Post by sandi66 on Dec 27, 2007 7:26:00 GMT -5
By: pelicanbrief114
27 Dec 2007, 01:15 AM EST
Msg. 637184 of 637206
Jump to msg. #
2007 Year In Review
And what likely is to transpire forthcoming in 2008 unless meaningful and perhaps painful (Short-term) measures are undertaken PRONTO!!!!
EXIT 2007: DENIALS & TONTARIA
by Jim Willie CB
Wall Street is in deep sneakers. They are busy putting a positive spin on 2007, which in mid-year unleashed the beginning of an unstoppable nightmare. The first cracks were revealed in gory fashion in the form of subprime mortgages blasting fissures through the entire bank and bond system. The next cracks will blossom into a mindboggling series of shocks next year. The US Federal Reserve planted millions of seeds, led by Alan Appleseed Greenspan, during almost two years of ridiculously irresponsible low interest rates so as to assure a doomed outcome. One should never entrust US-based lending institutions to create mortgage products, to approve of loans, to work (collude) with appraisers, the end result of which is massive creation of new debt destined to implode. Recall that the Good Crazed Maestro, who resembles Mr Magoo even more since his retirement, endorsed the housing bubble, begged for it even, urging down long-term interest rates in 2001 & 2002. He desperately needed for housing inflated so-called wealth to save his bacon from the stock bust a year earlier. Both the stock bubble and housing/mortgage bubbles had his fingerprints on them. GREENSPAN MORTGAGED THE ENTIRE BANKING SYSTEM AND ECONOMY WITH BAD LOANS, WHICH ARE IN SYSTEMIC DEFAULT. He actually blessed the housing bubble as a legitimate foundation for an entire USEconomy, a fact that should never be forgotten. One must knock down a fifth martini or whiskey to buy such heretical garbage, but the entire nation lapped it up like hopeless drunkards grasping at overturned bottles. The past several weeks have included a boatload of denials and a large dose of tontaria (Spanish: nonsense). This article is a brief attempt to address the denials and tontaria, a reflection upon the completed year. In no way is any claim made of being a comprehensive listing of blatant deceptions. That requires a 200-page book.
The Robert Rubin mentality has prevailed for well over a decade, wherein US banking policy is designed to recklessly put off problems until tomorrow in order to buy some time today. And yes, during the many todays, the Manhattan Made Men crowd have profited handsomely. Well, Bob, tomorrow is 2008. You are busy covering your hind parts with a fresh Abu Dhabi infusion at Citigroup, a guarantee of some bought time but not any reprieve of eventual bankruptcy. Rubin ushered in, with zero fanfare or broad recognition, the age of the Mussolini Fascist Business Model. The merger of state of big business started in the mid-1990 years with the financial sector, and has extended to energy and military defense in the 2000 years. Get nervous if and when it extends to the pharmaceutical industry in coming years and forced innoculations. Their motives are almost uniformly self-serving, not for the public sector service and benefit. This is about profit and control. In fact, a syndicate has had control of the White House since the Ole Gipper took one in the ribcage in a close call with the Grim Reaper in 1981. This group crosses political party lines with excellent disguise. Nationalism and security are their calling cards these days. The tragedy of this business model is the spread of corruption throughout an entire system, hidden at first, boasted in midstream, enforced at the point of a gun later on. My claim of US institutionalized dishonesty made in 2005 in public manner, even at conferences, has been verified with bold examples for all to see. It extends far and wide, to charity organizations, even to sports.
