ADMINISTRATION LIES TO HIDE FED LIES - (CPI NONSENSE)

Please examine the following interview of Austan Goolsbee (White House Economic Council of Advisors Chair) and Erin Burnett.  First, it is important to give Erin some praise since she is really a flaming liberal and typically serves up softballs and never challenges folks (unless they are hating on the US Treasury like Michael Pento).  While I wouldn't go so far as to say that Erin challenges Goolsbee, she does ask the questions we simply see that Goolsbee cannot answer it a straightforward manner or even close to truthfully.

We are witnessing the completion of a full circle where lies have required more lies and those lies have created the need to lie more.  The key here is that the CPI measures a basket of goods that exclude food and energy!  Of course the CPI is measurement stick as the basis of government payment increases or decreases for programs like social security.  Clearly the government is incented to manipulate this data and throw out anything that is really going up like food and energy.

At :40 seconds in the interview Erin asks the question about regular folks hurting due to the Fed's influence on driving up asset bubbles in commodities.  Goolsbee is a very good liar in that his response is "I don't know if the CPI shows that.  CPI is the stuff that we use".  Now, I'm not sure if Goolsbee means that the CPI is the stuff we use for economic misrepresentation and distortion of facts or if he is suggesting that CPI is a measure of the real cost to live, but whichever it is, it is complete nonsense.





The point of the post here is that the FED is blowing speculative bubbles as they have primed the pump with liquidity and every investor (large or small) has had to make decisions to deal with the environment that they have created.  Many of those choices have been to exit the USA altogether like I've discussed regularly while others have bought grains, cotton, oil, sugar, coffee, and anything else that is somehow unrelated to the value of the US dollar.  Senior citizens and the poor are the victims of this all out war as they are relying on fixed income investments or the generous hand of the government to assist them in meeting their daily living requirements.  While the Administration states there is no inflation as measured by the CPI, we all know that gas is now $1.00 higher than it was last year, coffee, sugar, bread, and all food is going higher.  The poor are going to suffer more and feel the increase to a much greater degree.  As I think about this I am disgusted because the Administration and liberals always tell us how much they care about these people, yet they would rather lie and cover up the farce of the CPI than tell the truth.

The FED is driving this unsustainable top in commodities and they need to stop.  They have driven us all to more risky assets and have destroyed lower risk products that serve people in need of predictable cashflows.  QEII is not going to produce more jobs, it is going to produce more price increases in these commodities and it will ultimately lead to a collapse (just like in June / July of 2008).  We are seeing the Administration lie to cover another lie and it isn't going to stop till it ends badly for many.

GOATMUG

Test

SNAP DATA - AUGUST - More Families Join The Party

Once again we review the monthly (SNAP) Foodstamp Data from August.  We see no change in the trend as more of your neighbors slip on to the roles of those that are dependent in some way on our government handout machine.  As I look at these numbers and how they continue to increase, it is almost like there is some kind of party going on and its popularity just keeps on growing.

AUGUST DATA
The highlights include;
42.4 Million receiving benefits which is a monthly gain of 1.3%.  So far year to date, we've managed to add 8.8% additional recipients.  Compared to last year the numbers show a 16.1% YOY gain in those participating.  Almost 20 million households are obtaining this assistance.

http://www.fns.usda.gov/pd/34SNAPmonthly.htm

 

While this data is backward looking it is quite easy to see that there has been no let up in the trend of dependency creation and worsening conditions for Americans.  We currently have a bit more than 307,000,000 US Citizens, which indicates that more than 13.5% of all people in the US are able to obtain some type of subsidy for their food.

WAR ON THOSE THAT CAN'T FIGHT BACK

It is a good thing that CPI data suggests that there is no inflation because these folks would have a tough time in the face of rising costs for a "basket" of goods that reflect the cost of living! (HA!!)  Have you looked at the increases in prices for food, gas, oil, and anything else that is a real cost?  I am expecting more and more terrible data from this report in the coming months.

GOATMUG

BIG WEEK = BIG FLOP?

