Finance, Fuel Prices, Economics, Markets

The Big Lie(s)

The definition of the Big Lie is that repeated often enough, the lie becomes the [brainwashed] truth, and the larger the lie, the more likely it is to be accepted.

Enter stage left Tiny Tim Geithner, temporary secretary of treasury, temporary because it is clear that he will not last long as the Obama fall guy on the economy. Tiny Tim has been telling lots of lies lately and repeating them often. Too often, and those will spell his demise. Here is one of the best:

That to get through this, governments need to act. Great obligation responsibility for governments to act to solve these things. The market will not solve this, and the great risk for us is we do too little, not that we do too much.

There you have it: “The market will not solve this.” This is funny. No, Tiny Tim, your problem is that the market will solve the problem, despite your attempts to prevent it, only in a way that is sheer terror for you and your kind. That is because the problem is trillions of dollars of unserviceable debt that you are trying to prevent from defaulting by making the payments for the people/banks/corporations who can’t pay. And you are mortgaging and taxing the very people who can’t pay to make the payments. What you are attempting to do is pure insanity disguised under the cloak of fraudulent economics.

Tiny Tim and Bearded Ben want you to know that they are working hard to bring interest rates down so that you can borrow even more money that you can’t pay back, and that will fix everything up just fine and dandy. As I have said all along, the solution to the problem of too much debt is to finance your way out of the problem. The big lie contained in that is not only the absurdity of it, but the fact that the financing will consist of simply printing up the money, a.k.a. counterfeiting it. Then Tiny Tim advises us:

That’s not going to happen in this country, will never happen. [repeats] Will never happen. Because we have a strong, independent Fed, with a clear authority from the Congress to keep inflation low at — stable at low levels going forward.

STEPHANOPOULOS: The Fed has been putting so much money into the system.

GEITHNER: But that’s not going to create the risk of hyperinflation in the future.

So there you have it folks, right from the little horses’s ass . . . er, mouth. Printing trillions of dollars of new money without an increase in productivity will not “hyperinflation.” Technically, that may be correct, for hyperinflation is usually defined as 50% or more inflation per month. Of course, he didn’t say that there wouldn’t be 50% inflation per year, which is more likely what will happen. Nor did he mention the risk of collapsing the dollar, which will cause hyperinflation.

Here’s a nifty Freudian slip:

As you said, I’ve worked all my life in public service. I‘ve spent my entire professional life helping this government and this country do a better job of dealing with financial crises and helping protect the economy from the damage these causes.

Oh, so you admit that during your career, all we have done is lurch from one crisis to another? And you see your job as doing a better job of dealing with them, not seeking a way to avoid one disaster after another which you and your cohorts engineer all by your greedy little selves. But then there is no end to the big lies:

I would not spend a penny on helping a bank for the purpose of helping a bank. Everything we’re doing is for the people that depend on this financial system. Every time we provide assistance to the financial institutions, it’s only because we need them to do a better job of getting credit to help reduce the risk of a deeper recession.

Cute, real cute. You and Ben have been at this for two years now and banks are lending less than ever.

Which is exactly what they should be doing, i.e., not making loans to people who are unlikely to be able to repay them. Isn’t that how banks got in this mess in the first place, smart fellow? Or is it that you want them to start the great credit game all over again in the hopes that you can somehow avoid the consequences that you have been currently unable to avoid so far?

Ach! listening to people like you is like trying to explain the behavior of a madman, because you are mad. You seek to bamboozle people indefinitely and repeal the laws of the universe. You speak of irresponsibility while being irresponsible.

The lies are consuming the nation, but Tiny Tim is so smart that he believes that he is exempt. He will also be consumed, and in ways that small-minded little twerp isn’t smart enough to know.


March 29, 2009 Posted by | Economics | Leave a comment

Bear Market Rallies

I find it amazing how many of my friends and acquaintances judge the economy by the short term performance of the stock markets. Markets only provide a fair indicator of economic performance in the medium to long term, and even then such judgements are shakey at best. Remember July, 2007? One month before the great crash began, and EVERYONE thought that all was just hunkey-dorey.

