Financial Crisis

[AlexLah]

Hey thanks Midas, I did not know he had a blog.

Yesterday I looked a short docu named: Lost Vegas on YT, it is really getting bad there in the US. Scary you can even say, 13 to 20 forclosures a day the guy is doing.

http://www.youtube.com/watch?v=rFTZ3flsipE

[midas]

Hey thanks Midas, I did not know he had a blog.

Yesterday I looked a short docu named: Lost Vegas on YT, it is really getting bad there in the US. Scary you can even say, 13 to 20 forclosures a day the guy is doing.

http://www.youtube.com/watch?v=rFTZ3flsipE

No problem Alex- the least I could contribute compared to all the stuff you have provided over the months :

I think this guy is really fascinating-the way he speaks with such confidence about what is predicting.

And I even like the way he explains how he predicts things-nothing magical just joining the dots and establishing

trends................... something which a few people on TV we know without naming names clearly are unable to do

[HardenedSoul]

Flying,

I don't know about you but I regard everything that CNBC is now saying about the market's can be considered as

an " advertorial " in the best interests of General Electric their parent company. I never believed half of what

they said before-look at that Jim Cramer scam artist telling people to keep buying

Bear Stearns at that time. But now CNBC has become a blatant propaganda machine for the vested interests

of a few and genuine journalism has been abandoned. In a few weeks time they will begin a long campaign involving thousands

of features and stories plugging the new proposed public health system for the USA

and the main beneficiary of all this will be General Electric.

So true ! The only commentator on CNBC with any credibility is Rick Santelli. He kinda tells it like it is . . .

That Bob Pisani really, really gets my goat. He walks around the floor of the NYSE when the Dow or the S&P are falling complaining about the lack of investors coming into the market to support prices. He and Steve Liesman seem convinced that all that is needed to fix the problems is confidence. They'll latch on to the most insignificant sliver of positivity in an overwhelmingly negative set of official figures and try to spin it as possibly being a base from which the US can build some sort of sustained recovery.

These gimps were the same idiots telling viewers just how shrewd the sovereign wealth funds had been by investinf in the likes of Merrill Lynch and Citibank when their shares were two or three times pricier than they are now.

They rubbish the notion of the existence of the PPT (Plunge Protection Team) even though it's official name, The President's Working Group of Financial Markets, is clearly and presently active in the markets and interfering with the normal operations of the gold, silver and stock markets through proxies like JPMC, Deutsche and Goldman Sachs.

[midas]

So true ! The only commentator on CNBC with any credibility is Rick Santelli. He kinda tells it like it is . . .

That Bob Pisani really, really gets my goat. He walks around the floor of the NYSE when the Dow or the S&P are falling complaining about the lack of investors coming into the market to support prices. He and Steve Liesman seem convinced that all that is needed to fix the problems is confidence. They'll latch on to the most insignificant sliver of positivity in an overwhelmingly negative set of official figures and try to spin it as possibly being a base from which the US can build some sort of sustained recovery.

These gimps were the same idiots telling viewers just how shrewd the sovereign wealth funds had been by investinf in the likes of Merrill Lynch and Citibank when their shares were two or three times pricier than they are now.

They rubbish the notion of the existence of the PPT (Plunge Protection Team) even though it's official name, The President's Working Group of Financial Markets, is clearly and presently active in the markets and interfering with the normal operations of the gold, silver and stock markets through proxies like JPMC, Deutsche and Goldman Sachs.

Yeah I really like him you must have seen the bit where he really lost his cool one morning

a few weeks ago ? Well with this latest Obama statement yesterday I think it's going to be very hard for them to

keep convincing people that the Emperor is still wearing clothes

it's amazing how they have been spinning everything the past few weeks- the jobless claims have dropped 13,000

so they get excited because it's less than last week but hang on a minute-it's still over 600,000

so don't break out the champagne just yet. And if they mention green shoots again I think I am going to be sick

To me everything CNBC have been saying and doing the past few weeks seem nothing less than

a " pump and dump "exercise

[12DrinkMore]

To me everything CNBC have been saying and doing the past few weeks seem nothing less than

a " pump and dump "exercise

Sort of

PIMP THE ECONOMY!

