Systems Close Shorts and Dollar Long...

Today, rather unexpectedly, my systems got flat all of their equity shorts and flat the currency trades. The markets may run further but I am now flat going into the weekend. This was a rather amazing month…with some account results over 100% for the month but overall performance averaging over 40% returns for the month. I get big months like this several times a year…but it still amazing to see the trades close.

I think its rather interesting that the systems covered and I am happy to be flat…certainly dangerous times we live in and challenging trading. I would not be surprised with anything out of our fearless money printing credit pushers. But in any case, I hope everyone takes this as a symbol that things are NOT ok and addresses their risks appropriately.

9/11 was a big event personally for me as my office was right there by the World Trade Center and it effected me and many of my friends directly - my thoughts are with all the people who lost loved-one’s this weekend. Have a safe weekend.

Inflation biased analyst’s just DO NOT get it...

Sorry to say it…but the currency machinations are an expression of the credit money system. They are and expression of the conflict that people have clamoring for available cash amounts the vast amounts of defaulting credit…since cash is not available, ironically, Tyler (as most people who study this subject), has it totally backwards. The Swiss actions related to Franc are highly deflationary not inflationary…its just amazing to me that people just don’t understand everything is the exact opposite of the way it appears…just as with nearly any good trade. But I guess when silver is $1.60 and the Dollar is over 200 Tyler and Sprott will finally get it. Don’t get me wrong I like Tyler, but that does not change the fact that he just does not get it…but then again that’s why some of my managed accounts are up well over 50% so far this month (and up hundreds of percent over the last year) - I would love to see his results. These fundamental misunderstandings regarding the nature of money and the unwind of the credit money system will be bankrupting quite a lot of people by the looks of things.

Competitive currency devaluations and currency debasement throughout history have led to inflation and the impoverishment of the mass of the people.

The Swiss franc’s 10% plummet against gold this week clearly shows how cash is far from ‘king’ and no fiat currency in the world, in any bank in the world can be considered a “safe haven”. - Zerohedge.com

That analysis is plainly WRONG as an analog to our current conditions!

There IS another FOOL among them...Fed employee Chris Whalen

Chris Whalen did an interview which can be found here. Apparently, he is totally mistaken as to how money works and what it is. He seems to believe that the dollar will continue to weaken, as printing and selling of credit increases as a mechanism to prop up the banks. He seems to believe that the FDIC is going to cover his funds at Bank of America when they go under - in fact he’s not worried in the least about his money deposited at BAC. He also can not seem to utter the phrase Bank “OF” America - to him its "Bank America” - clearly he has a Klugman type deficiency. What urks me about this kind of stuff is that these people ever had jobs running anything in the financial system when they do not understand the essence of their business - the nature of money, that the problem IS the FDIC. That in reality the implied guarantee from the US government is much less binding than one would think - the FDIC has up to 99 years to give you your money back. The reasons we have systemic problems are because people either cronied up like a lobbyists with a retainer or are simply clueless (like Whalen) or both.

What this means is that for all the fancy swanky talk, leveraged banks will go under and you will not get paid…Whalen will likely be one of them. What he seems to fail to understand is that flushing of credit down the toilet is not the same as availability of cash. Therefore, we have a MAJOR liquidity problem - MUCH MUCH bigger than in 2008 and the Fed and FDIC and the assorted credit pimping entities will have the only impact they have already had…they will make things worse.

I beg to differ with Macro Story (post can be found here) regarding Whalen being "arguably the best bank analyst in the country". His analysis is, on its face, fatally flawed.

Does Trichet ever answer a question...

Listening to Trichet attempt to avoid answering questions is troubling…he consistently uses double abstractions in an attempt to create the appearance of something concrete. For example: “Zee method for avoiding zee problem, all things being equal, as we have said strongly in zee past, is to do a very comrephensive analysis of zee zee analysis and then to make zee appropriate adjustments as we think appropriate. We will not negotiate on this.” What the hell is that supposed to mean? This guy knows nothing…and is apparently totally confused. As an example, these idiot central Banker’s like to talk about price stability…however, in the first year of the EURO, in Germany mil went from 1 Deutsch Mark per liter to 1 euro…there happened to be over 2 Marks to every Euro at that time…so that’s a 100% inflation that apparently Trichet did not notice. And the Dairy market in Germany is not isolated.

