The Light: Hillary

Oh, you remember Rep. Waters, don’t you? Who could forget her comments regarding Fannie Mae and Freddie Mac? Just in case, here’s a reminder:

Uh, um, hell yes, there was a big problem with Fannie Mae and Freddie Mac, Rep. Waters.

But wait, there’s more. Here is Rep. Waters revealing her true position on the government’s role in terms of Big Oil:

Okay, okay – I couldn’t resist that version. Too funny. Here is the real version:

Yes, all of that stuttering trying to cover up what she had just said is real. Yowzer.

Now, personally, I think Rep. Waters has demonstrated a complete and utter lack of integrity when it comes to financial issues, judging by her comments on Fannie and Freddie. So have Dodd and Frank, for that matter. That the latter two are the authors of a financial regulatory bill should give great pause to everyone.

So, it really should come as no surprise that now she wants to legislate quotas into the new Dood-Frank Financial Regulatory bill. Oh, how I wish I was kidding. According to this Daily Caller piece, that is exactly what Rep. Waters has done,
Racial Quotas in Dodd-Frank Financial Regulatory Bill:

The Dodd-Frank financial regulatory bill, ostensibly aimed at reforming Wall Street and preventing a future financial crisis, will impose racial and gender quotas on financial institutions if passed, according to economist Diana Furchtgott-Roth.

Section 342 of the bill will establish Offices of Minority and Women Inclusion in at least 20 federal financial services agencies. These offices will be tasked with implementing “standards and procedures to ensure, to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance, and all types of contracts.”

So called “fair inclusion” will apply to “financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services.”

The provision goes on to assert that the government will terminate contracts with institutions they deem have “failed to make a good faith effort to include minorities and women in their workforce.” [snip]

Good grief. Quotas? Where does that leave “anti-discrimination” regulations, then? That question is answered here:

The provision goes on to assert that the government will terminate contracts with institutions they deem have “failed to make a good faith effort to include minorities and women in their workforce.”

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor and senior fellow at the Hudson Institute, spotlighted the controversial section in an article at Real Clear Markets on June 8th. She told The Daily Caller that the law amounts to a quota system.

“This is a radical shift in employment legislation,” she said. “The law effectively changes the standard by which institutions are evaluated from anti-discrimination regulations to quotas. In order to be in compliance with the law these businesses will have to show that they have a certain percentage of women and a certain percentage of minorities.”

Furchtgott-Roth worries that this might be a harbinger of things to come.

“So what does this mean? Are we going to get rid of anti-discrimination laws all together and just put in quotas? Could this be what’s to come in other sectors?” she questioned. [snip]

Click HERE to read the rest.

Yes, I would say this is a huge departure from anti-discrimination regulations. That a quota system is being buried in this financial regulation shouldn’t really come as a surprise, I guess. But still, it does.

Wow. Has it really been less than two years since the Democrats controlled all three houses? Sure seems longer, especially considering all they have shoved down our throats. Er, I mean, “accomplished.”

And I guess if Rep. Waters gets her way, we’ll have another one shoved down our throats. Yep, pretty soon, quotas for everyone, coming to a business near you soon!! Good grief…

Scrolling through a number of blogs the other day, I came across this comment to a story in The Confluence. Many thanks to WMCB for posting it:

… I have a family member who is as conservative as it gets. We disagree a lot on how much the federal govt should do. But we wholeheartedly agree on this. He said to me last week,

“Until we can get the govt and the corporations out of bed with each other, we can’t even have a national conversation on how much or how little we want the govt to do. Until we end this rigged cronyism, we are ALL f*cked, Left, Right, and Center.”

Crony capitalism was a problem before this administration took power and that problem seems only to be increasing. Special interests, backroom deals, big corporations getting special exemptions — BP comes to mind. The corporate-owned media running interference and soft pedaling or ignoring stories until well past the expiration date of their effectiveness is likewise devastating.

