Wednesday, March 17, 2010

I Recommend Playing With FIRE

FIRE, as in finance, insurance, and real estate. If the last few months haven't proven to you on top of the last few years just how corrupt our whole system is, nothing will. If our economy is improving, why is it essential to keep rates low indefinitely with that ability to enact new programs if needed? The Fed sure has a strange concept of what "improvement" means. Even the NAR had to admit this week that new home sales are being destroyed by the continuous influx of distressed properties on the market.

Vikram Pandit of Citi gave one, maybe two giant fingers to the American taxpayer this week by announcing that they are expanding their proprietary trading desk. Given the fact that this type of trading is supposed to be curbed under the Volcker Rule wrapped inside of the Dodd bill, Pandit is blatantly telling us he don't think it will pass. Citi just doesn't care. After taking $45 billion dollars of our money, they know that either the bill won't be passed, or that they'll be able to squeeze in a few million more trades without penalty. Citi remains interesting in both the medium and long term, but due to the recent rise, Jan. 11s at strikes of $4 and $5 hold more appeal than Jan. 12s.

In another excellent article exposing our economic reality, Randall Forsyth revealed why there has been a recent reduction in mortgage debt; people have simply stopped paying. "To the extent American families' finances are improving, it's because their liabilities are being reduced by default...not exactly the path to prosperity."


Anonymous said...

Pandit and company on Wall Street must be laughing at the average American: let's make another public announcement that we're going to use free money from the Federal government to roll the dice again. If we lose, you pay!

AX said...

yes indeed, byt why not profit from the injustice? I will be adding Jan 11 $5 calls to our holdings.