KAIMU BIZ

Contrarians Denninger, Dent, Faber and Hoye Looking for Dollar Rebound

ALOHA !!

Simply put from a political perspective more Americans who vote with conviction have their futures tied to either the NYSE, NASDAQ or AMEX not the USDX and FX markets. It seems that a smart politically minded President who would like a second term would direct his energies to keep those 401k markets going and not the FX ones. Look at the PRICE FIXING that is going on in the real estate market(home buyers credit). All Americans with any kind of "means" depend on the US stock markets and the US real estate market to go up not down. Down is political suicide across the board, from retiring baby boomers to unions (think in terms of union member pension plans) and CEO bonuses. The Republicans certainly did not benefit from a crashing stock market in 2008. I think Obama understands this dynamic.

Certainly the US government did not get as BIG as it is by using "deflationary monetary policy"!! Not to mention US export markets benefit from a weaker US Dollar.

That leaves other export countries and their fiat currencies and USDX bulls sitting on the other side of the USDX trade. Hummmm??

A quote comes to mind back in 1971 attributed to the US Treasury Sec. John Connally. On taking the treasury post, Connally famously told a delegation of Europeans worried about exchange rate fluctuations that the American dollar "is our currency, but your problem." I believe America, the World Reserve Currency, still operates under that mantra! Certainly looking at a Denny's menu from 1960 would confirm that as fact ...

Here's Why Asia Must Eventually Ditch the Dollar

ALOHA !!

When the S&P rates a currency, known as a sovereign currency rating, they use two components, one internal and the other external. The basis of that rating system is that a currency is a reflection of debt and the ability of that country to service its debt in a fiscally responsible manner, hence "external debt" and "internal debt". Every fiat currency has "debt" as its basis, so every currency in the World is a "debt derivative". By switching from one country's currency to another all you are doing is shifting debt service values. In other words, in this World of today, DEBT IS MONEY! Look what just happened ... banks failed why? Banks continue to fail why? Financial crisis is a permanent mainstay why? As Bill Clinton might say ... ITS THE MONEY STUPID!

The US TREASURY operates the largest DEBT STORE in the World, call it DEBT-MART. Most pundits through the aid of the mainstream media will get on shows like CNBC and talk incessantly about Treasuries and the US Treasury auctions known as the bond market. They will comment forever on the interest rates and what the US FED will do next, yet there is very little comment on the fact that any US Treasury security, be it a Bill, a Note or a Bond is like a coin. There are two sides. The US Treasury issues or sells them and the US Treasury buys or redeems them. The "redemption" is the other side of the coin. To me what the US FED and TV shows like CNBC are doing is "distracting" you. Its the oldest scam in the World where you create a "fire" or in this case a "crisis" to distract people from what is really going on behind the curtain, behind closed doors, which is looting whats left of every American's wealth.

America and the two party system is a POLITICAL MONOPOLY. All that happens is we run from one crisis to the other and if it happens that the DEMS are in power when a perceived crisis occurs then the US Voter will run to the REPS and visa versa, otherwise how else would Obama have been elected.? Sure he is a charismatic young guy, but if you lose your job and your 401k becomes a 201k when Bush and the REPS are in office then what is the likelihood you will vote REP? So its a big political game of ping-pong, where US Voters are the ping-pong ball, we have had the exact same result every decade no matter which political party is in power, which is MORE DEBT ... more CRISIS.

Right now the US Congress is up against the US Public Debt ceiling again. This is a game that was started 70 years ago in 1940 with the first "debt ceiling" set at $45BIL USD, to appease foreigners and to make it look like the US Dollar and the US government is fiscally responsible, so that the USA after WW2 would become the next foreign reserve currency. The new Empire ... Now it is 70 years later and the "debt ceiling" needs to be raised yet again as US Public Debt is approaching $12.1TRIL USD. This is part of the "internal debt", which is one half the equation of the US sovereign currency rating issued by the S&P and Moody's.

DEBT-MART, the US Treasury securities have much more debt issues than just the usual Bills(Regular Series), CMBs(Cash Management), Notes and Bonds that you hear discussed on CNBC every day. In fact the US Treasury breaks their debt issues into two categories. One category they classify as "marketable" debt, which is all the stuff that Bill Gross at PIMCO talks about when he is on CNBC, but then the US Treasury has this other category of debt they call "non-marketable". Anyone know the difference between a US Treasury "marketable" security and one that is "non-marketable"? It has something to do with the "internal" and "external" ratings of S&P and Moody's. As Americans we are all captive prisoners and we are forced to buy our groceries and our cars using only US Dollars and in actuality if you look at the money in your wallet they are not even US Dollars, they are Federal Reserve Notes. Look at a $1 or a $5 and above even where it says United States of America it says "Federal Reserve Note" at the very highest part. That kind of makes a statement just the way our money is printed as it shows you who is at the top. Foreigners have to have "marketable" securities due to the nature of cross border transactions, which gives the US DEBT-MART its value. US Treasuries have to compete with other foreign government debt. Over the past couple years we Americans and the global community have been given quite a show by our banks on what it means to have a viable "market", a financial instrument that is "marketable". For if there is no public market for debt securities then the security becomes nothing more than an IOU between two consenting parties.

