Martin Armstrong – The Public V. Private Waves and Switzerland’s Fate Along with the Rest of us…

Yet another interesting lesson in relationship of economics to history. Seldom will you find mention of economics underlying history in traditional books, but Armstrong ties these relationships together for us, taking us to the current administration and their attack on capital in Switzerland…

The year 2016 seems to have particular meaning for Armstrong for the global economy as a whole. He makes the point that it is probably too late to fix our problems at this point and that we are now on our way into the history books. Simple math would tend to agree with that premise, and it, unfortunately, is not in politician’s self-interest to fix the underlying math…

*To PRINT, click "more" then "save document" to open in YOUR .pdf viewer where you can either save or print. Printing directly from the Sbribd menu may not produce good results.

Morning Update/ Market Thread 9/30

Good Morning,

Equity futures are higher this morning, below is a chart of the /ES & /YM (S&P and DOW futures:

NOTE: UPDATED CHART, the plunge followed the Chicago PMI report - The Chicago PMI fell back to 46.1, showing contraction when estimates were for growth and a number closer to 52.

The Dollar is down, bonds are down, oil and gold are both up.

First a big thank you to Davos who worked tirelessly to bring people updates on the economy – Thank You, your updates will be missed! I still have some projects myself and will be back into the full swing of writing hopefully by next week.

MBA purchase applications fell 6.5% for the prior week. That follows a rise of 5.6% the week prior. Interest rates are at historic lows, and yet Econoday is left to wonder why applications would be so low. Remember that this statistic was ruined when they stopped providing the raw data and now only give percentage moves. You will have no way to know what the real level of activity is here – by design:
MBA's purchase application index fell back 6.2 percent in the Sept. 25 week while the refinance application index slipped 0.8 percent. The dips come despite rock bottom loan rates including a 4.94 percent rate for 30-year mortgages, the lowest rate since mid-May. At 65.3 percent, refinancings are making up a larger share of total applications as homeowners scramble to lock in low rates and pay down higher rate loans. But the dip in the purchase index, if extended in coming weeks, would point to a slowing for home sales which, though bumpy, are just beginning to recover.

The ADP employment guess of the week is saying that we lost another 254,000 jobs in September. This is a report that I give little to no credence, we’ll get the government’s employment spin on Friday.

The third revision of 2nd quarter GDP came in higher than expected. Again, the GDP figures are grossly overstated as the deflator is understated plus we are counting mark to fantasy financial engineering, “growth,” as growth to our economy. Here’s Econoday’s report:
Yes, we are very much looking in the rear view mirror at this point. But the third estimate for second quarter GDP clearly shows the economy at recession bottom-with the weight of the evidence of more recent data arguing that the recession technically is over. And the component mix for second quarter GDP adds to the argument that the third quarter will be moderately positive. For the second revision to second quarter GDP, the Commerce Department nudged up its estimate to an annualized 0.7 percent decrease from the previous estimate of a 1.0 percent decline. The market forecast was for a 1.2 percent decrease. The upward revision was primarily due to higher estimates for business spending on software and nonresidential construction. Net, final sales are now more positive at an annualized 0.7 percent in the second quarter, compared to the second estimate of a 0.4 percent gain.

Year-on-year, real GDP decreased by 3.8 percent, after falling 3.3 percent in the first quarter.

On the inflation front, the GDP price index was unrevised at no change. The consensus had no revision at flat for the GDP price index.

The latest GDP numbers show the economy at recession bottom with increased likelihood that there will be an inventory boost in the third quarter, resulting in a moderately positive number for overall GDP. Equities should like today's report while bond yields should firm.

A part of that GDP report, corporate profits were revised downwards for Q2. We’re talking about a historic year over year decrease in profits of 19.2% which was revised downward from -17.7%. Of course the media spins the story to emphasize the short term bounce. Those who are “looking forward” are going to get burned again as the bounce is on the back of unsustainable government money pumping, not growth in the real economy:
Corporate profits in the second quarter were revised down slightly to an annualized $1.031 trillion from the original estimate of $1.050 trillion and in comparison to the first quarter's $0.976 trillion. Profits in the second quarter were up an annualized 24.5 percent, following an 85.1 percent surge the previous quarter. Profits are after tax but without inventory valuation and capital consumption adjustments. Corporate profits are down 19.2 percent on a year-on-year basis, compared to down 24.8 percent in the first quarter.

From a technical perspective, we are still forming a very nasty looking rising wedge. Rising wedges are bearish and the minimum target for those wedges is the base of the wedge. Below is a 9 month chart of the SPX:

The NDX is making an even more perfect rising wedge. The angle of ascent is steeper, you can expect that the correction will be steeper as well:

Regarding wave count, McHugh was in agreement that Monday’s advance was likely wave 1 up of wave 5 up (of c up of B up). That means that yesterday’s and this morning’s decline are likely wave 2. Wave 3 up of 5 up should begin fairly soon unless wave 5 truncates which it certainly can do. If this count is correct, the next wave up will be strong and it will finish very near to the top of this rally.

Notice that prices once again failed to get over the 1,061 pivot point. Your clue that wave 3 of 5 is underway is when that pivot point gives way. The next higher pivot is at 1,090, and current support is at 1,041.

How about that Indonesian earthquake? Another tsunami and now well over 100 killed… my sympathies, I’ve been to Pago Pago several times, it’s a tropical paradise but nature can certainly be brutal.

Donovan – Atlantis:

Davos on the Edge 9.30.2009


John Williams of Shadow Statistics: Not a Recovery, Dire Shape,

30 Minute point on, Part 1

World Bank Head Sees Dollar’s Role Diminishing

“The greenback’s fortunes will depend heavily on U.S. choices,” Mr. Zoellick said. “Will the United States resolve its debt problems without a resort to inflation? Can America establish long-term discipline over spending and its budget deficit?”

