sometime ago (a month ago i think), I have declared a nearly all out retreat from the US stock market. I closed both longs and short positions and exit the market en-masse.

My sixth sense proved prescient, as real businesses with cash flow JNJ, BRK/B, UNH, and even to some extent FRE, are wallowing near where they always were, when things with almost certainty of earnings going down big time, continues to float up due to Wall St. hypes.

The hypes are intentionally misleading, and the notion that the Fed is gonna print money to give to anybody, imho, is rubbish. They are in reality not giving anything to BSC, or the very least, not yet.

I am not sure at which point I will be investing again in the stock market given the very disturbing response to economic/earnings reality that they have displayed. Good luck to you all still fighting long or short.

It surprised me to see Karl declaring that the bankers wanted the Great Depression.

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even though it is a documented FACT that all were WARNED in 1991 - twenty years before the bubble happened.

Ten years?

If your options are a hyperinflationary blowoff or a deflationary credit collapse, and you're the one who is owed, which do you pick?

Gen,

What is the bank going to do with an extra few million xurban McMansions?

I would pick deflationary with credit collapse, isolate it within the best of ability -> if banks collapse take the equity completely and pay off the debt to the extent there's any money to do so, and then print some to cover whatever remains.

That's the strategy taken with BSC and it isn't the SAME as giving every ****er out there $100k to further their mcmansion and trinket buying bonanza. But the *******s out there playing spewed that garbage out everyday on tv, MSM you name it.

I am saying this again, if your bank is expected to in the long run turn earnings at today's at most $10 growing at money supply inflation, you are priced at 10x P/E thus $100 stock maximum and yes, I am describing Goldman Sach.

But this is really difficult to understand because it is kindergarten math at its finest.

Eleua, sell them back to you of course, once you manage to get a new job. Or, perhaps they just rent it to you via a "captive subsidary", effectively taking control of the assets.

In the meantime they have the collateral and the currency appreciates as the swamp is drained.

It beats a hyperinflationary outcome which gets them "paid" but the money they get paid with doesn't buy dick.

Gen, I figured this was the desired outcome when the Carlyle Capital lines were pulled by its brokers. The IB's, their brokers, will own it.

The Fed is providing credit in the form of first-since-the-Great-Depression discount window loans to the IB's, to finance the IB's while they liquidate their clients' (the hedge funds) collateral.

The Fed wants their Tier One clients, the very same IB's and money center banks, to survive, so the Fed can survive themselves. After all, the central bank racket is a very lucrative one.

I have called and emailed all my reps and congressmen -- again.

Here is the email with the names deleted where I laid out this view to a collegue.
______________________
From: Interested
Sent: Thursday, March 13, 2008 10:45 AM
To:
Subject: Bennie and the Feds

What most don’t understand is that this latest $200B swap is to primary dealers ONLY. This is not like the TOMO account or the TAF or the Discount Window available to all Reserve System banks.



They swap “AAA” MBS for the Fed’s Treasuries for 28 days.



This is a move by the Fed to temporarily liquefy the brokers balance sheets. To create solvency from this temporary liquidity, in turn the brokers will call in collateral from their clients the hedge funds. The brokers are calling in the collateral as they did with Carlyle today.



The hedge fund liquidation into the arms of the brokers, many of which are primary dealers, is underway. Darwin would be proud.



List of primary dealers:



BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Bear, Stearns & Co., Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Countrywide Securities Corporation
Credit Suisse Securities (USA) LLC
Daiwa Securities America Inc.
Deutsche Bank Securities Inc.
Dresdner Kleinwort Wasserstein Securities LLC.
Goldman, Sachs & Co.
Greenwich Capital Markets, Inc.
HSBC Securities (USA) Inc.
J. P. Morgan Securities Inc.
Lehman Brothers Inc.
Merrill Lynch Government Securities Inc.
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
UBS Securities LLC.

I'm guessing the banks holding residential real estate as an investment won't be any better than the sheep trying to do the same.

I think this economic contraction will last 10 years, as jobs are just not there, and the financing will also not be there to create them. The demographics of the US and most of the West are decidedly bearish for economic development and the immigration trends are turbo-charging that dysfunction.

Foreign nations will be worse off than we are.

If BB was to engineer a bond collapse, it would probably be to bail out his banking buddies with their "short-bonds" trade that has squicked them over the past few months.

A bond collapse also blows out the vig and allows the banks to earn a ****load (from anyone who is still able to borrow, which isn't many)

It works all the way around for the banks and ****s everyone else straight up the ass.

