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-- Posted Wednesday, 13 February 2008 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Wednesday, February 13, 2008

“Phenomenally accurate forecasts” 

Warren Buffett played the White Knight on Wall Street yesterday, promising to single-handedly buttress debt markets by writing secondary insurance on up to $800 billion of municipal bonds. Someone pointed out that it is not the muni bond market that is in trouble, but rather structured financial products. However, this seemed a niggling concern to us, since it is all but inconceivable that at least a few big cities are not going to go belly up in the next few years, having lived so high on the hog during ostensibly good times. And lest we forget, municipalities cannot print their way out of financial straits; rather, they must pay their bills the old-fashioned way: with tax revenues. If that were so easy to do, would cities like Pittsburgh and San Diego have teetered on the edge of bankruptcy during the boom years, as they did?

Anticipating skepticism, Buffett reassured a CNBC interviewer that he was only doing it for the money. He is offering to provide reinsurance to three beleaguered biggies: Ambac Financial Group, MBIA and Financial Guaranty Insurance. He said one of the three has already turned him down but didn’t specify which. Buffett is not acting out of altruism, as he himself has acknowledged, nor would we expect to see him stride onto the NYSE floor to meet all sellers in the event of a 1929-style crash. Rather, he is hoping to collect billions in premiums from the current insurers that are 50% higher than those now being assessed.

Cherry-Picking Risk

Further details were unclear, but we’d be surprised if the Sage had not done some hypothetical cherry-picking before broaching the offer. Some seem to think that confining it to munis would be skimming the cream, but for reasons noted above, we think risk in this market is currently underestimated – if not by Buffett, then by those who think New York, Los Angeles, Chicago, Boston et al. are going to skate through a deflationary depression that by now seems inevitable (a minority view, to be sure).

And neither, of course, will GM, which provided a further boost to stocks yesterday by clearing the air with news of a buyout offer that will be made to 75,000 union workers. No longer can anyone say that GM is not deadly serious about downsizing its operations to meet the competitive challenges ahead. The company also announced a fourth-quarter loss of $722 million, but the stock took it in stride, settling 46 cents lower following gains the previous day of more than twice that. The market as a whole backslid precipitously from its intraday highs, with the Dow Industrials giving up nearly a hundred points of a 230-point gain racked up in the first two hours of the session. Despite this, we remain wary of getting short here. Da Boyz have bigger plans, we suspect, than the so-far 400-point thrust off Monday’s lows.

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Ditch Your Guru!

When the Hidden Pivot seminar that was held last weekend sold out, I added an additional session on March 8-9. If you’d like to attend, click here  for further details and instructions on how to register. The class will be held on Saturday/Sunday 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.

A Class for Australians

I will also be offering a class in February that is tailored to the scheduling needs of students from Australia, New Zealand and Singapore. If you live in Sydney, this seminar will take place on February 21-22 (Thursday and Friday), from 3:30 p.m. to 7 p.m. These hours will also work for early risers in Western Europe.  For further details, click here.  You can also register directly by clicking here, then on the “Upcoming” tab. 

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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 Wednesday, 13 February 2008 | Digg This Article | Source: GoldSeek.com

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