This could easily have been titled "How to create a taxpayer revolt"

by perpetuating fraud at the highest levels possible

by remaining opaque

by paying $400B for a bazooka (cheaper on ebay)

by lying about the health of the economy and the financial system

by convincing Congress that TARP would solve the problems and should be sufficient

by promising it would save your 401k and pension funds

by changing your mind on how to implement TARP, again and again

by continuing to artificially support the toxic assets, the institutions holding them and those insuring them (the house of cards)

Paulson and crewe played congress like a fiddle made of gold.  Pandora's box has been opened.  For some strange reason when think about this house of cards I was reminded of an old school computer game (well, not as old as pong but not out on the Wii until they come up with some gizmo for it).  Lehman Brothers has a cameo appearance at the 0:15 mark, from there fast forward to October, 2008 around the 1:07 mark

Link Here

An acceptable substitute for this game would be KABOOM!

Edit: Ooops, $400M was supposed to read $400B (corrected)

http://www.youtube.com/watch?v=JaKkuJVy2YA

Rumor has it that Geithner et al are going to tap Gordon Gekko to oversee how Tarp funds will be dispersed.

From Mish:

This morning I was rudely greeted by two bizarre news headlines; bizarre because they were written about roughly the same thing, yet presented two diametrically opposed thoughts

The first was from the New York Times: Geithner Sets Limits on Bank Lobbying
The second was from the Wall Street Journal: Geithner's New Chief of Staff is Former Bank Lobbyist

What in the hell? Seriously? That used to be something you would only read in a local broadsheet while waiting on a sweaty tarmac to flee a collapsing South American dictatorship.

Yes, change comes hard in all senses of the word.

From Fortune Magazine (Hat tip Mish):

Banks don't have enough capital to fix their problems, which means the Obama administration may need a lot more money to clean up the financial mess.

The cost of the bank bailout is likely to be much higher than $700 billion.

While the Obama administration hasn't asked Congress for more money yet, some experts warn that government spending on support for struggling financial services companies will ultimately reach into the trillions of dollars.

"The amount of working capital you'd expect the government to take into this would be around $3 trillion to $4 trillion," said Simon Johnson, a senior fellow at the Peterson Institute for International Economics and author of its Baseline Scenario financial crisis blog.

But calls for a comprehensive response from the government have increased in recent weeks following the free fall of bank stocks.

Thurgy: Much higher than $700B means $3T

Not only do they have $600M in cash to back the $11B in debt I was also pretty certain the equity was being grossly overstated. Now there appears to be some proof. While this is an isolated event I'm sure these will become more frequent.

As if to underscore the reality of a the ongoing structural shift in consumption taking place, the Wall Street Journal "Deal of the Week" in commercial real estate this week is the sale of one of Cincinnati's largest malls by Simon Property Group (SPG) for $20 per square foot.

According to the Journal, the average price nationally for malls is around $134 per square foot.

"To be sure, the property is in sad shape," The newspaper noted. "Some 40% of its non-anchor retail space is empty."

Perhaps that $20 number will be seen again, not per square foot, but per share. I'm guessing we'll see a little bit of their financials with tomorrow's earnings.

. o O {Avoid trading when being treated for pneumonia} Yes, I'm sick AND stupid.

If you recall yesterday I said I was nibbling in Natty Gas futures.  I check in on NG today and see it's up 2%.  Pull up my open positions and I see some red.  Apparently not only does this medication have me irritable (or maybe it's the government) it also has me typing QMH09 instead of QNH09 and now I'm long crude oil. LOL, whoops.  Stupid keyboard ;-)  Well I guess I'm going to have to re-arrange all those lines on my crude oil charts to paint a bullish picture for me.  Screw it, I'll hold it for a day or two.

The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks ... The so-called "bad bank" plan, would address the key problem of how to price the assets by using a model-pricing mechanism. 

Thurgy: Jebus H.  I'm at a loss for words here.  The bad/non-performing and illiquid assets are already being marked-to-model, or marked-to-fantasy pricing.  Precisely why the banks keep these in off-balance sheet (Tier 3 assets).  If they had to mark even a small amount of this stuff to market they'd be insolvent..Oh wait, scratch that.  By definition a model is inherently wrong.  

The model would take account of the government's ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities. 

Thurgy: We've already heard about 'hold to maturity' from the TARP and Bear Stearns.  And they convinced congress this would work.  Secondly it will prove to be a blunder of extraordinary magnitude to assume the US will always have access to cheap funding.  We're already paying over $500B in interest per year...the US is basically a jumbo sub-prime borrower with an adjustable rate mortgage.  Lastly, it is a certainty the government will end up paying more than current market prices for these securities.  They are already marked to model and the government is also going to use a model for valuing these assets.  Considering the government has been wrong every step of the way, I don't expect them to come close to a reasonable valuation on these toxic assets.   

Where is the accountability?  

If the average tax payer invested his own dollar by buying banks when Paulson promised us way back then that the fundamentals of our economy remain strong and the banking industry is well capitalized, can they get TARP?  It is a toxic asset after all.  Or when Bernanke promised that sub prime will not spill over into the economy.  Or when every CEO was on the tube promising they were well capitalized days before an imploding.  When people were "spreading rumors" there was a witch hunt for the evil wrong-doers trying to bring down the stock prices of the bank.  It is completely legit to get on the TV and lie about your financial status as long as it is to restore confidence, but don't talk smack about anyone or the SEC will get you.  This level of fraud being perpetuated makes Madoff scheme look like a joke.  

Wall Street Journal:

According to a securities filing last week, Merrill's overall compensation and benefit expenses were down by 5.7%, to $15 billion in the year ended Dec. 26, from $15.9 billion a year earlier. The average Merrill employee got $247,423 in compensation and benefits in 2008, down just slightly from 2007.

