Thursday, December 25, 2008

here is to you wall street

Monday, December 22, 2008

what? Banker of the year??? kidding right

Sunday, December 14, 2008

Banks can't make money by not lending.

Monday, November 24, 2008

why is he reading bios?

Why is the president elect on television reading bios of his advisers and economic recovery team.? He is obviously not well versed in speaking about the economy or government policy on economics. I wonder if the media with dog him as much for is slips of the tongues and non-elegant delivery as they have other presidents. I doubt it. He is a great speaker when he has to talk about change without substance but when he is trying to deliver a podium press conference he has difficulty not unlike president Bush. He says we need a "big" stimulus package to "jolt" the economy back into shape. Please let him take the next 8 weeks to enroll in a crash course on economics at the University of Chicago so he can at least give a press conference where he doesn't look like a deer in the headlights. He doesn't get it and this is the second time he has given a press conference regarding the economy and he has not instilled any confidence in me. He has the standard answer that he is not going to discuss numbers right now and it sounds like he is totally clueless. I feel uncomfortable just listening to him try and find the words to answer questions. The press will led it slide though, just as they let him slide into the presidency with out having any idea of what his "plan for change" actually entailed. It is obvious we are living in an era where the media has become so filled with agenda pushing reporters claiming to be journalists (which they are nothing of the sort) can actually influence public policy and influence our national elections. It is disgusting to see how people have gone from being investigative and truth seeking to promoters for candidates. However, it is not surprising to me to see citizens just go along with the media's agenda because it is easier for them to not think about what they are being fed. Americans today would much rather have a general idea that tells them help and hope are coming soon, don't ask questions, just trust us because we know what is best for you.

Sunday, November 23, 2008

Citi cleans up again!!

Citi getting bailed out by the government. All American taxpayers are getting fleeced again. Citi already received at least 25 billion from the Tarp program is now getting another 20 million to go with 306 billion to offest potential toxic mortgage backed paper.

Friday, November 21, 2008

Tarp gone wild

It seems like the new objective for the fed is to see how far housing can fall now that they have taken care of the banks. I think the banks now have very little incentive to not increase their rate of foreclosure and get the "toxic" assets off of their books. The objective of the tarp funds was to take these bad assets off the books of the banks so they could begin lending again and encourage a bottom in home prices. It seems like the fed no longer felt that the continued drop in home prices was more acceptable than a closing of banks. It is a complete reversal. The original reasons for the tarp were no longer even an option. Until housing bottoms, banks can't lend even if purchasers put 20% down.

Monday, November 10, 2008

And we have to pay premiums....

I guess when you get to collect premiums like clock work, you have lots of time to get creative with other things.

Friday, November 7, 2008

economy will be a challenge

Hello!!!!! the great speaker has lost his ability to orate without inserting and, um and ahs in between every other word. He is a robot, media creation, and he has no clue. He didn't have time to write and practice this speech over and over and he had to try and give some specific ideas that were of substance. I thought he looked like a deer in the headlights and he pulled one over on 52% of the country. He had an agenda to get elected that has been his entire agenda for years and actually creating and implementing public policy is foreign to him. Now the media will likely try and spin his being clueless and refer to it as being prudent. He seems like a very nice and bright young man but he definitely has no idea what is going on with the economy or what to do to get the country in the right direction. He sold "change" to the American people but he has yet to figure out he will do. The media gave him a free pass and it is showing now.

Thursday, October 30, 2008

Citi gets 10 billion-raises rates on credit cards to 26%

I am dreaming or delirioius? I am so out of touch. I thought there were laws against loan sharking but evidently the government sanctions this sort of things these days. They give 10 billion to poor citi so the can do their part to help the economy and help fuel a recovery because it would be such a tragidy if Citi were to fail. I say they deserve to fail if they can't make it when they fleece the consumer with 26 % interest rates. Evidently credit card companies have no checks or balances on how badly they gouge customers. Now I know that these poor banks could not be expected to make money charging these ridiculous rates. I wonder which congressman is sleeping with the head of city in order to allow them to pillage America? Now it sure seems like the government is bending over backwards, or actually bending over forward, to help the poor, struggling banks and the banks just continue to ask for hand outs while the steel from their customers. The Home Depot credit card has a normally 21 % interest rate which should be illegal but to up it to 26 % with a letter saying take it or leave it proves that Americans have just been fleeced in the greatest scam in government history. The banks are getting handouts in order to stay in the business of ripping off consumers and the government just keep handing over the money. The money they are getting was to get the credit system moving again but today we found that the very bankers that nearly collapsed the entire world economic system are set to get bonuses nearly the exact amount of government bailout. We have been fleeced, pants, bent over, flim flamed, and bamboozled all at once. Politics as usual?

Sprint selling Nextel? Yeh step right up buyers!

I think sprint was the only one that didn't realize it was crap with they bought nextel in the first place. Who in their right mind would buy it now???????Sprint is a horribly run company, and nextel became horribly run when it became part of sprint. Sprint is likely to more share unless something drastic happens. They pcs network is terrible if you are not in a city. Nextel network has poor signal quality and their service has been horrible for so long that it will take a lot more than the CEO coming on TV saying how "cool" they are now and will be in the future. I am sure everyone remembers sprint started "firing" customers a few years back as if they were going to show the world who was boss. Hmmmm how's that working for them???I don't know if I have ever heard anything so stupid from a service oriented business in my entire life.

