basehitz

Key Points from NYU Commercial Real Estate Capital Markets Conference

CRE developer Jeff Neal in this video surveys landscape (literally) of empty buildings and unfinished projects in D.C. A lot of capital at risk here, and this is only one area of the country. He says “2010 CRE looks like an unavoidable bloodbath.”
www.youtube.com/watch?...

Just Call Us Subprime Sam

The folks get it (except CNBC viewers). Example, yesterday at the gym, Cheerleading Central was on. The market was up big. So with several spectators watching I said "I see Banana Ben is printing again today". Everyone understood and laughed. No one is buying. Most agree it is a farce. Even the regular folks get it. Yesterday I read that the Fed Reserve approval rating is 30% vs 40% for the IRS. When you lose to the IRS in a popularity contest, something's not quite right. Our monetary policy is internationally criticized. China fears what is happening to their reserves in US pesos. You would think these dickweeds would eventually moderate their experiment with OUR future. Instead, soon to be voting member of FOMC Bullard says we should expand MBS purchases.

Why? Cause no one else will buy this crap and the real estate market will implode. Everyone knows it (except CNBC fans). So they would rather put the currency and nation at risk than do the responsible thing and let market forces correct the imbalances.

Why? Cause they know the banks cannot take the hit the market would deal. And that is whom these bankers serve, their buddies who created this mess in the first place.

U.S. Government's Size: The Slow-Motion Crisis

It seems like it’s by design. Namely, maximize dependency on govt, thereby pressuring those dependents to maintain status quo for future sustenance. But since our debt has gone parabolic, it is mathematically assured this is unsustainable.

Another example: Most people are outraged by the bailout culture heaping massive benefit on the politically connected in this and previous administrations. (Think, former GS CEO bailing out his WS pals.) Just when some of us hoped they would end TARP’s existence, some in Congress want to canonize the bailout culture. Barney Frank and Chris Dodd are leading the charge. They are advocating:
1) broad discretion as to who gets money
2) unlimited new deficit spending to finance these bailouts
3) broad powers to the Treasury and Federal Reserve enacting whatever they want. Do you trust Banana Ben or Timmy with this kind of power?

WSJ link:
online.wsj.com/article...

It’s almost like they are saying, our failure is inevitable, so we will have one last drunken orgy and canonize our mutual destruction.

The Truth Behind China's Currency Peg

Your argument of the mutual long term benefit is logical, but both sides resist. Making the tough calls to allow the near term adjustment takes political will and backbone, which is rare in Washington. Consider the dilemma each side faces as each continues to pursue policy counter to the rebalancing required.

China: Some maintain it is very much at risk as it is still building export capacity, but for who? American consumers are still deleveraging and saving. . . finally. And since China doesn’t have social programs such as SS and Medicare as in US, they must save. So it’s doubtful they will take up the slack. Gary Shilling was interviewed recently on this:
finance.yahoo.com/tech...=

US: BHO initially advocated building American jobs for energy, infrastructure and others with long term benefit. He advocated ending politics-as-usual where special interests and self-serving politicians seeking campaign financing could be bought at the expense of the people. Many were hopeful. For many, we see that the only thing that changed was who the special interests are. Under Bush, Paulson raped the US Treasury to help his pals on WS, with little discernable help to Main Street. Under BHO, we find a continuation of these shameful practices and what has changed is who the special interests are that are shaping policy.

Banana Ben and Timmy continue to protect their pals in the financial industry who created this disaster in the first place, while punishing savers through zero interest rate policy and currency devaluation.

My hope is that enough people make it their business to learn what’s actually going on (as opposed to the crap being shoveled on CNBC), and speak out through all means available. (Thank you Peter for your contribution.) Some politicians will respond to public pressure. Those that won’t, come next election, fire them.

Example: Is anyone on the planet comfortable with what Banana Ben is doing besides hot money on WS? Does the Constitution even allow Kamikaze Ben to bail out foreign banks, or print trillions out of thin air? Yet a bill to audit the Fed was resisted by 26 Reps, whose names are at the bottom of this post:
market-ticker.org/arch...

Of particular note was Congressman Mel Watt., who was hostile to reigning in the Fed. Why? Zero Hedge says it like few can.
www.zerohedge.com/arti...
This kind of crap must stop in Washington before these self-serving A-holes destroy this country.