Next year, a reign of financial and economic terror will befall the world banking system, with the United States as its origin. The shock waves will have California as its epicenter, the creative laboratory of nutty mortgage design. The US banking system will finally be recognized as destroyed, insolvent, and entirely dysfunctional. The repair process in reaction will be interesting to behold, as money will be printed, created, and dispensed at a clip never seen before in a multi-national fashion in the history of mankind. So far, no level of desperation can be detected. That will surely change in 2008. The Wall Street criminal fraud artisans, at the focal point of responsibility for dissemination of trillion$ of mortgage bonds, could not resist temptation. In fact, the US Federal Reserve seems still unaware of crisis. Wall Street did what they do best, package and sell, with regard only for their fees, paychecks, and bonuses, as they organized collusion toward fraud and misrepresentation never seen before in modern history. Well, this time, they got stuck with a huge amount of inventory. Big domestic institutions followed by foreign institutions wised up, but not quickly enough. The private equity movement was in full swing also, leading to more accumulated inventory. Then it slammed shut. Unfortunately for them, the assembly line was halted abruptly. IMAGINE SALMONELLA in a meat packing business with huge volume in shipping products. As the production line halted, much of the toxic output ended up in the meat packer balance sheet, even dinner table. Some CEO executives took sick and fell by the wayside. Their customers are all sick, very sick, and will get even sicker.
BOLDFACED DENIAL WITH YET MORE SPIN
The 2007 year started out reasonably calm, and ended with constant damaging storms in an utter barrage. Wall Street denials of the housing crisis and mortgage debacle were as consistent as they were a departure from reality. The next big facade of deception to be smashed will be that the mortgage loan and bond problem is a subprime issue. By summertime, a gigantic crisis in mortgages will be recognized far beyond the boundaries of subprime. It is instead an adjustable mortgage issue, whose emphasis is firmly on recently written loans. By late next year, the climax to the mortgage debacle will be the horribly painful writedowns to prime mortgage bonds, from basic falling national housing collateral value. If the Untied States suffers another 5% to 7% decline in home values, the entire mortgage bond structure will be downgraded, lowered in value, sufficient to threaten the entire banking system. Below is a quick list of specific denials with ample spin, hard to swallow but heard frequently. Let this be a record of 2007, a litany recitation of corrupted information. Wall Street and their attendant media outlets and advertiser accomplices must paint a decent face on a turning point year coming to a close in 2007. It ended in truly deadly fashion. In just a few days recently, the following claims were made in the financial networks, from anchors to guests alike. They looked like liars because they are liars.
The real estate downturn was overblown. A modest correction took place, rendering prices more reasonable, taking the froth off the market, removing the speculators, bringing the system back to normal. What a crock! Watch inventory growth and continued home foreclosures. Watch housing values continue painfully down another 5% at the very least next year. Watch the incredible effect when prime mortgage loans and bonds crash as the next phase of this powerful bear market unfolds. National prices are down 6.7% for the last twelve months ending October in the top10 cities, and down 6.3% in the top20 cities. In eleven of the top20 cities, the largest single annual price decline has been recorded. Data comes from the S&P Case Shiller index. The prices are actually accelerating downward, in synch with inventories, as a valid expression of Supply & Demand dynamics. The ugly side to this story is horrendous mortgage fraud at every conceivable level. Small rings engaged in fraud with appraisers at the loan level, then abandoned loans. Lenders engaged in fraud at the volume level by promising refinances never to occur. The system enaged in NINJA loans on a rampant scale, requiring No Income, No Job or Income. Bankers engaged in fraud at packaged bond levels by blatant misrepresentation. This downturn has already caught the attention of some more diligent analysts, who have begun to recognize it as deep and damaging as anything seen since the Great Depression. We will witness a depression with an Orwellian spin, all the pain but little of the recognition. On the footpaths traveled by prospective home buyers, they hold back, realizing the market has not stabilized, anticipating better bargains ahead, as they assess that housing is not a safe investment, period. The American dream of a home has morphed into a nightmare, a prescription for losing your lifelong savings.
