Wednesday, April 9, 2008

SAR #8101

"I think we have come to the end of the road".
George Soros

Skim milk / Cream: Things are worse than they seem, or at least worse than reported by the likes of Morgan Stanley, Goldman Sachs and friends. As their credit weakens, the yield on their debt rises relative to Treasuries, and the price of their bonds decline. Thus they can understate how far in debt they are (the face value of the bonds), because theoretically they could buy it back below face value. They don't, but they do book the imaginary "profit".

Progress is as Progress Does: After $22 billion in training and equipmet, between 30 and 50% of the Iraqi forces sent into Basra and Sadr City recently deserted. Somebody's surge is working.

Slowdown: Do not invest in the new strip mall; there is no need for more places to spend money. To get out of the hole we're in, we need to stop spending 10 - 15% more than we earn. To get out of the hole we're in, we need to start saving 5 - 10% of our income. It will be a long while before the economy will grow enough to compensate for a 20% drop in customer spending.

Again: Citigroup is near a deal to dump about $12 billion of leveraged loans and bonds on unsuspecting greedy optimists, for less than 90 cents on the dollar.

Here to Help: Congress is going to solve the housing crisis with a $15 billion bill that gives $6 billion to housing builders to make up for lost profits. They are also giving a tax deduction of $500 to homeowners who don't itemize deductions. Never mind that the banks have already written off $235 billion or so, this $15 billion will do the trick. If not, they can always try giving more to the builders.

Market Talk: The President is says it is essential to our national defense that Congress bend over and pass the Columbia Free Trade Agreement. Really; I thought most of the cocaine came in duty-free already. Do we have any jobs left to ship them?

This Just In: Retail is obsessive. Every day that day's sales are compared to sales for the same day, week and month last year. Word has it that sales an un-named Big-3 retailer in a major city are down 25% or more every day last month. Same is true for every store in its district. Gives the home office something to obsess about.

Here's My Plan: When it becomes obvious the Fed has failed, the Treasury will borrow "in excess of requirements" (as if $9 trillion in debt were not enough) and deposit it at the Fed, giving them more money to give to Wall Street. Another plan calls for the Fed to issue its own debt, like Citibank and Bear Stearns.

Drugged: Pfizer has joined the ranks of pharmaceutical companies killing off their customers. Clinical trials showed their inhaled insulin raised lung cancer rates 500%. Negotiations with Big Tobacco are underway.

Trumpets! Here's the plan: The FHA will insure mortgages on rapidly depreciating houses, if the banks will write off part of the loss they would suffer if they refinanced the house or foreclosed. In other words, heads the bank wins because you pay off the loan, tails the bank wins because the FHA pays off the loan with taxpayers money.

Market Logic: Washington Mutual stock was up 30% after announcing that in order to raise $7 billion to survive it had diluted the book value of it shares by 30%. No wonder I'm not rich.

Diogenes Lite: The Pentagon has an outfit called "The Defense Academy for Credibility Assessment". They've developed a hand-held lie detector. It will be issued to journalists attending Pentagon and White House briefings.

Laissez le bon temps roule: Are we in a recession? Wrong question. Did the 2001 recession ever end? No. In 2000, median family income was $61,000. In 2007, median family income was $60,500. Good thing there's been no inflation except in food and fuel and taxes and healthcare. And lies.

Multiple Choice: A graph of the recession will resemble: (a) "V", (b) "U", (c) "W", (d) "L" or (e) "\"

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