I want to drop a quick note here.  This is a really, really, really big week. 

ELECTIONS
We have elections in the US for mid term positions where it is widely anticipated that voters will reject the unfettered spending of the current administration, Congress, and Senate.  (Don't forget Bush was also a complete idiot when it came to fiscal controls too and should be held responsible for his completely insane implementation of Medicare Part D which is the worst and costliest entitlement program ever!)

FOMC
Probably more important from a market and economic standpoint we also have a Federal Reserve FOMC meeting on Wednesday.  This is the meeting where Ben Bernanke has purposely timed the unveiling of their plans for additional stimulus spending which has been named "QE2" for Quantitative Easing 2.  The purpose of this program is to continue to spew liquidity in the form of electronic dollars all over the global economy to ensure that asset prices will rise.   As Alan Greenspan has stated, "nothing will help cure the economic conditions as much as a rising stock market!"  The real impact of all of this money sloshing around though is that the value of the dollar drops with each keystroke on the economic printing press.  QE2 is synonymous with dollar debasement.

DOLLAR DOWN MAKES GROCERIES RISE
Is it a wonder why you are going to see grocery costs rise?  Sugar, wheat, corn, rice, and coffee are rocketing higher.  Clothes prices are going to rip higher as cotton is at an all time high.  Oil and gas are vaulting upwards and it is suddenly possible to see my $100 oil price target prediction actually be met this year.  We are seeing all of these hard goods increase in cost, yet personal incomes are dropping.  If you hadn't realized it yet, it is almost like this is a war on the poor as these are the ones that will get squeezed the most in this environment.  Thank you Federal Reserve, US Treasury, and President Obama.  It is odd that the President sits idly by as the Fed rips up and destroys the purchasing power of the poor and the middle class.  I guess this achieves his goals though as more and more marginally middle class will slip into poverty and he can be their benevolent care-taker.  He can continue to promise to take from the wealthy and give the poor their fair share of hope.  The President should be slamming Bernanke and Geithner now and demanding that they quit destroying the value of the dollar.  Instead, he tells us that he inherited this mess and that fixes take time.  Very directly Mr. President, it takes no time to make a phone call and demand that Bernanke quit this now! 

TRADING UPDATE -
Ok, so what do I expect?  I expect that the elections will be exactly what has been predicted.  Congress will go to the Republicans and the Senate will remain in the hands of the Democrats.  The Fed will announce that they will do another $500 Billion of QE 2 and they are going to add more when and as needed with no cap.  This announcement will be less than the markets expect, but the added sentence that they will do more when needed will be somewhat of a life preserver.  The market should sell off some 3% to 5% (individual stocks could go down 10% or more).  At that point, that will be the signal to buy.  The Fed is essentially the market's put (floor) and therefore they will step in and buy and float this thing no matter what.  In a 1930's analog, this is about the time when the market dropped another 30% to 40% because the FED did not provide stimulus and Congress became budget hawkish and tried to reign in spending.  Bernanke will not make this mistake and in fact will go overboard attempting to overwhelm the stagnant real economy.  This annoucement is half the real deal and half a promise that there is no end to the intent to provide as much massive stimulus as needed.  He will signal with overwhelming confidence that there is no lack of desire or willingness to blow as much money as need to reflate the US stock market.

After the temporary drop in the market due to a smaller than expected stated amount, we will be buying anticipating a huge stimulus inflow courtesy of the Fed.  Of course our old favorites will be the targets with a couple of additions.  I still like emerging markets, but I will add SLV and DBA.  I am more positive on silver than gold right now and I like the agriculture commodities.  In addition, although the fertilizer names have run it is possible to see an even bigger move there.

Be careful ------ AND WAIT FOR THE PULLBACK!

GOATMUG

THIS IS A CANCER - CHRIS WHALEN ON THE MBS FRAUD

Chris Whalen is interviewed on Bloomberg about the MBS issue and the ramifications for investors.  Chris details how he thinks these losses will ultimately be put into an RTC type vehicle.

