Thursday, July 31, 2008

Investor Psychology: Delusional

US Q2 GDP up 1.9% vs 2.4% rise expected, fastest pace since Q3 2007
WASHINGTON (Thomson Financial) - Increased exports, a slightly less grim housing picture and higher consumer spending all caused the US economy to pick up speed in the second quarter, though not as much as analysts had expected, while overall inflation continued to rise, the Commerce Department said today.

The economy grew at a 1.9% annualized pace in the second quarter after rising at a downwardly revised 0.9% pace in the first three months of the year. Economists polled by Thomson Reuters IFR Markets had predicted 2.4% annual growth between April and June. Growth the second quarter is at the fastest pace since the third quarter of last year.

The department also revised lower its estimate for growth in the first quarter to 0.9%, slightly lower than the 1.0% pace released a month ago. And the fourth quarter of last year was revised lower to a 0.2% decline, the first negative quarter since the third quarter of 2001.

Economic rebound not as energetic as hoped for
WASHINGTON (AP) -- The prospects for a quick economic recovery dimmed Thursday, with new data showing the economy grew at a slower-than-expected rate this spring despite some oomph from tax rebate checks -- and actually shrank late last year.

Democrats called for a second economic stimulus package, while the Bush administration said the growth was proof the checks helped.

Armed with government stimulus checks of up to $600 per person, Americans boosted spending on food, clothing and other items in the second quarter, the Commerce Department reported.
But the gross domestic product still increased at a 1.9 percent annual rate, up from 0.9 percent in the first quarter but less than the 2.4 percent economists were looking for.

Government revisions showed the economy actually shrank at the end of last year at a 0.2 percent annual rate. It was the first quarterly dip for the GDP since the 2001 recession.

For the past two weeks Hanky Panky Paulson has been blowing smoke all over Washington, financial television, and Sunday Morning news programs about the "strong long-term fundamentals" of the US Economy. He's been blowing smoke up the asses of any Congressman or financial news talking head that will listen, that the stimulus checks Washington sent out early this summer would "provide the growth the nation needs going forward". Today Hanky Panky Paulson got a roundhouse right to the side of his lopsided noggin. The Flim-Flam Man has been exposed, his Confidence Scam revealed for the fraud that it is. How can anybody continue to believe the bald faced lies of this creature of deceit any longer? The Mother Of All Bubbles is about to burst. The Confidence Bubble.

It doesn't take a genius to figure out that if you factor in Inflation there is absolutely NO growth in America these days. Obviously the fourth quarter proves that as it has now been revised as negative even without factoring in Inflation. The only thing growing in America these days is the money supply and the noses of Bumbling Ben Bernanke, Hanky Panky Paulson, and George Bush.

A slightly less grim housing picture? What? Need proof that things won't be getting better anytime soon? Look no further than this observation: "Democrats called for a second economic stimulus package, while the Bush administration said the growth was proof the checks helped." Another stimulus package? LOL! Why? To keep the charade going a little longer? Where is the money for it going to come from? The checks helped? Mr. President, Sir, helped what? Perpetuate the illusion, I mean delusion, that the economy continues to grow, and everything will get better in the "second half"?

One month in the second half has fallen by the wayside already, and nothing is better than it was at the beginning of the month. In fact, despite all the lies, and pathetic attempts at instilling "confidence" in the economy, 1,978,000 NEW claims for unemployment were booked in the month of July. I can't wait to see what kind of fabricated jobs number the labor Department conjures up for Friday morning's non-farm payrolls report. I can only imagine the number of new jobs in construction, manufacturing, and banking were created. LOOOOOOOOOOOOOOOL! No doubt they will claim there were. But it won't be enough to offset the job loses last month. I boldly predict job losses in the month of July in excess of 125,000.

Weekly applications for jobless benefits soared to 448,000 last week, highest level since 2003
WASHINGTON (AP) -- The number of people filing claims for unemployment benefits jumped last week to the highest level in five years, reflecting in large part a new government outreach effort to locate people eligible for benefits.

The Labor Department reported Thursday that the number of applications for jobless benefits soared to 448,000, an increase of 44,000 from the previous week. That was far worse than the decline of 8,000 that economists had been expecting.

However, the government attributed much of the big jump to a special outreach program to notify people that they could qualify for up to 13 weeks of additional benefits because of legislation Congress passed in June.

When people came in to apply for the extended benefits, state claims officials discovered that many of them were eligible for another round of initial claims because they had held jobs for a brief period after exhausting their original benefits.

Labor Department officials said that these special factors played a big role in pushing claims higher last week. The jump was the biggest one-week increase since claims soared by 94,000 the week of Sept. 10, 2005, following a wave of layoffs in the wake of the devastation from the Gulf Coast hurricanes that year.

Why is there always an "excuse" when there are shocking economic data released? A special outreach program to notify people that could file for unemployment? If that don't beat all. Sheese, they don't even count half the people in this country that are unemployed as "unemployed" because they don't qualify for benefits anymore. Now they make pathetic excuses like this to "explain away" a five year high in "new" unemployment claims. Puh-leeeeeez! Excuses, excuses, excuse, is that all this country has to offer anymore? "Here's an excuse and a band-aid. Run along, everything will be alright." No, it won't.

Oil falls to almost $124 on dour US economic data
NEW YORK (AP) -- Oil prices pulled back Thursday, wiping out some gains from the previous day's $4 a barrel rally, as traders bet that a cooling U.S. economy will continue to eat into U.S. demand for fuel.

...the poor readings rekindled fears of a recession, prompting energy traders to dump oil contracts on expectations that more belt-tightening lay ahead for Americans who are already skipping vacations, giving up gas-gazzling SUVs and cutting back on driving to cope with almost $4-a-gallon gasoline.

Yesterdays unexpected drop in gasoline supplies seemed to throw cold water on the theory that a slowing economy will diminish demand for Oil. Yesterday's EIA figures showed gasoline demand reached a yearly high of 9.47 million barrels a day. Though less than a year ago, demand for gasoline obviously remains. The fact that demand for Oil in Asia, India and Russia is growing rapidly seems to escape the America-centric analysts here that believe the world still revolves around America. For every percentage drop in American demand for oil, there is a corresponding rise in demand overseas. China and India are on major growth curves, demand for Oil there is NOT going to wane just because Americans cannot afford it anymore. As a matter of fact, Oil is cheaper everywhere in the world than it is in America because of the floundering US Dollar. Demand destruction is a lie. If it were true then a 3.5 million barrel shortfall in yesterday petroleum numbers would not have sent the oil market into a buying frenzy. There is no excess capacity in the Oil market. Therefore there is no demand destruction. Oil prices are consolidating there recent powerful gains. Dreams of Oil at $60-80 a barrel again are just that.

Stressed banks borrow record amount from Fed
NEW YORK (Reuters) - Banks borrowed a record amount of funds from the Federal Reserve in the latest week as the year old credit crisis took a persistent toll, while the commercial paper market continued to contract, signaling tough conditions for short term borrowers.

Banks' primary credit borrowings averaged $17.45 billion per day in the latest week, the second straight week this had hit a record and up from $16.38 billion the previous week, Fed data showed on Thursday.

"It shows there's a shortage of liquidity in the system," said Christopher Low, chief economist at FTN Financial in New York.

Secondary credit the Fed extended, which is usually taken out by banks in need of emergency cash, rose to $89 million in the latest week, from $34 million the week before. Although these numbers are still very small compared with primary credit, "What that tells you is that there's an increasing number of banks that the Fed is classifying as 'unsound' or inadequately capitalized," Low said.

But, Hanky Panky Paulson told us just last week that the banking system was "sound". I guess that was just another lie intended to help the public "remain confident" in the banking system. Never forget, the first three letters in confidence are CON. The entire banking system is teetering on the edge of collapse. It continues to confound me that a MAJOR Gold Rush has not yet developed. But it will, and quite soon in fact. Unfortunately for many, when they go seeking Gold, it will be far too expensive for them. And that's why we also invest in Silver. The rise in the price of Silver in the months to come is going to be shocking.

