Tuesday, June 16, 2009

Wall Street Has Unwittingly Sealed Its Own Fate With The TARP Repayments

“These repayments are an encouraging sign of financial repair.....”, Treasury Secretary Timothy Geithner June 9, 2009

Mark that date and those comments because if there is anyone more lost in the wilderness as a Treasury Secretary than Hank Paulson, it surely must be Timothy Geithner. The link to that post ridiculously comes from FinancialStability.gov - a web site that espouses financial oversight, stability and transparency. The Big Lie remains in full force. The ability to politicians to talk their way out of this situation has passed. Now it's time to walk the talk. We need some true leadership in Washington. Web sites with hollow rhetoric about the rule of law and nobility when what we see is corruption and cronyism won't solve anything.

We can be assured Wall Street and Washington have no idea what storms brew before them. Neither saw this crisis coming. Nary a single person on Wall Street that I am aware of wrote of a coming credit crunch or liquidity shocks. Ken Lewis, the CEO of Bank of America, just told us again late last week that no one could have seen this coming. And with those words, Ken Lewis is uttering the very future without even realizing it. But this time will likely be different - market forces will more than likely bury attempts to save the economy once the great satan has gained critical mass once again. It will. We foretold of the last crisis and the next crisis is in the making . And just as we foretold before the last crisis, there will likely be no time for policy makers to react.

Last week ten banks were given the all-clear to repay the TARP funds. With that I believe it's appropriate from much of my quantitative work to put many of these institutions on some sort of high risk watch. I wrote a week or so ago that I believed any Wall Street banks repaying TARP assets have a high probability of failure be it market-based or receivership. And, I believe this extremely under appreciated risk is so great that I'm moving it to a headline post. Most specifically I am very concerned with firms that are reliant on a substantial amount of Frankenstein finance and trading for their profits.

Even though I haven't shown any of my most proprietary analytical work on here, all of my posts are based on data. And that is why our macro calls have probably been the best in the blogosphere and better than any economist I am aware of. There is an incredible amount of hard work and thought that went into those analytics. Not opinion which is always free and easy. I don't really care about opinion. Opinions are everywhere. Opinions have cost me dearly and I learned from those mistakes. Fox News, CNBC, Time magazine, Politico, The Huffington Post or the local barber shop. There are thousands upon thousands of people willing to share their opinion. Data, if interpreted accurately, doesn't lie. Only people and their opinions do. And that is really what it comes down to. Interpretation. Because every person on earth has access to the same market, economic and trading data that I do. And only accurate interpretation of what the world is telling us separates those who will keep their money from those who will lose their money.

On that note, I am going to show you some very telling data that lends substantial credence to this post. Data that you won't see anywhere else. And I do mean no where else. It will change the way you look at this crisis whether you are a bull or a bear or just plain confused. I don't know if I will post it in July or August but it will get posted in that time frame. In the mean time, enjoy the return of Pax Globalia.
posted by TimingLogic at 7:43 AM