Wednesday, September 24, 2008

Three Days

One of my favorite movies, Three Days of the Condor, finished with the following sequence which I think is eerily relevant to the type of criminal destruction we're witnessing right before our eyes. Take 5 or 10 minutes to watch Bernanke over these days, and reflect on the 3 day period of Wed.-Fri. of last week, which may have signaled the end of capitalism and American prosperity as we know it.

"Not with the heat on the company. TURNER:What if there hadn't been any heat; supposing I hadn't stumbled on a plan; say nobody had? HIGGINS:Different ballgame! Fact is there was nothing wrong with the plan. No, the plan was allright, the plan would have worked. TURNER:Boy, what is it with you people? Do you think not getting caught in a lie is the same thing as telling the truth? HIGGINS:No, it's simple economics. Today, it's oil, right? In ten or fifteen years, food, plutonium, maybe even sooner. Now what do you think the people are going to want us to do then? TURNER:Ask them HIGGINS:Not now; then! Ask em when theyr'e running out! Ask em when there's no heat in their homes and theyr'e cold. Ask em when their engines stop. Ask em when people who've never known hunger start going hungry. Want to know something? They won't want us to ask em! They'll just want us to get it for em . TURNER:Boy, have you found a home! 7 people killed, Higgins! HIGGINS:The company didn't order it, ATWOOD did! TURNER:Atwood did! And who the hell is Atwood, he's you, he's all you guys. 7 people killed and you played fucking games. HIGGINS:Right, and the other side does too! That's why we can't let you stay outside"

Oh the plan would've worked. MBS and CDOs, free reign of market terror, that worked great. And when leveraging 30-1 didn't work, they didn't ask us. They just changed the rules so that they could start over again from zero and will inflate us into not a recession, but a depression the likes of which we have never seen. And today it is oil. And when the Saudis wake up one day and realize the dollar is a dinosaur currency, we're finished....

I just had the surprising and pleasant experience of watching R Doggett from Texas not only take a rhino sized dump on Bush, but make Bernanke pee his pants only a little bit. He said, "let me get this straight. These assets which you describe as toxic, aka, no value, are the ones you propose we buy at above fire sale prices to clear out debt for the banks and burden the taxpayer with. No way." Bernanke asked him to address Paulson with these questions as he squirmed away. On the other end, reps Sanchez and Cummings were totally unimpressive with questions that had been answered a thousand times already, and both showing a complete lack of understanding of basic economic principles.

Anyone who is not embittered by our government's actions during this time is a fool, waiting on price increases, future job loss, and a higher tax bill. Neither Obama with his Milton Friedman efficient market theory background, or McCain with his I'm not so strong on economics will have a clue as to what to do. I wrote both of my senators yesterday, one republican and one democrat, with the same message. A vote for a bailout is a lost vote from me. Today mortgages, tomorrow auto and credit card loans for the septic tank we call the Treasury. Wake up. We're not Socialist, we're Capitalists. Businesses fail. Banks fail.

Buffett has become comical. $5 billion of GS. At guaranteed 10% returns. Like that's an investment any of us could ever make. With warrants at $115. Buoyed by his own purchase. Ridiculous.

I'm not ready to move to Canada yet, but I wonder what recourse we have in this mess. Wall St. will not fail. The lessons of the S&L crisis and LTM have never been learned and will be repeated in 5-7 years while we watch our real earnings get destroyed. I am bitter about rule changes that have cost me thousands of dollars in the middle of a game I predicted correctly. It's shocking to see even those like Kass rail against these measures as the shorts/hedge funds have been handcuffed by these changes, basically placing an ex post facto failure on those of us who correctly foresaw this swoon.

Forever optimistic however, I almost root for a small rally. That way, we can short companies like GGP again, who have $5 billion in debt due next year and not a prayer of raising that kind of money. If they hit $20, let's get back in. WSM is still on my list, and I like to hate large retailers as well. VNO has come into play, but a $12 beating on Monday will make us wait.

My picks stunk last week, a Cowboys win my only good call. The Bills played like crap, won, but didn't cover, and the Steelers couldn't get off a play and fell short. I will be up and running on Friday with my weekend picks and hope for better matchups this week.

Be safe out there with your money. This economy will get very rough. Our new horizon will take us out to 2010 or 2011 if LEAPS are available. Follow me through as we are still beating the market by well over 30% personally and much more if you had courage in LEH, WM, and EWBC that extended beyond my own.


Disgusted said...

You put it well. Anybody who isn't bothered by the Treasury bailout plan is a fool. Or has about $20 mil under the mattress, simple needs and couldn't care less if we go down the drain.

DCNorth said...

Hey Ax!

If you move to Canada, I would be more than happy to sponsor you (and Tiger Coach if he wants to come as well). Warning though, we only have 3 down football here in Canada, but at least the Bills are playing in Toronto!


AX said...

Thank you, Disgusted. Equally so by GW's "fair market value" comment for MDS.

AX said...

Thanks, DC, for your continued support. Hope you were able to make some money and get into cash over the last few weeks. Personally, I've had nothing but great Canadian experiences in both Toronto and Windsor....

DCNorth said...

Hey anytime Ax.

I live in TO so next time you are around let me know, I'd love to pick your brain and have some beers. (My treat of course.) My friends and I are shaking our heads as to what is happening to the US. Paulson who was at Goldman Sachs during 1998 to 2006 (the housing boom) is still trying to bailout his super rich buddies! I'm not buying it.

I've been in and out with some calls/puts on BAC and STI. Sold when they had that nice pop on Friday and switched over to some puts that I sold on Tuesday.

I see GGP has dropped nicely and kicking myself on that one. If for some miracle it goes back up to $20 I am piling in on that one.


AX said...

DC, just be wary that the bailout will extend to all sectors and that even REITs will be able to dump toxic mortgages and start with a fresh balance sheet. If that happens, GGP will be celebrating happy days again.

I remember when the Loonie was worth about 60 cents and my wife and I could go on a tear in Toronto. There was a bar that had 9-1-1 Wednesdays, and after showing my fireman badge (past life), we were treated quite well. How the times have changed.

Tiger Coach said...

President Bush and the EXECUTIVE BRANCH is suffering from a major credibility crisis... No one trusts him anymore, and NO ONE trusts Wall Street!!!

Evidently, it will be time to short the dollar...long on the Loonie..and gold!!!

DCNorth said...

Hello Ax,

Duly noted about the GGP. These are definitely harrowing times. A 60 cent dollar? Yikes. I was still in high school back and remember that going to Buffalo for cross border shopping wasn't worth it. Heck, the Americans were buying our cars and importing them south!


Wow, I never thought I would hear someone actually say "long on the loonie"...haha. Our economies are so interwined, that if the commodities comes back, it would definitely be worth revisiting.