Wow. What a day!

Is it me or did the indexes aujomagically end positive?

My vote for the two biggest days, as in most telling, of the year goes to today and 9/18 (the first cut). 9/18 signified that the fed's preference was for dollar destruction as the lesser of evils (as if a 96% decline in purchasing power since 1913 weren't enough). I think today means that for as long as they are able, the fed/PPT will continue to take drastic, rabbit-pulling measures to screw shorts and scare them straight. Otherwise, why not announce the new liquidity measures yesterday? I guess the alternative is that the fed is clueless and disconnected and scraped together this plan with other CBs after the tankage yesterday, but I doubt that.

I think Ben wants to be misunderstood as was Ali G., but in his own way. Because when they misunderstand you or can't make heads or tails of you, because of your office, they tend to mistake the obfuscation for profundity.

It's just part of the con. A mean, futile, and stupid gesture that changes absolutely nothing. See today's Fed Report in the WSE Pro, and listen to my podcast with Russ Winter. http://radiofreewallstreet.fm

I really think it's not shorts they're after, they're trying to keep 'holds' holding, esp. 201K types(only place J6P has much equity $ at stake) and most 'long time
horizon' institutions, i.e., pensions(those that remain, particularly pooblic ones), endowments, etc. Witness growth of not only automatic enrollment plans for 201K, but automatic increase in amount put into plan when(if?) raise is received & default portfolio mixes that, now, exclude stable-value fixed income funds & have equity % allocations of 50% and more until participant is beyond 50 y/o. A sustained bear market will require some liquidation by these types of holders to be, well, sustained.

the penny is starting to drop that the fiction that the banks and real estate types have been spewing for the past 12months is exactly that 'fiction'.



Dec. 12 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Kenneth Lewis is learning the hazards of economic forecasting.

Six months after saying the slowdown in U.S. housing sales was ``just about to be over,'' Lewis said today at an industry conference in New York that fourth-quarter profit will be ``quite disappointing'' and predicted a `challenging'' 2008 with higher writedowns for securities tied to the mortgage market.

Lewis said fourth-quarter losses from the credit markets will be more than the $3 billion that Charlotte, North Carolina- based Bank of America estimated last month. The world's biggest financial institutions have announced combined writedowns of more than $80 billion since August because of losses in the U.S. home- loan market.

``What's disturbing is it sounds like Bank of America is becoming more bearish on the U.S. economy,'' said Jeffrey Harte, a Chicago-based analyst at Sandler O'Neill & Partners LP, in an interview. ``Their franchise probably spans the consumer more than others, so what they say is meaningful.''

Keep your eye on the ball and don't be fooled by panic mongers.

[attachmentid=93720]

Link

It seems to me that this is just another "the fed is here to help" scheme. It's no different than the garbage operations the central banks conducted back in July, August, and September. Once the herd realizes that, LOB. As shorty would say, "GIT OUT"!

You raise a good point. But doesn't the auction facility provide the ability to rent liquidity at a cheaper price than the discount rate? Or even the current fed funds rate?


And there was this discussion of "permanent." Did they mean this is a permanent program or that is could become a permanent part of holdings?

One final thing. The extreme vagueness surrounding "sound financial institutions" and "sound collateral" makes me ... paranoid.

I looked at some of the charts and they all look crappy still.

CFC had another bad day. Those short term pops are just places to go short again.

yeah. dead crap bounce. Look at the prices. The most recent AAA rated pool 78 cents on the dollar.

I'd also point out the high likelihood that these are fictitious trades.

it must be almost time to go long the $US??

NEW YORK (Reuters) - A dollar crisis, in which investors sell all U.S. assets and the greenback on concerns about liquidity, is a clear possibility, said Robert Kowit, an international bond fund manager with Federated Investors, on Wednesday.

While the dollar's decline slowed and even partly reversed in the last month, the relatively large gap between U.S. imports over exports and the ongoing tight lending conditions are keeping the possibility of a crisis on the minds of investors.

"Top of the worry list is if we do get some kind of disorderly resolution of the so-called global imbalances which leads to some kind of dollar crisis," Kowit told the Reuters Investment 2008 Outlook Summit in New York.

http://www.reuters.com/article/InvestmentO...263442720071212

I reckon we are getting very close to the 'fornicate you' stage.

It has been in everyones best interests to try and work together to try to solve the problems,but it seems we are getting close to the point where everyone says,fornicate this, I am outta here..

NEW YORK (Reuters) - Central banks have been so focused on force-feeding financial markets with cash that they've overlooked a brewing inflation crisis, said Jim Grant, editor of Grant's Interest Rate Observer, on Wednesday.

