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  • Jim Cramer: Give Me Geithner Cause He Is The Only Guy We Got
  • Money And Markets - 7 Startling Forecasts For 2009
  • Nouriel Roubini Says US Banking System Insolvent
  • Gold ETF DGP Is Good Bet With New Market Rules
  • When The Market Comes Roaring Back Everyone Will Be Saved
  • Warren Buffett On Charlie Rose - Always Smartest Guy In The Room
  • Saturday’s G20 Summit Yields Something…I Think

Yup, that’s what he said.  I was just watching the “Stop Trading” segment on today’s CNBC Street Signs.  This segment is famous for the Cramer rant in 2007 - you know, the “They know nothing!!!!!!” tirade.

Jim Cramer just said Geithner is the guy for the Treasury job because he is the only person that knows what is going on with TARP (the Tarnished Asset Relief/Repurchase Program).  He said he was the co-pilot on that plane crash, but he knows what is going on, so we have to put him in as Treasury Secretary.

If I may quote the Republican House of Representative leader, Rep. Boehner, “Oh My God!”  If Cramer really believes this, then he too, is an idiot.  (For the record, I love Jim Cramer, but on this, WTF?!?!?)

He’s the only guy we got!?!?!  I could name about 100 guys and gals that could do this job and do it just as well as Timmy.  Heck, Cramer could do the job himself just as good.

The era of “it’s just too complicated for all of us small minded people to comprehend” is OVER.  Let me say it again…IT’S OVER!!!!!

The really intelligent people who we have looked up to for so long, as we recently have found out, are as full of crap as the rest of us.  They made things WAY overly complicated so they didn’t have to come clean with what they were doing.  They used massive leverage, in good times, to earn massive returns, using massive risk in the process, and then bonus themselves massively for their ultimate returns (did I mention, when times were good.)

As we all know, debt and leverage is a two edged sword.  A totally different topic, but when times go bad and you are leveraged to the hilt - armageddon.

In the case of Cramer saying that Geithner is the ONLY guy for the job, I need to stop writing or I will have a grand mall seizure.  Timmy might be just fine for the work as Treasury Secretary, but the only guy?  I need a break…later…

I watched to share a video today that I wanted to share with everyone.  These guys over at Money and Markets have been very right about many, MANY things in the past 12 months.  You have to register for free and then at the end of the video deal with the sales pitch of buying their research, but other than that, it is priceless.

What I heard in this video that struck me so close to home concerning the recent financial crisis is the following comment from Martin Weiss, the President of the company that pulled this video together.

The word “risk” has been damned for years to come.

This comment will ring true in my brain forever.  People are no longer interested in putting more money at risk.  That could be the death null of our financial system.  Even the professionals at the banks have NO interest in lending and taking on risk.

Here are the 7 startling forecasts these guys make for 2009…

1. Unemployment will rise quickly to 10% (16%+ if you include part timers) - people will be shocked at how fast unemployment will rise…
2. We will see an unstoppable chain reaction of bankruptcies - they go so far as naming names of companies that are on the brink (unheard of from financial pundits…)
3. The government will have to GIVE UP saving “too big to fail” companies - the US government will simply not have the resources to protect these guys.
4. The federal deficit will balloon to at least $2 trillion - probably a conservative estimate by all accounts.
5. The Dow Jones Industrial Average will plunge to 5500 - this is a huge move down that will completely put us in the tall weeds if this happens.
6. The real estate collapse will enter a new, more advanced stage - prices are going to continue to come down until it is in line with income, but it will go much further than that.  Real estate income is plummeting and that adds a whole new dimension to failures.
7. 2009 will be the year of the Great Financial Dustbowl, striking all forms of income - money will be VERY scarce and this will lead to massive depression like state - they call it a “money famine”.

This is a fantastic video and I agree with almost all of these predictions.  I wish it not true, but the statistics and physicals behind what is happening right now point to something very dire coming in the coming year.

Any thoughts???

I just read an article on Yahoo’s Tech Ticker by Henry Blodget at Clusterstock.  It said Nouriel Roubini, the renowned economic and financial professor from New York University, stated today that the “US banking system is effectively insolvent.”

