Here Is The Governments Idea Of How To Fix The Housing Market

Posted By on February 11, 2011

This had better be good, being that the baby boomers will be sellers and the youngsters are broke!

The Obama administration unveiled a proposal Friday for winding down mortgage giants Fannie Mae and Freddie Mac, spelling out three options for what could take their place and setting the stage for a debate over the nation’s $10.6 trillion mortgage market.

The steps, outlined in a “white paper,” are likely to mean higher borrowing costs and more-limited access to home loans for consumers. Treasury Secretary Timothy Geithner said establishing a new system could take five to seven years.

“This is a plan for fundamental reform of the housing market,” Mr. Geithner said, cautioning that “we’re going to proceed on this path of reform very carefully.”

The wind down of Fannie and Freddie will be slow and take a number of years, but the key question is what, if anything, will replace them? The plan offers three options: 

Option 1: Privatized system of housing finance with the government insurance role limited to FHA, USDA and Department of Veterans’ Affairs’ assistance for narrowly targeted groups of borrowers

The key problem with this first option is what happens when the private markets once again freeze up? With this option, when the next crisis arrives the government would have to scramble (like during the Depression) and come up with some programs to offer financing to qualified borrowers. Prior to the Depression, the most common mortgage loans was short term (like 1 to 5 years), interest only, with a balloon payment due at maturity. Even though a 50% downpayment was common before the Depression, when these balloon payments came due, the borrower couldn’t refinance – even if they had a job, because the private market was completely frozen. At that lack of financing lead to the formation of FHA and FNMA. 

So we could just scramble again, or have some sort of small program running that could be scaled up during the next crisis as proposed in Option 2.

Option 2: Privatized system of housing finance with assistance from FHA, USDA and Department of Veterans’ Affairs for narrowly targeted groups of borrowers and a guarantee mechanism to scale up during times of crisis.

This backstop would maintain a minimal presence in the market during normal times, but would be ready to scale up to a larger share of the market as private capital withdraws in times of financial stress. One approach would be to price the guarantee fee at a sufficiently high level that it would only be competitive in the absence of private capital. It would thus only expand when needed, and that need would be dictated by the market. An alternative approach would restrict the amount of public insurance sold to the private market in normal times, but allow the amount of insurance offered to ramp up to stabilize the market in times of stress.

Option 3: Privatized system of housing finance with FHA, USDA and Department of Veterans’ Affairs assistance for low- and moderate-income borrowers and catastrophic reinsurance behind significant private capital.

This is another way of providing mortgages during the next crisis, however I think this approach takes on too much risk.

And while the capital requirements, oversight of the private mortgage guarantors, and premiums collected to cover future losses will together help to reduce the risk to the taxpayer, the reinsurance of private-lending activity, by its nature, exposes the government to risk and moral hazard. If the oversight of the private mortgage guarantors is inadequate or the pricing of the reinsurance too low or recoupment of costs too politically difficult, then private actors in the market may take on excessive risk and the taxpayer could again bear the cost.

Not So Fast Big Guy…Where Do You Think You’re Going With All That Money!

Posted By on February 11, 2011

Al Arabiya reported that the Swiss foreign ministry has announced that all of Mubarak’s assets have been frozen by Switzerland.

From Reuters:

Switzerland has frozen assets possibly belonging to Hosni Mubarak, who stepped down as president of Egypt on Friday after 30 years of rule, a spokesman for the foreign ministry said.

“I can confirm that Switzerland has frozen possible assets of the former Egyptian president with immediate effect,” spokesman Lars Knuchel said, declining to specify how much money was involved.

In recent years, Switzerland has worked hard to improve its image as a haven for ill-gotten assets and has also frozen assets belonging to Tunisia’s former President Zine al-Abidine Ben Ali as well as those of Ivory Coast’s Laurent Gbagbo.

Stratfor Red Alert: Mubarak Resigns, Military Is In Charge

Posted By on February 11, 2011


February 11, 2011

Egyptian Vice President Omar Suleiman delivered the following statement Feb. 11: “In the name of God the merciful, the compassionate, citizens, during these very difficult circumstances Egypt is going through, President Hosni Mubarak has decided to step down from the office of president of the republic and has charged the high council of the armed forces to administer the affairs of the country. May God help everybody.”

Suleiman’s statement is the clearest indication thus far that the military has carried out a coup led by Defense Minister Field Marshal Mohammed Hussein Tantawi. It is not clear whether Suleiman will remain as the civilian head of the army-led government. Egypt is returning to the 1952 model of ruling the state via a council of army officers. The question now is to what extent the military elite will share power with its civilian counterparts.

More at:

Real Estate Rates Plowing Higher, Above 5%

Posted By on February 10, 2011

Real Estate mortgage rates heading the wrong way…….

U.S. 30-year mortgage rates have jumped above 5% for the first time since last spring, in a rapid rise that could present a challenge to the still-troubled housing market.

The average rate on 30-year fixed-rate mortgages climbed to 5.05% in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81% a week ago. It was the highest rate in the survey since April.

Rising mortgage rates are an immediate consequence of the large jump in the U.S. government’s borrowing costs in recent weeks. Mortgage rates tend to move in line with the yield on the 10-year Treasury note, which closed Thursday at 3.712%, up from its October low of 2.381%.

Mortgage applications to purchase homes have fallen 12% in two months as rates have surged, according to an index compiled by the Mortgage Bankers Association. A general rule of thumb holds that every one-percentage-point increase in interest rates effectively raises home costs for buyers by roughly 10%.

With rates at 4.5%, a buyer typically needs income of $84,000, assuming a 10% down payment, to qualify for a $400,000 30-year fixed-rate loan. At a 5.5% rate, the income requirement rises to $92,000.

