Tuesday, September 30, 2008

Nobody Knows What Nobody Knows

Well if you did not see today's mega rally coming, you just have not been paying attention! The markets recouped almost the entire temper tantrum induced losses from Monday's session. Renewed hope for a handout, bailout, gift or whatever you want to call it (some are now calling it a "rescue" plan) was seen as the catalyst. The strong belief that congress will fold and indeed flush over a trillion dollars of taxpayer money down the drain is so ingrained that Wall Street simply cannot function under any other circumstances. Crazy times.

It is a Bailout, A Turd by Any Other Name Will Smell Just as Bad
"You can't polish a turd." -Will Darnell from the novel "Christine" by Stephen King
From Wikitionary:

Singular bailout
Plural bailouts
a rescue, especially a financial rescue
example: 1. The government bailout of that corporation is going to cost the taxpayers a hundred million dollars.
example: 2. a backup supply of air in scuba diving

Are we clear? Any plan that hands insolvent banks can be called many things, but it IS a bailout. Trying to play with wording to make things sound different is a waste of time. Besides, that ship has sailed and everyone thinks of this thing as a bailout so trying to change that is wasteful.

Nobody Knows What Nobody Knows
The mainstream media was out in full force today, joined by the financial shows and the usual talking heads trying to plead for a bailout bill. The new angle of attack is to try and make the current credit issues relate to an average person. Just in the last hour I have heard on the nightly news and CNBC that if a bailout is not done, and soon, all of the following may happen:
1. You will lose your job
2. You will have no credit card use
3. You will not be able to get a car loan
4. You will not be able to go to college
5. Your kids will all be drug addicts (kidding)

I saw at least 4 different "small business" owners trotted out tonight to tell us all how they will not be able to make payroll unless the credit crunch eases. We can debate the merits of any business that pays employees with borrowed money, but it is clear that Wall Street has called in some favors to get a more sympathetic spin on the current debacle.

So where are we? It seems that a new bill (same as the old bill) is going to come back up for a vote later in the week, maybe after the Senate rubber stamps it first. If this bill does not pass, we are told, a total epic collapse will ensue.

So far the "abyss" has been vague. Something about no loans for bad credit risks or loans that are priced higher for risk. Wow, that is just crazy! See last nights post for more on the "Cheap Money Conundrum".

All over the world governments are scrambling. Ireland nationalized their entire banking system today and guaranteed more debt than their total GNP. I guess we are moving a bit slower here.

I am of the opinion that the whole "banks won't lend to other banks" line is old. If banks will not lend to another one, there may be good reasons. They might know the banks are in bad shape. They may be waiting for free government money to lend. They may be scared. I do not know. It seems nobody knows.

If the markets can rally on the hope of a bill, why not just keep that hope alive? Remember every quarter of banking write downs was "the kitchen sink" and the end of it? Maybe we can give Wall Street the same treatment. Keep trotting out bills that fail but keep promising a new one is going to pass. This way they will move on! Problem solved.

Sadly, I am about 98% sure that the old bill, I mean the new bill, is going to pass. Just too many wimps in congress to do what is right. After passage I will try and coordinate a list of contested seats for any "Yes" vote caster and I will be donating money to the challenger. I urge all the readers to do the same. You may be surprised how little money can swing votes in the smaller house districts, it can make a difference.

Any congress member that votes "Yes" to the bailout bill must be removed from office. It is worth your time and your money. Only after a real credible threat of voter action is established will our elected officials do what we want. The promise of active opposition to any "Yes" caster will be the voter's equivalent of Paulson's "Bazooka" analogy: Cross the voters and we will use it!

Have a good night.

Monday, September 29, 2008

Marketwatch: House to Wall Street: Drop dead

Still shocked at all the surprises, twists, and turns? Talk about a WILD day for all things political and financial! Late September and October have always been rough spots for the markets and this fall is shaping up to be diamond sandpaper.

Learn By Listening
The immediate temper tantrum thrown by Wall Street after the bailout bill was defeated tells you quite a bi by itself. Without a tangible "Do Over" handed to them by the Government, the markets sold off violently. While one should be mindful about assigning too much to wild market gyrations, I had two thoughts in mind during today's rout:
1. Wall Street Holds Assets as Hostages: Make no mistake, this is a dangerous game being played by the financial folks. Sending stocks plummeting in a fit over a no bailout vote is a clear threat. Wall Street has to be careful here to cause enough carnage to scare, but not enough damage to disable. If their ability to succeed can only be judged by the great job they did with mortgages, we should all be scared.
2. Insolvency is Serious: The banking sector is so seriously compromised that investors are ready to run for the exits. While some kind of bailout may have calmed things down, this fundamental issue will not go away.

I love to comb through market commentary at times like today because you can learn tons about how someone thinks just by listening. Wondering what traders think about all this? Here is an AP story with some revealing insight:
Stocks tumble as bailout plan fails in House
Monday September 29, 6:03 pm ET
By Tim Paradis, AP Business Writer
Stocks plunge as financial bailout plan fails in House vote; Dow fall 777, biggest drop ever
WASHINGTON (MarketWatch) - With a firm rejection of Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, the House Republicans have told the financial markets that they'll have to solve their problems on their own, without $700 billion of taxpayer money.
In a stunning vote on Monday, the House rejected the financial rescue package on a vote of 205 to 228. Republicans voted against the bill by a two-to-one ratio, and in the process rejected their own leadership, who had worked for nearly a week to craft a bill that could gain a majority. Nearly 100 Democrats also voted against the bill, spurning their leadership.
The plan's defeat came amid more reminders of how troubled the nation's financial system is -- before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies -- Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.
And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. has a list of over 110 banks that were in trouble in the second quarter, and that number surely has grown in the third.
Traders on the floor were stunned by the House vote.
"How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty," said Gordon Charlop, managing director with Rosenblatt Securities. "The bailout not going through sends a signal that Congress isn't willing to do their part."

So there you have it. Congress is not willing to "do their part"? What part is that? Use taxpayer money to save reckless institutions? Prop up asset values that do not reflect any reality? Ok. That quote is an important one as it captures the mindset of Wall Street.

Marketwatch: House to Wall Street: Drop dead
Best headline of the day goes to Marketwatch:
House to Wall Street: Drop deadCommentary: Uneasy Republicans couldn't stomach massive bailout
By MarketWatch
Last update: 2:40 p.m. EDT Sept. 29, 2008
WASHINGTON (MarketWatch) -
With a firm rejection of Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, the House Republicans have told the financial markets that they'll have to solve their problems on their own, without $700 billion of taxpayer money.

Too funny! I love the symbolism and feel of the headline.

So what happened today? I really am as confused as the next guy. The house republicans seemingly turned their votes late, but also plenty of Democrats flipped their vote. Could it be the unrelenting negative reaction the congress has been getting from the public? If the election was 8 months away, I think the bill passes no problem as the politicians would have thought voters would forget about this before the polls. With the election so close, this vote was likely to be issue number one for most voters and I think plenty in the congress just plain got scared. Good enough for me.

All the emails, faxes, and phone calls made a difference. Thanks go to Mike "Mish" Shedlock and Karl "Mad Dog" Denninger for all their work in coordinating the campaign against this bill. This is really quite an accomplishment, and we should all feel relieved.

