"Goldman Sachs and Wells Fargo warn 'delusional' investors on stocks." So what's your portfolio looking like today?

So what's your investment portfolio look like today?

On stocks, are you a bull or a bear?

I'm neither. I'm still into "asset preservation" and currency diversification. Commodities, food, oil, foreign markets, multinationals, dividend payers, foreign currencies, gold, silver. Knowing Bernanke is doing all he can to start a new bubble somewhere (hint - it's already well underway) while destroying the dollar.

Some companies are going to be going away these next few months, others will see their stocks continue to get pummeled, while others will do just fine. And there's a LOT more surprises to come.

I have one word for this market: Dangerous. Invest carefully. Read Crash Proof. Read Manias, Panics and Crashes. And don't put all your eggs in the US dollar. Cash is King - but cash comes in many forms, not just Bernanke's US dollars.

Wall Street faces the growing risk of an equities bloodbath in coming months as the credit crunch spreads to the wider economy and earnings crumble, according to a pair of grim reports issued by Goldman Sachs and Wells Fargo.

David Kostin, the chief US investment guru for Goldman Sachs, expects the S&P 500 index of Wall Street equities to plummet a further 15pc over the "near term" as companies scramble to lower their outlook for this year.

"Although only a few firms have reported first quarter results, early signs are awful. We expect a swath of lowered profit guidance," he said in a research note published today, entitled 'Fasten Seatbelts'.

Mr Kostin, who replaced the ever-bullish Abby Cohen as chief strategist in December, expects the S&P index to reach 1,160, which would amount to a fall of 27pc from the bull market peak of 1,576 in September and enter the annals as a relatively severe bear market.

Scott Anderson, chief economist at Wells Fargo, is equally pessimistic, describing the bullish views of some market players as "bordering on delusional".

"The equity markets have not yet priced in a prolonged downturn in economic growth in my opinion. We are still in the early stages of the credit crunch. Earnings estimates for the second half of the year are likely still far too high," he said.

LOOK OUT BELOW!!! CENTEX DUMPS LAND FOR 82% OFF. THAT'S RIGHT, THEY GOT 18 CENTS ON THE DOLLAR!!

Nah, real estate never goes down.

It's always a great time to buy.

Land is your safest investment - they're not makin' more of it ya know.

And oh, anyone who thought 10% off was a great deal - so sorry. 20% off? Like catching those knives, eh? 50% off - too good to pass up right? NOT! 82% off? HELL YEAH! NOW WE'RE TALKING!! And damn, say goodbye to the comps for a generation.

Ya know what, someone offers me some land or a house at 80% off, I'm taking a look at it. Now we're getting where we need to get. NOTE TO REALTORS WHO WANT TO EARN SOME RAMEN - BRING US DEALS AT 80% OFF - NOW WE'RE TALKING.

Here's Diana with the good news:

Centex Land Deal: And I Thought Worst Was Almost Over

Every time I want to say that the bleeding is over, I’m proven wrong. Centex just announced that they sold about 10 percent of their land holdings to a joint venture for what analysts compute is about 18 cents on the dollar.

The joint venture that is led by Dallas-based RSF partners paid $161 million for 8,500 lots in 11 states. The book value, according to Centex, was $528 million at the time of sale, but analysts say that was already after significant write-downs. They say the land was worth $900 million originally.

So the Dow went up 2.2% today, returning 5x in ONE DAY what the US 3-month T-bill is paying (at 0.47%) in a YEAR. So is going to cash the wrong move?

The Dow is down 1,000 points and 7% in dollar terms year to date, and down SIGNIFICANTLY more when looked at in Euro or Yen or Gold or Oil terms. Being in cash so far this year you'd be MUCH better off than being in stocks. Especially any stock that had ANYTHING to do with the REIC.

But the past is in the past. Right now the bond market is SCREAMING cash and safety. Even commodities are in total melt-down mode the past few days as investors move to cash.

