Sunday, September 14, 2008

Freefall Monday

First, did I call extraordinary events? Come on, did I? Did anyone think "Asian Overflow" was about pendulous breasts?
Back from Disneyland. Much to the chagrin of Mrs. Dawg I watched the world financial industry crumble to the tunes of "It's A Small World..." on my iPhone.

• BofA merger (stock swap) with Merrill. Circle the wagons.

• LEH officially filing bankruptcy. Make no mistake. The participants wanted to do a deal and the Fed and Treasury were ready to facilitate any deal. What happened is so bad they won't even talk about it. Barkclays and BofA looked at the books. There was no good bank part. So bad they must have told Paulson "you don't have enough money."

• Quadruple witching Friday.

• Somebody is going to do an index P/E calculation going forward. IMO over 40 by their methods, over 50 by mine. I eliminate survivors bias.

I am revising my call for Dow Industrials 9600 lower. At least 8800. Remember I've been talking about all the trends of the next few quarters starting with stairstep events. What the first step.

I reiterate my call for an emergency rate cut of 50bp. That means my WaMu HELOC goes to 4.5%. That'll help them, not.

• The glod and sliver pops are fear and something interesting. Call it a physical squeeze. Lots of people want to hold the coin and the dealers have gotten a bit sloppy in actually having the metal on hand. I'm not talking illegal; just in the mail, in process, awaiting customs, awaiting assay, in transit, any number of excuses as to why "I want my bullion" is being met with "Sorry, there will be a delay." And behind the scenes there is chicanery. Their sources are undoubtably juggling a small physical supply amongst multiple customers. Hedging, leveraging and arbitrage.

I doubt the markets will open under normal rules. Perhaps the uptick rule, but I don't expect the computer trades to be sidetracked until all the fast money is long gone then stranding the poor retail investor. We will hit at least the first circuit breaker, possibly in the first 20 minutes.

Cramer will be available all day to calm the skittish sheep... err... people. You can bet he'll be in suit and tie.

And people laughed at my call for ^HGX in the 80s.

Oh, and the picture? Buffett talked about swimming naked. This is about skydiving naked.


Casey Serin said...

M U R S T ! :-)

Bobbo, when my dream of living in a van is finally realized, I'll make sure to park it right outside your place for weeks on end. ;-)

spooq said...

I'm not sure the "physical squeeze" will result in coins/bars becoming more valuable. Sure, the premium might go up a bit, but not enough to counteract the fall in spot, unless GATA turn out not to be insane after all.

Rob Dawg said...

Agreed, the "delivery premium" is what is growing. I find that odious. A premium for delivery, a surcharge for storage, a fee for transactions. All scams to separate people from assets.

Lex said...

In other news, Pres. Bush accepted the resignations of Federal Reserve Chairman Ben Bernanke and Secretary of the Treasury Henry Paulson. Cuffy Meigs was nominated by the President to fill both positions. No congressional opposition is expected.

Bill in NC said...

"I am revising my call for Dow Industrials 9600 lower. At least 8800."

Shoot, we'll be at 9600 by the end of the week.

Even Cramer said he expects up to a 4% drop today.

Agent #777 said...

Scary...took my well known broker around 10 minutes to confirm my market order to cover 1000 WB this AM. I could not contact them by phone to determine what was wrong either.
I may initiate the short again if things shoot up on a possible rate cut tomorrow.

Jean ValJean said...

Ripped from Nekkid Capitalism:

Reader Michael M called our attention to this statement in a Financial Times article:

The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries.

Was this the quid pro quo for Band of America buying Merrill? If so, the repercussions extend beyond BofA. This is a time when the federal authorities need to be vigilant, not lax about banks taking risk with depostors' funds.

Note than many banking experts, post the S&L crisis and now, recommend the reverse, "narrow banking", which requires banks to invest depositors' funds only in the very safest assets. This is the exact opposite of the sort of regulatory measures needed to improve the health of the banking system. Expediency trumps soundness.

Northern Renter said...

I once saw a video clip on the Web of some guy skydiving naked. Talk about getting buffetted.


Jim said...

Are you thinking of draining the HELOC on the chance WaMu goes under and Bair freezes all foreclosures and payments and HELOCs and everything?

Could there be some free money there.....?

segfault said...

No, if the bank that carries your home loan goes under, the Feds take the loans along with the bank's other assets. So you still owe whatever you borrowed.

The_Scum said...

Dumped the SKF at 127+. Maybe too early but I have to be on the road later and I don't trust whatever the FED does tomorrow.

Time to let the trade settle and evaluate the next move.

Thank you FED and Treas for not using my tax dollars (for once) to bail out millionaires and screw me.

I think the powers that be realize the sheeple are becoming FED up.

H Simpson said...

anyone notice be it bankrupcy or merger, nothing happens until next jan?

These greedy bastards must be trying to score one more payday at end of year.



Lost Cause said...

Will there be a bounce tomorrow?

Pleather Murse said...

There is almost always a day-after bounce on days like this, but don't bank on it (ha-ha.) Oil is almost getting cheap enough to jump in, take a look at USO or OIH maybe. I like the dollar drop (played via UUP) but it's not enough yet considering the recent spike.

Pleather Murse said...

Just to keep things in perspective, BTW, this is no way near a crash. We're down about 4% today. "Black Monday" 1987 dropped 22%.

Rob Dawg said...

Tomorrow will be subdued. Less than a hundred points either way. Unless the BOA/MER deal is revealed as fraud. Then all bets are off. Who would want Bank of America stock when they've swallowed 3 huge deals in the last 18 months? Who wants Goldman when they only lost 12% today?

What happened today is that the mask was ripped off. No more mystery as to valuation.

Pleather Murse said...

Meanwhile, some economic data that got lost in the noise: "The New York Fed said its Empire State manufacturing survey for September declined 7.4 points, whereas economists were expecting a 1.4-point uptick. The Fed also released its capacity utilization and industrial production figures for August. Capacity use came in at 78.7%, down a percentage point from the July reading and short of analyst expectations of 79.6%. Industrial production declined 1.1% for August, down from a 0.1% increase in July and a wider loss than the 0.3% anticipated by analysts." (TheStreet)

Anyone expecting a 50 bps cut tomorrow?

segfault said...

I wouldn't buy BOA stock, but as an institution, it's "too big to fail," which means they can keep rolling the dice and buying up distressed companies.

Michael Ryan said...

Well, this will be an exciting day. The Nikkei has been open for 28 minutes and is already down 4.7%.