The Most Important Ruling

I understand that the judge in the Chrysler bankruptcy case is going to rule today on whether or not the sale to Fiat can go through. While getting little press, I feel this decision can potentially impact the entire framework of the American system. If he decides to rule in favor of the deal, we are in for a prolonged recession (if we weren't already).

Here is what the deal is: the bondholders, the ones Obama basically called greedy, are fighting the government's arrangement. They feel that their interests were not protected. They were offered $.30 on the dollar while the Union's fund got $.60-$.70 on the dollar. This is absolutely unacceptable to the bondholders and against the basic tenets of our laws.

The basic issue here is secured versus unsecured debt. In this case, the bonds were secured by the assets of Chrysler. When a company goes under, the secured debt holders are first in line. The Union's debt was unsecured which means they are entitled to be paid after the secured debt holders get their money. This is how contract law works.

If the judge goes ahead and approves the deal the government set forth, we will see private equity for investments disappear overnight. One of the successes of our system is that people can invest in worthwhile ventures while receiving some assurance their money is safe. Of course, there is still the chance of a loss, yet it is reduced when the debt is secured with assets.

Obama decided that the 'speculators' in this situation were being too greedy. After all, they were receiving a profit. Well, under a capitalistic system, companies are entitled to maximize the return for their shareholders. That is what these big, bad hedge funds did. Naturally, it is easy to demonize them.

Before jumping on the bandwagon, remember that these funds, Oppenheimer in particular, invest 401K and pension fund money. Their jobs is to make as much for their retirement accounts as they can. The entering into the deal with Chrysler was with the understanding that the debt was backed by assets. That is the rule of law and I hope the judge sees it that way.

Share and Enjoy!

Shoot The Dumbass

Did you catch the episode over New York City today? It seems that someone "genius" in the White House authorized a flyover of one of the President's planes for a photo op. In short, they ought to take the stupid son-of-a-bitch out back and shoot him or her. That person is simply too stupid to live.

Here is the story.

This just shows the lack of intelligence and compassion of the Obama administration. I will not buy the argument that they are sorry and it was an authorized flight. It was pure stupidity.

One who is thoroughly pissed is Mayor Bloomberg. And he should be. Of all the stupidity, this takes the cake. Anyone who was above the age of 12 during 2001 when the Twin Towers were hit know the devastation to families that occurred. To think this would not raise many of the same emotions is just asinine. You want a photo op, do it over South Dakota. To choose the location of the worst terror attack on American land since Pearl Harbor is baffling.

Well, I guess this is change you can believe in. Stupidity at its finest. I really hope Mayor Bloomberg calls out the idiots in the Adminstration who are responsible for this.

Share and Enjoy!

Stress Test Revealed

Does anyone out there really believe that the government is going to be truthful when the results of the stress tests are in? I certainly do not. This is nothing more than a mirage designed to appease the stock market. Those in power know that the media focuses upon large shifts in the market. While the politicians will try to separate Wall Street from Main Street when it serves them, a rising stock market protects all of them.

Many fail to understand the market is not the economy. When they see the headlines of the market crashing, everyone is aware of how hard things are. Those in power have to answer for the results. This is something they want to avoid.

At this moment, I believe Bernake and Geithner both know that the majority of the banks are insolvent. Simply, that means they need more money, a lot more. They are broke. The stress tests were sold as a way to 'grade' the banks. This is not true. They were put together to give the market confidence in these institutions. Sadly, this is another house of cards being erected.

The banks just received their first wave of bad news. Residential real estate is only 1/3 of the equation. We are already seeing the bubble in commercial real estate breaking. And, credit card defaults are on the rise. To quote the famous song: "We have only just begun".

The economy is in shambles. People are looking for the mustard seeds and green spouts. Do not believe any of them. This market is going to crash in the next few months. We got a boost because many of the companies "exceeded expectations" on their earnings. Big deal. Those expectations were so low that it is almost impossible not to meet them. Seriously, can anyone say that a Fortune 500 company's revenues being off 58% is good news? No. It is an abysmal time to be in business right now.