:D :D

[flying]

He seems to have been right on so many issues in the past and we only have to wait

until 2012 to see if he is right about this in the USA.

"The first thing to do is organize with tax revolts. That's going to be the big one because people can't afford to pay more school tax, property tax, any kind of tax. You're going to start seeing those kinds of protests start to develop."

This is what I have always thought & mentioned before. This I think will happen.

It does not even have to be organized. I am 99% sure it will occur on its own. You cannot have all this Unemployment & not have a big drop in tax revenues. Then you also have the general disenchanted public. This is the nose to the grindstone crowd I always speak of.

They have been working hard to maintain a middle class status now they see it stripped away by crooks & politicians who are crooked tax dodgers themselves. They see where their tax dollars have gone & now where the govt. plans to spend thiers & their childrens future tax dollars. Want to bet they will opt out any way they can?

This is also why I see the USD which is backed by the promise of others works also going down the toilet.

Lastly it is funny how many times we have heard from various crystal balls ...from the Mayans to Nostradamus that the world ends in 2012. I never thought much about it but now wonder if they meant the financial world?

[BlackJack]

why not put patients on a healthcare holiday

USA healthcare is too expensive and affordable only to some

put them on a plane to Thailand, Malaysia, Philippines, India

get them fixed - ship them back

costs savings approx 60%

Maybe if AIG had of used its brains and outsourced healthcare then it would not be bankrupt

think people think

Ladies and Gentlemen: the US Is Insolvent

"We are out of money." Barack Obama May 23, 2009

Does anyone get the feeling the markets will bleed on Tuesday when they re-open?

http://jessescrossroadscafe.blogspot.com/

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.

But surely another long-term problem is that America hasn't gone anything to rely on to drag itself out of the mess?

It produces so little today compared to Asian countries and it only ever had mega consumerism to keep the economy going anyway and how

can that be revived with so many jobs being lost every month?

[flying]

Short enough to post here..............

World Bank warns of social unrest

The head of the World Bank has warned that the global economic crisis could lead to serious social upheaval.

"If we do no take measures, there is a risk of a serious human and social crisis with very serious political implications," Robert Zoellick said.

He pointed to Eastern Europe, which faces the "tricky situation" of fast-shrinking economies and protests.

Mr Zoellick suggested governments should start preparing for high levels of unemployment.

"In my opinion, in this context, nobody really knows what is going to happen and the best one can do is be ready for any eventuality," Mr Zoellick said in an interview with Spain's El Pais newspaper.

"There is also what I call the 'X-factor', that one can not foresee," such as the recent outbreak of swine flu, he said.

"Latin America has remained reasonably stable, even if Mexico and Central America are under pressure because they rely a lot on the North American market," Mr Zoellick added.

It was reported last week that Mexico's economy shrank by 8.2% in the first three months of this year compared with a year earlier. Mexico sends 80% of its exports to the US.

Other economies in Eastern Europe have registered double-digit declines in GDP, such as Latvia and Estonia, while the retiring Bank of England rate-setter David Blanchflower has said at least one million more people in the UK will lose their jobs.

The World Bank has previously warned of a "human catastrophe" in the world's poorest countries unless more is done to tackle the global economic crisis.

It said an extra 53 million people are at risk of extreme poverty.

http://news.bbc.co.uk/1/hi/business/8066037.stm

[midas]

why not put patients on a healthcare holiday

USA healthcare is too expensive and affordable only to some

put them on a plane to Thailand, Malaysia, Philippines, India

get them fixed - ship them back

costs savings approx 60%

Maybe if AIG had of used its brains and outsourced healthcare then it would not be bankrupt

think people think

Is not practical- I was reading that many Americans don't even have passports

so many would not be able to leave USA quickly.

And from East Coast USA it's a very long flight. If you are proposing doing this to cut costs than presumably

they would be sitting in cattle class -not a good solution for a sick person

[Abrak]

So true ! The only commentator on CNBC with any credibility is Rick Santelli. He kinda tells it like it is . . .

