Jackson Jambalaya

"Let's start with AIG: $122 billion may not be enough.
Why? Because the CDS they wrote keep going down in value and forcing margin calls for more collateral (money).....
Now let's talk banks. You know, those things that are supposed to hold reserves against deposits when they make loans? Well guess what - there are no reserves. The non-borrowed reserves have been negative for months - since the turn of the year, in fact, and now total over $300 billion dollars.
What does this mean? Simple - the banks lost (blew, speculated with and got caught on the wrong side of, issued or purchased crap securities with, paid bonuses with, paid the light bill with, etc) the reserves they are supposed to hold against deposits. This would usually result in them being declared insolvent and the FDIC would seize them, but that would be inconvenient. So instead they went to The Fed which loaned them reserves so it appears they have some. It appears they have subsequently lost some of that money as well, because the "non-borrowed" reserve number continues to increase in the negative direction (that is, it's a negative number - a very large negative number.)..."
http://market-ticker.denninger.net/archives/P3.html

Keep Reading.

Can't say he didn't warn us.

Just wait until you see what will come next.
"If you're playing "Buffett", following his claim (note: there is no penalty for lying on national television about what you're doing in your personal account) that he's buying here, there is a little ugly fact you need to be aware of.
That fact is treasury issuance.
See, to fund all this crap that Congress, Paulson and Bernanke have in the pipe (you know, the TARP, the newly-minted SIV that Ben announced this morning to buy commercial paper, etc) the treasury issue requirements will be north of three trillion dollars in this fiscal year.
Oh, and that's before Obama wins (and he will) and promises another $1 trillion worth of new spending without a nickel's worth of ability to fund it.......
what's nasty here is that right now we're seeing a flight INTO longer-term bonds (the 10 in particular), which means the market is anticipating another stock panic, and with good reason....
Bernanke is doing what Paulson tried and failed at in the "free" (coerced by arm-twisting by Paulson) market through executive fiat, and he is printing money to fund it. Exactly how much money he is printing (as opposed to lending) depends on the precise amount of overpayment that is being induced through these so-called "loans", but that it is happening is not open to question.
Why has this become necessary?
Ben and Hank produced a dislocation in this section of the marketplace by favoring other debt instruments with federal guarantees, thereby forcing money out of these instruments.
This in turn created major problems for money market funds who buy this paper as a routine matter of course in that when they needed to redeem deposits they suddenly found no buyers for the securities, as those people had fled to other instruments that Ben had guaranteed payment on!
As each new facility is rolled out by Ben and Hank a new area of debt becomes backstopped by the government in some fashion, thereby forcing money out of other instruments and causing those instruments to become distressed!
We are rapidly reaching the point where only The Fed and Treasury are providing any lending at all!........"
The Market Ticker: Fiscal Category 5 Warning

"From a fundamental analysis perspective the underlying problem with the market here is the same as it was a year ago - valuations are too damn high. I have no faith that the operating earnings estimates for the S&P 500 are going to be delivered on a forward basis, and without that, I've got nothing to invest based on, since its always the earnings stupid that drives prices.
From a technical perspective the picture is even worse. We have a confirmed double-top, a DOW theory primary trend bear market reconfirmation, and a spike bottom. From a technical perspective this implies that the entire bull market move to the first peak is going to be retraced, which puts the S&P 500 down into the 500 area, erasing twenty years worth of gains....
Could it really be different this time? Sure. It can happen. We hear that constantly - "this time its different." Well, perhaps some day it will be.
But history says that staking your fortune on such a belief is a poor gamble. In every case through history primary bear markets - ones that have confirmed on Dow Theory - the buying opportunity hasn't been on the initial decline, in that every time that low has broken and led to new lows.
It is only when a low is made and retested a few months later that one can reasonably take long positions. A retest that comes a week or a month later is too much, too fast.
How do you know when you've got a valid retest? ......"
http://market-ticker.denninger.net/archives/P2.html