We invested trillions to prevent a credit freeze. Unfortunately, money aside, that is exactly what we have. Nobody is lending. The banks are holding onto the TARP money like a child holds a toy on Christmas morning. There is nothing being lend anywhere. And, if some of the ideas the government is proposing go through, the banks will tighten up even further. Credit card limits are already being reduced substantially.

I believe that on May 4th, the Feds will tell us that all the banks passed with a disclaimer that a few need to raise additional capital. The market will probably jump up another 150-200 points on this news. I, for one, will not buy a word of it. Eventually, the market corrects its misconceptions. In three months, these same institutions will have to report again. I do not believe they will be able to pull the same voodoo accounting they did this time. The proof will eventually come out just like it did last fall. I am here telling you the game is already up. The average person is just not in on it.

I would make my future plans accordingly.

Share and Enjoy!

Do Not Believe The Hype

Everything seems rosy with the banks. Everyday we see one report earnings and the stock prices go up regardless of what the numbers look like. First, we saw a government backed guarantee for these institutions with the TARP money. Then came the "cooking of the books" through the change in the mark-to-market regulations. This allowed the banks to alter how they wrote down the toxic debt they are carrying.

Well, if you have any sense you will see through this fluff. Mark my words: the banks will come crashing down again. They will sustain loses beyond comprehension. The government's "stress test", which I am sure all will pass admirably, will show the banks to be solvent under any conditions. Reality, sadly, will differ. We will see the banks suffer under an mountain of debt that comes crashing down. Defaults are going through the roof.

We are starting to see the first indication of this. Today, Capital One, one of the largest credit card issuer reported their 1st quarter earnings. Like many other banks, the numbers were not pretty. However, this is one that people should take note of. Capital One is a consumer credit lender. They are not into the mortgages and commercial real estate. Interest on credit cards are their game.

As you would imagine, they have a bit of exposure if people start to default at a higher rate (which they are). If you will notice, Capital One said losses will be higher than the $8.6 billion previously anticipated. They added almost $125 million to cover that this year.

Here is the problem: unemployment is rising. People in the market like to claim it is a lagging indicator of the economy. Under normal circumstances, that might be true. Yet, in this debacle it tells another story. We are most likely going to see close to 2 million more people lose their jobs in the next 6-9 months. Those people are going to encounter financial uncertainty like never before. This will start the onslaught of defaults.

The last time we saw a major recession was 1982. At that time, personal credit was restricted to a mortgage and, perhaps, a car loan. People simply did not have large credit card balances. That is not the case today. We presently have roughly $1.2 trillion in credit card debt out there. Keep in mind this is unsecured with no collateral backing it. The banks are totally exposed here.

So what is going to happen. I believe this default rate will jump to around 15% if we see unemployment move to the 10.5% rate. This will put the underemployment number closer to 20% which means 1 in 5 will be earning either none or only a portion of the money needed to survive. That will lead to a huge increase in the default rate.

What does this all mean? With $1.2 trillion sitting out there, a 15% default rate means $180 billion goes unpaid. That is a lot for the banks to absorb. In this era where the government issues $1 trillion stimulus plans, it is easy to lose site of how much money that really is. To give you some contrast, the entire infomercial industry generates $150 billion a year. The loses they will sustain are on top of all the other stuff presently affecting them.

The bottom line is to not believe the propaganda the Feds are delivering. There is a rough road ahead for all the banks. Capital One is a large creditor, but not the biggest. Citigroup and Bank of America also have billions of dollars worth of exposure. How much more do you think their balance sheets can take?

Things are grim. Consider that the next time you see some talking head on television spouting how the seeds of recovery are at hand. Things are going to get worse before they get better. Invest accordingly.

Share and Enjoy!

Strength Through Weakness?

Have you followed the situation off the coast of Somalia with the pirates? To me, this is an abysmal situation. How the United States government is acting tells me we are a much weakened state since the election of the Messiah, Barack Obama. Each day, he proves himself to be a weakling just like Jimmy Carter. That is what happens when you send a boy to do a man's job.

According to published reports, there was another vessel seized by pirates. An American tug boat with 16 on board was hijacked in the Gulf of Aden (read article here). This is on top of the struggle with the captain being detained for the better part of a week. And, what is being done about it? Well, the Obama administration is pondering the situation.

