Wall Street Ready To Tank Tomorrow

[Mr. X]

Yep I have an account. It's actually my second online account, I used to keep a rainy day fund with EmigrantDirect but moved over for the higher yield. For EverBank, you can start the application process online but you do need to mail in paperwork. I've moved funds between them and several different financial institutions without problem. I will say this though, their ACH does take longer (similar to your experience of the 5 business day wait) so now I initiate transfers through my broker which go through in about 2 business days.

Thanks for the feedback.

On a similar note, I just read today that a money market fund "broke the buck." First time in 14 years.

All Lehman related. Evergreen also broke the buck but Wachovia did a backstop. A couple others were affected as well. The one taxable MM fund I have had 0.7% exposure to Lehman but it was in a collateralized repo so it's a non-event. Those MM funds that broke the buck have completely spooked people with MM funds (unnecessarily IMO). Huge outflows from MM funds into treasuries. The huge influx of money into short term treasuries has caused the three month TBill rate to decline to the lowest level since 1954. Amazing. Actually it's beyond amazing.

Congrats on starting a position in gold. It's taking off like a freaking rocket today. Last I looked it was around $840 or up about 9%. It's surprising because the dollar is still holding up pretty well and sentiment is more towards a rate cut than a rate increase and inflation is not an issue. Classic flight to quality hedge in a tumultuous time. I was thinking of getting into the Spyder gold ETF this morning but I just couldn't pull the trigger when it was already up by 8%. Waiting for a dip before jumping in but I'm probably too late. Did you buy an ETF or a mining stock? I'm looking at AEM (Agnico-Eagle Mines). What do you like in gold mining stocks?

I thought the AIG bailout might give us a rally today. So much for that with the Dow down 300. Looks like that bailout just caused more anxiety about the other financials than it did to stem it. This market is acting irrationally. I have two natural gas stocks, the price of NG is up 7% today but almost all the NG gas drillers are down. Those parasitic hedge funds must still be unwinding their positions and driving prices down.

Where is the bottom on the Dow? I'm thinking we might be testing the 10,000 level by year end or earlier.

[Hunter Morrow]

10,000 by the end of the year?
Should I go check Intrade?

[Cliff]

I'm not going to blame this all on the private sector.
Deregulation definitely played an enormous part to this.
If bonds were regulated so bundled up pieces of overextended loans to people who could never pay back on them weren't "AAA", if institutions weren't leveraged at 10, 20, 30+ to 1, and so on and so forth.
If rules and accountability weren't thrown out the window in pursuit of profit none of this would have happened.
You think the Savings And Loans scandal would have been a big enough tip off that if rules were thrown out the window this would be the result.
Many people were on point about deregulation and sham accounting leading to a housing and investment collapse, for years, but they were all Chicken Littles. Sky's falling now, I guess.

It's funny ... I don't know a lot about economics or stocks, etc. I did watch a few documentaries on Enron though and a lot of what you're describing sounds very familiar. Can anybody "in the know" tell me if I'm wrong here? There seem to be some pretty close comparisons to what happened to Enron a while back and what's going on now.

[Mr. X]

It's funny ... I don't know a lot about economics or stocks, etc. I did watch a few documentaries on Enron though and a lot of what you're describing sounds very familiar. Can anybody "in the know" tell me if I'm wrong here? There seem to be some pretty close comparisons to what happened to Enron a while back and what's going on now.

IMO there is very little correlation between what happened with Enron and what happened with Lehman. Enron was flat out fraud, insider dealing and cooking the books. Lehman was about taking on too much risk with too little capital. Enron was a single company in the energy futures market whereas right now we have an entire sector that is under tremendous pressure on Wall Street.

[Cliff]

IMO there is very little correlation between what happened with Enron and what happened with Lehman. Enron was flat out fraud, insider dealing and cooking the books. Lehman was about taking on too much risk with too little capital. Enron was a single company in the energy futures market whereas right now we have an entire sector that is under tremendous pressure on Wall Street.

I see. I guess more than anything what brought Enron to my mind was the mention of deregulation and bad accounting/fraudulent accounting leading to huge losses on wall street.

[S197]

Congrats on starting a position in gold. It's taking off like a freaking rocket today. Last I looked it was around $840 or up about 9%. It's surprising because the dollar is still holding up pretty well and sentiment is more towards a rate cut than a rate increase and inflation is not an issue. Classic flight to quality hedge in a tumultuous time. I was thinking of getting into the Spyder gold ETF this morning but I just couldn't pull the trigger when it was already up by 8%. Waiting for a dip before jumping in but I'm probably too late. Did you buy an ETF or a mining stock? I'm looking at AEM (Agnico-Eagle Mines). What do you like in gold mining stocks?

I own the Spyder ETF as well as PRPFX, which primarily holds precious metals, swiss francs, and treasuries. I don't own any of the miners but AEM would be top 3 on my list if I did. The miners got hit a lot harder than GLD during gold's fall.

