TakeDown

Now that the short squeeze rally is fading with no new money flowing in the blood on the street is Lehman’s and the bear packs are circling for the take down of another elite Wall Street firm. Until now the rating agencies would barley issue a down grade until life support had been fully removed, but today

Moody’s Investors Service has downgraded the ratings of 279 tranches from 27 Alt-A transactions issued by Lehman XS Trust Series. One hundred sixty two downgraded tranches remain on review for possible further downgrade.

With another 97 placed on review for possible downgrade the bears have begun to stalk and falling into the trap Lehman has begun to run, announcing it’s intention to offer a cash raising 3,000,000 shares of preferred stock. CFO Eric Callan fains to the leverage reducing aspects of the sale, but on the street it smells like blood as they know that Lehman won’t limp far on the 3,000,000 share band aid. The bears will pace for now, when you see a volatility spike in the company’s options you’ll know when they are going to pounce.

ARS and UBS

Another block in the Wall of Ponzi rollover finance is crashing down under the weight of it’s Minsky moment. Today by a deed which bellows louder than any words can deny UBS admitted it could no longer hold up the value of the auction-rate securities in its customers accounts so the bank will write them down roughly 5 percent.

UBS will inform clients of the reduced value of their holdings via their online statements, Briefing.com said, citing a Dow Jones report. UBS customers had maintained full value without any discount that could reflect bondholders’ inability to sell their holdings.

Before the credit crunch banks which ran the auctions would buy up the unsold securities, but since last summer such maintenance is to be never more. Thus the illiquid assets remain stuck in clients accounts with no way out of the write down. We cannot find any hard numbers on the impending take down, but UBS

has been among the hardest hit of the banks, already writing down $17 billion worth of credit holdings and facing another $11 billion in write-downs in the first quarter, according to analysts at Oppenheimer.

Until now, customers who were unable to sell securities in regularly scheduled auctions were told that the securities retained full value and would receive higher interest rates. UBS, however, using an internal model to value the securities, will mark them down

And yet according to a UBS spokeswoman

“This is the right thing to do,” “This is in the best interest in our clients regarding our accounts.

A very singular version of right and wrong.

Alert: SLV

Short another 1/4 position SLV @ 176.15. All stops @ 181.51

Crashing The Gates

There is a ripe whiff of discontent in the air these days as educated highly compensated professionals, unaccustomed to rummaging in trash dumps for their next meals are taking to the streets and crashing the financial gates. First there were protests at Country wide, then Bear Stearns had it's granite lobby soiled by outraged investors and now inflamed and emboldened shareholders have stormed the gates of IKB. The bank has been mortally wounded by the collapse of the subprime mortgage market and shareholders have lost 70% of their value in six months. Pleading his case

Supervisory board president Ulrich Hartmann told the assembly that the board had no way of heading off the catastrophe that almost pushed IKB into bankruptcy."The crisis broke without warning,"

The risk of blatantly lying to recently fleeced shareholders, themselves facing unrestrained inflation because their central bank cut rates into the teeth of a commodities bubble to protect a criminal, irresponsible bank is that it can set the torch of rebellion ablaze.

European Central Bank president Jean-Claude Trichet reminded European Union lawmakers in Brussels that central bankers had issued several public warnings a year before the crisis broke that financial markets were underestimating risks. "I remember myself saying that we have to be prepared -- and the message was for the private sector in particular of course -- for a market correction," Trichet said.

"That was visible in the level of spreads, in the level of risk premia in the level of volatility that was observed in a large number of markets," he pointed out.

Now with most of its directors gone and IKB barely hanging on the counter parties smelling a way to relieve themselves of guarantees are dropping dead weight turning their backs and walking away.

FGIC Corp. said it's walking away from an agreement to provide $1.9 billion in guarantees on mortgage-linked securities because Credit Agricole SA and IKB Deutsche Industriebank didn't live up to their side of the deal.

Some are already critizing the bond insurers for abandoning IKB, but they were not the first.

``These guys should have a new motto: Heads we win, tails we rescind,'' said Julian Mann, the vice president for fixed income at First Pacific Advisors LLC, which manages $3.4 billion of bonds.

