NEWS #93

From March 3, 2010 to ?

April 22, 2010

Here is a link to 'Wall Street and Washington's Game Is Rigged', by Jeffrey Cooper on Minyanville.Com. I quote this article below.

"I can't help but wonder what animal spirits will look like without the spirits. When you disinfect the profit motive and sanitize drive and ambush ambition, for the sake of social engineering, do you risk committing the same foul that the financial engineers and paper pushers committed? Perhaps the issue isn't the issue but the issue is power and control. It sounds like a cliche, but cliches are so called because they are often times so true. In the name of organizing and branding society in the likeness of one's own intellectual predisposition, is there a risk of self-sabotaging the goose that laid the golden egg?

...Those in charge of the entrails of Lehman want to know who was in on shorting the stock, who orchestrated the bear raid? I understand the current CEO will testify today in front of Congress. It will not be a pretty picture. And as the saying goes, where there's one cockroach, there are many. It's gonna be hard to book a room in 'the little cockroaches motel,' as Tony Montana might say. 'The world was yours.' The empire was America's to lose."

Rich Kolon sends a pair of notes:

1. "It may be as simple as "I got lots of cash (available). What asset group should I invest in?",

Bonds? Well not if you want yield and protection from inflation. Foreign bonds? More reasonable.

Gold? Maybe, but governments inherently does not like this competition for fiat money, and they allow the bullion banks to run over it with paper derivatives. It's an inflation hedge.

Houses? No. The banks have not written them all down yet.

Currency? Yeah, but they tend to move slowly.

Horses? No, that's gambling.

Stocks? A potential inflation hedge? Individual stocks can be manipulated. Plus the government wouldn't mind them going up, as it would save their asses on pension underfunding. Even give them some capital gains to spend on giveaways and bailouts. Maybe worth the risk.

Rich"

2.

http://www.msnbc.msn.com/id/36674830/ns/us_news-the_new_york_times/

"Now why would our governments want to layoff the teachers of our children?

Would that eventually mean that our youth would become less capable at learning new skills or getting higher paid jobs which the governments could exploit for new tax revenues to pay for future obligations?

Logically, it sounds dumb to disadvantage our youth vs. the youth of other nations, in creating a productive economy.

Or does our government prefer youth that won't learn enough to question what our politicians and banksters and corporate vampires (CEOs, CFOs) are up to? Maybe they prefer controllable servants, who will be glad to babysit or wait on tables for a low wage, and send text messages all day for a monthly fee.

Rich"

The Orange Section sends this response.

"Actually the stock market is where I think the manipulation is under foot. I think the Obama administration is trying to use an upward stock market as a replacement for jobs growth politically. Christina Romer has to know where all their policy leads. Figuring out there is a slack aggregate demand issue isn't rocket science. The history of the New Deal is not kind to Keynsian Economics, yet Keynsian Demand side economics remain popular because they sound good when presented to the ignorant masses. They are equitable in the short run. It is all about growing political capital, not economic capital. The sad thing is that Paul Volcker should know better. He needed Reagan in power before he could do what was needed to break Careter's inflation.

Now add in the fact that Wall Street was one of Obama's largest donors in 2008.

My theory is that Wall Street is bidding up the market in part so Obama can claim some economic success despite abyssmal job numbers. I obviously can't prove anything, but I also am having a lot of trouble understanding why the DOW is above 11000 when virtually every economic fundamental says it should be headed the other way. I'm obviously missing a variable somewhere, I just don't know what it is. Again I'll cite a piece of wisdom from Buffet: "I don't invest in businesses I don't understand."

As far as my own accouts are concerned, I work for a corporation so I am incentivized to invest in a 401K due to my firm's high match. At 6% I immediately gain a 100% return on my money. The downside is that my investment options are limited to funds which spread between cash, bonds, and both foriegn and domestic equities. Given that narrow range of choices it is hard to deploy capital effectively. I also have no means to play the short side. Right now I'm playing defense and waiting for an opportunity, but as you have mentioend, the inflation risk is very scary. There is no good answer, just a question of which choice is less bad. I suspect most 401K owners are in the same boat. (one day I predict the 401K will come under heavy scrutiny for risk shift that it really was... one day...)"

Red and White D sends sends this link to 'New mortgage rules take effect' on CBC.ca.Com.

Ben SmithD sends sends this link to 'Sentiment Levels OBSCENE: Caution' on CBC.ca.Com.

And Keith sends this link to 'A Letter to the Bears' on NationalPost.Com.

What the writer above fails to point out is that all this good news is the result of MASSIVE injections of cash by the Feds and the FED. That is all winding down. When one considers that the winddown has started...what then does the future look like?

April 17, 2010

Golman made it the old fashioned way!

