Why Greece Matters to You - The American Taxpayer

New post at my personal blog, jackheald.com.

Should You Walk Away?

Here's the money quote from a scholarly article by University of Arizona professor Brent T White. regarding the economic impact of walking away from your mortgage:

Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility. This norm asymmetry leads to distributional inequalities in which individual homeowners shoulder a disproportionate burden from the housing collapse. (My emphasis)

Friends, the big banks are utterly immoral. Walking away from a mortgage that is no longer a good deal for you is NOT immoral. If you're having trouble with your mortgage, you need to read this.

"The Big Bankers Never Lose"

Ron Paul made this cogent observation - not in 2008 but in 1988.

"No matter which party is in power, they will appoint to the major offices members of these two committees, (Trilateral Commission and Council of Foreign Relations), so that Wall Streeters and the Big Bankers always have inside information as to what is going on."

See the entire video here.

Jack's Weekly Apocalypse Watch

Yeah, I renamed it. "Weekly Update" was just a little boring. Or "snorey", if you will. (Inside joke.)

Here's the news I found amusing this week.

Government No Longer Pretends To Be Anything Other Than an ATM for Bankers
In an utterly unsurprising development, the government has said it will guarantee unlimited number of losses at Fannie Mae & Freddie Mac for the next 3 years. You remember Fannie & Freddie, right? They were private companies that bought mortgages. This was their business model up till July 2008:

Step 1. Buy mortgages from banks that don't want to carry them because the mortgagees are bad credit risks.
Step 2. Lose trillions of dollars when those people who were bad credit risks quit paying.
Step 3. Pay their executive Big Bucks for doing a such a stellar job.

Then in July 2008, they couldn't pretend this was a viable business model anymore, so they called in their political debts and Congress handed them $700 billion dollars so they wouldn't have to officially declare themselves both Bankrupt and Insolvent. Congress assured us ignorant rubes that this was in our best interest, and that Things Would Be Better Now. Of course they were lying and of course we knew it. Fannie & Freddie are now even more broke, more insolvent and deeper in debt, so Congress - rather than writing a big check - just gave them a credit card with no limit.

Ain't it great to be a banker?

Never One To Miss an Opportunity To Look Idiotic, the TSA Outlaws Pooping and Peeing the Last Hour of a Flight
Unless you do it in your seat. Then it's okay. This in response to the guy who lit his underwear on fire. They also prohibited using electronics in the last hour and keeping anything in your lap the last hour.

Of course, a really CLEVER terrorist will find a way to make his poop and pee explosive, and then "detonate" it when they strap him into his seat.

I don't know why they don't just prohibit flying. Oh wait, yes I do. Where would all those mouth-breathers currently employed by the TSA go, the Post Office?

UPDATE: They caved on their stupid new rules.

James Cameron is in fact The King of Hollywood
We just got back from seeing Avatar, the latest movie from Titanic/Terminator creator/director James Cameron. It seems like every two months another movie is being touted as "ground-breaking-this" or "never-before-done-that" and invariably they all fail to live up to the hype. Avatar, however, exceeds the hype. I was blown away. It is a game changer. From now on, all movies will be either "Before Avatar" or "After Avatar". It really is that good. Go see it. You'll thank me.

More fun Graphs

I sincerely hope no one interprets my skewering of the Obama administration as an endorsement for Republicans. The only thing keeping Republicans from being the slimiest creatures on the planet is Democrats.

The REALLY fun part about all this is that the government has under-reported unemployment for more than two decades. John Williams at Shadow Government Statistics uses the government's pre-1982 formulas for calculating things like CPI and unemployment. He says the true unemployment rate, using the government'e earlier formula, is likely over 20%.

Now that's what I call "change we can believe in."

Too True to be Funny, Too Funny not to Share

I found this on Charles Goyette's website.

Rest in Peace - Ken Jessup

I lost an old friend today and don't much feel like talking about finance.

Rest in Peace, Ken.

Is Your Bank Doomed?

This list will tell you. Any number greater than 100 in the column labeled "Texas Ratio" means the bank is --uhm-- "less than healthy". How's that for politically correct?

If you consent to it, its not a crime

Interesting juxtaposition of headlines in the WSJ yesterday:

States Post Widespread Job Losses
Morgan Stanley Breaks a String of Losses
Wells Net Rises Despite Loan Losses

Rising unemployment. Big banks making tons of money and paying huge bonuses. Does this make any sense?

The U.S. Government is bought and paid for by the NY bankers. The government operates for the benefit of these banks. The bankers are raping us, and the government is the one providing the rope and duct tape.

The most profound insight on the nature of government comes from the Declaration of Independence: ...all government derives its just powers from the consent of the governed.

