Coked out money managers and piker retail investors dove head first into banks today, on the thesis that the Government always makes things better. There was no fundamental reason to get long, with oil higher and Fannie Mae [[FNM]] /Freddie Mac [[FRE]] on the cusp of disaster.
In my opinion, this is the worst type of moral hazard:
Through innovative and historic measures, taken by the Fed and Treasury, they (Gov’t cheese makers) have morphed Wall Streeters into upright walking pigs, always willing to take a stab at socialism.
This, as you can understand, is not how free markets work.
With the credit crisis in full blown mode here, I wouldn’t touch the banks, unless of course I was managing money for the Iranian Sovereign Wealth Fund.
Eventually, as predicted by many, the cheese makers will run out of dairy, unable to make new cheese. Then, and only then, will the market be able to correct itself and eliminate the weak/corrupted players.
For the day, my losses were minimal, as long positions in National-Oilwell Varco, Inc. [[NOV]] , Barnes & Noble, Inc. [[BKS]] , Clean Energy Fuels Corp. [[CLNE]] and Wachovia Corporation [[WB]] , amongst 90% of my financial shorts, buoyed me.
In addition, I have built a small cash position of 5%, which will be used to buy [[FXP]] under $85 or [[SKF]] under $125.
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A rat drowning in a barrel of fresh cream will churn and claw til he makes butter.
So it goes with financials/GSEs.
DRYS acting like sh!t, think I’ll sell tomorrow for a loss and go with some cheap OTM calls.
BKS chart looks just like the $SPX, heh.
That picture is priceless.
That Monkey makes me laugh every time.
Funny you should mention that, Sir Fly; I am looking for a good man to run our highly esteemed, yet honorable, Iranian Sovereign Wealth fund. Former US Government cheesemakers not welcome. We have billions and billions of useless oil for US$$$’s burning a hole in my wifes burka. Please do as you wish with it, Sire.
Your excellency, Machmood Achmenadinnerjahd.
Rice dismissed blustery comments from Russian leaders who say Warsaw’s hosting of 10 U.S. interceptor missiles just 115 miles from Russia’s westernmost frontier opens the country up to attack.
Such comments “border on the bizarre frankly,” Rice said, speaking to reporters traveling with her in Warsaw.
“When you threaten Poland, you perhaps forget that it is not 1988,” Rice said. “It’s 2008 and the United States has a … firm treaty guarantee to defend Poland’s territory as if it was the territory of the United States. So it’s probably not wise to throw these threats around.”
George Orwell (The Fly) is back from the farm.
Finally, it appears CRM will meet its maker.
“I don’t see why bankers have to invent so many new ways to lose money when the old ways worked so well”
hahaha, fly, i know somebody that works for CRM. it’s some kind of weird cult over there, and i’ve been secretly hoping the stock meets it’s maker. even though she’s a nice woman, i always love to see things implode.
i will say this, though: their product is actually quite decent for what it is. the stock, however, trades up to ridiculous valuations because CRM constantly name-drops google connections in ‘investor’ circles.
New York Times
August 20, 2008
Op-Ed Contributor
Russia Never Wanted a War
By MIKHAIL GORBACHEV
Moscow
THE acute phase of the crisis provoked by the Georgian forces’ assault on Tskhinvali, the capital of South Ossetia, is now behind us. But how can one erase from memory the horrifying scenes of the nighttime rocket attack on a peaceful town, the razing of entire city blocks, the deaths of people taking cover in basements, the destruction of ancient monuments and ancestral graves?
Russia did not want this crisis. The Russian leadership is in a strong enough position domestically; it did not need a little victorious war. Russia was dragged into the fray by the recklessness of the Georgian president, Mikheil Saakashvili. He would not have dared to attack without outside support. Once he did, Russia could not afford inaction.
The decision by the Russian president, Dmitri Medvedev, to now cease hostilities was the right move by a responsible leader. The Russian president acted calmly, confidently and firmly. Anyone who expected confusion in Moscow was disappointed.
