Thursday, June 25, 2009

Contrasts noted - Health care, Wall St bailouts, CHIP, Buffet on Leverage and Bernanke

Health care for ALL Americans vs. Wall St bailouts vs Childrens Health Insurance Program
Health care reform will have a cost, in trillions, to be funded over many years in the future, debate will last months, for the millions of uninsured, less fortunate Americans, more and more debate causes delays, continues, in this country, to fellow Americans, ACTUAL human suffering and premature DEATH. YES DEATH! What's clear is this: Very few, if any members of Congress or the Obama administration have any friends or relatives who are actually suffering from lack of access to health care. And many trees will die too as result of the massive reams of paper said reform will printed on.

Wall St, AIG bailouts, same if not greater costs, written up on a 1 page document.
Each action was billed by the Chairman of the Federal Reserve and US Treasury Secretary, Mr Paulson as "extraordinary".
Approved when? INSTANTLY.
Taxpayer funds and guarantees issued when? IMMEDIATELY.
Certain few more fortunate Wall Streeters, do not endure any suffering or lose their jobs, in fact, continue to handsomely benefit at taxpayer expense. In the past few weeks, some got SALARY RAISES of up to 50%. We'll see how long that lasts.

US Congress, largely one and the same hall of representative government, last summer, voted AGAINST the Childrens Health Insurance Program (CHIP); cost estimate $1 Billion - not a typo.

Warren Buffett on "crazy" Wall St and bank leverage and Bernanke
Buffett quoted Bloomberg News with Betty Liu June 24, 2009 - leverage was the root cause of our financial crisis; to which Betty referenced the oft quoted 30 to 1 Wall St reports - Buffett retorts, "that's just the observable, what was going on off balance sheet was "CRAZY". And further stated "If you're smart you don't need leverage and if your dumb you shouldn't be using it, added that you can't go broke if you don't owe any money."
Then BL asked if Bernanke was the right man for the job and the sage says "unqualified YES".

We remind the sage, that Mr Bernanke, in a prepared speech to Morehouse University in April 2009, blamed the Wall St meltdown, taxpayer-funded bailout entirely on what? Mortgages. Guess he didn't know then and doesn't yet know now about certain banks' and brokers' proprietary trading; I repeat PROPRIETARY - that means for the house, not for the customer. Whether on balance sheet or off balance sheet. And oh yes, the little leverage problem; my guess is that Bernanke didn't want to go there - perhaps he really doesn't understand it; therefore did not want to have to explain it; because that could bring up what he (and Greenspan) did not know about how certain few banks and brokerage firms were generating record after record EPS - in a supposedly transparent market; ANSWER - was to be found in the opaque markets; off balance sheet, proprietary valuation models, hedge fund like activities at a few large financial institutions.

Alarming disinformation and misinformation in the highest echelons of American finance.

Tuesday, June 23, 2009

Evaluate BB and TG first as ordinary citizens not as regulators

What real estate properties did they personally own? Mortgage?
Did they stay put, trade up or refinance and or pull cash out?
The majority of Americans did NOT move, trade up, flip or go crazy, did BB or TG?

During 2000's did the value of homes in their very own neighborhoods go down, stay about the same or hockey stick? If so why?

Did the value of homes in their previous neighborhoods stay the same, decline or hockey stick? If so why?

Did the value of houses they grew up in stay the same, go down or hockey stick? If so why?

Did the value of the college housing they resided in stay the same, go down or hockey stick? If so why?

The above reference value are things that reasonable adults in general, stay apprised of; there was no shortage of BBQ or cocktail party chatter.

Did the landscape of flowers, bushes, trees and tulips grow so beautful and tall that they caused the above to hockey stick? If so why?

Or was it the massive Wall St. leverage growing so nicely and paying out those handsome hockey stick bonuses? If so why?

Maybe BB and TG don't know or watch hockey - so they have an excuse; like color blindness they don't know a hockey stick when they see one. Wonder if they know what a boomerang is?

Sportin' Headline 2006 - (not a typo):
And for real - in the media that is, when did BB learn enough about real estate when the Wall St Journal headline appeared: “Bernanke Suggests Sinking Housing Market Could Dampen Growth” WSJ, October 5th. TG reported to BB – connect the dots! What did they know and fail to act upon? Maybe I might have missed it; but I didn't notice if the chairman wrote an Op-Ed piece to reject the headline - did you?

For TG, did he not notice that certain few banks FDIC insured demand deposits swelled in the 2003 to 2007 time period - and it wasn't due to attractive interest rates paid to depositors. Did anyone investigate the source of same? Did anyone bother to see that same banks broker dealer affiliates long standing proprietary money market funds assets were dropping? Despite having better yields than the insured (affiliated) bank deposits. Was anyone connecting the dots? Or is that just a child''s play?

Another series of siesta (anyone know the plural of siesta?) on the taxpayers dime.

