Steveg's Account Talk

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OK folks. I found what I feel is PROOF that the current rally (largely a rally in the financial sector) is FAKE -- a house built on SAND, and that we are really in much more trouble than is being said.

I read an article (http://www.bloomberg.com/apps/news?pid=20601087&sid=aQM1Cmt7cY24&refer=worldwide) about the ongoing bank "stress tests," and folks debating if, and/or how much of, the findings should be released to the public. This smells FISHY to me. Why would you NOT release the findings? Obviously, so that SOMETHING can be COVERED UP.

What I find most interesting, and revealing, in this article are these two quotes, from the executive vice president of the American Bankers' Association, Wayne Abernathy.

He says, of the stress tests:

"There are plenty of ways to go wrong here," said Wayne Abernathy, executive vice president of the American Bankers Association in Washington. "It might have sounded good at the time, but now looking back, it has far more risk than benefit."

And, of a potential release of stress test results:

"It’s very possible that we are seeing the turning of the corner for the banking industry," he said. "Our biggest fear is that it becomes a confidence-eroding episode at just the wrong time."

Here are my questions -- WHAT IS HE SO AFRAID OF?? The TRUTH coming out??? Look, if we are truly "seeing the turning of a corner for the banking industry" as he claims, then WHAT IS HE SO WORRIED ABOUT? The way I see it, you are only worried if you know that what you are hiding is NOT GOOD, and if it were exposed, your little charade would come to an end. If all these banks were truly sound, with no funny business on the books, no accounting "trickery," no B.S. hidden, but were truly in decent shape, then WHAT DOES MR. ABERNATHY, or the BANKING INDUSTRY, HAVE TO FEAR with respect to the potential release of some of the stress test results?? Why would such a release be a "confidence-eroding episode," unless there is something to be revealed by the stress tests that is WORTHY OF shaking the confidence of investors? In other words, he seems to be saying that "we don't want anyone to see the truth, because if they do, the "recovery" would reverse course as a result of the troubling things which would be revealed."

As it seems to me, if this is not proof that the so-called "recovery" we are seeing is nothing but a house of cards, I don't know what is.

Steve
 
They fear the simple mentality of the public herd making a false run on a bank. I'm sure glad that I bought myself a cuddle of those toxic banks last year. So far they have been great performers.
 
That is why I bought FAZ last Thursday and took 50% off the table in TSP equities. I don't believe the banks and the truth will eventually come out. My problem is FAZ isn't designed for a long term hold so if the cliff isn't hit shortly I will have to take my losses and wait a little more.
 
Birch --

Why would there be a run on a bank, based on the results of the "stress test," unless what was revealed suggested major problems with said bank? In other words, I could only see folks panicking if what the test revealed was quite ominous -- such that the band was INDEED NOT healthy. Would there be a "public herd making a false run on a bank," as you say, if the test results revealed the bank to be in sound financial shape? Of course not. They are scared of public reaction, because they KNOW there is something there for the public to react negatively TO!

Bottom line -- they are hiding. There is a whole lotta funny business going on behind closed doors, and the people in the know are scared to death to let the truth out into the open. And we're supposed to believe we have begun a "recovery"??!!

justbiz --

I would think that triple short financials will be a good place to be, at some point. Like you say, timing is the issue, but certainly the truth is NOT being told and, like you say, it will come out at some point -- with nasty consequences (unless, of course, you are in a triple short position!!!)
 
Well, biz, turns out FAZ was a good investment AS OF TODAY! Hope you were able to sell and lock in some nice profits!

Steve
 
Here's another good one from Denninger.

http://market-ticker.denninger.net/archives/979-Here-It-Comes-Prime-Delinquencies.html

And yet, our markets continue to respond in a way that suggests folks feel that we are "recovering" and need to "get in the game." The contradiction here is incredible, in my view, and I continue to wonder when our country is finally forced to face reality. When will it happen, and what will be the precipitator?

Steve
 
I make it a point to try and stay away from that cookie. I don't want exposure that contaminates.
 
Birch --

Not sure what you mean by "stay away from that 'cookie'," and "exposure that contaminates..."

Can you clarify?

Steve
 
I make it a point to ignore Karl - that's all. Since it's still a relatively free country that's my choice unless BHO mandates otherwise.
 
OK -- I gotcha. Yeah, we are still "relatively" free, so, for now, you can ignore him. ;)

In fact, even if/when we AREN'T free, you can probably still ignore him, since if anything, he'd be banished. He's calling for the heads of too many high-ranking government officials to be allowed to keep speaking. :laugh:

Steve
 
Sure, KD has his quirks, and goes off the deep end with some of his rants about "the end of the world."

Having said that though, much of the stuff he writes appeals to good old-fashioned common sense. I think he is spot on about many of the things he writes about, and, to me, it behooves any investor to have a balanced view about the situation we are in. If you imagine a scale, and you place Birchtree on one side and KD on the other, I'm thinking that the scale would sit pretty close to level, no? To me, there is value in seeing both sides. A permabull will look like a genius on the way up; a permabear will look the same on the way down. The truth is somewhere in between, most of the time, is it not? Just my 2 cents.

Steve
 
steveg said:
And yet, our markets continue to respond in a way that suggests folks feel that we are "recovering" and need to "get in the game." The contradiction here is incredible, in my view, and I continue to wonder when our country is finally forced to face reality. When will it happen, and what will be the precipitator?
Click to expand...