How in the hell did the Dollar recover this morning? Gold is now $14 off its morning high. Why? Oil prices are down. Why does Gold continue to be lead around by the price of Oil? I saw an analyst claim that the Dollar was up because Oil was down. LOL! Now that folks, is amusing. There is NOTHING, NOTHING, NOTHING in the US or the World that lends ANY fundamental support to the US Dollar. It should be falling like a stone in the ocean. The only reason I can figure that this is not the case is because if it were "allowed" to happen there would be a panic. And if Hurricane Katrina proved anything, this country is ill equipped to deal with a panic situation...any panic situation. The Dollar's destruction is coming, rest assured on that. The clowns "in power" will keep it suspended in midair or rolling gently downhill for as long as they can in an effort to save as many of their kind first, before they allow the falling Dollar to crush the public when it falls from the cliff.

Gold was shot down right on cue today as it reach 925 and a 38% retracement of it recent decline from 975 on July 22. A lot of Big Money wants Gold. That's why the price was brought in to the 200 day moving average. The Big Money loves to buy the 200 day moving average. Wise investors follow the Big Money. If just 5% of all the money "invested" in general equities was pulled and put into Gold, the resultant rise in price would take your breath away. $1000 Gold is now less than five weeks away. $1200+ Gold is less than five months away. And $25 Silver is going to cause a panic somewhere this Fall.

Wednesday, July 30, 2008

The First Three Letters of Confidence Spell CON

What was witnessed in the Precious Metals today was a "washout". The weak hands are now undoubtedly OUT of Gold and Silver. Those that sold today sold into eager and grateful hands. It should be noted, and highlighted, that this mornings chaos in both metals stopped dead and reversed hard at their respective 200 DAY moving averages. This was a big money buying opportunity. This was exactly what this metals market needed.

What was the cause of this metals meltdown this morning? More lies, spin, and a complete lack of understanding regarding the systemic risks that the financial system now faces. It continues to amaze, and disturb, me that every piece of news that is Gold positive is ignored and the metals sold. Where I come from it's called a scam.

There is no bigger joke, no bigger scam, no bigger crime in the history of humanity than that which is being perpetrated on America and the World today. Our way of life is literally being stolen from us as we sit around oblivious to it all. Each and every day we are inundated with headlines "trying" to warn us of the disaster our fearless leaders and government regulators have created to destroy our freedoms and wealth, and steal it all for themselves. And each and everyday Americans go on sitting in front of their big screen TVs believing they are rich. America is broke! Not just financially, but in total. The entire system is broken. The government is corrupt and full of con men. The banking industry is corrupt and full of con men. The press is not free, but run by the corrupt government. The infrastructure is dated and dilapidated. The auto industry has been crushed. The nations manufacturing base has been destroyed and shipped overseas. Debt is all that remains. Debt will be this nations legacy in the history books, and it's citizens slaves to their debt for generations to come.

SEC extends restrictions on short-selling
Federal regulators on Tuesday extended through mid-August a temporary order banning a certain kind of short-selling of the stocks of mortgage finance companies Fannie Mae, Freddie Mac and 17 large investment banks.

The Securities and Exchange Commission said the ban on so-called "naked" short selling will be in effect until 11:59 p.m. EDT on Aug. 12 and will not be extended.

Temporary order banning naked short-selling. LOL, naked short selling has been illegal since the 30s. This release claims the "ban" will not be extended beyond August 12. Could the lift-off in Gold then be scheduled for August 13th? Isn't it interesting that the "ban" on naked short-selling is ONLY on the banks and institutions that "borrow from the Fed"?

Borrow from Fed and you get protection against shorting
NEW YORK -- The U.S. Securities and Exchange Commission extended an emergency limit on short sales in shares of Freddie Mac, Fannie Mae, and 17 brokerages as it prepares broader rules to thwart stock manipulation.

The SEC pushed back expiration of its ban on so-called naked short sales of the firms' stocks to Aug. 12, the Washington-based agency said in a statement yesterday. The order aims to keep traders from driving down financial stocks after Bear Stearns Cos. and IndyMac Bancorp Inc. collapsed amid rumors they were faltering.

The emergency order, focused on companies whose collapse might expose the U.S. government to losses, gives regulators time to weigh wider restrictions. The SEC said yesterday it plans to collect data to measure the impact of the rule and will examine additional proposals to curb short sales.

Central banks extend emergency credit; rate hikes less likely
WASHINGTON -- The U.S., European, and Swiss central banks on Wednesday extended emergency lending facilities for investment banks and expanded other liquidity programs to ease credit market strains that have weighed on the global economy for nearly a year.

The U.S. Federal Reserve said it was prolonging until Jan. 30 the emergency credit facility for primary dealers that had been due to expire in mid-September.

The Fed said it acted "in light of continued fragile circumstances in financial markets," and said it would close the lending program once it determined credit market conditions were no longer "unusual and exigent."

Some analysts said the latest action suggested the Fed would be loathe to raise interest rates any time soon and interest-rate futures showed traders trimming back bets on the Fed raising rates this year.

So..., I guess it would be safe to say that the "credit crisis" is far from over? Geeze, I swear they just told us that it was over... How do you spell inflation? How do you spell LOTS of inflation. Strong Dollar, LOOOOOOOOOOOOOOOL. And people actually accepted this "breaking news" this morning as good and Dollar positive. The blind leading the blind. What a horror story.

The ADP employment survey
The ADP employment survey, a traditional gauge of nonfarm payroll figures, was released Wednesday. Joe LaVorgna, chief U.S. economist at Deutsche Bank, was hesitant to put much stock in the report. "Since last November, the average forecast miss on private payrolls using the ADP survey has been 116,000," he said, adding that between March and May, the ADP missed the mark by an average of 109,000.

Hey now, that's the kind of track record that just makes you want to go out and buy the US Dollar doesn't it? I guess you'd have to say the stock markets over reacted a bit to that news yesterday.

I added up the "initial claims" for unemployment over the first four weeks of July. The number in total was shocking. The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment insurance. The toal number of people filing "first-time claims" over the first four weeks of July was 1,530,000. Remember that numer when the non-farm payrolls number is rolled out Friday morning at 8:30 AM.

Government announces plans to borrow $27 billion
Those plans include raising $27 billion by selling a new 10-year note and a new 30-year bond at the regularly scheduled quarterly auctions to be held next week. The government needs to borrow $171 billion during the current July-September quarter, the second highest quarterly borrowing total on record.

The increased borrowing needs reflect the exploding federal budget deficit which is projected to more than double in size this year and to hit an all-time high of $482 billion in the 2009 budget year.

The administration released the new deficit forecasts on Monday. It blamed the surge on the sagging economy and the effort to keep the country from falling into a deep recession by mailing out 130 million economic stimulus payments.

So the government blamed the deficits on themselves? Write that down. If an exploding federal deficit is "good" for the Dollar, it's news to me. I guess it was good for stocks, they were up again today.

Oil jumps over $4 on surprise drop in gas supplies
NEW YORK (AP) -- Oil prices soared over $4 a barrel Wednesday, halting a dramatic two-week slide after a surprise drop in U.S. gasoline supplies fed speculation that record fuel prices aren't keeping Americans off the roads.

The Energy Information Administration said in its weekly inventory report that U.S. gasoline supplies fell by 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gas supplies to increase by 400,000 barrels. U.S. crude stockpiles also fell by 100,000 barrels last week, less than the 1.3 million barrels analysts had predicted.

The report gave some traders reasons to believe that crude's slide was overblown and that the drop in gas supplies mean prices have fallen enough to nudge Americans back onto the roads.

The surprise drop in gas supplies suggests record oil prices haven't curbed U.S. fuel demand to the extent that some energy market experts had anticipated after crude spiked above $147 a barrel earlier this month.

Where is all this demand destruction for Oil we keep having thrown in our faces "explaining" the recent drop in Oil prices. People, nothing goes straight up, not even Oil. Any lessening demand in the US will be met by increasing demand in China, India and Russia. Only a fool believes Oil prices are going to plummet back to $60 a barrel. Oil is going through a technical correction /consolidation. The entire Commodity Sector is because of it. Strong Dollar? LOL! If you've read this far, you know that's a crock of donkey dung.

The following essay is an absolute MUST READ. This is a rare "in a nutshell" piece that should put the entire financial collapse we face into complete perspective. If this essay does not convince you to buy and HOLD Gold and Silver, nothing ever will. Please read it in it's entirety at the link below.

The Con In Central Bankers’ Confidence
by Darryl Robert Schoon

Rising gold prices are a cold sore on the lip of central bankers. In the world of paper money, it’s a clear sign something’s not right

Central bankers are the keepers of the keys to the kingdom. The kingdom, however, is on the edge of bankruptcy and in danger as never before. Comparisons are now being made to the Great Depression of the 1930s. The comparisons, however, are just that.