The other half of the US DEBT-MART is the "non-marketable" securities, part of the other side of the US DEBT coin. You and I cannot buy one of those securities and neither can China. These securities are "non-marketable" because they are just IOUs between Public Trust Funds and the US Treasury. The S&P and Moody's base part of their rating criteria on a country's ability to service its debt through taxes. The US Treasury has some of the largest tax revenues of all the World, so it is therefore concluded that US Treasury securities are the safest and deserve one of the highest credit ratings possible. I have discovered that for FY 2009 the US Treasury ended up with around $1.9TRIL in net revenues and over $54TRIL in total DEBT issues. Most of that DEBT issued was IOUs to you and me, not China. In fact the $2TRIL USD China has in reserves pales in comparison to the $44TRIL our government owes us taxpayers. This information can be found in a US Treasury Daily Statement. But so long as we Americans are complacent and believe that our government will honor its IOUs then S&P and Moody's will continue to give the US Dollar its highest ratings.

So while there are endless debates, like this one, about whether China buys more US DEBT and the "convertability" of the Yuan and the US Dollar's global stature everyone misses the biggest scam going which is right under our noses and that is the "non-marketable" internal debt of the US Treasury whereby every dime that goes into "payroll taxes" is being looted and every dime that goes into government pensions are being looted and spent now, which is the complete polar opposite of such Trust Funds original intent. While we debate and mentally masturbate the China equation our financial stability is rotting from the inside out. Once again Jefferson had it right in terms of our biggest enemy. Our biggest enemy is our own government and its version of DEBT-MART. So do not worry about the poor Chinese and whether they are "safe" holding a US Treasury Bond for 30 years, worry more about yourself and whether you will be safe being a US citizen and whether you, like Californians are experiencing right now, will be handed a US government IOU when you retire. This country is built on IOUs. What else is fiat currency when there is no redeemability. This grandiose idea of "convertibility" is a game. What is it exactly that any currency is "convertible" to? DEBT ...

In 1971 Nixon gave the US FED what it was seeking ever since it was birthed in 1913. The US FED's true mandate was to end the gold standard. Something the US Congress wanted as well so they formed a partnership that has lasted some 96 years now. By former "empire standards" that is a very short time.

Look around you and tell me how well that "partnership" has worked for you? Do you feel secure and cared for? Is the "free lunch" everything you thought it would be? The real question and test in terms of your Freedom and Liberty is this question. Who owns you now? Who is it that you pay most of your hard-earned money to every year? Is it the utility company? Is it your mortgage company? Is it Blue Cross? Who gets close to 30% of your profits when you buy low and sell high? Who is your eternal partner in everything you do starting at birth and ending at death?

It is Uncle Sam who owns you ... the issuer of IOUs ... the CEO of DEBT-MART! Don't worry about China and their money for the Chinese have been around many more thousands of years than America and Americans have. Worry more about who you vote into the US Congress and who sits in the Oval Office. That has a lot more to do with your future retirement and what your money buys than a Yuan or a Euro does.

Roubini Hates Gold: Is He Wrong Again?

ALOHA!!

This was part of my weekly article published at place like GATA and The Trading Doctor entitled REVENUE BREAKDOWN. I also disagree with Roubini but for reasons that have nothing to do with the price of anything, but instead for pure "counterparty liability" issues. Of all the trades in the World "liabilities" are the most crowded.

READ ON:
Roubini is yet another one dimensional economist who misses the bigger picture of monetary risk. It has nothing to do with inflation/deflation, mere symptoms of the disease; it has a great deal more to do with debt "liabilities" and the C WORD of monetary risk.

