H1N1 Deaths Doubling Almost Every Two Weeks in Europe

Posted By thestatedtruth.com on November 22, 2009

H1N1 Deaths Doubling Almost Every Two Weeks in Europe

By Jason Gale

Nov. 23 (Bloomberg) — Swine flu deaths have doubled almost every two weeks since mid-October in Europe, with 166 occurring in the past week, the European Center for Disease Control and Prevention said.

Across the region, 667 people infected with the new H1N1 influenza strain have died since April, the Stockholm-based ECDC said today in a report obtained by Bloomberg. Cases of the pandemic flu are being reported in all European Union and European Free Trade Association countries, it said.

The infection, which causes little more than a sore throat, fever and a cough in the majority of cases, is increasing hospital admissions. The U.K. has 180 H1N1 patients in intensive care units, France has 81, the Netherlands 38, Norway 24 and Ireland 20, according to the ECDC.

Last Updated: November 22, 2009 23:20 EST

More from……..http://www.bloomberg.com/apps/news?pid=20601087&sid=at9EIIo8mpTs&pos=8

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Barron’s Big Money Poll……For Fall 2009

Posted By thestatedtruth.com on November 21, 2009

Barrons Bull Bear Survey

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$4.8 trillion – Interest on U.S. Debt

Posted By thestatedtruth.com on November 20, 2009

Shocking and hard to believe, but real.

Do you want gold as insurance or the dollar long-term?

$4.8 trillion – Interest on U.S. Debt


Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels.


By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: November 19, 2009: 1:05 PM ET

NEW YORK (CNNMoney.com) — Here’s a new way to think about the U.S. government’s epic borrowing: More than half of the $9 trillion in debt that Uncle Sam is expected to build up over the next decade will be interest.

More than half. In fact, $4.8 trillion.

If that’s hard to grasp, here’s another way to look at why that’s a problem.

In 2015 alone, the estimated interest due – $533 billion – is equal to a third of the federal income taxes expected to be paid that year, said Charles Konigsberg, chief budget counsel of the Concord Coalition, a deficit watchdog group.

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Paulson: Gold’s Bull Run Is Just Beginning….He’s Talking Years, Not Months

Posted By thestatedtruth.com on November 20, 2009

Paulson: Gold’s Bull Run Is Just Beginning
November 19, 2009
By Simon Avery

John Paulson, lionized by many investors for his winning bet on the fall of the housing and financial markets, is now getting aboard the gold wagon.

The hedge fund manager told his investors that even at $1,150 an ounce, the bull run on gold is just beginning, according to the Wall Street Journal.

His firm, Paulson & Co., plans to launch a fund January 1st dedicated to gold mining shares and other bullion related investments, the newspaper reported.

Mr. Paulson, who is estimated to be worth about $6 billion. His bet against real estate and banks between 2007 and 2009 reportedly netted his hedge fund about $20 billion.

On Thursday, the World Gold Council reported that demand for the precious metal increased 10% in the third quarter from the previous three month period, driven by investors looking for a currency hedge and more jewelery purchases.

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Mortgage Delinquencies And Foreclosures…..Are We There Yet?

Posted By thestatedtruth.com on November 19, 2009

Mortgage Delinquences

More at  www.ingerletter.com

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What The Hell Did I Hit To Get This Turned Around…..Oh, The U.S. Economy!

Posted By thestatedtruth.com on November 19, 2009

Posted By What Is This

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Don’t Worry About A Thing, I Got Your Back Side Covered

Posted By thestatedtruth.com on November 19, 2009

I Got Your Back Side Covered

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Some Food For Thought On The Ultimate Store Of Value, Gold…..

Posted By thestatedtruth.com on November 19, 2009

Jim Rickards: If gold is money again, at some point it goes to at least $4,000….How could this happen?  Easy if countries of the world print to much currency.

Thursday, November 19, 2009

Daily Dispatches
 

Today Jim Rickards remarked that the United States and China are devaluing their currencies against each other in a game of chicken, that gold should easily reach $2,000 per ounce next year just as a matter of supply and demand, and that  if gold should start being considered money again, it would have to rise to between $4,000 and $11,000 to support the big increase in the world’s money supply.

You can watch Rickards’ comments at the CNBC archive here:

http://www.cnbc.com/id/15840232?video=1336090735&play=1

 

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Chart Of The Day……….Federal Reserve Custodial Accounts (U.S. Debt Holdings Of Foreign Central Banks)

Posted By thestatedtruth.com on November 19, 2009

This chart says one thing bigger then anything else……..higher interest rates are only a matter of time.  The smartest guys on Wall Street starting with David Einhorn of Greenlight Capital  are betting on higher interest rates, forced by the market place, will happen sooner rather then latter starting in the United States and Japan.  (He is a critic of current investment-banking practices, saying they are incentivized to maximize employee compensation. He cites the statistic that investment banks pay out 50 percent of revenues as compensation, and higher leverage means more revenues, making this model inherently risky)
 
                                                           ********

The chart below depicts the balance at the Federal Reserve of its Custodial Accounts, which for some of our new readers, is basically the US debt holdings of Foreign Central Banks around the world. As such, it is a good way to gauge the relative indebtedness of the US.

I have been constructing this chart every week now for many years and each week I look at it and post the new data, I have to sigh in despair at what is portends for my children. Our nation is hopelessly bankrupt for all practical purposes as there is no way under heaven that a debt of this magnitude will ever be repaid in its entirety unless of course the currency in which the debt is denominated is deliberately debauched and drops precipitously in value. This is precisely what China is angry about, and I might add, rightfully so.

For the Chinese to go out of their way to formally rebuke the US ruling elites and monetary officials about the commodity bubble that is occurring courtesy of the collapsing US Dollar, is quite remarkable given their penchant for etiquette and tact. One can easily discern just how irritated not only China, but all of Asia is with the US. At some point, this tension is going to erupt in a much larger way. Heaven help us all when it does because it will be marked by a period of soaring interest rates as a buyer’s strike occurs in the US Treasury market.

The middle class will be the victims in all of this as the find themselves unable to keep up with the rapid increases in the cost of living.

Custodial Holdings

 From  www.jsmineset.com/

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Fidelity Says 401(k) Savings Accounts Recover From 2008 Decline

Posted By thestatedtruth.com on November 19, 2009

Nov. 19 (Bloomberg) — Fidelity Investments said the average balance on customers’ 401(k) retirement accounts has returned to September, 2008 levels on contributions and third- quarter investment gains.

Account balances in plans for U.S. workers benefited from the 22 percent year-to-date gain in the Standard & Poor’s 500 Index along with continuing employee contributions, the Boston- based firm said in a statement today, after reviewing 11 million accounts managed by Fidelity.

“The third quarter actually moved us into positive territory,” said Michael Doshier, vice president of Fidelity’s workplace investing group. “I think that surprised, if not everybody, a lot of people.”

Average account balances rose 13 percent to $60,700 from June to September, Doshier said, and are up 28 percent from $47,500 at the end of March. The gains include investment returns, employee contributions and employer’s matches. A typical 401(k) holds a mix of equities, bonds and cash.

The average balance was $58,400 at the end of September 2008. The S&P 500 Index lost 42 percent between Oct. 1, 2008, and the bottom of the market March 9.

Twenty-seven percent of companies that suspended their 401(k) matching contributions are beginning to make those payments again, according to Fidelity, the largest U.S. administrator of 401(k) plans. Companies have either reinstated the match or plan to do so in the next 12 months as the economy recovers, Fidelity said.

A Spectrem Group survey of 150 U.S. companies in March showed that 34 percent had reduced or eliminated retirement-plan contributions since January 2008.

Fidelity compiles data on contributions, investment returns and average balances quarterly. The report is based on plans at more than 17,000 companies.

In 2008, 49.8 million American workers participated in 401(k) plans with assets totaling $2.3 trillion, according to the Employee Benefit Research Institute and the Investment Company Institute, who together maintain a database of 24 million participants.

President Barack Obama’s 2010 budget calls for an agency to administer employees’ automatic enrollment in 401(k)s and Individual Retirement Accounts. In September, Obama announced rules to make automatic enrollment easier and to allow unused vacation time to be used for retirement savings.

The Senate Special Committee on Aging said Oct. 28 that target-date mutual funds, offered by employers as a default investment for workers in 401(k)s, often have high fees, limited choices and potential conflicts of interest. The funds move money from riskier investments like stocks to more conservative alternatives like bonds over time as an employee approaches retirement.

A coalition called Retirement USA, including the AFL-CIO, the Pension Rights Center and the Economic Policy Institute, is advocating for a universal, professionally managed and guaranteed savings program to supplement pensions, 401(k)s and Social Security.

More at  http://www.bloomberg.com/apps/news?pid=20601087&sid=asxvDsY3C57g&pos=4

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Meredith Whitney Is The Top Ranked Analyst On These Matters, Worth Listening To

Posted By thestatedtruth.com on November 19, 2009

Nov. 19 (Bloomberg) — Meredith Whitney, the analyst who cut her rating on Goldman Sachs Group Inc. last month, said the bank has lost some of its top-performing employees as executives left to start their own investment companies.

“Goldman’s lost a tremendous amount of talent going to set up their own hedge funds,” Whitney, founder of Meredith Whitney Advisory Group, said today in an interview on Bloomberg Radio. “It became a scary prospect of having the government determine what you make,” said Whitney, who also said today that bank stocks are “grossly overvalued.”

Whitney said valuations for bank shares are too high. “People are expecting something great to happen in 2010, and I think they are going to be severely disappointed,” she said.

Consumer and small business spending won’t rebound soon, Whitney said, estimating about $2.7 trillion in credit lines will be cut. She said she expects this year’s holiday season to be at best “flat” versus last year.

More at http://www.bloomberg.com/apps/news?pid=20601087&sid=a3MG10bCk2OE&pos=5

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Are We There Yet…….FHA, Prime Mortgage Defaults at Records on Job Losses

Posted By thestatedtruth.com on November 19, 2009

FHA, Prime Mortgage Defaults at Records on Job Losses

By Kathleen M. Howley

Nov. 19 (Bloomberg) — Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to three-decade highs in the third quarter, driven by the biggest job losses since the Great Depression.

One out of every six FHA mortgages was late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979, the Mortgage Bankers Association said today. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent, the highest since at least 1972.

Homeowners are falling behind on their mortgages as the U.S. has lost more than 7 million jobs since December 2007, driving the unemployment rate to 10.2 percent in October, the highest since 1983. Declining home prices in most markets also are preventing many owners from selling their properties, said Jay Brinkmann, the Washington-based trade group’s chief economist.

“If you don’t have a job, you can’t pay a mortgage,” Brinkmann said in an interview. “You don’t pay a mortgage with economic output, you pay a mortgage with a paycheck.”

The share of all types of mortgages with one or more payments overdue climbed to a record seasonally adjusted 9.64 percent in the third quarter. The foreclosure inventory increased to 4.47 percent from 4.3 percent. Both were the highest in 37 years of data.

The percentage of loans on which foreclosure actions were started was a record 1.42 percent. New foreclosures on prime fixed-rate loans increased to 0.71 percent from 0.67 percent, while FHA foreclosure starts rose to 1.31 percent from 1.15 percent.

Subprime adjustable-rate foreclosures starts dropped to 4.92 percent from 5.52 percent and the total foreclosure inventory for the types of loans that sparked the global financial crisis rose to 24.7 percent from 24.4 percent, Brinkmann said.

Defaults on FHA mortgages, which require down payments as small as 3.5 percent, may create another lending crisis, Toll Brothers Inc. Chief Executive Officer Robert Toll said yesterday.

“It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money,” said Toll, the head of the largest U.S. builder of luxury homes.

The FHA’s insurance reserve ratio fell to 0.53 percent, the lowest level in history, and more steps are needed to shore up the agency that guarantees one of every five single family loans, Housing and Urban Development Secretary Shaun Donovan said Nov. 12.

While the insurance fund’s capital ratio is at an all-time low, Donovan said those who say FHA is the next subprime- mortgage crisis are “dead wrong.” The quality of the loans FHA insures is “actually very good,” Donovan said.

A report yesterday showing an unexpected drop in housing starts highlighted how the property market remains reliant on government support to sustain a recovery. Homebuilding seized up as builders waited for President Barack Obama to extend an $8,000 housing tax credit for first-time buyers, which has since been passed and expanded.

Builders broke ground on 529,000 homes at an annual pace in October, down 11 percent from the previous month and the fewest since April’s all-time low, the Commerce Department said yesterday.

The U.S. economy returned to growth in the third quarter after a yearlong contraction, the Commerce Department said in an Oct. 29 report. The world’s largest economy expanded at a 3.5 percent pace from July through September. Household purchases climbed 3.4 percent, the most in two years.

In the second quarter, U.S. banks held $34 billion of properties acquired through foreclosure, including repossessed homes and condominium projects gone bust, according to the Federal Deposit Insurance Corp. in Washington. That’s almost double the amount from a year earlier.

Employment losses prevented many homeowners from refinancing during the quarter to make payments more affordable, Brinkmann said.

U.S. mortgage rates tumbled more than a quarter of a percentage point during the third quarter, to an average of 5.04 percent from 5.32 percent at the beginning of July, according to Freddie Mac in McLean, Virginia.

More at www.bloomberg.com

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The Presidential Pledge……A New Car In Every Garage And A Derivative In Every Account

Posted By thestatedtruth.com on November 18, 2009

Sinclair31

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So Tell Me Again, How’d Goldman Sachs Make All That Money?

Posted By thestatedtruth.com on November 18, 2009

So, Tell Me Again... How'd Goldman Sachs Make All That Money

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Don’t Worry About A Thing, I Got Your Back Side Covered

Posted By thestatedtruth.com on November 17, 2009

I Got Your Back Side Covered

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Markets Trying To Look Strong Until Year End…..If The Dollar Stays Weak, Then The Markets Will Likely Continue Strong

Posted By thestatedtruth.com on November 17, 2009

11-18-2009 Market Indicaters

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And The Winner Is……Google In A Land Slide

Posted By thestatedtruth.com on November 17, 2009

Dot Com Market

 From www.ingerletter.com

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Industrial Production Recovery Comparisons

Posted By thestatedtruth.com on November 17, 2009

Industrial Production

From www.ingerletter.com

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NASA Blast Costs $79 Million…..Hmm

Posted By thestatedtruth.com on November 14, 2009

Nov 14, 2009

Nasa had predicted that the impact would be powerful enough to send a 6km high plume of dust up from the Moon’s surface that would be visible from Earth through a telescope

Substantial water reserves have been found beneath the Moon’s surface, Nasa announced yesterday, paving the way for a permanent lunar base.

The discovery came from Nasa’s “moon bombing” mission, the Lunar Crater Observation and Sensing Satellite (LCROSS) probe, which was deliberately crashed into the lunar South Pole last month. An analysis of the dust thrown up from the impact revealed the presence of about 80 litres of water, or enough for a shallow bath. The results suggest that much larger, more accessible reserves are available at the poles.

“We can announce that we’ve found water — not just a little bit, a significant amount,” said Tony Colaprete, principal investigator for the mission at Nasa’s Ames Research Centre in California.

The exact form of the water is not yet clear, but it is likely to be spread out in small ice crystals. The rocket hit the Moon at an area where the surface temperature is around -230C. This region has not been in direct sunlight for at least two billion years.

The discovery comes at a good time for Nasa scientists, who are waiting for a White House decision on the future funding for lunar exploration, expected to be announced in January.

The Bush administration had set the ultimate goal of a permanent lunar base, but this could require an additional $3 billion a year on top of their $18 billion budget. Proposals for lunar settlements have all tended to rely heavily on the assumption that water supplies would be discovered.

“These results may just be the key to Nasa’s plans to put man back on the Moon — the LCROSS team conducted a beautifully simple experiment and it seems to have paid off,” said Chris Lintott, an astrophysicist from the University of Oxford.

The results will also come as a relief to astrophysicists who watched the impact live on October 9. The $79 million mission comprised two separate capsules, which were deliberately slammed into the Cabeus crater, around four minutes apart. The trailing capsule was designed to make spectroscopic measurements of the contents of a 6km plume of dust thrown up by the leading one. However, the impact was barely discernible and for several hours Nasa was unable to confirm that a plume had been detected at all, after having initially said that it would be visible through handheld telescopes from Earth.

Vincent Eke, from the University of Durham who helped the American space agency pick the location, said that the much smaller plume may have been a result of the large quantities of water. A high proportion of the capsule’s energy on impact would have gone into vaporising the ice, meaning there was less energy left to kick the dust up to high altitudes.

Scientists are now hoping to establish the origin of the water. One possibility is that it was deposited by comets, over as long as billions of years, meaning it could hold important clues to the history of the solar system.

Copyright 2009 Times Newspapers Ltd.

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Holy Moley Is This Ship Big…..Five Times Larger Than The Titantic

Posted By thestatedtruth.com on November 14, 2009

FORT LAUDERDALE, Fla. (AP) – The world’s largest cruise ship has arrived in South Florida.The 16-deck Oasis of the Seas docked Friday at Port Everglades in Fort Lauderdale. It set sail from Finland to Florida in late October.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

The massive $1.5 billion vessel is nearly 40 percent larger than the industry’s next-biggest ship and five times larger than the Titanic. It has 2,700 cabins and can accommodate 6,300 passengers and 2,100 crew members.

The ship also features various “neighborhoods”—parks, squares and arenas with special themes. One of them will be a tropical environment that will include palm trees.

The Oasis of the Seas will embark on its first cruise on Dec. 5.

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Fishy Dollars………Not Worth Anything, Just Throw The Scavinger Back

Posted By thestatedtruth.com on November 12, 2009

Fishy Dollars

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Fannie, Freddie Warn On More Losses In SEC Filing

Posted By thestatedtruth.com on November 12, 2009

Fannie, Freddie Warn On Losses
   By NICK TIMIRAOS

Fannie Mae and Freddie Mac, already reeling in red ink, are warning they could face additional losses from the weakening condition of mortgage-insurance companies.

Fannie and Freddie together have required capital injections from the Treasury of $112 billion since the government took them over through conservatorship last year. Their need for government support would have been greater without collecting on claims from mortgage-insurance companies.

But Fannie and Freddie have warned that their claims against the insurers may not be paid in full Fannie set aside $1 billion in loss reserves to cover the possibility that mortgage-insurance companies won’t be able to pay full claims, the company said in a Securities and Exchange Commission filing.

 
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Foreclosure Notices Hit Record High………

Posted By thestatedtruth.com on November 12, 2009

Foreclosure Notices

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Senator Chris Dodd Working On The Most Compicated Regulatory Bill Ever……..

Posted By thestatedtruth.com on November 12, 2009

Sen. Chris Dodd unveiled a whopper of a bill, one that might cause the biggest financial and monetary shakeup…umm…ever. Like most of Congress, we’ve barely cracked the 1,136-page affair…but here’s what we’re picking up thus far:

  • Under the proposed bill, the Fed gets stripped of almost all its banking oversight and consumer protection powers. Bernanke and company will be used only to determine monetary policy.
  • The bill would create three new government agencies:
  • One would be designed to regulate banks, essentially combining the current powers of the Fed, the Federal Deposit Insurance Corporation, the Comptroller and the Office of Thrift Supervision.
  • The second new agency – the Agency for Financial Stability – would be a “council of regulators” that would monitor systemic risk, enforce capital standards, limit leverage and even break up companies if Congress sees fit.
  • The third agency would be called the Consumer Financial Protection Agency, which will save us from ourselves by regulating consumer mortgage, credit and investment products
  • The SEC, for all its glory, gets more power and more money.
  • Hedge funds with more than $100 million will have to register with the SEC and disclose more information. Investment advisors and ratings agencies will also be targets for stricter oversight.
  • Looks like the most complicated regulatory system in the world is about to get much more complicated. We’ll keep an eye on it.