Here is a link to 'Goldman Sachs Sued by SEC for Fraud Tied to CDOs (Update4)', by Joshua Gallu and Christine Harper on Bloomberg.Com.

Here is a link to 'S.E.C. Accuses Goldman of Fraud in Housing Deal', by Louise Story and Gretchen Morgenson on NYTimes.Com.

And back by popular demand is my posting from March 15.

Scene in the Senate:

'...before us today is the Honorable Hammerin' Hank Paulson, head of Goldman, to testify on behalf of Financial Deregulation. (a chorus of harrumphs by various Senators).

What, Mr. Paulson [who has taken the form of a 3,000 pound crocodile] can we do for you today?'

PAULSON: 'I need things, I need stuff. I need more money. You need to give us the tools to go out and get that money. We need to compete with European Banks! They're going to kick our butts.'

(A chorus of harrumphs by various Senators is heard. European banks are not, up to this point, known to be stellar institutions....in the fiscal responsibility catagory they rank somewhere down below the Mexican banks.)

SENATOR DODD: 'There will be no butt kicking on my watch, Hank. I move we give Goldman and the Boys anything and everything they want!'

(A chorus of harrumphs by various Senators is heard, along with many 'here-here's and attaboy's.)

Hammerin' Hank leans back in his chair. He smiles a glaring and toothy smile. All three rows of his crocodile teeth are on display.

Scene at a Retirement Fund President's Office in 2010:

'Sir, I hate to disturb you, but there is a large, a really big 3,000 pound Crocodile at the door. He claims to know you personally. Should I let him in?'

'Oh no! It's that %&## Vice President from Goldman again. Whatever you do, don't let him in. Why don't you send him next door. There's fresh meat at the Hedge Fund next door.'

.............ADDENDUM.............

From Red and White D comes this:

"Bender,

You can't make this stuff up....it could only happen in real life.

Imagine....you have 10 million dollars. Enough to open a Goldman Sachs account.

Imagine too....you are one of thousands or maybe tens of thousands like yourself with 10 million or so dollars loafing around doing nothing.

Imagine you are a Goldman Sachs broker and you have all these accounts, thousands of them, clamoring for high return vehicles for their loafing around millions.

But, there is a problem. You went to the warehouse shelf and there was nothing there to sell. There are only so many bozos out their silly enough to get into a subprime mortgage that you can package up with others and off load onto your customers and make big fees.

So, what do you do? I Mean Really.....WHAT DO YOU DO????

Since you don't have any more ACTUAL worthless mortgages to package up and sell to your customers you invent something new. Almost literally out of thin air you create them. These little honeys are called Synthetic Collateralized Debt Obligations. These shiny late model beauties are based upon credit default swaps purchased from really stupid companies, like AIG, who promise to pay up....get this....only when the underlying mortgages BLOW UP!

Someone help me out here. I'm lost. They never taught this in econ 101.

http://en.wikipedia.org/wiki/Synthetic_CDO

Yes Virginia, there is a Santa Clause. And, there is also a moral to this story:

Never smile at a crocodile
No, you can't get friendly with a crocodile
Don't be taken in by his welcome grin
He's imagining how well you'd fit within his skin

Never smile at a crocodile
Never dip your hat and stop to talk awhile
Never run, walk away, say good-night, not good-day
Clear the aisle but never smile at Mister Crocodile

You may very well be well bred
Lots ot etiquette in your head
But there's always some special case, time or place
To forget etiquette
For instance:

Never smile at a crocodile
No, you can't get friendly with a crocodile
Don't be taken in by his welcome grin
He's imagining how well you'd fit within his skin

Never smile at a crocodile
Never dip your hat and stop to talk awhile
Never run, walk away, say good-night, not good-day
Clear the aisle but never smile at Mister Crocodile"

April 15, 2010

HAPPY TAX DAY AMERICA!

Here is a link to 'U.S. Economy: Manufacturing Advances, Labor Market Struggles', by Shobhana Chandra and Timothy R. Homan on Bloomberg.Com. I quote this article below.

"Economists forecast claims would fall to 440,000 from 460,000 the prior week, according to the median of 44 projections in a Bloomberg News survey. Estimates ranged from 415,000 to 451,000.

The four-week moving average of initial claims, a less volatile measure than the weekly figures, increased to 457,750 last week, from 450,250.

'We're not making rapid progress,' Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio. 'Job growth over the course of this year will be sufficient to bring the unemployment rate down.'"

Neal Soss is a master of double speak: "We're not making rapid progress". No kidding Neal. Going backward, going deeper in the hole is the opposite of progress. But Mr. Soss is confident that job growth this year will bring unemployment down. I am not. I will explain why below. I will continue quoting the article.