So, what to do? Stick your neck out, close your eyes, and buy the market? Or put it in cash, knowing that the Bear Stearns "acquisition" will be kabashed, that the Countrywide "merger" will fall through, and that Lehman Brothers, Fannie Mae, IndyMac, CIT Financial, Washington Mutual, Freddie Mac, First Fed and so many more are all looking straight at the abyss?

Will Manias, Panics and Crashes get everything right except the "get to cash" final chapter? Will this financial unwinding be different than every one of them to have ever come before?

These are dangerous and unsettled times HP'ers. But they're also opportunistic times if you play your cards right or get lucky.

So what will you do?

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

FLASH: The 3-month US t-bill is now paying 0.47%. That's right, 0.47%. The bond market is telling you something REALLY f*cking scary right now

One more time, until you can say it from memory:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Get to cash. Get to cash right now. Don't worry about the rate. Don't worry about short-term currency movements. Just get liquid. Fast.

One more time, for the newbies: Cash is King

"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king"

- Manias, Panics and Crashes, the HP Bible

And no, "cash" or "money" has not meant and will never mean owning one specific currency. "Cash" or "money" take many forms. "Liquidity" is what Kindleberger was getting to. And so should you.

Money is any token or other object that functions as a medium of exchange that is socially and legally accepted in payment for goods and services and in settlement of debts. Money also serves as a standard of value for measuring the relative worth of different goods and services and as a store of value.

Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to that quality of a business which enables it to meet its payment obligations, in terms of possessing sufficient liquid assets; and to such assets themselves.

With no safe place left to store wealth, some are now saying we have a US Treasury Bill Bubble. Man, these are bizarre times indeed.

You have t-bill yields falling to near record lows again as investors rush to the "safety" of US government debt (that alone is kinda funny, considering we're bankrupt), with investors apparently thinking deflation and depression are coming and are happy to earn essentially a negative interest rate on their cash.

Then at the same time you have investors bidding up gold to multi-decade highs, apparently fearing that the dollar is being debased and inflation is about to rage out of control. With a sprinkling of flight-to-safety store-of-wealth as well.

SO WHAT THE HELL IS GOING ON OUT THERE?

Well, one thing is that people are scared and trying to find a place to keep their wealth. And the second big thing is investors placing bets, very different bets, on the Inflation/Deflation thing.

If t-bills are in a bubble that could suddenly unwind, and gold is an asset that can be suddenly sold off to raise cash, and both are paying essentially no interest, that does lead us back to one thing, one sentence, one time-tested piece of advice:

Cash is King.

That said, I am using some cash now to buy very selected and targeted non-REIC buy-and-hold stocks that I see as unwisely and temporarily beaten down. CEOs and insiders were net buyers of stocks last month for the first time since 1995, and short levels are the highest since 1931, if that gives you some guidance as contrarians.

But keep these three words in your mind as it all continues to fall apart:

Cash is King.

Bubble Trouble: Could the Treasury Market Be Due for a Rapid Price Deflation?

Investors' raging demand for safe assets over the past six months may have created a bubble in the Treasury market -- and some onlookers expect to hear a bursting sound any minute now.

Insider Buys Exceed Sales, Signaling Market Bottom

The last seven times insiders bought more than they sold, between 1988 and 1995, the Standard & Poor's 500 Index rallied an average 21 percent in the following 12 months

While executives step up buying, short sellers are betting against U.S. companies like never before. The amount of short selling -- when traders sell borrowed shares expecting to buy them back after prices fall -- grew to 3.7 percent of the total shares on the NYSE last month, the highest since at least 1931.

More on 'cash is king'

Seems to be a bit of confusion on my recent call to begin deploying your cash carefully and selectively. So let me expand.

Manias, Panics and Crashes made it pretty clear what we would see, and now we're seeing it:

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

So those of you who smartly got out of real estate before it crashed, and got to cash, you were perfectly positioned. For those of you who were out of the market on January 1, and were in cash, you were perfectly positioned. For those of you who didn't trust US$ cash and moved to gold and other currencies, you were fricking geniuses.