In some ways, the situation is similar. In many ways, it is not. In a very fundamental way, the conditions are much worse. The systemic strains on the global financial system are today much more profound than even during the Great Depression.

The Great Depression of the 1930s was unique in the history of capital markets built on debt-based money, sic capitalism. Until the creation of the Federal Reserve System, the US economy had been a savings-based, not debt-based, economy. The difference between the two, although rarely understood, is profound

The price paid for credit-based expansion is debt. Increasing the debt-based money supply increases the amount of debt; and, over the naturally limited life of a debt-based economy, the constantly increasing and compounding levels of debt will grow until the economy collapses.

Compounding debt, the wellspring of bankers’ profits, will eventually destroy the economy on which it lives. The time it takes to do so is dependent on the strength and productivity of the underlying economy.

No economy, however, no matter how strong initially, can out run the constantly compounding debt of credit-based money—not even the United States.

Modern economics is a shell game, a 300 year old confidence game designed to hide the fact that bankers’ credit replaced real money, credit created out of thin air by private bankers and public government that leaves compounding debt, and ultimately economic destruction, in its wake.

Recently, because of the increasing collusion between bankers and government, the line between private banking and public government is gone. They are now one and the same—only the union hasn’t been publicly announced because of anticipated opposition to the now consummated marriage.

Central bankers are modern day confidence men who have so embedded themselves into the fabric of everyday commerce that people are convinced they need credit in order to survive; like Elvis Presley in his final days believed he needed prescription pills to live.

Just as Dr. “Nick”, Elvis Presley’s pill doctor, is responsible for killing Elvis with his over-prescription of drugs, Dr. Bernanke, the current US credit provider, and his predecessor Dr. Greenspan will be remembered for their fatal over-prescribing of central bank credit to the US and world economy. Too much of a good thing is and has always been in the end, a bad thing.

Tuesday, July 29, 2008

Confidence Is Key

Dollar Rallies On Stronger US Data, Stocks, Lower Oil
NEW YORK (Dow Jones)--The dollar rallied versus its major rivals Tuesday morning after U.S. stocks gained amid a decline in crude oil prices and an improved July consumer confidence index.

The dollar gained across the board to a five-week high against the euro, yen and Swiss franc, with the Dow Jones Industrial Average up more than 100 points on the day. The buck also advanced to a 1 1/2-week high against the U.K. pound as crude oil futures fell to $121.10 a barrel on the New York Mercantile Exchange, its lowest level since May 15.

Meanwhile, the Conference Board said its July index on consumer confidence moved up slightly to 51.9, from a revised 51.0 in June. The July reading was slightly better than the 51.0 reading expected by forecasters.

What a truck load of crap! Consumer Confidence was up a gigantic 9/10 of 1%. Hallelujah! Ding- dong the financial crisis is gone, the financial crisis is gone. Ding-dong Inflation must be dead. C'mon everybody, you know the words! Second verse same as the first... Oh my and Oil prices have plunged a WHOLE $3 Dollars AGAIN! The economy is saved! Just ignore the fact that they are at $121 a barrel...$50 more than they were 12 months ago. And stocks were up? Yes the SEC will decide this evening if naked-short selling bank stocks should continue to be forbidden. Better cover your shares ahead of that news.

Ever wonder just where this Consumer Confidence number comes from? Me too! So we went looking. And not only was it easy to find, it was easy to see what a load of crap it is.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS. TNS is the world's largest custom research company. The cutoff date for July's preliminary results was July 22nd.

They asked 5000 people, out of 300 million "How's life treatin' you?" and we're supposed to believe they speak for the nation? LOOOOOOOOOOOOOOOOOOOOOOOOOOOL! I'm sorry, but this information is hardly worth much in the face of the economic crisis staring down this country. People ran to the US Dollar on this bit of drivel? Somebody shoot me, I can't bear the stupidity any longer.

If things are so great, why was Oil once again down on the "pure speculation" that demand will drop in the months ahead because of the weakening economy. Clearly the economy is over the bump in the road and is ready to soar to new heights. The 9/10 of 1% JUMP in the Consumer Confidence number clearly proves that. If the economy is all set to rebound according to those interpreting these pithy Consumer Confidence numbers, then the demand for Oil should remain, not fall. This is asinine!

I many respects, all of what we have witnessed and heard over the past month has been a desperate attempt by those "in power" to maintain "confidence" in the financial system. The financial system, for what little it is worth these days is nothing more than a charade. Spin and double speak are used 24/7 to give the perception that the financial system remains sound, despite the "rumours" to the contrary. You know, rumours like these horrific profit losses in the banking sector, or the relative insolvency of Fannie Mae and Freddie Mac. None of those rumours are true. Hanky Panky Paulson, Bumbling Ben Bernanke, and the inept US Congress have fixed everything.

What Our Officials Most Fear
What do our officials most fear? They fear the public’s loss of confidence. Events are driving their improvised attempts to stem a general loss of confidence in the dollar, in them, the financial and monetary system, and the government as a whole.

It is not clear that they recognize that this is their greatest fear. But even if they do recognize that this is their greatest fear, they have no clear roadmap for dealing with it.

On May 13, 2008, Chairman Ben S. Bernanke spoke of many things, as he often does, of economic growth, of housing losses, of liquidity, of financial strains, and so on. And in doing so, he obscured his main fear. He fears our fears. He fears fear itself. He fears our loss of confidence in the currency and the monetary system and in the entire system itself. If he doesn’t, he should or soon will. Such a loss of confidence is inevitable.

Bernanke does not fully and openly express these broadscale fears. It would not be politic to do so. He might fan the flames of fear. When he is alone with himself in quiet moments, do these large fears cross his mind? Maybe, but it is just possible that he is not fully aware that these are his main fears. His self-knowledge may be deficient.

The Fed Chairman understands that confidence in the financial system and in banks in particular is the foundation of the system. Without it, lending evaporates and the economic system grinds to a halt until people arrange new channels of borrowing and lending. Bernanke, being a central banker, sees the solution to this as providing liquidity in a host of new and creative ways. It is the "how" of providing liquidity that interests Bernanke. The techniques of providing liquidity while not introducing moral hazard and not inflating the money supply are what fascinate him.

Our other major financial official is Henry Paulson, who is Secretary of the Treasury. I need only provide the titles of two of his speeches to make my point. On July 22, 2008, he gave a speech with the title: "Reinforcing Market Stability and Confidence." He stated unequivocally that these were his "highest priority." He means it. On June 5, 2002, while still Chairman and CEO of Goldman Sachs Group, Inc., he made a speech titled "Restoring Investor Confidence: An Agenda for Change."

Paulson in his speech tackles the topic of confidence in a very broad way. He touches upon banks, failing banks, the IndyMac failure, the FDIC, the financial markets, and non-bank financial institutions. Paulson is always attempting to reassure the people that the system is sound, so that they will have confidence in it. On January 22, 2008, for example, he said "I continue to have confidence in the underlying strength of the global economy."

I don't know about you, but I don't have any confidence in either of these two Pinocchios. It is truly scary, how the public is so easily misled by the spin and double speak of these two. It speaks volumes about the level of education in this nation. What a bunch of dumb asses. I guess even more scary is the fact that most people in this country never even hear, or are aware of the spin and double speak being spewed by these two reprobates. How could they be when they sit in front of their big screen TVs absorbed by the view. I guess they missed these headlines today, not to make mention of all those I have posted here for the past five months.

Home prices drop by record 15.8 pct. in May
Private housing index shows home prices dropping by record amount nationwide in May
NEW YORK (AP) -- Home prices tumbled by the steepest rate ever in May, according to a closely watched housing index released Tuesday, as the housing slump deepened nationwide.

The Standard & Poor's/Case-Shiller 20-city index dropped by 15.8 percent in May compared with a year ago, a record decline since its inception in 2000. The 10-city index plunged 16.9 percent, its biggest decline in its 21-year history.

No city in the Case-Shiller 20-city index saw price gains in May, the second straight month that's happened. The monthly indices have not recorded an overall home price increase in any month since August 2006.

Merrill asset sales stir question of credibility
Merrill Lynch asset sales, share offering indicates crisis not over for Wall Street
NEW YORK (AP) -- Merrill Lynch & Co.'s latest move to clear failed credit market investments from its books is likely to pressure other financial companies to dump their troubled holdings -- and, like Merrill, at a steep discount. But another round of write-downs or asset sales won't raise investors' ever-sagging confidence in the sector.

