Thursday, July 1, 2010

Bernanke and Geithner, did they deliberately mis-inform Congress?

From a story in Bloomberg today

Fed Made Taxpayers Unwitting Junk-Bond Buyers
By Caroline Salas, Craig Torres and Shannon D. Harrington - Jul 1, 2010

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.

If "the Fed did not understand the distressed state of some of the assets that it was purchasing from banks.." then we are allowing incompetent entities and disingenuous people to write rules and spend taxpayer money on another scam perpetrated on we the people by the smartest manipulators on earth.

Foreclosed Homes Sell at 27% Discount as Supply Grows

From a story by Dan Levy - Jun 30, 2010 on Bloomberg News, excerpts below

"Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc."

"The average price of a distressed property was $171,971, according to the Irvine, California-based data seller."

“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.

"The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said. "

"Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said."

You have to ask yourself: are economic conditions that much worse or have banks found another outlet to dispose of these distressed properties?

Do I smell the stink of vulture investors again? How about buying a property for a third or so less than it is worth, slapping on a coat of paint and reselling it at a 50% profit (still way below what its market value might be)? And you dont even have to watch This Old House to find out how, or even get your hands dirty...there is an unlimited supply of undocumented workers literally dying to work for less than minimum wage paid in cash under the table to do the dirty work.

Who has the kind of resources to do this? Those dastardly hedge funds? Wilbur Ross ( owner of a mortgage servicer empire with inside access to the cherries of distressed homes) Carl Icahn? George Soros ( who undoubtedly has the ear of the Administration)?

And of course, those banks are being paid by the Government (TARP remember) using our tax dollars and servicers and banks are being given free money incentives to "try" and modify mortgages. These are the same banks that bought insurance against default on these mortgages from AIG.

And they were paid out 100% by the NY Federal Reserve under Tim Geithner, on these contracts so that they possibly have already been made whole on these home mortgages that they are now foreclosing.Do they even own them anymore? Shouldnt AIG have been given the collateral?

Double dipping, nay triple dipping comes to mind. The mortgage crisis was caused by irresponsible lending...but it was legal lending for the most part.

Today it appears that a nasty unintended consequence of the bailout of the banks is very likely a collusion between Government (in its burocratic ignorance), the Too Big To Fail crowd,the uber-Rich, those nasty Wall Street Types and compliant Politicians creating legislation written by lobbyists for those same beneficiaries that is setting up another scandalous rip off of the helpless populace.

Wednesday, June 30, 2010

Municipal Bonds..a bargain or a huge risk waiting to swat you?

The following are excerpts from a Bloomberg article (link above)

Municipal bonds underperformed U.S. Treasuries in the first half as default speculation drove state and local government yields to the highest level relative to government bonds in 13 months.

Ten-year municipal bond yields rose to 100 percent of Treasuries for the first time since May 2009, from 80 percent six months ago, according to Municipal Market Advisors data.

Financial pressure on states and municipalities has built as revenue fell in the wake of the recession. More than two- thirds of states had a drop in revenue last quarter over the same period in 2009, the Nelson A. Rockefeller Institute of Government said this month. States will have confronted $296.6 billion of budget deficits from 2009 to 2012, the National Governors Association and National Association of State Budget Officers said.

Some thoughts on Bankers, Keynes and the markets

A sound banker, alas, is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional way along with his fellows, so that no one can really blame him. - John Maynard Keynes, 1931 ....Sound familiar?

Internet gets the brain thinking short term

Research increasingly suggests that one of the prices paid for the convenience of the Internet is a fundamental change in the way the brain operates. "Hypermedia"
skimming, skipping and clicking is redirecting the brain's energy to short-term thinking and away from a deeper, long-term process. "Only by combining data stored deep within our brains can we forge new ideas,"
The Economist notes. "No amount of magpie assemblage can compensate for this slow, synthetic creativity."

The Economist

Its not the data you look at, its the information you get from studying that data.
This takes contemplation...think about it!

"Do more of what's working, and less of what's not."

Dennis Gartman, Louis Navellier,the late Louis Rukeyser ( remember him on Friday's Wall Street Week?) and many other successful traders and advisors recommend you do this.

CoreCap has always recommended you do this too. Its the right advice. Gartman has oft opined that half the gain you will get in a bull market you will get in the last 10% of its span.

So if you find what sector, security, commodity etc is in an uptrend and you buy into that trend, your chances of making big gains are very good.

So where's an uptrend now? What's working today?

Try these sectors (based on our market monitoring process):

Metals & Mining - think gold stocks:El Dorado Gold, Barrick, Buenaventura and Randgold come to mind as does GDX the Market Vectors gold mining fund and Silver Wheaton of course. Gold stocks are cheap relative to gold. Most people don't own them. And, importantly, gold stocks are working right now. Remember, you want to own more of what is working and less of what is not.
Banking - Corpbanca, Bancolombia and locally Credicorp and M&T Bank look interesting
Computer Software - Cognizant is worth looking to see if it suits you and also Microsoft
Computer Hardware - Apple of course! Verizon will be a service provider for all things Apple come January 2011

These are suggestions for your further inquiry (with your investment advisor please) NOT reccommendations, which may not be suitable for you. CoreCap thinks these are working now. He could be wrong (not the first time) and he claims no responsibility if you act on these suggestions.

Tuesday, June 29, 2010

Crisis of Capitalism?

Here it is in a nutshell: the economic problems we face today are a failure of capitalism ....and we should explore a new order.

I am NOT a socialist but this animation is engaging and thought provoking.

Americans' savings rate rises to highest level in almost a year

Americans pushed up their savings rate last month to 4%, the highest level in nearly a year. Meanwhile, consumer spending increased 0.2% compared with April. Almost all of the economic growth in the U.S. is coming from spending by the government or businesses that are getting stimulus money, analysts said. The Washington Post

This is not high by international standards and not very healthy in my opinion. I had been looking for the rate to move to 7-8%; I have been wrong.

Monday, June 28, 2010

How the economy works by Clark and Dawes

And you thought you knew this stuff!!!
Get educated...

The European PIIGS problem clearly explained

Clark and Dawes ...; the equivalent to Who's on First

you gotta watchy this

A little sanity in the pursuit of Big Tobacco

A win for MO (Altria). Huge penalties avoided.This makes muni tobacco settlement bonds more secfure too.

U.S. Bid for Tobacco Company Damages Rejected by Supreme Court
2010-06-28 14:05:09.230 GMT

By Greg Stohr
June 28 (Bloomberg) -- The U.S. Supreme Court rejected the Justice Department’s bid for as much as $280 billion in tobacco company profits, refusing to hear an Obama administration appeal in the decade-old government suit against the industry.
The rebuff all but ensures that the racketeering suit first pressed by former President Bill Clinton’s administration won’t result in financial penalties against Altria Group Inc.’s Philip Morris USA and Reynolds American Inc.’s R.J. Reynolds Tobacco Co. It’s the second time the high court has refused to hear government arguments in the case.
The court also rejected a group of industry appeals aimed at overturning a trial judge’s finding that the cigarette makers defrauded the public about the dangers of smoking for more than 50 years.
U.S. District Judge Gladys Kessler’s ruling could open companies to continuing judicial oversight and impose more stringent limits on their business practices than the 2009 law that let the Food and Drug Administration regulate tobacco.

For Related News and Information:
For more Supreme Court stories: NI SUP BN .
For top legal news: TOP LAW .

--Editors: Jim Rubin, Laurie Asseo.

To contact the reporter on this story:
Greg Stohr in Washington at (1) (202) 624-1841 or

To contact the editor responsible for this story:
Mark Silva at 1-202-654-4315 or