"Fed Chairman Ben S. Bernanke said yesterday the labor market will be slow to recoup the jobs lost since the recession began in December 2007.

Bernanke, Unemployment

'Consumer spending should be aided by a gradual pickup in jobs and earnings, the recovery in household wealth from recent lows, and some improvement in credit availability,' he said in prepared testimony to the Joint Economic Committee of Congress. Even so, 'a significant amount of time will be required to restore the 8 1/2 million jobs that were lost during the past two years.'"

Now Bubble Boy Ben is saying out of one side of his mouth that consumer spending should be helped by a gradual pickup in jobs and earnings. The consumer accounts for 70 percent of the economy. So, the jobs numbers are critical, absolutely critical. Out of the other side of his mouth Bubble Boy is saying that job recovery will be slow. Did you get that?

What Bubble Boy does not say is that it could take ten to twelve years to recover the 8 1/2 million jobs lost. And you wonder why the FED has been keeping interest rates at the sub-basement levels. No wonder. The economy sucks, and it will keep on sucking for a long time. That is the real message that Bubble Boy is sending by way of the interest rates. Keep that in mind as bad things unfold in the latter part of 2010.

I give one more quote from the article.

"Output of business equipment increased 1.4 percent as demand for computers, communications equipment and semiconductors climbed, showing capital investment is improving."

As I have pointed out before, this is a reflection of businesses becoming more efficient, of getting even more lean. That is bad news for workers. Expect more layoffs. Because workers are consumers, and consumers make up 70 percent of the economy, the increased demand for computers is bad long-term news for the economy.

Here is a factor that I believe is under most economists' radar: Local Government Spending.

Here are links that tell you what is going on in my area.

1. 'City considers $68K statue', by Pete Nickeas of the Casper Star-Tribune. I quote below.

"Even as city of Casper officials are discussing layoffs and other cost-cutting measures in light of massive sales tax shortfalls, the city council is considering spending $68,000 on bronze geese and a massive statue near the western edge of Casper."

2. 'Hendry: County layoffs are likely', by Tom Morton of the Casper Star-Tribune.

This is what has been going on, and what will continue to go on in local governments across the nation. Budgets are being set now. The effects won't be fully seen until Summer, and won't be measurable until Fall. It's a very negative trend. It has very bad implications for the worker/consumer and for the economy. Meanwhile, we are seeing the markets make new highs. Markets rarely reflect the real world. They are their own worlds, tra la, tra la. We are in a Depression. This is what Depressions, in the modern era, look like.

April 13, 2010

Here is a link to '2010 Has the Look and Feel of 2007', by Richard Suttmeier on Minyanville.Com. I quote it below.

"Bad Consumer and Real Estate Loans are still rising -- Subprime loans were viewed as isolated in 2007, but obviously the problems spread to the broader mortgage market and dragged down the economy. Defaults and foreclosures continue to rise in 2010 with four million possible by year's end, up from 2.8 million in 2009. Many bad loans were pushed off balance sheet, and FASB rules now state that mark-to-market account has returned. The FDIC is allowing insured institutions until the end of 2012 to accomplish this. Our regulators are playing Kick the Can."

From Vegas comes this link to 'Miracle Rally', from Feb 8, 2010 Yahoo Message Boards.

Rich Kolon sends this link to 'Another Short Squeeze in the Precious Metals', by James Turk on FGMR.Com.

Here is a link to 'Prepare for 2007 All Over Again', by Toby Connor on Minyanville.Com. I quote it extensively below.

"In his mad attempt to avoid the mistakes of the depression, Bernanke is going to create a whole new type of depression. This time the depression will materialize as a hyper-inflationary storm.

What the powers that be fail to understand is that we're going to suffer a depression that is unavoidable when a credit bubble forms and pops. All we're doing is choosing the form of the depression. In this case the memory of the deflationary depression in the '30s has sent us down the other track into the beginnings of a hyperinflationary state.

...And what's going to bring it down? The same thing that destroyed the economy in 2008... oil! Without exception, every time oil spikes 100% or more within a short period of time (one year or less) it has eventually led to a recession. Well Bernanke’s insane monetary policy has virtually guaranteed that will play out again as oil has now risen more than 140% since this cyclical bull began.

Amazingly enough oil has done this in a very low demand/high supply environment. This fact could only be true if the cause for oil's rise in price is directly attributed to the Fed's monetary policy.

Once the market corrects I think we can back up the truck in virtually any asset class for the final parabolic move as the Fed completely loses control of money supply. We just need to keep in mind this will be an end game not the beginning of a new secular bull."

Toby Connor (above) is reading my mind! We are in a Depression, not a Recession. "All we're doing is choosing the form of the depression." When the fall Mr. Connor envision happens, you better come out of it owning a lot of gold. Inflation is going to be crazy.