Those now departed directors must have lined their pockets in the subprime prime times only to abandon the sinking ship once SIVs began leaking. So the directors and bond insurers keep their cash and the shareholders keep the shaft. Revolutions have been caused by exactly that.

Alert: SLV

With the stochastic in the 15 minute and daily charts rising but rolling over the SLV retracement is poised to meet it's end. It gaped down this morning making it impossible to enter so now we will take a 1/4 short position and hold it as long as the price stays under the 50 dma which is rolling over with the stochastic.

Sell short 25 shares SLV @ 177.51 stop @ 180.79

Trade Update: SLV

We were stopped out of our SLV short @ 170.56 and are out of the position. We were short 25 shares from 198.51 and short 25 shares from 180.90. We will look to reenter, but just where and when is really a US dollar story. After a protracted collapse the dollar is in dead cat bounce, once that kitty rolls back over silver will soar again. The real question is where will capitulation take place on the US dollar? When it does it will be very profitable to be out in front of it via silver.

Looking at the daily chart of SLV the huge double top from the 190 to 210 range is prominent and despite today's gains it will not be easily defeated. In fact this retracement after the roughly 50 point fall is an extraordinarily ordinary retracement. By the time SLV gets back to 190 the stochastic should be rolling over and we will be looking to enter for the next leg down. The point or top of the old wedge is at about 160 and that is where my finger will start to twitch for a long trade. Otherwise the prices will breakout above 210 on the way to new highs. If SLV breaks out above 210 we will be forced to get on board, but the battle between 190 and 210 (the range of the double top formation) will be epic. There is still a lot of money to be wrung from suckers (novice investors) long and short alike.

Alert: SLV

With silver selling off SLV has gapped down hard on consecutive days, but today is flat. The overall medium trend is down, but a retracment may be due. We are short 1/4 position from 198.51 and short 1/4 from 180.90, so lets move the stops down and set them ''too'' tight @ 170.55.

Trade Update: LEH

I set the stops for LEH to tight and we were stopped at 46.98, 48 cents away from the set stop of 46.50. LEH is back under 45, but the stochastic in the 15 minute chart is nearly zero and turning up, so we will wait to re enter.

Alert: SLV

We are short a 1/4 position on SLV from 198. Now we will add another 1/4 position and move all stops to 200.95

Sell short 25 shares SLV @ 180.90: stop @ 200.95

Alert: GDX

The GDXCX is affording no protection right now, cover it and open GDX April 45 call GDXDS

Buy to close 1 contract GDXCX @ .70
Sell to open 1 contract GDXDS @ 5.50

Alert: LEH

I think all this pomp and circumstance is BS. This is not a technical trade. The plungers meet yesterday, the pop at the open is part of a short squeeze. If LEH dives into single digits the specialist and the options exchange is going to get hit again. The Street elite don't like that sort of stuff so the deep out of the money options traders may be disappointed, but the naked short sellers might make something for themselves.

Short 1/4 position LEH @ 45.00 stop @ 46.5

Beat It

Say your kid says I'm gonna flunk algebra, but shows up with a glowing D+ instead of the feared F! Oh you'd by him a new bike right? Well that scam plays to a friendly audience on Wall Street TV and Bloomberg. If you still don't know that the financial media are the Street's whores just look at Bloomberg trips over itself to tell you the Goldman Sachs (GS) and Lehman Brothers (LEH) lost half of their income, but beat the estimates. Well now we know whats important to Bloomberg, but not to me if I'm a share holder. Kinda gets you thinkin who's side they on, don't it?

Oh yea the rally today, well did notice yesterday Paulson and Bernanke (Plungers) stroll out of the White house Just before the rally. I have said they will give up 12000 on the DOW only in death, so they are still capable to manipulate the stock market. Even with the VIX at 32 I don't trust this rally. If I could see some capitulation I might buy into it, but not yet. The Bear Stearns style options activity on Lehman out of the money puts shows me a safe play. Buy some contracts of Lehman Brothers April 2.50 puts at 0.15 symbol LYHPZ

Followed Fast then Followed Faster

With JP Morgan picking at the bones of Bear Stearn’s still warm corpse it’s now Lehman Brothers running from the same “unmerciful disaster”. Yesterday’s $2 billion infusion dresses up the balance book, but out on the Street it smells like blood.

