Tuesday, September 30, 2008

It's the DERIVATIVES, stupid!

Once again, America, it's not the mortgages, stupid, it’s the DERIVATIVES!

http://www.newsweek.com/id/161199

SIXTY-TWO TRILLION in derivatives -- collateralized by less than $1.5 Trillion in mortgage backed securities -- to be exact.

The U.S. economy can survive – even if e.g. $3 Trillion in mortgages and property values essentially went to ZERO -- which would never happen anyway... because at some point, say $0.05 to $0.20 on the dollar, there are buyers – there always are.  That’s why we call it market-based Capitalism!

Hell, the stock market lost a TRILLION yesterday alone!  Has Nuclear Winter ensued?  Well, I don't know about you, Mr. and Mrs. TV robot consumer/voter, but the sky is clear and the sun is shining where I live!

However, Wall Street cannot survive $62 Trillion in derivatives going to zero.  Their business/economic model is broken, and was catastrophically flawed to begin with. 

Suddenly, today, Wall Street’s financial “engineers” can no longer “manufacture” new ways to turnover the same nickel 1000 times, aggregating BILLIONS in fees from those transactions.

That is America’s problem – i.e. economy/government by Wall Street, through Washington.  It is fundamentally a house of cards.  And guess what?  The house of cards may finally be collapsing.

To this I say: Good riddance!

Sunday, September 28, 2008

TARP Again Official -- But No Smiles Allowed

Remember.  It’s not the mortgages but rather the $62 TRILLION in Wall Street generated derivatives (e.g. Credit Default Swaps) collateralized by them…

 

But at least, out of all of this collapse and bailout, someone (actor and finance editorialist, Ben Stein) that sort-of works for the man has finally been published describing basically just how and how much rigged the investing game is for you and me, the little guy taxpayer/investor: http://www.nytimes.com/2008/09/28/business/28every.html


Though what really pisses me off, at the moment, is that I wanted to link a picture here -- like the one on the front page of the Times a mere 2 hours or so ago (when I should have snabbed it).  It showed the whole sordid gang: Paulson, Frank, Pelosi, Reid, Baucus, et al. smiling ear-to-ear after they had finally shammed the official shite (bill) together.

But SUDDENLY (and I’m not kidding about this) all smiling TARP II, The Sequel celebration pictures have been taken down, replaced with dour, concerned, serious poses, seemingly across the entire www.

Thus, I hereby defy anyone to submit a picture of our glorious pigs (er… I mean leaders) in all their shit-eating-grin glory, celebrating the Stock Market’s (er… I mean Main Street’s) salvation!

Proceeding to youtube.com. Maybe someone uploaded a “smiley” clip there before the serious-only edict officially came down?!

Saturday, September 27, 2008

An Open Reply to Accrued Interest

http://accruedint.blogspot.com/2008/09/what-would-ya-like.html

So as much as we all hate the idea of a government bailout, we really need to consider what kind of capitalism we think we're defending. I'd love to hear more about long-term solutions to our problems. But in the short-term, we have to stem the relentless waves of fear. Before its too late.

Too late for what?

No personal offense intended, Mr. anonymous fixed income investor, but perhaps the real answer is… too late for you to keep your Wall Street job?

My wife and I have ½ Million in liquid investments (all cash and CDs today).  We largely own our property, including two rental homes.  We have small government and defense industry pensions.  And she can sign up for Social Security in two years.  Finally, we live in sparsely populated, ruggedly individualistic Montana, where we won’t have to cope as much with America's increasingly Soylent Green social and economic reality – except over the TV.

Thus, I told my wife yesterday that I think I could accept having that ½ Million in cash GO TO ZERO – as long as it meant Wall Street was wiped out too!

By this I mean:

  • Wipe out every dimwit, Ivy League MBA that caused this mess thinking he/she was smarter than those of us that play by the rules and pay our bills on time.
  • Wipe out the Washington lobbyists and mega corporations behind the entire ugly, cronyistic Wall Street and Washington sham such people cover up behind labels like market-based capitalism.
  • Wipe out government by Dow Jones Industrial Average.
  • Wipe out government by Hedge Funds.

