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Daily Digest - March 6

Friday, March 6, 2009, 12:04 PM
  • Comedy Central (3:00 blunders)
  • Chávez turns to Russians in gold venture
  • Country Default Risk Continues Its Rise
  • Country Default Risk Chart
  • Europe's banks face a $2 trillion dollar shortage
  • UK: BoE Cuts Rate to 0.5%, Begins Quantitative Easing
  • Ukraine's Tymoshenko warns of a new Iron Curtain
  • Venezuela's Chavez tightens state control of food amid rocketing inflation & food shortages
  • Stock doom and gold boom (H/T CP)
  • Citi Breaks the Buck
  • Warren Buffett Insights
  • Lodging bubble
  • Malls
  • The Treasury Mortgage Mod Program: Should We Hope It Doesn't Work?
  • Geography of a Recession (Zoom to get your county)
  • U.S. cities face tough questions in budget squeeze
  • 50,000 Protesters in NY, NY
  • Report: Record 5.4 Million U.S. Homeowners Delinquent or in Foreclosure
  • Negative Equity/Upside Down
  • "The End of Wall Street" Author Interview
  • Top Strategists Still Expecting a 46% Gain From Here
  • Fed Refuses to Release Bank Data, Insists on Secrecy (Update3)
  • Minyan Mailbag: Why Marked-to-Market Refuses to Die
  • Chanos on What's Ahead

 

Economy

Comedy Central (3:00 blunders)

http://www.thedailyshow.com/video/index.jhtml?videoId=220252&title=cnbc-...

Chávez turns to Russians in gold venture

As the helicopter skims low over one of the largest undeveloped gold deposits in the world, just south of the ragtag mining town of El Dorado, the pilot shrugs bleakly.

"It's a great shame," he says, gesturing at the scar blighting the pristine forest in south-eastern Venezuela, cleared by thousands of small-scale, illegal miners in their hunt for gold.

But after a decades-long free-for-all in which prospectors have wreaked environmental havoc while private companies have failed to extract an ounce of gold from Las Cristinas, Hugo Chávez, the president, has said it may be exploited in a joint venture between the state and a Rusoro Mining, a Russian miner.

Since oil provides more than 90 per cent of export revenues and more than half of government spending, collapsing energy prices have ignited the government's interest in the sizeable gold reserves in order to bolster its earnings, as well as in commodities such as coffee and cacao - once Venezuela's biggest export.

The partnership between the socialist president and the Russian company is one of the fruits of a budding friendship between Caracas and Moscow - part of the strategy of Venezuela's anti-imperialist president to challenge US influence in the region.

"The spirit of goodwill between the two governments has certainly helped us a lot," says George Salamis, president of Rusoro, which has already acquired and turned round two struggling mining operations here in the past year.

Some foreign companies have had a rough ride in Venezuela in recent years as Mr Chávez sought to make an example of capitalist companies while deepening his socialist revolution.

As well as companies affected by the state's drive to take over "strategic" industries during the past two years, one of the companies with the most disappointing performance has been Canada's Crystallex, which has been waiting for a permit to develop Las Cristinas since it was granted the concession in 2002.

"My main concern is removing the perception that Venezuela is a risky place to do business, which has been exacerbated by what has happened at Las Cristinas over the last 15 years," says Mr Salamis.

After buying the operations of US-based Hecla and South Africa's Gold Fields in 2008, Rusoro is the only international company extracting gold in Venezuela. With control of Las Cristinas as well as the neighbouring Brisas project, which is controlled by US-based Gold Reserve, Rusoro would add to its 10m ounces of reserves a further 27m ounces of gold, accounting for the majority of Venezuela's 50m ounces of deposits.

But there are significant hurdles. The unpredictability of doing business in Venezuela is exemplified by the insistence of Crystallex that it has not been notified of the government's intention to work with Rusoro instead, despite "continual communication with senior Venezuelan officials".

Rusoro's attempt to take over Gold Reserve's Brisas project has also not gone as smoothly as hoped, after a Canadian court derailed its all-stock offer, ruling that it had gained improper access to Gold Reserve's confidential information.

Country Default Risk Continues Its Rise

Below we highlight sovereign debt default risk as measured by credit default swap prices. The list below is sorted by year to date percentage change, and as shown, Japan's default risk is up the most in 2009, although it remains on the low side when compared to other countries. The United States' default risk is up 41% year to date. All CDS prices, with the exception of the US, are priced in US dollars, while US CDS prices are quoted in Euros. Sovereign debt insurance makes you wonder, especially for the big countries that are probably "too big to fail." If the US defaults, will anyone that sells the insurance contracts really be able to pay off the claims?

