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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: jim_p who wrote (7563)	1/5/2008 8:49:31 PM
From: NOW	Respond to of 50720

what makes you sure they just wont pull the rug out?

To: jim_p who wrote (7563)	1/8/2008 5:10:15 AM
From: SliderOnTheBlack	Read Replies (4) \| Respond to of 50720

jimp re: Credit Crisis There are some amazing things going on in the financial world... Citibank goes from being a subprime lender – to becoming a subprime borrower – with it’s 11% convertible deal with the government of Abu Dhabi’s investment arm - ADIA. 11% ! You could of been 12 months out of bankruptcy, with a foreclosure, have a 520 credit score, and lie about your income and your job...and still get a rate better than 11% from Citi itself -- just a few months ago. My how things change. And we've always looked at all these foreign countries accumulating massive foreign currency reserves as foes...and actually, they've now become our friends bailing out our banks and financial system. Friend, or still foe? (more on that later). In the past two years, sovereign wealth funds have invested over $77 billion in US & European banks and private equity firms. Notably… -- The Abu Dhabi Investment Authority invested $7.5 billion for a 4.9 percent holding in Citigroup. -- China Investment Corp. bought $5 billion of Morgan Stanley. -- Singapore’s Temasek Holdings also invested $4.4 billion in Merrill Lynch & Co. with an option to buy an additional $600 million of stock. -- The Government of Singapore Investment Corp invested $9.7 billion investment in Switzerland's UBS. -- Singapore-based Temasek Holdings invested $9.2 billion, buying an 18 % stake in Britain's Standard Chartered bank. Now what's scary is this... LTCM was a $4.5 billion dollar event. And we've had an LTCM equivalent, or better, virtually every couple of weeks. It makes you wonder how in the hell the market has held together and not gone into complete and total free-fall? The US Federal Reserve initially estimated U.S. subprime credit losses at $50 billion. And Hank Paulson assured the markets that the worst had passed and everything was under control. Then the bottom fell out of mortgage bonds, SIV’s imploded and the markets completely seized up. And Goldman made 100's of millions shorting subprime - thank you Hank. Now estimates on subprime losses have risen to between $200 and $400 billion. And it’s no longer just subprime mortgage loans. Now ramping delinquencies and rising losses in consumer debt such as credit cards and auto loans, have taken credit loss estimates up to between $400 and $800 billion. To put that in perspective: Japan's losses during it's banking crisis that led to a 17 year bear market in it's stock market and property values - was created by a $700 billion loss. Can you say Nikkei deja vu? But, here's the kicker... If losses reach the $600 billion level, it would mean that as much as 1/3rd of the “tier one” core banking capital of many US and European banks would be vaporized. ...and FASB 157 lies dead ahead. You would think that Enron and "off balance" sheet risk would be fresh on the memories of the market, but evidently not, because we've got about 400 Enrons afloat right now. The original SIV bailout was proposed at $80 billion. Now analysts are saying that it will take $300 billion. Bear Stearns CEO Jimmy Cayne just joined the unemployment line today. Given the losses, the CEO shakeouts, and the infusion of capital from SWF's -- this is truly becoming a historic market event. The key here is patience. Back in August I thought Goldman would separate itself from the pack on the initial meltdown and it did. Then Fannie & Freddie seemed to defy gravity as the rest of the financials went into meltdown and they become a sitting duck short. I think shorting the rallies off of each Fed cut & market rally is "the trade" for now. There are lots of manipulations and interventions. I think the one thing that traders are missing vis a vis the arguement on whether central banks are really adding liquidity here - is two things. The cloak of anonymity on both "who" comes to the discount window and "what" the Fed is taking as collateral. If central banks are taking illiquid assets off the hands of banks and replacing it with freshly minted cash...they most certainly are adding liquidity and lots of it. The wild card is the role that these SWF's (sovereign wealth funds) will play in the bailout. They are sitting on over $2 trillion of total capital. Think about how much capital Wall Street insiders have sucked out of not just the American citizenery, but of our public companies as well. The have sucked the lifeblood out of our economy, our financial system, our housing market and now out of many of our public companies. This has been an amazing transfer of wealth...and we are sitting at a historic tipping point both economically and politically here in the U.S. Think about how precarious the financial system is right here and now... then, think back on how the Fed created and profited from the great Depression... ...by pulling the plug on Wall Street, contracting credit and bringing the entire house of cards crashing down. ...once again -- two words...and two thoughts: Deja Vu... When, not if.. Everyone is looking to gold, oil and commodities as a safe haven, but should this contagion move to the next level, investors are going to have to institute "short" trades, not just hedges in commodities, or currencies to maintain wealth, let alone make money. Think about the fall of the Nikkei from 40,000 to 7,000. Gold up $13 and change as I type... because it knows which side of the "liquidity" debate it stands and it also smells .50 bp coming from "blinky." I guess the "boyz" bidding up Barrick - knew what they were doing (vbg). It's really getting interesting. If we get .50bp from the Fed... Gold will look like Secretariat coming out of the gate! I'm waiting for Bernanke to tell Ron Paul that we shouldn't be worried about he triple digit gold price, because if we adjust the price for inflation... gold would have to be at $2176 to equal the levels of the early 80's...and that gold is thus not signaling inflation, but is actually cheap! (vbg). S.O.T.B.