Don't Panic Says EU Bank's Hitchhiker's Guide To The Markets

Elaine Meinel Supkis

After 2 market sessions of feeble effort, the markets tanked again today and are now struggling upwards thanks to the $400 billion Santa Trichet gift grab bag. The looney mega-deal hucksters are back with a $25 billion buyout that produces absolutely nothing useful or exportable at all. And world markets lost $3 trillion this month so the $400 billion is just peanuts to this elephantine mess created by our ruling class criminals at the very top of the world's economic pyramid.

From Bloomberg:

European Central Bank President Jean- Claude Trichet called on investors to keep their composure amid a period of ``market nervousness,'' after central banks pumped billions of dollars of emergency funds into the banking system.

The ECB ``will continue to monitor the situation whilst euro-area financial markets in general are going back to normal functioning,'' Trichet said in a statement today. Keeping calm ``will help to consolidate a smooth return to a normal assessment of risks in liquid markets.''

The Frankfurt-based ECB pared the amount of money lent to banks in its fourth day of emergency money-market financing today, saying that euro interest rates are ``close to normal.'' The ECB, the U.S. Federal Reserve and other central banks injected $290 billion into money markets last week as concern that U.S. subprime mortgage losses will curtail lending drove up short-term borrowing costs.

Is Trichet a descendant of the purser on the Titanic? 'Do not panic. First class, get in the lifeboats. Don't worry about your luggage or jewels. All is safe, this is just a precaution. Orchestra, play louder. You have to drown out the screams coming from the flooded steerage quarters.' And pray, Trichet, what is 'normal'? Eh? This obvious global bubble created by the US and Japan? The world's #1 and #2 economies? Do you realize both are trying to kill their currencies and this is why the world Titanic was deliberately steered at full speed, into this field of icebergs?

Weber chimes in:

Regardless of ``tensions in some market segments, European and German economic data continue to be positive,'' Weber added. ``They point to a continuation of a robust and broad upswing.''

As the prow of the Titanic rises majestically in the starry night skies, as they fire off flares but tell everyone, this is the 4th of July, yes, we are swinging upwards with a vengence. One thing that infuriates me is how all these chaps love to look at the up data but won't look at the data that always predicts recessions or crashes. If they were drivers, they would ignore the warning barrels and signs while admiring billboards.

From Bloomberg:

Sentinel Management Group Inc., a Northbrook, Illinois-based hedge-fund manager, has asked regulators for permission to halt investor withdrawals.

The firm contacted the Commodity Futures Trading Commission for approval to halt redemptions ``until we can honor them in an orderly fashion,'' according to an Aug. 13 letter to clients.

The firm managed $1.6 billion as of last month, according to a filing with the U.S. Securities and Exchange Commission.

They will honor them by dissing the investors who will get little of their money back. First, we noted earlier that these riff raff ruffians keep nearly half of the money for you-know-who. They need 'up' markets to have something to spare for the investor who they keep saying, 'keep your money in and it will grow!' So long as the customer doesn't ask for it back, this is true! The profits are not harvested so each week, the managers can pull more and more out for themselves! One hedge fund went full pirate mode and sailed off to an island pretty much in Her Majesty's Privvy Purse (ole English for 'private, hahaha'). This event set off the present panic in earnest, a panic that cost the EU and US over $400 billion. Did I hear that $3 trillion has vanished along with these pirates? Heh. Arrest them and investigate them. If we can persuade the Queen's islands to reparate these pirates.

I found the $3 trillion story, from Bloomberg:

The 14 percent rally in Chinese stocks in the past two weeks has created some of the largest companies in the world by market capitalization and defied a global rout that wiped more than $3.3 trillion from equities worldwide.

Equities vanished in a poof of magical smoke! This is why I call it 'funny money'. It is real only if it is attached to something real. And it is not. It is mere magic numbers on ledgers that are run by crooks. And they are crooks. Resurrecting investment trusts and renaming them hedge funds was a crooked operation done by creeps who knew better, some of them were freaking economics professors and graduates! Don't they teach ANYTHING besides how to manipulate numbers in economics classes? Gads! Let me teach Yalies about the Great Depression. Classes will be held next to rail road tracks and under bridges in the rain.

From Bloomberg:

SLM Corp., the largest U.S. student- loan provider, will probably win shareholders' support for a $25.3 billion takeover offer tomorrow. The buyers, led by J.C. Flowers & Co., are less enthusiastic about the deal.

The $60-a-share bid tops SLM's closing price yesterday by 28 percent, ensuring approval by investors in the company, known as Sallie Mae, says Sameer Gokhale, an analyst at Keefe, Bruyette & Woods in New York. The buyout group became skittish after U.S. lawmakers last month voted subsidy cuts for the education-loan industry that may reduce Sallie Mae profit.

GODS ROTTED! Hell. OK...wonder why they had to dump so much kitty litter down the toilet? Well! This dumb bell buy-out needed $25.3 billion! HAHAHA. Gads. I can't believe the crassness here! Amazing. This ridiculous deal is using up 1/12th of the Rescue Rangers Plunge Protection Team's money. And what does this deal create?