Even Dan Froomkin, nee of the Washington Post, who now writes for Huffington Post, penned an article complaining that President Obama’s new fiscal deficit commission will be holding its meeting out of the public eye — contrary to the “transparency” repeatedly promised by this administration:

Members of President Obama’s deficit commission huddled behind closed doors Wednesday despite pleas from the left and right that they hold all their meetings in public.

The move only heightens suspicion that rather than forging a national consensus on future spending priorities, the commission’s work will consist of backroom dealings in which members of the Washington aristocracy find high-minded excuses for cutting the social safety net.

Bruce Reed, the commission’s executive director, assured the Huffington Post there is nothing sinister about holding working group meetings like today’s in private. But he had no good reason why they shouldn’t be held in public, either.

Froomkin’s article is entitled “Obama’s Fiscal Commission — What’s Going On In There?” if you would like to google and read it in its entirety.

Clearly, both sides are unhappy with this corporate cronyism — and we have seen all too many examples of it over the last ten years.

What’s the solution?

This is an open thread.

Or so it seems since Obama, despite all of the Town Halls, all of the polls (here’s one), the Tea Party protests, all of it, is going on with his huge push for his Healthcare bill, and it is most definitely his.

Even in the face of mounting opposition within his own party, and even among some liberals like Dr. Marcia Angell (who, by the way, is being demonized by some progressives as being “anti-woman” for opposing this bill. That is some logical leap, as in, it has lept away from being logical). Dr. Angell highlights that this bill as written is a gift to the pharmaceutical companies (Obama made his deal with them before any bill was ever even written) and the INSURANCE companies, the same ones Obama demonizes in his speeches. Yet, on Obama goes, as this article by Charles Krauthammer brings home, Onward with Obamacare, Regardless:

So the yearlong production, set to close after Massachusetts’s devastatingly negative Jan. 19 review, saw the curtain raised one last time. Obamacare lives.

After 34 speeches (as of 3/4/10), three sharp electoral rebukes (Virginia, New Jersey and Massachusetts) and a seven-hour seminar, the president announced Wednesday his determination to make one last push to pass his health-care reform.

The final act was carefully choreographed. The rollout began a week earlier with a couple of shows of bipartisanship: a Feb. 25 Blair House “summit” with Republicans, followed five days later with a few concessions tossed the Republicans’ way.

Show is the operative noun. Among the few Republican suggestions President Obama pretended to incorporate was tort reform. What did he suggest to address the plague of defensive medicine that a Massachusetts Medical Society study showed leads to about 25 percent of doctor referrals, tests and procedures being done for no medical reason? A few ridiculously insignificant demonstration projects amounting to one-half of one-hundredth of 1 percent of the cost of his health-care bill.

As for the Blair House seminar, its theatrical quality was obvious even before it began. The Democrats had already decided to go for a purely partisan bill. Obama signaled precisely that intent at the end of the summit show — then dramatically spelled it out just six days later in his 35th health-care speech: He is going for the party-line vote.

Unfortunately for Democrats, that seven-hour televised exercise had the unintended consequence of showing the Republicans to be not only highly informed on the subject, but also, as even Obama was forced to admit, possessed of principled objections — contradicting the ubiquitous Democratic/media meme that Republican opposition was nothing but nihilistic partisanship.

No kidding about the Blair House seminar. We suspected that was the case before it happened, and its hours long drama did nothing to dispel that initial suspicion. Not that that stopped Obama, then or now, despite the outcome. A big ol’ oopsie daisy” for the Democrats on that one:

Republicans did so well, in fact, that in his summation, Obama was reduced to suggesting that his health-care reform was indeed popular because when you ask people about individual items (for example, eliminating exclusions for preexisting conditions or capping individual out-of-pocket payments), they are in favor.

Yet mystifyingly they oppose the whole package. How can that be?

