Can you say, CHAIN REACTION! This is a game changer: "CIT finances about 1 million businesses from Dunkin’ Brands Inc. in Canton, Massachusetts, to Eddie Bauer Holdings Inc., the clothing chain in Bellevue, Washington, that’s operating under bankruptcy protection. The company says it’s the third-largest U.S. railcar-leasing firm and the world’s third-biggest aircraft financier."
CIT Bonds Signal Bankruptcy Inevitable as Debt Exchange Expires
By Pierre Paulden and Caroline Salas
Oct. 30 (Bloomberg) -- CIT Group Inc. bond and credit- default swap prices show that investors are betting the 101- year-old commercial lender will file for bankruptcy after the deadline for a debt exchange expired overnight.
Since CIT Chief Executive Officer Jeffrey Peek started a $30 billion debt swap Oct. 1, the company’s notes due Nov. 3 dropped 12 cents to 68 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Holders of the $500 million in notes were offered 90 cents on the dollar in new debt and equity in an out- of-court exchange that expired at 11:59 p.m. yesterday in New York. They would get 70 cents on the dollar in bonds and new stock in a pre-packaged bankruptcy.
“We believe they will file for bankruptcy within the week, provided nothing unexpected occurs,” Adam Steer, an analyst with CreditSights Inc. in New York, said in a telephone interview before the deadline passed.
CIT, which lost $5 billion in the past nine quarters and failed to get a second round of taxpayer funding in July, sought to avert collapse by asking bondholders to agree to the swap or vote for the pre-packaged bankruptcy. It faces opposition from billionaire investor Carl Icahn, who says he’s the largest bondholder, with $2 billion in debt. If CIT is forced into a “free-fall” bankruptcy, unsecured claims may fetch as little as 6 cents on the dollar, said Peek, who plans to leave the company at yearend.
Keith Rodwell, a spokesman for CIT in Sydney, declined to comment on the outcome of the debt-exchange offer. Curt Ritter, a company spokesman in New York, declined to comment yesterday.
READ ENTIRE ARTICLE HERE
Friday, October 30, 2009
Thursday, October 29, 2009
$1,000,000,000,000,000 In Derivitives (Quadrillion If You Don't Want to Count)
The fed hasn't just painted itself into a corner, it's taken a bath in cement and is now frozen in place. Raise interest rates - keep them the same...there is no cheating the invisible hand.
Trillion Dollar Ticking Derivatives Time Bomb to Explode Under Bankrupt Banks
* The current notional value of derivatives on US commercial banks’ balance sheets is $203 trillion.
* 97% of these ($196 trillion) sit on FIVE banks’ balance sheets (more on this shortly)
* If even 1% of this $203 trillion is “at risk” … you’re talking about $2 TRILLION in at risk bets made in the derivatives market
* If 10% of that 1% end badly, you’re talking about $200 billion in losses
Total equity at the five banks is $737 billion. So if you assume that only 1% of derivatives are “at risk” (odds are it’s more) and 10% of that at risk money is lost, you’ve wiped out nearly 1/3 of the banks’ equity.
If 2% of derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out $400 billion or nearly HALF of the banks’ equity.
If 4% of derivatives are “at risk” and 10% of those bets go bad, you’ve wiped out ALL OF THEIR EQUITY and they go to ZERO.
Remember, I’m only accounting for derivatives here… I’m not even including ON BALANCE sheet risks, mortgage backed securities, and all the other junk floating around.
Suffice to say derivatives are HUGE time bomb waiting to go off.
And what could trigger them?
Interest rates.
Of the $200+ trillion in derivatives on US banks’ balance sheets, 85% are based on interest rates.
For this reason, I cannot take ANY of the Fed’s mumblings about raising interest rates seriously AT ALL. Remember %$firstname$%, most if not ALL of the bailout money has gone to US banks in order to help them raise capital. So why would the Fed make a move that could potentially destroy these firms’ equity (essentially undoing all of its previous efforts)?
However, at this point, the Fed may not have a choice….
As I showed in yesterday’s issue, the bond market is DEMANDING higher yields from US debt. Put another way, US debt holders are unwilling to continue funding our profligate spending without getting paid more to do it… I can’t say I blame them, since the prospect of collecting a 3% yield to own a currency that’s lost 15% in the last six months isn’t too appealing.
But if yields rise this could blow up the derivatives market (remember 85% of derivatives are related to interest rates). So the question remains:
I want to be clear here. The above chart MAY not be as bad as it looks. Remember, NOT ALL notional value of derivatives are at risk. For instance, only 1% of the above numbers might actually be REAL money at risk…
The issue however, is that NO ONE knows how much money is at risk here. No one. But considering:
* The derivatives market is TOTALLY unregulated….
* The nightmare that has occurred due to instruments that were allegedly regulated (mortgage backed securities, etc.)…
* EVERY attempt to increase transparency or accounting standards at the banks has been met with threats of financial Armageddon…
It’s very difficult NOT to be freaked out by the above numbers. Personally, I sure hope that less than 0.0001% of that stuff is “at risk.” I hope bankers were more careful with interest-rate based derivatives than they were with mortgage-backed securities.
I hope… But I doubt it.