For about 5 minutes.

We are facing dire consequences from our debt induced buying binge of the last 5 years (or 10, or whatever). The impaired credit markets are a real bomb waiting to explode. Banks are insolvent, and pretend time has been cancelled for the foreseeable future. The world's economies are getting worse, and Spain is looking particularly bad. Something must be done to find a path out of this mess. And no, it will not be a fast turnaround and no I do not know what that path is.

One central premise that I think is being glossed over by many, but has long been a central theme here at Economic Disconnect, is this:

The Era of Cheap Money is Over

No plan I have seen has addressed this simple fact. Since 2001 credit and money has been available at all time historical low rates. Risk was poorly priced, if it was priced at all. You have heard that the credit markets are closed and that banks are not lending. This is indeed true to some degree, but what really is the problem is that it is not feasible for business and borrowers to take loans unless those loans are offered at all time low rates.

How many US business models have an allowance for higher borrowing costs? Not many I would bet. While the obvious bubble in housing and auto loans was easy to pinpoint as credit excesses, take a look at all kinds of banks, retailer, auto manufactures, etc and their business model is predicated in easy, cheap money. Here lies the real issue.

Any plan to get the country back on the right track has to attack what I will term "The Cheap Money Conundrum". Cheap capital is the only way for many to survive due to poor judgement and planning, but cheap money has gone the way of the dinosaur. This basic disconnect MUST be resolved before anything is going to get better.

As always, I try to inform and get you thinking. This is what I was thinking about today. What about you? Use the comments section to open discussions. I will be watching CNBC and the NFL game tonight so I should be able to read comments and be interactive.

Have a good night.

Friday, September 26, 2008

Blatant Manipulation

So far it seems a quiet Friday after all of the fireworks this week. I think everyone needs a breather and a moment to think about what has happened as well as what needs to happen. With a presidential debate tonight and an all weekend long bailout meeting, I fear solid thinking will get passed by once again.

Democrats Have a Large Majority, So What's the Hold Up?
The Democratic party holds a clear majority in both the House and the Senate. They will have the vote of many, though not a majority, of republicans. The Democrats feel they have a bailout (don't bother calling it a "rescue plan" or "investing in America) plan they like ready to go. So just what is the hold up on a vote?

Enter into the fearful world of politics. Every congress member know that public opinion is running wildly high AGAINST any Wall Street bailout with taxpayer dollars at real risk. Some estimates are as high as 75% against to a low figure of 60% against. I do not believe any real sampling could return a 40% pro-bailout result unless you are only asking Goldman Sachs employees! The severe anger and resentment of this possible bill makes the politician the one thing that can influence their behavior: fearful.

The democrats can pass this bill right now. They want to do this with a mega majority vote. In this way when election time comes this November they can say "You cannot blame just us, the republicans voted for this too!" The bailout is a bad policy and it is very unpopular. Our officials know this. Nobody wants to run against an opponent in November that can say "That guy/girl gave all your money to Wall Street, so vote for me instead!"

It is both craven and sad that any congress member would vote for something so opposed by their constituents of they felt they would not suffer at the polls for it. If this bill is the best thing for America, then vote on it and let it stand. If you think the bill will cost you your seat, then do not vote for it. Decision time is upon the congress. What is it going to be?

Blatant Manipulation
The past few weeks have really shown the kind of overt and far reaching manipulation that goes on in our markets. Even the most ardent "there is no manipulation" types have had to throw in the towel as the FED and Treasury show their hands time and time again. From banning short selling to futures market buying the government has been trying to prop up the market in full view for all.

This fact was even more pronounced last night when on a THURSDAY the FDIC made their move to close Washington Mutual and sell off their base to JP Morgan. This kind of thing is always done on a Friday to facilitate an orderly transfer for Monday. Why was Last night so important. The bailout bill of course.

The more I think about this "staring at the abyss" stuff I cannot help but have a certain feeling. A certain thought. Call it conspiracy theory of you will, but at least listen (read) what I have to say (write).

Can the current debacle be in and of itself a creation by Wall Street to get a free do over? Faced with probably a DECADE or more of stagnant earnings and never ending write downs, it seems to me the big boys on Wall Street hatched a plan. Create a desperate credit crunch by refusing to lend money. Call upon the government for help. Transfer all of you bad debt onto the taxpayer and start the game over again with fresh capital. Along the way set up a few fall guys (LEH, WM) to really scare people and this plan just might get off the ground if you had a sympathetic Treasury Secretary (former Goldman head Paulson).

The failure of Washington Mutual was a done deal for over 2 months now. The move to make it happen last night was a direct effort to cause panic and capitulation on a bailout bill that Wall Street wants. All the talk of collapse and living in caves is meant to prey on people's basic fears.

Look, I could be wrong here and in fact I think on the whole I am. I do think there are severe issues facing the debt and credit markets. I do think this is very serious. I also feel that last year I would have laughed if I had read this conspiracy theory on a blog. Tonight, I am not laughing. Discuss in the comments section.

Book Passage
Tonight I am putting in one of my all time favorites:
"It's fear, dude, just fear and you don't have to be Sun freakin Tzu to know that real fighting isn't about killing or even hurting the other the other guy, it's about scaring him enough to call it a day. Break their spirit, that's what every successful army goes for, from tribal face paint to the "blitzkrieg" to ...what did we call the first round of Gulf War Two, "Shock and Awe"? Perfect name, "Shock and Awe"! But what if the enemy can't be shocked and awed? Not just won't, but biologically can't? That's what happened that day outside New York City, that's the failure that almost lost us the whole damn war. The fact that we couldn't shock and awe Zack boomeranged right back in our faces and actually allowed Zack to shock and awe us! They're not afraid! No matter what we do, no matter how many we kill, they will never, ever be afraid.
Yonkers was supposed to be the day we restored confidence to the American people, instead we practically told them to kiss their ass goodbye."

Max Brooks - World War Z: the battle of Yonkers against the zombies chapter

Rock and Roll
A little music to head into the weekend, yes?

I love this song by the band Adrenalin. It was featured in the film "Iron Eagle" and it is a highly recommended listen. Here is "Road of the Gypsy":

I dug up this classic song and video complete with insanely hot lady! take a look at Eddie Money with "Shakin":

A little speed metal to end the night hot. Try out Megadeth with "Hanger 18":

Have a good night.

Thursday, September 25, 2008

And One More Thing

I just cannot stay away tonight!

Nasdaq Crash vs. Mortgage Crash - Who Holds Equals Who Gets Bailed Out
The technology stock boom was massive. Known also as the Dot Com Bust, this little tidbit of history yields a lesson.

The Nasdaq crashed from 5048 to a low of about 1200 in the time span of February 2000 to September 2002. Around 5 TRILLION dollars (the dollar was strong then!) was wiped out.

Now ask yourself: Any bailouts? Any emergency government meetings? Any "relief" for the losers? I thought not.

See, the difference here is that individual private investors held the majority of the toxic tech garbage. The taxpayer was already on the hook as they bought into the mania. The banks and brokerages had already pocketed their commission profits, and made out like devils. the Nasdaq today stands at around 2100, still only half the high and no "relief" for the small guy?

