Looking for some satisfaction today in the face of ANOTHER pathetic take down in the Precious Metals, I found great amusement in watching the Dow give back EVERYTHING it gained in Mondays euphoric reaction to the Fannie/Freddie bailout/scam. I guess everything ain't fixed after all.
Wall Street ends lower on concerns over Lehman
NEW YORK (AP) -- Stocks tumbled Tuesday, nearly erasing the previous session's big gains, after fresh concerns about the stability of Lehman Brothers Holdings Inc. punctured a sense of optimism about the financial sector. Each of the major indexes lost more than 2 percent. The Dow Jones industrials fell nearly 300 points.
"We're back to the fundamentals again," said Denis Amato, chief investment officer at Ancora Advisors in Cleveland, referring to investors' mentality a day after sending stocks higher. "These financial maneuverings don't create prosperity," he said of the government's moves to aid Fannie and Freddie. "Just because you make some financial change doesn't mean all the sudden the economy gets better."
You've got that right Denis. I'd swear Wall Street had bamboozled maintstreet yesterday into believing that the Fannie/Freedie bailout was going to lower the price of potatoes, gasoline, and leave Big Macs at 99 cents again. I guess not.
Mortgage bailout unlikely to lift US out of slump
WASHINGTON: If the government bailout of Fannie Mae and Freddie Mac is a salve to help heal what is ailing the U.S. economy, it is likely to be a slow-acting medicine that may not stop the infection before it gets worse.
Analysts predict the vicious cycle where housing, credit and financial problems force Americans to hunker down further — hobbling the economy and in turn aggravating those very troubles — won't be easily broken.
"The negative psychology has become embedded and will take time to unwind," said Brian Bethune, economist at Global Insight. "It is not instant coffee."
A growing number of analysts believes the economy will be thrown into reverse in the final three months of this year and perhaps in the first three months of next year, meeting a classic definition of a recession.
Howard Chernick, economics professor at Hunter College, predicts: "The U.S. economy will continue to spiral down."
The economy shrank late last year and barely budged at the start of this year. Growth picked up in the spring, thanks to brisk exports and the government's tax rebates, which energized shoppers at home. But that rebound wasn't expected to last.
Slower growth overseas will probably cause exports to fall off just as Americans are cutting their spending and the benefits of the rebates disappear.
Fannie, Freddie Plan Signals Open Raid on Federal Treasury
WASHINGTON, Sep 08, 2008 (BUSINESS WIRE) -- The U.S. Treasury announced yesterday that it is taking temporary control of floundering mortgage lenders Fannie Mae and Freddie Mac. The move is the latest chapter in a sorry story of regulatory failure, accounting fraud, and political cronyism.
Treasury Sec. Henry Paulson stated Sunday, "I attribute the need for today's action primarily to the inherent conflict and flawed business model embedded in the GSE structure," yet he still offers no plan to fundamentally reform this flawed structure and inherent conflict. Sec. Paulson's latest plan actually expands Fannie and Freddie's risky mortgage guarantee activity and delays the decision to even begin to reduce their size to 2010.
With this plan, the U.S. government is borrowing more money from foreign creditors, in order to buy equity and mortgage-backed securities in a convoluted way in an attempt to guarantee Fannie and Freddie bonds. This is not a sustainable or rational economic policy."
"With this plan, U.S. taxpayers are making an equity investment in two public companies so that those companies can continue to pay subordinated debt dividends to insider banks and Wall Street investors, and to prop up the mortgage-backed securities market."
AIG shares fall on fresh mortgage market concerns
NEW YORK (Reuters) - Shares of American International Group Inc (NYSE:AIG - News), the world's biggest insurer, fell 16 percent on Tuesday on fears that the company's large exposure to the mortgage markets could trigger the need to raise fresh capital.
AIG, which has recorded unrealized losses of more than $20 billion over the past three quarters on credit default swaps that guarantee mortgage-linked securities, raised more than $20 billion earlier this year, severely diluting shareholders' investments.