The planners of this campaign clearly wanted to make sure that, whatever the outcome, Russia would be blamed for worsening the situation. The West then mounted a propaganda attack against Russia, with the American news media leading the way.
The news coverage has been far from fair and balanced, especially during the first days of the crisis. Tskhinvali was in smoking ruins and thousands of people were fleeing — before any Russian troops arrived. Yet Russia was already being accused of aggression; news reports were often an embarrassing recitation of the Georgian leader’s deceptive statements.
It is still not quite clear whether the West was aware of Mr. Saakashvili’s plans to invade South Ossetia, and this is a serious matter. What is clear is that Western assistance in training Georgian troops and shipping large supplies of arms had been pushing the region toward war rather than peace.
If this military misadventure was a surprise for the Georgian leader’s foreign patrons, so much the worse. It looks like a classic wag-the-dog story.
Mr. Saakashvili had been lavished with praise for being a staunch American ally and a real democrat — and for helping out in Iraq. Now America’s friend has wrought disorder, and all of us — the Europeans and, most important, the region’s innocent civilians — must pick up the pieces.
Those who rush to judgment on what’s happening in the Caucasus, or those who seek influence there, should first have at least some idea of this region’s complexities. The Ossetians live both in Georgia and in Russia. The region is a patchwork of ethnic groups living in close proximity. Therefore, all talk of “this is our land,” “we are liberating our land,” is meaningless. We must think about the people who live on the land.
The problems of the Caucasus region cannot be solved by force. That has been tried more than once in the past two decades, and it has always boomeranged.
What is needed is a legally binding agreement not to use force. Mr. Saakashvili has repeatedly refused to sign such an agreement, for reasons that have now become abundantly clear.
The West would be wise to help achieve such an agreement now. If, instead, it chooses to blame Russia and re-arm Georgia, as American officials are suggesting, a new crisis will be inevitable. In that case, expect the worst.
In recent days, Secretary of State Condoleezza Rice and President Bush have been promising to isolate Russia. Some American politicians have threatened to expel it from the Group of 8 industrialized nations, to abolish the NATO-Russia Council and to keep Russia out of the World Trade Organization.
These are empty threats. For some time now, Russians have been wondering: If our opinion counts for nothing in those institutions, do we really need them? Just to sit at the nicely set dinner table and listen to lectures?
Indeed, Russia has long been told to simply accept the facts. Here’s the independence of Kosovo for you. Here’s the abrogation of the Antiballistic Missile Treaty, and the American decision to place missile defenses in neighboring countries. Here’s the unending expansion of NATO. All of these moves have been set against the backdrop of sweet talk about partnership. Why would anyone put up with such a charade?
There is much talk now in the United States about rethinking relations with Russia. One thing that should definitely be rethought: the habit of talking to Russia in a condescending way, without regard for its positions and interests.
Our two countries could develop a serious agenda for genuine, rather than token, cooperation. Many Americans, as well as Russians, understand the need for this. But is the same true of the political leaders?
A bipartisan commission led by Senator Chuck Hagel and former Senator Gary Hart has recently been established at Harvard to report on American-Russian relations to Congress and the next president. It includes serious people, and, judging by the commission’s early statements, its members understand the importance of Russia and the importance of constructive bilateral relations.
But the members of this commission should be careful. Their mandate is to present “policy recommendations for a new administration to advance America’s national interests in relations with Russia.” If that alone is the goal, then I doubt that much good will come out of it. If, however, the commission is ready to also consider the interests of the other side and of common security, it may actually help rebuild trust between Russia and the United States and allow them to start doing useful work together.
Mikhail Gorbachev is the former president of the Soviet Union. This article was translated by Pavel Palazhchenko from the Russian.
Bummer .. I was slowly building a short pos in CRM. Wasn’t fully loaded yet. Drats.
Anton, you’re very smart, that’s a given, but you are also one funny MF too.
