UPDATE: The 3-month US treasury bill is now paying 0.37%. This is not a drill.

Some animals are said to be able to sense earthquakes before they happen.

It looks like some bond buyers have the same ability.

March 20 (Bloomberg) -- U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 as investors seek the safety of government debt amid a loss of confidence in credit markets.

Bill rates declined as low as 0.387 percent as finance company CIT Group Inc. drew on $7.3 billion in credit lines after being shut out of short-term debt markets. Institutions worldwide have reported $195 billion in writedowns and losses related to subprime mortgage and collateralized debt obligations since the start of 2007.

``All the evidence out there suggests there's more pain to come,'' said Andrew Milligan, head of global strategy in Edinburgh at Standard Life Investments Ltd., which manages $265 billion in assets. ``Investors are going to say they need safer assets.''

Citibank steals a page from HP: "The Great Unwind has begun"

I should have trademarked "The Great Unwinding". Oh well.

This Citi report is straight from Manias, Panics and Crashes I swear. Or HP.

So what do you think is gonna blow up next?

The Great Unwind has begun, Citigroup Inc. strategists warned on Wednesday.

As markets and economies de-leverage across the globe, investors should avoid companies and countries that have grown to rely too much on borrowed money, they said.

"Steady growth, low inflation and rock-bottom interest rates encouraged economic and financial participants across the world economy to gear up over the past few years," Robert Buckland and his colleagues on Citi's global strategy team wrote in a note to clients. "Easy money encouraged many to buy a bigger house, a bigger car or a bigger speculative position."

"But now, any behavior that relied upon continued access to easy money is being dramatically reassessed," they added. "Leveraged banks must lend less, leveraged consumers must consume less, leveraged companies must acquire or invest less, and leveraged speculators must speculate less."

Anyone surprised at how bad this asset deflation is getting now?

Open thread to talk about where you're stashing your loot as the US bogs down in recession and The Great Unwinding continues.

Bernanke's panicked, massive and historic rate cuts are looking pretty ineffective so far, at least on investor psychology and consumer confidence.

It's also tough to create a new bubble when the banks can't and won't lend. Bubbles need leverage. Bubbles need debt. Bubbles need speculators. So are we out of bubbles?

Cash still feels king. But damn, some of these stocks are getting stupid cheap, if they'd just make a bottom.

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.

Stocks getting slammed around the world today (thanks to the US housing panic). Predictions for the US stock market?

Plunge Protection Team and the Fed ride to the rescue Tuesday, or is it time to just stand back and get out of the way?

You know, no matter what it saddens me that the United States lost control of its financial markets. If people can't have confidence in the balance sheets and unbiased auditing of US companies, where can they?

Shame on the Fed and SEC for allowing companies to cook the books and obscure the truth to the extent that they did. And for gods sake, go arrest someone so we can at least make it look like we're on the case!

And for those who though stocks were liquid because you could just hit the "sell" button and be done with it, how was your trading today? Bit frustrated eh?

European, Asian Markets Plunge Amid Pessimism Over US Stimulus Plan

LONDON (AP) -- European and Asian stock markets plunged Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

The U.K. benchmark FTSE-100 dropped 3.9 percent to 5,673.1; France's CAC-40 Index plunged 4.5 percent to 4,861.2, while Germany's slumped 5.35 percent to 6,922.7.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Jim Cramer calls for the nationalization of the toxic insurers, or else the banks will fail and the Dow will crash. Buckle up, away we go...

Yup, it's really hitting the fan now.

Here's the video

We're just getting started HP'ers. The real fight will be on soon - HP vs. the government and hedge fund managers like Cramer.

Will the taxpayers be called on to bail out the banks for their corruption and terrible decisions? Will trillions (yes, trillions, not $250 billion as Cramer says) of your kids' money be used to avoid the downfall of Merrill, Citi, JP Morgan, Fannie and Countrywide (moral hazard anyone? dollar destruction anyone?)

Or will Mr. Market do its thing, wiping out the idiot insurers and the banks, and then everyone grabs a shovel and digs out of the rubble?

You won't believe what you're about to see HP'ers. If you can, I recommend taking the rest of 2008 off, get your assets into the safest non-dollar investments you can find, stock up on popcorn, and wait out this financial typhoon.

Feds Need to Buy Mortgage Insurers

U.S. banks are taking a beating in the market because of the billions of dollars in subprime mortgages they have on their books. And with the insurers who backed the loans in danger of going belly up, there doesn’t seem to be a bottom for these stocks. If that ever happened, Cramer said, the entire system would collapse dominoes style.