FDIC Bankrupt? Uh huh.

From CNBC's "Breaking News" banner:

FDIC to Ask Banks to Pre-Pay Premiums to Inject Cash Into Deposit Insurance Fund (story developing)


Somehow I suspect it will be something like this:

(Gee, I need to graft Geithner's head on that one..... along with Bair!)

Anyway, the point stands. The FDIC is clearly out of money, and this is nothing more than yet another legalized accounting fraud game, where they'll get "the money" now but allow the banks to "recognize" that "charge" over time.

Gee, what happens if the bank doesn't have any money somewhere between now and then and fails?

Mark To Myth Losers: Americans

I have often written about the fraud in marking so-called "assets" to mythical values. But nowhere does the damage of this practice hit more home than it does in places like this:

Vacant homes can become havens for drug sales and other crimes. Health and sanitation is another issue when homeless people move in to properties where utilities have been disconnected. And as the weather cools, there is yet another worry -- fires started by intruders trying to keep warm in vacant homes.

"They want to find a place to get out of the cold," Rigler says at another home near 300 East and 800 South. Several windows and even two doors have needed boarding up in recent months to keep out those doggedly determined to take up residence.

Those homes are the "visible side" of accounting fraud.

This is not limited to Utah. In Oakland CA:

"Just about every foreclosed property on my beat has some kind of problem," said Derek Smitheram, a police officer in East Oakland, which he said has thousands of vacant homes.

Again, the issue here is that these properties are being intentionally kept back from the market due to valuation.

Or in Miami....

But the real estate agent now brings a pistol when he visits the foreclosures he is trying to sell for banks, in case he runs into squatters in the long-vacant homes.

The problem in all three places, and thousands of towns across the country, is the same: Banks have every incentive to drag their feet in both recognizing that loans are delinquent and thus to prosecute foreclosure in the first place, but also, once that has occurred, they have every incentive to hold properties off the market - the so-called "shadow inventory" - to avoid recognizing losses that have already occurred.

The Case for Inflation

Faber and the Dollar

PhD economist Marc Faber said in May:

“I am 100% sure that the U.S. will go into hyperinflation.”

Faber said he thinks – in the medium-term – we could have high levels of inflation (and see this and this).

Faber’s argument is that a weakening dollar will lead to inflation (as every dollar will buy less goods and services).

Government Printing

The government has injected trillions of dollars into the economy in the form of TARP bailout funds and other programs. Indeed, the government’s own watchdog over the TARP program – the special inspector general – said that number could be $23 trillion dollars in a worst-case scenario.

The basic argument for inflation is – as everyone knows – that the government has injected so much money into the economy (through bailouts, quantitative easing, purchase of treasuries, etc.) that there will be a lot more dollars chasing the same number of goods and services, which will drive up prices. In other words, the supply is the same, but demand has increased.

Indeed, the U.S. has also provided huge sums of dollars to foreign central banks. Could dollars given abroad cause inflation inside the U.S.? Yes – because some proportion of those dollars will be spent by citizens in those countries to buy stocks, commodities, goods and services within the U.S.

Three well-known advocates of the inflation argument are Rogers, Buffet and Schiff.

Specifically, billionaire investor Jim Rogers said we are facing an “inflationary holocaust”.

Warren Buffett said:

The policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

And Peter Schiff has argued for years that hyperinflation will wipe out the value of the dollar, so people should get all of their money out of dollars and into foreign currencies and assets.

But is all this government printing and quantitative easing really enough to cause inflation?

The back-of-the-envelope figures I’ve seen bandied about say no. Because of the massive destruction of credit (which – as Mish has repeatedly pointed out – must be included in discussions of inflation versus deflation), the government would probably have to print one-and-a-half to two times as much as it already has in order to create inflation.

The government could still do so. Yes, it would be suicidal for the dollar and might cause foreign buyers of U.S. treasuries to stop buying, but the boys in Washington could – if they were crazy enough – increase the money printing and quantitative easing to the point where inflation actually kicks in.

Will they do so? Summers, Geithner and Bernanke have proven themselves willing to do a lot of crazy things over the past year, so I wouldn’t rule the possibility out altogether.

Hyperinflation is Coming! Weimar Republic of Germany

Simon Johnson: Prospects for Your Future (Video on page)

Your Airplane Nate: Take care!

Morning Update/ Market Thread 9/29

Good Morning,

Equity futures are up a little this morning, rising to the 1,061 pivot on the latest Case-Schiller data that showed some month over month improvements (1,090 is the next higher pivot):

The dollar is up, bonds are down, oil and gold are both down.

The ICSC showed slight improvement, but we completely ignore that Goldman report as it has no basis in the real world whatsoever. The Redbook, half connected to the real world, showed a year over year decline in sales of 2.2% which is an improvement over last week’s -2.6% showing. Econoday claims an improving trend, but these have been negative for quite some time.

Here’s what was released by Econoday on the Case-Schiller Index:
Case-Shiller reports a third month of gains for home sale prices. The composite-10 index rose 1.7 percent in July on top of a 1.4 percent gain in June and a 0.5 percent gain in May. The composite-20 index, up 1.6 percent in July, shows similar gains. With the exception of Las Vegas, all metro areas show gains or at least flat conditions. Year-on-year rates also improved for a third month, now at minus 12.8 percent for the 10 index and at minus 13.3 percent for the 20. Rates of decline in California have definitely come down, now showing year-on-year declines in the mid-teens vs. 20 percent and worse declines earlier in the year. These are exhaustive data but do lag, which is a concern given set backs in new and existing home prices during August.

