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Posted on Thu, Nov 10, 2005 08:24

Anyone here involved in Stock Market?

I've always wanted to know what is going on behind the scenes, how to choose a stock, when to buy, when to sell, what to watch out for?

Last year I had some success investing, but in January I put all my savings into Starbucks, and needless to say, I am still waiting for my profit to materialize....

I know Sbux is a good company and it will perform eventually, but I hate to wait another year before making a move.

I am not rich, all I can spare is a few thousand dollars, so I can't afford to lose too much or leave it in one stock for a long period of time.

Could anyone tell me how to choose stocks? Most of the explanations are too complicated. I understand that I should look for a good company that had a temporary setback and is likely to bounce back, but how do I know I am not buying a lemon?

And the stock prices sometimes don' make sense at all. It's like someone in the background would pull the strings. Am I imagining it?

I've always wanted to know what real investors/traders think. You can't trust "experts". They have their motives for promoting certain stocks.

What I want is not insider information. That is illegal I know. Just some common sense advise from the investors' point of view.

And, yes, I know that every transaction is risky.

Thanks

.



BQ
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Posted on Fri, Sep 26, 2008 17:02

Quoting BQ:

Exclusive: Foreign banks may get help
By MIKE ALLEN | 9/21/08 7:24 AM EDT Text Size:



In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department?s mortgage bailout, according to the fine print of an administration statement Saturday night.

The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

Treasury Secretary Henry Paulson confirmed the change on ABC's "This Week," telling George Stephanopoulos that coverage of foreign-based banks is "a distinction without a difference to the American people."

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said.

"That's a distinction without a difference to the American people. The key here is protecting the system. ... We have a global financial system, and we are talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will. But, remember, this is about protecting the American people and protecting the taxpayers. and the American people don't care who owns the financial institution. If the financial institution in this country has problems, it'll have the same impact whether it's the U.S. or foreign."

The legislative outline that went to Capitol Hill at 1:30 a.m. Saturday had said that an eligible financial institution had to have ?its headquarters in the United States.? That would exclude foreign-based institutions with big U.S. operations, such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS.

But a Treasury ?Fact Sheet? released at 7:15 Saturday night sought to give the administration more flexibility, with an expanded definition that could include all of those banks: ?Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.?

See Also
McCain and Obama mum on bailout
Campaign advisers helped create mess
Franken helps craft McCain 'SNL' skit
The major change in the suggested eligibility requirements is the biggest change that Treasury publicly made after a day of briefings and conversations with Capitol Hill, and is likely the first of many.

Aspects of the $700 billion, two-year proposal that are still under negotiation include what, if anything, will be added to the administration?s simple but sweeping proposal. And the parliamentary route, such as what committees or hearings might be involved, has not been finalized.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has a hearing scheduled for Wednesday that is likely to focus on the proposal.

Under what congressional officials called a likely scenario, the measure could go to the House floor on Thursday, with passage expected the same day.

The Senate could take the package up as soon as Friday and send it to President Bush for his signature, although the Senate schedule is less predictable and had not been determined.

Officials expect passage by huge margins in both chambers because Paulson and Federal Reserve Chairman Ben Bernanke have told congressional leaders the country?s financial stability depends on it.

House Democrats plan to insist on adding protections for homeowners facing foreclosure. They also want to add a measure to help homeowners facing bankruptcy and an executive compensation restriction designed to prevent golden parachutes for the heads of troubled institutions.

Sen. Barack Obama (D-Ill.), who was supportive of the bailout concept in a statement released Friday, believes that ?whatever gets done in Congress has to protect Main Street,? senior adviser Stephanie Cutter said on MSNBC on Saturday.

On ?Fox News Sunday,? Paulson told Chris Wallace that he would resist the Democrats' desired limits on executive compensation.


"If we design it so it's punitive and institutions aren't going to participate, this won't work the way we need it to work," Paulson said. "Let's talk executive salaries: There have been excesses there. I agree with the American people. Pay should be for performance, not for failure. We've got work to do in that regard. We need to do that work. But we need this system to work. And so reforms need to come afterwards. My whole objective with the plan we have is to give us the maximum ability to make it work.?

And the secretary told NBC?s Tom Brokaw on ?Meet the Press? that he doesn?t want new regulations simultaneously: ?That's not doable to do that immediately. But we very much need new regulations.?

Senate Banking Committee Chairman Chris Dodd (D-Conn.) told Stephanopoulos on ABC: ?If we?re going to spend taxpayer money to get rid of bad debt in these places, what is the reciprocal obligation ? from the firms? ? I think there?s going to be a strong interest to deal with the Main Street aspects.?

Appearing with him, House Republican Leader John A. Boehner of Ohio retorted: ?We?ve already dealt with that, when we had the housing bill last summer. I didn?t vote for it, because it?s $300 billion bailout for scam artists and speculators and others around the housing industry. But there are a lot of tools in there to help the Federal Housing Administration deal with the foreclosure problem that?s out there. We need to rise above partisan politics ? and deal with this as adults.?



For all the readers who followed this forum, this will be my last post. MM has been deleting a lot of what I am trying to share in this chaotic time, MM has no care about your wealth or money. It is like MM has no care about its customer who support there business.

Since this is the case I am no longer interested to share hours of research and just getting deleted by a bunch of know nothing, I Have done my best to inform you about the derivative blow off and it has come true.

Now don't believe the U.S. economy has solved its problem. It is not over and American have sold there soul to corporations. The Constitution was written We the People but now it could be written We the Corporation because people have no more the freedom to prevent Gov't from bailing out corrupt financial entities, the Gov't mandates is to its people not its business and using tax payers money to bail out financial entities who pursues fraud,racketeering,deceptive advertising,larceny and others is not worthy of tax payers money period. They should all go bankrupt and then have a deep search down in the heart as to the reason why they went kaput, this bail out will not change a thing in there heart. All it will do, it will show corporate America how American don't understand there Constitution and they will probably laugh at all of you as being so ignorant because you have given up your total freedom and sold yourself to corporate slavery. This is what the bail out shows to me and many other people who can see all this for what it is.

The worse is coming next year, so be prepared.

God Bless you all..

BQ



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BQ
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Posted on Thu, Sep 25, 2008 06:59

Quoting BQ:

Exclusive: Foreign banks may get help
By MIKE ALLEN | 9/21/08 7:24 AM EDT Text Size:



In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department?s mortgage bailout, according to the fine print of an administration statement Saturday night.

The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

Treasury Secretary Henry Paulson confirmed the change on ABC's "This Week," telling George Stephanopoulos that coverage of foreign-based banks is "a distinction without a difference to the American people."

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said.

"That's a distinction without a difference to the American people. The key here is protecting the system. ... We have a global financial system, and we are talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will. But, remember, this is about protecting the American people and protecting the taxpayers. and the American people don't care who owns the financial institution. If the financial institution in this country has problems, it'll have the same impact whether it's the U.S. or foreign."

The legislative outline that went to Capitol Hill at 1:30 a.m. Saturday had said that an eligible financial institution had to have ?its headquarters in the United States.? That would exclude foreign-based institutions with big U.S. operations, such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS.

But a Treasury ?Fact Sheet? released at 7:15 Saturday night sought to give the administration more flexibility, with an expanded definition that could include all of those banks: ?Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.?

See Also
McCain and Obama mum on bailout
Campaign advisers helped create mess
Franken helps craft McCain 'SNL' skit
The major change in the suggested eligibility requirements is the biggest change that Treasury publicly made after a day of briefings and conversations with Capitol Hill, and is likely the first of many.

Aspects of the $700 billion, two-year proposal that are still under negotiation include what, if anything, will be added to the administration?s simple but sweeping proposal. And the parliamentary route, such as what committees or hearings might be involved, has not been finalized.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has a hearing scheduled for Wednesday that is likely to focus on the proposal.

Under what congressional officials called a likely scenario, the measure could go to the House floor on Thursday, with passage expected the same day.

The Senate could take the package up as soon as Friday and send it to President Bush for his signature, although the Senate schedule is less predictable and had not been determined.

Officials expect passage by huge margins in both chambers because Paulson and Federal Reserve Chairman Ben Bernanke have told congressional leaders the country?s financial stability depends on it.

House Democrats plan to insist on adding protections for homeowners facing foreclosure. They also want to add a measure to help homeowners facing bankruptcy and an executive compensation restriction designed to prevent golden parachutes for the heads of troubled institutions.

Sen. Barack Obama (D-Ill.), who was supportive of the bailout concept in a statement released Friday, believes that ?whatever gets done in Congress has to protect Main Street,? senior adviser Stephanie Cutter said on MSNBC on Saturday.

On ?Fox News Sunday,? Paulson told Chris Wallace that he would resist the Democrats' desired limits on executive compensation.


"If we design it so it's punitive and institutions aren't going to participate, this won't work the way we need it to work," Paulson said. "Let's talk executive salaries: There have been excesses there. I agree with the American people. Pay should be for performance, not for failure. We've got work to do in that regard. We need to do that work. But we need this system to work. And so reforms need to come afterwards. My whole objective with the plan we have is to give us the maximum ability to make it work.?

And the secretary told NBC?s Tom Brokaw on ?Meet the Press? that he doesn?t want new regulations simultaneously: ?That's not doable to do that immediately. But we very much need new regulations.?

Senate Banking Committee Chairman Chris Dodd (D-Conn.) told Stephanopoulos on ABC: ?If we?re going to spend taxpayer money to get rid of bad debt in these places, what is the reciprocal obligation ? from the firms? ? I think there?s going to be a strong interest to deal with the Main Street aspects.?

Appearing with him, House Republican Leader John A. Boehner of Ohio retorted: ?We?ve already dealt with that, when we had the housing bill last summer. I didn?t vote for it, because it?s $300 billion bailout for scam artists and speculators and others around the housing industry. But there are a lot of tools in there to help the Federal Housing Administration deal with the foreclosure problem that?s out there. We need to rise above partisan politics ? and deal with this as adults.?



Too Little Too Late
John Browne
Sep 25, 2008

Last week, Treasury Secretary Paulson and Fed Chairman Ben Bernanke faced Congressional leaders with a reported forecast that we are "literally days away from a complete meltdown of our financial system." Apparently, the politicians were stunned into a long silence.

If citizens across the country could glimpse the horror seen by the Congressmen (of which we have long warned), then widespread panic would truly be the order of the day. In particular, people will be shocked to see how Paulson's seemingly vast request to Congress for some $1 trillion is utterly dwarfed by the likely problem.

Of course, Paulson does not want to scare Congress. So he has offered them his own version of a teaser mortgage rate of just $1 trillion. The true figure will only kick in later, like one of the adjustable rate mortgages that tempted millions of optimistic home buyers. Once Congress is locked in to a "blank check", the funds will keep rolling until the presses run dry!

To put the problem into perspective, let's just consider some base statistics.

The publicly issued debt of the Unites States was, until very recently, a massive $5.3 trillion. The total debt, including non-public IOUs and unfunded obligations including social security and Medicare, is now a staggering $50 trillion! The total annual wealth generation, or GDP of America, is some $14 trillion.

Contrast those figures with the current debt problem ascribed to the reckless pursuit of predatory lending. Incidentally, predatory lending was made illegal in most states until overridden by President Bush to protect Wall Street profit opportunities.

The U.S. mortgage holdings are some $14.8 trillion, including some $3 trillion of commercial mortgages. Local government debt is some $3 trillion. But, even these gigantic figures pale in comparison beside the $20.4 trillion of consumer and corporate debt. Therefore, the total of non-Federal Government debt is some $38 trillion!

