Wednesday, October 7, 2009
The Dollar Collapse Is A Huge Part Of This Rally
Voltron says: about 50% of the stock market recovery is due to the dollar crashing.
Tuesday, October 6, 2009
On the Edge with . . . Janet Tavakoli (video)
“meltdown risk today is greater than in 2007″
Monday, October 5, 2009
End of the "petro-dollar"
Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Military home buyers find VA loans a roadblock
Voltron says: VA loans are sometimes not accepted because the home does not meet VA loan requirements (especially in the case of a trashed foreclosure), they take longer to close and can involve extra costs to the seller.
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/10/05/MN0D19UPNL.DTL
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2009/10/05/MN0D19UPNL.DTL
Sunday, October 4, 2009
Saturday, October 3, 2009
Friday, October 2, 2009
Unemployment rate officially 9.8% (really 17%)
Voltron says: Over a quarter of a million jobs were lost last month.
If you include people forced to work part time and "discouraged
workers" who have been unemployed so long that they no longer get
counted, one million jobs were lost and the true unemployment rate is
17%.
If you include people forced to work part time and "discouraged
workers" who have been unemployed so long that they no longer get
counted, one million jobs were lost and the true unemployment rate is
17%.
http://finance.yahoo.com/news/US-jobless-rate-reaches-98-apf-93159528.html?x=0&.v=13
Thursday, October 1, 2009
Wednesday, September 30, 2009
CIT's shaky future hurts small biz
From NPR Marketplace
CIT is this country's biggest lender to small and medium-sized businesses. Chances are though, you'd never heard of it 'til this summer when it ran into some trouble over how much money it owed. It tiptoed away from Chapter 11 back then, thanks in part to a $2 billion donation from the TARP. . .
There are reports today CIT is once again scrambling to work out a deal with its bondholders. If that deal does not work out, CIT may become one of the biggest bankruptcies in this country ever.
link here
CIT is this country's biggest lender to small and medium-sized businesses. Chances are though, you'd never heard of it 'til this summer when it ran into some trouble over how much money it owed. It tiptoed away from Chapter 11 back then, thanks in part to a $2 billion donation from the TARP. . .
There are reports today CIT is once again scrambling to work out a deal with its bondholders. If that deal does not work out, CIT may become one of the biggest bankruptcies in this country ever.
link here
FDIC Discloses Deposit Insurance Fund Is Now Negative
from zerohedge.com
"In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon."
Link here
"In an unprecedented disclosure, the FDIC has highlighted that it expects the DIF reserve ratio to be negative as of September 30. As there are a whopping 48 hours before that deadline, one can safely assume that the DIF is now well into negative territory: as of today depositors have no insurance courtesy of a banking system that has leeched out all the capital of the Federal Deposit Insurance Corporation. Let's pray there is no run on the bank soon."
Link here
Monday, September 28, 2009
Dollar carry trade
Voltron says: Low US interest rates mean FX traders can borrow dollars cheap and invest them in high interest rate currencies like the australian dollar. The kicker is that you gain if the dollar falls due to inflation.
http://www.businessinsider.com/dollar-carry-traders-take-advantage-of-fed-stimulus-2009-9
Sunday, September 27, 2009
CBO says Social Security in the red by next year
Voltron says: The upswing back into the black assumes a "V" shaped economic recovery.
http://crfb.org/blogs/cbo-projects-social-security-deficits-2010
http://crfb.org/blogs/cbo-projects-social-security-deficits-2010
Friday, September 25, 2009
U.S. Bailout at $11.6 Trillion
To put $11,600 Billion into context, consider some major US expenses, adjusted for inflation:
Marshall Plan: $115.3B
Louisiana Purchase: $217B
Apollo Moon Shots: $237B
S&L Bailout: $256B
Korean War: $454B
the New Deal: $500
Operation Iraqi Freedom: $597B
Vietnam War: $698B
NASA (total): $851.2B
WWII: $3.6T
http://www.ritholtz.com/blog/2009/09/bailout-costs-to-date/
Thursday, September 24, 2009
Home prices down 12.5% from last year
The median sales price was $177,700, down 12.5 percent from $203,200 in the same month last year.
Home sales drop 2.7 percent.
Foreclosures and other financially distressed sellers accounted for about 30 percent of the market.
With unemployment and foreclosures rising in the upper end of the housing market, "there will be plenty of more pain for higher-priced properties,"
http://finance.yahoo.com/news/Home-sales-drop-27-apf-2064841344.html?x=0&.v=6
Housing Crash to Resume on 7 Million Foreclosures, Amherst Says - Bloomberg.com
The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market.
Tuesday, September 22, 2009
Monday, September 21, 2009
Housing: "Facing a triple whammy" at end of Year
"We could be facing a triple whammy at the end of the year: the expiration of the tax credit, the end of the Fed mortgage-buying program and rising foreclosures."
Thomas Lawler, housing economist
Unable To Sell Homes, Brokers Turn To Arson
A California couple was so dependent on the housing market that, facing economic ruin after they lost virtually all of their property wealth when the economy tanked, they allegedly burned down their own home for insurance money.
Sunday, September 20, 2009
Conditions build for another meltdown
excerpt:
One year after the demise of Lehman Brothers Holdings Inc. paralyzed the financial system, "mega-banks," as Fine's group calls them, are as interconnected and inscrutable as ever. The Obama administration's plan for a regulatory overhaul wouldn't force them to shrink or simplify their structure.
"We could have another Lehman Monday," Niall Ferguson, author of the 2008 book "The Ascent of Money" and a professor of history at Harvard University in Cambridge, Mass., said in an interview. "The system is essentially unchanged, except that post-Lehman, the survivors have 'too big to fail' tattooed on their chests."
"We could have another Lehman Monday," Niall Ferguson, author of the 2008 book "The Ascent of Money" and a professor of history at Harvard University in Cambridge, Mass., said in an interview. "The system is essentially unchanged, except that post-Lehman, the survivors have 'too big to fail' tattooed on their chests."
More proof that banks are kicking the can down the road.
Voltron says: 62% of the foreclosures in Nevada are "postponed" . . . what are they waiting for?