 “Once mortgage rates reached the 4¾ level in December, refinance activity stopped altogether,” said Lou Barnes, a mortgage banker at Premier Mortgage Group in Boulder, Colo. He says a belief that prices, while low, will fall further is keeping many would-be buyers from stepping forward.

Higher rates already have snuffed out the refinancing boomlet that took place last summer and autumn as rates sank. Mortgage applications for refinancing are down 59% from their peak in August, according to analysis by research firm Zelman & Associates.

Mortgage originations are expected to fall to lows not seen in more than a decade as higher rates dry up refinancing activity. The Mortgage Bankers Association estimates originations will total $966 billion in 2011, down from $1.5 trillion in 2010 and the lowest since 1997.

More at:

More From Dallas Fed President Richard Fisher

Posted By on February 10, 2011

From Art Cashin on the floor of The New York Stock Exchange

Deserving A Second Look – On Tuesday, Richard Fisher, President of the Dallas Fed spoke.  The speech drew headlines on Mr. Fisher’s contention that he would be hard pressed not to dissent on any extension or expansion of QE2.

It was suggested that we take another look at the speech, not because we misread the QE2 bit, but because the speech contained some blunt criticism of Congress and the Executive Branch.  The criticism centered on their handling (or rather non-handling) of the budget and the deficit. 

Here’s a bit:

But here is the essential fact I want to emphasize and have you think about today: The Fed could not monetize the debt if the debt were not being created by Congress in the first place.

The Fed does not create government debt; Congress does. Deficits and the unfunded liabilities of Medicare and Social Security are not created by the Federal Reserve; they are the legacy of Congress. The Fed does not earmark taxpayer money for pet projects in local communities that taxpayers themselves would never countenance; only the Congress does that. The Congress and administration play the dominant role in creating the regulatory environment that incentivizes or discourages job creation.

It seems to me that those lawmakers who advocate “Ending the Fed” might better turn their considerable talents toward ending the fiscal debacle that has for too long run amuck within their own house.

A look within the United States makes clear the overriding influence of fiscal and regulatory policy. Monetary policy is uniform across the 50 states; the base rate of interest paid on a business or consumer loan or a mortgage in Michigan, California, Ohio or New York is the same as that paid in Texas. Yet there is a reason that Michigan and California each lost more than 600,000 jobs over the past decade while Texas added more than 700,000 over the same period.

 There is a reason that the population of Ohio grew by only 183,000 residents over the past 10 years, while Texas grows by that number every five and a half months. There is a reason that with each passing census, the state of New York has been losing congressional seats and Texas has been adding them; a reason that, in the recent census, California failed to gain any while Texas gained four. There is a reason that, as documented in the Jan. 12 issue of the Wall Street Journal, college graduates—the best and brightest of the successor generation—are leaving New York and Cleveland and Detroit and moving to Austin, Texas. There is a reason no state in the union houses more Fortune 500 headquarters than Texas. There is a reason for the disparate employment growth that has taken place in the 12 Federal Reserve districts over the past two decades, data that are documented in the graph at your place setting.

That reason has nothing to do with monetary policy. It has everything to do with the taxation and fiscal and regulatory policies of the states. The cost of capital does not explain the different economic performances of the states; the cost of doing business has everything to do with those differences. However well-meaning tax and regulatory initiatives in the laggard states may have been when they were conceived and levied, they have had unintended consequences that have led to economic underperformance and job destruction.

Similarly, the key to correcting the underperformance of the American economy and American job creation does not presently rest with the Federal Reserve. It is in the hands of those who make fiscal and regulatory policy.

A bit later he turns to how severe the problem may be:

We shall see if the new Congress will prove worthy of the power the American people have “loaned” them, and, together with the president, actually draw the spirits of fiscal reform and sanity from the “vasty deep” to at long last implement meaningful fiscal and regulatory policy that incentivizes private-sector job creation here at home while arresting the hemorrhaging of our Treasury. If they do, then more Americans will find work and be better off, better paid and freer to make their own decisions about the economy.

If they don’t, then woe to our children, their children and the American Dream.

It’s a great and insightful presentation.  Go to the Dallas Fed website and pull it up.  While you’re there pull up his prior speech filled with more “straight from the shoulder” discussions.  Thanks Mr. Fisher

Stratfor Alert: The Egyptian Military’s Options

Posted By on February 10, 2011

February 10, 2011

The decision by Egyptian President Hosni Mubarak not to resign seems to have shocked both the Egyptian military and Washington. CIA Director Leon Panetta spoke earlier as if his resignation was assured and a resolution to the crisis was guaranteed. Sources in Cairo spoke the same way. How the deal came apart, or whether Mubarak decided that transferring power to Vice President Omar Suleiman was sufficient cannot be known. What is known is that Mubarak did not do what was expected.

This now creates a massive crisis for the Egyptian military. Its goal is not to save Mubarak but to save the regime founded by Gamal Abdel Nasser. We are now less than six hours from dawn in Cairo. The military faces three choices. The first is to stand back, allow the crowds to swell and likely march to the presidential palace and perhaps enter the grounds. The second choice is to move troops and armor into position to block more demonstrators from entering Tahrir Square and keep those in the square in place. The third is to stage a coup and overthrow Mubarak.

The first strategy opens the door to regime change as the crowd, not the military, determines the course of events. The second creates the possibility of the military firing on the protesters, which have not been anti-military to this point. Clashes with the military (as opposed to the police, which have happened) would undermine the military’s desire to preserve the regime and the perception of the military as not hostile to the public.

That leaves the third option, which is a coup. Mubarak will be leaving office under any circumstances by September. The military does not want an extraconstitutional action, but Mubarak’s decision leaves the military in the position of taking one of the first two courses, which is unacceptable. That means military action to unseat Mubarak as the remaining choice.

