Sunday Night Update

Been 3 weeks, so if you haven't finished the last one, you likely won't. Again this one is disjoint but I can never find time to fix it up so I'm just going to send before it gets amazingly long. Lots of stuff has happened since we last spoke...

$117 oil. That is getting interesting. Summer driving season doesn't start until then end of next month. Hurricane season the month after....

$4 gas? $5?

In the middle of the 3rd straight “kitchen sink” quarter of earnings season – how many more kitchens do these companies have left???

Personal experience: Customized a laptop last week through HP. They said it would be done by the 25th, and with 6 to 8 days for shipping I should get it in early May. My thesis was that neither HP nor Fedex has anything better to do right now, and that the "strong" global economy the stock market seems to believe is a complete sham - so I predicted getting it BEFORE the day they claimed it would even be completed. Sure enough it was in transit this weekend already and I'm supposed to get it Wednesday (a couple days before it was to even be completed).

Oh, and shipping was free and I found a 30% off coupon (in 15 seconds of searching online) for the computer, as well as throwing in a free printer - tell me how you think margins are working out in the real world?

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Some awesome (i.e. the truth) quotes from the last real Fed Chairman we had (i.e. the one before Greenspan).

http://tinyurl.com/5yoqgo

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I don't think there were too many other Mish articles in here - but this one got more to the point the further you read!

http://tinyurl.com/5yvdgu

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What Middle Class? How long until that comes true?

http://tinyurl.com/45phfu

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People dying in food riots in Asia/Egypt. Rice up 50% in a week. Wait until that spreads. It will. China alone will cause it to as it’s citizens are now being able to afford more “mainstream” foods. Last I checked they have a lot of citizens.

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What’s with airlines? I’m obviously for safety and all, but this few hundred flights a day getting cancelled is starting to get out of control! Seems crazy, but I wonder if it has anything to do with reduced passenger loads, reduced business travel, and insane oil prices…

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You may have thought I was kidding when I said the Fed is going to run (and RUIN) the entire country. I wasn’t. If we allow this to continue, it’s done.

http://tinyurl.com/43euuf

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Read these 3 paragraphs, and think about what door was just opened.

The Federal Reserve decided last week to overstep its legal boundaries – going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns' mortgage debt. But the bank – J.P. Morgan – was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense. Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”

The Fed did not act to save a bank, but to enrich one. Congress has the power to appropriate resources for such a deal by the representative will of the people – the Fed does not, even under Depression era banking laws. The “loan” falls outside of Section 13-3 of the Federal Reserve Act, because it is not in fact a loan to either Bear Stearns or J.P. Morgan. Bear Stearns is no longer a business entity under this agreement. And if the fiction that this is a “loan” to J.P. Morgan was true, J.P. Morgan would be obligated to pay it back, period. The only point at which the value of the "collateral" would become an issue would be in the event that J.P. Morgan itself was to fail. No, this is not a loan. It is a put option granted by the Fed to J.P. Morgan on a basket of toxic securities. And it is not legal.

Not only was the action illegal, the vote itself was illegal. The Fed needs 5 members to vote on such actions and only 4 members were present. Fed Governor Mishkin was missing in action. Was he opposed to this illegal hijacking? There was an excellent discussion of this idea in the comments section of the California Housing Forecast.



Nothing will stop them from destroying this country as they are now "above the law".

Best guess at their "plan": Faulty rocket shot upwards to destroy shorts with lies/deceit/illegal acts, then massive crater to destroy longs when they let the truth out. Everyone is even, broke, and willing to do whatever they propose.

Privatized profits, socialized losses?

Hammer and sickle.

You might ask “why would they do that”? They have no choice. They all got greedy and F’d up the entire system. Bear Stearns showed it’s done. Why couldn’t they let it go bankrupt as it should have? Credit Default Swaps. Those 1 in a million lottery tickets that pay in full on default could not be paid. It would have resonated through the entire system and brought down the entire world financial market in one fell swoop. Doubt if you want, it’s true - they pretty much said it to Congress the next week. Bear isn’t even a real bank, heck they were the smallest of the “big 5”. That’s how intertwined it all is. The rest did the same stuff as Bear. Time is not on their side, it will get worse. Government bailouts at the taxpayer expense, no matter how illegal/unconstitutional it is, is the only way out. And it won't work. It’s math people. They want people to remain debt slaves – but the people can’t afford it – house prices NEED to come down to unlock the system.

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Far be it from me to tell anyone else what to do with their finances, but if I had access to a Home Equity Line, I’d likely have maxed it out by now – with the intention of selling it back to the bank in a year at about 25 cents on the dollar (50 if I’m feeling generous that day). And the bank would likely be thrilled.