Mortgage mod rules favor Wells Fargo
Voltron says: Normally when a house goes into foreclosure, any second mortgage gets wiped out. There has been a lot of contention about what happens to a second mortgage when a mortgage gets modified. Wells Fargo has a huge exposure to home equity loans (second liens).
excerpt:
"BlackRock Inc. Chairman Laurence Fink said Obama administration programs to help homeowners stave off foreclosure may hinder the recovery of the mortgage market while benefiting banks that own second loans on the properties.""Fink said policies introduced this year to reduce foreclosures are flawed because they don’t require home-equity loans to be wiped out before the mortgage is modified. Instead, in a break with the intentions of contracts, the second loan’s terms may also be revised, spreading the financial loss among lenders, he said.""One concern is that many servicers, which handle billing and collection for mortgage owners, also hold home-equity loans that would lose all value in a foreclosure."...aid for consumers whose debt is greater than the value of their homes is being blocked because other loan changes allow second mortgages to be kept “on the books of the financial institution as a performing asset”“If you really want to protect the homeowner, wipe out the second lien, modify the first lien,” Fink said.
$30 billion home loan time bomb set for 2010
Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures
Saturday, September 19, 2009
Strategic Default Data Suggests Foreclosure Prevention Tactics Useless
An interesting report in the Los Angeles Times shows that a person with super-prime credit scores is more likely to walk away from an underwater mortgage than a person with a subprime credit rating.
Suit Alleges Trusted Blacks Drew Minorities to High-Rate Loans
Voltron says: This Wells Fargo story won't go away.
http://washingtonindependent.com/59633/suit-alleges-trusted-black-figures-drew-minorities-to-high-rate-loans
http://washingtonindependent.com/59633/suit-alleges-trusted-black-figures-drew-minorities-to-high-rate-loans
Friday, September 18, 2009
Moody's bearish on housing recovery
Analysts say it will take more than 10 years to recapture peak home prices
Voltron says: Of course Moody's is wrong about this, like they are always wrong about everything. I expect that the government will try to paper it over with inflation; however, it's interesting that Moody's is admitting that there is a problem looming. Of course they probably won't change the rosy forecasts they use to rate mortgage pools.
Thursday, September 17, 2009
Tuesday, September 15, 2009
We still have the same disease
Nassim "Black Swan" Taleb: ‘We still have the same disease'
http://www.theglobeandmail.com/report-on-business/crash-and-recovery/we-still-have-the-same-disease/article1286246/
Jim Rogers: "Investors . . . should learn how to sell short [long term] government bonds"
http://www.youtube.com/watch?v=Vqbu6ZS3nJI&feature=youtube_gdata
Meredith Whitney: "Banks are extending and pretending"
http://www.cnbc.com/id/32856449
http://www.theglobeandmail.com/report-on-business/crash-and-recovery/we-still-have-the-same-disease/article1286246/
Jim Rogers: "Investors . . . should learn how to sell short [long term] government bonds"
http://www.youtube.com/watch?v=Vqbu6ZS3nJI&feature=youtube_gdata
Meredith Whitney: "Banks are extending and pretending"
http://www.cnbc.com/id/32856449
Monday, September 14, 2009
Friday, September 11, 2009
Home Prices Could Fall by Another 25%: Whitney
CNBC.com excerpt:
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.
"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.
If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.
"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
"Obviously that doesn't bode well for spending," Whitney said.
full article: http://www.cnbc.com/id/32773345
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
"No bank underwrote a loan with 10 percent unemployment on the horizon," Whitney said. "I think there is no doubt that home prices will go down dramatically from here, it's just a question of when."
Local governments and states are chronically under-funded and "most states are under water," adding to the problem of low private consumption, she said.
"If you look at the drivers for unemployment I don't see that reversing very soon," Whitney said.
If consumers were to decide to spend, "that would be a game-changer," but it would be an unnatural thing to do in a recession, she said.
"A lot of themes are constant, which is the US consumer and the small business doesn't have any credit, credit is still contracting," Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
"Obviously that doesn't bode well for spending," Whitney said.
full article: http://www.cnbc.com/id/32773345
Tuesday, September 8, 2009
Hyperinflation: The winners and losers
Voltron says: Der Spiegel has an article describing the German hyperinflation of the 20s (Hat tip to "Jeep"). I think the major trigger was foreign denominated debt (in that case, war reparations). It's interesting to note who the winners and losers were.
excerpt:
The stupid ones were those who had nest eggs: the thrifty, holders of government bonds, but primarily the country's pensioners. In other words, those who received money without having to work for it, who lived on their pensions or the interest on their savings. Large sections of the middle classes saw themselves stripped of their assets, losing almost everything they had set aside for years. Banks, savings banks, and insurance companies suffered huge losses and were left with nothing but their paper money. As a result, they had to start the majority of their businesses from scratch in 1924.
By perverse contrast, the winners of the hyperinflation were those with massive debts; first and foremost the state, but also private individuals who had borrowed money to buy houses, construction land or farmland, and whose loans were slashed by the switch to the rentenmark.
Some industrialists made huge gains from the period of hyperinflation. Hugo Stinnes, whom Time magazine crowned "Germany's new Kaiser," built up an immense corporate empire comprising heavy industry, newspapers, ships and hotels -- all based on a mountain of debt. As late as the summer of 1922, Stinnes was recommending that people continue capitalizing on "the weapon of inflation." Indeed manufacturers and craftsmen in general profited from the crisis since they possessed plants and buildings -- that is, tangible assets that outlived the currency switch.
Most farmers also did extremely well. "They had money to burn, and spent it willy-nilly," writer Lion Feuchtwanger recalled. Some bought themselves entire stables of racehorses, others expensive cars. "Farmer Greindlberger drove from the grimy village street of Englschalking to Munich in an elegant limousine complete with a liveried chauffeur, while he himself was dressed in a brown velvet jacket and a green chamois-tufted hat," Feuchtwanger wrote of the rural rich.
Never before had Germany witnessed such a fundamental redistribution of wealth, and many of the winners were those who had previously been wealthy.