The worst is over in financial firm bond loss writedowns, as the bank sector offers huge stock bargains. The stock selloff in bank equities is overblown. What a crock! They openly admit that the smartest guys in the room missed the big bond problem. Of course, they missed the problem, since they were feverishly trying to sell their lethal fraud-ridden bonds, the centerpiece to the problem. An old adage is appropriate, that hidden losses are triple the size of initial estimates. By the time more dust clears, Wall Street banker broker dealers in toxin will report bond writedowns totaling over $300 billion, perhaps over $500 billion. If the upper figures are a reality, then the financial nucleus on Wall Street is bankrupt. If lawsuits come fast & furious, their losses will easily surpass $1000 billion. The BKX banking stock index shows freefall, not any conceivable hint of reversal or stability. The funniest chapter of this tragedy is the continual renaming of the packaged bond toxin for sale by Wall Street. Collateralized Debt Obligations are not too bad sounding. Structured Investment Vehicles sounds more like trucks circling the city endlessly, whose bond cargo is unwelcome in any garage. Unidentified Financial Objects sound like they belong in Roswell New Mexico with other UFO sightings. They were designed to hold the unlabeled portions of dead bond packages, but jettisoning off the dead parts. The Master Liquidity Enhancement Conduit (MLEC) was a bold attempt by Wall Street to obtain USGovt bailout help, deceiving the US Congress and the public with a fancy label. The name of the game is to rename toxic agents, like salmonella, trichinosis, ptomaine. The public is not very educated, a strong advantage for the shell game artisans. There is innovation here, but only in packaging, nothing in value. This is not your father’s typical credit cycle. There is nothing healthy about what is happening, and no signs anywhere of stability of the situation. This is NOT the system working it out, but rather the system NOT working much at all.
The USEconomy has suffered no spillover from the housing crisis and mortgage debacle. Never under-estimate the US consumer. Claims continue to flow in that the economy is resilient, its back is not broken, growth continues, and consumers are hanging in there. What a crock! Those who embrace such spurious views must pay too much attention to the official USGovt statistics, and not enough of the regional sources (Philly Fed, Chicago PMI, business investment) relating to manufacturing and services. Has anyone noticed that the consumer retail figures are not inflation adjusted, and are running well below even the doctored CPI series? Retail is in decline in real terms. The consumers and households where they live are under strain never seen before in several decades. Energy bills this winter have absolutely slammed households, the worst being in the NorthEast with heating oil. The last resort has been credit cards, since $500 billion less in home equity extraction was pulled in 2007. The credit card delinquency is rising. In fact, most delinquencies are rising, probably juvenile delinquencies also. The occupant of the highest office in the land might be another. When bonds backed by credit cards and car loans go bust in 2008, the denial will fade away.
A USEconomic recession is not being indicated in the stock market, which is still an efficient market mechanism. The major stock indexes have held firm, withstood corrections and sudden selloffs. What a crock! Most major sector indexes have broken down, including banks (BKX), brokerage (XBD), mortgage finance (MFX), homebuilders (HGX), real estate investment trusts (RMZ), chips (SOX), retail (RLX), but not pharmaceuticals (DRG). America continues to be the sickest and most medicated in the industrialized world. And to be sure, the energy sector (XLE) is a strong as Atlas, while the Global Energy War rages on. Lest one forget, the defense industry (DFI) is doing swimmingly, as war is this administration’s middle name. Sorry, got distracted by details. The claims of an efficient market mechanism should bring laughter from the lowest portion of the human gut, with deep guffaws and bellows. The Plunge Protection Team has never been more active, and its activity has finally been admitted by the chieftains of the Titanics at sea, the ships of state. The Working Group for Financial Markets has worked overtime in 2007, rescuing the S&P500 with timely leveraged buys at 3pm. The PPT reach is broad, from stocks to bonds to currency to gold to oil. They have totally corrupted the entire financial market system. There is an efficient market mechanism at work, no denial here by me, since the PPT has efficiently destroyed the markets. So the S&P index is not pricing in a recession. Fine, everything else is!!! We have a situation where the top level overall measures show resilience, while all the components are breaking down. The Gross Domestic Product to measure economic growth has not faltered, while almost all economic components are in recession. The insult is to the doctors who falsify the all important aggregate measures, for the greater good. This is like saying every child in your family is sick, parents included, home structure also, but the family itself remains healthy and the home is strong. In the earliest school years, one should have learned that 1+1+1+1 does not equal 10. Every lie requires three more to support it. They powers forgot to lie with the components.
