From what I understand of this bill, lenders will be able to dump their worst mortgages most likely to default on the books of freddie and fannie at a mere 10% discount of the current appraisal of the home.  When fannie/freddie pay 90% of the appraised value of the home to bail out the lenders and housing prices continue to decline anyway (interest rates will rise, further depressing home values) the tax payer will once again get raped as the quasi government agencies have no choice but to realize the losses.  Essentially, we the tax payer get all of this toxic paper and foot the bill instead of the people who made these loans to begin with.  We’ll be taxed through inflation as the federal reserve will have to create more money as debt to bail out fannie/freddie.  When is this going to end?  I don’t know.  I suppose the easiest way to pay back debts to foreign holders of US treasuries is to print money.  Eventually, foreigners holding on to dollars are going to dump them.  They find there way back here, as they will be the only place where they can be redeemed with actual goods (we’ll be so poor from rising costs of goods, we’ll be forced to sell our assets to foreigners).  It’s already happening now.

http://youtube.com/watch?v=vVkFb26u9g8

http://youtube.com/watch?v=vVkFb26u9g8

http://youtube.com/watch?v=kTv1fo6sKmo

http://youtube.com/watch?v=3qicabStQkc

http://youtube.com/watch?v=7kpSbkaD4tM

Required reading

http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212

Illuminati symbolism

http://www.youtube.com/watch?v=nRlDlAkonJU&feature=related

The housing bail out passed this Saturday as the senate had a rare weekend session.  Unfortunately, this is not a problem that throwing more money at can solve.  There’s just one thing I’d like to ask Mr. Paulson.  How does giving the federal reserve an empty line of credit to the US treasury supposed to put confidence back into our financial markets?  If anything, such drastic measures being taken monied interests that run this country would instill less confidence. 

The moral hazzard created by this legislation is unprecedented.  What’s going to happen is that the loans that are most likely to default are going to be written down and sold at 90% appraised value to freddie/fannie (read:  the tax payer).  This benefits the lender big time as they no longer have to continue writing down over valued assets and the government puts in a bottom for them regardless of what the property is actually worth.  Yes, the government will set the back stop for the lenders, but home values will continue to decline, and the quasi government agencies that bought all of this toxic paper from the very people who made these loans to begin with will have no choice but to realize the losses.  Of course, this will be paid by tax payer through inflation as the federal reserve has to create new debt to pay the existing debt.  Dollars are toxic people.  Trade them for hard assets now unless you can find stocks that can beat the real rate of inflation (there are a few good ones out there).

As for how I see this week playing out, it all depends on what happens Monday. If we have a good day and the S&P can get back to the critical 1260 area, we could be all set for a continuation of the rally. With GM reporting earnings before the bell Tuesday and the S&P/Schiller Home Price Index coming out, this bottom that we are retesting may not hold and could send us back down big time, with financials leading the way. I just don’t know man, but I’m betting on some major disappointments from GM weighing on the market, much like Ford did last Thursday. Add in some bearish housing numbers, and this rally could be dead in the water.  Then again, this socialist lender bail out might spark the market to rally and buy financials that can foot their bad paper to freddie/fannie.

How I long to have a place of my own, away from the fakeness of the city and the yuppyness of the suburbs.  A place where things move slower, days are more enjoyable, and life and people are more genuine.  A place where people live and let live.  A place where you are truly free.  Growing up in the Texas hill country, I’ve seen and experienced more beautiful things than I ever deserved to.  From camping on the Guadalupe, to fishing the Llano, to swiming Lake Travis, to drinking a cold one at Lukenbach, to being on an absolute jewel of a hunting lease (an understatement at that.  more to come on that later.), I’ve been so blessed.  And yet my heart longs for a place of my own, away from the suburban expansion that threatens the very hill country I speak so fondly of.  

I know I’ve got alot of years ahead of me to make it happen.  I guess patience is something I’ve always lacked.  I mean, here I am taking 9 hours of classes this summer and working full time when people my age should be out enjoying themselves.  Not that I’m complaining, as this is a choice I’ve made for myself so I can move foward with my life that much quicker.  Still I wonder whether it’s worth it or not.

But let’s head back to what I’m dreaming of.  I’d love to be able to shut off all the lights in the house and not see another light other than the stars above.  I’d love to be able to drive up to the highest point of my property, flip the tail gate down, stretch out with a sleeping bag, and have my rifle, a cold six pack, my pet coyote (how cool would it be to have a pet coyote?) by my side.  I’d love to be able to look off my front porch to an endless field of bluebonnets in the spring.  I’d love to have a spring fed creek to relax next to in those dog days of summer.  I’d love to have a hot tub to relax in during those cold winter nights. 