Merrill said late Monday it was selling repackaged mortgage-backed securities for $7 billion -- just weeks after they had been worth $31 billion, giving them a current value of about 22 cents on the dollar. Analysts believe that sets a new and very low benchmark that other Wall Street banks -- including Citigroup Inc., Lehman Brothers Holdings Inc., Morgan Stanley, and JPMorgan Chase & Co. -- might have to meet when valuing their own investments.

Analyst sees $8 billion Citi writeoff after Merrill move
BANGALORE (Reuters) - Citigroup Inc may write down about $8 billion in the third quarter from its exposure to collateralized debt obligations (CDOs) after Merrill Lynch & Co agreed to sell its CDOs at a sharp discount, Deutsche Bank analyst Mike Mayo said.

The analyst also forecast a third-quarter loss and widened his 2008 loss estimate for Citigroup, the largest U.S. bank by assets.

We do think the CDO sale is large and diversified enough to be applicable to others with similar exposure and that the monoline settlements will pave the way for similar enough transactions," analysts at UBS said.

They said Citigroup has the largest exposure to both CDOs and monoline bond insurers, and that investors could expect further incremental write-downs in coming quarters.

NAB will shock Wall Street
The National Australia Bank's decision to write off 90 per cent of its US conduit loans will have dramatic repercussions around the world. Wall Street will be deeply shocked when they understand the repercussions of what NAB has done. It is clear global banks have nowhere near provided for their exposures to US housing loans which in the words of John Stewart are experiencing a “meltdown”.

We are now way beyond sub-prime. NAB says that it is suffering a 55 per cent loss on American housing loans – an event that has never happened in the history of a developed country in recent memory. This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates. A US recession is now locked in, but more alarmingly, 55 per cent loan losses point to the possibility of a depression.

It means the cost of bailing out housing exposures to the two mortgage insurers will be so great that it will leave no room to bail out anything else and there are several US banks that are now in big trouble. NAB says that the dislocation in the residential market is separate from the corporate market, but the flow on is inevitable.

While global banks have been writing down their balance sheet assets, few have tackled their conduit exposures which are off balance sheet but to which they are ultimately liable.

And traders bid up the Dollar on a PATHETIC 9/10 of 1% rise in Consumer Confidence? Is this country screwed or what? A systemic financial collapse is all but inevitable now. These butterfly bandages these knuckleheads keep slapping on a sucking chest wound are NOT going to save the patient, only prolong the agony and lead to an even more painful death. A Confidence Crisis has got to be just around the corner.

Meanwhile the flim-flam man Paulson is trying to convince us that the way out of the housing crisis is to create more easy money to loan it to people who can't afford to pay it back. Brilliant! Let's solve the problem by doing more of what caused the problem to begin with. Only will change the name and nobody will know the difference as long as the "think" we're doing something to fix the problem. BRILLIANT! ...and what in the hell is the Treasury Secretary doing drumming up mortgage options anyways?

A New Way to Generate Mortgages
The financial establishment came together Monday in search of a new way for banks to come up with cash for home mortgages. Regulators, bankers and traders, led by Treasury Secretary Paulson all pledged to do their best to get a “covered bond market” going in the United States.

Covered seems to be a synonym for collateralized, but it also has other meanings that may be appropriate in this effort to salvage the housing market.

At best, a covered bond market would provide a cheaper source of financing for banks while reassuring investors that their money will be safe.

It is highly unusual for the government to take such a major role in getting a market established, but Treasury officials said their action was needed to get more money into housing loans.

In Washington, Mr. Paulson said that “as we are all aware, the availability of affordable mortgage financing is essential to turning the corner on the current housing correction.

“We are at the early stages of what should be a promising path, where the nascent U.S. covered bond market can grow and provide a new source of mortgage financing,” Mr. Paulson said.

First, would somebody please tell Hany Panky Paulson that "we", as in most people, are NOT all aware of anything related to the credit crisis...most believe it is over, LOL. And then tell this misleading monetary monkey that "affordable housing" is what caused the housing crisis. The LAST thing the housing market needs is more cheap money for people who can't pay it back to borrow. Cheap mortgages are NOT the answer. Going back in time and recreating the problem is NOT going to fix it!

And of course, with Consumer Confidence soaring today, and Oil price plunging $3, it only made sense to flee the Precious Metals least if you're an American. How unAmerican to own Gold. Don't you have any "confidence' in the financial system? Do not be persuaded to dump your Gold and Silver. 2nd qtr GDP estimates are due Thursday morning, with non-farm payrolls for July due Friday. Consumer Confidence could be in for a big test later this week.

Monday, July 28, 2008

"But I thought the bottom was in?"

Client to broker as Dow plunges yet again:

Client: "...but,... But I thought the bottom was in? You told me the bottom was in, what do I do now"

Broker: "Pray."

There's a sucker born every minute, and Wall Street has the market cornered. Sucker's Rally, Dead Cat it what you will. You can't say it wasn't expected to turn out this way. The Three Stooges', Bernanke, Bush, and Paulson, cup of lies runneth over. In the past their lies might buy the markets a couple weeks, maybe a month's time, before they'd continue lower. Now their lies are good for buying time for just a day or two. There are fewer suckers left. Realists are now being born every minute. And the reality is that this "credit crisis" cannot be fixed. Period. The ship is sinking, and the rats aren't wasting time jumping it on each little rally inspired by these three clowns lies.

Duped far too many times by the lies spewed by Wall Street and Washington, investors will soon be on a mission in search of the Truth. And as we know, that Truth is Gold, and it's trusty sidekick Silver. As we have said many times since the first of the year, it will be the investors discovery of, and rush to, Gold that will propel it to "infinity and beyond". The lines are forming at bank exits as we type...

Wall Street in Financial Stock Fantasyland
...a gigantic flood of money [is] betting that the bottom is in for financial and real estate stocks.

But is that the case? Is the credit crisis over? I don't think so. And I ask you to consider, for a minute, Wall Street's forecasting track record on this issue ...

They said the same thing when the Fed started cutting rates last fall ...

They said the same thing when the Treasury rolled out the HOPE NOW mortgage modification program ...

They said the same thing in January when the Fed stepped up the pace of rate cuts ...

And they said the same thing in March when the Fed helped engineer the rescue of Bear Stearns.

Unthinkable Truth; Undeniable Reality
The truth may be unthinkable, but the reality is undeniable:

Much of our nation's financial structure is collapsing, and our government's only response is phony money, bogus bailouts and a litany of false promises.

Ben Bernanke, Henry Paulson, the FDIC and the U.S. Congress say they can do it all.

They say they can save bankrupt brokers like Bear Stearns ... take over recently failed banks like IndyMac Bank and First National of Nevada ... prop up insolvent mortgage giants like Fannie Mae and Freddie Mac ... refinance millions of defaulting mortgages ... dish out hundreds of billions in tax rebates ... and still have enough cash in the kitty to cover the next round of financial collapses.

They say their unbridled money printing won't devalue the U.S. dollar.

They say their unlimited pledge to guarantee junk mortgage bonds won't sabotage the credit of the U.S. Treasury.

They say their blank checks to private companies won't rip off U.S. taxpayers.

They'd have you believe they can outlaw the cycle of boom and bust ... repeal the law of supply and demand ... even freeze the march of time.

In the real world, of course, no government in history has ever been able to do anything of the kind, and they know it.

In the real world, their "solution" is part of the problem, and they know that too.

They know that wealth is generated from work — not from the paper money they're printing.

They understand the hazards of indulging the most daring debtors and rescuing the most reckless risk-takers.

They know darn well the fatal flaws of the course they've chosen. But they proceed to pursue it anyhow.

Home Foreclosures Soar 121 Percent
As foreclosures continue to soar, 220,000 homes were lost to bank repossessions in the second quarter, according to a housing market report Friday issued by RealtyTrac.

That's nearly triple the number from the same period in 2007.

A total of 739,714 foreclosure filings were recorded during that three-month period, up 14% from the first quarter, and 121% from the same period in 2007. That means that one of every 171 U.S. households received a filing, which include notices of default, auction sale notices and bank repossessions.

Fannie’s and Freddie’s free lunch
Defenders of the bail-out argue that these institutions are too big to be allowed to fail. If that is the case, the government had a responsibility to regulate them so that they would not fail. No insurance company would provide fire insurance without demanding adequate sprinklers; none would leave it to “self-regulation”. But that is what we have done with the financial system.