To add fuel to the mix, North Korea launched a rocket they claim has the ability to reach Hawaii. Allowing these nuts this technology is not making the United States safer. Of course Obama has done nothing but defer our safety to the United Nations which has done nothing. This is getting ridiculous.

Joe Biden was right when he said the world would test Barack Obama in the first 6 months of his administration. That is because those who pose a danger to the United States knew Obama was a wimp. He shies away from tough decisions. His history is to vote 'present' (a vote in the Senate which says I am here but I am too wimpy to take a position here). Well Mr. President, you cannot take that position when you occupy the Oval Office. So get out from under your desk and be a man. If you cannot do that, defer to Michelle; maybe she has the testicles in the family.

Those who regularly read this blog know I was not a big fan of George W. Bush. I think his Presidency was a disaster overall. However, one thing I give the guy credit for is that he understood his responsibility to protect America. And, he did that. His tactics might be questionable and are worth looking into. Yet, he did a decent job protecting us from outside attack.

This administration is showing itself to be weak. I know the comments I will get from my moronic liberal readers about diplomacy. Here this you fruit loops: you cannot negotiate with someone who is completely insane. If a person is willing to die for their cause (beliefs) there is only one option: kill that person. Those who are willing to strap a bomb to their back and walk into a shopping mall deserve a bullet. Plain and simple. These pirates are nothing more than terrorists on the high seas. For their actions, they deserve to bear the full weight of our military.

Yet Obama sits back while another vessel is taken. Mark my words, the Obama administration will change the world. However, not in the way he promised. His cutting of defense spending while rogue nations like North Korea and Iran are getting more technologically aggressive shows how little he cares about the country. Remember, Obama is not a stupid person. He gets it. He just doesn't care. His goal is to transform this nation into a obedient participant in the New World Order. Socialism on the grandest of scales. Everything he has done since he took office is in line with this idea. Being a weakling in the face of challenges plays right into that model.

Well, at least Jimmy Carter is starting to feel better. His Presidency is quickly going to move up from the bottom of worst administrations in the last 100 years. Now, if he can just surpass that crook Nixon...

Share and Enjoy!

New World Order

Here is a video that spells out an argument that there is a conspiracy taking place. Recent events seem to support that this movement exists. What do you think?




Share and Enjoy!

Governments Are Going Broke

The news of California's economic demise is well documented. Now, we are seeing that many other governmental agencies are facing similar circumstances. The days of reckless overspending are coming back to haunt these local and state governments. And, it serves them right.

Today, the mayor of New York announced that the city needed to undergo massive layoffs to prevent going bankrupt. Of course, it should come as no surprise that unions are at the center of the issue. New York will have to lay off as many as 7,000 employees unless concessions in benefits are made. This is according to an article run here.

How is this any different then the situation confronting General Motors? Management made poor decisions for decades spending on ideas that missed what the market needed while the unions presses (and received) wonderful contracts which destroyed the company. We see a similar story being run in government. Reckless politicians spent money without regard of how it would be paid back while conceding to the unions. Now, GM and many governments are facing bankruptcy.

Personally, I am glad to see so much trouble across the country. Government is addicted to tax revenue. Politicians spend without regard to the consequences of what they do. Campaigns are full of promises of "handouts" without any thought to the future. Today, the future is here.

Of course, areas like New York and California are going to solve this problem by raising taxes. We already saw some of the proposals the Governor of New York offered. If it moves, he wants to tax it. Typical government mindset. They screw the budget up and feel entitled to have the people give more. This is absolute bull crap. The time is near that the politicians are held accountable for their choices. Perhaps we could have them personally guarantee all their decisions. You put the government in debt, we, the people are entitled to all your money. That is a tidy sum with some of these politicians.

I am predicting there will be a tax revolt in the next few years. The way these idiots in government are spending money, those who are in a position of high net worth will not like giving more to the corrupt politicians. If the top 3% decided to withhold their tax payments, we would see the government stopped on a dime. This is what America needs. Let the politicians figure out how to keep their campaign promises without any tax dollars. If they want it, let them fund it.

The revolution is nearing. We are seeing the signs of it all over the country. People are angry. These politicians think it is business as usual. They better wake up soon.

Share and Enjoy!