April 10, 2010

Here is a link to 'Missed Messages From Fed Officials Pause Market Rally', by Richard Suttmeier on Minyanville.Com. I quote it below.

"Consumer borrowing declines $11.5 billion in February when a rise was expected. On Monday, my theme was that the Credit Squeeze is intensifying on Main Street. With new higher credit card rates, comes the desire by consumers not to use them.

Consumer borrowing has now declined in 12 of the past 13 months with the one up month in January on 2009 holiday spending. The February decline in credit card debt was 13.6%. Total borrowing is now $2.45 trillion, down 4% year over year. Investors will likely continue to use that so called “money on the sidelines” to pay down debt. This is a sign of economic weakness as consumer spending accounts for 70% of total economic activity."

Rich Kolon sends this note.

"Under ordinary circumstances, a short on this market would seem reasonable. However the shorts up against the power of the printing press for money, and that seems to be the reason for the continued rally.

Supporting the rally technically is the the QQQQ 20-week Signal, as the QQQQ remains above its 20 week moving average.

I think the reason that exists can be traced to the idea that thee government intends to use Fannie Mae and Freddie Mac as the "bad bank" for toxic mortgages.

See the Mike Whitney article posted earlier at Bessemer Bend Stocks, and here below.

http://tinyurl.com/ygu2s7j

'Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners' balances, which may lead to fewer foreclosures and a quicker end to the housing slum'

'The investment sharpies are scarfing up all the crummy MBS they can get their hands on, because they know they can trade it in for Triple A FHA-backed loans when the program get's going. It's another swindle cooked up by Treasury Secretary Timothy Geithner to keep the brokerage clan in the clover.'

'This is how it works: The new program offers incentives to banks and other deep-pocketed investors (in mortgage-backed securities) to slash the principal on underwater mortgages which keeps people from strategic default or foreclosure. Sounds good, right? But here's the catch: When the mortgage is refinanced, it's converted into a FHA-backed loan which provides an explicit gov-guarantee. So, for a slight loss on the face-value of the MBS, the investors (ie-- investment banks, hedgies, etc) are able to resuscitate their moribund securitizations (MBS) and reap hefty gains.'

And so the banks stuff with the toxic stuff can exchange them to get a government insured FHA loan, which they can choose to sell at a higher price.

And that would provide the funds that could move the stock market higher.

It's almost like another bailout, except the government will now pay on any default. And that can happen to many of those current toxic loans. But now the banks will not be stuck!

Rich"



April 7, 2010

Keith sends this link to 'Workers Worried Enough To Take Pay Cuts', by Douglas A. McIntyre on 247WallSt.com.

Here is a link to 'Is This an Economic Recovery?', by John Mauldin on Minyanville.Com. I quote it below.

"Debt crises have sadly similar conclusions: They always end in pain and tears. And although we have stopped, as private citizens, from accumulating debt (or in some cases, such as mortgages, have just walked away from the debt), our national government has stepped into the breach and is borrowing at mind-boggling levels.

...Something has to change. We have two paths to choose from. We can either slowly bring the US budget deficit back into balance (or at least to a level less than the growth in nominal GDP) or we can continue on the current path and become Greece or Japan. (Again, go the archives and search for "Japanese Disease".)

The first choice is a bad one, but the latter choice would be disastrous. If we take the first choice, which I call the Glide Path Option, a meaningful reduction would have to be on the order of $200 billion to $250 billion a year. That, along with reduced spending by state and local governments could (and probably will) amount to reducing spending by a little more than 2% of GDP."

Here is a link to 'Lack of Trust in Free Market Ensures Financial Mess', by Mike Mish Shedlock. I quote it below.

"Things That Need to Happen

China needs to float the RMB.

The US and the rest of the world need to let the market set interest rates.

Globally, bad banks need to fail instead of being propped up.

Housing prices need to fall to the point where they are affordable.

The US needs to encourage savings.

China and the US need to stop insane levels of fiscal stimulus

The US needs to stop being the world's policeman."



April 4, 2010

A note follows from Red and White D.

"The Big Short, Micheal Lewis. Read the book!

If for no reason other than entertainment. Read it. It is well written and humorous. He explains risk and it's measurement as well and as clearly as I have ever seen it. -------------------------

A migrant farm worker in Bakersfield, Ca. buys a 725,000 home with a no document loan. His annual income? $14,000.

This loan ends up as part of CDOs rated AAA by Moody's. How did they game the rating agencies? It's explained. It was toooooo simple.

Deutsch Bank, Goldman Sachs, AIG, bond traders and salesmen, hedge fund managers...a cast of thousands, no actually only 10 or so which morphed into thousands performing financial alchemy.