The same thing that drove Bear Stearns into the gutter is now Lehman’s worst enemy: Fear. The speed and severity of Bear’s collapse is throwing gasoline on the firestorm of panic now consuming the debt market.

Down in the pits fear morphs into greed as the same ominous options activity is taking place now on Lehman’s put contracts.

Options traders are making big bets that Lehman stock will drop an additional 24% by Thursday, when March options expire, Dow Jones Newswires reported. Traders also are betting that the shares will continue to plummet over the next month.

Lehman is caught in the same frenzy of credit capture and denial as Bear Stearns was in last week.

In an effort to quell concerns, Lehman CEO Ricard Fuld said, “The Federal Reserves decision to create a lending facility for primary dealers and permit a broad range of investment-grade securities to serve as collateral improves the liquidity picture, and from my perspective, takes the liquidity issues for the entire industry off the table.”

And it would if credit equaled earnings or earnings where anywhere to be found. If Lehman thinks it can borrow it’s way away from the credit crunch it had better pick up the pace, for that same “unmerciful disaster” which ran down Bear Stearns, it “Followed Fast then Followed Faster”.

Lehman reports tomorrow before the bell.

Trade Update: SLV

It looks like the metals are waiting to sell into the FED meeting. If this turns out to be correct we will sell short a 3/4 position of SLV. Move the stop on SLV up to 205.58

Don't Buy What Cramer is Selling

Jim Cramer is just a Wall Street mouthpiece. In this blogs Mauled post you can read about the advanced options activity by money in the know -CRAMER. So you have to believe that either Cramer didn't know about put activity-doubt it, or that he is setting you up. Which is it? Well we have a track record for Cramer here, read Cramer's Golden Rule then tell me what you decide.

Alert: SLV

Sell short 1/4 position SLV stop @ 201.50

Mauled

With the 27 point crash of Bear Sterns on Friday the crack in the global Ponzi finance scheme was widened and the economy upon which it depends brought to the event horizon of it’s Minsky moment. Bear Stearns dazed, distressed and hemorrhaging from the ugly open wounds of a subprime crisis it once denied, finally admitted that it is breathing it’s last breaths.

Alan Schwartz, Bear Stearns’ chief executive admitted it was forced to seek funding following a sudden spike in demand from investors wanting to withdraw their cash.

Mr Schwartz said today: “The company can make no assurance that any strategic alternatives” to fund itself in the long term “will be successfully completed”.

WOW that beats the Hell outta the To Big To Fail (TBTF) theory and is ominous for the remaining money center banks –all banks. There has been blood on the street for days, but just 24 hours ago Bear Stearns said it

“denied market rumors regarding the firm’s liquidity. The company stated that there is absolutely no truth to the rumors of liquidity problems that circulated today in the market.”

adding today that

… it had only experienced funding difficulties in the last 24 hours.

But they weren’t buying it in the options pit, down there they buying Bear Sterns puts, hand over fists full of them.

This past Tuesday, when Bear Stearns was trading around $65 a share, there was huge put volume in the March $30 strike.

And so it was that the shares sold for exactly $30.00 at the market close Friday. It was an overnight drop of $27.00, volume was huge.

The options activity undoubtedly represents not only some insiders protecting themselves, but an active feeding frenzy on the part of some insiders as well as the active option traders. It seems on behalf of the implied volatility of more than 100% that money in the know, knows the gig is up.

And today came news that several banks, including Goldman Sachs, would no longer act as a counterparty to any transactions with Bear. The inability to execute trades would essentially put Bear Stearns out of business.

It was the collapse of two Bear Stearns hedge funds last summer that brought credit markets to a roil and an economy to the brink. The ensuing frenzied concocting of bail out remedies, and resurrection screams, whether of housing, hedge funds, SIVs, asset backed commercial paper, and any sundry of credit crack addict rehab has failed as this will fail and so too Bear Sterns.

