Are We About to Experience an Economic 9/11? Is the Sky Really About to Fall?

[mjs020294]

MJS, I should have gambled on Bear!

Should of could of.  Easy to say post facto.  BTW - avoid the gambling word, that is a bad way to think about trading.

I screwed up like a rock star today.  Bought 8,000 Citigroup shares near the morning low, sold them for a nice profit about 10 minutes later.  They actually peaked about $1 higher than I sold, so I could have banked an extra $8k. Still had a pretty good day, so I will sleep well tonight.

[ufojoe]

"In 2008, we’re going to see some major, giant financial firms fall as they get hit by an economic 9/11."

- Gerald Celente, The Trends Journal, December 2007

* * * * *

I know some of you know who Celente is and you also know he has been very accurate with some
of his financial trends. He's also been wrong about things. I'd take his advice and couple it with all
of the other info. out there so that you can make an informed decision for you and your family.

At the very least, I'd move some money into gold stocks (GLD is one) and stock up on as much
food as you can so you can weather the coming inflation for a while. Obviously, if this lasts
for several years or longer, you're not going to be able to stock up enough food. So do what
you can to help alleviate the financial blow we'll all feel if this happens.

Written in 2007, at least (I'm not sure how much earlier he made the prediction) three months before
the Bear Stearns debacle. How many people would have foreseen the collapse of a financial giant like
Bear?

http://www.earthfiles.com/news.php?ID=1364&category=Environment

Tiny Excerpt:

December, 2007...

WHAT WOULD BE THE FIRST SIGNS YOU WOULD BE LOOKING FOR THAT THE UNITED STATES WAS IN A FULL BLOWN RECESSION?

Watch for when one of the big firms crashes - like a big bank, when that kind of thing happens. That's going to be the first signal.

THAT'S WHAT WAS GOING TO HAPPEN TO COUNTRYWIDE BANK THIS SUMMER, RIGHT?

Right, but even bigger than that. Much bigger - like a Bank of America, not that that is necessarily it, but of that caliber. Look for something big to break. We're in a recession already.

* * * * * * * * * *

And here's mainstream coverage of him from Nov. 2007 in UPI. I may have
posted this last year when I first saw it. The article/interview on Earth Files
is much more in depth. And you can find lots more on Celente on the net.

http://www.upi.com/NewsTrack/Business/2007/11/19/forecast_us_dollar_could_plunge_90_pct/4876

Forecast: U.S. dollar could plunge 90 pct

Published: Nov. 19, 2007

RHINEBECK, N.Y., Nov. 19 (UPI) -- A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said.

"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."

"The bigger they are, the harder they'll fall," he said in an interview with New York's Hudson Valley Business Journal.

Celente -- who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May -- told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse.

Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said.

Massive corporate losses, such as those recently posted by Citigroup Inc. and General Motors Corp., will also be fairly common "for some time to come," he said.

He said he would not "be surprised if giants tumble to their deaths," Celente said.

The Panic of 2008 will lead to a lower U.S. standard of living, he said.

A result will be a drop in holiday spending a year from now, followed by a permanent end of the "retail holiday frenzy" that has driven the U.S. economy since the 1940s, he said.

[mjs020294]

No there will not be a wide scale collapse of the financial institutions.  Large banks had sub prime losses to write off, and that is the only reason they are posting losses.  Once they write offs are over the banks will need to spend a couple of year increases their liquidity but the sky is not falling.

Yes the standard of living for the average American has peaked and we will never be as wealthy as a nation again.

[ufojoe]

MJS, not trying to get you going here but did you forecast the fall of a Giant similar to Bank of
America in December of 2007? And if I would have posted his words back then, (actually, I might
have done that!) would you have said, "Yes, a bank like BoA (or Bear) could fall."?

Here is Celente's latest appearance on Coast to Coast AM..

http://youtube.com/watch?v=ma0UpwXDNlU

That's Part One of Four...

And Gerald's website is:

www.trendsresearch.com

The online version of his newsletter is $100 a year and is cheaper if you buy a 2 or 3 years subscription.

[mjs020294]

MJS, not trying to get you going here but did you forecast the fall of a Giant similar to Bank of
America in December of 2007? And if I would have posted his words back then, (actually, I might
have done that!) would you have said, "Yes, a bank like BoA (or Bear) could fall."?

YES I knew a major financial institute would get bitten badly.  It was inevitable really and like we saw over the last few days most see the fall of a giants as the catalyst for a turnaround in the financial sector.  The FED acted immediately and for the time being the financials look to be moving in the right direction.  Whether there will be another dip and possibly another collapse or merger remains to be seen but it will not be wide scale.

If the FED act and help prop up the mortgage bond market it will end the sub-prime crisis overnight. 

[ufojoe]

YES I knew a major financial institute would get bitten badly.   

LINK?

Show us where you predicted a firm as big as Bear would fall like that. And if you can, I'm flying
to your house for an education!

[mjs020294]

YES I knew a major financial institute would get bitten badly.