All of this was being done in a black box environment where no regulator ever peeked his or her nose. Still doesn't as far as I know notwithstanding the harrumphs from congress and the squeals of "rape" from the taxpayer.

A thought: In 1929 as before, it was equities and the stock market that went berserk. This time it was the other side that collectively lost it's mind.

After 1929 we started putting the equity markets in glass houses so we could see what they were doing.

So, the alchemists moved into a black box called the bond market. There, in the darkness and gloom were no one could see them they cooked up a toxic brew for the world to drink and the taxpayer to buy.

I see ugly witches with warts on their noses, stirring boiling cauldrons over a fire... in a dank cave.

Caveat Emptor never applied more than it does now. These boys and girls are armed and dangerous...and still at large robbing a bank near you."

Rich Kolon sends this link to 'Timothy Geithner is a sniveling scamster', by Mike Whitney on SmirkingChimp.Com. I quote from it below.

"What does it mean? It means that Obama's mortgage modification extravaganza has touched-off a gold rush in toxic paper. Subprime securitizations, which had been worth next to nothing, are now the hottest trade on Wall Street. It's a subprime bonanza! The investment sharpies are scarfing up all the crummy MBS they can get their hands on, because they know they can trade it in for Triple A FHA-backed loans when the program get's going. It's another swindle cooked up by Treasury Secretary Timothy Geithner to keep the brokerage clan in the clover. Here's how a Wall Street veteran explained it to me:

'It looks like the investors in securitizations will be swapping underwater real estate for govt-insured paper... I think the scam here is just to provide some cover so the hedge funds and other high net worth individuals can trade their low grade paper for Triple AAA mortgages insured by the FHA at the taxpayer expense.'"

Rich also sends these notes.

"James Turks summarizes some of the key revelations that were presentations that came out of the CFTC hearings on precious metals.

http://www.fgmr.com/new-dynamic-in-the-gold-market.html

It is indeed startling to see that the CFTC apparently sat on information from a London precious metals trader Andrew Maguire who accurately predicted exactly WHEN and WHAT certain trades would shift the silver markets up or down, in effect proving that the gold market is manipulated.

(Coincidentally, Maguire was the victim of a hit and run driver recently, surviving the encounter.)

Be sure to PLAY the King World News interview with Andrew Maguire.

The hearings also revealed that the London Bullion Market is basically almost all PAPER trading, not physical gold trading. It is the massive paper trading - where the physical is not delivered - that allows the price manipulations that then affect the trading on the COMEX. The ratio of PAPER gold traded to PHYSICAL gold on the LBMA is about 100 to 1.

And despite Maguire's contacting the CFTC about a year ago about these price manipulations, and demonstrating it real-time, he was NOT invited to the hearings in progress.

HOW CROOKED IS THE SYSTEM?

..............

Here is a followup interview with GATA members at King World News.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/31_GATA.html

Just click on the microphone to hear the interview. If the interview falters, just move the slider back a bit and replay.

WHY are all the major news sources ignoring this fraud? Where is WSJ? CNBC? CNN? FOX? Bloomberg?

Can it be that JP Morgan is a big advertiser? A primary (connected) dealer with the US Treasury department?

Why did the CFTC not publicly interview the very guy that demonstrated the bullion bank manipulation live?

GATA's Bill Murphy had been scheduled by the many reporters in MSM to report on the situation. They ALL cancelled the interview later.

Can you say MSM coverup?

That's why you need to read the internet alternative news sites to get the facts, not the lies that the government use to control you.

http://www.zerohedge.com is one site.

The CFTC Mission Plaque: Pretense. They have been told for years about the massive short manipulation, and did nothing.

http://news.silverseek. com/GoldIsMoney/1270170340.php

Rich"

And here is a link to ''Some states face Greek-style debt woes', by Mary Williams Walsh on TheGlobeAndMail.Com.



March 27, 2010

Here is a link to 'US Government: On Its Way to Bankruptcy', by Michael Pollaro of Minyanville.Com. I quote it below.

"In the following four posts, through the story of Peter and Paul, I've attempted to lay bare the facts of a government whose obligations are so big and growing so fast, that unless millions of Americans are about to be told that they're not getting what they were promised because it simply costs too much, or millions of US government debt holders aren't getting their money back because America can't afford it, there will come a time when the only way out for the US government, to make good on its promises, will be via the wholesale use of the policy of inflation. In other words, by devaluing those obligations by printing money."

Here is a link to 'Prospects for a Strong Recovery in Employment', a positive artivle by James Kostohryz of Minyanville.Com. I quote it below.

"The fact that productivity is surging so strongly is a great sign for future employment growth. Why? It suggests strongly that companies probably overdid it on layoffs. That means that companies may need to pick up the pace of hiring as soon as their payrolls are unsustainably low.