Wednesday, October 15, 2008

credit cards

banking analysts are so SMART!!!! They cut earnings estimates on banks and credit card companies AFTER they came out and said they were seeing delinquencies rise. I can't believe the get paid for this crap. D0 you mean to tell me that after all that was going on with the economy that they could not see credit card defaults going higher???? Give me a break. Maybe some of the credit card holders got that letter in the mail that said we know you have been a great customer and that you have always paid your bill on time but we are raising the rates on your card and cutting your credit limit. Some of them may decide not to pay after reading that letter. The credit card companies like to change the rules in the middle of the game. Even if they put it in the fine print of the contract it still as extremely senseless to increase the rate of interest on customers that are going through a recession and may rely on the credit card to fund important expenses. I know that wall street is well insulated from the real world but all paychecks are not alike and all months do not have the same expenses. A credit card can be used in times of need until a bonus check or commission check arrives. People do wait for month or two at times for that check and therefore a balance remains on the card. The company abuses the contract and tries to increase their profits to shore up their balance sheets by sticking it to their most important customers. They have milked the system and customers for years and now because of their own stupidity they try to rape the consumer to make up for their losses.

Trust an Analyst? Think twice, check the date on this one!!!

You can not trust analyst getting the most face time. I think going on TV must do something to someones brain or the networks like to choose people who have issues with their intelligence before they go on TV. Eventually Bove will be right if he keeps calling for the Bottom and to buy banks. He has been spouting off about how great the deals are for banks since 2007. This article was printed in March 2008. Evidently, he didn't see the meltdown of July and October on the horizon. Shut up people!!!! Hubris and need for attention loses money for everyone. Bove says financial crisis over, buy banks Bear Stearns collapse was trigger for U.S. authorities to take drastic action By Alistair Barr & Riley McDermid, MarketWatch Last update: 1:37 p.m. EDT March 20, 2008 SAN FRANCISCO (MarketWatch) -- The financial crisis is over, giving investors a rare chance to buy bank stocks at attractive valuations, Punk Ziegel & Co. analyst Dick Bove said Thursday. During crises, problems reach a crescendo when even the most optimistic market participants become fearful. That usually prompts government and business to join forces on a big solution that may either work or fail, Bove said. Sponsored by: . "The actions taken by the Federal Reserve were innovative, dramatic and, in my view, brilliant because they went right to the problem," Bove wrote in a note to clients. "The actions being taken by the Federal Reserve are being mirrored by the Treasury, which now has finally grasped the scope of the problem." Interest rate reductions and steps to inject more cash directly into the banking system will help banks generate more profit. While most market participants are still worrying about write-downs and falling home prices, investors can now buy bank stocks at their cheapest levels in almost two decades, Bove said. "The last time an opportunity of this nature existed to buy bank stocks this cheap was in 1990," the analyst wrote. "The next time will be in 20 years. This is a once in a generation opportunity." Bove's advice stands in contrast to that of strategists at Citigroup Inc. (C: Citigroup, Inc C 17.66, -0.96, -5.2%) , who advised clients Wednesday to avoid leveraged financial-services company stocks because the "Great Unwind" has begun. See full story. Barclays Capital sounded more hopeful Thursday, echoing some of Bove's thoughts. Liquidity -- the ability to sell assets quickly for a solid price -- and confidence that trading counterparties have enough cash to pay up are crucial to keep financial markets functioning properly, said Larry Kantor, head of research at Barclays Capital. Recent actions by the Fed and others in the U.S. have made it clear that authorities are trying to make sure the supply of both these market ingredients is maintained, he said. "Successful efforts by authorities to restore liquidity and the orderly functioning of financial markets, along with the massive amount of policy stimulus that has already been applied ... are expected to lead to a modest recovery in the U.S. economy in the second half of the year," Kantor said. Still, he was more cautious than Bove on the outlook for banks and brokerage firms in the U.S. "While the measures that policymakers are taking to address the problems of liquidity and counterparty risk will restore some degree of order to financial markets, they are not likely to alleviate ongoing concerns about the size of losses at banks and brokers," Kantor warned. "Losses in securitized subprime mortgages may now be fully recognized, if not accounted for, but credit quality in the remainder of the non-agency mortgage market is still deteriorating," he added. "The quality of credit outside of mortgages -- including leveraged loans and securities backed by commercial real estate -- is just beginning to be tested under less favorable economic conditions and with reduced credit availability."

Tuesday, October 14, 2008

Aubry McClendon rides sinking ship down

Aubrey rides a sinking ship down. You could call it greed but you could also see it as last ditch effort to pump up stock in a heavily over extended company. You had all the talking heads pumping up natural gas for reasons that were only legit in their own head. IE (will oil is up so natural gas must go up…JJCramer) genius theory yes!!!!!! Everyone on Cnbc pumped up Chesapeake as if they were all in on the gig. My first question was how in the world would we see natural gas prices sky rocket when we have been finding more and more supply practically daily. This was the first warning sign that the Nat gas gurus were missing the boat and that the past several years of riding a mo mo stock to the bank wasn’t going to work for them in the near term. They could believe talking about a stock on national TV wouldn’t give it more momentum. They sited numerous buys by the Aubrey McClendon the CEO as sure sign the stock was going higher. They missed the truth by miles. Nat gas supply was growing Oil and Nat gas are two different commodities. Yeh rocket science I know…one is gas one is oil…doh The ceo doesn’t always know what is going on either. They are just as likely to be trying to bail out a sinking ship by showing confidence; however, ill guided it could be at the time. stock secondary selling of drillable land to raise capital. we cant drive cars with Nat gas yet we are finding more and more ways to burn coal cleaner and more efficiently Natural gas pipelines are costly to build and costly to maintain and many American homes still use heating oil that is delivered by truck to the homes and it is costly to convert home heating systems to natural gas. The guys on TV tend to live in a TV created bubble and their hubris tends to get in their way more often than not in these days of media hype where immediate ratings are more important that long term quality programming or quality investment advice. Remember when anyone tells you can watch TV and get rich they are appealing to the couch potato inside of you and hope that you will trust them and buy their book. They need you to believe them without question and they need you to be lazy and to not do your homework because then you will find out the truth about their strategies and you will find out why they need to get paid millions of dollars in TV and book contracts instead of using their “genius skill” to create unlimited wealth through stock trading. The point is this: HOW MANY TV SHOWS HAVE YOU SEEN WARREN BUFFET HOSTING? HOW MANY TIMES A WEEK DO YOU SEE WAREN BUFFET OFFERING STOCK PICKS TO THE PUBLIC? I think you get my point. In the movie “School of Rock” Jack black has the greatest line that seemed to fit the conversation he was having with the school faculty but also could be applied to the Wall Street “gurus”. “Those who can’t do teach…… Those who can’t teach, teach Gym”……….. (not you Mom!) I know some people are great teachers and love it like my Mother) Most gurus become gurus in good times and are lucky they don’t have to rely on their stock trading to provide income during the down times because they likely would meltdown. They would vaporize if they didn’t have the TV or book contract to save them from their horrible stock picks.