Now the banks themselves hold all the crap paper, and now the government would like to stick it to us again? I mean you get hit no matter what!

Wake up folks. Oppose this bailout!

Thursday Addendum

Thursday Addendum
After I had thought about the Michael Douglas funny tidbit at the UN, it got me thinking about a "Wall Street" film sequel idea. Yes, I would love to write a movie script!

Here goes:
After doing jail time for his offences in "Wall Street", Gordon Gekko is released and after some initial resistance to backing him, he finds financial backing at the dawn of the Nasdaq Tech boom. Gekko becomes a master of the classic "pump and dump" tech IPO mania and makes billions. His ego gets him into trouble during the big crash, and at the films end he is broke and dejected.

Last scene: Gekko is working as a bank clerk (circa year 2002) when he is approached by upper management. They ask Gekko "What do you think about the possibility of more aggressive mortgage lending?" Gekko's eyes light up as he sees his way back to success. Film ends with headlines and film form today's debacle.

I think it would be a hit! Plus it would elucidate all the silly excess that was the tech boom/bust and the current real estate meltdown.

What do you think?

Too Much Going On

I think it is the television station TNT's motto: "We Know Drama". Well, any TV show is seriously lacking in the kind of real drama that has gripped "A fundamentally sound and strong economy" over the last 2 weeks! So much news, so many headlines. It is hard to stay on top of this stuff and get ready for Armageddon at the same time.

I Just Wanted You to Not Test Nuclear Devices
Sometimes things happen that are so funny you cannot help but laugh till it hurts. Here is one such item I came across today:
Michael Douglas asked about Wall Street crisis
Wed Sep 24, 8:30 PM ET
UNITED NATIONS - Michael Douglas had to field questions Wednesday about the financial turmoil shaking world markets from reporters recalling his role in the 1987 film "Wall Street."
The actor sought to focus on the subject of Wednesday's news conference — urging the United States and eight other holdout nations to ratify a nuclear test ban treaty.
Douglas won an Academy Award for portraying the rapacious banker Gordon Gekko, who popularized the phrase "greed is good" in the movie.
After world leaders here condemned the "boundless greed" of world markets, Douglas was asked to compare nuclear Armageddon with the "financial Armageddon on Wall Street."
But the likening to Gekko did not end there, with a reporter asking: "Are you saying Gordon that greed is not good?"
"I'm not saying that," Douglas replied. "And my name is not Gordon. He's a character I played 20 years ago."

So Mr. Douglas was just trying to get more signatures to the nuclear test ban treaty (admirable) and some delusional UN staffer confused the man with one of his roles. I guess it is easy with the Terminator as the governor of California, but I laughed till it hurt on this one!

Too Much Going On
Late word tonight that the FDIC will take over the deposits at the troubled Washington Mutual (WM) and immediately sell that base to JP Morgan (JPM). What happens to the other (mostly bad) assets of WM is guesswork at this point, but I wonder if Paulson and the FDIC had hoped to have that bailout bill passed to run this job. Doing this on a Thursday night is highly unusual, and alas, there is yet another big wig meeting among the FED-Treasury-Congress players scheduled for tonight!

Loyal readers, I would love to write a huge post, but I worked all day (I had a big breakthrough on a tough project that I came up with all by my lonesome! Woo HOO!) and there is just too much. I suggest looking at the Calculated Risk comments section, as the JPM/WM news broke there first!

Things are getting strange, weird, you name it. Use the comments section to answer the following questions:
1. How much cash will I need for 8-14 days in the event of a real crisis?
2. Food and water amounts for 8-14 days?
3. Is transferring cash to a country like Switzerland feasible? How do I do it?
4. Other tips for a possible 8-14 days of unrest?

Have a good night, and take care my friends.

Wednesday, September 24, 2008

Financial Meltdown has Gone Super Critical

You know I have tons of stuff to do but I cannot draw myself away from all the unfolding drama. I feel that adding coverage to this moment is good use of my time and I hope all the loyal readers feel like this site adds value to your information basket. Be smart and be wary my friends, the dance is about to become dangerous.

Bill Gross Tells the Taxpayer What a Great Deal is Available, it is Just One Nobody Else Wants
I hate spending so much time on one guy, but every time Bill Gross opens his mouth I wish more and more he would take me up on that steel cage match! The latest nugget of wisdom from the PIMCO bond man is this wonderful tidbit:
Pimco's Gross: Bailout to benefit Main Street-WPost
NEW YORK, Sept 24 - The U.S. Treasury's proposed $700 billion bailout for financial firms could yield a profit of at least 7 percent to 8 percent and benefit taxpayers, Bill Gross, who manages the world's biggest bond fund, wrote in an opinion piece in The Washington Post on Wednesday.
Gross, the chief investment officer of Pacific Investment Management Co., or Pimco, estimates the average price of distressed mortgages that pass from "troubled financial institutions" to the Treasury at auction will be 65 cents on the dollar. That will represent a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 percent to 15 percent to the Treasury, Gross said.
"Financed at 3 percent to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 percent to 8 percent," Gross argued. "The Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street, as lending capacity and confidence is restored to our banks and the delicate balance between production and finance is given a chance to work its magic," Gross added.
Gross' estimate of double-digit returns in scooped up mortgage securities assumes lengthy ownership of the assets and is in turn dependent on the level of home foreclosures, "but the Treasury's program is, in fact, directed to prevent just that," he added. Gross manages the $133 billion Pimco Total Return Fund and helps oversee the more than $812 billion in assets at Pimco.

So this is a once in a lifetime deal that the taxpayers should be thankful for? If this wonderful return is so in the bag, how come nobody else is rushing in? Why is that Mr. Gross? I would like to further take apart this ridiculous piece, but I am confident that you, dear reader, can put it together by the sections I have marked off. What a sham. The bailout is of Main Street, not Wall Street according to Mr. Gross. OK.

Financial Meltdown has Gone Super critical

Above is a picture of a plutonium sphere as it is used for criticality experiments. There was a serious accident using this setup in 1945 that almost resulted in a nuclear accident:

I include this picture to try and make it clear that the financial system is close to a runaway failure on many levels. We all know about the insolvency issues thanks to fractional reserve banking. We are also facing a point where the average person is beginning to understand just how much of a sucker they are being played for.

The Bernanke/Paulson plan to pay high prices for bad assets has resulted in a widespread revolt. They would have the US taxpayer give a "Do Over" to the banking industry as they threaten the people with "The Abyss" unless this happens. There is NO REASON I can think of to burden ourselves with astronomical taxes and high credit costs for the foreseeable future when all we get in exchange is some kind of freedom to buy more useless lead paint crap from China. The game is up.

We are face with a clear choice:
1. Take the banking losses on our backs and eat the losses over time so they can carry on with business as usual
2. Just say NO and face an impaired system that will require an adjustment to a new way of living.

I cannot know what will happen if the banking system goes really bad. Nobody does. But I do know one thing; Give in to this fiscal hijacking and the failure we are trying to avoid will come soon enough. That is a fact.

