Quantitative Easing

I am absolutely flabbergasted at Bernanke's comments that the US economy is going to recover in 2010. And that Kenneth Lewis of B of A said that Jan and Feb were profitable quarters.

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B of A is in no possible way profitable unless it ignores its' writedowns. ARRRGH.

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The U.S. has entered the most ridiculous era of printing money out of thin air, and then buying its own Treasuries. In other words, it is printing money to lend to itself to bailout itself!!!

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The USD is just another asset bubble in a musical chair world of finance where one asset bubble replaces the other. First it was dot-com, boom and bust. Then it was real estate - boom and bust. Lately, the USD got oddly strong, and it's undoubtedly going to crash, causing inflation.

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This actually is super super smart for the U.S. to do, because China artificially suppresses its currency to keep exports strong. It then took all the extra profits it was making from U.S. exports, and lent it to us to the tune of a trillion in Treasuries. Well guess what, China... the U.S. - if it goes into hyperinflation (which it will) will pay back with worthless future USD. That is like the ultimate F.U. to China, and honestly, China deserves it.

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Whenever you are massively in debt, inflation helps you because your loan payback amount is fixed - not indexed to inflation. When the USD becomes worth less per unit, the relative size of the debt goes down in a percentage matched with inflation. It's brilliant actually, and inevitable.

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Of course, this then bankrupts the U.S. but it already is. The only reason operations and bailouts are continuing is because the U.S. now is lending money to itself by printing money.

massive drop in U.S. Dollar coming

Today gold skyrocketed, and the USD dropped substantially. This is because the Federal Reserve announced that it would buy U.S. Treasuries.

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I have been saying for such a long time that what makes me so nervous about the U.S. is the collapse of the dollar, which I am sure is going to happen.

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I feel like I'm sitting in the past, remembering what it was like when the USD was the world's reserve currency, and when it had value because China needed it to be lofty to help China with exports.

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I am completely against these bailouts, but today in the President's speech, he made his pitch for why trillions of dollars have to be injected. He said if the consumer stops spending, and business stops spending, and the government stops spending, it all spirals. But what he's doing is betting that the world will still put a blind eye to the fact that fiat currency is completely only worth the perceived value of its buying power, and nothing else. Gold's price has been supressed for two big reasons -

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1) Reserve banks are selling to keep market prices low and 2) Gold paper contracts are as worthless as the dollars are becoming. Gold paper contracts are traded like securities, with the ability to place naked short sells. In this collapsing house of cards of paper money, the only thing that will have any value really would be commodities.

federal reserve buys $300 billion of long term treasuries

I have been blogging a lot about my observation that China will soon not want to buy U.S. Treasuries. U.S. Treasuries are how the government borrows money to pay for all of these bailouts. I described a situation where China gets sick of the risk of a country that is going down the tubes, and puts their $ somewhere else. The chart to the right is what happened to the spot gold price today. Yesterday it took a drop below 900, then skyrocketed. The U.S.D. took a similar drop against world currencies, and Bernanke is sacrificing the dollar, like I knew he had to.

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The reason China has not been ditching the U.S. is because if it did, the U.S. Dollar would tank, thereby making importing of chinese goods much more expensive. So China and the U.S. were in a little mexican standoff, but with one big difference. China has the advantage of a billion rice farmers that have not been urbanized, and a much cheaper labor force. Oh and did I mention massive amounts of cash?

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Yesterday, to me was about the craziest (expected) news I've heard since Bear Stearns collapsed. Back when Bear went down, I said that this day would affect us more than 9/11 because of the fact that investment banks absolutely could not keep open because of their massive exposure to subprime losses.

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Yesterday, the Federal Reserve (aka the printing press) said it was going to buy $300 billion of U.S. Treasuries.