Wednesday, October 28, 2009
Two Face: Inflation Vs. Deflation
In the world of Batman, the public good is constantly under attack from Harvey Dent, aka Two Face: the insane arch criminal that makes decisions based on the flip of a coin. Unfortunately for those dependent upon the flip, each side of the coin is the same because two face likes to "make his own luck."Today the world economy is under attack from two different scenarios that look different at face value but may lead to the same result for nations that are heavily indebted: deflation and inflation.
Over the past two years the debate has raged between inflationary and deflationary camps sparring over how the world economy would suffer. This talk has recently come to a crescendo as much ado is being made about the upcoming G20 meeting in early November where many countries are expected to discuss the role of quantitative easing in their internal economic policies.
Some feel that these nations will be forced to curtail the expansion of the money supply by abandoning QE and raising interest rates - end result massive deflation.
Some feel that these nations will be forced to continue QE as the only means to fund themselves - end result massive inflation.
The common ground between both is that the fundamentals of the world economy are far from healthy.
Is it not becoming more clear that both scenarios may lead to the same result for those countries which are heavily indebted? That perhaps we have already made our own luck?
If the intervention is stopped, the financial system faces potential systemic collapse - much of which is guaranteed by these nations' governments. With a collapsing tax base, the interest payments on the debts become untenable (both public and private) and the default scenario emerges - forcing a devaluation of the currency and isolation of country from trade/financing with others. (This is a much different scenario than deflation in the Great Depression - the level of personal and governmental debts for countries was minimal if not nonexistent - same story in Japan in the 1990s).
END RESULT - CURRENCY DEVALUATION
If the intervention is continued, the integrity of the currency is undermined by both supply and confidence as holders of currency try to unload it, rushing to the exits like somebody yelled fire in a movie theater.
END RESULT - CURRENCY DEVALUATION
One thing we can all agree on is that two face has a gun to the world economy's head.
Let's hope there is an economic Batman out there somewhere to save us.
Tuesday, October 27, 2009
Faber & Roubini on Dollar
For those who didn't catch this video yesterday, Faber predicts the dollar approaching a value of zero on a time line between now and ten years.
Roubini has come on record lately stating that he is not a believer in gold and commodities at any price and that they are in a bubble. While this could be true in the short term he seldom makes projections further than 6-18 months out. Lost to many is his continued use of "right now."
Where is the truth between Faber & Roubini - likely somewhere in between.
Japan: Dollar Still World's Strongest Currency
For all of our sake, let's hope this is true and continues to be true. A weaker dollar will devastate Japanese exports - more so than it will China (you can bet this will be a conversation between United States Trade Representative Ron Kirk today in Hangzhou, China as he attends the 20th session of the U.S.-China Joint Commission on Commerce and Trade (JCCT)). Perhaps we will see a sustainable greenback rally in the near future coinciding with a stiff equities correction which will likely take out major financial players. Unfortunately, all good things come to an end, including the reign of king dollar. As intervention in failures continue, such actions will beget the erosion of currency integrity. As to the time line, it is debatable should we avoid another major market shock.
Maintaining confidence in the US economy and it's currency will be of paramount importance in maintaining stability. The Worsening Job Picture Fuels Slide In Confidence is a major challenge.
Dollar 'World's Strongest Currency': Japan
(AFP) – 6 hours ago
TOKYO — Japan's finance minister said on Tuesday that the dollar was still the world's strongest currency and it was natural for Tokyo to keep large stockpiles of the greenback.
"It is clear that the dollar is still the world's strongest currency," Finance Minister Hirohisa Fujii said at a press conference.
"It is a matter of course that the country keeps its foreign exchange reserves in a strong currency."
This in turn "also supports the dollar," he added.
Japan has the world's second-largest forex reserves after China. Tokyo gives no breakdown of the currencies, but most are believed to be held in dollars as a result of past intervention to sell the yen against the greenback.
Fujii said countries should not seek to artificially weaken their currencies to boost the competitiveness of their exports, but also reiterated that he was not necessarily in favour of a stronger yen.
"It would have a negative impact on the world's economic and political conditions if each nation engages in a race to devalue their currencies," he said.
Japan has not intervened in the foreign exchange market since March 2004, allowing the yen to find its own level against the dollar.
Fujii has said on several occasions since taking his post last month that in principle he opposes action to curb the strength of the yen, which hurts Japanese exporters' earnings.
But he has also said Tokyo does not rule out stepping into the market to sell the currency "in an abnormal situation."
The dollar hit an eight-month low against the Japanese currency last month, dropping below the 89 yen level, as the greenback came under broad pressure.
But it has since recovered some ground, striking a five-week high of 92.33 yen early in Tokyo trade on Tuesday.
Maintaining confidence in the US economy and it's currency will be of paramount importance in maintaining stability. The Worsening Job Picture Fuels Slide In Confidence is a major challenge.
Dollar 'World's Strongest Currency': Japan
(AFP) – 6 hours ago
TOKYO — Japan's finance minister said on Tuesday that the dollar was still the world's strongest currency and it was natural for Tokyo to keep large stockpiles of the greenback.