A Rough Day at the Office for Tim Geithner

Zero Hedge expresses my sentiment about Turbo Tax Timmy:
"Even as Tim Geithner was boldly lying today on national TV, claiming that he abhors the concept of too big to fail, and condemns moral hazard, behind everybody's back he, together with the entire Obama administration, was trying to pass a law that would shift TBTF from a temporary program into officially canonized law. This is a scandal that has gotten little recognition in most of the MSM: in essence it guarantees that the massive mega banks like Goldman Sachs, BofA, and JPM will take on so much disproportionate risk the next time around (and with a moral-hazard encouraging Federal Reserve as risk regulator virtually guarantees their implosion) that not only will they blow up spectacularly once again, but that their bailout next time around will surely force America, already strapped with trillions of new upcoming debt courtesy of stimulus after stimulus, into sovereign insolvency. "

www.zerohedge.com/arti...

Goldman's Human Face

In order words, a very small percentage of the taxpayer money they have taken (and have no intention of paying back) will be given to charity.
See previous post:
seekingalpha.com/user/...

Goldman Tries to Combat Its Bad Image

Link to above reference from Economic Policy Institute:
www.epi.org/analysis_a...

Goldman Tries to Combat Its Bad Image

If GS wants to show sincerity in BEGINNING to repair the damage they’ve already done, I’ve got some suggestions:

#1) The AIG bad bets which were paid off by the US taxpayer at 100%, which had already been negotiated for a stiff haircut partial reimbursement previous, give it back to the US Treasury. We know about the $13B backdoor payout thru AIG which the govt tried to keep secret. We also know that banks like Merrill Lynch that had bought credit-default swaps from failed insurers other than AIG were paid 13 cents on the dollar in deals moderated by New York’s insurance regulator. (See link below) 87% haircut on $13B = $11B. So at your rate of $500m/yr, that would be 22 years just to pay that back with no interest.
seekingalpha.com/artic...

#2) Or how about this taxpayer subsidy from the Economic Policy Institute:
“Goldman also benefited from artificially inexpensive debt thanks to the FDIC’s Temporary Liquidity Guarantee Program (TLGP). This program put a federal guarantee behind bonds issued by Goldman and other banks, including Bank of America and JP Morgan Chase, making them far more attractive to investors. For example, when Goldman sold $5 billion of 3.5 year bonds in November, it was able to attract buyers while offering a yield only 200 basis points higher than ultra-safe Treasuries with similar maturities. Altogether, Goldman issued $28 billion in debt using this program between November and April. Mark Zandi, chief economist at Moody’s Economy.com, called this bond-guarantee program an infinite subsidy whose value could not be calculated.”

Not sure how much to tack on. Infinity sounds like a big number, so let’s just double it to be generous. Instead of paying $500m/yr, up the ante to $1B/yr. After all, we know your wholly owned subsidiary, the Federal Reserve, with make the dollar worthless it we let this go too long.

#3) We also know your trading winning percentage is not possible.
www.zerohedge.com/arti...
So are you really THAT good? Or do you cheat? YOUR lawyer said in a courtroom:
“During Aleynikov’s July 4 bail hearing, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge that ‘the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.’”
blogs.wsj.com/deals/20.../

So, on a condition of settlement for ONLY THE ABOVE infractions (we’ll get to the rest later), you must also quit using this program.

So Lord Blankfein, do you really think we’re that f###ing stupid to believe your newfound “generosity” is sincere? If you want to convince us, right the 2 wrongs above immediately, quit using the program YOU say could be used to manipulate the markets, and THEN give to charity. I promise I will praise you if you do.

The Financial Crisis: Nowhere Near Over

“This indicates that Goldie is bearish on both the euro and gold. which hints that Wall Street’s finest are likely betting on a US Dollar rally”

The trade has been dollar up, stocks and commodities down, and vice versa. The inverse correlation was shown clearly by Karl Denninger in a chart here:
“The dollar and S&P 500 correlation . . . in July it became nearly-perfect”
market-ticker.org/arch...

And if Goldie is right on financials bearish bet, the market won’t fight that. Since Goldie’s results last 2 Qs shows they almost never have a losing day trading, you gonna bet against them?

I need to rephrase the author’s following statement:
“Given Goldman’s incredible access to and close relationship with the regulators and federal government”

That should read:
“Given Goldie’s directives to it’s wholly owned subsidiaries, the Federal Reserve and the US Treasury. . . “

Government Spending: Where Does It End?

