Wednesday, January 30, 2008

SAR #8031

The four most dangerous words in investing are
'This time it's different.'
- Sir John Templeton

Down Spot! S&P just lowered of the investment ratings on $534 billion in mortgage securities - 5% of all the mortgage debt in this country. Financial institution losses "will reach more than $265 billion" - 47%, of subprime mortgage bonds rated between January 2006 and June 2007. Remember when subprime was a pup and we were paper-training it?

What A Difference A Day Makes: Monday, Bush in SOTU: "Let us fund new technologies that can generate coal power while capturing carbon emissions." Wednesday, Bush administration drops support for the FutureGen carbon sequestration project because it would cost too much to save civilization. Maybe it's time to admit that 'clean coal' will never happen and come up with another make-believe way to solve our energy problems without reaching Fahrenheit 451.

Nickel and Dime: Some banks, desperate to raise for cash to meet capital requirements, are paying 5% to attract money to CD's and savings. A desperate few are raising their ATM fees for non-depositors to $3.00. Some are imposing fees for using the bank's own ATMs. It's like checking under the chair cushion for loose change. Desperate times call for foolish measures.

Platform Diving: McCain's platform this fall, according to fellow Republicans, will consist of assuring voters that the jobs are never coming back, the illegals are never going home, but the economy will do well because we'll have a lot more wars. And these are his co-defendants.

Slow and Steady: The Bush administration “is sending strong signals that U.S. troop reductions in Iraq will slow or stop altogether this summer," because of fears that the civil war/violence will resume once we go home. Bush wants to get to Crawford first. Okay with me; how about next Tuesday?

Contest: First to send me a citation in the Constitution that provides for Presidential dismissal of enacted laws through "signing statements" wins the usual prize.

Candy Coated: Bush asked Congress for $300 million this year for poor kids. He also demanded Congress extend his tax cuts for millionaires at a cost of $4.3 trillion over 10 years. Officially there are 15 million American children living in poverty; there are also about 15 million millionaires in the US. One group will get $28,667 every year for ten years, the other $20. Which hand has the M&Ms?

Secret Sauce: The Fed auctioned off another $30 billion to the banks, providing funds "to cash strapped banks". "Cash strapped banks" are banks which do not have enough capital to meet their reserve requirements. Bernanke said "the current auction process will continue for as long as needed to make sure that banks have sufficient reserves." That is, the banks are insolvent, but we're going to pretend that's not true. Don't look behind the curtain.

Dignity: “We must ensure that all life is treated with the dignity it deserves,” Bush in SOTU during what better damned well be his final State of the Union address. He didn’t talk about dignity in terms of ravaged pensions, working longer for lower wages, or the loss of healthcare and other benefits. He didn’t talk about the rise in poverty - 1 in 8 Americans now live below the poverty line. A coded message to the anti-abortion nuts.

Rescue Me ! Statistically the economy hasn't weakened much yet. Fed funds at 3.0% is a negative interest rate since inflation is running at 5.7%. Arthur Burns would have Fed's rate at 12% by now. What's scaring our betters? The invisible hand of the free market. That's what brought on the Crash, the Depression, the social changes, and the regulation of markets. That's what scares 'em. Payback.

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