Precipice....

Sunday, Feb 1st, 2009
2110 hrs

Some random thoughts in here. I'm more desultory than
usual....

- For the past few days, I have been reading some texts
on various neoclassical economic theories. A lot of the
people in power fall into this group of practioners,
including Dr. Bernanke. Doubling the monetary base should
spur an increase in inflation because it brings an increase
in credit. However, this has not been the case in the recent
past. What happens when good borrowers do not want to take
out additional loans and when unworthy borrowers are not
able to borrow?? The debt in the system cannot expand
because the economy has reached the thresholds of carrying
capacity. Unless there is a decrease in the total leverage
in the system there is NOTHING that can be done to halt
demand destruction and thus economic contraction. The
government has been trying to transfer leverage from the
private sector to itself [government]. Tch...tch.

- Its becoming clear that some of the big banks cannot
survive this malaise without getting money in Ts (Trillions!).
U read that correct, Trillions! And we go about it by
rewarding the bad guys rather than giving money to the
good guys (there are many solvent banks in this nation).

- We've had some rather crazy moves in the fixed income
markets last few weeks. That's what happens when treasury
bonds are being rained upon the public, thus depressing
price. This supply will make stocks and bonds crater!!
"Satyamev Jayate" means "Truth Wins" in Sanskrit, an
ancient language. Truth is that prices react to Supply
and Demand. Politicians in DC could have promised
people a lot of changes and money etc., but the fact is
that as long as we are printing government backed paper
there will be supply and bonds will fall with the only
thing stopping it are higher yields (higher rates).

- Wall Street was never made so people on Main Street
could make money. Wall Street was made so that Wall Street
could make money. I trade and another traders' best
interest is not in my best interest. Wall Street took
$70 Billion of taxpayer money and paid themselves
around $20 Billion in bonuses. I've hinted at this in
several past comments on my blog. Check out
www.alvinjamur.com then goto the blog section.

- This "Bad Bank" plan from Washington DC is plain and
simple : BAD! There is not enough transparency between
financial market participants to know the details of the
assets being held. We've just seen this drama play out
between Merrill Lynch and Bank of America. There will
be plenty more of this unless and until we have FULL
transparency....and that includes the Federal Reserve
and the various other games several administrations have
played.

- A long term SH*T show has just started. I do not know
how it might end. If things progress as they have been
in the recent past, and if equity market participants
come to their senses like their brethren in the fixed
income markets have, we will likely see the SP trading
around 550-600 and the DOW at around 5500.

...truly, we stand here at 8000, and at the precipices
of a very deep abyss.

- aLV