One Second to Midnight

Back in the days of the Cold War nuclear physicists used to use the term “One Minute to Midnight” as a colloquial term in speaking about how close the world was to nuclear war. Obviously, the closer the time was to “midnight”, the closer to annihilation.

In a somewhat similar vein, the world approaches a financial apocalypse. The toughest thing about actually learning something from history is that when you are “living it instead of reading about it”, you tend to downplay its significance; because you are convinced it is the normal course of human behavior.

It took hundreds of years to bring down the Roman and British Empires; no doubt the super-powers of there respective ages. The United States stands poised to “go down” with them for the exact same reason: unsustainable debt and the resultant debasement of their respective currencies. Oh, the country isn’t going away; just your money, wealth, and by default your freedom. It took the United States from 1776 to 1990 [214 years] to go to $3 Trillion in debt. It has taken Obama just under 2 years to match it.

On November 2^nd and 3^rd, two events will unfold that have the utmost importance for future generations of Americans, and by implication the rest of the free world: the first is the midterm elections, and the second is the meeting of the Federal Reserve.

I don’t know how I can be more blunt: the policies and agenda of B. Hussein Obama must be defeated AND repudiated, by the American people, in these midterm elections. With control of the House of Representatives, the Republicans will be given the opportunity to control every single purse string in Washington. The $64,000 question is whether, given this historic opportunity, they have the guts to do what is necessary and right. The mandate of the people is clear; politicos not so much. If they eventually cave, and go “Democrat Lite”, life as most Americans know it is OVER!!

Within hours of the results of the election, the Federal Reserve lets the world know what its intentions are for revitalizing the U.S. economy. This meeting is important because the Fed has openly telegraphed to the financial community its plans for “QE2” [2^nd round of Quantitative Easing]. In other words, the Fed is turning on the inflationary “money spigot” again; the only question is how much they are going to print. Weimar Republic here we come!!

It’s always been a mystery to me how these so called “financial sophisticates” at the Fed, from Harvard, Yale, and Princeton [and the other “elite” universities] can be so tone deaf to the realities of the real business world. Of course, some real business experience meeting a payroll and actually running something for profit might help; but hey, what do I know?

I’m happy to report that I have actually figured out the mystery of the Fed’s decision making. When you think of TARP, QE Lite, QE I, and now QE II, the destruction of the mortgage market, the bailout of the crooks executives at AIG, and a laundry list of other malfeasance that could fill the New York City telephone book, it has to be the only logical conclusion a serious trader could make.

I am of course thinking of this:

 The buzz on the street has the Fed printing to the tune of $100 Billion a month for at least a year. The problem is going to be finding enough Treasury paper at different maturities to satisfy the appetite of this black hole. So, look for the “smartest guys in the room” to be standing at the front of the line at future Treasury auctions gobbling up all the Obama debt. You see rubes, this is how you manipulate keep interest rates low forever! [Er, until rates start going up via hyper inflation, in which case the entire planet you are totally screwed. And you just know, it’s gotta be Bush’s fault!]

Now, the fun for us traders is trying to figure out what the street is expecting vs. what really happens. If the Fed does nothing?  Well, if this happens the Dow is down 500 points in 60 seconds, the Euro is down 200 pips in a heartbeat, and gold gets clobbered for at least $ 50 per Oz.. I see NO chance that this happens. But, if it does you will see first hand what a disaster looks like.

If the Fed announces $80 Billion OR LESS [per month Treasury purchases], there will be some dollar strength, equity weakness, and the precious metals should slide some. I put the odds here at about 20%.

If the Fed goes for instant “Weimar Republic” status, and opts for $200 Billion per month OR GREATER, watch gold and silver take off into orbit and the currencies jump. Odds here I put at 30%.

In any case, no matter what they do, it isn’t going to sit well with China, Japan, Euroland, and Brazil. It is an invitation to a trade war, and the U.S. will have started it. Don’t expect China to sit by and take this; they will respond at some point and it could get very ugly.

So, prosperity for the future depends almost solely on whether the Republicans step up to the plate and do the right thing. I’m not optimistic. The Fed? Academic twits who can be counted on almost 100% of the time to do the wrong thing. Exit question: what have they ever done right?

If you wander into this Fed clusterfark with a position, you might want to pay attention to this:

 -vegas

I am shocked, SHOCKED!