Investors are growing increasingly skittish ahead of a special meeting called for later this month. Those fears are compounded by worries that more losses may be in the pipeline, stoked by signs that other financial services firms, including Lehman Brothers Holdings Inc (NYSE:LEH - News), may be hit anew by mortgage losses.
Budget deficit expected to reach a near-record $407B under new congressional estimates
WASHINGTON (AP) -- The federal government will run a near-record deficit of $407 billion this year, according to the latest Capitol Hill estimates.
The Congressional Budget Office released figures Tuesday that indicate the red ink will spill over into next year, when the deficit would reach a record $438 billion -- and could go even higher as the government takes over mortgage giants Fannie Mae and Freddie Mac. http://biz.yahoo.com/ap/080909/budget_deficit.html
Home mortgage rate cut not enough to revive US housing
NEW YORK, Sept 9 (Reuters) - The fall in home mortgage rates this week, after the U.S. government took over giant lenders Fannie Mae and Freddie Mac, has stoked home buyer interest, but the massive inventory of unsold homes on the market and fears of job losses may keep house prices falling.
The government took over Fannie Mae and Freddie Mac on Sunday aiming to stabilize the two-year fall in house prices, the worst since the Great Depression, and ease the credit crunch in global markets.
In just one day though on Monday, average 30-year mortgage rates fell by half a percentage point to about 6.0 percent. In some areas home shopping has already picked up but it will take a few weeks to get a good read on buyer traffic, real estate executives say.
"It's enough to turn the starter, but I don't know that it keeps the engine running," said A.W. Pickel, chief executive of LeaderOne Financial Corporation in Overland Park, Kansas.
Why The Fannie-Freddie Bailout Will Fail
With yesterday's announcement of the most massive federal bailout of all time, it's now official: Fannie Mae and Freddie Mac, the two largest mortgage lenders on Earth, are bankrupt.
Some Washington bigwigs and bureaucrats will inevitably try to spin it. They'll avoid the "b" word with vengeance. They'll push the "c" word (conservatorship) with passion. And in the newspeak of 21st century bailouts, they'll tell you "it all depends on what the definition of solvency is."
The truth: Without their accounting smoke and mirrors, Fannie and Freddie have no capital. The government is seizing control of their operations. Their chief executives are getting fired. Common shareholders will be virtually wiped out. Preferred shareholders will get pennies. If that's not wholesale bankruptcy, what is?
Some Wall Street pundits and pros will also try to twist the facts to their own liking. They'll treat the bailout like long-awaited manna from heaven. They'll declare that the "credit crisis is now behind us." They may even jump in to buy select financial stocks. And then they'll try to persuade you to do the same.
The reality: This was the same pitch we heard in August of last year when the world's central banks made a coordinated attempt to rescue credit markets with massive injections of fresh cash. It was also the same pitch we heard in March when the Fed bailed out Bear Stearns. But each time, the crisis got progressively worse. Each time, investors lost fortunes.
Together, both Washington and Wall Street are trying to persuade you that, "no matter what, the government will save us from financial disaster." But the real lessons already learned from these events are another matter entirely:
Paulson’s Quick Draw
By: Peter Schiff, Euro Pacific Capital, Inc.
Treasury Secretary Henry Paulson, the man who said that subprime was contained and that the Bazooka in his pocket would never be used, now assures us that the bailout of Fannie Mae and Freddie Mac will be costless to taxpayers. Despite the near euphoria that the plan has sparked on Wall Street, the move will go down in history as the biggest policy blunder of all time, and will be credited as a pivotal point in the financial collapse of the American economy. The ultimate cost to Unites States citizens will be in the range of hundreds of billions of dollars, perhaps more.