Dollar, Weak Handed Shorts and Miscellanea...

What a web we weave. The dollar had a nice productive pullback from its recent test of resistance, is above major support at 75.25 and appears ready for lift off. While the USD/CHF (US Dollar/Swiss Franc) setup a flag for continuation of its move. The equity markets want to pretend that this whole thing is not happening…Gold and Silver are playing out as expected (Zerohedge was wrong again and does not seem to understand the problems embedded in the precious metals markets) with Oil the lone standout. Oil will fall too and much lower than nearly anyone may be expecting.

So, they are squeezing the begeebees out of poor shorts that used to be longs and don’t have very much money left. The best place to short is when all the shorts are forced to cover…this is where I like to short and today was no exception. I am expecting follow through on the dollar and a fairly dramatic one at that. Additionally, the markets may try to fool around up here…but I doubt it will last very long…but its not good to get excited about higher levels to short in a market where the EURO has put in a divergent asymmetrical zigzag off the lows…the pattern is weak, weak, weak.

The character of a good bear market is powerful rallies that close at the highs of the day…people swear they have to go higher, that they will go higher…but its a bear market remember.

End of the EU…when not IF

Wells Fargo is best of class...and TOXIC as hell

Anyone who may be wondering just why Uncle Warren seems so predisposed to snugly deals with insolvent financial firms and crappy rating agencies may want to consider the implications in another one of his backroom deals to both use his reputation and confidence building inertia to supply operating capital to one stinky, smelly and apparently preferred investment vehicle for the likes of John Paulson and Davie Tepper. I have, for a long time, expressed the total ridiculousness of the economic merits and synergies of BAC and Countrywide. But over inflated egos and dependence on the grand art of the capital raise as the engine of the 2% management fee for incompetent management diligence is quite popular on Wall Street and can overcome any obstacle that might get in its way - including a really shitty deal. This is why it so important for real managers not charge a management fee at all - after all, amatuers have to charge the fee because that's the axiom - its the main way they make money.

However, none of this forgives the fact that by some mysterious means Uncle Buffet, owning a large share of one of the most corrupt mortgage pumping institutions in domestic the financial world, was neatly omitted from the recent legislation that implicated even the grandest accounting control frauds going - JP Morgan and Goldman Tax. Somehow, one of the main engines of highly leveraged banking and mortgage products - Wachovia - was not even worth a mention next to the likes of WAMU and Countrywide...Wachovia only went bankrupt because of their fraudulent accounting and models for mortgage products - remember.

In fact, during the height of their demise, a friend of mine wanted to wire a payment of roughly $200,000 to a vendor in Europe only to be told that Wachovia could not execute the wire...it took weeks for them to get the wire transmitted though he had his business cash in their accounts.

Now, Wells Warrenovia Fargo has risen to the grandest of heights and pulled a Bank of Countrywide Lynch and actually competed for a useless liability called "Wachovia". The results should end up being similar. The reality, however, is that if you ever questioned the motivations of the master of integrity and character in the insider trading game...you now have your answer. The investment that Buffet made into BAC was a highly orchestrated manipulation by not only regulators and the government but also Buffet and Wells Warrenovia Fargo. There is simply no practical way of understanding how this organization is NOT on the list without some backroom dealing. Not to mention the fact that Wells is a totally predatory banking institution and has had a consistent pattern of deceit and manipulation in their markets...to find out more about this pristine piece of stinking excrement for an institution, one need only refer to the practices represented in this article: Reason to stop banking with Well Fargo

Think about it - if things are so bad that they are already calling in the last remaining guns via the Buffet slam...then things are really not pretty indeed. My view is we should be prepared for a liquidity crunch of such magnitude that it makes 2008’s small by comparison.