Remember the classic scene in the movie “Casablanca” where the head Nazi wants Rick’s nightclub to be shut down? And so, with Humphrey Bogart standing there wondering what the hell is going on, Claude Rains announces “I am shocked, shocked that there is gambling going on in this establishment”. Then immediately, Peter Lorre walks up and says “here are your winnings for the night”.

So, I know many of you are going to have to suspend disbelief at what I am about to announce. In good conscience I have to warn you with the following:

 Yesterday, in the Southern District Court of New York, plaintiffs Brian Beatty and Peter Laskaris [cases 10-08146 and 10-01857] sued J.P. Morgan and HSBC for MANIPULATING THE SILVER MARKET.

The reaction, upon hearing this news, of random passerby’s out my front window pretty much says it all:

Defendants are accused of the following [from the complaint]: 

                         "between in or about March 2008 and continuing through the present, Defendants have  combined, conspired and agreed to restrain trade in, fix, and manipulate prices of silver futures and options contracts traded in this District on the COMEX division of the NYMEX. Defendants thereby have violated Section 1 of the Sherman Act, 15 U.S.C ¶1. Also during the Class Period, individual Defendants have intentionally acted to manipulate prices of COMEX silver futures and options contracts. Such conduct violates Section 9(a) of the Commodity Exchange Act, 7 U.S.C. ¶13b."

What makes this case so interesting, besides the various allegations, is that the plaintiffs seek class action status. So, all you guys who have traded silver since March 2008 and lost money, here is your “lottery ticket” for remuneration plus treble damages.

What’s the world coming to when two of the largest market manipulators and crooks most respected Wall Street firms get accused for simply “making a market”?

Exit question: where the hell are the CFTC, NFA, SEC, and the Treasury Department? Oh wait, that’s right I remember; they watch porn for 8 hours a day from their office computers. You gotta have priorities after all.

-vegas

There Is a Season Turn, Turn, Turn ...

I’m perusing the comics financial press the other day, and I come across this gem: Goldman Sachs to issue $250 Million 50 year bonds [Due 11/1/2060], expected yield 6.25%, priced at Par = $25.

After I picked myself up off the floor and checked my pulse to see if I was still alive, some serious RED FLAGS immediately presented themselves. OK, so let me get this straight: GS, the bluest of blue investment banking bank holding companies wants some 50 year debt and is willing to pay 6.25%? With the Fed about 8 days away from starting QE2, at about $100 Billion a month, thereby driving long-term interest rates still lower [according to head wizard-of-smart Ben “Helicopter” Bernanke], why would you come to market 2 days before the proverbial  “buy-fest” in debt begins?

Could it be that the suits at GS don’t think interest rates can go much lower, and they might as well take the rubes money ASAP? Mix into this toxic soup some inflation going forward [how about 50 years worth], and you can be pretty much assured that underneath their collective breath they are chuckling mightily.

I know what you’re thinkin’: surely such crap A1 paper can’t be had by the common guy. Why GS could sell this thing out in 5 minutes to every astute pension plan and insurance company with a nickel in the bank. If only, oh my God, if only I [or you] could be let in on this deal. Why is it only the fat cats get the “special” stuff?

Fasten your seat belt Homer!! Maybe the stars are aligned just perfectly, I dunno. But isn’t it fortuitous that they have priced this at PAR = $25 and you can “get in on the deal” via the NYSE and take a piece of this bat guano. Got the “tingle in your legs” yet?

One more juicy tidbit: They got a 5 year window [2015] and then they can buy it back on the open market if they want. With Trillion Dollar deficits as far as the eye can see, hyper inflation around the corner, anyone wanna bet that in, say 2020 for instance, they buy this stuff back at $3 per share?

Since we are now in the “Turn, Turn, Turn … Season”, I am proud to announce that I am floating my own 250 Year, $250 Million Dollar debt issue. Natch, my credit rating is just as good as a TARP bank, so like Uncle Sam’s TIPS [Treasury Inflation Protected Securities] priced at a NEGATIVE -0.55% just the other day, I’m issuing my debt at a negative -0.50%!!