Lots of traders out there don't use CDS as an actual hedge for bonds they own, but instead they buy them simply because they think default risk will rise so they can sell the CDS at a higher price. Traders could care less if the firms writing the contracts can pay off the insurance as long as they're not the last ones holding the bag when the music stops. And those that do buy something like a US sovereign debt CDS as a hedge do it in order to meet compliance and risk regulations, not because they think it will pay off. As these examples and the mess with the Lehman bankruptcy and the AIG bailout illustrate, the whole CDS game is pretty messed up.

Country Default Risk Chart

Europe's banks face a $2 trillion dollar shortage

European banks face a US dollar "funding gap" of almost $2 trillion as a result of aggressive expansion around the world and may have difficulties rolling over debts, according to a report by the Bank for International Settlements.
The BIS said European and British banks have relied on an "unstable" source of funding, borrowing in their local currencies to finance "long positions in US dollars". Much of this has to be rolled over in short-term debt markets.
"The build-up of large net US dollar positions exposed these banks to funding risk, or the risk that their funding positions could not be rolled over," said the BIS.

The report, entitled "US dollar shortage in global banking", helps explain why there has been such a frantic scramble for dollars each time the credit crisis takes a turn for the worse. Many investors have been wrong-footed by the powerful rally in the dollar against almost all currencies, except the yen.

British banks had accumulated a dollar "funding gap" of $300bn by mid 2007. The latest BIS data up to the third quarter of 2008 shows that this exposure has been trimmed by "deleveraging" but it still largely hanging over the UK financial institutions.

Swiss banks had a funding gap of $300bn at the onset of the credit crunch, an extremely high figure relative to Swiss GDP. German banks were $300bn short, and Dutch banks were $150bn short. Belgian and French banks were neutral.

The BIS said the total "funding gap" in dollars was around $2.2 trillion at the peak, when money market liabilities are included. This had fallen to around $2 trillion by the time of the Lehman Brothers collapse. The data is collected with a lag but it appears that there are still huge dollar liabilities to be covered.

Simon Derrick, currency chief at the Bank of New York Mellon, said the implications are obvious. "The global bullion of the last eight years was funded on dollar balance sheets, so the capital destruction we're seeing leaves banks starved for dollars. Dollar is clearly going to appreciate a lot further," he said.

UK: BoE Cuts Rate to 0.5%, Begins Quantitative Easing

From The Times: Bank to 'print' £75bn of new money as it cuts rate:

The Bank of England ... confirmed it is beginning a strategy of so-called "quantitative easing".
...
The MPC ordered another half-point cut in base rate from an existing 1 per cent that was already the lowest in the Bank's 314-year history to a new all-time low of 0.5 per cent.
...
The MPC's decision to press on rapidly with QE, signalled a fortnight ago in minutes of its last meeting, means that it will now begin buying from commercial banks a range of corporate bonds (businesses' IOUs) and Treasury gilt-edged stock or "gilts" (Government IOUs).
With quantitative easing, the Fed (or the BoE in this case) prints money to buy treasuries (gilts) or other assets. The goal is to expand the monetary base.

But as Krugman noted last year, the results might be disappointing: The humbling of the Fed (wonkish).

[T]he Bank of Japan tried that, under the name "quantitative easing;" basically, the money just piled up in bank vaults. To see why, think of it this way: once T-bills have a near-zero interest rate, cash becomes a competitive store of value, even if it doesn't have any other advantages. As a result, monetary base and T-bills - the two sides of the Fed's balance sheet - become perfect substitutes. In that case, if the Fed expands its balance sheet, it's basically taking away with one hand what it's giving with the other: more monetary base is out there, but less short-term debt, and since these things are perfect substitutes, there's no market impact. That's why the liquidity trap makes conventional monetary policy impotent.

Note: Krugman's comments apply when the T-bill (or other assets) have a near-zero rate. So it depends on what assets the BoE buys.

Ukraine's Tymoshenko warns of a new Iron Curtain

The Ukrainian Prime Minister Yuliya Timoshenko warned in a newspaper commentary of a new "Iron Curtain" in Europe and calls on the European Central Bank to support those countries not in the euro zone. The euro should not lead to an Iron Curtain, which puts non-Euro countries into a higher risk class, which investors would no longer dare trust, Timoshenko wrote in Le Figaro.

Ukraine has asked the International Monetary Fund (IMF) for emergency aid to stabilize the economy. The country has been hit hard by the global crisis. The currency has lost more than 40 percent of its value since the autumn. The IMF, however, has delayed the transfer of the second loan tranche of a total of 16.4 billion U.S. dollars (13 billion euros) and called on the country to make its crisis management more urgent.

After the Fed also offered currency swaps to Brazil, Mexico and South Korea, Tymoshenko has called for a similar scheme in Europe: "The ECB should also provide access to these tools to countries outside the monetary area."