    The real question: Who will benefit from these proposals? Follow the money…

    Chris Dodd's Chief Contributors

    Shameful. How’s this for reform…the world’s biggest banks should not be allowed to buy a campaign for the chairman of the Senate Banking Committee.
    www.thedailyreckoning.com

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    Looking Good As long As This Lasts…..

    Posted By thestatedtruth.com on November 11, 2009

    THE G-20 MET LAST WEEKEND AND MADE IT VERY CLEAR NO MONETARY TIGHTENING WOULD OCCUR AT THIS TIME

    In effect, the G-20 said all systems are go for economic expansion globally.  The G-20 said in their news release, “Economic and financial conditions have improved following our coordinated response to the crisis.  However, the recovery is uneven and remains dependent on policy support. We agree to maintain support for the recovery until it is assured”

    May we translate?  All systems are go for global economic expansion.  When this news became public the U.S. dollar fell and gold rose substantially.

    U.S. MONEY SUPPLY CONTINUES TO BOOM

     

    clip_image002

    U.S. money supply is rising rapidly and this is another indicator of coming inflation and higher commodity prices in years ahead.  When combined with a lower dollar, this type of indicator has quite frequently led to inflation.  It is for this reason among others that we call for a resurgence of inflation in 2011.

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    Hmm…..Things May Get A Little Squirrely Going Into The End Of The Year

    Posted By thestatedtruth.com on November 11, 2009

    Squarl

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    Crop Failures Are Now On The Horizon And This Will Be Inflationary

    Posted By thestatedtruth.com on November 10, 2009

    Much of the middle of the nation — from the Great Lakes to the Mississippi Delta — received at least twice the normal amount of rainfall in October. That, combined with unusually cool temperatures, slowed crop development and made fields too wet for farmers to navigate with harvesting equipment.

    By Sunday, farmers in the major corn states had managed to harvest just 37% of that crop compared with 82% on average by that point over the past five years. This harvest is the slowest since at least the mid-1970s, when the federal government began tracking harvest progress.

    In addition to lower-than-expected yields, the rainy fall is stinging recession-weary farmers who now are spending more on propane to dry their crops than they had planned. The rain delay also means some farmers won’t be able to clear their fields of corn and soybeans in time to plant wheat this fall.

    Dave Koons, a 61-year-old farmer in Tower Hill, Ill., said Tuesday that he was able to plant only 100 acres of wheat this fall, half of what he had planned. “A lot of farmers around here have never seen anything like this,” said Mr. Koons, who also grows 800 acres of corn and soybeans.

    From www.wsj.com

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    Gene Inger’s Daily Briefing . . .Left Field Surprises

    Posted By thestatedtruth.com on November 10, 2009

    Gene Inger’s Daily Briefing . . . For Wednesday November 11, 2009:

    Good evening;

    Left-field surprises . . . have ways of impacting over-extended markets occasionally we have observed; irrespective of whether the market ‘deserves’ to decline (as surely this one does). As if to remind the world of the power of cyber-terror; guess what just happened this evening? If you saw ’60 Minutes’ on CBS last Sunday you’ll get it right away. They mentioned how ‘foreign’ control had tested infrastructure disruption with a twin-pronged attack in the past on two cities in Brazil. Guess what? Happening right as I’m going to press with this report. A total blackout in Brazil’s largest cities. Yes the implication of the Department of Defense and CBS was of China being behind it, but at the same time they did not say that Islamic terrorists didn’t have some capabilities.

    At this moment we have zero details; aside the basic realization of the blackout. The idea of a terrorist or cyber-attack (if ever mounted; such as the Northeastern blackout was thought by some to have actually been) would be a ripple ‘cascading failure’ that quickly brought down the power grids across a large segment of the East or the West of the United States. Given that everything (including water and whatever you think of nowadays) is dependent on the internet, more so in the U.S. than anywhere else, this is why the danger is so acute, and our systems so ill-prepared to confront as of yet.

    (Media reports say problems at a huge hydroelectric dam are to blame for electrical outages affecting large parts of Rio de Janeiro, Sao Paulo and other cities in several states. The G1 Web site of Globo TV says Brazil lost 17,000 megawatts of power after an unspecified problem happened at the Itaipu dam that straddles the border of Brazil and Paraguay. Not to make a connection; but that’s the region where Islamic activity in Latin America is concentrated, and those who know, know that I’m correct; which again is not to say it’s not coincidental. What may be coincidental is that we’d just mentioned the ’60 Minutes’ show about power outages here the other night..)

    I am not suggesting terror is what happened (though it’s a reminder), or that anything is needed of a left-field out-of-the-blue nature to break this heated stock market. But; I am suggesting that extended markets are vulnerable, just when many rationalize all sorts of reasons why it’s not. I think history is replete with examples proving the point; just when analysts dispense with normalcy, to become victims of the ‘spin’ that ‘this time is different’; the opposite of what occurred in late February / early March, when they were convinced we’d go lower, rather than have a rebound that would be the year’s best rally (even while we said that; this one has, granted, exceeded most logic, but the idea was generally on the mark then; and the market averages only recently finally became equidistant with respect to the A-B-C rally phases we have noted with respect to overall S&P actions.

    More at www.ingerletter.com

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    Foreclosure Activity Is Up In The Top 50 Metro Areas

    Posted By thestatedtruth.com on November 10, 2009

    Many of the Top 50 metro areas in the US are reporting “sharp increases in foreclosure activity.

    “Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio, chief executive officer of RealtyTrac. “While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A and Option ARMs are spreading the foreclosure flood to more metro areas in 2009.”

    “While the news itself is no surprise in the sense that we have expected and written about this situation repeatedly in recent months, the phrase ‘sharp increases in foreclosure activity’ is notable in the context of widespread views that credit difficulties are abating. Below is a reminder of where we stand in relation to the reset curve. This news of a shift in the character of foreclosure activity comes precisely in tandem with the beginning of the predictable second wave. The pleasant lull in the reset schedule is decidedly behind us.

    “The mortgages certainly do not reset at Treasury bill yields or even at standard spreads over LIBOR. Instead, they reset to a ‘premium’ spread above those rates. That ‘yield spread premium’ is precisely what the homeowners agreed to in return for the undocumented loan, and is particularly obnoxious at the point of reset if the mortgage itself is underwater (loan amount in excess of home value). Given that these mortgages were written during the last stages of the housing boom, at the highest prices, it is reasonable to assume they now sport very high loan-to-value ratios.”

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    Gene Inger Checks In With His Daily Briefing……….

    Posted By thestatedtruth.com on November 9, 2009

    Gene Inger’s Daily Briefing . . . for Tuesday November 10, 2009:

    Good evening;

    Bears are caving-in . . . increasingly, as they become convinced that so long as the ‘untouchable’ Fed engages in cover-up’s of the problems, and stimulates massively it is impossible to break the stock market for more than 3-6% corrections (which we’ve had a few of). While we called for upside continuation early this week (and then what comes next), what you have is a light-volume thrust to the upside, while concurrently, the bond markets are once again ignoring the shallow equity melt-up as orchestrated.

    Will this melt-up become a blow-off? Perhaps; but first it needed to deny a ‘head-and-shoulders’ topping possibility, that many technicians saw, but I didn’t really embrace, having seen such patterns decimated (and look like that until they simply aren’t). This is by far an unusual market movement (sure it’s periodically rewarding or frustrating, depending on the trading session); but what it is not is an immortal indestructible or perrinial advance, such as we rightly forecast from 2002-2006. It looks like that, but if it were to be, you’d need a lot more growth from the reflation than seems feasible. No doubt we’ve been too conservative about parts of our own forecast rebound; but let’s be candid; outside of a handful of big-caps (with the volume to get in as well as out if it becomes necessary for the big boys), there is less going on than meets the eye. In a sense that’s a narrowing rather than an expansion of participation, and a warning.

    There’s no disputing the Dollar-destructive collusion between the Fed or major banks overseas. There’s no disputing the inability of this Nation to stand-up for what’s right in relations with large trading partners who are also potential adversaries (hope that if able you saw ’60 Minutes’ Sunday night; with respect to cyber terrorism with oblique references to Communist China in particular and the danger to our infrastructure); at the same time as there’s no disputing that Iran (now buying mini-submarines from it’s reported the North Koreans) is hell-bent on destabilizing the region and raising risks. I will touch on the economic aspects a bit more in the video; but this is a high-risk time.

    The FX pitch about shorting the Dollar’s way out-of-line at this point even to debasing it as has obviously transpired. Be real careful about believing the idea that currency is about to be overtaken by physical gold; as there’s not enough to diversify thusly if the powers-that-be actually desired that, which they don’t. There is shadow currency in a sense; and an awareness that fiat currency (paper) has value because of confidence; which cannot be offset by a hard asset; hence the break of the Dollar either ‘crashes’ a lot of things fairly soon, or the stabilization we suspect (after this washout) actually materializes. Concurrently, those traders ‘cleaning up’ on this trade will experience, if that occurs, a fair amount of drama; while the Greenback rallies and stocks decline.

    Absolutely I’m not defending what this Government has done to ordinary Americans; in fact we’ve railed against it through two Administrations, of both parties. We base a lot of it on benign neglect, a moratorium on sensible trade policies, and no oversight. The rest (which popped the bubble) was creative financial engineering both by banks and urged-on by Congress, which rarely owns-up to their role in setting the stage. As traders perceive that the Fed has given the ‘green light’ not to worry (ie: no rate hikes soon); all other aspects as could intervene are cast aside (though they ought not be).

    True, as we wrote before the crash last year; the only way out of financial insolvency is to debase the currency and pay back creditors with depreciated Dollars. That’s the basis of the Dollar decline we forecast then; more recently we’ve allowed for it to end, or to be near an end (we’re often early; but then eventually the pattern proceeds later as it should). It’s so obvious that they are reflating the asset side of the ledger while a debt side deflating occurs, that it obviously drains massive liquidity, and carries with it a willingness to pummel the currency, which has occurred (and may in a climactic bit of a way yet). What we need is to repatriate capital to these United States, and then a bit of ‘farming it out’, which the banks have been reticent to do, as investments in us.

    That would be naturally stimulative, but require higher rates; a stronger Dollar; sound fiscal policies (oh my); transparent accounting (the opposite of letting banks bury their toxic asset holdings); and an environment for public policy friendly to repatriating our capital. Up to now (and this better change); Government acts hostile to U.S. growth in this sense, and has actually contributed to worsening certain problems, which may be part of why the market’s persisted (because there’s no where else for money to go). It is simplified by saying that’s a chasm between Wall Street and Main Street; but it is.

    More at www.ingerletter.com

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    Quote Of The Day……..

    Posted By thestatedtruth.com on November 8, 2009

    Few men have virtue to withstand the highest bidder.

                                                                                 George Washington

     

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    U.S. News & World Report Publisher Mort Zuckerman: U.S. On Brink of Deflation Crisis

    Posted By thestatedtruth.com on November 8, 2009

    Zuckerman: U.S. On Brink of Deflation Crisis

     

    Friday, November 6, 2009 9:52 AM        By: Gene J. Koprowski

     

     The U.S. is on the precipice of a deflation crisis, one which will devastate consumers and businesses alike, publisher Mort Zuckerman writes.“Inflation typically results from too much money chasing too few goods,” writes Zuckerman in U.S. News & World Report.“Today, too much supply is chasing too little demand.”Deflation is already part of the economic picture in the United States. Homeowners are trimming their total debts by $200 billion this year, and banks and businesses are paying down debt by $2.3 trillion, writes Zuckerman.

    “Small-business lending will contract by at least $113 billion,” he adds.

    Since the credit crisis began some back in late 2007, the credit available to consumers and the small-business sector — which employs half of America’s workforce — has pulled back by trillions of dollars. Most of that has been because of the reduction of credit lines.

    “The hope that new bank reserves would be available to prop up the faltering economy has not been fulfilled,” writes Zuckerman.

    To reverse the deflationary effects of this demonstrable low capacity utilization, demand growth will need to rally.

    “For this, we would need a significant improvement in employment and hence spending. But the job market is even worse than the overall economy, and the prospect is that high levels of joblessness will persist beyond the end of the recession,” writes Zuckerman.

    Many firms continue to cut the number of their employees and reduce discretionary costs, like advertising. This has significantly improved profit margins, even in the face of lower demand, he adds.

    This is a global phenomenon. Bloomberg News is reporting that the Bank of Japan said deflation will linger for a third year there.

    © 2009 Newsmax. All rights reserved.

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    Paul Volcker: U.S. Must Consume Less

    Posted By thestatedtruth.com on November 8, 2009

    Volcker: U.S. Must Consume Less

     

    Friday, November 6, 2009 11:56 AM            By: Dan Weil

     

    Former Federal Reserve Board Chairman Paul Volcker says the consumer accounts for too much of the economy, a point he says is understood by President Obama and one which implies political support for a weaker U.S. dollar.In a recent speech, Volcker said Obama realizes that “We cannot have so much consumption.”Consumer spending accounts for about 70 percent of GDP, a level has been reached only by “the magic of financial engineering,” Volcker said.”We cannot rebuild the economy to the tune of 70 percent consumption or housing booms. It will just break down again,” Volcker said.He told CNBC that in a recent meeting of economic advisors with Obama the president emphasized the need to increase exports.

    “That means more manufacturing,” Volcker said.

    “There was discussion of the importance of infrastructure. And there was considerable discussion of how can we take advantage of, so to speak, the need for a green economy, where we do a lot of the innovation.”

    The key, of course, is turning innovation — a major strength for the United States — into actual production, Volcker pointed out.

    “There was considerable talk about retrofitting buildings, save a lot of energy, at the same time give some jobs.”

    It also means that there is little reason to stop a steadily weakening dollar from falling even more, an event that would help the politicians immensely — if the government allowed it to happen.

    A strong dollar makes U.S. exports too expensive for foreigners to buy. On the other hand, a falling dollar brings U.S. labor costs in line with the world, at the expense of savers and the long-term retirements of millions of Americans.

    Cheaper dollars also brings billions of entitlements costs down, something politicians would vastly prefer to having to raise taxes or cut benefits.

    © 2009 Newsmax. All rights reserved.

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    At Least The United States Government Is Locking In A Low 30 Year Rate

    Posted By thestatedtruth.com on November 5, 2009

    U.S. to Sell $81 Billion in Long-Term Debt Next Week (Update2)
    By Rebecca Christie

    Nov. 4 (Bloomberg) — The U.S. Treasury Department said it plans to sell a record $81 billion in its quarterly auctions of long-term debt next week and will replace the inflation- protected 20-year bond with a reintroduced 30-year security.

    The Treasury will auction $40 billion in three-year notes on Nov. 9, $25 billion in 10-year notes Nov. 10 and $16 billion in 30-year bonds Nov. 12. The amounts were in line with the median forecast of $80 billion in a Bloomberg News survey of nine analysts.

    The U.S. is headed for a second straight year of budget deficits exceeding $1 trillion, and the country’s legal limit on debt may be reached next month. Treasury debt-management director Karthik Ramanathan told bond market participants this week to expect another year of government debt sales of $1.5 trillion to $2 trillion, minutes of the meeting showed today.

    “Treasury debt managers will continue to remain aggressive in managing financing needs while minimizing potential market implications,” the Treasury said in a statement in Washington.

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    Not The Best Way To Deal With Your Major Banker

    Posted By thestatedtruth.com on November 5, 2009

    US slaps duties on Beijing steel pipe imports
    By Sarah O’Connor in Washington
    Published: November 6 2009

    The US hit China with another big trade action on Thursday as it slapped ­preliminary anti-dumping duties on $2.6bn worth of Chinese pipe imports.

    The commerce department’s decision to impose duties of up to 99 per cent on imports of some steel pipes is the latest in a string of trade spats between over tyres, cars and chickens. It comes less than a fortnight before President Barack Obama’s first visit to China.

    The ruling will affect more imports by value than Mr Obama’s recent move to impose duties on Chinese tyres, which sparked an international row in which Beijing accused the US of “rampant protectionism”.

    The decision was a victory for steel companies, including US Steel Corporation, that petitioned for the duties in April. The United Steelworkers union said the decision was “an overdue message for thousands of American laid-off workers that trade laws are being enforced”. It says nearly half the domestic industry’s workers have been laid off.

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    Here We Go Again……Fannie Seeks $15 Billion in U.S. Aid After Ninth Straight Loss

    Posted By thestatedtruth.com on November 5, 2009

    Fannie Seeks $15 Billion in U.S. Aid After Ninth Straight Loss
    By Dawn Kopecki

    Nov. 5 (Bloomberg) — Fannie Mae, operating under a federal conservatorship, said it will seek $15 billion in aid from the U.S. Treasury as its ninth straight quarterly loss once again drove the mortgage-finance company’s net worth below zero.

    A third-quarter net loss of $18.9 billion, or $3.47 a share, pushed the company to request its fourth draw on a $200 billion lifeline from the government, Washington-based Fannie Mae said in a filing today with the Securities and Exchange Commission.

    Fannie Mae, which posted $101.6 billion in losses over the previous eight quarters, has already taken $44.9 billion in federal aid since April. Its shares, which peaked at $87.81 in December 2000, closed at $1.12 today in New York Stock Exchange composite trading.

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    Berkshire Buys Burlington Northern In Buffett’s Biggest Deal

    Posted By thestatedtruth.com on November 3, 2009

    Berkshire Buys Burlington Northern Santa Fe Railway

    By Andrew Frye

    Nov. 3 (Bloomberg) — Warren Buffett’sBerkshire Hathaway Inc. agreed to buy railroad Burlington Northern Santa Fe Corp. in what he described as an “all-in wager on the economic future of the United States.”

    The purchase, the largest ever for Berkshire, will cost the company $26 billion, or $100 a share in cash and stock, for the 77.4 percent of the railroad it doesn’t already own. Including his previous investment and debt assumption, the deal is valued at $44 billion, Omaha, Nebraska-based Berkshire said today in a statement. The railroad’s stock closed yesterday at $76.07.

    Berkshire has been building a stake in the Fort Worth, Texas-based railroad since 2006 as Buffett looked for what he called an “elephant”-sized acquisition allowing him to deploy his company’s cash hoard, which was more than $24 billion at the end of June. Trains stand to become more competitive against trucks with fuel prices high, he has said.

    “It is Warren being Warren, taking advantage of a market that is soft at a time when the possibility for competitive bids is relatively low,” said Tom Russo, a partner at Gardner Russo & Gardner, which holds Berkshire shares. “He looks at this as a business that has advantages against other forms of transportation.”

    At $100 a share, Buffett is paying 18.2 times Burlington Northern’s estimated 2010 earnings of $5.51, according to the average analyst projection in a Bloomberg survey. That compares with the 13.4 multiple for the Standard & Poor’s 500 Index as of yesterday’s close. Shares of Burlington Northern, the largest U.S. railroad, dropped 13 percent in the 12 months through yesterday.

    Union Pacific, CSX

    Competing railroad Union Pacific Corp.’s ratio was 13, while Jacksonville, Florida-based CSX Corp.’s was 13.1, Bloomberg data show.

    Union Pacific rose $4.35, or 7.9 percent, to $59.41 at 4 p.m. in New York Stock Exchange composite trading. CSX climbed 7.3 percent. Burlington Northern surged to $97. Berkshire Class A shares rose $1,700, or 1.7 percent, to $100,450.

    The deal culminates a search by Buffett, 79, that sent him to Europe looking for possible acquisitions and lamenting in letters to shareholders that he and Vice Chairman Charles Munger couldn’t find companies they considered large enough to meaningfully add to annual earnings.

    Buffett needs “elephants in order for us to use Berkshire’s flood of incoming cash,” he said in his annual letter to shareholders in 2007. “Charlie and I must therefore ignore the pursuit of mice and focus our acquisition efforts on much bigger game.”