Even if they are too big to fail, they are not too big to be reorganised. In effect, the administration is indeed proposing a form of financial reorganisation, but one that does not meet the basic tenets of what should constitute such a publicly sponsored scheme.

First, it should be fully transparent, with taxpayers knowing the risks they have assumed and how much has been given to the shareholders and bondholders being bailed out.

Second, there should be full accountability. Those who are responsible for the mistakes – management, shareholders and bondholders – should all bear the consequences. Taxpayers should not be asked to pony up a penny while shareholders are being protected.

Finally, taxpayers should be com­pensated for the risks they face. The greater the risks, the greater the compensation.

Take taxpayers off hook for rot at Fannie, Freddie
By John McCain
Americans should be outraged at the latest sweetheart deal in Washington. Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It's a tribute to what these two institutions — which most Americans have never heard of — have bought with more than $170-million worth of lobbyists in the past decade.

With combined obligations of roughly $5-trillion, the rapid failure of Fannie and Freddie would be a threat to mortgage markets and financial markets as a whole. Because of that threat, I support taking the unfortunate but necessary steps needed to keep the financial troubles at these two companies from further squeezing American families. But let us not forget that the threat that Fannie Mae and Freddie Mac pose to financial markets is a tribute to crony capitalism that reflects the power of the Washington establishment.

'Stealth' Housing Bailout: It's Bigger Than You Think
With Congress on the eve of passing a historic bill that would give the Treasury a blank check to lend money to Fannie Mae and Freddie Mac, it’s worth looking at how much money the government has already pumped into the system during the housing crisis.

The numbers are staggering and likely to get much larger. What we have here is, through a variety of programs, a stealth bailout where more than a trillion dollars of taxpayer guarantees have been extended to the housing market, both to keep it going and to clean up the mess from the past.

The total: $1.43 trillion.

Two more US lenders bite the dust as loan defaults soar
US BANKING regulators closed two lenders in California and Nevada two weeks after the collapse of IndyMac Bancorp, as loan defaults and foreclosures soar.

First National Bank of Nevada, with $US3.4 billion ($35.6 billion) in assets, and the Californian First Heritage Bank, with $US254 million, lacked sufficient capital, the Office of the Comptroller of the Currency said last week in a statement. Their deposits and some assets would be acquired by Mutual of Omaha Bank, the Federal Deposit Insurance Corporation said.

"This is part of the wringing-out process that we need to go through," the Senate Banking Committee chairman, Christopher Dodd, said on Saturday in Washington after the Senate vote. "I would anticipate there will be some additional bank failures."

Bush administration projects record 2009 deficit
WASHINGTON (AP) -- The government's budget deficit will surge past a half-trillion dollars next year, according to gloomy new estimates, a record flood of red ink that promises to force the winner of the presidential race to dramatically alter his economic agenda.

The deficit will hit $482 billion in the 2009 budget year that will be inherited by Democrat Barack Obama or Republican John McCain, the White House estimated Monday. That figure is sure to rise after adding the tens of billions of dollars in additional Iraq war funding it doesn't include, and the total could be higher yet if the economy fails to recover as the administration predicts.

The result: the biggest deficit ever in terms of dollars, though several were higher in the 1980s and early 1990s as a percentage of the overall economy.

"Whoever becomes the next president will have a very, very sobering first week in office," said Senate Budget Committee Chairman Kent Conrad, D-N.D.

Evidence of the US Banking System Teetering on the Brink of Collapse
1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.

2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?

7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?

8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?

13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.

14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?

24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.

25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.

Dow Plunges Over 200 Points
NEW YORK (AP) -- Wall Street again surrendered to investors' anxiety about the financial sector Monday, sending the Dow Jones industrials down 240 points and back into bear market territory. The flight from equities sent investors into safe-haven bets like Treasury bonds.

Financials that had rallied in recent weeks after logging huge declines, suffered from the same worries about souring debt that caused an abrupt end to their run-up late last week. Wall Street is concerned that a further withering of the housing and credit markets will damage bank balance sheets.

An International Monetary Fund report added to some of the stress in the market. The IMF predicted continuing problems in the credit and housing market that will continue to hurt the financial industry. It said, "at the moment a bottom for the housing market is not visible."

Thursday, July 24, 2008


...but Henry Paulson said...

...but Ben Bernanke said...

...but President Bush said...

They didn't say a damn thing that wasn't a lie. There's nothing shocking here. It was, and should have been expected.

Jobless claims jump as housing market gets weaker
WASHINGTON (AP) -- Two cornerstones of the economy -- jobs and housing -- sank to new depths Thursday, with unemployment claims bolting higher and home prices recording one of their steepest drops on record.

The bleak reports underscored the self-reinforcing cycle hampering the economy: As home prices sink, foreclosures rise, banks feel pressure to shy away from lending and employers cut jobs.

The Labor Department said the number of newly laid-off people filing for unemployment benefits rose to 406,000 last week, a jump of a seasonally adjusted 34,000. The last time jobless claims were higher was after the Gulf Coast hurricanes in 2005.

The housing news wasn't any better: As sales of previously owned homes fell in June and a glut of unsold and foreclosed homes on the market, the value of Americans' biggest asset continued to sag.

The median price for a home sold in June was $215,100, a drop of more than 6 percent from a year earlier and the fifth-largest year-to-year price drop on record, the National Association of Realtors said. Sales of previously owned homes fell 2.6 percent, to an annualized rate of 4.86 million.

With companies laying off workers and new jobs increasingly hard to find, the ranks of new homebuyers could shrivel further, spelling even more trouble ahead for the housing market and the economy. Consumer spending, the very lifeblood of the economy, is further in jeopardy.

Rising mortgage rates are also adding to the headaches. Rates on 30-year mortgages zoomed to 6.63 percent this week, the highest in nearly a year, as worries about inflation and the financial shape of Fannie and Freddie gripped investors.

Wall Street retreats following steeper-than-expected drop in home sales; financials decline
NEW YORK (AP) -- Wall Street abruptly ended an earnings-driven rally and closed sharply lower Thursday after a steeper-than-expected decline in existing home sales and worries about the financial sector chilled the market's recent optimism. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 points.

Investors punished shares of homebuilders and financial companies Thursday because both sectors have struggled with the declining housing market.

Alan Lancz, director at investment research group LanczGlobal, said investors are concluding that while financials had been oversold in recent weeks and were due for a rebound, problems remain with tight credit and souring mortgage debt.

"You have the rally and you almost get the hangover now where you say 'You know, we're not out of the woods yet,'" he said.

Financial stocks declined again Thursday after rising sharply in the past week from their recent lows.

Washington Mutual Inc. fell 62 cents, or 13 percent, to $4.03 after dropping 20 percent Wednesday as concerns persisted about the company's mortgage portfolio. The nation's largest thrift this week posted a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage holdings.

Other financials lost ground. Citigroup Inc. fell $2.06, or 9.8 percent, to $19.06, while Merrill Lynch & Co. fell $4.77, or 14 percent, to $29.04. Wachovia Corp. declined $1.96, or 11 percent, to $15.69.

Fannie Mae and Freddie Mac fell sharply after rallying earlier in the week on legislation speeding through Congress that would grant the Treasury Department power to extend the government-sponsored mortgage companies an unlimited line of credit and to buy an unspecified amount of their stock, if necessary. The companies together back or own $5 trillion in mortgages -- nearly half the nation's total.

Washington Mutual stock down on credit concerns
NEW YORK (Reuters) - Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz) shares fell more than 13 percent and the cost to insure its debt against default rose after an analyst said some creditors reduced their exposure to the largest U.S. savings and loan.

Citing the thrift's financial statements for the period ending June 30, Gimme Credit analyst Kathleen Shanley wrote that "many creditors have quietly been pulling funds" from the Seattle-based thrift.

Rescue for Fannie, Freddie may cost trillion, senator says
A government rescue of Fannie Mae and Freddie Mac would require taxpayers to pay "way" more than the $25 billion estimated by the Congressional Budget Office, potentially as much as $1 trillion, U.S. Sen. Jim Bunning said.

Treasury Secretary Henry Paulson "hasn't told us the truth about this bill," Bunning, a Republican from Kentucky, said in an interview with Bloomberg Television today. "Why would you put in a backstop of unlimited amounts of money if you weren't going to need it?"