Allow me to demystify. Imagine a bill granting every American a free federally delivered ice cream every Sunday morning. Provision 2: steak on Monday, also home delivered. Provision 3: a dozen red roses every Tuesday. You get the idea. Would each individual provision be popular in the polls? Of course.

However (life is a vale of howevers) suppose these provisions were bundled into a bill that also spelled out how the goodies are to be paid for and managed — say, half a trillion dollars in new taxes, half a trillion in Medicare cuts (cuts not to keep Medicare solvent but to pay for the ice cream, steak and flowers), 118 new boards and commissions to administer the bounty-giving, and government regulation dictating, for example, how your steak is to be cooked. How do you think this would poll?

Perhaps something like 3 to 1 against, which is what the latest CNN poll shows is the citizenry’s feeling about the current Democratic health-care bills.

Uh, yeah – I don’t know how many more ways Americans can say we do not want this bill as written, yet Obama and the Democrats continue their push regardless of the sentiment, and the concerns, like cost:

Late last year, Democrats were marveling at how close they were to historic health-care reform, noting how much agreement had been achieved among so many factions. The only remaining detail was how to pay for it.

Well, yes. That has generally been the problem with democratic governance: cost. The disagreeable absence of a free lunch.

Which is what drove even strong Obama supporter Warren Buffett to go public with his judgment that the current Senate bill, while better than nothing, is a failure because the country desperately needs to bend the cost curve down, and the bill doesn’t do it. Buffett’s advice would be to start over and get it right with a bill that says “we’re just going to focus on costs and we’re not going to dream up 2,000 pages of other things.” (Disclosure: Buffett is a director of The Washington Post Co.)

Obama has chosen differently, however. The time for debate is over, declared the nation’s seminar leader in chief. The man who vowed to undo Washington’s devious and wicked ways has directed the Congress to ram Obamacare through, by one vote if necessary, under the parliamentary device of “budget reconciliation.” The man who ran as a post-partisan is determined to remake a sixth of the U.S. economy despite the absence of support from a single Republican in either house, the first time anything of this size and scope has been enacted by pure party-line vote.

Surprised? You can only be disillusioned if you were once illusioned.
letters@charleskrauthammer.com

Well, true that. Those of us who were watching with eyes wide open, and not high on Hopium or drunk on Kool Aide, were never “illusioned.” As Obama’s tenure continues, we marvel that so many are STILL “illusioned.” Kinda makes you wonder just what the hell it takes to finally get through the closed minds of his supporters. Buying GM didn’t do it; taking over banks didn’t do it; giving away the store to the unions didn’t do it; his lack of experience and leadership didn’t do it; and now this healthcare debacle isn’t doing it. What in the hell does it TAKE to get through to them?

To be honest, I don’t think I want to know. How about you?

I saw the following video Tuesday morning, and could scarcely believe my eyes:

Someone PLEASE tell me how, in just FOUR SHORT MONTHS, Obama has managed to take over the banks, kick out the CEO of a private company, hand over a private company, financed with OUR money, to a union? Oh, and let’s not forget his handing over CA to another union, SEIU? How?? How has this happened???

Oh, wait - and how about those of us who pay back our credit card bills regularly now being saddled with having to support the losers who act in bad faith? Why do we have to constantly bail out, and ENABLE, those people who go over their means, be it credit cards or mortgages or car loans? And the Senate can stop acting like they give a crap about this issue - Obama VOTED to enable the credit card companies while a senator, along with many other Democrats. So just stop the charade - and stop laying the burden of irresponsible behavior on those of us who have good credit, or else WE might not have that any longer, either.

If you have not already read it, I recommend to you the following post by my good friend, SusanUnPC, “A Personal Note Only For Those Who Voted For Obama.” And I would add, not only “ditto,” but in the most pastoral way possible to those who did vote for Obama, you can just bite me for what you have unleashed on this country. If only there was a way to make only those people support the UAW/GM, pay the ne’er-do-wells’ credit card bills, etc.