By contrast, Bank of America employees got $75,577 in average compensation and benefits in 2008, down from $89,420 in 2007.

People at Merrill were loving life.  Levering up, and spreading their wealth internally.  Then they blew up and we are footing the bill for all of this.  Once again I'm at a loss for words but fortunately Adam, of the Daily Options Report, shares his thoughts on Merrill in 'Lunatic Fringe'.  This pretty much sums up my thoughts exactly and I'm sure most people would agree.  Rather than re-post it here you can just read it there.

Nearing the close we have financials up 13% and the real estate index up 9% . It's is your author's humble opinion that these moves are not natural, nor would I view this as a positive move over the medium term. I obviously have a bearish stance on REITS and it does irritate me to see the unwinding of the SRS traders and short covering with the market moving higher but then again these things I expect as the market ebbs and flows. It's not realistic to expect someone to be able to consistently time the market, which is why I chose to position trade. I got my SPG puts close enough to 50 ($49) so I'm ready for the REITards to run me over! If this blows up in my face, please don't tell anyone I got beat up by a bunch of REITards.

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Geithner wants to preserve the Private Banking system.  So the taxpayer will be the bad bank and they [the banks ] get to be the good bank.  We continue to prop up the institutions and derivatives that should default.  But what do we know, they are the subject matter experts right?  I mean BerTankE, Paulsen and Congress nailed this every step of the way, right?  

Here is one glaring problem.  A person who thinks outside of the box (Obama) has surrounded himself with Washington insiders and former high ranking people in the Financial sector.  Birds of a feather flock together.  The market is applauding , but I'm fairly certain in a year those smiles will turn upside down.  

Any uptick in the economy from stimulus will be given back, and then more at a later date.  ``Speed makes a difference here''.  Yep, we see where that's got us in the last 6 months.

Jumpstarting the economy is slang for defribrilating a corpse.  It might jump up a bit, but it's still dead.  The last 20 years has been a sham. 

My dad always told me, ``Don't write a check your ass can't cash, son''

We hear that so much lately, but then you hear Pelosi say the American people elected them as the majority, therefore they must like what they think.   Now there is some Congressmen (D) on Bloomberg saying the republicans got the economy into this mess and the democrats will lead us out.  Bi-partisan? Bullshit.  I've been fair in placing equal blame on both parties for the last 2 decades.

Pelosi and Frank are going to be the one's to put the nail in the coffin...  a slow and painful death.  Sorry, not trying to single out two Democrats but I really can not stand Pelosi.  Anybody ever seen her and Ray Finkle (From Ace Ventura) in the room at the same time?  I think not.  LACES OUT PELOSI

If it gets to the $47.50'ish level again today it's going to be on like Donkey Kong. In a previous post , "Simon says oops" there were a couple of SHORT entry points, one at 47.50'ish and one at 50. Let the market take us to that 875 area and that'll put SPG and the market in short-term overbought conditions. Precisely when I want to take my shots... I'll watch it at the close. Already have some short, will put some more on the higher I can get it.

If it doesn't pan out for me, it will not be the first time.

Long Gold / Short Oil has been shifted to a netural stance.  The relative strength on the ratio suggests some mean reversion in the near-term.  It could just be Gold falling, Oil rising or both.  Therefore I'm neutral for now.  I'm also nibbling at long natty gas futures, just for a trade.

It took 20 years to get us in the mess... However, right now is the most critical junction for the United States.  The stimulus,bailouts and interventions that might be put forth by this administration will determine our fate for the next 20 years.  I'm not here to bash the Democrats, Republicans nor Obama but I'm here to say we take our medicine now or we're going into the abyss.  I'm not even sure Japan is a fair comparison anymore.  Most think the quick and aggressive actions taken by the Fed and the Treasury will prevent Japan 2.0.  I'm also here to say we've had more 'bold and unprecidented actions' and the alphabet soup of lending facilities has actually made matters worse.    Interventions are NOT permanent.  Deficit spending here is not a good idea.  

If only we could keep kicking the can down the road.  I heard on ABC World News that for every $1 of spending we get $1.50 back in stimulus.  That figure is complete and total bull hockey poo.  It's more like $0.75 cents back the way I see it.    Look at how far the consumer has to deleverage before we can expect to see positive contributions to our GDP from these Stimulus plans, tax cuts, rebates, etc...  We are creating more debt to pay down debt.  Outstanding

Here are a few inspiring graphs depicting the American way.  The numbers don't lie, just Congress.  This is not about sub prime, housing, etc...  Household debt equals our GDP.   

This is a 20 year implosion.  Pull up graphs of the SP500/Dow and overlay them on the credit market debt, etc...  You'll see a striking resemblence.

Heard some talk about Gold taking out trend lines, etc...  I'm not seeing that from my perch.  Here is the same graph, just with the recent prices.  As you can see it bumped into the trend line before pulling back slightly.  My gut says I can buy back the contracts I sold to Dennis Gartman  at 905 down near the 860'ish area.  I do think the yellow metal will break out to the upside eventually, but for now it must exhale.

Assuming 47 holds on the XLE, here are some bullish price objectives.  Stop below 47, perhaps at the 46.50 area.  Currently momentum is compressing with price setting up the next move, which appears to have a target of $50 in the short-term (Again, assuming the shit doesn't hit the fan).

The market wants to go higher and it looks to be testing the 850-858 area.  This could setup a potential move to the 875 pivot and possibly up to near 890.  Look for a possible head-and-shoulders top near these levels.  I've drawn in a stop at 840.

