bearfund

Total Rating:
+5 / -1

497 Comments

    • Sat Sep 27th 17:45 PM | Rating: 0 0
      Commented on:
      Why Friday Came Early
      I have not seen anyone explain why the $1.9B JPMC paid for WM's deposits belongs to the FDIC, given that it does not require any money from the FDIC's insurance fund to protect the insured depositors (or even the uninsured ones, for that matter). Can someone with knowledge please tell us why this money goes to the FDIC rather than the next most senior creditors?
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    • Sat Sep 27th 11:45 AM | Rating: 0 0
      Commented on:
      On Board the 'U.S.S. Titanic'
      Your advice to the middle class is surely intended as sarcasm. It is what the middle class should have done 10 years ago to prevent the outcome we have today. But given the incentives in place, the middle class should:

      - Borrow as much money as possible.
      - Convert all financial assets and ready cash to gold, take physical delivery, and bury it under a rock in the middle of the desert.
      - Default on all debt.
      - Continue living rent-free for a year or three while your bank is "discouraged"... from foreclosing.
      - When the sheriff finally comes around, file BK.
      - Dig up your gold, smuggle it out of the country, and start a new life.
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    • Sat Sep 27th 00:53 AM | Rating: 0 0
      Commented on:
      Buying Gold: What is High and What is Low?
      A low price for gold is any price quoted in paper. A high price is your soul, your virginity, or your integrity.
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    • Fri Sep 26th 03:15 AM | Rating: 0 0
      Commented on:
      Nightmares on ETN Street: When Issuers Go Bust
      The really remarkable thing is that there are gold and silver ETNs. The price action there should be fascinating.
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    • Thu Sep 25th 11:31 AM | Rating: 0 0
      Commented on:
      5 Things the Treasury Should Clarify Now
      Actually, there is a way to figure out the hold-to-maturity value of these securities. Step 1: Mark the collateral to market. Step 2: Assume that every debtor who owes more than the collateral is worth will default. Step 3: Assume that every insolvent (liabilities exceed assets) debtor will default. Step 4: Assume that the remaining securities will perform in line with historical norms. Step 5: Add up all the numbers.

      Oversimplified, certainly, because of the difficulty of computing the cash flow from CDOs based on the cash flow from the underlying loans. But none of these steps requires much guesswork and the approach is clearly reasonable. Given that my money is to be spent buying toxic paper (a use of it which is outside the legitimate scope of government and unconscionable in any case), I would not object to the prices paid being based on this approach.

      The biggest problem is that tens of millions of American households are insolvent and any who purchased a residence in the past 5 years is likely to have negative equity. The collateral is likely worth less than two-thirds of its appraised value at origination. And thanks to ultra-loose Fed policy and mortgage rates artificially depressed by Frannie, most of the coupons are at rates well below inflation. So the true discounted hold-to-maturity value of the underlying mortgages might well be no more than 40-50% of par, making most subordinated paper ultimately backed by these loans worthless. And in any case, the more inflationary the bailout, the less valuable these long-term fixed-income securities become. It seems unlikely that giving the banks anything resembling an objectively fair price for this paper would actually improve their solvency. So any reasonable observer is forced to conclude that the intent of the bailout, indeed its purpose, is not to provide liquidity to holders of unmarketable securities but a simple and permanent transfer of money from the Treasury to the banks. If the eventual discounted losses are less than half the amount "invested", it would be a pleasant surprise. There is simply no possibility that any reasonable model-based pricing strategy would result both in full recovery of value and an improvement in bank solvency, although by sufficiently understating the devaluation of the dollar for a sufficiently long time, it may be possible to come close. No doubt this is their plan; indeed, it's the plan they've been executing for decades already.
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    • Thu Sep 25th 00:58 AM | Rating: 0 0
      Commented on:
      Call the Treasury's Bluff
      miclone83, because the "taxpayers" (most Americans pay virtually nothing) have very little skin in the game. The bondholders are in control on this one, as they always are in a bankruptcy situation, and they are looking to get control of America on the cheap.
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    • Thu Sep 25th 00:42 AM | Rating: 0 0
      Commented on:
      You Can't Handle The Truth
      You have a third choice. Put all your money in gold, physically in your possession, and be ready - with a real plan - on a moment's notice to get out of the US. However "scary" the consequences of not doing a bailout, they aren't nearly as scary as the consequences of doing one.
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    • Wed Sep 24th 10:58 AM | Rating: 0 0
      Commented on:
      Where's the Bottom? Still Anybody's Guess
      The bottom for equities and paper, in dollar terms, will come when people are no longer writing articles asking when the bottom will come, because they are too busy selling.

