Please read this:

and realize you have been duped big time, and yet still has the balls to yell insults at the people spending the time to make you aware of this gigantic crime being committed to you:

http://www.talkingpointsmemo.com/archives/2009/03/im_sure_the_knowledgeable_people.php

The end result is that if you do not have a means of transporting yourself out in the event of a riot ... there will be LULZ to be had.

What does a riot look like, you ask the mortgage toiletman!

Well, it begins with a very nice Sunday morning. Then you see something like 500-1000 vehicles and sometimes buses parked in the town center. Then out come tens of thousands of angry people you have never seen before and a few hundreds of them were going straight at you, and then pitch black.

Later, eye witnesses from every town will tell you the same thing. That people from other places riot in theirs. Isn't that strange? LOL.

This whole thing, was due to the inability to handle a very simple issue regarding CDS, that has been talked about for 2 years at every level of society (in the know that is).

Sigh, what do I know, or care. I got my exit route covered.


============================
Still don't have a good picture? Well then this interview should give you another piece of the puzzle.
============================

KAI VIGELAND: The reach of the Madoff scandal is so vast that today the FBI set up a special hotline for investors who think they're among the victims. The agency may want to keep that line open even after the dust settles. Because history teaches us that it probably won't be the last scam of this economic cycle.
There's a name for the part of the cycle we're in -- It's called the "bezzle."
Richard Parker of Harvard's Kennedy School knows all about it. Professor Parker good to have you with us.
PARKER: Delighted to be here.
VIGELAND: So, tell us. What is the "bezzle?"
PARKER: The "bezzle's" a term that was coined by the American economist John Kenneth Galbraith in a book called "The Great Crash: 1929" which he wrote in the middle of the 1950s. What he recognized was that at any given time there is a certain amount of embezzlement going on in the economy. Now this falsely inflates the sense of the total wealth of the economy at that moment. Because, not only does the embezzler now have substantial resources under his control but the embezzled does not yet know that he or she has lost those resources. And so there's, in effect, a kind of double counting of wealth of both the victim and the victimizer. And the inventory of that duplicity is what Ken called the bezzle.
VIGELAND: And at another point in time, then, all of that comes to light, is discovered?
PARKER: Yeah, what happens is that the bezzle varies in size with the business cycle and with the financial cycle. And so, what we've had in the last few years, presumably, is a run-up in the bezzle in conjunction with the run-up in the value of the markets. So that more and more people were drawn into the markets. Money was being made. More and more people came in, threw more money at the market and, as long as the markets kept rising and a new round of investors kept coming in, older investors kept getting good returns on their money and spreading the news that this was a great, sound and high-returning investment.
VIGELAND: So, how does Bernie Madoff fit into the bezzle and particularly within the context of the entire financial crisis?
PARKER: Bernie Madoff is a representative of the species of the bezzler, if you will. And he's by no means unique. This pattern of behavior can be traced back to that famous South Sea Bubble, or the Dutch Tulip Mania. It was a prominent feature in the crash of 1929, and is always present in the run-up in these financial cycles. And then, as the top of the market is reached, and we tip over and start sliding downward . . . of course, new money stops coming in and the game is over.
VIGELAND: So, now that we've entered this bezzle phase, is it safe to assume that there are more Madoffs out there?
PARKER: Oh, I think it's very safe to assume that there are more Madoffs out there.
VIGELAND: Will they be as bad -- $50 billion worth?
PARKER: Oh, I think they could be much worse. I mean . . .
VIGELAND: Oh, geez.
PARKER: Again, what you have to remember is once one or two of these start to tip over, confidence in the market slips. More people begin to pull their money out of various investment vehicles in a rush to get to the door and put it in CDs or cash or whatever. So, we're very likely to see many more of these and larger ones as well, too. I mean, we just don't know what's out there. That is a dark and scary forest to go wandering in in 2009.
VIGELAND: Richard Parker is a senior fellow at Harvard's Shorenstein Center and the author of "John Kenneth Galbraith: His Life, His Politics, His Economics." Thanks so much.
PARKER: Thank you, Tess. I really enjoyed it.

How many A&&holes work in Manhattan

Someone forwarded me this:

1. The average a-hole spend 2% of their time (i.e., about 30 min/day) walking the streets of Manhattan
2. You pass an average of 1 a-hole per block when walking the streets of Manhattan
3. The average block is 1/12th mile long
4. Manhattan has 22.96 sq mi in areaHmmm...... a bit of quickie math (assuming you only see a-holes coming toward you on your side of the street) yields an estimate of 1.3 million. Either my data/model is wrong or about 35% of the people employed in Manhattan are a-holes.

