The Black Hole Of Wallstreet

It has now become apparent to me after running across an article from Time magazine, written in March of 2008 entitled Credit Default Swaps: The Next Crisis? that hopes for an economic recovery anytime soon are unlikely. The numbers they quote are accurate and staggering. First I must explain exactly what a CDS is. It is a credit derivative contract between two counter parties. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument defaults. Its designed to work like homeowners insurance to protect against losses like fire and theft, giving the buyer peace of mind. But the big difference is the insurance market is regulated and the CDS market is not. Hedge funds and others on wall street are reaping great profits by betting against Americas corporate and financial interests sucking money out of our Economy and taxpayers pockets, as we try desperately to prop-up these damaged entities, in the form of bailout money. Just how big is this perverse market? according to the International Derivatives Association it exploded to $45 trillion in 2007, twice the size of the U.S. stock market valued at $22 trillion, and huge compared to the $7.1 trillion mortgage market. In addition the 25 top commercial banks hold more than $13 trillion in credit default swap exposure. Banks such as JP Morgan Chase, Citibank, Bank of America and Wachovia. As these bad bets as the Obama administration has coined them, continue to be made a cycle of losses land on their victims balance sheets, and in turn the taxpayer is left riding the Credit Default Swap roller coaster. The proof is in the pudding as Chrysler files bankruptcy today, and this administration points its finger of blame at hedge funds, but fails to correct the problem when it has the power to do so.

Jumping Ship

Arlen Specter the five term Republican Senator from Pennsylvania, switched parties Tuesday blindsiding his constituents, and giving a probable 60-vote filibuster Senate majority to the Democrats. It is likely that Mr. Specter has been courted by the Obama administration for months, seeing the opportunity to solidify remaining agendas like Health Care, Immigration, and Gun Control. You have to give Obama credit for the most aggressive power grab in the history of American politics as we know it. They seem to have all the bases covered and most of their pawns in place for a CHECKMATE call. The 29-year Senator even admitted that due to his recent polling figures that indicated it unlikely that he could win a sixth term in Pennsylvania, was the determining factor in his sudden change of parties. As he put it, I just could not let that happen. The Obama administration had made it perfectly clear that he would have their full support in a re-election bid if he decided to make the change. He stressed that he will not be an automatic 60th vote, possibly to deflect any impression that he is a yes-man politician, only time will tell.

Swine Of The Times

WOW you could not make this much news up. It seems that just about every day that you turn on the tv set or open a newspaper, there is a barrage of heightened alerts if its not Economic downturns, the Taliban overrunning Pakistan and getting hold of its NUKES, now a possible swine flu pandemic here and abroad. It certainly makes a case for those weak minded individuals that choose not to watch reality unfold daily. I say its better to deal with the truth, even if as old Jack puts it YOU CANT HANDLE THE TRUTH. Is it really that bad out your front doorstep? or is the (MASS MEDIA) running this show? You almost need to run out and grab up a prescription of Prozac if you plan on watching tomorrows edition of the situation room with Wolf Blitzer. The escalation of such events are of mind boggling proportions. I guess what I'm getting at, is the Media making very serious situations WORSE by reporting them with such consistency and intensity? or is it their duty as news sources to keep us informed?

Mortal Danger

One of the most serious threats to the security of the United states of America is unfolding as we speak, and Barack Obama is meeting with various heads of credit card companies today trying to iron out new consumer protection legislation, while his Secretary of State Hillary Clinton deals with the hard stuff, Clinton called the recent Taliban run towards Islamabad the capitol of Pakistan, a MORTAL DANGER. President Obama continues a pattern of miscues and the lack of judgement seen earlier in the election, and now in his Presidency. Beginning with the Reverend Wright, and William Aires controversy, and most recently bowing to a Saudi King, and laughing it up with Hugo Chavez, and trying to make good with Cuba. He has dealt with foreign policy in a mannerism not seen by previous presidents. It only makes sense to deal with leaders that have made it clear that nothing short of our complete destruction would be acceptable, by acting from a position of strength, with a touch of diplomacy, as opposed to flat out submissive posturing, and continuous apology's for perceived past transgressions made by the United States. Hillary and Bill clearly see the urgency in this scenario while Obama focuses on photo ops like the one today. Imagine an AQ-Khan scenario where the Taliban sells the fifty to one hundred estimated Weapons of Mass Destruction presently in Pakistan, to our enemies throughout the world on a nuclear black market. Instead the base of sale is Pakistan as opposed to Dubai, where Khan did business in the 1990s, and how convenient to have Osama bin Laden just down the road. This is the making of a truly apocalyptic nightmare. Another consideration and most probable scenario, is the little state of Israel taking action to curtail a rightly justifiable perceived threat to its existence.

