Wednesday, June 9, 2010

While Banana Ben Fiddles, More Doo Doo Hits The Fan

Looks like Ambac - the bond insurer that has been savaged by it's very poor investment decisions, incompetent management and credit default swaps - is getting ready to go tits up, while Bernanke cheerleads the lemmings off the cliff in front of Congress.  ABK's stock is currently down 37% on volumn that will end up today well over 3x the average daily volumn for the past 10 trading days.

Here's the article link courtesy of a commentor:   ABK = R.I.P.  The collateral effect of this situation could be quite staggering - the financial equivalent of the BP oil catastrophe - as this will potentially trigger $100's of billions in related credit default swaps and other toxic derivative transactions.  Muni paper, the largest beneficiary of ABK credit protection, could face staggering losses.

Ambac was one of the major beneficiaries from the $800 billion TARP and $1.25 trillion in toxic bond purchases by the Fed, as that monetization prevented the triggering of ABK's absurdly large portfolio of credit default swaps related to the Company's horrific investment decisions over the past 10 years.  I guess Banana Ben is too busy working out the details of his next helicopter drop to be bothered with specific details about why he looked like an utter idiot in front of the public today.  Got gold?


  1. I'm so glad someone else saw the "SHOW" between Mr. Bernanke and our Congresspersons: routine, shallowly inquisitive questions and just as superficial responses from Mr. Bernanke. I despair for the Future of our Country. Though you are wrong about the Public! The average, naive American does not know what is happening. I truly believe the Everyday Public would react if they understood! Who could help them understand? A truthful Mainstream Media on CBS, NBC, AND ABC including FOX.

  2. So what! PRint more billions, bail out the banksters/fraudsters, no one could see this coming, everyone was caught by surprise, our models didn't predict this, flee to the safety of the infinite supply of US dollars and bonds, & avoid anything that cannot be conjured from thin air or the stroke of a keyboard, such as Gold, Silver and euro's (sort of, at least compared to the USD).

    DAve, do things need to blow to Kingdome Come so I can see some new highs in my metal shares? Or is my frustration a contrary indicator when it comes to all the metals shares I hold that are being sold short with impunity by the fraudsters, naked shorters and hedge funds. I am sick of this BS.

    And if you haven't figured it out yet, Technical Analysis is the BEST way to buy or sell precious metals.

    Anytime there is a new breakout...sell it. A slamdown is coming. Anytime there is a massive sell off wih no support in it. The price action in AU/AG are so painted it is beyond criminal.

    If you are saying I'm a fool b/c that is not how TA works you are correct and that is the point. No 'free market' price action acts like this. TPTB suck in everyone to buy the breakouts, then they slam the price. Wash, rinse, repeat. Call it the Geoge Costanza school of chart analysis. Go against everything you have learned and every instict you have...and you will do just fine.

    what a load.

  3. Your frustration and irritation, like all of our's, reflects a bottom forming in the juniors and big move ahead for both juniors and large caps.

    Agree on your assessment of how to use T/A w/respect to the miners. We use that concept with our fund positions.

    Pressure is building in the metals and miners and I do believe we ::MAY:: see a move that takes most by surprise. Volumn is really drying up in the juniors which is a good sign.

    And just like every other wash/rinse cycle in the juniors, the hedge funds who are long senior/short juniors are going to get ass-raped when the juniors start screaming higher because they illiquidity works in both directions. They always get reamed when they go to cover their junior positions, but the NEVER learn.

    Patience will be rewarded.

    Read Stuart THomson's latest at and make sure you watch his gold and gdx videos.

  4. Dave--

    I don't have enough background in finance, etc. to know if this is a realistic possibility. IF you have the time, could you peruse this article and give your opinion on whether the Fed could actually engineer a "Minsky Melt-up", which would take the stock market another level higher before it resumes its secular bear market.

    If you don't have the time, I certainly understand. THANKS.

  5. Good catch! I missed this totally today. Big news again.

    At least Ben Bernanke has NO idea why gold keeps going up, which I like a lot!

  6. re: Minsky melt-up. Yes and as the article outlined, it's in the process of being engineered. Bernanke is arrogant enough to believe he can re-write economics and engineer a recovery using monetary policy. He's the perfect stool-pidgeon for his handlers - the wealthy bankers who control the Fed. There are several cases in history, most recently Zimbabwe, when the stock market goes to the moon and economic conditions go into a tailspin. That likely happens here.

  7. GYC, I can assure you Bernanke knows exactly why gold is going up. He also knows that eventually if he loses control the price (remember, Volker made the comment that the mistake they made when jacked interest rates was that he didn't cap the price of gold), that the Fed will lose its power. Again, Bernanke is blindly arrogant enough to believe that he can keep a lid ultimately on the price of gold. That's why he keeps threatening to jack the discount rate, which is utterly useless anyway.