    Trains, Trucks

    Burlington Northern, with pretax income of $3.37 billion on revenue of $18 billion last year, would be Berkshire’s second- largest operating unit by sales. The McLane unit, which delivers food to grocery stores and restaurants by truck, earned $276 million on revenue of $29.9 billion in 2008.

    Berkshire’s largest business is insurance, with units including auto specialist Geico Corp. Buffett, who is the company’s chairman and chief executive officer, has said he likes insurance because he gets to invest the premiums paid by customers until the cash is needed to pay claims. The insurance businesses last year collectively earned $7.51 billion on revenue of $30.3 billion.

    Buffett will use $16 billion in cash for the deal, half of which is being borrowed from banks and will be paid back in three annual installments, he told the CNBC. Berkshire will have more than $20 billion in consolidated cash after the purchase, he said.

    Cash Hoard

    “It doesn’t mean we’re out of business, but it does mean that we won’t be making any huge deals for a while,” Buffett told the network today. He said earlier this year the company needs at least $10 billion in cash to be ready for unforeseen events such as catastrophe claims at its insurance units.

    Berkshire would get $264 million from Burlington Northern if the railroad’s board accepts a higher bid, according to a regulatory filing today.

    Buffett built Berkshire into a $150 billion company buying firms that he deems to have durable competitive advantages. His largest purchases include the 1998 deal for General Reinsurance Corp. for more than $17 billion. Buffett expanded into power production with the purchase of MidAmerican Energy Holdings Co., and last year bought Marmon Holdings Inc., the collection of more than 100 businesses, from the Pritzker family. Marmon’s Union Tank Car unit manufactures and leases railroad cars.

    He expects the economy to recover, he said in an interview in September with his company’s Business Wire unit.

    “We are still tossing out 14 trillion worth of product a year,” he said. “It will return. It’s already returned with most people in most ways, but it’s not back 100 percent. It’ll get there.”

    ‘Simple Bet’

    The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. The world’s largest economy expanded at a 3.5 percent pace from July through September, Commerce Department figures showed last week.

    “It’s a pretty simple bet,” said Mario Gabelli, CEO of Gamco Investors Inc., which has holdings in Berkshire and Burlington Northern. “Warren knows the assets. He’s been involved in basic businesses like this for years.”

    Buffett is increasing his stake in an industry that doesn’t have any competitors for certain types of freight. Federal law requires some chemicals to be moved only by rail.

    Railroads burn less diesel fuel than trucks for each ton of cargo carried, giving companies such as Burlington Northern and Omaha-based Union Pacific a grip on bulk commodities such as coal. That fuel-efficiency advantage also gives railroads a share of the profits from moving goods such as Asian imports of cars and other consumer goods sent to U.S. West Coast ports.

    Fuel Prices

    From ships, containers are loaded onto railcars to be hauled to so-called intermodal terminals, where they’re transferred to trucks for the final leg of their journey.

    Buffett said in 2007 that railroads may prosper at the expense of trucks. “As oil prices go up, higher diesel fuel raises costs for rails, but it raises costs for its competitors, truckers, roughly by a factor of four,” Buffett told shareholders in 2007 at his company’s annual meeting. “There could be a lot more business there than there was in the past.”

    Berkshire’s board approved a 50-to-1 split of its Class B shares as part of the acquisition plan, the company said in a second statement. Berkshire will schedule a shareholder meeting to vote on an amendment to the company’s certificate of incorporation that’s needed to split the stock. B share typically trade for about a thirtieth of the price of A shares.

    Stock Split

    Most of the shares exchanged for Burlington Northern stock will be Class A shares, Berkshire said. Splitting the B shares is designed to accommodate the smallest holders who elect for a tax-free swap of the railroad’s stock, it said.

    Goldman Sachs Group Inc., Evercore Partners Inc., and Cravath Swaine & Moore LLP are advising Burlington. Berkshire didn’t disclose a financial adviser and said Munger Tolles & Olson LLP furnished legal advice.

    Matthew Rose, the chief executive officer of Burlington Northern, said he struck the deal with Buffett after the two met in Texas. Buffett, named by Forbes as the second-richest American, was visiting because he has other business interests in the state, Rose said.

    “We spent a couple hours talking about the economy and the business,” Rose told Bloomberg Television. “The next day I got a call. He asked me to meet on a Friday night down in downtown Fort Worth. It was a relatively short conversation; he told me what he wanted to do. The next day we fired up the process.”

    Antitrust Review

    Burlington Northern operates 32,000 miles of track, with 6,700 locomotives, according to its Web site. Most of the carrier’s network is west of the Mississippi, where it competes with Union Pacific.

    The U.S. Department of Justice will conduct an antitrust review, which Burlington expects to be completed by the first quarter of next year, the company said today in a conference call with analysts and investors.

    Burlington Northern said two-thirds of the shares that aren’t held by Berkshire must vote in favor of the transaction for it to proceed under Delaware law. The railroad said it anticipates a shareholder meeting in the first quarter of 2010 and the completion of the transaction “very shortly thereafter.”

    More at…..http://www.bloomberg.com/apps/news?pid=20601087&sid=aonNZzzcmEOY&pos=2

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    Gene Inger Gives Us His Opinions On Where Things Stand

    Posted By thestatedtruth.com on November 2, 2009

    Gene Inger’s Daily Briefing . . . for Tuesday November 3, 2009:
     
     A waterfall decline . . .
     
    Possibly the prospect of a heavier decline looming (irrespective of this technical fight, as well as psychological holding action purportedly merely awaiting the Fed decisions on Wednesday, which is actually what this is not primarily about), is such a cascading fear that nobody wants to talk about it. Unless of course you mean the top bankers at a hastily called meeting at the New York Fed this morning (ostensibly but hardly likely to have been about compensation); which I suspect is (for once) advance preparation for what may occur in-event the current PPT (Plunge Protection Team) is activated in response to market events that the honchos may already have an inkling are coming.
     
    This is the first time since we thought the PPT would plug the dike last February/early March for awhile (to wit: orchestrated coordinated international intervention pending I thought, rightly so, at the time, rather than a plunge into the abyss), that we mention it at all. And not to panic anybody about the fact that toxic assets are hardly distributed, nor banking problems addressed properly. Like I said; I literally perceived it in visually in Bernanke’s eyes at his last speech; and statement about the banking ‘reforms’ that I thought were disingenuous (I like and respect Bernanke) self-serving ‘spin’ to his big bank constituents; or should I say obliquely on their behalf. That’s probably why Paul Volker walked off his interview late today on CNBC; because he knows this is really a non-starter with respect to resolving our mess, and he doesn’t want to close ranks so much with an Administration and Fed continuing to pursue a warped interpretation of Keynesian economics. But he signed-on to this group. They should listen to this elder statesman of economics, rather than asking him to embrace wrongheaded policies.
     
    If you don’t think things are tough (too bad investors are misguided by so many once again into believing this is just a mild correction; not as bad as the bears anticipated; in the view of two well-known commentators; who are about to be hoisted once again by their own petards; and I actually hope they’re right; but seriously fear they are not); look at California. Now they want to add a 10% withholding on income tax above the norm (already about the highest in the Nation); but promise to give it back in April (of course). Americans are fed up; and though the stock market doesn’t show it much as of yet; just watch if what I fear comes to pass.
     
    That takes us to the present. This is not about a simple FOMC meeting. This is not a simple ‘worry about interest rates’. Interest rates have virtually nothing to do with this. Sure; while rate shifts can impact the bond market in particular; and the low rates (as low as .65 annually on so-called ‘risk free’ CD’s at Bank of America, which is typical in terms of how the policies are trying to encourage investors to embrace risk in every way imaginable; rather than continue the sanctity of rebuilding their financial situation as remains generally damaged; and faces further prospects of deterioration if they go for the bait of believing that only shallow corrections are possible or all is ascending).
     
    Besides calling for the actual top a couple weeks back (ideally by October 20th in the morning); we have done our best to call for the rebounds and downside probes in for sure what has been a contested slugfest for several days; but none of it is unusual. In an effort to garner attention that this was not going to be just another shakeout (just it should be noted how most label it to this day); we issued a ‘crash alert’ at the time, to make the point about ‘hording cash’ and having reserves so that whether the markets go completely haywire or not in the days or weeks ahead one is reasonably postured. That meant that conditions were deteriorating, rather than simply going to crash dive.
     
    Yes, everyone is hoping the next ISM statement, followed by the Employment Report Friday, somehow saves the day. Actually they are expected to be decent; why not. In response to the money thrown (here or there) and the stabilization efforts they should be better (but not quantifiably significant; and especially not given market valuations). So don’t count on that; unless looking for more rallies to spike up to be sold into.
     
    Conclusion: stabilization efforts notwithstanding; overall recession and deleveraging conditions will prevail (not may prevail) through this year, and probably into next year as well. Intervening rallies in markets will occur (some fairly wild), of limited duration. In event other developments unfold that could truly change prospects; we’ll evaluate.
                                                                               
                                                                                Gene Inger

                ******************************************************************************

    Requisite disclaimer: Trading in securities of any type may not be suitable for all individuals. Futures or options entail risk and volatility, versus investments. In our view, futures or options aren’t investments, but speculations. Decisions are the sole responsibility, discretion and at risk of any trader. Our discussions, or guidelines, in stocks & futures, are structural for purpose of giving shape and flow to our analysis. Patterns should be considered as guidelines only; to compliment your own good judgment, or that of your financial advisor. Market and/or economic forecasts are intended to be of a general nature, and should not be taken directly as a recommendation to buy or sell referenced securities, debt instruments, or futures contracts. To consider doing so; consult your own broker or professional to determine suitability. No commentary is to be considered an offer to buy or sell securities. While we may own securities discussed, it’s our policy not to cloud our judgment (right or wrong) in-event we hold a position. We normally disclose holding a position.

    More at www.ingerletter.com

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    Are There Clear Blue Sky’s Ahead…….Yes, Just A Matter Of A Little Fire And Ice First

    Posted By thestatedtruth.com on November 2, 2009

    Blue Skies

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    Isn’t The Horse Already Out Of The Barn……Fed Summons CEOs of 28 Top U.S. Banks to Meet With Supervisors On Compensation Issues

    Posted By thestatedtruth.com on November 1, 2009

    Fed Summons CEOs of 28 Top U.S. Banks to Meet With Supervisors

    By Craig Torres and Ian Katz

    Oct. 31 (Bloomberg) — The chief executive officers of 28 of the largest U.S. banks have been summoned to meet with supervisors at Federal Reserve banks to discuss new rules on compensation, said a person familiar with the matter.

    The Fed this month said it will review the largest banks to ensure compensation doesn’t create incentives for the kinds of risky investments that brought the global financial system to the edge of collapse, prompting bailouts of firms including Bank of America Corp. and Citigroup Inc.

    By summoning bank chiefs, the Fed is sending a message that it wants the pay reviews taken seriously, said Kevin Petrasic, an attorney at Washington law firm Paul Hastings and a former special counsel at the Office of Thrift Supervision.

    “It starts with the CEO,” Petrasic said. “It is not subtle at all to tell the most highly compensated people in the organization, ‘Okay we are starting with you.’”

    Chief executives at the Nov. 2 meetings will be briefed on so-called horizontal reviews used by regulators to compare banks and identify those where pay practices differ significantly from the norm, the person said. Among the topics to be covered will be how banks will share information with supervisors.

    In May, the Fed conducted so-called stress tests of the 19 largest financial firms, including Wells Fargo & Co., Morgan Stanley, Capital One Financial Corp. and MetLife Inc. to ensure their capital was adequate to withstand a more severe economic downturn. This time, the Fed isn’t naming the banks and the compensation review will be kept confidential.

    Sharing Information

    Fed Governor Daniel Tarullo is leading an overhaul of the central bank’s supervision and is making greater use of firm-by- firm comparisons and the Fed Board’s research economists to help supervisors identify risks. Tarullo, who is President Barack Obama’s first appointment to the Fed, will give a speech on compensation in Washington Nov. 2.

    The central bank’s action parallels efforts by U.S. lawmakers, the Obama administration and world leaders to overhaul incentives usually set by corporate boards and reduce threats to the financial system. Banks worldwide have taken more than $1.6 trillion in credit losses and writedowns since the financial crisis began around August 2007, according to data compiled by Bloomberg.

    Risky Behavior

    “The government wants to fan out the basic principles of reducing risky behavior and compensation design that supports that, such as stock payments over cash, clawbacks, pay tied to long-term performance,” said David Schmidt, a senior consultant for New York-based compensation firm James F. Reda & Associates.

    While the Fed’s proposed guidelines will apply to banks it supervises across the nation, the largest firms will have to describe plans to bring their practices into alignment. The central bank may take enforcement action against banks where compensation or risk-management practices threaten “safety and soundness” and no prompt measures are taken to address them, according to Fed’s proposed guidance.

    “It’s possible that the Fed will be putting pressure on pay levels in this review,” said David Wise, senior consultant at the Hay Group in New York, a management consulting firm.

    In their proposed guidance and in talks Fed officials have insisted that large pay packages will be viewed in light of the risks they generate.

    Delayed Bonuses

    Banks could make compensation more sensitive to risk, the Fed said in its proposed guidelines, by delaying the payout of a bonus. They could also extend from one year to two the period covered by performance measures and adjust bonus payments for any actual losses that become clear during the deferral period, also called a “clawback.”

    Employees who expose a firm to large amounts of risk might receive smaller bonuses than those whose activities are less risky, even if both types generate the same revenue or profit, the Fed said.

    Compensation practices at the thousands of smaller banks will be reviewed in the normal course of their risk management examinations. In 2008, the Fed supervised 5,757 bank holding companies as well as 862 state-chartered banks.

    The Fed’s reviews come as a revival in stock and commodity markets have boosted trading profits at the biggest banks. The Standard and Poor’s 500 Index has jumped 53 percent since March 9.

    Goldman Sachs Group Inc. set aside $16.7 billion for compensation and benefits in the first nine months of 2009, up 46 percent from a year earlier and enough to pay each worker $527,192 for the period.

    Almost three in five traders, analysts and fund managers believe their 2009 bonuses will either increase or won’t change, according to a quarterly poll of Bloomberg customers in six continents conducted Oct. 23-27.

    More…..http://www.bloomberg.com/apps/news?pid=20601109&sid=a4F2nP9DxqKk&pos=11

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    Ok….. Now We’ll See if The Stimulus Works Longer Term, If It Does, Things Should Start Rolling Soon In The United States!

    Posted By thestatedtruth.com on November 1, 2009

    China’s Recovery Strengthens, Adding Room for Stimulus Cuts

    By Bloomberg News

    Nov. 2 (Bloomberg) — Chinese manufacturing data for October showed the nation’s economic recovery is strengthening, giving policy makers more room to pare stimulus measures in coming months.

    The Purchasing Managers’ Index rose to a seasonally adjusted 55.2, the highest level in 18 months, the Federation of Logistics and Purchasing said yesterday in an e-mailed statement.

    Premier Wen Jiabao’s stimulus package and an unprecedented $1.27 trillion in new loans in the first nine months of this year are sustaining China’s rebound after overseas shipments slumped because of the global financial crisis. In the latest data, an index of export orders climbed to 54.5, the highest since April last year, suggesting global demand is recovering.

    “External demand will provide an additional source of support for growth in the months ahead,” said Brian Jackson, Hong Kong-based strategist for emerging markets at Royal Bank of Canada. “This should provide scope for Beijing to start tightening policy from early 2010 while still keeping growth at relatively high levels.”

    Jackson said the key one-year lending rate may climb to 6.39 percent from 5.31 percent by the end of next year. The yuan may rise to 6.5 per dollar after staying close to 6.83 for the past 15 months.

    UBS AG says the government may tighten by imposing a lending target of about 7 trillion yuan ($1 trillion) for 2010.

    Faster Economic Growth

    The world’s third-biggest economy may grow 9.5 percent from a year earlier this quarter, Zhang Liqun, of the State Council Development and Research Center, said in the statement. That would be the third straight acceleration and the biggest gain since the second quarter of 2008.

    China’s cabinet pledged Oct. 21 to continue monetary and fiscal stimulus even after growth exceeded officials’ expectations for the first nine months of the year. Commerce Minister Chen Deming warned Oct. 31 that the global economy may “plunge” if nations withdraw support measures too quickly.

    The latest PMI number was higher than the median estimate of 54.7 in a Bloomberg News survey of 10 economists. A reading above 50 indicates an expansion. Yesterday’s figure compares with a record-low 38.8 in November last year, when recessions in the U.S., Europe and Japan sent export orders plunging.

    A jump in the import index to 52.8 from 50.7 “shows an acceleration of domestic demand,” Zhang said.

    An output index rose to 59.3 in October from 58 in September and a measure of new orders climbed to 58.5 from 56.8. An index of employment dropped to 52.4 from 53.2.

    Auto Sales

    Surging auto sales, driven by tax cuts and subsidies, are boosting manufacturing. Passenger-car purchases exceeded 1 million for the first time in September as General Motors Co., the largest overseas automaker in China, reported that sales doubled.

    China will sustain its economic rebound this quarter and growth is likely to top the government’s 8 percent target for 2009, the central bank said Oct. 30.

    Policy makers need to “manage inflation expectations,” curb excess capacity and encourage sustainable lending growth, the central bank said in its report on the third-quarter economy.

    Billionaire investor George Soros said Oct. 30 in Budapest that China will be the “greatest winner” from the global financial crisis, with the U.S. losing the most. Nobel Prize- winning economist Joseph Stiglitz said Oct. 31 that emerging economies including China need to guard against “bubbles” caused by surging liquidity as governments around the world stimulate growth.

    The manufacturing index, released by the logistics federation and the Beijing-based National Bureau of Statistics, is based on replies to questionnaires sent to purchasing executives at more than 730 companies in 20 industries. It was instituted in January 2005.

    More at   http://www.bloomberg.com/apps/news?pid=20601087&sid=a_ThP1U.43VI&pos=3

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    Sounds Good, But Do Any Of Us Need More Debt At This Time? Geithner Urges Banks to Resume Lending

    Posted By thestatedtruth.com on November 1, 2009

    Geithner Urges Banks to Resume Lending, Help Recovery

    By Alison Fitzgerald

    Nov. 1 (Bloomberg) — U.S. Treasury Secretary Timothy Geithner said the country’s economic recovery and job creation hinge on banks taking more risk and restoring the flow of credit to businesses.

    “The big risk we face now is that banks are going to overcorrect and not take enough risk,” Geithner said in an interview today on NBC’s “Meet the Press” program. “We need them to take a chance again on the American economy. That’s going to be important to recovery.”

    Geithner judged the banking system to be “dramatically more stable” than it’s been in more than a year. U.S. banks have been reluctant to lend as the economy emerges from a recession and unemployment approaches 10 percent.

    Loans by the biggest banks receiving the most government assistance from the $700 billion Troubled Asset Relief Program fell by 17 percent in August to $234.7 billion, the third time in six months that lending declined.

    Bank of America Corp.’s total loan originations fell 22 percent to $57.1 billion in August from a month earlier, according to an Oct. 15 report from the Treasury. Lending by Wells Fargo & Co. fell 18 percent to $55 billion for the month, and JPMorgan Chase & Co.’s loan originations dropped 5 percent to $43.8 billion, the report showed.

    Household and business borrowing have plummeted in the last year. Consumer credit fell in the second quarter by 6.5 percent, according to the Federal Reserve’s flow of funds report. Non- financial business debt fell at a 1.75 percent annual rate.

    U.S. Savings Rate

    U.S. households are saving more, which Geithner said is a logical response to the economic crisis.

    Geithner said he expects the recovery to be “a little choppy.”

    The U.S. economy expanded in the third quarter for the first time in a year, the Commerce Department said last week. Gross domestic product grew at a 3.5 percent pace from July through September. Geithner declined to say whether he thinks the recession is over.

