Short Selling Restrictions “A Great Indicator of Imminent Market Crashes”
by ilene - February 27th, 2010 12:22 pm
Short Selling Restrictions "A Great Indicator of Imminent Market Crashes"
Courtesy of Mish
Inquiring minds are investigating Fannie Mae’s stunning $72 billion loss for 2009 as well as new short selling curbs. The two are actually related. Let’s take a look.
Please consider Fannie Posts $72 Billion Loss for ’09
Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation’s largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.
The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion.
While some analysts warn that efforts to modify loans are simply postponing foreclosures and delaying losses, Fannie Chief Executive Michael Williams said the company remained committed to preventing foreclosures. "Our overriding objective is keeping people in their homes whenever possible," he said in a statement.
The government took over Fannie and Freddie nearly 18 months ago as rising loan defaults burned big holes in the companies’ balance sheets. The government has agreed to absorb unlimited losses for the next three years and up to $400 billion after that. So far, the companies have taken a combined $127 billion in Treasury support, making this bailout one of the most expensive from the financial crisis.
Short Selling Limits Yet Again
Proving that the SEC has learned nothing from history (I have a nice Fannie Mae example to prove it), the S.E.C. Moves to Put Limits on Short-Selling
The Securities and Exchange Commission voted on Wednesday to limit short-selling of stocks that are falling rapidly in price, The New York Times’s Floyd Norris reports. The rule was adopted on a 3-to-2 vote, with the two Republican members saying that no case had been made to justify any further action against short-selling.
The limits would apply to any stock whose price has fallen at least 10 percent during a day’s session. After that, short-selling would still be legal but not unless the sale was at a price higher than the best bid price then available.
The S.E.C. chairwoman, Mary L. Schapiro, said
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DiggChina and Germany: The Perils of Vendor Financing
by ilene - February 27th, 2010 12:13 pm
China and Germany: The Perils of Vendor Financing
Courtesy of JOHN RUBINO at Dollar Collapse
In response to Why Would Anyone Buy a Spanish Bond?, reader RAID 3000 pointed out that the U.S. has far more serious problems than Europe (no argument there!) and included a link to LEAP2020, a European site doing great work on this subject. One of its articles contained the following chart:
This got me to wondering if it would be possible to construct a similar chart for China and its main trading partners. (The U.S. would dominate that one.) From there it occurred to me that China and Germany are in more or less the same boat due to their practice of vendor financing. They’ve gone about it differently but the effect has been the same. Consider:
China lends money directly to the U.S. by using the dollars it receives from us to buy Treasury paper. This lowers U.S. interest rates and supports the dollar, which allows us to continue to buy Chinese stuff.
Germany, on the other hand, has lent its credit rating to the whole Euro Zone, allowing countries like Greece and Spain to borrow more and at lower rates than they could have otherwise. The borrowers use some of this money to buy cars, pharmaceuticals, and solar panels from Germany.
Now both China and Germany have discovered that their surpluses were based in part on bad loans to weak borrowers, and that some of the assets they thought they owned are 1) not really theirs or 2) worth way less than face value.
China has a lot of dollars, but can’t unload them without destroying the value of the dollars it retains. It’s trying to move out slowly, scaling back its purchases of U.S. debt and buying gold and oil resources, but it has to walk a fine line because spooking the markets would defeat its purpose. So it’s stuck with big dollar balances for the foreseeable future, while the U.S. is actively destroying the currency’s value.
Germany doesn’t own a lot of Spanish or Greek assets, but is now on the hook for what might end up being hundreds of billions of euros of PIIGS country debt. Which is to say it has to eat some of the loans it made during its vendor financing days.