I am amazed he has yet viewed a US TREASURY DAILY STATEMENT. When I first saw a US Treasury Daily Statement I said to myself ... "SELF, LOOK AT ALL THOSE STACKED LIABILITIES ... EVEN THE ASSETS ARE LIABILITIES"! The liability side is HUGE; the asset side is tiny, if you look past the combined "marketable" and "non-marketable" US DEBT, which boils down to income/payroll tax revenues and excise tax revenues. In actuality a true accountant would look at NET tax revenues, which is even a much smaller number than actual gross tax revenues. Gross tax revenues is all that is ever broadcast in the mainstream, but everyone always forgets that the US government has to issue something we US taxpayers are very fond of ... "tax refunds"!
Who among us when we do our budgets counts credit card "available credit" as "income"? The US Treasury does as they place DEBT ISSUES on the asset(receipts) side of the Balance Sheet ledger, which is what a US TREASURY DAILY STATEMENT is. The US Treasury commingles debt and tax revenues as one, as receipts ... as assets.

Let me just say that if the US Treasury were forced to live just on NET tax revenues we would have to cut Social Security checks and Medicare benefits by 70%(recall the US Treasury Daily Statement calculations I did for October 20th). In fact the entire US government would have to shrink 70% so we would have to quit policing the entire World by 70%! Close 70% of our foreign military bases and shrink our troop size by 70%. That is a hell of a lot of “shrinkage”. That is 7 out of every 10 Federal Employees and Military personnel jobless. Imagine what that would do to the unemployment rate.
Where Roubini’s stance on unending US DEBT? The US TOTAL DEBT is one huge liability that makes the AIG derivative counterparty liability look tiny. Last year (FY 2009) the US DEBT liability ended over $54TRIL USD. Right now the FY 2010 US DEBT liability is already over $3.3TRIL USD.
Further ... on THE DEBT CEILING ... It first started in 1940 with $45BIL. That was 70 years ago and now it is $12.1TRIL USD! Guess what? They need to raise the debt ceiling again and soon since US PUBLIC DEBT is at $11.9TRIL right now. What have we learned from 70 years of Congressional DEBT CEILINGS? Roubini?
So what is gold? In my view it is the only financial entity in the World without liabilities. Gold cannot file bankruptcy or default on its DEBT payments. Gold has no US TREASURY DAILY STATEMENT since gold, unlike the US Dollar is not a "debt derivative". Speak to that Roubini ... as Dan Akroyd of the old Saturday Night Live POINT/COUNTERPOINT used to say ... "ROUBINI YOU IGNORANT SLUT!" I believe Akroyd went on to include such other delectable "points" as "rapacious swamp sow" and "... when you're on you back Jane, the meter is running!" Who is paying Roubini to be one dimensional? Certainly his paying subscribers, which pay quite a bit for his wisdom, should be entitled to a multi-dimensional view of gold and monetary liabilities and not just the same old crud about inflation/deflation that is easily obtained anywhere on the WWW for free!
The missing link: Since our dollar (money) is based on DEBT(faith and credit) then a DEBT crisis is a "monetary crisis".

Citigroup: Priced to Succeed

ALOHA !!

No that's not the American Dream, this is ...

This was the original definition of the AMERICAN DREAM that the bankers did not like, since it had nothing to do with DEBT. This is from the book THE EPIC OF AMERICA by James Addams (1931)...

"It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.” END

Sounds more like a repeat of the Declaration of Independence ...

Having the US government change our nappies every time we have a bank crisis brought on by high risk managers is not something I aspire to and nor do I want my tax dollars rewarding such behavior, yet reward we do, time after time!

But ... IT IS WHAT IT IS!

For my Spanish speaking amigos ... ES QUE LO ES!

Going to the beach bruddah!


On Aug 07 05:53 PM Ricard wrote:

> The American Dream was built on risk. Pioneers who settled in the
> Wild West braved many dangers and took on many risks without a social
> safety net. These people were not playing Russian roulette - they
> were people who wanted better lives for themselves and their children.
> If this play comes to pass, Citicorp (not Citigroup) will become
> free of the government (as free as one can expect...in the end, the
> government owns everything - doomsayers are simply stating the obvious
> thinking it is some sort of revelation), and will have its shot again
> building the American Dream. In fact, Citicorp as it stands (if
> you trust the latest earnings release) is already doing just that.
>

Citigroup: Priced to Succeed

ALOHA !!

Ricard - No I equated YOUR trades to Russian Roulette! I prefer to avoid "very wild rides"(your words not mine) ...

I understand your reasoning about how the government(taxpayers)get the toxic losses while CitiCorp gets Smith Barney. You are asking me, a guy who lives in Hawaii on a five acre ocean view farm, who has no inside connections to Geithner or Ben or even Pandit to accept that the toxic assets will be SPUN off by the US government in the "foreseeable future", as you put it.

