Daily Digest

Daily Digest - May 9

Saturday, May 9, 2009, 10:00 AM
  • Repost Video, Inspector General of the Federal Reserve (From Nate's Economic Edge Blog)
  • Senate Passes Expanded FDIC Credit Line
  • Foreclosures: The 2nd Wave
  • European gold sale blunder reaches $40 billion
  • Federal Campaign Contributuons 1994-2008 (Interactive chart)
  • Muted Recovery, Bernstein (Video---on page)
  • The Banks and Orwell
  • Obama Releases $3.4 Trillion Budget Plan
  • Commercial Mortgage Delinquencies Increase Sharply
  • Asian monetary fund
  • Elizabeth Warren---Denail (Video)
  • Free cars for poor fuel road rage
  • The Worst Case Scenerio
  • The zombie banks (Video)
  • Stress Test: 25-to-1 Leverage as a Healthy Bank Target?
  •  A few A(H1N1) Links Dr. Henry Niman's Map 2357 U.S. Cases as of this wrtitng, A(H1N1) Current Timeline, CDC Cases


Repost Video, Inspector General of the Federal Reserve (From Nate's Economic Edge Blog)

Senate Passes Expanded FDIC Credit Line

From Reuters: US Senate expands credit lines to FDIC reserves

The U.S. Senate on Wednesday approved a measure to expand a government credit line for the Federal Deposit Insurance Corp ... The FDIC ... has been able to tap the Treasury Department for up to $30 billion since 1991. That credit line would be increased to $100 billion under the new bill.

The House of Representatives has already passed its version of the legislation ...

Besides raising the cap on FDIC borrowing, the bill gives the federal insurer a $500 billion credit limit that will sunset at the end of next year.
Part of this is for the PPIP, see: Sorkin's ‘No-Risk’ Insurance at F.D.I.C.
[The F.D.I.C. is] going to be insuring 85 percent of the debt, provided by the Treasury, that private investors will use to subsidize their acquisitions of toxic assets. The program ... is the equivalent of TARP 2.0. Only this time, Congress didn’t get a chance to vote.
The F.D.I.C. is insuring the program, called the Public-Private Investment Program, by using a special provision in its charter that allows it to take extraordinary steps when an “emergency determination by secretary of the Treasury” is made to mitigate “systemic risk.”

Foreclosures: The 2nd Wave

From Nick Timiraos at the WSJ: Another Sign of Foreclosure Trouble in California

The homeowner association delinquency rate can serve as a leading indicator of sorts because homeowners usually stop paying dues before they stop paying their mortgage. The 90-day delinquency rate on dues for the 260 homeowner associations in California managed by Merit Property Management jumped to 5.3% in March from 2.8% last June. Delinquencies first spiked to 2.6% in December 2007 from 0.8% in March 2007.

... The rising number of HOA delinquencies and the boost in pre-foreclosure notices could be a harbinger of things to come. “There’s reason to believe in California there may be a second wave of foreclosures,” [Andrew Schlegel, Merit communities financial vice president] says.

European gold sale blunder reaches $40 billion

While the Chinese were adding to their gold stock over the last several years, Europeans were selling – with disastrous results. Back in 1999, Gold prices were depressed after an almost two-decade bear market. For some strange reason the Bank of England decided this would be a good time to start to sell its gold. Other European central banks followed. Even the Swiss, whose currency had been backed by gold jumped in with both feet. The result? A loss of $40 billion.

Europe’s central banks are $40bn poorer than they might have been after they followed a British move taken 10 years ago on Thursday to shrink the Bank of England’s gold reserves, analysis by the Financial Times has shown.

London’s announcement on May 7 1999 that it would sell a large share of the Bank’s gold reserves in favour of assets offering a return, such as government bonds, was the high water mark of so-called “anti-gold” sentiment among European central banks.

Many of these banks, such as those in France, Spain, the Netherlands and Portugal, decided later in 1999 to follow Britain and sell off their reserves. At that time, gold was worth around $280 an ounce, less than a third of its current level of more than $900.