Hmm - that’s a thought - let’s figure out how to do just that - let them pay for Obama’s taking over private companies, banks, and kowtowing to the unions (again - I am not anti-union in general, just when they try to take over states or private companies). A pipe dream, I know, but for this moment, it helps to keep my head from exploding…

As in Obama is continuing to channel Bush. I could just as easily entitle this, “Obama is going to make my head explode - AGAIN.” So this morning, I’m watching the news, and they’re all getting ready for Obama to make YET ANOTHER &*#$#&& press conference about how he wants to cut a whopping $17 billion from his 479 GAZILLION dollar budget (okay, it’s really “only” $3.4 TRILLION dollars). But get this - 40% - that’s FORTY PERCENT - of his “proposal” was taken from BUSH’s last budget request. The reporter, Mike Emmanuel, said he wouldn’t call it plagiarism exactly, though I don’t know what else one calls it when someone lifts something whole cloth from someone else, but I would. Oh, and he said that the Democrats were adamantly opposed to it when Bush proposed it, so it will sure be interesting to see what they do this time…

Still, this is a mere drop in the budget bucket, all things considered. Maybe instead of us/US buying up banks and failed car companies, we could cut back the budget some, and I don’t mean cutting services to the People. Just a thought…

So, as a way to ease my aching head, I have a very funny video for you. It goes hand in hand with the beginning of our Live Chat discussion on May 6th of “Hacking Democracy” and voting machine fraud (which continues next Weds., May 13, at 9:00pm):

Ah, yes - our “shadowy overlords” - that sounds just about right!

And, for those of you who were kind enough to inquire, and ask to see him again, I have two photos of Jordan for you, taken on Weds. I just found out that instead of him being 22, he is actually 26 (he is in the Witness Protection Program, having been rescued from a crazy person threatening to shoot him). He is a 16.2 hh Thoroughbred retired Hunter/Jumper. Here he is in all his glory, with one of his stablemates in the background:

And for a bonus, there was this backyard visitor:

Doesn’t that just make your head feel better?

Oh, and I saw Leila’s new owner. She said she and her family are DELIGHTED with Leila, that she is a wonderful addition to the family. Even more, the puffball miniature puppy she had already rescued and Leila are thick as thieves, even sleeping in the same crate together. They have already become inseparable (and she is bigger than the photo below, but just to remind you!).

What’s going on with you?

The other day, I provided a cursory overview of the details embedded in the recently proposed Public-Private Investment Partnership, Will Banks Truly Sell these Toxic Assets?

The main point I tried to highlight in that piece was the need for true price discovery for these toxic assets. A loyal reader provided tremendous insight in highlighting that the PPIP needs to assure that sellers are truly at arm’s length from buyers to insure that the price discovery process is real and fair.

There are potential concerns with this price discovery process highlighted in my piece Send in the Clown. Are the bank portfolios, located within the largest banks needing to sell toxic assets, attempting to prop the market higher?

I received some real time market color from KD at 12th Street Capital as to initial responses from customers, both buyers and sellers, who may participate in this PPIP. What have I learned?

If buyers and sellers previously had a wide gap in the perceived value of these toxic securities, then it appears as if that gap may have widened. While cheap government financing and loss mitigation allow buyers to pay higher levels, their bids are only higher by a few points. Meanwhile sellers, instead of working toward a middle ground in the price discovery process, have actually raised their prices.

How might this get rectified? Uncle Sam, in the persons of Tim Geithner and Sheila Bair, will strong arm parties on both sides to engage and transact.

What may expedite this process? Little publicity has been given to the fact that the two largest corporate credit unions in the country, U.S. Central Credit Union and West Corp Credit Union, failed last week. What do these credit unions own in their portfolios? Lots of toxic assets. Who will handle the liquidations? The FDIC.

Buyers know that forced liquidations by failed institutions will establish price levels. If I am a buyer, why should I be in a hurry to purchase assets, knowing that there are plenty of assets for sale.