Of course, not all of it will default. All things being equal, possibly only a small proportion will fail, at least initially. But today, all things are not equal. We know that we are heading into a recession. This means that increasing amounts of debts will default.

The main problem is that predatory lending incurs a high default rate. So if only 10 percent of outstanding loans default, the Government will have to raise some $4 trillion, or more than 5 times what Congress is being asked. It will increase the U.S. Government public debt by some 80 percent.

This will threaten the triple-A credit rating of American Government debt. It will also 'crowd out' corporations and entrepreneurs from crucial debt funding. Finally, it will put upward pressure on interest rates at precisely the time when lower rates are called for to avoid recession slipping into depression.

If the economy moves into a severe recession and then depression, default rates will explode. These, in turn, will cause stock markets to implode, as they did in 1929. In addition, the U.S. dollar is likely to plummet, driving up the trade deficit in the longer term. Considering these factors, many of which the Government prefers to hide, things look bad - very bad.

It does not take a rocket scientist to see that we face a very serious situation and that the $1 trillion Paulson rescue plan, although well intentioned, is far too small and too late to avoid disaster. So what should investors do?

An old maxim is that, gold makes sense when nothing else makes sense. Today, not much does make sense. Gold is likely to explode, at least in the initial stages of panic. In a recession, cash becomes a King. In a depression, gold is an Emperor.

In the current panic, many investors are jumping on U.S. Treasury bonds as a perceived life raft. But teetering on the shaky foundation of U.S. dollars, T-bonds are a trap to be avoided. As the U.S. dollar is likely to erode fast, the sovereign debt of countries with strong currencies, such as Swiss francs, are attractive, even with a negative yield.

In these precarious times, think return of capital, not return on capital.



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BQ
Available only
to logged in members
Posted on Mon, Sep 22, 2008 07:13

Exclusive: Foreign banks may get help
By MIKE ALLEN | 9/21/08 7:24 AM EDT Text Size:



In a change from the original proposal sent to Capitol Hill, foreign-based banks with big U.S. operations could qualify for the Treasury Department?s mortgage bailout, according to the fine print of an administration statement Saturday night.

The theory, according to a participant in the negotiations, is that if the goal is to solve a liquidity crisis, it makes no sense to exclude banks that do a lot of lending in the United States.

Treasury Secretary Henry Paulson confirmed the change on ABC's "This Week," telling George Stephanopoulos that coverage of foreign-based banks is "a distinction without a difference to the American people."

"If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution," Paulson said.

"That's a distinction without a difference to the American people. The key here is protecting the system. ... We have a global financial system, and we are talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will. But, remember, this is about protecting the American people and protecting the taxpayers. and the American people don't care who owns the financial institution. If the financial institution in this country has problems, it'll have the same impact whether it's the U.S. or foreign."

The legislative outline that went to Capitol Hill at 1:30 a.m. Saturday had said that an eligible financial institution had to have ?its headquarters in the United States.? That would exclude foreign-based institutions with big U.S. operations, such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS.

But a Treasury ?Fact Sheet? released at 7:15 Saturday night sought to give the administration more flexibility, with an expanded definition that could include all of those banks: ?Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.?

See Also
McCain and Obama mum on bailout
Campaign advisers helped create mess
Franken helps craft McCain 'SNL' skit
The major change in the suggested eligibility requirements is the biggest change that Treasury publicly made after a day of briefings and conversations with Capitol Hill, and is likely the first of many.

Aspects of the $700 billion, two-year proposal that are still under negotiation include what, if anything, will be added to the administration?s simple but sweeping proposal. And the parliamentary route, such as what committees or hearings might be involved, has not been finalized.

House Financial Services Committee Chairman Barney Frank (D-Mass.) has a hearing scheduled for Wednesday that is likely to focus on the proposal.

Under what congressional officials called a likely scenario, the measure could go to the House floor on Thursday, with passage expected the same day.

The Senate could take the package up as soon as Friday and send it to President Bush for his signature, although the Senate schedule is less predictable and had not been determined.

Officials expect passage by huge margins in both chambers because Paulson and Federal Reserve Chairman Ben Bernanke have told congressional leaders the country?s financial stability depends on it.

House Democrats plan to insist on adding protections for homeowners facing foreclosure. They also want to add a measure to help homeowners facing bankruptcy and an executive compensation restriction designed to prevent golden parachutes for the heads of troubled institutions.

Sen. Barack Obama (D-Ill.), who was supportive of the bailout concept in a statement released Friday, believes that ?whatever gets done in Congress has to protect Main Street,? senior adviser Stephanie Cutter said on MSNBC on Saturday.

On ?Fox News Sunday,? Paulson told Chris Wallace that he would resist the Democrats' desired limits on executive compensation.


"If we design it so it's punitive and institutions aren't going to participate, this won't work the way we need it to work," Paulson said. "Let's talk executive salaries: There have been excesses there. I agree with the American people. Pay should be for performance, not for failure. We've got work to do in that regard. We need to do that work. But we need this system to work. And so reforms need to come afterwards. My whole objective with the plan we have is to give us the maximum ability to make it work.?

And the secretary told NBC?s Tom Brokaw on ?Meet the Press? that he doesn?t want new regulations simultaneously: ?That's not doable to do that immediately. But we very much need new regulations.?

Senate Banking Committee Chairman Chris Dodd (D-Conn.) told Stephanopoulos on ABC: ?If we?re going to spend taxpayer money to get rid of bad debt in these places, what is the reciprocal obligation ? from the firms? ? I think there?s going to be a strong interest to deal with the Main Street aspects.?

Appearing with him, House Republican Leader John A. Boehner of Ohio retorted: ?We?ve already dealt with that, when we had the housing bill last summer. I didn?t vote for it, because it?s $300 billion bailout for scam artists and speculators and others around the housing industry. But there are a lot of tools in there to help the Federal Housing Administration deal with the foreclosure problem that?s out there. We need to rise above partisan politics ? and deal with this as adults.?



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BQ
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Posted on Sat, Sep 20, 2008 19:24

PETER BRIMELOW
Unraveling according to schedule

By Peter Brimelow, MarketWatch
Last update: 12:01 a.m. EDT Sept. 8, 2008Comments: 117NEW YORK (MarketWatch) -- A Fannie-Freddie bailout fillip in financial markets? Maybe, but a megabear says it just shows the world is unraveling right on schedule.
Harry Schultz' The International Harry Schultz Letter was posted last night right about the time the Fannie Mae-Freddie Mac bailout was reported. But Schultz anticipated it, writing sarcastically:
"Flash: As we go to press, the US Government reveals plan to take over Freddie Mac and Fannie Mae, the biggest bail-out by taxpayers in history. It also wipes out the shareholders! Sunday selected to avoid stock market action same day, just as bank closures are told after market close Friday. That tells you what shape markets are in when government and CEOs hide behind holidays."
Schultz had earlier made his overview clear (I'm translating slightly from of his text-message style):
"Fed maneuver room approximately gone. Any $US injection big enough to avert a depression triggers runaway inflation. If not big enough: depression. US on knife-edge. Gold helps you either way.
"Which brings us to [Pimco bond king] Bill Gross. He went crazy last week, urging government to bail out everyone, to save the system. Either he is a closet socialist, a corporate fascist ... or just trying to get government to bail him out of 61% of his toxic waste mortgage backed securities."
Schultz suggests just two alternative scenarios, both equally appalling:
"If Bush bails them all out, the die would be cast for inflation unseen in the West since 1923 Germany. If no bail: Hello, 1929."
Gee, thanks.
Schultz' apocalyptic style is easy to ridicule. Two generations of financial pooh-bahs (the sort of people who ran Freddie (FRE:Freddie Mac
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FNM 0.69, +0.20, +40.8%) ) and their journalist groupies have been dismissing him.
And Schultz is having a hard time right now. Over the past 12 months, HSL is down 14.4% by Hulbert Financial Digest count, vs. a loss of 10.1% for the dividend-reinvested Dow Jones Wilshire 5000. It's getting worse: Year-to-date, HSL is down 25.8% vs. a loss of 10.3% for the total return DJ-Wilshire 5000.
This is presumably because the great post-millennium hard-assets bull market has stumbled recently, albeit not for the first time. But the Aden sisters, Schultz prot?g?s and publishers of The Aden Forecast, seem to have handled the stumble better, while remaining true believers. (See Aug. 14 column)
Still, over the past five years, HSL has achieved a 17.82% annualized gain, vs. 7.85% annualized for the total return DJ-Wilshire 5000.
And Schultz was quick to recognize the end of the last hard-assets bull market more than two decades ago. But he still hasn't called the end of this one. (See July 7 column)
Plus ... well, Fannie and Freddie have collapsed, haven't they?
In his latest issue, Schultz summarizes:
"Widespread stagflation will probably now build more inflation than stagnation, then gradually morph into more stagnation than inflation. Then, deflation takes over, and ultimately, depression. All this over next 9 years.
"For the moment, seal off major wipe-out risks. Exit all money funds and currency time deposits, step up gold & oil positions, move into 1-2 year government bonds (non-US $) in First World nations. Swiss first choice. Think not of yield; think of an ark's life preserver around your neck."
Schultz is currently negative on the stock market. On gold, he writes:
"We were unduly cheerful about gold's path in last HSL. The entire commodity market from asbestos to zinc took a dive, along with most stock markets, not to mention a business slowdown. It was caused in part by the overshoot all markets had in recent years -- many going to record highs -- which eventually called for a mega correction to the mega rise. And in part caused by the global monetary mess which is having a deflationary pull-down effect."
But he concludes:
"Our upside gold targets are still valid, as soon as the currency/metal/oil corrections exhaust themselves, as all storms do."
Schultz' upside target, at last report, was $1,600 in fairly short order.



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BQ
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Posted on Sat, Sep 20, 2008 17:44

Panic, Consolidate, Game Over
Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
Sep 19, 2008

Use this link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

We are in historically unprecedented times. The foundation is being laid for a default of USTreasurys in the wake of the greatest regulatory failure in modern history, and the collapse of the US financial system. Anyone who cannot see that suffers from poor vision, chronic nostalgia, low mental wattage, a paycheck from Wall Street, a post in financial press media, or owning an Economics advanced degree. So many changes come with each passing day, not week, that it boggles the mind. Many of us predicted $100 updays for gold, and we almost saw one. The wheels came off the US financial wagon long ago, but only now that fact is being recognized. The monetization largesse finally has gone beyond the corrupt bailouts of fraud kings on Wall Street. My longstanding forecast has been that when the monetary inflation machinery spits output beyond the sanctimonious walls of the Wall Street whorehouses, INTO THE MAINSTREAM, that the gold price would rise substantially. That process has begun, starting with Fannie Mae & Freddie Mac, and now moving to AIG. Only when phony money floods the system where people live, not where the elite conmen with stranglehold control the counterfeit processes, will gold shine. So many unexpected upcoming events will occur, enough to make a forecaster dream. Let's begin with the most important. Much more details are provided to Hat Trick subscribers.

RAIDS OF INDIVIDUAL ACCOUNTS

This is so important a topic, that it deserves top billing!!! Hidden inside the AIG bailout funding package, surely hastily cobbled together, but carefully enough to include a totally corrupt clause, was a handy dandy clause that permits raids. The conglomerate financial firms are permitted at this point to use private individual brokerage account funds to relieve their own liquidity pressures. This represents unauthorized loans of your stock account assets. So next, if the conglomerate fails, your stock account is part of the bankruptcy process. Finally the corrupt USGovt and corrupt Wall Street houses are desperate enough to put into policy, stated by the US Federal Reserve, outlining the authorized raid of your money. Beware. A good route would be to remove your money, start a subscription here, and open a GoldMoney account, then purchase physical gold or preferably silver with my offered discount. That cannot be taken from you, and will rise 5x for gold and 10x for silver in the next two to three years. The actual evidence for legalized stock account raids by the financial firms can be found in recent articles in Financial Times and Wall Street Journal. So this is not a wild claim. The September 14th article on the Wall Street Journal entitled "Wall Street Crisis Hits Stocks" was the first exposure.

