Dick Bove gives Wells Fargo a "sell" rating

Voltron: Dick Bove is usually pretty bullish, so this is a (pleasant) surprise.

"I think the loan loss reserve has to go to a lot higher and I also think that they'll be writing off a minimum of $6 billion in bad loans every quarter for the next four to six quarters"

http://www.foxbusiness.com/story/markets/industries/finance/bove-downgrade-wells-fargo-pulls-market-lower/

Behind the Numbers At Wells Fargo

Excerpt:

Wells' Fire Engine Red Flags

Dig deeper into Wells Fargo's third quarter report, and here's what you'll find. It's got a massive consumer loan portfolio that it picked up when it bought Wachovia a year ago.

Wachovia had been brought low by its disastrous decision to buy the damaged Golden West Financial, which popularized the now excoriated 'pick-a-payment' loan program, which essentially let borrowers defer interest payments and add them to the loan's principal.

Many of these loans carry low initial rates that are just now starting to reset higher, backfiring on Wells as the recession continues.

Pick-A-Payment Losses

Ok now this is where it gets to be a funhouse hall of mirrors. Amidst the pie charts and graphics and footnotes, you'll see this in Wells Fargo's report: $107.3 billion in pick-a-payment loan principal still due and owing at the bank.

Now, a new accounting rule that just took effect this past summer says banks must book the value of those loans as of the time they're reported to shareholders. It's part of the 'fair market' rules you may have heard about.

So now Wells says these loans are really only worth, watch this: $87 bn. It calls this the carrying value of these loans.

That $20 billion could potentially come out in the wash as a future writedown-and $20 billion is nearly half Well's $53 billion in Tier 1 capital, Tier 1 being the capital cushion bank regulators says all banks must have to support their businesses.

But where did that $20 billion swing downward come from? Dig deeper into Wells' disclosures, you'll see that of those $107.3 billion in pick-a-payment loans, Wells says $57 billion are what's called 'impaired,' meaning, they're either not paying any interest, they're in default, or they are flat out delinquent.

Out of that pile of rotten apples, Wells says it thinks just $37.9 billion are worth anything at all.

What do you want to bet that it's not actually $37.9 billion, but the full $57 billion are worth nothing at all, given that home foreclosures are rising, wages are falling, as unemployment continues to rise?

Wells' Souring Commercial Real Estate Loans

It gets, well, worse at Wells. The bank says it also has $135 billion commercial real estate loans, much of which it picked up from Wachovia--$43 billion of this sum is at risk. About a third of Wells Fargo's commercial real estate loan book is tied to properties in California or Florida, two states slammed hard by downturn in real estate.

Wells' Off-Balance Sheet Uglies

There's more. Wells also has $174.4 billion in off balance sheet assets, with some $109 B that could come back onto its balance sheet if a new accounting rule takes effect next year.

And Wells executives are staring morosely at a mountain of rotten paper, $55 B in other toxic assets, called level 3 assets. Supporting all of this is its $53 billion in Tier 1 capital, as well as $98.1 billion in net worth on a hard asset, or tangible, basis.

Cookie Jar Reserves Swamp Interest Income

Meanwhile, Wells' loan loss reserves have grown to $24.5 B, double its $11.7 B in net interest income for the third quarter. Net interest income is the lifeblood of any bank, it's the money that comes in the door from loans, mortgages, credit cards, you name it.

When cookie jar reserves swamp interest income, watch out, that's a fire-engine red flag. Wells' credit reserve ratios are also well below what JPMorgan Chase and BofA have now.

http://emac.blogs.foxbusiness.com/2009/10/21/behind-the-numbers-at-wells fargo/

U.S. Hyperinflation

Excerpt:

Peter Bernholz (Professor Economics in Basel) studied the world's 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

http://wallstreetpit.com/11369-us-hyperinflation

Wells Fargo fails to beat "whisper number"

Voltron says: Wells Fargo fails to concoct enough fraudulent phantom "earnings" to beat the "whisper number" (i.e. the real earnings estimate of stock analysts as opposed to the lowball number they publish in order to manipulate the stock so they can profit from an upside "surprise")

http://www.bloomberg.com/apps/news?pid=20601206&sid=arm1bqFn5sy8

Einhorn Goes for Gold, Slamming U.S. Policies

Excerpts:

Mr. Einhorn reportedly likened Treasury Secretary Timothy Geithner's regulatory reform plan to trying to stop terrorism by "frisking grandma and taking away everyone's shampoo."