Personally I find CNBC boring and repetitive. Although I dont particularly like the channel (my GF does) I find 'E' gives by far the best investment advice.

[BlackJack]

why not put patients on a healthcare holiday

USA healthcare is too expensive and affordable only to some

put them on a plane to Thailand, Malaysia, Philippines, India

get them fixed - ship them back

costs savings approx 60%

Maybe if AIG had of used its brains and outsourced healthcare then it would not be bankrupt

think people think

Is not practical- I was reading that many Americans don't even have passports

so many would not be able to leave USA quickly.

And from East Coast USA it's a very long flight. If you are proposing doing this to cut costs than presumably

they would be sitting in cattle class -not a good solution for a sick person

NO its the AMA that wont allow it

anything can be done!

but there is no will to do it and plenty of bitching opposition to anything suggested

solutions to the problems are needed and NOW

[BlackJack]

Back in 1933, at a time of economic crisis, President Roosevelt forced U.S. Citizens to sell their gold at $20 an ounce - and then subsequently revalued the metal to $35. Could President Obama, a Roosevelt disciple, have similar plans in mind.

[BygonKeaw]

"The trends now indicate that our(USA) country is going bankrupt. The probability is, our country will move toward a military dictatorship, to prevent riots and complete social break down. Once the US breaks down, all the other cultures will under go similar things.

As of now, the world financial system is on the brink of collapse, due to its own shortcomings. The comptroller of currency stated in 2003 that the interest on the US national debt will not be affordable in less than 10 years. This theoretically means total bankruptcy for the US economy. And it's implications for the world, are immense.

In turn, the fractional reserve based monetary system is reaching its theoretical limits of expansion and the banking failures you are seeing are just the beginning. This is why inflation is skyrocketing, all debt is at record levels and the government and fed are hemorrhaging new money to bail out the corrupt system. For, the only way to keep the banks going is by making more money… the only way to make more money is to create more debt and inflation. It is simply a matter of time before the tables turn and there is no one willing to take new loans, while defaults grow, as people are unable to afford their current loans. Then the expansion of money will stop and contraction will begin on a scale never before seen, ending a century long, pyramid scheme. This has already begun."

Thoughts anyone???

[churchill]

Isn't this what lehman was accused of doing in HK and Germany ?

http://sovpsy.ru/why-is-bank-of-america-bl...ead-mothers.htm

[BlackJack]

the greatest asset the USA has is its ability to make people believe that what they see is not what they see.

The USA will simply conjure up a diversion as its always done.

If they could they would simply re value the price of gold but they cant as the gold in reserves has been leased out or sold or is under some kind of creative accounting.

In a word check mate.

Since theres more than 2 players its a matter of who will fold first and who will then follow.

It is happening now and just like the Titanic the band (USA spin doctors) will play on whilst the ship sinks beneath the waves - sucking other countries with it.

Its not doom and gloom folks - its reality TV

PS

Bubba and bro all have guns and they aint gonna take this lying down

[midas]

Isn't this what lehman was accused of doing in HK and Germany ?

http://sovpsy.ru/why-is-bank-of-america-bl...ead-mothers.htm

Don't forget these are the same people that deliberately colluded with Treasury Secretary Paulson

and Bernanke to keep quiet about the true status of Merrill Lynch ............. absolutely no moral standards whatsoever

[badge]

http://www.reuters.com/article/rbssFinanci...K43252320090525

[12DrinkMore]

The World Bank has previously warned of a "human catastrophe" in the world's poorest countries unless more is done to tackle the global economic crisis.

Whether the "human catastrophe" will be limited to the world's poorest nations is another question. Blanchflower's unemployment forecast looks pretty bad as well.

Here is another excellent and clearly written analysis from one of my favourite websites.

http://www.atimes.com/atimes/Global_Economy/KE22Dj02.html

Income-based model versus asset-based model

At fundamental issue here is the new asset-based economic/financial model (as contrasted with a traditional income-based model) which the US and Britain in particular have progressively adopted over the past couple of decades, and whether that new model is really workable and revivable in the light of its massive collapse that began with the emergence of the subprime crisis in late July of 2007.