Note that the year over year declines are still very large at 13.3%, but better than the expected 14.2% plunge the "experts" were counting on. These numbers are a disaster for overleveraged homeowners and banks - oh, and for our overleveraged government, the world's largest home owner, auto manufacturer owner, bank owner/partner, and market/data manipulator extrodinaire.

Consumer confidence comes out at 10:00 Eastern.

Yesterday’s move up was powerful price wise, but very weak volume wise. This is yet another sign that the top is nearing and that distribution is occurring. I see an overall declining volume pattern still while lately the down days are quite a bit heavier than the up days. This is true across the ETFs and all the indices, not just one or two.

McHugh wants to see a Hindenburg Omen to be ensured that wave C down has begun. A Hindenburg Omen occurs when the market is split, with a large percentage of new 52 week highs alongside a large percentage of new 52 week lows. Every major decline in the past 25 years has been preceded by a Hindy. In order to get one, however, prices must start down and produce the new lows that are required – that will take some time as we are currently running at 170 new highs and only 2 new 52 week lows. My point being that you should not expect to just fall off the proverbial cliff immediately when C begins. Sure, that still could happen, but the odds do not favor it playing out that way. Declines roll and develop and the meat of the decline usually occurs with wave 3 down. Again, we are nearing the end of the count for wave B up.

Styx – Crystal Ball:

Davos on the Edge 9.29.2009

  • Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
  • Hotel RevPAR off 18.3 Percent
  • U.S. ratings-fraud continues
  • Commentary: We shouldn't have homeless children in America
  • Saddled with Debt
  • En Down Ments (Chart)
  • Ludwig von Mises Institute (Video, H/T iDoctor)
  • The Economic Crisis and How to Deal with It (Video, H/T iDoctor)
  • Ferguson On US Deficit - Bloomberg (H/T iDoctor)



“A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank.” – Ron Paul

Federal Reserve Buys More Than 100% of Mortgages Issued in 2009

This is important information. What I've found and present below is that the Federal Reserve is not just supporting the housing market, it is the housing market.

Just as important as a person's desire to buy a home is their ability to gain access to mortgage funding.

The mortgage market is a gigantic beast with many moving parts, but it is pretty easy to understand from a high level.

The process works like this: A homeowner secures a mortgage from a bank or mortgage company. Then the mortgage is sold off to another company, with the cash generated by that sale now available to lend to other potential homeowners. Ultimately the mortgage may pass through several sets of hands but ultimately it lands with a terminal holder.

In that chain, the mortgage might get sold off several times, or perhaps sliced and diced by Wall Street wizards, but all that matters is that some company (with cash) is there at the end to buy the mortgage to keep the whole chain moving along.

Lately, the "terminal buyers" in that chain have increasingly ended up being the federal government (through the GSEs) and the Federal Reserve.

And not just by a little bit, but by a lot.

Here are the numbers:

So far in 2009 (through August), a total of 3.2 million existing homes were sold for an average price of $217,000, while 263,000 new homes were sold for an average price of $264,000.

Taken together, and assuming that we live in a world where 10% is the average down payment, we get this table:

Hotel RevPAR off 18.3 Percent

We are now into the business travel season, and as expected, RevPAR is off sharply from 2008.

From Oahu Island occupancy increases in STR weekly numbers

Overall the U.S. industry’s occupancy fell 8.6 percent to end the week at 59.6 percent. Average daily rate dropped 10.5 percent to finish the week at US$98.34. Revenue per available room for the week decreased 18.3 percent to finish at US$58.57.

Click on graph for larger image in new window.

U.S. ratings-fraud continues

This is only one of the outrageous aspects of this obvious scam. Ratings agencies are paid by the sellers of these products. Thus, the ratings agencies don't even pretend to independently evaluate these products (which, of course, is the primary function of these companies). The companies selling these products have to explain to the ratings agency how they should value them. If a particular ratings agency doesn't supply the appropriate “rubber-stamp” for the toxic security in question, then they don't get any future business.

It is a scam which is openly fraudulent, yet nothing has been done. Ratings agencies are still being paid by the sellers of these fraudulent securities. They still haven't even hired enough staff to evaluate the products they are “rating”. And government “regulators” still turn a blind-eye to this institutionalized fraud.

Commentary: We shouldn't have homeless children in America

The effects of homelessness on children are crippling.

Children who are homeless are in bad health twice as often as other children, and four times as often as children with a family annual income of more than $35,000. They are four times as likely to have asthma, and they go hungry twice as often as other children.

Homeless children have delayed development at a rate four times the national average. More than one-fifth of homeless children between 3 and 6 years have emotional problems that require professional attention.

Saddled with Debt

Ignoring the massive spike in government related debt (Federal, State, AND Local) for the time being and focusing instead on household liabilities as a percent of the national income, we see mortgage debt is now at 70% of GDP (more than double the level seen in the 1980's and 50% more than that seen at the beginning of this decade) and consumer debt is now at 18% of GDP.

The importance of all this is of course that all that debt that has been added over the years has been a huge contributor to that GDP. The fear is that the debt has just pulled a lot of consumption forward rather than infrastructure or other long term investments that will provide future growth opportunities.

En Down Ments (Chart)

Ludwig von Mises Institute (Video, H/T iDoctor)

The Economic Crisis and How to Deal with It (Video, H/T iDoctor)

iDoctor writes:

"WOW!! watch at (starts) 1:15:00 where Nail Ferguson starts speaking the truth that no one wants to hear & they cut him off...."

Ferguson On US Deficit - Bloomberg (H/T iDoctor)

Morning Update/ Market Thread 9/28

Good Morning,

I’m back! Turns out that Arno has a broken ankle and will need about 6 weeks to heal. Fun while it lasted, it’s a very difficult and disappointing way to end the trip. The window for doing the trip as planned has passed for the year, as far as I’m concerned, and I’m not planning on attempting it again.