    “A lot of damage was caused by this crisis. It’s going to take some time for us to grow out of this,” he said. “It could be a little choppy. It could be uneven. And it’s going to take awhile.”

    While the GDP report was a “good number,” he said a better measure of economic recovery will be job growth. The unemployment rate rose to 9.8 percent in September. Geithner said the rate is likely still rising, and he noted that most economists expect it to eclipse 10 percent.

    October Jobs

    A Labor Department report Nov. 6 will probably show joblessness nationwide reached 9.9 percent in October, according to a Bloomberg News survey of 61 economists. That would be the highest level since June 1983.

    “This is a tough economy still for huge numbers of American businesses,” he said. “The real test will be when we have unemployment come down.”

    The Treasury secretary said it’s not yet time to announce steps to cut the U.S. deficit, which has shot up to a record $1.4 trillion in the last year, triple the previous year, after the U.S. Congress committed billions to bailing out banks and President Barack Obama and lawmakers committed $787 billion to an economic stimulus package.

    Geithner said it’s “not yet” time to discuss whether another economic stimulus package should be considered, because only about half of the first one has been spent.

    More at     http://www.bloomberg.com/apps/news?pid=20601087&sid=aBG6IqPjtD1k&pos=5

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    Commercial Lender CIT Group Seeks Bankruptcy Protection After Bailout

    Posted By thestatedtruth.com on November 1, 2009

    CIT Group Seeks Bankruptcy Protection After Bailout

    By Tiffany Kary, Dawn McCarty and Lester Pimentel

    Nov. 1 (Bloomberg) — CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy with financing from investor Carl Icahn after the credit crunch dried up its funding and a U.S. bailout failed.

    New York-based CIT listed $71 billion in assets and $65 billion in debt, according to the filing. The company filed in the U.S. Bankruptcy Court for the Southern District of New York.

    CIT has $1 billion from Icahn to fund operations while it reorganizes. The credit line, to be drawn on until Dec. 31, would be a so-called debtor-in-possession loan if the company enters bankruptcy, CIT said in a statement Oct. 30.

    The company had asked bondholders to exchange $30 billion in debt for new securities and equity. Icahn made a competing offer. After CIT’s offer expired at midnight on Oct. 29, the company said it was tallying 150,000 ballots.

    CIT said it would try to emerge from bankruptcy two months from the date of its filing.

    Under the plan, the lender said it expects to cut total debt by about $10 billion, reduce its liquidity needs over the next three years and boost its capital ratios.

    More at     http://www.bloomberg.com/apps/news?pid=20601087&sid=aGR8yTH2eLwY&pos=1

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    Personal Savings As A Percentage Of Disposable Income

    Posted By thestatedtruth.com on October 31, 2009

    Personal Savings

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    White House Using Unrealistic Assumptions For Annual Budget Deficits……..

    Posted By thestatedtruth.com on October 31, 2009

    “Inflation is a monetary phenomenon, as Milton Friedman said. But hyperinflation is always and everywhere a political phenomenon, in the sense that it cannot occur without a fundamental malfunction of a country’s political economy.”

    Look at the chart below. Using realistic assumptions, It suggests that the annual US government fiscal deficit will approach $2 trillion in 2019. How can we come up with what looks to be about $15 trillion over the next ten years? The Argentinian answer was to print the money.

    jm103009image001

    In the US, the short answer is that unless the US consumers become a massive saving machine, to the tune of 8% or more of GDP and rising each year, and willingly put their savings into US government debt, it’s not going to happen. So sometime in the coming years, interest rates are likely to start to rise in order to compensate bond investors for what they perceive as risk. That will bring us to some very difficult and painful choices.

    More at John Mauldin’s     www.frontlinethoughts.com

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    Flying Pigs…..Banks Get New Rules on Property

    Posted By thestatedtruth.com on October 31, 2009

    A  bunch of crap……….Banks have generally been keeping a lid on commercial real-estate losses by extending these mortgages upon maturity. However, that practice, billed by many industry observers as “extending and pretending,” has come under criticism by some analysts and investors as it promises to put off the pains into the future.
      

    Banks Get New Rules on Property

     

    WSJ

    Federal bank regulators issued guidelines allowing banks to keep loans on their books as “performing” even if the value of the underlying properties have fallen below the loan amount.

    The volume of troubled commercial real-estate loans is skyrocketing. Regulators said that the rules were designed to encourage banks to restructure problem commercial mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems.

    The guidelines, released on Friday by agencies including the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of the Currency, provide guidance for bank examiners and financial institutions working with commercial property owners who are “experiencing diminished operating cash flows, depreciated collateral values, or prolonged delays in selling or renting commercial properties.” Restructurings are often in the best interest of both lenders and borrowers, the guidelines point out.

    The new rules don’t reverse existing rules. Rather they are more explicit than regulators have been in the past about how banks should deal with restructuring issues. Banks in recent months have been peppering agencies with questions about this as the number of problem loans has soared.

    Regulators have been expressing increasing concern that problems in commercial real estate could unglue the nascent economic recovery by slamming financial institutions with billions of dollars in new losses. FDIC Chairman Sheila Bair told a Senate subcommittee earlier this month that reworking the terms of these loans could help banks avoid larger losses. She likened it to the push regulators made last year for banks to rework troubled residential mortgages.

    About $770 billion of the $1.4 trillion commercial mortgages that will mature in the next five years are currently underwater, according to Foresight Analytics. As of last week, 106 banks had failed this year, the most since 1992?the peak of the savings-and-loan crisis. Regional and community banks especially have been paying dearly for their aggressive push into commercial real-estate lending during the boom years.

    The new guidelines are targeted primarily at the hundreds of billions of dollars worth of loans that are coming due that can’t be refinanced largely because the value of the properties have fallen below the loan amount. In many of these situations, the properties are still generating enough income to pay debt service.

    Banks have generally been keeping a lid on commercial real-estate losses by extending these mortgages upon maturity. However, that practice, billed by many industry observers as “extending and pretending,” has come under criticism by some analysts and investors as it promises to put off the pains into the future.

    Now federal regulators are essentially sanctioning the practice as long as banks restructure loans prudently. The federal guidelines note that banks that conduct “prudent” loan workouts after looking at the borrower’s financial condition “will not be subject to criticism (by regulators) for engaging in these efforts.” In addition, loans to creditworthy borrowers that have been restructured and are current won’t be reclassified as “high risk” by regulators solely because the collateral backing them has declined to an amount less than the loan balance, the new guidelines state.

    Critics say the new rules are yet another example of a head-in-the-sand approach by regulators, pointing to the relaxed accounting standards last year that enabled banks to avoid marking the value of the loans down. This is doing long-term damage to the economy, they say, because it ties up bank capital, preventing them from resuming lending.

    Critics say a wiser approach would be for regulators and banks to deal with problems quickly like the Resolution Trust Corp. did in the early 1990s during the last commercial real-estate crash. Back then, the RTC helped purge the financial system of toxic mortgages.

    The new guidance “gives people a long time to figure out they’re not going to pay it back,” said Douglas Durst, a leading New York City developer. “We are in a period where nothing is happening,” he said, adding that banks are “not making any new loans because they have this bad debt on their books and not writing it down and getting rid of it.”

    Peter Grant and Damian Paletta contributed to this article

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    Something Fishy Is Going On With The Dollar…….Just How Close To A Currency Disaster Are We?

    Posted By thestatedtruth.com on October 28, 2009

    Fishy Dollars

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    GMAC (The Car Financing Arm) Needs Another Government Injection (Its 3rd) Of $2.8 To $5.6 Billion

    Posted By thestatedtruth.com on October 27, 2009

    The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008, these people said. The latest infusion would come in the form of preferred stock. The government’s 34% stake in the company could increase if existing shares eventually are converted into common equity.

    The willingness by Treasury officials to deepen taxpayer exposure to GMAC reflects the troubled company’s importance to the revival of the auto industry. Founded in 1919, GMAC has $181 billion in assets and is a major financing provider on car purchases from General Motors Co. and Chrysler LLC. The new capital would help firm up GMAC’s balance sheet and solidify its auto-loan business.

    [Helping Hand]

    Federal officials also are moving to shore up GMAC’s ability to fund its daily operations, with the Federal Deposit Insurance Corp. telling the company Tuesday the agency will guarantee an additional $2.9 billion in debt, according to people familiar with the discussions. The FDIC guarantee will make it easier for the company to sell debt to investors. The FDIC backed $4.5 billion in GMAC-issued debt earlier this year.

    The FDIC approval came just four days before the expiration of the regulator’s program that guarantees debt issued by certain banks. It ended months of tense negotiations between GMAC and regulators. Without a deal, the company would have been forced to further reduce its lending volume. New-car loans by the company tumbled 55% to $5.6 billion in the second quarter from a year earlier.

    As part of the agreement, GMAC agreed to keep interest rates on deposit accounts offered through its banking unit at certain levels, according to people familiar with the situation.

    While GMAC is the only U.S. company to get three capital injections from the government since the financial crisis erupted two years ago, thousands of banks and other financial firms remain weakened by their exposure to fallen real-estate values and clobbered financial markets.

    Among U.S. banks that got a total of $204.64 billion in aid through the Troubled Asset Relief Program, just one-third of the capital has been repaid so far. Government officials are skeptical that some banks now wanting to escape the government’s grip are strong enough to do so, with Bank of America Corp.’s attempt to repay federal bailout funds snagged by a disagreement over how much additional capital the bank must raise to satisfy regulators, people familiar with the situation said.

    At GMAC, the likelihood of a third infusion increased when the government’s stress-test results were released in May. The test concluded GMAC needed $11.5 billion in common equity to continue lending in a stressed economy.

    www.wsj.com

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    Banks Say To Government…..Better You Take The Risk On Our Loan Portflio Then Us!

    Posted By thestatedtruth.com on October 26, 2009

    Bank Loans On The Books

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    Here Comes The Second Wave Of Mortgage Problems

    Posted By thestatedtruth.com on October 26, 2009

     

    Subprime Resets

    Subprime resets crushed the housing market in ’07 and ’08. Now a new wave of adjustable-rate mortgages is just around the corner.

    “These helped frame where we are in the mortgage crisis,”  “which has been the main shark in the water over the past couple of years. You should know where that shark is and whether or not it is hungry…

    “Clearly, it is not yet safe to get back in the water: Years 2010 and 2011 face big resets in so-called Alt-A and Option ARM loans. What this means is more write-downs and more losses for banks and others who hold these mortgages.

    From www.thedailyreckoning.com

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    The Value Of Debt Relief

    Posted By thestatedtruth.com on October 25, 2009

    Debts have value only to the extent that they are being paid, and a rapidly rising number of U.S. households aren’t doing so. Those defaults are leading to losses at banks, a wave of foreclosures, trouble for neighborhoods and strife for families. But they are also providing an immediate, albeit radical, form of debt relief.

    “It’s not ideal, because it carries other costs,” said Karen Dynan, a consumer-finance specialist at the liberal Brookings Institution think tank who recently served as a senior adviser to the Federal Reserve. But it is “going to help get household balance sheets back to the right place.”

    [Debt Relief chart]

    If one accounts for defaults, U.S. households’ debt burden is shrinking a lot faster than the official data suggest. First American CoreLogic, which tracks the performance of mortgage loans, estimates that some 9.3% of the nation’s 52.4 million mortgage holders were 60 or more days behind on their payments as of July. That represents relief on about $1.2 trillion in loans. The official data miss most of that, because the Fed doesn’t erase debts until banks have foreclosed, sold the homes and taken the loans off their books, a process that can drag out for more than a year.

    www.wsj.com

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    Commercial Real Estate Bust Looms Dead Ahead

    Posted By thestatedtruth.com on October 23, 2009

    Commercial Real Estate Bust Looms

    By John W. Schoen
    Thurs., Oct . 22, 2009

    That big whoosh you’re hearing is the air rushing out of a commercial real estate bubble.

    More than two years into the worst housing crisis in decades, commercial real estate is shaping up as the second half of what some are calling a “double bubble. Owners of shopping malls, hotels, office space and apartment buildings  and the bankers who financed them  face a major crunch over the next two years as the mortgages on those properties start coming due.

    Much like homeowners who now owe more on their mortgage than their house is worth, many commercial property owners have seen the value of their properties plummet, increasing the risk of default on hundreds of billions in commercial real estate loans.

    That is expected to put more stress on thousands of banks that have already been deemed not too big to fail.

    “I have never seen anything this bad, said Dan Tishman, CEO of Tishman Construction, one of the nation’s leading construction and management firms, comparing the current slide to major commercial real estate busts in the 1980s and ’90s.

    Even as economists and federal officials point to recent signs that the recession may be ending, there’s widespread concern that commercial real estate could pose a threat to the recovery. Federal Reserve Chairman Ben Bernanke told members of the House Financial Services Committee this month that “commercial real estate remains a very serious problem.”

    Though the market is only about a third the size of the $22 trillion residential market, in some ways the problem for commercial real estate is more severe. Unlike home mortgages that run for 15 or 30 years, much of the roughly $1.6 trillion in commercial real estate loans outstanding involves much shorter terms of three to seven years. Many of the loans were written at the height of the boom.

    “There was this unbelievable bout of lending that occurred all on a very short term, said Tishman. “With short maturities you’ve squeezed the accordion as close as you can get and caused a lot more refinancing in a short period of time.

    Commercial real estate became hugely popular with bankers during the boom. In 2006, commercial real estate made up 56 percent of U.S. banks’ loan portfolios up from 40 percent a decade earlier, according to FDIC data. For smaller banks with assets under $1 billion the concentration is even higher. Some 74 percent of all loans held by smaller banks are secured by commercial real estate. These roughly 6,500 banks represent some 90 percent of all U.S. banks.

    The risk for consumers is that heavy losses on commercial real estate could force banks to tighten lending for home mortgages, car loans and credit cards even further. It also could force bankers to try to offset commercial loan losses by accelerating sales of foreclosed homes, which could put further pressure on home prices.

    For commercial real estate owners, the problem starts with the impact of the recession on their properties. Massive layoffs have left office buildings with unrented space. The slowdown in consumer spending is hitting owners of malls and retail space where foot traffic has dried up. Hotel owners have been hurt by the slowdown in travel and tourism.

    On top of lost rent, commercial real estate owners who bought properties at the height of the boom have suffered the same fate as homeowners and suffered plunging values. From the peak in mid-2007, commercial property values are down by some 35 percent, according to Moody’s.

    As commercial real estate loans come due, property owners face the same dilemma as many homeowners. If they sell the property, they’ll take a big loss. But to refinance, they’ll have to come up with a lot of cash to make up for the value lost since they took out the loan.

    Most lenders are not especially interested in foreclosing because they’ll lose money selling into a distressed commercial real estate market. That’s prompted lenders to undertake a strategy of what industry insiders are calling pretend and extend.”

    As long as the commercial property owner is making payments, bankers are willing to delay refinancing for a few years in hopes that the economy and real estate market improve. But it remains to be seen whether that strategy will work.

    ‘I don’t think the banks can hold out that long, said Lesley Deutch, who follows the commercial real estate market for John Burns Real Estate Consulting. There was a lot underwritten during (the boom); there’s just too much to refinance, and the values have gone down too significantly.”

    A lot depends on how well the economy recovers in the next several years. If companies begin hiring again, empty space in office buildings will begin to fill up, shuttered stores in malls will reopen and hotel owners will see occupancy rates rise. But even if that happens, it’s not clear how long it will be before these properties regain their lost value.

    “So many of those assets were acquired at top dollar, said Susan Smith, director of the real estate group at Pricewaterhouse Coopers. When you add on top of that the significant amount of debt that was used to acquire many of these real estate properties, I think you are looking at a much more troublesome problem down the road with commercial defaults than residential if something doesn’t happen to facilitate refinancing.

    Some commercial property owners won’t have a patient banker to talk to when it comes time to try to postpone their refinancing. That’s because about a third of commercial loans are held by investors who bought commercial mortgage-backed securities, or bonds backed by the interest payments on those loans.

    Because each loan is held by dozens of investors, there is no mechanism for negotiating an extension, even if there were new investors to buy fresh mortgage bonds. Tishman estimates that some $200 billion of these bonds will need to be refinanced in the next year, or about four times the annual volume during the lending boom.

    “The reason that everyone is projecting the pain yet to come in commercial real estate is because the bulk of this debt that was done at high valuation, and high leverage has yet to mature, said Michael Pollock, general counsel of The Ashforth Co., which owns, develops and invests in commercial real estate. We’re really just seeing the tip of the iceberg.”

    Though there’s widespread agreement that a financial crunch is looming, some think the commercial real estate market may escape the kind of collapse in residential housing that brought down the U.S. economy. For one thing, the market is smaller.

    Bankers also have time to prepare for the crunch over the next few years. Tishman says he hopes federal regulators and legislators will be more proactive this time in heading off the problem.

    “Washington is no longer in the position to just float every industry there is, he said.  But when they see an industry that’s in need, they are going to do something about it before they will let it take the general economy down like the housing market and Lehman did.

    © 2009 msnbc.com

    URL: http://www.msnbc.msn.com/id/33404369/ns/business-personal_finance/

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    It’s Not Question Of If, But Only A Question Of When!

    Posted By thestatedtruth.com on October 20, 2009

    Oct. 20, 2009, 12:25 p.m. EDT

    Hedge Manager Sprott Sees Trouble

     

    US government is new “dead man walking”

    By Alistair Barr, MarketWatch

    NEW YORK (MarketWatch) – When so-called quantitative easing by central banks ends, the world economy may slip back into trouble, Canadian hedge fund manager Eric Sprott warned on Tuesday.

    Toronto-based Sprott called Citigroup, Fannie Mae, Freddie Mac, and General Motors “dead men walking” in late 2007. On Tuesday, he said the U.S. government is the new dead man walking, partly because it may struggle to keep borrowing enough money if the Federal Reserve stops buying Treasury bonds.

    Sprott’s Canadian hedge fund, Sprott Hedge Fund LP, is up more than 400% since inception in 2000 as it rode a surge in gold prices and shares of gold miners and other raw materials companies.

    Bank bailouts and other dramatic efforts by central banks have stopped the world “going into the abyss,” Sprott said during a presentation at the Value Investing Congress in New York.

    The “granddaddy” of all those bailout efforts is quantitative easing, in which central banks in the U.S. and the U.K. especially buy government bonds to keep interest rates low, Sprott said.

    The U.S. government has raised roughly 200% more by selling bonds this year, versus last year, Sprott noted. Through the end of the second quarter of 2009, he said the only major buyers of these government bonds were central banks.

    “When quantitative easing ends, what’s going to happen?” he added, noting that there are already two clues to answer that question.

    When the U.S. government’s cash-for-clunkers program ended, car sales slumped. Meanwhile, as the end of the government’s first-time homebuyer incentive approaches, recent data suggest weakness building again in the housing market, Sprott said.

    Roughly 35% of all homes bought in the U.S. recently were purchased through the incentive program. If it is not extended, December home sales could slump 25%, Sprott estimated.

    Sprott remains concerned about banks and other financial institutions in the U.S., because he thinks they remain too leveraged.

    Banks leveraged roughly 20 to 1, have about 5% of equity supporting mostly paper assets. If those assets fall by more than 5%, the institutions are effectively bankrupt, Sprott said.

    “The fundamental problem today is that the appropriate leverage ratio is certainly not 20 to 1,” Sprott said, citing some of the bank failures this year in the U.S.

    To be seized by the Federal Deposit Insurance Corp., these banks have already lost their 5% equity cushion. But some of the largest bank failures this year, including Colonial Bank, Guaranty Financial, and Corus, involved write-downs of between 11% and 25%, Sprott noted.  