It matters who you vote for. A person running for public office cannot be the sort our halls of government are filled with. All is well until something goes wrong and then of course it is too late. It matters who you vote for.

Sorry for the rant. There is just such a DIRTY feel to all of this I think there is no way to come out of it clean. The president will address the nation tonight at 9pm, and I imagine he is going to try and scare us all into stopping our faxes, emails, and phone calls against this action. I will tell you what; I AM SCARED. I am terrified that things could go bad in a hurray. I have a wife and we are taking care of her elderly mother and I could do without the stone age being pressed upon us. I am scared.

I am also fed up with this crap. I think things will pan out. I think this country has too many good people, too many good minds, and too much spirit to collapse. I think we can shatter the old banking network that has brought us to this junction and begin again.

It is decision time. There seems to be some kind of whisper about Monday being time zero for action, and I wonder what or whom is pushing that timeline (hello Japan and China!). I do not like being pushed. In fact I am a bit tired of all the poor treatment my money and my efforts has been put through over the last 10 years. Everyone must do as they feel is best, but my vote is for finding out if "The Abyss" means the end of Wall Street and the entire universe, or just the end of Wall Streets monopoly on financial matters.

Have a good night.

Tuesday, September 23, 2008

Maintenance of Illusion is Not a Sound Economic Policy

Hello all! Still amazed at what happens every day? I know I am. This blog was given special treat last post as Michael Panzer himself, the writer of the blog http://www.financialarmageddon.com/ stopped by and left a comment. I always stop by Mr. Panzer's site and his listing of this blog on his blogroll gives me a bunch of traffic! Thanks again for stopping by! That is exciting stuff.

Participation is Voluntary for Wall Street
There was a ton of coverage done on Hank Paulson and Ben Bernanke's testimony today in front of the Senate. There is so much to hash over, I can in no way cover all the details. I want to focus on a couple of particularly annoying points that stuck with me.

The first point is the desire by some in the Senate to attach CEO and other top executive pay restrictions during this time of Federal giveaways. It seems only correct to me to insist that the same boardroom members that brewed up this debacle should only get a minimum pay package on the taxpayer's bill. I mean, if indeed we are on the verge of total systemic collapse, multi-million dollar bonuses should be low on the CEO priority list as opposed to keeping a firm open.

Of course, this is not the case! When pressed about the pay cap inclusion, Mr. Paulson shows us that the inmates are running the asylum and that the same fellows that caused this mess still expect to make a killing. His quote (loosely; I cannot pour over all the transcripts right now):

"It may be difficult to get firms to participate if pay restrictions are enacted."

Did you get that? Insolvent banks looking to pocket big money from the taxpayers will not participate if their pay structures are messed with. No problem, none at all. These guys can opt out and please sign a form so I know who to short to ZERO if the ban is ever lifted! The sheer nerve of such a statement shpws you all you need to know about this mess.

Maintenance of Illusion is Not a Sound Economic Policy
The whopper of the day belonged to Benny Bernanke. Confused senators questioned how in the world the treasury purchase of toxic paper would make any difference, as there are plenty of buyers for that paper right now. Bernanke lowered the boom on us wall as he explained that the purchase price of the bad paper will be close to FULL WRITTEN VALUE! Of course! I myself had serious doubts about how this plan would help banks with capital, and here is the answer:

The FED and Treasury Plan on Paying Mythical Prices for the Trash paper

Reread that sentence again. There is no potential benefit here. This is a cash grab plain and simple. Even some senators that were pretty sure to rubber stamp this bill visually winced at this detail.

I can really appreciate the effort here. The main problem is that too much debt was created and extended with no reasonable expectation that is would ever be made good on. The reality has now sunk in. These instruments (Mortgage paper, school loans, Second mortgages, car loans) have a value, but that value effectively renders most firms insolvent. The solution presented by the FED and Treasury is to pretend. Seriously, the plan is to play make believe that these securities have close to their written value.

I am sorry to inform the powers that be of this simple fact:

Maintenance of Illusion is Not a Sound Economic Policy

I know, it's rough. I know this stinks. Is it really the best plan put forward by our "best and brightest" economic minds to play make believe? I guess it seems like a good idea right now, but can this kind of kicking the can really provide for a real recovery?

The root cause of all this is that our economy is now prefaced on runaway consumer spending. The years of 2002-2007 were 5 years of credit binge gone wild. Even if banks were helped out, even if we dodge a big bullet, lending cannot go on at a rate anywhere near where it was those 5 years. Everyone that wanted money got it. The only good borrowers left do not need any money. There is no way to make lending the driver of our economy unless we pursue the same wild lending practices that got us here.

I think Hank and Ben should take this weekend and do something more useful with their time. Your homework assignment boys is to flesh out a system where the velocity of credit and debt runs at about 1/3 of what it did during 2002-2007. Extra credit will be given for charts or funny cartoons. Have at it.

Have a good night.

Monday, September 22, 2008

Economic Doomsday Clock

Another Monday, but not a typical Monday! It seems like it has been over 3 months where new information and drama makes almost every day seem like it's own story. Thanks to all the loyal readers that hit my blog and others like it to try and understand what is happening. Now if only 20% of this country would take 30 minutes to get a clue, we could really get somewhere.

Real American Patriots
If you only read the major newspapers or watch the mainstream media you would have zero idea just what is happening today. We should give thanks to some of my personal heroes that have helped me to learn, and have made the attempt to shed some light on the farce that is unfolding. Here are my American Patriots, and this list could go on:
1. Michael Shedlock: With concise and revealing logic, Mish really breaks things down so even I can understand them. Great ability to see through the smoke deployed by our officials, and he pulls no punches. Thanks Mish.

2. Minyanville: The entire crew at Minyanville is both entertaining and clairvoyant. It would seem that if you were reading the "Random Thoughts". "5 Things You Need to Know", and Mr.Practical columns you knew before any of this happened how it would all play out. You simply cannot get that kind of talent anywhere else. Thanks guys.

3. Calculated Risk: Real time analysis that has no peer. The comments section of this site often is the best source of debate and idea exchange out there. With the awesome real world experience of Tanta added on, this site is excellent. Thanks to CR and Tanta for their efforts.

4. Barry Ritholtz: The man behind the site "The Big Picture" easily has the highest traffic of most any financial blog. Even with that kind of mainstream exposure, Barry pulls no punches and serves nobodies interests but his readers desire for good information. A rarity indeed. Thanks Barry.

There are others like Karl Denninger and Naked Capitalism that also strive to bring light to the financial shadows. You need these folks during this time, and I wish we had more of them.

Economic Doomsday Clock

The Doomsday Clock was started in 1947 as a visual cue to raise awareness of the dangers facing the world. From Wikipedia:
The Doomsday Clock is the symbolic clock face, maintained since 1947 by the Board of Directors of the Bulletin of the Atomic Scientists, at the University of Chicago. Using the analogy of the human race being at a time that is "minutes to midnight", wherein midnight represents "catastrophic destruction". Originally, the analogy represented the threat of global nuclear war, but since includes climate-changing technologies, "new developments in the life sciences and nanotechnology that could inflict irrevocable harm"

To hear Hank Paulson tell it, we were at somewhere around 2 seconds to midnight last Thursday and Friday. This impending calamity is what pushed the rush to action for the biggest taxpayer funded bailout in the history of the world. I propose that an addendum be added to any bill where we get a "Doomsday Clock" time check on the financial system. This way we can all get upset and sad when it gets closer to midnight and ecstatic when we are farther away. I feel this idea will have the kind of fear inducing power that the Treasury Secretaries words have not had to this point.