By insider trading disclosures the guy(Dick Parsons)you say who will bring C into the World of huge profits and who will be making all the key "crucial decisions" is actually loading up on Time Warner(TWX) stock instead of C. In fact one of his last "pure" acquisitions Mr. Parsons only bought 292 shares of C for a total investment value of $382, compared to 155,000 shares of TWX options he exercised. Does he not have any C options to exercise? My questions is why isn't your key insider loading up now if this is such a great trade? Or is he just there for the "freebies"?

You want a risky trade to work and you are begging your readers to buy into it on our dime! Will you inform us all when to sell your "very wild ride" or perhaps which option straddles you may employ later down the line?

My strategy is to trade less risky companies with long term track records of low risk and backed by management that understands risk and seeks to avoid it, not embrace it! C does not cut the mustard in that regard ...

I do wish you good luck in all honesty ... I would much rather see the readers here at SA profit rather than lose.

Maybe you can offer a "C Update" in a few months so the readers can post whether they made money or not.

Good luck ...


On Aug 07 05:07 PM Ricard wrote:

> I originally labeled you emotional because your post had nothing
> to do with the company highlighted in this article. Not because
> you had anything against 'trading', not because someone is handing
> you a loaded gun. Although, if you equate speculation to Russian
> roulette, I suggest you don't do it, for your own emotional well-being.
>
>
> I believe this speculative 'trade' has sound fundamental foundations
> if you discount Citi Holdings as already being this 'government bailed
> out institution' that you seem to equate to 'day trading' and 'moral
> decay'. I am not buying this portion of the company, and if you
> have read my article and understand my reasoning, I hope you can
> at least recognize this part of my argument. I do not think C deserves
> to have a large part in anyone's portfolio, but I am now repeating
> myself.
>
> I am not sure what your agenda is, but if you have a problem with
> the trade, I suggest you keep your arguments at that level. To think
> that I should be writing financial regulatory reform packages is
> not a reasonable expectation.
>
> On Aug 07 03:29 PM KAIMU BIZ wrote:

Citigroup: Priced to Succeed

ALOHA !!

Correct me if I am wrong but I do not call what you do as "investing", in fact you yourself call it "trading". It is trading prices and that is all it is! Hopefully for a profit ...

My suggestion that you miss is that I have nothing against "trading", but trade companies that have not been the beneficiaries of government and US FED largess for their entire business history. These are the banks and insurance companies that counted on the TOO BIG TO FAIL policy to "survive" and I guarantee that these same institutions will be at the trough sooner than later.

What you are telling us all to do is "gamble" with risky companies who have repeatedly shown they have no expertise at risk management. What I am saying is "gamble" with companies who did not need TARP, companies like Exxon or Apple or BHP or Microsoft, companies with long term proven track records that required no government BAILOUTS to "survive"! Heck, I would even go so far as to say regional US banks or foreign banks that never needed a BAILOUT. One that comes to mind is Bank Of Hawaii or almost any of the Canadian banks.

In laymans terms you are asking us to play Russian roulette with 5 bullets in the revolver, with the options hedge as the one empty chamber. I am saying play Russian roulette with one bullet!

Buy and trade companies that operate in "real wealth" terms where they actually sell products that you yourself use in your daily life, the basics you need to "survive" not what C needs to survive.

Ricardo, what's so emotional about that? If you want high emotions then take the "wild ride"(as you describe your trade)and buy C at bankrupt levels, support companies that know how to work their way around bankruptcy and hidden corrupt agendas. These companies like C exist on WHO YOU KNOW ethics. Is that what the American Dream is now?

If your gamble pays off then what? Whats the next one? And the next one? Should we all quit our day jobs and day trade with you? I mean what sort of life is that mate? I guess if we all want the retirement that our Fathers had or our Fathers Father had then we best get into high risk mode and make up for for all that lost purchasing power of a US Dollar.

You're day trading high risk and moral decay ...


On Aug 07 03:58 PM Ricard wrote:

> On Aug 07 02:14 PM AndrewBaker wrote:

Citigroup: Priced to Succeed

ALOHA !!

Quite simply this is a trading tip and has nothing to do with the US government adopting fiscal restraint and responsibility. What the US Banks have done is use their power status in Washington DC to influence the socializing of losses and the pimping of accounting principles. What was once GAAP, in other words "Generally Accepted Accounting Principles" is now reported in the optional "NON-GAAP", in other words "Generally Unaccepted Accounting Principles" or GUAP" ... If FASB were a poker game then all red cards would be wild. So in this new World of business principles, that could only have been envisioned by George Orwell, we have a transference of the TOO BIG TO FAIL business model that was once the turf of bloated and risky US Banks, whereby the US government is now recognized worldwide as the epitome of TOO BIG TO FAIL. Here now we have "short term" trading tip being leveraged on the backs of the Youth of America who have yet to have a say in what is fiscally responsible and what is not. The solution is to "SPIN IT OFF"! Whats is SPUN OFF is the irresponsible spending and DEBT of a generation that grew up with Capt Kangaroo and Gilligans Island educated in State sponsored schools where we were taught that government is our Savior. How many of us would have ever thought that somehow we'd all be day trading our way to retirement? There is something that is patently "evil" about that concept, especially since you have to consider who it is that controls the gates to the Casino.

