Tuesday, 24 March 2009

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The Big Takeover: I haven't had much to say over the past week and a half because there just isn't much that interests me right now, as it relates to the market. It seems the market has made an intermediate bottom, and it's going to continue to rally. The advance of the past 10 days has just a powerful move upward, with no meaningful retracement. That to me indicates an aggressive stance by hedge funds, mutual funds, banks, and large speculators because who else can stop the market from going down? So for now, the intermediate trend has changed from down to up, but the primary trend remains down. What you need to understand is that it's possible to make money in a depression if you follow the tape. And when the tape says to go LONG, you go LONG, regardless of the fundamentals. Are there any good fundamental reasons to buy stocks now? Not really. And the ones you bulls think are good reasons ( i.e. low P/E ratios, higher dividend yield, etc.) are nowhere near where levels where major lows have occurred in the market in the past 100 years. We have more to go on the downside before we get there. I read this article from Rollingstone titled "The Big Takeover: The global economic crisis isn't about money - it's about power. How Wall Street insiders are using the bailout to stage a revolution". If you want to know what's really taking place, it's worth a read. I will put some excerpts below and the link.

"It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far...."

"The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations..."

"In its simplest form, a CDS is just a bet on an outcome. Say Bank A writes a million-dollar mortgage to the Pope for a town house in the West Village. Bank A wants to hedge its mortgage risk in case the Pope can't make his monthly payments, so it buys CDS protection from Bank B, wherein it agrees to pay Bank B a premium of $1,000 a month for five years. In return, Bank B agrees to pay Bank A the full million-dollar value of the Pope's mortgage if he defaults. In theory, Bank A is covered if the Pope goes on a meth binge and loses his job."

"There's this notion that the regulators couldn't do anything to stop AIG," says a government official who was present during the bailout. "That's bullshit. What you have to understand is that these regulators have ultimate power. They can send you a letter and say, 'You don't exist anymore,' and that's basically that. They don't even really need due process. The OTS could have said, 'We're going to pull your charter; we're going to pull your license; we're going to sue you.' And getting sued by your primary regulator is the kiss of death...."

Source:
Rollingstone.com
3-19-09
Link: http://www.rollingstone.com/politics/story/26793903/the_big_takeover/4

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