I will note some negative divergences in the Money Flow and Momentum in the face of rising prices,  but I'm discounting this for now because it's not surprising to see the market get coiled around important pivot points. 

Tomorrow is the FOMC decision and we'll hear BerTANKe's outlook on the economy.  

From a prior post of mine 'Deflation not Bullish for Gold?'

So that's what I heard on Gloomberg...Gartman says people more concerned over deflation rather than inflation.  And deflation is not bullish for Gold.  ROFLCOPTER!

In fact, they've got it exactly ass-backwards.  

• Gold performs the best during deflation (especially debt deflation).
• Gold does not perform too well during inflation.  
• It performs the worst in disinflation.

Not too long ago he said Gold outlook is bearish and that Gold is not bullish during deflation.  Now I hear him right now on Bloomberg saying he's uping his target on Gold and he's adding to his position right here citing, "It'll likely be higher a month from now and likely a year from now".  He then adds there is no reason to be concerened about inflation now.  Ok so someone might claim to be long Gold here in anticipation of the inflationary pressures on the flip-side.  This is precisely why gold performs BEST during credit deflation.  Those guys make me laugh.  Even though I've been a bull on Gold I want to see it get over $918 before I add to my position and then again above $935'ish

In the beginning, when financials first started to get in trouble, Goldman Sachs was a favorite for the Long/Short hedgies.  Meaning "long the best, short the rest".  In the past couple of trading days Goldman has bounced from the $60 support line back to $71 ($70 is a pivot).  While most of the financials were getting murdered yesterday Goldman managed to paint a green close.  This smells like more of the same from the hedgies.

Goldman has long been seen as the "Cream of the Crop" by most.  By most I mean the people who don't bother to pull their heads out of their asses to see that Goldman Sach's shit stinks too.  Cramer has recommended them at $220, $200, $175, $125 and $75.  This was what he had to say late last year:

On his Mad Money show last night, Jim Cramer, a former Goldman-alum, said when the stock hits $75 per share 'buy it'. He said, "if you can buy a stock for $40 a share less than Warren Buffett, you're smart." 

Cramer was referring to the $5 billion investment Buffett made in Goldman in September, but actually Buffett bought perpetual preferred with a 10% dividend and warrants to purchase $5 billion of common stock with a strike price of $115 per share. Goldman sold $5 billion common shares to the public at $123 per share.

But what if this $5B was not an investment at all, but instead it was sort of a 'margin call' ??  The Oracle of Omaha sold option contracts (naked puts) to private investors for roughly $5B.  Goldman was reportedly the broker.

Jon Markman says, "because of its solid-gold credit rating, Berkshire Hathaway was not required to put up collateral to make this trade. But now rumors are flying on Wall Street that the owners of the contracts have demanded that broker Goldman Sachs put up collateral for the rest of the amount due. Since the value of the trade could be enormous, the collateral demands are said to be very large, and fears that Goldman will struggle to make good on its obligation has panicked shareholders."  

So most of this is old news, but the price action in GS suggests more of the same.  While I can't speak to those who are Long GS / Short some other insolvent bank, but I will say Goldman Sachs will be back to the $40's soon enough.  If the market takes out those lows I'm guessing Buffett will 'Invest' more in Goldman.  The only revenue stream GS has is short-selling toxic derivatives to their customers.

I wanted to follow-up on a post I made earlier that briefly talked about Gold and provide a visual with some navigational beacons drawn.

"I'm a fan of gold, but  so far gold has not managed to get above the downward sloping trend line from the March 2008 high.  If gold clears 850 that would setup a move to the 880-900 area, testing that trend line once again.  My gut tells me it will not get above it just yet [Edit 'it' refers to the trendline], but I'd love to be wrong.   If it does break north of 900 then we could be in for the 1k dash.  The Long Gold / Short Crude  is still one of my holdings."

Short-term momentum will being nearing overbought with any push towards the 850 level.  Overbought can lead to breakouts too so we can't assume an overbought condition in a shorter timeframe is time to sell.  But there has been some pretty good damage done to some technical indicators as of late.  The 845/850 will prove to be an important pivot point.  I imagine there will be some sellers right there.  In 'The Good the Bad and the Ugly' the projections I do have it going to 843 before turning back down.  The S&P closed at 840 yesterday.  The first projection at 900 was too ambitious as the highest it saw was 861 (futures).  Those are nothing more than projections.

In a previous post 05-Dec-2008  'To the bottom callers' :

In the longer term perspective, when commodities turn  then we can talk bottom.  They will be the leader out of this bear market.  Otherwise, any gyrations with the financials, consumer discretionary, etc are just noise.  Let's not get all giddy if the CRB manages to overtake the 20/50 day in the short-term.  

Notice the CRB index did manage to overtake both the 20 and 50 day moving averages briefly before falling back down.  Also notice it ran into to the trendline in the original graph before meeting some selling pressure.  Any break above the 50 day moving average at this point will likely set the run back to the 240 area.  It goes without saying this will lead the market higher if this does happen.  It seems the lows need to be tested first before we return to a large trading range on this and the S&P.  Let's keep an eye on the RSI action near the 50 area and the MACD making a meaningful moving above zero.

Oil is the number one speculative barometer in the economy.  Since the CRB is heavily weighted in Crude there is a lot of noise-to-signal in the index.  For this reason Thurgy likes to keep a close eye on beef.  Beef tends to be less speculative and an actual barometer to the health of the economy.

Jan. 21 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender by assets, gained 31 percent in New York trading after Chief Executive Officer Kenneth Lewis and five directors bought more than 500,000 shares for at least $3 million ...