Alert: UNG

They are finally letting the air out of UNG so we will sell our 1/4 position.

Sell 25 shares UNG @ 48.00

Trade Update: GLD SLV

If you want to have your as% handed to you chase gold and silver right here and you will get your wish. After trading over $100.00 per ounce this week $100.00 is now setting up as resistance as you can see from the chart of GLD. We are long GLD from 88.93, but are now shot IAU also from 95.55 as a hedge if you are so incline you can put a stop on IAU at 100.00, but I wont until after the FEDs meet next Tuesday.

The resistance on SLV at 205 is clear as is the powerful double top. Don't buy into this wait for the pull back to get in or add. I f you do buy some shiny stuff here set stops at 200.

What I finally learned by losing a lot of money was that YOU DON'T BUY INTO A HUGE RUN UP. Sounds simple, but the scam and the psychology are going against you. To get a better price on the positions they will be selling after the fed meeting the funds and institutions holding gold and silver along with the specialists are dialing the price upwards, squeezing the shorts and the uncommitted. Just when you panic and think it will never come back you get in at their price, that's when they sell and you say G%$#@. This is an old game, don't play it on their terms, wait.

Alert: OIL USO

Buy 100 shares USO @ 86.75
Sell short 100 shares OIL @ 64.38

Trade Alert: OIL USO

The price of crude oil futures traded over $110.00 per barrel and there seems to be no let up, but there are warning signs. You can see in the daily chart of the USO the volume exploding, with record 10+ million shares of the ETF changing hands and most of that buying. Now ask yourself what will happen once all the shares that can be bought have been bought exhausting all the available money to buy it. This one is easy it will crash providing for a nice short and a new long entry point. We will play this double edge sword long with USO and short via OIL using a full position of each.

Alert: EXK

Let's get out of Endeavour Silver Corp, but keep an eye on it.

Sell 100 shares EXK @ 3.96

Nothing's Changed Nothing's New

Even if you applaud what Elliot Spitzer did as Attorney General of New York, namely what no other governmental agency would, you still had to despise the grand standing, politically calculated manner in which he did it. It was interesting to see all those loyal Republican suits, suddenly soft on (white collar) crime crying on CNBC that Spitzer was a run away prosecutor motivated by political ambition. DUH! So was Ken Starr and that shrill bitch DA who prosecuted OJ. And now all those Democrats never once deceived by Bush just couldn’t believe Elliot was anything but pure. Maybe that’s the biggest problem, because that’s exactly what Street elite want, you fighting with me and looking the other way.

Elliot is actually quite an elitist himself and while it’s clear he went after his own kind only for the gubernatorial payoff at the end it is just as clear who he did not go after. It was in part the cabal at Goldman Sachs. In fact he could have started with Henry Paulson. Didn’t good ole Hank rustle up some subprime stew with spit and spittle and serve it up in SIVs world wide when CEO of the golden gangster? But no Hank is happy in Treasury now covering his tracks and bailin out his banker buds. And how about Council on Foreign Relations (CFR) member and Goldman analyst Abby Joseph Cohen? She along with Gruntal & Co gangster Joe –Fat Joe--Battipaglia pumped the dot com bubble until it burst in your face, then kept pumping it. Instead of coming out on CNBC and CNN finical news and telling you to sell, they said buy, and those that did bought right into the second greatest stock market crash of all time -the one upcoming being the greatest. It was an in your face pump and dump and Abby & Fat Joe should be in jail, but it was good for Wall Street so Spitzer looked away.

And that’s how it always plays out, investigations are merely shows of investigations. They digg up just enough dirt and sling just enough mud to make it look like the system is correcting itself, but in the end dirt settles, the mud never sticks the system changes nothing, and nether did Spitzer.

The demise of Elliot Spitzer is the result of in-fighting among the elites. I can’t really figure out how he was allowed to get caught on a prostitution charge of all things. It is a charge no one goes to prison for and the well connected get caught in only if they forgot to kiss the ring on the way up. To have even begun his self centered crusade he must have had the blessing of someone on high and so someone up there must have given the OK to give him up.