Foreign investment in US banks and institutions is a sign of strength, as they are attracted to opportunity in the United States. They see value in the US with bargain prices. What a crock! Foreign investors and institutions are actually racing to infuse cash into the several large banks in order to prevent a very ugly series of public declarations of bankruptcy. Start with Citigroup. Add Bear Stearns. Maybe pitch in Wells Fargo. The words ‘insufficient capital’ should tip off intelligent people, but so far that has yet to occur. The words mean insolvent and bankrupt, with absent cash liquidity being the linchpin for filing for bankruptcy. Foreign infusions like from Abu Dhabi, Singapore, even Citadel, these have stemmed the capital inadequacy condition, but not the insolvency. They are still suffering from assets being outweighed by liabilities. Their bonds and related derivatives have gone sour, resulting in magnificent losses. This is nowhere over. My view leans more on reality. Most Wall Street banks are now vampires, walking dead. They almost all seek huge gifts from the USGovt, at costs born eventually by the US taxpayers. Even that entity (taxpayers) is something of a joke. The Untied States does not pay its own bills, not when gargantuan federal deficits are financed by Arabs and Asians via recycled trade surplus. The printing press might soon be the biggest single support mechanism for US debts. The foreign institutions are taking a stake in control of the US system itself, even while they attempt to prevent the bankruptcy of some of their largest investments. If Citigroup did not receive the multi-billion$, how far would a bankruptcy filing be down the road? These banks are as busy trying to dump mortgage bonds as they are resisting compliance of accounting rules. They have so much garbage assets sitting off balance sheet, it has become openly humorous. No, the US system is being sold. Sovereignty is being compromised in open visible fashion. Expect in a few years to apply for a car loan from Arab and Chinese banks. They might actually be more honest.
Reasonable credit standards have returned to the lending process, an indication that the system has corrected itself. What a crock! Bankers and mortgage agencies have turned into scaredycats, afraid to lend even to qualified borrowers. They distrust all collateral presented, since either assets are questionable in value or markets are too opaque. Many loans are approved, but down payments are much higher than ever before. Lenders are properly afraid that home collateral will gradually vanish. Anyone who makes the above claim must not be watching the interbank commercial paper market, as sizeable amounts shrink every week, almost without exception. Anyone who makes the above claim must not be watching the LIBOR rates, which continue to give the US Federal Reserve skimpy shallow myopic solutions a failing grade. Anyone who makes the above claim must not be watching the parade of banker bond writeoff losses. Anyone who makes the above claim must not be watching the collapse in mortgage bond indexes, even the significant losses to primes. Anyone who makes the above claim must not be watching the banker capital ratios plummet. Anyone who makes the above claim must not be watching the delinquency rates on loans of almost every conceivable type. Anyone who makes the above claim must not be watching the decline in residential home values, the collateral for many asset backed bonds.
The US banking system is heading deeper into crisis. Just like the Japanese banking system went insolvent during the 1990 decade, so has the US banking system. This has been a Hat Trick Letter forecast, registered in 2005. Japan kept many insolvent banks afloat, refusing to log soured failed assets on their balance sheets. Japan ran trade surpluses. Neither does the US run surpluses, nor its banking system fully enable prevent dead assets from showing up on balance sheets. Few properly link the resuscitation of the Japanese banks with the rise of China in the Asian sphere. The industrial buildup in China owes its equipment investment primarily to Japan, not the US. The majority of Japanese trade takes place with China nowadays, not the US. The US banking system will continue to implode. Wait until the prime mortgage implosion next year. We are not even in middle stages to the housing crisis and mortgage debacle. IT WILL CHANGE THE ENTIRE US SYSTEM, IN EVERY PHASE, NOT JUST FINANCIAL.
