End of the End

Yesterday was the "End of the End" of the real foundation of the subprime+recession risk for the economy. "Battleship Ben" finally ended the dithering and brought his big guns to bear. The Fed rate cut to 3% in the overnight rate to bring it to the low end of the "neutral" zone, possibly even to the stimulative area as these zones aren't marked with certainty. And the statement said that the shelling will continue until risks to economic activity cease.

Fed rate cuts aren't a laser beam - continued low rates are needed over a period of time to let people obtain or save real cash from those lower rates. Refinancings and lower monthly home equity loan rates will pump huge amounts of cash into the pocket of the common man. Just like the US Navy learned in WW II on the islands, shelling of enemy positions requires extended, thorough hammering with the big 14" - 16" shells to reduce resistance. So Battleship Ben's cuts of last week and this week and the FOMC statement of continued shelling is what was needed.

That doesn't mean the beefers won't keep trying, as they did late yesterday PM. Their modus operandi is getting clearer. Short a rip and then put out rumors of more losses. They are even openly manipulating the press to create fear in operations reminscent of the 1920s. Anyone who has read that great trading book, "Reminiscences of a Stock Operator" can recognize their despicable tactics. For example, that fellow, Ackman, who runs a short pool - I'll just use the 1920s term - put out press releases to scare more people about bond insurers and to try to forestall investment in them.

These guys use double counting to get headlines. If a CDO has loans that realize losses, that's a ONE real loss. If a bond insurer insured a class of the CDO securities, there is still just ONE loss. It's just a matter of who bears it, either the actual holder of the class or the bond insurers. Press double counting is rampant - Babblevision doesn't bother checking or even asking these guys for facts before pumping our the rumors and charges. Battleship Ben mentioned the double counting in a recent speech.

If one has bothered to listen to conference calls of BAC or WB, for example, you would know that their year end marks looked through the CDO to the actual underlying loans and marked against them. Even if the bond insurance is zero , they have no significant further losses. That "fact" was both part of the company presentation and the subject of detailed analyst questions.

Also, the Fed lowering interest rates means that net interest income of these big banks is very positive and growing. That's a huge number for these banks with huge deposit bases.

So I think this is all over but the "mop up" operations. Those might take awhile and beefers might screech and more rich might panic, but the "End of the End" is here.

If the beefers knock stocks down, I'm a buyer.