Money for the managers doing this useless deal! That's all, folks. Just they will get their percentages and they will ride off to some island to celebrate with expensive wine and expensive women. Otherwise, it is one big fat zero.

From Bloomberg:

Moody's Investors Service and Standard & Poor's, the arbiters of creditworthiness, are losing their credibility in the fastest growing part of the bond market.

The New York-based ratings firms last month gave a new breed of credit derivatives triple-A ratings, indicating they were as safe as U.S. Treasuries. Now, investors are being offered as little as 70 cents on the dollar for the constant proportion debt obligations, securities that use credit-default swaps to speculate that companies with investment-grade ratings will be able to repay their debt.
*snip*
The rating firms help borrowers structure debt securities in a way that will get the highest possible credit rankings while allowing managers of the securities the most profit, according to Charles Calomiris, the Henry Kaufman professor of financial institutions at New York's Columbia University.

Moody's earned $884 million last year, or 43 percent of total revenue, from rating so-called structured notes, according to Neil Godsey, an equity analyst at Friedman, Billings, Ramsey Group Inc. in Arlington, Virginia. That's more than triple the $274 million generated in 2001.
*snip*
CPDO prices probably dropped between 19 percent and 33 percent, Banc of America Securities LLC credit strategist Jeffrey Rosenberg said in a July 30 report.

``Something that's triple-A clearly shouldn't be this volatile,'' David Watts, an analyst at bond research firm CreditSights Inc. in London, said.

Moody's got nearly a billion dollars to lie. They could have read my blog. I went to great pains to explain all this over the years. No one should have been fooled. All Ponzi schemes always start with great returns and all end in a big mess. The history of investment trusts is painfully obvious. I don't care what schemes they choose to set up to 'make money,' all they are is a group of people playing money games by taking on tons and tons of debt! Isn't that easy to see? Aren't the dangers obvious? New funds are spawned after a crash and they take off and cause yet another crash! This is why it is outlawed after mega-depressions. They can destroy the banking system!

From Bloomberg:

Shares in Coventree plunged as much as 41 percent on concern that some its funds will be forced into default if they can't get emergency funding from lenders that may include Canada's biggest banks.
*snip*
Coventree may not be the only Canadian commercial paper issuer struggling to refinance debt. DBRS, a Toronto-based credit rating company, said that 17 commercial paper trusts have requested emergency funding, including at least eight offered by Coventree.

A commercial paper issuer? What the hell is that? HAHAHA. The issuer of papers that denote value has no value? And they need cheap loans so they can what? Loan at a higher rate? Oh my, I see something very circular going on here. And what is a 'commercial paper trust' anyway? HAHAHA. Oh, the same thingies they had running riot from 1928 to 1930. Unlike homeowners going belly up to the tune of $5 billion a year, the COMMERCIAL loans can go for $5 TRILLION a year.

From Forbes:

The U.S. trade deficit dropped to a four-month low in June as record exports of farm goods and autos offset a jump in crude oil prices, the Commerce Department reported Tuesday. Imports from China hit an all-time high despite a string of recalls of tainted Chinese products.

In a second report, the Labor Department said that inflation at the wholesale level shot up 0.6 percent in July, reflecting a big jump in gasoline and other energy costs. Outside of energy, wholesale prices remained contained.

The trade deficit dropped to $58.1 billion in June, a 1.7 percent decrease from May and the lowest imbalance since February.

Oh boy! Down to $720 billion! We are...so doomed. Note that the flood of goods from China is rising, not falling. Even with Mattel's problems. See how 5 years of Mattel moving factoris to China made them richer:

Now it is going down. Badly. We can't blame the Chinese for this. If costs rose, the ruthless cost analysts inside of Mattel would pay the Chinese a visit. They had to keep inflation at bay no matter what. And Mattel doesn't sell to rich kids, they buy higher quality stuff from Germany or France. It is the Walmart customers that Mattel needs and they need super-cheap. Walmart forces Mattel to drop prices and all this means the Chinese do the best they can with whatever is at hand.

This is what we used to call 'Cheap Jap junk' from post WWII Japan. That stuff for kids had lead in the paint, too. But it was cheap! So we played with it. Lucky for me, I didn't eat toys all that much.

From the BBC:

US toymaker Mattel has recalled millions of toys worldwide for the second time in two weeks.
The recalled toys include Polly Pocket, Batman Magna, Doggie Daycare and Shonen Jump's One Piece playsets, all with small magnets that could break loose.

Shonen Jump is a Japanese company. And Japan has kept inflation down how? Oh, the same way we keep it down. The same forces at work in America are at work in Japan with a vengence. They cannot let even the slightest inflation! Not even a yen's worth!

From Yahoo:

The revolutionary U.S. consumer

All it's taking is the "fickle" U.S. consumer to overthrow China's "authoritarian export model," says Nathan Gardels in the Los Angeles Times. Arriving in the "Trojan horse" of global trade, U.S. consumers have gained much more power over China's policies than organized labor, human rights groups, or Chinese protesters -- and "they only have to stop spending" to flex their muscle. If China wants our continued business, it has to weed out corruption and apply the rule of law, or Americans will "cut the import lifeline and shift away from Chinese products that might poison their children or kill their pets."