The rest of the article is here: http://www.spiegel.de/international/germany/0,1518,641758,00.html
excerpt:
The stupid ones were those who had nest eggs: the thrifty, holders of government bonds, but primarily the country's pensioners. In other words, those who received money without having to work for it, who lived on their pensions or the interest on their savings. Large sections of the middle classes saw themselves stripped of their assets, losing almost everything they had set aside for years. Banks, savings banks, and insurance companies suffered huge losses and were left with nothing but their paper money. As a result, they had to start the majority of their businesses from scratch in 1924.
By perverse contrast, the winners of the hyperinflation were those with massive debts; first and foremost the state, but also private individuals who had borrowed money to buy houses, construction land or farmland, and whose loans were slashed by the switch to the rentenmark.
Some industrialists made huge gains from the period of hyperinflation. Hugo Stinnes, whom Time magazine crowned "Germany's new Kaiser," built up an immense corporate empire comprising heavy industry, newspapers, ships and hotels -- all based on a mountain of debt. As late as the summer of 1922, Stinnes was recommending that people continue capitalizing on "the weapon of inflation." Indeed manufacturers and craftsmen in general profited from the crisis since they possessed plants and buildings -- that is, tangible assets that outlived the currency switch.
Most farmers also did extremely well. "They had money to burn, and spent it willy-nilly," writer Lion Feuchtwanger recalled. Some bought themselves entire stables of racehorses, others expensive cars. "Farmer Greindlberger drove from the grimy village street of Englschalking to Munich in an elegant limousine complete with a liveried chauffeur, while he himself was dressed in a brown velvet jacket and a green chamois-tufted hat," Feuchtwanger wrote of the rural rich.
Never before had Germany witnessed such a fundamental redistribution of wealth, and many of the winners were those who had previously been wealthy.
The rest of the article is here: http://www.spiegel.de/international/germany/0,1518,641758,00.html
More sinister gold hanky-panky
Voltron says: Gold mining companies often sell their production in advance or hedge against down moves in the price of gold. Major mining companies are stopping this practice which indicates they think the price of gold is going higher. This article explains how this might be tied to gold market manipulation by central banks.
A year after financial crisis, a new world order emerges
Voltron says: a good summary and outlook:
Monday, September 7, 2009
Saturday, September 5, 2009
Wednesday, September 2, 2009
Wells Fargo CEO Stumpf Says Some Loan-Loss Rates Are Peaking
Voltron says: I'm not sure the CEOs comments are going to make anyone feel better about Wells Fargo.
Sept. 2 (Bloomberg) -- Wells Fargo & Co., the nation’s largest home lender, may be reaching a peak for losses tied to troubled loans, President and Chief Executive Officer John Stumpf said.
“There are some indications that we’re seeing a top in some of our problem loan areas,” Stumpf said in an interview from Wells Fargo’s San Francisco headquarters broadcast today on Bloomberg Television. In some businesses, the bank is seeing “very high levels of loss, but they look like they’re flattening out.”
Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the lender said on July 22. Charge-offs widened to 2.11 percent of loans in the second quarter from 1.54 percent in the first quarter.
Stumpf has told investors that he must increase profit before taxes and provisions at a pace to offset credit losses.
Loss rates on auto loans are stabilizing, Stumpf said, and “some buckets” of home-equity lines of credit “seem to be maybe not getting worse than they were before.”
excerpt:
“There are some indications that we’re seeing a top in some of our problem loan areas,” Stumpf said in an interview from Wells Fargo’s San Francisco headquarters broadcast today on Bloomberg Television. In some businesses, the bank is seeing “very high levels of loss, but they look like they’re flattening out.”
Voltron says: agreed. This is an inflection point before the losses resume.
Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter, the lender said on July 22. Charge-offs widened to 2.11 percent of loans in the second quarter from 1.54 percent in the first quarter.
Stumpf has told investors that he must increase profit before taxes and provisions at a pace to offset credit losses.
Voltron says: Oh, they'll "earn" their way out. no problem. whatever...
Loss rates on auto loans are stabilizing, Stumpf said, and “some buckets” of home-equity lines of credit “seem to be maybe not getting worse than they were before.”
Voltron says: That does not inspire confidence.
Wells Fargo's Tight Lips Drag on Shares
Excerpt:
NEW YORK -- Wells Fargo & Co. routinely ducks hard questions from investors. That insistence on silence has lately hurt the San Francisco bank's stock.
Wells Fargo is surely one of the strongest survivors of the financial crisis thus far, having gobbled up crumbling rival Wachovia Corp. at a fire-sale price last year. That merger made the one-time West Coast bank a national powerhouse of retail banking, with more than 10,000 branches and $1.3 trillion in assets.
But Wells Fargo's stature didn't prevent its shares from falling abruptly Tuesday amid a swirl of unfounded rumors. The shares fell as much as 6% during the day before recovering after CEO John Stumpf's said the bank doesn't plan to raise more capital to pay back government bailout money, which can hurt existing investors.
The stock's wild ride in part reflects investors' growing unease over Wells Fargo's refusal to mimic the routine disclosure practices of its large-bank rivals. Whereas J.P. Morgan Chase & Co., for example, provides extra detail about the condition of its operations, Wells Fargo says as little as possible.
A spokeswoman for Wells Fargo declined to comment for this report.
Wells Fargo stock is down about 11% year to date; that fall is less than the 32% decline at Citigroup Inc., but well behind the rise of 17% at Bank of America Inc. and the 31% rise in J.P. Morgan shares.
Wells Fargo is the only large bank that refuses to hold a quarterly conference call to discuss its earnings -- a prime opportunity for investors to ask questions of company executives. The bank also won't disclose its tangible book value per share, a statistic that became a focus of investors during the financial crisis, and that other banks routinely provide.
Perhaps most importantly, Wells Fargo has repeatedly refused to say exactly how the troubled loans it purchased with Wachovia are faring.
Full Article: http://online.wsj.com/article/SB125191978384280681.html
NEW YORK -- Wells Fargo & Co. routinely ducks hard questions from investors. That insistence on silence has lately hurt the San Francisco bank's stock.