Purchases by insiders typically are seen as a vote of confidence, and the filing helped Bank of America stock regain some of the ground lost this week.  Jamie Dimon, CEO of JPMorgan Chase & Co., also bought 500,000 shares of his bank valued at $11.5 million, according to a separate filing. Lewis bought his stake as the bank prepared to dismiss about 1,000 people, part of a reduction that may ultimately affect 35,000 jobs.

Thurgy:  That is a VERY fast filing of the share purchases.  Unusually so.  This is a vote of confidence like driving a Chevy Volt to a Congressional Hearing?.  I'm guessing they will be in front of the microphone very soon and didn't want any Leer jets coming back to haunt them.  So they throw back a few million (chump change) from the bonuses (or just TARP money) buying up shares.  This is so they have some skin in the game when they go to Washington really soon answering where the money has went and right before they ask for the next few hundred billion.

Well usually anyway.

These are just a few examples:

March, the expectation was a second half recovery.  It didn't happen.

October, the expectation was market crashing, circuit breakers, etc... after Tarp initially failed.  It didn't happen.

November, the expectation was 850 was the bottom.  It didn't happen.

January, the expectation was for an Obama Rally this week.  It didn't happen.

January, the market expects a second half recovery.  It's NOT going to happen.

Currently there is mixed reviews on the bottoms holding or not.  Maybe that means it will not if there is so much indecision there.  If everyone expects it to hold then likely it will not.  Or if everyone expects straight down to 680, it might bounce off 780.  Who the hell knows :)  The lower it goes the more coiled it will get.  There will be more value buyers down at 780.

``Start addressing the housing crisis. It's the best way out of this mess''

Cramer is an advisor to Obama for his day-to-day chores...Cramer's bottom call is in real trouble and he's already started whining about solving the housing problem.  He's also implied that the SKF is killing the banks now.  Next up?  Probably no short sales.  We might as well just have a system to where you can  not sell a stock unless it's more than you paid for it. 

..needed to get sales out of depression level numbers and back into recession level numbers.  Yeah, let's print money to get people into new cars.  Nevermind the auto sales for the years prior were excessive.  Mean reversion is a bitch.  But if we can get people into cars then money will return to the economy, right?  If the government supports the auto industry (which they have) then it's in  their best interest to see GM sell more cars.  Ok, let's give GMAC a lot of money because then they can lend it to the buyers.  In the years to come we'll probably start to see the 'Buy American' campaign's.  It doesn't matter what you buy, follow the paper trail of those dollars and see where you end up.  From start to finish:

Fed Print -> Banks -> Consumer -> Banks -> Fed  -> Purchasers of our debt (the printed money)

If this is a round-about way of soaking up the excess liquidity then it's a disaster.

• REIT Sector upgraded to Postive from Neutral at Barclays
  
• COVERAGE REITERATED: Simon Properties (SPG) reiterated by Barclays Capital. Reiterated rating Overweight.

The first thought that came to my mind was a quote from Full Metal Jacket:

Gunnery Sergeant Hartman: Who said that? Who the f**k said that? Who's the slimy little communist sh*t, twinkle-toed c**ksucker down here who just signed his own death warrant? Nobody, huh? The fairy f**king godmother said it. Out-f**king-standing! I will PT you all until you f**king die! I'll PT you until your a**holes are sucking buttermilk!

BCS (Barclays) Last: $4.16 -$3.09 (-42.62%)

Are they chosing REITS because they think Commercial Real Estate will be the first to bounce if by some miracle housing bottomed? Negative Ghostrider. Good luck with those dividends. IYR not even oversold yet in the near-term, but getting closer. On the dailies you got some more to go to the downside.

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Yeah, that's what we need.  More signs of treating the symptoms and not the problem.  Since we are a "Government of the people, for the people" it only makes sense that our government spending is the same as the consumer (or is it the other way around?)  And since our consumer is so important to our false economy the "Government for the people" will continue to answer to their needs because our needs is their needs.  Half of Congress (if not more) probably have the same amount of debt as the average consumer.  Do you really think our elected officials all sit above the bell curve?  We can't honestly expect our government to put the consumer on the right track when our own government is the enabler.

 

I really don't want to get fired up about taxes right now.  But what you will continue to see over the next decade is a slow bleeding of wealth.   Tax cuts to 95% of the American People is a stealth way of raising taxes on the other 5%.  Let's not kid ourselves here, just like the banks, surplus money to the consumer at this point will go straight towards debt.  Just like we can't force the banks to lend you aren't going to force the consumer to spend money that you would like to lend them.  You can't force them to into buying a new Chevy Volt.  And when it's all said and done there isn't much wealth left to recover.  Who wins here?  Well let me first start by saying debt is real.  Over time this debt is being shifted from one balance sheet to another and will all ultimately end up at Fed.  This debt will be either be paid by future tax revenue or defaulted on.  Taxes will have to be raised and wealth will be depleted.  In the end (10-20 years) you will have witnessed a complete balance in power away from the United States.  The redistribution of wealth will not be among our classes, but to the rest of the world.

On top of that our government will continue to support, and enhance, poverty programs which history has proven only keeps them in poverty.  Rather than give them an opportunity to get out of poverty we chose  to just support them.  "Spread the wealth"

And when Barney Franks finally gets his dream of doing mortgage modifications there are going to be another 100,000 homeowners right behind them in trouble.  Fixing housing will not fix the economy, it's the other way around.  But then again Barney Frank was the one supporting Phoney Mae and Fraudie Mac.   If housing were to bottom right now the banks are still insolvent.  Make no mistake about it when the day comes that housing does bottom don't expect any real appreciation thereafter for at least twice as long as they fall.

For some reason the Trichet Shovel Hit video isn't showing up in the previous post.  I'll try again here.  If it doesn't show up then just go here.

