I am so skeptical of this rally tonight, I even question the validity of the alleged big increase in Chinese exports that was announced this weekend. Who on earth is increasing their imports? U.S. imports were down in the last report, and certainly China's largest customer, Europe, has not been ramping up its purchases. Congrats and good luck to the nimble traders who went into the weekend well-positioned.
This strikes me as Europe's version of America circa four years ago. So I'm into a USA all the way investment posture.
Showing posts with label bailout. Show all posts
Showing posts with label bailout. Show all posts
Monday, June 11, 2012
Sunday, May 9, 2010
Gold and the European Bank Bailout
Of course Greece per se is not getting "bailed out". It is the lenders to Greece that are going to be made whole, for now. The mechanism is more debt creation and more leverage. It is a hair of the dog strategy that is fundamentally bullish for gold.
Gold's 50-day moving average is now decisively above its Jan. 21 high, and the shape of the curve is now concave upward; then it was convex and pointing down. The 150 day and longer moving averages never stopped moving up. Gold remains the only major asset for which the technicals and fundamentals (such as gold has any fundamentals) remain bullishly configured. Trying to pick the top of any asset in such condition is impossible. Think NASDAQ 199-. Why not a top at 3000? We're near 2000 a decade later. So 3000 was lunatic. But we went 2000 points and one year later. Meanwhile gold measured against the Dow or housing prices is barely in a bull market at all.
The more speculative precious metal is silver. We shall see on that one.
However, investing or hedging in gold is not easy. The gold fund "PHYS, the Sprott Physical Gold Trust, burst on the scene just a few months ago and is now at a 20% premium to NAV. Such is the anxiety over whether the GLD fund actually has possession of all its gold.
Relative to PHYS, the now smaller but better established fund Gold-Trust ("GTU") is at a mere 10% premium to NAV.
Neither of the above funds can be easily (or at all) sold short and have no linked options. So they are to buy and hold, or trade.
Back to silver. This site has mentioned Silver Bullion Trust several times. Very recently it sold at a discount to its silver. The price has now markedly outperformed the metal and is at about a 7% premium to NAV. There is probably a few percent more outperformance in this fund based on current bull market premia for GTU, the associated Central Fund of Canada ("CEF"), and PHYS, but investors and speculators are now buying silver with SBT.U (Toronto, and associated bulletin board SVRZF in the U. S.), not undervaluation any more.
As far as traditional stocks go, they don't really count anymore.
Copyright (C) Long Lake LLC 2010
Gold's 50-day moving average is now decisively above its Jan. 21 high, and the shape of the curve is now concave upward; then it was convex and pointing down. The 150 day and longer moving averages never stopped moving up. Gold remains the only major asset for which the technicals and fundamentals (such as gold has any fundamentals) remain bullishly configured. Trying to pick the top of any asset in such condition is impossible. Think NASDAQ 199-. Why not a top at 3000? We're near 2000 a decade later. So 3000 was lunatic. But we went 2000 points and one year later. Meanwhile gold measured against the Dow or housing prices is barely in a bull market at all.
The more speculative precious metal is silver. We shall see on that one.
However, investing or hedging in gold is not easy. The gold fund "PHYS, the Sprott Physical Gold Trust, burst on the scene just a few months ago and is now at a 20% premium to NAV. Such is the anxiety over whether the GLD fund actually has possession of all its gold.
Relative to PHYS, the now smaller but better established fund Gold-Trust ("GTU") is at a mere 10% premium to NAV.
Neither of the above funds can be easily (or at all) sold short and have no linked options. So they are to buy and hold, or trade.
Back to silver. This site has mentioned Silver Bullion Trust several times. Very recently it sold at a discount to its silver. The price has now markedly outperformed the metal and is at about a 7% premium to NAV. There is probably a few percent more outperformance in this fund based on current bull market premia for GTU, the associated Central Fund of Canada ("CEF"), and PHYS, but investors and speculators are now buying silver with SBT.U (Toronto, and associated bulletin board SVRZF in the U. S.), not undervaluation any more.
As far as traditional stocks go, they don't really count anymore.
Copyright (C) Long Lake LLC 2010
Monday, March 30, 2009
Auto Makers, Banks, and Bailouts
30 years ago, the Federal Government "bailed out" Chrysler with a loan. Taxpayers eventually made some money on that loan.
Thus began the age of bailouts, with bondholders of the poorly-run bank Continental Illinois being made whole due to years of hard work by the Feds after the bank collapsed, then the bailout of Mexico's bondholders in 1995 in and end-run around Congress, the bailout of Wall Street in the 1998 LTCM collapse, etc.
Now we read this about Chrysler (WSJ):
The government said it would provide Chrysler with capital for 30 days to cut a workable arrangement with Fiat SpA, the Italian auto maker that has a tentative alliance with Chrysler.