  8. News out of Moscow isn't good. Karzai's brother runs the heroin trade in Afghanistan and a Russian confrontation with the US's procies on the Afghan border will be bloody and likely lead to more SAM's reaching the opposition. Russia really could very easily blood the US forces in Afghanistan and the average Russianis getting really very angry about the rise of drug addiction on their streets right now. It's in the press over there that this start of the second opium war.

    "Reports circulating in the Kremlin today state that Prime Minister Putin [photo top left] has ordered Russian military forces to prepare to confront American military forces in Afghanistan over what Deputy Prime Minister Sergei Ivanov warns is the “greatest threat to International peace and security”, Afghanistan’s thriving drug trade supported by the US and NATO.

    Not being reported to the American people about the Afghanistan war is that it has nothing to do with their being protected from terrorists, but rather it involves the billions of dollars gained for many of the West’s top intelligence agencies (mainly the CIA) from the heroin produced in this region (90% of World’s total) that by 2001 the Taliban had virtually eliminated.

    Immediately after the US invasion of Afghanistan in October, 2001, the Central Intelligence Agency (CIA) installed one of their main Afghan operatives, Hamid Karzai, as President, who then put into power his brother Ahmed Wali Karzai, who since then has increased heroin production to levels unseen in modern times and resulting in the deaths of tens of thousands of Russian citizens.

    Viktor Ivanov, the head of Russia’s Federal Drug Control Service, Russia’s National drug enforcement agency, told parliament in May that it was reasonable to “call the flow of Afghan opiates the second edition of opium wars.” Ivanov was referring to the 19th-century war between Britain and China sparked by exports of opium from British India to China.

    Ivanov isn’t alone.

    “I can name you a lot of politicians in Russia who said that the Americans specially arranged the situation in Afghanistan so that we would receive a lot of drugs, and this is the real aim of their occupation,” said Andrei Klimov, the deputy head of the foreign affairs committee in Russia’s lower house of parliament. “I’m not sure this is true, but who knows.”

    One person who definitely knew it was true was German President Horst Koehler, who after returning from Afghanistan last month linked the war with the defense of German economic interests because it was securing free trade routes for the West and had nothing to do whatsoever with terrorism. For his “outspokenness” President Koehler was forced to resign plunging an already battered Chancellor Merkel into even greater political turmoil."

  9. For those Alex Jones fans out there here's a couple of great videos by the man. The second ones a bit more subtle but you will soon get he point.

  10. Dave: THANKS for your reply.

    But let me get this straight. You think this Minsky Melt-Up is not only a possibility but a probability?

    And if so, and the market goes way up into June, 2011 (let's agree with the article), then, this guy says, the "secular bear market resumes" -- so, the market then starts to come down again big time?

    I didn't even have this on my radar!

  11. No idea how this ultimately unfolds, the sequence of events. My personal view is that the Fed is going to try and reinflate the stock bubble to try and offset the wealth destruction from the housing collapse.

    Here's what I think: before this bottoms out, we'll see a 1:1 Dow/gold ratio. The question is whether this occurs at Dow 30,000 or Dow 3,000. And it could happen at Dow 30k, and gold stays there and the Dow crashes. I dunno. But I do think that the Fed will try to create a new stock bubble.

  12. Thanks again, Dave. Appreciate your insight. I just don't have all the tools to analyze this stuff.

  13. It appears that Banana Benron will decide to burden taxpayers with yet another shot of debt rather than let any of the crony capitalists suck up a little red ink. Comrade Bucky is going to fail to hold any value at all if this keeps happening.

    OT: Thanks for finding worth in the words this commontater has posted here in the comentariot part of the website. The locals in Redneckistan tend to think poorly of such ideas!

    He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper [candle] at mine, receives light without darkening me.
    Thomas Jefferson, letter to Isaac McPherson, 13 August 1813


  14. Mark Lundeen has a long running series of articles on the equity markets. He recently said that Bernanke is prepared to act at the BEV -40% point and the bear will eat him up.

    Joe M.

  15. How does he define "act." If you look at the Treasury auction results since the Treasury QE supposedly ended, Primary Dealers and Foreign CB's are taking down, usually, about 90% of the auctions, especially the longer paper.

    The Fed with its bank excess reserves is what is funding U.S. PD participation. If you look at the graphs of bank balance investments, most of their cash is going into Treasuries. The leverage their excess reserves at the Fed by at least 10:1. And the FCB's...hmmmm..didn't Banana Ben just orchestrate at 1/2 trillion swap facility? I bet those dollars are being used in the Indirect Bidder category.

    So my thesis is that the Fed is still doing QE, albeit in a subtle, indirect way. What is Lundeen talking about? Maybe the Bob Janjuah 5-10 trillion in coordination w/the ECB...

  16. Dave,

    He didn't define what he meant when he said Bernanke is prepared to act. But the impression I got was when the equity markets reach a certain level of decline, BB is prepared to go "all in" to reflate them just like he did at the 6600 DOW level. However, this time, for some reason, he will get run over.

    Joe M.