Wells Fargo is surely one of the strongest survivors of the financial crisis thus far, having gobbled up crumbling rival Wachovia Corp. at a fire-sale price last year. That merger made the one-time West Coast bank a national powerhouse of retail banking, with more than 10,000 branches and $1.3 trillion in assets.
But Wells Fargo's stature didn't prevent its shares from falling abruptly Tuesday amid a swirl of unfounded rumors. The shares fell as much as 6% during the day before recovering after CEO John Stumpf's said the bank doesn't plan to raise more capital to pay back government bailout money, which can hurt existing investors.
The stock's wild ride in part reflects investors' growing unease over Wells Fargo's refusal to mimic the routine disclosure practices of its large-bank rivals. Whereas J.P. Morgan Chase & Co., for example, provides extra detail about the condition of its operations, Wells Fargo says as little as possible.
A spokeswoman for Wells Fargo declined to comment for this report.
Wells Fargo stock is down about 11% year to date; that fall is less than the 32% decline at Citigroup Inc., but well behind the rise of 17% at Bank of America Inc. and the 31% rise in J.P. Morgan shares.
Wells Fargo is the only large bank that refuses to hold a quarterly conference call to discuss its earnings -- a prime opportunity for investors to ask questions of company executives. The bank also won't disclose its tangible book value per share, a statistic that became a focus of investors during the financial crisis, and that other banks routinely provide.
Perhaps most importantly, Wells Fargo has repeatedly refused to say exactly how the troubled loans it purchased with Wachovia are faring.
Full Article: http://online.wsj.com/article/SB125191978384280681.html
Monday, August 31, 2009
The Fed's Interesting Week
by Ron Paul
It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician's best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation's gross domestic product. It is also projected that by 2019 the national debt will be 68% of GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn't stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed's books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
It has been an interesting week indeed for the Federal Reserve. Early this week, it was announced that President Obama intends to reappoint Fed Chairman Ben Bernanke to a second term in January, signaling a vote of confidence in him. Bernanke seems to be popular with the administration and with Wall Street, and with good reason. His lending policies have left big banks flush with newly created cash that covers up old mistakes and allows for new ones. By buying up mountains of Treasury debt he has also enabled spending to soar to ridiculous levels that should startle any responsible economist, and scare any American concerned about the value of the dollar. However, these highly sensitive decisions about our money are not made by economists, they are made by politicians. Bernanke, like most of his predecessors, is the politician's best friend. However, there is no reason to believe any other central planner would behave any differently, considering the immense political pressure on the Fed.
Fed policies have been as bad for the economy as they are good for politicians and bankers, as the recently released numbers on the debt and deficit demonstrate. For the first time since World War II the annual budget deficit is projected to be over 11 percent of the nation's gross domestic product. It is also projected that by 2019 the national debt will be 68% of GDP. Our path, if unchanged, is completely untenable.
The administration claims that it inherited a dire situation from the last administration, which is absolutely true. However, that hasn't stopped them from accepting all the policies and premises that got us here, and accelerating those policies to rapidly make a bad situation much worse. The bailouts started with the last administration. They have gotten bigger with this one. The last administration gave us expanded government involvement in healthcare with a new prescription drug benefit. This administration gave us a renewal and expansion of SCHIP, and now the current healthcare takeover attempts. In reality, we can afford none of this, but shady monetary policy allows Washington to continue along its merry way, aggravating all our economic problems.
Not everyone in government finds it acceptable that the Fed wields so much power and privilege in secrecy. Last week, a federal judge ruled against Fed secrecy, compelling them to release under the Freedom of Information Act information regarding which banks received emergency loans, and under what terms. The Fed will, of course do everything in its power to fight this ruling and it is certainly not the last word on the issue. Still, it is encouraging to see that the interests of the taxpayers were defended victoriously in court, while the Fed only sees the plight of its big banker friends.
Meanwhile HR 1207 and S604, legislation to open up the Fed's books to a complete audit, continue to gain momentum in Congress as the people continue to insist on real transparency of the Federal Reserve. One way or another, the days of Fed autonomy are coming to an end, as well they should. No one should have the power to debauch the currency and gut the economy as they do. It is time they answered for their actions, so the people can understand that we truly are better off with freedom instead of Fed tyranny.
Our gold is going away
Voltron says: There are a lot of shady things that go on in the gold markets. This article asserts that more than half of the US gold reserve was exported in the last two years. Make sure you don your tinfoil hat while reading this.
Fed indirectly buying Treasuries to prop up dollar
Voltron says: The FED is buying Fannie Mae and Freddie Mac ("agency") paper from foreign central banks with the quid pro quo that they will buy U.S. Treasuries in order to prop up the dollar.
Thursday, August 27, 2009
Wednesday, August 26, 2009
Tuesday, August 25, 2009
Pre-paid college tuition
Voltron says: States are losing money on this . . . If you're enrolled, their loss is your gain.
http://marketplace.publicradio.org//display/web/2009/08/25/pm-college-futures
http://marketplace.publicradio.org//display/web/2009/08/25/pm-college-futures
Hot Waitress Index
Voltron says: Keep a weather eye for vanishing winsome hostesses. Hopefully
not too soon.
not too soon.
Sunday, August 23, 2009
Thursday, August 20, 2009
Lessons from Crazy Eddie
Voltron says: Anyone who lived in the New York City area in the 1980's remembers "Crazy Eddie". It was an electronics store chain with an ad campaign featuring a frenetic radio show host . . . Their prices were "Insaaaaaaaane!". The company was also a massive fraud from the beginning. NPR's "Planet Money" interviewed their CFO Sam Antar
http://www.npr.org/blogs/money/2009/08/into_the_mind_of_a_financial_c.html
http://www.npr.org/blogs/money/2009/08/into_the_mind_of_a_financial_c.html
Crazy Eddie was underreporting their sales and skimming the New York City sales tax (a whopping 8.5%). Their CFO said, the joke at the time was that if New York City eliminated their sales tax, half the mom and pop shops in the city would go out of business, implying that skimming sales tax was how most small businesses stay solvent! This flies in the face of academic economic wisdom, which is that eliminating the sales tax would be good for businesses. It reminds me of the scene from "Back to School" where Rodney Dangerfield is explaining why his business professor's example construction budget is bunk: "Well, first of all, you're gonna have to grease the local politicians for the sudden zoning problems that always come up. Then there's the long-term costs, such as waste disposal. I don't know if you're familiar with who runs that business, but I assure you it's not the Boy Scouts." After Crazy Eddy became publicly traded, they slowly moved their off-the-books business back on the books to give the illusion that their business was growing in order to inflate the stock price.