In short, wipe out government by those whose TARP actions are presently designed to insure that my, and the vast majority of Americans', quality of life will never, ever, ever improve -- no matter how hard we work, save or invest!

If we, the American people, had a vote in this, I suspect it would be to wipe out the whole rigged game.  As long as the house is wiped out too!

Seeing that would be worth MILLIONS of my own dollars – if only I had that much to lose!

Friday, September 26, 2008

After Eight Years...

In tonight's debate, after ceding the first 30 minutes to McCain on taxes and spending (earmarks),  Obama finally got up off the canvas on Iraq.

But what I do not understand, is how Obama lets McCain get away with the whole concept of Bushonomics in the first place.

My response, had I been up on that stage, would have been something like this: "My God, John, if your policy of rewarding those that don't need it with more and more tax cuts, with greater and greater capital gains profits, with more and more and more and more... IF THOSE POLICES COULD EVER BENEFIT A MAJORITY OF AMERICANS, THEN MY GOD SIR, WOULDN'T THEY HAVE DONE SO BY NOW!?  AFTER EIGHT YEARS, JOHN, WOULDN'T THEY HAVE DONE SO BY NOW!?  Shame on you, John McCain, shame on you!"

Thursday, September 25, 2008

Dollar For Dollar

If taxpayers have to bail out Wall Street, then we must own any profits resulting from the bailout.

The bottom line is: one dollar of equity (control) for every dollar of bail out.

If we must buy them then we must own them too!

They're OUR banks now!

Saturday, September 20, 2008

NO to Wall Street Greed and YES to Saving Again

In light of recent proposals for a Cosmic ($1 TRILLION) Wall Street bailout, it seems to me that, as a LEGISLATIVE body, Congress should enact laws to nationalize ill-gotten gains (through fines and incarceration), rather than merely absorb lousy debt created by Wall Street pirates. 

Encouraging Moral Hazard has failed to build and sustain our economy.

Incestuous corporate board room and CEO relationships should be rendered illegal.  No corporate officer should be compensated in excess of 100x average worker pay at a firm.  Corporate personhood, in the form of incestuous lobbying, which exploits and undermines our Democracy must be ended. 

Now that excess is the norm, Congress must consider taxing away Wall Street's most egregious practices by, for example, enacting new Federal trading transaction fees (e.g. 0.25% of the dollar amount of each trade) and by raising, not lowering, capital gains rates (or simply taxing all active and passive capital gains as ordinary income).  Only investment and saving can create stable jobs and economic growth.  In contrast, current, mostly Republican led, economic policy has produced a fundamentally unstable American economy -- a house of cards built on a foundation of debt and speculation producing only bubbles and crashes.

A better future demands that America pay down its debts and save again. 

To this end, Congress should enact a National Savings Plan -- to replace existing IRA, Roth, 401K and SEP accounts with a single, comprehensive national savings policy to cover both tax deferred and taxable retirement and savings accounts.   Absent real alternatives to dollar destruction and Wall Street speculation and risk, Americans and their government will never save substantially and America will continue into decline, instability and class warfare.

Under a National Savings Plan, there should be a fixed yield option guaranteeing at least 5% annual interest, in addition to standard, high risk, equity-based growth options.  Risk and inflation prevent and negate savings.  In contrast, a reasonable, safe and non-volatile return on savings would do exactly the opposite.

One-time consumption, stimulus packages should be discouraged. 

Exacerbating overspending will never fix America's negative per capita savings rate -- which has broken retirement for older workers and prevented younger workers from effectively participating in the U.S. economy.

Recent crises requiring drastic government intervention prove that current U.S. economic policy and structure is unsustainable. 

Economic crisis must be replaced by economic stability, where policy success is measured by increasing wages and living standards -- not by useless, risk and inflation rewarding metrics like GDP growth rates and average wage statistics skewed by the high salaries of the wealthiest workers.