What is catching about this 7 minute interview is that he suggests that this will be a non-event driven event, meaning that there won't be some big implosion, but rather a cancerous attack on bank earnings.

I'd love to have more details on what he mentions here, but he also suggests that JPM did a very good job of doing their paperwork.  He doesn't say more than that, but as you know, I love long/short plays.  I don't think I'd actually pull the trigger and go long JPM and short someone like BAC, but it is an interesting thought.

Ultimately he ends with the idea that investors in MBS might just have no recourse whatsoever if they cannot amass at least 25% of the issue.  If an investor can obtain 25% then they can compel the trustee to sue the creator of the security, otherwise, no recourse may be the result.  YUCK!  Can you imagine buying a complete fraud only to find out that you have no ability to do anything about it?

Enjoy!





Be Careful! (Hat tip to Karl D)  If you want to drink from the fire hydrant on this continuing issue, please check out his site daily. - http://www.market-ticker.org/

GOATMUG

BANKS - WHO WANTS EM?

I've taken a bit of flak over the last several days from people suggesting that I'm over-focused on banks.  Yes, I look at them, and yes they are important, but I need us to be on the same page regarding the concerns I have and where I think we are in general.

ROBOGATE / FORECLOSURE GATE / FRAUD
Ok, I've written about how dirty this whole process has been where banks have tried to forge documents and attempt to create titles where they have been lost.  These are juicy details and this is exactly the kind of item that makes a good story for a blog, but this is not really why this issue is such a big one.  The more important issue is that when the big banks were wrapping these mortgages into huge pools and securitizing them (slicing and dicing them into parts so different pension plans and investors could buy based on credit rating), they represented to them that they actually had recorded all of the documents for clear title and guaranteed or warranted that the MBS buyers were getting a solid legal claim to mortgage backed assets. 

What the sub-prime collapse and the subsequent real estate implosion has shown us is that the banks and their clearing system (MERS) did not actually do what they promised they would do by filing all the paperwork and ensuring that the MERS trust actually owned the notes and had a claim as a lien holder on the real estate asset.  By NOT doing what they promised in the prospectus or security documents, they committed fraud.  In addition, they firms are claiming that the securitizers that packaged up the deals didn't actually put the quality of loans in the deals that they promised.  This is the issue, and this is the big problem.  What this means is that the buyers of the MBS now potentially have a claim to get 100% of their money back on the investment because the trustee or the servicer, or the originator didn't actually create the MBS in the manner that they stated.  Remember, the buyers of these securities are not Joe 6 Pack.  The buyers of these MBS securities were insurance companies, mutual fund companies, hedge funds, governments, and private equity funds.  The buyers of these deals were big money players that then often leveraged these bets 10:1 or 30:1.  The total amount of mortgages wrapped up in these deals is numbering in the trillions!  So, are any of the buyers of these asking the originators to take them back?  Yes! 

http://www.bloomberg.com/news/2010-10-19/pimco-new-york-fed-said-to-seek-bank-of-america-repurchase-of-mortgages.html

I hope this provides some clarity regarding the view of the banks.  In addition, it is important to look at the chart for a technical view.  It is so interesting to me as I look at this 200 day view of XLF (big banks) that it simply cannot push through $15.00.  Look at the 5 or 6 attempts since June of 2010 to go higher.  Even in the last week we could just touch $15.00 only to be rejected.

As I am typing this, the market is ripping higher after yesterdays 165 point Dow thrashing.  This is the environment we live in now.  I truly believe that the market will not be allowed to decline for more than a day or two until after the elections.  If there were a string of 5 or 6 down days that would certainly ensure a resounding Democratic defeat.  The ability of the market to stay positive gives the incumbents a chance to retain a glimmer of hope to retain power.  Please note, that if Republicans do win, I actually believe banks will rally as the street will believe it will be business as usual and the Republicans will assist the banks in getting through this mess.  Hopefully that belief is misguided as I'm sick of the corruption and bailouts at taxpayer expense.

Be careful!

GOATMUG