I'm always fascinated by frauds. I've become convinced that the economy is completely dominated by fraud and criminal activity. The biggest cash crop in the United States is Marijuana. Credit Card fraud is larger than the entire illegal drug trade. During the S&L crisis of the 90's almost every bank committed fraud. When Fitch recently looked at individual mortgage files, they found "the appearance of fraud or misrepresentation in almost every file." I'm certain that all the major banks are insolvent and have committed massive frauds. After all, how can you compete with frauds when the government is complicit? To paraphrase Balzac: "behind every great fortune lies a great crime."
Former S&L regulator William Black has done a lot of great work on this. One of the first things he did was limit the growth of S&Ls. This seems counter-intuitive, but makes sense because all ponzi schemes must grow otherwise they implode, so it's a very easy way to ferret them out and limit the damage. With the current banking crises, the FDIC is doing the exact opposite by giving banks a pass to allow them to "earn their way out" of the red (i.e. grow). By the time the FDIC finally takes action, the losses are huge.
Wednesday, August 19, 2009
Tuesday, August 18, 2009
Saturday, August 15, 2009
Wells Fargo: Whatever Happened to Bank Bears? -- Seeking Alpha
Voltron says: "free thinking maverick" Reggie Middleton's latest, well
researched article on wells fargo
researched article on wells fargo
http://seekingalpha.com/article/155945-wells-fargo-whatever-happened-to-bank-bears
Thursday, August 13, 2009
Wednesday, August 12, 2009
ProShares UltraShort S&P 500, ProShares UltraShort 7-10 Year Treasury: Money Flow Leaders (SDS, PST) - WSJ.com
Voltron says: money is flowing into SDS (ultra short s&p500) and out
of PST (treasuries).
of PST (treasuries).
http://online.wsj.com/article/SB125009554881426385.html?ru=yahoo
Monday, August 10, 2009
Off Topic: USAA lets you deposit checks with iPhone
Voltron says: You can use the iphone camera to photograph the front and
back of a check and USAA will deposit it electronically. I think the fact
that the camera on the iPhone 3GS can focus in close opens up many
possibilities: business card scanner, document scanner, barcode scanning.
back of a check and USAA will deposit it electronically. I think the fact
that the camera on the iPhone 3GS can focus in close opens up many
possibilities: business card scanner, document scanner, barcode scanning.
http://www.nytimes.com/2009/08/10/technology/10check.html
[This is completely off topic and is not a statement about Apple stock.]
Friday, August 7, 2009
Is it Time To Short Wells Again?
August 7, 2009 – 3:07 pm
by Teri Buhl for BankImplode.com
The smart money has turned bearish on Wells Fargo again.
Yesterday, rapid put volume and big block buys on the September 26 strike price had hedgies buzzing. On Thursday WFC traded 87,500 calls against 194,000 puts for 2.20:1 put/call ratio. That type of unusually volume set off optionmonster.com alarm bells, as clients received email alerts to big institutional money turning negative on the stock.
Two well-known bank analysts said they got a rush of calls mid-day from their top hedge fund clients sniffing around for the name of the block buyer. According to traders on the CBOE and sources inside the firm’s trading operation it was none other then the recently-hailed trading profit leader Goldman Sachs. CBOE trading records show the put buyer traded around 30,000 contracts at the September 26 strike price paying $1.05 and $.1.10 between two big blocks.
Meaning: Goldmanites and other smart money are betting Wells’ stock gallop is over and the sharp reversal in bearish activity is a ‘tell’ sign that a downside move is in the near future.
Andrew Wilkinson, market analyst at Interactive Brokers Group said, “This was a very well-researched, well-timed turn on Wells Fargo yesterday.”
Pete Najarian, of OptionMonster.com, warns to be cautious on Well Fargo, while his Fast Money buddy Guy Adami said on yesterday’s show he’d ride a full-blown short now. FBR Capital Markets analyst Paul Miller has a current price target of $15 on the stock and recommends to short the heck out of it while it’s so overvalued. Famed short-sellers like Jim Chanos and David Einhorn, who successfully shorted Wells in the past, have likely been ramping up their short positions while the stock is flying at a high.
WFC hit a high for the year today at $29.34. Data Explorers says there has been a rapid increase in the short base this week, rising from 1.5% to 2% of shares outstanding on loan.
Why all the recent souring on the mortgage banking giant, considering they blew analyst EPS estimates out of the water again (by over 40%) for the second quarter? Because once again, it’s believed that Wells Fargo is playing accounting tricks to show paper profits like they did in Q1, this time off of goodwill from their Wachovia purchase.
Wells Fargo — which has a strange practice of never answering analyst calls when they announce earnings — will publish their 10-Q next week, sending data combers to scour through the details to try to find where the core pre-provision earnings really are.
According to Paul Miller’s team there are a few key data points that just don’t add up. One red flag they present is that mortgage rate movements in the quarter were not enough to justify a billion-dollar write-up in their mortgage servicing rights. Another is the fact the non-performing assets accelerated 45%, with an increase of $5.7bn over last quarter, yet the bank reserved only about half what it did the quarter before, at $700m for future loan losses. And this isn’t the first time in recent months analysts have complained bitterly that the bank was playing around with loan loss reserves for the purpose of boosting profits.
Miller — who doesn’t think the bank’s net charge-off or non-performing assets are going to decrease anytime this year, given the lagging job market — continues to warn that they are simply not managing their credit cost. He writes in a note to clients on July 22, “WFC will have to materially increase its provision expense, which will put pressure on earnings and valuations.”