"It is clear that the dollar is still the world's strongest currency," Finance Minister Hirohisa Fujii said at a press conference.
"It is a matter of course that the country keeps its foreign exchange reserves in a strong currency."
This in turn "also supports the dollar," he added.
Japan has the world's second-largest forex reserves after China. Tokyo gives no breakdown of the currencies, but most are believed to be held in dollars as a result of past intervention to sell the yen against the greenback.
Fujii said countries should not seek to artificially weaken their currencies to boost the competitiveness of their exports, but also reiterated that he was not necessarily in favour of a stronger yen.
"It would have a negative impact on the world's economic and political conditions if each nation engages in a race to devalue their currencies," he said.
Japan has not intervened in the foreign exchange market since March 2004, allowing the yen to find its own level against the dollar.
Fujii has said on several occasions since taking his post last month that in principle he opposes action to curb the strength of the yen, which hurts Japanese exporters' earnings.
But he has also said Tokyo does not rule out stepping into the market to sell the currency "in an abnormal situation."
The dollar hit an eight-month low against the Japanese currency last month, dropping below the 89 yen level, as the greenback came under broad pressure.
But it has since recovered some ground, striking a five-week high of 92.33 yen early in Tokyo trade on Tuesday.
Max & Erma's Is Toast
The only thing shocking here is that Max & Erma's was still in business. The retail climate will continue to deteriorate.
Sign of the times: it is rumored that the former flagship Marshall Field's in Chicago, now a Macy's, may not be able to afford a Christmas tree this year for the Walnut room.
Restaurant Chain Max & Erma's Files For Bankruptcy
(AP) – 23 hours ago
PITTSBURGH — The restaurant chain Max & Erma's Inc. has filed for Chapter 11 bankruptcy protection, listing between $1 million and $10 million in debts.
The hamburger and casual dining chain, which is based in Columbus, Ohio, has about 80 restaurants. It was acquired in April 2008 by G&R Acquisitions, which is based in Pittsburgh.
Documents filed Friday in U.S. Bankruptcy Court in Pittsburgh say Max & Erma's has between 200 and 999 creditors.
Typically, companies file for Chapter 11 protection so they can get temporary relief from creditors while developing a financial reorganization plan.
Sign of the times: it is rumored that the former flagship Marshall Field's in Chicago, now a Macy's, may not be able to afford a Christmas tree this year for the Walnut room.
Restaurant Chain Max & Erma's Files For Bankruptcy
(AP) – 23 hours ago
PITTSBURGH — The restaurant chain Max & Erma's Inc. has filed for Chapter 11 bankruptcy protection, listing between $1 million and $10 million in debts.
The hamburger and casual dining chain, which is based in Columbus, Ohio, has about 80 restaurants. It was acquired in April 2008 by G&R Acquisitions, which is based in Pittsburgh.
Documents filed Friday in U.S. Bankruptcy Court in Pittsburgh say Max & Erma's has between 200 and 999 creditors.
Typically, companies file for Chapter 11 protection so they can get temporary relief from creditors while developing a financial reorganization plan.
Monday, October 26, 2009
Today In Paradise: Monday, October 26th 2009
Lost in the Capmark mania (interesting enough CNBC did not mention Capmark in their first half hour of squawk on the street this morning)is the Fair Point bankruptcy, the largest telecommunications provider in the Northeast: FairPoint phone company files for bankruptcy
DSB's tale of bank runs and bankruptcy should be a warning to the world - don't take for granted the health of your bank. Research thoroughly it's integrity and ability to make it through another downturn. DSB Bank Declared Bankrupt
This week it looks as though we may hit the wall (temporarily on debt) as Clock ticking on debt ceiling: This week Uncle Sam plans to sell $123 billion worth of Treasurys. That will bring the country's debt level very close to the $12.1 trillion debt ceiling.
DSB's tale of bank runs and bankruptcy should be a warning to the world - don't take for granted the health of your bank. Research thoroughly it's integrity and ability to make it through another downturn. DSB Bank Declared Bankrupt
This week it looks as though we may hit the wall (temporarily on debt) as Clock ticking on debt ceiling: This week Uncle Sam plans to sell $123 billion worth of Treasurys. That will bring the country's debt level very close to the $12.1 trillion debt ceiling.
Move Over General Growth
2010, 2011 and 2012 will present huge challenges to the commercial real estate industry. A rolling stone gathers no moss and a rolling loan gathers no loss. The write downs and defaults are being pushed forward...this will no longer be possible in the next few years as the biggest losers destroy commercial lenders' balance sheets and get sent back to the FED.The impact is not limited to the United States. Dubai's Five-Star Ghost Town at the End of 'The World' is a stark reminder that we are not alone.
Deserted Shopping Mall Bleak Symbol of Fed Bailout
By Alister Bull
OKLAHOMA CITY (Reuters) - A $29 billion trail from the Federal Reserve's bailout of Wall Street investment bank Bear Stearns ends in a partially deserted shopping center on a bleak spot on the south side of Oklahoma City.
The Fed now owns the Crossroads Mall, a sprawling shopping complex at the junction of Interstate highways 244 and 35, complete with an oil well pumping crude in the parking lot -- except the Fed does not own the mineral rights.