Unless one believes that there has been some sort of remarkable advance in technology or workforce organization in the past three years, this unusual rise in output per worker will not be sustainable. Payrolls will have to rise to restore a more normal relationship between the level of production and employment."

Back to the dark side: Here is a link to 'Jobless Claims Prove This Is Still a Recession', a positive artivle by Richard Suttmeier of Minyanville.Com.

From Bloomberg.Com comes this article: 'Greenspan Calls Treasury Yields 'Canary in the Mine', by Joshua Zumbrun and Craig Torres.

And here is a related link to: 'U.S. bond rates raise alarm', by Barrie McKenna on TheGlobeAndMail.Com.

It's a Depression we are in folks. It is going to drag on for quite a while.



March 20, 2010



March 20, 2010

Here is a link to an interesting story if you are interested in economic theory:

'Reviewing the Velocity of Money', by John Mauldin on Minyanville.Com.

And here is a link to 'Stock Rally Says Economic Boom, Fed Shows Concerns', by Richard Suttmeier on Minyanville.Com. I quote it below.

"'with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.' I say that inflationary pressures are building. You see it at the supermarket, in the drug store, health-care premiums, and at the gas pump. With lower incomes, Americans see a higher cost of living on Main Street USA, while Wall Street gets record bonuses. Recent ISM reports show rising Prices Paid.

The Fed stated that the zero to .25% federal funds rate will be needed for an 'extended period' as I expected. The quantitative easing whereby the Fed purchases $1.25 trillion of agency mortgage-backed securities and $175 billion in GSE debt will end as planned at the end of this month.

A key statement for me is 'housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.' Without improvements on these two important fronts, the US economy is positioned for a double-dip.

Single-Family Housing Starts have stabilized at about 500,000 units annualized. This doesn't move the needle in the NAHB Housing Market Index, which remains depressed below a reading of 20, when 50 is neutral. Some are putting a positive spin on 'flat at a depressed level,' but in my judgment, with the tax credits set to expire at the end of April, the risk is for a double-dip in housing and banking, which is how 'The Great Credit Crunch' began at the end of 2006 and through 2007."

Rich Kolon sends this note.

"And the Fed and Treasury regulators saw neither.

Dylan Ratigan speaks out with former NY Governor Eliot Spitzer about a 2,200 page report on Lehman Brothers, which ultimately led to massive bailouts of banks.

http://www.msnbc.msn.com/id/32450072/vp/35841681#35841681

It's not just the tax payers who are paying for the bailouts. Think of the stockholders who lost money because of the allegedly criminal misreporting of the money received as sales of assets, instead of the actual temporary nature of money loaned to them to commit the fraud.

Think of the auditors who kept quiet about it. Think of the Fed and Treasury officials that are still on the payrolls, after not doing the proper job.

You have bankster CFOs, CEOs, professional auditors, and government officials misusing their positions to fleece the public.

And everyone of these people have yet to be brought to justice. Shows you how criminal our government acts.

And the fraud doesn't stop yet. Look at all the banks that are supposedly not even writing down subordinate mortgages, because the government is allowing them to misrepresent their value to investors in the accounting statements now.

And you have a President that appointed those government officials.

The first step to solving a problem is to define the problem. These types of problems ultimately exist because we have politicians and private bankers (who own the Fed) that refused to be constrained by honest (valuable) money. So they ultimately created a Ponzi scheme of printing paper fiat money.

Make sure you teach at least one other person in your life to understand this, so we can one day stop this insanity.

Rich"

Red and White D sends this link to an NPR story:

http://www.npr.org/templates/story/story.php?storyId=124690424

"'This is the story of human perception as much as it is anything else. And their attitude toward the financial markets was peculiar,' Lewis says. 'It was peculiar to be running around the world looking for unlikely things that might happen. ... And it told you something about Wall Street and ... the way the markets were functioning when they were dysfunctional. There weren't enough people thinking this way. There weren't enough people taking into account the real likelihood of extreme change in the world.'"

Note: I am currently following these stocks closely: NEP SINA CHBT RGLD AAPL GLD



March 15, 2010

Here is a note from Red and White D:

"Bender,

60 Minutes carried a very interesting story tonight on the high jinks in the finance world during the last 5 or so years. The fellow in your recently linked article, Michael Burry....the doctor guy with one eye....was a featured part of it.

http://www.cbsnews.com/stories/2010/03/12/60minutes/main6292458.shtml

They made a case that Goldman Sachs set AIG up for a fall knowingly. Burry, who really started the default swap thing with AIG in the first place, was buying default swaps on packaged mortgages he (Burry) knew were bound to fail. His strategy: betting against packaged mortgages.