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THE U.S. IS PRINTING MONEY TO PAY BACK FOR DEBTS IT CANNOT AFFORD TO PAY - THIS IS A HUGE IMBALANCE PUSHING TOWARD A DRAMATIC DROP IN THE U.S. DOLLAR AND HYPERINFLATION. HYPERINFLATION IS GOOD IF YOU HAVE MASSIVE DEBT BECAUSE YOU PAY BACK YOUR LOANS WITH WORTHLESS DOLLARS.

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This is what this is like. It's like a starving man cutting off his own foot, and making a stew. He will live a little longer having eaten his own foot, and he has another foot to eat if he needs to. He still has two hands which are important, but he will be walking around on ankle stumps. He will never be the same. He will die, and somebody will move into his apartment, clean it up and start over.

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Someone stronger and with two feet. The apartment is the United States, and the somebody else could most likely be China.

if i only played stocks

I don't trade stocks, nor do I own them. I have always had the belief that investments should not be made for purposes of cash flow. Investments should be made for growth. And buying stocks makes you focus your timing decisions on frustrating fluctuations. That's psychologically a handicap when investing.

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Therefore, knowing full well that the stock for Citibank is completely fixed and bobs at the machinations of the specialists, I would COMPLETELY short Citi in times like this. First of all, Citibank is going to go tits up.

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Do you know what also drives me batty? Kenneth Lewis, CEO of B of A - today said that biz was good, and the stock jumped. This reminds me of when Angelo Mozillo said that Countrywide had a "kitchen sink quarter" (as in, everything bad got thrown at us except for the kitchen sink - as if that makes any sense...) and that Countrywide would return to profitability in the next quarter. PEOPLE BOUGHT THAT STOCK FOR 29 AND IT'S WORTHLESS NOW.

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The same thing is going to happen to Citibank, but I won't short stocks. It is highly risky and a stupid, stressful thing to watch.

AIG

I'm sitting here trying to figure out the impact the likely demise of AIG is going to have on the world economy. I can't even imagine what is going to happen when AIG goes. And it's going to go because its survival is unsustainable.

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They traded in a thing called credit default swaps, or in other words, insurance for stupid investments. And their leverage was almost infinite, and its survival depended solely on REAL ESTATE GOING UP. Heck it hasn't even stabilized.

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At GFI, we are planning for hyperinflation and I am exploring an option of indexing prices daily. If inflation takes off, we're going to have to adjust our USD pricing to match the drop of the value of the dollar in order to keep current with supplier costs, etc.

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AIG is going to collapse, and honestly - I can't even imagine what mayhem this will bring. But it will be far greater and far deeper and far longer in duration than the Great Depression.

the plunge protection team at work!

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If you aren't familiar with "the working group" here is the wikipedia link.

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If you look at the daily charts, there will be a massive bomb of orders close to closing time, focusing on the bank stocks and other DOW indicators.

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It's your Federal Reserve and Treasury, working hand-in-hand, teaming up to make your USD worth less and less as this house of cards gets stacked higher and higher.

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I'm just amazed at how bold-faced this crap is.

violence follows massive job loss

When I first heard the song, "Lives In The Balance" by Jackson Browne, I cried. I pictured vividly the face of Dick Cheney as I heard this song:

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Ive been waiting for something to happen
For a week or a month or a year
With the blood in the ink of the headlines
And the sound of the crowd in my ear
You might ask what it takes to remember
When you know that youve seen it before
Where a government lies to a people
And a country is drifting to war

And theres a shadow on the faces
Of the men who send the guns
To the wars that are fought in places
Where their business interest runs

On the radio talk shows and the t.v.
You hear one thing again and again
How the u.s.a. stands for freedom
And we come to the aid of a friend
But who are the ones that we call our friends--
These governments killing their own?
Or the people who finally cant take any more
And they pick up a gun or a brick or a stone
There are lives in the balance
There are people under fire
There are children at the cannons
And there is blood on the wire

Theres a shadow on the faces
Of the men who fan the flames
Of the wars that are fought in places
Where we cant even say the names