    More….http://www.marketwatch.com/story/hedge-manager-sprott-sees-trouble-when-easing-ends-2009-10-20

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    The New Normal…..Things Are Looking Better But For The Wrong Reasons

    Posted By thestatedtruth.com on October 20, 2009

    Inventories

    Chart from The Wall Street Journal

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    Comparison Of Commercial vs. Residential Real Estate Changes

    Posted By thestatedtruth.com on October 20, 2009

    Real Estate

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    Einhorn Bets On Major Currency ‘Death Spiral”

    Posted By thestatedtruth.com on October 19, 2009

    Oct. 19, 2009, 2:39 p.m. EDT

    NEW YORK (MarketWatch) — Greenlight Capital is betting on the possibility of a major currency collapse and a surge in interest rates, the hedge-fund firm’s manager David Einhorn said Monday, citing ballooning government deficits in some of the world’s most developed countries.

    Einhorn, who warned about Lehman Brothers’ frailty before it collapsed last year, also said financial institutions that are deemed as “too big to fail,” such as Citigroup Inc. , should be broken up.

    Greenlight has been buying physical gold this year because Einhorn is concerned that efforts to save the financial system and fuel economic recovery are undermining the value of such currencies as the U.S. dollar.

    On Monday, he said Greenlight has added new trades to this investment theme, buying long-dated options on much higher interest rates in Japan and other developed regions — effectively giving the firm the chance to make big profits from a jump in rates. The options, bought from major banks, are tied to interest rates four to five years out, Einhorn noted.

    “Japan may already be past the point of no return,” he said during a presentation at the Value Investing Congress in New York.

    Japan’s debt is equal to 190% of the country’s gross domestic product and its government deficit will be 10% of GDP this year, according to Einhorn.

    Japan has been able to borrow money at roughly 2% a year to finance these deficits, partly because the country has many savers willing to buy low-yielding government bonds. However, some of these savers may begin spending instead as they enter retirement, Einhorn argued.

    “When the market refuses to refinance at cheap rates, problems emerge,” he said, adding that this could trigger a “currency death spiral.”

    Interest rates have been very stable in Japan for years, so the options on higher rates that Greenlight bought were relatively cheap. Einhorn said the “asymmetry” of that trade was interesting: If rates were to jump suddenly in Japan, Greenlight stands to make “multiples” on its positions.

    “There remains a possibility that I’m wrong, and I hope I am,” he commented. But earlier in the speech he remarked: “Just because something hasn’t happened before, that doesn’t mean it won’t.”

    Remedy to shore up system

    Einhorn also compared potential problems in sovereign-debt markets to the financial crisis that engulfed markets last year.

    When Lehman collapsed, investors reacted by dramatically increasing the cost of borrowing for rival Wall Street firms to the point where their business models were threatened, he Einhorn. The collapse of any major currency could have same impact of rerating the cost of financing governments in deficit.

    Unlike Japan, the United States isn’t past the point of no return, the fund manager stressed. However, he criticized financial-reform proposals pushed by Treasury Secretary Timothy Geithner, arguing they provide a government backstop for the largest institutions, entrenching them further.

    No institution should be too big to fail, Einhorn contended. “The real solution is to break up anything that fails that test. Lehman shouldn’t have existed in any size to threaten the financial system.”

    The same applies to Citigroup and Bear Stearns, which J.P. Mortgage Chase & Co. acquired, as well as American International Group Inc. and “dozens” of other firms, he said.

    More….http://www.marketwatch.com/story/story/print?guid=23465BA4-9D9F-4AA0-AD7E-88E2D5FBC7E6

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    Is He Kidding? Ted Turner Only Worth About 1.8 Billion Now, Has To Live With Less…..Say’s “You Know, If You Economize And Don’t Buy Any New Airplanes Or Long Range Jets, You Can Get Buy On A Billion Or Two”

    Posted By thestatedtruth.com on October 18, 2009

    Turner Lost CNN, Fonda, Fortune, Feels ‘Like a Dummy’

    By Brett Pulley and Anita Sharpe

    Oct. 16 (Bloomberg) — Ted Turner, the cable television pioneer who became one of the richest Americans, recalls the pain of losing his job at Time Warner Inc., his wife, the actress Jane Fonda, and $7 billion of his fortune.

    “It was like having my heart ripped out,” Turner said yesterday in an interview in New York. The founder of Turner Broadcasting System and the 24-hour cable news channel CNN, Turner said that he has “a couple billion” dollars left, including $700 million in Treasury bills.

    While contemporaries such as News Corp. Chief Executive Officer and Chairman Rupert Murdoch, Liberty Media Corp.’s John Malone and Viacom Inc.’s Sumner Redstone keep competing in the media industry, Turner says that he doesn’t have enough money to get back in the business. He now focuses on nuclear disarmament, global climate change, women’s rights, and the environment.

    “I’m working on the issues that are life or death for us,” said Turner, 70, who co-chairs the Nuclear Threat Initiative along with Sam Nunn, a former Democratic Senator from Georgia. “What I’m trying to do is stay relevant.”

    The CNN founder, known for provocative comments in his 40- year career, has lost none of his passion for news. He says 24- hour coverage of fighting worldwide has made war tougher for people to stomach.

    “War is obsolete,” Turner said. “The last time someone surrendered was Japan and that was 60 years ago. The Afghans will never surrender. We will just get tired and come home. We’ve already given up on Iraq and there’s oil in Iraq, there’s no oil in Afghanistan.”

    Turner quit the media business three years ago when he left the board of Time Warner, based in New York. The company bought Turner’s cable channels, also including TBS, TNT and Cartoon Network, in 1996, making him its largest individual shareholder. Turner lost $7 billion when Time Warner’s stock collapsed in the wake of the 2001 merger with AOL, the Internet business it is now shedding.

    Discussing the growing value of cable networks in the U.S., Turner said, “I feel like a dummy.” Mocking himself, he sings, “You let the big one get away.”

    Turner, who founded CNN in 1980, said that if he got his wish to run the network again, he would increase coverage of countries including China.

    “If I had the money, I’d think seriously about getting control of Time Warner and getting CNN to focus on serious journalism,” Turner said in a separate interview from his eighth-floor office at Turner Enterprises Inc. in downtown Atlanta. “They’re doing a good job but they could do better.”

    Time Warner’s stock dropped 60 percent in three years following the AOL merger’s completion in January 2001. Turner, once ranked among the richest Americans in the Forbes 400 list, was listed at number 196 in this year’s list, with an estimated net worth of $1.8 billion.

    Before Time Warner lost so much value, Turner says he had given away much of his money. His largest gift was a $1 billion pledge in 1997 to establish the United Nations Foundation. So far, $750 million of the pledge has gone to the organization, Turner said. He said he has the rest set aside.

    “If you were around at the time, I gave everybody a hundred thousand dollars if they came up with anything,” Turner said. “I just couldn’t hold onto it. I wanted to keep it moving. I get a dollar, I give it to you, you spend it, somebody else gets it. You know, pass it around. You know, it’s kind of like a joint — you just pass it around, light it up, you know, share with your friends.”

    Turner’s Atlanta offices are filled with memorabilia from his years in media and sailing, including his 1977 America’s Cup victory aboard Courageous. Three swords sit on his coffee table; a photo with Warren Buffett hangs on a nearby wall.

    Turner Enterprises owns about 2 million acres in 12 U.S. states and Argentina. More than 50,000 bison roam on parts of his land, according to the company. Some of those bison wind up in burgers and other dishes at Ted’s Montana Grill, a restaurant chain he co-founded in 2002.

    Ted’s has more than 50 outlets, according to its Web site. One of the restaurants is on the ground floor of the Atlanta offices, where a sign out front reads, “Eat here and we both can live.”

    Turner said he bought much of his land from energy companies. They retained the rights to oil, coal or natural gas found on the property, while he is entitled to royalties.

    “My land value has gone down,” Turner said. “I’m not in a position to buy anything substantial. I will still look at anything adjacent to me.”

    Turner said he has learned to live with less, yet he still bemoans the decline in his net worth.

    “To drop out of that league, that was hard to do,” Turner said. “I’ve had the experience of being on top and riding the roller coaster down again, nearly to the bottom. You know, if you economize and don’t buy new airplanes or long-range jets, or that sort of thing, you can get by on a billion or two.”

    Last Updated: October 16, 2009 15:18 EDT

    More……http://www.bloomberg.com/apps/news?pid=20601109&sid=afyLWnoS2WlA

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    U.S. Has record Budget Deficit……..

    Posted By thestatedtruth.com on October 16, 2009

    Geithner Says U.S. Must Instill Confidence in Fiscal Management

    By Robert Schmidt

    Oct. 16 (Bloomberg) — Treasury Secretary Timothy Geithner said the U.S. must reduce its record budget deficit as soon as the economy returns to a sustainable growth rate without relying on government assistance.

    “Americans understand that we have to go back to living within our means as a country,” he said in an interview broadcast today on CNBC. “When we have an economy that’s growing again and we get unemployment down, we’re going to have to bring those deficits down.”

    The U.S.’s 2009 budget gap widened to $1.42 trillion as the deepest recession since the 1930s crippled tax revenue and the administration increased spending to rescue the economy. The shortfall for the 12 months ended Sept. 30 was more than triple the $455 billion record set a year earlier, the Treasury Department said today in Washington.

    Geithner cautioned that a lack of confidence that the U.S. will return to fiscal sustainability may lead to a weaker economic recovery, higher interest rates and constrained investment.

    More……http://www.bloomberg.com/apps/news?pid=20601087&sid=aOWY.L8unNU8

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    Dirty Swines…..Minnesota Pigs Tested Positive for H1N1

    Posted By thestatedtruth.com on October 16, 2009

    Minnesota Pigs Tested for H1N1, May Be First in U.S.

     

    By Whitney McFerron

    Oct. 16 (Bloomberg) — Three pigs from the Minnesota state fair have been “tentatively identified” as having swine flu in what may be the first U.S. cases of the H1N1 virus among domestic livestock.

    The pigs were tested at the fair from Aug. 26 to Sept. 1 and “have probably gone to slaughter,” Gene Hugoson, the commissioner of the Minnesota Department of Agriculture, said today on a conference call with reporters. The pigs, which did not exhibit flu symptoms at the fair, were tested as part of a university project.

    “There is absolutely no food-safety risk from eating any kind of pork that has been contaminated at one time or another with H1N1,” Hugoson said. “Any pig that exhibits any type of an indication of sickness would not be accepted at slaughter.”

    The state has not traced the animals back to their owners. Final results of the tests likely will be confirmed next week, Hugoson said.

    The U.S. Department of Agriculture and the World Health Organization have said the H1N1 virus is not transmitted through properly handled pork. Concern over the illness has eroded pork demand and U.S. exports of the meat, sending hog futures down 25 percent since April 23, when the outbreak started. China, once the second-largest importer of U.S. pork, has blocked shipments.

    “I want to remind people that people cannot get this flu from eating pork or pork products,” USDA Secretary Tom Vilsack said in a statement. “Like people, swine routinely get sick or contract influenza viruses. We currently are testing the Minnesota samples to determine if this is 2009 pandemic H1N1 influenza.”

    An outbreak of the H1N1 virus also occurred among “multiple” children who were staying in a dormitory at the fair as part of a 4-H Club program, Joni Scheftel, the public health veterinarian at the Minnesota Department of Health, said on the call. It is “very, very unlikely” that the children were infected by the pigs, he said.

    “It’s likely that the pigs were infected by a person, either a 4-H kid or one of the 1 million visitors to the fair,” Scheftel said.

    Bill Hartmann, the executive director of the Minnesota Board of Animal Health, said all the producers who brought hogs to the fair are being notified that the virus was discovered.

    The National Pork Producers Council, a Washington-based trade organization, said “strict safeguards” are in place to prevent contamination in U.S. meat supplies.

    “All pork found in retail stores and restaurants is inspected to the rigors of USDA standards for wholesomeness, and every pig is inspected to ensure that only healthy pigs enter the food supply,” the agency said today in a statement.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aIqH2gH2o0MQ

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    More On Problem Mortgages…….

    Posted By thestatedtruth.com on October 15, 2009

    New Housing Crisis

    “US foreclosures jumped to an all-time high of 937,840 in the third quarter,” writes Ian Mathias in today’s issue of The 5 Min. Forecast. “That’s a 23% rise from the same time last year, says a report from RealtyTrac today. One in every 136 households received a filing – also a record. Once again Nevada takes the cake… An incredible one in every 23 households was in some form of foreclosure last quarter.

    “And they tell us the economy is recovering?

    “But here’s the kicker – a theme that should be no surprise to 5 Min. loyalists: This isn’t about subprime anymore. The most recent data from the Mortgage Banker’s Association claims subprime mortgages currently account for hardly a third of foreclosure starts, down from 50% last year. Prime loans – the gold standard of the mortgage biz – now take up a 58% share.

    “Even the foreclosure scene in terms of home prices has been turned on its head. Check it out:

    “About 35% of home foreclosures occur in the bottom third of the housing market, says zillow.com, down from 55% in 2006. In June, the most recent data available, 30% of foreclosures were in the top tier – nearly double the rate from the year before.

    “And the icing on this rotten cake: Option ARMs. This pending rate reset crisis – which just about everyone ‘in the know’ saw coming in early 2008 – looks like its really going to happen. 46% of option ARMs are currently 30 days past due, despite the fact that just 12% have reset to higher payments. Resets for the rest of those ARMs are right around the corner.”

    From  The Daily Reckoning

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    Dow 10,000….That Was Then, This Is Now

    Posted By thestatedtruth.com on October 15, 2009

    That Was Then, This Is Now – In his terrific “Big Picture” blog, Barry Ritholtz cited a neat 1999 comparison by Peter Boockvar.  Here’s the citation……

    With the DJIA approaching 10,000 again, let’s reminisce about 1999, the year it first passed that magic level on March 29th. Millennium by the Backstreet Boys was the best selling album, American Beauty won the Academy Award, the Euro was established, SpongeBob SquarePants aired for the first time, Hugo Chavez was elected President of Venezuela, Karl Malone, Pudge, Chipper Jones, Jagr and Kurt Warner won MVP awards and the average price of a gallon of gasoline at the pump was about $1.20. US nominal GDP ended at $9.6b vs $14.1 as of Q2 ‘09. Also, on March 29th 1999, the DXY was at 100.36 (now 75.60), the CRB was at 192.40 (now 269.15), gold was at $280 (now $1,060), oil was $16.44 (now $74.80), corn was $2.32 (now $3.85), copper was $.62 (now $2.83), the 10 yr yield was 5.19% (now 3.38%), and the fed funds rate was at 4.75% (now 0-.25%). Oh, how time flies.

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    States’ Tax Revenue Fell Record $63 Billion in Year

    Posted By thestatedtruth.com on October 15, 2009

    States’ Tax Revenue Fell Record $63 Billion in Year

    By Michael Weiss

    Oct. 15 (Bloomberg) — States’ tax revenue fell a record $63 billion during the fiscal year ended June 30, the Nelson A. Rockefeller Institute of Government, an Albany based research organization, said in a report released today.

    The data, based on U.S. Census information dating to 1962, also showed a second record decline for the quarter, April 1- June 30, the institute said.

    Last Updated: October 15, 2009 09:30 EDT

    http://www.bloomberg.com/apps/news?pid=20601110&sid=abKEnvXXhsEo

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    U.S. Foreclosure Filings Jump 23% to Record in Third Quarter

    Posted By thestatedtruth.com on October 15, 2009

    U.S. Foreclosure Filings Jump 23% to Record in Third Quarter

    By Dan Levy

    Oct. 15 (Bloomberg) — U.S. foreclosure filings climbed to a record in the third quarter as lenders seized more properties from delinquent borrowers, according to RealtyTrac Inc.

    A total of 937,840 homes received a default or auction notice or were repossessed by banks, a 23 percent increase from a year earlier, the Irvine, California-based seller of default data said today in a report. One out of every 136 U.S. households received a filing, the highest quarterly rate in records dating to January 2005.

    “The problem is prime loans going into foreclosure and people being underwater and losing their jobs,” Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles, said in an interview. “It’s a really bad number.”

    Mounting foreclosures mean U.S. home prices probably will resume falling, analysts from Amherst Securities Group LP in New York said Sept. 23. A “shadow inventory” of 7 million properties are in the foreclosure process or likely to be seized, up from 1.27 million in 2005, they said.

    The pace of prime and so-called alt-A loan defaults is accelerating as subprime defaults slow, Standard & Poor’s analysts led by Diane Westerback said yesterday in a report. Prime loans are those made to borrowers with the best credit records while alt-A loans are considered riskier because they were often granted without documenting the borrower’s income.

    Securities Losses

    More than $400 billion in U.S. home mortgages that were packaged into securities and sold by companies other than government-supported Fannie Mae and Freddie Mac are in default and may be foreclosed on, S&P said. Those defaults may depress home prices for years, the analysts said.

    The delinquency rate for prime loans rose to 6.41 percent in the second quarter from 6.06 percent, the Washington-based Mortgage Bankers Association said Aug. 20. The share of prime loans in foreclosure increased to 3 percent from 2.49 percent, the MBA said.

    “The number of people who can’t pay their mortgages, we haven’t seen the peak of that,” David Lowman, head of JPMorgan Chase & Co.’s mortgage unit, said this week. “That’s going to weigh on us for some time to come.”

    Home foreclosures will climb through late 2010, peaking after the unemployment rate reaches 10.2 percent in the second quarter, the mortgage bankers said in an Oct. 13 forecast.

    RealtyTrac reported that 343,638 properties received foreclosure filings in September alone, the third-highest monthly total behind July and August of this year. The September number fell 4 percent from the previous month, though it climbed 29 percent from a year earlier.

    Few Exceptions

    Bank seizures rose 21 percent from the previous quarter and increased in every state except two and the District of Columbia, RealtyTrac said.

    Nevada had the highest foreclosure rate: one in every 23 households, or almost six times the national average. A total of 47,925 Nevada homes got filings, up 10 percent from the previous quarter and 59 percent from a year earlier, RealtyTrac said.

    In both Arizona and California, one in 53 households received filings. They were followed by Florida, at one in 56, and Idaho, at one in 97. Utah, Georgia, Michigan, Colorado and Illinois rounded out the top 10 highest rates.

    New Jersey had the 15th highest rate. Connecticut was 25th and New York was 39th.

    Six states accounted for more than 60 percent of total filings in the U.S., led by California’s 250,054. Filings in the most populous state rose 19 percent from the third quarter of 2008. Bank seizures jumped 12 percent from the previous quarter.

    Florida Repossessions

    Florida had the next highest total, with 156,924 filings, up 23 percent from a year earlier. Bank seizures rose 16 percent from the previous quarter.

    Arizona had 50,342 filings, up 25 percent from the same period a year earlier. Nevada had 47,925, up 59 percent. Illinois had 37,270, a gain of 30 percent; and Michigan had 37,026, an increase of 22 percent.

    Georgia, Texas, Ohio and New Jersey rounded out the top 10 states with the most filings, RealtyTrac said.

    The company collects data from more than 2,200 counties representing 90 percent of the U.S. population.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aFofq9_za8Is

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    Boomers Have Their Backs Against The Wall…..

    Posted By thestatedtruth.com on October 14, 2009

    by Bill Bonner
    London, England

    Two important items in the news today:

    First, Bloomberg reports that retails sales fell 2.1% in September – the biggest decrease this year.

    Know what that means? It means the “Age of Thrift” is here…and that consumers really are cutting back – just like we said they would.

    And it means that the consumer economy is not going to return to robust growth anytime soon. And it means, too, that people will find it hard to find jobs for a very long time.

    Another thing it means is that housing prices are not likely to recover – not in our lifetimes. That was a once-a-century bubble and it has blown up.

