Tuesday, February 10, 2009

Dear Commander-in-Chief Obama,

This will be my last telegraph from the "kessel", like the one that is around Stalingrad, but instead of a city, I am talking of an entire nation and it's FUTURE.

Please take a moment to light a cigar, pour some wine, or whatever it is that helps make the living room more comfortable, my message will be mostly calm and not tainted with euphoric calls for riots this time. I am sober today and I think I am not hearing voices in my head right now as I typed this.

As we fire our last few artillery rounds, it becomes clear that the only remaining road left out of this trap is to:

1. Run a stress test on EVERY bank. That stress test will yield an asset value for which the bank equity is zero. We shall refer to that as the "breakeven" price.

1b. If the bank is inadequately capitalized (for example - STT is at 1.19% capital ratio, may I remind you of Freddie Mac who was at 2% capital ratio when they became a Federal Institution :) then ...

2. Empower the treasury to start an auction of the mortgages and other investments at that breakeven price. Every $ above that price goes to the equity holder of the bank and at the end of that you have a healthy bank, owned by the original private institution.

3. If no buyer was found at the "breakeven" price, I implore you to sell it at the highest bid.

4. Then recapitalize the bank and have it run as a government institution. I am not sugar coating here - it means the taxpayers pony up the amount required to just settle the trade and move on. Pay your bills, sir. It's a good thing.

Either way, you have resolved the so-called depression and we are ready to move out of the siege.

I have plenty of money to deploy as a private investor, sir. And I know that you are VERY MUCH aware that there is a capital formation starting as of November last year, PRIVATE CAPITAL, that is ready to deploy for EXACTLY that purpose. Pardon me for being blunt there, it's not exactly a secret out here.

However I cannot invest in ANY non-bank sector at this point because I know I will lose them all as the siege moves to its final conclusion - the annihilation of everything else that the banks have taken hostage along with them.

The private capital you are aware of, will also go away and close the last gap we have for saving ourselves. Where will they go, sir? Trust me, nothing good.

There are many excellent investments out there Herr Obama, but we do not want our heads blown off by snipers that are really just INSOLVENT BANKS.

In closing, for failing to heed my last non-vodka laced letter, by April this year, you may have to salute back to your followers this way:


About-to-be POW, Your humble servant MTGSPY.

PS: Please keep Gitmo open. I have early arthritic tendencies and I hate chancing Siberia. Global warming has not exactly been very apparent out there since February (!!) of 1943.


PSS: Did I see rescue????!!!! Are we going to really avoid the Gulag this time?


Update, Valentine's day - 2:

It appears that the entire left flank has been, err, liquidated.

Banks are not worth $40, 30, or $20, or even $10, or $5. It's zero sir. I know it cuz I was there marking it up myself. This is NOT a secret. Please, I don't want to go to Siberia, please. Force the equity in the banks to pay for all the losses and nationalize them and the overall market will be just fine. Otherwise, off to the east we go.

Also, please stop chatting about loan mod over the phone. The static crackles from 1-800-hopele$$ usually lead the snipers to our foxholes.
Not looking good ........


Greenie said...

Soldiers do not give orders to the king. Next time send your letter through Commander Turbo Tim.

MTGSPY said...

It was I believe, more of a plea of desperation from this frost bitten soldier. I would not dream of ordering the Fue.., u know, around.

Greenie said...

Frost-bitten knight may be :). Foot soldiers do not offer money to the king.

"I have plenty of money to deploy as a private investor, sir."

You know that king is in desperate need for money, and in times of trouble, private money of subjects is money of the king. All it needs is to a change the law to say so :). Why should the king bother to listen to your advice, when the above solution is much easier?

MTGSPY said...

Ya, and the question will then change how many guns are on each side of the table. It's been tried before, ya know.

qadi said...

Heh, this clown thinks m2m is relevant:


Apparently, m2m is too "pro-cyclical"... lol.

MTGSPY said...

He is a clown indeed Qadi.

Everything that is "toxic", per my experience with 2 of your favorite shorts out there FIRST HAND AS EMPLOYEE, are already in the Level 3 accounts.

That means suspending MTM will have NO measurable marginal impact on where things are, currently. Nice hypothesis, but like they say, nothing substitutes eye balls.

MTGSPY said...

News have the habit of being more timely these days:


qadi said...

This is a bizarre comment by Obama:

There also are “a lot of banks that are actually pretty well managed,” the president said, specifically citing JPMorgan Chase & Co. and its chief executive officer, Jamie Dimon.


Kristin said...

"I am sober today"

me, too, but it's still early.

Great post.. I found it via the Market Ticker today..

triptyx said...

Also here via the Market Ticker. Excellent post sir, thank you.

MTGSPY said...

I see a bunch of jokers were meeting in the whitehouse talking about loan mod again. AGAIN!!!!

This is 2009! The 1-800-HOPELE$$ is soooooooo 2008.

It appears nobody has the balls to do the right thing as of Thursday, 02/12/2009.

They really really want Valentine day massacre?

Banks are zero. And it's dragging everything down with it. Please pay up immediately for the shortfall in equity after zeroing them out. That will completely stop all this nonsense.

Stockfarmer said...

It would appear Operation Uranus started today. My FAZ got shoved up my well you know.

Long live the Fuehrer!!

MTGSPY said...

Add short through whatever crap that may follow. Paulson didn't do this mass loan mod for a good reason: cuz he wanted the next guy to do it. LOL. Hail Bush.
You just watch, the insane unintended consequences that follow.

alcan said...

Very impressed with your knowledge of history. What led to the German debacle at Stalingrad was the failure and implosion of the PIGS (Spanish and Italian divisions) and eastern Europeans (Romanians and Hungarians) on their flanks. Will these same entities contribute to the downfall of Germany again?

That being said, Stalingrad was followed by a reversal in favor of the Germans against the Russian Bear at Kharkov while Goebbels was preaching for Totallen Krieg to the masses. In this context, the last time I saw a W pattern on the SPY was late 2007 (I think the pre-Thanksgiving low on Nov 19/07) that was also precipitated by false hope (and eventual lies) when Faber came on CNBC to parrot AIG's claim that they would not need to take any writedowns. Now, all we need is Geithner to declare Totallen Krieg against falling home prices and the 1000 year credit bubble shall continue (or at least until late spring/early summer)!

MTGSPY said...

That is correct Herr Alcan. For that you will be riding the Tiger at the head of the first column tomorrow :)

D said...


May the best army win...

D said...

PS - Not compliance approved.


MTGSPY said...

That's okay D. I watch porn routinely at work when I am not at the desk. I also have a machete in my drawer and a couple of boxes of condoms - others have candies but I tend to just cut to the chase.

MTGSPY said...

D, what's ur "menu" for tomorrow?

D said...

Agentina (mendose) tonight, Brasilian (sao paulo) tomorrow...

I "embrace" cultural diversity.


D said...

My Friend

Machete...you go Tarzan!


D said...

I actually have the Tactical Response-3 SWAT...

BoyPlunger said...

The curtains are drawn and behind them hides a decade of misery Mr. President. Debt has become like ether.. it permeates every molecular crack and mountainous crevasse of the global financial system. Open the blinds. Shed light. Its the only solution...