The same goes for bear market rallies, which I call “fools rallies” because they sucker so many fools in. And huge numbers of those who lost half their 401Ks and whatnot are now being lured back in. This rally is only 11 days old and it is strong and violent. Here is what the previous rallies looked like.

On an average bear market rallies last for 9 days with an average gain of 16% from trough-to-peak.This most recent bear rally run has been the most violent, and the largest single move in the history of the markets. That means that it is a possibility the bear market is over – NO WAY!!!

Bear market rallies Start date End date Number of days % Change
1 9-Mar-09 23-Mar-09 11.0 21.6%
2 20-Jan-09 28-Jan-09 7.0 8.6%
3 20-Nov-08 8-Dec-08 12.0 20.9%
4 27-Oct-08 4-Nov-08 7.0 18.5%
5 10-Oct-08 20-Oct-08 7.0 9.6%
Average 8.8 15.8%

That should tell you all you need to know about this one.

Source: Reggie Middleton

March 26, 2009 Posted by | Investing | Leave a comment

Wall Street: Engineering Insurrection

You don’t much see it on the news, for the MSM, which is deeply linked to Wall Street Finaciers (a la G.E. Credit, et. al.) but the vitriolic hatred of Wall Street is simmering and about to become a boil. If you’d like to get an eyefull, try googling “wall street bastards,” for one. Or try “dear wall street” and check out the outpouring of sentiment. Much of it is quite vile, understandably so. But it also quite dangerous, and yet the Wall Street (and Raleigh) criminals are either oblivious or think they’re untouchable. I got news for them, they aren’t. Emails sent with threats of strangulation with piano wire are tame compared with the bulk of what is spreading around the internet like wildfire.

TinyTim Geithner’s latest bail out plan to remove toxic assets from bank balance sheets is just one more in a long line of criminal scams against the American public. Number ten, to be exact. And as always, the bullshit is twenty feet deep about “protecting the taxpayer” when in fact there is no protection and no intention to protect whatsoever. What is so surprising is the incredible arrogance revealed by the pathetically thin veneer that disguises these looting schemes. Within hours, the contrarian media lays them bare and reveals the reality of such scams for what they are: outright theivery.

TinyTim’s latest plan, announced to congress two months ago with virtually no details, now turns up as a complicated scheme to both enrich not only the banksters but hedge funds as well. It is just one more instance where you and I will be forced to pay – no, correction, robbed to pay, mainly because if you refuse men with badges and guns will show up at your home or office to make sure that you will pay, by force if necessary.

Here’s one good reason why the lives of the financial mafia may be in danger. This piece of crap was written by an Exec VP of AIG by the name of Jake DeSantis and published in the NYT. It is enough to make you sick, and more than enough to motivate the more hateful and unstable among us to do that which we see so often in the news these day. To wit, grab some guns and go out shooting.

Mr. De Santis claims he did nothing wrong, and that he slaved away working 12, 14 hours a day at self-less service to AIG only to be betrayed. Worked in the Financial Products Division as an Exec, the very division that nearly blew up the world. The letter is long and the following are selected paragraphs.

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in – or responsible for – the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company – during which A.I.G. reassured us many times we would be rewarded in March 2009 – we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

My Comment: Of course you didn’t know anything about it; nobody did, it was all done by ghosts in the middle of the night.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My Comment: Yes, but you couldn’t possibly be an exec in the same department for all those years and not know what was going on. The problem, you see, is that you and everyone else there, and in all other such criminal organizations, are raking in the huge bucks and so you turn a blind eye to what is going on. Then, when the rope slips around your neck, you start shouting the “poor me’s.”

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need. On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes . . . . .

My Comment: And so how was it, sir, that a bankrupt AIG was paying out multi-million dollar bonuses? Of course, you never asked, “with whose money?”