Thanks to all who supported the effort, and especially Davos who kept this site going. If you are not aware, Davos has announced that he is stopping his updates on Chris Martenson’s site at the end of this month. And, since I’m back he will also stop the updates on this site at that time. He plans on working on some projects and spending more time with his family. It’s difficult to put never ending work into a blog, and he deserves a well earned break and all our thanks for his help in spreading around some reality.

Equity futures are up this morning, here’s the overnight action on the /ES and /YM (S&P and DOW):

The dollar is up slightly, oil is flat, gold is up a couple dollars but still stuck below the $1,000 mark.

No economic news out today, that’s good as it gives me some time to get caught up on things. That’s going to take a few days, so please be patient with me and I’ll get back to writing full force again as soon as I can, but I’m going to have to work into it as I get settled again. Later in the week we have consumer confidence, another Q2 GDP trumped up revision, Chicago PMI and a host of the other usual highly questionable statistics! The next large event that everyone is looking forward to is the employment situation that comes out next week on the 2nd of October.

Below is a 6 month chart of the S&P 500. You can see that the rising wedge is still in play. According to McHugh, this latest down move should be followed by one more up move to finish off his wave count for the large wave B up, that puts C down to follow. Looking at the stochastics, the daily has a way to go before it’s oversold, but the 60 minute is on a fresh buy and the shorter term oscillators are mixed. I do see a very short term positive divergence but the negative divergence is still there, and quite large, on the longer time frames. My guess is that we may tap the bottom of that wedge sometime soon and then we’ll rise back to the top and possible make a new high. Wave 5’s, however, are tricky as they can either extend and rise above the top of the wedge, or they can truncate. This next wave up, when it begins, will likely be the bulls’ very last chance to escape with their pants on.
Numbers to watch? October 13th, and SPX 1133 in honor of Seth? What happened to him anyway? I’ll have to write him and find out… prison is not ruled out, lol. The pivot points to watch are support at 1,041 (next lower at 1,018), and resistance is at 1,061.

Speaking of bulls, even Jim Grant has turned bullish? That’s a great indication that the psychology for a major top is in place. During the Great Depression, there were also some very famous investors who turned bullish only to be wiped out later. Their thesis correct, it simply takes longer than you would think to draw in all the idiots, err… dumb money, which the world seems to flooded with. Insider selling? Still at record highs. Price to Earnings? Off the charts by historic norms. The math of debt? Even more unworkable than before. Banks? Still insolvent, but hiding via accounting tricks and supported by the government that is complicit in the deception.

No, those things have not changed one iota in the two weeks I was gone, and as you can see, neither has my outlook. The fleecing is ongoing, it’s going to get real ugly in the next round.

Not my favorite tune, but hey… I’m back in the saddle again!

Aerosmith - Back In The Saddle

Davos on the Edge 9.28.2009

  • Ticker Guy: Post-HR1207 Hearing (Video)
  • Max Keiser talks to Stacy Herbert about the IMF sales of 403 tons of gold (Video)
  • Is The Fed Hiding Gold Swap Arrangements With Foreign Central Banks?
  • The ONLY Bright Light on the Team: Blasts The Goldman Business Model, Moral Hazard, And Calls For A Return Of Glass-Steagall
  • Staycation (Chart on page)
  • Ron Paul on Fed Transparency, We Shouldn't be Afraid of the Truth (Video on page)
  • Naill Ferguson Discusses the G20 (Video, H/T Ernie)
  • Bailout Date
  • G-20 gridlock leaves global financial system at risk (H/T Dogs)
  • $1,900.00 or do Time (Congress excluded)


Ticker Guy: Post-HR1207 Hearing (Video)

Max Keiser talks to Stacy Herbert about the IMF sales of 403 tons of gold (Video)

Is The Fed Hiding Gold Swap Arrangements With Foreign Central Banks?

[Whitepaper on page]

There is not one asset that, over the decades and especially since the collapse of the gold standard, has received more claims of manipulation than gold. Yet evidence has always been impossible to come by. Are the interests imposing a gold price ceiling just too strong? If GATA's latest dispatch is correct, then yes, and they reach to the very pinnacle of modern financial oligarchy, represented by none other than the US Federal Reserve. GATA believes that the Fed has implicitly confirmed the existence of gold swap arrangements. As we all recall, the Fed issued nearly half a trillion in foreign CB liquidity swap lines whose primary reason was to make sure that foreign banks which were all massively short the dollar did not collapse, as the dollar skyrocketed into the end of 2008, after the capital markets became paralyzed and the dollar-short trade promptly became unwound. Could gold swaps be a comparable method for the Fed to explicitly permit foreign entities to keep gold prices low?

The other question of whether or not this confirmation needs an depth investigation over potential prior contradictory disclosure is left for the proper authorities. Of course, when it pertain to the Fed, there are no proper authorities. After all, the Fed is accountable to no one.