One thing that must be borne in mind is that whatever action is taken must be taken in the next six or seven hours. As dawn breaks over Cairo, it is likely that large numbers of others will join the demonstrators and that the crowd might begin to move. The military would then be forced to stand back and let events go where they go, or fire on the demonstrators. Indeed, in order to do the latter, troops and armor must move into position now, to possibly overawe the demonstrators.

Thus far, the military has avoided confrontation with the demonstrators as much as possible, and the demonstrators have expressed affection toward the army. To continue that policy, and to deal with Mubarak, the options are removing him from office in the next few hours or possibly losing control of the situation. But if this is the choice taken, it must be taken tonight so that it can be announced before demonstrations get under way Feb. 11 after Friday prayers.

It is of course possible that the crowds, reflecting on Mubarak’s willingness to cede power to Suleiman, may end the crisis, but it does not appear that way at the moment, and therefore the Egyptian military has some choices to make. Read more »

Recovery….Uh,What Recovery?

Posted By on February 10, 2011

Here is a chart of the total number of employed Americans over the past ten years.  Hmm, we heard there was a recovery going on….must have some wax in the ears, come again on that?

Oklahoma Cold Snap Sets New Records

Posted By on February 10, 2011

BARTLESVILLE, Okla. – A record amount of snow has fallen across Oklahoma while temperatures across the state Thursday morning were lower than North Pole, which was a balmy 16 degrees.

In Bartlesville, the National Weather Service recorded the temperature reaching -28 degrees below 0, setting an all-time city record.

The Oklahoma Mesonet released a statement saying Nowata reached -31 degrees. Whichever temperature is recorded, it will be an all-time low for Oklahoma. The previous state record was -27 in Watts in 1930 and -27 in Vinita in 1909.

Pirates Of The….Indian Ocean

Posted By on February 9, 2011

A tanker with $200 million in oil is hijacked off Oman  as Piracy spins out of control on the Indian Ocean’ shipping lanes….The hijacking came a day after an Italian tanker carrying oil worth more than $60 million was snatched by Somali pirates.

LONDON/ATHENS — Suspected Somali pirates captured a U.S.-bound tanker carrying around $200 million worth of crude oil in the Indian Ocean on Wednesday in one of the biggest hijackings in the area so far.

The hijacking marks a significant shift in piracy and the crisis could “strangle” vital shipping lanes, the association of supertanker owners warned.

The Irene SL, the length of three soccer pitches and with 25 crew members on board, was carrying about 2 million barrels of oil, or nearly one fifth of daily U.S. crude imports.

The hijacking came a day after an Italian tanker carrying oil worth more than $60 million was snatched by Somali pirates, reinforcing industry fears that the piracy scourge is “spinning out of control”.

“This morning the vessel was attacked by armed men,” the Irene SL’s Greece-based manager Enesel said. “For the moment there is no communication with the vessel.”

Turn Out The Lights….The Party Is Over For State And Local Government Spending

Posted By on February 9, 2011

This title wave will hit just as the federal stimulus money runs out! Question: So, where is the money going to come from to support all of the broke states?  Answer: It’s going to come from you and me, one way or another!

New Jersey rating cut while Arizona outlook negative…..

SAN FRANCISCO (Reuters) – Standard & Poor’s on Wednesday cut New Jersey’s bond rating a notch due to an unfunded pension shortfall and high debt, while Moody’s Investors Service warned Arizona of a possible downgrade by revising its outlook on the state to negative from stable.

Concerns are mounting about the finances of state governments. Some in Congress have even suggested legislation to allow states to declare bankruptcy to help them put their finances in order.

State governments continue to struggle with the effects of the 2007-2009 recession. Their revenue remains weak and altogether they face budget deficits of at least $100 billion for the next fiscal year, beginning for most in summer.

S&P’s action turns up the heat on New Jersey Governor Chris Christie. S&P downgraded New Jersey to AA-minus from AA two weeks before the Republican governor proposes his own fix for the state’s shaky finances.

President Barack Obama is expected to propose some financial relief for states in his budget plan but Republican lawmakers say there is no support for the kind of rescue mounted for states in the $814 billion economic stimulus approved by the Democrat-run Congress in 2009.

What Caused The Economic Meltdown In 2008-09….If You Said Housing Subprime Lending And Derivatives, You Get A Gold Star!

Posted By on February 9, 2011

According to the Office of the Comptroller of the Currency’s Quarterly Report on Bank Trading and Derivatives Activities for the Second Quarter 2010 (most recent), the notional value of derivatives held by U.S. commercial banks is around $223.4 TRILLION.  Yep, that’s T as in Trillions!

Five banks account for 95% of this. Can you guess which five?  Yep….



The Dance Of The Strandbeests

Posted By on February 9, 2011


Inquiring Minds Want To Know…What Will These Numbers Be By 2014

Posted By on February 8, 2011

Pimco’s El El-Erian… U.S. In Denial Of The New Normal

Posted By on February 8, 2011

The following is part of an interview of Pimco’s El-Erain by Germany’s SPIEGEL . Here are a few of his key points……

In 2006 we undertook a very comprehensive U.S. housing study and we said this housing market is very unstable and investors should reduce their exposure and manage risk better. Nothing happened in 2006, and nothing happened the first half of 2007.  And there are many other examples, including our 1999-2000 acute concern about Argentina.

We have said from day one that part of the problem in this country (U.S.) is there isn’t a sufficient recognition that there are new dynamics in play. It’s what we have called the bumpy journey to a new normal. Growth will be viewed as unusually sluggish. Unemployment will remain unusually high, and for an unusually long period. And we will see an accelerated realignment of the global economy.

SPIEGEL: The U.S. does not have a real plan for ridding itself of its debt problem.