“Decided” to donate? Hah! that was only after congress decided they were calling out the men with the badges and guns, Mr. De Santis. Your phoniness is all too transparent, you crook. Let’s see now, after taxes, so your gross was probably about a million-five. What a pittance for slaving away in the back rooms, unnoticed and unappreciated. When you are in that kind of pay bracket, there is no such thing as loyalty. You work in a pit full of vipers whom you never dare turn your back on. And then you publicly turn yourself into a sniveling whiner? No sale, you sanctimonious viper.

But for taxpayer support, your job would have ceased 18 months ago. And whether the people start coming after you with piano wire or molotov cocktails, you will, of course, be equally surprised. But no one else will. You are truly a man blinded by greed, though by no means the worst of the lot. You just made the mistake of public whining, and thereby making a target of yourself. What you did pretty well demonstrates your self-centeredness, lack of discretion and ethics that you tried to hang your hat on. That was just plain stupid.

If the rest of the AIG execs are as imprudent and foolish as you, no wonder AIG is where it is today.

March 26, 2009 Posted by | Blowing Steam | Leave a comment

Why AIG Was Too Big to Fail

And why neither congress nor the white house will do the right thing. Ever. After all, the name of the game here is protecting the big money interests, and to hell with the little people.

Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes.

Isn’t it nice to know that your future earnings are being used to bail out foreign banks?

So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure

It just makes one want to gag whenever these self-serving sewer rats start talking about “taxpayer’s interest.” Their only interest is with votes, and they are firmly convinced that those who vote for them are too stupid to know any better. And the sad news is, they are right. Stupid, lazy and every bit as self-serving as the rats they vote for. Barney Frank, for Christ’s sake. You might as well vote for Hugo Chavez, they’re both the same.

March 20, 2009 Posted by | Blowing Steam | Leave a comment

The Beast

Derivatives Beast Eats the Nation

Head First

“If you don’t bail us out, we will destroy the economy of the nation.” Those were the essence of the words told by AIG to the US government. Now, after three bail outs, AIG is still making the same threat. The problem with a man’s arrogance when it gets out of control is that it can easily destroy him. Megalomania clouds judgment to the point of insanity. And when this occurs with the rich and powerful, that degree of arrogance destroys nations and kills millions. The reader is aware of sufficient infamous examples in history that I need not recite them.

The arrogance of Wall Street financiers, the US executive and congress is reaching the point of irreversible self-destruction. It has crossed over the line into insanity. The insane are never aware of the monstrosity of their behavior, and with straight face will justify it, as they do every day. The case of AIG and the derivatives beast is now in the process of blowing up. The scandals and criminality of all concerned are of massive, unprecedented proportions. Wholesale money grabs involving hundreds of billions disguised as bailouts necessary to save the nation, are finally beginning to be exposed.

AIG, which just posted the largest corporate loss in history of $61.5 billion, is about to pay $1.2 billion in bonuses to employees for helping it go broke.

Today, the Toady in Chief, Obama went on television to rail at AIG for paying bonuses. Cute little game, Mr. Obama, after your White House boyz earlier deferred by saying the bonuses were contracts and you couldn’t abrogate them. Last I heard, you were an 80% owner of AIG and had an army of lawyers at Justice under your direct control who would have no trouble whatsoever stopping those payments. Mr. Obama, I publicly call you a liar, a thief and a criminal, virtually undifferentiated from your predecessors. All presidents lie all the time, but this is just emblematic of what we have become, a nation of liars. Starts at the top and works its way down.

The problem, of course, is that the media on whom the public relies for information, is deeply involved via massive conflicts of interest. They will not call this out, and in fact, they play the story to the Chief Toady’s benefit. The monopolistic corporate media are co-conspirators, members of the elite club of criminals. This is the price we pay for allowing the vital media to become concentrated in a few hands. And if congress has its way, there will be even fewer hands as they try to eliminate conservative talk radio. Its also the price we pay for shirking civic duty.”

A clear example of the mass insanity taking place on the east coast of the USA is this:

“This is an example of people at the commanding heights of the economy misbehaving, abusing the system,” said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, speaking of AIG.