European banks sold about 3,800 tonnes of gold, reaping about $56bn, according to calculations from official sales data and bullion prices.

Taking into account the likely returns from the investments in bonds, the banks have gained another $12bn. But because today’s gold prices are far higher, they are about $40bn poorer than if they had kept their reserves.

The biggest loser is the Swiss National Bank which sold 1,550 tonnes over the decade and at today’s gold prices is $19bn poorer, followed by the Bank of England, which is $5bn poorer.

Now, when I posted the article about the Chinese secretly stocking up, a number of commentators said in effect, “no big deal.” Well, it is a big deal, because it demonstrates the degree to which the money we hold has depreciated in value. The central banks sold at exactly the worst time and the Swiss were the worst of the lot. The Swiss must be especially chagrined given the catastrophic losses suffered by the once staid and stodgy Swiss jewel of a bank UBS. In my view, this episode demonstrates the degree to which we had bought into the fiat currency regime which was ushered in in 1971. So sure were the central banks that they sold 3800 tons worth. Ten years later, this decision is looking more hubristic than foolhardy.

Federal Campaign Contributuons 1994-2008 (Interactive chart)

Muted Recovery, Bernstein (Video---on page)

The Banks and Orwell

I continue to be amazed at the bank cheerleading in the press.

Obama Releases $3.4 Trillion Budget Plan

"We can no longer afford to spend as if deficits don't matter and waste is not our problem," he said. "We can no longer afford to leave the hard choices for the next budget, the next administration -- or the next generation."

Commercial Mortgage Delinquencies Increase Sharply

From Bloomberg: Commercial Mortgage Delinquencies in U.S. Rise to 11-Year High

The percentage of loans 30 days or more behind in payments rose to 2.45 percent, Trepp LLC said in a report. The delinquency rate was more than five times the year-ago number, Trepp said. The New York-based researcher’s records go back to 1998.
Commercial property values fell 21.5 percent through February from their October 2007 peak, according to Moody’s Investors Service.

Properties bought in 2006 are now worth on average 11 percent less than their original price, and those bought in 2007 are worth almost 20 percent less, Moody’s said.
Mortgages on rental apartment buildings posted the highest delinquency rate of securitized commercial property loans in April, rising to 5.24 percent from 3.86 percent in March, Trepp said.
These are delinquencies - not losses - but it will be interesting to see the expected losses (and loss rates) for multifamily and non-residential real estate reported this afternoon.

The Fed provides charge-off and delinquency rate for commercial real estate back to 1991. However, the Fed data includes C&D (construction and development) in CRE, so isn't directly comparable to the Trepp data.

Asian monetary fund

Eed harrison at credit writedowns elaborates on this bloomberg piece by william pesek on the decline of the IMF as an effective policy tool of washington in asia to maintain american financial dominance. pesek:

The “Asian Monetary Fund,” so passionately derided by Summers and Geithner at the time, is back. There is little a crisis-plagued U.S. can do to stop Asia’s $120 billion foreign- exchange reserve pool. Its creation is the clearest sign yet that Asia is getting serious about combating the global crisis. Done right, it will bode well for the region’s outlook. ...

Their concern was that it would eclipse the IMF in the region and, by extension, the U.S.’s say in how Asia retooled economies. They feared doling out billions of dollars in aid with few policy-change strings attached would prove dangerous. And they got their way. That changed this week.


[T]he West is weak, particularly the United States. No one from the IMF is dictating terms in Asia today. Nor will they for the foreseeable future. The die is cast. The United States badly overplayed its hand in the 1990s. Asia senses it is weak, overburdened with debt and depression. This is therefore their opportunity to break free and I believe Asia will use it.

whatever else the crisis may be, it is facilitating the shift of global economic power from the west to the east. that shift has long been in the cards as manufacturing capacity and foreign exchange piled up in eastern capitals while a burgeoning middle class began to emerge around them. now real operational control of the global economy is following.
Labels: economics, politics

Elizabeth Warren ---Denial (Video)

Free cars for poor fuel road rage

“It’s mind-boggling. You’ve got people out there saying, ‘I just lost my job. Hey, can I get a free car, too?’ ” said House Minority Leader Brad Jones (R-North Reading).