The runs on US banks are in progress. See Washington Mutual, where private email messages have been shared by WaMu bank officers. WaMu alone could deplete the entire Federal Deposit Insurance Corp fund for bank deposit coverage. Eventually the FDIC will compete for USGovt federal money for bailouts and nationalizations. Eventually, bank deposits will not receive 100 cents per dollar, in a compromise. Next the bank runs will push banks into failure, at a time when stock accounts are under raids, without broad public knowledge.

GOLD TAKES LEAD IN CURRENCY WORLD

Did anyone notice that on Wednesday the 17th, gold was up big, like over $50, silver was up big, like over 70 cents, but the USDollar was essentially flat, even up a smidgeon? By afternoon, the gold rise intensified, and the USDollar fell hard. THE MESSAGE IS CLEAR: GOLD IS LEADING MOVEMENTS IN CURRENCY PRICES. The world did flock to the USTreasurys, surely led by mangled confused central bankers who have lost control. However, gold is finally being seen as a safe haven. It will become highly amusing to observe a clueless cast of corrupted minds attempt to explain why gold vaults past the 1000 mark, and why silver vaults past the 20 mark. They will offer up reasons, and if lucky, they will touch on at most three or four of the twenty relevant reasons. Their confusion includes observation of the decline in the crude oil price. Their eye is off the monetary panic.

Moral hazard is just an obstacle to be side-stepped in such times. Today, Bill McCullum of PIMCO actually said "We should not give one thought to inflationary consequences." He was referring to gargantuan rescue packages and now global lending lines to central bankers. And people wonder why gold shot up $80 yesterday, and why silver shot up over $1 yesterday. PREPARE IN THE VERY NEAR FUTURE FOR GOLD TO RISE OVER $100 ON SUCCESSIVE DAYS, AND FOR SILVER TO RISE OVER $2 ON SUCCESSIVE DAYS. Inflation is soon to be seen as the remedy to prevent monetary collapse. Gold just hit 900, and silver has reached 12.70 today. The euro has risen 500 basis points just since Friday morning. Gold is not rising sharply due to inflation concerns alone, although plenty of monetary inflation is set to continue flying through the money pipelines. THE REAL REASON WHY GOLD IS RISING IS FOR THREAT OF SYSTEMIC FINANCIAL FAILURE CENTERING IN THE UNTIED STATES.



What factors are key to gold rising? Perhaps because the US financial system is imploding. Perhaps because the USGovt nationalization demands are accelerating. Perhaps because the threat of default for USTreasurys is seen as inevitable, even imminent. Perhaps because nitwits who have highjacked the White House and USMilitary are planning something truly reckless on the military front in Iran. Perhaps because the US Federal Reserve is depleted and secretly insolvent, even as they put word out of an INFINITE BALANCE SHEET. Perhaps because enormous demand has come in physical gold & silver, despite the low price set by corrupt US PaperHangers. Perhaps because fear has entered the room globally.

CONSOLIDATION AMONG THE DEAD

The financial firms are not just dead, they are corrupt to the core. Perhaps one or two Wall Street firms will be left standing in a year or more. Has anyone figured out why foreign pursuit of Wall Street firms is blocked? Partly because foreigners cannot assess the value of such complicated opaque assets, intertwined within nests of acid pits. The other reason is that US banking authorities wish to keep the protected corrupt evidence within the Manhattan fold. The South Koreans wanted a piece of Lehman Brothers, the best pieces. But they would have had access to evidence needed eventually in criminal prosecutions. See the KfW case of ?300 million theft, possibly soon to emerge against Lehman crooks. The German insurance titans wanted a piece of AIG, the dead insurance giant. But they would have been handed access to evidence of extreme vulnerability or criminality. Why were officers at Lehman permitted to remove box after box from their building, when it should be treated as a crime scene with yellow cordon tape? The answer has to do with the Fascist Business Model, the merger of state with business, where the syndicate facilitates fraud in deep collusion.

Why did Morgan Stanley stock go down hard after they announced early their quarterly earnings? Possibly because nobody believes they are honest. Morgan Stanley might be kept afloat longer, so as to enable theft of brokerage account funds. Lehman does not have private stock accounts, mostly bonds of the acidic type. So Lehman is free to enter the trash heap of liquidation and the de-bone process for assets. Meat is to be separated from bone. John Mack of Morgan Stanley had better be careful, as he appeals for a Chinese role in a merger. That could give the Chinese an important toe-hold in US mortgage bond ownership. They are looking to convert mammoth USTBond garbage paper into hard assets, as a foundation to a possible migration of one hundred thousand to one million elite Chinese, to California, Arizona, Las Vegas, and Florida. It is called colonization.

The moral of the consolidation story is that the dead are marrying the dead. The Bank of America merger with Merrill Lynch struck me as hilarious. Each is dead from insolvency. Each has big counter-party risk from coverage of failed bonds. So they will now serve as each other's guarantor of counter-party risk? Not in this world! Imagine two fat men absent of musculature tossed overboard a ship. They tell each other, "Stand on my shoulders and you will be fine for breathing in this vast sea." They both sink. The end game for such ludicrous indefensible consolidation is that the Wall Street fraudulent corporations go down all together. A friend called last night from the analyst community. He wondered aloud that nobody could expect the speed of the breakdown. My response was to point out a strong message mentioned here repeatedly. Since the Bear Stearns bailout killjob merger by JPMorgan, all Wall Street investment banks are aligned in similar fashion, with common bond risk and common counter-party risk. So when one Wall Street firm goes down, several will immediately go down, and AIG is the umbilical cord to the Main Street economy. This point was borne out as wickedly true when the Lehman funding bailout failed. The parties trying to bail them out, offering funds, all found themselves as subject to writedowns immediately. The funds they offered were not available, since the loop of price reality reduced the level of the offered funds!!! That means they are all in the same boat, and if one fails, they all fail. So the system will desperately attempt to avoid any failing. Thus, the entire system fails.

As simple citizens, people should be concerned that the US Federal Reserve and US Dept of Treasury have begun to take actions far outside their own legal powers. The bailout of AIG was made illegally. The USFed cannot act to aid non-bank entities. Senator Jim Bunning has drafted Congressional legislation to limit the USFed action outside the banking realm. The system is losing control, especially with the law.

The parade of doomed deals continues. Talks have begun for JPMorgan taking over Washington Mutual. Could the JPMorgan 'Garbage Can' be inadequate soon? Bank of America has entered talks to take over Merrill Lynch, apparently striking a deal. Could BOA serve as the alternative 'Garbage Can' next, whose service would be as squire to JPMorgan? Now Morgan Stanley is in talks to take over Wachovia. The disaster du jour today seems to be State Street, which was down over 50%. The dominos are falling. THE MESSAGE IS CLEAR: THE DEAD ARE MARRYING THE DEAD. It is unclear what music to play at such events. My suggestion is something from "Phantom of the Opera" would be apt.



A SHORT 'TOLD YOU SO' HERE

The US financial sector became unglued this week. In last week's article, the point was made that the financial system had just that one week to lift the USDollar, to raid private accounts with games like yanked credit and a raft of paper naked short gold & silver future contracts. Then next week the brown excrement hits the fan. Over the weekend, deals were attempted to be forged into the night. Nobody seemed to ask the question why they were all acting like in an emergency. What emergency? A condition ordered by whom? My maintained point is that the Bank For Intl Settlements ordered the US bankers to fix it or flush it!

Big news was expected from my analysis, and my Hat Trick Letter newsletter. We got it! By the way, AIG was not on the radar for numerous analysts. It was on my radar, a secondary radar. The big banks are primary for my observation and monitor. WE ARE WITNESSING A CONCENTRATION OF RISK, OF RUINED CORPORATIONS, AND OF THEIR ACIDIC BALANCE SHEETS THAT IS SO GREAT THAT THE RISK OF US FINANCIAL IMPLOSION GROWS BY THE DAY !!!

Blame for speculators continues, as nitwit players within the fraud centers accuse others of speculation, and threaten prosecution by their watchdogs on leash. Recent research failed to disclose any collusion or illegal activity in the crude oil market. That does not stop continued claims, with hue & cry. These criminals are pathetic, if not consistent. Just when failed regulation is at the core of the financial crisis, Wall Street conmen and clueless Congressional legislators argue for more regulation and control, when the regulators and controllers deserve prison terms. Instead, prosecute the regulators and controllers, and begin with Alan Greenspan, and his knights of the Stupid Table at the Federal Reserve.

The financial crisis continues each day. Last Friday the currency markets smelled what was cited in broad terms as the end of the OPEN WINDOW for the US banks. The euro currency rose over 220 basis points that Friday, and the pound sterling rose over 330 basis points. Gold and silver firmed in price. Something tipped them off, like huge flows of private money out of the Untied States. This week, AIG and Merrill Lynch and Morgan Stanley dominate the news. On two different days this week, the NYSE Dow Jones Industrial index fell over 400 points. Today, when the Dow Jones Index was up 170 points, in a phone call to a trusted friend, we both agreed that the index would turn negative before the afternoon, and close down. So far, that call looks correct, as it was minus 100 points before now being up 50 to 60 points.

By the way, important option put stock positions are in place against Goldman Sachs. They point to a strong likelihood of the GSax stock falling to 80 or 85 imminently. The knock on GSax is that they have lied about their subprime mortgage exposure, and soon will be forced to come clean. The 'GS' stock shares plummeted from 160 in early September, now to under 100. Justice is served. My guess is their executives will profit privately from shorting their own stock. Even their 6-month corporate paper must pay out 20% in bond yield in order to attract funds.

UNIVERSAL MONETARY INFLATION

OK, so finally the US Federal Reserve has opened the monetary spigots to England, to Europe, to Switzerland, to Japan, and later to Canada. Not only is the monetary spigot overflowing inside the Untied States, it is overflowing from the US to the world. At least to the world affected (infected) by US control. The total central bank infusions of liquidity (translated: phony money) is $180 billion in the last several hours alone!! This huge amount is not enough to quiet the LIBOR or the 2-year USTreasury swaps. Gold is rising versus the pound sterling, the euro, the yen, and Canadian Dollar, aka the loonie. This trend is new and powerful. Central bankers are growing desperate. Their measures to open numerous lending facilities have not stopped lending constraints. Even commercial paper has fallen by $52 billion last week.

Clownish anchors and analysts cannot seem to comprehend what is going on with the central bankers, liquidity injections, market tanking, USDollar decline, and gold & silver zoom. They wonder why the USDollar would continue to fall after central bankers reacted responsibly. BECAUSE THE USTREASURY IS DOOMED FROM INSOLVENT BANKS, EXTREME DEMANDS FROM NATIONALIZATION, AND RECESSION, AGAINST A BACKDROP OF ENDLESS WAR FOR PRIVATE SYNDICATE BENEFIT. It is obvious! Gold smells a systemic failure.

