
We have had decades of non-stop rampant inflation and simultaneous falling gold prices.
It's one thing to be stuck inside the box... but it's quite another to sit in the corner and stare at the cardboard.
The script for this global rebalancing has already been written and the talking points are already being laid down by everyone from the IMF to Pimco's Paul McCaulley.
China and the entire G-8 are already on board.
Neither China, or Russia are dumping dollars, or amassing gold.
The brakes although late, have been applied to the run-away specultive excesses of the credit markets. Plans are in place. Agreements have been made. Lessons have been learned. And Bear Stearns was up +15% today.
Also, relative the homebuilders and the housing bust. Here's a take from a man who's stood the test of time in markets good and bad -- Bill Miller.
Legg Mason's Miller says unfazed by housing slump
Mon Aug 6, 2007 5:08PM EDT
By Herbert Lash
NEW YORK, Aug 6 (Reuters) - Legg Mason's (LM.N: Quote, Profile, Research) star stock investor, Bill Miller, admits his fund's poor recent performance reflects investments in the battered housing sector and a failure to own surging energy stocks -- but he is unfazed by the U.S. housing slump.
As of Friday, Miller's Value Trust fund (LMVTX.O: Quote, Profile, Research) was down 2.73 percent year-to-date, putting it at the very bottom of similar funds, according to Lipper Inc., a unit of Reuters Group Plc.
Miller, however, defended the fund's holdings in a second-quarter letter to investors.
Investing in an industry or company amid its worst performance in years or decades can, though not always, prove quite profitable if the performance isn't measured in days or months, Miller said.
"The headlines today are all about this being the worst housing market since the early 1990s. Had you bought housing stocks during that previous period of duress, you would have made many times your money and handily outperformed the market over the subsequent decade," he said.
As of June 30, holdings of Value Trust included mortgage lender Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) and home builders Centex Corp. (CTX.N: Quote, Profile, Research), KB Home (KBH.N: Quote, Profile, Research) and Pulte Homes Inc. (PHM.N: Quote, Profile, Research)
All four stocks, which made up about 6.2 percent of Value Trust's portfolio, touched 52-week lows last week.
While clients may question the wisdom of holding housing stocks during the industry's worst market in at least 15 years -- a market where problems may linger until 2009 -- Miller said: "We actually try to buy low and sell high, and you don't buy low when everything is great and the headlines reflect it."
Miller acknowledged his move into home builders in late 2005 and 2006 was too early. "And if you are early enough that is indistinguishable from being wrong," he said.
As for energy and related stocks, which have been the best-performing sector over the past five years -- only in the 52 weeks ended June 30 did other sectors do better -- Miller again acknowledged he was mistaken: "It is said the only thing worse than being wrong is staying wrong."
Miller, who has noted in the past that energy can suffer sharp declines as cycles change, said it will soon be clear if a long cycle is coming to an end or whether there has been a secular change and energy prices don't decline."
And remember... Carl Ichan was looking to take out homebuilder WCI at $22 just weeks ago....and today it trades at $6 bucks.
Would that qualify for "blood in the streets?"
Got your waders?
Also: Berkshire Hathaway just reported a 33% surge in earnings.
Does that sound like the market, or the US economy is sinking into the abyss?
Don't throw out the baby with the bath water. The slime is being wrung out of the system. And US corporations are still flush with cash and low on debt....plus 45% of S&P earnings now come from abroad.
Remember back in 1997-98 during the last subprime meltdown? How long did it take for the markets to race to new all-time highs?
California survived the bust of their housing bubble then...and they and Florida will survive this one as well.
The single most significant factor in this market - is the new and unprecedented level of cooperation amongst global central banks.
The Bank of Japan is now in essence the 13th Federal Reserve District and the IMF is now walking Paulson's talking points.
These guys have a plan and have their ducks in a row.
You need to respect that and patiently wait for mistakes to be made - then seize the discrpancies between price and risk.
For gold -- the key was to already have been pre-positioned.
And this is how you got pre-positioned:
Following that chart and that gameplan - has allowed you to either accumulate more and more gold...with less and less portfolio exposure. Or, to have accumulated significant profits directly into the face of a 15 month long correction.
Don't get rid of your gold.
Get rid of your permabullism.
Respect your opponent and use their gameplan against them.
Always take what they give you...especially when they give it to you - again, and again, and again - on a silver platter.
Get outside the box... and stay there.
SOTB
PS:
Be carefull out there... ease into positions. While the dust has settled a bit... it doesn't mean tomorrow will be all sunshine and rainbows. |