The Worst Case Scenerio

Since the economy began sliding downhill in late 2007, mainstream economic and market experts have consistently erred on the sunny side.

As late as June 2008, mainstream consensus held that the U.S. was heading for a “soft landing” and would avoid recession. Several months later, the slump was acknowledged to have started in January 2008, but we were supposed to see renewed growth by mid-2009, with unemployment peaking in the eight-to-nine percent range. A quick “shovel-ready” stimulus bag was supposed to set us back on the road to prosperity.

In January, recovery projections were pushed forward to late 2009. Today, the consensus is for a mid-2010 recovery, with unemployment peaking at just over 10 percent. Clearly, the mainstream has struggled to catch up to reality for well over one year. What are the chances that they finally have it right this time?

Moreover, the mainstream continues to see what is going on as a plain-vanilla recession that will be quelled with some on-the-fly monetary and fiscal tinkering. Washington, we are told, will pull us out of this slump—as soon as the masses can be enticed back to the shopping malls. Then things will return to how they were before. But what if the experts and politicians are wrong not only on their ever-changing recovery timeline, but also on the nature—nay, the very existence—of a recovery?

America’s reigning political-economic ideology has demonstrably failed. Given that its government is obviously fumbling along without a clue, its foreign and domestic credit is tapped out, and its 300 million people are discovering that their hopes for continuous material improvement will never be met, could the U.S. be headed the way of the USSR?

Instead of a recovery as the mainstream envisions it, what if America permanently bankrupts, impoverishes, and marginalizes itself? What if its cherished institutions fail across the board? For example, what happens when the police realize that their under-funded pension plans cannot support a decent retirement? Will they stay honest, or will they opt to survive by any means necessary? These are questions that the mainstream does not even begin to contemplate.

In the interests of providing you with an alternate vision—something outside the mainstream—below are ten predictions for America through the year 2012. This is not boilerplate doom-saying. Rather, I am laying out in highly specific terms what will happen over the next three-odd years. Others have thrown around the term “Depression”, but I am going to tell you precisely what it means for you, your investments, and your community.

When these predictions come true, I expect to be rewarded with a seven-figure consulting gig, a book contract, or a high-level position in whatever administration succeeds the doomed Obama team—that is, if anyone succeeds it at all.

Prediction one. The twenty-five-year equities bubble pops in 2009. U.S. and foreign equities markets will stop treading water and realign with economic reality. Stock prices will cease to reflect the “greater fool” mentality and will return to being a function of dividend yields, which have long been miserable. The S&P 500 will sink below 500. In a bid to stem the panic, the government will enforce periodic “stock market holidays”, and will vastly expand the scope of its short-selling prohibitions—eventually banning short-selling altogether.

Prediction two. With public pension systems and tens of millions of 401k holders virtually wiped out—and with the Baby Boomers retiring en masse—there will be tremendous pressure on the government to get into the stock market in order to bid up prices.

Therefore, sometime in 2010, the Federal Reserve will create and loan out hundreds of billions of fresh dollars to the usual well-connected suspects, instructing them to buy up stocks on the public’s behalf. This scheme will have a fancy but meaningless name—something like the “Taxpayer Assurance Equities Facility”. It will have no effect other than to serve as buyer of last resort for capitulating smart-money types who want to get out of stocks entirely.

Prediction three. Millions of new retirees—including white-collar people with high expectations for a Golden Retirement—will be left virtually penniless. Thousands will starve or freeze to death in their own homes. Hundreds of thousands will find themselves evicted and homeless, or will have to move in with their less-than-enthusiastic children. Already strained by the rising tide of the working-age unemployed, state and local welfare services will be overwhelmed, and by 2012 will have largely collapsed and ceased to function in many parts of the country.