FOREIGN CREDITORS UNITE

A hidden initiative has been in progress for the last two weeks. Foreigners are forced to supply credit for the Untied States. Nations led by Russia, China, Arabs, and Japanese are meeting to form a formal committee. They have a common purpose, to maintain and manage massive US$-based debt securities in danger. Their continued credit support is hampered by three magnificent factors, each a show stopper. 1) The US banks are insolvent, 2) The Wall Street bankers export fraudulent bonds, and 3) The USMilitary has acted with chronic aggression in violation of established contracts, international treaties, and disrespect for sovereign boundaries. So they are working to organize a committee of giant USTreasury Bond creditors. They wish to confront the US debtor with a single voice. Regard this important step as a prelude to possible default of the USTreasurys. It is one thing to be in trouble from insolvency. Add corruption from export of fraud, and you have a bigger problem. Throw in military aggression, complete with misreporting by a controlled press, and you have a crisis in need of almost immediate remedy. My argument has been made for four years, that foreign held US debt creates a threat to national sovereignty. Since when are the Chinese our friends and allies? They are business partners turned rivals, now adversaries. Since when are Russians our friends and allies? They are energy and metals suppliers, betrayed by treaty violations, now adversaries, even on the military front. Since when are Arabs our friends and allies? For three decades an uneasy partnership has been in existence, one that has turned into a blatant protection racket. The endless concocted war on terrorism is seen by Arabs as a war on Islam.

USTREASURYS AT RISK

Don't be fooled by the drop in USTBond yields. That is a symptom of collapse in my view. Yesterday, it was with great disillusion yet satisfaction that my eyes and ears witnessed an interview by a Standard & Poor analyst. He said there was no imminent danger of a USTreasury debt security downgrade, but he did say that if pushed, the S&P would put them on NEGATIVE WATCH. Interpret that to mean the USTreasurys will soon be downgraded. Never is a denial of such importance made without coming to fact and fruition later. Why else is the topic even discussed? This line of thinking is basic when ripping the BS from US financial propaganda. Notice the Credit Default Swap price for USTreasury Notes. The price is around 0.24% for the AAA-rated USGovt debt. Without colossal continued corrupt pressure against the ratings agencies by the US thugs in financial orifices, the USGovt debt would have been downgraded immediately with the launch of the Iraq and Afghan Wars, or years earlier. The Shock & Awe should have been reflected in USTBond risk.



CHECK OUT THE 1-MONTH USTBILL YIELD

The US bankers have lost control badly. Even ill-equipped USFed Chairman Bernanke admitted recently as having lost control. He spoke to economist David Hale at a Florida financial conference last week. Bernanke said, "We have lost control. We cannot stabilize the dollar. We cannot control commodity prices." The age of central bank control, ala Soviet Politburo, is coming to an end. GOLD RECOGNIZES IT. Check out the 1-month USTreasury Bill yield. Incredibly, it closed under 0.1% yesterday. This ultra short-term bond yield testifies to lost control and the advent of extreme conditions, the prelude to an historical storm. Just what should the USTreasury maturity yield curve look like before a default? Let me check, and get back to you. Ooops, no precedent! The TED Spread (difference between USTreasury and EuroDollar yield) has jumped up, another signal of banking turmoil. In recent days, the tight grip control of certain commodities has been lost by the Evil Ones. Even Morgan Stanley has been forced to close down its trading desks at the Platts Window, where they trade crude oil. The USCongress is equally lost. Today, a quote came from Senate Majority Leader Harry Reid. They are unlikely to pass new legislation to overhaul financial regulations this year. He said, "No one knows what to do. We are in new territory, this is a different game. [Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson] know what to do, but they are trying to come up with ideas." Gee! Maybe the chief architects of this grand failure have a solution? They should be ignored then imprisoned. Perhaps they are seeking final opportunities to steal, raid, and pilfer from the public till during the final months of this Administration.



The 2-year USTBill yield has also plummeted, but not as drastically. It is now far below the official USFed Fed Funds 2.0% rate. Some thought the USFed might cut rates in an act of desperation this week, me included. My guess is for two reasons, why they did not. 1) They did not want to project an impression of lost control, not after the Fannie Mae & Freddie Mac bailout, not after the failed Lehman Brothers deal, not after the shotgun wedding for Bank of America & Merrill Lynch, not after the secret eloped marriage in the works for JPMorgan & Washington Mutual, not after the merger of cadavers planned between Morgan Stanley & Wachovia. And 2) the Bank For Intl Settlements in Switzerland might have forbidden a USFed rate cut. My maintained position is firm, that the BIS ordered the US to fix it or flush it! Let's watch to see if the 2-year TBill yield continues lower, a signal of even more lost control.



THE USELESS INFLATION VS DEFLATION DEBATE

My greatest impatience is shown for those who attempt to argue whether inflation or deflation is winning, and where we stand. Such pursuits of chasing one's tail serves to illuminate nothing and to waste time. We have both, will continue to have both, as both intensify. The key is for monetary inflation to enter the mainstream, which is underway finally. One can benefit little from putting the unique crisis into convenient cans for purposes of organization. This is not simple, and people should not attempt to simplify the ongoing collapse of the Great American Experiment in Counterfeit Monetary Systems. To be sure, we have gone past a tipping point. The move to flood the monetary pools of phony money beyond Wall Street is the big event. To be sure, the bankruptcies and deep insolvent events are accelerating. To be sure, the desperation for attempted mergers is palpable. To be sure, central bank activity with lending, swapping, and even accepting stock equity as collateral is a sign of total absence of any safeguard toward respect of moral hazard.

Looking for inflation vs deflation labels when the failure and default of USTBonds and receivership occur TOTALLY MISSES WHAT IS GOING ON. This is a death event for the US finances, US banking system, USEconomy structure, and USTreasurys, all rolled together like a gigantic vortex hurricane. Looking for (in) vs (de)flation in this environment is like observing color schemes on walking dead as they attempt to merge at a ceremony. They are of DEAD PARTIES ATTEMPTING TO SHARE COUNTER-PARTY RISK. Looking for (in) vs (de)flation when dead partners are marrying is like DECIDING WHETHER A HONEYMOON SHOULD TAKE PLACE IN THE CARIBBEAN OR FRENCH COAST. They both go to the recycling cemetery instead. The place to be now is in gold and silver, preferably silver since central banks own none and because silver has strong industrial demand. Besides, a silver default of sorts has been in effect for several months.

It is with pleasure to attend again the upcoming Cambridge House conference in Toronto on October 4 and 5. Thankfully, my Frequent Flyer miles were used to cover the airfare from Costa Rica, where the rainy season is coming close to an end. POR FIN! Is that inflationary or deflationary? With absolute certainty, one can say WHO CARES?

Buy gold, buy silver, do NOT use borrowed money or leverage, and rest comfortably at night, since it cannot be taken from you. Then patiently wait for gravity to work, for night to follow day, for evil to be unmasked, for foreign creditors to arrive with hatchets.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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Sep 18, 2008
Jim Willie CB



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Posted on Sat, Sep 20, 2008 07:28

The World Gone Crazy and Your Gold Stocks
Kenneth J. Gerbino
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Kenneth J. Gerbino & Company
Sep 20, 2008

Gold going up almost $90 on September 17th is not to be taken lightly. This is extremely unusual and bullish. The global financial system led by the United States investment banks, insurance companies and commercial banks are now in a precarious and dangerous situation with asset values and balance sheets suspect.

The bottom line is that the precious metal mining stocks with economic resources in the ground will rebound dramatically led by the larger producers.

Financial institutions with various types of commercial paper, interest rate certificates, and packaged loan or debt portfolios insured by derivatives or some other contractual form of IOUs are now impossible to value or analyze. Here are the facts and my conclusions as where we are headed.

Financial Companies and Stock Markets

1. Looking at the AIG and Lehman Brothers balance sheets, it appears that the Feds and the TV guys could be off target by $450 billion. I took the short and long term investment assets that supposedly are loaded with toxic paper and simply decreased the value by a conservative 20%. Comparing these new asset values to the liabilities shows a $458 billion shortfall.

2. The above points to a possible $162 billion shortfall for Lehman and a $296 billion shortfall for AIG. This means that possibly in the next few weeks or months some other creditors (banks, insurance companies, investment banks) will have to write off hundreds of billions of assets they are carrying on their books (assets owed to them by Lehman or AIG). Bottom line: there is probably more bad news coming and the $85 billion from the Fed for the AIG bailout may be just the beginning of a flood of new money needed.

3. Reports state that AIG had also provided $400 billion of debt insurance to banks all over the world. How can AIG possibly honor even a small percent of this commitment if some of these debts default? If some of this debt goes bad then these banks will be stuck with zero protection on the toxic loans they foolishly made. Will the Fed or foreign central banks with a deal with the Fed honor all this paper?

4. Reserve Fund, the nations oldest money market fund wrote off $785 million of Lehman paper as their Board declared these assets "worthless."

5. Citicorp in 1991 with just a 5-7% decrease in real estate values was almost technically bankrupt because of over-leverage. With real estate today down 15-30% depending on what area of the country you live in, it is hard to imagine that we will not see similar financial stress with more financial institutions.

6. Russia closed their stock and bond markets a few days ago for 24 hours due to a panic. Their stock market is down 54% in 60 days. The Hong Kong stock market is down to 19,327 from 32,000 last November. China's Shanghai "A" Stock Market is down from 6,200 to 2,179 in the past 11 months. The Japanese Nikkei is at 11,920 from 17,300 last October. These are Friday, 19 September closing prices.

Globally stocks were getting battered and central banks have been adding massive amounts of bail out money over the last three months (I lost track when it went over $400 billion) including $200 billion in "liquidity" in just the last two days. This is highly inflationary medium to long term but will cause stocks and gold to move higher in unison until inflation is rampant, then interest rates will rise dramatically and stocks will head down and gold will soar. Remember an OK economy and an OK stock market are not always bad for gold or gold stocks. In 1980 when gold roared to $850 the Dow Jones was up 13.7%. All this money being injected into the economy will be a "fix" and in the short term should make gold and the stock market more buoyant.

The Bad News Regarding the Government Solutions

1. The money supply (MZM - zero maturity or immediately available money) in the U.S. has already increased by $1 trillion in the past 14 months yet most commentators are fixated on M1 which is an obsolete measurement of money supply because money is swept from these M1 accounts every night into interest bearing money markets (not counted as M1). Therefore the so called monetary base is useless as an indication of the nation's money supply. Because of this huge confusion people are worried about a "deflation" because M1 is going sideways. On the contrary, we are being flooded with money and because of the stress on Wall Street much more is coming and this will be very inflationary.

2. The bailout of the financial institutions Fannie, Freddie, AIG and the consolidation of investment banks like Merrill and probably Morgan Stanley into commercial banks will create institutions that cannot fail. Hence the entire professional hierarchy of these new giants will certainly lean towards investments and more financial gimmicks (some to be created in the future) as speculative as possible to make more year end bonuses. Top management who can now also make huge bonuses could care less as Uncle Sam will be there to bail them out. This is certainly a moral hazard concept that will cause taxpayers huge pain in the future.

3. China and India have both doubled their money supplies in just the last 5 years! I am expecting 10-15% annual inflation rates in both these countries for the next 3-4 years. This will have a dramatic positive effect on gold demand and prices and will dwarf the U.S. and European demand for gold.

4. The Inflation vs. Deflation debate is a debate between Knowledge and Stupidity. History and Fantasy. Understanding and Confusion. When a stock portfolio goes from $2 million to $1 million this is in fact a "deflated" value but this does not cause a deflation in the economy. Even with $10 trillion of stock market losses it has little effect on the general price level of goods and services in an economy. The crash of 1987 saw $15 trillion of stock and bond losses in the U.S. An historic loss of asset values at the time. Yet inflation in 1988 and 1989 averaged 3.2% and 4.3% respectively. There was no deflation. The same concept is true for real estate. Real Estate losses in 1990-91 were in the trillions and the inflation rates in 1990, 91, 92 averaged 4% annually. There was no deflation. There never is with paper money.

