Finance Section

A busy weekend in Washington.

Lehman Brothers, one of the great names of Wall Street, is facing a weekend of desperate negotiations as executive battle to arrange a rescue bid for the 158-year old US Bank.

Lehman has to come up with some kind of solution before the market opens on Monday, or face a further loss of confidence that could spread to the rest of the market. Shares in other institutions such as AIG, the insurance giant, and Washington Mutual, the troubled lender, tumbled last week amid concerns that they too could struggle to raise fresh capital.

Hot NEWS!!!! Lehman Brothers intends to file for Chapter 11.

For Immediate Release
Media Contact: Monique Wise
1-646-333-9056
Investor Contact: Shaun Butler
1-212-526-8381

LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION; NO OTHER LEHMAN BROTHERS’ U.S. SUBSIDIARIES OR AFFILIATES, INCLUDING ITS BROKER-DEALER AND INVESTMENT MANAGEMENT SUBSIDIARIES, ARE INCLUDED IN THE FILING

NEW YORK, September 15, 2008 – Lehman Brothers Holdings Inc. (“LBHI”) announced today that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. None of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings, LLC, may continue to trade or take other actions with respect to their accounts.
The Board of Directors of LBHI authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value. In conjunction with the filing, LBHI intends to file a variety of first day motions that will allow it to continue to manage operations in the ordinary course. Those motions include requests to make wage and salary payments and continue other benefits to its employees.
LEHMAN BROTHERS HOLDINGS INC. ANNOUNCES IT INTENDS TO FILE CHAPTER 11 BANKRUPTCY PETITION / pg.2
LBHI is exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its Investment Management Division (“IMD”). LBHI intends to pursue those discussions as well as a number of other strategic alternatives.
Neuberger Berman, LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of its parent, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and are not subject to the claims of Lehman Brothers Holdings’ creditors.
Lehman Brothers (ticker symbol: LEH) is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. For further information about Lehman Brothers, visit the Firm’s Web site at www.lehman.com.

This week must have been a memorable week. Never before have we witness the market on the verge of collapse to rebound so strongly. A spectaculor week indeed. It would do down in history.

Is this the beginning of a rally or is it just a dead cat bounce?

Close observation for coming week to see a sustained strength to ensure a recovery is in place. Otherwise, the bear trap is in. Recalling the 1997 currency crisis, regional governments have injected much funds overnight where the market reacted positively for few days and unfortunately, it is shortlived. Would history repeats itself?

"Throughout all my years of investing, I've found that big money was never made in the buying or the selling. The big money was made in waiting.".... Jesse Livermore.

orangtua wrote:

This week must have been a memorable week. Never before have we witness the market on the verge of collapse to rebound so strongly. A spectaculor week indeed. It would do down in history.

Is this the beginning of a rally or is it just a dead cat bounce?

Close observation for coming week to see a sustained strength to ensure a recovery is in place. Otherwise, the bear trap is in. Recalling the 1997 currency crisis, regional governments have injected much funds overnight where the market reacted positively for few days and unfortunately, it is shortlived. Would history repeats itself?

"Throughout all my years of investing, I've found that big money was never made in the buying or the selling. The big money was made in waiting.".... Jesse Livermore.

During our last meeting in the afternoon on 20th Sept, after the CFD training, I asked everyone for their opinion what you they think if US approved the USD700billiob bailout package. Although the night before, the market rally, many or almost all who are present for the meeting think that it will NOT be able to solve the problem. All agree that it is the bear market.

Bear market has good money making opportunity for shorting or buying put. A few people came to ask me, "the price is already very low, can it still gets lower?" I told them, from the chart it looks like it will still gets lower. I further added that it has to get lower before it can gets back up.

In the CFD course, I show the example of shorting APPLE when it was at $132 and some said that it is quite low already. However, based on Turtle Trading System, AAPL will be a shorting target if its drops to $120. A few days later, it happens. It has since drop to below $90.

I hope that many of you have make some good fast money during this big drop. Some saw this coming but are those who like or want to do shorting and have step aside instead of buying has make the right choice in not losing.