...
If the two reach a definitive alliance agreement, the government would consider investing up to $6 billion more in Chrysler. If the talks fail, the company would be allowed to collapse.
Just as with Citigroup and its ilk today, one wonders if it would not have been better if Chrysler had been left to die in 1979. Think of how many investors have lost how many dollars propping this corpse up for the last three decades.
(EBR might praise the administration for making a tough decision on the automakers, except that at least these companies actually make products people use, employ skilled labor, and are victims of the worst economic banana since the Great Depression; whereas those who caused this banana are receiving trillions of dollars in aid. While in the bailout mode, why not give a little less to Big Finance and more so the automakers can ride out this downturn, Mr. President?)
It is past time for a people-centric financial policy built on equity rather than debt. Policies in that direction will in and of themselves render "banking" what it was in the 1950s, a small utility-like part of the economy without the swagger and pretense of all the "Masters of the Universe" bull----.
Copyright (C) Long Lake LLC 2009
Thus began the age of bailouts, with bondholders of the poorly-run bank Continental Illinois being made whole due to years of hard work by the Feds after the bank collapsed, then the bailout of Mexico's bondholders in 1995 in and end-run around Congress, the bailout of Wall Street in the 1998 LTCM collapse, etc.
Now we read this about Chrysler (WSJ):
The government said it would provide Chrysler with capital for 30 days to cut a workable arrangement with Fiat SpA, the Italian auto maker that has a tentative alliance with Chrysler.
...
If the two reach a definitive alliance agreement, the government would consider investing up to $6 billion more in Chrysler. If the talks fail, the company would be allowed to collapse.
Just as with Citigroup and its ilk today, one wonders if it would not have been better if Chrysler had been left to die in 1979. Think of how many investors have lost how many dollars propping this corpse up for the last three decades.
(EBR might praise the administration for making a tough decision on the automakers, except that at least these companies actually make products people use, employ skilled labor, and are victims of the worst economic banana since the Great Depression; whereas those who caused this banana are receiving trillions of dollars in aid. While in the bailout mode, why not give a little less to Big Finance and more so the automakers can ride out this downturn, Mr. President?)
It is past time for a people-centric financial policy built on equity rather than debt. Policies in that direction will in and of themselves render "banking" what it was in the 1950s, a small utility-like part of the economy without the swagger and pretense of all the "Masters of the Universe" bull----.
Copyright (C) Long Lake LLC 2009
Sunday, March 29, 2009
More on AIG and Geithner as Scammer-in-Chief
Zero Hedge has posted on its own web site and as a guest post at Naked Capitalism some explosive charges regarding the mechanism by which AIG allegedly raped shareholders, with the approval of Mr. Geithner.
The language is harsh and the conclusions appear reasonable, at least to this non-trader in the securities described.
The simplest way to read this is to go to www.zerohedge.blogspot.com:
SUNDAY, MARCH 29, 2009
Exclusive: AIG Was Responsible For The Banks' January & February Profitability
Zero Hedge is rarely speechless, but after receiving this email from a correlation desk trader, we simply had to hold a moment of silence for the phenomenal scam that continues unabated in the financial markets, and now has the full oversight and blessing of the U.S. government, which in turns keeps on duping U.S. taxpayers into believing everything is good.
The above is enough of a teaser. Non-technical people can skim over what they don't understand. There is a layman's explanation later after a bunch of technical stuff.
Copyright (C) Long Lake LLC 2009
Just Following Orders
"Moral hazard" in financial systems refers to such things as encouraging risky behavior to recur by bailing out those who take risk and lose. Here is a new form of it. David Kotok, chief economist for Cumberland Advisors, a large investment firm, writes a column today ("PPIP: Heads or Tails?) in "The Big Picture" which describes the Obama-Geithner latest bailout plan (The "PPIP") for the financial community in these summary terms:
As a money manager for our clients, the Cumberland firm will look at PPIP and may use it on behalf of clients after we have reviewed an official form of an offering document. As a private citizen concerned about my country and its policy direction, I think this reeks and stinks.
I understand his reasoning. Unfortunately, it is that of an underling and a weasel. Presumably Mr. Kotok needs a job. Otherwise he should resign rather than participate in what he knows is a reeking and stinking rip-off of America.
Copyright (C) Long Lake LLC 2009
Sunday, March 22, 2009
Krugman: Obama Blowing His First and Last Chance to Set the Banking System Right
In the continuing effort to ignore the reality that the Fed/Feds have simply given tens of billions of dollars to AIG's gambling partners, many of whom were foreign bank(ster)s, apparently Sec'y Geithner is going to announce tomorrow rather than next month the administration's plan to give more money away to banks (and therefore to their employees, no matter how much they claim to hate their executives).
