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“With between 45 and 70 times leverage, plus too big for the country to save, plus $1 quadrillion in derivatives, it is unlikely that the banking system will survive the next few years in its present form.”
I cannot recommend the following article highly enough, especially if you are fairly new to trying to figure this banking mess out. This article was posted on Jesse’s Cafe, as always his articles are classy and prescient and his sidebar is full of good reading. Please note we are starting to see QUADRILLION appear more often. Have we become immune to TRILLION already?
A SHOCKING FALL by Egon von Greyerz – Matterhorn Asset Management
“Paper money eventually returns to its intrinsic value ZERO” - Voltaire 1729
This month we will discuss what is likely to be a major change both in sentiment and in the economy in the next few months. The autumn of 2009 will be full of shocking surprises in the banking sector, in financial markets and in the world economy. The events that we outlined in our previous newsletter, “The Dark Years Are Here” are going to start unfolding. There will also be shocking falls in stock markets, in the dollar and in bond markets. But these falls will create major opportunities for investors which we will also discuss....
http://matterhornassetmanagement.com/newsletter/?newsletter=21
http://matterhornassetmanagement.com/newsletter/?newsletter=20
A Shocking Fall
by Egon von Greyerz – Matterhorn Asset Management
24 comments:
Latest market update from the esteemed Walayat. I short he sees a biggish correction coming around Dow 10,000. Of course, neither he, nor anyone, knows. His tone reminds me slightly of Gaudia Ray.
http://www.marketoracle.co.uk/Article13091.html
Re the post, this article looks like the typical cataclysmic, gold buggish outfit that are not of much use as to how to employ capital; unless you think having 100% gold allocation is appropriate.
From their March missive:
Invest in physical gold for wealth preservation
Matterhorn Asset Management has created a totally unique programme that satisfies the strictest wealth protection criteria. This is the only effective means by which investors can protect their capital in a world financial system, which is virtually bankrupt.
The unique features of Matterhorn’s Gold Investment Programme bl, BLA
http://matterhornassetmanagement.com/newsletter/?newsletter=4
The reason I like resing people like Trader Mike and Walayat or Colin Twiggs is that they're trying to work out what's going on and invest accordingly, rather than starting from some a priori position from which everything else is judged.
Mugabe I have a Quint Tatro charting post for you tomorrow. He is now being carried by Forbes. Sometimes I feel these articles are a lot of gloom and doom that don't say much as well. It is just another point of view and hope their dire predictions are wrong. Do you think that this economy can survive?
How do you see the long term playing out?
BOSTON (Reuters) - Cerberus Capital Management has been swamped with redemption requests with the Wall Street Journal reporting that investors are asking to pull out $5.5 billion or 71 percent of assets from its hedge funds.
Does anyone know why? Are other hedge funds facing the same redemption requests?
I really don't know how the long term will play out. I'm trying to be tactical rather than strategic. I imagine countries with low debt levels (perosnal,corporate and govt) and political stability should fare well. Who would that mean? Norway and Brazil? Just guessing here.
I think we're looking at v slow growth / contraction for a long time. I do not think we get all out collapse as it is not in the vested interest of any major country for this to happen. E.g., in whose interest is it for the dollar to collapse? Answer: virtually nobody's. So it won't happen.
Trying to work out the macro picture requires more intelligence and far more knowledge than I have. That's why I read people like Mish. It's intellectually interesting but not necessarily financially profitable. And as I've said before, I've got a position in gold just in case everything does go horribly wrong.
On a personal level, I would like to make enough money off the markets to be financially secure, and then give some of it back to worthy causes. Suffice to say I'm not there yet!!!
Queenbee - It was not my intention to scare you. Trading based on the chart leaves little room for fear, if you are able to be unemotional about the matter. Fear is just another emotion, and it can often hold you back from an entry that in retrospect was the right one, as you admitted yourself. You see the opportunity, but don't act on it because of the nagging little voices in the back of your head.
Too much macro economic reading (Mish etc) on how bad we all know things are can certainly scare you. One can begin to think everything is going to collapse tomorrow. I know in my case that is partly responsible for my not going long into one of the greatest rallies is stock market history. But I am not going to get bent out of shape about it, trades are like the bus, another one will be along in a while.
See Tim Knight (a great trader) at Slope of Hope where he has been beating himself up about this very thing for weeks now. Too much bearish bias getting in the way.