LINK?

Show us where you predicted a firm as big as Bear would fall like that. And if you can, I'm flying
to your house for an education!

I don't discuss or post all my thoughts on the Internet Joe.  On Sunday/Monday I would have been surprised to see a real giant like Citigroup going down but the swift moves take by the FED have pretty much closed that door.

Weakening the dollar isn't necessarily a bad thing so long as it doesn't get out of hand.  A weak dollar makes imports expensive, and reduces spending.  The American public need to adjust the way they live, and the end of the world might not happen.

[ufojoe]

So, do you see another Giant falling like Celente suspects?

I think it's too late for Americans to adjust on their own. They're going to be forced to do it real
soon I'm afraid.

But if you look at Celente's other stuff, he's got a lot of positive trends for us in the future.

[mjs020294]

So, do you see another Giant falling like Celente suspects?

Sunday/Monday this week I would say yes, absolutely.  I now think the FED will act on the mortgage market and that should stop the bleeding.  If they don't we could see a merger of convenience between two struggling companies like Citigroup and UBS, or another company could fold but I think that is unlikely rigtht now.

[ufojoe]

Please not on Sunday! I want to by some gold. I may join Don Harrold day trading service
and may sign up for Celente's newsletter.

[superbuc]

To you both, I think we can see the light at the end of the tunnel.  I think by June we'll be on the upswing in the broad markets.  Below are 2 articles to allay your fears: one by the famous Bill Gross and the other appears on Forbes website as of today.  The Fed has done a great job in my estimation.  They're not just slashing rates wily nilly.   Instead, they're using the discount window, they're pull with Fannie and Freddie, and creating new ways to accomplish the same goal (lending facility created this past week).   Now, the Fed doesn't need to bail out the mortgage market. The banks have more room to help folks re-finance their bad loans.   

The other issue, the banks.....Wachovia, Wash Mu, Bank of America, and Citi are all fine in my estimation.  Lehman, Merrill, and Goldman are ok, too.  I think many of them "confessed" last year to write losses off for 2007 and start anew for 2008 as their books are much cleaner.

Bill Gross, bond guru (long column that says he and his colleagues aren't worried as they've been in the last 6-12 months and a stated AAA bond, is a AAA bond).

___________________________________________

Still, we would both agree that value is returning to many parts of the bond market. If an investor requires 5%+ yields to compensate for future inflation, then they can increasingly be found in authentic AAA assets – not disguised Old Maids. There’s not a hint of plastic surgery in agency-backed FNMA and FHLMC mortgages at 5¾%, although their actual ages (average lives) may be somewhat in doubt. Similarly, SBA government-guaranteed loans at LIBOR+ 125 basis point yields are beginning to entice, as are some of those bank loans when priced in the high 80s as opposed to 95 cents on the dollar. If capitalism is a going enterprise – and we think it is – then investors will eventually return to play similar, perhaps more conservative games – much as they have in the past. And if Washington gets off its high “moral hazard� horse and moves to support housing prices, investors will return in a rush. PIMCO wants to sit at this more attractive return table – to provide an attractive return on your money (no matter what the asset class) as well as a return of your money. No Old Maids. No silicone AAA ratings. And ladies – no crotchety old bachelors either. The game, as well as the name of the game, is changing. It’s no country for Old Maids anymore.

 William H. Gross

Managing Director
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+March+2008.htm
_________________________________________________________

Wall Street Test Drives New Fed Loans
Maurna Desmond, 03.21.08, 5:50 PM ET


Wall Street outfits have begun testing out the Federal Reserve's recent offer to directly lend emergency loans to the rattled firms. The first few days of the program over the past week had the companies feeling out the new line of cash, just sort of seeing how it works.

The Federal Reserve reported Thursday that it directly leant several unnamed investment companies about $31.3 billion in the three first days since it expanded its discount window borrowings beyond commercial banks on Monday. Goldman Sachs, Lehman Brothers and Morgan Stanley previously confimred they were taking advantage of the Fed's new lending facility.

March has been busy for the Fed as it scrambles to stabilize credit-crunched capital markets rattled by the subprime meltdown and stave off a potential recession.

On another front, the goverment tried to bring liquidity to the mortgage market by allowing government-backed jumbo loan lenders Freddie Mac and Fannie Mae to lower their required capital cushions. This break, announced on Wednesday, allowed the two lenders to immediately lend up to an additional $200 billion by freeing up a relatively small $2.7 billion. The loans are intended to help individuals on the verge of default get into home mortages they can actually afford. (See "Betting on Fannie and Freddie")

On Sunday night, Bernanke's Fed announced a new lending facility intended to keep other big brokerage houses from suffering the same fate as nearly broke Bear Stearns. (See "Bear Throws In The Towel" ) The new program allows primary dealers, a group of about 20 big banks and brokers, to borrow funds for 24 hours "at the borrower's initiative" from the Fed at the discount rate, which is currently 2.5%, by posting investment-grade collateral. As the commercial bank primary dealers already had access to the discount window, the Fed's move was mainly a way to extend this direct lending to the other firms.