Why is the administration making the case for new and unprecedented powers at potentially Treasury, Fed, and FDIC to overtake non-financial institutions?

Matthew Richardson and Nouriel Roubini write on the predicament facing certain banks (thank you, Andy):

Finally, we have to anticipate the likelihood that some banks will resist selling their loans and securities. Why? Currently, the government has been giving them the option to keep holding them with the hope that market conditions will improve.

Going forward, the government must insist on the banks’ involvement in the new program. The reason that financial institutions must be pressured is that they are the cause of the financial crisis. They took advantage of loopholes to avoid regulatory requirements, taking a huge bet on securities they were never meant to hold in the first place.

What happens if removing toxic assets from a bank’s balance sheet at near-market prices shows it is effectively insolvent? Then we will have to face the elephant in the room. We may then have to start asking, “Why keep insolvent banks afloat?” And having asked that, we will have to search for ways to manage the ensuing systemic risk.

Either way, once the plan is fully implemented, we will be entering a new phase of the financial crisis.

The powers that be in Washington know that the liquidation process of these toxic assets will inevitably cause the failure of even more entities, both financial and non-financial. To that end, they are making the case now for new powers to step in, take over certain institutions that may pose real systemic risk, and methodically liquidate them. If that is the case, as a potential investor I am behooved to wait and be patient.

Moody’s Cuts Wells, BofA Ratings. What prompted these cuts? Exposure to commercial real estate. Exposure to option-ARM mortgages. Exposure to California and southwestern U.S. market that has extraordinary high levels of delinquencies and defaults.

The waves are high and getting higher. The cross currents are vicious. The undertow is strong.

LD

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***Cross-posted from my blog, Sense on Cents. Come by and visit!
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I will provide my insights and perspectives on Charlie Rose’s interview of Treasury Secretary Tim Geithner last evening. The interview has been broken down into 6 separate clips, with my commentary preceding each clip.

Part 1
In this clip, Geithner wears both the political and policy hats. While promoting the Obama agenda initially (housing, education, healthcare, energy), he then turns toward the specifics of unlocking the consumer credit securitization markets via the TALF (Term Asset Backed Securities Loan Facility). This facility attempts to restart the securitization market and model which I wrote was broken back on November 12th (The Wall Street Model Is Broken…and Won’t Soon be Fixed). That market provides approximately 40% of the financing to a wide array of consumer finance markets. Geithner attempts to portray a measure of confidence and aggressiveness. The market has currently responded with a vote of no confidence.

Part 2
Geithner addresses further specifics about the TALF and the public/private partnership that would be connected to the effort. The specifics of this public/private partnership are not addressed but, in essence, the government would provide financing (loans) for private entities to purchase asset-backed securities currently clogging bank balance sheets. Geithner does not provide specifics on the terms of the loans and MORE IMPORTANTLY does not address the fact that the government will likely share in the losses on these securities going forward. I believe many private investors are salivating at the potential for this program. Our Economic All Star John Mauldin commented that this partnership is the equivalent of government money coming in the front door and going to hedge funds out the back door. Mauldin proposes a suspension of the “mark to market” accounting rule that forces banks to mark these securities to depressed levels in the presence of no buyers.

Geithner defends his aborted initial delivery on his grand plan as “mismanaged expectations.” He also inaccurately describes mortgage rates as being close to 5%. The “mortgage mirage,” in which many people can not get a mortgage, has 30 year conventional mortgage rates closer to 5.5% and Jumbo rates in the 7% range, but virtually inaccessible.

Part 3
Geithner is forceful in this clip in stating that the government will stand behind the 20 largest banking institutions. These banks represent approximately 70% of the banking industry and - without using the phrase - Geithner is saying they’re “too big to fail.” He defends the capital injected as ultimately being in the best interests of the economy and taxpayers. He rails on the mismanagement and gross compensation practices at many of these institutions. He appreciates the anger and outrage of responsible people who are sufferring from the damage caused by those who have been irresponsible. All good.