Venezuela's Chavez tightens state control of food amid rocketing inflation & food shortages

White rice, the staple for many Venezuelans, can now only be sold at a price of 2.15 bolivares (71p) per kilo. Private companies insist that production of that kilo costs 4.41 bolivares (£1.46) and that government regulations are impossible to fulfil and companies will quickly go broke. Companies that are dedicated to rice production must ensure that 80 per cent of their efforts are dedicated to white rice. The new regulations set production percentages, as companies were rebranding their products to avoid the government controls, like flavouring the rice, as the price restrictions apply only to white rice.

"Forcing companies to produce rice at a loss will not resolve the situation, simply make it worse," said Luis Carmona of Polar, a rice company that has been singled out by the government for trying to sidestep restrictions.

Stock doom and gold boom (H/T CP)

#1 - The Banking Crisis Will Drag On

The International Monetary Fund keeps raising estimates on bank losses, but even its recent estimate of $2.2 trillion in losses is probably way behind the curve.

On the other hand, economics professor Nouriel Roubini, who has been very prescient on this crisis, estimates total losses for in the financial industry will reach $3.6 trillion. Of the total, he calculates that American banks face half that risk. The rest is overseas.

I think there's much more dirty laundry to be aired. We haven't even seen much bad news yet on offshore banks, which thrive on secrecy. Maybe they're all fine, conservatively managed institutions. Or maybe, with the financial tide going out, we'll find a lot of the Caribbean banks have been swimming naked.

Force #2 - Real Estate Crisis is Nowhere Near a Bottom

Home prices follow income. Incomes are going down, and we are in a deflationary spiral now. I expect we'll see both incomes and home prices fall into 2012.

Citi Breaks the Buck 

Citigroup (C) shares fell below $1 per share today, cementing its status as a penny stock. Citigroup is now the only stock in the Dow and one of six stocks in the growing list of S&P 500 stocks (AIG, ETFC, ODP, GNW, and THC) currently trading under a dollar. The only question now is when does Citi get pulled from the Dow. Although at this point does it really matter? Consider the fact that if Citi dropped to zero, given its weight in the index, it would have less than an 8 point impact on the overall price of the index. 

Warren Buffett Insights

Lodging bubble

Malls

The Treasury Mortgage Mod Program: Should We Hope It Doesn't Work? 

First, it appears the program is a five year payment reduction program. While the guidelines are silent here, reasonable people would infer that the payment relief will be added to principal (particularly since the monthly borrower incentive for keeping current, is paid the servicer on behalf of the borrower to reduce principal, which suggests it is to offset principal increases). From the guidelines:
The Home Affordable Modification program has a simple goal: reduce the amount homeowners owe per month to sustainable levels to stabilize communities. 

Yves here. I think they mean "pay" when they say "owe".

The program keeps the previously announced construct of having the lender reduce mortgage payments so they are no more than 38% of income, then Uncle Sam kicks in and provides a subsidy to bring the level down to 31%. Now we get to the doozy:
To ensure long-term affordability, the modified payments will be kept in place for five years and the loan rate will be capped for the life of the loan. After five years, the interest rate can be gradually stepped-up by 1% per year to the conforming loan survey rate in place at the time of the modification.

So effectively, the borrower gets a teaser that over time adjusts to a fixed rate mortgage at current (low) interest rates.

Let's think this through a second. The borrower is still under water (of course, Bernanke & Co. regard this as temporary misvaluation resulting from irrational pessimism, but the more data driven crowd sees housing prices as having moves way out of line with incomes. And the outlook for incomes isn't exactly rosy either). The borrower therefore has no reason to invest in the house, including routine maintenance (assuming he can somehow scare up the dough). If the boiler goes, the roof leaks, he has no incentive to fix it. Similarly, if he were to sell the house (let's say he got a good job elsewhere), he's still faced with either negotiating a short sale or walking and leaving the bank with the property. Thus for the bank all this does is kick the can down the road, unless we assume a recovery from these levels.

Ah, but we have our good friend inflation! The Fed is desperately trying to create inflation, surely that will take hold, raising nominal prices and lifting some borrowers out of negative equity status.

Geography of a Recession (Zoom to get your county)

U.S. cities face tough questions in budget squeeze 

PHILADELPHIA (Reuters) - When a major city faces a budget shortfall of $175 million, should it close public swimming pools, reduce the size of the police force, spend less money repairing roads or raise taxes? 

Cities across America are struggling with such dilemmas as the recession blows holes in their budgets. In Philadelphia, city officials are asking the public to help them decide what to do.

With painful spending cuts, tax increases, or both on the horizon, the city has conducted a series of public meetings to give citizens the chance for the first time to have their say on the new financial plan before it is drawn up.