If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.
But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls.
Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.
But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets. Actually, that’s not quite it: the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don't think I can finish this on a Times blog (expletive deleted)]”
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
Why, I thought over a soy cappuccino, not make this a Krugman morning doubleheader? So, for those who don't have terminal bailout fatigue, here are some comments from his "Conscience of a Liberal" blog from yesterday on this plan, the title of which, for those who would like to read the whole post, is un-confusingly titled "More on the bank plan".
Why was I so quick to condemn the Geithner plan? Because it’s not new; it’s just another version of an idea that keeps coming up and keeps being refuted. It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September.
So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?
If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.
But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls.
Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.
But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets. Actually, that’s not quite it: the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don't think I can finish this on a Times blog (expletive deleted)]”
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.
DoctoRx again.
So, not only is Krugman horrified, but he has become one of a growing number of bloggers who are blaming the President himself for policies with which they disagree, rather than using such euphemisms as "Team Obama" or claiming that Obama is being given bad advice.
If Barack Obama's honeymoon did not end with last week's AIG public relations disaster, it may well end tomorrow.
Copyright (C) Long Lake LLC 2009
Thursday, March 19, 2009
Shocked and Law . . . and Gentle Ben
Here are some observations on topics of current interest.
First, the AIG mess.
Congress is shocked; the House passed a punitive tax on these bonuses, even though it authorized them just a month ago. From the WSJ:
The legislation was rushed to the floor by Democratic leaders amid a storm of protest among rank-and-file lawmakers over AIG's decision to pay bonuses to hundreds of current and former employees, while receiving more than $100 billion in taxpayer assistance. Approved on a 328-93 vote, the measure would impose a 90% surtax on the disputed payments, effective for bonuses made after Dec. 31, 2008.
"These people are getting away with murder," Ways and Means Chairman Charles Rangel (D., N.Y.) said Thursday during debate on the House floor. "They're getting paid for the destruction they've caused to our communities."
Comment: "These people" are not "getting away with murder". They are just getting paid per contract.
And Congress should be outraged by the entire bailout of AIG's counterparties, who are getting paid massive amounts of money in full despite entering into agreements with AIG even though they knew, or should have known, that AIG had no reserves for. It is Congress that is trying to get away with murder by deliberately avoiding the real scandal.
On the appropriateness of this ex post facto punitive measure:
"Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. ... The sober people of America are weary of the fluctuating policy which has directed the public councils. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community." James Madison, Federalist Number 44, 1788.
Congress hasn't changed much since 1788, has it?
If they want to save money, how about a real debate about why the Afghan War, now in its eighth year, is worth fighting at this time of economic distress at home?
************************************************************************************
The Bernanke '60 Minutes' interview was summarized by CBS. Here are some snippets of CBS' commentary:
The interviewer (Pelley) asked:
"You've been printing money?"
"Well, effectively," Bernanke said. "And we need to do that, because our economy is very weak and inflation is very low."
Comment: Consumer prices are probably 10% higher than they were 2, or at most 3, years ago. That's hardly low inflation. Sure, the worst economy in decades has temporarily caused price declines, but printing money to cure economic slowdowns has never worked. It has been tried at least since Egypt under the Pharaohs and didn't work then. It didn't work for the Romans. It is perhaps even being discarded in Zimbabwe! It won't work here.
When Mr. Pelley asked, re the TARP bailout plan of last fall:
"Was anyone on Capitol Hill skeptical?", the Chairman answered:
"Well, I do remember one conversation I had where I was addressing a caucus of congressmen. And a congressman said to me, 'Mr. Chairman, you know, I'm talking to bankers in my town. I'm talking to shopkeepers in my town. And they say things are normal. Nothing's going on We don't see any problem.'
And I turned to him and I said, 'You will,'" Bernanke recalled.
Comment: So TARP passed, and the congressman saw a mess occur.
This is reminiscent of the scare tactics used to pass TARP. It was threatened that if the bill did not pass, the Dow would fall 2000 points (to about 8500). Well, the bill passed, and the Dow fell as much as 4000 points, industrial production plummeted, etc. In fact, it wasn't until the passage of TARP that the panic in the financial markets began. The Lehman bankruptcy was at least a week in hand, without special panic.
What actually happened is that everyone said that if Paulson and Bernanke are panicking and have to save the banks so urgently, we have to panic too- and so they did.
So Chairman Bernanke, who had uttered soothing predictions all throughout 2008, turned on a dime in the fall of 2008 and along with the Bush Administration and a sleepwalking (at best) Congress, helped create the mess that he told the congressmen that TARP was going to avert.
Copyright (C) Long Lake LLC 2009
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