Goose, Gold, And The Greenback

Goldman Sachs' CFO is on the tape defending its AIG Counterparty payments. Stating they were only protecting shareholder rights, even though a likely AIG bankruptcy wouldn't disrupt the company. OK..why then take the money from AIG then? That's an easy answer, they put the screws to AIG, because everyone else was. They knew if they created enough confusion with regards to collateral payments, AIG's common stock would collapse, thus requiring the capital markets/government to panic and bail AIG out. The Goose hasn't come this far because of playing fair.

The 6% drop in Goose yesterday came on the backs of a rumored secondary public offering of stock. If an offering is made to the public, its interesting they are trying to raise cash before their quarterly earnings. Its smart of them to try to raise cash after the stock has already rallied 70% even though any spot secondary would be priced a few bucks below the current price.

Morgan Stanly dropped 15% yesterday as well, as more analysts are lowering their estimates for the coming quarter. The near term results are going to be weak, as the Moose has paired back their risky trading. They have taken a risk averse attitude for the time being. From what I am hearing they are taking little or no proprietary trading positions, as well as they are about to take additional mark downs in their Commercial Real Estate portfolio. I don't know how they are going to pay back TARP, when they are still posting losses in almost every important segment. I think the odds that the Moose posts a loss is 50/50.

I at least give Goldman/Morgan credit for backing the Mark to Market rule. Their books are already priced to this standard.

With the Federal Reserve continuing to print money, the dollar has fallen roughly 8% recently, sharply reversing a strong uptrend. The Fed will do anything to unlock credit markets. They will keep buying treasuries and agency securities, driving yields lower and lower. What they are trying to do is force the market to consider much riskier asset classes, bypassing the yields on Treasuries. The downside to this, is there might come a time, where the flight to quality is away from the U.S. Capital Market System. When does it become a situation when foreigners walk away because the Fed/Government is too indebted? Too obligated? Too leveraged? In 6 to 9 months, if the Fed's actions don't work...Then what? At the moment it looks like the Fed has an unlimited balance sheet...but for how long?

Nothing the Fed/Treasury/Government has done the last 6 months has worked, that is why the market wants nothing to do with riskier asset classes, that is why you are seeing Gold rally here. Its the return of the Inflation/Safety trade.

What I have seen the last two trading sessions is not good, what I am seeing is the same trade happening over and over again. The Groundhog Trade...Short Financials...Long Treasuries...Long Gold...Ring the Register!! More of the same for the next 6 months unfortunately.

Random Thoughts-

I am begging Citigroup to reverse stock split their common. It will just make it more easier to borrow Citi, then short the hell out of. It makes no sense to reverse Citigroup, unless for psychological reasons. The fundamentals still suck, and they are getting worse by the day. Any time a company enacts a reverse stock split, the best thing to do is to run for the hills.

The financials have dropped 15% the last few days, almost erasing all the gains they accumulated during the week. Just like I said they would. The only way to fix the banking system is to hammer the common equity of the publicly traded banks, by forcing them to mark their securities down to 40 cents on the dollar, then to sell them to the Treasury, this will loosen up bank balance sheets, so they can make loans and unfreeze the credit system. THERE!!! I said it.

I am also reading that the banks have not taken the required Loan Loss Reserves needed to cover the potential losses in Credit Cards, Auto Loans, and HELOC, because they don't need to. Why this reasoning? Everyone knows the Economy is going to get better later this year. Why bleed reserves back into the income statement when you can just bet that the economy is just going to get better? All of these guys are on the "Peterman Realty Bus Tour" These guys are not living in realty.

1471 Hedge Funds liquidated in 2008, 775 Hedge Funds in the 4th quarter alone. Being a former trader at a Hedge Fund...I will just say this...Its about time.

The more Jeff Zucker from NBC opens his mouth, the more people watch Jon Stewart on Comedy Central. Jon Stewart is one of the most intelligent individuals on TV Today, the nitwits at CNBC are no match for him.

One year ago this past week, Bear Stearns blew up....that's when the powers that be failed us. They suckered us into believing that a Bear Stearn's collapse would doom us all. The average citizen had no choice but to listen to them back then. But now...its a become almost numbing listening to the static every day. There was never any systemic risk, they created it so that they can doop the masses into believing it, so they can keep the money machine alive and well.

The new buzz words for 2009 is "SYSTEMIC RISK" which has overtaken "TOO BIG TO FAIL" It really should be "BEND OVER" for the next decade.

Ben Bernanke again talking about changing accounting rules. That's the only thing that is going to save us all.....Yes...ACCOUNTING FRAUD!

I find it amusing that the former CFO of Citigroup Gary Crittenden (A Moron BTW), has been named the new chief of Citigroups Troubled Asset Division. Isn't every division considered 'Troubled" at Citi? I cant stop laughing! I really cant. Its life imitating Art.

I find it ludicrous that any bill that focuses on assisting distressed U.S. Taxpayers with their homes always gets stalled in Congress, while our elected officials take time out to write into law how bonus money can he handed out circumventing TARP.

Barclay's selling their I-Shares ETF Business is a very smart move. Kind of surprised coming from this bank, although the British are usually ahead of the game. The ETF business has been one of the few bright spots in structured finance, but there is going to be some regulation instituted soon, and that will happen sooner rather then later. These 2x and 3x leverage ETF'S are running out of control, and the uptick rule is going to be reinstated including the ETF's, reducing their effectiveness and volatility.