Why? Because now we're now seeing the "self-feeeding panic" stage, where the bubble bursts. Housing is in a historic fire sale which will go on for years. And many individual stocks have been recently and swiftly destroyed, many down 50% and some down 90%+, and you have many foreign stock markets that have seen 20%+ bear market declines, in just a matter of weeks. Ouch.

Can stocks and markets (and even a hard asset like gold) go lower? Of course. Will housing continue to fall? Yes, definitely, yes. But remember, stocks are not houses. Some stocks are tied to housing, and they got rightly slaughtered. Countrywide, IndyMac, Fannie, Freddie, KB Home, MBIA, the list goes on and on and on.

But other stocks are not tied to housing, and they got killed to, with the expectation that housing will take everything down. And indeed, the housing crash does affect almost everything, but it's a question of degrees. How bad does the housing crash hurt Exxon Mobile? Or Yahoo? Or Berkshire? Or Russia?

So, in an asset price deflationary cycle like we're seeing, where people are dumping what they have, cash is king. Why? Because only the people holding the cash can swoop in and buy the assets at the fire sale prices when the time is right. And only the assets that make sense to buy.

Would I recommend buying a condo in Miami or Phoenix that's 50% off today? HELL NO! Why? Because that condo is going to keep falling and falling in value, until the price to rent or price to income ratio makes sense, and the inventory dries up.

Do I recommend buying KB Home or Fannie or IndyMac? HELL NO! Why? Because they're likely going to go bankrupt.

But I do recommend wisely and patiently using your cash and looking for opportunities. They're out there. I'm not recommending the stock MARKET, I'm recommending you look for individual stocks and other investments.

And most importantly, with Bennie and the Inkjets debasing the currency, slashing rates, and threatening to print dollars like never before, holding US dollars is the worst cash you can hold. At least take a look at other currencies (easy via ETF's like FXY, FXE, FXF, etc) to diversify your cash. Cash earning 2% in a US bank account sucks, especially when Bernanke is destroying the dollar. 6% was acceptable. 2% sucks. You need to protect the value of your cash, since the Fed is not.

Hold your cash tightly, diversify your cash, be careful with your cash, make your cash work, make sure it's in a safe place (i.e. not WaMu or Countrywide bank), and be glad that you have cash to use when the rest of the world panics and wants to get rid of their assets at any price.

Microsoft - Yahoo: Does this deal herald The Great 2008 Fire Sale?

Watch now as smart investors, companies and countries swoop in to buy distressed real estate and institutions for pennies on the dollar, deploying their mountains of accumulated cash and low-interest loans.

The Great 2008 Fire Sale is on.

So, is it time for you to start wisely deploying your cash?

I think it is. But be careful. Some knives fall all the way. (In other words, don't rush out to buy a condo in Miami or pets.com stock)

I can't stress how important the failure of MBIA and Ambac will be. You'll see soon enough.

Think about it this way. Most of you have insurance - for health, your car, your possessions or your home. Assume something bad happened and you needed your insurance company to pay up, and when you went to them for your settlement, they wouldn't answer the phone, and you were on your own.

Welcome to Ambac and MBIA. They insured the debt of the cities of the United States. And now they're going belly up, and the cities will have a tough time funding new projects and issuing new debt. And $700 billion of insured debt is now walking across the grand canyon without a net.

And now a whole new round of "mark-to-market" will need to happen at the financial institutions that are already on the brink of failure. I just heard Cramer on MSNBC say that when these two fail, "they won't be able to open the market" and a 2,000 point drop in the Dow was likely. Wow.

The whole leveraged house of cards is collapsing HP'ers, piece by piece. Believe it or not, we're still just getting started.