Amid a global credit crunch, liquidity has reached buzz word status in financial markets and among monetary policy officials, so that the implications of adding so much money to the system has been largely ignored.

"The word liquidity is a phony word that sounds sophisticated," Grant told the Reuters Investment 2008 Outlook Summit. "It clearly means money, money that is being materialized out of thin air through the actions of central banks."

http://www.reuters.com/article/InvestmentO...264245420071212

He's wrong. The EU and Canada have far greater problems than the US. They are holding more of the worthless crap.

Game Theory


Game Theory has emerged recently as a powerful challenger to the conventional method of examining economics. Although many illustrious predecessors worked on problems in what can be called "game theory", the fundamental, formal conception of game theory as part and parcel of economic theory were first organized in John von Neumann and Oskar Morgenstern's 1944 classic, Theory of Games and Economic Behavior (1944).

The main purpose of game theory is to consider situations where instead of agents making decisions as reactions to exogenous prices ("dead variables"), their decisions are strategic reactions to other agents actions ("live variables"). An agent is faced with a set of moves he can play and will form a strategy, a best response to his environment, which he will play by. Strategies can be either "pure" (i.e. play a particular move) or "mixed" (random play). A " Nash Equilibrium" will be reached when each agent's actions begets a reaction by all the other agents which, in turn, begets the same initial action. In other words, the best responses of all players are in accordance with each other.


http://cepa.newschool.edu/~het/schools/game.htm

I don't know about that Doc.

I'm not saying you're wrong. Just a lot of US financial institutions have yet to come clean. When you factor in the "prime" stuff about to go into default, that changes everything.

I think US banks, insurance companies, and pension institutions are loaded to the gills in all forms of US debt if you know what I mean.

Dead wrong. Far more money is being destroyed by the debt collapse than central banks are creating. The only thing the CB's have created so far is hot air (except for the BOE which did inflate their base due to the bailout of Fallen Rock). ECB has had some wild fluctuations, but essentially has kept their base flat for months. Fed has grown its base at about the same rate as last year.

Let's see how much cash they really add. The Fed will almost certainly substantially offset any cash forced into the system via the Taffies, by reducing standard open market operations.

crude up 4 bucks today

bullish!

no inflation

well, actually 0.00000000000000001%

core rate 0.000000000000000000000000000001%

then with declining earnings from the slowing economy and huge losses in the financial sector, stocks will crash, right?

You may be right about the insurance companies, but my bet is that most of it is in the hands of local governments, pension funds, and hedge funds. Most banks, probably not. They were the ones who created this stuff and mostly offloaded it on their customers.

If US banks were in so much trouble, and some are, particularly the ones we've heard about, but if the bulk were in such deep trouble, why has there been there so little upward pressure on the Fed Funds rate and why haven't they been borrowing at the discount window? CD rates have been dropping like a rock since October. I think WM and CFC are going bye bye, along with some lesser lights, but the bulk of the banksters I suspect will be able to skate by on the edge.

It depends how bad things get. But I just don't think that the US dollar is any worse than any other currency right now. They all suck. So maybe the dollar won't collapse, because it the price of crap priced in terms of other crap.

My money is still on the bull...

[attachmentid=93724]

[attachmentid=93725]

"why has there been there so little upward pressure on the Fed Funds rate and why haven't they been borrowing at the discount window?"

This is an unbelievably great question and observation. I think I have a potential answer. The funds rate on Treasuries is so low because Treasuries are the basis for cash in a banking system. I think the fed funds rate on non Treasuries is the more accurate stat to look at, which would be different from the artificially contrived stop out rates on those produced by the Fed. I think the Fed is using some bogus formula for the fed funds that factors a certain percentage to be MBS, essentially subsidizing and capping the MBS stop out rate.

Let me just add that the MBS true interbank lending rate is also fraudulent because it presumes a Treasury bailout that may not happen.

To quote a certain Winter, all the stats are meaningless at this point.

"They all suck."

Damn straight. What's a pilfered saver to do? (rhetorical question)

I guess the Fed has to do this kind of thing because everything is just peachy:

Fed Bypasses Procedures to Gain Auction Authority in Rare Move

By Scott Lanman

Dec. 12 (Bloomberg) -- The Federal Reserve took advantage of emergency powers to authorize the auctions that officials felt were necessary to ease a credit squeeze, concluding it otherwise lacked legal permission to do so.

http://www.bloomberg.com/apps/news?pid=206...w&refer=economy

I think big banksters are screwed. In fact, i think small banksters are really screwed. Honestly, i think the Fed has its head up its ass and doesn't realize the massive insolvency that will emerge in the entire banking system.

CEO Jamie Dimon says, "No M-LEC, wouldn't bother us." If it wouldn't bother you, why are you willing pony up $10B to set it up? Actions betray words.

