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The Fed, The Swamp, & The Brooklyn Bridge (By Dr. Joe Duarte) The S&P 500 closed below 900 on November 11, as traders again reassessed the current situation, for the umpteenth time. And while no one is saying it, the whole secrecy thing is raising some significant questions about what the heck is really going on. Here's the scenario. The Federal Reserve is refusing to disclose to whom it has lent over $2 trillion. The Bloomberg headline, linked to by the Drudge Report, stirred up a hornet's nest. But maybe the Fed doesn't want to open up its books because the mess is bigger than even the central bank appreciated when it started along the road to the biggest bailout in history. And as things progress, it's becoming increasingly clear that this situation is starting to worsen, as everyone wants a bailout. According to The Wall Street Journal: "The U.S. government's financial-system rescue plans are coming under pressure as a growing array of distressed companies signal the need for assistance." The Journal notes that "Fannie Mae said it is losing money so rapidly it may need a cash infusion from the Treasury Department by year's end. The funds would come from a special $100 billion pool Treasury set aside back in September to aid the company. Fannie Mae had a loss of $29 billion for the third quarter." Elsewhere, American Express is the latest big financial company that has become a savings bank, a fact that would allow it to be regulated by the Federal Reserve, but also to borrow from the Fed's now multiple credit lines. More daunting is the fact that the government's funds for the bailout are starting to run out. According to the Journal: "The Treasury has committed all but $60 billion of the first $350 billion in funds granted by Congress under the TARP plan. That sum remains after accounting for Treasury's planned investments in the banking sector and Monday's additional $40 billion investment in troubled insurer American International Group Inc." Analysts and the banking community are now waking up to the fact that things may not work out as planned. Here's an example: The rescue efforts are "evolving in ways that I don't think anyone anticipated," said Camden Fine, president and CEO of the Independent Community Bankers of America, a trade group. "Things are just hitting them from every single direction, every day, and I don't think they know whether to spit or go blind." Some are thinking that Fannie Mae's losses are "house cleaning" by the new CEO. But here are some figures that suggest that there isn't a whole lot left to clean: 'Fannie said its net worth totaled $9.4 billion as of Sept. 30, down from $41.4 billion three months earlier. To remain in business, Fannie would need funding from the Treasury if its net worth fell below zero. Fannie said that may happen "if current trends in the housing and financial markets continue or worsen." When the government seized the company, Treasury pledged to provide as much as $100 billion if needed. Here's the bottom line. Everywhere you look these days, things seem to be going wrong, despite large cash infusions from every government in the world. The fact is that the system is likely so screwed up that there probably isn't enough money that can fix it, and that's why the Fed doesn't want to let anyone look at their books. Bloomberg has sued the government and may eventually get a look at those books. But, do we really want to know who borrowed what and what they put up in collateral? The real question for investors is how many plots of swamp land and how many Brooklyn Bridges are going to be on the Fed's balance sheet when we finally get that look. We can only guess about how much selling will go on when the truth about the nonsense that has gone on is unveiled. Oh yeah, don't forget about the oil wells, the golden egss, the magic beans and the fountain of youth too. After all, isn't immortality what all politicians are seeking?
The Investrend Earnings Calendar features Applied Materials (NASDAQ: AMAT), expected at $0.14; Crocs (NASDAQ: CROX), expected at $0.02; Green Mountain Coffee (NASDAQ: GMCR), expected at $0.21; Paragon Shipping (NASDAQ: PRGN), expected at $0.45.
The Investrend Economics Calendar lists Treasury auctions 10-year notes (1 p.m.).
The Investrend Events Calendar showcases AB, KEY, TCB, AMTD, BEN, HCBK, ASBC at Merrill Lynch Banking & Financial Services Conf; BA at Merrill Lynch Defense Outlook Forum; BPAX, CBMX, CYTK, DYAX, ADL at Rodman & Renshaw Annual Global Investment Conf; CMKG, NGEN, BLD, ICOP, TBUS at Paulson Investment's 31st Annual Westergaard Conf; DGX, RECN, WPI, BAX, MOH, CELG at Credit Suisse Group Healthcare Conference; MAS, HOV, BDK, TOL, LEG, MHK, PHM at UBS Building and Building Products Sixth Annual CEO Conf; WERN, ITT, TWIN, ABFS, AME at Robert W. Baird & Co Industrial Conf.
The Investrend Money Index is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ 50 Most Actives indicate the direction in which the mass of money is flowing. Last session's trading showed five advancers versus 45 decliners. There were no significant advancers. Decliners followed Gen Growth Prop InC (NYSE: GGP) down 64.31%, Genworth Financial (NYSE: GNW) down 54.41%, Focus Media Holding Limited (NASDAQ: FMCN) down 45.12%, Las Vegas Sands Corp (NYSE: LVS) down 33.25%, Hartford Fin Svc (NYSE: HIG) down 22.75%, Sprint Nxtel Cp (NYSE: S) down 21.67%, Dryships Inc. (NASDAQ: DRYS) down 20.64%, American Capital Strategies, Lt (NASDAQ: ACAS) down 14.23%, Gen Motors (NYSE: GM) down 13.10%, Seagate Technology (NYSE: STX) down 11.45%, JA Solar Holdings, Co., Ltd. (NASDAQ: JASO) down 9.73%, Ford Motor Co (NYSE: F) down 6.74%, Micron Technology (NYSE: MU) down 6.52%.
Vote in the Investrend Poll Question of the Day at Investrend Information (http://www.investrendinformation.com).
Investrend Website of the Day: http://www.actsofkindness.org/people/days.asp
Quote of the Day: "An actor is a sculptor who carves in snow." Edwin Booth
Today is: National Pizza With The Works Except Anchovies Day.
Happy Birthday: Edwin Booth, Robert Louis Stevenson, Jack Elam, Garry Marshall, Whoopi Goldberg, Vinny Testaverde, Jimmy Kimmel, Steve Zahn.
Today in History: English King Ethelred ordered in 1002 the killing of all Danes in England. The Denny Party landed at Alki Point in 1951, the first settlers of what would become Seattle, Washington. Collier's magazine in 1909 accused U.S. Secretary of the Interior Richard Ballinger of questionable dealings in Alaskan coal fields. The American space probe, Mariner 9, became in 1971 the first spacecraft to orbit another planet, swinging into its planned trajectory around Mars without a hitch. In 1990, implementation of the World Wide Web began when Tim Berniers-Lee wrote the first web page on a NeXT workstation. Chicago Bears cornerback Nathan Vasher returned in 2005 a missed field goal 108 yards against the San Francisco 49ers, the longest play in NFL history.
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