Prediction four. “Quantitative easing” will fail to restart previous patterns of lending and consumption. As the government sends out additional “rebate” checks and takes ever-more drastic measures to force banks to lend, hyperinflation could take hold. However, comprehensive debt relief via a devaluation of the dollar is even more likely. This would entail the government issuing one “new” dollar for some greater number of “old” dollars—thus reducing both debts and savings simultaneously. This would make for a clean slate a la Fight Club.

As there are many more debtors than savers in the U.S., the vast majority would support devaluation. The Chinese and other foreign holders of our bonds would be screaming mad, but unable to do anything. Every country that has not found a way out of dollar-denominated reserve assets by 2012 will see its reserves eliminated.

Prediction five. The government will stop pretending that it can finance continuous multi-trillion-dollar deficits on the private market. By late 2010, the sole buyers of new U.S. Treasury and agency bonds will be the Federal Reserve and a few derelict financial institutions under government control. This may or may not lead to hyperinflation. (See prediction four).

Prediction six. As the need for financial industry paper-pushers declines and people have less money to spend on lawyers and Starbucks (SBUX), unemployment will rise until the private sector has eliminated all of its excess capacity and superfluous or socially needless jobs. The government’s narrow unemployment figure (U3) will rise into the high teens by late 2010. The government’s broader unemployment figure (U6) will cease to be reported when it reaches 25 percent—it will simply be too embarrassing. Ultimately, one in three work-eligible Americans will be unemployed, underemployed, or never-employed (e.g. college grads permanently unable to find suitable work).

Prediction seven. With their pension dreams squashed, and their salaries frozen or cut, police and other local government workers will turn to wholesale corruption in order to survive. America’s ideal of honest, courteous, and impartial cops, teachers, and small-time local functionaries will have come to an end.

Prediction eight. Commercial overcapacity will strike with a vengeance. By 2012, thousands of enclosed malls, strip malls, unfinished residential developments, motels, truck stops, distribution centers, middle-of-nowhere resorts and casinos, and small-city airports across America will turn into dilapidated, unwanted, and dangerous ghost towns. With no economic incentive for their maintenance or repair, they will crumble into overgrown, plywood-and-sheet-rock ruins.

Prediction nine. By the end of 2010, tens of millions of households will have fallen behind on their mortgages or stopped paying altogether. Many banks will be unable to process the massive volume of foreclosure paperwork, much less actually seize and resell the homes.

Devaluation (as mentioned in prediction four) could ease the situation for those mortgage holders still afloat, but it would also eliminate any incentive for most banks to stay in the mortgage business. In any case, the housing market in many parts of the country will lock up completely—nothing bought or sold.

With virtually no loans being made, even the government will finally acknowledge that most banks are fundamentally insolvent. A general bank run will only be averted through a roughly one trillion-dollar recapitalization of the FDIC, courtesy of new money from the Federal Reserve.

Prediction ten. As an economy is never independent of the society within which it functions, the next few paragraphs will focus on social and political factors. These factors will have as much of an impact on market and consumer confidence as any developments in the financial sector.

Whether rightly or not, President Obama, having come to power at the dawn of this crisis, will be blamed for it by over 50 percent of the population. He will be a one-term president. In response to his perceived socialization of America, there will be a swarm of secessionist and extremist activity, much of it violent. Militias and armed sects will be more prominent than in the early 1990s. Stand-off dramas, violent score-settlings, and going-out-with-a-bang attacks by laid-off workers and bankrupted investors—already a national plague—will become an everyday occurrence.

For both economic and social reasons, millions of immigrants and guest workers will return to their home countries, taking their assets and skills with them. The flow of skilled immigrants will slow to a trickle. Birth rates will plummet as families struggle with uncertainty and reduced (or no) income.