When will it end? Next year is an election year. And in spite of the increasing public concern about deficit spending, all indications are there is no abatement. Of course, since we can’t possibly borrow that much money at reasonable rates, Banana Ben is the key to how long the Kool-Aid is dispensed. Both Japan and China spoke out recently adding to the global chorus criticizing the outrageous monetary policy.

So Banana Ben finally said something today. The key point from an AP article:
“He made clear Fed policymakers will keep rates at super-low levels. Yet through his words, Bernanke is also trying to bolster confidence in the dollar WITHOUT ACTUALLY RAISING RATES”.

In other words, it’s BS. The market immediately read that and celebrated continued free money for speculation while trashing the dollar.

But not to worry, the same article asked the “experts”:
“Economists say a free-fall in the value of the dollar is remote”

These would be the same morons who said brilliant things like “subprime is contained”, and didn’t see any of this coming before it imploded. How reassuring they don’t see the risk today. . . again. Banana Ben was in that camp.

Here’s link to full AP story:
finance.yahoo.com/news...=

Housing and Banking Woes to Continue

Oct 8 from NY Times
“Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout.”

FHA commissioner Stevens before House Subcommittee:
“Stevens assured lawmakers that his agency would not need a bailout and that it was managing its risks.”

"But he (Stevens) acknowledged that 20% of FHA loans insured last year — and as many as 24% from 2007 — faced serious problems including foreclosure.”

Recall, his testimony before Congress was just last month. Seems “fixing” the real estate bubble facilitated by crappy lending practices, is . . . well, more of the same.

Link to NYT article
www.nytimes.com/2009/1...

Confidence and Trade: Spin vs. Reality

"“Sometimes what looks bad on the surface is actually . . . a steaming turd."

OK, he didn't exactly say that. So I took some liberty to calibrate what he said with what he meant. . . without the rose colored glasses.

I read an interesting report today from Comstock Partners on their projections for the CONTINUING consumer deleveraging for several more YEARS. Uh, oh. This was well worth my time to read and fits in with Karl's often cited data on consumer retrenchment.
www.investmentpostcard...

Emerson Electric CEO: Washington Is Destroying U.S. Manufacturing

Unintended consequences of policy actions can have far reaching effects. As another example, corporate reactions to anticipated legislation intending to reign in off-shoring of jobs resulted in off-shoring of companies, with resulting loss in tax revenue.

From a Reuters story March ’09:
“Yet a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.”
“Over the past six months companies including offshore drilling contractors Noble Corp and Transocean, energy-focused engineering group Foster Wheeler and oilfield services company Weatherfield International have all announced plans to shift domicile to Switzerland.”
www.reuters.com/articl...

This is just one of many examples that could be cited.

Peter Schiff: The Government Chose Wrong

"It's the politicians who don't like gold, because gold imposes discipline on politicians. It keeps them honest, and politicians don't want to be honest. They want to get elected."

Buying votes is standard practice for many incumbants. Since we have lived beyond our means for 3 decades, the shortfall is made up by printing money and piling on debt. Until it looks like this:
2.bp.blogspot.com/_vIR...

1971 was when the dollar got off the gold standard. Notice where that is on above chart. It has now gone parabolic. Clearly this is not sustainable. Politicians, with a few exceptions, will put their next election ahead of our long term prosperity. If Banana Ben continues to accommodate irresponsible borrowing and spending for endless bailouts, backstops and handouts for consumption rather than investment, history suggests we are courting disaster.

I suspect that BB will want to avoid going down in history as the one at the helm when the US dollar and it's economy is destroyed. If for no better reason than self-serving legacy preservation, that may drive him to show some restraint. He does not deserve all the "credit" for this precarious state. "Easy Al" Greenspan was Fed Chairman beginning in 1987. Notice the debt ramp during that time and especially after the dot-bomb implosion when he lowered rates to 1% and held it there to facilitate the housing bubble. They both should be very proud of their "accomplishments".

Tuesday Outlook: Commodities, Global Markets

Since early Sept, conspicuous high volume declines vs moderate volume advances. Yesterday’s % gain vs weak volume is typical. Ditto USO in spite of big drop in dollar, and it finished weak.

Imagine the crappy volume without the bots, which would also explain those precision bounces off moving averages.

I wonder if Da Boyz will try to keep it up thru year end for bonuses.