TB’s Quote of the Day: “I am not a hero…I am a simple researcher.” – Simon Wiesenthal. TB saw “I Will Never Forget You” last night, a documentary on his life…and yes, one person can make a difference…why shouldn’t it be you?
…today’s slug refers to the late SF newspaper columnist, Herb Caen, who was responsible for TB’s ’three dot’ journalism. You have to be a babyboomer or earlier to remember Catholics having to eat fish on Friday…actually just no meat, but that was the source of Herb’s headline on that day each week. Either way it is starting to smell out there and that is what we will discuss today…and how are you this Payrolls Friday…looking for a loss of 50k jobs…third consecutive loss…TB sees more than that.
Overnight top headlines on Bloomberg:
*Thailand pledges rice supplies to importers: India cracks down on hoarding…this is food, people! The staple of Asia and other underdeveloped areas…this is what we have created!
*Chertkow, once a dollar bull, now sees long-term decline in US Dollar…McTeer wants it weak, for now…for exports sake…think about this…and the only true dollar bull standing is…Larry Kudlow!
*Dimon rejected rescuing Bear Stearns’ until Fed’s Geithner promised funding
*Lenders overwhelmed by foreclosures let delinquent borrowers stay in homes…there’s your solution!
*Buy Wal-Mart, sell Goldman Sachs is becoming easiest trade on Wall Street…TB likes neither!
*Spain property auction flop brings downgavel on decade-long housing boom…housing is 20% of US economy…it has soared to more than 50% of Spanish economy…condos for foreigners! Sitting empty.
Today’s Topics:
1. Mad as hell?…do something dammit!
2. Beware the stock market…will the pattern this year be repeated today? Wait and see!
3. There are ‘banks’…and then there are banks!
1. If you are, as TB and many of his readers, and other writers he respects are then why don’t you do something about it? TB said a week ago that you should CALL your Senator (get logged in there, not just lost in a shuffle of emails and let them know that the future of this country is of concern to you and it sure better be to them. Here are two reasons, the first was what prompted the topic in the first place:
*Senator ‘Chris’ Dodd. THIS chairman of the Senate Banking Committee is holding up two nominations for Fed governors…politics as usual but this is no time for that…you couldn’t write a book that would put all of our problems in a presidential election year. Thankfully, Sen. Dodd is not a contender to lead the country…if you listened to him when he was running he waffled on everything. Now, he is refusing to put these two appointees up for a vote at a time when the Federal Reserve is in deep trouble. It has now committed about half its balance sheet to problems and there are exactly five governors…the minimum for a quorum for emergency action like they did with Bear! Imagine what would have happened if one was unreachable…and worse, two governors are going off the board soon. You have to call your two Senators and tell them to get him off his butt and do something. Yesterday, he was on CNBC and he was asked what he was doing about the mess we are in…but not one question about the appointments! If you are about this country do something proactive and end this before we do have a meltdown!
*Senator ‘Chuck’ Scheumer (D-NY) was also on CNBC Thursday and Jim Cramer grilled him about the ‘plan’ he is trying to put through to stabilize the mortgage market. The topic in question was a proposal that would allow homebuilders to “apply current losses to taxes paid four years ago, instead of the usual two.” Do you get it? These clowns were selling to some of the most uncreditworthy buyers and they are still building, yet we are supposed to give them back the taxes they paid while the principals keep their gains? Is this a great country or what? Add them to the likes of Angelo Mozillo who was a major creator of this mess, and banks like Washington Mutual who borrowed heavily from the FHLB for years, and now we are supposed to give them back something? Meanwhile we don’t care about those who are suffering that bought homes…TB does not mean the speculators but people who have had problems not due to their mistakes…including those who were duped into believing they were qualified home buyers…you really think illiterate people created the numbers on those ‘liar loans’? Get real!
But what is behind Sen. Scheumer’s largesse with our taxpayer dollars? Thanks to TB’s friend, Joan McCullough who also writes a daily, check this out: “In February, the political action committee of the 235,000 member National Association of Home Builders cut off off donations to congressional candidates.” Why? you ask…it is called leverage…or extortion…it is the equivalent of breaking your kneecaps to get your attention. Ask your Congressman or Senator how much they received from the NAHB PAC…TB dares you! You should all be sick and disgusted at this point!