If you continue to consent to this type of government, then it is not rape, it is merely kinky, consensual sex.

Why the SEC will never rein in Goldman Sachs

Seriously, do you still believe this is a government "of the people, by the people, blah blah blah"?

From Bloomberg: The U.S. Securities and Exchange Commission hired Adam Storch, a 29-year-old former employee in Goldman Sachs Group Inc.’s business intelligence unit, as the enforcement division’s first chief operating officer, according to people familiar with the decision. The COO, who started Oct. 13, has “a great deal of background” in technology and managing processes and the pace of work, Robert Khuzami, head of enforcement, said yesterday in Washington. Storch, who worked since 2004 in a unit at Goldman Sachs that reviewed contracts and transactions for signs of fraud, will be charged with making the unit more efficient. Storch, reached by telephone at the SEC, declined to comment.

That's right - the chief enforcer for the SEC is a wet-behind-the-ears Goldman Sachs puppy. He worked at G-S since 1984 which means "since they hired him out of college." Yeah, that is some serious experience there.

I continue to assert that Goldman Sachs owns the government and runs things for their own benefit. How else to explain the fact that this time last year, the big banks - led by G-S - were begging for a government bailout and this year G-S is set to pay their biggest bonuses ever?

Remember: government derives its just powers from the consent of the governed. As long as "We the People" continue to assent to this government, then the crime syndicate that runs the biggest banks and by proxy the government will continue stealing from us and say it is for our own good.

What Happened to Global Warming?

That bastion of reactionary, luddite, head-in-the-sand hyperconservatism - the British Broadcasting Company, (yes, I am attempting to be sarcastic) - wants to know what happened to Global Warming.  Good story and worth your time.

Have you noticed that the Do-Gooders who always worry about things that cannot be changed have switched the object of their worry to Climate Change and away from Global Warming? Back in the mid 70s, the same nincompoops were up in arms about the coming New Ice Age but they had to change their tune in the late 80s because the Ice Age they predicted with such confident certainty was manifestly failing to... well, manifest.

That's when they changed to worrying about Global Warming.

I suppose after another 20 years of the Climate not Changing, they'll worry about The Sky Falling, or something equally unlikely and unpreventable. These people would be objects of pity and derision if they didn't wield so much power to harm the rest of us with their baseless schemes.

DOW at 10000? Whoop Tee Doo

The Dow Jones Industrial Average closed above 10,000 today for the first time in a while. It first crossed the 10,000 in 2000.

What does "Dow 10000" mean today?

In 2000, you'd need more than 30 ounces of gold to buy the Dow. Today, you'd need less than 10 ounces.

In 2000, your dollar would buy almost 30% more than it will today. (Check out the Bureau of Labor Statistics Inflation Calculator linked here on my site.) That's what inflation does to you.

In other words, the Dow at 10,000 today is equivalent to the Dow at about 7500 in 2000.

Whoop Tee Freakin' Doo.

Imagine how bad it would be if STUPID people were in charge..

The date is July, 2005. Can you guess who is answering the questions?

Q. "Can you give us your view of whether there is a housing bubble out there?"
A. "I don't know whether prices are exactly where they should be but I think they are supported by the strength of the economy."

Q. "So tell me, what is the worst case scenario, if in fact we were to see prices come down substantially across the country? "
A. "I don't buy your premise. It is a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. I'm confident in the fact that the bank regulators will pay close attention to the kinds of loans that are being made, making sure that underwriting is being done right... I do think this is mostly a localized problem and not something that impacts the national economy."

In hindsight, it sounds like this person was not very well informed, doesn't it? But who could blame him?

You'd need to actually know what was going on inside the banks to realize that they were making loans they knew couldn't be repaid - and the only people who knew that were the bankers themselves.

And you'd need to know what was going on with the bank regulators to realize they weren't doing a thing about it - and the only people who knew that were the Bankers responsible for watching over the banks. No, the only possible way you could expect someone to know what was really happening with the banks would be the people in charge of the Federal Reserve. They were really the only ones who could possibly know, right?

So you could hardly blame this guy for being so completely clueless.

Good thing we have really well informed, intelligent and ethical individuals deciding how to save the economy.

/sarcasm

S&P 500 now trading at 140 Times Earnings

Greetings readers,

I will be away from my computer over the weekend for a much-needed vacation, so my "Weekly Update" will not be published. But I do want to pass along this news to you:

As of September 30, the S&P 500 was trading at 140 times earnings. Here's the link to the Standard and Poors website confirming this information.

