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Scorpio

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Here’s something that makes absolutely no sense

If you feel like you’ve been watching a meteor streaking across the sky over the past several weeks, it turns out it was just Tesla stock soaring to astronomical heights.

As of Tuesday afternoon, Tesla’s stock price was up 4x in the last four months, more than double since the beginning of January, and nearly 50% since February 1st.

(The stock is now down about 20% from that peak.)

It was an absolutely epic surge that nearly outpaced the 2017 Bitcoin bubble.

But even still-- the company is now worth a whopping $136 billion at the time of this writing.

Much of the stock’s rise was related to Tesla’s earnings, which were announced at the end of January; the company reported a net loss for the year, and a total of 367,500 vehicles sold in 2019.

I find this pretty incredible; Tesla told investors at the beginning of 2019 that they would sell between 360,000 and 400,000 vehicles for the year. They achieved the low end of that estimate.

And that’s great. Congratulations. But the stock price is now multiples higher simply because they did what they said they would do. That’s a pretty low bar.

At $136 billion, Tesla is now worth more than Ford, General Motors, and Nissan COMBINED. Those three companies collectively sell more than 14 million vehicles annually.

Now, don’t get me wrong-- I like Tesla just fine. This isn’t a dig against the company. But I find it extraordinary how much investors are willing to overpay for shares.

According to the company’s most recent financial statements, Tesla lost $745 million in 2019.

Well, that’s OK… newer companies often lose money for several years before they reach maturity while they’re still growing.

But Tesla’s balance sheet also shows total ‘equity’ of just $6.6 billion.

This is essentially Tesla’s ‘net worth’, i.e. the value of all of its assets, including factories, cash, inventory, brand value, etc. minus liabilities like loans and other obligations.

Remember, investors are essentially buying shares of Tesla at a value of $136 billion. This means that people are willing to pay more than TWENTY TIMES what Tesla’s assets are worth even though the company is losing money.

Now let’s look at a mature company to see a comparison.

Volkswagen Group is the largest automobile conglomerate in the world; it owns brands like Porsche, Bugatti, Audi, Bentley, Skoda, Lamborghini, Seat, and of course, Volkswagen.

In total, Volkswagen Group sells more than 11 million vehicles per year. This makes it THIRTY TIMES bigger than Tesla in terms of vehicle sales.

Volkswagen Group earned more than $13 billion in 2018, and will likely exceed that figure when it reports its 4th quarter numbers for 2019. This ranks Volkswagen among the 50 most profitable companies in the WORLD.

And Volkswagen’s equity is $131 billion according to its most recent financial statements.

So-- Tesla loses money and has equity valued at $6.6 billion. Volkswagen sells 40x as many cars, is one of the most profitable companies in the world, and has $131 billion in equity. (Volkswagen also pays a small dividend to shareholders.)

Which of these companies is worth more?

You guessed it. Tesla.

Volkwagen’s stock price values the entire company at just $95 billion.

So investors are willing to pay $20 for every $1 in equity for unprofitable Tesla. But they’re only willing to pay 72 cents for every $1 in equity for extremely profitable and much larger Volkswagen.

Why?

This is where people usually talk about Tesla’s ‘technology’, its leadership with electric vehicles, autonomous driving, etc.

That might have been true several years ago. But every automobile manufacturer in the world has had the opportunity to catch up. And Tesla is no longer the clear leader.

Volkswagen’s Audi brand recently launched its A8 with the most advanced autonomous driving technology in existence. The A8, in fact, is the only production vehicle in the world with ‘level 3’ autonomous driving technology. ‘Level 3’ is so bleeding edge it isn’t even legal yet in many countries.

And just yesterday, one of Nissan’s autonomous vehicles broke a record in the UK for driving 230 miles (on an extremely complicated route) without any driver involvement.

Plus there are plenty of other companies developing driverless technology, including some giants like Google. So, again, Tesla is no longer the clear leader in this field.