Main street and most of the financial press still seem to be enamored with the talked-up-by-Buffett Wells; but the institutional money is starting to place its bets — based on extreme skepticism with a firm which has allowed serious questions to fester about how they’re really making their profits.
by Teri Buhl for BankImplode.com
The smart money has turned bearish on Wells Fargo again.
Yesterday, rapid put volume and big block buys on the September 26 strike price had hedgies buzzing. On Thursday WFC traded 87,500 calls against 194,000 puts for 2.20:1 put/call ratio. That type of unusually volume set off optionmonster.com alarm bells, as clients received email alerts to big institutional money turning negative on the stock.
Two well-known bank analysts said they got a rush of calls mid-day from their top hedge fund clients sniffing around for the name of the block buyer. According to traders on the CBOE and sources inside the firm’s trading operation it was none other then the recently-hailed trading profit leader Goldman Sachs. CBOE trading records show the put buyer traded around 30,000 contracts at the September 26 strike price paying $1.05 and $.1.10 between two big blocks.
Meaning: Goldmanites and other smart money are betting Wells’ stock gallop is over and the sharp reversal in bearish activity is a ‘tell’ sign that a downside move is in the near future.
Andrew Wilkinson, market analyst at Interactive Brokers Group said, “This was a very well-researched, well-timed turn on Wells Fargo yesterday.”
Pete Najarian, of OptionMonster.com, warns to be cautious on Well Fargo, while his Fast Money buddy Guy Adami said on yesterday’s show he’d ride a full-blown short now. FBR Capital Markets analyst Paul Miller has a current price target of $15 on the stock and recommends to short the heck out of it while it’s so overvalued. Famed short-sellers like Jim Chanos and David Einhorn, who successfully shorted Wells in the past, have likely been ramping up their short positions while the stock is flying at a high.
WFC hit a high for the year today at $29.34. Data Explorers says there has been a rapid increase in the short base this week, rising from 1.5% to 2% of shares outstanding on loan.
Why all the recent souring on the mortgage banking giant, considering they blew analyst EPS estimates out of the water again (by over 40%) for the second quarter? Because once again, it’s believed that Wells Fargo is playing accounting tricks to show paper profits like they did in Q1, this time off of goodwill from their Wachovia purchase.
Wells Fargo — which has a strange practice of never answering analyst calls when they announce earnings — will publish their 10-Q next week, sending data combers to scour through the details to try to find where the core pre-provision earnings really are.
According to Paul Miller’s team there are a few key data points that just don’t add up. One red flag they present is that mortgage rate movements in the quarter were not enough to justify a billion-dollar write-up in their mortgage servicing rights. Another is the fact the non-performing assets accelerated 45%, with an increase of $5.7bn over last quarter, yet the bank reserved only about half what it did the quarter before, at $700m for future loan losses. And this isn’t the first time in recent months analysts have complained bitterly that the bank was playing around with loan loss reserves for the purpose of boosting profits.
Miller — who doesn’t think the bank’s net charge-off or non-performing assets are going to decrease anytime this year, given the lagging job market — continues to warn that they are simply not managing their credit cost. He writes in a note to clients on July 22, “WFC will have to materially increase its provision expense, which will put pressure on earnings and valuations.”
Main street and most of the financial press still seem to be enamored with the talked-up-by-Buffett Wells; but the institutional money is starting to place its bets — based on extreme skepticism with a firm which has allowed serious questions to fester about how they’re really making their profits.
Wednesday, August 5, 2009
About half of U.S. mortgages seen underwater by 2011
Excerpt:
NEW YORK (Reuters) - The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.
Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.
http://www.reuters.com/article/businessNews/idUSTRE5745JP20090805?feedType=RSS&feedName=businessNews
Monday, August 3, 2009
FDIC: More losses to come from home equity loans
Voltron says: Wells Fargo is a big player.
http://www.reuters.com/article/marketsNews/idINN0352824120090803?rpc=44
http://www.reuters.com/article/marketsNews/idINN0352824120090803?rpc=44
Thursday, July 30, 2009
Wednesday, July 29, 2009
Wells Fargo owns crappy Georgia credit card debt too.
ATLANTA (TheStreet) -- Georgia has the unfortunate distinction of leading the U.S. with 21 bank failures this year and last. And many other banks in the state are suffering from very high levels of bad loans.
Most of the failed Georgia institutions made outsized bets during the real estate boom on residential and commercial construction projects in the Atlanta area. Since the quality of commercial real estate loans is declining sharply as the later stages of the banking crisis unfold, there are dozens of banks and thrifts in trouble.
...
Wells Fargo also has a credit card subsidiary among the 10 largest Georgia banks, Wachovia Card Services of Atlanta. This institution was assigned a financial rating of C despite its increasing credit card charge-offs, because it's strongly capitalized.
http://www.thestreet.com/_yahoo/story/10555199/1/georgia-has-failed-banks-on-its-mind.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Most of the failed Georgia institutions made outsized bets during the real estate boom on residential and commercial construction projects in the Atlanta area. Since the quality of commercial real estate loans is declining sharply as the later stages of the banking crisis unfold, there are dozens of banks and thrifts in trouble.
...
Wells Fargo also has a credit card subsidiary among the 10 largest Georgia banks, Wachovia Card Services of Atlanta. This institution was assigned a financial rating of C despite its increasing credit card charge-offs, because it's strongly capitalized.
http://www.thestreet.com/_yahoo/story/10555199/1/georgia-has-failed-banks-on-its-mind.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
Monday, July 27, 2009
Widening Commercial Real Estate Crisis Hits U.S. Banks
Excerpt:
Wells Fargo & Co., for example, said 2.3% of its commercial real estate mortgages were considered nonperforming as of the second quarter, up nearly three-fold from 0.8% a year ago.
The San Francisco bank purchased its large teetering rival Wachovia Corp. at the end of last year, and Wells Fargo now holds $138 billion in commercial real estate loans, more than any other lender. Wachovia expanded aggressively into commercial real estate before falling victim to rising losses from consumer loans.