Referencing the Resolution Trust Company is a joke, then why not reference the one before that and the one before that, start with the Hoover con called "Reconstruction Finance Corporation" then go backwards from there. All these GSE companies do is forward sell failed debt(malinvestnments) using inflation, which devalues the purchasing power of the US Dollar. I call that "embedded inflation" and it is "embedded" because each succeeding generation refuses to pay down anything and actually increases the DEBT load of future generations. .

"It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world."-Thomas Jefferson

The last American generation that followed Jefferson's advice was in 1835.

To say that C has been well managed or is the hands of excellent managers who know how to "survive" is so completely asinine I can hardly comprehend it! Just how is it we got into this financial crisis if all the "experts" are such "experts"? Is that what we are reduced to in American business now ... "survival"? Where's the long term plan for self-sufficiency and adept innovation and grassroots growth from manufacturing or are we going to suckle at the government's teat until its shriveled and empty? I would say that if we shrunk government and took away government contracts and largess that the Fortune 500 would end up being the Fortune 5! Is it any wonder that without the US government growing its DEBT LOAD exponentially there would be no US economic growth. What kind of country builds its future on massive DEBT? I would hazard a guess that the author of this trade has never even seen a days worth of spending as reported on the US TREASURY DAILY STATEMENT. I would also guess his reply to that concern would be "so what"!

So the advice is "Jump on in the waters fine, we'll let some other sucker worry about C when we're done with it!"

The infamous words of John Connolly, US Tres Sec under Nixon back in 1971, have come home to roost, "Its our dollar but its your problem!" So now the US Banks are telling the American taxpayer, "Its our counterparty risk, buts its your problem!" Do not get fooled because the US Banks are not just telling the American taxpayer its our problem, they are saying this to the American youth who will inherit the toxic garbage that has been cleansed for generations using the "garbage disposal" of the money supply known as monetary inflation.

Trades in C are trades in "false wealth", they are trades against our kids future. Take the $$$ signs out of your eyes for once in your life and look in the mirror of reality, because in the end you are fooling yourself if you think this sort of "trading" is anything different than what the traders of ENRON were doing behind the facade of "profits are okay at any cost"! Like an alcoholic might say, "Next rolling blackout please and make it a double!"

ALL OUR BEST THINKING GOT US HERE ...

Geithner's China Strategy: A Viewer's Guide

ALOHA !!

The simple truth about the US Banks and the IMF is that none of them could qualify for their own loans. Without constant "bailouts" these entities would be standing in line with Lehmans ...

Geithner's China Strategy: A Viewer's Guide

ALOHA !!

America is an EMPIRE ... there is no doubt. I do not see the Chinese Coast Guard patrolling Lake Michigan. I do not even see the Japanese Navy on R&R in San Francisco Bay. Nor do I see the German Light Armor Division rolling into the Tijuana on peace keeping missions. Imagine if those countries had the added expense to Police their Foreign Policy ineptness. About the only country in the World who has followed the US Military around the World in major pre-emptive combat, like a loyal puppy dog, has been Australia. I don't know, how would you guys feel if you saw the Chinese Coast Guard patrolling the Gulf Of Mexico? Imagine how the Iraqis and Iranians feel then. Our Coast Guard is on duty all over the Middle East.

Now MILITARY costs are just one aspect of the huge cost of EMPIRE. If you want to watch what we spend every day, just on Vendors like Lockheed and General Dynamics, then you can see that at the US TREASURY DAILY STATEMENT. We have been spending around $1 - $2BIL USD per day. Remember that is only Vendors and has nothing to do with payroll or Veterans benefits or any of the other incidental costs of a Military Superpower. Currently the Obama regime is outspending the Bush regime on Military by about 2 to 1, according to the US Treasury numbers.

Then there are the "embedded welfare" costs or entitlements. These are the "promises" the various two party aristocracy have used over the past decades in order to retain power over the voters. We are now all witness to the fact that polticians only have one expertise ... "getting elected"!