Wednesday, October 8, 2008

16% of homeowners underwater

An article in the Wall Street Journal stated that an estimated 16% of homeowners have mortgages that are greater than the current value of their home. Wow! 16% of homeowners as an estimated 12 million properties according to Moody' If a home was purchased in the past 5 years 29% are estimated to be upside down with their mortgage. ( These are incredible figures. There likelihood of default rises considerable when this happens because people run out of options. Impossible to refinance, impossible to get a second on your equity, impossible to sell to pay of the mortgage. If a seller takes less for the home, they would still have to bring money to the table at closing or go through the ridiculously arduous process of a short sale. This could add to the major snowball of foreclosures and completely derail our economy. The sale of mortgage backed securities blew up when a number of loans defaulted because no one could tell how many more bad loans were on the books MBS owners. The market to buy and sell MBS disappeared and it left a major vacuum. The resultant affect is now hurting the economy while many on wall street try to claim that people who bought more than they could afford have caused the problem which is an extremely naive and simplistic view of a world wide crisis. But typical because Wall Street was at the heart of this meltdown.

Tuesday, October 7, 2008

AIG reveals the insurance business scam

I heard the question asked today "how could AIG reack up credit defaults losses so great that it threatened the entire world economy?" Simple answer "it is is the insurance business." Insurance companies are not in the business of paying insurance. They are in the business of collecting premiums and making money while paying insurance claims as infrequently as possible. Why is it that people pay premiums religiously year after year and then a storm hits and the insurance company goes belly up? HMMMMMM go figure. Well AIG collected premiums on credit default swaps to insure the purchasers of these mortgage derived securities in case of default. They made enormous sums of money over the past few years but when the defaults began to pile up and claims were made, they company was not able to meet its obligations. Lo and behold in steps the federal government to save the day. Here is the tip. Get in the insurance business and collect premiums as large and as often as you can and then when the sludge hits the fan and your customers are in dire straights you can go out of business. Just make sure you get as much stock and cash in bonuses and salaries as you can and spend it on something of value so they can't get it back from you later. Ever wonder why so wealthy people want to get in the insurance business? Well now you know. Do you think Warren Buffet is in the insurance business because he wants to help people? Maybe, Maybe not but I would guess that the cash cow that come with it is likely the more applicable reason.

Jim Cramer and Wachovia Bank

Any day now Cramer will come out and say how badly he missed the call on Wachovia Bank. Oh wait, we are talking about Cramer, so skip that first point. He was trying to pump up WB for some reason for the past few months. I don't know if he was just hoping he could claim a winner because WB had made it to this point and may be able to weather the storm because of it large deposit base but he was destroying capital all the way down. Evidently no one remembered that WB scooped up World Savings a while back along with their bundles of option arm mortgages. The vulture banks in their hubris thought they could snap up these failing companies at fire sale prices and suffer no consequences but even Bank of America is showing signs their anchor is dragging. They swoop in and buy mortgages for pennies on the dollar without ever figuring out their true value and then expect the federal government to take the losses. WB and Bank of America both acquired assets for pennies on the dollar and intended to milk them for all they were worth. They aren't going to lend more in order to get the housing market flowing, but are hoarding cash, looking for a bailout. As for Cramer and his WB pick and pump who knows but he is now telling everyone to exit stage right after driving them off a cliff for the past year. Hubris, narcissism and arrogance at its finest. Cramer seems like a nice guy but he really is a modern day media creation.

Bove and Cramer sipping cheap scotch

How many times have you heard Dick Bove saying the banks were not in trouble and the banks are doing well? Everyday maybe for the past 3 months. Hopefully he won't turn out to be another Cramer now that Bank of American has ruined his thesis. If he does a Cramer he will come out and say "oh I meant to say the depositors were OK and their money was safe, not shareholders" Cross you fingers. The world does not need another Jim Cramer. Holy buckets batman never thought anyone could every be as bad as Cramer "one of the greatest minds" (in his own mind of course) on wall street. Looks like all the face time Bove is getting for figuring out the financial system was a mess (oh yeh shocker there) is making him a little dizzy.

Truth or fiction at Bank of America

Ken Lewis said that bank of American is making all the loans they can with any qualified applicants. Funny that just last week they cut off McDonald's franchisees who were looking to upgrade or remodel their stores. I guess having a proven, cash flowing, successful business that continues to thrive in this tough economy does not meet their standards. Ken Lewis seems to not know what really is going on at B of A. They are hoarding cash just like everyone else but he is trying to spin things so they can be seen as the good guys but they are holding the government and tax payers hostage because they have so much cash in the form of deposits. I am guessing but it seems like Lewis has been holding his hand very tight to his vest and now coming out to cut dividend may be a sign that they are a little more exposed then previously reported.

Monday, October 6, 2008

Mortgage relief from Bank of America/Countrywide. (Amazing the speed of settlement after the house passed 700 billion) . The banks are holding the country hostage and taking everyone for all they are worth. They can change terms of credit midstream and can hoard money until they know the coast is clear while taking advantage of government bailout funds. It is disgusting. Wonder how many people could have survived the past month if they would have known things were going to change with their mortgage?OK sounds great, how are they going to decide where the money goes? Funny how we didn't hear until 700 billion was passed and coincidently an agreement is reach with BOA....Oh yeh and funny "the 700" legilation includes a clause that allows banks to not honor exclusitivity agreements. IE Citi and WellsCall me crazy but feels more and more like everyone exept the government and the big banks are getting screwed without even being taken to dinner.