What I really want is the freedom that land ownership offers.  Money comes and money goes, but land is real and you can survive through thick and thin with it.  Being able to support yourself and your family no matter what happens to the rest of the world is what real life is all about.  Alot of people are living in a matrix world where the illusion of freedom exists.  Just how free are you though, if you rely on someone else for all of your needs?  The chains of bondage are in place and slowly tightening.  Reality will be a harsh wake up call to the people who refuse to acknowledge that the chains even exist (more to come on this subject on a later date).   

So how do you play this hand if you are a trader or investor.  Since I’m a little bit of both, I’ll tell you and let you make up your mind.  From a trading stand point, I’d say it’s time to short oil.  The bull rush wasn’t quite able to break the $150 mark which would have set off a bigger bull frenzy.  Now that we are at $135, (unless the bulls get some major help in the next couple of day), oil will sell off as people take their profits and the shorts will move in, creating downward pressure.  I see short term upside potential as financials got way over sold during the freddie/fannie hysteria.  The ETF XLF will give you broad exposure to the financials.  I expect possibly a 25% upside.  I’d take profits after that kind of gain, but it’s really up to you on whether or not to hang onto it much longer. 

As an investor, I’d be waiting for some more correction in the oil/gold/commodities before adding more to my long positions.  I will be buying gold if/when it slips below $900 an ounce.  I sincerely believe it will be off to the races to $1200-$1400 an ounce by the end of this year, and will continue to perform well over the next 5-8 years.  With the weakness in oil, expect some major corrections in the prices of oil/natural gas stocks.  Don’t worry though, they will bounce back.  It may take longer as we are coming out of summer and into the fall (less demand for oil), but they will continue to perform strong over the next few years. 

I’ll let yall know what I’m doing once we get to the height of this bounce and idiots think that 11,000 was the bottom and the credit/dollar/oil crisis is behind us.  Believe it or not, there are alot of people out there who will see the Dow coming back and believe we actually hit a bottom here.  Remember, as a trader, be a contrarian.  As an investor, stick with the macroeconomic fundamentals. 

Don’t get me wrong folks, we are in a secular bull market in commodities.  That being said, crude is bound to correct sooner or later and I see it dropping in the $120 range barring an attack on Iran or a major hurricane in the gulf.  I think the market has gotten ahead of itself here.  Often some of the biggest corrections happen in bull markets, so don’t let the drop in commodities get to you.  The dollar isn’t magically going to strengthen anytime soon and continue to buy into weakness here folks.

Hedge your long position in energy stocks by picking up an oil refiner.  The margins for these companies have been getting squashed with the dramatic rise in crude compared to gasoline.  Valero (VLO) and Tesoro (TSO) are a couple of my picks.  They’ve both been hammered and will rebound nicely over the next few months if we see a correction in the price of crude.

If Gold drops back below $900 an ounce, you better get in.  Historically, an ounce of gold trades right around 10 times the price of crude.  With crude droping to $120 and bears dominating the stock market, expect to see some money moving to the safety of gold.  It is my belief that we’ll see $1200 gold by the end of this year.  Maybe even higher depending on how much bad debt is still floating around the balance sheets of banks.  The fed is in no position to raise (although that’s what they should be doing).  Expect more downside to the dollar as the Fed desperately tries to save bankrupt banks.  All of this makes me bullish on gold.

Which brings me to my next point.  Stay short the financials people.  Freddy Mac and Fannie Mae are the weakest, but they are bad across the board.  They have a ton of deleveraging to go and a ton of bad debt to write off.  Helicopter Ben has cut rates to 2% and they still can’t get out of trouble.  The Fed is practically giving away money and they find themselves in more and more trouble.  And don’t buy a home as real estate prices still have a long way to come down (unless you are in Texas, a tax/business friendly state that is attracting people like flies on road kill).  It almost sucks that we are such a booming state.  The influx of Californians will someday destroy this once great republic. 

Commodities baby.  Sinking dollar + increasing global demand = hedge against failing government fiat currency, and a chance to profit.  Short term, they might go through a pull back, but don’t let that discourage you.  We haven’t begun to see the inflationary effects from helicopter Ben’s rate cuts.  This money that is flowing into commodities is merely the remaining wealth that didn’t get destroyed in the housing collapse.  Two stocks I particularly like are the uranium explorer URZ and oil exploration/producer GTE. 

