Friday, July 18, 2008

Meaningless Market Gyrations Show How Clueless Everyone Is

Sweltering heat all week up here in Massachusetts. I will never complain about heat, just the cold, but you could SEE the air today it was so heavy and humid! Garden update is as follows; Potatoes look good, strawberry plant is going wild, cucumbers starting to grow out well, but turnips and carrots do not look like a go. Also, I seem to have a rampant mushroom growth problem with the lawn. Any tips on how to stop them from the more experienced lawn folks? I will be away for training at an out of state site for my company all next week, so no posting next week.

Weeks Best Articles
Wild and crazy weeks tend to produce good articles. I am becoming a fan of the site Naked Capitalism by Yves Smith, and will be adding his site to the blogroll. Check his work out.

Any of the "5 Things you Need to Know" from this week were spectacular, but yesterday's was the best:
http://www.minyanville.com/articles/depression-california-housing-mortgage-time/index/a/18055

Mish shows his comedic side with a look at the 90% drop in Orange County construction:
http://globaleconomicanalysis.blogspot.com/2008/07/orange-county-office-construction-sinks.html

A look back at a 2005 post by The Mess That Greenspan Made that basically spells out where we are now, 3 years in advance!:
http://themessthatgreenspanmade.blogspot.com/2008/07/valuable-lessons-about-debt-revisited.html

Plenty of others, and please post some of your favorites in the comments that I can read this weekend.

Meaningless Market Gyrations Show How Clueless Everyone Is
The saga that was the week of July 14th through July 18th was a good show. Sadness and despair on Monday in the face of outright socialism, then smile about said socialism, then exuberant excitement about possible lack of socialism! That was alot of ground to cover.

The Fannie and Freddie news was the dominator, as it should be. With backstops, bailouts, loans, and credit line extensions all ready in the wings (not that it is needed!) it was clear the FED and Treasury were removing the "implied guarantee" from the whole GSE game. While government control of FNM/FRE would mean all those shareholders were broke, it at least promised to protect the mythical "system stability" we all crave like a cheeseburger.

This at first made the stocks drop. Then the idea that there was some price for FNM/FRE stock, buyers rushed in. Faced with a new rising stock price, which Mr. Bernanke actually said he WAS TRYING TO ENGINEER, Freddie Mac bum rushed the FED and Treasury by quickly moving to place a huge stock sale for this month. How big? How about 6 Billion dollars, for a 5.5 Billion dollar company! 100% dilution baby, yeah!

So what does it all mean? I can kind of understand the fools out there lining up to buy the Freddie offering. If you rode this pig all the way down, the only way to get any capital back is to keep the thing away from the government. Why not double down your bet? It is usually good advice to gamble bigger when you are down a ton, ask any gambler in treatment they will say the same thing. I wonder if the FED will buy the offering themselves? Who knows.

When you are watching swings of 20% in a stock any stock, on a daily basis repeatedly then things are just plain lost. Right now nobody knows what the GSE's are worth, or any of the banks for that matter. Merrill Lynch had a terrible report, but Citigroup had a "better than expected" report. Which is real? I have no idea. With all of the accounting games these firms play we never know just what is going on.

The gyrations make the markets look silly and foolish. Obviously things are getting out of control. We go from total meltdown to huge upside potential withing hours of each other. I always had a feeling the big money managers were about as smart as a rock, but now I have proof daily. Freddie is a zero, then it rallies a bit, then it goes for a 100% dilution to build capital it says they do not need, and the stock still is going up. OK. Good luck with that one.

My final takeaway this week was from the JP Morgan conference call. Mr. Jamie Dimon the CEO, who I have hammered at times, was brutally honest and forthcoming to a degree. His message: Deterioration is occurring across all credit spaces. Prime loans, credit cards, auto loans, commercial loans, they are all getting worse. That is not good. His dour comments went unheard. I give him full credit for at least trying to warn people.

I wanted to take a position in this market, but the FED's stupid pet tricks and the crazy % swings are making entry/exit points tough to manage. I cannot do daily moves, so this market is just too tough for me to play. If you are out in the mix, beware and good luck!

Friday Night Entertainment
I know it is hard to have so few posts to read, but I always try to deliver the goods on Friday!

Gas Guzzler!
So you are taking the train to work instead of driving, but your gasoline bill is not going down? What could it be?
cat
more cat pictures

I was thinking about the great Dale Earnhardt lately, basically how much less I like racing since he has been gone. So sad. Take a look at Dale's last win from 2000 at the Talladega racetrack where he came from 18th place with 4 laps to go to win the race!


If you are amazed at he whole Guitar Hero craze as I am, check out the hardest guitar song possible on the game by Dragonforce. The song is called "Through the Fire and Flames" and the guitar work is simply baffling. The duelling solos at the end bear watching!:


I heard Metallica is coming out with a new album. One can hope it is good, but if not we always have the good old stuff! Listen to "For Whom the Bell Tolls":


The "Diary of a Madmen" album by Ozzy with Randy Rhoades is one of the true masterpieces of all time. I love all the songs. Try a listen to "S.A.T.O" which features wondeeful guitar riffs and a great tempo:

Have a good night.

8 comments:

watchtower said...

@ GYSC
Thanks for the post and the rock bloggin'


High Finance and Bolshevik Principles
by J. R. Nyquist

"One only has to wait for the FDIC to detonate beneath a floundering Republic. If anyone thought U.S. Treasury bonds are a riskless investment, think again. Am I suggesting the U.S. government will default on its obligations? In my opinion, no other outcome is imaginable."

http://www.financialsense.com/stormwatch/geo/pastanalysis/2008/0718.html

getyourselfconnected said...

Watchtower,
Thanks so much for checking in, I appreciate it. I have been playing tennis, walking, running, and fishing so posting has been light. What a wild time in the world though. I will read your article tomorrow. thanks again.

Anonymous said...

Try this youtube link:http://youtube.com/watch?v=L7EpGVB7-kk

Anonymous said...

GYSC

Glad to hear the potatoes are doing well. The grasshoppers stripped every leave off of mine out at the farm and it looks like that garden out there is going to be a bust this year, The one here at the house is doing well though.

What was becoming clear to me last week was the war going on in the financial. Cox came in and called a ceasefire, this was a desperation move. The manipulation is getting more destabilizing and blatant which at some point I think it is going to have the opposite effect the intend, This war isn't over.
Sold half my bear fund last Friday. I'm still looking for a longer term harbor that will be safe but finding one is proving to be elusive.

Kevin

Anonymous said...

Jon Stewart Its the Stupid Economy!!

http://tinyurl.com/5durdq

WOW just WOW!

G

PS: Sure hope everyone has their debts paid off when this thing busts loose!

watchtower said...

Economic stimulus, Part 2?

Democrats say they will proceed this fall with a "Son of Stimulus."

http://news.yahoo.com/s/csm/20080721/ts_csm/astim

I thought this was pretty funny (only on one level though)..."Son of Stimulus"
Brahahahahahaha
You know, I think I will have to hang on to my physical silver because these people are going off the deep end by giving away all this "free" money. Not that they have done "Son of Stimulus" yet but they are talking about it.

How 'bout that AAPL stock?
That can't be good.

Anonymous said...

Two banks just failed this week but were sold to Bank of Omaha. The Senate passed a bailout bill for homeowners. (President said he will sign it -- you know it's a good bill then!)

Oils coming down. The grass is growing! Everything is fine!

No wait..... everything is not fine but you would never guess that if you watch the mainstream media. Pay no attention to the man behind the curtain and don't worry more spending checks are on the way!

G

PS: Hope the bloggers here are keeping score and can post about it here!

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