Property crime will explode as citizens bitter over their own shattered dreams attempt to comfort themselves by taking what is not theirs. Mutinies and desertions will proliferate in an increasingly demoralized, over-stretched military, especially when states can no longer provide the educational and other benefits promised to their National Guard troops.

There will be widespread tax collection issues, and a huge backlash against Federal and state bureaucrats who demand three-percent annual pay raises while private sector wages remain frozen or worse. In short, the “Tea Parties” of tomorrow will likely not be so restrained.

Finally, between now and 2012, we are likely to see another earth-shaking national embarrassment on the scale of the 9/11 attacks or Hurricane Katrina and its aftermath. This will demonstrate conclusively to all Americans that their government, even under a savior-figure like Obama, cannot, in fact, save them.

By 2012, there will be a general feeling that the nation is in immediate danger of blowing up or coming apart at the seams. This fear will be justified, given that the U.S. has always been held together by the promise of a continuously rising material standard of living—the famous “pursuit of happiness”—rather than any ethnic or religious ties. If that goes, so could everything else. We were lucky in the 1930s—we may not be so lucky again.

The zombie banks (Video)

Stress Test: 25-to-1 Leverage as a Healthy Bank Target?

Recall that before the 2004 SEC Bear Stearns exemption for the 5 biggest investment banks, net cap rules limited leverage to 12-to-1 for investment banks.

Is 25-to-1 leverage appropriate for depository banks? Well, maybe before the repeal of Glass Steagal — but with today’s toxic asset laden banks, 25-to-1 seems awfully friendly.

Why the generosity? According to Bloomberg, its to allow the banks to “grow” their way out of the mess through earnings. Instead of being an honest broker of the banks conditions, the Treasury Department is now a shareholder and cheerleader for bank profitability:

“Treasury Secretary Timothy Geithner is betting that U.S. banks can do something their Japanese counterparts were unable to accomplish in that country’s “lost decade” of the 1990s: earn their way out of trouble.

The stress-test results released yesterday by regulators found that the 19 largest banks face a $74.6 billion capital hole that may be filled mostly by private money. That compares with the hundreds of billions of dollars seen by outside analysts, including the International Monetary Fund, and takes into account banks’ projected earnings over the next two years.”

What a horrific idea.

Put on your rally caps, Uncle Sam is in da house . .

A few A(H1N1) Links Dr. Henry Niman's Map 2,357 U.S. Cases as of this wrtitng, A(H1N1) Current TimelineCDC Cases


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Re: Daily Digest - May 9 - Inspector General of the Fed

My guess is that it won't do much good, but maybe if enough people write/email/phone, some of the message may get through -- anyway, here os a copy of my email:

Dear President Obama and Staff

Re: The Federal Reserve

I listened to the Inspector General of the Federal Reserve,  Elisabeth Colemen responding to Rep. Alan Grayson today during a current Congressional hearing. Aside from being obviously incompetent to hold the position she occupies, she stated that her department has done no review of  some 8 trillion in "off-book" funding advanced since Sept 2008 as reported by Bloomberg and in fact didn't know anything about such activity. Further she stated that no review of the of the recent several trillion dollars advanced to banks has been done and that she and her department did not know where the funds went.

I respectfully request that you take the necessary steps to ensure that she leave her position immediately, and that an investigation is  undertaken by an independent party under Executive Branch supervision without delay. Something is terribly wrong here.


James Pitre

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Re: Daily Digest - May 9


I just wanted to thank you for reposting the Inspector General video.  I missed it the first time and realized it must be pretty important if you reposted it.  The Fed is giving away our money. I now wonder what level of complicity at the upper echelons of the government was required to allow this to happen?  I love my country, that is the way I was raised, but sometimes I think it is the citizenry (myself included) that is zombified.  It is so hard to accept that the only ones getting the help here are the banks and the very very rich.  This Inspector General is an interesting example of  how deliberately putting the most incompetent/uninformed person at the front line can deflect one from accountability (sometimes I think the managed care companies rely on this same strategy).  I wish I could say what to do next.  Making politicians accountable is important so writing letters is important too.  Right now it seems clear to me that we in the lower, middle and upper middle classes are pretty much on our own....