27 Dec 2007, 01:15 AM EST
Msg. 637184 of 637206
Jump to msg. #
2007 Year In Review
And what likely is to transpire forthcoming in 2008 unless meaningful and perhaps painful (Short-term) measures are undertaken PRONTO!!!!
EXIT 2007: DENIALS & TONTARIA
by Jim Willie CB
Wall Street is in deep sneakers. They are busy putting a positive spin on 2007, which in mid-year unleashed the beginning of an unstoppable nightmare. The first cracks were revealed in gory fashion in the form of subprime mortgages blasting fissures through the entire bank and bond system. The next cracks will blossom into a mindboggling series of shocks next year. The US Federal Reserve planted millions of seeds, led by Alan Appleseed Greenspan, during almost two years of ridiculously irresponsible low interest rates so as to assure a doomed outcome. One should never entrust US-based lending institutions to create mortgage products, to approve of loans, to work (collude) with appraisers, the end result of which is massive creation of new debt destined to implode. Recall that the Good Crazed Maestro, who resembles Mr Magoo even more since his retirement, endorsed the housing bubble, begged for it even, urging down long-term interest rates in 2001 & 2002. He desperately needed for housing inflated so-called wealth to save his bacon from the stock bust a year earlier. Both the stock bubble and housing/mortgage bubbles had his fingerprints on them. GREENSPAN MORTGAGED THE ENTIRE BANKING SYSTEM AND ECONOMY WITH BAD LOANS, WHICH ARE IN SYSTEMIC DEFAULT. He actually blessed the housing bubble as a legitimate foundation for an entire USEconomy, a fact that should never be forgotten. One must knock down a fifth martini or whiskey to buy such heretical garbage, but the entire nation lapped it up like hopeless drunkards grasping at overturned bottles. The past several weeks have included a boatload of denials and a large dose of tontaria (Spanish: nonsense). This article is a brief attempt to address the denials and tontaria, a reflection upon the completed year. In no way is any claim made of being a comprehensive listing of blatant deceptions. That requires a 200-page book.
The Robert Rubin mentality has prevailed for well over a decade, wherein US banking policy is designed to recklessly put off problems until tomorrow in order to buy some time today. And yes, during the many todays, the Manhattan Made Men crowd have profited handsomely. Well, Bob, tomorrow is 2008. You are busy covering your hind parts with a fresh Abu Dhabi infusion at Citigroup, a guarantee of some bought time but not any reprieve of eventual bankruptcy. Rubin ushered in, with zero fanfare or broad recognition, the age of the Mussolini Fascist Business Model. The merger of state of big business started in the mid-1990 years with the financial sector, and has extended to energy and military defense in the 2000 years. Get nervous if and when it extends to the pharmaceutical industry in coming years and forced innoculations. Their motives are almost uniformly self-serving, not for the public sector service and benefit. This is about profit and control. In fact, a syndicate has had control of the White House since the Ole Gipper took one in the ribcage in a close call with the Grim Reaper in 1981. This group crosses political party lines with excellent disguise. Nationalism and security are their calling cards these days. The tragedy of this business model is the spread of corruption throughout an entire system, hidden at first, boasted in midstream, enforced at the point of a gun later on. My claim of US institutionalized dishonesty made in 2005 in public manner, even at conferences, has been verified with bold examples for all to see. It extends far and wide, to charity organizations, even to sports.
