Here Comes TARP 2: Bank Of America Implodes, At $6.87, BAC CDS Up 20% To 260 bps As Bankruptcy Contemplated

With Bank of America investors finally realizing it is game over for the company as a going concern, at this point there are just two options for Brian Moynihan: the spin off of CFC as a bad bank, backstopped by the Fed, or, well, Chapter 11, which for a bank is essentially liquidation (and with CDS trading up 50 bps to 260 a bankruptcy seems increasingly inevitable). It also means that another TARP is on the way. And once America realizes that another several trillion have to be put into its insolvent banking sector, it will get quite violent. The biggest irony: it is AIG which takes down the financial system for the second time after its lawsuit against BAC filed last night kills Bank of America.

Watch Obama Convey The Teleprompter's Thoughts On the S&P Downgrade Live

Update: the meeting scheduled for 1:00 pm has been delayed until 1:30 pm.
The daily teleprompted appearance you have all been waiting for.

Nine-Year-Old Discusses Monetary Inflation and What Is Wrong with US Foreign Policy

Sunday, August 07, 2011 – with Anthony Wile

Jesse The Daily Bell is pleased to present this exclusive interview with a nine-year-old boy named Jesse.
Introduction: Jesse is a typical young boy who enjoys exploring ideas and concepts. He is an average student, who tends to enjoy recess more than doing classroom work. His teachers often say that Jesse is remarkably in tune with higher-level concepts – a trait that may have resulted from an overwhelming amount of exposure to free-market thinkers. One of those free-market thinkers was Harry Browne. Jesse knew Harry and even visited with him at his home in Tennessee shortly before he passed away. Additionally, Jesse has spent a lot of time with the well-known silver analyst David Morgan and his family. Last week's interview here at the Daily Bell was with Pat Gorman. He too is a friend of Jesse's, as is Terry Coxon, Ron Holland and Shawn Perger. Most recently this nine-year old boy read Richard Maybury's "What Ever Happened to Penny Candy?" After he finished reading the book, we decided to ask Jesse a few questions about the world around us. What follows is a completely unedited interview. All questions that were asked are included in the precise order in which they were asked.
A brief synopsis:
Daily Bell: Who is Ben Bernanke?
Jesse Wile: He is the man who runs the Federal Reserve.
Daily Bell: What is the Federal Reserve?
Jesse Wile: It's where the paper money is made. I think in a basement.
Daily Bell: Why do they have the ability to do that?
Jesse Wile: Because the Presidents give them the ability to make the money with machines.
Daily Bell: Why do they do that?
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Guest Post: It’s Time To Be Very Concerned About What’s Going On Behind The Scenes

Ancient Greek mythology tells the tale of Odysseus, the heroic king of Ithaca whose 10-year journey home after the Trojan War became one of the world’s most famous epics. At one point in the journey, his ship was heading straight for two deadly hazards– on one side was Scylla, a six-headed monster disguised as a giant rock, and on the other side was Charybdis, a sinister whirlpool born from the sea god Poseidon. The perils were close enough to pose an inescapable threat to ships passing through, forcing the captain to choose between the two evils. A Latin proverb from this story, “incidit in scyllam cupiens vitare charybdim” (he runs on Scylla, wishing to avoid Charybdis), is now “between a rock and a hard place” in modern English. This is exactly where the entire world finds itself right now. With confidence vanishing, markets panicking, and entire nations going bankrupt, ultimately there are no good solutions… and thinking people need to understand some simple truths about the situation...

Shocker: JPM Sees Gold At $2,500 By Year End

We though we had seen it all... Then JPM's Colin Fenton came out with a prediction of gold hitting $2500 by year end. That's right: JP Morgan... $2500...."Gold and sugar have potential to run a lot higher. It has been clear for weeks that the prompt CMX gold price has been building in a rising probability of a reflaring of financial crisis, gaining by 9.7% since June 30 as the MSCI World Equity index dropped by 10.1%. The correlation in daily price changes between these two assets has dropped to –0.09 from +0.29 over the prior year. Gold’s correlation against TIPS has doubled to 0.35 from 0.18. Against Italian and Spanish 5-year sovereign CDS prices, the gold correlation has moved to 0.27 and 0.32, from 0.07 and 0.04, respectively. Before the downgrade, our view was that cash gold could average $1800 per oz by year end. This view will likely now prove to be too conservative: spot gold could drive to $2500 per oz or higher, albeit on very high volatility." It is unclear if Blythe precleared this client note. But at this point it probably does not matter.

KABOOOM: BERKSHIRE HATHAWAY INC OUTLOOK TO NEGATIVE FROM STABLE BY S&P

More shortly. And yes, just as ZH predicted an hour ago.

Bank Of America Is Just The Start Of Paulson's Problems: Behold.... Citigroup

With Bank of America getting taken to the woodshed, we can only hope that Paulson managed to sell all of his stock in the name, or otherwise just like Bruce Berkowitz is organizing a call to defend Bank of America on Wednesday, Bank of America would have to organize a call today to protect JP from his LPs. Alas, Bank of America is just the start of Paulson's problems. For a just as big problem we shift our attention to the next worst bank in America, Citigroup, which as the excerpt below demonstrates, was a bragging point in the firm's January 2011 letter. Alas, there is little to brag about these days. Which is why we wish to caution investors to be vary careful with liquidation-like selloffs in gold. Should D-Day strike at Paulson, the firm's multi-billion GLD "gold share class" will likely have to be sold very fast to preserve liquidity. When that happens we may see a 20-30% correction in gold in one day. This is just a theoretical warning, and we hope to have some sense of when, if at all, it would take place. But just something to keep in the backs of your heads...






Guest Post: The Stock Market And The Dollar: There Are Only Three Possibilities

Since the stock market is in the news (perhaps as a result of trillions of dollars/euros/yen/yuan/quatloos having suddenly vanished from millions of accounts), it seems timely to examine the key correlation between stocks and the U.S. dollar. As I have often noted here, this "big picture" correlation is a simple see-saw: when the dollar is scraping bottom, stocks are at their highs, and when the dollar is up then stocks are tanking. At the risk of alienating chart-averse readers, I've marked up the charts of the S&P 500 (SPX) and the U.S. dollar index (DXY). For those who aren't going to look at the charts, what they suggest is that there are really only three possibilities in play:

A. Stocks go up and the dollar drops to new lows

B. Stocks fall and the dollar rises significantly, a pattern that has repeated several times since 2007

C. The see-saw breaks and stocks and the USD rise or fall together.





Gold Vaults Over $1,700 Amid Debt Worries










S&P Downgrades Fannie Mae, Freddie Mac, Others

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