"What is good about this bill is the fact that maybe it shores up Fannie and Freddie for a temporary basis," Bunning said. "What it does not do is change the model of Fannie and Freddie. It does not give the regulators the power to make the changes needed in Freddie and Fannie to make them viable entities for the future. That is why I object."

Ford Posts Worst Quarterly Performance in Its History
DEARBORN, Mich. (AP) -- Ford Motor Co. posted the worst quarterly performance in its history Thursday, losing $8.67 billion in the second quarter.

The net loss includes $8.03 billion worth of write-offs because the sharp decline in U.S. truck and SUV sales has reduced the value of Ford's North American truck plants and Ford Motor Credit Co.'s lease portfolio. Even excluding those items, Ford lost 62 cents per share, worse than Wall Street expected. Twelve analysts surveyed by Thomson Financial, on average, expected a 27 cent loss per share.

ncluding the write-downs, Ford lost $3.88 per share in the April-June quarter, compared with net profit of $750 million, or 31 cents per share, in the same quarter a year ago.

The second-quarter loss surpassed Ford's previous record quarterly loss, $6.7 billion in the first quarter of 1992.

Second-quarter revenue was $38.6 billion, down $5.6 billion from the year-ago period. Analysts expected $34.6 billion.

U.S. House bid to sell oil from reserve fails
WASHINGTON, July 24 (Reuters) - The U.S. House of Representatives on Thursday failed to pass legislation intended to cool off gasoline prices by requiring the government to sell 70 million barrels of light sweet crude oil from the Strategic Petroleum Reserve, the national stockpile.

Democrats had pushed the legislation, hoping to lower surging oil prices by putting more of the reserve's light sweet crude, sought by refiners, on the market. Sweet crude is desirable because it has less sulphur and is more easily refined into gasoline, diesel fuel and other petroleum products.

The White House had threatened to veto the measure, arguing that Congress should work toward increasing domestic supply rather than tap into a strategic reserve.

Ron Paul discloses housing bailout bill's money and power grab
In a videotaped statement Wednesday, U.S. Rep. Ron Paul, R-Texas, disclosed some shocking details of the housing bailout legislation being rushed through Congress:

-- The two troubled federal mortgage agencies, Freddie Mac and Fannie Mae, will be given unlimited access to the U.S. Treasury without requiring any further approval from Congress.

-- The U.S. national debt ceiling will be raised by $800 billion, which suggests that the bailout is expected to cost a lot more than the country is being told.

-- All credit card transactions will have to be reported to the Internal Revenue Service, as if the country isn't under enough government surveillance already.
You can watch Paul's statement at GoldSeek here:

Wednesday, July 23, 2008

"You Can't Fix Stupid"

Why is Gold going down? Because the government wants it too.

Why is Oil going down? Because the government wants it too.

Why is the Dollar going up? Because the government wants it to.

Why are bank stocks going up? Because the government wants them to.

I know, it's stupid. ...but you can't fix stupid. Stupid is as stupid does. Thanks Forrest. Gold is the enemy of the government. Oil is the government's Achilles heel. The Dollar is to the government what oxygen is to you and me. And if the banks are allowed to fail, the entire reason for the government's existence is destroyed. It's really that simple, and stupid at the same time. The government exists to steal your money thru inflation.

House passes housing bill; Bush lifts veto threat
WASHINGTON (Reuters) - The House of Representatives passed a massive housing rescue bill on Wednesday while the White House dropped a threat to veto it, paving the way for measures aimed at shoring up the worst U.S. housing market since the Great Depression.

Removal of the presidential veto threat spurred investors to snap up shares and bonds of mortgage finance companies Fannie Mae and Freddie Mac, which would receive an emergency government lifeline under the bill.

The bill had been in the works for months, but took on greater urgency since concerns about Fannie and Freddie's finances mounted in mid-June

Ten days ago, the U.S. Treasury pledged an unspecified credit line for the companies and said it would buy their stock, if needed, to bolster investor confidence. Those emergency measures required congressional approval.

The two companies, which own or guarantee almost half of the $12 trillion in U.S. mortgage debt outstanding, have recorded heavy losses in the past year amid rising defaults.

If they were unable to keep financing mortgages, analysts say the already weak housing market could grind to a halt, tipping the U.S. economy into a deep recession.

Treasury Secretary Henry Paulson said he recommended that Bush drop his objections because reforms for Fannie Mae and Freddie Mac, the country's two biggest mortgage finance companies, were too important.

"What we're doing with the (companies) is orders of magnitude more important than any of the other parts of this housing legislation," Paulson told reporters.

Congressional budget analysts put a $25 billion potential price tag on the provision to bolster Fannie and Freddie, but pointed to a wide range of possible costs.

Both Paulson and the companies have said the credit line was just a backstop and they had no intention of using it.

The bill also contains an increase in the Treasury's borrowing authority. This hike was sketched out in a fiscal 2009 budget blueprint that cleared Congress earlier this year.

The current debt limit is set at $9.815 trillion. Under the bill, it would be increased to $10.615 trillion to accommodate the federal government's continued deficit spending.

" accommodate the federal government's continued deficit spending." That says it all right there. Continued deficit spending spells just one thing...a lower Dollar. Despite every ounce of hot air spewed by the arrogant traitor Paulson, the US Government has no desire for a "strong Dollar". This housing bill and the bailout of Fannie and Freddie prove that beyond a shadow of a doubt. What could be more inflationary? I'm sure Paulson and his cabal at the Fed will think of something soon. As they say, you can't fix stupid.

Rescuing Fannie Mae or Freddie is nonsense
The proposed rescue of Fannie Mae and Freddie Mac makes no sense.

Both companies are mortgage bundlers and investors.

They buy mortgages from other lenders and securitize them. They hold some for investment and sell some to others. They guarantee payments on the mortgage-backed securities they sell to others. And they buy mortgage-backed securities from other bundlers for investment.

Recently, the stock prices for Fannie and Freddie fell precipitously, to roughly a quarter of their previous peak. That represents a sharply revised judgment by investors about the value of Fannie and Freddie's business model and activities.

That's too bad for holders of Fannie and Freddie stock. But in and of itself, it doesn't represent a systemic economic threat warranting the intervention of the federal government.

The Bush administration has proposed that Fannie and Freddie be given an unlimited line of credit from the federal government and that the federal government be permitted to contribute equity if Fannie and Freddie have capital problems. Congress appears likely to go along.

In the meantime, the Fed has agreed to lend to Fannie and Freddie as well.

Instead, Congress should phase out the existing $2.25 billion line of credit each enterprise has with the federal government over a period of, say, five years, and declare that Fannie and Freddie from that point on are on their own.

Fannie Mae and Freddie Mac are doing a VERY POOR job of running their businesses, so the federal government is going to step in and help them to continue to run a bad business. Sounds pretty stupid too me too. But as you know, you can't fix stupid.

Bouncing Banks: How $11B of Losses Is 'Good News' on Wall St.
Financial stocks were taking a breather Wednesday, which is to be expected after the group's ferocious rally. Heading into today, the Financial SPDR (XLF) had risen 31% in a five-day advance, culminating (perhaps) on Tuesday when huge losses were greeted as good news.

Five banks reporting results Tuesday -- Wachovia, Washington Mutual, SunTrust, Fifth Third, and Regions Financial -- posted quarterly losses of over $11 billion, yet saw their market-caps rise a collective $11.6 billion, with an average gain of 14%, the WSJ reports.

"Bad results are good when expectations are so low,'' Deutsche Bank's influential analyst Michael Mayo wrote Tuesday, comments that both summed up the mood and helped define it. "Real estate problems remain significant, but outside these areas problems have not yet spread in score or severity as much as feared.''

Further aiding sentiment: Both Wachovia's Robert Steel and Washington Mutual's Kerry Killinger declared their respective firms don't need to raise more capital, even after taking losses of $8.7 billion and $3.33 billion, respectively.'Good-News'-on-Wall-St.?tickers=WM,WB,XLF,JPM,AXP,STI,FITB

Didn't we here this same nonsense when banks reported last quarter? They were wrong then, and they are wrong now. The ONLY thing putting a bid under these pathetic banks and their equally pathetic balance sheets is the arbitrary enforcement of an SEC rule that has been "unenforced" since it's inception. The SEC has banned "naked shorting" in 17 banking related stocks. And the government claims that speculators in the Oil markets are manipulating price. The government enforcing a LAW only when it's convenient sounds more like market manipulation to me. Yes, I know banks rising on dreadful earnings sure looks stupid, but hey, you can't fix stupid.