In short, it is time for bold action to reform U.S economic policy.  The system is broken for the majority of workers, who are further burdened over and over and over and over to fund bailouts for failed Wall Street schemes and Republican robber baron ideology.  Fix the dollar.  Fix saving.  Fix retirement.  Fix America!

As Bob Reich has said, in a healthy democracy, "the economy should work for us [the majority], and not the other way around."

Cosmic Bailout

Congratulations, Mr. and Mrs. Taxpayer, you are now the lucky owners of all the lousy debt instruments that Wall Street created, but no longer wishes to hold.

And since The Pigs own the system, it is you, and not they, that must pay for its mistakes!

Thursday, September 18, 2008

Unconventional Ruin

"A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him."

John Maynard Keynes, 1931

Wednesday, September 17, 2008

God Bless America!

Latest news…

Apparently, the bailout of AIG (er… I mean bridge loan) may require fully ½ of the actual, liquid capital the U.S. government has on its books presently…

At the start of the year, the Fed had close to $800 billion on its balance sheet. Tony Crescenzi, bond analyst for Miller Tabak & Co, estimated that following the rescue of American International Group, the Fed may only have $195 billion left.

In other words, apparently, THE U.S. GOVERNMENT is now low on liquidity…

Thus more dollars must be printed and more treasuries must be sold – to sterilize those dollars – so that the bailout slash Nationalization of all these insolvent/POS firms (like AIG) that have been running secret hedge funds can continue unabated!  (There will no doubt be more -- and Mr. Stock Market knows it.)

For review, (yes, I know it's something of an oversimplification but it's accurate enough, based on net effect) these secret hedge funds within firms like AIG (god knows how many there really are at this point) have been driven, either directly or indirectly, at least until the gimmick collapsed, by the carry trade resulting from free (1% interest) Alan Greenspan money that essentially capitalized the housing/credit bubble.   It takes as much as 30-40x leverage to milk the carry trade arbitrage.  Much of this leverage has been collateralized by mortgage backed securities (MBS) then hedged through credit default swaps (CDS).  At AIG it was the CDS gamble that blew up as reserve requirements for insurance on hedged debt tied to increasingly worthless mortgages (ultimate writeoffs will utlimately exceed $1 TRILLION).  In short, the net effect is that credit losses and downgrades are so rampant that money (credit) - i.e. the buck as we know it -- has been broken.

For review, MBSes are becoming worthless because each day more and more homeowners walk (forcibly or willingly default) on low/no equity mortgages (even 20-30% equity holders are walking at this point in bubble markets like California and Nevada – Ed McMahon syndrome) because millions of homeowners finally understand that they never, ever will be made whole, investment-wise, at their inflated purchase prices and colossal jumbo loan sizes.

Thus no one will trade with anyone.  Defaults are soaring and CDS issuers like AIG face a Katrina like storm of bad bets.  Thus, virtually every liquid investment (equities) held by endangered firms is being liquidated as I write this.  And spreads, swaps, tranches -- i.e. financial derivatives of all shapes and sizes -- are simply blowing up (rate/spread-wise) as capital markets become illiquid.

In summary (gallows humor)…

I wonder if  this will affect interest rates – i.e. the ultimate value of U.S. currency?  (Though today flight to safety is causing the dollar and long treasuries to rise in value).

In summary (simple description of true economic reality America faces)…

Today, in technical terms, the U.S. economic scenario has changed yet again, having obviously become quite fluid.

Yesterday we were The Soviet Union of America (bailouts of rich people to privatize profits while socializing losses to poor people -- taxpayers).

Today, if our creditors – China, Europe, Japan, Russia, oil States, etc. – start balking at buying ever more U.S. paper we will embark on a path to become the next Weimar Republic.

Meanwhile, to try and put a tourniquet on the blood-letting, the uptick rule may be reinstated or shorting stocks will simply be made illegal.

God Bless America!  God Damn America!  Either way, the Pigs will always win and You, their serf/taxpayer, will always lose!