Six Situations to Monitor for the Rest of 2008
When IndyMac Bank collapsed in early July, USAGOLD-Centennial Precious Metals logged the largest single week volume in its 35 year history. And that was just the beginning. By mid-August gold coin demand had become so strong globally that U.S. Mint and South Africa's Rand Refinery announced they could no longer keep up with their orders and promptly shut down operations. Soon thereafter, the U.S. mint resumed gold coin production, but explained that they would now be forced to ration output. Much of the demand that spawned the mints' problems came from individuals around the globe concerned about the safety of their banks and financial institutions -- a worry not likely to dissipate anytime soon.
Hang Tough
The technical evidence is pouring in that gold is making a secondary test of its Aug. 15 low. This means that we are at an important buy point for gold, and people who have been watching from the sidelines now have an opportunity to enter the market.
What we have just been through is a central bank dollar support operation. The paper aristocracy badly injures the economy under the rationalization that they are creating wealth out of nothing. You remember the description of Greenspan as a miracle man. This is because he was able to create money and ease credit, and thus push up the stock market, without causing (much of) a rise in consumer prices.
This appeared to be a miracle to the paper aristocracy. He was creating wealth for them, and there were no bad consequences. But you can’t create something out of nothing. You can’t create real wealth by printing up pieces of paper. And a person who believes in miracles is not a scientist..
What we have just been through is a central bank dollar support operation. The paper aristocracy badly injures the economy under the rationalization that they are creating wealth out of nothing. You remember the description of Greenspan as a miracle man. This is because he was able to create money and ease credit, and thus push up the stock market, without causing (much of) a rise in consumer prices.
This appeared to be a miracle to the paper aristocracy. He was creating wealth for them, and there were no bad consequences. But you can’t create something out of nothing. You can’t create real wealth by printing up pieces of paper. And a person who believes in miracles is not a scientist..
Right now the big picture tells us that, from time to time the establishment declares war on gold bugs. Currently we are in one of these wars, as there has been a central bank support operation in favor of the dollar which has pushed it up above 79. Indeed, the current situation looks a lot like November 1978 when Jimmy Carter declared war on the gold bugs and knocked the price of gold down by 20%. What a buy opportunity was there my friends. Gold went from $200 to $875 in the next 14 months. You have to make a decision. Are you going with the lemmings, or are you going with the winners?
I like many of you reading this, and thank you for doing so, am at my wits end. Loses in my portfolio have been mounting, both paper and real. I have stuck to my convictions regardless because I am convinced that the Precious Metals offer the only hope of keeping ones financial head above water in the quickly deteriorating financial environment we live in. This Fannie/Freddie bailout is less about saving the financial system and more about exposing the dire situation that envelops it. The government did not want to go down this road, assuredly not. But the rapidly evolving whirlpool about to suck the US Financial System down the drain is gaining strength. The Fed and the Treasury had to do something, even if it was just to put a butterfly bandage on a sucking chest wound.
As often as I can, I share with you the headlines that convince me daily that the fed and treasury are losing their "game" with the markets. I have to keep a position in the Precious Metals because I just don't know when the day will come that Bumbling Ben and Hanky Panky Paulson will finally lose control and all hell breaks lose.
It is increasingly frustrating to "keep my chin up" as every reason to own Precious Metals is shot down by another metals take down on the CRIMEX. And folks, it is at the CRIMEX, in collusion with the US Government, that Precious Metals investors are being robbed almost daily, in spite of news and events that should have Gold and Silver well on their way to "infinity and beyond".
Posted above is a four hour chart of Gold. On this chart I have placed vertical blue lines to highlight each four hour period of maximum CRIMEX involvement in the Gold market: 8AM to 12PM est. Just like this morning, it is shocking how many days Gold has been taken down at the open since the middle of July when IndyMac blew up and Hanky Panky Paulson conned the US Congress into giving him a blank check to bailout Fannie/Freddie. This chart is all the evidence of a crime that I need. At no time in the past seven weeks has the price of Gold been hammered overseas like it has been on the CRIMEX. How much longer will the world allow these criminals to dictate price in the Precious Metals markets?
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