5. Do not confuse financial assets, real assets and money. They are very different animals. The deflation fears are promoted by the banking establishment economists as an excuse to print more money. In a paper money system deflation is basically impossible. Yes, "deflated" prices of assets can take place but that is a market mechanism of asset prices and asset values and nothing to do with a deflation in the economy.

6. The great deflation and Depression in the U.S. in the 1930's was caused by three factors. Treasury Secretary Mellon who was clueless on the theories and practices of money and credit thought that because the stock market was going up in the late twenties that the money supply would explode and we would have "inflation" so he instigated a horrendous margin increase to curb stock prices and liquidations then followed and got out of hand. He also raised taxes! On top of that the Federal Reserve actually drained money out of the banking system. This caused a panic and a true deflation. It was the work of government intervention. When Credit Anstalt (major Austrian bank) went under in May of 1931, it brought down many British and U.S. banks and started the banking crises of the 1930's.

7. There will be no deflation. If your adviser or broker or newsletter writer ever mentions this word send him this article and wise him/her up. Inflation is here to stay as prices have not gone down in this country in any year for the last 60 years despite the calls of the deflationists. During this time, despite market crashes, horrible recessions, and numerous real estate busts we have had no deflations. Paper money is inflationary and we are going to be flooded with more of it before the bailout of the global financial system is completed.

8. Nancy Pelosi (Speaker of the House) and Barney Frank (Chairman of the Banking Committee) want to have Congress handle the current financial crises. This is almost as bad as it gets. There is only a handful of men in Washington that understand honest monetary policy. Friend Congressman Ron Paul is one of the few. The Congressional solution will be to flood the country with even more money and this will take the heat off the Fed and Treasury for debasing the currency. They will socialize Wall Street and under the guise of protecting people give the bankers carte blanche to speculate, take huge bonuses and never have to worry about losses as the Fed will bail them out. The real hidden price of all this is the destruction of the middle and lower income earners standard of living. There is no free lunch.

9. Merrill Lynch every year does a very extensive and well known Global Survey of Money Managers. The results just announced are so off the wall that it made me add another $1,000 an ounce to my gold price projection. 7 out of 10 managers expect lower inflation in the next 12 months. This means that the so called best and brightest managing trillions of dollars have bought into the Great Lie.

10. The Great Lie: For almost 75 years the Fed and the Treasury have promoted the following concept. Inflation is caused by a strong economy. This, of course, is a smokescreen for the truth that all inflations are caused by an increase in money supply. But with this stable datum that a strong economy causes inflation, the powers that be always had something else to blame for inflation. Money managers therefore thinking that if a strong economy causes inflation then a slow economy or a recession will cause less inflation. Therefore they reason "why own gold or the gold stocks". These were some of the guys selling the gold shares the last 3-4 months. They are so wrong.

11. Ironically there are plenty of institutional money managers and investors that buy gold because they think a massive deflation will take place and money will disappear, therefore making gold a good hedge as a substitute currency. On the other hand inflation minded investors buy gold to protect themselves from higher prices. Gold is actually benefitting from the Great Lie. Unfortunately, the man in the street is not as inflation from more paper money ruins his take home pay purchasing power.

The Gold Mining Stocks

The last six months have seen total devastation of the junior and developmental precious metal mining stocks as well as huge share losses for the majors. This was caused by a series of events that added up to what can only be described as a once in lifetime phenomena when one considers gold at $800 and silver above $10. The events are listed below.

Thousands of new mining companies came into existence from 2003 to 2008 taking investment dollars for these uneconomic and speculative ventures from the normal pool of gold bug or money manager investors.

A gold ETF is formed and billions of dollars that normally would be invested in gold mining companies was diverted to bullion.

Gold goes above the old high of $850 and new investors, momentum players and hedge funds pile in with even more money, many with margin leverage and buy anything in sight.

Insiders and promoters of speculative companies issue thousands of press releases with bullish news that is mostly pie in the sky and sell their shares into these press releases - shares that they paid pennies for.

Jim Dines turns the whole world onto the uranium stocks which go ballistic and many gold bugs sell gold shares and buy uranium stocks. Dines call on uranium was clairvoyant and he came in at the exact bottom. Nevertheless money is diverted from the gold and silver mining shares.

Mining promoters jump on the uranium bandwagon and create approximately 300 new uranium companies that siphon off even more gold bug and gold managers' assets.

Gold and uranium prices have a normal pullback and people who came in at the top start seeing erosion in their portfolios and start to sell.

Commodity prices go up dramatically and also have a natural pullback and pundits now are crying "deflation" totally ignoring the fact that prices are still up over 100% and more for almost every commodity in the world over the last three years.

Many investors and hedge funds pile into the gold stocks and gold during the October 2007 - March 2008 high range. Prices start turning down in sympathy with gold and the momentum players with huge leverage and funds start dumping.

Gold corrects from above $1,000 to $800 and then below and the "deflationists" convince the Street that because of all the real estate sub prime problems and mortgage problems that deflation is coming as well as a recession and gold will have to go down even further. Some pundits talk about $500 gold. More selling by investors.

The summer rolls around and the Canadians are fishing, hiking and camping and nowhere to be found. The Europeans are on vacation and closed down for the summer. There are no bids for junior stocks. A 5,000 share sell order for a $2.00 mining stock knocks the price down 20 cents and wipes out millions of dollars of market value. Selling begets more selling.

Stock markets globally are going down and people are liquidating blue chips as well as major gold stocks.

Insiders of the junior mining companies in Canada are trying to sell some stock to pay for their kids tuitions and they are now part of the problem. Note, that inspections of junior mining companies income statements show these entrepreneurs usually take very modest salaries and justifiably sell stock to make ends meet. The "moose pasture promoters" do this with malicious intent and rip off investors.

Insiders are now seeing their stocks collapse and the market makers in Canada and London have literally headed for the hills. Insiders decide to let the market take the stocks down to wherever they are going and will enjoy reissuing options to themselves and management at much lower prices and wait for the next upturn to cash in.

Real assets-in-the-ground juniors and quality development companies are trashed with the thousands of "moose pasture" stocks that deserved to be zero in the first place.

Investors who are gold bugs and visit all the usual gold sites are disgusted and now in fear. Their spouses are shocked at how bad these investments appear. Tough times on the homefront.

Stock markets are in turmoil, the dollar is being debased by massive money supply infusions, trade deficits, budget deficits, etc. and yet gold and the gold stocks continue to go down. The impossible is happening.

The gold stocks are so oversold that some of the sophisticated medium to short term technical indicators are the most oversold in history. My favorite NYSE gold stock that produces gold for zero cost (that's $0.00) because of copper credits is selling at 6 times next year's cash flow. It is below $10. I expect it to reach $40 if gold just stays at $900. Unbelievable.

It seems like it is all over for the gold bugs... almost.

Wednesday, September 17, 2008 arrives and gold soars $90 in normal and aftermarket trading in New York. The bell has rung. The great bull market to end all bull markets in gold has resumed.
What is Next

Current gold buyers are most likely split between investors that believe a horrible deflation is coming and money will be wiped out so gold should be a good substitute and other investors who correctly understand that trillions of new dollars and foreign currencies are going to flood world economies to bail out the institutions and this will be very inflationary.

Both sides will have great conviction and this $90 move underlines those thoughts. Therefore, with the financial turmoil of this week gold and the quality mining stocks should move much higher with or without the stock market.

Moose pasture stocks will not recover, ever. Sell them, take your tax losses and buy companies with real resources and reserves.

The recent bailouts announced this week have turned Wall Street into Sweden. The large financial stocks are now backed by and socialized by Uncle Sam. This will create even more problems in the future. A list of the negatives on this is very long and would include such negatives as bureaucrats deciding on investment allocations, political favors used by politicians to get funding for pork barrel projects in their districts and red tape to choke a horse.

Socialism is a failure, but capitalism with a paper money system and a central bank manipulating interest rates, foreign exchange values and creating money and credit out of thin air is just as bad. Gold will now go much higher because of all this but it is a sad commentary on the banking elite and government fools that are responsible for our present condition.



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Posted on Thu, Sep 18, 2008 21:24

Gold has always been a store of value for over 5000 years because the people who understand how the financial system work know the players can't be trusted as they always create crisis like you see now, you only have to study history and visit major history museum or coin shop to see the end result of the fiat or the currency of Empire financial system, the conclusion are all the same, they end up bust or lose most of there purchasing power. Gold is starting to get more respect now.

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Equity fears drive up price of gold
By Juliette Garside
Last Updated: 2:47am BST 19/09/2008



Gold prices have continued to soar as fear drives capital from the equity and insurance markets.

On the London bullion market, gold rose more than 5pc to close at $861.25. Since last Friday, it has risen by ?107, an increase of 14pc.

Silver also benefited from the flight to safety, rising over 8pc to $12.19.

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"What is left for people to put their money in?" asked Afsin Nabavi, head of trading at MKS Finance.

"They can't trust the banks, they can't trust insurance companies, they can't trust the stock markets."

In the US, gold enjoyed its biggest rally in nine years, with silver reaping the benefits of the overflow.

Gold futures rose to a six-week high early yesterday, with stock for December delivery up $22.20, or 2.6pc, to $872.70 an ounce on the COMEX division of the New York Mercantile Exchange.

Yesterday's gains followed Wednesday's 9pc, $70 rise, which was the biggest one-day gain for gold futures since February 2000.

The metal is still some way from its March 2008 record of $1,033.90 an ounce.

From Chicago, Frank Lesh of FuturePath Trading LLC, said: "The fear trade is real big now, and rightfully so. People are

full of Treasuries [government bonds], and gold looks like another logical place to go."

The run-up in gold futures was directly tied to fears about financial companies' viability and a suspicion that the Federal Reserve's effort to boost interbank lending might have been "too much too soon", said RBC Capital Markets Global Futures vice-president George Gero.

In the US, silver futures for December delivery jumped 73 cents, or 6.3pc, to $12.405 an ounce, after an 11pc surge yesterday.