Monday, June 8, 2009

DEEP, Liquid and trusted US Treasury markets until...

Today on Bloomberg, reporter Steven Engle reported that Robert Zoellick, World Bank, said that China's move away from its concentrated dollar holdings is unlikely to occur very soon BECAUSE of the "Deep, trusted and liquid US Treasury market"- I like to be hopeful, optimistic and wave the flag too but for different reasons; Flag day is coming up on June 14.

Deep, trusted and liquid means full faith and credit. Full faith and credit means unlimited taxing authority. Taxpayers brace for a huge load - coming down on our backs - stand up and be the face of deep, liquid and trusted so that we can show the rest of the world we are responsible for paying down / off the debt.

When we have conquered this Everest - size pile of debt - catch your breath real quick; no problem because we will be fully fit to man handle the tiny burdens of what? The tax increases necessary to pay for Social Security and universal healthcare - estimated to be over $30 to 40 trillion. Good thing it does not come due all at once. Because when we've have tackled those behemoths someone with a memory will remind us that there are not chump change, to-be-funded promises made in corporate pensions and municipal contracts.

And a couple of minor realities: Even a fifth grader can do the math as long as she has accurate numbers to begin with; (is it any wonder why our kids grow up to be confused about the multiple sets of books that abound?)
US Inflation, therefore interest rates are unlikely to go down.
With more debt and increasingly higher interest upon both the interest and debt outstanding, MORE, not fewer questions, challenges will arise due to the realities facing the dollar.
Market demand for Treasuries, from all sources, net looks to trend down over time.

The inevitable - when not if conclusion for US Dollar denominated anything.
And the always "home court advantage" attendant to financial accounting rules, asset valuation rules, official statistics, though represented as "full disclosure" is somewhere south of "full" - such that everything the rest of the world receives in payment is coined in US dollars - and has regrettably been hastened by the actions of past and current US Treasury / Fed / NY Fed / Wall St / AIG / Counterparties. Especially the proprietary trading, few too big to fail aka too big to exist - thanks to Chairman Volker for that one.

Note to policy makers when it comes to traditional bank loans 10x leverage for the bank is traditional; to suggest that 25 x leverage (or only 4% of assets to debt for financial trading assets - you're kidding right?) Allowing that kind of leverage for anything - is SPECULATION. REPEAT SPECULATION. And repeats what's already been encored by the too big to fail - LONG TERM CAPITAL MANAGEMENT circa 1998. Recall what leverage, derivatives and off balance sheet encourages / causes? Everything is created, traded and valued where? IN DARKNESS.

Is there even one?
Is there even one prudent advisor who is pounding the table demanding maximum exposure to as many US dollar denominated assets as possible? Show me. And especially show me if I am incorrect or unsound.

This will make for interesting not here to fore seen bed mates er investors / creditors including Canada, China, India, Japan, the OPEC countries, the rest of Latin and South America and Europe versus the Dollar. What to do about the all these new Dollars floating around?

Better start the PR spin and minting those new Martian Intergalactic Oxygen and Water-backed Bonds; soon we may all need a drink and breath of fresh air.

Thursday, June 4, 2009

Graphic Thinking

Mr Richard Shelby, US Senator, said today on Bloomberg TV, "banks which are in distress are not in a position to make loans", so these banks require restoration such that they can extend new loans, then (magically) "confidence will come back into "the system" and the economy will recover". Later today, Bloomberg reported that US consumers are effectively "broke" with a chart showing that mortgage debt is near equal to home values, up from about 50% in about 2006. To which I say regarding the dollars especially those with new ink still drying - "nature abhors a vacuum" a quote attributed to Spinoza, Descartes, even Aristotle. A link to the science of pressure inherent in vacuums is here

So what does it mean?
In a political context, the phrase refers to power vacuums -- if an important person or agency abandons their 'role', another soon takes it's place. In this case, certain, not all of Wall St entered the power vacuum created by the inaction, inability at the SEC, took supposedly legal information, and evaluation and valuation advantages thru use of hidden special purpose entities (SPE's), Structured Investment Vehicles (SIV's), off balance sheet entities, derivatives and credit default swaps - almost forgot the 2000%, 3000%, 4000%, 5000% leverage upon same and more intra-quarter during 2004 to 2007.

Hypothetically, if the number of prostitutes increases will it cause an increase in tricks? Yes. Will the prostitutes' revenue increase? Yes. Will the dollars paid increase the same as the increase in tricks? No. Why? Because as you increase the supply of anything the price of it will go down. And the more tricks provided to the customers the less and less and less the customers will return for services. In other words - they've had their fill. Satisfied themselves. Fully satiated.

The US and its elected public officials are foisting a similar artifice upon the taxpayers and creditors of US debt. Not only are there trillions more dollars (as above, worth increasingly less and less) but there is more and more debt. Get it? Inflation in and of the economy is the hoped for rescue; precisely a Goldilocks economy is the only thing that seems to offer any hope.