Look at that news quote carefully. See anything odd about it? How long has Barney Frank been in congress and on committees such as that one? Answer: a very long time, measured in decades. What did Frank do about this during all the years this was developing? What he did was to actually make it all possible, along with the other 534 sewer rats in Washington. Statements like that are made by thousands of high ranking officials every day, who themselves are the real perpetrators for having taken bribes to look the other way. This is the nature of our government. A keptocracy in the process of degeneration.

Oh, and of course after the shit hits the fan, Herr Bernanke expresses outrage over AIG bonuses. Neither he nor his pals at Treasury saw no necessity of attaching ANY strings to the three bailouts totalling $170 billion. Not once, but three times, even after the sex parties in Hollywood at taxpayer expense. Blind Ben Bernanke, protoge of Sir Greenspin, never saw anything wrong with anything.

Neither did it pass my notice that the DC rodents want the Swiss to reveal their banking secrets. The Swiss are a minor problem. The real problem are the Queen’s dozen or so pirate islands of the Caribbean where most of the stolen loot is stashed. The rats are heavily invested in those islands, and so their banking secrecy is quite safe.

Washington is overrun by rats carrying a plague named greed. Virtually nothing will ever be done to these people, or to stop the looting of the nation. This is a plague in its most virulent and contagious stages; it has spread across the nation and infected every facet of our economic and moral life. From the woman who wants a face transplant, and has no qualms about wearing a dead woman’s face, to the ghoulish surgeons who do such things for money – to that which we call a democracy that is nothing more than mob rule. The most valuable assets in existence today are 7″ x 10″ glossy photographs, and tape recordings taken surreptitiously. They are the pathway to riches in the halls of Babylon, and the reason why these massive crimes will not stop until there is nothing left to loot.

Oh, and about the title, think of all the people like Greenspan and Bernanke who extolled the virtues of derivatives, think about the conscious and deliberate conspiracy they engaged in. Men such as these know exactly what they say and do. They are accomplished public liars above all else. The derivatives beast ate AIG, Lehman, Bear-Sterns, Wachovia, Merrill-Lynch and on and on. Its one quadrillion appetite is infinite. And it is now consuming the USA, head-first. This should be obvious since the nation is now headless and adrift in a sea of insanity.

March 16, 2009 Posted by | Blowing Steam | , , , , , , , | Leave a comment

Point of No Return

Economic outcomes are fairly predictable, its the timing of outcomes that isn’t. I was only one of thousands who wrote that USG was putting itself into a position from which it could not recover. This was the absurdity of trying to finance the nation’s way out of a debt-based financial collapse. Sooner or later they would destroy the very Treasury market that made the financing possible, thereby forcing the Fed to pick up the slack. Of course, with the Fed creating new money to buy treasuries, that devalues the dollar which devalues the bonds. Catch 22, damned if they do and damned if they don’t, a lose-lose proposition if ever there was one.

All indications are that the Treasury market turned the corner last week with rates rising and prices falling. Also, news broke (via Tzarina Pelosi) of yet even more “stimulus” bills in the works, all this in the face of the USG needing to raise at least $2.8 trillion and up to $3.3 trillion this year. That is simply impossible without collapsing the market, so hi-ho, hi-ho, its off to the printers they go.

Consider: $3 trillion is now 1/4th of the whole economy, now down to about $12 trillion GDP. To pull that much money from private capital would by itself collapse the economy.

Next, China has issued its fourth warning, this time by Premier Wen. These warnings started at low levels and climbed the ladder to the top. That latest warning is no idle threat; they are telling the rodents in DC that they will dump their bonds if the rodents start monetizing. The threat is no longer idle since exports to the US are down by half, and so the Chinese have far less to loose by dumping than by keeping.

I believe that this is setting the stage for a future dollar devaluation. That is the only remaining option after a Treasury collapse. Despite the massive amounts of new government credit creation, I do not see this as inflationary since most of it is going into the black holes of derivative implosions and very, very little of it will reach the pockets of the people. Government spending cannot take the place of consumer spending and so has very little power to cause price increases except in limited sectors like shovels for filling potholes. FACT: Government can spend $3 trillion but consumers spend more than $10 trillion, so that barely offsets the decline in consumer spending, yet alone increases it.

