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Proud to Be Long SKF (Ultra Short Financials)

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September 17, 2008 – Comments (14) | RELATED TICKERS: SKF , SRS , GLD

SKF broke $140. It has call contracts for $320.00  SKDAY.X




Fools think the sell off is over, I think it is just begining. Lehman had $600 Billion in debt obligations. Someone was on the otherside of the LEH trade.

WM, MER, FRE, LEH, FRN, CFC, MS etc... someone was on the opposite side of that trade, and they are going to come up real short.

GS and JPM are next. They are the remaining side of the trades. 

Russia is down 57% since July 08. They have stopped trading 2 days in a row. Some one is going to lose here.

China is down 60% YTD. Someone is going to loose here.

The US is being asked for a time line to leave Iraq. Some one is going to loose here.

The US is borrowing $1-3 Billion a day. Someone is going to pay here and not with their home equity.

Fiat currencies always fail it is a matter of time. Someone is going to loose here. 

Americans have Net ZERO saving. Many are going to loose their jobs here in the recession

Home values have fallen 20%. Many are going to loose here. 40% of American home owners will be UPSIDE down if housing falls another 20%. And they will in many areas. Many will walk away.

Socialism gradually makes everyone poorer, until the state fails.

Bank runs? You bet, just wait and see. Costco food runs and stock piling, already happening.

Did you see Gold today? Largest one day rally...that is fear. Fear is the Mother of Panic.

Did you see the Two US Presidential Cannidates? A suspected socialist kid and a Mad Man, weak leadership creates lack of confidence and fear. Fear is the mother of panic.

If McCain or Obama told you everything is "Ok". Would you believe them? (Ref:

McCain Lie Counter )

The Mess On Wall Street: Four Trillion Dollars Down The Drain

"The collapse of so many major financial institutions in the past year, and over the past few days especially, is hard to fathom in its enormity. Sometimes you need a good visual to put things in perspective. The New York Times has an interactive graphic up on its site that pretty much says it all. It shows that $4 trillion has been wiped off the total market capitalization of the U.S. stock market since last October. Of that, nearly $1 trillion is from the decline in the financial sector alone.

Each box in the graphic is proportional to the size of the market capitalization of the biggest financial firms then and now. As you mouse over the squares, you can see how much each value each company lost between October 9, 2007 and September 12, 2008. Here are some of the individual losses by market cap:

Citigroup: $236.7 billion to $97.8 billion.
Bank of America: $236.5 billion to $150.2 billion.
AIG: $179.8 billion to $32.3 billion
Goldman Sachs: $97.7 billion to $61.3 billion
American Express: $74.8 billion to $45 billion.
Morgan Stanley: $73.1 billion to $41.1 billion.
Fannie Mae: $64.8 billion to $700 million.
Merrill Lynch: $63.9 billion to $24.2 billion
Freddie Mac: $41.5 billion to $300 million.
Lehman Brothers: $34.4 billion to $2.5 billion.
Washington Mutual: $31.1 billion to $2.9 billion"

 

Mish Shedlock says it better:

You Know The Banking System Is Unsound When....

1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.

2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?

3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.

4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?

5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail". Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.

6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses Makes Them Insolvent".

7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?

8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?

9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation.

10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.

11. The SEC takes emergency action during options expirations week regarding short sales.

12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).

13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.

14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?

15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care?

16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price?

17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later.

18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all?

19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking "How the hell can Countrywide add to Bank of America earnings?" Here's how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over "Fraudulent Conveyance" are now surfacing.

20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $8.75 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally.

21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say.

22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words.

23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.

24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

 

 

 

14 Comments – Post Your Own

#1) On September 17, 2008 at 9:28 PM, LordZ wrote:

Ares if you think gold is going up... buy the double etf

DGP..

I own it and enjoyed my only 25% gain of the day....

 

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#2) On September 17, 2008 at 9:39 PM, dexion10 (27.48) wrote:

bold call here.

The next move will be dramatic and quick... I'm not so sure there won't be a counter move. 

"The Man" and the system won't go out with out a fight. I think they could force a rally on the market. 

I've covered the SKF and remaind short via my core short positions

SRS RYL PACW

If we rally I'll get more short if we go down big I've got more than adequate exposure for that move.