The ONLY Bright Light on the Team: Blasts The Goldman Business Model, Moral Hazard, And Calls For A Return Of Glass-Steagall

[Whitepaper on page]

Staycation (Chart on page)

Ron Paul on Fed Transparency, We Shouldn't be Afraid of the Truth (Video on page)

Naill Ferguson Discusses the G20 (Video, H/T Ernie)

Bailout Costs..... to Date

--- Amounts (Billions)---
Limit Current
Total $11,563.65 $3,025.27
Federal Reserve Total $5,870.65 $1,590.11
Primary Credit Discount $110.74 $28.51
Secondary Credit $1.00 $0.58
Primary dealer and others $147.00 $0.00
ABCP Liquidity $145.89 $0.08
AIG Credit $60.00 $38.81
Commercial Paper program $1,200.00 $42.44
Maiden Lane (Bear Stearns assets) $29.50 $26.19
Maiden Lane II (AIG assets) $22.50 $14.66
Maiden Lane III (AIG assets) $30.00 $20.55
Term Securities Lending $75.00 $0.00
Term Auction Facility $375.00 $196.02
Securities lending overnight $10.42 $9.25
Term Asset-Backed Loans (TALF) $1,000.00 $41.88
Currency Swaps/Other Assets $606.00 $59.12
GSE Debt Purchases $200.00 $129.21
GSE Mortgage-Backed Securities $1,250.00 $693.60
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $289.22
FDIC Total $2,477.50 $356.00
Public-Private Investment (PPIP)$1,000.00 0.00
Temporary Liquidity Guarantees* $1,400.00 $301.00
Guaranteeing GE Debt $65.00 $55.00
Citigroup Bailout, FDIC Share $10.00 $0.00
Bank of America Bailout, FDIC Share $2.50 $0.00
HUD Total $306.00 $3.25
Hope for Homeowners (FHA) $300.00 $3.20
Neighborhood Stabilization (FHA) $6.00 $0.05

G-20 gridlock leaves global financial system at risk (H/T Dogs)

NEW YORK— A year after the panic that brought the world’s financial system to the brink of collapse, the Group of 20 nations will now assume the role of a permanent council on global economic cooperation. But there is still no global regulatory framework to prevent another major market meltdown. As the leaders of the world's top industrialized nations gather in Pittsburgh, that will be another item on the menu while they sip wine and nibble on hors d'oeuvres.

$1,900.00 or do Time (Congress excluded)

Taxation Chief of Staff Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead. He signed it "Sincerely, Thomas A. Barthold."

Davos on the Edge / Market Thread 9.25.2009

  • New Push for Global Currency
  • Gloom Boom & Doom (Video)
  • Peter Schiff, Dollar G20 (Video, H/T iDoctor)
  • A Coming Flood of Bank Owned Homes
  • Chart: Damaged REO, Mone-In Ready REO, Shorts & Non-Distressed
  • FOMC Between the Lines
  • Not Exactly Doom-and-Gloomers
  • Why the U.S. economy CAN'T “recover”
  • ICN (Video, H/T iDoctor)


New Push for Global Currency

The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC.

Gloom Boom & Doom (Video)

Peter Schiff, Dollar G20 (Video, H/T iDoctor)


A Coming Flood of Bank Owned Homes

Thus, it creates a “growing ’shadow’ inventory of pent-up supply that will eventually hit the market.”

Here’s the excerpt from the WSJ:

“The size of this shadow inventory is a source of concern and debate among real-estate agents and analysts who worry that when the supply is unleashed, it could interrupt the budding housing recovery and ignite a new wave of stress in the housing market . . . Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due.

As of July, mortgage companies hadn’t begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn’t yet acquired the property. The figures don’t include home-equity loans and other second mortgages.

Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier.”

This overhang is likely going to be problematic for years to come . . .

Chart: Damaged REO, Mone-In Ready REO, Shorts & Non-Distressed

FOMC Between the Lines

Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

We believe in the Easter Bunny and Santa Claus too, as shown by the clear contradiction with our previous paragraph.

Not Exactly Doom-and-Gloomers

According to the U.S. Small Business Administration, many successful entrepreneurs have similar traits and characteristics, including:

  • Persistence
  • Desire for immediate feedback
  • Inquisitiveness
  • Strong drive to achieve
  • High energy level
  • Goal-oriented behavior
  • Independent
  • Demanding
  • Self-confident
  • Calculated risk taker
  • Creative
  • Innovative
  • Vision
  • Commitment
  • Problem solving skills
  • Tolerance for ambiguity
  • Strong integrity
  • Highly reliable
  • Personal initiative
  • Ability to consolidate resources
  • Strong management and organizational skills
  • Competitive
  • Change agent
  • Tolerance for failure
  • Desire to work hard

In sum, they are not the kind of people who tend towards pessimism or who easily lose heart. With that in mind, the perspectives detailed by the nation's largest non-profit foundation devoted to entrepreneurship in the following report, "Entrepreneurs' Gloom Contradicts Wall Street Optimism," should give (further) pause to those who believe a "V"-shaped recovery is at hand:

Why the U.S. economy CAN'T “recover”

When asked to justify their reluctance to apply the label of “recession” to this economic collapse (which is, in reality, a Greater Depression), the reply was the same: formally declaring a “recession” was something which was done in hindsight – after enough data had accumulated to justify that backward-looking prognosis.

What a surprising coincidence that these same U.S. market-pumpers see absolutely no reason to exercise any caution at all when declaring a “recovery” has begun!

One of the chief propaganda tools of these shills is the index of economic “leading indicators”. Even if I were to concede these “indicators” were a persuasive tool for predicting future economic activity (which I don't), this particular statistic only has relevance if the economy is operating within something close to normal parameters – which it isn't.

ICN (Video, H/T iDoctor)


Davos on the Edge / Market Thread 9.24.2009

  • CORRUPTION: Reverse-Insurance?! (FDIC)
  • Get ready for this: officials may soon ask banks to bail out the government
  • Derivatives Could Cause Another Meltdown: Mobius (Video on page)
  • Income for the Masses Not Keeping Up... For 40 Years (Chart on page)
  • Mark Faber Part 1 Video (H/T iDoctor)
  • Mark Faber Part 2 Video (H/T iDoctor)
  • Mark Faber Part 3 Video (H/T iDoctor)
  • Shocker: Most Traffic Growth To UK News Sites Is Coming From U.S.