Nearly a third of Wells Fargo's total commercial real estate loans are tied to properties in California or Florida -- two regions among the hardest hit by the real estate depression.
Wells Fargo did not immediately respond to a request for comment.
http://online.wsj.com/article/SB124873477869684979.html?ru=yahoo#mod=yahoo_hs
Wells Fargo & Co., for example, said 2.3% of its commercial real estate mortgages were considered nonperforming as of the second quarter, up nearly three-fold from 0.8% a year ago.
The San Francisco bank purchased its large teetering rival Wachovia Corp. at the end of last year, and Wells Fargo now holds $138 billion in commercial real estate loans, more than any other lender. Wachovia expanded aggressively into commercial real estate before falling victim to rising losses from consumer loans.
Nearly a third of Wells Fargo's total commercial real estate loans are tied to properties in California or Florida -- two regions among the hardest hit by the real estate depression.
Wells Fargo did not immediately respond to a request for comment.
http://online.wsj.com/article/SB124873477869684979.html?ru=yahoo#mod=yahoo_hs
Friday, July 24, 2009
Wednesday, July 22, 2009
For Wells, Multiple Ruts in the Road
Excerpt:
Through the credit crunch, Wells Fargo has convinced investors that it is a cut above other large banks. Its shares trade at 2.5 times tangible book value versus 1.6 times for J.P. Morgan Chase. But while Wells posted better-than-expected second-quarter profits on Wednesday, it also showed a sharp deterioration in credit quality.
The question now hanging over the company: Has Wells's management been caught out by the recent poor performance of the bank's loans? One reason Wells trades at a big premium over others is the perception that its executives have a strong handle on credit risk. Now, though, there are signs that the bank may have been too optimistic about the quality of loans it got from Wachovia, the large bank it acquired last year. Moreover, many of Wells's own loans continue to perform disappointingly, with nonperformers going up in the second quarter for corporate loans, commercial real-estate credits and its $117 billion of core home-equity loans.
Voltron says: remember, home equity loans are second mortgages. If the first mortgage is worth 99 cents on the dollar, the home-equity loan is worth zero.
Granted, as the economy struggles, rising bad loans are hardly a surprise. But they become a big deal for investors if management doesn't appear to have set aside adequate loan-loss reserves.
Wells's reserves are equivalent to 2.86% of loans, well below 5% for J.P. Morgan and 3.61% at Bank of America. Wells's defenders might point out that less of its loans are going bad. Its nonperformers are equal to 1.92% of loans vs. 2.17% at J.P. Morgan and 3.12% at BofA. But Wells's nonperformers ratio could go higher.
For instance, there are signs this may happen on a $51.6 billion portfolio of option adjustable-rate mortgages Wells inherited from Wachovia. The bank said 3.21% of these loans were more than 90 days past due in the second quarter, a big leap from 1.11% in the first quarter. And these are loans that Wells didn't treat as impaired when it bought Wachovia, presumably because management thought they were stronger than those they did mark down.
http://online.wsj.com/article/SB124831419380774639.html
Through the credit crunch, Wells Fargo has convinced investors that it is a cut above other large banks. Its shares trade at 2.5 times tangible book value versus 1.6 times for J.P. Morgan Chase. But while Wells posted better-than-expected second-quarter profits on Wednesday, it also showed a sharp deterioration in credit quality.
The question now hanging over the company: Has Wells's management been caught out by the recent poor performance of the bank's loans? One reason Wells trades at a big premium over others is the perception that its executives have a strong handle on credit risk. Now, though, there are signs that the bank may have been too optimistic about the quality of loans it got from Wachovia, the large bank it acquired last year. Moreover, many of Wells's own loans continue to perform disappointingly, with nonperformers going up in the second quarter for corporate loans, commercial real-estate credits and its $117 billion of core home-equity loans.
Voltron says: remember, home equity loans are second mortgages. If the first mortgage is worth 99 cents on the dollar, the home-equity loan is worth zero.
Granted, as the economy struggles, rising bad loans are hardly a surprise. But they become a big deal for investors if management doesn't appear to have set aside adequate loan-loss reserves.
Wells's reserves are equivalent to 2.86% of loans, well below 5% for J.P. Morgan and 3.61% at Bank of America. Wells's defenders might point out that less of its loans are going bad. Its nonperformers are equal to 1.92% of loans vs. 2.17% at J.P. Morgan and 3.12% at BofA. But Wells's nonperformers ratio could go higher.
For instance, there are signs this may happen on a $51.6 billion portfolio of option adjustable-rate mortgages Wells inherited from Wachovia. The bank said 3.21% of these loans were more than 90 days past due in the second quarter, a big leap from 1.11% in the first quarter. And these are loans that Wells didn't treat as impaired when it bought Wachovia, presumably because management thought they were stronger than those they did mark down.
http://online.wsj.com/article/SB124831419380774639.html
Wells Fargo's Beat Rings Hollow
Excerpt:
Despite Wells Fargo's huge profit beat and a pronouncement that the firm had surpassed its stress-test capital mandate, investors sent its stock down on worries about escalating credit problems.
Wells added $700 million to its credit reserves, bringing its total allowance for credit losses over the next year to $23.5 billion.
"We expect credit losses and nonperforming assets to increase," Chief Credit Officer Mike Loughlin said in a statement.
http://www.thestreet.com/story/10549240/1/wells-fargos-beat-rings-hollow.html
Credit Worries Shadow Wells Fargo as Earnings Jump
Voltron says: Wall Street Journal calls out Wells Fargo on it's lies.
Wells Fargo & Co.'s second-quarter earnings soared 81%, hitting a new company record, amid the bank's acquisition of Wachovia.
But shares fell 6.9% premarket despite the company's results topping analysts' expectations as loan troubles continued to mount.
Larger banks like Wells Fargo have enjoyed a lift from the recent mini-boom in mortgage refinancing, which is a major business for the San Francisco bank. But rising delinquencies and credit woes continued.
Analysts have expressed concern about the risk Wells Fargo assumed with its purchase of troubled Wachovia, which left it heavily exposed to the rapidly weakening commercial real estate sector. Meanwhile, option adjustable-rate mortgages have been generating proportionally more delinquencies and foreclosures than subprime mortgages in recent months, which could mean higher-than-expected losses for some of the bigger banks.