The Fed finds itself in the unusual situation of being an Oklahoma City landlord after it lent JPMorgan Chase $29 billion to buy Bear Stearns last year.
That money was secured by a portfolio of Bear assets. Crossroads Mall is the only bricks and mortar acquired through bailout. The remaining billions are tied up in invisible securities spread across hundreds, if not thousands, of properties.
It is hard to be precise because the Fed has not published specifics on what it now owns. The only reason that Crossroads Mall has surfaced is that it went into foreclosure in April.
Noah Diggs, who had just successfully concluded a search for work here as a shop assistant, was surprised and somewhat alarmed to learn the U.S. central bank now owned the property.
"That is a bad thing, right?" he said, surveying the empty parking lot on a rainy morning in early October.
Public anger over the bailout of rich Wall Street bankers has evolved into wider opposition toward government intrusion into the private sector, complicating President Barack Obama's efforts to reform financial regulation and healthcare.
The controversial action to save Bear Stearns in March 2008 was defended as less damaging for the U.S. economy than letting it fail. The merit of this argument was underscored in September 2008 when rival investment bank Lehman Brothers foundered, sparking a global financial panic.
READ ENTIRE STORY
Sunday, October 25, 2009
Capmark Bankruptcy Offical
In a move widely anticipated by the financial community now for months, mega commercial lender Capmark has officially filed for bankruptcy. As large as Capmark is, it is relatively small in comparison the larger players in the commercial real estate industry and is the canary in the coal mine for certain turmoil in the industry moving forward.
Commercial loans from the 2004-2007 era typically had a 5 year fuse before refinancing or payment. The most highly leveraged, bubble era transactions took place in 2006 & 2007 (not to downplay the bone headed deals from 2004-2005).
As more loans begin to tick down to repayment and or refinancing, ownership groups are finding that their assets now have negative equity and the balance due on their loans are 10%-60% above the market price of the assets.
Capmark Financial Files for Bankruptcy
By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) -- Capmark Financial Group Inc., one of the largest commercial real-estate lenders in the U.S., said Sunday that it and some of its subsidiaries have filed for bankruptcy protection.
The firm said it has filed motions to allow it to continue to pay vendors and salaries, and that the move "should not impact the way Capmark does business with its customers and partners."
"As of October 23, 2009, Capmark and its filing subsidiaries had in excess of $500 million of cash and cash equivalents ... available to fund its operations," it said in a statement.
The lender added that it "continues to look for appropriate strategic outcomes for certain of its businesses."
The move could add to concern that the commercial real-estate market is struggling as much as the residential side. See earlier story on Capmark.
A group of funds -- composed of Kohlberg Kravis Roberts & Co, Goldman Sachs Group's /quotes/comstock/13*!gs/quotes/nls/gs (GS 180.36, -3.33, -1.81%) Goldman Sachs Capital Partners and Five Mile Capital -- owned 75.4% of Capmark, while GMAC LLC owned 21.3%, and Capmark employees and directors owned most of the remainder, according to a Reuters report citing the bankruptcy filing.
Capmark listed $20.1 billion in assets and $21 billion in liabilities as of June 30 in its Wilmington, Del.-bankruptcy filing, the report said.
Capmark, formerly GMAC's commercial property arm, had recently reported a second-quarter loss of $1.6 billion.
The company said its Capmark Bank unit is not included in the filing, nor are Capmark Investments LP, Capmark Securities Inc. and Capmark's Asian, Indian and European subsidiaries.
Subsidiaries filing for Chapter 11 protection included Capmark Finance Inc., Capmark Capital Inc., Capmark Equity Investments Inc., Mortgage Investments LLC, Net Lease Acquisition LLC, SJM Cap LLC, Capmark Affordable Equity Holdings Inc., Capmark REO Holding LLC, Summit Crest Ventures LLC, Capmark Affordable Equity Inc. and 33 other low-income housing tax credit entities, it said.
Commercial loans from the 2004-2007 era typically had a 5 year fuse before refinancing or payment. The most highly leveraged, bubble era transactions took place in 2006 & 2007 (not to downplay the bone headed deals from 2004-2005).
As more loans begin to tick down to repayment and or refinancing, ownership groups are finding that their assets now have negative equity and the balance due on their loans are 10%-60% above the market price of the assets.
Capmark Financial Files for Bankruptcy
By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) -- Capmark Financial Group Inc., one of the largest commercial real-estate lenders in the U.S., said Sunday that it and some of its subsidiaries have filed for bankruptcy protection.
The firm said it has filed motions to allow it to continue to pay vendors and salaries, and that the move "should not impact the way Capmark does business with its customers and partners."
"As of October 23, 2009, Capmark and its filing subsidiaries had in excess of $500 million of cash and cash equivalents ... available to fund its operations," it said in a statement.
The lender added that it "continues to look for appropriate strategic outcomes for certain of its businesses."
The move could add to concern that the commercial real-estate market is struggling as much as the residential side. See earlier story on Capmark.