Bocca, keep the bowl tight so he can enjoy the ride!
Fly: What do you think of “traders” out here in internet leechland who have a cash “position” of greater than 5% … say more like 60% cash or even 100% cash. Don’t hold back.
I would say that for most people here, 5% cash is very low. Just my impression.
Waiting to pounce on VMC @ 80
Shortbus:
My guess: most people on this site have less than 100k in the market.
Therefore, their cash position is irrelevant.
Rice arrogantly dismissing Russia’s threats out of hand is par for the course.
Putin has been expressing his concerns about placing missles in Poland and the Czech Republic for several months, and we’ve been dismissing him and flickig his concerns like a flea on a hot summer day. He expressed concerns about recognizing Kosovo as an independent nation. The West basically told him to fuck off and to like it.
Think about it. We’re broke, and Russia is one of the largest foreign creditors of U.S. debt. They have a near monopoly on nat gas into eastern and central Europe. They know our military assets are stretched to the limit, while their military assets were collecting dust until Georgia.
Who really has the best bargaining position?
Corn
We do.
We have 14 aircraft carriers and they have one.
Fly – Is LM short within your top 10 holdings?
yes
First Mickey says “[Georgian president Mikheil Saakashvili] would not have dared to attack without outside support”, and then he says “It is still not quite clear whether the West was aware of Mr. Saakashvili’s plans to invade South Ossetia”.
Which is it, Mickey? And no comment on nuking Polska?
Tear down these walls, sir.
TEAR DOWN THESE WALLS!!
The American Empire is broke but they can still push their way into every affair with their military might. You are like a muscle bound bully in the playground. Short on intellect, short on resources, nothing else to do but kick ass and torment the little kiddies.
My respect for your puny country could not sink lower. I call a bottom in american self respect and spit at your athletic accomplishments and bullshit financial organizations.
Get your shit together yanks. PS JakeGint can suck on the big hose.
Fly, how much do you have in the market? Can you give us a ballpark?
I’m just here to learn.
I have a good amount.
Primarily, I manage $$ for others.
monopoly?
free parking!
Chivas:
Don’t you have a bottle of gin to attend to?
Not monopoly, but NEAR monopoly.
http://italy.usembassy.gov/pdf/other/RS22562.pdf
We are going to see a rally tomorrow to test the prior support we broke as resistance. At that point, we will go much lower.
Thanks, Granpa.
And thanks in advance for the $5 in my birthday card.
Yeah Fly, when you say I bought 1000 shares of this and 2000 shares of that are you speaking about your personal holdings? Margin? OPM? What is your net worth?
Tech looks ready to fall. MSFT, CSCO, JNPR, GD, AAPL all look ready to drop. QQQQ’s sitting right on 200 day.
Shortbus, I have well over a 100k in the game and have a huge cash position currently, ie. over 75%.
Patience is a virtue, you don’t have to throw around irresponsible bets like some half retarded otc guy. Waiting until you find a situation you really believe in works just fine as far as investments go.
Also many of my trades lately are refined to day trades given the crazy state of the market so my cash position is as of 4 pm.
Shortbus- 40% cash here.
JDSU blows(not that it wasn’t obvious for many years)
AAPL has been puzzling me for the past month or so. I have Jan 2009 and 2010 calls at strike 200 that i bought after the stock’s collapse to 150 or so. i have a decent gain. should i get out or do you guys see a nice run for the company?
i also have some RIG and HAL shares… any thoughts on either?
“The Fly” is a mystery, wrapped inside an enigma.
That’s all I will say about my money management.
Just give us a ballpark. Russ Winter claims over $2M, Denninger claims north of $5M. Shall we say eight figures? Nine?
Churchill was edited.
The original quote was “mystery, wrapped inside an enema”, then something something something, wrapped up like a douche in the rumor of the night.
I thought “The Fly” is a RIDDLE, wrapped in a mystery, inside an enigma.
Maybe ‘The Time Machine’ is the key.
