Big Bubbette

The Entry Point Market Investors May Be Missing

Or, the companies are spending the money for life support to make it through this "rough patch". If a company is not selling products or having a positive cash stream how long will those nest eggs gathered by laying off staff and cutting expenses last? At some point you run out of people to lay off to improve the bottom line.

Here is a picture of Christmas future for the US. The only good news here is that we are not as bad off as Japan. Of course if Japan falls will it be what tips the US off the edge?

www.telegraph.co.uk/fi...


On Nov 04 06:31 AM Tom Armistead wrote:

> Something the article touched on but which might bear amplifying
> is that many companies have been able to generate increased cash
> flow by reducing operating capital. Funds that are no longer tied
> up in inventory or accounts receivable are sitting on the balance
> sheet, availble to finance expansion, increase dividends, pay special
> dividends, repurchase stock, or attract the attention of activist
> investors.
>
> With stronger balance sheets and reduced expenses, these companies
> should be able to perfrom very well, resulting in multiple expansion.

Bottomless Pit Watch: GMAC

Another bail-out waiting to hit is the Federal Pension Guarantee Fund.

GDP Growth: Step One on a Long Road Back to Recovery

Well said Mad. Anyone that thinks this data points to a recovery is staring at the hole and not the donut.
Disclosure: I am not invested in Krispy Creme (except for the one on my desk).

Cap and Trade Would Sink the U.S. Economy

Unfortunately the overwhelming evidence is that what was first called Global Warming was debunked, so like Pelosi now on the public option, simple change the name. Now it is Climate Change. The evidence is that the Earth goes through periods of warming and cooling. The causes are complex and layered. Take for example solar flares, or the Earth warms when the magnetic poles reverse, which is happening now. The science is clear and Global warming should be put in the same need category as an investigation into Sasquatch. Maybe it is all the methane being created by the Sasquatch, hmmm the EPA better get on that.


On Oct 29 12:10 PM user396040 wrote:

> We have to initially examine whether something must be done about
> greenhouse gases - if it is not necessary, then this piece makes
> some sense. Unfortunately, the overwhelming evidence is that it is
> prudent and even urgent for us to do something to reduce the ever
> increasing levels of greenhouse gas emissions. This is a matter of
> climate science and has become well enough established(although,
> admittedly, there are a few dissenters) that it would be imprudent
> to take no action. It is very misleading to characterize cap and
> trade as at tax or drag on the economy. Of course, if the government
> auctions off allowances and then burns the money it collects, the
> effect will be the opposite of a fiscal stimulus and, depending on
> when in the economic cycle it occurs and what monetary policy is
> in effect, it could reduce economic activity. But no one in his right
> mind is talking about burning the money. If the government uses the
> auction proceeds to reduce income taxes(including corporate taxes),
> a very good case could be made that it will stimulate the economy.

Why Too-Big-to-Fail Shouldn't Be Codified

Re-instate the Glass-Steagall Act, but break the too big too fail back into their component parts. Savings banks doing mortgages with underwriting standards (hello), and investment banks that want to take risks and can be shown the door to the bankruptcy court. While the repeal of the Glass-Steagall Act was a part of the problem there was a concerted effort to deregulate the banks and investments to allow these monsters bubble machines to grow. Even with the proposed regulations it is not clear these issues will be dealt with.

Go back to 1999 when Clinton and a group of Republicans repealed the Glass-Steagall Act:
The Gramm-Leach-Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, (Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United States Congress (1999-2001) which repealed part of the Glass-Steagall Act of 1933, opening up the market among banking companies, securities companies and insurance companies. The Glass-Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and/or an insurance company.

The Gramm-Leach-Bliley Act allowed commercial banks, investment banks, securities firms and insurance companies to consolidate. For example, Citicorp (a commercial bank holding company) merged with Travelers Group (an insurance company) in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica and Travelers. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act of 1956 by combining securities, insurance, and banking, if not for a temporary waiver process.[1] The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the "financial services industry".

en.wikipedia.org/wiki/...

Reinstatement of parts of the Glass-Steagall Act and other regulations need to be put in place. We do not need more government bureaucracy to intrude in business. Break up the too big too fail and send the parts with the massive debt to the bankruptcy court, as it should have been in the first place and not move the debt to the taxpayer.

It is estimated that currently 95% of all mortgages are being issued by the government guaranteed by the taxpayer under Freddie, Fannie and Ginnie. That needs to change.

Cap and Trade Would Sink the U.S. Economy

A further consequence not covered in this article is the impact it will have on farming. Farming here requires massive amounts of energy and fertilizers, all which would be hit with taxes under cap and trade. This will drive up the cost of food. As the US is the food basket of the world how do you think that will pan out? There are global food shortages now.

