I'm at a point that I read enough good financial bloggers that not all of them give me an "on the mark" moment. However, I did come across one this morning by Ken Denninger in his "Market Ticker" blog that simply hits spot on the problem we faces as a nation.
Once you read it, you'll realize the EXACT SITUATION we face and that this economic crisis was not handled properly for political reasons.
http://market-ticker.denninger.net/archives/2125-Housing-Obama-Still-Has-Not-Grown-Up.html
Sorry, but when there's an ECONOMIC CRISIS in the United States and you need to find the best solution for the people of the United States, best thing to do is the right thing to get the country functioning with a LONG-TERM, SUSTAINABLE solution. Not a broken legacy system with patches and patches adding up to trillions of dollars. That's what banks do with their computer systems and someday, those chickens will come home to roost as well.
In other words, think of the needs of the many, not the few...Think of the FUTURE.
Friday, March 26, 2010
Monday, March 15, 2010
Moody's Cautions U.S. Ratings
As I mentioned in the previous post, once a ratings agency decides to cut the U.S. sovereign debt rating, it's goodnight to the U.S. life support system and perhaps the dollar itself.
In an article from earlier this morning from the Financial Times, Tracy Alloway writes "Moody’s warns on US finances."
Credit rating agency, Moody’s Investor Service, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.
Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”
http://ftalphaville.ft.com/thecut/2010/03/15/174686/moodys-warns-on-us-finances/
Is Moody's trying to say they don't want healthcare to pass?
Actually, Moody's is kind of equivalent to a bug politically because they know once they downgrade the rating, they're basically destroying themselves. Believe me, we'll know the rating has been downgraded far before the actual event takes place.
In an article from earlier this morning from the Financial Times, Tracy Alloway writes "Moody’s warns on US finances."
Credit rating agency, Moody’s Investor Service, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.
Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”
http://ftalphaville.ft.com/thecut/2010/03/15/174686/moodys-warns-on-us-finances/
Is Moody's trying to say they don't want healthcare to pass?
Actually, Moody's is kind of equivalent to a bug politically because they know once they downgrade the rating, they're basically destroying themselves. Believe me, we'll know the rating has been downgraded far before the actual event takes place.
Sunday, March 14, 2010
Coffee, Tea or Me--the Individual
There is growing excitement about the coffee party--a party that stands for taking back the United States government for the people and away from special interests and corporations. It is another add-on to what I believe will be a cycle of anti-establishment behavior in the country in the years to come (only, this time, maybe we can do without the hippie, smug idealism).
I haven't been to a coffee or tea party, but I was at a birthday party last night, and we discussed politics, history and current events--I know, I'm old and this is my kind of party.
Someone said that nothing ever comes out of an anti-establishment movement, but I tend to disagree with that. The 1960's brought change in the form of civil rights and greater freedoms for race, gender and sexuality--only to see repression return to the mainstream when the baby boomers got older. Of course, the baby boomers are the largest demographic group in the U.S. so anything mainstream for them is always the way to go, whether marching on Washington or making as much money and buying as many things as humanly possible.
Only, the baby boomers forgot to take into account that they are also susceptible to human nature, and baby-boomer politicians sold themselves out because not only did they have an arrogance about them that their needs come before all others, but a "la-la-la-live for today" attitude--which still resembles mainstream in this country.
As much as I hated Ronald Reagan for increasing U.S. debt to increase spending, consumer spending increasing by excessive-minded baby-boomers, the phrase "Just Say No" to make everything all right with our children and selling arms to the enemy, the most irritating thing was a false reality that our country was prosperous when it was heading into a recession and the first bubble-to-bust in what would become a series of bubble bursts every decade.
I thought would this mania would end in 1992 when Bill Clinton came to office.
But, with a Republican Congress entering in 1994, Clinton simply became a Republican in Democrat's clothing and it was under his administration that Glass-Steagall was repealed in 1999, which allowed banks and investment banks to merge as one entity.