I have a new poll up tonight based on the "Economic Doomsday Clock" theme;

What time is it on the Economic Doomsday Clock?
-It is after 11pm, and my mother always said "Nothing Good Happens After 11pm!"
-It is about 11:45; there is still time to get a handle on runaway government spending
-It is 2 minutes to midnight; store water and guns
-Too late; Apocalypse!

Please vote and pass this around.

Have a good night.

Friday, September 19, 2008

Enron Was Ahead of Its Time

Having fun yet? So many story lines and so many angles. What a mess this has all become. The major average "SOARED" this week to finish up where they stared on Monday. I wonder why that is not the headline today? I am going to hit a few key points I am thinking about, and then I will try and amuse/entertain as is the Friday Night usual.

US Congress Eager to Sign Bill with No Details
In case there was any doubt, we have perhaps the largest collection of hapless bums running the country. There was a story on Yahoo Finance earlier that quoted a Senator with the following line:

"We will pass the Treasury plan (RTC plan) as soon as we can, and I would like to see some details."

I have news for you chump, the time to see details is before you pass the biggest bailout plan since the Marshal Plan after WWII, not after. Isn't one of the major problems right now that many "homeowners" signed mortgages without seeing the details before they signed? Creepy.

Well here at Economic Disconnect I was able to obtain the complete bill, and I have taken out some details that the US congress may like to know about before they sign on the dotted line. Here are some key attachments:

1. Ben Bernanke will from now on be referred to as "Great Exalted One" during all congress briefings and interviews as well as in any written media.
2. Hank Paulson will be called "Chrome Domed Love Machine" from this point forward.
3. Treasury and Federal Reserve employees have been granted the right of "Primae Noctis" with regards to any US virgins, should any still exist.
4. Keys to Fort Knox will be provided to Paulson and Bernanke to ward off future "Systemic Risk".

I think the US Congress should really read this thing through before they sign off on it as these attachments seem a bit much to me.

Bill Gross is a Dirty Rotten Criminal

The more Bill Gross of Pimco opens his mouth the more I want him to take me up on my steel cage match challenge. The balls on this charlatan can only be termed massive. After positioning himself to make sure the government has to bailout everything this side of the Milky Way, this clown now fully expects to be managing the FED's holdings! Too rich! Check it out:
Pimco's Gross looks to manage government's rescued assetsFriday September 19, 2:51 pm ET
NEW YORK (Reuters) - Bill Gross, chief investment officer of Pimco, said he is interested in managing a pool of assets acquired by the government through recent financial rescue plans.
"We have interest in managing this giant pool of assets, and we expect to be called," Gross said on CNBC television in response to a question on whether Pimco had been consulted by the government about doing so.

With the way the powers have danced to Mr. Gross Outs tunes so far I have every belief Bill will get his wish. Please Bill, give me a call on that match. Soon.

Enron Was Ahead of Its Time
You have to feel bad for those poor souls which ran Enron. They were years ahead of their time, they were just unappreciated as clever geniuses. If Ken Lay and crew had only waited a few more years, history would regard them as savvy players that used the whole "systemic risk" pocket aces to great effect.

Those poor Enron guys. While they were attacked for accounting fraud, Fannie Mae had their purchase caps lifted and was able to operate for 2 years without a single shred of quarterly reports. I mean, falsifying earnings reports is bad, but now that is the new good! Too late for Enron.

Enron used wild and complicated derivatives bets to lever up their small initial working capital into a mammoth, if hollow, money base. At the time this was panned as dangerous but today it is known as the investment bank business model. Again, too late for Enron.

Enron hid losses and wildly exaggerated their asset values using internal parameters that had no basis in the real world. Now this is currently known as "Level Three Asset Accounting" and "Mark to Model" pricing. Again, just missed by a sliver of geological time! Poor fools.

Enron shopped around for a buyer to help them survive, but after looking at their books there were no takers. Once again, we see that the Enron model was not wrong, just early. Today we have the FED and Treasury forcing mergers and buyouts for insolvent institutions, and when that fails they just bail them out themselves.

I think it is clear that the so called scandal that was Enron was something else entirely. I think Enron was punished and attacked so harshly because they exposed the clever plan the banks had for screwing the US taxpayer into paying for their never ending party. Enron was early once again, and paid the price. Their model was then copied and amplified to arrive at the point in time we are now at. I am not writing this to be funny. There is no material difference between Enron's behavior and that of today's players. Sick? Yes. Sad? That too. Basically what we deserve for being the losers that vote in fools? You bet your ass.

Friday Night Entertainment

Book Passages
I think i will include the writer and book title so that if the passage I use is interesting to you, you can take a look at the book.
"So I think I can tell you this: I can just about guarantee you, I believe I can guarantee you, that if you'll take this on faith and commit yourself for two years, assuming you get through some further testing, you will thank me. You'll say I was right. You'll tell me that the very thought that you might have missed out on this gives you the chills. How many human beings have ever lived, Si? Five or six billion, maybe? Well, if you should test out, you'll become one of maybe a dozen out of all those billions, maybe the only one, who just might have the greatest adventure any human being has ever had."

from the novel "Time and Again" by Jack Finney

Rock Blogging
We are in desperate need of some good tunes to soothe the soul after this week.

I am cautiously optimistic about the new Metallica album. Take a listen to "The Day That Never Comes" and you will go back in time to the years when Metallica albums like "Ride the Lightning". I like this song:

I must admit, I can envision a charge on the Fed and Treasury by an army with the intent of setting things straight. Useful visual imagery is provided by Darth Vader's march on the Jedi temple:

Frustrated? Angry? Rock out to Limp Bizkit's temper loss song "Break Stuff". Warning: rough language and imagery. Give me something to BREAK!!!!!!!!!!!!!:

Have a good night.

Thursday, September 18, 2008

Stupid is as Stupid Does

How was that for a wild ride? Dow up 150 points, sinks to down 150 points to close up, up and away over 400 points to the upside! Volatility, hallowed be thy name. I am a bit bemused by the late day action so bear with me.

Stupid is as Stupid Does
There is no real details as yet on the Resolution Trust Corporation (RTC) plan that maybe, might be in the works as reported by that pillar of integrity, CNBC. While the talking heads ( think Maria Bartiromo) are almost orgasmic with their excitement, think one second about what this means:

The RTC takes on bad debts, thus removing them from the books of banks;
The bad debts now reside at the US treasury;
Somehow some way this ends the credit crunch

If a reader can make a reasonable case how that works, leave me a comment, I am puzzled.

In addition, the US is now in the works of banning all short selling, just as the British has done. Why not just stop all trading on bad days like Russia? Why not just put a floor under stock prices like Pakistan?

We are quickly going over the deep end here. Here is one comment I lifted from the Yahoo Washington Mutual (WM) message boards tonight:

Title: Government To Take On Bad Bank Debts
Body: WOOOOHOOOO! We are off to the races tomorrow! Up day ahead!