A majority of around 1,800 people who attended the four meetings were willing to pay higher taxes to preserve essential public services.

50,000 Protesters in NY, NY

Report: Record 5.4 Million U.S. Homeowners Delinquent or in Foreclosure 

More Americans struggled to pay their mortgage bills in the fourth quarter of 2008. A record 5.4 million U.S. homeowners with a mortgage, or nearly 12%, were either behind on payments or in foreclosure at the end of last year, according to an industry survey. 

The Mortgage Bankers Association said Thursday the percentage of loans at least a month overdue or in foreclosure was up from 10% in the July-September quarter and up from about 8% a year earlier.

The sharpest increases in loans 90-days past due were in Louisiana, New York, Georgia, Texas and Mississippi, reflecting a spreading recession and massive job losses nationwide.

The report also showed the delinquency rates for fixed-rate mortgages climbed in the fourth quarter, another sign that layoffs are taking a toll on homeowners.

The percentage of loans at least 30 days past due rose to a record 7.88%, up from 6.99% in the third quarter and 5.82% a year earlier -- the biggest quarterly jump for delinquencies since the survey began in 1972.

Negative Equity/Upside down

"The End of Wall Street" Author Interview

Top Strategists Still Expecting a 46% Gain From Here

While two more Wall Street strategists lowered their year-end S&P 500 price targets recently, collectively they're still looking for a 46% gain from the index's current levels. As shown below, UBS, Goldman, and Credit Suisse have now lowered their year-end price targets since the start of the year. The UBS move from 1,300 to 1,100 makes Deutsche Bank the most bullish with a target of 1,140. Barclays has the lowest price target of 874, which would be a 27% increase from here.

Treasury secretary's choice for deputy withdraws

The decision followed more than a month of intense scrutiny of her taxes and multiple interviews. No tax problems or other issues arose during Nazareth's vetting, said the person, who requested anonymity because Geithner's choice of Nazareth was never announced officially.

Fed Refuses to Release Bank Data, Insists on Secrecy (Update3)

March 5 (Bloomberg) -- The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won't make the information public, the central bank said in a reply to a Bloomberg News lawsuit.

The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast "a stigma" on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral.

Fed secrecy was the focus of a Senate Banking Committee hearing today in which the panel's top two members said the central bank's reluctance to identify companies benefiting from the American International Group Inc. bailout risks undermining public confidence in the government.

"If the American taxpayer's money is at stake, and it is, big time, I believe the American taxpayers, the people, and this committee, we need to know who benefited, where this money went," said Senator Richard Shelby of Alabama, the committee's top Republican. "There is no transparency here. We are going to find out."

The bank provides "select members and staff of the Board of Governors with daily and weekly reports" on Primary Dealer Credit Facility borrowing, said Susan E. McLaughlin, a senior vice president in the markets group of the Federal Reserve Bank of New York in a sworn statement. The documents "include the names of the primary dealers that have borrowed from the PDCF, individual loan amounts, composition of securities pledged and rates for specific loans."

Information Shared

The Board of Governors contends that it's separate from its member banks, including the Federal Reserve Bank of New York which runs the lending programs. Most documents relevant to the Bloomberg suit are at the Federal Reserve Bank of New York, which isn't subject to FOIA law, according to the Fed. The Board of Governors has 231 pages of documents, which it is denying access to under an exemption under trade secrets.

"I would assume that information would be shared by the Fed and the New York Fed," said U.S. Representative Scott Garrett, a New Jersey Republican. "At some point, the demand for transparency is paramount to any demand that they have for secrecy."

Bloomberg sued Nov. 7 under the U.S. Freedom of Information Act, requesting details about the terms of 11 Fed lending programs.

The Bloomberg lawsuit said the collateral lists "are central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression."

‘Deeply Troubled'

Fed Vice Chairman Donald Kohn told the Senate panel today that revealing the names of AIG's counterparties would make companies less likely to do business with any recipient of government aid, risking further turmoil at the insurer and financial markets.

"I don't consider that an adequate" response, "to put it mildly," Committee Chairman Christopher Dodd, a Connecticut Democrat, told Kohn at the hearing. "The public is deeply, deeply troubled."

Shelby told the Fed vice chairman that "your answer here is very disturbing."

"People want to know what you've done with this money," he said.

Kohn said the Fed wouldn't reveal the counterparties in Maiden Lane III, a company formed by the central bank to purchase collateralized debt obligations on which AIG's financial products unit had written credit-default swaps.

"The Fed and the Treasury can be secretive for a while, but not forever," Shelby said.

Commercial, Consumer Loans

The Fed stepped into a rescue role that was the original purpose of the Treasury's $700 billion Troubled Asset Relief Program. The central bank's loans don't have the oversight safeguards that Congress imposed upon the TARP.