      The bottom for the dollar, however, does not exist. It will continue asymptotically approaching zero until it becomes inconvenient to quote prices in it, at which time it will have zeros lopped off or otherwise be replaced by something else with indistinguishable characteristics, which will itself promptly begin its own asymptotic march toward zero.
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    • Wed Sep 24th 01:07 AM | Rating: 0 0
      Commented on:
      "Peak Oil Pundit" Predicts Rally to $500 a Barrel
      Oil will surely cost $500 a barrel, but that won't be much of a reflection on oil. The dollar is headed to zero. Those holding dollars and needing oil had better snap up that $500 barrel; it will likely be $600 the next day and $100m a year later.
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    • Wed Sep 24th 00:39 AM | Rating: 0 0
      Commented on:
      Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing
      Personally I don't think $700b is enough. They really need to pay full price for this paper so that the banks will be healthy again, and let's not have any questionable paper left lying on their balance sheets: take it all down. To really be sure the threat of "meltdown" is allayed, and kickstart the economy so that working families can find jobs and keep their children safe, I believe we need to give Mr. Paulson at least $3-4T as a blank check. The amount should be renewable every year until stability is achieved. Congress is harming America with its delay. We need action now!

      Disclosure: long PST TBT GLD SLV gold and silver bars, short 2036 and 2038 Treasury bonds, USD/NOK.
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    • Wed Sep 24th 00:30 AM | Rating: 0 0
      Commented on:
      The Greatest Short Sale in History
      The best thing Paulson could do for his country is issue that $700b in debt and then repudiate every last one of the 11T+ dollars of outstanding debt. Refuse to pay anything on it and dare the world to come get their money if they want it.

      Why is this good for America? Because no one would ever lend to it again. It would have no credit anywhere, ever. It would have to start over - with rich forests, productive farmland, mines, oil, gas, and 8000 tonnes of gold to use as money. Let's rebuild a state without debt, without bankers, and without politicians.
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    • Wed Sep 24th 00:26 AM | Rating: 0 0
      Commented on:
      Caterpillar's Troubling Bond Issue
      The market really has it backwards. Who would you rather have owe you money: a corporation with cash, inventory, and plant, that is consistently profitable and is unable to print money to pay its obligations, or a corrupt government printing money and going deeper into debt at an accelerating rate while its tax base erodes by the day? And PS, there is often no recovery in sovereign defaults. If CAT goes belly-up its assets will be sold off and you will receive the proceeds.
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    • Wed Sep 24th 00:11 AM | Rating: 0 0
      Commented on:
      Financial Crises Are Not That Rare
      aran, no it would not. The first step in fractional reserve is invisible reserve. If you can't physically hold your assets and keep them physically separate from everyone else's, you simply cannot be sure they're still "fully reserved". So the first step down the treacherous path was to put all the gold in a vault and create demand drafts against it. You could go get it "any time you want" and if you looked into the vault you would see a big pile of gold. But you would not know how many other demand drafts were outstanding against that gold, so the gnawing uncertainty creeps in. What if the bank is unscrupulous? What if the regulators charged with ensuring full reserve are asleep, or worse, complicit? From there you move to gold-as-metal and "money" is paper issued by the government claiming to be backed by gold. All this really does is replace thousands of small hidden-reserve banks under diverse control and in competition with one another with a single giant hidden-reserve bank under the control of people who think, rightly or not, that their will is an adequate substitute for the rule of law. It doesn't take long to go from there to Roosevelt, and thence to Nixon.

      Gold in your pocket. Gold in your safe. Gold in your strongboxes. Nothing else will do.
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    • Tue Sep 23rd 12:01 PM | Rating: 0 0
      Commented on:
      Financial Crises Are Not That Rare
      No kidding. The modern financial system features an extraordinary degree of leverage and as with all highly leveraged systems, the slightest flutter of weakness sends the system into a tailspin. It has been lurching from one crisis to the next since its creation.

      None of the bailouts or restructurings have helped, nor will any that comes of this one. Because fundamentally they have not reduced the amount of leverage available to interlocked firms, nor the demand for credit. As long as so many firms exist at the pleasure of the credit markets, there will be an endless cycle of crises, collapses, and spectacular booms. Restricting the availability of credit and the extent of its place in the capital structure is absolutely essential to any viable reform. No interlocked bank should owe more than twice its shareholders' tangible equity; most other corporations should have little or no debt at all. And no individual should have access to credit for any purpose other than direct investment, and then only against solid collateral with plenty of equity. This is a recipe for slow but steady growth, a very boring economy that provides decent rewards to those who outproduce their competitors and significant, but not overwhelming, losses to those who take poor risks. It offers little in the way of interlocked systemic risk given the lightly-leveraged condition of major players and, therefore, does not require a central bank. If one then replaces Federal Reserve Notes with circulating gold and/or silver, one has an economic system that can continue creating wealth through any storm and, in extremis, can rebuild itself from nothing if need be.

      It's all about robustness. The current system trades robustness for opportunity at the margins. The problem with this tradeoff is that it has gone far beyond the point of diminishing returns. It is true that one can achieve a 100x win in a single hour trading in thin markets on enormous leverage. But for every such winner there are losers, and if they too are leveraged they will far outnumber the winners. The aggregate size of the opportunity is far smaller than the systemic cost in robustness. The biggest risk is, and has always been, leverage. A year on, it doesn't seem that anyone has learned that.
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    • Tue Sep 23rd 03:15 AM | Rating: 0 0
      Commented on:
      Gold Will Rise, If It's Money
      LarryH, save $1000 or so out of that "every penny" and buy some guns. Sad but true. And don't be afraid to use them. What's the alternative?
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