The economy of the 16 countries sharing the euro will shrink 1.9 percent in 2009, the Brussels-based commission said today, revising a November estimate for growth of 0.1 percent. European Central Bank President Jean-Claude Trichet today said economic prospects are “substantially” worse than the ECB predicted just last month...

Spain, the euro area’s fourth-largest economy, had its AAA sovereign credit rating removed by Standard & Poor’s today as its budget deficit swells. It was the second downgrade of a euro- region government in five days, after Greece last week

Looks like I allowed too much time in my Surprises for 2009 in that I figured it might take until mid 2009 before Trichet was hit over the head with a shovel. I've underestimated the velocity of the "oh-shit" train, but I'm still about a year in front of Bernanke and Co. (but I'm a year behind others). This shouldn't actually be listed as a surprise as the majority has been debating over when this will happen not if.

My father's brother's nephew's cousin's former roommate who works in the ECB sent me the actual video of Trichet getting hit over the head with a shovel. He was last heard saying 'Our single mandate of price stability has been achieved...'

Video Link Here

I'd like to re-post something back in the start of October. It's worth re-introducing the maastrict treaty and how this will ultimately turn the Gyro into a Hoagie.

On 05 OCTOBER 2008 POST TITLED 'EURO: Dead man walking':

A country in the eurozone can, without being in breach of the Maastricht Treaty, create a new central bank controlling the monetary policy of a new currency. This loophole in the Maastricht Treaty is not widely known

I've long felt we would see a turn in the USD once Trichet realized the deflationary forces at work. His single mandate of price stability will need to be revised in short order. Obviously the cat is out of the bag now as the Euro has broken down and out. It's this very reason the USD has shown strength despite what most call "printing" in the US. There will likely be periods of every kinds of 'flation thrown into the mix due the inevitable fiscal polices, rate cuts (taxation without representation) and stimulus packages, but the overall trend will continue to be deflation. Re-inflating the largest credit bubble in history is an IMPOSSIBILITY. Bottom line is that the amount of "printing" is far less than the money being "lost". But I digress.

The Berlin Wall

Germany will likely be the first to pull out. Germans savers have requested their money in German Euros due to concerns over the stability in the region. They've specifically started avoiding notes coming from certain other countries (Spain, Ireland, Portugal and Italy). Both Italy and Ireland can no longer bear the brunt of the high interest rates that Comrade Trichet sets and may need to pull out for that reason. The EURO is facing a serious threat and I personally think it can be partially attributed to Trichet's unwillingness look anywhere other than the rear-view mirror. With or without countries abandoning the Euro, there will be substantial rate cuts ahead due to the several economies already in a recession.

The flight from risk (EURO, etc...) is underpinning the strength of the dollar because, like the yen, the USD was used as a funding source for higher yielding currencies. Next up will be the Chinese banks. The speculative flow of hot money that went into the Chinese banking system has now "left the building". I'm not here to say there isn't uncertainty in the future or the USDbut that a lot of dollars were sold to fund the higher yielding currencies are now coming back.

--end quote--

Simon Property Group, Inc. (Simon) is a real estate company in United States. Simon operates from five retail real estate platforms: regional malls, Premium Outlet Centers, The Mills, community/lifestyle centers and international properties. As of July 31, 2008, the Company owned or had an interest in 383 properties comprising 261 million square feet of gross leasable area in North America, Europe and Asia. The Company is headquartered in Indianapolis, Indiana. Simon Property Group, L.P. (the Operating Partnership) is a majority-owned partnership subsidiary of Simon that owns all of its real estate properties. On April 3, 2007, SPG-FCM Ventures, LLC, a joint venture between an entity owned by Simon and funds managed by Farallon Capital Management, L.L.C., completed the acquisition of The Mills Corporation.

Balance Sheet
Total Cash (mrq):	646.12M
Total Cash Per Share (mrq):	2.861
Total Debt (mrq):	17.88B
Total Debt/Equity (mrq):	5.397
Current Ratio (mrq):	1.024
Book Value Per Share (mrq):	11.378

Thurgy says shareholder dilution coming soon to a secondary near you. How else do they plan on servicing that debt? Sorry folks, parks closed. The moose out front should have told ya. Yeah yeah, I know I've mentioned them here several times over the last month and that it's a favorite long-term short of mine. Anyway, hoping to get a bounce to the 48-50 area this week so I can add a little more to the shorts. I should note their earnings come out on 30-Jan so that's going to be partly responsible for the uptick in volatility in the chart. I'm a buyer of volatility right here, it's the cheapest it's seen since October, in a sector that's going into the crapper. A short put ladder is tempting me for the front-month (already hold leaps). However this would be a directional play to the downside (that's what I expect) as opposed to someone just getting long volatility. There are just too many ways to get long volatility. Adam at the Daily Options Report probably knows at least 5 good ways to do it. He has a PhD in Volatility and a masters in Option Greeks. You do need an above average IQ to comprehend his thoughts and I do not have that IQ but I still go there for the pictures and humor. He occasionally sends me a dumbed down version upon request. Highly recommended blog.

For the long-term, I'm standing at home plate pointing to the left field wall. My view of long-term is years you can count on one hand. Meanwhile the REITards can buy up all the preferred shares they want taking comfort that the 10% dividend is will pay them to wait for the recovery even with a falling stock. Just because you are getting "pot odds" and make the "call" doesn't mean you're going to win the hand. But again the long preferred / short common isn't so bad.

S&P

Most expect an Obama Rally next week.  854 then 865-875 and 900 serve as overhead resistance.  Anything above that will likely spark some short covering.  It does look like the market is setting up to re-test those lows sooner rather than later.  Either way, the onus is on the bulls and I'm a seller of strength.