So this moron is excited about the US government (his money) taking the Billions 9Trillions?) of bad debt onto the books to allow insolvent banks to do.......just what exactly? This is the kind of lunacy that can drive a man insane.

I will point you towards two pieces tonight that have the best edge on the situation. Think carefully while you read them.

Mish-Sharp as always
He may be the best out there, and he has a short, but sharp thought:

No excerpt, read the whole thing.

Barry Ritholtz is also brilliant and he covers all the bases tonight:

Again, no excerpt, read the whole thing. Now.

Tomorrow will be interesting to say the least. I wonder if at some point anyone out there is going to wake up and realize how the average person is getting it royally in this deal. No vote, no say, just a bunch of clueless fools grasping at straws pushing the limits of debt possibility at our expense as some kind of crazy experiment. Something must be done. I doubt anything will.

Have a good night.

Wednesday, September 17, 2008

Pandemonium of the Clueless

Hello out there in financial reader land! Have you been having fun? Have you been on the edge of your seat with crazy disbelief at the rapid developments? I know I have been overwhelmed with information and news! Loyal reader G asked that i post if/when the proverbial sh#t hit the fan, and I say "ask and you shall receive".

Did Anyone Notice this Little Tidbit in the Mainstream Media?
Now I will say upfront that with all the drama going on, it could be possibly forgiven for the mainstream media to skip over this little item, but seriously has there been a more ominous headline anywhere this week?:

Russia suspends stock trading to stop market meltdown
by Dario Thuburn
Wed Sep 17, 2:05 PM ET
MOSCOW (AFP) - Russia suspended trading on its two main stock markets for a second day Wednesday as shares nosedived and officials pledged 44 billion dollars to fight collapsing investor confidence.

After a 50 plus % drop over two days, Russia says "No Mas" and pulls the plug. No word yet on when it will reopen, but this may be the scariest thing I saw this week. This bears your attention.

Gold Rallies Back
While still quite a ways off from the old highs, Gold has made a nice move, and today it made it's biggest one day run ever. Why? Well, with all the crap paper out there and with trust evaporated, only treasuries (why trust those?) and the good old yellow metal will do for many. This reminds me of a story that was told to a young Conan the Barbarian by his father. Conan's father related to him the story abut the "riddle of steel", but I have put in GOLD instead of steel to make my point:

Once giants lived in the earth, Conan, and in the darkness of chaos, they fooled Crom, and they took from him the enigma of steel [GOLD]. Crom was angered, and the earth shook, and fire and wind struck down these giants, and they threw their bodies into the waters. But in their rage, the gods forgot the secret of steel [GOLD] and left it on the battlefield, and we who found it, are just men, not gods, not giants, just men. And the secret of steel [GOLD] has always carried with it a mystery. You must learn its riddle, Conan, you must learn its discipline, for no one, no one in this world can you trust, not men, not women, not beasts, this you can trust.

While this whole mess can turn on any assets class at any minute, I still love gold's fundamentals going forward. Just be careful out there!

A Brief Statement of Truth
Senator Harry Reid (D-Nevada) had a rare honest moment today and I will direct you towards Mish for full coverage here:

Quick summary "Nobody knows what the hell to do about this mess!" You hit it out of the park Mr. Reid, Bravo!

Pandemonium of the Clueless
There is simply too much going on for me to be able to cover all the bases. I refer you to the blogroll to the left. Naked Capitalism, Calculated Risk, Minyanville, and Mish have been doing unbelievable real-time analysis of all the news and their material is the best anywhere, anyplace.

With all that has been going on my main focus has been on the whole moral hazard issues. Not in the sense of "should we be doing this, it may be a moral hazard" because the hot to trot leadership we have has already made the choice to wade in. I mean just what in the world is Ben Bernanke and Henry Paulson thinking about as they make the off the cuff moves with billions of taxpayer dollars? Sadly the folks we all sent to congress are unable due to limited mental ability to ask any questions or to get some kind of fix on the FED and Treasury's thinking process. In the spirit of goodwill, I thought I might put together a few questions that our elected representative may, just maybe, want to get answered by the "Toxic Twins" of Bernanke and Paulson before any more bailouts/conservatorships/liquidity injections etc are done. Hopefully one of them will read these and try to get a response.

1. What is a "Systemic Risk" exactly and in no uncertain terms?

2. If indeed the US financial system is "Fundamentally Sound and Secure" as you have stated on numerous occasions, how does that square with the idea that a Bear Stearns or a Fannie Mae, or an AIG bankruptcy would cause a "systemic risk" to the entire financial system? Can those two ideas be reconciled?

3. While Lehman Brothers employees are filling cardboard boxes and leaving their jobs, how can Merrill Lynch workers and Freddie Mac employees be supported? What would you say to the Lehman folks right now?

4. Is there a dollar figure at which taxpayer backed bailouts will have to stop? If yes, what is that number? If no, do you see a problem with that?

5. With the FED and the Treasury backing down on the AIG "bridge loan" or whatever you call it, is it even remotely reasonable to expect private firms (still standing banks, foreign wealth funds, etc) to put up any money towards helping failing businesses? Why indeed should they if the US government will assume all the risks? Do you see the underlying issue here?

6. Secretary Paulson; as a former head of Goldman Sachs would you have recommend to your board to extend the AIG bridge loan? If not, why is the US taxpayer not given equal consideration?

7. If the only thing keeping the banking system afloat right now is the delaying tactics aimed at keeping assets related to real estate and their associated derivatives form being valued at their realistic price, how long can that go on? Do you have a plan that takes into consideration those items being marked to current market? If you do not, why not?

8. While the SEC has targeted short sellers as of late, what is being done about CNBC anchors reporting on phone calls they are having on air in the midst of this market turmoil? Is one more disruptive than the other? If so, how?

9. Have you thought further ahead than 5-10 days over the last 6 months? Be honest.

10. Are you two on Dope?

There are 10 questions that need to be answered before Hank and Bennie make any more moves. Somebody has to answer for the debacle that is currently underway. That not one serious or revealing question has been asked or answered says alot about both our journalists and our leaders.

Final Thoughts
This is the big time. There are things at work here that are huge. Yes, I can agree that the system is at stake. But you have to ask yourself, if we can delay a real day of reckoning for all the troubled debt that is out there, will it just go away? Or will it only come back later? I can understand the yearning to kick the can down the road, but that mentality got us into this mess after the Tech bust. At some point you have to face your own monsters. Hiding and pretending they are not there only gets you so far. It should be time to face ours.

Hedge Fund Bailouts
I have it on good authority, insider information actually, that the next in line for a bailout is the hedge fund below:
more animals

Have a good night.

Thursday, September 11, 2008

Public Enemy Number One

Hello all once again! Hope all is well with the regulars. While the den/library is now finished up, I have moved on to the overhaul of the living room. Not as intensive, but still time consuming. It probably is better that was as the loss of Tom Brady for the Patriots was as sad an event as I have seen in some time. Also the stuff going on out there in the financial world is enough to push a man to his bullshit meter limits.