Chief Executive Jon Stumpf said Wednesday the company's top priority is to integrate Wachovia as smoothly as possible, adding that the integration is on track. He added in November, banks in Colorado will convert Wachovia branches to Wells Fargo ones.
Investors must rely on management to volunteer information about the integration, because the company has said it again won't hold a conference call.
Wells Fargo posted income of $3.17 billion, or 57 cents a share, up from $1.75 billion, or 53 cents a share, a year earlier. The company had 36% more shares outstanding in the most recent period amid the takeover. Revenue nearly doubled to $22.5 billion from $11.46 billion, with Wachovia making up 39% of the total.
Analysts polled by Thomson Reuters expected earnings of 34 cents on revenue of $20.49 billion.
Credit-loss provisions were $5.09 billion, up 69% from a year earlier and 11% from the prior quarter. Net charge-offs rose to 2.1% of average loans from 1.54% in the prior quarter. Nonperforming assets grew to 2.2% from 1.5% in the prior quarter.
The bank's tangible common equity ratio, which measures how much of a bank's hard assets its shareholders actually own, rose to 5.2% from 3.8% in the prior quarter
Wells Fargo & Co.'s second-quarter earnings soared 81%, hitting a new company record, amid the bank's acquisition of Wachovia.
But shares fell 6.9% premarket despite the company's results topping analysts' expectations as loan troubles continued to mount.
Larger banks like Wells Fargo have enjoyed a lift from the recent mini-boom in mortgage refinancing, which is a major business for the San Francisco bank. But rising delinquencies and credit woes continued.
Analysts have expressed concern about the risk Wells Fargo assumed with its purchase of troubled Wachovia, which left it heavily exposed to the rapidly weakening commercial real estate sector. Meanwhile, option adjustable-rate mortgages have been generating proportionally more delinquencies and foreclosures than subprime mortgages in recent months, which could mean higher-than-expected losses for some of the bigger banks.
Chief Executive Jon Stumpf said Wednesday the company's top priority is to integrate Wachovia as smoothly as possible, adding that the integration is on track. He added in November, banks in Colorado will convert Wachovia branches to Wells Fargo ones.
Investors must rely on management to volunteer information about the integration, because the company has said it again won't hold a conference call.
Wells Fargo posted income of $3.17 billion, or 57 cents a share, up from $1.75 billion, or 53 cents a share, a year earlier. The company had 36% more shares outstanding in the most recent period amid the takeover. Revenue nearly doubled to $22.5 billion from $11.46 billion, with Wachovia making up 39% of the total.
Analysts polled by Thomson Reuters expected earnings of 34 cents on revenue of $20.49 billion.
Credit-loss provisions were $5.09 billion, up 69% from a year earlier and 11% from the prior quarter. Net charge-offs rose to 2.1% of average loans from 1.54% in the prior quarter. Nonperforming assets grew to 2.2% from 1.5% in the prior quarter.
The bank's tangible common equity ratio, which measures how much of a bank's hard assets its shareholders actually own, rose to 5.2% from 3.8% in the prior quarter
Saturday, July 18, 2009
Monday, July 13, 2009
Deliberately walking away from mortgages
Voltron says: No surprise, when people's houses are worth less than the mortgage, they walk. The government is trying to trick people into refinancing their mortgages into full-recourse loans to prevent them from walking away, but most people aren't that stupid. The banks are not willing (or able) to eat the loss by lowering the principal amount of the loan, interest rates are already effectively zero and the government is broke. The only way the government can keep the banks solvent is through inflation.
Article has some updated statistics:
http://www.latimes.com/classified/realestate/news/la-fi-harney12-2009jul12,0,3674775.story
Friday, July 10, 2009
California says all I need are some tasty waves, a cool buzz, and I'm fine
Voltron says: I find it amazing how blasé people are about the fact that California is broke. California is now issuing IOUs, which the banks have stopped accepting as of today. They are being bought for 50-88 cents on the dollar on ebay and craigslist. California is basically trying to print it's own money. Fiat money (i.e. money not backed by gold or silver) originally derived its value from the fact that it was accepted for payment of taxes. California is going to have to accept these IOUs at 100 cents on the dollar for taxes, fines, fees, etc. All of the IOUs will end up being returned to the state, requiring the state to issue more and more IOUs, in a financial death-spiral.
http://finance.yahoo.com/news/Californias-creditors-look-to-apf-238352721.html?x=0&.v=3
http://finance.yahoo.com/news/Californias-creditors-look-to-apf-238352721.html?x=0&.v=3
Dollar devaluation this summer?
Voltron says: rumor has it that the dollar will be devalued this summer during a special "bank holiday." You see, any banana republic can devalue its currency to shrug off its debt by adjusting the official foreign exchange rates. The problem is that the US Dollar is the world's reserve currency and everything is pegged to the dollar. This fact has allowed the US to get away with monetary murder for decades (low interest rates), but it's a double edged sword. The US gets to finance its debt at low interest, not because its a super cool peachy keen country, precisely BECAUSE it can't default very easily through devaluation (a.k.a inflation).
http://www.examiner.com/x-6012-State-of-the-World-Examiner~y2009m6d24-Bank-Holiday-planned-for-September
http://www.examiner.com/x-6012-State-of-the-World-Examiner~y2009m6d24-Bank-Holiday-planned-for-September
Thursday, July 9, 2009
Goldman conspiracy theory
Voltron says: rumor on the street is that the software stolen by a rogue ex-Goldman Sachs employee reveals that Goldman Sachs has been hacking into the stock exchanges and front-running the entire market.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aFeyqdzYcizc
http://www.ritholtz.com/blog/2009/07/is-goldman-stealing-100-million-per-trading-day/
Monday, July 6, 2009
Bearish WFC and IYR options activity
Voltron says: Someone is making some rather large bets that Wells Fargo will decline over 35% by mid August. Also, puts were purchased on IYR with a break even at 7% below the current price.
Subscribe to:
Posts (Atom)
