Voltron's economics blog. Started in Iraq in 2007 as the "Gamblers Anonymous Support Group" email list.
Sunday, April 18, 2010
SEC charges Goldman Sachs
Voltron says: I knew years ago about the fraud and deceit in the mortgage and mortgage derivatives market but, I have to admit I was surprised that some CDOs were actually intentionally structured to fail while being marketed as Triple-A good paper. I knew that people were betting against them, but this is even worse than I ever imagined. This has all come to the surface in the last couple of weeks, and already there is an SEC action against Goldman Sachs. Simultaneously financial reform legislation is being drafted, hearings are being held and an avalanche of option arm mortgages made at the peak of the bubble are about to have interest rate resets. I think Wall St is going to start yanking on the leash . . . whenever the status quo is threatened the stock market and house prices will go down and interest rates and oil prices will go up. The government may take Goldman down, but they are not going to go quietly . . . they'll drag the economy down with them . . . and somehow profit from it.
I've adjusted my forecast (right panel of the blog). It may be time to start getting short, while you can.
Note: Does not include Medicare, Medicaid or Social Security.
This is not an offer to buy or sell securities in any jurisdiction. This blog is for informational purposes only. I do not give legal, tax or accounting advice of any kind. I am not a licensed financial advisor. I make no representations as to the suitability of any transaction at any time. In fact, you should ignore everything I say.
Voltron's Current Forecast
Wall Street and the government are about to engage in battle and recriminations in the face of a massive wave of foreclosures. Wall Street will start yanking the leash, causing stock market crashes whenever the status quo is threatened.
The Fed's announcement that they are going to print a Trillion dollars and use it to buy debt is the proverbial "crossing of the Rubicon" The US Dollar is toast. I think the trigger will be some of the smaller holders of Treasurys (Singapore, for example) trying to dump their holdings before China does. This will cause a panic stampede out of Treasurys which will destroy the dollar.
Wells Fargo are liars. They have over 150 Billion in worthless home equity loans and a Trillion dollars in off-balance sheet liabilities.
Do not abuse leverage. The Fed is going to spend limitless amounts of money to pound interest rates and Gold prices into appearing "normal" when in fact they are on the verge of exploding. The tremendous volatility will shake out leveraged players.