El-Erian: There are several ways that a country can deal with its debt issues. I suspect the U.S. will end up with a mix of some fiscal adjustment and inflating its way out.

SPIEGEL: Washington never publicly talks about that option.

El-Erian: Europe and Germany, especially, have been very scared of hyperinflation. The U.S. is influenced by a different historical experience, that of the fear of another Great Depression. So this country has a huge aversion to recession, huge. And if you ask a policymaker if you’re going to make a mistake, which mistake would you rather make, they would say I’d rather make an inflation mistake than make a growth mistake.

SPIEGEL: But, everyone will have to suffer the consequences. The Fed is flooding the markets with another $600 billion that will impact not only the U.S. but the rest of the world as well.

El-Erian: It’s inflating the whole world, that’s absolutely right. We are concerned that QE2 …

SPIEGEL: … the name given to the US central bank’s quantative easing program …

El-Erian: … will be disappointing in terms of its own objectives because it’s a very imperfect instrument to deal with the headwinds to U.S. growth. The U.S. economy cannot productively absorb all this liquidity. So when all the liquidity is injected into the system, it also goes elsewhere. Its like pouring water on a hard surface, it splashes everywhere. That explains the large skepticism about QE2 outside the U.S.

SPIEGEL: Is there a better way?

El-Erian: We have said from day one that part of the problem in this country is there isn’t a sufficient recognition that there are new dynamics in play. It’s what we have called the bumpy journey to a new normal. Growth will be viewed as unusually sluggish. Unemployment will remain unusually high, and for an unusually long period. And we will see an accelerated realignment of the global economy.

SPIEGEL: What will that new global economy look like?

El-Erian: It is a multispeed world. While several advanced economies are dealing with debt overhangs, systemically important emerging economies will hit a development breakout phase. So our view has been if you’re faced with this world, policymakers around the globe should not be using just fiscal and monetary policies. They should also be using the whole array of structural reforms. The U.S. should be doing something about its labor market like Germany did. Many countries should be doing more to improve the functioning of the financial system, and not just pouring in liquidity.

SPIEGEL: How long do you see the dollar remaining the world’s reserve currency?

El-Erian: At some point, we’re going to evolve into a genuine world of multiple reserve currencies, but it cannot happen overnight because there are certain requirements.

SPIEGEL: For example?

El-Erian: Take China as an example. From the outside, we all look at China and see the second largest economy in the world. As the second largest economy in the world, we say it should have global responsibilities. The currency should be convertible and flexible. But go to China, and they will ask you what you are talking about. Look at per capita income, they will say. We’re number 99 in the world, not number two. At number 99, our responsibility is domestic because we have lots of people that are poor. So we don’t want our currency to appreciate and to be volatile. When we get closer to number two, we’ll take on global responsibilities.

For the whole interview, click here:,1518,744297,00.html

The Suez Canal, Egypt

Posted By on February 8, 2011

The Suez Canal is a global chokepoint and passage for goods in todays world.  What that means is….. news of Suez Canal workers going on strike won’t help the situation in Egypt or the World for that matter!.

Nomura has a great map showing just exactly what that means.  This map shows it’s  the dominant route for goods from Asia to Europe.

World Oil Reserve Rankings

Posted By on February 7, 2011

Canada is #2

Dallas Fed’s Richard Fisher Is On The Tape…He Says He Won’t Vote For QE 3

Posted By on February 7, 2011

What Dallas Fed Fisher is saying in a nutshell is basically the national debt can’t get any bigger without destroying the Dollar and causing inflation.

Dallas Fed’s Richard Fisher 

Bloomberg Headlines:


Consumer Credit Rises $6.09 Billion In December, First Increase Since August 2008

Posted By on February 7, 2011

We’ll see how long this lasts, best guess is it’s a short lived event…..why do we say that?  Well, just look around you, what do you see….states, counties and cities getting ready for large budget cuts and layoffs, and taxes will have to go up. We have not solved any of the problems that caused the 2008-2009 economic crisis, but our national debt has grown faster than at  any time in history.  We might as well add the demographic’s in here too, as the largest segment is getting older and by nature spending less.  Once the government stimulus runs out, most likely by mid year, either the economy slides backwards again or QE III starts, and the national debt gets even larger. 

Revolving consumer debt grew in December (at an annualized pace of 3.5%), which represents growth for the first time since 2008.

Cold Weather Hits Mexico

Posted By on February 7, 2011

Freezing weather and snow paralyzed the border city of Ciudad Juarez, knocking out electricity and water in thousands of homes and closing roads and factories.

Record low temperatures hit the city, across from El Paso, Texas with temeratures fluctuating between -0.4 and 10 degrees Fahrenheit (-18 and -10 degrees Celsius).

“There have been cold temperatures in the past, but nothing that has lasted for so many days. It’s been 40 years since the city has seen an emergency like this,” said Efren Matamoros, head of the city’s civil protection service.

Units at 17 power stations — with 6,792 megawatts of generating capacity — in northern Mexico shut down due to the unusually cold weather, forcing the national electricity monopoly to ask factories to curb usage.

“Chicken” Of The Sea………If You Get Our Drift

Posted By on February 6, 2011

Captain:  That’s an awful big looking Tuna (inquiring minds think it might be a shark)……yep, it’s bigger then the USS Recovery ship can handle for sure! So what do we do?   Hint: Start those engines and run, baby…run.

Egypt Has A Classic Run On Their Banks

Posted By on February 6, 2011

Egyptian banks have been closed for almost two weeks.  As they reopen they will have what is commonly called a “run on the banks”….in Egypt!
Egypt’s return to normalcy begins with the banks re-opening.  According to Bloomberg, the Egyptian government was forced to use military cargo planes carrying $854 million to deliver cash to various banks, in order to satisfy the large number of nervous depositors looking to make withdrawals.


