AIG -  Diversionary Tactic?

I find it interesting that the general public is up in arms about a measly $100 Million in AIG bonuses - yet practically oblivious to the extra $1.2 Trillion dollars that the Fed has authorized. They have created the “Ouroboros” snake to print the money to swallow the US Treasuries.  

 US Constitution, Capitalism and Confidence

So much is happening so fast that the US Congress is passing 1,000 + page spending bills without reading it - at the request of the new president - Really….

 Claw Back is what everyone is seeking - to just get back to break even, to that point before Bear Stearns was slaughtered, but at what cost?

 If the rules are going to be changed in the middle of the game - constantly - eventually people will not play - then where will we be?

 Breaking contracts and taxing individuals at 90% retroactive is worse than a dangerous precedent - it borders on treason - based on the fact that elected officials are not holding up their oath to support and defend the constitution of the United States - and may be recklessly destroying the foundations of the country.

 Quantitative Easing Spreads - As Currency Wars Get Underway

I was broadcasting live coverage of the The US Federal Reserve on Wednesday when I nearly fell out of my chair to short the dollar. The video of the live broadcast is available on the www.Investors-Education-Network.com site.

Although I discussed the possibility of Quantitative Easing, I assumed that Bernanke would wait at least until after the G20 meeting to pump another Trillion dollars into the economy.

 If all the central banks follow suite - they will effectively be filling the pool with more paper.

 Budget - Unsustainable?

On Friday the Congressional Budget Office told the Obama administration that the current level of debt, budget, and spending is “Unsustainable”. The administrations press secretary dismissed the warning with a analogy of trying to pick the basketball playoffs five years out.

 From where I sit -  that’s the problem… I believe that too many people,  that should know better, are treating this as if it was just a game… Well - maybe it is…

  Reservations on Reserve Currency?

The US Dollar suffered it’s worst week since 1985, and the Euro staged it’s best ever gain since it’s 1999 inception. Gold surged on the Quantitative Easing surprise, and some analysts expect Gold to retest the $1,000 mark. Is this the end of the Greenback?

 Signs Earlier in the Week?

The currencies showed no reaction to fundamental surprises on Monday and Tuesday.

 TICS Data - Amazingly Horrible - Setup for FOMC?

The Treasury Inflows were astoundingly weak with a negative $43 Billion versus expectations of a positive $44 Billion. Was this a factor in the QE decision?

 New Housing Starts??  - Signaling a Real Estate Bottom?

New construction unexpectedly jumped  up 22% versus an expected negative -3.4%. Where and who is building houses?

 The glut of unsold property has not disappeared, so who and how are new housing starts getting underway? Are the government accountants beginning to start counting the boxes under the bridges? Let’s wait for the revisions next month. Let’s see what the revisions look like next month!

 The Week Ahead - Lot’s of Scheduled News and High Level Meetings

Break out your popcorn and settle in your favorite seat as Ben Bernanke and Tim Geithner will be testifying on financial regulation reform before House Financial Services Committee in Washington

 Meanwhile Back at the Bank - FDIC

Market News International on Friday reported that Sheil Bair - Chairman of the FDIC stated that…. Although the FDIC deposit insurance funds is heading to zero, she’s confident it will be replenished. as the long term outlook for insured banks is “very good”

 This as Ben Bernanke on Friday addressed the Community Banks and reassured them that opportunities are available and that they need to continue lending. As for “too big to fail”, Bernanke indicated oversight is needed - which drew large applause. Bernanke said the Fed will support housing market and FDIC for now, but will taper off and withdraw.

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By Jerry Furst - Sr Analyst “1st on Forex”

at Investors Education Network.com

Mid Week Review

As we await Interest Rates from the ECB and the UK.

The fools on the hill continue to entertain us with their multi-trillion dollar show…

The Cast of Characters:

The President, The Fed Chairman, the Treasury Secretary, the Prime Minister of the UK, and Jimmy Rodgers!

So far this week has shown…

An amazing Soap opera of intrigue as the President of the United States suggested that it might be a good time to start buying into the stock market for “the long term”.