Goldman, who just incidentally was a market maker in packaged mortgages, jumps right in to that market with both feet, buying billions of dollars worth of CDS contracts from AIG probably with full knowledge that the 'AAA paper' mortgage contracts they were insuring were likely to become worthless.

Goldman was laying off 'risk' on crappy mortgage paper to AIG at the same time they were selling them as AAA paper to hapless investors.

AIG was just plain stupid. Too stupid not to fail.

The taxpayer took the hit.

http://www.nytimes.com/2010/02/07/business/07goldman.html?hp=&adxnnl=1&adxnnlx=1268622144-bZBKj+NF9l8ZGKLJ9aa0NQ

When AIG was about to default on the billions owed to CDS counterparties like Goldman and Burry, sums in the tens if not hundreds of billions of dollars, Uncle Sammy showed up to bail out AIG's counterparties.....100 cents on the dollar.

Goldman made money both ways, commissions selling the soon to be worthless packaged mortgages in the first place, and then was paid billions on the swaps when they did become worthless. No wonder you could get 125 percent to value mortgages in 2005, with sharks like this running the ranch, who were betting you would default.

Insanity gone wild in unregulated markets!

Now, since the Goldman boys were so smart in laying all that risk off on the taxpayer, they are paying themselves handsome bonuses with those billions our Uncle ponied up.

This was a battle between wall street titans in a dark alley market place. We all paid for it. It will eventually go down as the greatest con in history. I am at a loss to see how it could have been prevented short of monitoring every transaction by every player in the financial markets. And, who would do it? Bond rating agencies are a joke. Bureaucrats just bumble around bumping into each other while looking busy till payday and Congress just harrumphs.

60 minutes suggested it will ultimately transform wall street entirely."

Here is an interesting link:

http://www.nytimes.com/2010/03/16/business/16regulate.html?ref=business

Senators Dodd and Selby....busy undoing what they have already done...and for which we are all paying.

Scene in the Senate:

'...before us today is the Honorable Hammerin' Hank Paulson, head of Goldman, to testify on behalf of Financial Deregulation. (a chorus of harrumphs by various Senators).

What, Mr. Paulson [who has taken the form of a 3,000 pound crocodile] can we do for you today?'

PAULSON: 'I need things, I need stuff. I need more money. You need to give us the tools to go out and get that money. We need to compete with European Banks! They're going to kick our butts.'

(A chorus of harrumphs by various Senators is heard. European banks are not, up to this point, known to be stellar institutions....in the fiscal responsibility catagory they rank somewhere down below the Mexican banks.)

SENATOR DODD: 'There will be no butt kicking on my watch, Hank. I move we give Goldman and the Boys anything and everything they want!'

(A chorus of harrumphs by various Senators is heard, along with many 'here-here's and attaboy's.)

Hammerin' Hank leans back in his chair. He smiles a glaring and toothy smile. All three rows of his crocodile teeth are on display.

Scene at a Retirement Fund President's Office in 2010:

'Sir, I hate to disturb you, but there is a large, a really big 3,000 pound Crocodile at the door. He claims to know you personally. Should I let him in?'

'Oh no! It's that %&## Vice President from Goldman again. Whatever you do, don't let him in. Why don't you send him next door. There's fresh meat at the Hedge Fund next door.'



March 12, 2010

Here is a link to a story that makes perfect sense to me. 'U.S. Stocks Fluctuate Following Decrease in Consumer Confidence', by Rita Nazareth on Bloomberg.Com. Retail sales were up in February, but Confidence fell. Hmmmm. Could that mean that I am doing alright, but I know my neighbor is still out of work?

Here is a link to a January 29 story I am watching, and think all Benders should be watching: 'U.S. Oil Rig Count Rises to Highest Level Since 1993', by Margot Habiby on Bloomberg.Com. I quote below.

"'With oil in the $70 to $80 range, it's very economical for operators to be drilling oil wells,' said Gene Shiels, assistant director of investor relations at Baker Hughes. 'We're really seeing it in two places, in the Permian Basin in Texas, where the wells are pretty shallow, and in the Williston basin, also known as the Bakken basin, in the Dakotas.'"

Lots of rigs are running to where the 'gettin' is good'. The Bakken has the potential reserves of Saudi Arabia. Got it? There has to be a way for a small investor to own a piece of this story. There are going to be tons of money made here. A guy I have coffee with every morning (and worked with in the oil patch) has a wife and sister-in-law who own a farm in North Dakota. Five miles away, a neighboring farm had two wells drilled on it (in the Bakken). Those wells each produce 750 barrels a day, each. Do the math. That is a ton of money flowing off just one farm.

Here is another 'old' news story that has gotten my attention: 'Obama using 'bounty hunters' to root out fraud', by Ricardo Alonso-Zaldivar (AP). This has far-reaching implications. This Executive Order applies not only to Medicare, but also to all other departments of the Federal Government, HUD, DOD, DOE, etc.