Next year, a reign of financial and economic terror will befall the world banking system, with the United States as its origin. The shock waves will have California as its epicenter, the creative laboratory of nutty mortgage design. The US banking system will finally be recognized as destroyed, insolvent, and entirely dysfunctional. The repair process in reaction will be interesting to behold, as money will be printed, created, and dispensed at a clip never seen before in a multi-national fashion in the history of mankind. So far, no level of desperation can be detected. That will surely change in 2008. The Wall Street criminal fraud artisans, at the focal point of responsibility for dissemination of trillion$ of mortgage bonds, could not resist temptation. In fact, the US Federal Reserve seems still unaware of crisis. Wall Street did what they do best, package and sell, with regard only for their fees, paychecks, and bonuses, as they organized collusion toward fraud and misrepresentation never seen before in modern history. Well, this time, they got stuck with a huge amount of inventory. Big domestic institutions followed by foreign institutions wised up, but not quickly enough. The private equity movement was in full swing also, leading to more accumulated inventory. Then it slammed shut. Unfortunately for them, the assembly line was halted abruptly. IMAGINE SALMONELLA in a meat packing business with huge volume in shipping products. As the production line halted, much of the toxic output ended up in the meat packer balance sheet, even dinner table. Some CEO executives took sick and fell by the wayside. Their customers are all sick, very sick, and will get even sicker.
BOLDFACED DENIAL WITH YET MORE SPIN
The 2007 year started out reasonably calm, and ended with constant damaging storms in an utter barrage. Wall Street denials of the housing crisis and mortgage debacle were as consistent as they were a departure from reality. The next big facade of deception to be smashed will be that the mortgage loan and bond problem is a subprime issue. By summertime, a gigantic crisis in mortgages will be recognized far beyond the boundaries of subprime. It is instead an adjustable mortgage issue, whose emphasis is firmly on recently written loans. By late next year, the climax to the mortgage debacle will be the horribly painful writedowns to prime mortgage bonds, from basic falling national housing collateral value. If the Untied States suffers another 5% to 7% decline in home values, the entire mortgage bond structure will be downgraded, lowered in value, sufficient to threaten the entire banking system. Below is a quick list of specific denials with ample spin, hard to swallow but heard frequently. Let this be a record of 2007, a litany recitation of corrupted information. Wall Street and their attendant media outlets and advertiser accomplices must paint a decent face on a turning point year coming to a close in 2007. It ended in truly deadly fashion. In just a few days recently, the following claims were made in the financial networks, from anchors to guests alike. They looked like liars because they are liars.
The real estate downturn was overblown. A modest correction took place, rendering prices more reasonable, taking the froth off the market, removing the speculators, bringing the system back to normal. What a crock! Watch inventory growth and continued home foreclosures. Watch housing values continue painfully down another 5% at the very least next year. Watch the incredible effect when prime mortgage loans and bonds crash as the next phase of this powerful bear market unfolds. National prices are down 6.7% for the last twelve months ending October in the top10 cities, and down 6.3% in the top20 cities. In eleven of the top20 cities, the largest single annual price decline has been recorded. Data comes from the S&P Case Shiller index. The prices are actually accelerating downward, in synch with inventories, as a valid expression of Supply & Demand dynamics. The ugly side to this story is horrendous mortgage fraud at every conceivable level. Small rings engaged in fraud with appraisers at the loan level, then abandoned loans. Lenders engaged in fraud at the volume level by promising refinances never to occur. The system enaged in NINJA loans on a rampant scale, requiring No Income, No Job or Income. Bankers engaged in fraud at packaged bond levels by blatant misrepresentation. This downturn has already caught the attention of some more diligent analysts, who have begun to recognize it as deep and damaging as anything seen since the Great Depression. We will witness a depression with an Orwellian spin, all the pain but little of the recognition. On the footpaths traveled by prospective home buyers, they hold back, realizing the market has not stabilized, anticipating better bargains ahead, as they assess that housing is not a safe investment, period. The American dream of a home has morphed into a nightmare, a prescription for losing your lifelong savings.