Then, as we are now seeing, there are the "embedded bailouts" that have been going on in the US banking industry since forever. That's the old "socialize losses and privatize profits" scam that is now in the TOO BIG TO FAIL.realm with the FDIC backstopping 306 million Americans. Every week some bank, somewhere in America goes belly up. It has become routine,, so routine that it is hardly reported any more. Remember when the first ones started with Indy Mac and the actual bank runs we saw on TV, where every one was standing in line outside their bank branch? Remember that? Well, the "embedded guarantees" have rendered those past TV images to a step below a BMW TV ad in terms of news status.

So we have all these "embedded promises and guarantees" that the US government must cover or else there would be rioting in the streets like there is in China and Europe. Imagine if our government decided to renege on Unemployment benefits or Social Security checks ... Does anyone here ever ask themselves ... "Hey what did Americans do back before there was Social Security and Unemployment benefits?" Well, it was simple, your family took care of you and if you had no family then you were not taken care of. Also I might point out that most American families had a farm somewhere in their lineage to rely on. If you notice when the Chinese factory workers lose their jobs they go back to their families and their farms. Even Mexicans working here in the USA have the option of going back to their families and farms in Mexico. Americans no longer have that option as the two party political nanny machine has bred the instinct of self-sufficiency out of the average American. We Americans are all now "wards of the State". Imagine the Presidential candidate who runs on the platform of cutting Social Security and Unemployment benefits. This is why the system has to collapse under its own weight, like any other past Empire did.

I have to point out that while China and the other foreigners may not be selling off US Treasuries, they are selling off US Agency Bonds(FNM & FRE) and US corporate bonds. There is more to the US DEBT juggernaut than just Treasuries. In fact the last three reported quarters for Net Purchases of LT(Long Term) US Securities by Foreigners yielded America only $910MIL USD as Foreigners mainly sold off some $220BIL USD worth of Agency Bonds. So Foreigners are not seeing the US real estate market as a viable vehicle in the future. In fact most of the purchases and redemptions going on are Short Term US DEBT, like Bills, with maturity dates of one year or less. Foreigners are saying they are not interested in US DEBT for the long haul. I see that as Foreigners "unofficially" placing a "negative watch" on the USA Sovereign Credit Rating. As we all saw during the Sub Prime crisis the US rating agencies kept a AAA rating until the entire market collapsed, so I do not expect that S&P and Moodys are on top of US Sovereign Credit either. In other words you have to get your clues "unofficially" like Foreigners voting with their feet.

SPENDING ... The combined cost for the following line items just crossed the $1TRIL USD mark last week.
- Social Security
- Medicare
- Medicaid

The combined cost of the following two line items crossed the $2TRIL USD mark last week as well.
- Other
- Unclassified

You might ask how it is that we can spend $2TRIL on "Other" and "Unclassified"? You might ask ...

The cost of the American government today is "embedded promises and guarantees" and a large percentage of those "promises and guarantees" do not even benefit Americans.

This is NOT the government our Founding Fathers envisioned for our future. Their vision has morphed into Crony Socialism and a large part of the blame goes to the face in your mirror. Do you really want to dismantle the EMPIRE? I didn't think so ...

The Age of Turbulence: Preparing for the Crash

ALOHA !!

Another aspect of the equation is Agency Bonds and the lack of Foreign appetite for the future of the US real estate market, which has been a factor contributing to the decline of US LT DEBT NET PURCHASES on a quarterly basis. I translate this as an "unofficial" announcement by Foreigners that the US Sovereign Credit Rating is on a "negative watch" downgrade. As we have learned from the Sub Prime debacle, the US credit rating agencies only react after the fact and I see no signs credit rating agencies have changed that practice, especially when it comes to the "Sovereigns".

The latest reported TIC quarterly NET PURCHASES of US Long Term(LT) Securities has been dismal if you “net out” the totals for each debt product, which includes AGENCY DEBT, the debt nobody talks about. It seems the fascination for US Treasuries overrides the failures of FNM and FRE (Agency Bonds).

LINK: www.treas.gov/tic/snet...

If I just look at US Bonds America’s debt profile looks rosy, but if I net out Agency Debt and US Corporate Bonds it looks like this:

TOTAL NET LT US SECURITIES

Q3/2008 = $6.548BIL USD
Q4/2008 = ($74.341BIL USD)
Q1/2009 = $68.703BIL USD

TOTAL = $0.91BIL USD ($910MIL)

In terms of purchasing LT US Securities the Foreigners have voted with their feet. Now only short term US DEBT remains viable and as the US TREASURY DAILY STATEMENT reveals most of that is in Bills, the shortest of the short term.

