“When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see money flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.”
–Ayn Rand, Atlas Shrugged (1957)
I could take the time here to unleash a deafening bitch session, but I will refrain. I will refrain because I find it so difficult right now to stop laughing. Citibank profitable? Does it get any funnier than that? Reminds me of a joke I came across the other day:
A guy walks into a big downtown bank. He points a gun at the teller and says: "Give me all your money.
"The teller replies calmly: "You don't understand. This is a bank. We don't have any money."
Yeah, Citibank turned a profit...and Santa Claus is real, Dorthy really did go to a place called OZ on the top of a tornado, and OJ's innocent. Yeah, right...
Big rally in the equity markets today... It's called a short squeeze. If this was a "legitimate" rally that signalled a "turn in the economy", why was Oil down? Why was Copper down? Why was the CRB Index DOWN? Are not Oil and Copper barometers of economic virility? Rally...yeah, right. Markets don't go straight up, AND they don't go straight down. NOTHING has changed. And would somebody PLEASE tell that proverbial LIAR, the Pied Piper of misinformation, Bungling Bumbling Ben Bernanke, that THERE WILL NOT BE ANYTHING RESEMBLING AN ECONOMIC RECOVERY IN 2009.
Of course Gold got pushed off the back of the garbage truck this morning. Who needs Gold? Banking stocks are down 95%, that's THE place to make money! LOOOOOOOOOOOOL! Let's see, Gold was down yesterday because the Dollar was so "strong". And Gold was down today because the Dollar was so weak. Whatever, Gold was down today because the criminals that are allowed to short metal that doesn't exist, at the behest of the US Government, were doing just that...breaking the law with the governments consent. Nobody who owns REAL GOLD was selling any of it today. Gold that doesn't exist was sold today. Of course we should all know by now that the law is only made to screw the little guy and protect the criminals in government and banking. Heck, if you need just one reason to own Gold that would be it. As ass backwards as the world has become, the world is certainly doomed.
I can't stop laughing, please forgive me...
New Red Flag for Markets: Credit Is Tightening Again
While Wall Street enjoys its relief rally Tuesday, stocks face looming danger from a familiar foe: tightening of credit.
Several metrics that market analysts use to gauge the availability of credit have been signaling trouble in recent days, throwing up a caution flag that tougher times could lie ahead for the availability of cash.
That's a formula that always spells trouble for investors.
Among the signs that analysts say point to credit problems are Libor, or the rate banks charge each other for overnight lending; The "Ted spread," which is the difference between 3-month Libor and the 3-month Treasury bill; two-year credit default swap rates; and the Commercial Mortgage-Backed Securities index, or CMBX.
Libor rates have swelled to prices not seen since December, with the trend indicating a June three-month rate of 1.7 percent, Lutz said in a research note. A widening in Libor emanates from lower confidence that institutions have in each other and leads to tighter lending policies. Three-month Libor gained Tuesday to about 1.33 percent.
Similarly, the CMBX and the two-year swap spread both are at four-month highs, while the Ted Spread, which indicates willingness to lend, also is moving lower, falling Tuesday to 1.09 percent.
None of it bodes well for the credit picture in 2009, and if credit tightens up, the stock market will feel the pinch regardless of what Tuesday's sharp rally indicates.
"With those four things showing more and more strain, there's a disconnect with equities rallying the way they are," Lutz says. "If they keep trading this way it's definitely an indication that there could be another leg down in stocks."
"After several months of swift declines and an environment where global central banks continue to cut short-term interest rates, any increase in Libor rates is a troubling reminder of the tension in credit markets," says Greg McBride, senior financial analyst for Bankrate.com. "The equity markets have effectively been behind the curve of what the credit markets have seen and experienced first-hand."
While analysts are quick to point out that the tightening is not at alarming levels at least in the short term, there's concern over the pressure the failing economy will put on lending practices.
"The underlying economy continues to deteriorate. The default rates on some of these underlying loans has been able to go up," says Mike Larson, an analyst with Weiss Research.
"While they've been able to buy a period of calm, we have yet to see if it's a genuine turn and not just driven by Fed largesse."
Other indicators that have analysts concerned include the difference between investment grade bonds and Treasurys, as well as increasing problems in the commercial real estate business that will be reflected in the CMBS rates and other metrics.
"There's a lack of confidence and a tremendous amount of uncertainty over the fact that all the heavy artillery that the Fed, the Treasury and other central banks around the globe have been throwing at the problem has shown little impact thus far," McBride says. "Pessimism rules the day."
http://finance.yahoo.com/news/New-Red-Flag-for-Markets-cnbc-14596385.html
Citi: Pandit's Defense Boosts Wall Street
Strip away the billions of toxic assets and the billions more that the feds have pumped into Citigroup (C), and what you have is a dandy little bank that actually makes money. At least that was the upbeat takeaway from Citi's beleaguered CEO Vikram Pandit, who distributed a memo to employees late on Mar. 9 about the bank's bright prospects, despite the current $1-a-share price tag.
That's a very large exception. Key market participants are still circumspect about the dark hole of toxic assets on all bank balance sheets. Pandit did not address Citi's balance sheet in his comments to employees, except to say that he felt confident of the bank's capital strength, based on its stress tests.
While Pandit is doing his level best to convince investors that Citi is in a strong capital position and won't need more bailout money, market skeptics like Barrack still abound. In a new note, for instance, analyst Tim Backshall of Credit Derivatives Research said that despite the U.S. Treasury's best efforts, credit risk is still high and little can be done to "fill any of the holes in bank balance sheets" as a result of the ongoing deterioration in the value of mortgage loans and other investment vehicles that are stuffed full of bad debt.
Until investors can feel confident that the worst is over and the bloodletting of bad assets has stabilized, many view bank stocks—and Citi in particular—as high-risk propositions.
"What they are pointing out is that on an operating earning basis, they are still a viable entity, but we're not buying it at this point," says Dan Genter, chief investment officer of RNC Genter Capital in Los Angeles. "What you have are these assets, some of which you put a big blanket over and call toxic. They are saying that when that is dealt with they are worth more than $1 a share, and I think that is a valid point.
"The capital backstop by the government is helping them earn their way out of this, but if you are a buyer [of Citi stock] you are a high-risk buyer. The stock can be up 50% in a heartbeat or it can be down. Bank stocks look attractive, but we're probably going to wait for a little more confirmation."
http://www.businessweek.com/bwdaily/dnflash/content/mar2009/db20090310_761018_page_2.htm
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