A group of funds -- composed of Kohlberg Kravis Roberts & Co, Goldman Sachs Group's /quotes/comstock/13*!gs/quotes/nls/gs (GS 180.36, -3.33, -1.81%) Goldman Sachs Capital Partners and Five Mile Capital -- owned 75.4% of Capmark, while GMAC LLC owned 21.3%, and Capmark employees and directors owned most of the remainder, according to a Reuters report citing the bankruptcy filing.
Capmark listed $20.1 billion in assets and $21 billion in liabilities as of June 30 in its Wilmington, Del.-bankruptcy filing, the report said.
Capmark, formerly GMAC's commercial property arm, had recently reported a second-quarter loss of $1.6 billion.
The company said its Capmark Bank unit is not included in the filing, nor are Capmark Investments LP, Capmark Securities Inc. and Capmark's Asian, Indian and European subsidiaries.
Subsidiaries filing for Chapter 11 protection included Capmark Finance Inc., Capmark Capital Inc., Capmark Equity Investments Inc., Mortgage Investments LLC, Net Lease Acquisition LLC, SJM Cap LLC, Capmark Affordable Equity Holdings Inc., Capmark REO Holding LLC, Summit Crest Ventures LLC, Capmark Affordable Equity Inc. and 33 other low-income housing tax credit entities, it said.
Wednesday, October 21, 2009
Collapse Dead Ahead If Course Not Changed
The same folks that did not see the credit crisis approaching in early 2007 - the same folks that predicted there would be no recession - the same folks that proclaimed the recession over - the same folks that have been wrong every time in the past two years will be unable (or unwilling) to warn us of the issues that still threaten our country and economy on the horizon.
Right now the rogue wave of currency crisis is building steam - we have to fire all engines to avoid it and have our life rafts made of hard assets ready. Most people will dismiss this - to that I say, please review the facts. It costs you nothing to be prepared. It can cost you everything to be uneducated.
Death of 'Soul of Capitalism:' Bogle, Faber, Moore
20 reasons America has lost its soul and collapse is inevitable
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Jack Bogle published "The Battle for the Soul of Capitalism" four years ago. The battle's over. The sequel should be titled: "Capitalism Died a Lost Soul." Worse, we've lost "America's Soul." And worldwide the consequences will be catastrophic.
That's why a man like Hong Kong's contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today."
No, not just another meltdown, another bear market recession like the one recently triggered by Wall Street's "too-greedy-to-fail" banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great "American Economic Empire" for 233 years will collapse, a total disaster, a destiny we created.
OK, deny it. But I'll bet you have a nagging feeling maybe he's right, the end may be near. I have for a long time: I wrote a column back in 1997: "Battling for the Soul of Wall Street." My interest in "The Soul" -- what Jung called the "collective unconscious" -- dates back to my Ph.D. dissertation: "Modern Man in Search of His Soul," a title borrowed from Jung's 1933 book, "Modern Man in Search of a Soul." This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.
Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav's "The Seat of the Soul," Thomas Moore's "Care of the Soul" and sacred texts.
But for Wall Street and American capitalism, use your gut. You know something's very wrong: A year ago "too-greedy-to-fail" banks were insolvent, in a near-death experience. Now, magically they're back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing Federal debt are killing taxpayers.
Yes, Wall Street has lost its moral compass. They created the mess, now, like vultures, they're capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.
Here are the Top 20 reasons American capitalism has lost its soul:
1. Collapse is now inevitable
Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global "wars, massive government-debt defaults, and the impoverishment of large segments of Western society." Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is "inevitable."
When? He hesitates: "But what I don't know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000." But the end is inevitable, a historical imperative.
2. Nobody's planning for a 'Black Swan'
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think "Black Swan" and read evolutionary biologist Jared Diamond's "Collapse: How Societies Choose to Fail or Succeed."
A crisis hits. We act surprised. Shouldn't. But it's too late: "Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power."
Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately "one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions."
Sound familiar? "This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians," thus setting up the "inevitable" collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.
3. Wall Street sacked Washington
Bogle warned of a growing three-part threat -- a "happy conspiracy" -- in "The Battle for the Soul of Capitalism:" "The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised."
But since his book, "Wall Street America" went over to the dark side, got mega-greedy and took control of "Washington America." Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.
Who's in power? Irrelevant. The "happy conspiracy" controls both parties, writes the laws to suit its needs, with absolute control of America's fiscal and monetary policies. Sorry Jack, but the "Battle for the Soul of Capitalism" really was lost.
4. When greed was legalized
Go see Michael Moore's documentary, "Capitalism: A Love Story." "Disaster Capitalism" author Naomi Klein recently interviewed Moore in The Nation magazine: "Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don't put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control."
Greed's OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: "Capitalism does the opposite of that. It not only doesn't really put any structure or restrictions on it. It encourages it, it rewards" greed, creating bigger, more frequent bubble/bust cycles.
It happens because capitalism is now in "the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets." Yes, greed was legalized in America, with Wall Street running Washington.
5. Triggering the end of our 'life cycle'
Like Diamond, Faber also sees the historical imperative: "Every successful society" grows "out of some kind of challenge." Today, the "life cycle" of capitalism is on the decline.
He asks himself: "How are you so sure about this final collapse?" The answer: "Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline." Success makes us our own worst enemy.
