Thursday, May 21, 2009

Thursday Downgrade Avalanche

What a busy week! Home late every night, but I have tomorrow through Monday off for a nice 4 day weekend. Get your Friday night requests for any category in!

Federal Reserve Audit Petition
There is a wonderful bill authored by none other than Ron Paul that calls for a complete audit of the Federal Reserve. At first mostly Republicans were getting on board, but now even the democrats are getting wise to the idea that the FED is doing things above and beyond their charter and they are staring to take the FDIC along with them.

Democrat Alan Grayson has now pledged to rally democrat support, and this should bring even more pressure on those that would vote against such a measure. There is an online petition available here, but please note that while Economic Disconnect is all aboard this bill, the site hosting the petition is pretty far left politically and my participation in the online petition in no way is an endorsement for the site in general.

More to Every Story
Last week I had linked to the NY Times story that was written by one of their own business writes about his journey into foreclosure and bankruptcy. While forthcoming and honest, there did seem to be some more under the surface that was glossed over.

Loyal reader GawainsGhost points us to this Atlantic piece by the writer Megan McArdle who found out some more information.
It seems the NY Times writer has been through the bankruptcy process before, as his wife has done it twice. This adds to the drama of the story, but his own personal life I think is his own. Still, worth a look to get a fuller picture of what was going on.

Home Depot CEO vs Ben Bernanke on Housing
The great blog Bubble Meter picked up on words of caution given by Home Depot CEO Frank Blake (via Financial Times):
Growing optimism over the US housing market may be premature, a leading retailer warned on Tuesday.
Frank Blake, chief executive of Home Depot, said housing market signals were still mixed.
"We are concerned about the accelerating rates of foreclosures, particularly in the western part of the country," he said, noting that one out of every 54 homes in California was in foreclosure.
Mr Blake said that a slowing foreclosure rate in California during the fourth quarter had led to an improvement in regional store sales but the trend had then reversed as foreclosure rates rose again in the first quarter.
The shift "provides a cautionary note on signalling a recovery prematurely", he said. "Before we see real improvement we believe we need to see sustainable deceleration in foreclosures."
There were 342,038 foreclosure filings in April, according to data from RealtyTrac, an increase of 1 per cent from the previous month and up 32 per cent from last year.

Ben Bernanke still sees growth and a housing turnaround in 2009 (it is now mid May) but the CEO of arguably the most directly effected company by real estate trends says otherwise. Who are you going to believe?

Thursday Downgrade Avalanche
The big news of the day was the debt downgrade of the United Kingdom by ratings firm Standard & Poor's (S&P). While the validity of the ratings by many of the rating firms can be questioned, they still move markets and have bearings on holders of various debts, bonds, etc. S&P cited ever rising debt accumulated by the UK as they try to spend their way out of a overspending led recession. This mantra may sound familiar.

Mish has a "Parade of Downgrades" up this evening and I would recommend you take a look.
Among the downgrade (or soon to be downgraded) club today:
United Kingdom
Spain (several big banks probable)
Hungary (several big banks)
Irish Banks (again!)

Mish closes with one performer that has not been downgraded: GOLD

While countries the world over are playing the print-o-rama of money game, gold has quietly had another good run. Economic Disconnect is a huge fan of Gold (and Silver) but has been caught flat-footed by the recent rally and too busy to work out new entry points. I will make some solid commitments over the weekend and then put them in play next week. I am looking at a spread between GLD, SLV, GG, and PAAS. I will of course share those trades in case you would like to lose a bunch of money by doing what I do. You are warned!
Full Disclosure: Long gold and silver through various channels in positions in place since 2002-2005. No currently active positions taken out since 2006.

Break Up California???
With the situation in California quickly moving to crisis stage, ideas on what to do are sure to spring up. While the debate may be fun, we all know a Federal bailout and guarantee will be coming very soon. Still, that is no fun to write about!

Clusterstock has a great find from the site BreakingViews that posits the idea of breaking California up into 4 states!:
...But theoretically the state is salvageable, argues Breakingviews, if only because the state could both afford higher taxes and reduce state spending. Spending is far from bare-bones levels, and state employees are extremely well paid.
But Breakingviews actually proposes a much more radical solution, which is breaking California up into 4 distinct states (seriously). Think of it like good bank/bad bank, but for states.
Actually it's a little different. The idea is not that this will solve the state's financial problems, but that it will split it into four coherent political units, which would be:
San Diego/Orange County/Inland Empire (socially conservative, Hispanic, heavily military)
Greater LA (Hollywood and Hispanics, very liberal)
San Francisco/Silicon Valley (Liberal, but very dynamic and market oriented)
Central (Conservative, Kansas-like)

This is a political scientist's late night fantasy and doing this might actually solve some political problems, but in the end it wouldn't work.