Moreover, pretty much every auto manufacturer now offers electric vehicles, from luxury brands like Porsche’s Taycan and Jaguar’s I-PACE, to affordable, mass market vehicles like the Volkswagen e-Golf.

Many of these models are very highly rated and extremely competitive with Tesla’s products.

In addition to not having any clear technological advantage, Tesla also has no special financial or manufacturing advantage.

Automobile manufacturing is a fairly low margin business, and Tesla is no exception. The company’s gross profit margin (according to its own financial statements) is 20.1%.

This means that it costs Tesla about 80% of the sales price to manufacture the vehicle. So 80 cents out of every dollar in vehicle sales goes to manufacturing expenses. The other 20 cents has to pay for all the other expenses of the business-- legal, accounting, rent, etc.

20.1% is pretty much in line with the rest of the industry; Volkswagen Group posted a gross profit margin of 19.65%, and Daimler (Mercedes) was 19.8%.

So from this perspective, Tesla is just like every other automobile manufacturer. It just happens to be unprofitable and a lot smaller… yet it’s somehow worth more than most of its competitors combined.

That makes total sense.

To your freedom,



Simon Black,
 

Uglytruth

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Short a few shares......... if you dare!
 

Scorpio

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looks like they are going to be giving away natty sometime soon,

the 'ole bernie free heat for your homes.........

1.png
 

Scorpio

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longer term pic where you can see it was a touch lower back in Mar 1 of 16,
then it went on a bit of a run


2.jpg
 

solarion

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JayDubya

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Do you dare roll the dice and take a chance?
(Following the "buy it when nobody wants it" theory.)
 

Scorpio

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I hear ya, kickin' the tires now and wrestling with the risk vs reward on it
 

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Cigarlover

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So in 3 years the dow goes from 18k to 29k and by Nov may even break 30k..Were lucky to grow gap by about 3% a year but the dow is going to average 15-20% over the same period. Something doesn't add up.
 

solarion

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It's almost...like there are two economies. Who'dathunkit.
 

madhu

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So in 3 years the dow goes from 18k to 29k and by Nov may even break 30k..Were lucky to grow gap by about 3% a year but the dow is going to average 15-20% over the same period. Something doesn't add up.
it doesn’t because fiat printer are running as fast as they can to keep the interest rates artificially low and after sep 19,2019 repo market fiasco where the overnight rate jumped from 2% to 10%, the feds were forced to bail out wall street again with billions every day till that crisis was papered over. But for every treatment that the fed does, there is a sideeffect.

There is obvious distress in the whole system and it may be deflation that is not responding to any of the fed measures. In order to save Too big to fail (only 4 mega banks) the feds are printing without any congressional or American oversight approval. There is hyperinflation for main street but wall street is sitting pretty with printed paper that is appreciating in their stock performance.
At some point everyone will come to know that the only appreciating asset is Wall Street stocks and then the Uber driver , neighbourhood barber is going to tell you stock tips. Till then there is only one way and the stocks are going higher. Why stop at dow40,000. We might as well hit Dow 100,000. Mark to fantasy value.
 

BarnacleBob

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Tax his land, Tax his bed, Tax the table,
At which he's fed.

Tax his tractor, Tax his mule, Teach him taxes
Are the rule.

Tax his work, Tax his pay, He works for peanuts anyway!

Tax his cow, Tax his goat, Tax his pants,
Tax his coat.

Tax his ties, Tax his shirt, Tax his work,
Tax his dirt.

Tax his tobacco, Tax his drink, Tax him if he
Tries to think.

Tax his cigars, Tax his beers, If he cries Tax his tears.

Tax his car, Tax his gas, Find other ways
To tax his ass.

Tax all he has Then let him know
That you won't be done Till he has no dough.

When he screams and hollers; Then tax him some more, Tax him till He's good and sore.