Total Fed lending exceeded $2 trillion for the first time Nov. 6 after rising by 138 percent, or $1.23 trillion, in the 12 weeks since Sept. 14, when central bank governors relaxed collateral standards to accept securities that weren't rated AAA. Fed lending as of Feb. 25 was $1.92 billion.

On Feb. 23, the Fed disclosed a breakdown by broad categories for $1.81 trillion of collateral pledged by banks and bond dealers as of Dec. 17 after Congress demanded more transparency from the central bank.

$11.7 Trillion

The largest portions of collateral being held by the Fed at that time were $456 billion in commercial loans, $203 billion in consumer loans and $159 billion in residential mortgages, according to the central bank's Web site. It didn't identify any loans or provide their credit ratings and said it will update the figures about every two months.

Government loans, spending or guarantees to rescue the country's financial system total more than $11.7 trillion since the international credit crisis began in August 2007, according to data compiled by Bloomberg. In return, banks left collateral with the central bank that effectively acts as a credit line that lenders can draw on without posting additional assets.

Bloomberg News, a unit of New York-based Bloomberg LP, on May 21 asked the Fed to provide data on collateral posted from April 4 to May 20. The central bank said June 19 that it needed until July 3 to search documents and determine whether it would make them public. Bloomberg didn't receive a formal response that would let it file an appeal within the legal time limit.

Minyan Mailbag: Why Marked-to-Market Refuses to Die

My sense is that the accounting industry is telling the banking regulators and the SEC that it's fine if the government wants to suspend marked-to-market accounting - but firms had better set up adequate reserves for the entire remaining life of these heretofore-marked securities and loans, and be prepared to add to those reserves if the economy worsens. Otherwise, the accountants won't sign clean audit opinions.

And this is where the rubber meets the road. The regulators know the assets (particularly the funky tranches of CDOs, CLOs, etc.) aren't adequately reserved for tough times (if they were, would you really need to stress-test the banks?).

So the stand-off continues. And unless the government is prepared to hold accounting firms blameless from lawsuits, I think the stand-off is likely to continue indefinitely.

Chanos on What's Ahead

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20 Comments

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 6

Today's Email From Schwab: Dow drops below 7,000: What should you do?

This raised an eyebrow for a few reasons, one, the DOW has been below 7k for several days, and two, I think it is going to have a net effect of securities dropping even more and the "dollar" strenghtening as more and more investors shift. And two, California Munies?!?!

The link are CA Munis safe states "Barring disaster or a breakdown of political will, state GO bond payments should always come first. " Egh, would a depression be a disaster? This and Comedy Central's video about where a lot of investors get their investment advice really makes me take pause. I still have friends who look at the blogoshpere as giving cook investment advice. ~I hope they have a good sense of humor.

Take care


 
SCH066239_MV_08.jpg
transp.gif
   We’re here with help in this turbulent
market.
 
 

As we enter March, poor economic news is resulting in continued Mark_Riepe.jpgtransp.gif

Mark Riepe, CFA
Senior Vice
President,
Schwab Center for Financial Research

market
turmoil. While the most natural instinct is to react emotionally, I would ask
that you step back and take full advantage of Schwab’s numerous resources to
help you through these difficult times.

First and foremost, please
remember that we’re always here to provide the help you need. You can call
800-435-4000 anytime for answers to your questions. You can also schedule a
personal consultation for more specific advice about your situation and a review
of your portfolio. It’s easy to arrange and part of the service you receive as a
client.

Insights for
your next steps.

I’d like to highlight some articles and how-to guides that I think you’ll
find useful and that are particularly appropriate right now:

Commentary on what’s driving the economy and
market.

Read insight from Chief Investment Strategist Liz Ann Sonders as she
discusses the large revision to fourth-quarter 2008 gross domestic product
(GDP), as well as recent market action, in "Get on Your Boots: Economy and Market Sink Even
More
."

The Obama administration, like the Bush administration before
it, is spending lots of time on banks. Director of Income Planning Rob Williams
helps you learn more about the effects on banks’ investors and on preferred bank
stocks in "Preferred Stock, Nationalization and the Banking Sector: Impacts
and Scenarios
."

Our latest on conservative
investments.

If you’ve reached a point where you feel uncomfortable placing more dollars
in the equity markets, read our latest thinking on short-term investments and
municipal bonds from Rob Williams in "CDs and Other Short-Term Investments," "What Are the Risks and Rewards of Closed-End Bond Funds?" and
"Are California State Muni Bonds Secure?"

Reaching your longer-term goals.

If you're nearing retirement, read my related article, "7 Ways to Take Control of Your Retirement in Rough Times." If
your 401(k) account is the bulk of your portfolio, read "6 Tips for 401(k) Investing in Today's Volatile
Market
.”