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California is done with muni-bond insurers (they are making their own), Credit Default Swaps are worthless as the bankruptcies are no longer allowed – it was all a farce. People paid for things that didn’t exist so Wall Street could line it’s pockets. Then when the lottery hit, they claimed the Powerball number only counts if the ball is blue – sorry everyone, thanks for playing.

The systematic demise of the largest ponzi-scheme joke of a system is happening.

Sign the petition AND contact your reps.

To contact your reps
http://www.congress.org/

Type in your zip code and it gives you your senators etc. and let's you write them. I'm sure they will soon be sick of me. I've also made more than a few phone calls to Senators Klobuchar and Coleman. Feel free to do the same and complain about your bailout of choice. If we sit back and let them get bought by big business while we foot the bill we are all going to be very sorry.

Klobuchar: 202-224-3244

Coleman: 202-224-5641

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From Bloomberg (via Mish):

Seventy percent of consumers who have received their 2007 income tax refund are using it to pay off credit cards and bills, the first time in 20 years that figure has topped 50 percent, according to Beemer. People who may have never seen the inside of a Wal-Mart are now buying groceries there, he said.

"In my 29 years of research, consumers are doing exactly what they said they are going to do: they're not spending," Beemer said in a telephone interview. He said his firm interviews 8,000 to 15,000 consumers a week.

This is a stunning announcement: "Seventy percent of consumers who have received their 2007 income tax refund are using it to pay off credit cards and bills, the first time in 20 years that figure has topped 50 percent."

Anyone who thinks Bush's economic stimulus package will work is sadly mistaken.

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The homebuilders NEED to go away, and NOW. Oversupply is destroying the housing market of this country – why do we continue to encourage it?

An easy cause to call a rep about as there isn't a SINGLE reason for these companies to exist, much less be funded by us for their blatant destruction of our neighborhoods and communities.

"Neither the National Association of Home Builders nor the National Association of Realtors saw these housing declines coming, but somehow they know what the answer is. The answer is always the same: more handouts to the NAHB and the NAR."


Meanwhile back at the ranch... As people rubberneck the Bear Stern (BSC) demise, one of the most putrid legislative moves in the modern era is getting shoved up tax payers' arses without nary a peep by the mass media. I am talking about the http://biz.yahoo.com/ap/080123/economic_.... proposed loss carry back provision, which would allow homebuilders to recover taxes paid during the bubble years by offsetting the income with the losses they are incurring now.

In essence Minyans, you and I will give back to the Robert Toll (Toll Bros (TOL)), and Ara Hovnanian (Hovnanian Ent. (HOV)),of the world millions of dollars to prop up their closely held companies, i.e. companies' in which they have majority interest and/or control, whose stocks these individuals had the magic foresight to dump by the millions of shares right before the whole Ponzi scheme collapsed.

If ever there was an action that should undermine investors' confidence in our market system and reinforce the view that the government exists to grease the palms of those who pay their way into influencing the government, this is it.

I have not had a position in homebuilders in quite a while, so I could care less whether homies stocks go up or down. Furthermore our money is likely to do sweet nothing to the business prospects of those companies, except permitting them to show our involuntary charity as income on their statements, which probably will trigger some more option grants to the insiders. Alas, the involvement I do have in the homies is one with only clearly defined downside, that of a taxpayer watching money being transferred from my pocket to the pockets of those whose dog and pony hype shows were part and parcel of the disaster we are facing right now.

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Great food for thought. How does this even get fixed? What I do know is that it's surely not by doing what they are about to do (which by the way is illegal, but nobody seems to care about the law anymore).
http://tinyurl.com/4fcrqc

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I stopped reading after the first paragraph. But all I can say is cry me an F'ing river! After the numerous Buffet rumors, the China rumors, the Ambac rumors and on and on, NOW they suddenly care?! Downright ridiculous.
http://tinyurl.com/3q232s

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Reminder: Go back and read the Herb Greenberg piece in the last message I sent about how it's not the "shorts" that are to blame, it's the longs. 100% correct.

Delusional would be their word, not mine. But we already know they get it over there...
http://tinyurl.com/3pxvt8

The best way to illustrate that it ISN'T the shorts. China's market is now down about 50% (ouch) - and shorting is not even allowed.

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Short article, but beautifully said.
http://tinyurl.com/4j7ja5

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"The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system."
http://tinyurl.com/2yzu84

Really, you better get me those designs quickly or we aren't going to have ANY say on where to put the hammer or the sickle on the flag. Wow, this is moving fast. Although good luck getting something like this passed quickly.