CORRUPTION: Reverse-Insurance?! (FDIC)

Let me pose a question to you.

Let's say you own a $200,000 house free and clear.

Let's further say that you would like fire insurance. Just in case you are a klutz in the kitchen, for example.

So you sit down and write yourself a fire insurance policy. You promise to pay yourself $200,000 to rebuild your house if it burns to the ground.

You then put your "insurance policy" in the safe and pat yourself on the back - you're insured!

Now, you want to re-do your kitchen and add a pool, so you go to the bank to get a mortgage to finance those improvements.

The mortgage company would accept your self-written policy as proof of insurance, right?

Oh wait - they'd call that fraud?

Well gee, what's this then?

Get ready for this: officials may soon ask banks to bail out the government

[Video on page]

Tired of the government bailing out banks? Get ready for this: officials may soon ask banks to bail out the government.

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

The plan, strongly supported by bankers and their lobbyists, would be a major reversal of fortune.

A hallmark of the financial crisis has been the decision by successive administrations over the last year to lend hundreds of billions of taxpayer dollars to large and small banks.

“It’s a nice irony,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, a consulting company. “Like so much of this crisis, this is an issue that involves the least worst options.”

Bankers and their lobbyists like the idea because it is more attractive than the alternatives: yet another across-the-board emergency assessment on them, or tapping an existing $100 billion credit line to the Treasury.

Derivatives Could Cause Another Meltdown: Mobius (Video on page)

Income for the Masses Not Keeping Up... For 40 Years (Chart on page)

Mark Faber Part 2 Video (H/T iDoctor)


Mark Faber Part 2 Video (H/T iDoctor)


Mark Faber Part 3 Video (H/T iDoctor)


Mark Faber Stocks 2 Video (H/T iDoctor)

Shocker: Most Traffic Growth To UK News Sites Is Coming From U.S.

Brit news sites from across the pond is growing nearly seven times as fast as that domestically. (To view a breakdown chart, click here.)Foreign Visitors To UK News Sites

Davos on the Edge / Market Thread 9.23.2009

  • HSBC bids farewell to dollar supremacy (H/T SaxPlayer00o1)
  • Fed to Geithner: Pi$$ Off
  • The origin of the U.S. dollar as legal tender and its link to Depression
  • Debt Clock (Global)
  • Episode 21 - The Web of Debt, 2 Beers with Steve
  • Dr. Rand Paul Part 1 (Video, H/T iDoctor)
  • Dr. Rand Paul Part 2 (Video, H/T iDoctor)
  • Dr. Rand Paul Part 3 (Video, H/T iDoctor)
  • Major Crisis Still Ahead, Past One Was Minor (Video H/T iDoctor)
  • Max Keiser Puts and Calls (Video)


HSBC bids farewell to dollar supremacy (H/T SaxPlayer00o1)

The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC.

Fed to Geithner: Pi$$ Off

“Federal Reserve Board has rejected a request by U.S. Treasury Secretary Timothy Geithner for a public review of the central bank’s structure and governance, three people familiar with the matter said.

The Obama administration proposed on June 17 a financial- regulatory overhaul including a “comprehensive review” of the Fed’s “ability to accomplish its existing and proposed functions” and the role of its regional banks. The Fed was to lead the study and enlist the Treasury and “a wide range of external experts.”

The Fed needs to be VERY concerned with maintaining their independence.

Regardless of your views about Ron Paul (his new book is called End the Fed), its the rest of the crowd of that scares me. Imagine what the dolts who run congress would do if they had access to the Fed’s authority.

The origin of the U.S. dollar as legal tender and its link to Depression

The question was: how can a government without the levers of the money printing press use money as an escape-hatch in a depressionary environment? So to answer that question, I wanted to look at the origins of legal tender laws in the U.S.. When the United States was established, the U.S. Constitution outlined the basic framework through which government – both state and federal – could act on behalf of America’s citizens. Nowhere in the U.S. Constitution was legal tender mentioned, and this is a bone of contention still amongst those who see the Federal Reserve as an illegitimate institution. Below, I want to outline a brief (and hopefully non-ideological) history of how the greenback became legal tender in the United States. I have some related comments at the end on Depressions and their lasting consequences on politics and history.

The Constitution

The Constitution mentions the word money in three sections, 8, 9 and 10. Below are the individual citations as they pertain to Congress acting on behalf of the federal government:

Section. 8. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow Money on the credit of the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

Section 9 is no longer applicable, but here it is.

Section. 9. The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

In Article 1, Section 10 of the Constitution, the authorities regarding money and taxation for individual states are outlined. It states:

Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws; and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

No State shall, without the Consent of Congress, lay any Duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

You have probably noticed that nowhere in here was the term ‘legal tender’ used. Why? The intention was to allow anyone to issue coins and notes backed by gold or silver. In fact, foreign coins backed by gold and silver were accepted in the U.S. because 80 percent of money in circulation in the U.S. pre-1800 was foreign.

Centralisation or de-centralisation?

Episode 21 - The Web of Debt, 2 Beers with Steve

In this episode we talk with author Ellen H. Brown, author of Web of Debt, about the creation of money, public banking, and naked short selling.

Upcoming guests for Two Beers With Steve are:

Richard Heinberg - Author of nine books including The Party's Over, Peak Everything and the newly released Blackout

George Selgin - University of Georgia Proffesor of Economics and authro fo the book The Theory of Free Banking

Also we will speak with the Producer of the Money Masters film w/ Bill Still. [enphasis mine]

As always you can subscribe to get automatic downloads of teh show as soon as they are available.