The US economy has rapidly converted from a traditional, income-generating machine to a so-called "new economy", an asset-inflating one. An income-generating machine derives wealth from the production and sale of goods and services, while an asset-inflating one derives wealth from accelerated asset appreciation, or targeted inflation of assets - in other words, by the creation of serial asset bubbles. In this new model, traditional wealth generation takes a back seat to "paper" wealth generation via serial asset bubble creation.

In the traditional income-based economic model, the financial sector serves to support the real economy, where the vast bulk of real income is generated, by providing credit and other traditional financing services aimed at sustaining existing and fostering new income-generating business ventures, and supporting consumer spending via traditional credit services. The income generated in the financial sector is not of major proportions, but is a distant second to that generated in the real economy.

The asset-based model is radically different. In this new model, innovative and grandiose opportunities arise for the generation of gigantic sums of "paper" wealth from within the financial sector itself, thanks to what can only be called the fostering of an incestuous relationship between government and Big Finance.

Assuming that you agree with the analysis, then the first question is whether the "stimulus" packages will be able to fire up more asset inflation and save the US and the UK from the doom in the short term?

But more importantly the BIG question is whether an economy can be based on rising asset prices without actually producing physical "stuff" that people want to buy?

Possibly, with the humongous amount of money being printed, the falls in asset prices might just be arrested. But I simply cannot believe that continuation of an economy based on rising property and stock market prices is going to lead to anything other than another crisis. There can surely be no long term future in it. All that is achieved is that money is concentrated in the pockets of the few bankers/politicians and the rest of us have to pay.

Economies surely have to be based around production of stuff that people that people can see, feel and think it is worth buying. This is why I am convinced that the Asians will come out of this mess quicker and with more sustainable success than the UK and US.

Catch this

http://www.tfreview.com/xq/asp/sid.802C4A2.../qx/display.htm

and this

http://www.atimes.com/atimes/Global_Economy/KE19Dj06.html

[flying]

http://www.reuters.com/article/rbssFinanci...K43252320090525

"The economy should have bottomed this year in the first quarter if there are no further negative political developments in the rest of 2009,"

You know while the political problems of course have their impact. What makes this reporter believe that is the sole deciding factor?

[AlexLah]

I am in a very bad mood today!

The US and the UK are clinically dead!

The once so great empires will pay their price,. It is only a matter of some time before the two of them will be turned into serfdom.

We do not need Al Gay Da, just have to wait and look at the stupid decisions your governments make.

The UK and the US will be transformed into less then developing countries within a year or two.

Get used to living in tents and walk for two hours to get a bit of water, because that is where your countries are heading for.

Insha Allah!

[MJP]

I am in a very bad mood today!

The US and the UK are clinically dead!

The once so great empires will pay their price,. It is only a matter of some time before the two of them will be turned into serfdom.

We do not need Al Gay Da, just have to wait and look at the stupid decisions your governments make.

The UK and the US will be transformed into less then developing countries within a year or two.

Get used to living in tents and walk for two hours to get a bit of water, because that is where your countries are heading for.

Insha Allah!

One of the reasons I moved to Issan, Alex.

Scarily, make you right.

[Naam]

LO AND BEHOLD! HEAR YE OH PEOPLE OF THE WORLD... PROPHET ALEX SPEAKETH THE TRUTH

[AlexLah]

Naam, you think there will be Mad Max kinda stuff over there in some years?

Change you can believe in, ha ha ha ha haaaaaaaaa!

[12DrinkMore]

Why do I get the feeling that we have been screwed here?

http://www.atimes.com/atimes/Global_Economy/KE22Dj04.html

Three big banks, Goldman Sachs, JPMorgan and Morgan Stanley, say they are so healthy now that they can begin to pay back the billions they were given by the US Treasury in December, when they said they were on the brink of failure.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.

I don't quite understand all this accounting jargon. All I can see is that JPM received bailout funds in December which apparently they didn't need, and bought WaMu from the government FDIC lot for 1.9 Billion, and now expect to make 29.1 Billion in income. Which presumably the FDIC could have earned.

I have the suspicion that JPM has just managed to make a massive fortune at the expense of the tax payers.