"Although our leaders ought to be making some serious choices, they appear too trapped in the short term and special interests to make them," Mr. Einhorn said.

Last week when Federal Reserve Chairman Ben Bernanke, Mr. Geithner and White House economic adviser Larry Summers spoke in interviews and on panel discussions, Mr. Einhorn said, "My instinct was to want to short the dollar but then I looked at other major currencies - euro, yen and British pound - and they might be worse."

Mr. Einhorn added, "Picking these currencies is like choosing my favorite dental procedure. And I decided holding gold is better than holding cash, especially now that both offer no yield."

http://dealbook.blogs.nytimes.com/2009/10/20/einhorn-goes-for-gold-slamming-us-policies/

Inflation Will Kill Stocks

Voltron says: One way of valuing stocks is to add up the discounted expected dividends. The key word is here is "discounted", i.e., adjusting for time, interest rates and inflation. If inflation goes up, future dividends are worth less in today's dollars.

http://www.businessinsider.com/dont-kid-yourself-inflation-will-kill-stocks-2009-10

Wells Fargo sees credit losses peaking next year

Voltron says: isn't that what they said last year?

http://www.marketwatch.com/story/wells-fargo-sees-credit-losses-peaking-next
-year-2009-10-21

Wells Fargo 3rd Q results tomorrow

http://www.thestreet.com/_yahoo/story/10614210/1/well-fargos-credit-book-in-the-spotlight.html

China Is Already Dumping the Dollar

"The idea they don't have anywhere else to go or would shoot themselves in the foot if there were a steep decline in the dollar or appreciation of their currency reassures many people in Washington 'we can relax'," he says. "An appreciation of the renminbi may reduce value of their international reserves but increases the value of every other asset the Chinese own," most notably the commodity assets they have been buying all over the world.

Perhaps most importantly, China's massive stimulus program is helping to generate internal consumption in the People's Republic, meaning local manufacturers are less dependent on exports. Because of the "rapid growth" of Chinese domestic consumption, Ferguson predicts China's international trade surplus could be gone by next year.

http://finance.yahoo.com/tech-ticker/article/357648/Wake-Up-Washington!-China-Is-Already-Dumping-the-Dollar-Niall-Ferguson-Says

Gold may not follow the crash next time

Voltron says: when the stock market crashed last year, gold prices went down with it because hedge funds were forced to sell any assets, including gold, to raise cash for margin calls. Do not expect this to happen next time because one of the major exchanges is now allowing gold to be used as margin collateral. And, oh by the way, the gold will be stored outside the U.S., in London.

http://www.marketwatch.com/story/cme-to-allow-gold-as-collateral-for-all-exchange-products-2009-10-19

John Browne on Inflation

Russia Prepares To Short $18 Billion

Voltron says: Usually banana republics are unable to raise money in their home currency and are "forced" to denominate their bonds in other currencies such as the US dollar. In this case it would seem that Russia is issuing debt in dollars not because they have to, but because they can . . . they will benefit from low interest rates and any crash in the dollar. Which would give them every reason to engineer a crash of the dollar. Imagine if China did this!

http://www.businessinsider.com/russia-preparing-to-short-eighteen-billion-dollars-2009-10

The FHA Is A Looming Disaster

• The FHA has expanded from guaranteeing just 2% of mortgages to over 20% in just a couple of years, dramatically raising its exposure to the still declining US housing market.
• The FHA still backs toxic, almost-no-money down mortgages. It will currently guarantee mortgages with as low as 3.5% downpayments.
• The FHA's mission is political: it is still trying to "expand home ownership."
• The discredited ideology of home ownership is the most toxic ideology since communism.
• The number of mortgage companies whose loans are backed from the FHA has grown from around 1,000 to over 3,300 but the FHA hasn't grown its ability to analyze these companies.
• A recent audit of FHA applications found only 5% included all the necessary documents.
• The leadership of the FHA is completely oblivious to its coming ruin.
• The FHA is in even worse shape than Fannie Mae and Freddie Mac.