The Dilbert way of looking at it:
http://tinyurl.com/4phfr8

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Fraud in CPI – let’s just change how it’s calc’d when we don’t like what it says. Good luck to anyone in this country on fixed income.

http://tinyurl.com/4zxfbg

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Even worse - Banks lying about LIBOR?? What a joke of system this has become. Ponzi would be proud.

http://tinyurl.com/3ndyf9

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Socialism, and who's to blame. Loved the last paragraph, but read the other stuff too.
http://tinyurl.com/4cumq2

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Once again, the quote in the last paragraph is the clincher, but you might as well read the rest to see how ugly Florida is getting. California has been lagging Florida - we better hope it's not next. By then it's light's out as that's the 6th largest economy on the planet:

The Herald Tribune reports from Florida. “The crowd filed in to the large white tent behind the Bahia Mar resort for Friday’s real estate auction organized by Sotheby’s and Daniel DeCaro Auctions as a four-piece jazz band played a peppy rendition of ‘I Feel Good.’ Only a handful of the properties would be selling absolute, where any bid would be accepted. The rest carried a non-disclosed reserve, or minimum bid. The auction, which was anticipated to take four to five hours, wound up clocking in at barely two.”

“The first property out of the gate was not a good omen: auctioneer Daniel DeCaro tried opening the bidding for 1850 South Treasure Drive in Miami Beach, a waterfront lot, at $1 million. There was no response.”

“He then tried to get something started at $500,000, but again, no dice. $250,000? Still dead air. $100,000? Silence. At that point, DeCaro threw in the towel and passed the property by.”

“‘Please come see us afterwards,’ he told the crowd.”

“By the time it was over, 67 of the 99 properties on the block had no bids. ‘This was a disaster,’ said Fort Lauderdale broker Paul Merlesena following the auction. ‘They’re basically going to have to give them away now.’”

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If you happen to have faith in the government, I might as well pass along this "colorful" advice:

All losses go on The Public Debt.
Therefore, buy all financials.
That's the trade guys.

HB&B are going to end up with all the assets, especially houses.

They are engineering a bond market collapse. I am certain of it, having gone back and listened to Bernankes testimony, especially the exchange with Kennedy.

He played Kennedy like a f*cking violin and they are draining cash at the same time they're prodding Congress to take the entire loss from the housing mess onto the public balance sheet.

Its the same f*cking playbook that was run in the 30s and we know how that turned out. Bernanke claims "The Fed inappropriately held policy rates too high" - that's horsesh*t.

The Fed follows, not leads.

What caused rates to go up? Congress tried to print its way out of the bubble by propping asset prices.

That caused a bond market collapse and THAT is why we had the Depression.


We're headed for a sh*tstorm of unprecedented size folks.

I can't tell you when its going to happen, but I can tell you with absolute certainty that it will.

This sort of fraud doesn't live for long. Eventually the people who are being f*cked get tired of it and force a fix.

There's nothing honest in any of these numbers. JP Morgan's "earnings report" is total horsesh*t; read the actual release. Goldman and the rest of the IBs have "met lowered estimates" by shifting a total amount of debt that equals their MARKET CAP from Level 2 to Level 3.

That, under an honest accounting regime, would be a Chapter 11 filing, not an "earnings release."

We don't have that any more.

So far investors are "allowing" this, but is this really being overlooked or are people heading quietly for the door while shoveling shares into your 401k and IRA account?

I don't know the answer to that but if its the latter then we have once again suffered what happened to people in the Tech Wreck, which I warned repeatedly about at the time and was called all sorts of names by people that two years later went bankrupt and lost everything.

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Keep up the games banks, many of your days are numbered. This ought to help consumers.

http://tinyurl.com/65kmfs

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A submission from Mr LaMar that I thought I’d pass along:

The Roaring Twenties was a time of prosperity and excess in the city, and, despite warnings against speculation, many believed that the market could sustain high price levels. Shortly before the crash, Irving Fisher famously proclaimed, "Stock prices have reached what looks like a permanently high plateau."[1] The euphoria and financial gains of the great bull market were shattered on Black Thursday, when share prices on the NYSE collapsed. Stock prices fell on that day and they continued to fall, at an unprecedented rate, for a full month.

In the days leading up to Black Thursday, the market was unstable. Periods of selling and high volumes of trading were interspersed with brief periods of rising prices and recovery. Economist and author Jude Wanniski later correlated these swings with the prospects for passage of the Smoot-Hawley Tariff Act, which was then being debated in Congress[2]. After the crash, the Dow Jones Industrial Average (DJIA) recovered early in 1930, only to reverse again, reaching a low point of the great bear market in 1932. The Dow did not return to pre-1929 levels until late 1954,[3] and was lower at its July 8, 1932 level than it had been since the 1800s.[4]

“ Anyone who bought stocks in mid-1929 and held onto them saw most of his adult life pass by before getting back to even. ”

—Richard M. Salsman[5]

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Peter Schiff has been ahead of the curve. He was mocked repeatedly, but has now proven to be correct. I'm afraid the same thing is likely to happen here as well...

http://tinyurl.com/54dzh7

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Maybe it's just the voices I give the various participants, but this once again made me laugh aloud.

http://tinyurl.com/48tzlg

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Longer, but KD at his best - hitting numerous topics.
http://tinyurl.com/3oljgd

Sign that petition.