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The Chris Martenson Advertising Drive

Something that struck me as important and newsworthy for this thread...

A moment of your time would be appreciated... :-




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Re: Daily Digest - May 9

Anyone have any theories as to where that unaccounted for 1 trillion dollars went?
If the FED has it on their books, and we're responsible for paying for it, perhaps there should be some answers.

Obviously, this woman's post is vestigial.
For an inspector, she hasn't done much inspecting or auditing.

Purdy neferious, but hey, it's the FED... anyone expect anything other than absolute corruption?


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Re: Daily Digest - May 9

 Hello Denise:


Right now it seems clear to me that we in the lower, middle and upper middle classes are pretty much on our own....


I'd add even the very wealthy blue blood save for a very, very, very few of the powerful ones, I have some (Andover Prep School type) friends who are really upset with this and they will be taxed and pay the bulk of this mess.

I think it boils down to what Chris once said, and I should have linked to it, and didn't, so I will paraphrase, after he completed all his advanced degrees (including I think an MBA in finance) he later realized they didn't teach him what money was, or how it was created. That was galvanized for me later when in this video 60 Minutes asked Bernanke if we'd be on the hook for this money and he said no and it was let go at that. Technically, I don't think Bernanke lied, it won't just be us, it will be us, our kids, their kids and their kids kids who are on the hook for this mess.

Glad to do a repost, I realize that a lot gets looked over when we are in a rush and not everyone can make it here everyday. Sometimes I repost stuff when it gets sent to me later on as a hat tip by regular readers/posters.

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Re: Daily Digest - May 9

The market rally continues!

Economic data continues to pour out positive (albeit, better than expected) results!

Consumers and producers express positive sentiments!


Did Dr. Martenson get it wrong?  Are we missing out on 'THE' bull rally of our life time? 

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Re: Daily Digest - May 9

Hello Creative Investor: I guess it all depends on how you define "bull" when it comes to the postive "data" that is driving the market.




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Re: Daily Digest - May 9
Creative Investor wrote:

The market rally continues!

Economic data continues to pour out positive (albeit, better than expected) results!

Consumers and producers express positive sentiments!

Did Dr. Martenson get it wrong?  Are we missing out on 'THE' bull rally of our life time? 

A lot of people seem to think so:

05/05/09 London, England Happy days are here again! Enjoy them while they last…

“Optimism builds,” says a headline in the Financial Times.

As predicted, the world markets are enjoying a bounce. People who had no idea there was anything wrong with the world financial system two years ago, now say the problem has been fixed.

Who fixed it? The people who had no idea what was wrong with it, of course.

What did they fix it with? The same thing that caused the problem they didn’t see – debt.

Who makes sure it won’t break again? The people who didn’t notice the wheels coming off the last time.

While it's possible that some may be missing THE' bull rally of our life time, I doubt that Dr Martenson is wrong.

Good luck with your creative investing.

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Re: Daily Digest - May 9

I think they should take the ten predictions from "Worst Case Scenerio" and put them on Intrade.

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Re: Daily Digest - May 9
Creative Investor wrote:

The market rally continues!

Economic data continues to pour out positive (albeit, better than expected) results!

Consumers and producers express positive sentiments!


Did Dr. Martenson get it wrong?  Are we missing out on 'THE' bull rally of our life time? 


The stock market can rally on a simple media anouncement, a sustain rally can be a flight from treasures/cash into something else. Nothing has changed in the economic fundamentals to indicate a recovery. The debt hasn't gone, the production is still down, people didn't suddently get employed again. If you think the stock market represents the economy then think again. It's  a casino mostly.


60 Minutes asked Bernanke video was interesting, basically Bernake's main priority was proping up the banks. Seeing he is chairman of a government sanctioned "cartel" of banks, it sure looked a lot like shameless self interest under the guise of doing the greater good. It explains heaps.