The worst is over in financial firm bond loss writedowns, as the bank sector offers huge stock bargains. The stock selloff in bank equities is overblown. What a crock! They openly admit that the smartest guys in the room missed the big bond problem. Of course, they missed the problem, since they were feverishly trying to sell their lethal fraud-ridden bonds, the centerpiece to the problem. An old adage is appropriate, that hidden losses are triple the size of initial estimates. By the time more dust clears, Wall Street banker broker dealers in toxin will report bond writedowns totaling over $300 billion, perhaps over $500 billion. If the upper figures are a reality, then the financial nucleus on Wall Street is bankrupt. If lawsuits come fast & furious, their losses will easily surpass $1000 billion. The BKX banking stock index shows freefall, not any conceivable hint of reversal or stability. The funniest chapter of this tragedy is the continual renaming of the packaged bond toxin for sale by Wall Street. Collateralized Debt Obligations are not too bad sounding. Structured Investment Vehicles sounds more like trucks circling the city endlessly, whose bond cargo is unwelcome in any garage. Unidentified Financial Objects sound like they belong in Roswell New Mexico with other UFO sightings. They were designed to hold the unlabeled portions of dead bond packages, but jettisoning off the dead parts. The Master Liquidity Enhancement Conduit (MLEC) was a bold attempt by Wall Street to obtain USGovt bailout help, deceiving the US Congress and the public with a fancy label. The name of the game is to rename toxic agents, like salmonella, trichinosis, ptomaine. The public is not very educated, a strong advantage for the shell game artisans. There is innovation here, but only in packaging, nothing in value. This is not your father’s typical credit cycle. There is nothing healthy about what is happening, and no signs anywhere of stability of the situation. This is NOT the system working it out, but rather the system NOT working much at all.
The USEconomy has suffered no spillover from the housing crisis and mortgage debacle. Never under-estimate the US consumer. Claims continue to flow in that the economy is resilient, its back is not broken, growth continues, and consumers are hanging in there. What a crock! Those who embrace such spurious views must pay too much attention to the official USGovt statistics, and not enough of the regional sources (Philly Fed, Chicago PMI, business investment) relating to manufacturing and services. Has anyone noticed that the consumer retail figures are not inflation adjusted, and are running well below even the doctored CPI series? Retail is in decline in real terms. The consumers and households where they live are under strain never seen before in several decades. Energy bills this winter have absolutely slammed households, the worst being in the NorthEast with heating oil. The last resort has been credit cards, since $500 billion less in home equity extraction was pulled in 2007. The credit card delinquency is rising. In fact, most delinquencies are rising, probably juvenile delinquencies also. The occupant of the highest office in the land might be another. When bonds backed by credit cards and car loans go bust in 2008, the denial will fade away.
A USEconomic recession is not being indicated in the stock market, which is still an efficient market mechanism. The major stock indexes have held firm, withstood corrections and sudden selloffs. What a crock! Most major sector indexes have broken down, including banks (BKX), brokerage (XBD), mortgage finance (MFX), homebuilders (HGX), real estate investment trusts (RMZ), chips (SOX), retail (RLX), but not pharmaceuticals (DRG). America continues to be the sickest and most medicated in the industrialized world. And to be sure, the energy sector (XLE) is a strong as Atlas, while the Global Energy War rages on. Lest one forget, the defense industry (DFI) is doing swimmingly, as war is this administration’s middle name. Sorry, got distracted by details. The claims of an efficient market mechanism should bring laughter from the lowest portion of the human gut, with deep guffaws and bellows. The Plunge Protection Team has never been more active, and its activity has finally been admitted by the chieftains of the Titanics at sea, the ships of state. The Working Group for Financial Markets has worked overtime in 2007, rescuing the S&P500 with timely leveraged buys at 3pm. The PPT reach is broad, from stocks to bonds to currency to gold to oil. They have totally corrupted the entire financial market system. There is an efficient market mechanism at work, no denial here by me, since the PPT has efficiently destroyed the markets. So the S&P index is not pricing in a recession. Fine, everything else is!!! We have a situation where the top level overall measures show resilience, while all the components are breaking down. The Gross Domestic Product to measure economic growth has not faltered, while almost all economic components are in recession. The insult is to the doctors who falsify the all important aggregate measures, for the greater good. This is like saying every child in your family is sick, parents included, home structure also, but the family itself remains healthy and the home is strong. In the earliest school years, one should have learned that 1+1+1+1 does not equal 10. Every lie requires three more to support it. They powers forgot to lie with the components.
