A political analyst from Russia says that "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse." Igor Panarin also added that the U.S. economy "is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale." Panarin also predicts that the United States will break up into 6 smaller countries and that Russia and China will emerge as the world's great powers, both economically and militarily.
Tuesday, November 25, 2008
Good News! Consumer Confidence Rises!
Consumer confidence recovered somewhat for November, largely attributed to falling gasoline prices over the past few months. The index rose to 44.9 in November from 38.8 in October.
Only $20 Billion Left of Treasury's $700 Billion
After today's announcement of an additional $200 bailout by Treasury Secretary Paulson, only $20 billion remains of the $700 bailout that Congress provided to the Treasury Department in the September bailout package.
FDIC Loans Lose $7.6 Billion
The FDIC has announced that 171 banks are now on its watch list of troubled institutions. It also released figures that show a ten-fold increase for losses over the past year for bad loans.
Moody's Downgrades PRIME Mortgage Debt
As if the subprime mortgage market wasn't frightening enough, this morning Moody's has downgraded tranches of prime mortgage debt, based upon rising default rates. Prime mortgages are the ones that 90% of working Americans have securing their home loans. These are supposed to be the good loans! Moody's downgraded $10 trillion of prime mortgages from Aaa to Caa3 today because default rates have risen to 3%. This is surprising, especially in light of the fact that these tranches were created with the estimation that they would never rise to default rates above 1%.
Case-Shiller Declines 16.6%
Real estate prices declined during October by 16.6%, according to the latest figures from the Case-Shiller real estate index. Prices declined in all cities where prices were measured for the sixth consecutive month, and was a record decline for the history of the index. The picture above is worth a thousand words.
Federal Reserve Bailout Du Jour -- Another $800 Billion
The Fed has announced this morning that they will begin buying even more toxic debt, including student loans, auto loans, and credit card debt. The Federal Reserve has now committed $800 billion more to the credit markets.
This can not end well, in my opinion. We should all prepare for chaos, and the time is coming that it will no longer be contained to Wall Street and the financial markets. The Mother of all Bubbles is going to blow up, and I believe it is going to happen sooner rather than later. Market mayhem is coming!
Here is the Bloomberg story.
Commodities Showing New Signs of Life
Commodity prices are showing signs of price reinvigoration again in recent days. Yesterday's rapid rise in stock index futures has given a strong shot in the arm to commodity prices as well.
Jim Rogers Was Right In Predicting Temporary Dollar Rise
In April this year, famed investor/commodity guru Jim Rogers accurately predicted that the U.S. Dollar would rise temporarily. Now, however, he is predicting that the greenback will be devalued as policymakers seek to weaken it to artificially make the U.S. more competitive. He says that the Dollar is "going to lose its status as the world's reserve currency,'' he told Bloomberg yesterday. "It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.'' Rogers has a good track record with his predictions, and he puts his money where his mouth is.
Here is the Bloomberg story.
3Q GDP Worsens, Revised Down to -0.5%
The U.S. economy shrank by more than originally expected during the 3rd Quarter. Estimates were revised downward from -.3% to -.5%. Some surprise!
Here is more info from Marketwatch.
Fed Paying Above Market Value for Toxic Debt
It now appears that in order to try to shore up the economy, the Federal government is now paying premium prices for toxic debt. Private investors that were willing to buy these troubled assets are withdrawing offers because the government is so willing to pay a higher-than-market price for the same debt in the hopes that they will increase in value sometime down the road. This is a fine prescription for saddling the American taxpayer with crushing debt and monstrous losses in the future as more and more of these instruments continue to lose value. The government is betting against private capital that they can make them increase in value despite the views to the contrary of the finest minds in private industry. This is risky at best because our government is betting that these bad loans have greater value than the price that private distressed debt experts believe they are worth. History suggests that the government will be wrong and that the American People will pay a much heavier price for the indulgent overconfidence of government beaurocrats. Not only is the government over-paying for this debt now, but the American People will pay for it again at some point in the future. So this is what the Plunge Protection Team really looks like?
Monday, November 24, 2008
$7.7 Trillion of U.S. Government Bailouts -- So Far!
From Bloomberg this evening:
"The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday."
Here is the full Bloomberg story.
Dollar Get's Drilled!
Now this is looking ugly! Are the chickens now beginning home to roost for profligate spending and irresponsible fiscal and monetary policy? As the Dollar drops, commodity prices (ie., inflation) will start to pick up steam again.
President-Elect Obama's News Conference Calms Markets
The financial markets appear to have been reasonably pleased today with President-Elect Barack Obama's performance in a news conference announcing his plans for economic stimulus and appointing his economic advisory team. He has passed his most important test thus far.
The Mother of All Bubbles Is Building!
The Mother of all Bubbles is building. This bubble is the largest in human history, and when it pops, everyone will be affected. It will cause market mayhem and a run for the exists the likes of which has never been seen before. What is it?
"The American government bonds are the world’s last bubble and the price of commodities has to increase." Jim Rogers, famous investor and commodity guru
The Mother of All Bubbles is U.S. Government debt!
There is no such thing as bankruptcy for an entire country. There is no International Bankruptcy Court. Bankruptcy for a nation is done by monetizing the debt of that country. It is done by creating monstrous amounts of new money with the intent of inflating a nation's way out of a crisis. Sound familiar? It should! It has been done by other nations in the past, including the Roman Empire, the Weimar Republic, and in Zimbabwe today. We're in the early stages of that phenomenon now here in the United States. We have created the Mother of All Bubbles!
Q4 GDP May Drop 8%
Whisper news for the 4th Quarter GDP is that the U.S. economy may contract as much as 8%! If so, stocks will probably drop even further. Hold onto your money folks!
Why Are Food Prices So High When Commodity Prices Are Falling?
Food commodity prices have plunged 45-60% in the past six months. So why are food prices at the grocery store substantially higher than one year ago? Grain, dairy, meat and soft commodity prices are the lowest we have seen in two years, so why are prices at the grocery store still higher than one year ago? Gas prices have plunged over the past six months due to the lower crude oil price, but food prices have remained stubbornly high. Either wholesale food distributors are hanging onto the higher prices while their own costs drop, or the grocery store chains are gouging consumers to pad their pockets. One of these two groups -- or a combination of both -- is keeping the excess profits and taking advantage of consumers by not passing on the lower commodity prices to the people who buy their products.
Gold's Message to Global Financial Markets
While commodity prices have collapsed worldwide due to the economic weakness, gold prices over recent days have surged higher instead. Why? As the ultimate barometer of both economic uncertainty and inflation fears, the price of gold futures has surged in the past few trading sessions. What conclusions are we to draw from this? That with the Fed having incresed the money supply by 39% in 2008 alone, the financial markets are anticipating higher inflation ahead. However, I suspect that this higher inflation will likely occur only if the economy begins to rebound.
Sunday, November 23, 2008
Citigroup's $326 Billion Bailout Package
From Bloomberg:
"The U.S. government agreed to protect $306 billion of loans and securities on Citigroup Inc.‘s books against losses, as it seeks to shore up investor confidence in the bank."
(Citi was also given another $20 billion capital injection.)
Click here for the entire story.
Text from joint FDIC, Fed, Treasury statement.