Sunday, October 5, 2008

worthy or unworthy? Who Decides?

The problem of people deserving money or not is misleading as well. How can a project be funded when the bank goes under? How can the borrower maintain credit and timely payments on obligations when the bank fails? This is the beginning of another cycle: the downward spiral of credit reports and personal and company credit. It just starts with one and the pricing for funds goes up exponentially if a business is left hanging do to a bank failure. They are then expected to pay much higher costs for funds and it constricts their margins. They cycle continues. It is extremely simplistic for the Wall Street brains and pundits to say this crisis occurred because people bought property they couldn't afford. It is arrogant and childish as well because those so call irresponsible buyers could likely have sold their home in time of need at a break even price if Wall Street would not have sold, resold, and resold the underlying assets while taking their cut each time. Wall Street has used the American mortgagee for their profit and now they are trying to blame the person who tried to buy a home for the going market price. WAKE up people!!!!!! I am not at all for government intervention or bigger government but it is clear Wall Street behaves like unsupervised children in a candy store. Wall Street just happens to be in a money store instead and they can't or won't supervise themselves and the entire country has to pay for it. The bailout is really irrelevant because the people holding real estate are now expecting to pay 100 cents on the dollar for their mortgage while Wall Street is getting away with paying 25 cents on the dollar. It is a load of crap and one more twit that comes on TV trying to blame irresponsibility of the American consumer as the reason for a housing collapse needs to get smacked into reality. The only bubble left is the one in the head of most people on wall street and those mouths on TV that have proven by missing this entire market demise, that they are as much gullible as guru. Yet they are all so smart. How does that happen?????

Friday, October 3, 2008

Latest News from MarketWatch -

Latest News from MarketWatch -

The demand is there because home owners are being fleeced...who wants mortgages for .25 cents on dollar

They are are being valued by the larger banks because they have already made money off the mortgage boom and wall street made their money by creating securities with our mortgages and in turn undercutting our assets. They are writing things down 75% but the banks will then be expected to collect 100% on these assets while the people on main street get shafted because the underlying value has been cut in half even though they have not profited like wall street or the banks. The banks and wall street peeps seem to think it is OK to make 3, 4 or 10 times profit from on the backs of American home owners while they get screwed into the ground because of banking greed and government failure to protect home owners from being hurt by the leveraged cdo's. We are all being used as profit centers and they have made money from the the loans on origination, then more profit selling mortgages as securities and now the fire sale buyers will get to make 300 and 400% profits on homeowners again because home owners have to pay the full value of their mortgage regardless of what caused the drop in prices. It is a load of crap and if one other person says people that bought things they couldn't afford are the cause of this problem I will jump through the TV and smack the crap out of them.

wrong wrong wrong!

Cody you have this one wrong. Your ranting and raving about free market capitalism is about 10 years too late. Where were you when the local governments were on the take, the federal government was allowing wall street to use mortgages from the American people were sold, traded and retraded in order to leverage profits. You benefitted from this and your hedge fund did as well regardless of whether you say you were not involved in cdo's or mbs's. The market was booming in part because of the profits from these securities and anyone that was in the market profited. You got the benefit of the irresponsiblity of wall street and now you want to wash your hands as if free market was working. It wasn't working. I was setting the country up for a real estate crash and most people who own homes, who did nothing wrong, are suffering. It is not about buying things people couldn't afford. When you buy a stock, you pay for it once. If the price goes down you don't keep paying you just lose your money. Your stock broker got paid and you lose. Now what you and many other people who like to act as though they are smarter than everyone else because you have profited from the entire mortgage and real estate bubble because these levered mortgages created huge profits. The market would not have been where it was without these un checked selling and packaging of these loans. You benefitted. The Average American who hold a mortgage now on a property that may be worth less than the value of the home now is labeled by you "as a person buying things they can't afford". But you want the current companies to write down the losses then sell their assets at pennies on the dollar and then collect 100% of the term value of that loan when the collateral underneath the loan is not as worth what it was 2 years ago. It is a load a crap and for you to rant and rave about without considering the fact that a mortgage not the same a stock and should not be sold as such. Because wall street levered everyone in the country without our knowledge you act as if it was everyone's faul and that they were wrong for getting a mortgage. Another load of crap. If you buy a stock for 100 and the stock goes down to 50 are you going to pay 100 for it? but if you bought it you you lost 50 $ but you aren't expected to pay for it at full price again. But you are saying that wall street gets to write off all the losses after they have profited on these mortgages and made their cash, now they sell them at rock bottom prices and they get to make 100% on the investment because it is a mortgage when the underying assets is worth half price. It is apples and oranges and if you don't think through you end up blaming Americans for the cause and punishing them because you thought you were smarter than people who wanted to own their own home.

Wednesday, October 1, 2008

Congressman Barton needs econ 101

Barton just said that increasing FDIC insurance on savings accounts to 250,000 up from 100,000 said this has nothing to do with liquidity and the credit crunch. Hello! Hello! Anyone home in there. One major issue is that people are running to with drawl large deposits out of banks because of the fear of bank failure. The banks lend money based on their deposit base. If they lose their deposit base they can't lend as much and will be less likely to lend as their reserve requirements rise. I can't believe what these guys same at times. Definite need to send the entirety of congress to econ 101.

Did you say live without credit?