    Mortgage lenders say they expect the peak in foreclosures to come about a year from now. As for the bottom of price declines, you can expect that in 2013 or beyond. A housing bubble typically takes prices down for six years, says a study by professors Reinhart and Rogoff. But this was not a typical bubble; it was an extraordinary bubble. Seems logical that the correction will be extraordinarily deep and long too.

    www.thedailyreckoning.com

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    China And Exxon Mobil Are Locked In A Bidding War Over Large New Oil Find…..

    Posted By thestatedtruth.com on October 14, 2009

    “China National Offshore Oil Corp and Exxon Mobil are about to enter a bidding war over oil-rich water near Ghana. At stake is ‘Jubilee,’ a recently discovered offshore site that probably holds a couple billion barrels of oil. This isn’t China’s state-owned offshore oil company’s first foray into the global energy grab, but its one of its biggest. Exxon currently has the winning bid – $4 billion.

    “Technically it’s going to be a ‘bidding war,’ but really its just a matter of how much China is willing to pay. The Red Nation announced this morning that its foreign exchange reserves rose $178 billion in the third quarter to $2.27 trillion – the biggest national war chest in the history of fiat money…a feat they’ve accomplished in a remarkably short time:

    US Consumption vs. Chines Savings

    From The Daily Reckoning

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    So Now You know……October 13,1792

    Posted By thestatedtruth.com on October 13, 2009

    October 13, 1792

    White House Cornerstone Laid

    The cornerstone is laid for a presidential residence in the newly designated capital city of Washington. In 1800, President John Adams became the first president to reside in the executive mansion, which soon became known as the “White House” because its white-gray Virginia freestone contrasted strikingly with the red brick of nearby buildings.

    The city of Washington was created to replace Philadelphia as the nation’s capital because of its geographical position in the center of the existing new republic. The states of Maryland and Virginia ceded land around the Potomac River to form the District of Columbia, and work began on Washington in 1791. French architect Charles L’Enfant designed the area’s radical layout, full of dozens of circles, crisscross avenues, and plentiful parks. In 1792, work began on the neoclassical White House building at 1600 Pennsylvania Avenue under the guidance of Irish American architect James Hoban, whose design was influenced by Leinster House in Dublin and by a building sketch in James Gibbs’ Book of Architecture. President George Washington chose the site.

    On November 1, President John Adams was welcomed into the executive mansion. His wife, Abigail, wrote about their new home: “I pray heaven to bestow the best of blessings on this house, and on all that shall hereafter inhabit it. May none but wise men ever rule under this roof!”

    In 1814, during the War of 1812, the White House was set on fire along with the U.S. Capitol by British soldiers in retaliation for the burning of government buildings in Canada by U.S. troops. The burned-out building was subsequently rebuilt and enlarged under the direction of James Hoban, who added east and west terraces to the main building, along with a semicircular south portico and a colonnaded north portico. The smoke-stained stone walls were painted white. Work was completed on the White House in the 1820s.

    Major restoration occurred during the administration of President Harry Truman, and Truman lived across the street for several years in Blair House. Since 1995, Pennsylvania Avenue between the White House and Lafayette Square has been closed to vehicular traffic for security reasons. Today, more than a million tourists visit the White House annually. It is the oldest federal building in the nation’s capital.

    From     http://www.history.com/this-day-in-history.do?action=VideoArticle&id=7049

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    “What Happened To Global Warming?”

    Posted By thestatedtruth.com on October 13, 2009

    “What happened to global warming?” asks a headline at the BBC.

    Folks in the Rockies are shivering. “Western Montana breaks records,” says a report. Missoula reported a low of 8 degrees yesterday…14 degrees lower than the previous record for this early in the season.

    Nearby Idaho had heavy snow last week too. Same thing in New Zealand, where roads were blocked by heavy snow.

    In New Zealand, two major North Island highways remain closed after unseasonal heavy snow days stranded motorists for two nights. “Even if this was the middle of winter this is extreme,” said an analyst.

    And right now, it’s spring in NZ. They had a spring snowstorm that put their winter snowstorms to shame.

    “Forget global warming,” says old friend Jim Davidson. “Get ready for another ice age.” Buy Brazil, he advises; the cold will drive down farm output in North America and Europe.

    As the BBC reports, worldwide temperatures are not increasing; they’ve been falling for the last 10 years. No one knows why. Global warming enthusiasts say the trend is still towards higher temperatures. Their opponents say the world is actually beginning a major period of cooling – driven by solar activity, not by man-made carbon emissions. 

                                     From The Daily Reckoning

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    The Gap In The GAPP……………..

    Posted By thestatedtruth.com on October 12, 2009

    The fiscal condition of the United Sates has deteriorated dramatically during the last several years. On the basis of current obligations, US indebtedness totals “only” about $12 trillion. But when utilizing traditional GAAP accounting – the kind of accounting that every public company in the United States MUST use – US indebtedness soars to $74 trillion. This astounding sum is more than six times US GDP. (GAAP accounting includes things like the present value of the Social Security liability and the Medicare liability – i.e. real liabilities.)

    US GAAP

    Perhaps this mind-blowingly large debt load would seem less mind- blowing if it were DE-creasing. But it is not. Instead, the current US administration is amplifying the long-standing American habit of spending money it does not have.

    From The Daily Reckoning

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    Consumer Credit Plunging In A Free Fall

    Posted By thestatedtruth.com on October 12, 2009

     

    Outstanding US Consumer Credit

    Interesting huh? Consumer credit has fallen off a cliff.

    What does that mean exactly? It means Americans aren’t borrowing…and they aren’t buying either.

    From The Daily Reckoning

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    Back In Earlier Days You Had To Mind Your “P’s” and “Q’s”

    Posted By thestatedtruth.com on October 11, 2009

    In the 1700′s, at local taverns , pubs, and bars, people drank  from pint and quart-sized containers.  A bar maid’s job was to keep an eye on the customers and keep the drinks coming.  She had to pay close attention and remember who was drinking in ‘pints’ and who was drinking in ‘quarts,’ hence the term ‘minding your ‘P’s and Q’s.

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    Killing The Goose That Layed The Golden Egg…..By John Mauldin

    Posted By thestatedtruth.com on October 11, 2009

    Thoughts from the Frontline Weekly Newsletter

    Killing the Goose

    by John Mauldin
    October 9, 2009
    Visit John's MySpace Page

    In this issue:
    Killing the Goose
    What Were We Thinking?
    Let’s Play Turn It Around
    Detroit, the Red Sox and the Yankees, and Traveling Too Much

     Peggy Noonan, maybe the most gifted essayist of our time, wrote a few weeks ago about the vague concern that many of us have that the monster looming up ahead of us has the potential (my interpretation) for not just plucking a few feathers from the goose that lays the golden egg (the US free-market economy), or stealing a few more of the valuable eggs, but of actually killing the goose. Today we look at the possibility that the fiscal path of the enormous US government deficits we are on could indeed kill the goose, or harm it so badly it will make the lost decades that Japan has suffered seem like a stroll in the park.And while I do not think we will get to that point (though I can’t deny the possibility), for reasons I will go into, there is the very real prospect that the upheavals created by not dealing proactively with the problems (or denying they exist) will be as bad as or worse than the credit crisis we have gone through. This is not going to be something that happens overnight, and the seeming return to normalcy that so many predict has the rather alarming aspect of creating a sense of complacency that will only serve to “kick the can” down the road.This week we look at the problem, and then muse upon what the more likely scenarios are that may play out. This is a longer version of a speech I gave this morning to the New Orleans Conference, where I also offered a path out of the problems. This letter will be a little more controversial than normal, but I hope it makes us all think about the very serious plight we have put ourselves in.What Were We Thinking?

    As a culture, the current mix of generations, especially in the US, has made some choices. Choices which, in hindsight, leave the adult in us asking, “What were we thinking?”

    We made a series of bad choices and suffered the credit crisis because of it. Now, as a nation, we are in the middle of making an even worse choice, one that will leave us with no good choices – only choices of pretty bad to awful. Let’s begin with a quote from a recent client letter by my friends at Hayman Advisors (in Dallas).

    “Western democracies, communistic capitalists, and Japanese deflationists are concurrently engaging in what may be the largest, global financial experiment in history. Everywhere you turn, governments are running enormous fiscal deficits financed by printing money. The greatest risk of these policies is that the quantitative easing will persist until the value of the currency equals the actual cost of printing the currency (which is just slightly above zero).

    “There have been 28 episodes of hyperinflation of national economies in the 20th century, with 20 occurring after 1980. Peter Bernholz (Professor Emeritus of Economics in the Center for Economics and Business (WWZ) at the University of Basel, Switzerland) has spent his career examining the intertwined worlds of politics and economics with special attention given to money. In his most recent book, Monetary Regimes and Inflation: History, Economic and Political Relationships, Bernholz analyzes the 12 largest episodes of hyperinflations – all of which were caused by financing huge public budget deficits through money creation. His conclusion: the tipping point for hyperinflation occurs when the government’s deficit exceed 40% of its expenditures.

    “According to the current Office of Management and Budget (OMB) projections, US federal expenditures are projected to be $3.653 trillion in FY 2009 and $3.766 trillion in FY 2010, with unified deficits of $1.580 trillion and $1.502 trillion, respectively. These projections imply that the US will run deficits equal to 43.3% and 39.9% of expenditures in 2009 and 2010, respectively. To put it simply, roughly 40% of what our government is spending has to be borrowed. [Emphasis mine]

    “One has to ask whether the US reached the critical tipping point. Beyond the quantitative measurements associated with government deficits and money creation, there exists a qualitative aspect to such a scenario that may be far more important. The qualitative perceptions of fiscal and monetary policies are impossible to control once confidence is lost. In fact, recent price action in metals, the dollar and commodities suggests that the market is already anticipating the future.”

    Let me point out that the deficits for 2010 assume a rather robust recovery, and so they could turn out to be much worse, especially if unemployment continues to rise and Congress decides (rightly) to extend unemployment benefits.

    The interest on the national debt in fiscal 2008 was $451 billion. Even though the debt has exploded, the interest for fiscal 2009 is down to “only” $383 billion. My back-of-the-napkin estimate says that is over 20% of total 2009 tax receipts. I guess when you take interest rates to zero and really load up on short-term debt, it helps lower interest costs. (More on that future problem later.) http://www.savingsbonds.gov/govt/reports/ir/ir_expense.htm

    The fiscal deficits are projected to be about 11% of nominal GDP, which is now roughly $14.3 trillion. The Congressional Budget Office currently projects that deficits will still be $1 trillion in ten years.

    The worst-case assumption, adding 8% of GDP to the debt each year, and not the 11% we are experiencing today. The Congressional Budget Office projections are now even worse, and that assumes a very rosy 3% or more growth in the economy for the next five years. Under Woody’s scenario, the national debt would rise to $18 trillion by 2015, or well over 100% of GDP, depending on your growth assumptions. Take some time to study the tables, but I am going to focus on 2015 and not the outlier years.

    jm100909image001

    $1.5 trillion dollars means that someone has to invest that much in Treasury bonds. Let’s look at where the $1.5 trillion might come from. Let’s assume that all of our trade deficit comes back to the US and is invested in US government bonds. Today we found out that the latest monthly trade deficit was just over $30 billion, or $370 billion annualized (which is half what it was a few years ago). That still leaves $1.13 trillion that needs to be found to be invested in US government debt (forget about business and consumer loans and mortgages).

    Killing the Goose

    $1.13 trillion is roughly 8% of total US GDP. That is a staggering amount. And again, that assumes that foreigners continue to put 100% of their fresh reserves into dollar-denominated assets. That is not a safe assumption, given the recent news stories about how governments are thinking about whether to create an alternative to the dollar as a reserve currency. (And if I was watching the US run $1.5 trillion deficits with no realistic plans to cut back, I would be having private talks too. They would be idiots not to do so.)

    There are only three sources for the needed funds: either an increase in taxes or people increasing savings and putting them into government bonds or the Fed monetizing the debt, or some combination of all three.

    Now the Fed is in fact monetizing a portion of the debt as part of its quantitative easing program, and US consumers are saving more. Tax receipts are way down. I can tell you there is a great deal of angst in New Orleans tonight about the Fed monetization. This is traditionally a “gold bug” conference, and many of the participants and speakers see only inflation in our future.

    Long-time readers know that I think the Fed has been able to get away with its rather large monetization program because of the massive deflationary forces let loose in the world by the credit crisis, which is forcing a monster deleveraging regime all over the world. Where has all the money gone that the Fed has printed? Right back onto the Fed’s balance sheet as bank reserves. The banks are not lending, so this money does not get into the system in the usual manner associated with fractional reserve banking. Until that happens, and is accompanied by increasing wages and employment, inflation is not in our immediate future.

    And this brings us to our conundrum. You cannot continue to run deficits significantly larger than nominal GDP for too long without risking the demise of the economic system. Ask Argentina or any of the other nations where hyperinflation occurred, as detailed in the study mentioned above. But we are in a deflationary environment, so the Fed can monetize the debt far more than any of us suppose without risking immediate and spiraling inflation.

    But there is a limit to the Fed’s ability to do so without causing real inflation. First, as long as the Fed is independent, at some point they will simply have to tell Congress we can no longer monetize the debt. While I am sure that some of you doubt they would do so, the Fed officials and economists I have been around are pretty adamant about that. There is a line they will not be pushed past. It may be further than I like, but it is there.

    The Fed cannot simply buy up all the debt needed to fund the government. Again, no one on the FOMC would either advocate or allow that. That would in fact start us down a very dangerous path rather quickly. Therefore, they must have a large number of willing bond buyers outside the Fed. The good news, gentle reader, is that we will find someone to buy that debt. That is also the bad news. Let’s go back 30 years.

    Legend now has it that Paul Volker single-handedly took the inflation bull by the horns and ripped them off. Now, it took fortitude to do that in the face of certain recession and high unemployment. Those were not fun days. But his partner in the deed was the bond market. Bond investors simply demanded higher returns, because they were really worried about inflation.

    At some point, if we do not get the government deficit under control, the bond market is once again going to react. Seemingly overnight, real (inflation-adjusted) rates are going to rise, and will do so rapidly. And I am not talking about 1 or 2%. You just cannot have 8% of a $14-trillion GDP go into US government debt every year, forever, at today’s low real rates.

    Let’s play a thought game. If you take 8% of US consumer spending and save it, and it finds its way into government bonds, you have reduced consumer spending and therefore the actual GDP. But how about those who want to invest in stocks? Foreign bonds and currencies? New businesses? Loans of all types? How much are we going to have to save to get the necessary capital? How high will the saving rate have to be to finance all those other activities in a world where debt securitization is still anemic?

    Some will point to Japan and their government debt-to-GDP ratio, which will soon be over 200%, a far cry from where we are today. Why can’t we grow our debt to 200%? Because the Japanese have long had a culture of saving and investing in government bonds. It’s what you do to support the country. But even they will run into a wall as their savings rate continues to drop, because so many of their citizens are retired and are now selling bonds to finance retirement. They too are running massive fiscal deficits, on the order of the size of the US deficits. And does anyone really want to have two lost decades, like Japan?

    How long can we go before there is an upheaval? I don’t know. The markets can remain irrational or complacent for a lot longer than most of us think. It could be years. Or not. Suddenly, it will be July 2008 and the bond vigilantes stampede.

    But now, we seemingly can borrow with no consequences. The deflation that is in the air, plus the lack of bank lending holds, down the normal inflation impulses. We as a nation are leveraging ourselves up. We’re partying like it’s still 2005. The music is playing and we are dancing. Our Congress is trying to figure out how to run even higher deficits.

    At some point, the consequences will be significant. There are two paths, and it is not clear which one we will take. First, we might see inflation kick in and actual rates rise. Since so much of our national debt is short-term debt, that means yet another rise in the deficit as rates rise. Mortgage rates rise, putting pressure on the housing market. There will be even more pressure on commercial mortgages. Consumer debt will be harder to get and cost more. It will mean funding costs for businesses will rise, and that hurts employment. It would be a return to the 1970s of high interest rates and stagnant growth in a very slow-growth environment.

    Second, we could see deflation kick in and, even though rates stay more or less where they are, real (after-deflation) rates could rise as they did in the ’30s and in Japan.

    Some of my most knowledgeable friends argue for the inflation side, and others take the deflation side. I tend to think the Fed will fight deflation until we get inflation, but the consequences will not be pleasant. There is no benign path.

    How can we avoid such an upheaval? The only way is to make some very difficult choices. There have to be some adults making the choices, as the teenagers now in control clearly cannot make them.

    As I have written in the past, we can run deficits of 2% of GDP for a very long time, which in a few years would be about $300 billion. It is my belief that if the bond market and world investors saw a credible plan to put us on a path to a deficit no larger than 2% of GDP, the dire upheaval that is in our future could be avoided.

    But that will mean some painful choices. It is not a matter of pain or no pain, it is just deciding when and how bad it will be. The longer we wait, the worse the consequences.

    Let’s Play Turn It Around

    There are businessmen who are called turnaround specialists. They come into companies that are sick but have a basic competency, and that with the right management can be made into viable concerns. Generally, the choices the new management makes are painful to those involved, but they are necessary if the enterprise is to remain a going concern.

    So, for the next few pages, I am going to suggest some things we can do to turn the US around. They are not easy fixes, and I know a lot of readers will not like what they read or will disagree on points. But something like this is going to have to be done, or we risk killing the goose.

    First, we must acknowledge the deficit is out of control, and spending must be cut. If we raise taxes by as much as the Obama administration now wants to, we will most assuredly put the country back into a deep recession in 2011. Think what raising taxes in 1937 did to a nascent recovery. A $3-trillion-dollar budget is 20% of the US economy. That is just simply too much.

    Quick fact. The most credible studies show that government expenditures exert no multiplier effect on the economy. Actually, they show them to be very slightly negative. This is not just in the US. However, the tax effect has a multiplier of 3! If we raise taxes by $300 billion in 2011, that will slam the economy in the face. Further, we will collect less taxes than projected, as economic activity will fall.

    You cannot cure a too much debt problem with more debt. We cannot borrow our way into prosperity. Every crisis of the past decades has been a result of too much debt and leverage and we seem to want to repeat the past mistakes, hoping that this time it will be different. It won’t.

    Ok, now let’s play the Turnaround Hammer Game.

    + We should start with a 5% acrossthe-board cut in spending in all programs. Federal employees, except for military personnel, should see a 5% cut in pay as part of that program. The average federal worker makes $75,419 a year, while the average in the private sector is $39,751. The rest of us are taking pay cuts in the form of higher taxes. No cost of living increases, etc. We are on an austerity program and need to do what it takes. If a program is deemed too important to be cut, then another program has to be cut more.

    Then the next year another 2.5% cut across the board. And then an absolute freeze on the overall budget size until the deficit is 2% or less of GDP.

    + Social Security must be fixed now. We all know that it is going to have to be done, so why not just do it? Means testing should be a part of the mix. As an idea, for every $10,000 in income a retiree has, he gets $1,000 less in SS payments. And increase the retirement age down the road. When SS was launched, retirement age was 65. But the average life span was 65. There are other things we can do, but whatever our poison of choice is, we need to take it.

    + Medicare must be revised, with real health-care reform. The national debt is $56 trillion if we count unfunded liabilities, much of which is Medicare. It will become a nightmare around the middle of the next decade. Adding more expenses now without cutting elsewhere makes no sense. If we kill the goose, no one will get anything excect very empty promises.

    Side note: there actually is a lot of waste in the system. Software should be written that analyzes every patient and procedure and produces an outcomes-based analysis of what is reasonable, rather than throwing every test at every patient. And the government should make sure, even if it has to spend the money, that the updated system is in place in every hospital and clinic in the country. And doctors should be given access to it so they can decide what type of care is appropriate to prescribe. And health-care reform means tort reform.