Shorts On Fire
Ben Bernanke and Hank Paulson spoke to congress this past week and their message was clear: Inflation be damned, job one is to rescue the financial system! Of course they will, keep in mind that the Federal Reserve is OWNED by the very banks which they are RESCUING! They will have their hands full in doing so.

During that same congressional testimony the corruption and rot within the regulatory agencies was on full display as one top regulator placed a BAN on activity which has been ILLEGAL since the great depression. A tacit admission that the firms it regulates are and HAVE BEEN above the law. No sooner did the announced ban on NAKED short selling in 17 financial and banking firms was given to CONGRESS, it was then IMMEDIATELY delayed until Monday, July 21st in order to provide an exit for the CULPRITS of this nefarious, illegal and predatory practice.

The BIGGEST rally in financial and banking stocks in decades was nothing more than the perpetrators and criminals FLEEING the scene of their latest CRIMES.

The greatest transfer of wealth in history is beginning to unfold, as those who store their wealth in paper lose it to those who DON’T! It will take years to unfold.

This is the greatest OPPORTUNITY in history. Do not be afraid. Do your homework and thrive. Markets will zoom all over the place as investment assumptions that have held for years are now FALSE. We are not close to the end game here, cash is still spoken of as SAFE and risk free which is the most outrageous of LIES. Paper is poison and the sooner you invest with that in mind the sooner you will be on your way to the penthouse. People that hold their wealth in G7 paper are headed to the OUTHOUSE and they will be able to use their wealth as high priced toilet paper.

Sure as I'm sitting here, this rally in banking stocks will fail. The first seeds may have been sown today. Banking stocks closed well off of their highs today after the announcement of the housing bill and attached Fannie and Freddie bailout. Gold and Silver got fleeced today by the CRIMEX goons in an effort to give credence to the governments new plan to instill "confidence in the financial system". If giving another boost to the burgeoning hyperinflation scenario will instill confidence in this dead cat, so be it. Gold and Silver will not be held back long. ALL attempts previously have failed, this one will too. Yup, buying bank stocks because the talking heads on financial tv claim they are undervalued is stupid, but again, and I hate to beat a dead cat, you can't fix stupid.

No Bottom Yet For Flailing Financials
In recent months, even the most blindly optimistic forecasters have come to grips with how our banks and investment banks took wildly imprudent risks that will result in horrific losses. The resulting sell-off in financial shares has tempted many investors to scoop up these companies at apparently fire sale prices. Wise investors should resist the temptation, as the pain for financials is just getting started.

The rescue of Fannie Mae and Freddy Mac, in particular, generated a wave of buying amongst the so-called “bargain basement” financial stocks, off some 80 percent from their highs. This optimism was based largely on the belief that the taxpayer would be forced to rescue the banks. But the banks are not the only financial institutions in trouble. The home lending and credit boom provided a feast for all manner of other speculations. Credit cards lenders became very aggressive as did auto lenders and lenders to students. Even businesses borrowed in order to participate in the great consumer credit boom.

These categories of lending are vast, in sum, amounting to several trillion dollars. All financials are exposed, but the degree of infection is not yet fully understood. Soon, even the government must wonder how much more taxpayer “rescue” the $14 trillion U.S. economy can afford?

As the recession takes hold, borrowers are heading for stringent times, especially those with large, high cost credit card debts. Likewise, their lenders, including many regional banks, are likely to experience massive loan defaults. Then, there are the insurance companies who have invested much of their own reserve funds in real estate.

In short, investors should become urgently aware that banks are not the only financial institutions that will be adversely affected by the severe economic conditions now looming ahead.

While the true extent of the problem is hard to estimate, it is a certainty that the U.S. dollar is likely to remain under downward pressure. Gold is likely to experience strong upward pressure as high inflation leads into hyperinflation and systemic financial risks become increasingly manifest, offsetting the downward pressures of recession.

"Buy bank stocks? Are you stupid?" Try as you might, you just can't fix stupid.

So far this week we saw Wachovia get socked for an $8.86 billion loss with a layoff announcement of 10,750 employees, while Washington Mutual got hammered for a $3.3 billion loss and increased its beleaguered loan-loss reserves by $3.74 billion to $8.46 billion as it announced expense cuts and asset sales. This is nothing. This is just the beginning. This is just window dressing to protect incumbents. Together with the science fiction and fantasy we got last week from the banking sector, these latest financial statements from the banking sector should receive a Nebula Award from the Science Fiction and Fantasy Writers of America. Gene Roddenberry could not have dreamt up financial statements that were more phantasmagoric.
All these bank losses, as terrible as they are even in their understated amounts, are pathological accounting lies aimed at keeping the sheople from going ballistic on the incumbent scum-bags in Congress so that these corrupt reprobates and sociopaths can continue in office and maintain their rape, pillage and slaughter of the sheople of the US unabated on behalf of their evil, malevolent and rapacious Illuminist masters.

The stock markets, the bond markets, the derivative markets and the entire financial system would collapse if people knew the real truth about the balance sheets, income statements and debt-to-equity ratios of virtually all the major commercial and investment banking fraudsters of Wall Street. So the devastating truth will be withheld most likely until the final quarter which ends in December, because a good portion of the earnings results for the third quarter are going to be announced prior to the US general elections which would normally be held in early November, barring some false-flag attack. Until then, the huge whitewash reservoir behind the "creative accounting" dam will be sucked dry. We're not sure if there is enough whitewash left on the planet to cover up the losses for Q3, however.

Tuesday, July 22, 2008

Do You Believe The Lies...Or The Truth?


Housing to turn corner within months: Paulson
WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Tuesday that America's housing market could turn a corner and begin recovering within months, but it will take longer to resolve all housing-related problems.
"Obviously, it will go on beyond months with some of the issues in the housing market, but I believe we can get to the point within months where we turn the corner on housing," Paulson said in a televised interview with Fox Business Network.

He said the corner would be turned at the point when home prices begin to stabilize and more buyers start to enter the market. He added that the role played by Fannie Mae and Freddie Mac was crucial to providing financing to potential buyers.

Treasurys lower on Plosser comments, drop in oil
NEW YORK (AP) — Treasury prices dropped Tuesday as Federal Reserve Bank of Philadelphia President Charles Plosser said the central bank will need to boost interest rates "sooner rather than later" to fend off inflation.

"Inflation is already too high and inconsistent with our goal of — and responsibility to ensure — price stability," Plosser said in a speech to a group assembled by the Philadelphia Business Journal. "We will need to reverse course — the exact timing depends on how the economy evolves, but I anticipate the reversal will need to be started sooner rather than later."

Stocks Surge as Oil Plunges
Wall Street traded higher Tuesday as investors were encouraged by another sharp drop in oil prices and snapped up shares of undervalued financial companies.

The focus on higher oil's impact on the economy has been so intense that any notch lower breeds optimism that the commodities run-up might perhaps be nearing an end, analysts said. That means, for the moment, corporate earnings reports have lost some of their dominance of the market.

The market was looking at the long-term impact of somewhat cheaper energy -- and likely betting that company earnings would pick up if oil extends its decline.

"There's been so many people speculating about oil taking off and how to handle it, the whole economy has been focused on it," said Todd Leone, managing director of equity trading at Cowen & Co. "Just the fact that it has dropped -- a big move down -- helps out. There's the perception that this will get the economy going again."

Wachovia turnaround rallies banks
NEW YORK (MarketWatch) -- Shares of Wachovia surged almost 30% Tuesday and led to another rally in regional banking stocks after Wachovia said it would not need to raise new capital and a top analyst predicted a double-up of the company's stock.

"We are committed to a strong balance sheet and protecting and creating shareholder value. We have several initiatives as we have described under way to protect, preserve, and generate capital, and additional options are open to us," Chief Executive Officer Robert Steel said during a conference call with investors Tuesday. He also said the company wouldn't sell fresh shares.

Regulators Spin Public to Boost Fannie, Freddie
July 16 (Bloomberg) -- In his zeal to crack down on false market rumors, here are a couple of places for Securities and Exchange Commission Chairman Christopher Cox to start looking: the U.S. Treasury Department and the Office of Federal Housing Enterprise Oversight.
At least Cox didn't know what he was talking about back in March when he publicly vouched for the strength of Bear Stearns Cos.' capital, just days before the investment bank collapsed. Treasury Secretary Henry Paulson and Ofheo's director, James Lockhart, have no such excuse for the way they pumped Fannie Mae and Freddie Mac last week.

