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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Pogeu Mahone who wrote (10099)	9/28/2008 10:25:27 AM
From: Hawkmoon	3 Recommendations Read Replies (2) \| Respond to of 33421

Yep.. that's the other shoe to drop.. We myopically focus on our own banking excesses without recognizing that European banks are even more highly leveraged. Then combine that with many of them possessing liabilities in excess of their host nation's GNP, and an ECB that, as I understand it, has no charter to provide the same manner of support that the Federal Reserve does for US bank, and you have a recipe for a tremendous disaster in Euroland. And we hear the Chinese gloating about their own financial system, while ranting about the flaws in ours, when it's widely known that many of their banks have issed tremendous quantities of non-performing loans of their own. And they ignore the fact that it was primarily their money, gained by selling stuff into our markets, that purchased many of those mortgage backed securities. All because they didn't want their currency to appreciate. Again.. I think the metaphor still holds.. When the US catches a cold, the rest of the world will eventually catch Pneumonia. So the question is.. Can a quick shot of antibiotics keep this financial "bronchitis" from turning into full blown pneumonia?? Or is this situation really a virus for which, like the cold, has no cure and must be permitted to run its course? Right now, I'm really hoping it's "bacterial" (with the supranational hedge funds and private equity representing the bacteria to be "contained".. ;0) But I have no illusions that it might turn out to be viral. However, the ultimate question is whether the world is going to rely upon the US to be the financial doctor, or is this going to be a combined medical effort? How's that for dragging out a metaphor ad infinitum.. ;0) Hawk

To: Pogeu Mahone who wrote (10099)	9/28/2008 11:42:27 PM
From: John Pitera	1 Recommendation Read Replies (1) \| Respond to of 33421

Hi Zeus, these European and Asian banks are sitting on thousands of credit default swaps that were built into CDO's; and the Credit Default Swaps are not going to get paid. There has already been widespread talk that this US bailout will extend to foreign banks that have conducted a lot of business in the US. That's how this solid wall of storm surge is going to cost several trillion dollars and as Warren Buffet has mentioned repeatedly, these CDO's and then the Credit Default Swaps and other swaps and derivatives are set up in a Daisy chain manner in which the swath of the storm and the fiancial damage just continues to increase exponetially. As Bob Furman has pointed out, we'll need to see a very quick Supra National Agency with heavy participation by the FED, The UK Financial Services Authority; the ECB, The Swiss National Bank, The Bank of Japan..... our buddies in Beijing, the RBA (Aust); Canada etc come to create the workout schedule of this. I have also mentioned the need for this on a half dozen occasions on this thread. This is a failure of the Global financial system and as we have witnessed with AIG and their CDS group of 377 people located in London; coupled with Citi having these billions of dollars of SIV write offs.... again created by unit in the City financial district in London...... London and it's government is every bit as culpable and should have to come up with a bailout on a dollar for dollar ... pound for pound basis. UBS in Switzerland is culpable in this travesty; as are German, Dutch, French; Asian banks in Honk Kong; even Abu Dhabi. The hammer needs to fall hard all of the players. That's why the US Dollar has been so strong since mid July. All of these foreign banking and investment entities need to pay as well. There should be hell to pay if they don't and McCain and Obama should read up on the cliff notes on this and tell Global system the way it will be. The fact, that so many will balk at this and in many other cases just not have the reserves to make the situation right; is the underlying bullish arguement as to why we can see dramtically higher stores of asset value.... Gold, Silver, Crude, Grains, Copper..... et ala. these stores of value can go up dramatically while US real estate goes down or coalesces into a bottoming pattern. Regional US real estate is not fungible; is not transportable and as Art Cashin has famously said..... you want to keep enough gold to be able to bribe the boarder guards ... well it's tough to be able to tuck part of a colonial, a split-level; or a duplex into your overcoat to achieve your fungible liquidity needs when you need to be able to bribe the boarder guards or convert it into something as readily valuable. John edit..... NOW if you have a SKY HOOK... and can readily relocate said real estate assets...... but alas, the SKY HOOK is a story for another day.