    Today, I got a note from a friend of mine who just had yet another heart attack. It seems his stent is now blocked by 50%. He is a vet, and his primary care is the Veterans Administration. The Veterans Hospital system will not do a procedure to unblock the stent until it is 70% blocked. He does not have any money, so he is simply waiting to have another heart attack. I am really looking forward to government-run health care.

    + Each year we allow almost 1 million immigrants into the US, mostly family of people already here. I suggest that for the next two years we stop that. Instead, let anyone who can buy a home, passes basic screening, and can demonstrate the ability to pay for health insurance immigrate to the US and get a temporary green card. If they behave, then the card becomes permanent after four years.

    We almost immediately put a floor on the housing market, absorb the excess homes, and within a year the housing-construction market, along with the jobs that are now gone, will be back. That is stimulus that costs the taxpayers nothing.

    + While I can’t believe I am writing this, taxes are going to have to rise, if for no other reason than this Congress is hell bent on raising taxes. But rescinding the entire Bush tax cuts, plus adding a 10% surcharge as Congress wants to do in one fell swoop, is an absolute guarantee of a recession. So do it gradually over (say) 4 years, and then reinstitute the cuts when the deficit is under 2% of GDP. Remember the negative tax-multiplier effect of raising taxes. And the definitive work on that was done by Obama’s chairman of the Council of Economic Advisors, Christina Romer.

    We should consider a VAT tax and a major cut/reorganization of the corporate tax. We need to encourage corporations to hire more, and you do that by taxing less. Let’s make our corporations more competitive, not less. Our taxes are much higher than those of any of our major competitors. And please forget that insane carbon tax. If you want to cut emissions, do it straightforwardly by raising taxes significantly on gasoline. Don’t back-door it on consumers. (And I am NOT advocating such a policy.)

    + An aggressive tax benefit for new venture-capital money that is invested in new technologies will result in new industries. The only way we can grow our way out of this mess is to create whole new industries, like we did in the late ’70s and ’80s. (Think computers and the internet and telecom.)

    + Unemployment is likely to continue to rise and last longer than ever before. We have to take care of the basic needs of those who want work but can’t find it. Unemployment insurance should be extended to those who are still looking for work past the time for benefits to expire, and some program of local volunteer service should be instituted as the price for getting continued benefits after the primary benefits time period runs out. Not only will this help the community, but it will get the person out into the world where he is more likely to meet someone who can give him a job. But the costs of this program should be revenue-neutral. Something else has to be cut.

    + We have to re-hink our military costs (I can’t believe I am writing this!). We now spend almost 50% of the world’s total military budget. Maybe we need to understand that we can’t fight two wars and support hundreds of bases around the world. If we kill the goose, our ability to fight even one medium-sized war will be diminished. The harsh reality is that everything has to be re-evaluated. As an example, do we really need to be in Korea? If so, why can’t Korea pay for much of the cost? They are now a rich nation. There are budgetary fiscal limits to being the policeman for the world.

    + Glass-Steagall, or some form of it, should be brought back. Banks, which are subject to taxpayer bailouts, should not be in the investment banking and derivatives-creating business. Derivatives, especially credit default swaps, should be on an exchange, and too big to fail must go. Banks have enough risk just making loans. Leverage should be dialed down, and hedge funds selling what amounts to naked call options in any form, derivative or otherwise, should be regulated.

    Let me see, is there any group I have not offended yet? But something like I am suggesting is going to have to be done at some point. There is no way we can continue forever on the current path. At some point, we will hit the wall. The fight between the bug and the windshield always ends in favor of the windshield. The bond market is going to have to see a credible effort to get back to a reasonable deficit, or we risk a very difficult economic environment. The longer we wait, the worse it will be.

    It is not going to be easy to persuade a majority of Americans that we need to do something now. More realistically, we are going to probably have to begin to experience a crisis of some type to get politicians motivated to do something.

    We are not going back to normal, although it is likely we will see some form of Statistical Recovery. But we cannot get complacent. Somewhere out there is the real potential for another crisis, which will dwarf the last one. You will not want to be long much of anything when it happens, except hedged or liquid investments. Though admittedly, this could go on for a long time. I just don’t know how long “long” is. Other than it will be too long and then not long enough.

    John Mauldin
    John@FrontLineThoughts.com

    Copyright 2009 John Mauldin. All Rights Reserved

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    What’s The Difference Between A Ballon And A Bubble?

    Posted By thestatedtruth.com on October 10, 2009

    Another Ballon

    www.ingerletter.com

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    Dificit’s Come, But They Never Seem To Go

    Posted By thestatedtruth.com on October 10, 2009

    U.S. Trade Deficit

    www.ingerletter.com

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    Four bad Bears, Currently Not Looking So Bad!

    Posted By thestatedtruth.com on October 10, 2009

    Four Bad Bears Updated

    www.ingerletter.com

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    What A Bunch Of Morons……

    Posted By thestatedtruth.com on October 8, 2009

     How can they lose this much money?     Oh, they’re giving loans to the same home buyers that wiped out sub prime.  The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said.  It appears destined for a taxpayer bailout in the next 24 to 36 months, consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run. The program insures loans with down payments as low as 3.5 percent and has no formal credit-score requirements.  About 14.4 percent of FHA loans were delinquent as of June 30 and 2.98 percent were already being foreclosed upon, according to the Mortgage Bankers Association. The combined percentage for all mortgages was a record 13.16 percent,

     

    FHA’s $54 Billion in Losses May Require Bailout, Pinto Says

    By Jody Shenn

    Oct. 8 (Bloomberg) — The Federal Housing Administration, which insures mortgages with low down payments, may require a U.S. bailout because of $54 billion more in losses than it can withstand, a former Fannie Mae executive said.

    “It appears destined for a taxpayer bailout in the next 24 to 36 months, consultant Edward Pinto said in testimony prepared for a House committee hearing in Washington today. Pinto was the chief credit officer from 1987 to 1989 for Fannie Mae, the mortgage-finance company that is now government-run.

    The FHA program’s volumes have quadrupled since 2006 as private lenders and insurers pulled back amid the U.S. housing slump, Pinto said. The trend has left the agency backing risky loans and exposed to fraud in a market where prices have yet to stabilize, he said. The program insures loans with down payments as low as 3.5 percent and has no formal credit-score requirements.

    FHA Commissioner David H. Stevens, who will also speak today, said last month that falling prices would push its single-family fund’s reserves below a 2 percent cushion required by Congress. Under no circumstances will a taxpayer bailout be needed” because the shortfall will be cured over time, he said.

    Brian Sullivan, a spokesman for the Housing and Urban Development Department, which oversees the FHA, declined to comment.

    The idea the FHA needs a rescue is just plain wrong, Stevens said in an Oct. 6 letter to the Wall Street Journal. That’s in part because the FHA’s accounting method mean its reserves are enough to cover more than 30 years of projected losses, assuming no revenue from new business.

    Total Reserves

    FHA’s total reserves exceed $30 billion, or more than 4.4 percent of its insurance, according to Stevens. The loan- insurance ratio, which compares the reserves with the loans insured, was 6.4 percent a year ago, government data shows.

    The agency said last month it would tighten some credit, appraisal and lender standards and appoint a chief risk officer. In the first half of the year, FHA insured more than $178 billion of new mortgages, or about 19 percent of the total, according to the newsletter Inside Mortgage Finance.

    Official figures on FHA’s reserves as of Sept. 30 won’t show a shortfall when released because  the assumptions used will be overly optimistic relative to loss mitigation resulting from both loan modifications and recent and expected underwriting changes, Pinto said.

    Seized by Regulators

    Last December, three months after regulators seized Fannie Mae and rival Freddie Mac of McLean, Virginia, Pinto told lawmakers taxpayers will have to stand behind hundreds of billions of dollars of losses at the companies. That was before the firms tapped almost $100 billion of their capital lifelines at the Treasury, which this year grew from the $100 billion each initially pledged to $200 billion.

    Pinto’s testimony says he based his FHA estimates on his performance projections for high loan-to-value ratio loans insured by Fannie Mae in 2006, about 20 percent of which he expects to default costing 50 percent of balances.

    About 14.4 percent of FHA loans were delinquent as of June 30 and 2.98 percent were already being foreclosed upon, according to the Mortgage Bankers Association. The combined percentage for all mortgages was a record 13.16 percent, according to data from the Washington-based trade group, which said in releasing the figures the share of FHA loans past due is being suppressed by the large amount new debt.

    Boyd Campbell, testifying on behalf of the National Association of Realtors, said that the FHA has helped avoid a worse collapse, according to his prepared remarks.

    Changes to the agency should include moves meant to bolster its technology and staff, ease its restrictions on condominium loans and extend its ability to back larger mortgages, he said.

    “Due to solid underwriting requirements and responsible lending practices, FHA has avoided the brunt of defaults and foreclosures facing the rest of the real estate finance industry, Campbell said in the prepared testimony.

    www.bloomberg.com

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    Back In The Late 1700′s……….

    Posted By thestatedtruth.com on October 6, 2009

    In the late 1700′s, many houses consisted of  a large room with only one chair. Commonly, a long wide board folded down from the wall, and was used for dining. The ‘head of the household’ always sat in the chair while everyone else ate sitting on the floor. Occasionally a guest, who was usually a man, would be invited to sit in this chair during a meal.  To sit in the chair meant you were important and in charge.. They called the one sitting in the chair the ‘chair man…’  Today in business, we use the expression or title Chairman’ or  ‘Chairman of the Board.’

    Now you know!

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    This Is One Very Big Company…….

    Posted By thestatedtruth.com on October 6, 2009

    Exxon Mobil Passes PetroChina as World’s Most Valuable Company

    By Joe Carroll

    Oct. 6 (Bloomberg) — Exxon Mobil Corp. overtook PetroChina Co. as the world’s most valuable company, ending a four-month reign by the Beijing-based oil producer after price controls in China failed to keep pace with rising crude costs.

    State-controlled PetroChina’s Shanghai-traded shares have declined 2.2 percent since Sept. 2, when the Chinese government last raised domestic prices for gasoline and diesel. Exxon Mobil rose 0.7 percent in the same period to a market capitalization of $330 billion, compared with $325.4 billion for PetroChina.

    Oil futures traded in New York have jumped 59 percent this year, heading for the biggest gain in a decade amid signs that demand for petroleum-based fuels such as gasoline is rebounding after a recession-driven collapse. China has allowed filling stations to raise gasoline and diesel prices this year by 19 percent and 18 percent, respectively.

    China, which ranks behind only the U.S. in energy consumption, on Sept. 30 withdrew 37 percent of the fuel-price increase granted on Sept. 2. The government has raised fuel prices four times and lowered them on three occasions this year under a system introduced in December to take into account fluctuations in the costs for oil purchased by refiners, according to the National Development and Reform Commission. The government policy allows prices to be changed when crude costs fluctuate more than 4 percent over 22 working days.

    Irving, Texas-based Exxon Mobil, which traces it roots to the 1880s and John D. Rockefeller’s Standard Oil Trust, lost the top ranking to PetroChina in May after China’s stimulus plan caused a surge in the nation’s stocks.

    PetroChina’s 14 percent return on capital is less than half of Exxon Mobil’s 36 percent return, the highest among the world’s biggest 10 oil companies by sales, according to data compiled by Bloomberg.

    Exxon Mobil’s annual sales are more than twice those of PetroChina. The company had $425 billion in sales last year, or $60.45 for every man, woman and child on the planet.

    More…..http://www.bloomberg.com/apps/news?pid=20601087&sid=a_hHYY2kw07M

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    Back In The Day……….

    Posted By thestatedtruth.com on October 5, 2009

    In the 1700′s men and women took  baths only twice a year (May and October). Women kept their hair covered, while men shaved their heads (because of lice and bugs) and wore wigs.  Wealthy men could afford good wigs made from wool. They couldn’t wash the wigs, so to clean them they would carve out a loaf of bread, put the wig in the shell, and bake it for 30 minutes. The heat would make the wig big and fluffy, hence the term ‘big wig.’ Today we often use the term ‘here comes the  Big Wig’ because someone appears to be more powerful and  wealthy.

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    In The Day….Things Were Very Different

    Posted By thestatedtruth.com on October 3, 2009

    In George Washington’s days, there were no cameras.  One’s image was either sculpted or painted.  Some paintings of George Washington showed him standing behind a desk with one arm behind his back while others showed both legs and both arms. Prices charged by painters were not based on how many people were to be painted, but by how many limbs were to be painted.  Arms and legs are ‘limbs,’ therefore painting them would cost the buyer more.  Hence the expression, ‘Okay, but it’ll  cost you an arm and a leg.’

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    Annual Per Capita GDP……And Japan’s Stunning Revaluation

    Posted By thestatedtruth.com on October 3, 2009

     

    China Per Capita GDP

    Only 20 years ago every broker was convinced Japan would soon be the world’s economic powerhouse. Eight of the world’s ten biggest companies were Japanese in 1988. Today, the biggest (Toyota) is 22nd and only five others are in the top 100.   Stunning to say the least…………………

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    5 Tries In Afghanistan, 0 For 4 So Far By The Great Powers

    Posted By thestatedtruth.com on October 2, 2009

    Afghanistan

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    Swiss Health Care Thrives Without Public Option

    Posted By thestatedtruth.com on October 1, 2009

     

    Swiss Health Without Public Option

     

    October 1, 2009

    ZURICH — Like every other country in Europe, Switzerland guarantees health care for all its citizens. But the system here does not remotely resemble the model of bureaucratic, socialized medicine often cited by opponents of universal coverage in the United States.

    Swiss private insurers are required to offer coverage to all citizens, regardless of age or medical history. And those people, in turn, are obligated to buy health insurance.

    That is why many academics who have studied the Swiss health care system have pointed to this Alpine nation of about 7.5 million as a model that delivers much of what Washington is aiming to accomplish — without the contentious option of a government-run health insurance plan.

    In Congress, the Senate Finance Committee is dealing with legislation proposed by its chairman, Max Baucus, Democrat of Montana, which would require nearly all Americans to buy health insurance, but stops short of the government-run insurance option that is still strongly supported by liberal Democrats.

    Two amendments that would have added a public option to the Baucus bill were voted down on Tuesday. But another Senate bill, like the House versions, calls for a public insurance option.

    By many measures, the Swiss are healthier than Americans, and surveys indicate that Swiss people are generally happy with their system. Switzerland, moreover, provides high-quality care at costs well below what the United States spends per person. Swiss insurance companies offer the mandatory basic plan on a not-for-profit basis, although they are permitted to earn a profit on supplemental plans.

    And yet, as a potential model for the United States, the Swiss health care system involves some important trade-offs that American consumers, insurers and health care providers might find hard to swallow.

    The Swiss government does not “ration care” — that populist bogeyman in the American debate — but it does keep down overall spending by regulating drug prices and fees for lab tests and medical devices. It also requires patients to share some costs — at a higher level than in the United States — so they have an incentive to avoid unnecessary treatments. And some doctors grumble that cost controls are making it harder these days for a physician to make a franc.

    The Swiss government also provides direct cash subsidies to people if health insurance equals more than 8 percent of personal income, and about 35 to 40 percent of households get some form of subsidy. In some cases, employers contribute part of the insurance premium, but, unlike in the United States, they do not receive a tax break for it. (All the health care proposals in Congress would provide a subsidy to moderate-income Americans.)

    Unlike the United States, where the Medicare program for the elderly costs taxpayers about $500 billion a year, Switzerland has no special break for older Swiss people beyond the general subsidy.

    “Switzerland’s health care system is different from virtually every other country in the world,” said Regina Herzlinger, a Harvard Business School professor who has studied the Swiss approach extensively.

    “What I like about it is that it’s got universal coverage, it’s customer driven, and there are no intermediaries shopping on people’s behalf,” she added. “And there’s no waiting lists or rationing.”

    Since being made mandatory in 1996, the Swiss system has become a popular model for experts seeking alternatives to government-run health care. Indeed, it has attracted some unlikely American admirers, like Bill O’Reilly, the Fox News talk show host. And it has lured some members of Congress on fact-finding trips here to seek ideas for overhauling the United States system.

    The Swiss approach is also popular with patients like Frieda Burgstaller, 72, who says she likes the freedom of choice and access that the private system provides. “If the doctor says it has to be done, it’s done,” said Mrs. Burgstaller. “You don’t wait. And it’s covered.”

    While many patients seem content, the burdens fall more heavily on doctors, especially general practitioners and pediatricians.

    Dr. Gerlinde Schurter, Mrs. Burgstaller’s physician, says she feels squeezed by government regulators and insurance companies that have fought to hold down costs — most recently with a 15 percent cut in lab fees that forced her five-member group to lay off its principal technician.

    Dr. Schurter also fears a so-called blue letter, a warning from an insurance company that she is prescribing too many drugs or expensive procedures.

    If doctors cannot justify their treatments, they can be forced to repay insurers for a portion of the medical services prescribed. And while prescriptions are covered, the government has insisted that consumers fork over a 20 percent co-payment if they want brand-name drugs, rather than 10 percent for generics.

    Similarly, the government health office also lowered reimbursements across the board for medical devices in 2006.

    These are among the reasons health care costs consume 10.8 percent of gross domestic product in Switzerland, compared with 16 percent in the United States, the highest level of spending among industrial countries, according to the Organization for Economic Cooperation and Development.

    Still, along with lower costs and the freedom to choose doctors come bigger bills for individual patients. On average, out-of-pocket payments come to $1,350 annually. That is the highest among the 30 countries tracked by the O.E.C.D. and well above the $890 average for the United States, which comes in second.

    Then there are the hefty prices of the insurance policies themselves, which can top 14,000 Swiss francs a year for a family of four in Zurich, or about $13,600. That is roughly comparable to the national average annual premium for a family policy under employer-sponsored group plans in the United States, but in high-cost American cities the figure can be much higher.

    Direct comparisons are hard to make, however, because in the American system, employers and employees share the cost of premiums, which are also exempt from individual and corporate income taxes.

    Nevertheless, Swiss citizens relish the lack of bureaucracy, especially compared with systems in Britain and Germany, even if their doctors grumble.

    As in the United States, practitioners typically are paid on a fee-for-service basis, rather than on salary. But they make less than their American counterparts. According to the O.E.C.D., specialists in Switzerland earn three times more than the nation’s average wage, compared with 5.6 times for American specialists. General practitioners in Switzerland make 2.7 times more than the average wage, versus 3.7 in the United States.

    That is partly because the Swiss health insurers are not shy about using their muscle with physicians.

    Pius Gyger, director of health economics and health policy at Helsana, the country’s biggest insurer, cannot suppress a smile when asked about the effectiveness of the so-called blue letters.

    “If there’s something strange, we knock at the doctor’s door,” he said. “For doctors, it’s an incentive to treat economically, but often perceived as a threat.”

    He estimates that only about 3 percent of doctors get the letters and that fewer than 1 percent actually have to return money. Still, Mr. Gyger said, “it’s an easy exercise for us and it has an effect.”

    Despite pressure on general practitioners, hospital physicians like Edouard Battegay at the University of Zurich say universal coverage also lowers costs by reducing emergency room visits.

    Indeed, his E.R. is as quiet and efficient as a Swiss watch, and he still expresses amazement at what he saw when he worked briefly in Seattle.

    “I’ve seen things in the U.S. that I’ve never seen here; it was a state of disaster,” he said. “Chronic disease management is better here. If you don’t treat hypertension, you treat strokes. Not treating patients is expensive.”

    And even Dr. Schurter — who says her income has been flat for the last five years — praises the virtues of the Swiss system for patients struck by catastrophe.

    When her daughter was found to have leukemia seven years ago, “I never worried for a second how and if she’d get treatment and if it would be paid for,” she said. “All was granted as naturally as the air we breathe.”      More…………

    www.nytimes.com

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    Consumer Protection, Now That’s A Noble Idea

    Posted By thestatedtruth.com on October 1, 2009

    Bernanke Urges ‘Strong’ Consumer Protection in House Testimony

    By Scott Lanman and Craig Torres

    Oct. 1 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke told lawmakers that protecting consumers of financial services is “vitally important,” while omitting prior criticism of an Obama administration proposal to shift such powers from the Fed to a new agency.