Do the same with your cities with parameters that I may have missed, along with your definitions of a-holes.

Lots of stories, none good.

With much lighter load in my portfolio, I feel finally less pressure to offer some serious thinkings for the weeks ahead.

1. GE - completely surrounded with no escape. They will get government "cooperation" and will trade like C. Impact:
a. 401ks/pension plans - nuff said.
b. insolvent CDS writers: The "fundamentals" writer such as insurance companies, who didn't hedge as effectively as the hedge funds and GS of the world. Typically run by eggheads, these would go to government for another round of handout. Names? Just throw a few dart and one will hit - PRU? HIG? AIG? (just kidding on the last one).

2. Chinese did the right thing - no explicit stimulus. US has trapped itself.
a. Many argues pushing the "demand" side (rebate checks, shovel-ready jobs) is the way to go. The reality is that "supply" or "demand" side are both constrained by the fact that only about 10% of the money will come back as consumption, and the rest will go paying off debt. In fact, contrary to gov't mantras: the less money someone has at this point, the more likely he/she uses the stimulus to pay off debt. They see this as a "source" of their ongoing problems recently. Private polls and recent underground studies have confirmed that.
b. Of course some eggheads in Obama cabinet realized this as well and instead of calling it "spending" bill, called it "National Investment Whatever" Act. If I must guess, the "investment" content vs. the "spending" content is about 1:5 at the most. No bills go out without a debate and those debates invariably demand the "faster" cure, which is chronically over the ages perceived to be the "spending" part.
c. I don't advocate tax cuts (supply siders). Why? I don't believe in Jesus. Ok, just kidding - aside from my disdain of the neo-cons and christian fanatics, such thing does not address the current situation, or too slow to do anything at the moment.

So the Chinese have figured it out, and Obama did not in the stimulus front. Therefore some economy will grow and some will absolutely falter. Decoupling? By definition, if two people committed two opposite acts, you will expect opposite results, hao bu hao?

3. Misconception about health care and education. There are some hopes that Obama will correctly address issues in this space, that people pay too much for too little. Where's the red meat? The for-profit education sectors - which has not fallen nearly as much as the health-care insurers/providers. The executives in these two sectors in many cases were extracting 200% - 300% more money than their counterparts in C / AIG / ABK. Don't believe me? Then do your own research and let me know when you're ready for another raid. :)

4. There have been ill developments on the "private capital" stories that I have shared a few weeks back, about them buying portfolios that the insolvent banks could no longer hold due to lack of capital. I have received news that about $100B of this will be disbanded for "other" use in 2 weeks time, to my disappointment. In my opinion, these were the last hopes of actually clearing the market in any significant way, and the administration has failed to follow through their promises in lieu of political agendas. While the impact may seem muted initially, the long term hit will be felt around may-june, in ways that I could not conceive beyond further chronic stock weaknesses.

Until then be well. Don't eat too much beef.

Mandatory post - new month.

Otherwise the page looks blank, as if I was trying to post porn and didn't do it properly.

Anyway, nothing new. Oh, maybe a new catch phrase: 30-30 at the next bottom.

For the next 30 yrs it will be up and down 30%? LOL.

Letter to the Bear Council

I am preparing to go all out long, in a time frame that may not be very far from here. Trust me it does not mean very well for those happened to be net long at this time.

But before I do that, I want to ask a question to otherwise very rational, intelligent people, that have in the past 3 months invested in the belief that 1) given the cost of PRIVATE capital is higher than the range of possible returns, and 2) the cost of SPOT government borrowing is lower than the range of PAST returns, decided to invest in the direction indicated by 2). That meant going long.

There were arguments in WSJ showing S&P chief economist, Mark Zandi, saying that for every $1 stimulus, $1.64 return will be earned. Bill Miller of Legg Mason, earlier today gave a speech recoginizing Mark's remarks and the currently low cost of SPOT govt borrowing as it relates to Keynesian spending. Obama presentation showing a lack of internet penetration among minorities argues also for expansion of infrastructure.

What I observed today:

1. Nationalization of C, and perhaps BAC as early as Monday. That means everybody else will also be nationalized, as nobody can compete with the US govt and if they tried to do so, will go BK.
2. Realization that a huge ETF, USO, may be a ponzi scheme that relies on new investors.
3. Announcement by the government to settling the debt of a gambler who bet on unregulated CDS market (same as dog racing), AIG. The last interest payment (quarterly) on this was $37B.
4. A possible announcement of some kind from UK/Europe this weekend.
5. The most massive liquidation of hedge fund that will ever happen.
6. A possible 50% shortfall on income taxes in 2009.
7. USSR did not earn 64% return on its investment between 1950-1989 in any given year.
8. Spot yield curve is not a predictor of future interest rate.