Whether you call us directly or prefer to take advantage of
our guidance on Schwab.com, our goal is to provide all the support you need to
help you through these difficult times.

Thank you for investing with Schwab.

Mark Riepe

Mark Riepe, CFA
Senior Vice
President,
Schwab Center for Financial Research

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: Daily Digest - March 6

cartoon20090212.jpg

DrKrbyLuv's picture
DrKrbyLuv
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 1995
Re: Daily Digest - March 6

Fed Refuses to Release Bank Data, Insists on Secrecy (Update3) 

Amazing - the Fed is defending their position by claiming that they are
allowed to be a secretive entity - after all, they are a private
corporation. And if it is true, as they say, then why do we have them
controlling our monetary policies?!

BTW - the eight biggest owners of the New York Federal Reserve Bank
include Citibank, Chase Manhatten, Morgan Guaranty Trust, Chemical
Bank, Manufacturers Hanover Trust, Bankers Trust Company, National Bank
of North America, and the Bank of New York (Eustace Mullins, Secrets of
the Federal Reserve, p. 179). Isn't this clear conflict of interest,
the Fed is conducting secret dealings with the banks that own them.

The Fed is a colossal and criminal conflict of interest!

Larry 

ckessel's picture
ckessel
Status: Martenson Brigade Member (Offline)
Joined: Nov 12 2008
Posts: 479
Re: Daily Digest - March 6

Larry,

And who owns 

Citibank, Chase Manhatten, Morgan Guaranty Trust, Chemical
Bank, Manufacturers Hanover Trust, Bankers Trust Company, National Bank
of North America, and the Bank of New York ?

Identify them and the party will get real interesting!

Coop

jamesdvetter's picture
jamesdvetter
Status: Bronze Member (Offline)
Joined: Feb 23 2009
Posts: 51
Re: Daily Digest - March 6

We have become Orwell's 1984...wrong is the new right..stealing money is the new giving..acting recklessly with money is the new thrift...government policy (public) has become the new "private," per Fed. Reserve.  Larry is correct..END THE FED BEFORE THEY END US!

 

Jim

reistr's picture
reistr
Status: Bronze Member (Offline)
Joined: Jul 15 2008
Posts: 50
Re: Daily Digest - March 6
<strong>Mark Riepe, CFA</strong> wrote:

We’re here with help in this turbulent market.

...

If you're nearing retirement, read my related article, "7 Ways to Take Control of Your Retirement in Rough Times." If your 401(k) account is the bulk of your portfolio, read "6 Tips for 401(k) Investing in Today's Volatile Market.”

 

I really wonder how well his investment "advice" went for their customers during the past year... Now they re-invent themselves as "help in this turbulent market". I fell really sorry for the people who trust those "experts" with their money - They pay a comission so they can lose their money. What a scam!

Any honest investment advisor, would tell their clients to cash whatever they can and put it under their matress until things stabilize... But then, no commissions, eh?

Oh well, at least we know the markets will turn around soon... ;)

reistr's picture
reistr
Status: Bronze Member (Offline)
Joined: Jul 15 2008
Posts: 50
Re: Daily Digest - March 6

Davos,

I think you may enjoy this Graph - Not sure if you followed the "Housing Bubble" movement, I did and this was my all times favourite graph (check out the date):

 http://globaleconomicanalysis.blogspot.com/2005/03/its-totally-new-paradigm.html

My favourite part is the "best time to buy" (it reminds me of Warren Buffet and GE).

And here is an interesting theory about why we just don't seem to learn...

http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070220

mpelchat's picture
mpelchat
Status: Silver Member (Offline)
Joined: Sep 10 2008
Posts: 214
Re: Daily Digest - March 6
ckessel wrote:

Larry,

And who owns 

Citibank, Chase Manhatten, Morgan Guaranty Trust, Chemical Bank, Manufacturers Hanover Trust, Bankers Trust Company, National Bank of North America, and the Bank of New York ?

Identify them and the party will get real interesting!

Coop

Coop,

Who owns them owns the government.  The last man to stand up to them got shot in the head, that man was about to get rid of the Fed.  His name was Kennedy.

Knock on the devils door long enough and it will answer. 

I do not advocate fear, I do advocate knowing what you are getting into, than you can make an informed choice.

jamesdvetter's picture
jamesdvetter
Status: Bronze Member (Offline)
Joined: Feb 23 2009
Posts: 51
Re: Daily Digest - March 6
reistr wrote:

Any honest investment advisor, would tell their clients to cash whatever they can and put it under their matress until things stabilize... But then, no commissions, eh?