So let's take a poll, would you prefer to possibly lower the carbon content in the air or eat? Vote below.

On top of the cost increase in production there will be a corresponding increase in the cost to get the produce to market.

Better start working on those Victory Gardens folks.

Cap and Trade Would Sink the U.S. Economy

John, agreed. Fix the economy and restore jobs. Instead we have one side show after another. Bright and shiny bobbles to entertain and distract the masses. To say the Spendocrats are fiddling while Rome burns gives them too much credit. 2010 vote and send fiscally responsible candidates to office Red or Blue. We need to drain the swamp.

Cap and Trade Would Sink the U.S. Economy

There is no doubt that cap and trade will be the third largest scam in our history, following TARP and the stimulus. A massive tax increase here, and if the citizens of our Nation are sold down the river to a foreign treaty in Copenhagen (which thankfully would have to be ratified by a 2/3's vote of the Senate which is likely all that will save us from it), then for the first time in our Nation's history we will be subject to a foreign powers tax. The Copenhagen Accord would send trillions of our dollars to Third World Countries.

Who would benefit here? It would create the next bubble so Wall-Street and Goldman are rubbing their hands waiting to start trading and pouring money into this bubble machine. The government would be standing with their hands out collecting the taxes that will be placed on all petroleum products.

Anyone doubt Obama wants to give taxing authority to a foreign power need to look no further than one of the few bills he actually proposed in the Senate called the "Global Poverty Act" a feel good sounding bill until you look at the details:
aim.org/aim-column.../

We now have Obama and Harold Koh who seem to think that the Constitution can be subservient to a foreign Treaty:

"Koh is encumbered by a long paper trail that proves he is eager to use foreign and international law to interpret American law. He calls himself a transnationalist, which means wanting U.S. courts to "domesticate" foreign and international law -- i.e., integrate it into U.S. domestic law binding on U.S. citizens.

Koh wants to put the United States under a global legal system that would diminish our "distinctive rights culture," such as our broad speech and religion rights, due process and trial by jury. Koh complains that our First Amendment gives "protections for speech and religion ... far greater emphasis and judicial protection in America than in Europe or Asia." "
humanevents.com/ar...

Mr. Jackson is spot on. Crap on trade would kill the existing industry and drive the price of electricity, and more importantly the price of gas to unprecedented highs. Likely only a coincidence that would force people to buy the electric cars government motors is trying to push through the pipeline.

The amount of stimulus money being pumped into the green initiative and the massive publicity blitz by the Truth Commission papers to try and drum up support for this tripe is astounding. An entire industry of fuzzy headed environmentalists, greenies and liberals are all slavering trying to push an agenda with taxpayer money that will turn brown and excrete methane once the taxpayer funds are cut-off.

While there is no doubt we could do more to improve our environment, I for one would much prefer to spend my taxes on cleaning up the Puget Sound, Chesapeake Bay, the Great Lakes, provide incentives for industry to install scrubbers on smoke stacks; basically spend the money in our Country where it will not only stimulate the economy but clean-up our environment. Or, we can send TRILLIONS of our tax dollars overseas to Third World Country warlords to squander.

Several days ago I attended a presentation with government officials all from the Greenie movement. They said that people can use the "free money" (insert taxpayer funds) available now, or eventually the government is just going to force people to comply. An example is a proposal to have a required energy inspection when you sell your home and it will be given a score. Getting past the fact this is just another fee that will need to be paid to the inspector and the government, what purpose for this other than the next shoe to drop and require owners to take funds out of the sale price to bring the home up to a certain energy standard. Ignore the fact that this would be a government taking and violate the Constitution, but who pays attention to the Constitution anymore?

Where in the stimulus bill is there any money for nuclear power development? Where is there money to develop the technology to extract the shale oil in Wyoming and Montana that has reserves estimated to be able to meet out energy needs for the next 250 years?
msnbc.msn.com/id/2.../

Instead, let's immediately destroy our existing industry that is based on fossil fuels over this stupidity, rather than transitioning in a staged and calculated fashion that makes economic sense. Just like health care let's rush it through and damn the consequences because it just has to be good for us. Except for the profits the greenies will make as long as the government tit is feeding it, cap and trade will drive the economy further in the toilet. But that appears where this administration thinks it should be.

California Legislators Got Drunk on Stock Market Gains

Gray Davis and the Democratic Legislature gifted the prison guard union 100% pay on retirement available to qualified participants starting as early as age 52. This gift has since been extended to many other government unions. Gray Davis was told at the time it was not sustainable and would eventually bankrupt the State. So he proposed a $15.00 fee on drivers licenses. Davis was run out of office for the fee/tax, but the gift to the Unions remained.