Show Notes

Money as Debt

Naked Short Selling

Exponential Growth

If the Dow is to follow the 1930s model....(Chart from BiiWii)


Dr. Rand Paul Part 1(Video, H/T iDoctor)

Dr. Rand Paul Part 2 (Video, H/T iDoctor)

Dr. Rand Paul Part 3 (Video, H/T iDoctor)

Major Crisis Still Ahead, Past One Was Minor (Video H/T iDoctor)

Max Keiser Puts and Calls (Video)

Davos on the Edge / Market Thread 9.22.2009

  • Federal Reserve Accounts For 50% Of Q2 Treasury Purchases
  • Report: Strategic Defaults a "Growing Problem"
  • The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.
  • Foreign Investors FLEE from U.S. debt (Possible Re-Post)
  • Obsolescence: Obama open to newspaper bailout bill
  • Silver Wheaton: the SAFE alternative to SLV
  • Fidelity Investments Thinks You Are A Dumb A$$ (Title from Michael Covel)
  • IMF to sell 403 tonnes of gold to boost lending to poor (H/T SaxPlaer00o1)


Federal Reserve Accounts For 50% Of Q2 Treasury Purchases

The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases.

This dramatic imbalance puts a lot of question marks over how the upcoming hundreds of billions in incremental Treasury purchases will be soaked up, now that QE only has $15 billion of capacity for USTs: with Households lapping up risky assets it is unlikely they will look at Treasuries absent some dramatic downward move in equities, while Foreign purchasers, which many speculate are in a game of Mutual Assured Destruction regarding UST purchases, have in fact been aggressively lowering their purchases of Treasuries (from $159 billion in Q1 to $101 billion in Q2, an almost 40% decline in appetite!). Will the US make these purchases much more attractive come October when QE for USTs ends? And if so, what kind of rates are we talking about? One thing is certain: in terms of priorities of the Federal Reserve, keeping the equity market buoyant, is a distant second to ensuring successful auction after auction well into 2010. After all there is near $9 trillion in budget deficits that need financing over the next 10 years.

From Morgan Stanley:

Flow of funds: The Fed also released its flow of funds data for Q2 on September 17. The main points are that:

Households reduced Q2 Treasury purchases from their blistering pace in Q1

Foreign accounts reduced Q2 UST purchases as the Fed ramped up Q/E ops

Bank Q2 purchases remained anemic despite the fall in other lending options

Broker/dealer purchases were high but not sustainable, expect Q3 moderation

Report: Strategic Defaults a "Growing Problem"

From Kenneth Harney at the LA Times: Homeowners who 'strategically default' on loans a growing problem

National credit bureau Experian teamed with consulting company Oliver Wyman to identify the characteristics and debt management behavior of the growing numbers of homeowners who bail out of their mortgages with none of the expected warning signs, such as nonpayments on other debts.


[Some results:]


The number of strategic defaults is far beyond most industry estimates -- 588,000 nationwide during 2008, more than double the total in 2007. ...

The U.S. Balance Sheet: Households See Net Worth Down by $12 Trillion Since Peak and Total Debt Floating in the Market of $33 Trillion.

Current U.S. household net worth: $53 trillion

U.S. household real estate: $20 trillion

So real estate makes up nearly 40 percent of household net worth. Keep in mind that $20 trillion in real estate is secured by $10.4 trillion in mortgages many that are now going bad. Interestingly enough, if you look at the mortgage data it peaks around $10.54 trillion and has fallen to $10.4 trillion. Do we really think that only a few hundred billion in mortgages have gone bad? This is simply a reflection of banks not writing down option ARMs and other questionable assets.

The commercial real estate debt is going to hit and cause more losses in the years to come. Yet this is part of the trend that we will not be seeing in the Q3 report. And if you really want to see something frightening in the report, just look at total debt outstanding:

Foreign Investors FLEE from U.S. debt (Possible Re-Post)

Ben's magic printing-press – which supposedly can print up infinite amounts of new “money” without diluting all the trillions of existing U.S. dollars (i.e. without inflation).

The fact is that there will never be any more foreign demand for U.S. debt, unless/until U.S. interest rates rise high enough to compensate foreign investors for the high risk of default and the enormous inflationary pressures building up in the U.S. economy, as a result of the current reckless creation of new money and debt.

Just as U.S. perma-bulls have discovered the myth that foreign investors would “always” be willing to load up on more U.S. debt, these same deluded zealots are about to discover that there is nothing “magical” about Bernanke's printing press. The U.S. government may be able to grossly manipulate markets over a short-term basis, but it is utterly incapable of repealing the rules of arithmetic.

As any decent economic commentator can tell you, “inflation” is a monetary phenomenon.

Obsolescence: Obama open to newspaper bailout bill

Sen. Ben Cardin (D-Md.) has introduced S. 673, the so-called "Newspaper Revitalization Act," that would give outlets tax deals if they were to restructure as 501(c)(3) corporations. That bill has so far attracted one cosponsor, Cardin's Maryland colleague Sen. Barbara Mikulski (D).

Silver Wheaton: the SAFE alternative to SLV

To begin with, what most people don't know is that the vast majority of global silver production is in the form of byproducts of other mining operations – sometimes this silver occurs in primarily gold-based ores, but most of it is produced as a byproduct of base metals deposits. Thus, most silver production is of secondary importance to mining companies – making them very receptive to proposals from Silver Wheaton to pay them up front for the silver they will mine, but at a substantially discounted price.

Fidelity Investments Thinks You Are A Dumb A$$ (Title from Michael Covel)


IMF to sell 403 tonnes of gold to boost lending to poor (H/T SaxPlaer00o1)

A prime candidate could be China, which is sitting on the world's largest foreign exchange reserves, topping two trillion dollars, and has been seeking to diversify away from the dollar.