Jobs

Only 15 days into the year we've had over 120k job cuts announced by just a few of the larger corporations.  Even World Wrestling Entertainment had to piledrive 60 people.  Can you smell what The ROCK is cooking?  The feedback loop has already begun as job losses accelerate.  Less jobs means less money.  Less money means less tax revenue.  Less tax revenue means budget shortfalls.  Budget shortfalls means cuts.  Cuts leads to less spending and more job lossess.  Rince, lather and repeat.  The $10 trillion question is whether Ben will be able to soften the crash landing without sparking hyperinflation on the flip-side.  The real booger here is how they're going to soak of the liquidity fast enough to prevent the USD $10,000 bills, but not so fast as to hinder the economic recovery.

Gold

I'm a fan of gold, but  so far gold has not managed to get above the downward sloping trend line from the March 2008 high.  If gold clears 850 that would setup a move to the 880-900 area, testing that trend line once again.  My gut tells me it will not get above it just yet, but I'd love to be wrong.   If it does break north of 900 then we could be in for the 1k dash.  The Long Gold / Short Crude  is still one of my holdings.  If and when I see the gold/oil ratio get into the 30's I will consider the trade mentioned below.

Silver

I've heard a few mention a Long Silver / Short Gold trade, referencing it's long-term ratio averages.  To me this seems to be a pro-recovery trade only, and a bit premature.  If you believe there is a recovery on the way then this is not a bad trade.  Nonetheless, Silver had a good day on Friday moving up 7%.  I will consider the Long Silver / Short Gold trade when I feel it's time to speculate on a bottom in the economy 6 months out.  Once it becomes evident of a recovery then any base metal is going to perform well along with just about every commodity.  I do hold some SLV $11 calls, but that's viewed as more of a hedge to all my other shorts.  

Oil

Crude has gotten to the point to where whipsaws will be commonplace.  Reasons of course are OPEC, geopolitical tensions and the periodic "recession is almost over" nonsense.  However, it doesn't appear to be very hard to push crude down towards $30 right now.  The back of the board has continued to come in towards the front month and at some point there will be massive fuel hedging if there is even a chance of a recovery on the horizon.  If there an actual recovery that follows then I'd like to be a buyer of the airlines this time around, assuming they hedged their jet fuel this time.

Euro

If the euro clears 1.337/8 that could setup the move up to the 1.35 and above that is 1.39 (with some resistance along the way).  That would help gold to 865 next week.  It is  your author's humble opinion that the euro will not break/stay above 1.39 and will see 1.25 soon.  The action in the Euro this week raised some red flags for me after the ECB cut rates.  It only found a pulse after the Citi/Bofa/TarPoilet Paper news surfaced.  If the Euro moves north of 1.40 then Gold will shoot towards 1000.  Be warned, it's not a matter of if, but when the Euro currency starts to devalue relative to the dollar.  Let's just say they are right about where we were 1 year ago, headed down the same road.  However, if the market goes higher then the Euro will likely follow it providing there isn't something immediately out of the Eurozone like Deutsche Bank being insolvent (which they are I think) having the equivalent of 80% of Germany's GDP in assets (which they did).  Or perhaps Credit Suisse, RBS, UBS and too many to list start having headlines like Citigroup, BofA (which they are)

Disclosure Edit: Thurgy is short of the EuroDollar, legging into the position.

...as to why JPM and Citigroup moved their earnings up and then BAC.  It was probably by insistance of Henry Paulson et al.  They needed some fodder to scare up the remainder of TarPoilet paper in Sentate before the new administration comes in just in time to craft another lovely piece of legislation.  But this version will new-and-improved!  I hear Barney Frank has bought him a brand new pen for this one.  I'm also guessing they will not be able to attach the next one to the Mental Health bill like TARP I is.  Yup, a mental health bill.  Why?  Karl Denninger at Market Ticker explains:

"All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

What is a "revenue bill"?

Legally, it is a bill that obligates the taxpayer.  This is why the TARP/EESA had to be attached to existing legislation in The Senate - it was not Constitutional for The Senate to originate that bill (the Senate CAN originate other sorts of bills) because under The Constitution all revenue bills must originate in The House.  Because the EESA proposed to raise revenue (indirectly; it was a bill to spend and thus obligate the taxpayer for which revenue would have to be raised) it had to originate in The House of Representatives.

Thus the game-playing by the Senate, attaching it to an existing revenue bill (the "mental health" bill) that was languishing on The Senate floor.

There was a mad rush to get something done.  That was evident when Paulson delivered his version of TARP on 4 printed pages (probably double-spaced too).   CONgress believed it was necessary to do this end the crisis of confidence, stabailize the financial system and stop tanks and Marshall Law from rolling into town.  But most importantly it was to save the 401k's from losing more value.  ``We heard the stock market speak when the bill failed to pass, this is necessary.  Constituents are now calling me saying their retirement accounts are losing value and now they support the bill''  - LOL

It's time to start the "stop the next TARP-ish bailout" efforts.  Banks need another $800B I'm hearing?  Gee, seems like a LOT of people were saying that initial $700B was just the buy-in to this high-stakes game of poker where only the house players win.   By supporting bad banks you bring down the entire system with it.  Now we are the one's getting poked... ``Bank of America...Bank of Opportunity''  - Nice one Kiefer

Before I take a cheap shot at this guy I'll first acknowledge that back in 2007 his contrarian views and a lot predictions for 2008 came true. Hat tip to you Kass.