Item #1-5 supports the idea of going long in the near future for a massive dead cat bounce. #6-8 is the invisible hands that kept writing on the walls of my cube.

Therefore, I pose the question as to how the most rational investors I have known decided to believe #1-5 was irrelevant THREE months ago and were on the same side of Bill Miller and Mark Zandi today.

This is not meant to be a satire, but more of an honest response so we all may learn how we think over time and the events that correspond to that thinking.

In closing, I would like to quote Warren Buffett, that he "never bought a stock". Within the context of today's realities, would you say that is a good thing?


Thanks and have a good weekend.

-MTGSPY

PS: 9. I have used internet for 13 years now and I am not a Google Brother.

The same man said these words:

2007:
"My view is that the evidence is overwhelming that most people are too risk averse. And that therefore they should be taking a lot more risk than they feel like is right. "

2009:
" The problem with credit is that it is far too expensive to make
it economic to use it to grow. With investment grade debt
having yields greater than the growth rate of nominal GDP,
the cost of new debt in the system exceeds the ability to earn
enough to pay for it. Hence, the deleveraging going on. The
government on the other hand, can borrow at half the growth
rate of nominal GDP, and hence, it is the government that
will, and should, borrow aggressively to invest in the country’s
future.
All of this was explained a generation ago by Keynes when
we last had a crisis like this, and anyone seeking to
understand it should either go to the source, or to the second
volume of Robert Skidelsky’s monumental three-volume
biography.
I remain optimistic that the new administration, which is
staffed with first rate financial talent, coupled with the Fed,"

The point:

The 2009 post is identical to the psychobabbles you have been hearing recently from everyone in the government and "analysts" on TVs.

Having not lived 1929 nor trust anyone including unknown financial bloggers, you began to have doubt, hope, uncertainty: could it really be the magic bullet? Print $1 and get $1.64 back?

There is only probabilities regarding the truth, the best a statistician can do is to look for OBSERVEABLE events that correlates very well with the answer you are seeking. Thus the photo and quote from 2007. :)

Remember this again in April, who said it and when.

In your mind of mind, don't you realize the only person knowing the size of your paycheck is the only one who could determine who could afford to pay what? That is in addition to technical issues, such as actually holding the loans for say, 30 years, and not beholden to investors for a quick flip profits. And that person is who? That's what I thought.

I was a grasshopper who asked if the cost of originating and portfolioing that loan was $108, how come the borrowers only pay us something worth $101-102? The answer is never that complicated, as one learned later in life.

HOLY SHITTTTT!!!!! Fuehrer HAS failed to save us now. Everyman for himself!!!!

O-Fuehrer only sent rumanian and hungarian rabbles with sharpened stick to rescue us from this pit of hell!!!!!!!!



The early part of this man's speech reveals the Fuehrer has been misled or at least completely unaware of the situation.

He does not know the difference between exchange traded futures contract with CDOs!!!!!!!!!

Aaaaiiiiieeeeee!!!!!!

I have no reason it was limited to just this Gibb, because the speech was prepared. O-tay didn't know.

We are completely doomed.

People screaming and running back from the front gave stories of incompetence by General Timmy and O-tay himself getting trapped into choosing to i)retract his servicer "bribe" or ii) get a market collapse to SPX 200-300 in the attempt to save us the other day.

I didn't believe it when I first heard it. I drank the kool-aid religiously. I only read propaganda to make my life more straightforward and easy to comprehend.

But now my blind faith to O-tay the savior has been proven to be my biggest and possible the last folly.

Obama Sir: While retreating, the best course of action is ...

Leaving behind a few understrength companies to set up ambushes and sacrificed themselves for the fatherland.

That means you nationalize the banks this VERY minute. This will leave nobody LEFT TO DEFAULT. You don't get any worse than it already is. Get $0 for the bank equity and jam the losses to the taxpayers, if that is needed (and I believe that will be somewhat huge).

Then the market stabilize, overall it will go up a bit but then it stops crashing and number crunchers can go out there and figure out the fair values of everything. Commodities will be up, basic industry will be up, homebuilders will be flat to down, banks will be zero, autos will be zero.

It's the only fool proof idea I got, and my fingers started numbing down from the cold down here sir.

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:


















Sincerely,

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.

http://en.wikipedia.org/wiki/Battle_of_Stalingrad


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

http://www.nytimes.com/2009/02/12/business/12stress.html?_r=1

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 ........