Have you got a windfall, share with me ya?

Market Melt-down. Why is it so bad? THE PONZI SCHEME

Let me explain why the situation is so dire and dangerous.

Sure there were articles on the crisis, but they were merely describing the rescue of the largest insurance company in the USA (A.I.G.) if not the world and the amount involved. No explanation whatsoever, as to why only a few days earlier the Fed and the Treasury allowed the 4th largest bank, Lehman Bros to fold up but rushed in to rescue AIG with an unprecedented US$ 85 billion.

The Global Financial Tsunami – the corruption within the global banking system and how these financial leeches through fraud and political protection created and amassed a global financial fortune in excess of US$500 Trillion.

Let me assure you that this is not a typo error. You got it right. It is not billions but a whopping US$500 trillion. I have been advised that as of the Q2 of 2008, the figure may have reached US$565 trillion.

This is a complex subject but I shall endeavour to make it as simple as I can.

Starting Point

The Ponzi Scheme

The crux of the fraudulent Ponzi scheme is the twin pillars of:

1) Fannie Mae & Freddie Mac – the two giant mortgage corporations of USA

2) The Derivative financial tool known as Credit Default Swap (CDS)

Once you have a grasp of these two concepts, you cannot but agree that we are facing total global banking collapse. Why? Because the entire global banking system has been built on these two financial pillars! But the system became irreparable in the last 7 years when CDS became the linchpin in the massive expansion of derivative trading and financial engineering.



The Mechanics

1. Banks became greedy and were unwilling to earn safe and steady profits from mortgages for housing and commercial properties which usually spread over a period of between 5 to 30 years.

2. Banks wanted massive profits in the shortest period of time and the ability to lend massive amounts and not be regulated as to how to do it.

3. The crooks devised a scheme. It was a simple idea.

4. Banks will provide mortgages to all and sundry.

5. I am going to use a simple example and using small numbers to illustrate for ease of calculation. Thus, assuming the Bank gave out US$1 million to finance mortgages, bearing interest at 10%.

6. The bank then sold the mortgages to Fannie Mae and Freddie Mac at a discount. Fannie Mae and Freddie Mac being Government Sponsored Companies (GSCs) are able to get cheap financing to purchase these mortgages as they were assumed to be “guaranteed by the US Government”.

7. Fannie Mae and Freddie Mac then package these mortgages into all sorts of structured financial products and these were sold to investors (private as well governments). Central Banks hold massive amounts of dollar reserves and they need to find a safe haven for them. Hence, and invariably, Central Banks invest their reserves in US Treasuries and financial “mortgage-backed” products issued by Fannie Mae and Freddie Mac as well as other US financial institutions.

8. With the payment of US$ 1 million by Fannie Mae / Freddie Mac, the bank by law, can lend ten times the amount after keeping 10% reserves i.e.US$100,000. Therefore, the bank can lend US$9 million by “creating money out of thin air” i.e. by crediting the borrowers in their loan accounts in amount of the loans extended. These US$9 million loans secured by mortgages are then sold to Fannie Mae / Freddie Mac again.

The cycle keeps repeating and the banks keep creating more and more loans.

It was so easy that the banks decided to create dubious loans called “Liars Loans” whereby the borrower need not state the actual income and or ability to repay.

9. As more and more of these loans were created, investors (government and private) demanded assurances that these loans were good for investments. The rating agencies (e.g. Moodys, Standard & Poor and Fitch etc.) who in collusion with banks, gave AAA ratings to what were essentially junks. This fraud led investors to believe that these financial products were good investments.

10. The rating agencies were only too aware that this scheme needed something more concrete to prolong the fraud and induce the investors to part with their monies.

11. The insurance companies like A.I.G. came into the picture. They were seduced by the idea that if they can insure against risks of accidents, storms etc., they could also insure risks against default by the mortgage holders. Thus was born the financial innovation – Credit Default Swap (CDS). Any financial product with a sound CDS would be rated AAA. It was as good as being guaranteed by Uncle Sam. *******s the world over, especially central banks, fell for it – hook, line and sinker.