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Posted on Thu, Sep 18, 2008 18:07

METALS STOCKS
Gold tops $900 an ounce as anxiety persists
Investors push prices up 5.5%, continuing Wednesday's spike
By Moming Zhou & Steve Goldstein, MarketWatch
Last update: 6:32 p.m. EDT Sept. 18, 2008Comments: 281NEW YORK (MarketWatch) -- Gold futures surged for a second day Thursday, with the benchmark contract topping $900 an ounce for the first time in six weeks, as investors showed continued anxiety over the global financial system's cash crunch.
Gold, which jumped $70 in the previous session, tacked on another $46.50, or 5.5%, to end at $897 an ounce on the Comex division of the New York Mercantile Exchange. At one point, the contract traded as high as $926.
'We're surprised that gold is not already at $2,000 per ounce.'
? John Hill, Citigroup analysts
In electronic trade, however, gold last fell back $40 to $857 and U.S. stocks staged a massive late-afternoon rally, amid signs that investors are starting to gain confidence in measures to provide capital to troubled financial firms. The Dow Jones Industrial Average ($INDU:Dow Jones Industrial Average
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Last: 11,019.69+410.03+3.86%

4:30pm 09/18/2008

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$INDU 11,019.69, +410.03, +3.9%) leaped 410 points to end at 11,019 following two sharply lower days.
Video: Gold Still Ultimate Safe Haven

For a second day, gold spiked to recent highs as investors flocked to safety. Natalie Dempster of the World Gold Council says the current market environment will be good for gold prices going forward. Stacey Delo reports. (Sept. 18)The recent jump in gold prices "can be attributed to large amounts of money fleeing to the yellow metal as a safe haven in these troubled times," said Sam Kirtley, editor of Gold-Prices.biz. See Commodities Corner.
The financial crisis "will probably worsen over the coming months," he added, and the money the central banks are pumping into the system is adding to inflationary pressures, which "are certainly showing in gold [prices]."
Recent jumps in gold prices also came after market fund pioneer The Reserve shook the market by cutting the net asset value of its flagship Primary Fund Wednesday. This lead to firms like Deutsche Bank, Legg Mason and others to try to calm investors and prevent a run on their funds. See full story.
Gold bugs have been proven correct in the contention that "an overwhelmingly vast and complex pool of nested financial derivatives would ultimately result in cascading defaults and ruin for major portions of the banking system," wrote Citigroup analyst John Hill.
"Frankly, we're surprised that gold is not already at $2,000 per ounce," he added.
The banking tension was given new weight on Thursday as the Fed authorized a $180 billion expansion of its swap lines with other world central banks. The funds, which will be provided by the U.S. central bank, can be injected into money markets through overnight and term loans. See related story.
The decision comes a day after measures of short-term borrowing costs made huge jumps as banks grew increasingly wary of lending to each other in the wake of the failure of investment bank Lehman Brothers and jitters about the entire financial sector.
Adding more uncertainties to the financial system, speculation on Thursday had both Morgan Stanley
Last: 22.55+0.35+1.58%

4:03pm 09/18/2008

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MS 22.55, +0.35, +1.6%) and Washington Mutual (WM:Washington Mutual Inc
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Last: 2.99+0.98+48.76%

6:40pm 09/18/2008

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WM 2.99, +0.98, +48.8%) seeking out merger partners.
Dollar mixed
The U.S. dollar was trading lower against the euro and the British pound Thursday, but higher against the Japanese yen. The dollar index (DXY:US Dollar Index Future - Spot Price
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Last: 78.67+0.66+0.84%

8:36pm 09/18/2008

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DXY 78.67, +0.66, +0.8%) , which tracks the value of the greenback against other major currencies, slid 0.3%. See Currencies.
The Labor Department reported Thursday that initial claims for state jobless benefits rose by 10,000 in the latest week. Claims for the week ending Sept. 13 rose to 455,000, the highest since Aug. 2.
The four-week average of those claims also rose, by 5,000, to 445,000. The average, a measure of the underlying claims trend, was the highest since Aug. 16. See Economic Report.
Gold's Wednesday rally came as a key money-market fund "broke the buck," as Russia halted trading in its stock market and as rumors swirled around the health of UBS, though both the Swiss bank and its regulator denied them.
According to Brien Lundin, editor of Gold Newsletter, a piling of short positions -- or bets that gold would fall -- had led gold's recent correction to under $750 an ounce. This, he said, was unjustified, "just as gold's run over $1,000 this year was unjustified."
"Now, the fundamentals of gold are coming back into play, and we're seeing the resulting snapback in the price," Lundin said.
"Physical demand is breaking records, mining supply continues to fall, and the economic environment is, of course, promoting safe-haven demand," Lundin continued. "The shorts are covering, the funds are buying back in and everyone wants the safety of gold."
Among other metals, December silver surged 9% to $12.70 an ounce, October platinum added 4.7% to $1,137.60 an ounce and December palladium rose 5.4% to $239.45 an ounce. Copper for December delivery rose slightly to $3.07 a pound.
In spot trading, the London gold fixing price (38099902:Gold - Afternoon Fix (Source N M Rothschild)
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Last: 813.00+813.000.00%

12:00am 09/17/2008

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38099902 813.00, +813.00, 0.0%) , used as a benchmark for gold for immediate delivery, stood at $863 an ounce Thursday afternoon, up $50 from Wednesday afternoon.
On the equities side, the Amex Gold Bugs Index (HUI:amex gold bugs index equal-$ weight
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Last: 313.90-0.43-0.14%

5:10pm 09/18/2008

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HUI 313.90, -0.43, -0.1%) fell 0.4% to 313.90 points, as gold fell back in electronic trade and the rest of the market rallied back.
The SPDR Gold Trust (GLD:spdr gold trust gold shs
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Last: 82.80-2.66-3.11%

4:01pm 09/18/2008

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GLD 82.80, -2.66, -3.1%) dipped 3.1% to $82.80, the iShare Gold Trust (IAU:iShares COMEX Gold Trust
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Last: 83.24-2.31-2.70%

4:02pm 09/18/2008

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IAU 83.24, -2.31, -2.7%) fell 2.7% to $83.24, the iShares Silver Trust ETF (SLV:ishares silver trust ishares
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Last: 11.89-0.01-0.08%

4:07pm 09/18/2008

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SLV 11.89, -0.01, -0.1%) dipped 0.1% to $11.89 and the Market Vectors-Gold Miners ETF (GDX:market vectors etf tr gold miner etf
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Last: 34.20+0.10+0.29%

4:16pm 09/18/2008

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GDX 34.20, +0.10, +0.3%) added 0.3% to $34.20.
Moming Zhou is a MarketWatch reporter, based in San Francisco.
Steve Goldstein is MarketWatch's London bureau chief.



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Posted on Thu, Sep 18, 2008 18:05

Comrade Bernanke Does it Again
Peter Schiff
Posted Sep 18, 2008

By nationalizing nearly 80% of AIG for $85 billion, the Fed is doing a lot more than simply flushing taxpayer money down the toilet. The greater wrong is allowing the agency that has the power to print money to take control of a private enterprise, especially without the approval of the company's shareholders. The move represents the largest lurch toward socialism that this country has ever seen, and signals the end of the vibrancy of America's once vaunted free market economy. Since there is no limit to the amount of money the Fed can create, there is no limit to the number of assets they can acquire.

The "line in the sand" that the Government seemed to draw by refusing to bail out Lehman Brothers was erased in just two days by the very next wave of financial panic.

While Fannie and Freddie were arguably quasi-government agencies that deserved special protection, no such status exists with AIG. Where does the Fed get the authority to use the money it prints to take over private companies? Congress never gave such authority and, even if it had, it would be unconstitutional, as Congress itself has no such authority to delegate. What about the shareholders? Why didn't they get to vote on this acquisition? Whatever happened to private property rights?

Where does this stop? What other troubled companies will the Fed nationalize, and how much will it cost? Why stop at troubled companies? If the Fed can buy into a sick company, why not a healthy one? Now that we have allowed the Fed to take over any asset it wants, private property rights are meaningless. When oil prices get really high, why bother with a windfall profits tax when the Fed can simply nationalize Exxon-Mobil with a few cranks on its printing press. Who needs Bolsheviks when you have the Fed?

AIG is not a bank; it is not even an investment bank. The "lender of last resort" power was supposed to apply only to banks, to prevent runs. It was not meant to apply to any company that had been declared "too big to fail".

I suppose the Fed is trying to get around some of the more obvious illegalities by having the new AIG shares issued on behalf of the Treasury. What happened to the concept of an independent Fed? Here you have the Fed seizing a private company and ceding control to the U.S. Treasury. Rather then acting independently, the Fed and the Government are merely partners in crime.

On the economic side, the Fed expects us to believe this is a smart investment. Does anyone really think that officials at the Fed and Treasury are suddenly private equity experts? These are the guys who missed both the tech and housing bubbles, and who assured us that subprime problems were contained. I would not trust them to run a lemonade stand, let alone one of the largest insurance companies in the world.

The idea that this bailout was necessary given that the alternative would be worse should by now be fully discredited. All of today's financial problems are the direct consequence of Fed policy that was designed to weaken the recession that followed the bursting of the tech bubble and the shock of September 11th. Of course, the tech bubble itself resulted from the Fed's actions to sooth the pain following the collapse of LTCM, the Russian debt default, the Asian crisis, and Y2K.

I suppose the precedent for all of these actions was established back in 1979 when the government guaranteed Chrysler's debt. It sure would have been a lot better and a whole lot cheaper if we had simply let Chrysler fail. The road to financial hell, or in this case socialism, is certainly paved with "good" intentions. Today's historic surge in the price of gold shows that at least a few investors are refusing to march in the parade.



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Posted on Thu, Sep 18, 2008 07:22

Treasury to Sell Bills to Bolster Fed Balance Sheet (Update3)

By Rebecca Christie and John Brinsley

Sept. 17 (Bloomberg) -- The Treasury is selling $100 billion in short-term debt to enable the Federal Reserve to expand its balance sheet, a sign of the strains created by the biggest extension of central-bank credit to financial companies since the Great Depression.

The program started today with a $40 billion auction of 35- day bills, a day after the government agreed to take over American International Group Inc., the Treasury said in a statement in Washington. Another $60 billion will be sold tomorrow, it said.

The proceeds will

provide cash for use'' by the Fed as it seeks to boost liquidity in credit markets struggling from $515 billion in writedowns and losses since the start of last year. The announcement illustrates the potential drain on the government's finances in taking over AIG, Fannie Mae and Freddie Mac, and taking on $29 billion in Bear Stearns Cos. assets.



It is becoming imperative for the Fed to take actions to enlarge its balance sheet,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York.

Tomorrow, Treasury said it will sell $30 billion in 20-day bills and another $30 billion in 76-day bills, both for settlement Sept. 19. These bills will

help provide additional funding for the Federal Reserve,'' the department said.

Yesterday the Fed announced an $85 billion loan to AIG, in exchange for a 79.9 percent government stake in the largest U.S. insurer. The Fed also has set up several other emergency lending programs to provide Wall Street firms with ready access to funding.

Cash for the Fed



The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program'' and

will provide cash for use in the Fed initiatives,'' the department's statement said.

Treasury Secretary Henry Paulson has worked with the Fed to manage the financial sector's cash crunch. The new bill auctions will help to ensure financial institutions have ready access to Treasury securities, which have been in short supply recently as firms try to maintain liquidity.

Arguing before Congress in July for unlimited authority to help mortgage companies Fannie Mae and Freddie Mac, Paulson said

if you have a bazooka in your pocket and people know it, you probably won't have to use it.''



This is Hank Paulson making sure that there are extra bazooka shells sitting at the Fed,'' said Adam Posen, deputy director of the Peterson Institute for International Economics in Washington. Treasury is

hoping this convinces people that'' the Fed won't have to use them, Posen said.

Fed's Balance Sheet

The Fed will offset the impact of the new bill sales on its balance sheet so as not to affect the stance of monetary policy. The federal funds rate target will remain at 2 percent.

The Treasury said it will sell the new bills using its existing auction procedures, giving

as much advance notification as possible.'' The bills will not have a uniform fixed term, giving the Treasury the same duration flexibility that it has with cash-management bills.

Fed holdings of Treasury securities have fallen to $478 billion as of Sept. 10, from $741 billion at the beginning of the year, as the central bank has made room on its balance sheet for the new lending facilities.

In tomorrow's auctions, the Treasury said it would sell $30 billion in 20-day cash management bills with a closing competitive bid time of 11:30 a.m. New York time and $30 billion in a 76-day cash management bill with a closing competitive bid time of 1 p.m.



Last Updated: September 17, 2008 17:50 EDT



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Posted on Thu, Sep 18, 2008 07:19

China has its own idea of a world currency reserve.

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China paper urges new currency order after "financial tsunami" Tue Sep 16, 11:12 PM ET



BEIJING (Reuters) - Threatened by a "financial tsunami," the world must consider building a financial order no longer dependent on the United States, a leading Chinese state newspaper said on Wednesday.

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The commentary in the overseas edition of the People's Daily said the collapse of Lehman Brothers Holdings Inc (LEH.P) "may augur an even larger impending global 'financial tsunami'."

The People's Daily is the official newspaper of China's ruling Communist Party, and the overseas edition is a smaller circulation offshoot of the main paper.