The S&P 500 is an index of the 500 largest public companies in America. It is considered the most reliable proxy for the overall state of the entire stock market.  For comparison, over the last 80 years, the S&P 500 has traded at an average of 15 times earnings.

What does this mean to you?

It means that the rise in values in the stock market since March is not the result of improvements in business; it is the result of the government dumping a little over a trillion dollars into the five biggest banks. The banks were supposed to use that money to lend, but they have instead used it to speculate in the market. (Goldman Sachs is the worst offender. The others are Morgan Stanley, JP Morgan Chase, Bank of America and Citigroup.)

This is NOT the time to be putting money into the market. It is time to make sure your investments are protected from a stock market reversal. It is also time to be saving and getting out of debt.

See you all next week.

Mid-Week Update

Hello faithful readers,

Just a brief note to let you know why you have not heard from me in the last month. I am hard at work changing this update from a text-based to a video-based update. It's taking longer than I anticipated, but we will get there.

In the meantime, I want to share with you a couple of things:

The first is a video I just found today. This is from Dylan Ratigan's show on MSNBC back in July. (Don't know why it took me so long to find it.) Dylan is one of the very few people in the MSM who asks good questions and doesn't kow-tow to his corporate masters. I have the utmost respect for him. (When he left CNBC, I quit watching it.)

This video is the clearest, simplest explanation of what happened with the banks and the Fed in the last year. If you're not angry, you're not paying attention.

Of particular interest is the presence of Eliot Spitzer, the disgraced former governnor of New York who was forced to resign in March 2008 when it was discovered he had paid for sex. Spitzer was the most powerful public figure fighting corruption on Wall Street. His forced resignation occurred exactly one week prior to Bear Stearns being forced to sell itself to JPMorgan Chase. This was no coincidence.

The second is to recommend to you Matt Taibbi's article in the most recent issue of Rolling Stone. Taibbi is an investigative journalist of the highest quality. He has authored two of the best pieces I have read on the banking crisis. (Link is here.) It actually amazes me that he is still walking around, because he exposes malfeasance at the highest levels of our government and banking system. Please do yourself a favor and read it either online, (once it is posted) or pick up a copy at the newsstand today. It is the issue with U2 on the cover.

"I Gotcher Green Shoots Right Here"

One of the most reliable indicators of world economic conditions is shipping traffic. Here's a story in the UK's Daily Mail about the unprecedented decline in the amount of shipping world wide and - most shocking to me - the precipitous decline in the cost of renting a container ship.

This entire story is worth a read, but some of the highlights - if you are in a hurry are:

• A massive fleet of empty container ships sits idle in the waters off Singapore. Apparently, world ship owners are just parking them there
• The cost of chartering a bulk freighter has plunged from $300,000 last summer to $10,000 earlier this year.
• It takes 3 years from the time a new ship is ordered till it is delivered. Come 2011, the world's biggest ship-building companies in South Korea will have nothing to work on, because no one is ordering new ships.

Here's a sea-level photo of some of those idle ships:

The Impending Doom of the US Dollar

Here's a fascinating story from Larry Edelson at Money and Markets about the US Dollar.  He writes from Asia:

We are now the laughing stock of Asia. Our dollars are no longer respected; our ambitions, no longer mimicked. Our way of life, often based on consuming far beyond our means, is being flat-out rejected.

I can’t even exchange a $100 bill on the street here anymore: Most of the street money changers will take euros, Singapore dollars, even Chinese yuan. But fearful of losing their shirt with sinking exchange rates, they don’t want U.S. dollars. Not long ago, I never traveled without my American Express card. Now, it sits in my office safe. Many in Asia no longer accept the card anymore. MasterCard and Visa are still OK, but they’re also losing market share to locally grown cards like Aeon.

The running joke in Singapore, Hong Kong, Bangkok, and Kuala Lumpur is that the U.S. is the place where even your pet could get a credit card or a home mortgage. So to Asians, the crisis we’re going through is our own fault. And although it was also caused by blunders in Western Europe and other regions, truth be told, they are mostly right.

When foreigners hold dollars, and those dollars lose value against their home currencies, then they lose purchasing power. The US Dollar has lost of 15% of its value since March. That means a street vendor who accepted dollars in March can now buy 15% less with those dollars than he could just six months ago. And what happened six months ago to trigger this decline? The Federal Reserve began dumping something north of $700 billion freshly created-out-of-thin-air dollars into their member banks.

The dollar is doomed unless the government slashes spending, but you can bet every last depreciating dollar you own that will not happen.

Rights & Responsibilities

According to the wisdom of the day, healthcare is a universal human right. When the term "universal right" is used, I cannot help but think of the Bill of Rights, where rights such as free speech, freedom of assembly and freedom of religion are enumerated. However, as best as I can tell, the people who use the term "universal right" as applied to healthcare mean something different than what I think of when I hear the term.