Bloomberg: U.S. financial losses from the credit crisis may reach $3.6 trillion, suggesting the banking system is “effectively insolvent,” said New York University Professor Nouriel Roubini, who predicted last year’s economic crisis.

Mr. Roubini was one of the very few who called this crisis and warned everyone he could about it - before it happened.  He said the losses could mount to over $1 trillion.  Now he is saying over $3.6 trillion.   Holy crap!

If this guy is right, and he has been right SEVERAL times in the past on several other issues, then we are all screwed.  I firmly believe things will never be the same after this 9-11 like attack on our financial system, but if our banking system is insolvent, then things are going to get very interesting around here over the next year or so.

I could write on this subject for days and still not be satisfied with my outrage.  What the folks who put the entire system at risk (see Henry Paulson) to merely line their own pockets did, was flat out criminal.  People need to go to jail over this and the US government needs to start clawbacks immediately on the massive amount of money bilked from the system over the last couple of years.

I heard one of Obama’s economic team say they don’t want to dwell on the past and want to look forward.  She said there is nothing they could do about those folks and what money they took from the system.

I say “bullcrap”!!!  I know this is very anti-American in its sentiment, but they need to start seizing assets immediately.  Start freezing them all up until this whole mess can get sorted out.

Mr. Roubini, I sincerely hope you are wrong, but I fear you are correct.  I also fear you may be revising your estimates again…

I purchased, on Friday, a bunch of a Gold ETF that simply doubles the return of the standard gold index (it is up 15% since my purchase).  The regular gold ETF that everyone points to invest in gold without actually buying the hard stuff, is GLD.  This is an excellent way to get gold exposure and play the gold commodity.

However, if you are as bearish as I am on the market and the US Dollar, then you want to go ahead and double down.  These type of ETF’s are not for everyone.  When you use a gold ETF like DGP, you get twice the movement than the actual underlying instrument.  This means double the profits when things go well - but double the losses if your bet is wrong.  Be careful.

The reason I like gold right now, a lot, is that the US Dollar will very soon get crushed.  Deflation rules the day at the moment and the US Dollar continues to rebound from its multi-year drop, however, inflation will soon be the leading headline when things start to turn around.

The real rebound may not be for quite some time, but there will sure to be a dead-cat’s bounce at some point.  There will be a huge rally, just like in 1929 and 1930, before the real bad things happen to the market with its systemic issues.  This is why I am doubled down.

Now, usually, when the market rallies in normal conditions, you will see a flight from gold and it will usually be stagnant or even go down.  When the market rallies, it means investors are deciding to take on more risk by going into companies and avoiding the lower risk, recession loving investments - like Treasuries and gold.

However, this is not a normal market.   Nothing really makes sense anymore on a fundamental basis, so we must look at each individual asset much closer.  Gold will rally as the volatility continues to be at unprecedented levels - regardless of the stock market movements.

If you are interested in investing in gold, I would suggest looking at the tremendously easy to trade ETF’s, GLD for normal tracking of the gold commodity and DGP for twice the movement of the gold.  Remember, both of these investments are called “long” ETF’s.  This means they are betting the investment will increase in value.  There are other ETF’s that bet against gold.  These are called “short ETF’s”.  This, for another post.

One more thing, as we always preach on this site and others, if you see movements like I have in just a few short days (15% since midday Friday), then you MUST take some or all of your investment off the table.  You must take your profits. Remember, this is practically a whole year’s worth of return in just a few days.  That run will not last and being overly greedy expecting a 50% or even a double, is a risk that might pay off, but most likely will not.  Take some profits and have a nice Christmas when you see these types of movements.

I just read an article in this week’s Baron’s magazine that convinces me there are LOTS of people out there that simply don’t get it.  The severity of what the financial markets are facing at the moment is unprecedented.

This sobering article on high end real estate and how prices have dropped nearly 50% across the board was spot on for 95% of the writing.  Prices have plummetted for the once recession proof ultra-high end real estate and the folks who are selling are shocked that it is happening.

Not sure why this is the case, but they are beside themselves they have to sell their $20 million mansions for $12 million.

This is another example showing how fragile the entire system can be.  It also highlights the VERY important fact that the system is far more important than just any one part of that system.  In other words, the only way a ultra-high end market exists (or any segment of the market for that matter) is when the entire system is healthy and all are benefiting.