They sell us the president the same way
They sell us our clothes and our cars
They sell us every thing from youth to religion
The same time they sell us our wars
I want to know who the men in the shadows are
I want to hear somebody asking them why
They can be counted on to tell us who our enemies are
But theyre never the ones to fight or to die
And there are lives in the balance
There are people under fire
There are children at the cannons
And there is blood on the wire

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Hummers are selling like hotcakes in Iraq. The Iraq economy is booming, and there are nouveau riche with enough discretionary dollars that they are buying SUV's, just like the USA in 2006. However they aren't in debt like we are now. Read this article!!! (CLICK HERE)

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Obama needs to bring the troops home now, from all foreign countries, and prepare for violence. When the bank kicks you out of the home, and there are no soup lines like the last great depression, violence will break out.

when will housing recover?

To those of you who have followed my blog for years, you'll agree that I've been remarkably accurate at financial forecasting. I told you a couple of years ago that Citigroup was hopelessly overleveraged, and now that it has gone below a buck a share, it's going to get nationalized and anybody who owns the stock will lose their whole investment.

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I hope I had saved some of you from buying financials back when I said it was ridiculous. My investing forecasts come from really really simple rules, that I've explained before - and they cannot be broken. I may not know the exact day something is going to happen, but I'm smack on sure that imbalances will resolve in a certain way with a certain severity. It's like weather forecasting. They find out where the "high pressure zones" are, and they know from that where the wind will blow. Same with finances, and I was watching on the Las Vegas news and though prices are nearly half what they were in 2006, the newsman said that prices should recover to their 2006 prices within two years.

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Bull fucking shit. You dumb ass bastard. You have no fucking idea what you are talking about. Real estate prices - when they hit bottom, they stay at the bottom for a long time. Bottoms are not like peaks. Peaks hit in a day then bob down, bottoms stay shitty for a long time before they start to buoy up due to pressures like 1) a growing economy or 2) a growing demographic. NEITHER ARE COMING ANY TIME SOON - and real estate prices, are not going to reach 2006 levels for at LEAST another 45-90 years. In fact, Real Estate is going to drop probably another half - OR MORE.

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I am just absolutely sick of people saying that things are going to be fine soon. I'm running off to an appointment, or I would say why things are not going to be anywhere near fine in the U.S. for at least 45 years - if ever, and I am 100% right. I am very sorry to say this - China will be fine! But the next to go will be the USD, and with that will go everything else. I'm sorry! But it's true!

About The Market Collapse

I am headed to Vegas and I have a really bad flu bug but I wanted to chime in here about the world markets.

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The stock market is not a true indicator of what is going on, because the market will bob up and down. What creeps me out bigtime is that AIG needs more money to survive. AIG cannot be saved, even though we did a massive bailout of it - because it wrote insurance for derivatives that were leveraged 20:1, and all of these policies are worthless.

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AIG participated in a thing called, "credit default swaps" something even more stupid than subprime lending, more stupid than mortgage backed securities. Bear Stearns collapsed because of the derivatives, and couldn't be saved, and AIG is needing this money for operations. However, it has no sustainability. If AIG goes, (and it will), then THAT will be another Bear Stearns moment. I said in the other blog on the day that Bear Stearns collapsed, it will affect our lives deeper and longer than 9/11. AIG collapsing will make a complete meltdown and devastation of the world economy. If you think this is bad, I am positive that these are good times compared to what is ahead.

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Short term- GM, AIG fail. Then, Citigroup and B of A go. Ford and GM around the same time. The USD collapses, and hyperinflation kicks in, with the U.S. going insolvent. Job losses hit 25%, and this time the U.S. is insolvent so there can't be social programs to rescue or protect people. In the last depression, there were soup lines. In this one, who is going to provide assistance? I am so glad I don't have stocks right now.

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The world economies are collapsing because of "emperor has no clothes" quality of fiat currency. My advice - enjoy these days right now and put your game face on because we're really going to have to be versatile, calm and strong.