And we buy from whom? Does Mattel have a toy factory here? Eh? And food: we didn't 'buy Chinese food' for our pets. The SUPPLIERS did...secretly! And if they don't buy it from China, who will they get it from? Indonesia? And are they better? How about...MEXICO? Oh, but that isn't so cheap anymore. Hmmm, buying dog food ingredients that are as cheap as China....hmmm...how about...IRAN! Hey, we can buy from them.

This is the problem: there is inflation everywhere. The Chinese fixed the inflation but now it is everywhere at the BOTTOM of the system, not the top. Not where the finished car or TV is, they are dropping in price because they have a huge profit margin so the corporations can cut and cut prices while staying alive.

No, the inflation is where there is LITTLE PROFIT MARGINS and the manufacturer has to pass on inflation intact or cut wages which leads to a depression. A depression is when everyone is forced to use cash money rather than IOUs to buy stuff. It has nothing to do with 'inflation.'

From Yahoo Finance:

As low-income and first-time homebuyers are finding fewer mortgage options in the wake of the subprime meltdown, applications have risen sharply at the New Deal-era Federal Housing Administration. After a three-year dry patch, and despite the housing sector slowdown, FHA loan applications are up 76.8 percent since December. But the FHA has changed little since 1934, and borrowers have to wait 90 to 120 days to get loans of up to only $362,790. "FHA is definitely a step behind where the private markets have gone," says Keith Gumbinger of HSH Associates. (USA Today)

Everyone is running to the FHA that has strict rules and thus, isn't going bankrupt. This was started in the Great Depression when there was near-zero mortgages being granted by banks. Hell, there were virtually no banks left! Gads! That should scare the bejezus out of everyone driving this mess today. During the funny money free mortgage fest, few people went to the FHA for loans. Now they are banging at the door. Hysterical, isn't it?

From the Washington Post:

After fighting one of the nation's largest corporate fraud cases, former Adelphia Communications executives John and Timothy Rigas reported to a federal prison in North Carolina.
*snip*
Prosecutors claimed that the Rigases made Adelphia's finances appear more robust when they were dangerously overextended by concealing nearly $2.3 billion of the company's debt. They also accused the family of using company funds to finance personal expenses, including 100 pairs of slippers for Timothy Rigas and more than $3 million to produce a film by John Rigas's daughter.

Arrest them all. When everything crashes, there will be lots and lots and lots of books to examine as the SEC is reborn. We should put Spitzer in charge but right now he is busy wrecking his career fighting old Joe Bruno, my State Senator. I'm certain in 10 years we will be seeing lots of stories like this one. All this is a left over from the previous crash. Along with the Enron crew, living and dead.

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Comments

[Blunt Force Trauma]

Hey, Elaine. Got any room in your hills for squatters? I'll need some place to go to when TSHTF. I figure, from reading your blog that we've got, what, 3 more months or less?

[JohnCat]

Hey Elaine:

More happy news:

http://tinyurl.com/3yfg7c

Sentinel Management Group Seeks to Halt Redemptions (Update3)

By Jenny Strasburg and Matthew Leising

Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., the Illinois-based firm that manages $1.6 billion, said it asked regulators for permission to freeze client withdrawals because credit-market turmoil made it impossible to trade.

[Elaine Meinel Supkis]

I have a pretty big property. But you have to shovel snow. Everyone who has lived here says 'yes' at the beginning of winter but by the end of February when we get hammered with one blizzard after another...the worst ones come in March, people flee.

[Cato]

Because we don't have leaders much less adults minding the store, everybody's kept in the dark. So, for those that are paying attention you make the best of the misinformation as if reading tea leaves or interpreting the Tarot. Pay no attention to that man behind the curtain (PNATTMBTC).

This business of avoiding any real world pricing of derivatives, CDOs, CMOs opened Pandora's Box. Result: no liquidity. Now, I'm seeing similar creeping rumors (the authorities are to blame for not coming clean on these issues. It's like its nobodys business but theirs) pertaining to money market funds. The last time I checked a money market fund was a plain vanilla assortment of short-term T-Bills, 30 day commercial paper and certain time deposit certificates. Somebody's worried they might be subject to a redemption freeze. Why? It's supposed to be safer than goats milk.

Unless these portfolios are also crammed full of mortgage-backed products too. I suspect they are.

[Elaine Meinel Supkis]

I am restarting my daily pod casts. If everyone likes these, I will continue doing them. I will need feedback to see if things are working out.

[Canuck]

I hate to dissuade you from the podcast but it’s much faster for me to read your work. With the amount of material I try to absorb I can’t afford the time. It was interesting to hear your voice. You should try doing an audio mix with the music instead of a background with the mic.

[Elaine]

You are correct, Canuck. I already fixed some of the problems. I am thinking how best to do things. Give me a few more tries at it. I really appreciate your feedback.

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