This Great Depression II might have happened anyway if Glass-Steagall was not repealed (Glass-Steagall was made into law after The Great Depression to basically prevent overinvestment in banking products, such as mortgages), but I think Glass-Steagall's repeal set the stage for 2008's economic credit crisis. So, that was Clinton's fault because it was under his watch--whether he was "forced" into it with the threat of impeachment or not, it was on his watch.
Of course, Larry "I won't listen to anything about derivatives" Summers was under Clinton and is back NOW under the Obama Administration along with other Wall Street affiliates Tim Geithner and Ben Bernanke.
So, despite, GW Bush's massive overspending and deregulation of...well...every corporation and industry around the world, that same corporate philosophy of "greed is good" and let's get every consumer to spend until they have nothing left and a huge bubble pops, is still around.
Which leads me to a post on The Coffee Party Website. Call it a post or a rant, but here it is:
In the end, when it comes to corporate greed, the best way to destroy it is to not feed into it. The unemployed people have no choice on how they spend; the employed but fiscally conservative will only live within their means and start saving--which many are doing; and the foolish will take on more debt and spend on items they just don't need.
A couple questions: How do retail sales go up in an economy with nearly 20 percent unemployed, disaffected or part-time workers looking for full-time jobs? It doesn't. Numbers get revised way down for January so the headlines can show that retail numbers went up in February.
Consumer sentiment is down--way down.
How do banks get nearly 0 percent interest in taxpayer money and lend 30 percent on credit cards to consumers? How did unsophisticated borrowers get 0 percent, interest-only mortgages that bank CEOs knew would eventually destroy the mortgage industry and, with Glass-Steagall repealed, take down the global economy? How do these insolvent banks remain solvent when they brought the global economy to its knees?
Answer--a dying philosophy for consumers to take on debt and spend, spend, spend on material goods to prop up the entire world's global economy. Does that really make us "number one" in this world?
The Federal government is now our economy. It feeds banks (who retain the money until they're self-sufficient), it backs mortgages with FHA, Fannie Mae and Freddie Mac loans (at an unsustainable volume as the Fed buys mortgage-backed securities). In all, it puts the country in trillions of dollars of debt.
Now, how are we really "number one" in this world if we're more in debt than any other country. Answer--we print money. The Federal Reserve prints it--sells Treasury bonds to foreign countries that hold a promissory note, hoping we can pay since we're the United States.
That's all well and good, as long as the world keeps believing that printed dollar has any value behind it. Well, of course it does, because we're USA--the economic standard. Just look at us--our infrastructure, our educational system, our healthcare and our people, driving with their fancy Toyotas, watching their big-screen TVs unless they are walking away from their houses.
One way to get the message heard is to stop spending, start saving and opening up to reality--and I don't mean reality TV. We the people and the federal government didn't live within our means, we fostered this behavior around the world and we're paying a non-monetary price for that right now.
This is the message--there are no Republicans, Democrats or Independents for that matter. There are multinational corporations living and breathing on the printed dollar, which may soon have little value in the entire scheme of things.
If one day, a ratings agency said the United States' sovereign debt was less than AAA--the highest rating--and more like BBB (because we're trillions of dollars in debt with money based on bonds we'll never be able to pay back), then goodnight. The value of the dollar is completely worthless. That said, however, the Euro will go first, as well as the Yen and all the other currency. China and Japan hold the most U.S. debt, and they know the U.S. can't pay them back. But, they need the U.S. as much as the U.S. needs their money.
How does this madness end? We stop spending money we don't have.
Although, at this point, I don't think we have much choice in the matter, anyway.
So, we've seen the enemy and it's corporate and federal government greed, working hand-in-hand, as well as greed within ourselves by feeling entitled to luxuries we don't necessarily deserve. Living within our means is really the only choice, knowing that risk can be bring reward but it can have negative consequences as well.
