Shame Of The Nation

Arnold Schwarzenegger Will undoubtedly go down as the most disliked governor in California state history after implementing his plan of budget cuts that were announced recently. California residents should feel some sort of responsibility for placing such an insensitive individual in public office, for it is the weakest and most needy individuals that will become collateral damage in this financial debacle. President Obama just announced NO BAILOUTS FOR CALIFORNIA, so help from the feds should not be expected. The cuts go as follows, elimination of welfare to work programs effecting approximately 500,000 family's, terminating health care for 1-million children statewide known as healthy family's, and Medi-Cal for residents 65 and older, no emergency health care for undocumented immigrants, phase out the Cal-Grant college aid program for students with enough audacity of hope to believe a college education is still important, cutting general fund support for state parks in half, releasing criminals a year early, borrowing 2-billion from local municipal budgets, lay off 5,000 state workers, cut K-12 school funding, this does not even include projected cuts to the disabled, and elderly, fire protection, law enforcement, those cuts will come later down the line.

Bulls To The Slaughter

With the recent run up of some bank stocks exceeding the 30% mark, you would tend to believe that all is well on wall street and a reemergence of the bull market is occurring. For those that study the markets history and take into account such fundamentals as real earnings, unemployment figures, GDP, exports, and other factors, you could make the case for what some have called a SUCKERS RALLY happening recently. The reality is that an estimated 1-Trillion dollars in toxic assets are yet to be realized in the next 8 years do to resets on interest only loans in the commercial and residential real estate market. Why these factors remain ignored is pure conjecture. One could assume that this administration now needs to project a constant stream of positive sentiment so that the market moves upward. The net result is that the formula on these assets goes as follows, the resets occur causing defaults and foreclosures, toxic loans fall on banks balance sheets causing downward pressure on bank stocks instigating a sell off. A more sensible solution is to create a BAD BANK to harbor these toxic assets, so that financial institutions are freed up to loan money on transactions that are responsibly structured, thus increasing their rate of success. This strategy has worked well in the past and there is no reason that it couldn't work in the future.

Twist Of Fate

Today Benjamin Netanyahu and Barack Obama met at the White House to discuss the Iranian dilemma. It is widely believed that Iran is only fourteen months from having enough enriched uranium to assemble a nuclear weapon, and has already achieved the missile technology as a carrier system that is easily within range of the tiny state of Israel. Due to the genocidal comments made by Iranian President Mahmoud Ahmadinejad aimed towards the people of Israel, it is good to see that both countries have an open dialogue and are in agreement that something must be done immediately. Ironically the Palestinians could become Israel's greatest allies, as they must realize that they themselves would become nuclear collateral damage if Iran's anti-Semitic goals were to come to fruition. Due mainly to the close proximity of several Arab countries surrounding the Gaza strip, a strange twist of fate could develop between mortal enemies. Peace cannot happen without the Arab world admitting that Israel has the right to exist. Although Ahmadinejad does not have the capability to act on his controversial beliefs as he is not Iran's supreme leader, that privilege is the Seyyed Ali Khameini's. This threat must be dealt with soon, as this could propel the world into a state of war of epic proportions.

Reality Check

Its starting to become apparent that Barack Obamas so called GREEN SHOOTS in the economy have been sprayed with economic weedkiller, in the form of REAL numbers. The lack of common sense strategies is beginning to rear its ugly head. We all know that its impossible to spend your way out of debt, and throwing TRILLIONS of dollars at toxic assets does not make sense. CONSUMER SPENDING fell 0.5% in April, when economists expected it to be flat, this indicates a much deeper recession than previously projected. Imported PETROLEUM is up 15.4% in April, while EXPORT prices are down 6.8% from last April. BOND prices rose, while a startling 342,000 notices of default were sent out to homeowners nationwide. MORTGAGE APPLICATIONS slipped to the lowest level since March even when interest rates are the lowest in decades. Banks hoarded a record 1.1 Trillion dollars of cash even after the Treasury and Central Bank made emergency injections of capitol, and set up special lending programs to ensure lenders extend credit to households and businesses alike. The only problem was the government forgot to install regulation to ensure that loans would be made to those of intention. The net result is the government gets its power grab, while the taxpayer picks up the tab.

