Monday, March 17, 2008

SAR #8078

Things are going to get worse, before they get worst.

Three Balls: The Fed has created a new lending facility for "primary dealers" (big brokerage houses) which will let them dump their defective mortgage backed securities and receive Treasury Notes in return. The pawn will be for 90 days at the discount rate. The Fed also lowered the discount rate immediately, by 0.25%, to 3.25%, which is not enough to make anyone happy, but is enough to ratchet up inflation and further downgrade the value of the dollar.

Sooner Than Later: Police in the UK insist that primary school kids should be entered in the national DNA database "if they exhibit behavior indicating they may become criminals in later life." We got our concept of civil liberties from them. Maybe we should offer to loan it back, we're not using it.

Ice Skating: Bear Stearns was worth only 10% of its claimed balance sheet, probably less. If you subtract the Fed's $30 billion gift from the $250 million Morgan paid, Stearns net value appears to have been about minus $29.75 billion. Makes you want to read the footnotes.

Teacher's Pet: Twenty thousand California teachers are being notified that their positions are being abolished due to cuts in the state's education budget. Now the kids have not only been kicked out of their homes, they're getting screwed out of schooling, too. Quite an education they're getting.

Foam: The markets anticipate large write-downs of 'goodwill' by investment firms over the next few months. Writing off 'goodwill' is an accountant's way of admitting you paid too much for something. Ask Sprint about Nextel.

Adjustments: Kenya is acting out the doomsters' scenario for a post-peak oil world. The country's farmers are not preparing their fields for planting because of the high cost of fuel. Predictions are that yields will be less than half of normal. Some predict that that will become normal.

Clean Coal: Go to Eastern Kentucky, West Virginia. Fly over the Appalachians. See clean coal in the getting. Each week, coal companies use explosives equal to the Hiroshima bomb to turn mountaintops into rubble. Then they push the rubble into local streams. The EPA calls it "fill", not waste. The waste is the current EPA.

John Denver : With local government facing tax shortfalls, infrastructure repair and maintenance will suffer. We've been expecting more potholes and such. But in Michigan, three counties are considering letting the paved roads go back to gravel. Doing nothing as a plan.

Bluffing: The Army conducts 'lessons learned' examinations. Doctors attend 'morbidity and mortality' conferences. Learning from past mistakes is one of the hallmarks of professionals, learning from the mistakes of others is a mark of intelligence. A complete and willful disregard for history seems to be a prerequisite for a management position on Wall Street.

Mission Creep: The Federal Reserve Act has been mysteriously amended to enable the Fed to prop up not just banks, but brokerage houses. Directly. A former director of Monetary Affairs at the Fed says "It is a serious extension of putting the Federal Reserve's balance sheet in harm's way. That's got to tell you the economy is in a pretty precarious state." Comes as a shock, I tell you. A shock.

The Winner Is... Some think of my comments as mini-rants. Every now and then a really good rant is called for: today's Most Excellent Rant award goes to Sudden Debt's modernization of George Orwell. Go, read.

1 comment:

Anonymous said...

"The Federal Reserve Act has been mysteriously amended to enable the Fed to prop up not just banks, but brokerage houses."

An act of Congress passed in 1999.