The Fed also closed the gap between the discount rate and the broader federal funds rate by a quarter point on Sunday. After Tuesday's rate cuts, federal funds, a target rate for loans that commercial banks charge each other, was 2.25%.


http://www.forbes.com/2008/03/21/borrowing-fed-discount-markets-econ-cx_md_0321markets03_print.html
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For new money, I'd look at Global companies (Wal-mart, Shell, Diageo, Roche, Altria, and etc), investment-grade fixed income (including preferreds and municipals), and Berkshire Hathaway (you can do the B class).  I think select commodities will be ok, but, I'd stay away from putting a large portion there.  Also, to me, gold is definitly not a buy/long.

[nybuccguy]

     Its a Good thing the tax cuts are working.

[ufojoe]

I think gold is an excellent buy. The dollar may come back for a bit and gold may drop. But once the crap
hits the fan, (IF it hits the fan) gold will soar and the dollar will tank.

What do you guys think of this article?

This can be found on the FT website. I had to pull it off another website because my allotment of
free articles has been used up.

Via: Financial Times:

Central banks on both sides of the Atlantic are actively engaged in discussions about the feasibility of mass purchases of mortgage-backed securities as a possible solution to the credit crisis.

Such a move would involve the use of public funds to shore up the market in a key financial instrument and restore confidence by ending the current vicious circle of forced sales, falling prices and weakening balance sheets.

The conversations, part of a broader exchange as to possible future steps in battling financial turmoil, are at an early stage. However, the fact that such a move is being discussed at all indicates the depth of concern that exists over the health of the banking system.
It shows how far the policy debate has shifted in recent weeks as the crisis has spread to prime mortgage assets in the US and engulfed Bear Stearns, the investment bank.

The Bank of England appears most enthusiastic to explore the idea. The Federal Reserve is open in principle to the possibility that intervention in the MBS market might be justified in certain scenarios, but only as a last resort. The European Central Bank appears least enthusiastic.

Any move to buy mortgage-backed securities would require government involvement because taxpayers would be assuming credit risk. There is no indication as yet that the US administration would favour such moves. In the eurozone it would require agreement from 15 separate governments.

[superbuc]

Of course you think that.  You're a "sky is falling" conspiratorialist!    It's ok. You go buy the
hot dot" (gold) and put it under your mattress and 1) I'll buy low and 2) invest on a regular basis.  We can still have a beer and watch the Bucs sometime.

So, here's another rebuttal for ya...
_____________________________________________________________

Fed Says Not Discussing
Coordinated MBS Buying


By GREG IP
March 21, 2008 8:41 p.m.

The U.S. Federal Reserve, responding to press reports, said it is not discussing coordinated purchases of mortgage-backed securities with other central banks.

"The Federal Reserve is not involved in discussions with foreign central banks for coordinated buying of MBS," a senior Fed official said.

The Financial Times reported on its web site Friday evening that "central banks on both sides of the Atlantic are actively engaged in discussions about the feasibility of mass purchases of mortgage-backed securities as a possible solution to the credit crisis."

The newspaper said the Bank of England appears most enthusiastic to explore the idea, the Fed is open in principle but only as a last resort, and the European Central Bank appears least enthusiastic.

The Fed has already announced several initiatives to provide additional liquidity to the MBS market, including expanded, longer-term repo operations in which bond dealers pledge MBS to borrow short-term funds from the Fed. Only MBS backed by the federal government or by the federally-sponsored mortgage agencies Fannie Mae and Freddie Mac can be pledged in such operations.

The Fed has also unveiled a facility to lend dealers up to $200 billion in Treasury bonds, starting March 27, in return for a like amount of both agency-backed and other ("private label") MBS for up to 28 days.

Finally, on Sunday it announced a new facility under which bond dealers can borrow directly from the Fed's discount window with a wide variety of investment-grade collateral, including agency and private label MBS and corporate bonds.

Some on Wall Street have pressed the Fed to go further and purchase MBS outright. The Fed has the legal authority to purchase agency MBS but not private label MBS. It has been reluctant to do so since that could potentially distort the fundamental prices of such securities. Its recent steps were aimed at averting a crippling aversion by investors to holding any MBS irrespective of their fundamental value.

The Fed has, however, lent its moral support to other initiatives to boost demand for MBS. Fed Chairman Ben Bernanke has called on Fannie and Freddie to issue additional capital, which would expand their ability to buy or guarantee MBS. He has also called for an expansion of the Federal Housing Administration's authority to guarantee troubled mortgages.

Fed officials continue to consider a wide variety of options for improving conditions in the credit markets.

Write to Greg Ip at greg.ip@wsj.com

[ufojoe]

If I buy gold, it will be in a gold tracking stock like GLD.

How empty will sports arenas/stadiums be if the economy crashes like I suspect?

And, you don't have to be a conspiracy guy to see that an ugly turn in the economy is very
possible.

But it helps! :-)