The Next Credit Crunch

In a recent interview between renowned financial guru Meredith Whitney formerly chief financial analyst for Oppenheimer, and Americas richest man Warren Buffet, Meredith laid down the gauntlet with her latest prediction in Whitney's sector of expertise, the credit market, and the picture is not a good one. She claims that lines of credit will be cut by two trillion this year and will top out at two and a half trillion by the end of 2010. Since lines of credit are the LIFE BLOOD of the majority of Americans, this would retard the ability for a timely economic recovery as the one promised by this administration. The major players in this sector are JP. Morgan Chase (JPM), Bank of America (BAC), Citigroup (C), Capital One (COF), America Express (AXP). Another subject she did not discuss rate jacking. In the small print on credit card companies contracts they retain the right to elevate your interest rate to as much as thirty percent if you are just one day late. Whats worse is that the other card companies retain the right even if its another companies card you are late on, and they all report to one another. This could be the proverbial straw that broke the camels back if shes right.

The Numbers Dont Lie

Well folks the numbers just came in again, and show this recession is deepening at almost every level. Housing starts are down, unemployment has reached the six million mark nationwide at 8.5% the highest level since 1983, and a staggering 663,000 jobs lost for the month of March alone. Foreclosures are up 24% year to date at a total of 803,489 homes lost, and the second largest retail mall corporation has filed bankruptcy. This all means that those glimmers of hope Barack Obama talks of could just be SMOKE and MIRRORS. For example, why does a program designed to help as many as 9 million individuals keep their homes exist? when about 7.6 million don't even qualify for the program. And his plan for refinancing is even worse. The American people deserve better when it comes to developing comprehensive plans to solve these dilemma's. It would be a shame to get nothing in return for the trillions spent on bailouts, acquisitions, and payoffs.

Laughing at Trump

Famous TV star and billionaire real estate mogul Donald Trump, claims in a recent CNBC interview on Wednesday that when he sought out loans for Commercial real estate acquisitions, he was laughed at. This is not good news for average Americans looking for financing and loans, to float their lifestyles. If the Donald CAN'T get a loan, how can we? And he seemed to be right in the assessment that he thought that they were hoarding the capitol. That is exactly why there doing it, to cover holes in their balance sheets in the form of TOXIC Mortgages, whats worse is these assets continue devaluation, and they don't know when they will bottom. In addition to this problem, the banks aren't required to loan a dime of the capitol given to them by this administration. One of the most respected financial analyst, former Oppenheimer consultant Meredith Whitney said we are looking at an additional thirty percent decline in home values in some areas of the country, as well as being on the verge of a catastrophic credit crunch with lines being cut as much as fifty percent. If she is remotely correct we are not even at the fifty yard line in this recession.

Economics 101

There are two lines of defense the Federal Reserve employs in stabilizing the economy in recessionary times, one is monetary policy which deals with injecting money directly into the banking system so that loans can be made, and interest rate manipulation to elevate peoples interest in acquiring those loans. The government has taken monetary policy to a level unseen in previous recessions by injecting over a trillion dollars recently, and rates are the lowest in decades. It only makes sense to believe fiscal policy, which involves government spending, and taxation will be implemented with the same fervor. This administration has set the table for spending on the health care, immigration, and the green economy agendas. Huge tax increases across the board are the net result for repayment of these debts with a touch of hyperinflation and dollar devaluation to boot. Tea parties are happening across the nation tomorrow, to show peoples rejection of such irresponsible fiscal policy. Sacramento California expects over ten thousand people to show up, at the steps of the state capital. With businesses closeing daily, and state revenue drying up tomorrows tea party should be quite interesting to say the least.

The Quickening

If the Obama administration is successful in achieving their carefully laid out agenda, our future should look something like this near the end of his first term. Presently they are working diligently on stabilizing the banks, by infusing large amounts of cash into these institutions, as to free up lending, and solve liquidity problems. they are also working on forcing the American auto industry to retool and put in place, key people that fit the governments vision of what type of vehicles should be built for the future, and the personnel that runs these companies. We also know that health care will become socialized medicine, and the cost will be massive. In addition Barack, and other key Democrats such as Diane Feinstien have let it be known that gun control is in the near future. Much higher taxes are inevitable to repay all this Tarp money. Big government is an understatement when describing the future of America, Socialism is not. And the national debt could reach twenty trillion dollars, when they raise the peverbial mission accomplished banner.