Monday, September 15, 2008

500 Points Closer to ZERO!

Remember the final scene in Fight Club?  – when banks on Wall Street explode and topple like dominos…

Well, I never thought I might actually live to see it – but that's how George Bush's economy looks today.

But, suddenly, I find I'm looking forward to a world where all men are created equal -- again – as always it should be!

Though, like Steely Dan sang so many years ago, Only a Fool Would Say That...

Peace, Love, Out!

Sunday, September 14, 2008

Greenspan: "I wouldn't put my money on it."

"I wouldn't put my money on it."  was Alan Greenspan's answer to George Stephanopoulos' questioning if the United States could skirt an economic recession in 2008 or 2009.

He's right!  I wouldn't put my money on it either! 

But then he's also one of the most culpable contributors to America's current economic predicament.

  • Greenspan supported repeal of the Glass-Steagall act which had regulated U.S. depository institutions in order to prevent off-balance-sheet (remember Enron?) Special Investment Vehicles (SIVs) that created the housing bubble and led to a credit collapse that has essentially taken America's investment banking system down and placed every single financial account and transaction in the world at greater risk.
  • On January 25th, 2001, Greenspan testified before Congress in support of the Bush Tax Cuts for the Rich that ultimately led to larger and every growing Federal Budget deficits under the Bush administration.  Greenspan testified that the U.S. government should essentially be prevented from accumulate capital surpluses, because public accumulation of capital, even to pay down the National Debt, could limit economic growth.
  • During the recession following 911, Greenspan approved lowering the Fed Funds rate to one percent which,  adjusted for inflation, created negative Federal interest.  Currency debasement in turn stimulated promiscuously irresponsible lending, spawning a carry trade arbitrage against the U.S. Dollar, whereby speculators like large hedge funds profited immensely, but briefly, simply by borrowing short from the U.S. government then lending and investing long outside the U.S. using 30 or 40 times leverage.

With friends like Greenspan and the Republicans, who needs enemies?

Above all else self evidently wrong with pandemic Wall Street and Washington synergy today, Greenspan's cheap money policy, coupled with unending cycles of Republican-led financial system deregulation, precipitated the bubble and current collapse in U.S. housing and banking and exacerbated off-shoring of U.S. factories and jobs through the carry trade.  Such profligate and arguably corrupt leadership, leading to unsustainable levels of systemic risk, explains why a bear market in global equities and debt instruments has likely only just begun, as well as why the per-capita savings rate in this country, in contrast to creditor G8 nations and all BRIC nations, is negative.  History shows that debt crises punctuate the decline of great nations.

Thus, today marks a unique opportunity for the Left with regard to the pursuit of a Real, Populist, Egalitarian American Democracy.

As the three legs -- jobs, homes and consumption comprising the stool that is American class aspiration crumble -- the same stool upon which Alan Greenspan would today not risk his own capital in support -- the probability rises, perhaps unlike any time since The Great Depression, that America's White, Male, pseudo-Christian, Ivy League educated aristocracy, comprising 2 or 3 percent of its population, will finally be called to account by the electorate for its crony capitalist hegemony.  Perhaps Enough is [finally] enough!

So, despite obvious and growing economic anxiety and suffering, for which I do not rejoice, ironically I am compelled to thank Mr. Greenspan, today -- for rendering populist arguments for economic justice and real American Democracy so much easier to make!

Tuesday, September 09, 2008

The Katrina Economy

Note that this is a one hour Charlie Rose clip, with guests: New York Times' Floyd Norris and Gretchen Morgenson  as well as PIMCO's Mohamed El-Erian, and New York University Professor Nouriel Roubini -- about the economy we inherit from George Bush.

If you watch the clip, you may agree with me that Chris Matthews was utterly wrong today on Hardball in asserting -- if Obama can somehow articulate a bridge to the future for the next generation -- that white, middle-class mothers under age 45, with whom he's apparently slipping in national polls, will vote for him. 