It’s all salacious and entertaining enough, but to us as traders nothing about the stock market or the system it controls has changed in the past 24 hours. The Street elites don’t want to change the system they want to preserve it and so did Spitzer. He did preserve it and managed to take a little something for himself in the process. That process involved serving up some Martha Steward size mini treats to be publicly baked and maybe Elliot decided to bite into a little bigger piece of the pie against better advice. Maybe he was just unlucky. I don’t know or care. I do know Spitzer made no difference in or out. Sadly the stock market is still the greatest device known to man to transfer wealth from the 99% to the 1% and Elliot Spitzer had no intentions of changing it.

Imploding

The stock market is melting down, imploding. The DOW’s rise from 10,000 to 14,000 was on
the backs of homeowners diving into debt instead of true sound profits, so you would expect the DOW to crash to 10,000 at least. The DOW is so rigged that you can see on the three year chart where the Plunger Protection Team (PPT) likes to defend the index which is 14,000, 13,000 and 12,000 even. Months ago I said I will not believe they can’t prop the market up anymore, until they can’t hold 12,000 and Friday they could not. Now ask yourself this, if the PPT can’t even keep the DOW up there what chance does that give them to hold the real stock market the S&P 500?

So what does this mean, blind naked shorting? Not so fast. Battered and bullied down 2,000 points the natural market forces my do what all the kings horses and men could not, support the DOW in the short term. The DOW is only three points under 12,000, so I expect a gap up in the morning if the PPT has it’s way. Failing that there is every reason to believe a turn around at the 11,500 level will take place marking a successful test of the January lows. However if 11,500 does not hold we will go short the diamonds DIA as 10,000 is most likely next.

Master Liars

As a resource for the novice investor this blog should more than give you information the major media wont, but I should alert you to their tricks as well. The mission of this blog is to alert novice investors and the general public to the reality that the stock market, being more than a few bad apples is a Mafia whose sole purpose is to bleed you dry to the last red cent. The conduit for the transfer of your wealth to the Street elites is the stock market, the simple tools used to facilitate the transfer are the interest rate and Madison avenue packaged lies. Pile onto that a bunch of complex sounding high powered economic BS, the major media co conspirators and you get a full blown abomination. Here is a classic from Allan Greenspan in the fall of 1996. With the DOW over 6000 Al coined the famous phrase ‘’irrational exuberance ‘’. This is what mouth piece Al says of it now.

In his 2007 autobiography, The Age of Turbulence: Adventures in a New World, he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn't figure it out: ''I'd come to realize that we'd never be able to identify irrational exuberance with certainty, much less act on it, until after the fact.''

That lovely piece of Pravda comes by way of Mr. Robert J. Shiller of Ohio.com. in a piece entitled Even the experts missed the housing bubble. Bull!

This is what was really going on. As Al was blowing up the dot.com bubble knowing full well what would happen when it popped, he cast his grand fatherly scorn at you and me and blamed us for the bubble he just created. Latter the FED chief raised interest six times in a row to bring the dot com crashing down on millions of pension funds and retail investors (you and me). And poor uncle Al cannot ''identify irrational exuberance with certainty''. What an excellent example of the often used incompetence or it’s just too complicated lie. I will mention that your kids wouldn't get this one over on you, but the media fall hook line and sinker for it.

Were all these people stupid? It can't be. We have to consider the possibility that perfectly rational people can get caught up in a bubble. In this connection, it is helpful to refer to an important bit of economic theory about herd behavior.

Three economists, Sushil Bikhchandani, David Hirshleifer and Ivo Welch, in a classic 1992 article, defined what they call ''information cascades'' that can lead people into serious error. They found that these cascades can affect even perfectly rational people and cause bubblelike phenomena. Why? Ultimately, people sometimes need to rely on the judgment of others, and therein lies the problem. The theory provides a framework for understanding the real estate turbulence we are now observing.

See that the experts can explain it all. They couldn't help it. I have a better explanation, THEY ARE LIARS!