Dave Ramsey is becoming a preacher more than advisor these days. A popular TV show and high rating doesn't mean that your views represent that of most of Americans. 100,000 hits to your website means that 100,000 out of about 2.8 billion people are with you. This is a very small percentage of the country and for anyone to get on national TV and say that all Americans are mad about the bailout plan is misleading and delusional. It smacks of unfettered self promotion and arrogance than of a fair representation of the facts. We have enough wrong information out for the public to sort through with out having the media trying to act as the pied piper in order to get viewers over the edge with them. FYI Just because you have a forum does not mean you represent the population. Actors and Musicians please take note here. Hollywood please take not here. Politicians please take note here. Just because you have a mic in your face or a camera turned on in front of you DOES NOT MEAN YOU HAVE A CLUE AS TO WHAT IS THE REAL DESIRES OR FEELINGS OF MOST OF AMERICANS. Politicians are drawing only about 1/2 of the voting population and they they are only getting half them to agree with them. How in any way does that represent America?????? Now if you had a hit TV show or successful record means you have no idea what "all" or the majority of America is thinking and for you to think otherwise is complete hubris and arrogance. America has been mesmerized by the media now for years and it has become a forum for bull shit. Excuse the expression but it fits. Anyone who comes on TV and speaks with conviction can garner a following resembling Jim Jones and rhetoric becomes the poison kool-aid. Anyone who does have a forum owes it to everyone else to put some realistic checks and balances on what they say. Lose the delusion that you are representative of the majority and lose the arrogance that you have all the answers. I know it is is tough to not think so highly of your own opinions when you fall for the pseudo guru status the networks banter about in order to create buzz and ratings but be one of the few who can be realistic, honest and thoughtful of the propensity for people to follow those with the loudest voice. It is your duty with your forum to stop adding to the nonsense and use your loud voice to to the right thing not just do something.

Tuesday, September 30, 2008

Credit Markets need help but it is still a scam

The latest issue is said to be that mark to market accounting is the cause of this financial freeze up. The assets held by one company have to be marked to the current market price. All this means is that if you sold 10 apples at the market for 10$ because you had to get to a wedding and needed a quick sale, you set the price for everyone else also selling apples. They would have to show on their books that all the apples they had were $1 each regardless of the fact that maybe next month they apples you have stored away may be worth $2 or even $10 a piece. In a very liquid market assets that are marked to market will adjust quickly to the market price if there is a demandfor the product. The next day someone may "bid" for your apples at $5 a piece which might be a better fair market price. Problems arise if no one wants any apples at all. I you try to sell your apples and no one makes an offer to you then, in theory, your mark to market would essentially be zero. If this was just an off day at the market, but if your books were being audited the next day, the value of your all of your apples would be worth zero. You could have thousands of apples that are likely to be worth a substantial amount of money but with the accounting rules of mark to market you would be insolvent. Your shareholders would panic and your stock would likely drop off a cliff. This is what has happened at wall street because the market to sell mortgage backed securities disappeared and therefore it become impossible to put a price on the assets or mark them to market. Another wrench in the works is that these securities have nothing really to do with the actual real estate value of the collateralizing real estate itself, but they are collateralized by mortgages that have the actual real estate as its collateral. If it was one for one and each mortgage was still tied to its original piece of property the value of the underlying asset could be assessed by comparing it to houses sold in the market. Wall street begin selling and selling these mbs based on the potential cash flow from principal and interest over the course of the loan. They took a big cut of the pie for commissions and loaded quality mortgages with poor mortgages but still priced them all as if they would preform to full term. An investment was made in this paper and it could be sold or traded again and each time a commission or fee was charged. There has been billions of dollars made on mortgages from main street just for trading such instruments. Now many banks and mortgage companies are getting stung because once defaults started on these packages of loans not one was willing to pay full price. The market collapsed and this mess started. Now those with the money are waiting for Washington to ride in to the rescue and allow the bigger and better banks to swallow up the written down assets for pennies on the dollar. However, the people on main street are expected and have been expected to pay the full dollar amount of their current loan with out any term changes or reductions even though billions have been made from the mortgages and the new buyers are going to make billions more because they now have the right to collect 100 cents on the dollar for assets they purchased for a song. The home owner has just become a pawn in the game. This wall street/government allowed mess is going to make billions more for banks and wall street but it has already destroyed trillions in wealth that belonged to main street homeowners. The system was manipulated and not regulated property by the government and now the banks hold everyone hostage as they wait for everything to hit bottom dollar and then they move in usually with government assistance to quadrupole profits again. There is no excuse for what has happened to those who have worked hard and done the right things and held their financial worth in real estate. Now the big idea is to get the prices stabilized after people of in many cases lost their equity completely and the banks again have put the sleeper hold on the credit markets and they are cleaning up.

Monday, September 29, 2008

Courage needed in Washington

We have a failure of leadership in the congress. We elect officials to use their judgement to do what is right for the country during their stay on the hill. We are not in a democracy that allows all of us to vote on every issue. The current congressional leaders are clearly trying react to voters before they act for the good of the country. They lack the courage to stand up and say what they truly believe and risk not being re-elected. Those who voted no today on the bailout bill sited numerous phone calls saying to vote not because people don't want to bail out wall street. The election is close at hand so care is being taken to actually pay attention to voter feedback but the reality is that we elect "representatives" that are supposed to do what they think is right during their term. Our checks and balances come at election time and if those in congress act in any other way they are just being puppets. They are puppets for one side and then puppets for the other side to try and get as many votes as possible. The failure of leadership reinforces the assumption that these so called "leaders" have no integrity. Today man revealed their true character and their true purpose. The character is weak and the purpose is re election. Neither of those things have anything to do with serving the American people or doing what is right for our country.

No banks are immune

There is chatter on the news channels that there are banks that have not participated in this crisis and that they are not affected by the credit meltdown. The reality is that there is no bank that is immune to this crisis. All banks hold mortgages of some kind and they make their profits on the interest from lending money. This is how the market works. You put money in the bank and they get to lend it out at a 10 to 1 ratio and charge 2, 3 or 4 times the rate of return that they offer to depositors. All banks will be holding more toxic assets daily if the credit market stays frozen. Home prices will decline further, foreclosures will increase and in turn all prices of real estate in the area of bank owned homes will be pulled down. You see the larger banks scrambling to scoop up banks with massive deposit bases in order to secure their own balance sheets. They don't want the mortgages from those banks because they can use the deposits to shore up the books and when the market stabilizes they will begin to lend out against all of those deposits with the 10 to 1 ratio previously mentioned. We will have a few very large banks that hold all the deposits as well as the cards. The banking industry could end up looking more like the utility business as consumers will be given one choice of where to shop. Think about your electric bill for a minute. Is there any competition in that market? Can you switch to a different power provider if you don't like their service? I don't know of any place where you are given choice for electricity and it soon could be the same regarding our banking if we don't get the credit markets functioning again.