Its pronouncements do not necessarily directly reflect leadership views, but this commentary by a professor at Shanghai's Tongji University suggested considerable official alarm at the strains buckling world financial markets.

China's central bank earlier this week cut its lending rate for the first time in six years, a move analysts said was aimed at bolstering the economy and the battered stock market.

"The eruption of the U.S. sub-prime crisis has exposed massive loopholes in the United States' financial oversight and supervision," writes the commentator, Shi Jianxun.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States."

But Vice Premier Wang Qishan, on a visit to the United States, told U.S. trade officials in a meeting on Tuesday that China and the United States needed to maintain close economic ties with global markets going through such turbulence.

"The Chinese government is well aware of the fact that the United States, which is the world's largest developed country, and China, which is the world's largest developing country, should have constructive and cooperative economic and trade relations," he said.

China is a major buyer of U.S. Treasury bonds, and through its sovereign wealth fund it has taken stakes in two large U.S. financial institutions.

In July 2005, China revalued the yuan and freed it from a dollar peg to float within managed bands. But the yuan and China's trade remains tightly linked to the fortunes of the dollar.

The commentary suggested China must brace for grave economic fallout and look to alternatives, saying the crisis brings to mind the Great Depression of the 1930s.

"Lehman Brothers announced bankruptcy will not only have a domino effect on the global financial world, it will bring a shock to the world economy," the front-page comment stated.

(Reporting by Chris Buckley; Editing by Ken Wills)



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Posted on Tue, Sep 16, 2008 21:20

As I shared with you a while back, the other shoe was coming off and now you will see more of this from now on.

BQ

Money market giant freezes redemptions

By Sam Mamudi
Last update: 5:19 p.m. EDT Sept. 16, 2008Comments: 98
NEW YORK (MarketWatch) -- One of the first and largest money market funds has put a seven-day freeze on redemptions after the net asset value of its shares fell below $1. Primary Fund (RFIXX:RFIXX
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RFIXX, , ) , a $62 billion fund managed by money market fund inventor The Reserve, said Tuesday afternoon that its $785 million holding of Lehman Brothers Holdings debt has been valued at zero. As of 4 p.m., the value of the fund's share is 97 cents. The Reserve said that redemption requests received before 3 p.m. Tuesday will be paid out at $1 a share.



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Posted on Tue, Sep 16, 2008 17:04

(Barcelona) - Net foreign purchases of U.S. long-term securities have declined to $6.1 billion in July from 59.9 billion in June, according to data released by the U.S. treasury Department.


Foreign purchases have resulted in a negative total amount of $25.6 billion worth of U.S. long term securities, of which foreign investors purchases were negative $20.7 billion, and foreign official institutions were negative $4.9 billion.


American citizens have sold a net $31.7 billion of long term foreign securities.

Copyright 2008 FOREXSTREET S.L, All rights reserved



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Posted on Tue, Sep 16, 2008 17:03

Policyholders mob AIG office in Singapore
Worried about soundness of insurer, customers rush to cash out policies; 'cut my losses'



September 16, 2008

(Reuters)?Hundreds of anxious investors thronged the Singapore office of a unit of American International Group to redeem their policies on Tuesday, on fears the U.S. insurance giant could be the next financial firm to tumble. American International Assurance, a wholly owned subsidiary of AIG, pinned up an article from a local paper headlined ?AIA policy holders get assurance? at its entrance, but that did not deter wary investors who are facing a deluge of bad news after Lehman Brothers filed for bankruptcy protection on Monday.

?There?s so much financial turmoil. Anyway, the yield?s not that attractive,? said 60-year old stock trader Tan Peng Hock, a policy holder in the queue, who said he did not mind surrendering a policy worth about $42,000 despite possible losses.

?I prefer to hold cash for the time being...It?s better to be safe than sorry,? said Mr. Tan.

AIG, once the world?s top insurer by market value, has scrambled to raise cash and has been thrown a $20 billion lifeline by New York state, but came under renewed pressure on Tuesday as ratings agencies downgraded its debt.

Security guards were ushering customers to the upper floors as crowds built up outside after lunch at AIA?s office in the central business district of Singapore, a growing wealth management and financial services centre.

A spokeswoman for AIA said the firm would be issuing a statement later on Tuesday.

Singapore?s central bank assured investors on Tuesday that ?AIA currently has sufficient assets in its insurance funds to meet liabilities to policy holders?.

?Policyholders should, therefore, not act hastily to terminate their insurance policies with AIA as they may suffer losses from the premature termination and lose the insurance protection they may need,? the statement by the Monetary Authority of Singapore added.

But some investors in Singapore remained unconvinced.

?I want to put the money into a bank account because I don?t know the value of AIA?s assets,? said a 55-year old customer, who declined to be identified, adding he hoped to redeem his endowment fund which had already matured.

The region?s central banks flooded money markets with cash on Tuesday, dishing out $27 billion, as they tried to prevent upheaval on Wall Street from freezing the financial system.

?I just got an investment plan so I want to cut my losses before it becomes worse,? said 38-year-old investor Ed Chow.



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Posted on Tue, Sep 16, 2008 08:21

"I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said.

Ross says he will be looking to pick up smaller distressed institutions. "There will be opportunities, but we will need federal assistance in them, because what we're mainly looking for is stable sources of deposits, not so much the loan portfolio."

Ross feels that there will be too many people willing to provide capital to the large financials, which makes them less of a bargain than smaller banks.

When asked about his views on Bank of America's [BAC 27.75 1.20 (+4.52%) ] purchase of Merrill Lynch [MER 19.92 2.86 (+16.76%) ], Ross said that he didn't think that Merrill was in that dire a position.


"I think people in general felt better about Merrill's situation than about Lehman. I think ever since John Thain came in, he's done a wonderful job trying to fix what was a very difficult situation," Ross said.

He also noted that this was really now the second successful turnaround for Thain. "He (Thain)saved Merrill, went into BoFA ... Temasek, for example, went into something like a $5 a share profit out of this. So it's not a tragic ending."

"It will be very interesting to see where Thain ends up in the Bank of America hierarchy," Ross added.



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Posted on Tue, Sep 16, 2008 08:17

Here is another Band Aid being applied to the problem, the credit bust of Lehmann is the real blow for the rest of the derivative meltdown, the domino effect has been put in motion, the deep effect will be felt some time after the 4 th Quarter and in between 1 st and 2 nd Quarter next year. The acceleration has been set in motion and the unwinding process will just have to make its way.

Wilbur Ross another equivalent to Warren Buffet said in a press release he expect 1000 Banks to go under. The U.S. Treasury has a big problem on its hand, the election. In a recent survey it said 87 % of American thought the Gov't had it all wrong and the people are right.

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World?s biggest banks join forces
By Krishna Guha in Washington

Published: September 15 2008 04:43 | Last updated: September 15 2008 04:43

Ten of the world?s biggest banks have agreed to pool $70bn in a giant liquidity fund as part of a dramatic series of private and public sector initiatives intended to mitigate the impact of the expected failure of Lehman Brothers, the investment bank.

The moves came as Merrill Lynch, another investment bank, prepared to announce that it was being taken over by Bank of America.

EDITOR?S CHOICE
Full coverage: Crisis on Wall Street - Sep-12Lex Special: Extra Live notes - Sep-15Lex: Banking models - Sep-15Lex: Lehman?s bankruptcy - Sep-15Slideshow: Weekend drama in pictures - Sep-15Lex: No more bull - Sep-15The Federal Reserve said it was dramatically easing its lending terms and would allow investment banks to pledge equities and loans in return for cash.

Both the Fed move and the new private sector liquidity fund are specifically aimed at countering a feared disruption in the triparty repo market, a market in which investment banks secure short-term funding, much of it from money market mutual funds.

The Securities and Exchange Commission issued a statement saying that it would ensure an orderly winding down of Lehman in conjunction with its international counterparts.

Treasury Secretary Hank Paulson said the co-ordinated moves, announced late on Sunday night, would ?be critical to facilitating liquid, smooth functioning markets and addressing potential concerns in the credit markets? and praised the financial sector for joining forces with the US authorities to contain market risks.

However, the US authorities believe that even these aggressive moves will only mitigate and not prevent a period of turbulence in the markets that could last for a number of days.

The 10 banks ? Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Merrill Lynch, Morgan Stanley and UBS ? all pledged $7bn towards the liquidity fund, which is in effect a self-insurance scheme.

Each of them will be able to borrow up to one third of the total fund ? about $23bn ? as needed against a very wide range of collateral, including assets such as real estate that still cannot be pledged in return for loans from the Fed.

In a joint statement, the banks said the fund was intended to support liquidity and reduce volatility in an ?extraordinary market environment.? They said they would also work towards an ?orderly resolution? of Lehman derivatives exposure.

Ben Bernanke, the Fed chairman, said the Fed was taking a series of steps to ?mitigate the potential risks and disruptions to markets? arising from the crisis at Lehman.

The Federal Reserve announced a dramatic easing of the terms under which it lends to primary dealers ? most of whom are investment banks ? under the Primary Dealer Credit Facility. Dealers will now be able to pledge a wide range of assets including equities, whole loans and sub-investment grade debt.

The Fed ? which meets on Tuesday to set interest rates ? also announced that it was broadening the range of assets that can be pledged in exchange for loans of government bonds under its Treasury Securities Lending Facility to include all investment-grade debt, increasing the size of this scheme from $175bn to $200bn and increasing the frequency of its auctions.

The Fed added that it was suspending a rule that normally prohibits deposit-taking banks from using deposits to help finance their investment banking subsidiaries to allow them to fund activities normally funded in the repo market on a temporary basis until January 30 2009.

The Federal Reserve declined to comment on reports that AIG, the troubled insurance company, was seeking the ability to borrow from it as well.

The Fed has not at this point acceded to any request from AIG. If there was to be funding for AIG it would probably take the form of an emergency loan rather than a new facility for all insurance companies.

The new Fed terms are much easier than existing ones. The PDCF is now an almost perfect substitute for the triparty repo market ? the market in which investment banks traditionally meet much of their short-term funding needs.

Until now an investment bank that faced a sudden cut-off in funding in the repo market would have found it difficult to replace this with Fed cash using the same assets as collateral.

This should allow Lehman to migrate from funding its operations in the repo market to funding its remaining activities with the Fed in a gradual and orderly fashion as its activities are unwound.

However, other investment banks remain extremely reluctant to borrow from this facility, fearing it would be seen as a sign of desperation.

This ?stigma? problem with the PDCF explains why the Fed had to expand and ease the terms on its Treasuries lending facility as well ? as the latter is widely used by all investment banks.

The US authorities have put intense pressure on a number of weak financial institutions to strengthen their financial positions, if necessary by takeover by stronger entities.
Copyright The Financial Times Limited 2008



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Posted on Tue, Sep 16, 2008 07:57

I would not discount Tony opinion as he was in China during the Olympics game but not to watch the games but doing research on the growing trends,retail sale number crunching and others. He visited quite a number of business to discover the future gems in the rough and the gems which are getting polished and ready to explode in value and growth.

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Foreign stocks: Wall Street is screaming BUY.
Should you run the other way?
by Tony Sagami 09-16-08



Wow ? talk about a disaster. Bad news at AIG, Lehman, and throughout the financial sector led to a world-class pummeling on Wall Street. The Dow lost more than 504 points, while the S&P 500 dropped more than 4.6%, the worst single-day decline since right after the 9/11 terrorist attacks.

Definitely stay tuned to Money and Markets for more updates on where we're going next.

What else is on my mind? Well, whenever the pinstripe suit crowd in Manhattan starts to agree with me ... I get real worried.
I start to sweat ... I begin to question my research ... And I look for every possible hole in my conclusions.