@ Shortbus – My account is 8 figures and I stay 50%+ cash frequently in a market like this.
When major disconnects happen, you need to be able to trade size and rotate back out to re-load for the next one. Case in point – the bank pukage mid-july, the materials pukage last 2 weeks.
I recycle capital frequently.
How about the Florida rainfall?
How many of those abandoned/foreclosed/unfinished condo’s and homes are being eaten by mold and trashed by the weather?
Florida is fucked
Fly, you haven’t laser beamed any blogs, in like over a year. Have you lost your nerve?
Fly,
They can make cheese forever as they own the cheese making machines. Think about the alignment with their interests of borrowing wheels of cheese from others and paying them back with inferior future cheese cheapened by inflation…why wouldn’t they want that? It’s the ’70s all over again…borrow now and use inflation to repay with depreciated currency…fuck it we’ll just print more!!!
I am stuck in Dallas, American couldn’t find pilots. They are bringing cots. I hate airlines and hope oil goes to 300 to put all those fuckers out of biz. Thank you and good night.
RUSSIA IS BACK
By George Friedman
On Sept. 11, 1990, U.S. President George H. W. Bush addressed Congress. He spoke in the wake of the end of Communism in Eastern Europe, the weakening of the Soviet Union, and the invasion of Kuwait by Saddam Hussein. He argued that a New World Order was emerging: “A hundred generations have searched for this elusive path to peace, while a thousand wars raged across the span of human endeavor, and today that new world is struggling to be born. A world quite different from the one we’ve known. A world where the rule of law supplants the rule of the jungle. A world in which nations recognize the shared responsibility for freedom and justice. A world where the strong respect the rights of the weak.”
After every major, systemic war, there is the hope that this will be the war to end all wars. The idea driving it is simple. Wars are usually won by grand coalitions. The idea is that the coalition that won the war by working together will continue to work together to make the peace. Indeed, the idea is that the defeated will join the coalition and work with them to ensure the peace. This was the dream behind the Congress of Vienna, the League of Nations, the United Nations and, after the Cold War, NATO. The idea was that there would be no major issues that couldn’t be handled by the victors, now joined with the defeated. That was the idea that drove George H. W. Bush as the Cold War was coming to its end.
Those with the dream are always disappointed. The victorious coalition breaks apart. The defeated refuse to play the role assigned to them. New powers emerge that were not part of the coalition. Anyone may have ideals and visions. The reality of the world order is that there are profound divergences of interest in a world where distrust is a natural and reasonable response to reality. In the end, ideals and visions vanish in a new round of geopolitical conflict.
The post-Cold War world, the New World Order, ended with authority on Aug. 8, 2008, when Russia and Georgia went to war. Certainly, this war was not in itself of major significance, and a very good case can be made that the New World Order actually started coming apart on Sept. 11, 2001. But it was on Aug. 8 that a nation-state, Russia, attacked another nation-state, Georgia, out of fear of the intentions of a third nation-state, the United States. This causes us to begin thinking about the Real World Order.
The global system is suffering from two imbalances. First, one nation-state, the United States, remains overwhelmingly powerful, and no combination of powers are in a position to control its behavior. We are aware of all the economic problems besetting the United States, but the reality is that the American economy is larger than the next three economies combined (Japan, Germany and China). The U.S. military controls all the world’s oceans and effectively dominates space. Because of these factors, the United States remains politically powerful — not liked and perhaps not admired, but enormously powerful.
The second imbalance is within the United States itself. Its ground forces and the bulk of its logistical capability are committed to the Middle East, particularly Iraq and Afghanistan. The United States also is threatening on occasion to go to war with Iran, which would tie down most of its air power, and it is facing a destabilizing Pakistan. Therefore, there is this paradox: The United States is so powerful that, in the long run, it has created an imbalance in the global system. In the short run, however, it is so off balance that it has few, if any, military resources to deal with challenges elsewhere. That means that the United States remains the dominant power in the long run but it cannot exercise that power in the short run. This creates a window of opportunity for other countries to act.