When addressing the need for global regulatory changes as well as domestic regulatory changes, I suggest Secretary Geithner listen to former Australian Prime Minister and Treasurer Paul Keating who undressed him this past weekend. Keating opines that the IMF and World Bank will see a massive shift in power to the surplus economies of the East from the debtor economies of the West. Here at home, when Geithner talks about focused accountability, let’s see if he and the Obama administration effect the necessary changes in the corrosive influence of lobbyists as well as addressing the incompetence displayed at the SEC and FINRA.

Part 4
Geithner attempts to make the case that investors, both foreign and domestic, will continue to invest in our country and our U.S. government debt if they have confidence. The administration has the obligation to maintain that confidence. The first step in maintaining the confidence is displayed in the budget proposed by President Obama. Geithner puts his political hat back on in promoting the Obama agenda as being economically sound, laced with fiscal discipline, and promoting their moral obligation.

Investors are less sure about Geithner’s feelings and have voiced their indecision by exiting the markets since this budget was proposed.

Geithner further addresses the necessity for individuals, corporations, and governments to live within their means. Investors have roundly responded that they believe this administration and Congress are doing anything but living within their means given the undisciplined spending in the Stimulus plan, the budget, and the Omnibus Bill.

Geithner uses the lessons of the ’90s as justification for raising taxes going forward. He prefaces his remarks that taxes will only be raised “when the economy recovers.” Charlie Rose appropriately challeneges him on the overly optimistic economic assumptions utilized in the budget. I would ask why the base case GDP in the Bank Stress Test of 2% growth in 2010 is not the same level of GDP used in Obama’s budget. The budget assumes 3.2% !!

Part 5
In this clip, Geithner is largely wearing his political hat. He defends the Administration’s vetting process as he staffs Treasury. He further pushes the Obama agenda. In regards to criticism he has experienced, he responds that it is purely part of the job.

On the auto front, he dodges the question of bankruptcy.

Charlie Rose then questions him on what he has learned so far in his role as Treasury Secretary. Geithner responds that many may not know that he spent a large part of his career at Treasury serving under Robert Rubin and Larry Summers. He holds them in very high regard and seems to promote that respect for them is universal. He does not address that Rubin was at the core of the lack of regulatory oversight that we have had for the last decade, as well as being the prime architect of the massive systemic risk that Citibank has developed.

When asked if he could see the problems developing that now envelop our economy, Geithner ducks in stating that most people missed it.

Part 6
Geithner remarks that both capitalism and our financial system have already changed and will continue to change as the necessary regulatory systems are put in place.

Geithner further adds that he is confident America will respond to this crisis because it is not a question of ability but a question of will. He believes this Administration possesses the will to make every necessary move to restore our economy.

In my personal opinion, it is also most definitely about ability as well. Do we have the measure of integrity and quality in our elected officials? Chuck Hagel, Leon Panetta and others have railed on the corrupt system of lobbying, campaign contributions, and persistent fundraising that has polluted our country and the process of government. While the Obama Administration has spoken about addressing parts of these issues, their actions and policy proposals to date indicate otherwise.

I found the Geithner interview to be interesting, while not exactly enlightening.

He is both politician and policy maven. To this point, the markets have graded him as decidedly mediocre. Although, to be fair, Washington as a whole is graded no better.

LD

Video provided by CheneyWatch.org for NoQuarterUsa.net YouTube channel

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**Cross-posted from my blog, Sense on Cents. Come by and visit!
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I very much appreciate reading material written by people whom I perceive as having no agenda. I have tried to bring people like this (including Ray Dalio, Paul Keating, Bob Rodriguez, Steve Rehm, Kevin Doyle, Vaclav Klaus, and many others) to Sense on Cents because I firmly believe we all become more educated and informed in the process. Please let me know if and when you perceive me, any of the pieces to which I link, or radio guests on NQR’s Sense on Cents as not dealing totally in the truth. Constructive criticism is always appreciated and will make for a better site.

