Wednesday, July 22, 2009

Got Our Answer

OK, we've got significant clarity concerning the stock markets.

We should soon see Dow 9500-10,500, with commensurate rises in the S&P and the Nasdaq. This was my secondary and not my primary count. Mea culpa. Sorry.

Then we should turn down hard (probably this fall) to new lows in the 2010-2012 time frame, to end the bear market, though not the Depression, which is just getting warmed up. The markets declined from 1929 to 1933 in the last depression, then turned up and never looked back. The economy didn't recover until 1941. They also spent 40% of their time in the 1929-1933 framework in rally mode, so the last four months have not been unusual at all. They've been a little on the weak side, actually.

If you have any stocks or mutual funds you want to sell, it will be time soon.

Pay no attention to the good economic news. The rising tide of mass sentiment (as reflected by the stock market rise) will lift all other boats as well. At least for a little while.

Saturday, July 18, 2009

Bank Holiday Predicted Soon

This comes from a mainstream news source, CBS's Marketwatch.com. Commentator Peter Brimelow is reporting that the Harry Schultz Letter, a subscription newsletter for wealthy investors, is predicting,

"Another FDR-style 'bank holiday' of indefinite length, perhaps soon, to let the insiders sort out the bank mess, which (despite their rosy propaganda campaign) is getting more out of their control every day. Insiders want to impose new bank rules. Widespread nationalization could result, already underway. It could also lead to a formal U.S. dollar devaluation, as FDR did by revaluing gold (and then confiscating it)."


It is also reported that rumors are flying around to the effect that

"Some U.S. embassies worldwide are being advised to purchase massive amounts of local currencies; enough to last them a year. Some embassies are being sent enormous amounts of U.S. cash to purchase currencies from those governments, quietly. But not pound sterling. Inside the State Dept., there is a sense of sadness and foreboding that 'something' is about to happen ... within 180 days, but could be 120-150 days."


You need to understand that this is not a joke. You need to take this very, very seriously. This is no time for complacency. When and if this thing unfolds, it will unfold with frightening speed and you will be in big trouble if you are not prepared. Here is what you need to do:

1. You need to quietly withdraw whatever extra cash you have in the bank and bring it home with you and hide it. If you have children, do not tell them what you are doing. They will blab it to their friends. Keep only the minimum amount necessary on deposit. You need to do that now. By the end of the month of July. Here's why. If this is a real threat, the government will simply announce on Friday after close of business that the banks will not reopen on Monday. You will be in trouble.

2. You need to quietly purchase dry and bulk food goods that you normally would eat anyhow, and if you have a spare freezer or something, fill it with frozen goods. Once again, nobody should know what you're doing. Personally, we stockpile canned goods, beans, rice, bulk goods like flour, sugar, and we have a freezer full of meat.

3. If your conscience and the laws of your state permit you to own a firearm, and you are reasonably proficient with one, it would be a good idea to have one.

4. If you have access to alternative heating sources, like wood, stock up. If you use propane or heating oil, fill up your tanks now, and keep them topped off. The same is true for lawnmower/motorcycle/chainsaw fuel. Keep the gas cans in the shed or garage full.

5. If you need to make necessary purchases, like new clothing or shoes, do so now. Don't wait.

6. Buy some gold and silver, and consider perhaps holding some foreign currency, like Euros or Yen. You can order it at your local bank or exchange your dollars for it at international airports, in small to moderate amounts.

If the rumors are false, what's the downside? Nothing. You put your money back in the bank in a few months and you eat the bulk goods and burn the fuel that you've bought. No harm, no foul. If the rumors are true, you are able to feed your family, keep warm, pay your bills, and maybe even quietly help a neighbor or two.

Friday, July 17, 2009

Lest You Think I'm An Alarmist

Good old Hank Paulson was on Capitol Hill yesterday giving a speech. I don't think I saw it covered by any of the U.S. media, but the Brits picked it up. We were on the verge of total collapse last Fall, and the government was worried about things like a collapse of basic law and order whether or not they could feed the American people and for how long.

Fortunately, all that is behind us, right? Wrong. The effects of the stimulus packages that they're claiming saved the world will soon wear off, and we'll be right back where we started. Say it with me, please. For times like this we need the 4 G's. God. Guns. Groceries. Gold. Having a little cash on hand is a very good idea, as well. Protect yourself and don't tell anyone else about your preparations, or you might wind up sharing them involuntarily with your neighbors.