Cyclone Yasi Devastates Australian Crops

Posted By on February 6, 2011

World commodity supplies will by the time summer is over, be called world commodity shortages!  We are likely (barring a miracle) going to see a dynamic increase in food prices across the board.  Let’s hope that the U.S. Midwest snow cover melts in a slow ordinary way….if not, we’ll have floods and crop damages here too.  Not what a world short of food needs to hear!

World sugar supplies will  fall short of demand, said Rabobank Groep NV, after a cyclone with winds stronger than Hurricane Katrina destroyed homes and smashed crops in Australia, driving sugar prices to 30-year highs.

Tropical Cyclone Yasi ripped through northern Queensland, a region growing a third of the country’s cane, cutting output potential in the area by about 50 percent, producers group Canegrowers said Feb. 4. The storm, which the government says may have wiped out at least A$500 million ($507 million) of agricultural production, raised speculation that the world’s third-largest sugar exporter may struggle to match last year’s output that was the lowest in two decades.

PIMCO’s Bill Gross Has Some Harsh Words For TPTB (The Powers That Be)

Posted By on February 4, 2011

Here are some snippets from Bill Gross’s February Investment Outlook Newsletter….
Devil’s Bargain
  • Money has become the economic and political wedge for profound changes in American society.
  • Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders.
  • Old-fashioned gilts and Treasury bonds may need to be “exorcised” from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint.

This country desperately requires a rebalancing of priorities. After readjusting the compensation scales via regulation and/or free market common sense, America needs to anoint a new set of Mensans who can create something more than a cash machine and make this country competitive again in the global marketplace. We need to find a new economic Keynes or at least elect a chastened Congress that can take our structurally unemployed and give them a chance to be productive workers again. We must have a President whose idea of “centrist” policy is not to hand out presents to the right and the left and then altruistically proclaim the benefits of bipartisanship. We need a President who does more than propose “Win The Future” at annual State of the Union addresses without policy follow-up. America requires more than a makeover or a facelift. It needs a heart transplant absent the contagious antibodies of money and finance filtering through the system. It needs a Congress that cannot be bought and sold by lobbyists on K Street, whose pockets in turn are stuffed with corporate and special interest group payola. Are record corporate profits a fair price for America’s soul? A devil’s bargain more than likely.

To rebalance debt loads and re-equitize financial institutions that should have known better, central banks and policymakers are taking money from one class of asset holders and giving it to another. A low or negative real interest rate for an “extended period of time” is the most devilish of all policy tools. And the asset class holder that it affects, or better yet, “infects,” is the small saver and institutions such as insurance companies and pension funds that hold long-term fixed income assets. It is anyone who holds bonds with coupons that cannot keep up with inflation or the depositor in a local bank who cumulatively holds trillions of dollars in time deposits that don’t earn a real rate of interest. This is the framework that has been created by modern-day policymakers who have innovated far beyond their biblical counterparts. To put it bluntly, they are robbing savers and taking money surreptitiously from longer-term asset holders who are incorrectly measuring future inflation.

Persons Not In The Labor Force But Who Want Jobs Are Now At All Time Record!

Posted By on February 4, 2011

Interesting Tid Bit!

The number of people who are not in the labor force, but who want a job now  just hit  6,643K, a jump of 431K from December.  It is the highest number in history. If included in the labor statistics, it would send the unemployment rate to about 12.8%.

Demographics Doo Doo In Congress

Posted By on February 4, 2011

The House is the youngest since Eisenhower was elected in 1952.  And the Senate, well….it’s the oldest Senate we’ve ever had going back to the Civil War.  No wonder they can’t agree on anything!

Bernanke Says No Inflation Problem Here In The United States…

Posted By on February 3, 2011

Uh…OK let her rip Big Ben….Speaking at the National Press Club in Washington,  Ben Bernanke said it’s up to other countries to control their own inflation. It’s not a U.S. problem!  By the way big Ben, the continuous commodity index is on a roll to the upside…oh well, guess that doesn’t count.

Just so you know…….

By Definition:   The Thomson Reuters Equal Weight Continuous Commodity Index is recognized as a major barometer of commodity prices. The index comprises 17 commodity futures that are continuously re-balanced: Cocoa, Coffee, Copper, Corn, Cotton, Crude Oil, Gold, Heating Oil, Live Cattle, Live Hogs, Natural Gas, Orange Juice, Platinum, Silver, Soybeans, Sugar No. 11, and Wheat. The index trades on the ICE Futures Exchange.

Bernanke said the recovery should gain speed this year, but continued support from the Fed is needed amid high unemployment and low inflation, he shrugged off higher commodity prices.

The United Nations apparently has a different opinion on inflation!

Surging food prices that contributed to sparking uprisings in Tunisia and Egypt threaten to fuel more unrest. The United Nations said Thursday its index of global food prices reached a new all time high last month, eclipsing the peak in July 2008, due to rising prices for cereals, sugar and vegetable oils. The gauge rose 3.4%, its seventh straight monthly gain, putting prices at their highest point since the U.N. Food and Agriculture Organization started measuring global prices in 1990.

U.S. And China Threaten Each Other According To WikiLeaks Documents

Posted By on February 3, 2011

The United States threatened to take military action against China during a secret “star wars” arms race within the past few years, according to leaked documents obtained by The Daily Telegraph.


By Tim Ross, Holly Watt and Christopher Hope

The two nuclear superpowers both shot down their own satellites using sophisticated missiles in separate show of strength, the files suggest.

The American Government was so incensed by Chinese actions in space that it privately warned Beijing it would face military action if it did not desist.

The Chinese carried out further tests as recently as last year, however, leading to further protests from Hillary Clinton, the US Secretary of State, secret documents show.