Lehman Getting Assistance it Does Not Want
There have been many sources being "quoted" today with some kind of so called information on what is to become of Lehman brothers (LEH). I saw one report that said JP Morgan took a look and said no thanks, then I saw one that said Goldman was a last resort buyer but that fell out as well. Tonight there is yet another report that Bank of America (BAC) is the next in line. All I can say, in the immortal words of Arnold on Different Strokes is, "What you talking about Willis!?"

BAC is already saddled with the Countryfried bad paper and now personal identification theft disclosure. How in the world is BAC going to take in all the issues with LEH? I have no idea, but I imagine there will be even more taxpayer cash involved. From tonight's story:

Lehman in sale talks as survival questioned: sources
Thursday September 11, 6:22 pm ET
By Patrick M. Fitzgibbons
NEW YORK (Reuters) - Lehman Brothers Holdings Inc was forced into talks about a possible sale after the Wall Street bank's shares plunged more than 40 percent and cast doubts on its survival.
The company and U.S. regulators were in intensive discussions about a number of options, including a complete sale, but Lehman has been resisting U.S. government intervention, a source with direct knowledge of the discussions said.

So LEH is resistant? Let em fail I say. Why is the US government AGAIN in on one of these deals? Just what in the hell is going on here? Not every single bank or brokerage can be a "systemic risk" can they? They must be a systemic risk to fat cat CEO pensions and stock plans, because that is the only group benefiting from this stuff. There is better analysis out there than I can give here quickly, so use the blogroll and comments section to discuss. I am about at wits end with this endless intervention.

Public Enemy Number One
Darth Sidious: "Every single jedi, including your friend Obi Wan Kenobi, is now an enemy of the Republic."
Darth Vader: " I understand my Master."

As if I needed another boiling point tonight, check out the boldness of this call to screw taxpayers as hard a possible without the benefit of dinner first:

Democrats call for foreclosure freeze
Thursday September 11, 5:39 pm ET
By Julie Hirschfeld Davis, Associated Press Writer
Democrats call on Fannie Mae and Freddie Mac, under government control, to halt foreclosures
WASHINGTON (AP) -- Four Democratic senators urged the mortgage companies Fannie Mae and Freddie Mac on Thursday to temporarily freeze foreclosures on loans they hold.
The troubled companies, seized by the government Sunday, should help struggling borrowers swap their mortgages for more affordable loans and stay in their homes, the lawmakers wrote the new chief executives and federal regulator now running Fannie Mae and Freddie Mac.
It was the latest sign of mounting congressional pressure on James Lockhart, the director of the Federal Housing Finance Agency, to ensure that the companies use their clout in the mortgage market to help homeowners caught in the housing crisis.
The senators -- Sherrod Brown of Ohio, Bob Casey of Pennsylvania, Bob Menendez of New Jersey and Charles Schumer of New York -- wrote that the companies should "take whatever actions are necessary" so more families "do not have to suffer the economic and personal disaster of foreclosure."

I would also add Barney Frank to this list as he is a hopeless fool on the whole thing. Now before anyone gets all "see what the democrats are doing" on me know this: this plan will (A)get put forward, and (B) get passed overwhelmingly by both democrats and republicans. So please save the partisan stuff, both sides are whores in an election year.

So now that FNM/FRE are backed by you and me, why the heck not just stop all foreclosures for 90 days? Why not 120? Why not forever? Taxes, carrying costs,etc will be covered by the taxpayer so why not give a bunch of voters a rent free 6-12 months? Sounds just wonder-fing-full to me.

There is nothing to do here. No letters to write, no calls to make, no protests to form. The only thing to do is to go to the polls this November and vote AGAINST every single incumbent in the house and senate and local government unless you are sure they will oppose any more intervention and any more costs being passed to the taxpayer. That's it, that's all. The screwballs on this list are now enemies of the good and right and I will contribute cash money to their opponents whenever they are up for election.

There is something very wrong going on right now and there is significant long term damage being done to the US citizen. Too focused on Sarah Palin's eyeglass style, too enamored with the new 90210 show, too distracted by the high cost of living, the average person is blindly being robbed with nobody to speak for them. We are supposed to have a representative government, but they only represent the banks and the foreign debt holders. Sad times indeed. If you have children I feel bad for you and for them going forward.

Have a good night.

Friday, September 5, 2008

Friday Night Fights

Thanks for the kind words on the renovation project. Working for a living is rough stuff! Next up is the living room, but that only need paint, new heater covers, and a good cleaning. The never ending story.

Blog will be light on material tonight as I am as sick and mad over the current mess out there and I want to stay in a good mood. It is NFL opening weekend and I want to be positive.

Fannie and Freddie Bailout Plan at Hand
News on the wires this evening that a final plan to backstop FNM/FRE is about ready for action. Laddy freaking Da. More government jokers putting my money on the line to help banks and foreign debt holders. thanks a bunch guys. Not much detail as yet, but I am sure it is going to cause me to yell and/or throw stuff. Yahoo article here:

So after all the jawboning about how any backstop would not be needed, it is needed after all. Why the sudden rush now? I believe I have an answer.....

Bill Gross and a Steel Cage Match
The manager of the largest bond fund, Bill Gross of PIMCO, has come out and basically said the US government has to start putting floors underneath all kinds of assets to stave off panic and deflation. OK shit for brains, why not move to Pakistan where they are trying that very thing? Don't let the door hit you on the way out Bill. Let me get the timing of this straight; Mr. Gross pleas like a little baby for federal mass capital infusions, especially to cover the ENORMOUS amount of FNM paper that PIMCO holds to protect against losses and presto! A plan is about in place. Well color me unsurprised.

Get this Bill, I don't care what you want. I don't care if the only thing that will save me from a life of hunting and gathering to eat is a massive government sponsored backstop of all things financial. I would rather have the system collapse than keep up this charade any longer. You want to take my money and give golden parachutes to banking executives? You want to take my money and support home prices in ghost towns in Metro Phoenix? You want to take my money and keep your carp FNM paper good? I tell you what sir, you can have it. Just step right up and into a steel cage. They close the door and we have at it. Me to keep what's mine and you to take it from me. The person that can exit the cage gets his way? Are you game?

There has to come a time when we the people say No More. Enough is enough. The great credit experiment is over and it was a failure. Start looking for ways to rebuild a busted system instead of getting even more dumb and pouring whatever resources the US still might have on a lost cause. Enough said.

Friday Night Entertainment
Now that I have that off my chest, lets move along. I am sitting right now surrounded by all my books. Reading is FUNdamental ya know? As a new feature I will be posting lines from some of my favorite books. You may be able to source it by GOOGLE, maybe not. This might inspire some interest in some of my favorite books. Lets try it out with two selections form two of my favorites.

Novel Line One
"Hapscomb's Texaco sat on Number 93 just north of Arnette, a pissant four-street burg about 110 miles from Houston. Tonight the regulars were there, sitting by the cash register, drinking beer, talking idly, watching the bugs fly into the big lighted sign."