The bond market will not collapse quickly, nor will Fed bond purchases ramp up fast. The time frame for this second leg down of the GREAT COLLAPSE will be 1-2 years.

The outlook for Precious Metals is that the fear factor can be expected to steadily grow as the current rally fades out. I see a case for a slow, but steady climb in prices (with the usual wild swings in sentiment). If the economic news is bad enough in May, prices will hold throughout summer, so we may have at best only a couple more months to buy at bargain prices. Silver should easily be flirting with $20 by September and $25-30 by November.

There is a huge consensus that silver will close the spread with gold; I agree, and fear plus limited quantity is the reason.

March 14, 2009 Posted by | Investing | 1 Comment

Chinese-American Ponzi Scheme Ending

Running a trade deficit means that a nation pays out more than it takes in. Over time a nation can loose all its money but for the usual dishonest machinations of governments to conceal the nature of the problem. In the case of the US, which imports three times as much as it exports, those deficits have been financed by those nations that sell the largest amounts to us.

The major portion of US defict is financed by China and Japan who purchase US Treasury and other bonds. China holds over $1 trillion and Japan $900 billion. But with the US borrowing and throwing money around like it were mere fertillizer, our creditors are beginning to take notice.

“We have lent a huge amount of money to the United States,” Chinese Permier Wen Jin Bao said at a press briefing in Beijing today after the annual meeting of the legislature. “Of course we are concerned about the safety of our assets. To be honest, I am a little bit worried. I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

Which means, don’t print money to solve your debt problems.

“China is worried that the U.S. may solve its problems with the fiscal deficit and banks by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

Delegates of China’s legislative advisory body suggested that the biggest foreign holder of U.S. debt diversify away from Treasuries into more risky assets at the annual meeting that started on March 3.

One of the major constraints on Chairman Bernanke’s desire to print money (via the purchase of US government debt) has, no doubt, been the worry about a potential backlash from China, the biggest buyer of US debt.

The heretofore mutually beneficial arrangement of China purchasing US debt with trade surpluses generated by American purchases of Chinese goods is drawing to a close. China’s trade surplus has all but evaporated, eliminating the need or ability of China to purchase additional US debt. In addition, the Chinese have made it clear that their national interests are best served by diversifying into commodities and other real assets, the value of which is not contingent upon an over-leveraged debtor nation.

Meanwhile, the financial media is celebrating a rally in the stock markets and calling for a bottom and a turnaround. They wish. Because that is all it is. Not one single problem of the financial collapse has been solved. After two years of throwing handfuls of water at a forest fire, the latest proposal is to simply cover up the banking problems by a return to mark-to-model accounting. In other words, if you are bankrupt, all you need to do is just change the numbers and presto! Everything’s A-OK. Except that its not.

The United States of America may yet be able to stave off a complete and total economic collapse – one that was guaranteed by the reckless activities of the last two years – but only for a matter of months, not years. Introducing more lies and deception into a system already living in fear of deception won’t making things better. It will only force even more capital to the sidelines.

As I’ve written before, the jig’s up when China sees better uses for its money than lending it to a deadbeat. That time is getting dangerously close.

March 13, 2009 Posted by | Daily Brief | Leave a comment

Capital Withdraws

As we have witnessed over and over again, as the tide goes out on our Ponzi scheme “finance economy”, the underlying muck on the bottom is exposed. That Bernard Madoff goes to jail today is but the tip of the iceberg. The greater criminal activity resides in the Wall Street banks.

WASHINGTON (Reuters) – The U.S. House Financial Services Committee will hold a hearing next week to ask key justice officials and regulators what they need to prosecute wrongdoers in the financial crisis, the chairman of the committee said on Thursday.

Barney Frank, a Massachusetts Democrat, said he had invited officials from the U.S. Justice Department, the FBI, the Securities and Exchange Commission, and all the bank regulators to the hearing.

This would appear to be good news but for the fact that so much of the noise coming out of Gomorrah, is little but window dressing.