Then tax his coffin, Tax his grave, Tax the sod in Which he's laid...

Put these words Upon his tomb, Taxes drove me to my doom...'

When he's gone, Do not relax, Its time to apply The inheritance tax.


Accounts Receivable Tax

Building Permit Tax

CDL license Tax

Cigarette Tax

Corporate Income Tax

Dog License Tax

Excise Taxes

Federal Income Tax

Federal Unemployment Tax (FUTA)

Fishing License Tax

Food License Tax

Fuel Permit Tax

Gasoline Tax (currently 44.75 cents per gallon)

Gross Receipts Tax

Hunting License Tax

Inheritance Tax

Inventory Tax

IRS Interest Charges IRS Penalties (tax on top of tax)

Liquor Tax

Luxury Taxes

Marriage License Tax

Medicare Tax

Personal Property Tax

Property Tax

Real Estate Tax

Service Charge Tax

Social Security Tax

Road Usage Tax

Recreational Vehicle Tax

Sales Tax

School Tax

State Income Tax

State Unemployment Tax (SUTA)

Telephone Federal Excise Tax

Telephone Federal Universal Service Fee Tax

Telephone Federal, State and Local Surcharge Taxes

Telephone Minimum Usage Surcharge Tax

Telephone Recurring and Nonrecurring Charges Tax

Telephone State and Local Tax

Telephone Usage Charge Tax

Utility Taxes

Vehicle License Registration Tax

Vehicle Sales Tax

Watercraft Registration Tax

Well Permit Tax

Workers Compensation Tax

STILL THINK THIS IS FUNNY?

Not one of these taxes existed 100 years ago, & our nation was the most prosperous in the world.

We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.



What in the heck happened? Can you spell 'politicians?'
 

Scorpio

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with the weakness in stocks supposedly due to more beer virus propaganda,

metals are making attempts at resistance,
gold getting up near 1600 while silver tries once again to get to 18

gold chart looks more convincing, while if silver ever breaks and runs, it should run for awhile

2.png


1.png
 

Scorpio

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metals would already be on a tear if it wasn't for this IMO:

the us dollar has been rippin' to the up,


3.png
 

Scorpio

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fyi,

gold has taken the 1600 hill and silver has blown out 18

good runs going on in the metals
 

arminius

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^^^

That is an excellent encapulization of what has happened to our culture...
 

JayDubya

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Surprise! Massive Consumer Debt Fueling 'Record' Economy

http://www.silverbearcafe.com/private/02.20/record.html

In May 2018, we reported a 47% increase in total consumer debt. Today, that debt is still on the rise, now at a staggering 61% increase since 2008.

You can see how total outstanding consumer debt, currently at $4.2 trillion, has skyrocketed since 2008 in this graph.

But the total amount of outstanding debt isn't the only problem, because as reported by Newsmax Finance, consumer borrowing in December also shot up the most in five months:

Total credit climbed by $22.1 billion from the prior month, exceeding all economist estimates in Bloomberg's survey, after a downwardly revised $11.8 billion gain in the prior month.

This graph shows the change in consumer credit for the past 25 years. What's particularly interesting to note is that monthly increases in consumer borrowing have pretty much stayed above the $10 billion mark (and mostly above $20 billion) since 2013.

That high rate of increased consumer borrowing came at a time when the Dow doubled from 14,000 to over 29,000 today.

The eerie problem with economic growth fueled by consumer debt

Consumer spending represents about 70% of all economic growth, so if most of that spending is fueled by debt, then there could be a bursting debt bubble on the horizon when the bill comes due. Especially if consumers can't afford to pay their bills.

"The rebound in credit suggests consumers needed more than just wage gains and cheaper fuel to drive fourth-quarter growth," according to Newsmax. If that's true, it seems like consumers already are having trouble paying the bill with earned wages.

