Fed Head Lays An Egg

MBIA Posts 4Q Loss of $2.3 Billion on Derivatives Write-Down, Growing Loss Reserves
NEW YORK (AP) -- MBIA Inc. reported write-downs of $3.5 billion on souring credit derivatives in the fourth quarter Thursday, raising the possibility that the world's largest bond insurer could lose its top credit rating.
http://biz.yahoo.com/ap/080131/earns_mbia.html


GDP slows to 0.6% in fourth quarter, U.S. says
Housing investments fall at fastest pace in 26 years; core inflation higher

WASHINGTON (MarketWatch) - The U.S. economy barely grew in the fourth quarter, pulled down by a worsening slump in housing and heightened caution by consumers and businesses, the Commerce Department reported Wednesday.

The 0.6% annualized growth rate in gross domestic product was lower than the 1.1% expected by economists surveyed by MarketWatch. The drag from inventories was larger than expected.
"The GDP hit stall speed," wrote Joseph Brusuelas, chief U.S. economist at IDEAglobal.

GDP hadn't been any slower since the end of 2002, when the economy was struggling to recover from the recession a year earlier.
http://www.marketwatch.com/news/story/us-economy-slows-06-growth/story.aspx?guid=%7B9C5A0518-549D-4A8D-8666-881C32657085%7D


And so the story goes...or should we say grows? Big Ben and his cadre of financial knuckleheads gave the financial markets what they wanted yesterday, a fat 50 point Fed Funds interest rate cut. There was Euphoria first [the rush of getting your junkie fix] by Wall Street wizards. But this was low grade "stuff" and the high crashed quickly. What you saw in the stock market yesterday was a classic short squeeze. Those that bet the Fed would only cut 25 points and the market would tank on the news were short going into the announcement. They were tripping over themselves to cover their asses in the minutes following the 50 point cut anouncement. Once their new short plays were covered there were NO buyers left, and the market rush stalled and fell quickly back to earth.

Perhaps the realization that things aren't as "under control" in the credit markets as the Fed would like everbody to believe is beginning to scare people out of the stock market....and eventually into the safe and welcoming arms of Gold. There is a Gold investment tsunami, building on the sea of liquidity that these monetary mudheads at the Fed has unleashed, that is going to lift Gold to unimaginable heights in 2008.

O.6% growth in 4th quarter GDP? Imagine that number if the US Government wasn't involved in rigging it. The US has already slipped into a recession. To suggest otherwise is purely delusional. Many of the elements "normally" associated with the "end" of a recession are occuring now at the begining: rising unemployment, bankruptcy, foreclosure. We are ONLY entering a recession, and these elements are already hogging the headlines. Imagine then for a moment, how bad things are going to get before we see the "end" of this recession. We'll be lucky if all we get is a recession.

The 50 point cut yesterday proved that the Fed is not out to save the stock market as much as they are out to save their banking buddies. Despite Capt. Bernanke's assurances back in May 2006 that the subprime "issue" was contained and would not be a threat to the whole economy, things are begining to look pretty dark for the banks. MBIA news this morning is certainly not going to result in any high fives in the accounting offices of banks holding stacks of decaying mortgage securities. The entire corporate and municipal bond market is now at risk of imploding and bringing down the investors holding a lot of what will soon be deemed "junk" because of the insures inability to back these bonds up. What a catastrophe.

What is really at the root of all the peril on Wall Street and in the financial world today? One word: GREED. It was greed that destroyed the Roman Empire. And it is greed that has, is, and will destroy our once great nation America. Don't blame, or allow anybody in Washington to blame, the Chinese. It was American business that went to China to build things cheaper, to fatten their margins, and enrich their shareholders that destroyed America's manufacturing base. It was those backing NAFTA, that cost Americans jobs. It was Alan Greenspan that suggested everybody take out an adjustable rate loan and that "derivatives were good" because they helped spread the risk around. Yeah they certainly do...right around the neck of America like a hangmans noose. Wasn't it Lenin who once said, "American capitalists will hang themselves one day, and we'll supply them the rope."?

There was also a short Squeeze in Gold and Silver yesterday following the Fed's Folly. Some were dumb enough to bet the Fed would dissappoint. Even if the Fed had ONLY cut 25 points, it still would have been Gold positive. As a matter of fact, there has probably NEVER been a more positive environment to own Gold, in any of our lifetimes, than there is today. Gold is STILL cheap at $930 an ounce. Silver is cheaper than cheap at $16.70 an ounce. It may be safe to say now that "the sky is the limit"...at the very least anyways. The Moon is still up there.

Gold and Silver have performed in stunning fashion this January. Both our at or near our interim tops [ +/- 20 at 950 Gold and 17.43 Silver ]. February is seasonally a neutral month for the Precious Metals, and a bit of consolidation soon would be good for the Bulls going forward. I would not rule out another visit to the 50 day moving average, quite possibly in the next six weeks. Always remember, NO market goes straight up, or down. However, that being said, the real risk in Precious Metals now, is being OUT of the market. If you must trade, ALWAYS, maintain a "core" position for those days certain to come when you sit there wishing you were in when you're sitting on the sidelines empty handed.