Even the Financial Stability Oversight Board's Mission Statement infers symptoms of a "monetary crisis" ...

"It is a crisis of confidence, of capital, of credit and of consumer and business demand. Rather than providing the credit that allows new ideas to flourish into new jobs, or families to afford homes and autos, we have seen banks and other sources of credit freeze up – contributing to and potentially accelerating what already threatens to be a serious recession. ... " END

Now if US Banks are refusing to lend then they are no longer banks? Isn't that their primary "business model" ... lending? Based on recent quarterly financials of large banks such as Goldman Sachs and JP Morgan it seems most of their revenue streams come from their trading desks now days and not from loans. So essentially the $700BIL USD BAILOUT from 2008 was used to "trade against order flows", known lately in the media as flash trading.

The whole "rescue of American families" as Henry Paulson, US Tres Sec 2008, stated was the purpose of the $700BIL USD Bank Bailout stinks of PRICE FIXING 101 ... When was the last time government "price fixing" worked?

Prior to this FINSOB Mission Statement is this "Updated: April 20, 2009". Most Mission Statements I have seen don't have regular "updates", so that in itself makes me uneasy and wondering if this group has any idea what it is doing.

A Mission Statement in a constant state of flux ... like predicting the future, nothing is certain.

Analyzing the Australian Dollar, Up, Down and Under

ALOHA !!

Sounds like someone has been looking over my shoulder!

In Jan 2008 I took a trip to Perth, Western Australia and even took the Indian Pacific train from Sydney to Perth. It was a fantastic trip!

I meet with two Perth based mining execs.
- Straits Resources(SRL:ASX)
- Silver Lakes Resources(SLR:ASX)

Straits is a long term producer mainly coal, copper and gold.
Silver Lakes is strictly just gold, properties in Kalgoorlie area.

I was very impressed as both are producers with some great properties and cash flow positive with either little debt or none and no hedging.

Okay ... I converted US Dollars to AUD at $0.65. I then took those funds and bought both companies, SLR@ $0.17AUD and SRL@$0.70AUD.

By doing that I participated in the FX spread profit and the commodity company profit off the lows in Novermber 2008.

Prior to this move I was concentrated on the TSX in 2007. I am now strictly ASX. Why would an American with US Dollars buy other American or Canadian commodity companies when the currency arbitrage is so enticing for the ASX? Why would I pay the same price for shares of a TSX "explorer" when I can buy Aussie "producers" for the same price or less? The problem with TSX "explorers" is that they spend their cash flows on building big 43-101s in hopes a major will scoop them up, which means more exposure to risky and dilutive funding. The Aussies tend to go straight to production and then use the cash flow to pay for further exploration and increased production. Its a more self-sufficient business model that I prefer.

The move that began in Jan 2008 has proven to be highly rewarding. I appreciate the article and its detail and anyone with eyes can see with one visit to Australia that China plays a large roll in Australia's future growth, as well as India and Japan in lesser degrees. When I lived in Perth, Western Australia in the 1970s Japan was the dominate player and nobody ever heard of China and now China is the new Japan.

Lets hope that the Aussie real estate market does not follow America's, but during my visit to Perth, I saw some highly speculative and high prices real estate mania going on. If the Australian government can keep the labor market stable then the Aussies may avert a US style disaster. China will play a key role in keeping the Aussie's employed.

If I had to tie my future to one country I'd rather ties it to a country that is a "creditor" and not a "debtor" ...

G'day ...

Is the U.S. Dollar the Fed's Next Weapon?

ALOHA !!

The Us government and the US FED can spew out tailored data to make anything look good. Naturally employment is a key factor in the economy and it has a major role as to a sovereign's ability to service its debt. This is like dominoes ... If employment is down then tax revenues are down, so not only are small businesses struggling under such circumstances but the ripple effects end up on the US TREASURY'S bottom line. Once that becomes a trend then a sovereign credit rating comes into play, whether officially announced or not.

I really do not care what the "official" unemployment rate is since there are so many versions of unemployment calculations they become worthless. One fact is clear and that is if the BLS used U7 rate like they did in 1994 to measure unemployment then America would be sitting at 21% unemployment right now. I cannot speak for others here but I personally have never known so many relatives, friends and associates who are either unemployed or under-employed in all my life.

Lets measure employment using tax revenue growth rates.

- Q4/2008 drops down to -2% growth from Q3 of +2.75% growth.
- Q1/2009 drops to -6.5% growth from -2%.
- Q2/2009 drops to -9.2% growth from -6.5%.
- Q3/2009 drops to -14% growth from - 9.2%.