So I have no problems picking on people better than me. This guy has always rubbed me the wrong way. Maybe it was his smug look, winter scruff on his face, sitting in front of those fancy bookcases at Seabreeze Partners. He is a noted contrarian that ran a Short-Only fund that has since converted. Now I haven't seen this guy since early 2008 as I do not watch CNBC but every now and again I look for some humor in TheStreet.com headlines, mostly to see if Cramer is bullish or not so I know when to get short.

In 2007 a contratrian view of the market was the correct side to be on. However it seems to me that often times a contrarian just finds reasons to be a contrarian as opposed to looking at things objectively. Case and point. In Jan 2008 Kass recommended people buy Citigroup at $20 and put it in a sock drawer for a year or two. When I first read this one year ago, the first thought that came to my mind was why in the world is a guy that is running a short-only fund recommending people get long something. I didn't hear him say to get short another name at the same time so I can't give him credit for a hedged call. Secondly, has the guy looked at the macro view? Lastly, has he seen the size of their Tier 3 (off-balance sheet) assets? Fast forward to present day and your socks are worth more than your Citigroup stock.

Often times it does pay to zig when other people are zagging, but constantly taking the contrarian view will have you owning Citigroup at $20. I imagine Saudi Prince Alwaleed bin Talal is not too happy with Dougie right about now.

• 01/15/08 Kass: Buy Citigroup for a Rainy Day
  
• 05/29/08 Kass: I'm Putting My Money in the Banks
  
• 11/21/08 Kass: Bonds May No Longer Rule (Shorts TLT at 104 for "anti-implosion" hedge)
  
• 12/08/08 Kass: On the Road to Recovery
  
• 12/22/08 Kass: Too Early to Expect a Turnaround (The bottom line is that while I am feeling pretty, pretty, pretty, pretty good that the stock market has bottomed...)
  
• 01/15/09 Kass: It's a Sad State of Affairs

I guess it's time to re-post my photochop from the original TARP.  We have some new and improved idiocy to take into consideration as well as older information.

• Bank of America gets $135B backstop from the Fed.  Taxpayer is already losing $6 billion in 6 months on Bear Stearns assets parked in the Maiden II fund setup by Treasury.  Bank of America will double those losses, at a mimimum, after the Merrill and Countrywide toxic waste is moved into the Maiden II fund.  We haven't even put Citi's garbage in there, YET.  They only had about a trillion in off-balance sheet assets before this party ended.  Remember, there was a good chance the taxpayer makes money on this plan...
  
• Senate approves release of unspent bailout 
• The bailout for state and federal pension funds haven't even begun.
  
• Commercial Real Estate is just starting to implode.  Bye-bye regional banks.
• We only get back 50 cents in positive GDP for every $1 of debt we are taking on now.
  
• Paulsen, when at Goldman Sachs, had the "shackles of leverage" removed that was limiting the investment banks from going over a 12 to 1 leverage ratio.  Once that was done we had Bear Stearns leveraged to 40:1 before it's blow-up, Lehman 30:1, etc...  
• There was "only" like $60 trillion in derivatives globally.  What's a mere 20% loss on that look like?  If you are leveraged 30:1 and you take a 20% hit you are insolvent.
• You were being told this is a crisis of confidence.  It's a crisis of garbage.
• Trichet Vision Unravels as Italy, Spain Debt Shunned.  Here is excerpt from a previous post 'EURO: Dead man walking'.

``I've long felt we would see a turn in the USD once Trichet realized the deflationary forces at work.  His single mandate of price stability will need to be revised in short order.  Obviously the cat is out of the bag now as the Euro has broken down and out.  It's this very reason the USD has shown strength despite what most call "printing" in the US.  There will  likely be periods of every kinds of 'flation thrown into the mix due the inevitable fiscal policys, rate cuts (taxation without represenation) and stimulus packages, but the overall trend will continue to be deflation.  Re-inflating the largest credit bubble in history is an IMPOSSIBILITY.  Bottom line is that the amount of "printing" is far less than the money being "lost".  But I digress.''

 Gloomberg article here.  I just wanted to highlight one part:

“This is more short-term fire-fighting tactics,” said Ed Rogers, chief executive officer at Tokyo-based hedge-fund adviser Rogers Investment Advisors Y.K. “Once again, the U.S. government does not seem to be thinking in terms of final solutions to the problem.”

Price projections assuming a run to 900, completing the right side of the head-and-shoulders before the next measured move to 780'ish.

The Good (Short Term) - Be nibble in your trading

If overhead resistance at 868 taken out in the next few trading days then we could move to 900 on short covering alone. Bear market rallies often end on good news, such as an inauguration. That's about all the good news, although some might view the Senate voting to release the remaining $350B of Tarpoilet Paper as good news. Chalk up another solved crisis for Barney Frank. Proud of my Senator Vitter for trying to get this stopped even if he was doing the honka chonka with the D.C. Madam at one point. Sell into strength.

The Bad (Intermediate Term)

Bear Wedge breakout could put 944 as the top in this correction. Since the November lows most (including myself) considered a rally to as high as 1060, a 38.2% retracement of the bear market. Unfortunately those pesky little numbers like Job Losses, Retail Sales and Real Estate kept getting in the way. So far the market has only managed to retrace to the first fib at 950. It appears we are headed down to the November lows sooner rather than later. Got Puts? This does not rule out the possibility of seeing 1000 on the S&P though, afterall REITards are still out in full force talking their book on TV. But for those of us with more than two firing neurons up top know that Commercial Real Estate is done, finito. I have and will stay short SPG, VNO and HCP until they all get a 50% haircut. Still though, never underestimate the power of stupid people in large groups. Therefore it's premature to rule out some sort of 'Obama-wan Kenobi' plan leading to irrational exuberance in the market. Sell into strength.