Explanation of Dow Theory:
http://en.wikipedia.org/wiki/Dow_theory

Mr. Denninger keeps asking questions regarding the financial crisis completely missed by the media. He is not some conspiracy theorist or a genius. He simply reads what is published and asks questions, something our money honeys seem unable to do as they blather about the rise and fall of the Dow Empire. He coins a new word in this post, fraudacity, as he discusses the phoniness of the Bacardi Bailout:
"John Mack yesterday in a CNBC interview said that the capital deployed by Treasury into the banks was going to rebuild their capital ratios - not be lent out. In other words, they intend to hoard it.
CNBC's Fast Money finally started talking about the outright fraud and lies last night. Dylan Ratigan was absolutely on fire about the fact that Paulson was in fact one of the executives lobbying hard for removal of leverage limits in 2004, just two years before he took the position at Treasury (and cashed out $500 million in Goldman Sachs stock tax free.)
I and a few others have been peppering the media with this, and finally, someone woke up to the fact that the very same people who made this mess now want we the taxpayers to pay for cleaning it up - after they ran off with all your money!.....
Nor does it stop there....."

Fraudacity Story

I have posted a few articles from The Market Ticker, Karl Denninger's website, this year as I find his analysis to be penetrating, candid, and more expert than most of what I read in the media. Here are his end of 2007 review and predictions for 2008 column from earlier this year. Warning: it's a verrry long read but well worth it. If you are trying to understand what is going on right now, this column is a good place to start. Most of his predictions have been fulfilled so far this year. Mr. Denninger wrote:
"There are many who argue that The Bear Market, however, not only did not arrive but that we will rocket to new highs, and have a solid market in 2008.
It is my view that they are sorely mistaken, and soon are to be not only dead wrong but dead broke..........

Here’s my view on what you can expect in 2008:
The US will enter a recession, if it has not already done so. It will be consumer spending driven, with its genesis found in the Housing market. The slowdown will become evident once the “real” holiday sales data is posted, and accelerate into the first quarter.
Unemployment will increase significantly, rising to north of 5% by the middle of next year. This will of course cascade back into consumer default rates (mortgages, credit cards, auto loans, etc) and cause yet more layoffs. The “virtuous cycle” will turn vicious.
Housing will not turn in 2008. The total damage to prices will exceed a cumulative 15% from 2005-2008, and it will not be over. At least one, and probably several, national home builders will be cut to the single digits on their stock price or go bankrupt and be reorganized. Residential Real Estate will NOT be a buy in 2008; you’re still at least one and probably two years too early. The story in the housing space in ’08 will be the defaults on “prime” mortgages – which in reality were nothing of the kind (e.g. “Option ARMs”), and on the piggyback seconds and HELOCs behind them.........
The “big story” in the financial markets for 2008, and the likely trigger for major turmoil, will be the implosion of the CDS marketplace and how Buffett profited from it. This will stabilize the municipal bond marketplace which has been positively hammered.
Equity prices will be choppy in the first couple of months and will experience a peak to trough swing of at least 20% during the year in total. I expect the S&P 500 to at least touch 1220 in 2008 and my current downside target is 1070. Note that should we get a “parabolic” sort of move in the first quarter, which is possible, the potential for an even louder “boom” (collapse) goes up dramatically; in that case I would not be surprised to see a three-digit handle on the S&P 500 sometime during the 2008-2010 time period.....
The Dollar will bounce all over before starting to take off when it becomes apparently that the rest of the world is going to get it worse than we will.
The “market callers” who are (almost to a man!) calling for big moves northward in 2008 will be coming to the public “hat in hand” as we get into the latter part of the year. ..........."
http://market-ticker.denninger.net/archives/134-The-Year-In-Review-And-a-Look-Ahead-for-2008.html

Sit down, pour yourself a drink, and read his column in its entirety, even if it takes thirty minutes. If you've read nothing else on this website, read this article. Denninger has consistently nailed what is going on in our economy and financial markets all year. I will continue to post his columns here as we need more straight talk from experts like him. If you listened to him for awhile, your portfolio is in better shape than if you followed the advice of the goateed-motor mouth ritalin junkie on CNBC. One further point he makes which most people don't know: When the fed injects liquidity into the system it is a loan. At some point it has to be withdrawn. We are going to be dealing with this mess for a long time to come. What we need are straight talk and tough questions, not hot air and posturing. Start by educating yourself.