The truth is that financial crime is so rampant, and the markets so rigged, that a large part of the current problem is simply capital flight. People with money look at our markets and say, “Screw that! My money is safer in a strong box than on Wall Street.” In the stock markets there’s no one left but but the professional gamblers.

New York Attorney General Andrew Cuomo says that traders looted Merrill Lynch. Cuomoclaimed that Merrill traders had mismarked their books as of early December in an effort to get higher bonuses.

“It appears that some of these losses may have been booked by Merrill employees who marked down their portfolios only after their 2008 bonuses were set,” the attorney general wrote in the filing. “Despite the gargantuan unexpected losses, Merrill did not reconsider its bonus awards” and Bank of America did not request or demand that Merrill reduce its bonus pool, he wrote.

Its not as if the financial police did not know what was going on, for they surely did. What were the congressional banking committees doing all those years? Sleeping or collecting bribes? Judge for yourself.

Investors, particularly foreign investors, are not going to return to our markets when they have much in common with Moscow.

Investors are not going to return so long as the likes of JP Morgan and Goldman Sucks exist as proxies for Washington, rigging the markets to suit political policy. For example, Morgan has over $70 trillion with a T in interest rate derivatives which exist at the behest of the Fed and its never ending quest to crush interest rates to zero.

People foolishly celebrate low interest rates only because they are not aware of how this destroys capital as well as savings. Who wants to save at 1% when inflation is 4%? If anyone should wonder why the US has no savings, one need look no further than this. NO SAVINGS = NO CAPITAL = THIRD WORLD ECONOMY. The steady drip, drip, drip continues.

General Electric Co. (GE) and its finance arm have lost their coveted AAA long-term credit rating from Standard Poor’s Ratings Service, which said its view of GE Capital on a stand-alone basis had fallen.

And that is where we are headed at a very rapid clip owing to the endless self-dealing in Washington. Capital is being destroyed at a rate that we may never be able to recover from its loss. In the name of replacing the lost capital, worthless paper money will pour off the printing presses. This flood of funny money will only benefit the broker-dealers of Wall Street, the first to get the money before the price increases begin. The very same Democrats who railed against trickle-down economics, now extol its virtues now that they control the printing press.

We could clean out the scumbag bankers but we’d still be left with scumbag Washington, who would just create a new crop of sycophant bankers to serve their socialist interests. There is no remedy for a nation of suckling pigs who desire to spend their lives sucking the government teat. The republic no longer exists; a democracy will and are voting themselves the treasury. They will keep debiting the national credit card until the bond buyers wake up and shut the spiggot off. That day is not very far off.

How do you have a recovery in the economy without a recovery in the capital markets?

The answer is that you don’t. An honest government would shut down bankrupt banks, not fund them with trillions of borrowed money. That is pure insanity. . . . . of the sort nations do not recover from.

March 12, 2009 Posted by | Investing | Leave a comment

Beware the Bear Market Rally

American savers are getting desperate, particularly those approaching or at retirement age, who have seen their savings decimated by 50% or more. Statistics show that relatively few were smart enough to get out of the market. Most took the advice of their financial advisors (aka stock brokers by any other names are still stock brokers) who said, “Be patient, the market will bounce back in time.” Or churned their accounts, moving them out of the pan and into the fire.

Of course, it didn’t and it won’t. This is the exception to the over-stated rule that over the long run you always win with the Dow. That is pure horsefeathers. People who are desperate have an ugly tendency to grasp at straws so that a big bear market bounce will likely be one of the cruelest events to happen. People will see the bounce as salvation, an opportunity that must be grabbed.

Equally desperate are the thousand of funds now riding the edge of extension. Those vultures are more desperate and want to believe even more than broken retirees. When the rally starts, they will throw magnesium on the fire.

In barely 18 months the Dow has given up 7,640 points, the sort of showing not seen since . . . well, you know. Far too many people think that it just can’t get any worse. The belief in easy money, easy living dies hard. People either do not know or ignore history. The young have an excuse since they are taught nothing in the schools. Their elders simply choose to live in their alternative universes, fantasies of progressivism and self-delusion. The very sort of people who worship Darwinian principles and science who, then turn right around and deny it as applying to their political ideology. The role of government is to prevent bad things from happening to good people.