12. The scheme works out like this – AIG sells protection – i.e. in the event there is a default, AIG will pay out to the buyer who buys the protection (the CDS) in exchange for the payment of premiums covering the period of protection not unlike your usual insurance policy. It was easy money for everyone.

The banks get to sell their loans and have the liquidity to create more loans.

Fannie Mae / Freddie Mac and other financial institutions get the opportunity to repackage these loans / mortgages and sells them to investors with a tidy profit.

The investors are happy with their so-called guaranteed returns. The insurance companies, investment banks and other players get their premium income for selling protection. It was old fashion mafia loan sharking and protection business dressed up in modern financial jargon and everyone was too arrogant and greedy to see through the fraud.

13. When loans default and continue to be delinquent, the law (depending on each country) provides that if the loan is in default for 90 days or more, it should be declared a Non-Performing Loan (NPL) and banks must provide reserve to cover the loss.

14. What happened was banks were covering the defaults and kept them on the books for two years or more in the hope that no one would be wiser and interest income from new loans would cover the defaulted old loans – the classic ponzi modus operandi.

15. When the two years default reached critical proportions starting with the sub-prime loans, the fraud began to unravel. Investors began demanding their protection money for the losses arising from these defaults. It has been estimated that the market value of the CDS was in excess of US$60 trillion but the capital of the insurance companies like AIG are only in the billions. It is therefore a physical impossibility to make good the demand for payment for the defaults.

16. If AIG the No. 1 insurer in US and the world is in default, it means the rest are in deep shits. You can take it as a given that no one and no one has good coverage and protection anymore.

17. When there is no coverage and protection, how can there be AAA ratings for new issues of such financial products? Fannie Mae/Freddie Mac etc. cannot package these products for sale to investors and if they cannot sell, they will have no funds to buy more dubious mortgages from corrupt and fraudulent Wall Street banks. With no additional funds, these crooks in JP Morgan Chase, Goldman Sachs, Citigroup, Lehman Bros., Morgan Stanley, Merrill Lynch, Bank of America, UBS, Barclays, HSBC, Deutsche Bank, Credit Suisse, etc. will have difficulty extending new loans.

The “Musical Money Chair” will have to come to a complete halt. The entire system gets into a gridlock.

Given the above explanation, can the US government and the Fed continue to bail out banks and other financial institutions? When US is in deficit in both the budget and current accounts, where else can they get the extra monies except by creating out of thin air (virtually by keying digits into computers) or print more dollars.

If you are a sovereign lender or a private hedge fund, knowing the situation, would you lend more monies to the US Treasury knowing that each dollar issued (whether digitally or in printed notes) are not worth the value stated therein.

These dollars ARE NO BETTER THAN TOILET PAPER.

The bulk of our reserves are in US dollars. Our trade – petroleum products, palm oil and other exports are mainly traded in dollars. When the dollar dives into the cesspool of waste, what then?

Here is the list of the 6 big stock market crashes in history.

Last century 70s Hong Kong stock market crash
Hang Seng Index
Biggest Drop: 91%
Highest: 1780
Lowest: 150


1929 US stock market crash (July 1929 - August 1932)
Dow Jones Industrial Average
Biggest Drop: 89.05%
Highest: 380.33
Lowest: 41.63


1989 Japan bubble burst (December 1989 - April 2003)
Nikkei
Biggest Drop: 80.2%
Highest: 38916.00
Lowest: 7699.50


Last century 90s Taiwan stock market crash
Taiwan Weighted
Biggest Drop: 80%
Highest: 12495
Lowest: 2560


1993 China stock market crash (February 1993 - July 1994)
Shanghai Composite
Biggest Drop: 79.1%
Highest: 1558.95
Lowest: 325.89


2008 Vietnam stock market crash (March 2007 - June 2008)
Ho Chi Minh VN Stock Index
Biggest Drop: 68.6%
Highest: 1170.67
Lowest: 367.456