Wednesday, March 5, 2008

Just Tell The Truth Already

Pretty nice weather up here today. Mid forties and just a hint of that "warm air" smell. So soon yet so far away is the springtime.

Ambac "Bailout Plan" Fails to Materialize
This morning all the message boards were buzzing with the "secret" that a bailout plan for Ambac insurance was about to be unveiled. Longs battled shorts on the message boards and the cast of CNBC was breaking their own arms patting themselves on the back. The markets were seeing a good lift, and promised so much more when the "surprise bailout" announcement was to be made. Trading was suspended in ABK stock as the big moment neared. And then.....

...ABK basically will be selling a bunch of stock that nobody would want to raise around 1-1.5 Billion dollars to "protect" their AAA rating. HAHAHAHAHAHA!! Too Funny!

Seriously, this was probably the funniest and most reveling day the financial world has seen in a while. After 3 weeks of meetings, planning, and rumor running, all that could be done for ABK was to issue a ton more stock? Things must be pretty bleak indeed. That was the funny part, the total lack of anything substantial for ABK.

What was revealing is the fact that IF a conglomerate of banks had out together a ton of coin to back ABK (still far less than their expected losses) the markets would have gone parabolic to the upside. The point here is that the market is STILL looking for a quick and easy patch to paint over the credit mess and make it go away. This shows the kind of lack of understanding of the underlying issues that have caused this problem to balloon to massive proportions.

The debt driven, credit and finance based economy of the past 5 years will not unwind overnight. It will not be fixed by moving a few assets between balance sheets to hide losses. This will take time and pain. Playing with fake ratings, delaying the sale of dead assets, and hiding the gigantic amounts of real estate now "owned" by the banks will not change anything. You can bank on it.

Just Tell The Truth Already
Even after a whole day and night to let it go, I am still fuming over the latest comments by Bernanke as it relates to the "principal reductions" for bad loans. I am not the only one, as the blogosphere has been on fire with outrage and argument.

I wish that the FED, the banks, and the government would just come clean about what is going on. I have had it with all the baby talk about a slowing economy. I am sick of hearing about the small number of troubled mortgages that need our help. I am tired of oil (and later gasoline) going up in price because the FED cannot stop cutting interest rates. Yes, I am annoyed in general. Right now, tomorrow even, Bernanke and the heads of the 4 largest banks should be on CNN and made to answer, in no ambiguous language, the following questions:
  • How was possible for someone that makes $30,000 to get a mortgage for $500,000?
  • How can a total default of just 10% of ALL mortgages cause a epic collapse of the entire US banking system?
  • Why is it your mission to make the dollar worthless?
  • Why in the world is this MY problem?
  • Why are you so stupid?
  • Why do you make so much money for being stupid?
  • How can I get that job?
  • How do you sleep at night?
  • At what point do you think the average person, when faced with your silly "if the system fails you will be hurt along with everyone else" threat just say "So What!"

Sorry to rant, but the events of the past few days have really turned my stomach. The era of no responsibility must come to an end. We are all to blame. Perhaps not YOU in particular, but we all (collectively) have been guilty for years of electing fools and morons to office. This is what you get. As a US taxpayer and citizen, I want my 9 questions answered in no uncertain terms. Use the comments section to ask a few of your own and I will post a compilation of them either tomorrow or Friday. Try to make them good!

Have a good night.


Anonymous said...

Well oil, gold and silver are heading up up and away. Too bad there hasn't been a big dip as I always see that as my buying opportunity. Well the new Dawn of War:Soulstorm came out and it's time to lock myself to the PC for a few hundred hours until I finish it.


PS: Bernake doesn't have a hard time sleeping as he is an android.

Anonymous said...

"I wish that the FED, the banks, and the government would just come clean about what is going on."

They are as far as I can tell, we are going to lower interest rates even if it means a total collapse of the dollar and raging inflation to bailout the banks and prop up assert prices and if you don't think we can or you don't like it screw you. This has 100% backing by the elected leaders of this country and besides that it buys votes and if you don't like it screw you. Most of the people in this clueless consumer debt based economy of ours wants and expects a free lunch and although it will never be free if it can just be put off for a few more years great. Hate to say it but that is the way it is and I don't believe that the few of us that see it for what it is can do anything to stop this non-sense as we are the minority and clearly out voted.


KJ said...

Regarding your Q as to how 10% of bad mortgages is bringing down the whole system, I think there's so much leverage and so much skimming going on each time this mortgage paper is passed along that we don't even know how much of a Ponzi scheme it really is. I think every time a home loan explodes, 2 or 3 times it's value in paper gets vaporized.

I'm not an economist, so if I have this wrong, don't hesitate to say so. It's how I learn.

As far as Qs for Bernanke, I think the ultimate question is -- can this really be fixed? If he knows, I wish he'd say so and get on with it.

Some say this last bubble just papered over the bomb with false prosperity and that the economy's growth is largely an inflation of the money supply via credit, and now it's deflating because there's not enough real growth to sustain it, let alone keep it growing.

Unless wages go up, a lot of people will have to stop spending. Their wages can't handle any more debt. But despite all the bail-out schemes, the one we haven't heard is an increase in wages. And I can't think of another bubble that would bail out JSP. It feels like the end of the line. But I don't know what that might mean in practical terms.

Sorry for the long post. Thanks for your blog. Great stuff!

TexasRadio said...

Just get an answer to question #5 and I'll be satisfied.

Russ DoGG said...

I couldn't agree more with you. That idea is hilarious. As in stupid.

getyourselfconnected said...

You may not be an economist, as I am certainly not, but you have a better grasp of reality than about 95% of the financial world right now!
Kevin, I agree with your comment absolutely. You are right, there are just too few of us to make a dent in the system. I can still moan about it though!

watchtower said...

Now you all get out there and start spending!!! It's your patriotic duty after all. (or this puppy going down, ****, I'm even going to send you a check to get you started!)

Love, "W"

newscalculus said...

if its gonna crash...lets be done with it...ive got a sixpack waiting