Consumer analysis - final demand measures.
You see, the US consumer is, as above near broke, done spending on non-essential items - what more is there left to want? For instance, how many new books, cd's, music, movies, shoes, handbags, Nike's, cars, trucks, perfume, make up, er skin care products, name any other product from and the like can we endlessly continue to order and devote the time necessary to consume or more important, find space in the closet. Fortunately, Congress has not figured out a way to increase the number of hours in a day yet; no doubt someone is thinking about this economic bonanza. Back to prostitution. Once, we have satisfied ourselves - what happens? Correct, we don't have the same urge anymore, hence the demand goes down.

Back to Mr Shelby, the US consumer - the overwhelming 800 pound guerrilla in the world's economy is fully satisfied after satisfying itself during the 2004 to 2007 time frame. And some, myself included, with a larger social economic world view, say over the past 30 years.

One last final observation on consumer spending.

Consumers' conversation with self.

"OH I just have to have that pair of shoes, new breasts, sports car". True.

I'll be sooooo excited, sooooo happy, soooo thrilled, so much more attractive, so popular, a new conversation piece. True.

Until tomorrow.

The let down comes, inevitable, inescapable.

It's not that they are not the perfect color or shape.

It's not that they don't look great.

It's this.

It's largely superficial, self packaging, external.

When the cause of the initial drive and desire comes from within, a conditioned-by-advertising perceived need, a seeming deficit, we are led to think some thing's missing within ourselves, yet this much is true. The answers lie inside.

Is it any wonder, (thanks David Bowie) that Beverly Hills has more psychotherapists per person than most if not all other cities in the US? Wealth, money, spending and consumption does not, can not and never will buy happiness.

Said another way, what is the half life of happiness from buying a new product?
And to close, John Lennon - "all we need is love" - to which I add "and not anymore stuff".

Wednesday, June 3, 2009

Finally - a truth about too big to fail - from John Bowman, the new director of the Office of Thrift Supervision (OTS)

Too Big To Fail.
One truth has been told by a government official FINALLY.
Today is June 3, 2009.

Here's the truth.
Mr Bowman, on Bloomberg TV today with Kathleen Hays, stated publicly and named Citigroup, Bank of America, Wachovia - "The too big to fail were Not allowed to fail" further he stated "absent government intervention [more plainly known as the taxpayers assistance] would have failed."

Let me repeat that - "Not allowed to fail" and only because of massive assistance, free lunch from the taxpayer would have failed.

I say and many others may agree - despite the money - the manner in which the money was basically handed out to the above and the financial accounting rules softened such that "new and improved fair value" with fabric softener was to be used upon those soiled off balance sheet bets, er excuse me assets to freshen them up for the new owners, US taxpayers.

Bloomberg ran a story Friday June 5, 2009 (re: the above "new and improved" accounting would have wiped out MORE than Citigroups first quarter profit of $16B - not a typo)

The first George Bush, #41 coined a phrase that resonates "kinder and gentler". And further coined "a thousand points of light" as long as light does not apply to certain banks, brokers, insurance outfits, better described as credit default guarantors is yet again another manifestation of how the monied set can create its own more than unique perception of reality. Mary Karr, literature professor at Syracuse, offered an example from her new boy friend's family from Long Island's North Shore, the family has always had a dog named "Tiger" - yes correct Tiger #1, 2, 3, 4, 5, 6.

There is a reason - the hearings on the multi trillion bailouts ocurred after the elections - the elected public officials / politicians hope that come the next election cycle - bailouts will be a faded memory to which this writer says - Hope and denial is not an investment strategy - never was, never will be.

Assets compared to Liabilities.
Assets can go up or down in value, everyone knows this. Debt, US Treasury / Government Debt on the other hand have these unique qualities: a due date, interest rate and no, the amount owed does not change or go away, ever.

Consider the Urgent Fornicate for America Act.

Update JULY 28, 2010 - Bill Gross, in his famous Deficit spending is like flushing money down an economic toilet then added that declining birth rates do not help the current situation.
Maybe I should have pulled the trigger - back in the Fall of '08 to suggest, not totally facetiously, that Mr Obama should have proposed and pushed for enactment of the Urgent Fornicate for America Act (UFFAA). What with winter then setting upon us, temperatures outside dropping, tensions inside rising and more and more Americans home from work (layoffs, less hours and just plain old full unemployment) what better way to keep the NOT-entitled-to-a-bail-out-taxpayers happy? And such a deal - get $500 instant cash, better than a tax credit for every baby born in 2009 and 2010. But in order to actually get the cash, taxpayers must sign a confidentiality agreement - never disclose to the new babies, ever. Just so the game can go on; business / politics as usual.

- yet another preventable principal agent conflict of interest problem on the current and future taxpayers' dime.