The proof is in the pudding, with official inflation at 2.5% (including food and energy) and still rising, and personal income stagnating since 2013. If rising inflation and stagnating wages continue, consumers will have difficulty repaying their debts.

And keep in mind, the Federal Reserve report on consumer borrowing doesn't factor in mortgage debt or loans backed by real estate.

So if the "record economic expansion" is mainly fueled by consumer debt, and something else happens so consumers can't pay back that debt, then credit defaults will likely increase.

We can already see this in the auto loan market. In Q4 2019, serious auto loan delinquencies (90 days or more past due) rose by 15.5% from a year ago. Auto loan delinquencies now represent $66 billion — a record high.

With too many defaults, you could have a debt bubble burst similar to the one that caused the last recession. Except with $4.2 trillion in debt outstanding, the weight on the economy would be unprecedented.

Billionaires have warned about debt, economists have warned about debt, even the Fed has warned of a debt bubble. Hopefully someone listens, but it might already be too late.

Shield your retirement from a potential debt bubble explosion

The debt that is fueling the "record" growth in the U.S. could quickly become a lead weight that could sink the economy. All it would take is for one thing to go wrong.

Which is why now is an ideal time to consider shielding your retirement from market cheerleaders who think "more debt is better" without considering the consequences of mindless growth.

So while you examine your portfolio for opportunities to diversify your assets and reduce your risk exposure, consider moving some of your funds into precious metals such as gold and silver.
 

BarnacleBob

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Scorpio

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going to mark some charts here for reference

us dollar, gold, silver, sp 500 and oil

1.png


2.png
3.png
4.png
5.png
 

Scorpio

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one thing about this flash crash blood letting,

it was only a year ago Dec when it happened,
same thing, sharp, fast and hard to the down,

by the turn of the year, fiat poured into the markets, and by end of year, setting new all time highs,

leading to the real question, is it over, or yet another fleecing, enticing players with the promise of yet another 'buying opportunity'..............
 

Scorpio

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Perspective,

Here is a chart of the SP 500 weekly,
that other dive spoken of, took it down to the 200 moving avg, and this one isn't even close,

Matter of fact, this has only declined to the highs of Sept 18, or a little over a year ago,
While it looks pretty impressive, big picture there really hasn't been any significant damage as of yet. Just as there wasn't in Dec of '18

1.png
 

Scorpio

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After the market crushed the bond yields,
there was a 'emergency' meeting of world bankers including our fed.

from that G7, they stated ready willing and able due to beer virus

then later today, fed announced full 1/2 point or 50pt decrease in rates.

market freaks the f@#$ out to the down, as they are now wondering what the fed knows that they do not.

bonds continued their slide, with 10's now pumping at the 1% level

meanwhile, the metals took this newz and ran, hard to the up for gold and silver
 

Au-myn

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Matter of fact, this has only declined to the highs of Sept 18, or a little over a year ago,
While it looks pretty impressive, big picture there really hasn't been any significant damage as of yet. Just as there wasn't in Dec of '18
I agree, Scorpio. The big December sell-off caught a nice bounce. Still hanging in the ascending trend channel...

spx1.png
 

JayDubya

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Simon Black on the Fed's reaction....

On October 19, 1987, the US stock market suffered the worst crash in its more than 200 year history, dropping more than 23% in a matter of hours.

It wasn’t just in the United States, either. More than 20 major stock markets around the world, from London to Hong Kong to Australia, fell by similar amounts.

And economists estimate that stocks worldwide lost roughly $1.7 trillion of value (approximately 10% of global GDP at the time) during the October 1987 crash.

The next morning on October 20th, the Federal Reserve announced that they would do whatever it takes to support the economy.

And ten days later they cut interest rates by 0.5%.

Yesterday the Federal Reserve did the same thing. Stock markets worldwide have been jittery lately due to Corona Virus fears, so the Federal Reserve stepped in and cut interest rates by 0.5%.