Here is link to another story flying under the radar of most folks: 'Connecticut Sues Moody's,S&P Over 'Tainted Ratings'', by Chad Bray of Dow Jones Newswires. This is the suit I have been waiting for. When asked on CNBC what the difference between this suit and the suits filed by Ohio and California, the Attorney General for Connecticut explain that the other two suits were only on behalf of the states' pension funds. Connecticut's suit is on behalf of all investors in the state. Wow. It's about time this happened.

Inflation

Your government has been lying to you. Right now it is telling you that inflation is 'low' and 'mild'. The fact that both Greenspan and Bubble Boy Bernanke could ignore asset inflation as house prices doubled, sometimes in just three years, is a clear indicator of just how insulated they are from the real world. I could have told them but they won't take my call, nor yours either. Here in the real world, I see significant price jumps in the past three months in everything having to do with automobiles: gasoline, tires, batteries, etc. But there is no inflation right? That is what your government is telling you.

So how does Bubble Boy keep from seeing the real inflation that is out there? He reads government reports. They are full of lies and misrepresentations. You and I know that. But he believes them...and then (and this is the scary part) he makes decisions, that effect you and me in a big way, based upon what he has read. This is precisely the formula for failure. This is what the Russians did back in the bad old days of the Cold War. The guys at the top started to believe the lies generated by the beaurocracy below them.



March 8, 2010

From Keith comes this link to a very long, but rewarding read:

'Betting on the Blind Side', by Michael Lewis on Vanity Fair.Com.

From Vegas comes this link to:

'Cramer is telling viewers that Citigroup is worth more than two JP Morgans! ?', on Yahoo.Com.

And here is a short note from Rich Kolon.

"HSNSI 'bullish sentiment is approaching dangerously high levels.'

'It currently stands at 62.8%, up from 13.8% just one month ago.'

http://www.marketwatch.com/story/advisory-bullishness-reaching-too-high-levels-2010-03-05

Rich"



March 3, 2010

Here are two links from Vegas.

'Wall Street's Bailout Hustle', by Matt Taibbi on RollingStone.Com.

'8 Reasons Wall Street Loses Another 20% in This Decade', by Paul B. Farrell on Yahoo.Com.

Here is a link from Red and White D.

'Jittery Shoppers Dim Stores' Hopes', by Miguel Bustillo, Sara Murray and Rachel Dodes on WSJ.Com.

From Rich Kolon comes this link.

'The 21st Century Economic Breakdown', by Jim Quin on Minyanville.Com.

And here is a note from Rich.

"...Not exactly, but that is the gist of what he thinks is happening to money supply. It is not being counted in M1 and M2 figures, as the Fed is not reporting the growth in its deposit currency in those calculations.

http://www.fgmr.com/us-dollar-money-supply-is-underreported.html

Essentially the Fed used to print currency to purchase paper assets, such as treasury bonds, from banks.

Now the Fed has been increasing the reserve accounts of money that these banks have at the Federal Reserve. That extra money is really loans from the Fed to these banks, with the Fed accepting toxic assets as collateral.

The key becomes whether these banks will ever try to pay back their loans to the Fed. Turk does not mention this. But theoretically those deposit reserves could be spent by the banks, if they don't intend pay back the Fed.

Since the banks have been reluctant to reduce their reserve accounts, e.g. by making loans to businesses, the inflationary impact on the money supply has not been released into the economy.

So what matters is whether any of those banks will renege on the buyback of those assets, and still keep the money, thus triggering high inflation. My guess is that Turk thinks that is likely.

Rich"

..............................

Here is a link to an article with grim news.

'States Reported Fifth Consecutive Drop in Tax Collections in the Fourth Quarter of 2009', on RockInst.Org.

Here is a link to another piece with a black border.

'Get Ready for a Double Dip in Housing', by Richard Suttmeier on Minyanville.Com. I quote it below.

"Sales of new homes plunged 11.2% in January to a record low 309,000 units on an annualized basis. Sales of existing homes fell 7.2% to a seasonally adjusted annual rate of 5.05 million units, the weakest reading since June 2009."

Bubble Boy Won't Take Your Calls...

Ben Bernanke, whom I call Bubble Boy, won't take your calls. But he's a smart guy. He looks at charts, like the one on the link below.

http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg

He can see what is coming. He has probably made a plan, and is probably implementing it as you read this. The resets are coming. He knows. Everyone whose call he does take knows they are coming. But he does not take your call.

You have no voice in the discussion, no place at the table. Presidents of countries and big banks do. Other central bankers do. He takes all their calls. Now, since he does not take your calls, but does take theirs...in whose interests do you think he will act?



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