Funny thing is I'm not a gold bug. Every time I buy commodities, the old Simon-Ehrlich wager (there's a good wikipedia background on this) is in the back of my mind. But I couldn't ignore the macro events and gold just seemed to be the logical hedge. Worked out today, we'll see about the long run. Best thing I've probably done is sat on the sidelines through all this mess.

As for the MMF, you're right it was due to their Lehman holdings but it could be a harbinger of what's to come if we see WaMu, Wachovia, and other failures. I guess my point with that is, use a MMA, take the FDIC insurance, there's no upside to a standard MMF over an MMA. Your muni is obviously an exception due to the tax breaks but if yields are comparable why not have that extra insurance.

[S197]

The biggest issue today is the utter lack of transparency. The FASB pronouncement that was supposed to go into affect next year putting most of the off-balance sheet stuff back on the books has been pushed back another year. The Fed is taking toxic mortgage backed securities as collateral and issuing Treasuries in their place. The rating agencies are a joke. Enron was investment grade days before it collapsed. The recent downgrades came far too late. Not to mention the amount of level 3 assets, bogus inflation numbers… the list goes on and on.

This country is overleveraged on a personal and macro scale. We’ve lived beyond our means and now it’s really coming back to bite us in the ####. Don’t get me wrong, I’m not a chicken little or perma-bear, but we need to go through this pain in order to come out a better country. And I think we will. I think there will be historic buying opportunities but that’s a ways off.

For now the best advice I can give is 1) get out of debt, 2) contribute to your retirement and 3) live below your means and save.

If I had to pick a #4, it would probably be don’t listen to Jim Cramer

[AnnE]

[quote="Mr. X"][quote="S197"] I've left the 401K alone. [/quote]

I had some nice gains in a few commodity stocks during the runup; mostly natural gas plays along with Potash and Mosaic. I also got beat-up on the decline which was much steeper than the runup. Glad I got out of Potash and Mosaic when I did as both of those have cratered.[/quote]

You might be sorry you got out of Mosaic. I have insider information! <G>

Hey, people all over the planet need fertilizer, ya know. It'll come back, watch and see.

AnnE in MN who bought when it was $13.25. <g>

[Mr. X]

This just blows my mind. The yield on the 3 month TBill closed today at 4 basis points. Translation: you get $4 of interest on a $10,000 investment.

Look ... that's not an investment. It's a safekeeping arrangement. The Mattress Option is clearly in play here. People are totally spooked and scared S-list. The panic button is getting a workout.

[S197]

This just blows my mind. The yield on the 3 month TBill closed today at 4 basis points. Translation: you get $4 of interest on a $10,000 investment.

Look ... that's not an investment. It's a safekeeping arrangement. The Mattress Option is clearly in play here. People are totally spooked and scared S-list. The panic button is getting a workout.

Unbelievable. Capitulation?

Three-month bill rates may be the lowest since the 1930s based on monthly figures on the Fed Board of Governors' Web site. Daily figures go back as far as 1954

Man I was hoping to say on the sidelines until after the election but the panic is amazing. I'll be eyeing the VIX very closely.

Think it's time to short T-bills.

[Mr. X]

Think it's time to short T-bills.

Is that another way of saying you're in favor of a tax increase or a devaluation of the dollar?

China said today that they need to look at alternatives to the dollar as a reserve currency. They hold over a trillion dollars of treasuries. This explains in part the single largest one day increase in gold prices since they started tracking it.

I see the SEC is finally going to prohibit naked shorts starting tomorrow. They're only about 12 months to late. Talk about an agency that is asleep at the wheel.

[S197]

Is that another way of saying you're in favor of a tax increase or a devaluation of the dollar?

Not in favor of it but I think it will happen. May as well make some money off of the panic.

[Kansas Viking]

I can't believe we printed more money today. This is right along the same financial thinking as "I can't be broke, I still have checks."

The Little Dutch Boy is sticking his fingers in the holes in the dam. Before long the whole thing is going to break loose and drown him.

[OJVIKE]

I can't believe we printed more money today. This is right along the same financial thinking as "I can't be broke, I still have checks."

The Little Dutch Boy is sticking his fingers in the holes in the dam. Before long the whole thing is going to break loose and drown him.

are his fingers even big enough?they are also gunna drop the interest rate again..oil dropped another 5 bucks a barrel.Yet there is no relieve at the pump .I do realize there is a trickle down effect.

we have become way to oil dependant as a nation.This is a problem when China is gobbling up most of the natural resorces and storing it.
will there be a reasonable solution in our near future.We can only hope.

Well who feels our nation is doing "fair" in the going green.I believe this will help our energy crisis.witch would also help the economy eventually.

[John]

I know Geoff, Geoff is a friend of mine.... Geoff doesn't want politics here.

You guys want to talk trading tips, great, and I know some of you are friends here, that's cool. Stick to financials and I think we're good. Thanks.