This fact is often overlooked when the Reagan-ites want to push lower taxes on the rich and tout trickle down economics.  Like most other economic theories, it works fine when the financial markets are doing fine.  When they are sickly, like now, the imperfections come to the surface.

Back to the article…at the very end of the article, the typical real estate agent does the typical real estate agent thing by saying there is TONS of money sitting on the sideline right now and when it comes back, prices will soar and times will be good again.

WRONG! WRONG! WRONG!

The entire financial system is very sick right now.  It will not only take years for our financial system to recover, the wounds of selling real estate for 50% less than what you could have just 12 months prior run VERY deep.  People are nervous right now that the entire system is about to collapse.  They are not waiting for slightly better times.  They would sell in a heartbeat if they could and thank their lucky stars they did.  Then, the next thing out of their mouths will be “never again in that position.”

The depth and breadth of the credit default swap market and mortgage backed security market that is presntly collapsing for investors all over the world is so deep, it is simply incalculable.  Nobody knows how deep the rabbit hole travels and this will be with us for a long time.

I liked the article and suggest giving it a read.  But please, don’t be fooled into thinking there is this massive amount of cash sitting on the sidelines ready to bid up prices again when we see any light at the end of the tunnel.  It will take a long time to see the light and when we do, we will be gripping with white knuckles telling ourselves we will not be taking on all that risk again.

READ THE ENTIRE ARTICLE HERE.

Warren Buffett was on Charlie Rose back on October 1st of this year.  I just watched the entire video again to remind myself that this is without a doubt, the smartest guy IN ANY room. 

It is interesting to watch this video at this time, on this day, when so much has happened in the marketplace since then.  At the time, it had only been a few weeks since the Lehman meltdown and the larger financial meltdown had not happened yet. October was one of the worst months on record for the stock market and several other financial markets.

There are simply too many gems to list them all here.  But one of my favorite comments he makes is the three “I’s” that exist in our society.  The Innovators; the Imitators; and the Idiots.  I love it.

Another famous saying of Warren Buffett’s is “Be fearful when others are greedy and be greedy when others are fearful.”  That saying has gotten so much attention as of late since fear rules the day, but again he touches on this phenomenon in this interview.

Finally, he uses a few terms that are quite shocking.  Warren Buffett called this recent financial crisis an “economic Pearl Harbor.”  He then goes on to call mortgage derivatives and credit default swaps “financial weapons of mass destruction.”

From a Great Depression perspective, we are not there yet, he says.  However, when Treasury Bills are paying 1/20th of 1%, that means the market is saying it is just as good to put your money under your mattress.  This is very important.

In any event, I suggest everyone carve out some time to watch this video with Warren Buffett being interviewed by Charlie Rose (at least once).

VIEW THE ENTIRE VIDEO HERE.

The G20 summit was the gathering of 20 of the biggest economies in the world.  Their goal was to address the calamity in today’s global economies.  In short, they need to put up a united front against the fear bubble I mentioned in a previous post.

During Saturday’s summit, the G20 pledged the following:

• Aggressively battle the global recession by agreeing to not pass new restrictions on global trade …

• Improve regulatory supervision of banks …

• Implement stricter accounting standards …

• Employ oversight of the derivatives markets, and …

• Synchronize tax cuts, lower interest rates, and spending initiatives.

In a statement issued after the meeting, the G20 said,

Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries.

I am always skeptical when it comes to mixing money and politics - which is just about 100% of the time.  I love the idea of a united front and global response, but it has never worked in past.

Because of this, I remain cautious and continue to move my money to US Treasuries.  My 401k and other IRA’s are with Fidelity.  I love that company, but things can be limited.  I have moved my 401k to an income producing bond fund and everything else to the short-term US Treasury fund, FFXSX.

I may miss some of the upside when it comes back,  but I am still so very cautious of a HUGE downturn next year.  I was waiting for someone to say DOW 6000 and it happened last night on the best show on financial television, Fast Money.  Guy Adami stated that the DOW could have a “6 handle” if we break through the 7800 technical support established in mid-October.  A 6 handle is not DOW 6000 but that is where it could go if we break through that technical support.

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