It’s his ultimate doomsday scenario, and he fully believes it could happen if the government doesn’t act quickly.

Spooky housing crash / mortgage meltdown youtube compilation video - with Ron Paul telling people how it is and how it's gonna be

One person stood up and told the truth about the Fed, about housing and about our corrupted Congress.

And America evidently wasn't ready for him.

They weren't ready for the truth.

Too bad.

European Central Bank's helicopter drops €348,000,000,000 down to the panicked banks in a single day. All through Europe, it's now raining Euros!!!

And we trust these pretty colored little pieces of paper why?


E.C.B. Makes $500 Billion Infusion

FRANKFURT — The European Central Bank on Tuesday pumped 348 billion euros ($500 billion) into the financial system, easing conditions in credit markets grappling with a global lending squeeze linked to the United States housing downturn and traditional year-end demands for cash.

Veteran financial forcaster predicts "financial tsunami". HP'ers shrug and ask what took so long.

Well, here's some interesting weekend reading.

Spend next week reviewing your portfolio. Eliminate as much risk as you can. Get defensive. You'll be glad you did.

MarketWatch: Schultz sees an apocalypse now - Veteran editor declares 'A financial tsunami is upon us'

Among other interesting ideas raised by Schultz in his intense, somewhat terrifying introduction: recession, possibly depression; bank failures; exchange controls; housing prices down by 50%; credit card company failures; money market fund dangers; tripling of U.S. jobless numbers; federal bail-outs for Fannie Mae.

His advice, translated out of his shorthand style: "If you have not already done so, take immediate measures to safeguard your assets against the global derivative crisis ... Most urgent is close out time deposits, buy non-U.S. government bonds."

In other words, Schultz is saying the U.S. banking system is threatened. How's that for a Christmas greeting?

Schultz says "the second biggest danger is owning U.S. dollars in any form, (it) has crashed and going much lower ... use dollar rallies to exit dollars or sell short ... This is not a time to seek profits, but to protect what U have ... Portfolio diversification is essential in troubled times."

Schultz's favored currencies: "In order of preference: Swiss Franc, Australian dollar, Euro, Canadian dollar."

On gold, he writes: "The public is still not in the gold market. They will be in 2008 as the derivatives and credit crises bring down more financial institutions (amid recession) and eyes will be opened, via pain. While Rome burns, gold will smash through its old unadjusted-for-inflation $850 high on the way to $1,600, & who knows how far beyond ..."

HousingPANIC Stupid Question of the Day

What are the chances you'll lose your job or income stream during this economic downfall?

What do you do?

How do you like your hedge fund blowups - scrambled or over-easy?

Ah, ya gotta love "our fund isn't blowing up" announcements even though the fund is blowing up. They've gotta do it though - only way to get rid of the assets before they hit firesale pricing.

Deny, Deny, Deny. Then run like the dickens.

LONDON, Aug 9 (Reuters) - Goldman Sachs said on Thursday that it was "business as usual" at its Global Alpha hedge fund but declined further comment on the fund's operations.

The fund has been the subject of persistent speculation for the past couple of days, with Goldman on Tuesday denying market talk that it was liquidating the fund.

On Thursday, French bank BNP Paribas (BNPP.PA: Quote, Profile, Research) froze 1.6 billion euros ($2.21 billion) worth of funds, citing problems over U.S. subprime mortgages.

FLASH: UK central banker comes clean: Admits causing housing bubble for short-term gain, leaves financial catastrophe for others to deal with

You'd like to think the world's central bankers were smart people. That they cared about short term issues, but had their eye mainly on the long term welfare of people, families and society at large.

That's not the case folks. The US and UK central banks are evidently made up of incompetent, clueless, morally-questionable boobs, driven by short-term business profits and serving their political masters, who could care less about the societal and personal destruction caused by their misguided, short-sighted, greed-inspired ways.

Seriously.

Here's a startling and bizarre admission from UK bank governor Lord Eddie George, where he admits he and his crew inflated the biggest bubble the world has ever seen simply because they thought they had no other short-term option to deal with the 2001 slowdown.

Here's one they should have considered in 2001 - go into recession. Taking that medicine then would have prevented the bubble, and prevented the biggest asset crash in recorded human history now underway.

You should all be outraged, sickened... and not surprised.

The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday.

Lord George said he and his colleagues on the Monetary Policy Committee " did not have much of a choice" as they battled to prevent the UK being dragged into a worldwide economic slump by slashing interest rates. And he said his legacy to the current MPC was to "sort out" the problems he had caused.

"We only had two alternative ways of sustaining demand and keeping the economy moving forward - one was public spending and the other was consumption.

"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."

He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said.