A deflationary preference is perfectly logical. It just sounded like something you'd move to the Tinfoil forum. Maybe I read too much Rothschilds/Rockefellar one-worlder into it.

Thanks.

However, one thing is not clear to me. When you say something like:

Quote:

That dislocation could come at any time, it will come without warning, and it WILL occur when the bond market discerns that Congress is going to monetize the losses.

and also say they will not 'print', but rather allow a deflationary collapse, I'm not sure how that works. If Congress monetizes the losses, that usually means they provide the money, either through new debt or out-right printing in order to buy up the defaulting debt. And like you say, the bond market would take this as an inflationary action, not deflationary.

If the Congress, rather than monetizing debt by giving banks cash for the bad debts, instead nationalizes that debt without compensating the banks, (which in effect makes the MBS debt directly part of the national debt), than that, I agree, would be deflationary as far as the money supply. (But most likely kill the dollar, which would likely be price inflationary.)

I thought in the Great Depression, the government didn't monetize bad debts, and so the banks ate them and died, destroying the debt money and the savings of individuals.

So my question is, how is Congress monetizing debt deflationary?

I want to know how the .gov survives a bond collapse that last for any length of time.

The .gov is broke and fixing to get more so, if bonds collapse including T's then they're debt costs go stratospheric.

They can't survive that and they certainly can't survive the loss of income as the tax base shrinks to nothing.

The FED can't kill the host here, the host is the .gov, if it gets sick enough FED go bye bye.

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I thought in the Great Depression, the government didn't monetize bad debts, and so the banks ate them and died, destroying the debt money and the savings of individuals.

Jamie "we'll be fine" Dimon wouldn't mind picking up some new banks at bargain-basement prices.

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So my question is, how is Congress monetizing debt deflationary?

I think it depends on the rate of monetization. If they do it in small increments maybe they can prevent a bond market panic. If they monetize a lot in one swoop the bond market jacks up borrowing costs before they can fire up the presses.

The bond marked blew up in '31.

We're going down the same road.

Note that The Depression was deflationary despite the bond market blowing up.

So, being heavy in cash with little or no assets and zero debt is a winning strategy?

Absolutely Eleua.

Well, as winning as you can be under the circumstances. You may still be ****ed if you can't get a job!

"Note that The Depression was deflationary despite the bond market blowing up. "

I thought a bond market blow up IS deflationary. Yields would shoot up.. mortgage rates would spike.. asset prices would fall further..

I guess banks could now make more money.. but anyone who needed new debt would be shelling out some cash for it.

Quote:

I want to know how the .gov survives a bond collapse that last for any length of time...

...The FED can't kill the host here, the host is the .gov, if it gets sick enough FED go bye bye.

Two things will become more apparent as this plays out, (1) the Federal Reserve is not only not a part of the Federal Government, it's interests are sometimes contrary to the best interests of the government and people, and (2) the politicians running the government get more from the banks than they do from the government, so whose side do you suppose they will turn out to be on? At first it seems unthinkable that those running the government would engage in action (or inaction) that would be detrimental to the government, but if you follow the money trail it becomes plausible, and if you stop to realize it has always been this way, it becomes downright inevitable.

The bankers won't kill the goose, they'll just usurp its power and squeeze everything they possibly can from it.

I'm not sold on this, I'm perfectly sold on the government screwing up, I have no problem with that.

Our government cannot survive a deflationary enviroment with ramping bond yields that's absurd, we'd just be better off going BK and starting over.

That's what we should do anyhow.

Yup, restart the software and in the start-up wizard, where it asks "Starting balance?" they could just place $100

Sweet!

Psst - the total so far (if you count the bill in committee to play RTC II) is up to $500 billion.

Still think it won't happen BW?

My question is, if the long bond sells off, where would that money likely go?

I've always thought they'd end up printing at some point, I'm just not sure about connecting that to a deflationary collapse.

If the monetization get's going fast enough you don't need bonds money floats out of the sky.

It's just tough for me to connect a deflationary collapse to a paper currency, those are very rare events.

The banks will not permit a hyperinflationary blowoff.

In the places where it has happened the banks have been powerless to stop it or have stepped back and let the politicians kill themselves (e.g. Weimar)

Forget it here. You're talking about the entirety of Wall Street and Main Street "standing back" which instantaneously blows up the game, because the PDs are the conduit for Treasury sales.