video: http://www.businessinsider.com/the-fha-is-a-looming-disaster-2009-10

Daily Show: Dow 10,000

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Dow Jones Rebounds to 1999
www.thedailyshow.com
Daily Show Full Episodes Political Humor Ron Paul Interview

Chinese drywall problems

http://www.google.com/hostednews/ap/article/ALeqM5gD4avarflIqeq856bkEM8jMJRR_wD9BBMB980

When Big Returns Aren't That Big

http://www.smartmoney.com/investing/stocks/when-big-returns-aren-t-that-big/

Word on the street: TARP money used to buy US Treasuries

Voltron says: Rumor has it that much of the $700 Billion TARP bailout money was used to buy Treasuries (which is a typical form of collateral) which would explain how the new Treasury debt was absorbed so easily by the market. It's going to be a mess when all those treasuries eventually get sold while the Treasury Dept is simultaneously issuing more debt.

Foreclosures hit record

http://money.cnn.com/2009/10/15/real_estate/foreclosure_crisis_deepens/?postversion=2009101507

Dollar to fall by half

Voltron says: Hat Tip to "Jeep"

Oct. 15 (Bloomberg) -- The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.'s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

"The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger," said Daisuke Uno at Sumitomo Mitsui, a unit of Japan's third- biggest bank. "The dollar's fall won't stop until there's a change to the global currency system."

http://www.bloomberg.com/apps/news?pid=20601087&sid=a_A5nqmw9Dq8

Wells Fargo's shadyness

http://www.businessweek.com/bwdaily/dnflash/content/oct2009/db20091014_008314.htm?campaign_id=yhoo

DOW 10,000, 7537 or 3,333

Voltron says: since the dollar has gone down about 25% and gold has trippled sine the Dow first hit 10k, the rise in the dow is merely nominal.

http://www.zerohedge.com/article/dow-10000-oh-wait-make-7537

Harrods to sell gold bullion

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/6328823/Harrods-to-sell-gold-bullion-for-first-time.html

How Marc Faber And John Paulson Are Playing The Inflation Trade

http://www.businessinsider.com/how-marc-faber-and-john-paulson-are-playing-the-inflation-trade-2009-10

60% of borrowers underwater

http://ftalphaville.ft.com/blog/2009/10/14/77561/majority-of-current-rmbs-borrowers-underwater-fitch-says/

Housing risks still lurk even as buyers return

http://news.yahoo.com/s/nm/20091012/ts_nm/us_usa_housing

Home values expected to fall 10% nationally

David H. Stevens, head of the Federal Housing Administration, told a panel at the Mortgage Bankers Association convention at the San Diego Convention Center that all signs point to a further 10 percent drop in home values by the first quarter of next year.

Many economists believe unemployment will continue to grow until next year, even if the recession is ending.

http://www3.signonsandiego.com/stories/2009/oct/13/home-values-expected-fall-10-nationally/?business&zIndex=181662

Dollar loses reserve status to yen & euro

"[Federal Reserve Chairman Bernanke] is in a crisis worse than the meltdown ever was," said Peter Schiff, president of Euro Pacific Capital. "I fear that he could be the Fed chairman who brought down the whole thing."

http://www.nypost.com/p/news/business/dollar_loses_reserve_status_to_yen_hFyfwvpBW1YYLykSJwTTEL

US home rescue plan delaying, not solving crisis

http://www.reuters.com/article/marketsNews/idCNN1249572220091013

Single Best Investment in History = 258,449%

By Barry Ritholtz - October 12th, 2009, 11:00AM
The single best investment -- in terms of greatest return on invested dollars -- has been the lobbying efforts of the major banks and finance firms.

They spent $114.2 million dollars in contributions toward the 2008 election, according to the the nonpartisan Center for Responsive Politics. The companies that have been awarded taxpayers' money from Congress's bailout bill spent $77 million on lobbying and $37 million on federal campaign contributions, the Center finds.

These firms political activities have yielded them $295.2 billion from Recapitalization, TARP and other assorted bailouts.