Honestly there are so many things that are remarkable about this—

First, the Fed already has a regularly scheduled meeting coming up in two weeks on March 17th. But apparently they thought the situation was so severe that they held an emergency meeting yesterday and hastily voted to cut interest rates by 0.5%.

Just think about what that means: 30+ years ago, the Fed cut rates by half a percent after, literally, the worst day in the history of the stock market.

Today’s stock market turmoil is nowhere near as bad as it was in 1987. Sure, the market is down around 10% over the past two weeks. But where is the law that says the stock market isn’t allowed to fall? Capitalism is all about risk and reward. There are supposed to be periods of decline.

But to the Fed, a 10% correction is catastrophic… SOOOOO catastrophic, in fact, that they couldn’t even wait two more weeks for their regularly scheduled meeting. They had to take immediate action to prop up the stock market.

Ironically, this interest rate cut caused investors to panic even more. After the Fed made its announcement, the Dow Jones Industrial Average plummeted another 800 points.

It’s as if the entire market collectively thought, “Holy cow, if the Fed is taking EMERGENCY action, things must be even worse than we thought.” So the rate cut had the opposite effect as intended.

The Fed also managed to confuse the hell out of everyone… which is something they’ve been doing a lot of lately.

Last year, for example, even when they insisted that the US economy was booming and the unemployment rate was at a record low, they still cut rates by 0.75%... which is typically something they would only do when there’s economic weakness.

And then, yesterday at 10am, the Fed announced that “the fundamentals of the US economy remain strong. . .” But just an hour later they changed their tune and said, “risks to the US outlook have changed materially.”

Go figure, the market tanked even more.

Perhaps most comical is that the entire episode was forgotten by this morning… and the only story that seems to be driving the market is the resurrection of Joe Biden.

So the Fed basically blew a 0.50% rate cut and has absolutely nothing to show for it.

Here’s why that matters—

In the crash of 1987 when the Fed cut interest rates, its benchmark rate was 7.25%. So a half-percent cut was not especially significant.

In 2000 when the US economy entered recession (and the stock market started to fall from its peak), the Fed’s benchmark rate was 6.5%. So they had plenty of room to cut rates.

In 2007 when the US economy entered recession yet again (and the stock market started to fall from its peak), the Fed’s benchmark rate was 5.25%-- still plenty of room to cut rates.

But as of yesterday morning, the Fed’s benchmark interest was just 1.75%. So a 0.5% cut is pretty huge. Do the math-- they cut interest rates by nearly a third, down to 1.25%.

This gives them VERY little room to cut rates further when the US economy enters recession, virtually guaranteeing that interest rates in the Land of the Free will go negative.

Remember that, in a typical recession, the Fed cuts interest rates by an average of 5%.

Rates right now are only 1.25%... so we could easily see rates at MINUS 3 to 4%.

Just imagine paying money to deposit your savings at the bank (Wells Fargo will have so much fun), or being paid to borrow money…

That is now a very likely possibility in the most advanced economy in the world.

I probably don’t have to tell you this, but negative interest rates will almost certainly be very positive for gold prices, and gold-related investments.

More on that soon… because this emotional roller coaster is far from over.

To your freedom,



Simon Black,
 

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Scorpio

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quite illuminating how many of the rag writers are coming out announcing:

-this is it
-we told you so
-we warned you this was coming


and the list is quite lengthy, which of course then begs some questioning,
-is it really?
-you told us some time between now and the end of the world, so your timing was a bit stretched
-you warned us of something, not of specifics, so you painted with a very wide brush
 

madhu

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We had discussion here re oil prices and asset price. Oil is Used as a collateral to access debt, aka dollar. How to access new debt? By hypothecating assets that are in debt already from previous loan. This was the reason for the property bubble to deflate after oil prices fell. May be the banks don’t care any more and they just lend NINJA loans even to companies for this zombi economy to continue. Yes that can continue Till the govt monetizes all the debt and the currency becomes worthless. Every asset price is so distorted and one cannot discover true value
When oil prices fall so does the fall in asset prices all across the board and nothing the federal reserve can do about it? This is deflationary and all the kings men cannot put Humpty Dumpty back together.
May be some body else can explain this better.
 