Now, bringing about corporate change is nearly impossible because money rules--it rules the justice system, the political system (obviously), the media and our own health. We can protest for ideologies and blog until tomorrow on arguments about which party is right or wrong, but we should never condemn the dollar itself. Right? No way.
Well, the time has finally come to examine everyone's life--each individual--against a ruling class based on monetary wealth. It is time for the majority--the soon-to-be-lost middle class--to realize that their individual lives are far more important that monetary gains by the small, but highly wealthy elite.
These elite are not part of a political party--they're part of a minority club that rules, fails and then rules again. In the club, failure does not exist because CEOs (and politicians) are entitled to succeed. Why not? They have money...they can fail most of their lives with one success thrown in for good measure. Look at George W. Bush.
That is, until these CEOs need to lay off thousands or more people because of their own indiscrepancies. Maybe it's a politician responsible for sending men and women to die because of their own political causes and not in defense of a nation.
That's the club and, if you're a member, you win whether your constituency wins or loses.
No thanks. I believe in fairness and, if you take a risk and fail, you lose. If you risk and win, you succeed. And that everyone should succeed or fail based on their own merit--based on the established set of rules and guidelines. At least, that's how I was treated growing up.
Maybe it's that, or maybe it's just that old Groucho Marx saying, "I would never want to belong to a club that would have me as a member."
That's because groups get things done. Clubs are for members only.
I haven't been to a coffee or tea party, but I was at a birthday party last night, and we discussed politics, history and current events--I know, I'm old and this is my kind of party.
Someone said that nothing ever comes out of an anti-establishment movement, but I tend to disagree with that. The 1960's brought change in the form of civil rights and greater freedoms for race, gender and sexuality--only to see repression return to the mainstream when the baby boomers got older. Of course, the baby boomers are the largest demographic group in the U.S. so anything mainstream for them is always the way to go, whether marching on Washington or making as much money and buying as many things as humanly possible.
Only, the baby boomers forgot to take into account that they are also susceptible to human nature, and baby-boomer politicians sold themselves out because not only did they have an arrogance about them that their needs come before all others, but a "la-la-la-live for today" attitude--which still resembles mainstream in this country.
As much as I hated Ronald Reagan for increasing U.S. debt to increase spending, consumer spending increasing by excessive-minded baby-boomers, the phrase "Just Say No" to make everything all right with our children and selling arms to the enemy, the most irritating thing was a false reality that our country was prosperous when it was heading into a recession and the first bubble-to-bust in what would become a series of bubble bursts every decade.
I thought would this mania would end in 1992 when Bill Clinton came to office.
But, with a Republican Congress entering in 1994, Clinton simply became a Republican in Democrat's clothing and it was under his administration that Glass-Steagall was repealed in 1999, which allowed banks and investment banks to merge as one entity.
This Great Depression II might have happened anyway if Glass-Steagall was not repealed (Glass-Steagall was made into law after The Great Depression to basically prevent overinvestment in banking products, such as mortgages), but I think Glass-Steagall's repeal set the stage for 2008's economic credit crisis. So, that was Clinton's fault because it was under his watch--whether he was "forced" into it with the threat of impeachment or not, it was on his watch.
Of course, Larry "I won't listen to anything about derivatives" Summers was under Clinton and is back NOW under the Obama Administration along with other Wall Street affiliates Tim Geithner and Ben Bernanke.
So, despite, GW Bush's massive overspending and deregulation of...well...every corporation and industry around the world, that same corporate philosophy of "greed is good" and let's get every consumer to spend until they have nothing left and a huge bubble pops, is still around.
Which leads me to a post on The Coffee Party Website. Call it a post or a rant, but here it is:
In the end, when it comes to corporate greed, the best way to destroy it is to not feed into it. The unemployed people have no choice on how they spend; the employed but fiscally conservative will only live within their means and start saving--which many are doing; and the foolish will take on more debt and spend on items they just don't need.
A couple questions: How do retail sales go up in an economy with nearly 20 percent unemployed, disaffected or part-time workers looking for full-time jobs? It doesn't. Numbers get revised way down for January so the headlines can show that retail numbers went up in February.