Ambac Downgraded, Cities Seen at Risk

A downgrade of bond insurer Ambac Financial Group Inc. is likely to have far-reaching effects, making it more difficult for cities to issue new bonds and forcing further write-downs at financial services companies, analysts said Friday.

Since late last year, when the agencies first raised the prospect, analysts have suggested any move to cut Ambac or MBIA below "AAA" could be disastrous. The concern is that downgrades will lead to a reduction in the value of portfolios at dozens of financial institutions, said Donald Light, a senior analyst at Celent LLC.

"Bond insurers are the lynchpin holding together valuations of portfolios of all kinds of financial institutions," Light said.

Warren Buffett's Berkshire Hathaway could be one company that gets a boost. Buffett launched a new bond insurance business in December that has a "AAA" credit rating and a solid balance sheet. Buffett's new company also has the benefit of having no questionable loans on its books.

HousingPANIC Stupid Question of the Day

Regarding the "cash is king" mantra, as written about in Manias, Panics and Crashes:

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Is "cash is king" still relevant today (especially non-US$ cash)? Or, because of an incompetent, negligent and corrupted Fed, is it truly gonna be "different this time",

Good morning world. Welcome to the biggest financial crisis since the Great Depression. Hey - did someone just say PANIC?!

Northern's dilemma will rock markets

Northern Rock crisis sparks banking panic

Run on the bank

Scramble to quit UK bank


So, no surprise for HP'ers. We've been predicting runs on the banks for months. And now they're here. So what should you do to get ready for the collapse? Here's Ten Ways to Prepare for the Great Crash:

1) Get to cash, NOW. Every financial mania ends with a rush to cash, and a liquidation of assets at greater and greater loss. Get to cash. Even gold is at risk as owners liquidate to raise cash.

2) Know where your cash is, and that it's protected by the "full faith and credit" of the host government. If you have more than the allowed limits in any one institution, and they go tits up, it's your own damn fault. If there's no protection, get your money out of there NOW.

3) Unless you plan on keeping your house forever, sell your house as fast as you can at whatever price you can get for it. Because you'll never get that price again in your lifetime. And then rent (for a fraction of the cost of buying)

4) Get out of all stocks and money market funds. Yes, that's right, even money market funds are not secure, and they can and will lose value

5) Get into short term US government t-bills and liquid FDIC-insured savings accounts (up to the FDIC limits). Wait for the bad storm to pass

6) Tell everyone you care about that The Great Unwinding is here. Use the "email this post" function (the little envelope by the comments link below) to send this to your friends and family. DO NOT be the last one out of the pool - be the first.

7) Get 100% out of ANY troubled bank or brokerage, and any bank exposed to the subprime cancer. If and when they go belly up, even getting your FDIC insured deposits out will be a pain.

8) Check your mutual funds and 401k. Get them to cash and T-bills if you can.

9) Watch what the central banks do. Their actions may present you with some short-term trading opportunities. Watch for currency meltdowns - don't have all your cash in one currency. Use the currency ETFs to spread your risk.

10) Get some popcorn. You're gonna witness some historic stuff these next few days, weeks and months.

From The Independent:

Panic on the streets of Britain: Northern rocked, City shocked

Yesterday something happened that I have not seen in my lifetime, a run on a major British bank. There were queues outside Northern Rock branches as depositors tried to get their money out.

This is the sort of event that happened in America after the Great Crash of 1929. For Northern Rock, this is catastrophe. For the rest of us it marks the end of an era of easy money.

Are you ready for the storm?

Again and again, and you'll know why soon enough, I'll repeat this mantra from the HP bible - Manias, Panics and Crashes:

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And so here we go... should be quite the ride this week, pre-Fed. Buckle up.

Banks face 10-day debt timebomb

Britain's biggest banks could be forced to cough up as much as £70bn over the next 10 days, as the credit crisis that has seized the global financial system sparks a fresh wave of chaos.

Fears of this impending call on bank credit lines are the true reason that lending between banks has ground to a halt, according to senior money market sources.