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Want to know why the public is screwed, because this is how things worked:
http://tinyurl.com/32gpmr

A couple of key excerpts:

The two didn't say exactly how much money they made at their last jobs but Kent admitted they each had six-figure incomes.

Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month.

Only $1,800 to cover $10,000 in bills

Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.

And...

Despite their financial problems, the Copes have worked hard to protect their credit rating, staying current on bills. And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example.

When are people going to wake up?

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Jobs #'s are atrocious.
http://tinyurl.com/44n9vp

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6 airlines have declared bankruptcy in the last 2 weeks.

Rice now up 50% in 2 weeks. Do you know how much rice is eaten on a daily basis?

Notice what isn’t going up in price food-wise? Meat. Care to know why? Grain prices are SO out of control, that farmers can no longer afford to feed their animals. Instead they kill them. Meat supply surging. Unfortunately you can’t undo this down the road for obvious reasons. The impending shortage is when meat prices will surge. I don’t care, I don’t buy it anyway. Let’s see how the rest of the country likes it.

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Look up the comments Sallie Mae made about the future of student loans – hint, the used the phrase “train wreck”. Over a third of the top 100 student loan lenders have completely stopped. Next month is application time. Train wreck suddenly looks like an understatement. Keep it up Fed/Gov’t. Hide the sausage is going to destroy things even more than finally fessing up…

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Really – what is going to happen to California? This is getting ugly, and the “fun” hasn’t even begun.
http://tinyurl.com/3wga7s

But I’m sure there is plenty of spending going on in CA these days? Then again, the San Joaquin County building Department notes that 2200 swimming pool permits issued by this time last year- so far this year they've issued 2

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As a little birdie said:

Now with the new tax legislation, in order to recover 2004 taxes, every builder and bank is going to be liquidating land in 2008 as losses must be realized this year(impairments don't cut it in the tax world).

LAND VALUES WILL CRASH BY THE END OF THE YEAR AS EVERYONE IS SELLING AT THE SAME TIME. TAX PAYERS, GET YOUR CHECKBOOKS READY.....You are going to owe the builders and banks that put you into this mess billions.

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Lies from S&P - these are some more a** holes that need to be shut down.
http://tinyurl.com/4yw53j

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So they are allowed to go to the discount window (with the real banks) and thus get bailed out with taxpayer money -and this is what they do with the money? Raise your hand really f'ing high if you didn't see this coming....

WASHINGTON (Dow Jones)--Investment banks may be abusing the money they are borrowing from the Federal Reserve's discount window in order to issue dividends, a top House Democrat said Wednesday.

Rep. Paul Kanjorski, D-Penn., the chairman of the House subcommittee with oversight over the capital markets, raised the concern during a hearing Wednesday. He said a hedge fund manager suggested in a recent meeting that large banks may be borrowing billions of dollars in funds made available by the central bank in order to benefit their shareholders.

"I myself will be incensed if after going to the rescue of these institutions there are those types of abuses occurring," Kanjorski said. "Particularly I'll be incensed if the Federal Reserve hasn't marched up here with emergency sirens saying there's something happening that shouldn't happen."

Federal Reserve Gov. Randall Kroszner said he was unaware of any type of abuses, and that any such actions wouldn't be tolerated. He stressed that the funds have only been made available to a "limited number of institutions with which we have had a long-standing relationship."

Otherwise put:
Looks to me like they are creating these CLO for the sole purpose of sucking at the Fed teat. I can think of much better uses for tax dollars than keeping investment banks that pay their CEO $25m on life support. That's right taxpayers, tax money you could have spent on your children is being given to a company (Lehman) that pays it's CEO $25m.

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Non-required:

Had to put this one in just because it made me laugh.
http://tinyurl.com/4yoscr

An interesting subsection of the final days of Bear Stearns:

Even as the firm frantically negotiated a rescue package, Bear executives continued to try to convince the world that everything was under control. That evening Schwartz contacted a well-known New York hedge fund manager (a longtime Bear prime brokerage client). He pleaded with the manager to appear on CNBC the next morning and express his confidence in Bear. The hedge fund manager declined politely but wondered why Bear needed a client to convince the world of its health. He wouldn't wonder long.
http://tinyurl.com/3cnor6

Terrified Fed
http://tinyurl.com/5bz6wo

Haven’t read it all yet but...
http://tinyurl.com/3vtyxw

If American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. -- Thomas Jefferson

It IS happening RIGHT NOW.