Beijing justified its actions by accusing the Americans of developing an “offensive” laser weapon system that would have the capability of destroying missiles before they left enemy territory.

The disclosures are contained in the latest documents obtained by the Wikileaks website, which have been released to The Telegraph. They detail the private fears of both superpowers as they sought mastery of the new military frontier.

More at:

Gallup Finds U.S. Unemployment Up Slightly in January to 9.8%

Posted By on February 3, 2011

It will be interesting to see if the government figures come in the same…so where is the “big economic recovery” that we hear about on a daily basis from the talking heads…looks more like a “small economic recovery” to us…inquiring minds want to know!


by Dennis Jacobe, Chief Economist

PRINCETON, NJ — Unemployment, as measured by Gallup without seasonal adjustment, increased to 9.8% at the end of January — up from 9.6% at the end of December, but down from 10.9% a year ago.

Underemployment Essentially Unchanged in January

Underemployment — the combination of part-time workers wanting full-time work and Gallup’s U.S. unemployment rate — was 18.9% in January, essentially the same as the 19.0% of December. Underemployment now stands one percentage point below the 19.9% of a year ago.

The Story Of Johann Gutenberg….Who’s That You Say? Read On

Posted By on February 3, 2011

From Art Cashin on the floor of The New York Stock Exchange

On this day in 1468, one of the most influential figures in the last 2000 years (and maybe all of history) died.  To keep things in perspective try to remember a few things:  Leonardo Da Vinci was seven years old, Michelangelo had not been born yet and a guy named Christopher Columbus was just a teenage apprentice on a Genovese Ferry.

If it had not been for this guy who died on this day, none of those guys would have become as famous as they are today.  In fact, if it had not been for this guy who died, the Dark Ages might have remained dark and 90% of what we know today would be unknown.  He had created a revolution that changed the way ideas were processed and began the knowledge revolution.

The deceased was Johann Gutenberg….yes the inventor of “moveable type”….and thus printing….and thus knowledge for the common man.  So, you say, let’s hear about his grand and laudatory funeral.

Well, the man who changed much of history died blind, poor, and virtually unnoticed.  Now, before you cynically assume this dismal end was the result of the failure of early printing, check again.  Gutenberg’s printing was a winner from the get go.  He started it in 1450 and within five years the Gutenberg Bible was almost due.  Also due, however, was a loan to a certain Johann Fust (seed money for the print shop).  Fust knew a good thing when he saw one and refused to extend the loan for even one day.  In default, Gutenberg handed over the print shop (type, press, paper, coffee-pot) to Fust who completed the Bible and became fabulously wealthy.

Australia’s Cyclone Yasi Will Have An Impact On Commodities And Economies Worldwide

Posted By on February 2, 2011

Australia’s cyclone Yasi is one of history’s worst…and will have impacts on commodities worldwide!  This will be a tough summer for inflation which the U.S. government says we don’t have!

Starbucks To Introduce New Logo Without Name

Posted By on February 2, 2011

Logo changes carry with them certain challenges, but most at least show the name!

Starbucks has emerged over the last 20 years as one of the premier consumer brands in the world, alongside icons like Apple and Nike. Now, the company has decided to give that brand a facelift, revamping its ubiquitous logo. While logo overhauls can successfully communicate a company’s evolution and growth, those changes are also fraught with peril. Redesigns that are poorly conceived, or considered too radical, have triggered a backlash among loyal customers, the very people who give the brand its power. In the case of Starbucks, the new logo highlights a strategic shift for the company — but it has also sparked criticism from many outspoken fans.

The new Starbucks logo is an obvious departure, but not a radical shift, from the logo that has adorned the coffee chain’s cups since 1992. It retains the company’s signature siren (a twin-tailed mermaid figure) still in the traditional Starbucks green. When Starbucks was founded in the 1970s, the mermaid was selected as a nod to the seafaring nature of the coffee business (the chain’s namesake is Starbuck, the first mate character on the whale ship depicted in Herman Melville’s Moby-Dick). But gone are the words “Starbucks” and “Coffee,” a move that highlights the company’s expansion plans.

The deletion of the words “Starbucks Coffee” from the logo is obviously significant. Dispensing with a direct connection to coffee signals that the chain, which sells sandwiches, baked goods, music and other products in its stores as well as branded coffee through supermarkets, is angling to diversify further. “Our brand identity will give us the freedom and flexibility to explore innovations and new channels of distribution that will keep us in step with our current customers and build strong connections with new customers,” founder and CEO Howard Schultz wrote on the company’s website in early January.

At the same time, dropping the name altogether plays to the company’s global ambitions. In the spring of 2010, Schultz said Asia represented the company’s biggest growth opportunity and that the chain would ultimately open thousands of stores in China. In early 2011, the company also announced plans for entering the market in India. With no verbiage on the new logo, the company avoids the complication of translating its name into the languages of those countries as well as other future markets.


Commodities On A Tear…But, The U.S. Government Says Nope, “No Inflation”

Posted By on February 2, 2011

Commodities are now setting new records almost daily.  Where the stock markets still have some catching up to do, commodities are exploring new high territory.

Minimum Wage Comparisons…Europe Vs. The United States

Posted By on February 2, 2011

The European Commission reported the monthly minimum wages for European countries for 2011…here is how it compares to the United States.

More at:

Massive Cyclone Of Epic Proportions Makes Landfall In Australia

Posted By on February 2, 2011

Australia is fighting its worst weather in a 100 years, first rain and floods, now a huge cyclone.  Cyclone Yasi, which is now projected to be a category 5 storm according to the Australian Weather Bureau, is making landfall in Queensland and will add to the continent’s flooding misery, which has already incurred over $20 billion of damages to eastern states. Yet in a case of supreme irony, the West of the continent, unlike the East which has been having flood after flood, and which is the source of Australia’s bread basket and where the bulk of the grains come from, is wrapped in a drought that threatens to impair an already week wheat harvest.