Tuesday Fed Chairman Ben Bernanke took the hot seat for Senate testimony and amongst some of the things he said was….

“There was Failure of oversight….”

Looming Commercial Real Estate Crisis

AIG’s Financial Product Division was separate from their New York State Insurance company…. (However they both seem to be on the same ship….)

Rewarding the Three major credit agencies, despite their lack of any credible ratings - seemed to be ok with the Fed chairman

Bernanke Dodged the question

When asked, “Should banks, using taxpayer money to bail them out, charge those same taxpayers in excess of 20% interest on credit cards?” He bailed out of an answer…

When the question of Nationalization came up - his answer was that he did not think it would be necessary - but was prepared…(that means to me- it will and basically has already happened)

A pointed question of “Do you think there are any “outer limits” as to how much money you are prepared and able to provide to bail out banks - received a vague ” there is a limit…  (just how many trillion$ is still To Be Determined)

Meanwhile - over at the White House….

UK Prime Minster Brown was not treated to formal flags and podiums… but a strange oval office press conference was had…

Key points :

The G20 meeting next month in London “must clean up the banking system” and the Prim Minister mentioned that the possibility of a “Global New Deal” is quite possible in the next few months….

Does that imply that all citizens of the earth will become equally miserable?

“The Challenges are Global”

“We need a Green Recovery”

“Regulatory System Needs Global Reform”

US Treasury Secretary Timmy Gee…

Was being lobbed soft balls in his testimony -  the most important thing I heard was that the Senate leader notified the panel that the Treasury Secretary was prepared to go behind closed doors and answer questions (away from the television cameras)  Thanks for your public service guys…  

Meanwhile - Commodity Jimmy Rodgers Over in Singapore…

Interviewed live on MSNBC Wednesday Evening by Larry Kudlow

He said he was “Mind Boggled” at how the US government is imploding and being run by…. well let’s just say he did not have nice things to say about the Treasury Secretary or Fed Chairman….

Highlights and Quotes by the ex-patriot….

• - Mainly watching the markets….
• - Supply of Commodities is declining
• - Fundamentals for Commodities “Getting Better”
• - He will be exiting the US Dollar sometime in 2009 or 2010
• - In the last 2 months “the only market I’ve bought has been China”

So there you have a mid week run down - as the world awaits the Bank of England and the ECB to lower rates on Thursday - the limplications may not have any effect as we get closer to the April Fools gathering of the G20.

 But you must admit - living in this time- let alone trading through this time is as Visa would say… “priceless”…..

 Stay Tuned… It just might get more interesting as the Governments are coming to the rescue of us all!  Makes me feel quite comfortable…

 Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey. 

Another Week - Another Batch of Bad News

•  Weekly Jobless Claims - Worse Ever!
•  Bank of Amerika Chief - Subpoenaed Over Pay Bonuses
•  AIG Needs Billion$ More
•  General Motors Heading for Bankruptcy
•  Iran ready to make some Nukes
•  North Korea Ready to Launch Them
•  That’s just Thursday’s short list from the US
•  Europe and Asia’s Data is Debatably Worse!
•  But Wait…. There’s More… to come!

US GDP Expected to Come Out at -5.4 %

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Chart Patterns Setting Up

EUR-USD  1 Hour Chart - Shows Triangle Pattern

 USD-CAD - Daily Triangle Pattern - Consolidation Coming to the Breaking Point?

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This Did Not Have To Happen - Questions that Need Answers

• All the Kings Horses…. 
• Nobody Trusts the Numbers 
• Creative Destruction  
• Margin Calls In Front of Redemptions 
• Gold’s Biggest One Day Percentage Gain Ever!  
• Is There a Leader in the House? Senate? Corner Office?  
• “They’ve lost faith in the Financials” – Art Cashin 
• Senator Shelby: We are going to have to have some hearings early next year 
• One Solution: “World Wide Interest Rate Cut” - - James Cramer  
• Resolution Trust - All Over Again  
• Fear in Solid Control  
• China Daily – World Needs New Currency  
• Lack of Regulation in Credit Default Market  
• Fiduciary Duty – Lack of Oversight  
• Too Big To Fail?  What About Bank of America  - Using Depositors Money !!
• Who’s Next?  