There is something in those balance sheets that don't add up.

Combine this concept with the scenario of a limited number of players (Fed+20) with pre-knowledge of others actions with coordination. Throw in an eleimination of antitrust and security laws and no need for margin yields the current system.

THe actions of everyone else is generally just noise on the underlying signal from the Fed+20, except when the underlying signal is occasionally overwhelmed.

And we have the most transparent system.

any advance notice may have spoiled the relative surprise the Fed and its counterparts delivered today.

It's not the first time Fed officials have taken unorthodox steps to prevent word of an upcoming decision from leaking. In August, St. Louis Fed President William Poole skipped an emergency conference call among policy makers and kept dinner plans with university professors and students to avoid any hint the central bank was going to cut the discount rate and revise its economic outlook the next day.

aren't they clever at tricking investors?

Well, after yesterday's rout, the TED spread stood at a shocking 218 bps.

Guess where it ended today.... 218 bps.


A spectacular non-event.

Nope. It's more direct than that. Debt collapse forces liquidation of all asset classes.

The first commandments of trading.

Honor thy support and thy resistance.

Do not bear false witness against thy trend channels.

Thous shalt not make for yourself an idol, whether in the form of anything that is in heaven above including solar power, or that is on the earth beneath including oil, or that is in the water under the earth including any other form of alternative energy such as hydrogen fuel cells.

Thou shalt not bow down to them or worship them that are made of gold or silver copper or pork bellies.

for I the Lord your Market am a jealous Market, punishing children for the iniquity of parents, to the third and the fourth generation of those who reject me, but showing steadfast love to the thousandth generation of those who love me and keep these commandments.

"It's more direct than that. Debt collapse forces liquidation of all asset classes."

That includes all LT sovereign debt?

Dear Yahweh,

What happens when Rabbi Ben starts pumping up the SOMA? Does my ass get bum-rushed by the mother of all short squeezes?

Best regards,

Concerned Gentile

these guys are acting like Microsoft, using and abusing small companies

EBAY gets $30 Million Spanking, Still Refuses to Pay Up

A federal judge has approved a roughly $30 Million judgment against eBay Inc. more than four years after a jury concluded the online auctioneer had infringed on the patent of a small Virginia company.

Since the legal tug-of-war began, MercExchange's payroll has shrank from more than 40 employees to three.

EBay has vehemently declined to pay.

It ended September with $3.9 Billion in cash.

Is the Chinese central bank also colluding with the Fed, or are they excluded from the clique?

Seems to me if their goal is to show-prop world stock markets, they better not piss off the Chinese.

Else maybe they'll pull the ripcord.

here is a longer snippet than normal from the DR guys who are in OZ.

*** Yesterday, we drove out to the Yarra Valley. Melbourne is usually ranked as one of the most livable cities in the world. We can see why. The houses are cute...many with double-decker porches and wrought iron trim. The place is clean...safe...and easy to get around.

Down in St. Kilda, it seems like a beach resort, with crowds filling the bars and restaurants, and young people gaily and drunkenly cavorting in the streets. In fact, our only reproach is that the city is relentlessly casual, like Florida or California.

Out at the Yarrawarra winery, it looks more like the Shenandoah Valley. The country is beautiful, open...with horses and vineyards...and friendly people serving up so many wine samples we had to lie down.

“This place is not that different from the United States and Britain,” says our man on the scene, Dan Denning. “It’s really the same story. Lots of debt. High asset prices. People who’ve bought houses they really can’t afford, counting on price increases to save them. So far, they’ve done well...very well. Australia hasn’t had a recession in 16 years.

“All the Anglo-Saxon economies are similar – in that they all depend on consumer spending and have a lot of debt. But Australia – and Canada, too – have a great advantage. Especially Australia, because it’s so close to Asia. This is where the Chinese buy their raw materials. It’s a resource economy, not simply a consumer economy. Australians have gotten rich as prices of raw materials have gone up, especially out in Western Australia. And as long as the Chinese keep ordering resources, prices are probably going to keep going up...and the Australians are going to keep making money. But that’s the big question. If U.S. consumers stop buying, the Chinese aren’t going to need so many raw materials.”

U.S. consumers buy one-fifth of everything the whole world sells. And U.S. consumers are feeling the effects of lower housing prices. As prices fall, the average person’s net worth goes down...and with it goes his desire to buy.

“But wait,” said a man at our get-together the other night. “There are about 3 billion people in Asia. And right now, the Chinese government is encouraging domestic demand. They have plenty of potential demand in Asia. They just have to tap into it. Even if the U.S. stops buying, it shouldn’t hurt the Chinese economy for very long. They’ll still want houses and refrigerators...which means, they’re going to want to buy copper and iron ore from us here in Oz. I think we’ve got a long boom still ahead of us here.”