From Bloomberg: “At stake is the output of the country’s biggest wheat- growing state at a time when global food shortages have pushed prices to records. The drought has already prompted the government of Western Australian state Premier Colin Barnett to cut its economic growth forecast for the year to June 30 to 4 percent, from 4.5 percent.”

CAIRNS, Australia (AP) — The eye of the most powerful cyclone to hit northeast Australia in nearly 100 years has made landfall. Cyclone Yasi’s eye came ashore at the small resort town of Mission Beach early Thursday morning. Thousands of residents huddled in evacuation centers or hid at home in bathrooms behind piles of blankets and mattresses.

Australian leaders issued dire warnings of potential devastation for cities and towns dotted along a stretch of coast more than 190 miles (300 kilometers) long in north Queensland state, in an area considered the gateway to the Great Barrier Reef.

“This is a cyclone of savagery and intensity,” Prime Minister Julia Gillard said in a nationally televised news conference as the storm moved toward the coast. “People are facing some really dreadful hours in front of them.”

Winds at the center of the storm were gusting up to 186 mph (300 kph), and the front was about 300 miles (500 kilometers) across. The worst of the winds were expected to last up to four hours on the coast, though blustery conditions and heavy rain could last for 24 hours.

Stratfor: Mubarak Declines To Run For Re-Election

Posted By on February 1, 2011

Looks like a stalling tactic…If we were Egyptian President Hosni Mubarak, we’d be getting out of Dodge (Egypt) and fast!

February 1, 2011

Egyptian President Hosni Mubarak said Feb. 1 he would not seek another term as president in elections slated for September but that he will complete his current term. In a televised national address, his second since the Egyptian unrest began the previous week, Mubarak said he would use the remainder of his term to oversee the transition of power. He also called on the parliament to amend the Egyptian Constitution’s Article 76 (which narrows the pool of potential presidential candidates) and Article 77 (which allows for unlimited presidential terms). It is currently unclear whether these measures will be considered.

The opposition immediately rejected the pronouncement. Each political concession offered during this crisis by the Egyptian political establishment — which until this point had ruled with absolute authority since the 1950s — has only emboldened the opposition. Unrest is thus likely to continue, which means the Egyptian military likely will attempt to force Mubarak to step down before the elections. However, even this will not likely resolve matters, as the need to create a neutral caretaker government until elections can be held will be the basis for further struggles between the regime and the opposition.

More at:

Food Stamp Usage Continues Higher…Up 14% From One Year Ago

Posted By on February 1, 2011

We’re looking at nearly 15% of the population now on food stamps….and the drift between the rich and the poor continues to get wider by the day! 

As of November, the SNAP program had 43.6 million participants, an increase of 400k from October, and a 14% increase, or 5.3 million from a year prior. The chart below says it all.

A Fabulous Story, My Good Watson

Posted By on January 31, 2011

From Art Cashin on the floor of The New York Stock Exchange

On this day in 1876, an already legendary medical professor at Edinburgh University began to address a new group of students.  He began his lecture with his usual demand for observation.  He pounded on his theme of the “vast importance of little distinctions” of the “endless significance of trifles.”  “Yeah, yeah!,” thought the students (or whatever the 1870’s equivalent of a cynical “yeah, yeah” was).  Sure you’re a famous surgeon and professor but what will all this minutia get us.

He called for the first patient.  Then, according to published reports, the following happened….

A man walked in and stood for a moment.  The professor walked around him slowly, twice.  Then the professor said something like – “Army…recently discharged….probably Scots Highland regiment.  (“Aye! Sir!” came the reply).  Next – you were likely a non-commissioned officer…likely in the West Indies – perhaps Barbados.”

When the patient confirmed the correctness of every guess, the class was intrigued.  When Professor Joseph Bell explained each guess they were amazed.  “The man appeared courteous and respectful but did not remove his hat.  Members of the Army do not, so he was likely recently discharged.  His gait and tone tell me he’s Scottish thus the Highland regiment and he had an air of authority suggesting he was a non-com.  And the mild elephantitis evident on his arms tell me he was stationed in Barbados where there have been recent outbreaks.”

Needless to say, the class was impressed.  One student in particular was awed.  For the next few years, he observed Bell observing things. Every day was fascinating – like the time a student knocked on Bell’s door.  Bell, without looking up, said – “What are you worried about?”  Startled….the student said, “How did you know I was worried?”  Still not looking up, Dr. Bell said – “You knocked four times.  The timid knock once.  Most men knock either two or three times.  The worried, knock four times.”  Time and again the awe-struck student watched Dr. Bell make amazing deductions from simple observations.  He vowed he would never forget Dr. Bell – and he never did – and he made sure none us would either.

After graduation, the student hung out his medical shingle.  Unfortunately, there was an outbreak of health at the time.  To avoid starving, the student turned to writing.  He needed a new kind of character, so he chose a detective….an incredibly observant detective….someone like Dr. Bell.  And…..for a sidekick he gave him a curious but not so observant doctor….somewhat like himself.  Thus, the author, Arthur Conan Doyle, portrayed himself as Dr. Watson, standing in the shadow of his hero – the great Dr. Bell – whom he renamed – Sherlock Holmes.

Donald Trump Says A Mideast Explosion Could Destroy OPEP While Lowering Oil Prices…And Tells Us How He Would Rebuild America

Posted By on January 31, 2011

Whether you like him or not, most would probably agree after reading this that Donald Trump would show us how an Eagle with clipped wings (the U.S.) can fly again.  This guy gets it.  You want to see growth again in the U.S., then here is the man for the job!

