GSE Woes and More Fed Easing Ahead by Frank Barbera

In one of the best articles of its kind Barbera explains how rising unemployment figures reveal how the US and the West are already in recession and how they are probably well on their way to a major depression. He goes on to reveal the differences between CDOs and CDS and their relationship with clarity and insight and he demonstrates how when significant CDOs go belly up the results will cause a systemic catastrophy for the US financial system and its main representative, the Dollar. In short, it's a enlightening read.

http://www.financialsense.com/Market/barbera/2008/0819.html

The CDO mess satirically exposed by the two Johns having "The Last Laugh"

It's brilliantly done and funny, too.

The banks are skating on very thin ice

To get a clue about just how deep banks may fall have a look at the links on the site with the link below. Banks are ready to sink under the weight of their CDOs. Jim Sinclair thinks that the credit default obligations will be the next big thing to hit the banks - and it looks like they already are.

Have a peak at this. It's the best argument I know for investing in gold and silver.

Press here



I'll be making several posts with notes on Captain Corelli's Mandolin over the next couple of weeks.

There's a panic in asset backed securities!

Investors use this market to hedge against these assets. It looks as if the underlying asset values are collapsing, particularly recently. It's a shocking chart.

Here


This article helps explain that chart.

Here

Is it any wonder that a number of banks in the US and around the world are having to write off huge chunks of their net worth. It looks as if they are only just beginning this process! Merrill Lynch had to admit to having to write off over $8 billion dollars the other day. Is that just the tip of the iceberg for this and other US and European banks?

CDOs
Are these devices(derivatives) a clever way to disperse risk or are they as Warren Buffet has said, “financial weapons of mass destruction”,that are poorly understood and perilous boosters of credit? "The Economist" print edition 19/4 2007

Gold and silver will be the main beneficiaries here.

British banks are in trouble!

The panic continued today with the British Government finally giving a guarantee to savers in Northern Rock this evening. Shareholders in Northern Rock will be left with huge losses. The 1.4 million savers with Northern Rock will have had their confidence shaken in the banking system. Late today the Alliance and Leicester lost around a third of its value on the British Stock Exchange. Bradford and Bingley were also hit hard. It looks as if we are at the beginning of a banking crisis and not at its end.

James Sinclair (America's "Mr Gold") thinks that the authorities in both the US and in Britain have not been forthright in informing the public about the extent of the problems in CDOs. Banks are not lending to one another for fear of exchanging toxic packages of loans. Liquidity is now at a premium. Sinclair added yesterday in a radio interview that what is happening in financial markets is the result of the paper mountain "shaking" in CDOs. What will happen when this mountain of unregulated debt falls will be catastrophic for everyone who has savings or are in debt.

Subprime loans for the car industry in the US is now in trouble and house prices are beginning to go into a tailspin on both sides of the Atlantic. It hardly needs adding that the many trillions of dollars in CDOs are based on home loans. No one knows how to value the CDOs. Even those packages that have value are now falling in value because the home loans on which they are based are becoming riskier every day!

So much for Anglo-Saxon models of finance that was recommended to anyone who would listen in Europe and the rest of the world.

Most people have yet to figure that gold is the safest place of refuge from the coming storm. Silver is a good bet, too. Shares in good equities of both can still be had for next to nothing. Soon, like gold, they will be unaffordable. "The Perfect Storm" has arrived and it will be somewhat like the tsunami that swept onto the beaches of Thailand just a few years ago.