As was stated, going long AIG at $0.50 was more than just looking at a chart - based on the fundamentals, it was purely a gambling leap of faith (that AIG would not be allowed to fail by the PTB) which happened to work out well for longs. Just because a stock has plunged is not automatically a reason to trade it, most sensible people should avoid things like AIG. In a real free market, AIG should have failed last year.
Unless you are a well connected GoldPerson with the inside info, IMHO it is best to avoid situations like that. This is one reason why I don't "screen" the entire market for stock trades, you will get too many possibles and won't be knowledgeable enough about the company and familiar with it's long-term charts nor will you know the vital insider information that is often impossible to find on smaller companies. You can research all this, but I just find there aren't enough hours in the day, unless you want to be stuck in front of your monitor day and night.
Day-traders can ignore this info knowing they will be out before the close, I am referring to trend trading with a longer holding period. You can hedge too, but that usually involves put or call options which have a cost - sometimes the options are priced high, making the hedge expensive and cutting profit. Not practical for small accounts in most cases.
Remember a famous quote about traders "There are old traders, and bold traders, but there are no old and bold traders."
The Number 1 Rule of Trading: "Don't Lose Your Capital!!"
mugabe -
Hope you see this:- Thanks for comments on my little blogette (& thanks to QB too) – I think another way of looking at all this is to say that there’s no harm in predictions and they might help one form a view of what is going to happen, but the only sensible way to trade is (your words) ‘to listen to the market rather than tell it what to do’ I totally agree with that. I became very tired of working out what ought to happen only to find out that something quite different happened. I am going to write a piece about ‘listening to the market’ in the next week or so – I find that writing things down helps me find answers.
Walyat’s tone may remind you of Gaudia but Gaudia has not made one good market call whereas Walayat called the bottom and if only I’d believed him I would have done well. I foolishly thought that his bad quality of writing made him a bad analyst. And to think he is UK based unlike 99% of all the other analysts. Oh well, I live to invest another day.
BTW I am still looking for a UK stockbroker who will let me sell short. All I have found for short selling so far is spread betting. Is that all there is?
Thank you guys for you wisdom and insight. As you can see from my comment yesterday that showed my original positions, I would have done well long term, but was shaken out in March because I didn't want to lose it all.
Shaza sent me this picture relating to the rise and fall of the dollar since the 1800's. I found it to be interesting
http://www.zerohedge.com/sites/default/files/images/SeanMaloneRiseFallDollarLarge.jpg
This is a great thread of "high-level" comments. Likewise I read Mish and other sites that have a macro-fundamental point of view. My problem related to this typically appears as a fear/greed thing--wanting to profit from the move that "must" be coming soon and not wanting to miss the move. Especially when I agree that these macro/fundamental things "ought" to be so...when this happens, I really focus on charts and try to figure out if I should take the opposite side or just wait. From a previous thread, "who is the loser on my timeframe?"
RealityTrader's blog has an excellent one-liner on this issue of fundamental/macro: "...could this have been said a week or a month ago just as well and did not impact market during this time? If so, what makes me think it will do so now"?
Loco,
Why not ask interactive Brokers re short selling? They certianly do LSE equities:
http://www.interactivebrokers.com/en/p.php?f=exchanges&ib_entity=uk
A fine posting QB. How many of these articles have we all read. None of them deal with time, like this one has.
The only thing I know is unemployment is increasing, whether it is 500,000 per month or 100,000 per month it is still going up.
The government will continue extending unemployment benefits. If people can't live on their earnings getting a minimum of 25% less on unemployment will not help their financial position. Nor will it help the economy when they spend 25% less. While unemployment is income taxable the Federal government will not collect Social Security and Medicare Taxes. So it is a double hit to the treasury, having to pay the unemployment and not collect the ss taxes.
I also know that the Federal deficits will increase for the operations of the government plus it will increase for the suplementary war funding plus stimulus 2 and for whatever else is dreamed up Obamacare, Cap and trade. Even if Obamacare passes in some smaller form it will still cost the treasury.
The tax cuts are due to expire which will also reduce spending in the economy.
The deficits will continue to be monitzed.
So you see these are the only things I know. The things I don't know scare me at night.
I see an overbought stock market going into the worse times of the year (september, and october).
I also see lots of green shoots. Which are valid if the recession is indeed ending. But it does not look that way to me.
At this time I continue to trade long with short stops.
I would not buy puts for they are way too expensive. I would rather set stops and be out rather than holding a losing position and have and expiring put lose in value.
