FLASH - Bernanke admits that inflation is both a hidden tax and a monetary phenomenon.
Watch the video.
http://www.house.gov/paul/index.shtml
Sunday, July 13, 2008
Care to watch the CEO of Indymac, the second largest bank failure, at a press conference this weekend?
Listen to the words carefully. You will hear something that is entirely untrue but it is carefully scripted to suggest that your deposits are safe and secure.
Let me know if you pick it up.
http://www.youtube.com/watch?v=YWObzm9O1Nc
Listen to the words carefully. You will hear something that is entirely untrue but it is carefully scripted to suggest that your deposits are safe and secure.
Let me know if you pick it up.
http://www.youtube.com/watch?v=YWObzm9O1Nc
Saturday, July 12, 2008
FLASH : REAL UNEMPLOYMENT NEAR 10% - and that is our own lying number (I added for effect).
And, guess what? It was over 8% for May of 2007 - LAST YEAR! Did you read that anywhere? Noooooooo. You read unemployment at historical lows - 4.5%.
These definitions are real and also from the BLS. Please focus on the hitherto unmentioned crazy relative locked in the basement - U-6.
Definitions of U-1 to U-6:
U-1: Persons unemployed 15 weeks or longer, as a percent of the civilian labor force
U-2: Job losers and persons who completed temporary jobs, as a percent of the civilian labor force
U-3: Total unemployed persons, as a percent of the civilian labor force (the official unemployment rate)
U-4: Total unemployed persons plus discouraged workers, as a percent of the civilian labor force plus discouraged workers
U-5: Total unemployed persons, plus discouraged workers, plus all other “marginally attached” workers, as a percent of the civilian labor force plus all “marginally attached” workers
U-6: Total unemployed persons, plus all “marginally attached” workers, plus all persons employed part time for economic reasons, as a percent of the civilian labor force plus all “marginally attached” workers
U-6 IS the real unemployment, as bad as it gets. It is still a lie but it's now more like a really, really big white lie.
No more needs to be said.
This is a lot like the FED no longer publishing the M-3 measure of the money supply because it so, so, so massively disturbing. They know what it is but they no longer publish it. Best guess of folks that try to continue to calculate it...in excess of 20%...per year.
Or consider the insulting "core" inflation numbers of 3%+/-. Does anybody actually live without energy or housing or any other "adjusted-out" items?
Are you now beginning to understand why you feel like you have been in a recession?
Of course you do because you've been in one one for more than a year.
Wait until the next post for a discussion of Greenspan's ultimate bonehead thought. This one, if we un-correct his correction, would reduce GDP by nearly 2%. Sooooo, for as long as our "reported" GDP has been less than 2%, we have actually been in a recession.
So, we have understated unemployment, understated inflation and understated growth in the money supply. And these are just the first three crazy relatives!
Ah, I feel so clean now. Now we can talk about ALL of the other relatives in the basement. It's actually a small compound down there. We'll bring them up one at a time to get you used to them...slowly.
Hell, some one left the basement door open...they are all coming out...they're hideous...derivatives, Alt-A mortgages, negative am mortgages, consumer loans, real government deficits, real government debt, unfunded government liabilities, Level 3 assets...AAARRRGGGHHH!
Friday, July 11, 2008
By the way, check out the June 22nd blog. Very prophetic.
You don't have to be smart. You just have to read a lot and think like a sneaky bastard...just like a Central Banker or the head of the Treasury.
To make money, you don't need a lot of warning. I think 19 days was enough.
Did anyone else short Freddy or Fannie or think Indy would fail?
An you call yourself "Shufflers"!
What do you think will fail next?
You don't have to be smart. You just have to read a lot and think like a sneaky bastard...just like a Central Banker or the head of the Treasury.
To make money, you don't need a lot of warning. I think 19 days was enough.
Did anyone else short Freddy or Fannie or think Indy would fail?
An you call yourself "Shufflers"!
What do you think will fail next?
To the tune of the intro to "The Rockford Files":
"Eh, yo, Danny Boy. This is your buddy, Fat Sally…Sal Minela. You still bustin’ knee caps? I gotta couple of stugotts been a little light recently and I need some persuasive collections. Names Skinny Fannie, Fast Freddy and their pal Mini Indy. It’s about $6 trillion with the vig. U interested? Call me."
OK, let's go over this again.
1. You can't lend money to people that can't pay it back.
2. You are not a government that can print money so you must either earn it, borrow it or have someone buy your equity.
3. Contrary to some folk's opinion, money is not just digital bit and bites created at the Treasury's or the FED' whim.
4. If you leverage your equity 30:1 (or even 220:1 ala Bear Sterns), just a weeeee little decline in the market wipes out your equity and, therefore, your capital structure.
"What we have here is a failure to communicate."
Let's remember just what our government is. It is nothing more than the collective capabilities of all of its citizens. That's it. We, as productive citizens, produce value in excess of what we consume, after tax (or at least that is what we are supposed to do). This is called savings.
Then there is the government. It is funded by our taxes. These taxes may be invested in things that last, such as bridges, roads, utilities, etc. We can spend it on social requirements such as the military. We can spend it on the necessary expenses of our country (though you and I might differ on the definition of "necessities"). Then, after all of this investing and spending, we still don't have enough, the country may use our collective ability to service new debt and we can borrow. To support that debt, we must pay interest, but that interest must be paid out of our taxes UNLESS you have a giant governmental negative-am economy.
That is it! We have a giant negative-am country!!!