Consumer sentiment is down--way down.
How do banks get nearly 0 percent interest in taxpayer money and lend 30 percent on credit cards to consumers? How did unsophisticated borrowers get 0 percent, interest-only mortgages that bank CEOs knew would eventually destroy the mortgage industry and, with Glass-Steagall repealed, take down the global economy? How do these insolvent banks remain solvent when they brought the global economy to its knees?
Answer--a dying philosophy for consumers to take on debt and spend, spend, spend on material goods to prop up the entire world's global economy. Does that really make us "number one" in this world?
The Federal government is now our economy. It feeds banks (who retain the money until they're self-sufficient), it backs mortgages with FHA, Fannie Mae and Freddie Mac loans (at an unsustainable volume as the Fed buys mortgage-backed securities). In all, it puts the country in trillions of dollars of debt.
Now, how are we really "number one" in this world if we're more in debt than any other country. Answer--we print money. The Federal Reserve prints it--sells Treasury bonds to foreign countries that hold a promissory note, hoping we can pay since we're the United States.
That's all well and good, as long as the world keeps believing that printed dollar has any value behind it. Well, of course it does, because we're USA--the economic standard. Just look at us--our infrastructure, our educational system, our healthcare and our people, driving with their fancy Toyotas, watching their big-screen TVs unless they are walking away from their houses.
One way to get the message heard is to stop spending, start saving and opening up to reality--and I don't mean reality TV. We the people and the federal government didn't live within our means, we fostered this behavior around the world and we're paying a non-monetary price for that right now.
This is the message--there are no Republicans, Democrats or Independents for that matter. There are multinational corporations living and breathing on the printed dollar, which may soon have little value in the entire scheme of things.
If one day, a ratings agency said the United States' sovereign debt was less than AAA--the highest rating--and more like BBB (because we're trillions of dollars in debt with money based on bonds we'll never be able to pay back), then goodnight. The value of the dollar is completely worthless. That said, however, the Euro will go first, as well as the Yen and all the other currency. China and Japan hold the most U.S. debt, and they know the U.S. can't pay them back. But, they need the U.S. as much as the U.S. needs their money.
How does this madness end? We stop spending money we don't have.
Although, at this point, I don't think we have much choice in the matter, anyway.
So, we've seen the enemy and it's corporate and federal government greed, working hand-in-hand, as well as greed within ourselves by feeling entitled to luxuries we don't necessarily deserve. Living within our means is really the only choice, knowing that risk can be bring reward but it can have negative consequences as well.
Now, bringing about corporate change is nearly impossible because money rules--it rules the justice system, the political system (obviously), the media and our own health. We can protest for ideologies and blog until tomorrow on arguments about which party is right or wrong, but we should never condemn the dollar itself. Right? No way.
Well, the time has finally come to examine everyone's life--each individual--against a ruling class based on monetary wealth. It is time for the majority--the soon-to-be-lost middle class--to realize that their individual lives are far more important that monetary gains by the small, but highly wealthy elite.
These elite are not part of a political party--they're part of a minority club that rules, fails and then rules again. In the club, failure does not exist because CEOs (and politicians) are entitled to succeed. Why not? They have money...they can fail most of their lives with one success thrown in for good measure. Look at George W. Bush.
That is, until these CEOs need to lay off thousands or more people because of their own indiscrepancies. Maybe it's a politician responsible for sending men and women to die because of their own political causes and not in defense of a nation.
That's the club and, if you're a member, you win whether your constituency wins or loses.
No thanks. I believe in fairness and, if you take a risk and fail, you lose. If you risk and win, you succeed. And that everyone should succeed or fail based on their own merit--based on the established set of rules and guidelines. At least, that's how I was treated growing up.
Maybe it's that, or maybe it's just that old Groucho Marx saying, "I would never want to belong to a club that would have me as a member."