Maybe so. But our guess is that the Australians may have a short bust in front of them too.
Until tomorrow,

Bill Bonner
The Daily Reckoning

TED spread chart (3m Libor - 3m Tbill)

After:

100bps Fed cuts
The Super Duper SIV
The Short-Reaming-Day-After-Tomorrow Surprise Central Bank Gang Bang Liquidity Plan.

I shorted WM after the 1 pm shank yesterday. Thanks to the Ducelon? article on WSE. What a POS. I don't know how they can avoid a BK.
These pops are a great opportunity to get short. You have to start thinking like these thieves.
Also CFC had a 7% sinker today. I guess it is not too big too fail.

Let it be so written. Let it be so done. Yul Brenner

Meg don't want to set no prezidents. Who knows where it would end?

BTW, we had another one of these yestidy. How many is that? Today no. New lows overwhelmed new highs 138/59 on NYSE and 168/69 on Nasty.

I heard about Ben's new plan on the radio. No details of course, but something about a plan. When they then said the Sow was up 100 something I figured it wasn't much of a plan. My nightmare daydream plan had the Fed announcing they would buy any and every mortgage security, at par, and I do mean buy. Now there's a plan. A thousand point day rally plan. Ben however settled on a new Potemkin plan. One that's third rate with only two digits in front of the B. Pretty weak. Even the first big plan, the Super SIV plan had three numbers before the 'B'.

Until they come of with a plan that has a 'T' in the amount I'm thinking bears won't be jumping out of high windows. Just drinking too many beers and using some bad words perhaps.

On a related note Jim 'Dow 36,000 ' Glassman got a gig replacing Karen Hughes as the State Department point person for selling America to various swarthy people offshore. In other good news Florida municipalitites can now get 25% of their money out of the state run MM fund. Oh joy.
http://www.orlandosentinel.com/orl-run1207...0,6505853.story

From the same link:



And we wouldn't want that, would we? Their 'surprise', as it turns out, was for them in the end.

monthly gov't PPI Lie tomorrow morning
I'll guess 0.1% with core 0.0%

monthly gov't CPI Lie Friday morning
I'll guess 0.1% with core -0.2% to help the Friday greenprint

My wynn broke quadruple support today and was down again!

I can only trade in the morning for an hour so I don't have time to watch.was able to cover some of my calls near the the low in the morning and put them back on a point or so higher.


The covered calls have saved me and I'm only down a little bit.I just wonder when this thing will bounce and stay in a range while my calls evaporate.

The pain in Spain falls mainly on the SHEEPLE!!!

Spain's Sinking Property Market May Roil Europe (Update1)

Dec. 12 (Bloomberg) -- Julia Gavin sold more than a house a week as the Spanish real-estate boom peaked last year. Now that business is drying up, she's sharing leads with competitors, reckoning a partial commission is better than none at all.

``We're up to our ears with work, but no sales,'' says Gavin, 52, who works near Madrid. ``It's horrible.''

http://www.bloomberg.com/apps/news?pid=206...u6.o&refer=home

Everyone has been so well conditioned to believe that property never goes down.

It will be a very rude awakening for these people.



From the same article.

Slump `Unthinkable'

A residential real estate slump is ``unthinkable,'' Zapatero's top economic adviser, David Taguas, said in a Sept. 17 interview. The solvency of the banking system and of real estate developers, as well as the unmet demand for new homes, will prevent any meaningful price erosion, Taguas said.

``To talk about severe adjustments or a meltdown in prices is ridiculous,'' Taguas said.

Welcome to the Real (GlenGarry,Glen Ross)world..

Gavin and her clients are paying the price. In one case last month, she says, she thought she had a sale after three months of negotiations among buyer, seller and mortgage lender. Then Ibercaja SA, a Spanish savings bank, refused her client a loan covering the 168,000-euro ($247,000) purchase price. The bank said it had concluded the client was overpaying for the property in El Escorial, near Madrid.

``The banks are coming up with a million excuses not to give loans,'' Gavin said. ``They don't want to take any risks.''

I don't know about the CPI or PPI but I do know that there are a couple of billion souls who will be eating even less now.

Amen, Brother Doctor... errr, Dr. Brother... err....

I mean, "Well said."

Great graph.
Great commentary.

Part 2 of Radio Free Wall Street 2 part podcast for today has been posted. Part 1 is a chat with Russ Winter, which was under way when the Fed news broke, so you get our instantaneous reaction.

In Part 2 I talk with Aaron Krowne about the Fed's action, and a variety of other topics pertinent to the financial meltdown.

You can listen to both right now at http://radiofreewallstreet.fm