"Banks are hoarding cash," said David Brickman, the head of European credit strategy at Lehman Brothers. "We think the reason for that is the commercial paper markets. There was $100bn of commercial paper issued by European institutions that was scheduled to roll over in August, much of which struggled to do so.

Manias, Panics and Crashes on "Discredit" and the scramble to unload at greater and greater losses

One more time, so you know what's happening, and what's going to happen.

There should be no surprises for HP'ers. None. It hath been foretold.

From the HP Bible "Manias, Panics and Crashes" by Kindleberger:

* Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

* The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

Got cash? Morgan Stanley issues "Triple Sell Warning" on equities, first time since dot-com crash

Got cash? It's tough to pick exactly when markets will crash and bubbles will pop, but it's pretty easy to identify "why". And as Buffett said, always sell too early. The stock market euphoria during this historic housing crash has been interesting to watch, especially in the context of Bernanke's "it won't spill over" statements. Yeah, right, Ben. We trust you.

Everbank is paying 6.01% on savings. HSBC is also 5.5%, and e-loan has some good CD rates I'm enjoying. I check bankrate.com for the best rates and just keep it moving around. With bond yields soaring those saver rates will keep getting better hopefully.

Keep in mind you don't want more than $100,000 in any one bank (FDIC limit), 'cause bank failures may be next during the rush to cash, as is written about here.

Good luck out there.

Morgan Stanley warns the 'mid-cycle rally is over'

Morgan Stanley has advised clients to slash exposure to the stock market after its three key warning indicators began flashing a "Full House" sell signal for the first time since the dotcom bust.

Teun Draaisma, chief of European equities strategist for the US investment bank, said the triple warning was a "very powerful" signal that had been triggered just five times since 1980.

"Interest rates are rising and reaching critical levels. This matters more than growth for equities, so we think the mid-cycle rally is over. Our model is forecasting a 14pc correction over the next six months, but it could be more serious," he said. Mr Draaisma said the MSCI index of 600 European and British equities had dropped by an average of 15.2pc over six months after each "Full House" signal, with falls of 25.2pc after September 1987 and 26.2pc after April 2002.

"We prefer to be on the right side of these odds," he said.

The first of the three signals Morgan Stanley monitors is a "composite valuation indicator" that divides the price/earnings ratio on stocks by bond yields. It measures "median" share prices that capture the froth of the merger boom, rather than relying on a handful of big companies on the major indexes.

Financial Times: "Spanish property boom ends in panic"

Two articles yesterday here in Europe should give those of you in the US a peek at headlines to come there... Ah, the end of a grand worldwide game of musical chairs. Textbook financial mania (always followed by the textbook panic and crash). And remember, the rush to cash can be fierce.

Pero suzanne lo investigó!!!

First this one in the Financial Times:

Spanish property boom ends in panic

Spain's overpriced property market came crashing down yesterday, with panic selling of real estate stocks signalling the end of a 10-year-old construction boom.

The sell-off dragged down related industries such as construction and banking and caused a 2.7 per cent drop in the Ibex 35 index of leading shares.

The fall also rippled through other European markets as investors worried about its knock-on effects.

And then this one in the Independent:

As Spain falters, is the world's property boom coming to an end?

Panic selling of Spanish real estate stocks this week sent shudders through property markets worldwide. As investors bet that Spain's 10-year construction boom is finally over, we take a look at global property hotspots to see who will be the next casualty.

For Brits fantasising about sipping sangria while watching the value of their Spanish holiday-home soar, the dream is over. After five years of double-digit growth, house prices rose by a relatively modest 9 per cent in 2006 and are expected to slow dramatically this year.

A constant stream of bad news has shaken foreign buyer confidence in Spanish property, while relatively high prices and competition from cheaper destinations such as Morocco and Bulgaria has drained demand. Corruption scandals linked to property deals have been rife - in Marbella, several municipal councillors are in jail awaiting trial for allegedly taking kick-backs.