-- Posted Sunday, 13 January 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks
Monday, January 14, 2008
“Phenomenally accurate forecasts”
Look out below! The Fed chairman gave it his best shot on Thursday, lying through his teeth about the true state of the economy, but apparently no one believed him. We were surprised ourselves by the stock market’s dour reaction, since we’d fully expected Wall Street’s magicians of manipulation to keep Thursday’s short-squeeze going for at least another day or two. But if they couldn’t coax a measly 300-point rally in the Dow from such analgesic news as was spun by the Fed’s Liquefier-in-Chief on Thursday, then things may be grimmer than we had imagined.
Still, even with most stocks falling on Friday, it was understandable that financial shares did not to go with the flow. That’s because the Fed’s rock-solid commitment to keep on easing will be as good as free money to the leverageurs. As long as they are confident the trend in short term rates is going to continue lower, they can keep their yield-curve Ponzi game going, borrowing short and lending long. Bernanke may think he’s doing these thimble-riggers a favor, but in reality the promise of more Fed easing will only allow desperate lenders to dig themselves a deeper grave.
The Takeover Fairy
Concerning B of A’s takeover of Countrywide, although it became official yesterday, anything gained by moving the firm’s by-now insoluble problems to the back burner was lost to investors. But who knows? Maybe the market would have sold off even harder if the Countrywide “story” had continued to draw on scary rumors rather than on the fairy-godmother scenario that the spinmeisters have now put into play.
Anyone who remember the supposedly mild recession of 1990-91 might recall that B of A was in dire straits itself back then (along with Citi, which came within a heartbeat of flatlining). B of A’s knight in shining was Walter Shorenstein, a San Francisco real estate mogul who, from the regulators’ point of view, was right out of central casting. Shorenstein evidently was in better shape than most of his fellow developers at the time, and that is undoubtedly why he was chosen by the regulators to “buy” Bank of America’s imposing headquarters in the heart of San Francisco’s financial district. I doubt whether he had to ante up more than a token $1 to acquire the 44-story landmark, but whatever the case, he became the building’s new owner, freeing up whatever ledger-entry capital B of A had tied up in the place.
We see Countrywide’s problems as more serious than the ones faced by B of A 15 years ago, but only time will tell. We also assume that the takeover deal will be structured in such a way as to prevent the full dollar-liability of Countrywide’s problems to redound to B of A’s bottom line.
News aside, and for the record, we went long on Friday’s close, shorting January 126 Diamond puts for 1.35. As we explained in the chat room minutes before the final bell, we did so in contrarian fashion, unable to imagine anything that might cause stocks to rise on Monday. We are nevertheless still admonishing you to “Look out below!” -- but not necessarily in the first couple of hours of trading on Monday. Have a great weekend!
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Here’s Your $50 Coupon…
A flurry of late registrations brought last weekend’s Hidden Pivot seminar to near-capacity, so I have scheduled another class in February for those who missed it. Click here for a $50 discount and instructions for registering. The class will be held on the weekend of February 9-10, from 9:00 a.m. to 12:30 p.m. Mountain Time. If you want to learn how to forecast stocks and commodities as confidently and precisely as top pros, this is an opportunity you should not pass up.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Sunday, 13 January 2008 | Digg This Article | Source: GoldSeek.com