The Ugly - Get Short or Get TARP'd (Long Term)

I fully expect a single digit P/E on the S&P. It has did this only 9 times since the year 1900 and each time it breaks below 10 it stays there for a prolonged period of time. This has been the perfect storm and there is every reason to expect this scenario to play out. Even with a 10 multiple and $50 earnings that is a 500 price target. Gives a whole new meaning to the S&P "500". Got Puts? This may take months or a year, perhaps two. Heh, the Japanese stock market is sitting at 8,000 a mere 20 years after it topped at 38,000. Read that last sentence a few times then ask yourself that question, "Does the market always come back?" The housing bubble coupled with peak credit in a nation of 0% savings and all consumption plus a global recession = bad news bulls. Sell into strength.

Normally in this situation I would advocate a Long Divorce Attorney, Short Wedding Planners trade (both have Semi-Pro Ultra Long/Short ETFs). However, this time is different and me thinks people will be too broke to get married or divorced. Therefore I'm recommending shorting both.

Picture is from 30-Nov-2008 when I posted about how to know when to exit long positions.  

On 05-Jan-2009 Cramer: Back to Bullish on the Dow for 2009

Dow Close: 9,000

On 15-Jan-2009 

Dow as of this posting: 8,017

Bloomberg: Bernanke Urges ‘Strong Measures’ to Stabilize Banks 

Short-term momentum is oversold, with some positive divergences.  

I've left out support/resistance points above and below the magenta lines for the time being.

So I had been long DRYS stock at $5.58, and have been writing covered calls... My position as of Friday was Long DRYS, Short the Jan 7.5 puts, Short Jan 12.50 calls, Long Jan 15.00 calls, Short Jan 17.50 calls...

This morning I wake up to an Options Assignment Notification.  ASSIGNED OPTIONS SYMB:OOCAV OOC JAN 12 1/2 CALL CONTRACTS The 12.50 were assigned, so they sold my underlying, at 5.50 basis for 12.50.  Now all I'm left with is the naked puts, and the 15/17.50 vertical.  I understand how/why this happens, but what a pisser.  I wanted to see the natural 200%'er and now they peed on my rug.  It totally tied the room together.

Right now investors are bracing and expecting the worst out of the Financial sector this quarter. However, don't forget that these guys make Houdini jealous when it comes to PFM.  In the last couple of quarters we've seen the "Tier 3 Shuffle" - where banks increases Tier 3 assets a quarter before the EOY.  I have a hunch this could result in a "not as bad as expected" reporting quarter sparking some kind of rally.  Am I betting on this?  No.  What I'm waiting on is if this happens I can get some short positions up higher because once the Tier 3 assets start hitting the books again earnings will actually reflect what people were expecting this quarter, but it'll be next quarter.

I don't give this high probability, but it's just a scenario I've considered.

Says Christopher Rupkey of the Bank of Tokyo-Mitsubishi on Bloomberg referring to the US.

Something is in the water.  Look, I'm not going to say we're can't go higher in the market but the talk of a V-shaped recovery and being near the end of the recession is just absurd.  I'm sure most of this nonsense is spawned from:

• Bear Markets average 18 months in duration
  
• Recessions average 11 months in duration
  
• Stocks are cheap, fundamentals, p/e, dividends, blah
  

How many of you can look 12 months down the road from now and see the fundamental picture of the economy improving?  Sure we're going to have massive stimulus packages but in no way is this going to improve the fundamentals or have permanent, lasting effects (well, none that are positive, there will be lasting effects).  We're not the first country to build bridges to nowhere . o O {Japan}  But doing nothing isn't a good idea either.  The death-spiral that would ensue would certainly gurantee the Mayans were right.  I'll let you guys hold your breath over CONgress not botching another one.  

Obama said ``the uemployment rate _could_ reach double digits and our deficit _could_ reach 1 trillion''.  You can safely replace the world 'could' with 'will', irregardless of this stimulus.  Any form of tax cut to the consumer will be saved.  Leaving one class out of a tax cut/credit is the same thing as raising their tax.  The net result is that you've brought down others to bring up noone.

Now I really wish I could find the bill/act that was put in place many years ago that effectively let companies/contractors to government sponsered spending rape the taxpayer with the amounts they are allowed to charge for the jobs.  I seem to think at one point Ron Paul was trying to get this repealed for these reasons, but I could be wrong.  

The market going higher isn't a reflection of the true state of the economy, but the speculation on it's recovery.  Just like in early 2008 when economy was supposed to recover in the second-half.  Right...I'm sure there will be some upticks here and there, and a few false starts but we're going to be hard-pressed to pull out of this one anytime soon.  Anyway, the higher we go, the better.  I've not been net-short this market for some time and frankly I'm just trading the wave.  I don't care which way it's going, just not sideways.  But then there was that time between late Oct-Nov when Mr. Market was butchering bulls AND bears in the same day...yeah that wasn't too fun.  

If by chance the market makes it all the way to 1200+ , and you are still holding your 201k, you might want to _consider_ abandoning ship...the hell with women and children first! ABANDON SHIP!   If we pull out of a recession in the next several months then I'll hang up my spurs.

Edit: Sorry, the alternative energy money spent will have lasting positive effects.  The other trillions will not.

I don't see anyone warming up in the Team 850 Bullpen.  Does this mean it's safe?  Bulls better kick it up a notch or someone will have to wake up the gimp.

I remember that one from a while back.  And the two kitchen sink quarters in financials.  Now it's going to be a V-shaped recovery.  Hell, I'm all in then!!!! *not

Narrowly skirt a depression maybe... Remember a depression is defined as a 10% drop in GDP peak to trough.  It might take years, who knows really.  It depends on just how much they prolong the inevitable.