Scary Template

With the market up over 30% in just over a month the temptation is to believe that capitulation has been achieved and we are in the midst of a bull market run. We must remember that the reason for a turnaround in the banking sector might well be due to the artificial liquidity infusion designed by the U.S. TREASURY, and that huge exposure to toxic assets still exist, and will remain on balance sheets for some time to come. Most experts agree we are in the midst of a contraction in available credit to consumers and this will hamper a return to consumer spending. Those who have studied the great depression see a similar template occurring, in the market crash of 1929 stocks plunged 48% in just two months, followed by a surge of almost 50% and then declined 86% from the high of the rally. You all know the old saying HISTORY REPEATS ITSELF, the odds of this happening again are probably slim, due to the fact that government intervention did not take place back then. But the fact that fundamentals such as true earnings, positive employment figures and GDP growth, property appreciation just don't bear this turnaround out. A return of these elements are the only path to real economic progress.

Bad News For The Wealthy

Mr Obamas health care overhaul blueprint was unveiled on Saturday, and apparently their was a substantial error in the estimate of the original proposal, what does this mean? The government is going to need more money than they thought, lots more. So they decided to appropriate the funds by tightening Estate tax rules, giving wealthy taxpayers less flexibility to minimize their liability on inherited goods. Businesses will also be targeted to close the gap on the shortfall, they estimate a needed one Trillion dollars to reach their goal of socialized medicine. If their health care plan plays out like the recent bailouts in the banking sector, one Trillion dollars is grossly underestimated. The middle class is no longer the preferred target to acquire additional funding for the plethora of projects on this administrations drawing board. Support for these agendas increase daily as the media continues its unrelenting coverage 24-7, and the power of their adversaries diminish. Who would of thought that the Republicans spokesman Rush Limbaugh would fall so far and so fast. He is now viewed by the left as an Right wing whack-job, not to be taken as a serious threat, now that two thirds of Americans consider themselves Democrats.

Regulatory Control Ahead

Representatives of the trade groups such as large securities firms, hedge funds, and banking institutions met today as Treasury Secretary Timothy Geithner laid out his plans to formulate a position where one individual is in charge of mitigating SYSTEMIC RISK within the marketplace. If risk is found he or she will impose regulation to stem any damage that the regulator perceives. This revelation by the Treasury Secretary will undoubtedly cause a view of extreme divergence, and slow the process. Barack Obama has already let it be known that he wishes to have this legislation in place and the position filled by the end of the year. I believe that a council would better serve this purpose, for the mere fact that an excessive concentration of control in the hands of CEO'S and HEDGE MANAGERS is most likely what got us into this economic dilemma, and to much control by ONE regulator could have a similar effect. The net result from these firms perspective is reduced latitude in trades and sectors, thus reducing their ability to reap great profits for their clients. Hopefully the right decisions are made as the taxpayer is undoubtedly on the hook for deals cut on either end.

California's War On Education

Leaders of California's public universities voted yesterday to raise undergraduate fees 10% next year. Another bright idea in a plethora of mistakes made by academia and state government officials. As if the burden of a dream of a higher education by the states youth isn't distant enough, lets heap more debt onto the shoulders of these students. This all means the cost of a college education in California will have risen 70% since 2001-even when adjusted for inflation. These idiots seem to forget that this country was made great by education followed by innovation, and college is the direct path to an innovative society, without it we cannot compete on an increasingly globalized platform. These decision makers were quoted as saying the plan will take from the rich and give to the poor, in the form of additional available capitol for student loans. In order for that comment to be correct you would have to assume that a disproportionate amount of students are from the silver spoon club with affluent parents, i bet if you run the numbers its the polar opposite with more students obtaining loans with interest rates to be paid back after completing their education. These individuals should do the right thing and keep their mouths shut.

