Wednesday, September 17, 2008

Pandemonium of the Clueless

Hello out there in financial reader land! Have you been having fun? Have you been on the edge of your seat with crazy disbelief at the rapid developments? I know I have been overwhelmed with information and news! Loyal reader G asked that i post if/when the proverbial sh#t hit the fan, and I say "ask and you shall receive".

Did Anyone Notice this Little Tidbit in the Mainstream Media?
Now I will say upfront that with all the drama going on, it could be possibly forgiven for the mainstream media to skip over this little item, but seriously has there been a more ominous headline anywhere this week?:

Russia suspends stock trading to stop market meltdown
by Dario Thuburn
Wed Sep 17, 2:05 PM ET
MOSCOW (AFP) - Russia suspended trading on its two main stock markets for a second day Wednesday as shares nosedived and officials pledged 44 billion dollars to fight collapsing investor confidence.

After a 50 plus % drop over two days, Russia says "No Mas" and pulls the plug. No word yet on when it will reopen, but this may be the scariest thing I saw this week. This bears your attention.

Gold Rallies Back
While still quite a ways off from the old highs, Gold has made a nice move, and today it made it's biggest one day run ever. Why? Well, with all the crap paper out there and with trust evaporated, only treasuries (why trust those?) and the good old yellow metal will do for many. This reminds me of a story that was told to a young Conan the Barbarian by his father. Conan's father related to him the story abut the "riddle of steel", but I have put in GOLD instead of steel to make my point:

Once giants lived in the earth, Conan, and in the darkness of chaos, they fooled Crom, and they took from him the enigma of steel [GOLD]. Crom was angered, and the earth shook, and fire and wind struck down these giants, and they threw their bodies into the waters. But in their rage, the gods forgot the secret of steel [GOLD] and left it on the battlefield, and we who found it, are just men, not gods, not giants, just men. And the secret of steel [GOLD] has always carried with it a mystery. You must learn its riddle, Conan, you must learn its discipline, for no one, no one in this world can you trust, not men, not women, not beasts, this you can trust.


While this whole mess can turn on any assets class at any minute, I still love gold's fundamentals going forward. Just be careful out there!

A Brief Statement of Truth
Senator Harry Reid (D-Nevada) had a rare honest moment today and I will direct you towards Mish for full coverage here:
http://globaleconomicanalysis.blogspot.com/2008/09/senate-majority-leader-reid-no-one.html

Quick summary "Nobody knows what the hell to do about this mess!" You hit it out of the park Mr. Reid, Bravo!

Pandemonium of the Clueless
There is simply too much going on for me to be able to cover all the bases. I refer you to the blogroll to the left. Naked Capitalism, Calculated Risk, Minyanville, and Mish have been doing unbelievable real-time analysis of all the news and their material is the best anywhere, anyplace.

With all that has been going on my main focus has been on the whole moral hazard issues. Not in the sense of "should we be doing this, it may be a moral hazard" because the hot to trot leadership we have has already made the choice to wade in. I mean just what in the world is Ben Bernanke and Henry Paulson thinking about as they make the off the cuff moves with billions of taxpayer dollars? Sadly the folks we all sent to congress are unable due to limited mental ability to ask any questions or to get some kind of fix on the FED and Treasury's thinking process. In the spirit of goodwill, I thought I might put together a few questions that our elected representative may, just maybe, want to get answered by the "Toxic Twins" of Bernanke and Paulson before any more bailouts/conservatorships/liquidity injections etc are done. Hopefully one of them will read these and try to get a response.

1. What is a "Systemic Risk" exactly and in no uncertain terms?

2. If indeed the US financial system is "Fundamentally Sound and Secure" as you have stated on numerous occasions, how does that square with the idea that a Bear Stearns or a Fannie Mae, or an AIG bankruptcy would cause a "systemic risk" to the entire financial system? Can those two ideas be reconciled?

3. While Lehman Brothers employees are filling cardboard boxes and leaving their jobs, how can Merrill Lynch workers and Freddie Mac employees be supported? What would you say to the Lehman folks right now?

4. Is there a dollar figure at which taxpayer backed bailouts will have to stop? If yes, what is that number? If no, do you see a problem with that?

5. With the FED and the Treasury backing down on the AIG "bridge loan" or whatever you call it, is it even remotely reasonable to expect private firms (still standing banks, foreign wealth funds, etc) to put up any money towards helping failing businesses? Why indeed should they if the US government will assume all the risks? Do you see the underlying issue here?

6. Secretary Paulson; as a former head of Goldman Sachs would you have recommend to your board to extend the AIG bridge loan? If not, why is the US taxpayer not given equal consideration?

7. If the only thing keeping the banking system afloat right now is the delaying tactics aimed at keeping assets related to real estate and their associated derivatives form being valued at their realistic price, how long can that go on? Do you have a plan that takes into consideration those items being marked to current market? If you do not, why not?

8. While the SEC has targeted short sellers as of late, what is being done about CNBC anchors reporting on phone calls they are having on air in the midst of this market turmoil? Is one more disruptive than the other? If so, how?

9. Have you thought further ahead than 5-10 days over the last 6 months? Be honest.

10. Are you two on Dope?

There are 10 questions that need to be answered before Hank and Bennie make any more moves. Somebody has to answer for the debacle that is currently underway. That not one serious or revealing question has been asked or answered says alot about both our journalists and our leaders.

Final Thoughts
This is the big time. There are things at work here that are huge. Yes, I can agree that the system is at stake. But you have to ask yourself, if we can delay a real day of reckoning for all the troubled debt that is out there, will it just go away? Or will it only come back later? I can understand the yearning to kick the can down the road, but that mentality got us into this mess after the Tech bust. At some point you have to face your own monsters. Hiding and pretending they are not there only gets you so far. It should be time to face ours.

Hedge Fund Bailouts
I have it on good authority, insider information actually, that the next in line for a bailout is the hedge fund below:
cat
more animals

Have a good night.

4 comments:

Anonymous said...

Hey all!

Thanks again for the honorable mention. Gotta ask why don't the mainstream market tickers even report the russian index numbers?

Oh wait so gold and silver get hammered down but hint at daily upward movement caps? I call bullsh1t!

I follow very unconventional media outlets so yeah I saw the RU markets moving anyways. Nothing new here but I am sure they are pissed their boat is going down with ours! Go fig.

Can the bailouts go on forever?

When will the masses say no mas?

I have.

G

PS: Rockets in metals guys!

watchtower said...

Actually GYSC that would be your loyal "moonbat" reader Watchtower that asked for this post :)

Ah, the Russia thing, very interesting, I wonder how that is going to turn out?

Did anyone see what came out of Bejing?
"BEIJING, Sept 17 (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

I picked that up over at KD's Market Ticker site(link to the side).
Speaking of which KD seems particularly upset at the current events transpiring, even downright morose at times.
I guess what I'm saying is that KD put up a bone chilling post this evening that probably needs to be read (plus he has a vid too).

Thanks for the post tonight GYSC, looking forward to more in the future (hmmm, I wonder if there is any "meltdown music" out there for Friday night?)

"and the wind began to howl..."

watchtower said...

Hey G
I was waiting for gold to hit $700 before I pulled the trigger, looks like I've watched that opportunity sail away, hope that at least you got some deals :)

david said...

Excellent blogpost title!

I was glad to see gold rally at last, it stayed quiet until yesterday rallying just moderately, despite all the turmoil.

Facing these monsters is going to be nasty!