As I understand it, every right possessed by Person A implies a responsibility on the part of Person B. For example:

- my right to speak my mind means you have the responsibility to NOT prevent me from speaking my mind.
- my right to freedom of assembly means you the responsibility to NOT prevent me from assembling with whomever I want.
- my right to worship as I see fit means you have the responsibility to NOT prevent me from worshiping as I see fit.

However, there are also limits to your responsibility:
- you are not responsible to publish my speech
- you are not responsible to drive me to my meeting place
- you are not responsible to contribute to my religion

In other words, your responsibilities to my rights are negative - you are obligated to NOT PREVENT me from doing something. This is the simplest way to test whether something is really a universal right. The cool thing about this system of universal rights and obligations is that it requires no effort on my part to NOT PREVENT you from doing something. I don't have to take action nor do I have to spend time or money or effort to allow you to exercise your rights. My responsibility to you is to do nothing.

Does "universal healthcare" pass this test? Nope, not in the slightest.

In the current debate, if you have a right to healthcare, it obligates someone else to provide that care, does it not? If you have a right to be treated for cancer, then obviously some doctor has an obligation to treat you for cancer. If you have a right to diabetes medicine, then some drug company has the obligation to provide you that medicine, some doctor has the obligation to write the prescription, and some pharmacist has the obligation to prepare the medicine. And if the doctor, pharmacist or drug company somehow fail to provide that care, treatment and medicine properly, then apparently you have the right to sue them for malpractice which service - no doubt - some schmuck lawyer will be obligated to provide you.

Whatever else this may be, it is not a universal right. It sounds a lot like slavery to me: forcing someone else, against their will or their best interests, to provide time, labor and/or money for your wishes, wants and desires.

Those who claim that everyone has a "right" to universal healthcare obviously mean something different by the word "right" than the Founders meant when they penned the Bill of Rights.

Forgive me, but I fail to see how you have any right to obligate me to provide you healthcare. I just don't see it.

How much is a trillion?

Very well done slide show demonstrating the kinds of money required to keep Goldman Sachs, Morgan Stanley, Bank of America, Wells Fargo and Citibank from collapsing.

A Private Swiss Bank Is Pulling Out of America

This is a long read, but worthwhile. Wegelin & Co is a private Swiss bank founded in 1754. It is divesting itself of all American securities and will no longer act as an intermediary for clients who wish to own American securities through them.

What Does It Mean: The IRS is making it ever more difficult and complex for foreigners to invest in America. The IRS is trying to increase tax revenues, but the effect of these new policies will be a decrease in foreign investment in America. Wegelin & Co estimates the US will need an additional $2 Trillion in tax revenues to make up for the losses from foreign investors.

This is a terrific paper with a lot of very good information. It is well worth your time to read.

One of the most damning quotes comes in  the first few paragraphs. Remember, this is a Swiss bank's view of America:

...let us briefly recall the sort of tax authorities we are dealing with, and the sort of state they serve: a country that, over the last 60 years, has unquestionably been one of the most aggressive nations in the world. The USA has fought by far the largest number of wars, sometimes with, but mostly without a UN mandate. It has broken the international laws of war, maintained secret prisons, and fought an absurd war against drugs, with serious consequences both abroad (Columbia, Afghanistan) and at home (according to reliable sources, the tentacles of the narcotics mafia now reach well into political circles). With breathtaking moral duplicity, the USA maintains enormous offshore havens in Florida, Delaware and others of its states. The moralizers have joined sides with a nation that still makes extensive use of the death penalty, and that has a legal system under which lawyers can get rich on the misfortunes of their clients. Liability cases often end in verdicts with exorbitant damages, which makes business activity extremely risky, for medium-sized enterprises in particular. The moralizers provide intellectual support for a country that allows its infrastructure to collapse, and then stuffs convicts into hopelessly overfilled jails, after what are not infrequently dubious proceedings. They fund a nation that tolerates – or rather, causes – regular crises in the global financial system that it manages. A country whose underclass enjoys neither the benefits of an adequate education, nor a halfway functional health care system; a country whose economic system is increasingly inclined to over consumption, and in which saving and investing have increasingly become alien concepts, a situation that has undoubtedly been one of the driving forces behind the current recession, with all its catastrophic consequences for the whole world.

What Can You Do: The Declaration of Independence declares that "government derives its just powers from the consent of the governed." Once we - the people of these united States - cease to consent to this government, it will cease to possess any just powers, and will in fact be nothing more than a criminal organization, exactly like the mafia. What we can do is cease to consent to this government.