Powder Keg

Barack Obama met with Hamid Karzai, and Asif ali Zardari today at the White House in an attempt to shore up a commitment by Afghanistan, and Pakistan to fight the war on terror together, as the Taliban is just a mere 60-miles from Islamabad the capitol of Pakistan. Thousands were forced to flee the region in what promises to be a deadly showdown. The meeting occurred as Secretary Of State: Hillary Clinton apologized for the deaths of dozens of local Afghan citizens that were killed by a stray U.S. missile strike on Monday. This incident continues to fuel anti-American sentiment in the region. The stress increases daily as multiple problematic scenarios escalate including increased violence in Iraq, just as Obama is shifting his focus to Afghanistan with a commitment of 20-thousand fresh troops. All this at a time when the issues of Iran and Israel are of utmost importance. There is no doubt that President Obama has undertaken the weight of the world upon his shoulders. No sitting president has dealt with this volume of critical issues here and abroad all at once, and his decisions made this year should all be ones for the history books.

Up In Smoke

Governor Arnold Schwarzenegger has apparently come up with a plan for increasing state revenue by working towards legalizing Marijuana and taxing those that use it for RECREATIONAL purposes. Maria and the kids must be proud to have such a good role model at home, imagine his children at school when another kid yells across the quad: HEY TELL YOUR DAD THANKS, as they light up a joint. Its individuals like Arnold that give California a bad reputation. His bright idea of putting an Indian gaming casino on every corner seems to have had little positive impact on the states deficit problems, and this idea probably would follow suit if passed. What kind of message does this send to our children, and those hard working individuals in law enforcement fighting the war on drugs, and the crime that it promotes? Has it gotten to the point where electing politicians with ethics and comprehensive solutions to budget problems is impossible? Its easy to see why Schwarzenegger has recently achieved the distinguished award of the second lowest approval rating in California history, only to his predecessor Gray Davis which was ejected from office.

Dont Unpack Your Bags Just Yet:

Last month Rush Limbaugh declared defiantly that he would be abandoning his penthouse in New York City, for some new digs in Florida due to an unjust tax burden placed on himself and other wealthy individuals by the state. It appears that he just might have to leave the country in order to live the opulent lifestyle he has become so accustomed to here in the U.S. without being subject to Barack Obamas new WEALTH REDISTRIBUTION program that the Treasury Secretary Tim Geithner announced today. No more tax LOOPHOLES declared the feds. Apparently they plan to abolish the massive benefits big corporations and wealthy individuals receive by off-shore banking, and doing business in foreign countries. This administrations vision of the future is becoming clearer daily and it does not look bright for the rich. A storm is brewing and its wrath is in the form of CLASS WARFARE, by the end of Obamas first term the playing field should be level, and the wealthy will be reduced to groundskeepers. Forget the kids attending MIT with a degree in mathematics, and becoming a successful DERIVATIVES trader or HEDGE FUND MANAGER on Wall Street. Instead they will be prepared for jobs in such stimulus programs as road construction, or GREEN ECONOMY projects. Rush will be broadcasting his show from the Camen Islands, but the upside is Havana is only a short flight for those great cigars he likes to smoke.

Munger Favor's 100% Ban On (CDS) Market.

My original interest was to find the root cause of the negative feedback loop we are now experiencing in today's economy, and understand how this great Nation could flip-flop from the CAPITALISTIC FREE market system of a year ago, to one of escalating BIG GOVERNMENT and a socialist mindset. In less than 48-hours of writing my blog on the Credit Default Swap dilemma, my suspicions have been confirmed by an interview done on Bloomberg yesterday on May 1st-2009 with Charles Munger second in command at Berkshire Hathaway and Warren Buffets right hand man. Mr Munger says that if he were the Governor of the world he would ban the CDS market entirely for good, basically because of the systemic damage caused to the market by the greed of a few short-sided Individuals. He goes on to state that this can only be accomplished by intervention by the Federal Government installing regulation to prevent the excesses that caused the current fiscal crises. I myself had no idea that the CDS market was so vast, until I ran across the raw numbers in the Time magazine article i blogged about on Thursday , the CDS market at 45-trillion dollars was according to the International Derivatives Association over twice the size of the entire 2007 value of the U.S. STOCK MARKET, and over four times as big as the entire 2007 U.S. mortgage market. We all now know the motive (GREED) and now the process (CREDIT DEFAULT SWAPS) that these influential Individuals have been using to wreak economic havoc on this country.