QB, just a comment re editing, you need to add the link to the rest of the story, here is the link, that was only the first paragraphs...
Here is the link that was not added at the end of the first paragraph:
http://matterhornassetmanagement.com/newsletter/?newsletter=21
QB, can you put the link back in so that people can finish the artile? WR
Addendum:
The link inside the article is not the to the end of the post, it links to another newsletter, sorry for the confusion!
Let's suppose that C is being manipulated on the inside as was AIG. What I remember was I bought C in January, but the news (noise) lead me to believe it was a goner. So I quickly sold it and made enough to cover my trading costs. I never looked at it again until this week. Now I am wondering can we see a repeat?
Now had I been watching it I would have caught it on the rise up this past two months. The question is can it rise like a phoenix or will the October surprise take the whole thing down again. Wild 600-1000 point swings. Last year Mish's Macro Economic outlook saved me 95% of my 401k as I was sitting in a MM vehicle in my 401k before September.
After the crash and shunning from people who called me a doom sayer, I waded into a trading account. Put in as much as I would miss it if I lost it all. However I left my 401k alone.
Now those who left their money in Mutual funds are gleeful then have gotten 50% back, but I tell them they still in the hole and I am still content with my choices.
I have had some recent success with using Vector Vest and and old trading method 'The Darvas Box Theory' Some of you may have heard of it.
We all use something I just love the conversation today and look at almost everyone's recommendations as time allows.
Caution from Tickrville
http://www.tickerville.com/index.php/site/comments/papa_t_continues_to_preach_caution/
Quint Tatro's dad is on Tickerville now, he is really frightened of the market activity on SP...
He ( Tatro Sr) mentions SRS too, he has 6 short positions from RE-Emerging markets, energy, banks etc. His dad take is very different strategy from his son's, they both manage funds but in dif ways! It is a good listen, with charts.
Tatro SR says that Sales, production (n not productivity) employment and personal income have to be rising, if not no recovery..US has not one of those things rising....TAX, you will love this guy! Go to link above!
PS Elliot wave put an an alert to go net short!
BUT...others say we may follow Japanese model and go up 40%! Toss a coin?
This week will see the end of Treasury Open Marke Operations end...IT IS DONE OVER NEXT WEEK...now will the Gov REALLY pull money back...
OK, Add that to Ron Pauls' FED audit Bill in October...if gov pulls back, there will be no volume, no buyer and money! Oh Dear, Very dramatic!
We Live in dramatic times!
The masters of the financial circus are the bankers. Not only did they reap the benefits from manufacturing toxic financial products to the extent of receiving bonuses and stocks in the $trillions during the last 15-20 years. But they are also the only beneficiaries of the trillions of dollars that have been printed by governments to rescue the financial system. Why are the bankers benefiting from the rescue of their own banks? Because they are the ones controlling the government, advising the government and making major contributions to the politicians...
Yep, and they don't know how to do anything but steal. The end is near.
If Quint's dad is right, look for a major move UP in Treasuries, interesting that Tatro Sr sees interest rate decrease, does that mean we go negative, like Sweden now
...MOnday 10am is going to be very interesting as SP is sitting right on the trend line...and I mean RIGHT on the trend line.
Loco, Gaudia did not even get the Flu call right, he was banking on Avian Flu and got Swine flu instead! You gotta laugh.
Now he thinks the world will be engulfed in a plague of Swine flu, even though the vaccine is virtually out...even WHO is going to administer the vaccine on the same plan as poli and small pox in third world countries...
Shaza it looks big on my computer too,WR
It is big on my computer.
For an amusing look at how economies are denoted...emoticons?
"Last week's data persuaded me to move the Econbrowser Emoticon back into neutral, signifying that I now judge overall output to be growing slowly rather than declining. Here are details on the evidence that prompted this change in assessment, and what it signifies.
See Hamilton's post for the reasons for the change. I think we are a long way from a smiley face."
http://www.calculatedriskblog.com/2009/08/econbrowser-shifts-to-neutral.html
I had to repost this article as I had left two links off at the bottom (Sorry Waverider).
Shaza is seeing the text as either too big or too small. Is anyone else having that problem? I completely redid it. Thanks WR for bring those missing links to my attention. Ok that is three that say the text is too big. Let me look at it again.
Edgar I am afraid you are right and hope you are wrong. Financially I am in a good spot.
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