It Goes to Vapor from here…

Commentary by Leane Roffey Line, PhD.

Many of you already know me as a quant fi mathhead nerdy “post-menopausal intellectual woman voter”. You may also know that I have had nearly forty years experience with the mathematics of things such as markets, actuarial studies, engineering studies in computational biology, and other arcana. I also was a pretty active trader at one time, when I did have money, and in particular know more than a little bit about commodities.

Here is my take on what is happening and why, concerning this credit crisis, and why I’m advocating no fast action.

 I am going to share with you all here a street level example of exactly what a con job is being played on the American pepul, and this is just one scenario that played out since the beginning of this credit crisis. (In fact, several people at Merrill lost their jobs, fired over a year or more BEFORE the crisis began last summer for saying that Merrill quit taking on any more CDOs (collateralized debt obligations, the “big bucket” here)).

Financial firms have been systematically destroying capital, writing it down throughout this credit crisis they manufactured, wiping down their own book values. They went bankrupt, literally, and recapitalized themselves at the same time, without having to file Chapter 11, swinging deals with the likes of Singapore (Temasek, the sovereign wealth fund of the gov. of Singapore, has bought nearly 10 billion of Merrill) and other people with money. You’ve all seen who has bought whom and witnessed in the last few weeks a literal shift of “assets” from certain firms to certain other firms. The risk and hedging strategies of everyone concerned here should have been under FBI investigation a very long time ago. But, because we have an adminstration whose players run their government like some tower defense game, we are now in the middle of one of the largest con jobs I’ve ever seen in all my years.

Every firm out there at the core of this financial crisis was “levered up” to the gills over a year ago. Any CDOs sold to hedge funds, depending on how the deal was structured, could come back onto balance sheets by year-end. Or not. This includes aforementioned CDOs, credit swaps (which are a little like musical chairs), arbitrage and hedge funds, just about anything “cool” or “novel” that made good old retail brokerage look boring.

The point is, the capital has been effectively shifted and transferred, most of it offshore already, and the American taxpayer’s feet would have been held to the fire, all Bushco had to do was push a few panic buttons. Credit Cheney here. Not just taxpayers, but corporate bond holders, stockholders etc. depending on how far the shares fell, would be sacrificed in the return to VAPOR.

I submit to you that these people deliberately and with intent destroyed their own capital base in an attempt to feather their own nests. I do not believe, in my heart of hearts, that Poulson, Bernanke, or anyone in congress can fully conceive of the depth and breath of this swindle, let alone properly assess either the amount of money involved here or the effect it will have on the economy.

I say, let the credit market freeze. Take the hit. Let the stocks fall. Do nothing. Take a few days to breath. I am a technical trader. I say: The trend is the trend until the end, and then, we must move to pick up the pieces with whatever intellectual capacity is left in place after the dust settles.

The more the Repubs and Bushco push for immediacy the less likely I would be to acquiese to their request. Whatever they have hanging in the balance here I don’t believe the American people should pay for. The American people will however have to pay the price for electing these goons in the first place, I can’t do anything about that. I am sorry for your loss, if you lose something. We have already lost everything we have, so I’m afraid I’m out of sympathy chips at the moment. America FIRED me long ago, now I’m FIRING back.

NO BAILOUT.

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