The Numbers Tell the Story

I seem to be locked into viewing the continuing foreclosure momentum. There are 5 million families who owe at least 25% more than what their house would sell for. 2 million go underwater if their houses loses 5% of their market value. There are about 11 million underwater. The biggest statistic is that since 2006, families have lost $7 trillion in home equity value. That has created a huge psychological impact to feeling rich or poor and what and when to spend money. Compare that to the trillions in debt this country has incurred and one can see that we are being bombarded from all directions. The housing situation is more subtle yet powerful in its influence over everything else. Look at Fannie and Freddie and the billions they ask for quarterly with no ceiling in effect like our debt ceiling that Congress has to vote on. They receive what they ask for. This is a reflections of millions of people losing their biggest asset. Viewing the headlines today, it seems to be under the radar because there has been so much emphasis on it in the recent past. Yet it will come back to the surface again, because action is required to set this on a different path.

Bernanke's latest implemented plan to buy $600 billion of bonds to keep the interests down and the dollar lower has created the opposite effect. Since our search for a home, the mortgage rate has gone from 4.12% to 4.7%. That is a 14% increase in less than two months. On a $150,000 mortgage, that is an extra $72.50 a month.

Numbers are meaningful. They tell the story. Is there anyone interested in reading it?

Bank Bailout List

A while ago, I mentioned that the court was to decide whether Mr. Bernanke had to make the list of 20 banks that would have failed if not rescued available to the public. Last week a court said this list must be made public. I wait to see this list, but also know that it is not in his best interest nor these banks to do so. I wonder if he will appeal the decision.

After this event, Mr. Bernanke said he felt, "sad...." that Lehman Brothers failed, but said he couldn't do anything. I do not understand what made that company different from the too big to fail group, given the market havoc its bankruptcy created.

Once this list is available, we are going to find out the magnitude of the lack of 'objectivity' with the feds in how they chose which institutions to rescue. Transparency here will show where changes are needed. I expect more market upheaval with this knowledge.

We can use this situation to apply to our personal lives too to see where transparency is needed. We have places within that are subjective and need to be exposed for our health and well-being. Wherever resistance is felt, the truth waits to be revealed. We need to either develop or access our own inner justice system. This will automatically contribute to changing our outer system where our courts are acting on our behalf. Again, as I said in the last blog, each of us is important to creating change where needed in our government, schools and so on. We can take the lead by consciously changing ourselves and then deciding what contribution we want to make to help pave the way to implement the changes.

Concern about TARP and Citigroup repayment

There is growing evidence that our country is on a path of having to take a 'fall' because of what is going on with the way money is being managed.

The inspector general who oversees TARP estimates the total cost of Wall Street bailouts could eventually reach $23.7 trillion. And I thought we were only talking hundreds of billions. And look at the fact that the $200B savings that Geithner pointed out is going to be spent versus saving to apply toward this huge liability.

Then today I found out that Citigroup who is repaying $25B of their TARP loan is going to get a giant tax break of $38B. Companies are allowed to offset their losses against their gains, but in this situation, the government sale of 34% stake in Citi and Citi's share sales qualify as a change in ownership. What is totally disheartening is that the news reported the repayment and excluded what the 'government intentionally set up' that requires the IRS to allow it. This may be legal but is totally unethical. Wouldn't you repay your debts if you were going to receive an even bigger monetary gift by doing so? This kind of behavior crosses all lines of political parties. It doesn't matter who is in office. Money always affects the leaders' judgment by forcing action that always keeps it first versus looking out for the welfare and common good of the people. Yet at this time in our history, we have gotten the better of ourselves, because we have weakened our ability to maneuver due to the mountainous debt. Debt buries at all levels when it gets unmanageable. It appears to me that handwriting is on the wall and it is not in the distant future.