2. TB is frankly sick of hearing all the ‘bottom is in’ thinking along with you will be sorry if you are in stocks…bonds are unattractive and money market funds are paying 2% or less (some funds are waving fees to keep from going negative…effectively breaking the buck). Well, if you are holding cash you are in good company since there is now $3.5 trillion in money market funds!…of course the bulls say it is poised to pounce…yes, but on what good news? Besides isn’t it better to earn 1-2% than lose 10%?
This is from TB’s closing market summary last night…your attention should be on today’s close”
”…a third straight meaningless day due to low volume and failure to take out any significant technical levels BUT that would be wrong. This is the third countertrend rally this year…until proven otherwise…in all three cases there was a good up spike another day that set either a double top or slightly lower high…then down! This is a bad pattern if it happens tomorrow and TB thinks it will be. Remember 3 strikes…y’er out! Also, we had inside days on Dow Utilities, Barron’s 400 and Russell 2000 and almost inside days on Dow Industrials and Nasdaq 100…after Tuesday’s rally, a really bad thing. Payrolls could be the coup de gras.”
CNBC is all abuzz with “we have an interim bottom”…trust the above comment because if we close down today (as TB believes we should), all bets are off…this after a horrid payrolls report with huge downward revisions to the first two months…is this cause to rally?
Worse yet, options strategies have now been adopted by most hedge funds…these create huge volatility while limiting losses if the bet goes wrong. Look at the movers every day: the three horsemen (AAPL, GOOG and RIMM…the 4th AMZN is now impotent), XOM,CAT< BA< G<, MMM, AA, CSCO. Not only that but on the AMEX Composite just two stocks (British Tobacco (BTI) and Imperial Oil (IMO) have been the only movers for weeks and determine the direction of a 700 plus index? This is absurd.
3. Saving the best for last. TB just learned that the OCC has observers posted in the major banks and is told by a former examiner that this has been the case for some time…concerns over repeal of Glass-Steagall? TB has obtained a 33 page report on the condition of commercial banks (US only) with respect to derivative exposure…TB can forward if you are interested. It not only provides the exposure but breaks it down, with some good and bad news. Just five large commercial banks dominated derivatives activity in the US (note this does not include investment banks!)…representing 97% of the notional amount and 87% of industry net credit exposure…thanks to Joan McCullough for summarizing. The good news is #1 JPM with $85 TRILLION (remember Bear had $17 trillion) is 95% OTC contracts but 80% of those are interest rate swaps (hopefully with strong banks but we don’t know the breakdown), and only 9% credit derivatives (or about 7% of total). Now look at #4 HSBC with just $4.2 trillion (how can you say just in a sentence with trillion?), BUT almost 30% of that is credit derivatives. HSBC ranks number five in total volume; Citi is #2 ($33 trillion); #3 Wachovia ($5 trillion); #4…Wells Fargo (WFC) has just over $1 trillion and is number six! Thanks to Joan for reporting on this and it should be of major concern to you, especially as Bayern LB, a large German bank said it will write down $6.7 billion derivatives which it plans to place in a separate SIV…that’s the ticket, just get them off balance sheet…which should be prohibited! The write-down was double prior estimates!
TB repeats: if you think today’s commentary and payrolls are good for stocks…be his guest!
TB hopes to get away from all this today…Please…if only for TB…call your Senators today! Tell them you know about Dodd and Scheumer and you want this to cease immediately. Then let them stew on it all weekend, not you! It is out of your hands but YOU can make a difference…please do it!
TB
Trader Bill thinks it is clear to anyone reading these missives that they are merely commentaries…as he sees it…and do not necessarily reflect the views of anyone other than his own. Information is gathered from sources he has found reliable, but no guarantees of accuracy are implied. These are merely observations of events in the marketplace offering in an attempt to offer a non-mainstream viewpoint. Hope you find it useful.
Copyright TBD Capital LLC April 4, 2008