July 17, 2009
Paulson reveals US concerns of breakdown in law and order
By Stephen Foley in New York

The Bush administration and Congress discussed the possibility of a breakdown in law and order and the logistics of feeding US citizens if commerce and banking collapsed as a result of last autumn's financial panic, it was disclosed yesterday.

Making his first appearance on Capitol Hill since leaving office, the former Treasury secretary Hank Paulson said it was important at the time not to reveal the extent of officials' concerns, for fear it would "terrify the American people and lead to an even bigger problem".

Mr Paulson testified to the House Oversight Committee on the Bush administration's unpopular $700bn (£426bn) bailout of Wall Street, which was triggered by the failure of Lehman Brothers last September. In the days that followed, a run on some of the safest investment vehicles in the financial markets threatened to make it impossible for people to access their savings.

Paul Kanjorski, a Pennsylvania Democrat, asked Mr Paulson to reveal details of officials' concerns, which were relayed to Congress in hasty conference calls last year. The calls included discussion of law and order and whether it would be possible to feed the American people, and for how long, according to Mr Kanjorski.

"In a world where information can flow, money can move with the speed of light electronically, I looked at the ripple effect, and looked at when a financial system fails, a whole country's economic system can fail," Mr Paulson said. "I believe we could have gone back to the sorts of situations we saw in the Depression. I try not to use hyperbole. It's impossible to prove now since it didn't happen."

The Oversight committee is investigating the takeover of Merrill Lynch by Bank of America, a deal forged in the desperate weekend that Lehman Brothers failed, and which later required government support because of Merrill's spiralling losses.

Mr Paulson defended putting pressure on Bank of America when it had last-minute doubts about the deal in December. Not to have done so could have rekindled the "financial havoc" the bailout had calmed.

Thursday, July 16, 2009

More Clarity

About a month and a half ago I said we were at a fork in the road where the stock markets are concerned. Yesterday's rally provided more clarity. The decline from the early June highs has thus far unfolded in a three wave corrective pattern, which means that there's probably still more upside to come before we turn and head down to new lows for the final leg of the bear market.

This will be confirmed if we break 1880 Nasdaq, 957 S&P, and 8900 Dow, which I expect we will do soon. Perhaps today.

We will work our way up to Dow 9500-10,000 before the next leg of the decline begins.

If you have any stocks or mutual funds you want to sell, that will be the time to do it. Expect the good news in the economy to be magnified beyond all proportion, the bad news to be downplayed, and people to feel quite optimistic about how things are going. Don't fall into that trap yourself. It's just mass sentiment. If you want to feel optimistic, that's fine. Don't go and buy a brand new car with a six or seven year loan based on a happy feeling in your tummy, though.

Tuesday, July 14, 2009

Citibank on the Verge of Failure

The Federal Deposit Insurance Corporation or the FDIC is the entity that insures your bank accounts up to $250,000. It is almost broke It has opened a line of credit at the Treasury and is increasing fees on its member banks. Basically the FDIC is like any other insurance program. Every bank has to be a member and pay for insurance. The money is collected, invested conservatively, and is available for use to cover the shortfall when a member bank goes belly-up.

Well, this has been the worst year since the Great Depression for bank failures. 56 banks have failed so far this year. During the Depression, most banks had only one "store." Today we have branch banking. One bank owns several buildings and uses them as outlets. When you treat each branch as a separate bank, and then you factor in all the branches of each bank that has failed, the statistics are grim. We're pretty close to on par with the failure rate early in the Great Depression.

Citibank is one of the largest banks in the country. Its failure would wipe out the FDIC. Its liabilities are far, far in excess of the FDIC's funds. Even during the best of times the FDIC only has money on hand to cover about 22% of deposits.

There will be all kinds of creative efforts to keep Citi from drawing on its FDIC funds. That will be difficult to accomplish. After the Treasury Secretary and the Fed Chair pretty much put a gun to the head of Bank of America CEO Ken Lewis late last year, and raped him by making him buy Merrill, there's very few that have the ability to buy Citi and assume its debts, and even fewer that want to. Ken was fired by the board of Bank of America not long after that. No bank CEO will jump willingly into the maw of that tiger again. There's no upside.