Right, Resistr....and no commissions in gold either!  My advisor tells me the only way you can purchase gold with self-directed IRA funds is if you purchase US gov't-minted gold coins or bullion.  Why?  Then they can track the serial numbers and, if necessary, find the private citizens who have the gold, a la gold confiscation in the 30s under FDR.  Beware the gov't!!

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: Daily Digest - March 6

Cartoon%20-%20The%20Raw%20Deal%20%28600%29.jpg 

 

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Ron Shimshock
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Re: Daily Digest - March 6

I like the Daily Show and I think Jon Stewart is a funny guy.  I also agree with him that most often, CNBC just focuses on "grow, grow, grow" (or "buy, buy, buy" in the language of Jim Cramer) than on the realities of what's happening.  However to say that everyone on CNBC is that way is the equivalent of throwing out the baby with the bathwater.

I've watched CNBC for several years, and I can say people like Joe Kernen and Rick Santelli are good at what they do, and draw from years of industry experience.  Both of them have had no problem calling out their co-workers in the past when they believe they are wrong.  I find all this current attention on Santelli amusing, since he's been offering "straight talk" for years.

.'s picture
.
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Re: Daily Digest - March 6

The above link,

"50,000 Protesters in NY, NY"

is just the beginning.  I wonder how long it will be until American protest start to have a less peaceful tone.

 

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grl
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Re: Daily Digest - March 6

The John Stewart segment was hilarious

... and Ron a big thank you for your post. It seems that there were a lot of people who seemed to believe that Rick Santelli was all for the bail outs of big business but oh no....when it came to the little guy (those pesky irresponsible homeowners) he jumped all over it. (And by extension, those of us who got pretty peeved at the latest mortgage bailout were lumped into the same category.)  That is simply a wrong assumption and a big misunderstanding of what the mortgage bailout really is. Sigh, no need to beat a dead horse.

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cat233
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Re: Daily Digest - March 6

Ron,

Thank you for the clips.  I agree with you, especially regarding Kernen and Santelli... I think they are both top notch.

Cat

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reistr
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Re: Daily Digest - March 6

Here's a very interesting article about China buying undervalued international companies.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/03/china_still_buying_the_world.html

It reminded me of a comment that, I believe, Warren Buffett made on Charlie Rose - He stated that whenever the US sold dollars to other countries (mainly China) to raise money, you were selling a piece of the nation.

So it looks like China is now collecting... Using up all those dollars they accumulated to buy companies on the cheap.

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Peter G
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Re: Daily Digest - March 6

Was not sure where to post this info. Please reply back if I should have done it another way.

Here is an article that sums up status of Europe "Prison of Nations". A freind of mine told me the trouble's his family in Latvia saw this past couple of weekends. His moms comments were "at least when the caos existed when they became there own country they were moving to independence... this time they are scared that they may go back to Russian control."

One comment also stuck own in the end of the article "“We won’t pay for your crisis!”

Does it sound familiar with how most feel here within USA? Is anybody else hearing the same wherever you are? 

http://www.globalresearch.ca/index.php?context=va&aid=12547

 

 

 

 

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Davos
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Re: Daily Digest - March 6

How much should I divide this buy? http://247wallst.com/2009/03/06/cramer-picks-djia-5320-as-absolute-djia-...

SkylightMT's picture
SkylightMT
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Posts: 125
Re: Daily Digest - March 6
Davos wrote:

How much should I divide this buy? http://247wallst.com/2009/03/06/cramer-picks-djia-5320-as-absolute-djia-...

 Cramer's more of a performer or a comedian than an economist. Even the mainstream boards I read (where everyone is still in denial and completely wedded to the old paradigm) think he's too optimistic.

SkylightMT's picture
SkylightMT
Status: Silver Member (Offline)
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Posts: 125
Re: Daily Digest - March 6
Peter G wrote:

Was not sure where to post this info. Please reply back if I should have done it another way.

Here is an article that sums up status of Europe "Prison of Nations". A freind of mine told me the trouble's his family in Latvia saw this past couple of weekends. His moms comments were "at least when the caos existed when they became there own country they were moving to independence... this time they are scared that they may go back to Russian control."

One comment also stuck own in the end of the article "“We won’t pay for your crisis!”

Does it sound familiar with how most feel here within USA? Is anybody else hearing the same wherever you are? 

http://www.globalresearch.ca/index.php?context=va&aid=12547

Not so much in the US, yet. People are angry about the bailouts and some are angry about the stimulus plan, but its not really showing up yet with riots in the streets. People here in the US don't really feel they are in danger of some other country's political system taking over the United States - at least, not the same way that people in Eastern Europe, who know it can happen, and happen quickly, feel. I also don't think that, for the most part, people see the crisis as "your" crisis - they see it as everyone's crisis.