Either way, those surpluses — and the balance sheets built on…
Guest Post: Notional IRS, CDS, and Printing Press Irrelevance
by Zero Hedge - February 27th, 2010 11:54 am
Courtesy of Tyler Durden
Notional IRS, CDS, and Printing Press Irrelevance, Submitted by JM
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| Notional OTCs and Printing Press Irrelevance III.pdf | 87.28 KB |
Guest Post: Notional IRS, CDS, and Printing Press Irrelevance JM February
by ilene - February 27th, 2010 11:54 am
Courtesy of Tyler Durden
Notional IRS, CDS, and Printing Press Irrelevance, Submitted by JM
| Attachment | Size |
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| Notional OTCs and Printing Press Irrelevance III.pdf | 87.28 KB |
Warren Buffett 2009 Letter To Shareholders
by Zero Hedge - February 27th, 2010 11:38 am
Courtesy of Tyler Durden
THE MULTIPLICATION OF MONEY
by ilene - February 27th, 2010 11:27 am
THE MULTIPLICATION OF MONEY
Courtesy of John Mauldin at Thoughts from the Frontline
Where Is All that Greek Gold?
The Greeks Write Back
The Euro and a Conspiracy of Hedge Funds
So Where’s the Inflation?
No Help for Homebuilders
The economy grew in the fourth quarter by 5.9%, the most in years. The adjusted monetary base is exploding. Bank reserves are literally through the roof. The Fed is flooding money into the system in an effort to get banks to lend. An historically normal response by banks (to increase lending) would have been massively inflationary, causing the Fed to stomp on the brakes. Despite raising the almost meaningless discount rate (as who uses it?), this week Ben Bernanke assured Congress of an easy monetary policy, with rates remaining low for a long time. Many ask, how can this not be inflationary?
This week we look at some fundamentals of money supply and the economy. If you understand this, you won’t get misled by people selling investments, telling you to buy this or that based on some chart that shows whatever they are selling to be what you absolutely have to have to protect your portfolio and/or make massive profits. And we touch on a few odds and ends. And yes, I can’t resist, a few more thoughts on
Before we get into the…
Weekly Chartology
by Zero Hedge - February 27th, 2010 11:18 am
Courtesy of Tyler Durden
Even Goldman’s clients are increasingly challenging the firm’s unrelenting bullish outlook: David Kostin says: “Our view that S&P 500 earnings will approach prior peak levels in 2011 represents a key argument supporting our bullish view on US equities. However, it remains the single most contentious point in our recent meetings with both the micro and macro investors. Separately, 10% of S&P 500 sales originate in Europe. Stocks with high revenue exposure face headwinds and should lag the broader market.”
And here is what the world looks like through 3D, rose-colored glasses:
Our top-down EPS forecasts of $76 and $90 for 2010 and 2011 reflect +33% and +20% growth, respectively. Our pre-provision and write-down EPS forecasts are $81 for 2010 and $91 for 2011. Bottom-up consensus forecasts a 39% increase in 2010 to $79, and a 20% increase in 2011 to $95.
Surely Europe filing Ch.11 will only raise the 2011 EPS forecast.
OilPrice.com Weekly Oil Market Update: 02/22/2010 – 02/26/2010
by Zero Hedge - February 27th, 2010 11:16 am
Courtesy of Tyler Durden
Submitted by Darrell Delamaide of OilPrice.com
Crude Oil Hits Ceiling in Week as Hedge Funds Attack Euro
Crude oil broke through the $80 a barrel ceiling repeatedly during the week but kept falling back as hedge funds placed big bets on the Euro’s decline.
The fiscal drama in Greece held global markets hostage much of the week as worries about the impact of the Greek crisis on the euro outweighed comments from Federal Reserve chairman Ben Bernanke about continued low interest rates in the U.S., pushing the euro down against the dollar and damping crude prices.
The euro recovered some ground on Friday amid new reports of European aid for Greece after falling to a nine-month low of $1.3440 on Thursday. Germany’s state-owned bank KfW may take part in a planned Greek bond offering next week, according to market reports.
The Wall Street Journal reported on Friday that a small group of elite hedge fund traders have concluded that the euro could be headed to parity with the dollar and their bearish bets are increasing the downward pressure on the 16-nation currency.
The Journal compared the situation to the hedge fund attack on the dollar in 2008. However, the trades are not expected to lead to a collapse of the currency as the attacks of George Soros on the British pound did in 1992, the paper said.
Positive U.S. economic data on Friday, including a revised fourth-quarter GDP annual growth rate of 5.9%, help crude oil futures claw back some of Thursday’s losses and near the $80 threshold again. Nymex’s benchmark West Texas Intermediate settled at $79.66 on Friday, after topping $80 earlier in the week.