One final comment, I saw Time chose Bernanke as the person of the year. I can only laugh since as you know I think he should be replaced by allowing the banks to lead the way in telling the government what to do through intimidation of the financial system collapsing. I keep remembering what Thomas Jefferson said about the banks being too powerful. I would rather this system fail and we start over than imprison each of us, our children, our grandchildren, our great grandchildren, and future offspring indefinitely.

Federal Reserve Transparency, Bernanke re-nominated, CIA Probe

I am all fired up this morning after reading the president has re-nominated Bernanke as federal reserve chairman. If the senate confirms him, then status quo is the name of the game in Washington. Our use of easy credit policies is what led to the Great Depression with unemployment of 20%. And if the same measurements are used today that were used then, unemployment is closer to 16%.

Some good news is that a federal judge said today that the federal reserve has to identify to the public the name of the banks who received the $2.2 trillion in loans. Bernanke did 'say' that transparency is important, yet he is the one who is trying to keep the list secret. Another interesting fact is that during the Depression the total stimulus as a percentage of GDP was 8.3%. In all the other 17 recessions since creation of the federal reserve, it did not go above 7.2%. Today it is at 29.9%. The masses need to take charge and speak up. Faith and trust in the government can only goes so far as the numbers, growing exponentially, speak for themselves. Again, once the foreign countries lose this faith, we will all be shocked awake. We have the opportunity to take the lead instead of being crucified after the fact.

The White House Budget Office said that by 2019 the public debt will double to reach 75% of the size of the entire national economy. Given this estimate, a reasonable person can see that we are on a path of massive sudden contraction because of immense debt expansion.

One final comment, I agree with the special prosecutor being assigned for the CIA probe to investigate interrogation abuses. Some months back, I commented on this, saying no president should be above the law. I am glad to see the law still prevails. Whatever the outcome, that is what is important. Without the strength of the justice system, we are at the mercy of whoever is in power. And we have seen historical examples of the outcome when that happens.

Bernanke's words, China, Note of Self-Understanding

Bernanke's words last Friday did wonders to provide buoyancy to the markets. I still think we are in a bear market rally and when the hot air deflates, it will be sudden. Enjoy the ride as long as the helium lasts. Then I hope you are out when it is used up. The statistics I have been pointing out in my previous blogs are facts versus just words. And to repeat myself, he should be replaced.

As you know I have been following tidbits on China. Today, I saw a quote from Henry Kissinger, the man who helped establish ties with China under President Nixon. He said, "I think the center of gravity of the economic world is beginning to shift towards Asia." That is confirmation of what I see as the trend too. We'll need a big couch for all of us to sit together :) i.e. U.S. squeezing in with China. He also mentioned the new alternative or companion currency to the dollar that China brought up a while ago. He see the dollar built around the Chinese currency once it is convertible in approximately 5-15 years.

What is interesting and I found surprising is the leader on producing manufactured goods sold worldwide. It is the U.S. at 20% with farm equipment, airplanes, military weapons, chemicals, shipbuilding and so on. Notice these are big ticket items versus what China sells. They produce 12% and Japan follows with 11%. This information doesn't seem to be mentioned in the mainstream news, and as a result people think we have sent everything out of the country except pizza and beer. :) I am half serious on that statement.

As you can see I am feeling lighthearted writing this article. I discovered something about myself last week. I decide that treating myself as I would have others treat me makes life kinder. Notice the twist on the biblical quote, "Do unto others as you would do unto yourself." That doesn't work well if the self is being mistreated. Any comments or thoughts on this?

Arrival

Momentum seems to be underway to take the market below 8000.  Having the bad news being greater than the analysts' estimates only encourages the drop.  We are experiencing a time when forecasts do not carry much accuracy.  The bear did not hibernate this winter.  Be more risk averse.  I recommend that everyone be objective and stand back, knowing that what is occurring today on a global scale is a necessary purging.  Use your personal involvement to see inside yourself and what needs purging there.  