Quoting 18th century Scottish historian Alexander Fraser Tytler: "The average life span of the world's greatest civilizations has been 200 years" progressing from "bondage to spiritual faith ... to great courage ... to liberty ... to abundance ... to selfishness ... to complacency ... to apathy ... to dependence and ... back into bondage!"
Where is America in the cycle? "It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical 'society cycle.' ... The U.S. is somewhere between the phase where it moves 'from complacency to apathy' and 'from apathy to dependence.'"
In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.
15 more clues capitalism lost its soul ... is a disaster waiting to happen
Much more evidence litters the battlefield:
1.
Wall Street wealth now calls the shots in Congress, the White House
2.
America's top 1% own more than 90% of America's wealth
3.
The average worker's income has declined in three decades while CEO compensation exploded over ten times
4.
The Fed is now the 'fourth branch of government' operating autonomously, secretly printing money at will
5.
Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6.
Bill Gross warns of a "new normal" with slow growth, low earnings and stock prices
7.
While the White House's chief economist retorts with hype of a recovery unimpeded by the "new normal"
8.
Wall Street's high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9.
401(k)s have lost 26.7% of their value in the past decade
10.
Oil and energy costs will skyrocket
11.
Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world's reserve currency
12.
In two years federal debt exploded from $11.2 to $23.7 trillion
13.
New financial reforms will do little to prevent the next meltdown
14.
The "forever war" between Western and Islamic fundamentalists will widen
15.
As will environmental threats and unfunded entitlements
"America Capitalism" is a "Lost Soul" ... we've lost our moral compass ... the coming collapse is the end of an "inevitable" historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.
Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The "Great Depression 2" is dead ahead. Unfortunately, there's absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.
Right now the rogue wave of currency crisis is building steam - we have to fire all engines to avoid it and have our life rafts made of hard assets ready. Most people will dismiss this - to that I say, please review the facts. It costs you nothing to be prepared. It can cost you everything to be uneducated.
Death of 'Soul of Capitalism:' Bogle, Faber, Moore
20 reasons America has lost its soul and collapse is inevitable
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Jack Bogle published "The Battle for the Soul of Capitalism" four years ago. The battle's over. The sequel should be titled: "Capitalism Died a Lost Soul." Worse, we've lost "America's Soul." And worldwide the consequences will be catastrophic.
That's why a man like Hong Kong's contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: "The future will be a total disaster, with a collapse of our capitalistic system as we know it today."
No, not just another meltdown, another bear market recession like the one recently triggered by Wall Street's "too-greedy-to-fail" banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great "American Economic Empire" for 233 years will collapse, a total disaster, a destiny we created.
OK, deny it. But I'll bet you have a nagging feeling maybe he's right, the end may be near. I have for a long time: I wrote a column back in 1997: "Battling for the Soul of Wall Street." My interest in "The Soul" -- what Jung called the "collective unconscious" -- dates back to my Ph.D. dissertation: "Modern Man in Search of His Soul," a title borrowed from Jung's 1933 book, "Modern Man in Search of a Soul." This battle has been on my mind since my days at Morgan Stanley 30 years ago, witnessing the decline.
Has capitalism lost its soul? Guys like Bogle and Faber sense it. Read more about the soul in physicist Gary Zukav's "The Seat of the Soul," Thomas Moore's "Care of the Soul" and sacred texts.
But for Wall Street and American capitalism, use your gut. You know something's very wrong: A year ago "too-greedy-to-fail" banks were insolvent, in a near-death experience. Now, magically they're back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing Federal debt are killing taxpayers.
Yes, Wall Street has lost its moral compass. They created the mess, now, like vultures, they're capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.
Here are the Top 20 reasons American capitalism has lost its soul:
1. Collapse is now inevitable
Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global "wars, massive government-debt defaults, and the impoverishment of large segments of Western society." Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is "inevitable."
When? He hesitates: "But what I don't know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000." But the end is inevitable, a historical imperative.
2. Nobody's planning for a 'Black Swan'
While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think "Black Swan" and read evolutionary biologist Jared Diamond's "Collapse: How Societies Choose to Fail or Succeed."
A crisis hits. We act surprised. Shouldn't. But it's too late: "Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power."
Warnings are everywhere. Why not prepare? Why sabotage our power, our future? Why set up an entire nation to fail? Diamond says: Unfortunately "one of the choices has depended on the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions."
Sound familiar? "This type of decision-making is the opposite of the short-term reactive decision-making that too often characterizes our elected politicians," thus setting up the "inevitable" collapse. Remember, Greenspan, Bernanke, Bush, Paulson all missed the 2007-8 meltdown: It will happen again, in a bigger crisis.
3. Wall Street sacked Washington
Bogle warned of a growing three-part threat -- a "happy conspiracy" -- in "The Battle for the Soul of Capitalism:" "The business and ethical standards of corporate America, of investment America, and of mutual fund America have been gravely compromised."
But since his book, "Wall Street America" went over to the dark side, got mega-greedy and took control of "Washington America." Their spoils of war included bailouts, bankruptcies, stimulus, nationalizations and $23.7 trillion new debt off-loaded to the Treasury, Fed and American people.