In spite of crude’s difficulties in staying above $80, some analysts issued bullish prognoses for energy futures. Goldman Sachs forecast a new trading range of $85 to $95, up from the $70 to $80 of the past several months, amid supply disruptions from the North Sea and Venezuela and the impact of the Total refinery strike, which was resolved earlier this week.
Other analysts, too, looked for fundamental supply and demand considerations to reassert themselves amid the currency turmoil and lift crude oil futures into a higher trading range. Oil futures prices gained more than 9% in February but remained below January’s highs.
Source: http://www.oilprice.com/article-crude-oil-hits-ceiling-in-week-as-hedge-funds-attack-euro.html
By Darrell Delamaide of OilPrice.com who focus on, Fossil…
How The GMAC Bailout Was The Biggest Scam Of Them All
by ilene - February 27th, 2010 11:12 am
How The GMAC Bailout Was The Biggest Scam Of Them All
Courtesy of Vincent Fernando at Clusterstock
GM’s financing arm, GMAC was the only entity to be bailed out by a full three rounds of aid and the only bank whereby the U.S. government still holds a majority stake.
Heat is picking up in regards to why GMAC received such special attention.
They also questioned whether the rescue of GMAC, achieved in part by making it a bank, had created a long-term situation in which the government guarantee of bank deposits was subsidizing sales at General Motors and Chrysler.
GMAC is the primary source of financing for GM and Chrysler dealers, and a major source of loans for buyers of their vehicles. Elizabeth Warren, a Harvard law professor who chairs the panel, said she understood GMAC’s utility for GM and Chrysler.
"What I don’t understand," she said, "is what the justification is for being an independent bank that takes deposits that has a backup from the United States government."
…
Ron Bloom, a senior adviser to Treasury Secretary Timothy F. Geithner, told the panel that the rescue of GMAC was necessary to save the automakers, and that the $17.2 billion price tag was a good deal for taxpayers. He said that no other lender or combination of lenders could have quickly replaced GMAC’s role in the marketplace.
Guest Post: The Chilean Earthquake From A First Person Perspective
by Zero Hedge - February 27th, 2010 10:52 am
Courtesy of Tyler Durden
Submitted by regular Zero Hedge guest author Gonzalo Lira
Hello Gringos!
I’ve been under the weather for the last few days. So last night I went to sleep early, around 11pm.
Around 3:15am, I suddenly woke up, even though I usually sleep straight through until the dawn. There was no obvious reason to wake up at such an odd hour. Claire, my dog, was sound asleep. Out my window on the 15th floor of my building, all the buildings across from the Los Leones golf course were quiet.
But I was wide awake.
So finally, I decided to make the best of it—I got my laptop and surfed the net, wide awake, reading (of all things) about what the iPad might mean to newspaper publishing—when the earthquake hit.
“Hit” makes it sound too dramatic—initially, it was a a minor tremer with a slow circular roll. The clock on my computer read 3:34am.
Now, a tremor like this is nothing unusual. Since I live on the 15th floor of my 15 storey building—and since this is Chile—I’m used to tremors. To paraphrase Linda Evangelista, I don’t get out of bed for anything under 6.0 on the Richter scale.
So at first, I didn’t think much of this tremor—because that’s what it was, at first: A minor tremor.
But then, it refused to peter out. I got out of bed but stayed in my room—I heard something smash down on the opposite side of my apartment—and then something else crashed, only much nearer.
The floor was moving around and around—you felt as if you were standing dead center of a swiftly spinning merry-go-round, trying to keep your balance. There was no up-and-down motion, only round-and-round.
The television started moving, as did the bed, and I could hear glass shattering from other parts of my apartment. Claire—awake finally—was whining and brushing my leg—but I couldn’t quite stay on my feet, bouncing off the edge of my bed to my feet, then losing my balance and falling back down again, then to my feet again.
From the living room of my apartment, I could hear furniture crashing, and from the kitchen, cutlery clattered about like a pocketful of coins jangled by an impatient gambler.
I’d left my room dark when I’d started surfing the net—so I had…
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