China in early September agreed to buy the first IMF bonds for about 50 billion dollars and has been on a gold-buying streak, increasing its gold reserves by 75 per cent from 2003 to 2008, according to official media.

The IMF said that if official demand is insufficient, it could conduct the gold sales "on-market in a phased manner over time," in line with an approach already followed by central banks.

The IMF would be constrained by the overall ceilings agreed by the central banks, which currently is 400 tonnes annually for the next five years, starting on September 27.

The IMF said it "will inform markets before any on-market sales commence" and "report regularly to the public on the progress with the gold sales."

In July, the IMF announced it would increase its lending to poor countries, mostly in Africa, to 17 billion dollars by 2014, including 8.0 billion over the next two years.

That compares with an annual average of one billion dollars in the 2006-2008 period to poor countries, and three billion dollars in the first half of 2009.

The IMF also had decided to cancel interest payments owed by poor countries through end-2011 and reform lending practices to make loans quickly available, at higher ceilings on amounts and with more flexible conditions.

Davos on the Edge / Market Thread 9.21.2009

  • Tax the Dogs: State plots dog surcharge
  • Irene Aldridge Gets Death Threats Over Her Views On HFT, Pitches Book Again
  • 95% Of Your Savings, IRA, Checking Account and Retirement will be Gone (Video from
  • Elderly Bank Bandit: I Robbed to Pay Off My Mortgage
  • Faux capitalists look for the free lunch
  • ‘We still have the same disease' (H/T xRayMike79)
  • "Bailout" Money & Bankers: Corruption: Banks Lending UNSECURED To Terrorists?


Tax the Dogs: State plots dog surcharge

“The number of abandoned animals has gone through the roof over the past few years,” Jehlen said. “Shelters are euthanizing animals because they have too many.”

Jehlen pointed out that the MSPCA and several dog kennels and purebred pooch clubs throughout the state support the bill.

But French bulldog owner Megan Doerrer said she’s tired of the dog pile of state fees and taxes.

“I don’t want to pay more and I don’t think anyone else does either. It’s a weird time to choose to raise prices,” said Doerrer, 25, a math teacher who lives in the South End and was walking her dog Brady in Peters Park.

Clerks from cities and towns also oppose the additional fee, saying the state is snatching even more money away after cutting local aid.

Irene Aldridge Gets Death Threats Over Her Views On HFT, Pitches Book Again

Click to play

OUTRAGE: TYING IT ALL TOGETHER (Strong language, don't watch if offended)


95% Of Your Savings, IRA, Checking Account and Retirement will be Gone (Video from

I started at the 2:20 minute point...


Elderly Bank Bandit: I Robbed to Pay Off My Mortgage

"I had to get us out of this," the elderly man said Friday from the other side of the glass at San Diego central jail. "I've never done a bad thing in my life. But when you get desperate, I guess you throw all that sh-- out the window."

Listening to how Michael Casey Wilson of Santee tells it, a 17 percent mortgage, the threat of homelessness and a terminal health condition will turn a man to crime.

Wilson, 69, is accused of walking into the Bank of America branch in the 4100 block of El Cajon Boulevard in City Heights and handing a bank manager a demand note, saying he had a bomb. Prosecutors said he made off with $107,000 before he was caught lying on a front porch near the bank.

Faux capitalists look for the free lunch

The book has a chapter titled ‘Casino capitalism,’ which suggests that a simple solution to banks’ problems is to identify the banks that are insolvent and temporarily nationalise them. “Appoint new management, and give them six months to spin out 10 per cent of each of the separate viable pieces, with the taxpayer retaining the rest as passive investors. Bank of America can spin out five major pieces: BoA, Merrill, Countrywide, a toxic holding company, and the rest of its holdings,” Ritholtz recommends.

‘We still have the same disease' (H/T xRayMike79)

MT: They're all still here. Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient's symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.

"Bailout" Money & Bankers: Corruption: Banks Lending UNSECURED To Terrorists?

Can someone answer this question:



This is an OUTRAGE. Not only did this guy effectively stick the US Taxpayer with the $50,000 in debt it appears he may have been using the freaking money to plot some sort of terrorist attack as part of an Al-Quaida cell INSIDE THE UNITED STATES?


And don't try to tell me this is an "isolated incident" either. Some of these banks have had active programs for years to give loans and other services to undocumented illegal aliens. Wells Fargo even advertised their willingness to lend to people in this nation illegally:

It's the American dream -- buying a home for your family. And now you don't have to be in the country legally to own one.

Wells Fargo is first major California lender to offer home loans to illegal immigrants, 10News reported.

"We're not required to ask the immigration status of any of our customers. That is the responsibility of the federal government," Wells Fargo bank representative Jerry Ruiz said.

Bank America has provided credit cards for years to illegal immigrants and others "without social security numbers", requiring only that they have a checking account for three months. BAC will also extend mortgages to these people - individuals who could be deported at any time, sticking the bank (well no, sticking the taxpayer, since we bailed them out!) with the loss.

Oh, and if you want an ACORN connection to all this? Here it is - this time with CITIBANK, who only exists today because of taxpayer largesse:

The local program, which uses tax identification numbers instead of Social Security numbers, is similar to programs run by small lenders – and two state agencies – around the country that have distributed millions of dollars to undocumented immigrants over the past few years.

“There is a huge untapped market out there, but it is a controversial program,” said Sarah Lumbert, office director of San Diego's ACORN Housing Corp., part of a national group working with Citibank to provide tax-ID loans.

Isn't that special?

Not only is the taxpayer bailing out banks that have made loans to illegal immigrants but now it appears that the taxpayer has been bailing out banks WHO EFFECTIVELY GAVE MONEY TO AL-QUAIDA TO FUND A TERRORIST ATTACK IN THE UNITED STATES!

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