Exactly. Outside the gloom and doom people, no one is identifying what will be a catalyst/precipitator to break the la la mood. Everything negative has but a brief effect. I keep remembering the CEO who said govt is all in and govt always wins. Maybe he was right. Even Oscar changed his board.

Every negative macro business or financial health analysis seems to show stresses or trends that should sour any positive notion. Yet spring has sprung once again. There are advisors, though, that believe the market is due for a drop. It's just not apparent what might cause it.
 
Warren --

Everything negative has but a brief effect. I keep remembering the CEO who said govt is all in and govt always wins. Maybe he was right. Even Oscar changed his board.

Every negative macro business or financial health analysis seems to show stresses or trends that should sour any positive notion. Yet spring has sprung once again.
Click to expand...

That's exactly right. Everything negative, right now, barely affects the markets, and yet even news that is "just not quite as bad as expected" is taken as being a rallying cry. This suggests to me that what is going on in the markets is not rational, but emotional -- too much negativity pent up for too long, and needs to be purged, a la buying stocks, perhaps? I don't know...

There's a part of me that thinks, with respect to your "government always wins" thought, that we are in fact being "manipulated" by the powers that be. What I mean by that is, it seems like there is a concerted effort to try to "talk us into" being positive. Bad news is being squelched, or else prettied-up with lipstick and a bow, and good news is being manufactured (i.e. banks reporting 1st quarter profits -- while behind the scenes apparently being told through stress test results that they are short on capital http://apnews.myway.com/article/20090428/D97RF22G1.html). It seems like the government is saying -- if we can control the presses, control the flow of information, and "act" as if things will be just fine, then maybe we can steer the public/investors into jumping on board and buying stocks. That, to me, is the best explanation for what is happening in the markets -- emotional buying, not based on underlying facts. And, if this is true, then if/when the rug is pulled out and the truth leaks, well...I could see a scenario where a re-test of the lows is a BEST case scenario. Not that I am predicting that, I'm just saying that I think the underlying fraud, deceit, and lying in terms of balance sheets and all is like an iceberg -- we've only seen the top 10%. It's what lies under the surface of the water that I think we should all be interested in knowing...

Steve
 
steveg said:
Warren --



There's a part of me that thinks, with respect to your "government always wins" thought, that we are in fact being "manipulated" by the powers that be. What I mean by that is, it seems like there is a concerted effort to try to "talk us into" being positive. Bad news is being squelched, or else prettied-up with lipstick and a bow, and good news is being manufactured (i.e. banks reporting 1st quarter profits -- while behind the scenes apparently being told through stress test results that they are short on capital http://apnews.myway.com/article/20090428/D97RF22G1.html). It seems like the government is saying -- if we can control the presses, control the flow of information, and "act" as if things will be just fine, then maybe we can steer the public/investors into jumping on board and buying stocks.
Click to expand...

Your description is more like a state news agency from the old Soviet Union or Iraq's pre-Saddam days vice the supposedly free press. I guess when you have the major news networks in your back pocket it works much the same way. :suspicious:
 
justbiz --

Good point. You're right -- it's the same effect either way.

You know, just to further my point...the "standard" definition of an economic depression is a 10% decrease in GDP. Today's first quarter GDP number came in at -6.1%. That and the -6.3% number in the last quarter of '08 puts us at -12.4% in just TWO QUARTERS. By definition, this is a depression. Yet, who is saying so? Who in government or the mainstream media has used the "D" word in the last two months? Oh -- and how has the market reacted to today's number? The DOW is currently UP 100 points. Completely irrational, in my view.

The last time I felt this strongly that the market was completely failing to reflect what I felt that the underlying data would support was early in 2008. I was near CERTAIN that based on all the underlying things going on, that we were facing a huge market drop. As a result, I pulled out my money in late January, with SPX in the low 1300s. I waited and waited, but the market remained up. So I eventually chickened out and put my money back in -- and took a 33% loss as a result. Now, once again, it feels like the same thing, to me. I continue to feel as strong as ever that this rally is built on a house of shaky cards; do I chicken out yet again, and throw my money back in, or do I maintain my convictions this time and avoid what I feel will be, eventually, a major loss?

Steve
 
Hey, I've already cut the trail - just watch your step. But you are safer on the trail than in a clearing. I'd be concerned about the run up that may be in the pipeline for tomorrow when the shorts start to pull their pants back up.
 
Birch --

I think the "watch your step" part of your post is the part that concerns me. I'm still thinking about jumping aboard this irrational ride for a bit and making some quick gains. It's just that thus far, I have no confidence that I can determine the appropriate time to step back off the trail...and I believe that stepping off WILL be required in the not-too-distant future if I want to avoid another big down leg that I feel certain is to come. There's no doubt that for whatever reason, the market is currently running on an optimism that has been tough to shake. For how long, though, is the question -- in my mind.

You know what, though? I'm glad you are still reading my thread. I am surprised you haven't dumped this thread out back with the dirty dishwater, like you have KD! I know you don't have much use for those of us that currently are holding to negative sentiments -- except that you hope we all panic and toss our money in so that you can absorb the resulting gains! :rolleyes:

Steve
 
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