The outcome of the Iraq war can be seen emerging. The United States has succeeded in creating the foundations for a political settlement among the main Iraqi factions that will create a relatively stable government. In that sense, U.S. policy has succeeded. But the problem the United States has is the length of time it took to achieve this success. Had it occurred in 2003, the United States would not suffer its current imbalance. But this is 2008, more than five years after the invasion. The United States never expected a war of this duration, nor did it plan for it. In order to fight the war, it had to inject a major portion of its ground fighting capability into it. The length of the war was the problem. U.S. ground forces are either in Iraq, recovering from a tour or preparing for a deployment. What strategic reserves are available are tasked into Afghanistan. Little is left over.
As Iraq pulled in the bulk of available forces, the United States did not shift its foreign policy elsewhere. For example, it remained committed to the expansion of democracy in the former Soviet Union and the expansion of NATO, to include Ukraine and Georgia. From the fall of the former Soviet Union, the United States saw itself as having a dominant role in reshaping post-Soviet social and political orders, including influencing the emergence of democratic institutions and free markets. The United States saw this almost in the same light as it saw the democratization of Germany and Japan after World War II. Having defeated the Soviet Union, it now fell to the United States to reshape the societies of the successor states.
Through the 1990s, the successor states, particularly Russia, were inert. Undergoing painful internal upheaval — which foreigners saw as reform but which many Russians viewed as a foreign-inspired national catastrophe — Russia could not resist American and European involvement in regional and internal affairs. From the American point of view, the reshaping of the region — from the Kosovo war to the expansion of NATO to the deployment of U.S. Air Force bases to Central Asia — was simply a logical expansion of the collapse of the Soviet Union. It was a benign attempt to stabilize the region, enhance its prosperity and security and integrate it into the global system.
As Russia regained its balance from the chaos of the 1990s, it began to see the American and European presence in a less benign light. It was not clear to the Russians that the United States was trying to stabilize the region. Rather, it appeared to the Russians that the United States was trying to take advantage of Russian weakness to impose a new politico-military reality in which Russia was to be surrounded with nations controlled by the United States and its military system, NATO. In spite of the promise made by Bill Clinton that NATO would not expand into the former Soviet Union, the three Baltic states were admitted. The promise was not addressed. NATO was expanded because it could and Russia could do nothing about it.
From the Russian point of view, the strategic break point was Ukraine. When the Orange Revolution came to Ukraine, the American and European impression was that this was a spontaneous democratic rising. The Russian perception was that it was a well-financed CIA operation to foment an anti-Russian and pro-American uprising in Ukraine. When the United States quickly began discussing the inclusion of Ukraine in NATO, the Russians came to the conclusion that the United States intended to surround and crush the Russian Federation. In their view, if NATO expanded into Ukraine, the Western military alliance would place Russia in a strategically untenable position. Russia would be indefensible. The American response was that it had no intention of threatening Russia. The Russian question was returned: Then why are you trying to take control of Ukraine? What other purpose would you have? The United States dismissed these Russian concerns as absurd. The Russians, not regarding them as absurd at all, began planning on the assumption of a hostile United States.
If the United States had intended to break the Russian Federation once and for all, the time for that was in the 1990s, before Yeltsin was replaced by Putin and before 9/11. There was, however, no clear policy on this, because the United States felt it had all the time in the world. Superficially this was true, but only superficially. First, the United States did not understand that the Yeltsin years were a temporary aberration and that a new government intending to stabilize Russia was inevitable. If not Putin, it would have been someone else. Second, the United States did not appreciate that it did not control the international agenda. Sept. 11, 2001, took away American options in the former Soviet Union. No only did it need Russian help in Afghanistan, but it was going to spend the next decade tied up in the Middle East. The United States had lost its room for maneuver and therefore had run out of time.