The reason he's wrong is that Matthews, an elite media celebrity with a multi-million dollar, multi-year contract, is incapable of a legitimate assessment of the true state of the U.S. economy -- in its frightening middle-class context -- given the ongoing housing collapse and in the wake of taxpayer-funded bailouts of Bear Stearns, Fannie Mae and Freddie Mac.

And the reason Matthews' too future oriented strategy would fail is -- because each passing day leading to this election, millions of mothers (and fathers) in this country are feeling increasingly panicky.  Like 2004, such troubled people may yet again not vote for change.  Instead, they may again mistakenly vote for normal, for a fictional, nostalgic Andy Griffith past, when America was happier, as a natural avoidance to the bleak future they see every day in the news and the Dow Jones' Industrial Average.

Today, millions of working Americans are stranded on the rooftops of George Bush's Katrina Economy.  The water is rising -- and they're praying a helicopter is on its way!  

But if that helicopter arrives, there seems a growing fear among them that the pilot may be different (young, black, thoughtful, highly-educated and articulate).  And America is not used to different.  So, as in the aftermath of 911, some could be fearful enough to again vote Republican -- for Grandpa, the War Hero and a common, white, pretty, eerily familiar mother that would carry a disabled child to term, no matter the defect.

Thus, like 2004, this election has again unfortunately descended -- to personality, values, and added race.  Panic, after all, is an emotion.  And emotions muddle clear thinking.  

How can any woman's children cross a bridge to the future when parents lose their houses, their jobs and their tiny, but highly coveted, trickled down slice of the American dream?

Yes.  It's insane!  With McCain-Palin, the helicopter never gases up, let alone rescues anyone -- anyone not already listed on the Fortune 500.  Whereas, with Obama-Biden, and a new Congress, maybe America's middle and under class still has a fighting chance?

So, Messers Obama and Biden, please do all that you can to empathize with gnawing, growing middle-class economic panic.  Like Reagan in 1980, level with us daily and especially during the debates.  Americans need to better understand why things are so bad and how much more likely they are to worsen under the disregard and profligacy of the Bush administration's 3rd term Presidential candidate, John McCain.  Like Ross Perot, use pie charts and statistics if you must.   Unemployment is rising.  When it reaches 8 percent, that giant sucking sound will be so loud we won't be able to hear ourselves think.

So, first, calm us down!  Then clearly and rationally demonstrate exactly why and, most importantly, how you will help those of us most in need first -- instead of providing yet another victory lap for globalism's winners' circle .  Then Democrats may win, for once, and finally get an opportunity to provide some overdue relief.

Monday, September 08, 2008

The Depressionest Guys in the Room

Ousted Fannie Mae and Freddie Mac CEOs Daniel Mudd and Richard Syron are expected to pocket as much as $50M in severance pay -- for running Fannie and Freddie, the too big to fail ($5.3T outstanding MBS debt) government sponsored entities that sustain liquidity in the U.S mortgage market, so far into the ground the U.S. Treasury had to take action, defining a Federal conservatorship and paving the way for ultimate public/private reorganization.

During their tenures since 2003, Mudd and Syron have separately received at least $38M in compensation.

But then I'm sure the movie (hint, hint) will supply even more gory, inside details...

And Republicans call this shit Free Market Capitalism?!  Try crony capitalism and trickle-down capitalism!

Frankly, at this point, wouldn't Socialism be more cost effective?

Why not, for example, nationalize energy exploration, production and distribution?  How about nationalizing health care?  I mean, if  we taxpayers must bail out morally, now financially, bankrupt Wall Street over and over and over again, then we at least deserve the opportunity to reorganize a few firms that can a.) benefit our society and b.) turn a profit!

Sunday, September 07, 2008

Barack, Let Your Hands Go...

After watching your post-speech interview with George Stephanopoulos on This Week (I mostly liked the speech clips but disliked the interview), I am compelled to invoke a perhaps cliched metaphor -- that you are a young, gifted boxer in a long and grueling bout.  It's the tenth of twelve rounds.  The scorecards are even and the judges are deadlocked.  Your opponent, the Champion, is tired, old and slow, but he is as powerful as he is brutal and ruthless.  Win or lose, it is time to abandon caution, calculation and flippancy.  It is time to let your hands go... guided less by your mind and more by your instincts and your heart.