Foreign investment in US banks and institutions is a sign of strength, as they are attracted to opportunity in the United States. They see value in the US with bargain prices. What a crock! Foreign investors and institutions are actually racing to infuse cash into the several large banks in order to prevent a very ugly series of public declarations of bankruptcy. Start with Citigroup. Add Bear Stearns. Maybe pitch in Wells Fargo. The words ‘insufficient capital’ should tip off intelligent people, but so far that has yet to occur. The words mean insolvent and bankrupt, with absent cash liquidity being the linchpin for filing for bankruptcy. Foreign infusions like from Abu Dhabi, Singapore, even Citadel, these have stemmed the capital inadequacy condition, but not the insolvency. They are still suffering from assets being outweighed by liabilities. Their bonds and related derivatives have gone sour, resulting in magnificent losses. This is nowhere over. My view leans more on reality. Most Wall Street banks are now vampires, walking dead. They almost all seek huge gifts from the USGovt, at costs born eventually by the US taxpayers. Even that entity (taxpayers) is something of a joke. The Untied States does not pay its own bills, not when gargantuan federal deficits are financed by Arabs and Asians via recycled trade surplus. The printing press might soon be the biggest single support mechanism for US debts. The foreign institutions are taking a stake in control of the US system itself, even while they attempt to prevent the bankruptcy of some of their largest investments. If Citigroup did not receive the multi-billion$, how far would a bankruptcy filing be down the road? These banks are as busy trying to dump mortgage bonds as they are resisting compliance of accounting rules. They have so much garbage assets sitting off balance sheet, it has become openly humorous. No, the US system is being sold. Sovereignty is being compromised in open visible fashion. Expect in a few years to apply for a car loan from Arab and Chinese banks. They might actually be more honest.
Reasonable credit standards have returned to the lending process, an indication that the system has corrected itself. What a crock! Bankers and mortgage agencies have turned into scaredycats, afraid to lend even to qualified borrowers. They distrust all collateral presented, since either assets are questionable in value or markets are too opaque. Many loans are approved, but down payments are much higher than ever before. Lenders are properly afraid that home collateral will gradually vanish. Anyone who makes the above claim must not be watching the interbank commercial paper market, as sizeable amounts shrink every week, almost without exception. Anyone who makes the above claim must not be watching the LIBOR rates, which continue to give the US Federal Reserve skimpy shallow myopic solutions a failing grade. Anyone who makes the above claim must not be watching the parade of banker bond writeoff losses. Anyone who makes the above claim must not be watching the collapse in mortgage bond indexes, even the significant losses to primes. Anyone who makes the above claim must not be watching the banker capital ratios plummet. Anyone who makes the above claim must not be watching the delinquency rates on loans of almost every conceivable type. Anyone who makes the above claim must not be watching the decline in residential home values, the collateral for many asset backed bonds.
The US banking system is heading deeper into crisis. Just like the Japanese banking system went insolvent during the 1990 decade, so has the US banking system. This has been a Hat Trick Letter forecast, registered in 2005. Japan kept many insolvent banks afloat, refusing to log soured failed assets on their balance sheets. Japan ran trade surpluses. Neither does the US run surpluses, nor its banking system fully enable prevent dead assets from showing up on balance sheets. Few properly link the resuscitation of the Japanese banks with the rise of China in the Asian sphere. The industrial buildup in China owes its equipment investment primarily to Japan, not the US. The majority of Japanese trade takes place with China nowadays, not the US. The US banking system will continue to implode. Wait until the prime mortgage implosion next year. We are not even in middle stages to the housing crisis and mortgage debacle. IT WILL CHANGE THE ENTIRE US SYSTEM, IN EVERY PHASE, NOT JUST FINANCIAL.