 

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#3) On September 17, 2008 at 9:51 PM, abitare (31.77) wrote:

LordZ,

U r catching on. I like that call, I might reduce my SKF and move more into gold actually. SKF has not performed that well. The financials have been crushed and SKF is only up to $135? That is pretty weak. I might look to short some regionial banks.

dexion10 

I own and like SRS. But it has WalMart and Costco. I think, so it has not performed well either. 

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#4) On September 17, 2008 at 9:52 PM, abitare (31.77) wrote:

LordZ,

U r catching on. I like that call, I might reduce my SKF and move more into gold actually. SKF has not performed that well. The financials have been crushed and SKF is only up to $135? That is pretty weak. I might look to short some regionial banks.

dexion10 

I own and like SRS. But it has WalMart and Costco. I think, so it has not performed well either. 

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#5) On September 17, 2008 at 10:15 PM, Harold71 (22.70) wrote:

Man I was in DGP, it tanked after I sold and now it blew past me.  I think it heads to $25 though.

Geez... CEF should not be up 17%...they hold half gold and half silver.  Waiting for the bottom on gold is costly, I see it's up huge again after hours.

Where are the strong dollar people when you need 'em?  Hehe.   Seriously though one last tick up in the dollar before it dies please.

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#6) On September 17, 2008 at 10:55 PM, motleyanimal (87.23) wrote:

Keep an eye on the SEC. I know Christopher Cox is a worthless incompetent Bush political appointee, but he is being forced to take some serious actions.

These banks and financials are being destroyed by short trading hedge funds.

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#7) On September 17, 2008 at 11:28 PM, daayoo (< 20) wrote:

It's lose not loose

Sheesh!!!

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#8) On September 18, 2008 at 1:58 AM, jujubeanss (65.07) wrote:

i agree with the part about government sponsered ratings agencies.

 they are probably the cause of a lot of this.

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#9) On September 18, 2008 at 7:17 AM, AnomaLee (28.50) wrote:

"These banks and financials are being destroyed by short trading hedge funds."

Really?? How is that? 

I think you're crying wolf. If you need a loan from the bank(hedge fund, pension fund, SWFund, etc) to pay your bills then how....

The reality today is that the banks are "destroying" hedge funds...

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#10) On September 18, 2008 at 1:07 PM, dinodelaurentis (74.54) wrote:

look to the future gang and invest in prison stocks. :D

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#11) On September 18, 2008 at 7:21 PM, Tastylunch (29.20) wrote:

ouch 1300 points? your point loss today, made me feel better about my own. :-)

 yeah investment banks are toast it would seem.

 Point one reminds of the Gas Stations signs that say "Clean Restrooms"....

 

 

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#12) On September 18, 2008 at 7:26 PM, abitare (31.77) wrote:

Tastylunch,

Good to hear from you. Pretty big rally.  

No doubt that is a record. I had my CAPS points cut in half last Sep, when the FED intervened.

But their activities will back fire. IMO

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#13) On September 18, 2008 at 7:37 PM, abitare (31.77) wrote:

FYI -

Fear Returns to the Markets

Posted by Barry Ritholtz on Thursday, September 18, 2008 | 01:30 PM in 

The watchword during much of the current sell-off has been complacency.

We had major denial as to the breadth and depth of the problem. Remember back when Housing issues were "contained?" Do you recall that sub-prime "did not matter?" That the "Goldilocks economy" was just fine?

Those phrases will go down in history as aphorisms of the clueless, excuses by those who should have known better. Hopefully, someone will hold the perma-bulls, the money-losers, the idealogues, accountable.

Meanwhile, as the market panic has now increased to palpable levels, creating a tiny ray of hope: Fear has returned.

As the VIX chart below shows, there is some measure of panic. We have now spiked above all of the recent panics of the past 2 years -- but not nearly as much as we have seen in the 2,000, mid-2001, and 9/11. Those 3 prior panics set up the 2002/03 lows 2 years later.

The only question for traders is whether or not this sell off is closer to the ones seen over the past 2 years (in which case you can buy 'em here) or more like the 2000- 03 period (in which case we have more selling to go).

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#14) On September 18, 2008 at 8:00 PM, abitare (31.77) wrote:

Great post here from Big Picture:

Dylan Ratigan: S&P Needs to Take Responsibilty

 

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