The return on investment: 258,449 percent.

http://www.ritholtz.com/blog/2009/10/single-best-investment-in-history-258449/

It's Official, Central Banks Are Fleeing The Dollar

http://www.businessinsider.com/its-official-central-banks-are-fleeing-the-dollar-2009-10

Americans Still Delusional About House Prices

http://www.businessinsider.com/henry-blodget-americans-still-delusional-about-house-prices-2009-10

Besides The Fed, Nobody Is Buying Agency Debt

http://www.businessinsider.com/chart-of-the-day-who-bought-us-government-deb-2009-10?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock+Chart+of+the+Day%2C+Thusday%2C+10%2F8%2F09

34 Banks Miss TARP Dividends

http://www.nakedcapitalism.com/2009/10/34-banks-miss-tarp-dividends-and-almost-no-one-notices.html

Commercial Real Estate May Be Next Victim of Recession

data suggests that the $3.5 trillion in outstanding commercial real estate debt could be what some fear: the other shoe about to drop . . . There have been estimates of $800 billion to $1 trillion of commercial mortgage defaults over the next several years, if we don't find a solution to our current troubles.

Transcript: http://www.pbs.org/newshour/bb/business/july-dec09/realestate_10-06.html

FHA may need a $54 billion bailout

voltron says: too bad there is no way to short this (it's a government agency)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOmu318hOZr4

Union Bank of Switzerland says sell Wells Fargo

http://www.dividend.com/blog/?p=14677

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.

http://www.businessinsider.com/chart-of-the-day-sp-500-in-dollars-and-euros-2009-10

Whalen: Q4 “Going to Be a Bank Bloodbath”

http://www.ritholtz.com/blog/2009/10/whalen-real-economy-is-dying-q4-going-to-be-a-bloodbath/

On the Edge with . . . Janet Tavakoli (video)

“meltdown risk today is greater than in 2007″

http://maxkeiser.com/2009/10/03/ote21-on-the-edge-with-janet-tavakoli/

When Banks Start Lending... Watch Out!

http://www.businessinsider.com/chart-of-the-day-us-monetary-base-2009-10

Report on Bailouts Says Treasury Misled Public

http://marketplace.publicradio.org//display/web/2009/10/05/pm-tarp

http://www.nytimes.com/2009/10/05/business/economy/05bank.html?_r=1&scp=2&sq=tarp&st=cse

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.

http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html

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

Search working again

Voltron says: There is now a search box at the bottom on the blog.

Unemployment outlasts benefits

Weak Dollar Helps Bulls Erase Losses

http://www.businessinsider.com/weak-dollar-helps-bulls-erase-losses-2009-10

Options activity on Wells Fargo, Moody's and Morgan Stanley

http://www.forbes.com/2009/10/02/morgan-stanley-bearish-personal-finance-investing-ideas-wells-fargo.html?partner=yahootix

Whitney: Small Business Will Be Strangled By Credit Crunch Part II

http://www.businessinsider.com/whitney-the-credit-crunch-is-about-to-suffocate-small-businesses-2009-10

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%.

http://finance.yahoo.com/news/US-jobless-rate-reaches-98-apf-93159528.html?x=0&.v=13

Daily Show: High Frequency Trading Cash Cow (video)

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Cash Cow - High-Frequency Trading
www.thedailyshow.com
Daily Show Full Episodes Political Humor Ron Paul Interview

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

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

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

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

Humor: Elephant in the room (video)

http://www.youtube.com/v/RYA0DsPcbaU

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/

Loan Losses Triple-Slam The Banks

http://www.businessinsider.com/loan-losses-triple-slam-banks-25-09-09

Short sales increase

http://www.baltimoresun.com/business/chi-sun-short-sales-0920sep20,0,1828281.story?page=1

Inflation a Risk Without Foreign Debt Buyers: Robertson

http://www.cnbc.com/id/33004753

Dollar under scrutiny at G20 summit

http://news.yahoo.com/s/afp/financeeconomyg20forexuschina

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.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw6_gqc0EKKg

A stimulating discussion of Option-Arms

http://www.calculatedriskblog.com/2009/09/comment-on-option-arms.html

Bankruptcy Filings Approach 2005 Highs

http://globaleconomicanalysis.blogspot.com/2009/09/bankruptcy-filings-approach-2005-highs.html