Saturday, September 27, 2008

Congressional hissy fit

Neil Cavuto just reported Chuck Schummer had a bit of a hissy fit. I have to praise Cavuto for the perfect label for what just happened. It (Hisy fit) is a term usually reserved for the description of young bratty child not get their way. I think it fits because congress is showing us that they have the maturity of young children that are first and foremost concerned with their own needs ( in this case re-election). Our system has turned out to be a bunch of bratty, self serving men and women continually trying to hide behind the facade of public service. We have been taken, yes taken by the smooth sales job and the double speak of congress. They are getting paid to serve the public but each and everyone of them has a personal agenda to get re elected at any cost.

payper post

Financial Reality Revisited: Responsibility to pay

Financial Reality Revisited: Responsibility to pay

Thursday, September 25, 2008

An exam for politicians?

You have to pass a test to sell securities, to be an appraiser, to sell real estate, to get a teaching degree, to be a doctor, a lawyer, a contractor, electrician or plumber. Why don't politicians have to pass a test that would evaluate their knowledge of economics, world politics, governmental processes and the constitution? Popularity has little to do with the qualification to govern. Before entering any race for congress or senate their should be an exam that must be past in order start a campaign. It would save millions if not billions of dollars spent on ridiculous hearings where congress asks the same stupid questions over and over again. This week's hearing could have been done by just having a video of Paulson and Bernake giving the same answers over and over again while all of congress had to sit there, watch and take notes. When voter turnout has dropped to 50% at times or below it is clear that main street America has lost faith in our elected officials maybe a test would help improve the quality of our public servants.

Economic education for congress

It is clear that very few people understanding the pricing of assets. This "bailout" bill gives us the perfect insight as to the level of understanding congress and the general public has regarding economics. It appears that the majority of congress and the majority of citizens are having trouble letting go of their resentment at wall street's wealthy and are allowing it to blind them to the fact that there is a high probability that the government/citizens may make money on this deal. The core of the matter is proper pricing and though you can say that these "bundles" of mortgage become less and less valuable as defaults occur there is always the hard asset (the real estate itself) that remains. The holder of these mortgages has the right to the property so in theory they can not go to zero. If the treasury negotiates a price of .50 on the dollar in order for this to be a complete waste of tax dollars, every house would have to end up being worth 1/2 the amount of the mortgage. I do not know the statistics but I would surmise that it is not highly probable that all the real estate to be acquired will be worth less than 50% of the mortgage amount. Second mortgages are erased when property is taken back by the lender and real estate would have to drop considerably more for these assets to be worth 40% of the mortgage value on main street. The congress is pandering to voters rather than educating them, which in my opinion is what is needed more frequently in our republican form of government. We elect officials to represent us. We don't vote on all issues if this was a true democracy by definition. Our officials need to educate themselves, make critical judgments, get things done while apprising constituents of the process rather than being so reactionary to citizen outcry. We have a system that allows for citizen outcry every 2, 4, 6 years by voting in better representatives. Our system will breakdown or bottleneck continuously if we have law makers reacting to who squawks the loudest. The other reality is that just because officials get angry calls about issues it is in no way a random sample of the population and may eve be completely opposite of the sentiment of the community in its entirety. We don't have a say in everything and our system is not set up to function as a true democracy but in today's age we have gotten bogged down by ridiculous pandering, especially during election years. Our current situation reveals just how uneducated our officials are regarding the financial system and it also reveals just how adept they are at pointing fingers at anyone else to try and cover up their lack of foresight or knowledge of current issues. In order to keep the system from falling apart producing a major recession or depression the government needs to act quickly. These proposal has potential to generate free market interest in these products one the government begins to put a bid under them and if they do purchase a number of these assets they probably will recoup all of the capital outlay. Congress needs to get it together and make sure they do the right thing and what is right for our country. An elected official in our system is sent to Washington to represent the best interest of the public and use their judgement in times of crisis not ask voters how high to jump when a critical issue arises. If you want different representation then you need to vote during the elections for more trusted and accountable officials.

Wednesday, September 24, 2008

Is Msnbc now run by the democratic party?

Msnbc has completely lost any sense of balance in regards to its political reporting. They are completely in the tank. Chris Mathews is in love with Barack Obama and practically drools when he talks about him and he made some sickening reference that he felt a tingle running up his leg when he heard Obama speak. Hey having your opinion is fine but try to have some journalistic integrity. It is completely absurd and as if they didn't have enough left wing palavering they add the Maddow show. Hello. Hello. Didn't they get the memo that said Air America made no money and had no listeners? Thankfully David Gregory has a reputation as a journalist and is likely not willing to ruin his reputation by following the shameful precedent set by Mathews and Oberlman. Maybe the bosses at Msnbc are starting to see the light and don't want to be in the dark when it comes to ratings. If they want to have an op ed channel they have the right but please don't try and pretend it is remotely close to journalism.

Leadership by the presidential candidates?