In other words, Mr. Obama, please stop trying to crossover to the Republican base and to the confused middle with carefully-parsed, four-minute answers, where any casual observer can see electoral college calculus computing behind your eyes.  You said Americans are not stupid!  Give us a chance to prove it.  Barack, you're a winner, let your hands go... close the deal through greater engagement with old and new Democrats during interviews and the forthcoming debates.

Simply put, at this point in U.S. political history, the Republican party is not big enough to win a Presidential election.  Thus, you need only Democrats to win.  How did Ronald Reagan win?  Democrats.  Why did John Kerry lose?  Democrats.  If Democrats turn out, as they did in the primaries -- you win.  If they are lukewarm and uninspired, or only moderately inspired on election day -- you will probably lose. 

I also contend that the majority of swing voters, whether they know it or not, are Democrats.  They have moderate incomes.  They aspire to working and middle class dreams: a house maybe, perhaps a better life for their children.  And as you well know, they long to believe in something beyond cynical, divisive, Conservative Think Tank manipulation masking corporate fascism.

Thus, you need voters like my wife.  A lifelong Democrat, she donated money and volunteered time as a precinct captain for your primary campaign in Helena, Montana.  She made get-out-the-vote calls.  She was disappointed with the poor logistics behind the call lists (many calls she made were repeats, seemingly due to poor record keeping).  But she became disillusioned (and stopped volunteering) after your middling Senate vote supporting telecom immunity under FISA renewal.

You don't need voters like my dad.  He is emblematic of voters you will never reach: white, old, peevish, angry and confused.  People that decry "big government" yet sign up early for Social Security and Medicare -- "before the Government goes bankrupt."  People that "don't care" about recycling or global warming.  People that "earned" their right to drive cars and consume oil -- forever.  People that were always financially secure in America and retired after many years at the same job.  They can't help feeling lucky, exceptional and entitled.  But to do so, they need to delude themselves -- that it's still 1959 in America.  They wouldn't vote for a 47-year-old, black President in 1000 years.  They voted for George Bush twice.

So please, Mr. Obama, stop trying to be safe enough to reach everyone and try harder to honor, to strengthen and to enlarge The Democratic Wing of the Democratic Party -- that put you over the top against Hillary Clinton.  We do not want smiling, pretty, innocuous, prom-king Barry Obama.  We want Anti-Bush Barack Obama.  We want someone less comfortable as our candidate and generally more earnest and authentic -- to mobilize every single adult in families with incomes under $50K per year to vote.  Please try and be less flip and more solemn in making our case -- that George Bush's Republican Party, despite its cynical "small town values" rhetoric, abandons ninety percent of its constituency the day after every election.

Despite the fact you are not Left enough for us, Mr. Obama, you remain our only choice in America, short of emigration.  Please honor our trust and endorsement by making a real difference for America's politically and economically exploited majority.  First, however, you must convince that majority that John McCain, if he cares, cannot possibly change Washington and America due to the narrow self-interests driving his Party.  To this end, we wish to see you smiling and calculating less and caring more.  America is in deep, deep trouble and being President is always serious business.  Surely, a purer heart than George Bush's is needed.  If it be yours, please simply show it more!

Good luck and Godspeed.

Sincerely,

Todd and Mary Ryder

Friday, September 05, 2008

What's not to like?

http://www.marketwatch.com/news/story/stock-market-may-already-voting/story.aspx?guid=F82F7147-937C-4AC7-A226-5002673EAC0C&dist=SecMostRead#comments

A 72-year-old, cancer-ridden, pus-bag President?
A gun-toting, oil-drilling, MILF, beauty-queen VP -- one heartbeat away from the hardest job in the world?
Come on, Mr. Stock Market, what's not to like?