Have we been screwed again by these banking bastards?

Edited May 26, 2009 by 12DrinkMore

[AlexLah]

Ok from the web.

\

Purchase accounting is an accounting method that is used under certain circumstances in accounting for a business combination, such as a merger, consolidation, or stock acquisition. Accounting for a business combination by the purchase method follows principles normally applicable under the historical-cost method for acquisitions of assets and issuances of stock. The cost to the purchasing entity of acquiring another company in a business combination treated as a purchase is the amount of cash disbursed or the fair value of other assets distributed or securities issued.

The cost of the assets recorded on the acquired company’s books is not recorded by the acquiring company as the cost of the purchased assets, as would be the case when the pooling-of-interests method is used. Because the assets acquired are recorded at their fair market value, any excess of cost over these fair values of total identifiable net assets is assigned to intangibles, such as goodwill. Goodwill is amortized over a period not to exceed 40 years. The purchase method of accounting must be used for a business combination unless all conditions prescribed for a pooling of interests are met.

In purchase accounting, post-acquisition earnings of the acquired entity are combined with the surviving entity’s earnings. Restatement of the financial statements of prior years is not required.

Do I understand it correct with the following example?

Cost of company = 100

Assets (securities) 1000 Valued by the sold/taken over company at the time.

Assets revalued by acquiring company 500

500-100=400 = profit when resold

Something like they opened all cans of tuna and found 50% contained rotten fish, the other 50% is recanned and sold again?

I dunno.....

Edit:

There are conditions where the choice between pooling and purchase accounting can have real effects on the cash flows and value of the firm. The first is when all or some of the goodwill amortization is tax deductible. In any acquisition where market value exceeds book value, the use of purchase accounting should result in higher cash flows and value than the use of pooling accounting. The other is if there are constraints on dividend and debt policy, stated in terms of retained earnings, that might become tighter if there are amortization expenses that reduce earnings; if there are, the use of pooling accounting may provide the firm with more flexibility on both dividend and financing decisions.

Edited May 26, 2009 by AlexLah

[teletiger]

When JPMorgan bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.

12D, very astute of JPM to mark them down 25%.

These toxic assets (sub-prime mortgages, auto loans, student loans,(credit cards?)) are only worth what people will pay for them. The property values are already down 40% and this is before the millions of foreclosures to come. (foreclosures are estimated at 25c on the dollar) Auto and student debt default......pick your own number, 30/40/50%?....and credit cards?...

A ballpark figure (mine) is that JPM are $50 billion out of pocket on this deal.

Unless they've got Government (taxpayer) indemnity on the toxics. AIMHO of course. DYOR.

Regards.

Edited May 26, 2009 by teletiger

[midas]

The green shoots are about to die

The consensus is not just that things are not getting better......... but they are getting worse.

U.S. home prices fall at record pace: Case-Shiller

May 26, 2009, 9:12 a.m. EST

WASHINGTON (MarketWatch) -- U.S. home prices fell a record 19.1% in the first quarter compared with a year earlier, according to the national Case-Shiller home price index released Tuesday. On a month-to-month basis, prices in 20 selected cities fell 2.2% in March and were down 18.7% in the past year. Seventeen of 20 cities saw prices fall in March, with record declines in Minneapolis, Detroit and New York. "We see no evidence that that a recovery in home prices has begun," said David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index. From the peak, home prices are down 32.2%, and on average are at the same level they were at in late 2002.

http://www.marketwatch.com/story/us-home-p...ce-case-shiller

And as one analyst said - you dont get a bounce back on housing like the stock market

- the last major downturn in California took 6 years to show any signs of stabilising

Edited May 26, 2009 by midas

[AlexLah]

And that guy comes home with how many USD every month?

Me thinks that when job losses continu to be falling by the hundreds of thousands a month is a bit better indicator for an economy?

Another example of a moron?

Edit:

I think they will drop by another 20-30 %

Edited May 26, 2009 by AlexLah

[jumnien]

The total US debt is very low at around 45% of GDP. UK debt is around 100% of GDP.

[AlexLah]

Really?

How if you add another zero, on the right side that is..........