I also like corn.  I don’t think the market has fully priced in the effects of the recent floods in the nation’s heartland.  With the government paying our farmers to produce corn for our gas tanks, other commodities will continue to rise due to more farmers ditching soybeans, wheat, ect. for corn. 

Also, short the financials.  They’ve still got alot of bad debt on the balance sheets and are understating it because they are trying to raise capital like crazy right now.  It’s a bear market folks and I expect to see the dow at 10,000 by the end of this year.  With socialists prospects like McCain or Obama, it’s a lose lose situation for the greater economy, but there is and always will be a bull market somewhere.  Oh, and I’d recommend having about $1,000 stashed away at home in case all hell breaks loose and more banks start to drop.  Also, buy some precious metals while they are still relvatively cheap.  There’s going to be one heck of a bull market coming down the road for them.

  The fed is in no position to raise rates, but eventually they are going to have to, to fight off inflation.  This rise will further drop house prices, hurt banks with tons of mortgage assets, force more forclosures, and tighten credit.  All of these things will weigh on the economy in 2009.  We could go through a period worse than the late 1970’s. 

First, there is no competition or incentive to boost performance if there is a permanent subsidy in place for it.  In a supposed “free market” society, competition is the very thing that produces innovation, new ideas, greater performance, and a better standard of living.  American companies are now looking overseas for the best and brightest because we don’t produce them over here at the pace of the Chinese.  Perhaps it’s time to bring some free market reform the the education arena. 

Second, the government dictates the curriculum of the class room (who actually learned anything about how the federal reserve functions, or how the bureaucrats waste your tax dollars in order to fatten up their own wallets?).  One of Marx’s ten planks of communist revolution was centralized control of education.  What exactly are our children learning in the class room?  Propaganda?  Are we being intentionally dumbed down so we don’t see the very chains that have been placed around us? 

Third (which kind of ties in with point #2), you’ll never see a school voucher/choice program in this country because the people in power have everything to lose from one being put in place.  Alan Keyes says it all right here with this quote. 

“Do we really think that a government-dominated education is going to produce citizens capable of dominating their government, as the education of a truly vigilant self-governing people requires?” 

The answer, well it’s a no brainer.  Of course not.  These bureaucrats in DC have a vested interest in keeping you dumbed down.  They want to take everything you have from you, redistribute an amount just small enough to keep you voting them back into office, expand the size, scope, and power of government, reap the harvests of your own labor, get rich off your hard earned dollar, and pretend they are doing you a favor by creating more and more welfare programs to go along with every other program/subsidy already in place.  If they let the education system fall into the hands of self governing individuals, the power would shift back to the people, and we’d control our government instead of it being the other way around. 

This is why the recent California home schooling ban is a threat to the liberty of this entire country.  To limit a parent’s right to teach their child what they wont teach them in the public schools in this country constitutes as fascism.  Make no mistake about it, these bureaucrats, despotic judges, bankers, and leftists involved at the various higher education facilities across this country have an agenda.  It’s time to pull yourself out of the matrix and free you mind from the things they are trying to teach you.  Question authority, think for yourself, free your mind, look at the principles this nation was founded upon, and look at what this nation has become.  The truth will set you free, and that truth is that throughout history, there has always been a small group of people looking to take advantage of the masses.   

Anyway, they knew just how much exposure they had to bad subprime debt, but failed to let investors know about it.  There are sharks all over wall street folks that will take you for everything you have if you aren’t careful.  That’s why I recommend that you as an individual should know at all times just what you are invested in, play it safe until you know what you are doing, have a game plan, and always remember that it is better to preserve capital and live to play another day instead of trusting anyone you see on TV or on wall street and losing everything but the very shirt on your back. 

That being said, the feds are just on a witch hunt.  The real criminals are Greenspan, Bernanke, and the politicians that empower the banking cartel known as the federal reserve.  This subprime crisis never would of occured if they just let markets correct and stopped creating more money to stop the dot com bubble bursting recession. 

The moral hazzard is gone in this country.  Banks don’t lose under helicopter Ben.  We just socialize the losses of these wall street investment banks via the most regressive of taxes.  Inflation is destroying the middle class.  The sad part is, most of these people that the bureaucrats and federal reserve are destroying want to surrender even more power via more taxation and more regulation (ie. market manipulation in favor of the well connected).  This isn’t a free market.  This is socialism for the elite.