Who's in power? Irrelevant. The "happy conspiracy" controls both parties, writes the laws to suit its needs, with absolute control of America's fiscal and monetary policies. Sorry Jack, but the "Battle for the Soul of Capitalism" really was lost.
4. When greed was legalized
Go see Michael Moore's documentary, "Capitalism: A Love Story." "Disaster Capitalism" author Naomi Klein recently interviewed Moore in The Nation magazine: "Capitalism is the legalization of this greed. Greed has been with human beings forever. We have a number of things in our species that you would call the dark side, and greed is one of them. If you don't put certain structures in place or restrictions on those parts of our being that come from that dark place, then it gets out of control."
Greed's OK, within limits, like the 10 Commandments. Yes, the soul can thrive around greed, if there are structures and restrictions to keep it from going out of control. But Moore warns: "Capitalism does the opposite of that. It not only doesn't really put any structure or restrictions on it. It encourages it, it rewards" greed, creating bigger, more frequent bubble/bust cycles.
It happens because capitalism is now in "the hands of people whose only concern is their fiduciary responsibility to their shareholders or to their own pockets." Yes, greed was legalized in America, with Wall Street running Washington.
5. Triggering the end of our 'life cycle'
Like Diamond, Faber also sees the historical imperative: "Every successful society" grows "out of some kind of challenge." Today, the "life cycle" of capitalism is on the decline.
He asks himself: "How are you so sure about this final collapse?" The answer: "Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline." Success makes us our own worst enemy.
Quoting 18th century Scottish historian Alexander Fraser Tytler: "The average life span of the world's greatest civilizations has been 200 years" progressing from "bondage to spiritual faith ... to great courage ... to liberty ... to abundance ... to selfishness ... to complacency ... to apathy ... to dependence and ... back into bondage!"
Where is America in the cycle? "It is most unlikely that Western societies, and especially the U.S., will be an exception to this typical 'society cycle.' ... The U.S. is somewhere between the phase where it moves 'from complacency to apathy' and 'from apathy to dependence.'"
In short, America is a grumpy old man with hardening of the arteries. Our capitalism is near the tipping point, unprepared for a catastrophe, set up for collapse and rapid decline.
15 more clues capitalism lost its soul ... is a disaster waiting to happen
Much more evidence litters the battlefield:
1.
Wall Street wealth now calls the shots in Congress, the White House
2.
America's top 1% own more than 90% of America's wealth
3.
The average worker's income has declined in three decades while CEO compensation exploded over ten times
4.
The Fed is now the 'fourth branch of government' operating autonomously, secretly printing money at will
5.
Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6.
Bill Gross warns of a "new normal" with slow growth, low earnings and stock prices
7.
While the White House's chief economist retorts with hype of a recovery unimpeded by the "new normal"
8.
Wall Street's high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9.
401(k)s have lost 26.7% of their value in the past decade
10.
Oil and energy costs will skyrocket
11.
Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world's reserve currency
12.
In two years federal debt exploded from $11.2 to $23.7 trillion
13.
New financial reforms will do little to prevent the next meltdown
14.
The "forever war" between Western and Islamic fundamentalists will widen
15.
As will environmental threats and unfunded entitlements
"America Capitalism" is a "Lost Soul" ... we've lost our moral compass ... the coming collapse is the end of an "inevitable" historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.
Faber is uncertain about timing, we are not. There is a high probability of a crisis and collapse by 2012. The "Great Depression 2" is dead ahead. Unfortunately, there's absolutely nothing you can do to hide from this unfolding reality or prevent the rush of the historical imperative.
Tuesday, October 13, 2009
What Is Peace? No More War
Before Eisenhower, the champion of the anti military-industrial complex was General Smedley Butler - "a man among men" according to Eisenhower. Little known to many, he alleged that industrialists had approached him to lead a coup to overthrow the United States in the 1930s until he blew the whistle to Congress. He described his role below:
"I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents."
The never ending wars in Iraq, Afghanistan and Pakistan have killed millions of civilians - not to mention the toll on the American military and how they have effectively bankrupted the United States of America. With this culture of war we live in today, it has been estimated that more than half of all engineers work in some capacity for the federal government (in large part in support of these conflicts). This crowds out capital (both real and mental) and deprives the private sector of much needed brainpower to create useful, innovative businesses and products. Why are there military bases in 130 countries? Who is profiting from these wars?
Capmark Capsized?
Here we go again...CIT won't be lonely
Capmark Financial Bankruptcy Due Soon: Source
NEW YORK (Reuters) - Capmark Financial Group Inc., the commercial real estate company created through a 2006 leveraged buyout of certain GMAC assets, is preparing to file for bankruptcy possibly by the end of next week, according to a source with direct knowledge of the situation.
The company, which owns a bank that will continue to operate while it is in court, is in negotiations with lenders, bondholders and the Federal Deposit Insurance Company that will result in a filing by the end of October at the latest, the source said.
They are working on details of a debt-for-equity swap that will take place to bring the company back out of bankruptcy, he said. It is not certain how long the court process could take.
Capmark was not immediately available for comment.
Last month, Capmark said it may file for Chapter 11 bankruptcy protection after soured loans left it with a $1.62 billion second-quarter loss. It said stockholders had negative equity of $1.14 billion as of June 30.