Headlines and Events - Getting Out Of Hand

The Market Carnage Continues…

It amazes me that even last week I heard some market analysts and pundits say that we were not in a recession! Long time readers of my blog know  that I called the portential for the worst time since the “Great Depression”  My Headline for Jan 22 was “Recession in Play - Depression on the Way?”

http://blogs.fxstreet.com/1stonforex/2008/01/22/recession-in-play-depression-on-the-way/

on January 24th I refrenced the Great Depression again

http://blogs.fxstreet.com/1stonforex/2008/01/24/bernanke-watches-futures-trader-watches-past-and-reminisces-of-the-shoe-shine-boy-cnbc-girls/

Gold was basically flat on Monday and I was pondering why - I called it Sunday Night - I hope some of you had come to the same conclusions.  I really find no joy in being right about things being so wrong - but the Rose Colored Windows are being shattered.

The Blame Game

Boiled Down It IS This: Regulatory oversight was and is missing. It looks like Political Cronies and underskilled Government Workers in the trenches over their head allowed the train to run off the tracks - this is beyond criminal as people are losing their jobs and life savings - around the globe!

What Would You Do With Interest Rates?

The Federal Reserve is scheduled to make an interest rate announcement tomorrow afternoon - and it comes at a time when Ben Bernanke is walking a tight rope of what to do - and say.  The Dow dropped over 500 points on Monday - the worst drop since the NYSE reopened after the attacks of September 11th.

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Unexpected Consequences - AIG Looks for Billions

AIG has been downgraded by Moody’s as one of the United States largest Insurance companies has been denied access to federal funds and not even access to a “bridge loan” that would give the company time to sell some assets - However, it is being reported that AIG is in need of $75 Billion

Oil Drops well below $100 - Dollar Hangs Tough

The US Dollar has given up some ground - but surprisingly not that much. It appears that the unwinding of several trades and the need for cash transactions may be holding the greenback up as a necessary instrument of trade. Oil positions are likely being liquidated and so all the selling is dropping the price.

Free Webinar - Tune in to Live Coverage of the FOMC Announcement visit www.ienweb.com to register

Systemic Risk at Hand

9pm Sunday and all is not well - The “systemic risk” that Hank Paulson and the US Treasury and Federal Reserve has been trying to ward off may be at hand. 

Reports are coming across fast and furious - one that there may be an emergency rate cut! Separating the rumors from fact is necessary - but until the dust settles - volatility seems to be certain as the official news is leaking out.  Panic is thick!

Watching the currencies - the dollar has dropped some - but things are tenuous. A flight to safety is making me think gold. Interesting how gold was driven so low last week.

Is This the Bottom?

Uncertainty in situations like this often signal a bottoming process that is fraught with twists and turns like a unknown roller coaster or a runaway train.  A calm head is needed to weather the storm.  Smart moves will be rewarded.

End of Investment Houses and Broker Dealers?

In a surprise move, Bank of America is rumored to have bought Merrill Lynch and John Thain may join Lehman Brothers employees in packing his desk.  It appears the two giants that will cease to exist come Monday. There is talk that this is the beginning of the end of the Big Investment Houses and Broker Dealers. 

Reading the wires - AIG is looking to sell Billions in Assets looking for support from Ben Bernanke and the Federal Reserve.

Unprecedented and Historic

CNBC is working with full staff Sunday night - same as when Bear Stearns was bailed out. Reports that the Treasury and FED are taking equities as collateral…

Market News International reporting that the FED is “Launching several initiatives to support the markets” and that the CFTC has made a rare statement late Sunday night that it is protecting Lehman’s commodity and futures customers and they are in touch with international regulators to help maintain stability of the markets.

The Wall Street Journal is saying the American Financial System is Being Shaken to it’s core”

Stay Tuned… Trade Safe… Trade Smart… or get out of the way…

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