So Donald, tell us how you really feel about China.  But to tell the truth, he makes a number of extremely good point(s)….“If we ever taxed Chinese products coming into this country, we would pay off the debt so fast it would make your head spin. More importantly, we would start creating jobs in our country”.

Part 1 of a 2 part series:

Trump takes aim at America’s “horrible” trade agreements, declares that the Middle East is going to explode, warns about “catastrophic” oil prices, and charges that Obama’s Afghanistan policy is “dangerous and stupid.” He also complains that the United States is a “laughing stock” throughout the world — and confirms that he is seriously considering running for president in 2012.

Referring to President Obama’s State of the Union speech, Trump says: “He didn’t talk about the deficit, he didn’t talk about how to pay off all the debt that we have. Instead he’s telling everybody what a great country China is, that China has the fastest computer in the world. That should be for the president of China to talk about, not President Obama.

“I love the country and I hate what’s happening to the country. In 12 years China will take over as the world’s leading economic power, if not sooner, and the way we’re going this country will not be a great country as it was anymore. That’s so very very sad to me.”

Trump has a lot more to say about China.

“I’m a big buyer of products, and I’m also unfortunately a big buyer of Chinese products,” he says. “It’s very hard not to buy Chinese products, including sheetrock, which has destroyed many a development and many a life.

“I’ll say this: We make better products than China. The problem is they manipulate their currency so badly that it’s almost impossible for a person like me to buy outside China.

“I want to buy an American product. The Chinese products come in, they’re cheaper. They’re not as good but they’re cheaper. And it’s not because of their workers, it’s because of their manipulation of their currency.

“Another thing: If you try to do business in China, it’s almost impossible. They want all your technology. They want you to build your plants in China.

“We have a very weak policy. Whether it’s China, or the horrible agreement just signed with South Korea, or any of the other horrible deals that we make, we don’t have the ability to make good deals with other countries.

We’re like a whipping post for other countries. We are standing there and being beaten by South Korea, by Mexico, by China, by India. If you have a problem with a credit card and you call somebody up, that person is based in India.

“And then they wonder why we’re not going to have jobs for another five or six years.

Trump has a surprising response to speculation that the turmoil in Egypt and other countries in the Middle East could push oil prices to as high as $200 a barrel.

“It also could go the other way. Frankly, the Middle East is a tinderbox. It’s going to explode. OPEC will probably be destroyed if it explodes, and oil prices could go the other way.

“I understand economics. You break up what would normally be an illegal monopoly, OPEC, and break it up very strongly. The Middle East is exploding, and I’m saying that could have a positive impact on oil prices.

“If you look at oil right now, it’s soon going to be $100 a barrel. Far too high. It’s set by OPEC. I think OPEC would explode with the Middle East and that wouldn’t be the worst thing in the world.”

Trump has especially harsh words for OPEC and its grip on oil prices.

“Here you have 12 men, in this case all men, they sit around a table and they set the price of oil.

“We have so much oil. There’s so much oil out at sea. I see $3.50 for a gallon of gas. Cars are lined up trying to get it, and at $3.50. It’s a shame. It’s a ridiculous shame.

“Plus we don’t use our natural gas. We have more natural gas than anybody. Why we not using it is an amazing thing.

Asked where he thinks the price of oil is headed, Trump responds: “I think it could go, with proper leadership, down to $40 a barrel. I think if we continue the way it is, it’s going to go up to $150 a barrel.”

Turning to Afghanistan and the timeline President Obama has proposed for withdrawal of American troops, Trump tells Newsmax: “We should be out of there as soon as possible. At the same time, when Obama announced that he’s going to be out at a certain date, these militants are just sitting back saying, ‘He gave us a specific date. This is fantastic. We’ll just sit back and then we’ll take it over the minute they leave.’

Part 2 latter in the week!

More at:

Home Ownership Rates Continue To Fall

Posted By on January 31, 2011

Home ownership rates continue to fall. History tells us that boom bust cycles tend to overshoot both on the upside and to the downside.  More downside should be expected here.

In the fourth quarter of 2010, 66.5% of Americans owned homes, down from 67.2% a year earlier and the lowest rate since the end of 1998, according the Census Bureau. The ownership rate surged to a record 69.2% in 2004’s second and fourth quarters. After that down she went.

Just 44.8% of black-only households were homeowners in the fourth quarter of 2010, down from 46% a year earlier. The rate for Hispanics also fell, to 46.8% from 48.4%, the Census showed. The rate for white, non-Hispanic households slipped to 74.2%, from 74.5%.

The West was most effected and continues to see high foreclosure rates. It registered the nation’s lowest ownership rate at 61%, down from 62.3% a year earlier. The Midwest had the highest percentage of homeowners among regions, but also saw a year-over-year decline, to 70.5% from 71.3%.

Florida Judge Rules New Healthcare Law Unconstitutional

Posted By on January 31, 2011

Here we go….things are going to get real interesting with the new healthcare law.  A federal judge ruled that Congress violated the Constitution by requiring Americans to purchase health insurance in the new health overhaul, and said the entire law “must be declared void.”

In ruling against President Obama‘s health care law, federal Judge Roger Vinson used Mr. Obama‘s own position from the 2008 campaign against him, when the then-Illinois senator argued there were other ways to achieve reform short of requiring every American to purchase insurance.  “I note that in 2008, then-Senator Obama supported a health care reform proposal that did not include an individual mandate because he was at that time strongly opposed to the idea, stating that, ‘If a mandate was the solution, we can try that to solve homelessness by mandating everybody to buy a house,’” Judge Vinson wrote in a footnote toward the end of his 78-page ruling Monday. 

Copyright © 2016 The Stated Truth | Website Operator: John Schultz