This is getting real bad real fast. Just as we predicted. Freddie Mac
is down another 32% TODAY Lehman Bros. is down another 17% TODAY Everyone needs to raise capital but where is it going to come from? Large investors? Sovereign funds? China? U.A.E.? Who in their right mind would want to attempt to catch a falling knife?
Think this one through in this formula illustration: 5 trillion
dollars of mortgages X average leverage X derivative = DISASTER.
Paulson and Bernanke are testifying on Capitol Hill as I write this. If
they do not get Congress to act the country is in a mess. I only hope
they convince Congress to make the tax cuts permanent and send a
signal that they will stop deficit spending. If not the worst is yet
to come. The only source for the amount of capital these markets
require is massive amounts of inflation. The presses need to get
running or the pain that is coming will make round one that started
in March with the Bears Stearn collapse look mild. The DOW started
off up 75 points today and is now down. Oil is up. Gold is up and the two year note is down to 2.39%. The Plunge protection team is
powerless to stop the bleeding.
The dollar resumed it's fall
and if the presses run like I expect you will see a dollar at 1.75
to the Euro.
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