    “It is vitally important that consumers be protected from unfair and deceptive practices in their financial dealings,” Bernanke said in testimony today to the House Financial Services Committee. “Strong consumer protection” helps preserve savings and promote confidence in financial firms and markets, he said.  More…..

    http://www.bloomberg.com/apps/news?pid=20601087&sid=afVE59L6o3VQ

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    Top Ten Oil Consumers Of The World…..Nothing Surprising Here

    Posted By thestatedtruth.com on September 30, 2009

    Top Ten Oil Consumers

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    The History Of Golf…..Kind Of

    Posted By thestatedtruth.com on September 28, 2009

    History Of Golf

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    Quote Of The Day…..

    Posted By thestatedtruth.com on September 27, 2009

    “I hope I shall possess firmness and virtue enough to maintain what I consider the most enviable of all titles, the character of an honest man.”   

                                                      George Washington
                           

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    Quote Of The Day…….

    Posted By thestatedtruth.com on September 24, 2009

    “Don’t worry when you are not recognized, but strive to be worthy of recognition.”           

                       Abraham Lincoln

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    Paul Volcker Unleashes Another Volley On The Wizards Of Wall Street

    Posted By thestatedtruth.com on September 24, 2009

    Volcker Unleashes Volley

    By Larry Doyle|Sep 24, 2009, 1:00 PM

    Volcker Unleashes Another Volley on the Wizards in Wall Street and WashingtonI find it interesting, but not surprising, that former Fed Chair Paul Volcker’s testimony to Congress this morning has received little to no coverage by major media outlets. Why? With few exceptions, the financial media plays along with the financial industry which pays the bills while relegating investors and the American public to the bleachers.

    Recall that just a week ago I wrote “Volcker Launches Bombshell on Wall Street and Washington.” I highlighted Volcker’s direct hit:

    While the insiders on Wall Street and Washington pander about real financial regulatory reform, former Fed chair Paul Volcker yesterday hit ground zero on this hotly debated topic.

    The heart of financial regulatory reform is centered on the implementation of leverage by our largest financial institutions. The leverage is exercised in a wide array of activities, both on and off-balance sheet. The capital utilized by the banks in these activities is credit that has not and will not flow directly through to the economy. Why? The banks believe that they will generate a greater return on the capital via proprietary activities rather than facilitating client business and addressing customer needs.

    Today, Volcker locks and loads and unleashes another volley on the wizards in Washington and their incestuous brethren on Wall Street. Whatever you may think of Volcker as a central banker, I hold him in high regard for elevating the debate at this critical point in our country’s economic history. Regrettably, President Obama’s adviser, Mr. Larry Summers, has taken Mr. Volcker’s chair away from the table. Yes, this is the same Mr. Summers who The New York Times described this past April as having received A Rich Education . . .

    Mr. Summers, the former Treasury secretary and Harvard president who is now the chief economic adviser to President Obama, earned nearly $5.2 million in just the last of his two years at one of the world’s largest funds, according to financial records released Friday by the White House.

    Impressive as that might sound, it is all the more considering that Mr. Summers worked there just one day a week.

    Although I digress from my focus on Mr. Volcker, I find it enlightening that the man in Washington who has pushed Volcker away from the table stuffed himself at the Wall Street trough. Back to Mr. Volcker.

    Volcker reiterated his views today that the fundamental manner in which banks allocate capital must change in order to regain and then preserve future economic prosperity. He castigates those on Wall Street for having achieved ‘business as usual’ while he deferentially but clearly holds those in Washington in disdain for allowing it.

    The San Francisco Chronicle (why couldn’t I find commentary by a major financial media outlet?) picks up an AP story of Volcker’s assault and writes, Obama Plans Maintain ‘Too Big to Fail’:

    A top White House economic adviser says the Obama administration’s proposed overhaul of financial rules preserves the policy of “too big to fail,” and could lead to future bailouts.

    Volcker said he does not differ with the administration on most of its proposals, and takes “as a given” that banks will be bailed out in times of crisis.

    But he said he opposed bailouts of insurance firms like American International Group Inc., automakers’ finance arms and others.

    “The safety net has been extended outside the banking system,” Volcker said. “That’s what I want to change.”

    Volcker, 81, has emerged as one of the administration’s internal critics. He serves as head of President Barack Obama’s Economic Recovery Advisory Board, but has said the administration should take a slower, more methodical approach to overhauling the financial system. (emphases added)

    For clarity purposes, what Volcker is driving toward is shutting down the internal ‘back room’ casinos, otherwise known as internal hedge funds, operating inside the large Wall Street banks. The capital allocated to those business units is capital that is not and will not flow through to Main Street. In short, Volcker supports backstopping commercial banking activities supporting our economy while not supporting the implicitly risky trading activities connected with banks’ proprietary business units.

    Will the banking system survive without these units? Yes. Will they be as profitable? No. Will their stocks be repriced without these business units? Yes.

    All this said, Wall Street lost trillions of dollars throughout this meltdown. A significant percentage of those losses has yet to be acknowledged. Our wizards in Washington believe that keeping the back room casino open allows the system to heal itself most quickly.

    Do you think for a second that as it heals itself the crowd on Wall Street will be amenable to truly changing the rules? Does Wall Street work for Washington or does that relationship truly run the other way?

    Volcker’s direct hit on this Washington-Wall Street charade is not only timely but critically important. Regrettably, his views will receive little attention and less chance of actually being enacted. They still deserve to be spread to the American public.    More from   http://wallstreetpit.com/

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    Quote Of The Day….

    Posted By thestatedtruth.com on September 23, 2009

     ”I am one of those who do not believe that a national debt is a national 
    blessing, but rather a curse to a republic; inasmuch as it is calculated to 
    raise around the administration a moneyed aristocracy dangerous to the 
    liberties of the country.”

    – Andrew Jackson
    (1767-1845) 7th US President

     

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    Anyone Ever Seen One Of These Before?

    Posted By thestatedtruth.com on September 23, 2009

    U.S.S. Independence (LCS-2)  …….We’ve been hearing rumblings about these U.S. Navy triple-hulled ships, so here’s one that was launched recently….Build by General Dynamics, it’s called a “Littoral Combat Ship” (LCS), and it can move weapons around faster than any ship in the Navy.  Littoral means close to shore, and that’s where these fleet-hulled ships will operate.  They are taylor made for launching helicopters and armored vehicles, for mine sweeping operations and firing torpedoes, missiles and machine guns.   The best thing of all is the price tag, $208 million each, a relative bargin in this day and age.  The Navy says it hopes to build 55 of them.  Lastly, this baby is fast,  rumored to be out of the dock  at 60 knots. 
    Triple Hulled Ship
    Triple Hulled Ship 2
    Triple Hulled Ship 3

    The design for Independence (LCS 2) is based on a proven high-speed trimaran (Benchijigua Express) hull built by Austal (Henderson, Australia). The 127-meter surface combatant design calls for a crew of 40 sailors, while the trimaran hull should enable the ship to reach sustainable speeds of nearly 50 knots (60 mph; 90 km/h) and range as far as 10,000 nautical miles (20,000 km).[citation needed]

    With 11,000 cubic meters of payload volume the ship is designed with twice the objective payload and volume so that it can carry out one mission while a separate mission module is in reserve. The large flight deck, 1,030 m2 (11,100 sq ft), will support operation of two SH-60 helicopters, multiple UAVs, or one large CH-53 class helicopter (which is larger than a V-22 transport). The stable trimaran hull will allow flight operations up to sea state 5.[3]

    Fixed core capabilities will be carried for self-defense and command and control. However unlike traditional fighting ships with fixed armament such as guns and missiles, innovative and tailored mission modules will be configured for one mission package at a time. Modules may consist of manned aircraft, unmanned vehicles, off-board sensors, or mission-manning detachments – all in an expandable open systems architecture.

    The large interior volume and payload is greater than larger destroyers and is sufficient to serve as a high-speed transport and maneuver platform. The mission bay is 11,800 square feet (1,100 m2), and takes up most of the deck below the hangar and flight deck.[citation needed]

    In addition to cargo or container-sized mission modules, the bay can carry four lanes of multiple Strykers, armored Humvees, and their associated troops. An elevator allows air transport of packages the size of a twenty-foot long shipping container that can be moved into the mission bay while at sea. A side access ramp allows for vehicle roll-on/roll-off loading to a dock and allows the ship to even transport the Expeditionary Fighting Vehicle.[4]

    The habitability area is under the bridge with bunks for many personnel.

    Independence also has an integrated LOS Mast, Sea Giraffe 3D Radar and SeaStar Safire FLIR. Side and forward surfaces are angled for reduced radar profile. In addition, H-60 series helicopters provide airlift, rescue, anti-submarine, radar picket and anti-ship capabilities with torpedoes and missiles.

    The Raytheon Evolved SeaRAM missile defense system is installed on the hangar roof. The SeaRAM combines the sensors of the Phalanx 1B close-in weapon system with an 11-missile launcher for the Rolling Airframe Missile (RAM), creating an autonomous system.[5]

    To reduce the risk of fire on the all aluminum ship, many parts are protected from fire, and smoking is not permitted on board.[6]

    Northrop Grumman has demonstrated sensor fusion of on and off-board systems in the Integrated Combat Management System (ICMS) used on ‘Independence.[7]

    From Wikipedia

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    Just The Facts Please……………….

    Posted By thestatedtruth.com on September 22, 2009

    Loan Delinquency Rate

    Bank Credit

    Charts thank to …. www.ingerletter.com

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    World Gold Holdings And One Reason For A Lower Dollar………………

    Posted By thestatedtruth.com on September 22, 2009

    Official World Gold Holdings

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    Hmm…..Those Curves In The Road Sure Do Come Up On You Fast, I Didn’t Even See A Sign, And I Know It Wasn’t On My Map

    Posted By thestatedtruth.com on September 21, 2009

    Technically The Recession Is Likely Over

    From  jsmineset.com

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    This Just In From Jim Sinclair, The Most Successful Commodity Metals Trader Of All Time………………..

    Posted By thestatedtruth.com on September 21, 2009

    China, Russia and the rest of the BRICs will bring the Super Sovereign Currency alternative to the G20 discussion. We have seen that developing over the last few weeks.

    We know that the main thrust of the G20 where the West is concerned is banking regulations and a unified commitment not to withdraw from anti-deflationary, therefore inflationary, monetary stimulation prematurely.

    It will be interesting to see the Fed comments for this month after the FMOC meeting under these circumstances.

    The following reflects the most informed opinions on the banking regulation issue.

    Why much of the G20 debate on banking reform is futile
    What do we want from our banks? The answer might seem fairly obvious. First and foremost, we require safety for our money. That’s what banks were originally for. But these days we expect more than a simple safe deposit box. We also want our money to be put to good use, so that it can generate a return. Banks attempt to do so by lending the money out. Understandably, this can never be an entirely risk free process, but the “maturity transformation” of money thereby achieved is a vital part of any thriving, free market economy.


    By Jeremy Warne
    Published: 7:27PM BST 21 Sep 2009

    Over the past two years, the banking system has failed in both these core functions. Will the mass of new banking regulation under discussion at this week’s G20 summit in Pittsburgh succeed in recreating the expected combination of safety for our money and the easily available credit economies need for growth and prosperity? From where I sit, it looks far from assured.

    Sure enough, most of what’s proposed on leverage, capital and liquidity ought to ensure that banks are safer. But the measures proposed will also make credit scarcer and more expensive, as well as raising barriers to entry in an industry desperately in need of more competition.

    There is a consequent trade off between safety and risk, which if it leads to permanently high unemployment and lower growth may not be as obviously desirable as it now seems. It is by no means clear how much of this stuff is really necessary, and certainly it would be counter-productive to impose it quickly. The effect would be to undermine the recovery and thereby further derail the banking system.

    As ever with the G20, there is little agreement on the detail of what needs to be done. Countries still have subtly, sometimes dramatically, different views, depending on quite how impaired their banking systems are. On capital, everyone accepts there has to be more of it to cushion banks against bad debts, but how much more and what kind?

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    “Payment Option ARMs Mortgages Are About To Explode,”

    Posted By thestatedtruth.com on September 18, 2009

    “Option” Mortgages To Explode

     

    Thu Sep 17, 2009

    By Lisa Lambert

    WASHINGTON (Reuters) – The federal government and states are girding themselves for the next foreclosure crisis in the country’s housing downturn: payment option adjustable rate mortgages that are beginning to reset.

    “Payment option ARMs are about to explode,” Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama’s administration to discuss ways to combat mortgage scams.

    “That’s the next round of potential foreclosures in our country,” he said.

    Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These “underwater” mortgages have been a driving force behind rising defaults and mounting foreclosures.

    In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state’s attorney general, Terry Goddard, told Reuters after the meeting.

    “It’s the other shoe,” he said. “I can’t say it’s waiting to drop. It’s dropping now.”

    The mortgages differ from other ARMs by offering an option to pay only the interest each month or a low minimum payment that leads to a rising balance in the loan’s principal.

    When the balance of the loan reaches a certain level or the mortgage hits a specific date, the borrower must begin making full payments to cover the new amount. The loan’s interest rate also may have been fixed at a low level for the first few years with a so-called teaser rate, but then reset to a higher level.

    Because the new monthly payments can be five or 10 times what borrowers are accustomed to paying, they “threaten a much greater hit to the consumer than the subprimes,” Goddard said, referring to the mortgages often extended to less credit-worthy

    borrowers that fed the first wave of the financial crisis.

    Miller said option-ARMs were discussed at Tuesday’s meeting on mortgage scams, which brought state attorneys general from across the country together with U.S. Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, and Federal Trade Commission Chairman Jon Leibowitz.

    The mortgages tend to be “jumbo,” or for significantly large amounts, Goddard said, making it even harder for borrowers to sidestep foreclosure. He said he expected to see an increase in scams as distressed homeowners become more desperate to refinance big debts.

    Goddard said his office is investigating hundreds of cases where companies have made fraudulent promises, and charged large fees, to mortgage defaulters.

    The U.S. housing market has suffered the worst downturn since the Great Depression, and its impact has rippled through the recession-hit economy.

    Some signs of stabilization emerged recently, with sales rising and home price declines moderating in many regions of the country. Home prices in some regions have risen.

    However, many economists say there is still a huge supply of unsold homes lingering on the market and that, coupled with a frenzy of more foreclosures ahead, should depress home prices for the rest of 2009.

    Real estate data firm RealtyTrac, in its August 2009 U.S. Foreclosure Market Report, said foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 358,471 U.S. properties during the month, a decrease of less than 1 percent from the previous month, but an increase of nearly 18 percent from the same month a year ago.

    The report said one in every 357 U.S. housing units received a foreclosure filing last month.

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    BlackRock’s Fink Says Obama Rules Threaten Home Loan Markets

    Posted By thestatedtruth.com on September 18, 2009

    BlackRock’s Fink Says Obama Rules Threaten Markets

    By Sree Vidya Bhaktavatsalam and Jody Shenn

    Sept. 18 (Bloomberg) — 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.

    “I am just very worried,” Fink said yesterday in an interview in New York. “How do we get a vibrant securitization market back when we are doing these things in the short run that are good for the banking system and good for the homeowner but not as good as it should be?”

    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.

    At stake is the recovery in the market for securities created from individual loans, including the almost $1.7 trillion in residential-mortgage bonds not backed by the U.S., according to Fink. Federal Reserve Chairman Ben S. Bernanke said in April the securitization market was “until recently” an important source of credit for the U.S. economy.

    “This to me is one of the biggest issues facing American capitalism,” Fink said. “There is modification going on protecting our banks, protecting their balance sheets.” With the right types of changes, he added, “the homeowner is better off, America is better off, and you could say the first lien holder is better off.”

    Fink, who as a First Boston Corp. executive in the 1980s helped create securities known as collateralized-mortgage obligations, will lead the world’s biggest money manager when BlackRock completes its acquisition of Barclays Global Investors later this year. The New York-based company, which will oversee about $3 trillion, has emerged as a top adviser on distressed securities to governments and financial institutions since the credit crisis started in 2007.

    Fink, who also serves as BlackRock’s chief executive officer, is the highest-profile investor to call attention to potential conflicts when banks that service mortgages handle loan modifications. 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.

    JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co. and Citigroup Inc., the four largest servicers, own almost $450 billion of home-equity loans, according to Laurie Goodman, an analyst at Amherst Securities Group in New York.

    President Barack Obama’s $75 billion Making Home Affordable plan provides taxpayer subsidies to encourage loan servicers to rework borrowers’ first mortgages to cut their monthly payments to 31 percent of their incomes. Provisions for second mortgages weren’t immediately released.

    Obama later signed a law giving servicers safe harbor from investor lawsuits when they modify debt using the program.

    The Treasury Department, responding to complaints from investors, said in April that when first mortgages are modified, participating banks with second liens would also have to revise terms. A department official said in July it hadn’t completed contracts with such requirements, and some banks said they might not sign them.

    Bond investors would prefer that more homeowners had loan balances reduced rather than payment terms eased, Curtis Glovier, a managing director at New York-based Fortress Investment Group LLC, told Congress in July. Such 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,” he said.

    Bernanke has been working to revive securitization. The Fed’s Term Asset-Backed Securities Loan Facility, a program under which the central bank lends to buyers of asset-backed debt, “has shown early success in reducing risk spreads and stimulating securitization activity,” he said on Aug. 21.

    The program has helped create demand this year for $124 billion of new securities backed by debt such as automobile leases, credit cards and small-equipment loans. No private securities have been created out of new commercial or residential mortgages since early 2008.

    A record $1.2 trillion of home-loan bonds not guaranteed by government-supported Fannie Mae and Freddie Mac, or U.S. agency Ginnie Mae, was issued in 2005 and 2006. Sales of commercial mortgage-backed securities peaked in 2007 at $237 billion.

    The dispute over loan modifications echoes complaints by institutional investors that Obama’s handling of Chrysler LLC’s bankruptcy benefited unsecured creditors including unionized workers at the expense of secured lenders.

    “If you really want to protect the homeowner, wipe out the second lien, modify the first lien,” Fink said.

    http://www.bloomberg.com/apps/news?pid=20601109&sid=a.wV83iJI34k

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    Mad As Hell About Bankers And Wall Street Pay…….

    Posted By thestatedtruth.com on September 18, 2009

    Wall Street And Bank Bonuses

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    How Does Your Wealth Stand Up To The Averages………

    Posted By thestatedtruth.com on September 18, 2009

    2009 U.S. Household-Sector Asset Wealth

    Total houehold wealth is up 3.9% April through June 2009, but  is still down by 19% from the high reached back in the third quarter of 2007.  To put things into another perspective, just do tthe math on the next chart from 2007.  To do the math….hint, we are subtracting  the 19% loss that we’ve had since the third quarter 2007  from the net worth  number  in the chart below,  or easier yet…. if you multiply 81% (x) times  each number from 2007 ….presto,  you will see where you are now,  compared to everyone else……………..

    Distribution Of Liquid and Total Net-Worth

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    FDIC Insurance Funds Are Running Out………….

    Posted By thestatedtruth.com on September 17, 2009

    FDIC Insurance Fund

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    The Bloomberg Professional Confidence Index Shows Global Economy Is Trending To The Upside……

    Posted By thestatedtruth.com on September 16, 2009

    The Bloomberg Professional Confidence Global Economy

    The Bloomberg Professional Confidence Index Global Economy is comprised of responses about the outlook for the global economy, from users globally. A value above 50 indicates a positive sentiment about the global economy from all Bloomberg respondents

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