Along with the aformentioned, I have also previously remarked on my high regard for John Mauldin, one of our Economic All-Stars. John himself possesses an insightful global perspective and has a circle of friends and confidantes that are simply off the charts.

In John’s weekly Outside the Box, he shares with us the perceptions of Michael E. Lewitt. Mr. Lewitt writes at length on topics we have covered here previously, but his level of detail and thoughtful analysis are well worth the read.

Topics covered include:
1. economic policies proposed by Obama administration are not promoting long term growth.

2. market outlook . . . sell rallies as earnings and prices are projected lower by 10-25%.

3. R (ecession) vs D (epression) . . . whatever you want to call it, our economy is going to have low growth at best when growth does return . . . time, time, time . . .

4. changing dynamics in the world of investing mandate that people get further up the learning curve . . . . Come to Sense on Cents!!!

5. bank nationalization, in perception or actuality, is a drag on the economy as a whole and specifically for well managed banking institutions

6. holds particular scorn for the “bank robbery” that occurred at Merrill Lynch during the bonus payouts in late 2008.

7. GM is bankrupt in all but name, so now it is time to deal with the truth and go through the bankruptcy process..

8. Obama’s budget utilizes wildly optimistic economic projections and is set up to fail. Government waste MUST be eliminated.

9. the coming meltdown in eastern Europe “will have major negative consequences for world financial markets.”

As I read Lewitt’s piece, Reality Bites, I kept nodding my head and whispering to myself, ‘that’s right,” “yep, I agree,” and “why doesn’t the media cover this?”

This piece may take two sittings to read, but as you look to navigate your own economic landscape it is a must read. Please share it with friends and colleagues as well.

LD

These are clearly the times that try our souls. In an attempt to bring a measure of perspective to the markets and economy, let us review some month-to-date stats for February and add economic commentary:

DJIA: -9%
S&P 500: -5.7%
Nasdaq: -2.3%
Bonds: flat to -10% depending on sector
$/Yen: 94.14 versus 89.81
$/Euro: 1.262 vs 1.280
Oil: 38.78 vs 41.60
Gold: 975 vs 929

There really has been no place to hide. Why? Very simply because in a “massive margin call” (selling assets purchased with borrowed money) when debt cannot be refinanced, all assets are “on sale” in order to pay down debts!!

We have achieved the objective we were looking for in the DJIA and are about 5% away from the objective on the S&P. If there are people who were outright short the market “nobody ever went broke taking a profit.” The question is where do we go from here? In order to address that question, we need to break it down into its component parts.

Will we see more forced selling and by whom?
Yes . . . hedge funds, private equity, insurance companies and others all will be sellers. Wall Street banks will NOT allocate balance sheet to take on assets. As painful as this is, I personally do not think we have seen a capitulation. While there will be some pools of private capital to provide liquidity as need be, they will be patient. As bad as the market feels, it does not strike me as oversold or overly cheap based upon expected earnings and the degree of uncertainty/risk.

Interest Rates
While we saw healthy activity in various sectors of the bond market in the first 6 weeks of the year, many sectors have given back a lot of ground this week. Credit risks, default risks, and foreclosure risks are keeping investors away. With a whiff of inflation today in the Producer Price Index and the Federal Reserve minutes focusing on inflation more than deflation, I do think we can see a serious move higher in government rates.

Global Markets
Europe is worse off than the United States. Asian markets had initially bounced but have since given back those gains. These export based economies have come to a screeching halt. Germany indicated it may take a stand, if need be, to support the Euro. Eastern European losses pose major concerns for Western European banks. I also read a startling stat today that Western European banks hold 75% of emerging market debt, while the U.S. and Asian banks hold less than 10% each. Sovereign credit risks are very high. Could a government default or devalue its currency to manage its debt? Most definitely!!