Obama was definitely caught by surprise today when McCain said he was halting his campaign and heading back to Washington until the financial crisis was resolved. It was such a lame response from him and his staff that revealed their shock. They said that a president should be able to do to things at once. I have never heard a more ridiculous answer. He is still a senator remember. He needs to get himself back to Washington and do his job in time of crisis. He still is getting paid the 160,000 to be a senator and he says he is not going back when the country is facing it worst financial crisis in history. How presidential. I don't think so. It is clear that he care more about speeches and running for president than he cares about being a lawmaker or senator. He is revealing his true intentions and feelings. He never intended to be a senator and he never intended to do his job when it was crunch time if it meant it would take him away from his all important campaign. It will be a travesty if this man is elected president. He has been orchestrating every move for years in order to try and run for president. He gives speech that have little substance and he gets people enthused by spouting off about change but he is the farthest thing from change. He is a puppet and he has been grooming himself for a run for president nothing more nothing less. His legislative career has been thin at best and his give of oration has allowed him to fool nearly half of the American public so far. The left wing media, which I know is redundant, are enthralled with him blinded by his charm and rhetoric. Being president is not about being charming or being able to speak well. Those two things might help but the job is about leadership and strength and Obama show us all again today that he is lacking in both categories. He seems like a very nice man and I am sure he is rather charming but he is not the right man for the job. Someday he may be but that day is not today. McCain stood up today and too the bull by the horns and showed up where his priorities lie. He wanted to be back in Washington to help resolve this major problem. Obama wanted to campaign and debate. It was as if it was throwing a wrench in his plans to actually have to do his current job. He didn't think this one through very well and decided it would behoove him to get intopower struggle instead of just saying "hey good idea, lets get back to Washington and help out, and hit the campaign after the crisis is averted." It would have been simple and would have not left the impression of a another self absorbed politcian. McCain will score points for his courage to take action and for his offer for McCain to join him but Obama missed the opportunity to score a few points himself. McCain showed us all something today. All of us who actually want to see a true leader in the oval office. He made the call and put his country, his constituents, and all Americans ahead of a presidential campaign. Obama didn't want to be a part of the solution. McCain showed leadership and integrity. Obama did not. Who was more presidential?

Auto dealerships getting hit hard

Everyone can say what they want about wall street being bailed out or that we shouldn't pay for their mistakes but it is becoming more clear everyday that our economy is in trouble. There is no play book to use for this crisis and we are fortunate to have two very bright and dedicated people trying to help us through this unprecedented time but Congress seems set on proving a point and trying to make things an "us against them battle" and they are trying to cover up the fact that they blew it. Here is the latest example of the widening scope of the fianancial crisis: One of the largest Chevrolet dealers in the country, Bill Heard Chevrolet, closed the doors of all 13 of its dealerships. They have been one of the top selling, if not the top selling dealers in the country for several years. The problems started about a month ago when the could not obtain short term financing to fund their operations. As credit tightened, they were put in an impossible situation with no cash flow. Auto sales are down, lease vehicle returns were clogging inventory as people unloaded low mileage SUVs for better more efficient cars. There was no way for Heard to make a change quickly enough to unload inventory and promote smaller vehicles if they couldn't get short term credit. It is just one more sign that main street is already showing signs of breaking under this "wall street" problem. It is sad to see such a highly successful operation be shut down after years of service primarily due to the credit crunch.
Top Ten things that could help the economy 1. builders stop building 2. congress stop talking and posturing for votes 3. People everywhere- Our economy is not a cash based economy. It can't function without credit. You would not have had the ability to work and live as well if we lived solely on a cash basis. Get over it and except the fact that we can only thrive if business is growing, paying and hiring. 4. Bad credit has a different definition than credit. Raise your hand if you paid cash for you house, car and kitchen remodel. Ok let me see that is .........1 person, 2 maybe oh wait ok you were just swatting a fly right? 5. Let the Smart guys do their job. IE Ben Bernake and Hank Paulson. Stop wasting their time with your none sense and own up to the fact that you never saw this crisis coming and that you have little clue what is going on and you think the best way to get votes is to blame everyone else for your ineptitude. 6. Middle America-realize that now your life savings is in jeopardy, if we let this go on and more and more banks fail, economy tanks and we have a depression the FDIC will not be able to meet their obligations. If you have paid off your home and thought it would rely on it in times of need by selling, refinancing or using an emergency line of credit you will suffer the most. 7. Decoupling-remember last year when the rage was that the world would not be affected by the USA housing crisis and that we had decoupled from world markets? Well that wasn't exactly true just as the message is being bantered by congress that wall street doesn't effect main street isn't true either. Main street is in trouble. 8. Realize just how much is added to the economy for every one loan a bank gives out to the public. One particular housing sale may play a part in 20 or 30 people's paycheck at minimum. The normal level of transactions pumps unlimited sources of funds into the market place and we all benefit. 9. There are people who have ran small businesses based on real estate purchases and selling and or rental property. They have done nothing wrong. They have not speculated in order to make a quick buck, they have not bought property with no money down, nor have they tried to manipulate the system. They have done a great service to the economy by taking on the risks involved with rental property and provided quality affordable housing to people who choose or rent. They have paid thousands of dollars for repairs, maintenance, taxes, insurance, utilities and accounting. Many of them are now stuck in the middle of this mess. They are no longer able to raise capital to fund day to day and month to month operations. Even with substantial down payments some real estate will not cash flow enough to pay for a new heating and cooling unit or new roof especially if rental rates decline. This in turn can affect the housing market by allowing needed repairs to be delayed in turn keeping money from returning to economy from the purchase and installation of items. 10. blaming the administration solves nothing, and the truth is that this issue started back in Clinton years when the bills was signed allowing investment banks and commercial holding banks begin to trade assets and derivatives. Try to keep up with times and stop trying to fool the public into voting for you. Blaming someone for a problem this massive is insane. There is plenty of blame for everyone on both sides.

Does Congress watch these meetings?

I was wondering whether any of these congress people watch these hearings before they get to have face time. Certainly sounds like I am hearing the same questions and comments over and over again. Call me crazy but they seem to have a great knack for wasting time as the economy struggles. The congress is so far removed from reality that they have no idea what the implications are when credit markets stop functioning. The interbank lending rate has risen again over night and banks are not lending money to each other, to businesses or to individuals. When banks hoard money they stop the economy from functioning.