These people are not stupid or the kind who get caught up in anything. Rather they are cold calculating criminals who set the trap with easy money and wait for the masses to get caught in the hype. The boom and bust cycle not only can be avoided with 100% accuracy, the FED actually have to manufacture them with interest rate gyrations. Then they hide behind high powered economic gibberish and FED speak, then blame it on ''information cascades'' and the irrational public. Yea that's good for city folk Al, but I know the cat by the paw.

This is the same old MO at work as in the 1930s the dot bust and the housing bubble pop. First the FED dope pushers drop interest rates to near zero, delivering an enticing initial fix of credit crack. Then with business and the public hooked on the ponzi financing after-effects they cut you off by raising rates again. Over extended on the high of cheap money, but with suddenly no credit available the credit addicted economy crashes, bankrupts, defaults and ultimately is forced to sell the business factories homes and land back to the bank for pennies on the dollar. And of course the FED is Godfather to all US banks.

Novice investors should know that there was no money is lost when bubbles pop, wealth is simply transferred from the masses to the elites. Did you notice how men like Morgan, Kennedy and Rockefeller, just happened to be in cash and out of the stock market before on black Tuesday? Did you know that Joe Kennedy was actually short the market on that day? And so it was that Goldman Sachs partners were shorting the subprime sector through all of 2007 while they invested client money long in subprime.

Goldman with nerves of steel made no secret of its success in its Q3 report of Sept. 20th:

"Net revenues in [trading] mortgages were...significantly higher, despite continued deterioration in the market environment. Significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions."

So, the Goldman Gangster made a killing in the summer of 2007 by selling subprime mortgage-backed bonds short, the bonds that they had just been long in their client portfolio.

These experts didn't miss the housing bubble they made it. No one is saying that it was illegal, bi it Kida shoots that imperfect information theory in the foot doesn't it?

Trade Update: SLV

Of the big three gold, silver, and oil, silver seems to be the most overbought in the short term. One look at the daily chart of SLV shows you why. The divergence between the share price and the 200 day moving average is extreme to say the least and the previously pegged stochastic has rolled over and is heading down. Now take a look at the huge buying volume over the last month, that is panic buying and is not sustainable. But none of that really scares me as much as this. The two day chart shows an up close followed by a down day. Notice the ranges of the two days are in the same bounds and the volume is high, from buying to selling. That is new buyers coming in are about to get bit as the old holders are getting out. All this is signaling a change in direction, what I'm waiting for now is Crammer to come out to tell us to buy.

How far down will it go? The bad news is that it won't go far. If SLV falls to 150 sell your parents and children into slavery and load the boat, but 170 is probably the best we can hope for. You might not even want to short it, just pick up some more farther down.

Alert : GDX IAU SLV

The volatility and volume in silver tells me that a temporary top is forming in the metals. I can go over things more thoroughly after the market closes, but for now we will close or hedge some positions.

Sell 25 SLV @ 200.00
Sell short 100 IAU @ 95.55
Sell to open 1 contract GDXCX @ $5.00

Is Barrick a Bank?

Barrick is lying about its exposure to hedges like a major bank.

Barrick Gold is sitting on an unrealized "mark to market" hedging loss of $6.165 billion, and the loss is growing. They hedged 9.5 million oz. of gold at $296/oz. in "project" hedges. With the gold price at $945/oz., they are losing about $649/oz. on the hedge. $649 x 9.5 = $6.165 billion loss. Barrick's loss grows by $950 million for every $100 increase in the gold price.

I am a subscriber to Jason’s newsletter and know him to be very smart and usually right. He has been collecting gold under $300.00 per ounce so you could say I’m a fan, but this is too much even for me. Would short that ABX? Well there are a couple of ways (1) by shorting a 1/4 position with a stop at the 52-week high of $54.00, of (2) buying an in the money put for say October 2008 or January 2009. Nothing goes up in a straight line everything pulls back sometime, but shorting a gold stock now a days that’s un-American.

Alert: UNG SLV

We have talked about it long enough, we will now take 1/4 positions in UNG and SLV

Buy 25 shares UNG @ 46.47 stop @ 43.44
Buy 25 shares SLV @ 200.50 stop @ 194.50