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Six percent eh? That’s damn expensive money – something like 30 times the official “overnight” rate to borrow. In addition he got warrants to buy 700 million shares at $7.14 each, which are (at this writing) about 75 cents each in the money. Oh, and there’s no lock-up period on those either.
Can I ask an inconvenient question on the latter? 447 million shares have traded hands on BAC this morning thus far. Were any of them shorted against the box by Berkshire, given that there are no apparent restrictions on his disposition of those warrants?
http://www.fedupusa.org/2011/08/wheres-the-retraction-pumpers-bank-of-america/
With the economy still very weak, more stimulus is certainly needed. However just because the U.S. economy desperately needs a jolt of energy does not mean that the Fed will supply it. The topic of Bernanke’s 10am ET speech tomorrow says it all. He plans to speak about the “near and long term prospects for the U.S. economy.” In 2010, the topic of his speech was “The Economic Outlook and the Federal Reserve’s Policy Response.” The big difference between this year and last is that we are now talking about inflation and not deflation risks. Recent economic data has been mixed but at the end of the day, the performance of the U.S. economy has been subpar and for this reason, we do not rule out slightly more aggressive action by the Fed.
From the most flimsy to the most aggressive, here are 5 of the Fed’s options. We believe that the central bank will opt for either an ambiguous pledge to do all that is necessary with no concrete commitment, extend their 2013 low rates pledge to the securities portfolio or sell short term bonds and buy longer term bonds to "twist" the yield curve.
1. “We are also worried” – If the Fed opts to do nothing more than express their concern about the economy and give an ambiguous pledge to do all that is necessary, investors will be sorely disappointed.
2. Extends 2013 pledge to Securities Portfolio – When the Fed met earlier this month, they tweaked the extended language sentence of their FOMC statement to say that the Fed Funds rate would remain at exceptionally low levels at least through mid 2013. They can opt to extend this pledge to their securities portfolio which leaves open the door to QE3 without explicitly initiating it.
3. Operation Twist – The Fed could also bring back a tool used in the 1960s that twisted the yield curve by selling short term bonds and buying longer term bonds. This would drive short term yields up and long term yield down which effectively extends the maturity of their securities portfolio without increasing the balance sheet. This would be a more aggressive action than another language tweak (see #2).
4. Reduce Interest on Reserves to ZIRP – The central bank could also cut the interest paid on reserves from 0.25 percent to 0 percent or cut swap line rates in order to bring down the tremendous amount of liquidity.
5. Another Round of QE – The most aggressive options would be for the Fed to introduce another round of stimulus but given the level of inflation and the criticism of QE2, this option may be the least likely. One other possibility is inflation targeting but this “nuclear option” is so unlikely that it is not allocated its own category.
http://www.fx360.com/commentary/kathy/6024/usd-what-to-expect-from-jackson-hole.aspx
Regardless of the motives, what's done is done. He will probably make billions on the sweet deal just like with Goldman Sachs. The markets surged higher on the news. However, an over bought short term market, a master resistance level tagged and a speech by Federal Reserve Chairman Ben Bernanke all caused profit taking from the opening gap higher. The markets are down 1% across the board after being higher by 1%.
Tomorrow, Ben Bernanke gives his speech at Jackson Hole. Most analysts are saying the markets will drop sharply and make new lows. Their reasoning is that he will not directly announce any new major job creating, quantitative easing policy, thus the market will be disappointed. While this is a possibility, when everyone is saying one thing, it is often prudent to look for the other. Ben Bernanke is well aware that the markets are looking at him under a microscope. Whether or not the markets see some selling, it is unlikely the markets will head directly to the recent lows and lower. It is very possible to see a rally. Should the recent rally continue in the coming weeks, Bank of America – Buffet news tells us more storm clouds are on the horizon. Be prepared.
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Here are a few key reasons that tell us this deal is forecasting problems ahead.
1. It was just a few day's ago that Bank of America stated that they did not need any capital, now we know that was not true. The second largest bank in the United States needed capital and they needed it bad. We can only wonder how long this deal will help to lift the market. Just look at 2008, this could be a repeat of things to come.
2. The Warren Buffett investment in BAC stock also tells us that the European banks are not the only banks in serious trouble. The leading banks in the United States are in serious trouble as well. If there is one cockroach there is usually a million.
3. Warren Buffett has made a career of investing in troubled companies for the sake of the economy. The last time he made an investment such as this one was back in 2008 with Goldman Sachs Group Inc.(NYSE:GS). It is important to remember that Goldman Sachs was bailed out by the tax payer in what was called the TARP program. Buffett knows that the U.S. taxpayer will bail him out if he is wrong and Bank of America stock does go belly up.
Tomorrow, the Federal Reserve Chairman Ben Bernanke will speak in Jackson Hole, Wyoming. More pressure than ever will be on Chairman Bernanke to try and say something to help prop this market up. It was just one year ago that Chairman Bernanke signaled to investors that he would do another round of quantitative easing coined QE-2. That QE-2 program just ended in June and it is unlikely that Chairman Bernanke will announce another round of quantitative easing.
Many traders seem to be taking profits off the table this morning since they know that Bank of America was in worse shape then originally thought. We can only wonder what will be said tomorrow and more importantly how the market will react after the Bernanke speech.
Files declassified in America have revealed covert public relations and lobbying activities of Israel in the U.S.
The National Archive made the documents public following a Senate investigation. They suggest Israel has been trying to shape media coverage of issues it regards as important.
You can download the files from the web-site of the Institute for Research on Middle Eastern policy. And we can cross to Washington now and talk to Grant F. Smith who is a director at that Institute.
http://tv.globalresearch.ca/2011/08/declassified-massive-israeli-manipulation-us-mediaTo give you an indication of how absurdly small a number even $20 billion is relative to the sums of money the banks made unloading worthless crap subprime assets on foreigners, pension funds and other unsuspecting suckers around the world, consider this: in 2008 alone, the state pension fund of Florida, all by itself, lost more than three times that amount ($62 billion) thanks in significant part to investments in these deadly MBS.
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Those leading the charge for “fiscal consolidation” now seem positively shocked by the violent gyrations in the stock market, as expectations rapidly seem to be shifting toward an “L” shaped recovery or worse – a possible global recession. To those of us on this blog who have consistently downplayed the prospects of global recovery in the midst of widespread private sector AND public sector retrenchment, none of this sadly comes as a surprise. We are, as Bill Mitchell noted recently, experiencing a “self-inflicted catastrophe”, largely because of dangerously destr............