You can go with the link to see the various political calculations.

With thoughts even being voiced about splitting California up, and Texas leaving the Union you know things have crosses over into the Twilight Zone (I do not mean the vampire novels!). May you live in exciting times. We do.

Have a good night.


Anonymous said...


While I did sign the Federal Reserve Audit Petition, I have to admit that I believe the political system in this country is so corrupt that even if by some miracle this did go threw that the audit of the FED would come out just like the bank stress test: Bogus.


getyourselfconnected said...

as usual you are spot on. Any requests for tomorrow?

Lisa said...

Hey GYSC, I left you a response on my site. :) How about some Beatles for tomorrow? Ok,ok, just kidding! Elvis, maybe? I end the day with such a headache anymore, something soothing would be nice.

GawainsGhost said...

Guitarzan by Ray Stevens.

watchtower said...

If I ever see a Beatles vid posted here I'll know for sure that the "end draweth nigh" : )

Stagflationary Mark said...


"May you live in exciting times."

There's exciting times and then there's exciting times overleveraged 40-1 that can cause some to say, "I think I just peed myself a little. On the downleg!" ;)

GawainsGhost said...

Couple of interesting articles in the new issue of BusinessWeek this morning. One on how and why the bankruptcy system is, well, bankrupt. The other on whether America is on the verge of decline.

I suspect we're about to enter a tenuous period in which innovation and growth will be stifled by stupidity. But it's not like we haven't been through anything like that before. So I think we'll emerge, after oh I don't know a decade or so, as a stronger, more resilient and more intelligent country. We just need to weed out the stupid people first.

Like this NYT writer. I read his write up last week with some interest, because I've seen it all too often before. Sometimes the most seemingly intelligent people can do the most stupid things. Like after a divorce and being saddled with alimony and child support payments, marry some pampered princess you knew in high school, who happens to be a serial bankruptcy filer with a history of debt default and has her own children to provide for, then taking out a mortgage that you couldn't possibly service, running up credit cards to cover ever-mounting expenses, going deeply into debt then defaulting and declaring bankruptcy. All while pretending to be a revered economics writer for the New York Times, the "paper of record." It's almost as ridiculous as it is insane. But that's a Baby Boomer for you.

When the history of this generation is written, it will be in the words of the Greeks: After hubris comes nemesis.

Oh, well, ce la vie, as they say in France.

For my own part, I'm going to go down to the Mazda dealer in a couple of weeks and put a downpayment on a new RX-8. I've decided to go with the Touring model, since the Grand Touring model has too many bells and whistles I really don't need. Like the pop-up GPS map LED screen. I don't drive anywhere without a road atlas, so I fail to see why I would need or want to spend thousands of dollars on a computer that does not know where I'm going and probably couldn't provide accurate directions even if it did.

But that's just me, locked and loaded.

Anonymous said...


How about, Ace of Base - The Sign


watchtower said...

@ GawainsGhost
I'm still enjoying the h### out of my Bullitt, I'd buy it again if I totaled it.
Hope you get your RX-8.

You never know unless you try, so I'm going to suggest "Sabotage" by the Beastie Boys.
I usually don't care for anything that even hints at being Rap but I must admit that I do dig this song.

It was in the new Star Trek movie or I probably would have forgotten about it.

getyourselfconnected said...

are you serious with Ace of Base? I remember that tune but it does not seem like your type of music!
Love the Beastie Boys, the only rap I really like. "So whatcha want" is my favorite.
when I bought my G35X I told the guy all I wanted was the all wheel drive option and nothing else. He was like "you do not want the integrated computer pop up diplay with all the GPS options?" and I said "I can read a map". They had to get my car from another delaership because they did not have a bare bones one.

Anonymous said...


I told you I listen to all kinds of music. I don't care of rap or heavy metal particularly but some of it I can tolerate. The Sign represents how I feel the US government right now I saw the sign and it's a big middle finger pointed right at the average American.


Anonymous said...


Here ya go

Papa's on the house.

There is a bluegrass festival this steve puts on every year here. I'm ready for that.