- Ernie.


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Re: Daily Digest - May 9

Hi Creative Investor,

If the market going up on a) the basis of (doctored?) bank results, b) a number of earnings results being bad (but not as bad as expected, Ford for example), c) unemployment figures for the month being in the 500 thousands instead of 600 thousands (oops, not forgetting the DOWNWARD revisions of the previous two months and the fact that a percentage of the decrease is due to temporarary census workers), d) the MOUNTAIN of money that is being pumped into the system to return it to 'normality', etc, etc then yes, we are witnessing the bull rally of our lifetimes.

Me? I'm not holding my breath for it. One of the more often quoted phrases I've heard on/in the media is about jobless fiigures being a lagging indicator. Well, surely earnings are lagging indicators as well and yet this is never stated?! Jobless people are (in the near future) NOT going to spend as much so from an empirical standpoint surely earnings in the near future are going to fall? There is also the propensity to make earnings look good (i.e. 'massage' upwards) and jobless figures look better (i.e. 'massage' downwards) - I can't see this being positive.

Or maybe I'm just naive.


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Re: Daily Digest - May 9

PS Creative Investor

No jobs = no consumer

No credit/savings = no consumer

No consumer = no economy

I posted this on the DG of the 10th becuase I ran out of room a day ago.....I'd give it (Scribd doc inside link) a good read, I'm not disputing that there might be a little wave to ride, but, and it is a big but, I think there are some scary fundamentals at play outside the equity market (i.e. bonds and the dollar).

In any event I'd pay close attention to the chart at the top of page 8.

Take care

Frank Veneroso: Investors Appear Too Optimistic

Frank Veneroso is skeptical that a downturn of this magnitude could be nearing an end as soon as the markets seem to believe. He parses the data and investor psychology.


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Audit? Investigation? Review?


The Office of Inspector General (OIG) IS SAID TO conduct "independent and objective audits, inspections, evaluations, investigations, and other reviews related to programs and operations of the Board of Governors of the Federal Reserve System (Board)."  The OIG is the Fed's internal audit function, reviews such things as benefit programs for Fed employees, travel expenditures, maintenance disbursements, etc.  Even with this narrower scope, the independence and objectivity of all internal auditors are always questionable.


I had the privilege of witnessing the dynamic that led to the likes of Ms. Coleman becoming the Inspector General of the Board of Governors.  True, she's incompetent and totally over her head.  How did this happen?  Answer:  Affirmative Action in Promotion Policies.

For the past several decades, women have been promoted based on their gender, and sometimes race, rather than qualifications.  This is true in a majority of large corporations, and true at all levels of government and non-profits.

Her incompetence reached a zenith, and was fully on display, in her failure to give a clear answer to Alan Grayson question, "...I'd like to know, if you're not responsible for investigating that [off-balance sheet transactions]...who is?" 

Her answer should have been, “The GAO” or "I DON'T KNOW."  She appears clueless regarding her own job description, as well as the Fed's monetary policy decisions and actions.  She should have saved herself the public embarrassment by stating the fact up front.

It is the GAO (U.S. Government Accountability Office) that supposedly has the ability to audit the Fed's monetary policy decisions, but WITH LIMITS.  Sorry, but the GAO is currently a toothless dog.


See: http://www.law.cornell.edu/uscode/html/uscode31/usc_sec_31_00000714----000-.html, specifically sections (1) through (4).


Thus, see Ron Paul’s HR 1207 here:  http://www.govtrack.us/congress/billtext.xpd?bill=h111-1207  


This legislation won’t give Congress what they need.  Economic/monetary policy is not subject to “standards,” and all audits are performed AGAINST standards.


The Congress is 96 years late, and tens of trillions of dollars short. 


Watch Ron Paul bark at Bernanke and Ben’s responsive smirk!  http://www.dailypaul.com/node/91999


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