In continuing the behind-the-scenes viewing:

*  Russia and the Ukraine continue to deprive Europe of the gas that they rely on to fill 25% of their needs.  Ukraine faces economic collapse as Russia tries to squeeze this country by charging much higher prices per cubic meter.  Russia's monetary reserves are dissolving because of lower oil prices.

*  Will Israel go it alone and air strike Iran's nuclear facilities?  The news came out that they talked to President Bush last year and he said no.

*  Moody Investor Services estimates 300 global junk bond issuers will default; that's 15% versus 12% during the 1991 recession.  This environment creates a severe challenge for companies to raise capital to survive, let alone grow.

*  Citigroup is 'too big to fail,' yet that is what is happening even with $45B given to them from the $700B bailout.  They will break up in an attempt to save the pieces.

*  Bernanke said that more government investment in financial institutions are essential to maintain stability.  How much money is enough achieve this?

What looks unconnected is part of the same puzzle.  Like Chief Seattle said, we are all connected in the same big web.

One final note:  anyone who owns a home should consider appealing the value used by the state assessor's office in determining property taxes.  In my past, I did that once in California.  It took 3 appeals to be accepted.   

Cleaning Out The Financial Closet

The threads are surfacing more frequently now, reflecting the cracks in our financial foundation.  High profile New York figures like Bernard Madoff show us a great example of what is yet to come:  at least $50B in losses with his ponzi scheme.  France banks are exposed to at least $400M, Sweden $300M, Spain $3.1B, HSBC in Geneva at least $4.22B, hedge funds yet to be identified, and the beat goes on.  Contraction exposed this fraudulent setup.  And what blows my mind is that Madoff is a former chairman of the NASDAQ stock exchange.  A second example is Marc S. Dreier to the tune of hundreds of millions.  The ripple effect over the next few weeks, as the system continues to contract, will determine the extent of the tsunami.

Watch the dollar. As it goes down U.S. Treasuries become less appealing to foreign investors, and it leads to more inflation.  Bernanke is looking at reducing the discount rate again, to possibly zero.  This will affect the dollar in a huge way.  Again, what is the point of diminishing returns when the creditors say 'enough is enough' and no longer buy our bonds and treasuries?  I think it is closer than the horizon.  The best step each of us can take is keep paying down the personal debt.  That step gives us more freedom when the biggest tsunami we have ever experienced touches our shore.  I am not being pessimistic.  I think what is happening is for the highest good, especially now that the worms are coming out of the woodwork who used the expanded liquidity over the last decade or two to hide behind.  It does show a giant hole in the regulations are implemented. 

Recession

Those experts, like Bernanke, refrain from using the word recession even though we are in one.  This is a normal part of the market cycle and the market is reflecting this.  It's not the recession that is creating the 'whip-saw' effect, it's the lack of confidence in the experts.  The Fed has given billions to the banks, yet there is no reflection of that on the loaning side to businesses and individuals, collectively.  Paulson is now showing what we intuitively knew; that the bailout should not have been passed.  We are the blind leading the blind.  Taking one prudent step at a time is the lesson to learn versus throwing money around as if it is limitless like we have done.  The higher the country's debt, the less value of the dollar.  Where is the visionary who is looking long-term as we take a big hit in the short-term?  I'm only noticing speeches that say everyone will be rescued.  That is a victim mentality and does not allow for soul growth in learning how to be self-empowered and creative in finding a solution at the individual and community level.

In my previous blog, I mentioned two signs for my optimism.  The third sign came out today with Warren Buffet saying he is buying U.S. stocks now.  He is worth listening to because through his actions and net worth, he has lived the 'American dream.'  Only listen to those who 'walk their talk,' not those who talk according to what they think Americans want to hear.  Listen to those who reflect self-empowerment, not those who use the 'fear consciousness' to manipulate the public with only words.  When fear is present, the clarity is blurred and actions taken will be distorted reflecting this.  Again, I say this because I am thinking of our children, grandchildren and the unborn yet to come.