The next step would be some sort of government bailout that happens outside of the FDIC, I suppose.

You need to have access to your money, and these events are imperiling that access. You need, at the very least, to have cash to cover several months worth of living expenses on hand, in your home. If you have a large amount in the bank, or in bank cd's, I recommend you spread it over several different banks, so that if one goes you are not hamstrung. I also recommend that you be psychologically prepared to take it all out of the bank should things get truly ugly. Find out from your bank what the rules are about cashing out an account. They will not want to give you cash. They will want to give you a check. They will make all sorts of rules about what you have to do to go about getting cash. My own bank in Cincinnati, Fifth Third, wouldn't give me my deposits in cash without two business day's notice. You need to know in advance what those rules are, and you need to not be afraid to take control of your money in an emergency, for an emergency is a real possibility.

Peace.


CIT Group Says Its Failure Risks Demise of Customers (Update3)

By Pierre Paulden and Caroline Salas


July 13 (Bloomberg) -- CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.

A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.

CIT executives spoke with regulators during the past two days, according to a person familiar with the talks, after its bonds and shares tumbled on concern that the Federal Deposit Insurance Corp. won’t allow the lender into its bond-guarantee program created last year to unfreeze debt markets. CIT may default as soon as April, when a $2.1 billion credit line matures, according to Fitch Ratings.

“A CIT default would create liquidity issues for the corporate sector,” Ed Grebeck, chief executive officer of debt consulting firm Tempus Advisors in Stamford, Connecticut. “If CIT isn’t doing trade finance and lending, its customers will look to other banks for replacement and from what I’ve seen, they aren’t willing to step up.”

Bonds, Shares Fall

A failure of CIT, run by Chief Executive Officer Jeffrey Peek, would be the biggest bank collapse since regulators seized Washington Mutual Inc. in September. CIT reported $75.7 billion in assets and $68.2 billion in liabilities, including $3 billion in deposits, at the end of the first quarter.

CIT’s $656 million of 5.125 percent notes due in 2014 fell 4.5 cents on the dollar to 53 cents as of 9:21 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 20 percent.

The stock declined 36 cents, or 23.5 percent, to $1.17 as of 9:36 a.m. in New York Stock Exchange composite trading. It dropped 46 cents, or 23 percent, last week.

The company, which reported more than $3 billion of losses in the past eight quarters, says it’s hired Skadden, Arps, Slate, Meagher & Flom LLP as an adviser.

New York-based Skadden is known for its work in mergers and acquisitions and bankruptcies. The firm represented BHP Billiton Ltd., the world’s largest mining company, in its $150 billion proposed acquisition of Rio Tinto, and advised Circuit City Stores Inc. in its bankruptcy.

Maturing Debt

“Skadden is one of the principal law firms representing CIT,” Ritter said in an e-mail on July 11. “They represent the firm on a wide variety of corporate matters. CIT will not comment on any specific aspect of their engagement.”

Jay Goffman, co-head of Skadden’s global corporate restructuring group, declined to comment on the firm’s work for CIT.

CIT faces $10 billion of maturing debt through 2010 and hasn’t sold corporate bonds in more than a year, according to data compiled by Bloomberg.

Credit-default swaps on CIT rose 2 percentage points to 39.5 percent upfront, according to broker Phoenix Partners Group. That’s in addition to 5 percent a year, meaning it would cost $3.95 million initially and $500,000 annually to protect $10 million of CIT debt for five years. The upfront cost reached the highest since Oct. 17, when it climbed to a record 41.5 percent, according to CMA DataVision prices.

Bondholder Protection

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

CIT, which says it was the first to offer credit to help consumers nationwide buy Studebaker cars, funds about 1 million businesses from Dunkin’ Brands Inc. in Canton, Massachusetts, to Eddie Bauer Holdings Inc., the bankrupt clothing chain in Bellevue, Washington. CIT says it’s the third-largest U.S. railcar-leasing firm and the world’s third-biggest aircraft financier.

CIT became a bank in December to qualify for a government bailout and received $2.33 billion in funds from the U.S. Treasury.