Maritime Nightmare

Recently an escalation of hijackings have occurred off the coast of Somalia in the Aidan sea, this area is a busy shipping lane in which thousands of vessels carry cargo, and tourists on a regular basis. currently there are over two hundred people being held for ransom, most of which work for companies in the maritime cargo industry. These ships are boarded, and hostages are taken, and usually released when the companies insurance carrier pays the ransom. Last week the U.S. flagged Maersk Alabama was boarded and the captain Richard Phillips was taken hostage, in exchange for the Maersk and her crew. The ordeal ended with Phillips unscathed after a highly elite team of Navy Seal snipers shot and killed the pirates from the deck of their ship. This incident has brought great debate on how these hijackings should be dealt with, without causing an A-symmetrical war or other conflicts such as Black Hawk down in which many military personnel were killed. Talks are under way, with arming vessels with weaponry and security personnel at the forefront of solutions. In the meantime Barack Obama has logged his first armed conflict decision successfully, by leaving the call to shoot to kill to the commander of the naval vessel.

Smoke and Mirrors

The same tactics used to destroy our investment banking system in recent months are now being used by the Obama administration in the form of deceptive sediment released to media outlets as to change the average Americans viewpoint of the current state of the economy from negative to positive. The government realizes that consumer confidence trumps liquidity infusion, and it is Americans spending their hard earned money on goods and services on a consistent basis that makes a healthy economy. Recent evidence of this deceptive news strategy is Citibank and Wells Fargo reporting that they have miraculously become profitable, and attributed this new success to loans made within their mortgage departments. It does not take a rocket scientist to figure out that when Citi got forty billion, and Wells got fifteen billion in Tarp funds that their balance sheets would show a positive reflection in the form of available capitol for loans to be made. And the most recent news, is an huge increase in housing sales, of coarse sales have surged, because of investors jumping into the market realizing that home prices and interest rates are the lowest in decades. Now the results everyone has been waiting for in the form of stress tests in the banking system, to determine solvency, are suddenly going to be suppressed. The longer the truth is withheld in these matters, the deeper the recession.

Wealth Evaporation

This year the Obama administration is planning some of the most dramatic changes ever implemented in the way that wall street does business. In a recent interview on meet the press Tim Geithner, the Treasury Secretary, divulged that plans are under way to regulate the way Hedge funds can operate within the stock market. Their goal is to move away from the boom and bust era we are seeing in today's economy. How will this be accomplished? by reinstalling the uptick rule and other mechanisms that regulate trades made by highly influential individuals that manage these funds globally. I also believe that they will limit the trades this administration has coined as bad bets, where a fund will actually bet huge amounts of cash on the decline or rise of stocks, institutions, commodities and other investment vehicles. Since the definition of a hedge fund is a highly speculative, loosely regulated, investment tool, this type of change will greatly diminish the ability to secure the large amounts of liquidity made in recent years. Some of these financial geniuses have made as much as two billion dollars a year themselves, with George Soros making over one billion in 2008 in a nightmare market scenario. The flip side is that everyone from the average worker investing their hard earned retirement money, to the marginally wealthy American with less than one hundred million dollars will be making a fraction of the potential yields that they saw in the markets past. This will stagnate Americas ability to achieve accelerated wealth models that put us in a class by our self. We will not only suffer the wealth evaporation to date in the form of stock losses, but the wealth evaporation in limited future, stock gains.

Economic Endgame

The stock market continues it’s highly volatile swings of upturns followed by larger Dow downturns, in its quest for capitulation of the market, so that a reemergence of a bull market run can be had, and the previous highs of fourteen and some change during 2007 can be realized. The only problem with these aspirations is that one would have to believe that the market driver mechanism positive sediment would outpace negative sediment on a sustained basis in order for this to occur. One would also have to believe that we have achieved bottom in such areas as accelerated unemployment figures, toxic mortgage activity, a frozen lending market, GDP growth, and a breaking of the self prophesying negative feedback loop we are now experiencing at present. In addition we would have to throw common sense aside and believe that the unprecedented trillions of dollars this administration is spending in the form of bailouts, acquisitions, and payoffs is somehow going to right this economic titanic. Lets be serious, the only transparency in this colossal fiasco is that at some point, this debt is going to be paid back by dramatic increases in the form of tax code modification, not loan modification. Again the middle class will be the fall guy in this perverse economic opera, and a small group of highly elite government, and private sector individuals will implement this massive change. Change is coming alright, in the form of a new world socialist agenda, and the suppression and dissection of the wonderful free and capitalistic nation we have all grown to love. In light of the recent G-20 Summit meetings, it has become apparent to even Barack Obama that the burden and blame of this situation should be squarely placed on the shoulders of present and future generations of American citizens. This is the type of change that this nation can ill afford.