Why?

Because the Wall Street crowd is better at being a day late and a dollar short than anybody I know. And I've learned over the years, that you can make a ton of money by NOT listening to them!

It's not that they're stupid

The Wall Street crowd isn't stupid. Heck, most of them attended more prestigious colleges than I did. And they can drop more names than I ever could.

So what has me worried?

The chief investment strategist at Citigroup just recommended that investors increase their stock portfolio's allocation in foreign stocks to 55%.


Wall Street is screaming: BUY, BUY, BUY foreign stocks!
That's way, way up from the 30% he had been recommending. And it's roughly quadruple the 12% to 15% that the typical mutual fund investor owns in foreign funds.

Why the sudden and dramatic increase?

Jeffrey Applegate, the head of Citigroup's Global Wealth Management, said: "The primary engines of growth have shifted away from the United States. Investors need to position themselves to take advantage of global opportunities."

Applegate is right ... but a little late to the party.

From 2003 to the end of 2007, the average annual return for the Dow Jones Wilshire Emerging Markets Index was 46% while the S&P 500 only returned 12.8%.

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Those gangbuster returns have increased the impact of foreign stocks on global markets. According to Russell Investments, the value of U.S. stocks in the world market fell below 50% in 2005. And now they only represent 43% of the capitalization of the Dow Jones Wilshire Global Total Market Index.

If you think those oversized returns mean that investing in foreign markets automatically means more risk ... you would be wrong. According to Morningstar, the standard deviation (a measure of an investment's volatility) of the U.S. stock market was 15.4 for the past 10 years. And for foreign stocks it was 15.5.

That's right. Investing in foreign markets has no more risk than investing in U.S. stocks ... plus you get paid a lot more for doing so.

China's the best house in a great neighborhood

I think Citigroup and Russell are dead right. And investors should have a meaningful, if not heavy, weighting in foreign stocks. I may be biased. But I believe Asia ? particularly China ? will be the most productive part of the global market to invest in over the next decade.

I say that because the fundamental news coming out of China in the past week has been very, very positive ...


China?s exports are soaring ... up a whopping 21.1%!
Chinese retail sales increased by 23.2% in August. That brings the year-to-date growth rate to 21.9%, a huge jump from the 15.7% during the same period last year.


Inflation is dropping in China. Consumer prices rose 4.9% for the 12 months ending in August, falling from 6.3% in July.


China's trade surplus for August was 14.9% higher than a year ago. And its exports surged by 21.1%.


Chinese officials are working on a stimulus plan for as much as 400 billion yuan (US$58 billion) in tax cuts and government spending to keep its economic train on track.


The 'smart' money still believes in the China growth story. Foreign direct investment pumped another $7 billion into China last month. And it's up an amazing 41.6% for the year.
Investing in Asia has never been easier

I am not suggesting that you put 55% of your stock portfolio into Asia. But I believe that you should have at least 20% of your portfolio in Asian equities. And it is easier than you may think because there are three ways to invest in Asia without ever leaving the comfort of your current brokerage firm, through ...

Mutual funds,


Exchange traded funds (ETFs), or


Individual stocks.
Did you know that over 100 Asian companies are listed on the New York Stock Exchange and Nasdaq? I'm talking about companies like Toyota (TM), China Mobile (CHL), Korea Electric Power (KEP), Taiwan Semiconductor (TSM), and Telekomunikasi Indonesia (TLKM.JK) to name a few.

And the time is right, too.

The Shanghai Composite Index is down by 50% since November 2007, despite the strong Chinese fundamentals. But unlike the U.S., China is still growing like a weed.

The Chinese economy has grown by more than 10% in the first half of the year. And it's on track for its sixth consecutive year of double-digit economic growth.

That combination of cheap prices and high growth has me licking my chops. And while I am nervous that the Wall Street crowd has finally jumped on the foreign stock bandwagon, I am very confident that you'll be thrilled with the results if you add more Asian spice to your portfolio today.

Best wishes,

Tony

P.S. Want to share your thoughts on the economy ? or any other investment topic ? with our entire Money and Markets audience? Then check out the Editor-For-A-Day contest that we're running right now!



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About Money and Markets


Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Tony Sagami, Nilus Mattive, Sean Brodrick, Larry Edelson, Michael Larson and Jack Crooks. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amber Dakar, Dinesh Kalera, Christina Kern, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau and Leslie Underwood.

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:



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Posted on Tue, Sep 16, 2008 07:35

Article history
If this is the death of Wall Street as we know it, the tombstone will read: killed by complexity.

Derivatives in their baffling modern forms ? collateralised debt obligations, credit default swaps and so on ? lie at the heart of the failure of Lehman, Bear Stearns, Fannie and Freddie, and even our own Northern Rock.

The philosophy that underpins the growth of derivatives is the idea that risk can be transferred to institutions more able to take the strain. In theory, it's a terrific scheme ? the weak can get rid of risks they can't handle, and the financial system should be stronger as a result.

The practice is very different, as Warren Buffett worked out years ago. His 2002 letter to his Berkshire Hathaway shareholders made headlines by condemning derivatives as "financial weapons of mass destruction". The passage comprised only a couple of pages of the lengthy letter but read it again today - it is the best guide to understanding how Wall Street has arrived at today's mess.

Here is Buffett on General Re Securities, a derivatives dealer that Berkshire inherited with its purchase of insurer General Re. "At year-end (after ten months of winding down its operation) it had 14,384 contracts outstanding, involving 672 counterparties around the world. Each contract has a plus or minus value derived from one or more reference items, including some of mind-boggling complexity. Valuing a portfolio like that, expert auditors could easily and honestly have widely varying opinions."

Now consider Lehman Brothers balance sheet. On page 62 of last year's accounts, under the heading "off balance sheet arrangements" you will find a staggering figure. Lehman had derivative contracts with a face value of $738bn.

The notes, fairly, make the point that the fair value is smaller than the notional amount ? Lehman believed the figure was $36.8bn. Even so, "mind-boggling complexity" perfectly describes Lehman's business

How can you hope to sell such a business over a weekend? You can't, unless the state is willing to underwrite the risk. This time, the US Treasury, said "no". Quite right, too: the US taxpayers are on the hook for too much already.

Complexity breeds other faults, as Buffett described. Derivatives, because they are so hard to value, make it easier for traders and chief executives to inflate earnings. They exacerbate problems if a company, for unrelated reasons, suffers a credit downgrade that requires it to post collateral with counterparties ? "a spiral that can lead to a corporate meltdown," he wrote. They create a "daisy chain" of risk as the troubles of one company infect another.

Buffett made a gloomy prediction half a decade ago. "The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear," he said. "Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts."

That event has duly arrived. Lehman Brothers has declared bankruptcy. Merrill Lynch has rushed into the arms of Bank of America. AIG, once the US's largest insurer, is pleading with the Fed for funds.

Unwinding a big derivatives book is no easy task - like Hell, derivatives are easy to enter and impossible to exit, said Buffett. That's why the failure of a firm the size of Lehman presents such a risk to the financial system ? we don't know how many other firms will be brought down as the body is extracted from the financial web.

In the long run, though, financial regulators must now know what must happen: it's time for them to bring down the curtain on the era of opaque financial derivatives.



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2 part posts as I pasted the graphics to give a better picture.

Part 1

The Ultimate Wall Street Nightmare
by Martin D. Weiss, Ph.D. 09-15-08



In the wake of Lehman's demise, Fed Chairman Bernanke and Treasury Secretary Paulson will try to put out the word that it's no great trauma.

But it's a lie and they know it. If they openly admitted that the Lehman collapse will paralyze Wall Street, torpedo the stock market and sink the economy, they'd have to pony up $100 billion or more to support it. Instead, their agenda was to push big banks to put up the money. And they failed to do so.

No matter what, there's no denying that the Lehman debacle is a massive and immediate threat to U.S. and global markets. At the latest reckoning, Lehman had $691 billion in assets. That makes it bigger than Wachovia, twice as big as Washington Mutual, and over sixteen times larger than Schwab.

Lehman's debts ? at $668.6 billion ? are also enormous. Even if you added together all the debts of TD Ameritrade, E-Trade and Schwab, you'd still have only $108.5 billion, or less than one-sixth the total debts which Lehman reports.

In fact, among brokers, there are only two other U.S. firms that beat Lehman in the debt category: Morgan Stanley, with $1 trillion, and Merrill Lynch, with $988 billion.

Can you imagine anyone in his right mind making the argument that a Merrill Lynch downfall would be "no great trauma to investors and financial markets"? Of course not.

The reality: The collapse of America's third-largest brokerage operation is very serious business with equally serious consequences. The primary concern ...

Defaults on Derivatives

We've lost count of how many times the authorities have virtually sworn on a stack of Bibles that "our financial system is fundamentally sound."

But no one could possibly lose count of their recent desperate efforts to prevent the system's collapse ? actions which directly belie their words:

One ? the coordinated efforts by central banks to flood the global economy with liquidity in the summer of 2007.

Two ? the hasty bailout of Bear Stearns in March of this year.

Three ? the giant Fannie and Freddie rescue announced just eight days ago.

Each time they intervene, they say "we must not reward CEOs who deceive the public and walk off with multibillion dollar bonus checks." And each time they say it's the "last time we'll make an exception to that rule."

But then they go ahead and do it anyhow, not only breaking their own word ... but also trashing the long tradition of restraint established by their predecessors since the Great Depression.

Why? Because they had neither the courage nor the audacity to confront Wall Street's ultimate nightmare: A collapse in the giant mountain of derivatives.

Derivatives are essentially bets on interest rates, foreign currencies, stocks or specific events like the bankruptcy of a particular company. The interest rate-related bets are by far the biggest. But the bets on bankruptcies ? called credit default swaps ? are the fastest growing and the most volatile.

These derivatives were originally designed to help hedge investments reduce risk ? like insurance policies. But in practice, they've been increasingly used to leverage investments, increasing the risks of participants.

Here are some essential facts that illustrate the enormity of the problem ...

* The amounts are absurdly large. The total "notional," or face value, of derivatives held by U.S. banks is $180 trillion, and it's three times that much globally. This figure is said to overstate the actual market risk. But it does not overstate the risk of defaults such as those that could be triggered by the failure of a company the size of Lehman Brothers.

* Over 90% of all derivatives are traded outside of regulated exchanges. Consequently, other than very general information, the authorities have no mechanism for keeping track ? let alone efficiently cleaning up the mess in the wake of a giant failure.

* Off the balance sheets. Some companies report nothing more than the total value of their derivatives in footnotes to their financial statements. Others don't report at all. Consequently, the actual risk, amounts and even the very existence of derivatives is often poorly disclosed to investors.

* Disclosure in the brokerage industry is especially bad. Many brokerages are private and do not disclose more than their rank and serial number. The SEC collects sparse data and does not publish it. So if you want to figure out how much derivates risk your broker is exposed to, good luck! Getting the information can be like pulling teeth.


* Concentrated in the hands of five major players. Nearly 97% of all U.S. bank-held derivatives are concentrated in the hands of just five major U.S. banks ? JPMorgan Chase, Citibank, Bank of America, Wachovia and HSBC.

* Far larger than assets. As you can see in the chart to the left, the pile-up of derivatives greatly exceeds the total assets of the firms. At the same time, in most cases, the default risk related to these holdings greatly exceed the banks' capital.

* Big brokers are also loaded with derivatives. Merrill Lynch has $4.2 trillion. Morgan Stanley has $7.1 trillion. As best we can determine, Lehman Brothers has significantly less ? $729 billion. But in proportion to its dwindling capital, its exposure seems to be among the worst.

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