JayDubya

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Some Dealers Telling Customers to Stop Paying Auto Loans, Sign for New Ones

https://www.caranddriver.com/news/a31055930/car-dealers-encouraging-loan-defaults/

The Wall Street Journal reported on a dodgy practice called kicking the trade, in which people just walk away from their debt on a car.

  • In a process called "kicking the trade," some car dealers are telling people who can't afford their current auto loan to just not pay it, and pick up a new loan.
  • It's a short-term solution to a longer-term problem, and it could be happening more often than anyone would expect, as the Wall Street Journal reported.
  • The move has an obvious negative effect on the customers' credit scores but at least one observer suspects it would entice higher-end shoppers, not just the poor.
It's not a move for everyone, but there is apparently a growing number of people who can't afford their auto loans and who are just stopping their payments in order to buy another car. Hard numbers are difficult to come by, but a recent report in the Wall Street Journal found a handful of anecdotes that this practice, known as "kicking the trade," is quietly happening across the country with people who sign auto loans that they then can't afford.

Exactly how many people have stopped paying their auto loans at the suggestion of a dealer interested in selling them another car is pretty close to impossible to determine. We do know that the average new-vehicle price hovers around $35,000. The Federal Reserve Bank of New York (a.k.a. the New York Fed) keeps statistics on overall automotive loans and the number of delinquencies of those loans and has found an increasing trend in recent years.

The amount of money taken out for auto loans has been on the rise since 2010 and was over $150 million in the U.S. for each of the last three quarters of 2019. The number of auto loans that have transitioned into what the Fed calls "serious delinquency" (more than 90 days late) has been slowly rising since 2012, but the total isn't as high as in the recessionary years of 2009 and 2010.

In part, this is because there are simply more auto loans happening. The New York Fed's quarterly report on household debt and credit in the United States that was published in February says auto loan originations, including both newly opened loans and leases, were $159 billion in the fourth quarter of 2019, about the same as the previous quarter's high level. Similarly, the credit agency TransUnion released a report that found that auto originations grew by 4.3 percent, year over year, in the third quarter of 2019, adding 7.5 million new accounts. The average balance of those new accounts was $22,232, or 3.3 percent higher than the same period the year before, TransUnion said.

The Fed found in February 2019 that 2018 "marked the highest level in the 19-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports, up in nominal terms from 2017's $569 billion." The Fed reported that even though a lot of the growth came from individuals with high credit ratings (over 760), given the overall increase in the number of auto loans originated in 2018, "there are now more subprime auto loan borrowers than ever, and thus a larger group of borrowers at high risk of delinquency."

There's a company called Swapalease that helps arrange car-lease transfers to let people transfer an existing lease to another person, potentially a method that avoids the negative effects of simply walking away from a lease. Scot Hall, senior vice president of operations at the company, told Car and Driver that he believes the number of dealers who actually are "kicking the trade" are few and far between, and he pointed out that there are risks for any dealership that tries this strategy. "If a dealer was guilty of inflating a client's income on an application for credit, serious legal and business consequences would result for that dealership," he said.

The bottom line is how it affects the person who signs on the dotted line, of course. And buyers are ultimately responsible for balances of loans, even if they default.
 

Scorpio

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WOW!

OIL MARKET OPENS IN FULL COLLAPSE!!

DOWN $8 TO 33 BUCK PER

after massive decreases already last week,

dow down almost 1000 pts on the open

Gold up 21 and chasin' down 1700
 

Scorpio

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Scorpio

Hunter of Chin Li's Boo Hoo Flu
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these are yields from last friday, not including tonights action

first is 10 yr, then 30 yr for morts

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