Priced at PAR = $1.00, I expect all of you dear readers to take a chunk of this good stuff. Matter of fact, even though you don’t know it yet, I took the liberty of already selling it to you. YES, I KNOW YOU KNOW HOW GOOD MY STUFF REALLY IS!!

Now remember, negative interest means you gotta pay me to hold the stuff. Just send all of your pocket change to my e-currency account at Liberty Reserve [Acct. # U0041308] every few weeks or so, and we’ll call it even! Hey, I’m a better credit risk than a TARP BANK! Oh yea, and just like GS, my debt is for “Corporate Purposes” also. So, sleep well at night knowing it will be spent invested wisely.

What’s the worst that can happen?

 -vegas

Flash Update as of 3:45 PM 10/26/2010
Honestly folks, I can't make this stuff up because it would be to easy. GS now says it will increase the size of its offering to $1.3 BILLION, from its original size of $250 Million, because demand for the issue is so high.

I'm gonna stay at $250 Million with my issue; I don't need the extra cash - I'll let GS skim the rubes.

-vegas

The World Is in the Very Best of Hands

My pulse quickens and my blood races as the most exciting event of the weekend unfolds. I can relax now though because it’s sadly come to an end. I am, of course, talking about the G-20 meeting in Gyeongju., South Korea. With the exception of the United Nations and the U.S. Congress, you basically got a pow-wow of the worlds biggest twits.

All last week, I searched in vain for an OTC penny stock that was heavily into strip clubs and limousine services located in Gyeongju. Natch, you gotta figure that 4^th quarter earnings are good for a bump up and therefore a higher stock price. You tellin’ me everything is in private hands? Oh, the humanity ……

And so, after the last stretch limo is parked and the “dickerin” is over, out trots little Timmy Geithner at his presser and reiterates the big lie that “the U.S. wishes to see a strong dollar”. Now, that definitely makes little Timmy a lock for this weeks Joseph Goebbels Award in Journalistic Communications. Congrats little Timmy!

Most of these parties policy meetings have the outward veneer of a true love fest. I mean, who wants to be mad in the middle of a lap dance. But this one was a little different. For sure, you won’t read it this way in the WaPo or NY Times, but the Germans basically called Geithner’s bluff; namely, that writing checks for trillions of dollars that you don’t have is truly dangerous and stupid.

The Chinese? Well, they just smile and then go party. If you think they pay any attention to anything little Timmy has to say then you probably still believe in “Hope & Change”. They simply follow the “Golden Rule”: “Them that has the gold make all the rules”.

Hell, the Brazilians didn’t even make the trip. Faced with a rapidly appreciating currency vis-a-vie the rest of the world, they found it unfathomable to be forced to sit for 4 or 5 days and listen to nothing but bullshit.

But seriously, who would travel 10,000 miles to the strip clubs of Gyeongju, when you live in Brazil? Have you seen the women in Brazil?

So, the upshot of this confab is that the U.S. is going to continue to print money like the Weimar Republic. Granted, the currency markets might be a little dollar short at the moment, but don’t think for a second the apparatchiks in Washington want a higher dollar.

What could possibly go wrong?

-vegas

If Only Dreams Could Make It So

Since Imam Obama got elected, the U.S Dollar has lost approximately 20% of it value against the Swiss Franc. In the same period, Gold has risen approximately 80% and Silver a whopping 250%. Somebody please answer me this: If I was trying to economically ruin the United States, what policies would I initiate any different than the current crowd in Washington?

I’m wondering where the Euro would be if it weren’t for the Gypsies running Greece. That’s kept somewhat of a lid on the Euro’s rise these last few weeks, but even with the 45 year old anarchist students demonstrating in the streets of Athens, and the French socialists with their panties bunched up over a rise in the retirement age to 62 from 60, they aren’t nuts enough to run trillion dollar deficits.

Apparently, we are.

-vegas

New Algorithm

I'm back with the algorithm that made me a legendary floor trader. Follow the link on the right and download "The Vegas Short Term Algorithm". I look forward to your comments and questions.

I'll be commenting regularly on Forex markets, the Vegas Short Term Algorithm [STA], offshore ideas, and business matters that affect the Forex market. Sign up and leave me your comments.

 As the days fly by, I'll be making cosmetic changes here and there, as well as adding some other content. I plan to make this fun and interesting as well as be content driven to make you rich. Hang on for the ride.

-vegas