That's because groups get things done. Clubs are for members only.
Thursday, March 11, 2010
The Patient is Slipping, Doctor
From now on, I'm going to use the analogy of the United States as a comatose patient on life support and the U.S. Government as the life support system. That's the fact because without the Fed dollars propping up this economy--banks, Fannie Mae, Freddie Mac, automakers--the U.S. would flatline. Can we all agree on that? If not, then we're trillions of dollars in debt for no reason, and we should have a health care plan that covers ALL Americans (I agree on the latter anyway, but that's just my opinion).
So, if the U.S. is a comatose patient on life support, I can only quote a line from the comic in "Defending Your Life," the Albert Brooks movie, where a comic tries to find out how long a dead man was in a coma by asking him if Elvis is living or dead. The man said living. The comic said to Art, the dead man, "Long coma, Art...long coma."
I say the same for the comatose U.S. economy kept on life support by the U.S. government. "Long coma." Here's why just based on TODAY's STATISTICS. I don't mean "today" as in the current environment. I mean, literally, TODAY.
First, a headline from the Wall Street Journal:
• The Kansas City Missouri School Board voted on Wednesday night to shutter nearly half of its schools in an effort to avoid going broke.
That’s not the top story—but one of the top stories.
Half of a major city's schools are closing so it will not go broke. I know education is the first to go being the values that they are in this country, but that’s ridiculous.
And, with declining tax values and no replenishment of funds, when will the second half shutter? The decay of our education system within states and municipalities going broke.
Not to mention first-time unemployment claims continue above 460,000 today--a 6,000 claim improvement from the previous number.
I saw an unemployed engineer of 35-years the other day standing next to the subway with a cup in his hands—and we’re still on government life support.
These are the early signs of decline for the supposed wealthiest country in the world.
Not a sermon, just a rant.
Also today, Marketwatch.com said retail stocks fell, led by Bed, Bath & Beyond Inc. after the home-furnishings retailer was cut to underperform from market perform by FBR Capital Markets.
Men's Wearhouse Inc. declined 5.2 percent after the men's clothing retailer reported worse than expected fourth-quarter sales.
The children's clothing retailer Gymboree Corp. rose 7.3 percent after its fourth-quarter profit topped Street expectations and its first-quarter outlook also may exceed estimates, Marketwatch said.
Here's the deal--Bed, Bath & Beyond anchors alot of retail centers and if that goes dark, it's just not a good sign that retail real estate investment trusts in debt are going to get their rent to pay their debt. That means those commercial real estate loans in those commercial mortgage-backed securities and those collateralized debt obligations will not be able to receive their payments. That means investors will lose money on those securities. That means banks, insurance companies, other companies and individuals that made these investments will lose money as billions and billions of CMBS dollars mature from 2015 to 2017--assuming nobody replaces Bed, Bath & Beyond as an anchor retailer.
Do you see anybody opening large new stores anywhere in your area anytime soon?
Do you see people spending on discretionary items anytime soon?
Even Men's Wearhouse, a clothing store for men, is doing poorly.
Retail has not even started to show delinquencies--yet. Hotel remains at the top of CMBS defaults, followed by multifamily and then retail. Keep in mind that CMBS special servicers are doing all they can to extend these loans. However, why would anyone in their right mind invest in the CMBS market with current fundamentals? Unless of course, it was the Fed giving money to banks to make these investments.
All fine...except--as we know--it costs money...lots of money to keep an individual on a life support system. Just think how much it costs the Fed (the taxpayers) to keep the U.S. on life support. That's all well and good, except the patient isn't getting any better.
Real estate values continue to fall in residential and commercial real estate; oil prices are rising--meaning gas prices increase and higher payments for consumers; consumers are saving and still paying off debt; unemployment remains high. When do we get back to consumer spending by way of 2005-2007. How about the 12th--the 12th of never--as Earth, Wind and Fire sang.