Risk to Taxpayers

The FDIC is concerned that standing behind CIT debt would put taxpayer money at risk because the company’s credit quality is worsening, people familiar with the regulator’s thinking, who declined to be identified because the talks are private, said last week. Since Nov. 25 the FDIC has backed $274 billion in bond sales under its Temporary Liquidity Guarantee Program, designed to give creditworthy borrowers access to funds after debt markets seized up following the failure of Lehman Brothers Holdings Inc.

The federal agency, run by Chairman Sheila Bair, is in discussions with CIT about how the lender can strengthen its financial position to get approval, including raising capital, said one of the people. CIT’s measures to improve its credit quality, such as by transferring assets to its bank, have been insufficient, the person said.

‘Active Discussions’

CIT is in “active discussions” with regulators on a “series of measures to improve the company’s near-term liquidity position,” it said in a statement distributed by Business Wire today. The talks include CIT’s application for FDIC funds and measures such as the transfer of assets to CIT Bank, it said.

CIT’s internal report outlines the potential effects of a failure on customers to which it’s committed $3.9 billion of bank lines.

A “substantial portion” of clients “would not have easy access to additional revolving credit without CIT,” according to the documents. “This could lead to business failure for those who lack additional liquidity.”

BlueTarp Financial is “one of many small businesses that rely on CIT, and without a player like them there is no one else to turn to,” said Bond Isaacson, CEO of the Charlotte, North Carolina-based provider of trade credit to building contractors.

“We are treading on thin ice if CIT is allowed to fail and with them will go a lot of small businesses,” Isaacson said.

The company has already cut back on arranging new loans and its failure wouldn’t cause widespread problems, said Kathleen Shanley, a Chicago-based bond analyst for Gimme Credit LLC.

“Absent a change of heart on the part of the FDIC, it is difficult to see how CIT can survive,” Shanley said. “Fixed income investors have lost confidence in the viability of CIT’s business model, which will make it extremely difficult for the company to fund its upcoming debt maturities and ongoing operations.”

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Caroline Salas in New York at csalas1@bloomberg.net

Last Updated: July 13, 2009 09:50 EDT

Wednesday, July 1, 2009

A Century of Self

It ought to be obvious to the astute reader that I think that fallen human beings are often driven by irrational forces. I do not, like many, assign evolutionary causes to this. Nor do I believe that the rational mind is unable to control the irrational parts of ourselves. I believe this irrationality is a product of the Fall, and a large part of the task of the Christian life lies in the assertion and reordering of the individual via the renewed mind. As we have developed and begun believing various philosophies that deny the rational and embrace the irrational, we find ourselves less and less able to control ourselves. More and more external control is needed.

What comes of all of this is that you have been programmed to think the way you think. Or perhaps we should say, you have been programmed not to think. You have been programmed to emote and respond. Techniques pioneered by psychoanalysis have been adopted by big business and government in order to persuade you to behave in certain ways. The effectiveness of these techniques was quite surprising to me.

Here is a link to an extremely interesting 4 part series by the BBC on the rise of modern systems of propaganda, beginning with the ideas of Sigmund Freud. It's quite lengthy, but very worthwhile.

I refer often to the "Powers That Be" (abbreviated the PTB.) They are the elites who think themselves above the fray, and not in need of any control themselves. They make decisions about what is best for us because they don't think we're able to do that ourselves. They have developed a way to hide their agenda and to make the mass of us want to do what they want us to do. Here is a very clear window into their world. It explains why we are where we are in both economic and cultural terms. They have sown the wind and we are now reaping the whirlwind.

If all of the things described in this video are true, and the conclusions are correct, then we as a mass of human beings have been reduced to a state in which we live simply to gratify our basest impulses, many of which we are not even conscious of. We have no true identity except the one we purchase.

If so, what is needed by the PTB now in order to govern society is some sort of mass crisis to "get us all to pull together" and reinstitute something like the 1950's era drive to conformity described in the video. Something like an economic crisis. Or a war. Or an environmental crisis. Or all of the above. A terror so real that it becomes our foremost desire in our hierarchy of desires.

As I said before in another post, the hardest part of getting through this Depression will not be economic or social. It will be between your ears. If you have been regenerated by the Spirit of God, you have all that you need to begin to know the truth and be set free. You have all that you need to walk in self control and perceive and do what is good. Our economic, political, and social life is not exempt from that process or shuttered somewhere to another compartment. The first step is to understand that you have been believing a lot of lies. The second step is to find out what the truth is.