We tax, we spend more than we tax, we borrow to spend and we borrow to pay the interest on the debt we borrowed. How do we get away with it? We have a giant printing press. The world uses our currency and they have wanted our dollars. Also, it helps that we have 13 or so aircraft carriers, a large number of "boomers" (submarines that break things, not you and me), an even larger number of warheads and the demonstrated ability and desire to use them to defend liberty and capitalism (OK, not really but it sounds good). This is the real meaning of "defending the dollar".
But, you and I do not have a trigger in our hands so our debts must be paid and serviced. We don't have a personal printing press.
Another truism: Most people think that assets are fixed in value and debt is variable. It is quite the opposite. Assets vary in value and debt is fixed.
As an example, you buy a house for $500,000 and borrow $475,000 (a very generous, by current standards, 5% down). If, just if, the value of your home declines by 25%, as they have in many parts of the country, your home is now worth $375,000 BUT you still owe $475,000. You must pay that off somehow and you must service the debt while you owe it.
If you don't pay this debt, the bank looses money. That loss reduces their equity and they can now lend less. Less lending, less growth capital, higher rates, etc.
This is right where we are now. Over valued assets everywhere supported by too much debt and too little income to service the debt. This is true for individuals and for the country.
And for Fannie and for Freddy and for Indy. And the "ands" just keep on coming!
"Eh, yo, Danny Boy. This is your buddy, Fat Sally…Sal Minela. You still bustin’ knee caps? I gotta couple of stugotts been a little light recently and I need some persuasive collections. Names Skinny Fannie, Fast Freddy and their pal Mini Indy. It’s about $6 trillion with the vig. U interested? Call me."
OK, let's go over this again.
1. You can't lend money to people that can't pay it back.
2. You are not a government that can print money so you must either earn it, borrow it or have someone buy your equity.
3. Contrary to some folk's opinion, money is not just digital bit and bites created at the Treasury's or the FED' whim.
4. If you leverage your equity 30:1 (or even 220:1 ala Bear Sterns), just a weeeee little decline in the market wipes out your equity and, therefore, your capital structure.
"What we have here is a failure to communicate."
Let's remember just what our government is. It is nothing more than the collective capabilities of all of its citizens. That's it. We, as productive citizens, produce value in excess of what we consume, after tax (or at least that is what we are supposed to do). This is called savings.
Then there is the government. It is funded by our taxes. These taxes may be invested in things that last, such as bridges, roads, utilities, etc. We can spend it on social requirements such as the military. We can spend it on the necessary expenses of our country (though you and I might differ on the definition of "necessities"). Then, after all of this investing and spending, we still don't have enough, the country may use our collective ability to service new debt and we can borrow. To support that debt, we must pay interest, but that interest must be paid out of our taxes UNLESS you have a giant governmental negative-am economy.
That is it! We have a giant negative-am country!!!
We tax, we spend more than we tax, we borrow to spend and we borrow to pay the interest on the debt we borrowed. How do we get away with it? We have a giant printing press. The world uses our currency and they have wanted our dollars. Also, it helps that we have 13 or so aircraft carriers, a large number of "boomers" (submarines that break things, not you and me), an even larger number of warheads and the demonstrated ability and desire to use them to defend liberty and capitalism (OK, not really but it sounds good). This is the real meaning of "defending the dollar".
But, you and I do not have a trigger in our hands so our debts must be paid and serviced. We don't have a personal printing press.
Another truism: Most people think that assets are fixed in value and debt is variable. It is quite the opposite. Assets vary in value and debt is fixed.
As an example, you buy a house for $500,000 and borrow $475,000 (a very generous, by current standards, 5% down). If, just if, the value of your home declines by 25%, as they have in many parts of the country, your home is now worth $375,000 BUT you still owe $475,000. You must pay that off somehow and you must service the debt while you owe it.
If you don't pay this debt, the bank looses money. That loss reduces their equity and they can now lend less. Less lending, less growth capital, higher rates, etc.
This is right where we are now. Over valued assets everywhere supported by too much debt and too little income to service the debt. This is true for individuals and for the country.
And for Fannie and for Freddy and for Indy. And the "ands" just keep on coming!
Friday, July 4, 2008
Yes, I know that I have always been inspired by Ross Perot's charts (he has a new web site with new charts "perotcharts.com").This chart, however, is a real game changer.
For everyone who thinks the consumer may return soon, therefore driving stocks back up, think of this. For our Texas listeners, most of whom heat their homes with natural gas, see what impact natural gas prices will have on your disposable this fall and winter.
Let's round for effect. Last fall, natgas spot was about $7. Today it is about $14. Assuming that it does not go up any more this year, your home heating bill will more than double, after taxes and fees.
Soooooo, if my monthly home heating bill was $700 last year, this year it will be $1400.
We pause for effect...
Did anyone out there plan to spend $500-$1000 more each month to heat their homes? What effect do you think this will have upon disposable incomes? Think this will make consumers spend more or less? And this is just the heating bill. This does not include the increased cost of virtually everything else.
Just food for thought when deciding upon whether we have a bottom in sight anywhere. Especially financials. If financials are struggling with write-offs, what do you think this massive decrease in disposable income will have on the propensity of consumers to pay their outstanding obligations? My bet is that write-offs and foreclosures will continue to increase dramatically. And this is if the natgas prices just don't go up any more.
Cash, puts, shorts, precious metals seem a whole lot safer right now. Obviously, if you believe that the tops are in for energy, then take another tack. If you believe that energy is flat to increasing or if you think some further conflict is probable in the Middle East, this chart might be conservative by the end of this year.
Pull out your crystal ball and take your choice.
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