Slow recovery, weak fundamentals, higher savings, trillions of debt and major CMBS fixed-rate maturites in the tune of more than $180 billion from 2015-2017. That's like saying that even if the patient goes into remission, gets off of life support and begins to walk tomorrow, the U.S. will not be out of the woods completely for another seven years.
"Long coma, Art. Long coma."
So, if the U.S. is a comatose patient on life support, I can only quote a line from the comic in "Defending Your Life," the Albert Brooks movie, where a comic tries to find out how long a dead man was in a coma by asking him if Elvis is living or dead. The man said living. The comic said to Art, the dead man, "Long coma, Art...long coma."
I say the same for the comatose U.S. economy kept on life support by the U.S. government. "Long coma." Here's why just based on TODAY's STATISTICS. I don't mean "today" as in the current environment. I mean, literally, TODAY.
First, a headline from the Wall Street Journal:
• The Kansas City Missouri School Board voted on Wednesday night to shutter nearly half of its schools in an effort to avoid going broke.
That’s not the top story—but one of the top stories.
Half of a major city's schools are closing so it will not go broke. I know education is the first to go being the values that they are in this country, but that’s ridiculous.
And, with declining tax values and no replenishment of funds, when will the second half shutter? The decay of our education system within states and municipalities going broke.
Not to mention first-time unemployment claims continue above 460,000 today--a 6,000 claim improvement from the previous number.
I saw an unemployed engineer of 35-years the other day standing next to the subway with a cup in his hands—and we’re still on government life support.
These are the early signs of decline for the supposed wealthiest country in the world.
Not a sermon, just a rant.
Also today, Marketwatch.com said retail stocks fell, led by Bed, Bath & Beyond Inc. after the home-furnishings retailer was cut to underperform from market perform by FBR Capital Markets.
Men's Wearhouse Inc. declined 5.2 percent after the men's clothing retailer reported worse than expected fourth-quarter sales.
The children's clothing retailer Gymboree Corp. rose 7.3 percent after its fourth-quarter profit topped Street expectations and its first-quarter outlook also may exceed estimates, Marketwatch said.
Here's the deal--Bed, Bath & Beyond anchors alot of retail centers and if that goes dark, it's just not a good sign that retail real estate investment trusts in debt are going to get their rent to pay their debt. That means those commercial real estate loans in those commercial mortgage-backed securities and those collateralized debt obligations will not be able to receive their payments. That means investors will lose money on those securities. That means banks, insurance companies, other companies and individuals that made these investments will lose money as billions and billions of CMBS dollars mature from 2015 to 2017--assuming nobody replaces Bed, Bath & Beyond as an anchor retailer.
Do you see anybody opening large new stores anywhere in your area anytime soon?
Do you see people spending on discretionary items anytime soon?
Even Men's Wearhouse, a clothing store for men, is doing poorly.
Retail has not even started to show delinquencies--yet. Hotel remains at the top of CMBS defaults, followed by multifamily and then retail. Keep in mind that CMBS special servicers are doing all they can to extend these loans. However, why would anyone in their right mind invest in the CMBS market with current fundamentals? Unless of course, it was the Fed giving money to banks to make these investments.
All fine...except--as we know--it costs money...lots of money to keep an individual on a life support system. Just think how much it costs the Fed (the taxpayers) to keep the U.S. on life support. That's all well and good, except the patient isn't getting any better.
Real estate values continue to fall in residential and commercial real estate; oil prices are rising--meaning gas prices increase and higher payments for consumers; consumers are saving and still paying off debt; unemployment remains high. When do we get back to consumer spending by way of 2005-2007. How about the 12th--the 12th of never--as Earth, Wind and Fire sang.
Slow recovery, weak fundamentals, higher savings, trillions of debt and major CMBS fixed-rate maturites in the tune of more than $180 billion from 2015-2017. That's like saying that even if the patient goes into remission, gets off of life support and begins to walk tomorrow, the U.S. will not be out of the woods completely for another seven years.
"Long coma, Art. Long coma."
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