I see a pattern ... Now the last time these growth rates slid into negative territory was in 2002 when the USDX was at 120. By using these growth rates it is obvious that the USDX is in another down leg like it was in 2002 when the USDX was at 120. The USDX slid from 120 in 2002 down to 80 in 2005, a 40 point drop. In Q1/2009 the USDX peaked at 89 so a similar 2002 move down would give the USDX a 40 handle within two years. Definitely Q1 2009 validated the Q4/2008 negative growth rate trend and it has been downhill ever since for tax revenues and that will point to a downtrend in the USDX that I believe history will record began in 2009.

Given the massive US DEBT load and the Crony Socialist governments of the past decades there can be no other direction for such a system to morph other than more debt USSR style and we all know how that ended. A Russian tank blew a hole right through the Communist Party Headquarters with a drunken Yeltsin swinging form the gun turret. As far as I can see that is about the only thing that would awaken the US Congress from their stupor is a hole in the Rotunda! My point is, even as I have veered offtrack into politicos, is that OBAMA has no other choice than to increase spending.

Now in 1908 there existed a similar situation as we have now, except that 1908 was prior to 1913, so the US FED did not yet exist. Back then Lindberg, the famous aviator, had his Father in Congress, Charles A. Lindberg, who coined the term MONEY TRUST. Follow along and we get to FDR and in 1933 he defaulted to gold and by 1935 FDR was looking at weak inflation instead of deflation. Fast forward to Bernanke at Princeton and he reiterates the exact same FDR devaluation policy to the letter in numerous speeches. So Bernanke knows his monetary history, he just doesn't make it public like he used to when all he had to worry about is tenure at Princeton. There is something to be said about the comfort and safety of academia.

So in reality this is a monetary crisis ... and in every monetary crisis it is "confidence" that is the last straw.

Ever since Rubin there has been this STRONG DOLLAR POLICY mantra at the US TREASURY. Well, just a few months ago Geithner carried on the mantra at the Beijing Improv, where his STRONG DOLLAR stand-up act met with much laughter from Chinese students. So if Chinese, 20 something, students find the US STRONG DOLLAR POLICY a joke what must the Communist leaders know?

The US TREASURY outlays spell it out loud and clear ...

"Government is essentially the negation of Liberty." - Ludwig Von Mises

"GOVERNMENT IS ONLY AS HONEST AS ITS MONEY" - Me

Small Business Lending: Why the Programs Need to Change

ALOHA !!

Here is my simple MONEY FLOW CHART ...

US TREASURY >>> US FED >>> WE THE PEOPLE

Who is that in the middle skimming profits and running insider trading scams night and day? It looks like a simple MAFIA MONEY FLOW CHART ...

CASINO >>> MAFIA >>> GAMBLERS

The CASINO creates the chips(DEBT) ... The MAFIA skims the take(interest/fees) and the GAMBLERS get hosed(TARP) ...

Not a whole lot of difference. The MAFIA skims Vegas casino profits and so does the US FED.

GET RID OF THE MIDDLE MAN ...

Is it not "our wealth" that is at stake in this high stakes fiat poker game? In my view we are allowing the US government and the US FED to play without even an ante! Why should we who hold the "real assets" of America ... we who are the only ones "AT RISK" have to pay interest at all?

Lose the US FED ... its a MONEY MONOPOLY ...

Then get rid of the REP and DEM Dog and Pony Show that resides at the US Congress which has brought ruination to these shores.

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY ...

Small Business Lending: Why the Programs Need to Change

ALOHA !!

Please-e-e ... according to Karen Gordon Mills she "honed her expertise as a former managing director and COO for E.S. Jacobs & Co., a leveraged buyout firm. "

Those are more MADE IN WALL STREET skills ...

As I said I would prefer a "real' Venture Capitalist, non CFO type heading the SBA.

Obama has chosen WALL STREET once again ...


On Jul 19 01:54 PM rollini wrote:

> FYI, the new Administrator of the SBA, confirmed April 6, 2009, Karen
> Gordon Mills, is an experienced business person and venture capitalist
> by background. Now what is needed is more clarity regarding its
> mandate, streamlining of its processes, and stimulus funding to be
> made available in 2009, or else the SBA will have no ability to contribute
> to an economic recovery.

Six Signs Economy Is Turning the Corner

ALOHA !!

The title of this article should be changed to "SIX SIGNS THAT I GET PAID BY CNBC"!

Mr.Newman ... The day you mention US TREASURY DAILY STATEMENT or US WITHHOLDING TAX REVENUES in one of your article is the day I will take you seriously. Otherwise, get a real job!