Bank of America versus America

BofA to face SEC trial, Loses Gov't Guarantees

BofA plays lawyer games with congress

BofA's Growing Legal Woes Could Bring Shakeup at Top

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

http://www.calculatedriskblog.com/2009/09/housing-facing-triple-whammy-at-end-of.html

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.

http://www.businessinsider.com/john-carney-unable-to-sell-homes-brokers-turn-to-arson-2009-9

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."

full article: http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20090920/BUSINESS12/909200339

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?

http://boombustblog.com/200909191145/The-ARE-trying-to-kick-the-bad-mortgages-down-the-road-here-s-proof.html

Updated Links

Voltron says: I've updated the links on the right column on the blog. Enjoy.

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.

Full article: http://www.bloomberg.com/apps/news?pid=20601103&sid=a.wV83iJI34k

$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

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/09/20/MNOR19N2B1.DTL

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.

http://globaleconomicanalysis.blogspot.com/2009/09/strategic-default-data-suggests.html

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

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.

http://www.marketwatch.com/story/home-prices-wont-regain-peak-this-decade-moodys-2009-09-18?siteid=nwhreal

Is Wells Fargo Making AIG's Suicidal Mistake?

http://www.businessinsider.com/john-carney-is-wells-fargo-making-aigs-suicidal-mistake-2009-9

FDIC is broke

http://www.calculatedriskblog.com/2009/09/fdics-bair-dif-may-borrow-from-treasury.html

FHA going the way of Fannie and Freddie

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/17/AR2009091704594.html

Bove: Wells Fargo Sitting On A Volcano About To Explode (WFC)

http://www.businessinsider.com/bove-wells-fargo-sitting-on-a-volcano-about-to-explode-2009-9

"Option" mortgages to explode, officials warn

http://www.reuters.com/articlePrint?articleId=USTRE58G5U320090917

Wells Fargo’s Commercial Portfolio is a ticking time bomb

http://bankimplode.com/blog/2009/09/17/wells-fargo-s-commercial-portfolio-is-a-ticking-time-bomb-exclusive/

5 Reasons for Caution in the Stock Market and Housing Casino

http://www.doctorhousingbubble.com/5-reasons-for-caution-in-the-stock-market-and-housing-casino-public-private-investment-program-gives-it-a-go-64-million-gives-you-access-to-1-3-billion-in-unpaid-principal/

Peter Schiff interview (video)

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

We're not out of the woods

http://www.cnbc.com/id/32837255/site/14081545

http://marketplace.publicradio.org//display/web/2009/09/14/pm-obama-q/?refid=0

http://www.bloomberg.com/apps/news?pid=20601208&sid=aSbIT8GZjdKI

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

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

The Next Financial Crisis

http://www.tnr.com/article/economy/the-next-financial-crisis

Peter Schiff on gold (video)

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.

http://jessescrossroadscafe.blogspot.com/2009/09/barrick-capitulates.html

Insiders are heavy sellers

http://www.time.com/time/business/article/0,8599,1920635,00.html

A year after financial crisis, a new world order emerges

Voltron says: a good summary and outlook:

http://news.yahoo.com/s/mcclatchy/20090908/pl_mcclatchy/3307834/print

Gold Advances to $1,000 on Dollar’s Weakness, Inflation Hedge

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQX1jTKsEjS4

Alan Greenspan warns of US inflation risks

http://www.theaustralian.news.com.au/business/story/0,28124,26042538-5018001,00.html

China alarmed by US money printing

http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html

MARC FABER Now you need a machine gun (video)

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.

excerpt:

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.”

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.

link: http://www.bloomberg.com/apps/news?pid=20601087&sid=aa7bHfruDGgs

Philadelphia gets a subprime loan

Voltron says: what could possibly go wrong?

http://marketplace.publicradio.org//display/web/2009/09/02/pm-philly-loan

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

Is Wells Fargo Regretting Its Wachovia Acquisition?

http://seekingalpha.com/article/159603-is-wells-fargo-regretting-its-wachovi
a-acquisition