And now we come to the key point. In spite of diminishing military options outside of the Middle East, the United States did not modify its policy in the former Soviet Union. It continued to aggressively attempt to influence countries in the region, and it became particularly committed to integrating Ukraine and Georgia into NATO, in spite of the fact that both were of overwhelming strategic interest to the Russians. Ukraine dominated Russia’s southwestern flank, without any natural boundaries protecting them. Georgia was seen as a constant irritant in Chechnya as well as a barrier to Russian interests in the Caucasus.
Moving rapidly to consolidate U.S. control over these and other countries in the former Soviet Union made strategic sense. Russia was weak, divided and poorly governed. It could make no response. Continuing this policy in the 2000s, when the Russians were getting stronger, more united and better governed and while U.S. forces were no longer available, made much less sense. The United States continued to irritate the Russians without having, in the short run, the forces needed to act decisively.
The American calculation was that the Russian government would not confront American interests in the region. The Russian calculation was that it could not wait to confront these interests because the United States was concluding the Iraq war and would return to its pre-eminent position in a few short years. Therefore, it made no sense for Russia to wait and it made every sense for Russia to act as quickly as possible.
The Russians were partly influenced in their timing by the success of the American surge in Iraq. If the United States continued its policy and had force to back it up, the Russians would lose their window of opportunity. Moreover, the Russians had an additional lever for use on the Americans: Iran.
The United States had been playing a complex game with Iran for years, threatening to attack while trying to negotiate. The Americans needed the Russians. Sanctions against Iran would have no meaning if the Russians did not participate, and the United States did not want Russia selling advance air defense systems to Iran. (Such systems, which American analysts had warned were quite capable, were not present in Syria on Sept. 6, 2007, when the Israelis struck a nuclear facility there.) As the United States re-evaluates the Russian military, it does not want to be surprised by Russian technology. Therefore, the more aggressive the United States becomes toward Russia, the greater the difficulties it will have in Iran. This further encouraged the Russians to act sooner rather than later.
The Russians have now proven two things. First, contrary to the reality of the 1990s, they can execute a competent military operation. Second, contrary to regional perception, the United States cannot intervene. The Russian message was directed against Ukraine most of all, but the Baltics, Central Asia and Belarus are all listening. The Russians will not act precipitously. They expect all of these countries to adjust their foreign policies away from the United States and toward Russia. They are looking to see if the lesson is absorbed. At first, there will be mighty speeches and resistance. But the reality on the ground is the reality on the ground.
We would expect the Russians to get traction. But if they don’t, the Russians are aware that they are, in the long run, much weaker than the Americans, and that they will retain their regional position of strength only while the United States is off balance in Iraq. If the lesson isn’t absorbed, the Russians are capable of more direct action, and they will not let this chance slip away. This is their chance to redefine their sphere of influence. They will not get another.
The other country that is watching and thinking is Iran. Iran had accepted the idea that it had lost the chance to dominate Iraq. It had also accepted the idea that it would have to bargain away its nuclear capability or lose it. The Iranians are now wondering if this is still true and are undoubtedly pinging the Russians about the situation. Meanwhile, the Russians are waiting for the Americans to calm down and get serious. If the Americans plan to take meaningful action against them, they will respond in Iran. But the Americans have no meaningful actions they can take; they need to get out of Iraq and they need help against Iran. The quid pro quo here is obvious. The United States acquiesces to Russian actions (which it can’t do anything about), while the Russians cooperate with the Unit ed States against Iran getting nuclear weapons (something Russia does not want to see).
One of the interesting concepts of the New World Order was that all serious countries would want to participate in it and that the only threat would come from rogue states and nonstate actors such as North Korea and al Qaeda. Serious analysts argued that conflict between nation-states would not be important in the 21st century. There will certainly be rogue states and nonstate actors, but the 21st century will be no different than any other century. On Aug. 8, the Russians invited us all to the Real World Order.
Mike,
My attention span is way too short for a monster post like that. Perhaps a link will do.
Airlines Suck …. Ride the Rails!