How bad is it? Well in Moraga recently a fireman retired at age 52 on $252,000.00 per year plus benefits. The City of Vallejo had to declare bankruptcy to get out from under the government benefit costs. The California Legislatures (with a bill sponsored by the firefighters union) response to try and pass a law to make it more difficult for Cities and their citizens to declare bankruptcy. It passed the Assembly but is now hung up but may still see the light of day.

If you want to see the most bankrupt States in the Union look for Democratic controlled State government with large government unions.

If you want to see how your State may be faring:

www.pensiontsunami.com/

Many of these unions lost massive amounts of their funds in the stock crash. The part the public does not understand is that the nimrods in government have guaranteed these pensions with taxpayer money. The budget shortfall in California for government union pensions is estimated to start next year at around 60 BILLION dollars. It goes up from there.

Expect to see more cities in California, New York, New Jersey, Mass., etc. with Democratic "free lunch" government and large government unions to fall into bankruptcy. As the unions fail how will that impact the health care costs under the changes being proposed in DC?

As more pension funds collapse they fall on the Federal Pension Guarantee Corporation. This will be yet another taxpayer bail-out:
news.illinois.edu/news...

Debunking the 'Too Big to Fail' Myth Once and for All

These too big to fail were created after Clinton and a group of Republicans repealed the Glass-Steagall Act in 1999. Re-instated the Glass-Steagall Act. Separate the savings banks from the investment banks as they were before 1999. Send them through bankruptcy court to get rid of the toxic assets instead of shifting the debt to the backs of the taxpayer.

Instead Obama wants to create more government bureaucracy to run private business. We do no need more government.

Break-out or Fake-out?

Articulate and thoughtful response. San Francisco just reported unemployment at 10.1%. It is likely California has crossed over 20% unemployment. Stroll through any town in the Bay Area and notice the empty commercial spaces. Local family run companies that have been here for years are closing. The economic engine that was California is out of gas and the green technology being forced down everyone's throat in the stimulus as the panacea is not going to pull it out. The importance of a robust economy here to the recovery of the Country should not be overlooked. California is teetering on the edge of bankruptcy.


On Oct 14 04:27 PM market ace wrote:

> The whole financial world and the US economy are riding the gov't
> and medias giant FAKE OUT
>
> The FED is destroying interest earnings for millions of retirees
> and therefore destroying income necessary for recovery just so they
> can pimp for their failed banks. Bottom line: Right now, $1,000 invested
> in a 3-month Treasury bill yields a meager $1.20 in yearly interest.
> At that rate, just to match the 5 percent interest you could have
> earned on T-bills in early 2007, you’d have to leave your money sitting
> there for 42 years! U.S. savers are obviously getting shafted. <br/>
>
> The U.S. Treasury Gobbling Up Available Credit, Crowding Out Nearly
> All U.S. Businesses!
>
> Due to giant bailouts and out-of-control federal deficits, the U.S.
> Treasury is now borrowing money at the fastest rate of all time,
> hogging nearly all available supplies of credit. Meanwhile, American
> businesses and average consumers are getting shut out or even shoved
> out of the credit markets.
>
> In the first half of this year, the Treasury has stepped up its pace
> of borrowing to annual rates of $1.4 trillion in the first quarter
> and $1.9 trillion in the second quarter. That’s 3.5 times and six
> times more than last year’s pace, respectively.
>
> Meanwhile, businesses are getting crumbs: Last year, banks provided
> new credit at the annual pace of $472.4 billion in the first quarter
> and $86.7 billion in the second. This year, on a net basis, they’re
> not providing any credit whatsoever. In fact, they’re actually liquidating
> loans at the rate of $857.2 billion in the first quarter and $931.3
> billion in the second.
>
> Ditto for mortgages. Last year, mortgages were being created at the
> annual clip of $522.5 billion and $124 billion in the first and second
> quarters, respectively. This year, they’ve been liquidated at an
> annual pace of $39.3 billion in the first quarter and $239.5 billion
> in the second. WIth a foreclosure every 13 seconds this will only
> get much worse.
>
> For consumers to borrow on credit cards and with other consumer loans
> is even tougher. Last year, people were able to add to their consumer
> credit at annual rates of $115 billion and $105 billion in the first
> two quarters. This year, in contrast, they’ve been forced to cut
> down their credit balances at annual rates of $95.3 billion in the
> first quarter and $166.8 billion in the second quarter.
>
> Clearly, consumers, small businesses, and even larger businesses
> are also getting shafted.
>
> But Wall Street Traders Reap Gigantic Rewards While Average Workers
> Face Worst U.S. Job Market Ever Recorded!
>
> So it should come as no surprise that, with the U.S. Federal Reserve
> virtually guaranteeing a fantasy land financial environment for banks,
> GS has hit the jackpot this year: The bank has accumulated a bonus
> pool of an estimated $16 billion to dish out to an exclusive group
> of its heavy hitters as part of Wall Streets pool of an estimated
> $140 billion. That’s enough to cover a $50,000 bonus check for each
> and every household living in Los Angeles, Chicago, San Francisco,
> and Detroit.
>
> Meanwhile, all across the USA, with small and medium-sized businesses
> unable to get credit or hire Long-term joblessness has hit the highest
> level in at least a half century: The share of the unemployed who
> were out of work for at least six months reached 35.6 percent in
> September, the most since the U.S. Labor Department began keeping
> statistics in 1948.
>
> More than 5.4 million people have been unemployed for at least 27
> weeks, with 1.3 million expected to exhaust their benefits by the
> end of this year. 15 million unemployed Americans are competing for
> 3 million available jobs, the worst on record, while 35 million remain
> on food stamps.
>
> More than 7.2 million jobs have been lost in the past 21 months.
> In contrast, in the 30 months of the past recession, only 2.7 million
> jobs were lost. The official unemployment rate, at 9.8 percent, is
> just the tip of the iceberg. The true unemployment rate, including
> part-time workers who can’t find full-time jobs and workers who have
> given up looking, is 17 percent according to the U.S. Labor Department
> and 21.4 percent according to Shadow Government Statistics.
>
> Anyone thinking that this Stock Market miracle reaching over 10,000
> today while the US dollar is getting crushed is not a head fake will
> soon learn a lot ablout false hope.