Economy
It is all focused on global government intervention. While the Obama Administration has only been in office for a month, the markets are not giving him, Secretary Geithner, and team a resounding welcome. The Administration has created measures of uncertainty while Congress was nothing short of pathetic in the process and execution of the stimulus plan. The housing plan and bank plans also present a wide array of “unintended consequences” which unsettle the market.

When can I get constructive?
I will go back to my piece entitled “Reason for Optimism” which I wrote on the heels of the Administration propping the “bad bank” (remember, I liked Bank Transition). For those who forget, the DJIA moved up toward 8600-8700 at that point and is down approximatley 13% since then. I do think the market is going to price certain banks to the point where the government will have little choice but to temporarily nationalize them. Where is Sheila Bair? We used to hear from her regularly. Has Secretary Geithner stifled her? The sooner the government makes this move, the sooner the markets may start to stabilize while not necessarily improve. Can you make investment decisions based on what wonks and policy mavens in Washington may do? We’ll keep our ear to the ground but don’t hold your breath because they have not given us a lot of confidence to this point.

I’ll keep writing. Please keep your cards and letters coming!!

LD

Well, Obama got back to Washington, DC after his long weekend away in Chicago. Then he went wheels up to go to Denver, CO to sign the $787 billion dollar Porkulus bill. Why Denver? Because CO was SO helpful to him during the Campaign, and that’s where he got to play Greek Temple dress up. Oh, wait - that’s the real reason. What HE claims is, besides it being the stage of the DNC Convention, it is to promote Green Jobs. Yeah. Okay. Whatever.

You know - we ragged on Bush constantly for his little jaunts and vacations. Funny, I don’t hear any of the Democrats talking smack about OBAMA already having taken TWO weekends away in less than a MONTH. Oh, right - Obama can do no wrong. I forgot. My bad. Ahem.

Getting back to the Porkulus Bill - once Obama signs it, the SECOND his hand finishes the signature, not only will we be in the hole for that $787 Billion, but we will have to borrow ONE TRILLION DOLLARS. Yes, I said one (1) TRILLION buckaroos. Yep! And where will we get that money? Who will lend it to us? Excellent question! Stu Barney said this morning that Japan is our biggest lender, but they are in the midst of a Depression, with a big “D.” So, don’t know how they will be able to pony up any more for our poor fiscal management.

And, the Stock Market has PLUNGED this morning as the Porkulus Bill is about to become law. Great. Way to stimulate the economy!

Oh, CRAP - maybe this IS their idea of “stimulus”!! To send it DOWN, not UP!! We are so screwed…

By the way, did you know that whole light rail thing in there is to have a high speed train go between Los Angeles and Las Vegas? Gee - I wonder who would have worked to get THAT in there. Hmm. Let me think. It couldn’t be the Mormon, Senate Majority Leader, REID who pushed for the Sin Express, could it?? Oh, no - I’m sure not.

While my senator, Lindsey Graham, is raising some eyebrows with his “Nationalize the Banks” cry, he gets it right in the following video when speaking back to Seantor Chuck “Chattering Class” Schumer:

Bottom line? We’re screwed. We’re screwed because the Party in Power is taking advantage of US because they can. We are going to be in debt for ages to come because of this Porkulus Bill, and the ADDITIONAL $1 Trillion we are going to have to borrow on top of that. The kicker is that this bill will do very little to actually stimulate the economy. That has nothing to do with Bipartisanship per se - it has to do with the Democrats taking advantage in a massive way, with little regard for restoring our economic security. That there was no bipartisanship of which to speak is unfortunate - yet another promise broken by The One. Not surprising though.

The bottom line is that this bill, soon to be a law, will do nothing to kick-start our economy, certainly not any time soon. Hey, I’m not the only one who thinks so. Go look at the freakin’ Dow - that tells the tale. And the tale it tells is a sad one - we’re screwed.