Novel Line Two
"They must have a print. Why fingerprint if they didn't have something to match it to? They were checking that van for prints. No time to see if they were checking cars too.
Van. Carrying the wheelchair with Lounds in it-that tipped them. Or maybe somebody in Chicago saw the van. There were a lot of vans at Gateway, private vans, delivery vans.
No, Graham just knew he had a van. Graham knew because he knew. Graham knew. Graham knew. The son of a bitch was a monster

Film Clip
One of Ray Bradbury's greatest works was "Something Wicked This Way Comes". A film adaptation was made that was pretty good. Check out this amazing sequence as Mr. Dark steals life from Charles Halloway, very scary scene:

Rock Blogging
One of my favorite bands is Creedence Clearwater Revival, but I love so many songs it can be hard to pick out just one. Take a listen to the classic "Fortunate Son":

Found a great old clip of a live Kenny Rogers performance of "Ruby". Classic tune:

Black Sabbath always gets the rep that they only had heavy stuff, but they often used blues and alternative instruments for many songs (The Wizard, NIB, etc). One immortal song is "Planet Caravan" which is just amazing:

Final song for the evening. I heard this one on the way home and it got me all amped up. Billy Idol with "Rebel Yell":

Have a good night.

Wednesday, September 3, 2008

Conflicting Headlines, Conflicting Data, Overall Confliction

Once again I say hello to all the loyal readers and any that just swing by by chance! It has been a while once again. I FINALLY finished the new Den/Library room and I must say I am a bit impressed. I have not done real work for some time and I have not done construction/carpentry in a LONG time but the results were better than hoped for. I have pictures at the end of the post.

Summer is fading away up here. The mornings are dark and the sun is setting earlier. The temps are getting cool at night. It is enough to make me cry, as you all know how much I dearly LOVE the cold weather! The only good thing is that NFL football season starts tomorrow night and I am extremely excited for some games.

Palin Vice President Pick By McCain
As usual I try to keep political crap out of this blog, but I have a few observations on the current campaigns. John McCain's pick of Sarah Palin seemed a bit strange to me, and as new events unfolded seemed very strange indeed. Obviously facing the rough economic times to come a solid financial pick was preferred by me (hello, Mitt Romney PLEASE!) but whatever. Please note how when a Republican woman is running for Vice president with a large family and some daughter issues the news media asks whether she should be running at all. Compare and contrast this with a Democrat candidate where the only stories would be of the amazing perseverance of the woman running and how tough she must be. Again, no horse in this race but biased media reporting should always be noted as it extends to all facets of news.

Lehman Brothers - Just Go Away Already!
The drama involved in the Lehman Brothers (LEH) saga is almost too much. There are crazy reports every day. The latest news has a Korean banking consortium led by Korea Development Bank (KDP) buying up to a 25% stake in the firm. Some stories have a Korean Military Pension Fund also getting onboard. While the CNBC types get to cream their pants at the idea that LEH is not a ZERO, there are some real issues that need to be thought about before flailing away at a deal like this.

For one thing the selling of a major stake of a large investment bank to a foreign company has to be more clearly annotated. If (when) LEH fails, will the KDP get made whole no matter what? I certainly can imagine this kind of rider on any deal. If so, does the FED and Treasury backstop such a deal with tax money? We don't know. In the scheme of things any bailout of any firm in the US ( be it FNM, FRE, BSC, etc) is really saving the foreign debt holders ass anyway, I guess this point is not that big a deal. Just seems like a little caution should be exercised before selling off huge chunks of US firms to foreign countries. My 2 cents.

The second problem with this is that how in the world does anyone really think they can make out on this deal. LEH is stuffed full of some of the worst toxic mortgage crap there is. Alt-A is just getting going baby, and if KDP thinks they are getting a deal they are, just a raw one. Never mind the commercial paper mess on the way for 2009 and what havoc that will play on firms like LEH. I am not one to stop a fool from losing his money, but you know we the people are going to get fleeced to pay Korea back when this goes bad. Again, perhaps a little public debate on this issue by the presidential candidates would be more useful that the usual "I think creationism should be taught in schools" debate that gets 20 minutes every time.

Gold and Silver Armageddon
Wow, gold and silver have been getting beaten like a red headed step child! There are many smarter watchers of the metals than me with good analysis on this, but again it seems too much leverage was the culprit. Leverage is bad no matter the asset class being chased. Sadly the fundamentals of gold are great but is seems the "evil speculators" have cause great technical damage. Where is the gold price bailout I wonder? I still have an inkling to buy miners and or gold ETF's is the $750 area is breached, but then again I am a total chicken so we shall see!

Conflicting Headlines, Conflicting Data, Overall Confliction
Check out these headlines, all on Yahoo Finance today:

Domestic auto makers post steep August U.S. sales drops
Oil prices down slightly as stronger dollar, falling fuel demand outweigh Gulf oil shutdown
Homebuilder Hovnanian Enterprises reports wider 3Q loss on declining home sales, land values
GMAC Financial cutting 5,000 jobs, ceasing wholesale mortgage originations

Compare the above with the fantasy 3% plus GDP reading last week and the following headline also from today:

Factory orders see wide gains led by aircraft

So which is it? We are in the midst of the worst housing bust ever which has facilitated all kinds of FED lending and bailouts, or everything is running smooth at3% growth? The auto makers are seeing sales fall by staggering 20-50% but aircraft sales are making up the difference in this high fuel cost environment? Brokers are being indicted left and right for ARS sales that were lies, but foreign banks want to step up and buy huge stakes in these same firms? None of this stuff gels together and thus i call bullshit.

We can debate the GDP, or any government data point, based on how it is calculated by funny math and the like. Instead just try to focus on the clear baloney being bandied about by news sources, talking heads and our officials. Everything is great except for this huge debt unraveling and once in a lifetime credit crunch but there will be no effect on the overall economy? Ok.

Something has to give. This kind of debt collapse cannot exist in a vacuum. While figures don't lie, liars can figure and the time is coming when the clear reality of lost jobs, lost home values, lost companies to overseas countries and lost standard of living will not be able to be glossed over by funny stats. Strap in for that ride.

Den/Library Remodel
I have always wanted a den type room, basically a library to house my substantial book collection (over 250 strong) and to serve as a NO TELEVISION exclusion zone for reading and writing my fantastic blog, Economic Disconnect. After about 4 full weekends and some afternoons of hard work, I finally have such a room.

The room sits opposite the main living room with a nice gas fireplace centrally located. The issue was this atrocious wood paneling that adorned the walls. The wood paneling sucked up all the light and made the room very dark. To take off the paneling i had to gingerly remove it without ripping to much of the drywall off due to the adhesive that was used. After that I had to repair and make smooth the damaged walls, then prime the plain drywall, then paint. I also had to make all new wood trim for the room as I destroyed the old stuff during demolition. I just love cutting miter joints by hand! Anyways, here are some pictures of the before and after.

This picture is of a corner with the window visible. Note the repaired walls and missing wood trim:

Now witness the completed section with new stained and sealed wood trim around the window:

Here is the wall where the computer was to be placed all patched up:

And here is the finished wall with the computer in place. This is the spot where the magical writing abilities of the author are put to use:

Now I am no pro, but I am pleased with the results. Only about 6 other rooms that need some kind of work left to go! Who says there is a home improvement spending collapse?

Have a good night.