But people who make conscious choices to deny reality are not good people; they are self-destructive people who will reap what they sow while taking everyone else down with them. One should not be surprised if the bear market rally is not government sponsored. Make note of Changeman’s recent comments. The rally, should it develop, will reach the level of absolute mania. The media will turn a fan on the flames; there will be jubilation and celebration and money thrown around as if it were 2004. The blast furnace of bubblemania will have one last go-round before the ultimate collapse. Make no mistake about it; when the rally turns, total desperation and capitulation will reign supreme and we will finally see something close to a bottom at 2,500 to 3,000, possibly worse.

The NASDAQ will likely cease to exist under the weight of the collapse of thousands of public companies as the stock market finally coughs up its role as the world’s greatest casino. The general public will shun stocks for decades to come as the art of raising capital shifts to the other side of the plant which is not buried under a mountain of unserviceable debt.

With a new president who has much in common with Hugo Chavez, all basis for hope is evaporating. A cataclysm the like the world has never seen is upon us. Its name is economic collapse. Buckle your seat belts. We are in for one hell of a ride.

March 9, 2009 Posted by | Daily Brief | , , , , | Leave a comment

Capital Markets Hit Men

By now it ought to be abundantly clear that our government is run by gangs of criminals for gangs of criminals. In prior ages this involved the like of the Mafia and other organized crime gangs. Today it consists of corporations organized of gangs of financial vultures and hit men, commonly known as banks and hedge funds, tho its often hard to tell the two apart. Throw insurance companies like AIG into the mix as well.

In the last couple days we have a good example of these guys hard at work. General Electric is their present target, whereas in the more recent past the targets were (and still are) wounded banks. These gangs are permitted to legally go on search and pillage missions with the tacit permission of Washington – which is well aware of their criminal activity, much the same as it was with Madoff, Sanford and others – by virtue of the fact that they refuse to put a stop to it. That it is being done to one of our premier industrial corporations tells us about all we need to know.

I’ll explain this by means of an example. Let’s say that it is legal (it isn’t) to take out life insurance policies on other people. And let’s say twenty people take out life insurance policies on YOU! Would you be worried if you found out about it? Why?

Credit default swaps are insurance taken out on debt, usually bonds, and big corporations like GE issue a lot of bonds. People who buy them may opt to buy credit insurance, but why would anyone do that on an outfit like GE? Does anyone seriously expect GE to default on its debt? Regardless, a lot of people (gangs) in recent months took out CDS on GE, and the number grows every day. And as the number of CDS on GE grows, more and more bond holders start wondering why. Now enter the vulture banks and hedge funds who start shorting GE stock and driving it down. These wouldn’t happen to be the very same CDS buyers now, would it? Nah, couldn’t be, not our nice honest bankers like the good folks at Goldman Sucks.

No margin is required for the sellers of CDS; neither do they have to post any reserves, so those who sell and those who buy CDS can enter into an unspoken conspiracy as the CDS seller (with inside info) starts buying Swaps for his own account. Next thing you know, the poor target discovers that he has hundreds of billions worth of death warrants issued on his behalf.

Now GE stock suddenly starts dropping and more and more short sellers, sensing blood in the water, start shorting. Suddenly a $35 stock in a matter of weeks is down to $6, and although no one knows anything seriously wrong with GE, everyone believes that other people know something they don’t. And so a stock death spiral develops and GE is about to be decapitalized. All as a result of those who took out life insurance policies on GE and seek to profit by killing the principal.

Financial law enforcement? What enforcement, there is none. And who in their right mind is going to invest hard earned capital in these “markets.” They’re not markets; they’re an organized crime ring designed to fleece the unwary.

The whole point is that if you no longer have trustworthy capital markets, you don’t got anything other than a third world train wreck.

Welcome to the new America, folks.

March 4, 2009 Posted by | Investing | , , , , , , , | Leave a comment