Tuesday, September 23, 2008

A sure sign credit markets are frozen

It was reported yesterday that Bank of America, the buyer of Countrywide Mortgage and more recently one of the teetering investment banks, Merrill Lynch & Co, is not willing to loan to McDonald's franchisees seeking cash to upgrade their stores. This is amazing to me. I know that McDonald's has a pretty good track record for successful franchises, and franchisees likely generate great cash flow. McDonald's stock has been preforming greatly during these tough times as well so if anyone needed any further confirmation that credit was becoming a larger problem, now you have it. The banks have closed up shop to wait for brighter days ahead and this is a perfect example of how crazy it has become in the credit markets. Congress should take note.

Monday, September 22, 2008

What to expect from Congress

I just saw the Barney Frank, Nancy Pelosi news conference and was not surprised to hear they are already trying to cover their back sides if whatever they sign into law does not help the economy. It is as if they have no identity. The very people we count on to take responsibility and to look out for us, the American public, are afraid to commit to anything that may just have a chance to help a lot of people survive the credit crunch. I think that I have heard it all and then they come out and say something this childish. The truth of the matter is that we have a congress full of lawyers, many who have never practiced law, lifetime politicians, a few military personal, and no economists. The committees that do deal with finance are not headed by economists or financial brain children. They are usually guided by those with most seniority that lust for the most power. Anything to do with financing in our government is power and the lobbyist spare no expense to influence those with power. I am sure there is no place on earth, except possibly in the palace of the Queen of England, where more shallow deferential platitudes are bantered about as much as Hawaiians say aloha. Our politicians have become power and attention seekers with little expertise in economics or global markets. They want all the accolades of a superstar without having to take any responsibility for their actions. It has become almost comical.

Friday options told story

Last Friday when the fed announced their "bailout" plan it may have been a sign that we may begin to have some improvement with the market. However, the options traded for October might have told a better short term story. The options for September were expiring and trading had increased as expected but as prices of some stocks jumped up 5 and even 10 % the November in the money and close to the money options did virtually nothing. The Mosiac company had a nearly 10$ gain for the day but the November 100 and 105 calls barely moved. It appeared to be a clear sign that investors were very leery of the fed plan and still not yet ready to bet on an improving stock market for the short term. I would guess that is was just a lot of short covering and profit taking after the ban on short selling was being instated. It was time to get out, cover the shorts and wait for the market to settle before jumping back into the November and December options. I had never seen action quite like this where the next months calls moved so little while the stock price was ramped higher Monday finished the tale as the market sold off big making most investors a little woozy from the roller coaster ride. I was hoping after stomaching last weeks wicked fluctuations that a few day reprieve would give everyone a chance to take a breath but that obviously didn't happen.

Mark to Market?

One of the reasons for our current meltdown in the financial system is something called mark to market pricing. In theory it was to protect investors from crafty book keeping that would hide low value or depreciating assets from the public. When real estate became large parts of investment firm assets and had to be valued with the mark to market model it just didn't work. In a liquid market with full transparency mark to market may make sense but real estate is not liquid and it is not a monolith. There are many different ways real estate produces a return on invested cash that mark to market fails to address. If one firm folds and they have had to mark down real estate assets because they have been bundled into traded securities of which the good and bad are indistinguishable, the value of all real estate backed securities had to be priced accordingly. It is one big casserole surprise that looks very burnt on the surface and no one wants it because they don't know what is inside. Anyone holding these mortgage backed securities appears to be ready for a fall, true or not, and it becomes more and more difficult to obtain funds, investors withdraw funds and downward spiral may lead to the end.

Wednesday, September 17, 2008

This isn't subprime anymore

The credit crisis that has overtaken the country is no longer just about sub prime mortgages. It has gone from a few defaulted loans to the beginning of a world wide financial crisis that is affecting nearly everyone. The year of lies and accounting magic allowed for the destruction of billions of dollars of capital. The market bottom may be near but then again we might be witnesses the uncovering of a very nasty can of worms that has been held in secrecy the past few years. It is hitting main street now and if the credit markets stay frozen there is a chance that real estate could become the new unwanted asset. I question whether the market can even have normal inflation related appreciation if there is no way to purchase a home without 20 or 30 percent down payment and taking out the 2003 prices may be next. There is just no way to produce price appreciation without the leverage of lower down payments.

Tuesday, September 16, 2008

The fine line between lying and ceo confidence

I know that it is easy for most people to assume that when a CEO of a major corporation announces with conviction that everything is ok with the company or that they are going to resolve their issues in the next quarter etc are just blowing smoke but a case can be made that they may actually believe their statment. It could be called over confidence, delustional or just a strong degree of self efficacy that ususally has lead these head honchos to there position at the top in the first place. Most highly successful people have overcome great obstacles and challenges to get ahead. The personality traits of these people is often very similar in nature and once of the most common is extreme self confidence coupled with determination. The confidence can lead to hubris over time but it also can turn into a deep seeded belief that they can overcome any challenge is none too large for them to tackle. I know that people are often to quick to judge a person as arrogant or egotistical when they fail big after facing what appeared to be insurmountable odds. They may have held out until the last possible moment before they had to submit and they often will leave with the belief that if they had more time they would figure out how to turn things around. Of course this still could be seen as hubris. I am throwing out possibility that the origin of this "self-confidence" can be from blatant disregard for shareholders or it can come from the belief that the CEO can get the job done and that their is no way the can fail. Either way it can lead to some major credibility issues but for everyone one major corporate meltdown their is likely 100 battles won with this determination and confidence. They were just not front page news. This is just a different spin, something to think about while flogging your favorite CEO.

Monday, September 15, 2008

Where are the bottom callers?

Today was a hard hitting day on Wallstreet and the market sank below the July 15, 2008 support level. It had taken two months but the so called expert bottom callers who couldn't stop yakking on on July 15 were fairly quiet today. It is a perfect example of how analysts often become so self absorbed and arrogant that they don't even care if they are wrong. They loudest of the talkers usually are following a long list of wrong calls followed by justification or manipulation to obscure their mistakes. CNBC is notorious for pumping "experts" and allowing them to continue to have forum even after they lead viewers astray and mislead the public regarding the track record of anyone who can get in front of a microphone and camera.