In a statement on July 10, with shares of Fannie and Freddie in a freefall, Lockhart -- their chief regulator -- said they ``are adequately capitalized, holding capital well in excess of the Ofheo-directed requirement, which exceeds the statutory minimums.''

Paulson, testifying that day in Congress, backed Lockhart's assurances on Fannie and Freddie. ``Their regulator has made clear that they are adequately capitalized,'' he said. Federal Reserve Chairman Ben Bernanke also weighed in, saying, ``they are well capitalized in a regulatory sense.''

What these men should have known -- must have known -- is that the government's capital requirements for Fannie and Freddie are a joke.

The two government-chartered mortgage financiers were so well capitalized that Paulson had to announce a government rescue plan for them three days later on July 13, a Sunday. That was the same day the SEC issued its warning against ``manipulation of securities prices through intentionally spreading false information.'' Whatever credibility Paulson, Lockhart and Bernanke had in the marketplace before last week, they just blew a big wad of it.

The most amazing aspect of the government's capital requirements is that they let Fannie and Freddie count tens of billions of dollars of losses as capital, even though they don't qualify as equity. While it may be technically accurate to say that Fannie and Freddie are adequately capitalized by the government's measure, any assertion that they are adequately capitalized in real life just isn't true.


Wachovia, other U.S. banks post dismal results
NEW YORK, July 22 (Reuters) - Wachovia Corp and Washington Mutual Inc led several large U.S. banks in posting weak second-quarter results on Tuesday, hurt by soaring losses from mortgages and other debt.
Wachovia reported a $8.86 billion loss, while Washington Mutual said it lost $3.33 billion. Two Ohio-based regional banks, Fifth Third Bancorp and KeyCorp, also posted losses. Southeast regional banks Regions Financial Corp and SunTrust Banks Inc each said profit fell.

Wachovia and Regions also slashed their dividends, while Wachovia, Fifth Third and KeyCorp incurred charges from their tax treatment of some lease transactions.

Lenders are suffering as the U.S. housing crisis deepens, making it harder for consumers, businesses and homebuilders to stay current on their loans.

"There is no easy fix," said Michael Nix, who helps invest $750 million at Greenwood Capital Associates LLC in Greenwood, South Carolina. "We have to see stabilization in housing and, until we see that, it's hard to get comfortable."

Bank shares nevertheless soared after Wachovia said it would not sell common stock to raise capital.

Rescue of mortgage giants could hit $25 billion
A federal rescue of troubled mortgage giants Fannie Mae and Freddie Mac could cost taxpayers as much as $25 billion, Congress' top budget analyst said Tuesday.

California foreclosures soar to 20-year high in second quarter
LOS ANGELES: Foreclosures in California soared in the second quarter to the highest level in at least 20 years, as many homeowners who bought at the height of the housing boom were unable to make mortgage payments, a real estate research firm said Tuesday.
In addition, the number of default notices — an indicator of possible future foreclosures — also jumped during the period between April and June, according to DataQuick Information Systems.
In all, some 63,061 California homes were lost to foreclosure in the second quarter — the most in any quarter since 1988, when the firm began tracking foreclosures.

Investors question financial sector rebound
CHARLOTTE, N.C. (AP) — A surprisingly large second-quarter loss at Wachovia Corp. has quickly revived Wall Street's concerns that the financial sector still has a long way to go before it recovers from the year-old credit crisis.

Investors got a cold wake-up call when Wachovia, the nation's fourth-largest bank, racked up an $8.86 billion loss because of charges and reserves for bad mortgage loans. The Charlotte-based bank on Tuesday also cut its dividend for the second time this year and eliminated 10,750 positions.

After markets closed, Washington Mutual Inc. delivered a further jolt. It swung to a $3.33 billion loss in the second quarter as it boosted its loan loss reserve to more than $8 billion, betting on more soured mortgages.

Several regional banks also posted losses Tuesday or said their second quarter profit fell.

The banks' results were especially sobering for investors who last week sent stocks soaring after better-than-estimated reports from Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.

Even Wachovia's crosstown rival, Bank of America Corp., managed to beat Wall Street expectations. The nation's second-largest bank by assets said Monday its second-quarter earnings fell 41 percent, hurt from the impact of the ensuing credit crisis.

Lies. The worst part of lies, is that people believe them. Pinocchio Paulson is the Prince of Deceit. Housing to turn corner in months? What a load of crap. Unless of course he means it is going to turn the corner and head down the next block. LOL! Ain't gonna happen Hapless Hank. Boast all you want about the "importance" of Fannie and Freddie to home buyers. Just don't look past the fact that the next home buyers are going to have to be "qualified home buyers", and thanks to you and your little cabal of cronies at the Fed, they seem to be disappearing quicker than honey bees. Without "qualified home buyers", there can't be a bottom in the housing market.

Federal Reserve Bank of Philadelphia President Charles Plosser is an inflation uber hawk. He has voted against all of the Feds recent rate cuts, and voted for a rate increase at the last Fed meeting. Bumbling Ben last week all but ruled out any "sooner rather than later" interest rate hikes when he back tracked on his recent flawed view of the nations growth prospects going forward. Only an idiot would buy the Dollar in the belief that the Fed is going to raise interest rates. And so what if they do. They are presently 225 basis points behind the ECB in interest rates. The Truths mentioned above should be all the proof one needs that rate hikes by the Fed are highly unlikely.

Financial companies are not undervalued, they are now grossly overvalued. This short covering rally precipitate by the SEC's threat to go after naked shorts in the 13 broker dealer stocks has spooked the shorts. The legitimate shorts will be back shortly, and they will have a fresh pool of overvalued stock to draw from to short these patsy banks further into the ground. Oil prices hardly "plunged" today. They were down $3. Weeeeeeeeeeeeeee! $125 Oil is hardly "going to get the economy moving", and you're dreaming if you think Oil prices are going to just roll over and go back to $60. It's unlikely Oil will EVER be below $100 again.

If the congress gives Paulson a dime to bailout Freddie and Fannie they should all be voted out at the poles this Fall. Did you know that every member of the House is up for re-election in November? Vote out the incumbents if you really want to see some change in the country.

The Truths. NOTHING was revealed today by anybody that supports a strong Dollar or lower Gold and Silver prices. In fact, ALL the news today only enhances support for a lower Dollar and much higher Gold and Silver prices. $25 BILLION to bailout the evil Mortgage Twins? That's wishful thinking. It would have to be over $1 TRILLION.

The banks have had unquestionably horrendous earnings. I don't care if they "beat the street". Nobody should. The Street is utterly clueless. Nobody with a brain buys stock in companies losing money like banks are right now, and with further losses in the pipeline for several quarters to come. Only shorts buy stocks in beaten down banks that "beat bogus estimates". They have to take their profits sometime, and then look to make more. Unfortunately a number of investors will be sucked into this bear trap and be crushed by it. I have no pity for them. Either have your money in cash or Precious Metals. It is really that simple.

The Asians have bid up Gold and Silver regularly overnight. They are delighted every morning as they awaken to the dumb Americans foolish take down of the Gold and Silver prices. They have also regularly Sold the Dollar on these pathetic European and American market bids. The Dollar is CRAP. The OPEC countries and the Russians rejoice with every drop in the price of Gold and Silver and rise in the Dollar as well. They can't wait to dump more Dollars and buy more Gold and Silver.

Patience in these markets is essential. Volatility is part of the game. Rest assured that Gold and Silver are poised to reach new heights in spite of every effort by those on the CRIMEX to thwart the relentless rise in the Precious Metals. The US Dollar is doomed to complete collapse, time is not on it's side.

A Golden Parachute with a Silver Lining
Since 1913 when the Federal Reserve first issued its debt based paper money in the US, the paper US dollar has lost 95 % of its value, a loss of 95 % over 95 years. Perhaps in five more years, 100 years after the creation of the Federal Reserve, the US dollar will have lost 100 % of its value—which means in five years the US paper dollar will be worth nothing.

Throughout history, no fiat money system has stood the test of time. All attempts to substitute paper money for gold and silver have ended in the total destruction and debasement of the currency.

This time will be no different. It is hubris to think otherwise but unfortunately the vast majority do—which is a clear sign they’re not thinking at all.