We had a huge, mostly unexpected drop in employment last month. This month is likely to be as bad or worse. Our president is trying to do things to protect the blue collar worker, at least that's how he is talking, and many people have a lot of hope in him. As unemployment increases, though, we might see more anger and more rioting. Its more likely to be directed at the banks than at the govt, I believe.

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Damnthematrix
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Re: Daily Digest - March 6

 

Too Big to Save

By Robert Romano

In
the debate over moral hazard, one argument often made is that certain
institutions are simply too big to fail. That, if they are allowed to
fail, the greater economy will be irreparably damaged, and the people
will be unnecessarily hurt.

The reality emerging, however, is that the crumbling financial system is, in fact, too big to save.
And the bailouts themselves are irreparably damaging the economy, and
yes, the people are hurting badly as a result. Unnecessarily.

On March 2nd, the Treasury and Federal
Reserve unveiled the latest bailout for troubled insurance giant
AIG—another $30 billion from the Troubled Asset Relief Program (TARP)
for a grand total of $173 billion thus far.
This follows a long line of bailouts for this company—and
others—that come in for money, and then show up just months later
looking for yet more when the last bailout fails to return the company
to profitability.

The argument being made by the Fed and Treasury, as reported by yesterday by the Wall Street Journal in “AIG's Black Box,†is that these companies are “systemically importantâ€â€”or in other words, too big to fail.

Under that comes everybody that has
latched on to the TARP or the Fed's discount window for cash: banks,
creditors, investment firms, insurance companies, automakers, and on
down the line.

To be certain, the bad news keeps
rolling in. GM and Chrysler have received a combined $17 billion from
TARP, but as Bloomberg reports, the companies are still descending into insolvency
as sales figures come in worse than expected. They will likely follow
on the heels of AIG and return to the Treasury with hat in hand,
begging the taxpayers for more loans that they probably won't be able
to pay back.

Another example of government failing to
plug a hole in a dam that has already broken is its ill-conceived
foreclosure “prevention†schemes. In 2008, Congress dedicated
some $300 billion for that purpose, and yet 2.3 million foreclosures
happened anyway. In 2009, the Obama Administration is proposing another
$75 billion to “prevent†foreclosures.

It gets worse. Last year, Congress spent
some $200 billion to purchase Fannie Mae and Freddie Mac debt. Since
TARP, the number's up to $600 billion for purchasing mortgage-backed securities—which
were sold by the Government Sponsored Enterprises all over the world
with the implicit backing of the federal government. And now, this
year, the Obama Administration wants to allocate another $200 billion
for Fannie and Freddie to reduce mortgage rates for those who cannot
pay at the expense of those who are making their payments on time and
in full.

Stand back even further, and the picture only grows grimmer. Last year, $150 billion was dedicated to economic “stimulus.â€
This year, the number grew to $787 billion. Last year, $700 billion was
dedicated to the Troubled Asset Relief Program, much of which still
cannot be accounted for. This year, President Obama makes TARP a line
on his budget—another $750 billion—“just in case.â€

Does anyone see a pattern here? We do.
The bailouts are not working. They have all to date proven to be
insufficient at addressing the structural problems internally and
externally that prevent these companies from returning to solvency and
self-sufficiency. They should be allowed to fail. Allowed to go bankrupt. And allowed to be gutted by market forces.

Instead, these businesses are rapidly
becoming nationalized as de facto agencies of government; yet more
lines on the budget. What is happening is akin to the people of Pompei
that were showered and solidified in volcanic ash ages ago. Neither
will return to life any time soon.

Meanwhile, it is the issues that government refuses to address that are all the more disconcerting for the American taxpayer.

To date, Congress has not voted upon any
proposals to restore price stability by eliminating the dual mandate at
the Federal Reserve—it was easy money from the Fed that accommodated
excessive lending that created the housing bubble in the first place.
Nor has there been an up-or-down vote to reduce spending, balance the
budget, pay down the national debt, and get America off its addiction
to foreign credit, which further allows this unbridled spending spree
to continue unabated.

The icing on the cake, though, is
President Obama's proposed $3.6 trillion budget that will expand the
deficit for 2009 to $1.75 trillion. The national debt will grow to well
over $11 trillion. One can almost hear the American taxpayer's head
exploding.

The debt being placed upon the American
people is a heavy burden that they did not ask for, did not vote for,
and is one that can never possibly be paid back.

The dawning reality is that these companies: AIG, the automakers, the banks, the housing sector—indeed, Big Government itself—are not too big to fail, but too big to save.

And that case must be made loud and
clear to lawmakers before they proceed even further into the breach.
Before the economy is irreparably broken and the nation forever
bankrupted. Before the people becomes slaves to the national debt. In
short, before it is too late.

Robert Romano is the Senior Editor of ALG News Bureau.

http://alg31blog.timberlakepublishing.com/default.asp?Display=1011

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