U.S Dollar: Chart Points to Major Reversal/Rally

Somewhere in the not too distant future a plonker is going to land in the punch bowl. Not sure what it will be, where it will be, but it will bob to the top and various house of cards on artificial life support from the Fed and others, will start to fold. California is bankrupt, which that on its own could prove to be what pushes this off a cliff. Israel takes out the Iranian nuclear plants., maybe commercial real estate. There is a long list of possibilities that could start the party.

The government has shot every wad they have. What will they do stimulus II, III and beyond. Buy more companies too big to fail? Bail out government motors again? Have more artificial bankruptcies? Print more trillions? At some point when the tab comes due the taxpayers are going to drop under the debt load. Zombie taxpayers? The Fed is talking about a VAT, the State of California is talking about a SAT (tax on services such as accountants, lawyers, etc. apparently designed to drive out whatever business remains in the State). When you add up the VAT and the SAT the taxpayers will have SQUAT.

But on the bright side Obama won a Nobel Prize. Laughter is the best medicine. A new term needs to be added to the lexicon, to be "Nobeled".

If you Google the topic the UAE has been discussing creating their own gold based currency for some time. Oil will gradually move away from the dollar to hedge. I think the first to make that move was Saddam Hussein.

Analyzing Larry Summers

I never blame myself when I'm not hitting. I just blame the bat and if it keeps up, I change bats. After all, if I know it isn't my fault that I'm not hitting, how can I get mad at myself?
Yogi Berra


On Oct 07 02:41 PM Gary A wrote:

> Alan, both parties are at fault. IMO the Bank of International Settlements
> allowed shadow banking and the Fed looked the other way as this system
> was imported to the US in the form of liar loans.
>
> This was a ponzi SCAM. And it happened under the watch of the BIS,
> the home bank of the central banks.
>
> Making the Fed the financial watchdog king is putting the fox in
> charge of the hen house. Just remember, Rubin, Greenspan, Frank,
> Gramm, etc all had something to do with making Wall Street into a
> casino. Both parties were in the pockets of the rich banks. And now
> the consumer, the engine of the world, is broke. Yet no one is prosecuted
> for this fraud.
>
> They may get around to prosecuting the foot soldiers like Mozillo,
> but what about Geithner, Greenspan, Summers, Rubin, Frank, Graham,
> Dodd, etc. etc? If you commit a crime that is high up enough, no
> one gets prosecuted. I think Voltaire said something like that.

Employment in Crisis

Some interesting stats regarding layoffs on Wall-Street. Maybe they can find employment building roads or some of the other shovel ready projects under the stimulus package:

"Amid credit market turmoil, a subsequent downturn in dealflow and a global recession, pink slips have littered Wall Street, and now PE firms, law firms and other companies are announcing layoffs. Here's Dealscape's latest:

www.thedeal.com/newswe...

Recession Is Over; Depression Has Just Begun

No worries. Al Gore and Boxer will pass Crap on Trade, sorry Cap and Trade, oops the Pollution Reduction and Investment Act and all will be well.