Capmark, which has been in debt restructuring talks for many months, is being pushed to bankruptcy court by a deterioration in the commercial real estate market and its outlook over the last three months, the source said.
Kohlberg Kravis Roberts & Co KKR.UL, Goldman Sachs Group (GS.N) and Five Mile Capital, which bought Capmark in March 2006 for $1.5 billion in cash plus more than $7 billion in debt at the peak of the housing market, will not receive payment through the bankruptcy.
The source said the company will belong to its creditor group, which is made up of more than 50 banks and more than 50 hedge funds among others. The lead banks are Citigroup's (C.N) Citibank and JPMorgan Chase (JPM.N).
They are negotiating a pre-arranged bankruptcy, for which Capmark needs approval from two-thirds of their creditors. But Capmark will file this month even if it does not get that support to meet the terms of a $490 million asset sale to a group including Warren Buffett, the source said.
Capmark agreed to sell its loan servicing and mortgage business to Berkshire Hathaway (BRKa.N) and Leucadia National (LUK.N) for $490 million. In that September 2 agreement, Capmark purchased a contract, or put, for $40 million giving it the right to sell them the business. That put expires within 60 days - around November 2 - unless the company files for bankruptcy.
In bankruptcy, Buffett's group will essentially be the "stalking horse" setting the floor in a so-called "363" asset sale bidding for the assets, and the put is extended.
It will use the funds from that sale to help shore up Capmark Bank, which is based in Utah and has about $10 billion in assets, the source said. The company has already added about $900 million in capital to the bank.
After emerging from bankruptcy, Capmark will likely be wound down during five or more years as the owners wait for a better market to sell most of the assets, the source said.
The filing will be another red mark for General Motors', which was in bankruptcy court itself earlier this year. It opened GMAC - known as the General Motors Acceptance Corporation - to do auto financing - but expanded into both commercial and residential real estate over the years.
Capmark, based in Horsham, Pennsylvania, has three main commercial real estate businesses: lending and mortgage banking, investments and funds management and servicing. It had more than $288 billion in commercial real estate loans as of June 30.
Read More Here
Capmark Financial Bankruptcy Due Soon: Source
NEW YORK (Reuters) - Capmark Financial Group Inc., the commercial real estate company created through a 2006 leveraged buyout of certain GMAC assets, is preparing to file for bankruptcy possibly by the end of next week, according to a source with direct knowledge of the situation.
The company, which owns a bank that will continue to operate while it is in court, is in negotiations with lenders, bondholders and the Federal Deposit Insurance Company that will result in a filing by the end of October at the latest, the source said.
They are working on details of a debt-for-equity swap that will take place to bring the company back out of bankruptcy, he said. It is not certain how long the court process could take.
Capmark was not immediately available for comment.
Last month, Capmark said it may file for Chapter 11 bankruptcy protection after soured loans left it with a $1.62 billion second-quarter loss. It said stockholders had negative equity of $1.14 billion as of June 30.
Capmark, which has been in debt restructuring talks for many months, is being pushed to bankruptcy court by a deterioration in the commercial real estate market and its outlook over the last three months, the source said.
Kohlberg Kravis Roberts & Co KKR.UL, Goldman Sachs Group (GS.N) and Five Mile Capital, which bought Capmark in March 2006 for $1.5 billion in cash plus more than $7 billion in debt at the peak of the housing market, will not receive payment through the bankruptcy.
The source said the company will belong to its creditor group, which is made up of more than 50 banks and more than 50 hedge funds among others. The lead banks are Citigroup's (C.N) Citibank and JPMorgan Chase (JPM.N).
They are negotiating a pre-arranged bankruptcy, for which Capmark needs approval from two-thirds of their creditors. But Capmark will file this month even if it does not get that support to meet the terms of a $490 million asset sale to a group including Warren Buffett, the source said.
Capmark agreed to sell its loan servicing and mortgage business to Berkshire Hathaway (BRKa.N) and Leucadia National (LUK.N) for $490 million. In that September 2 agreement, Capmark purchased a contract, or put, for $40 million giving it the right to sell them the business. That put expires within 60 days - around November 2 - unless the company files for bankruptcy.
In bankruptcy, Buffett's group will essentially be the "stalking horse" setting the floor in a so-called "363" asset sale bidding for the assets, and the put is extended.
It will use the funds from that sale to help shore up Capmark Bank, which is based in Utah and has about $10 billion in assets, the source said. The company has already added about $900 million in capital to the bank.
After emerging from bankruptcy, Capmark will likely be wound down during five or more years as the owners wait for a better market to sell most of the assets, the source said.
The filing will be another red mark for General Motors', which was in bankruptcy court itself earlier this year. It opened GMAC - known as the General Motors Acceptance Corporation - to do auto financing - but expanded into both commercial and residential real estate over the years.
Capmark, based in Horsham, Pennsylvania, has three main commercial real estate businesses: lending and mortgage banking, investments and funds management and servicing. It had more than $288 billion in commercial real estate loans as of June 30.
Read More Here
Martin Armstrong on National Debt
In Armstrong's latest "A Three Year Old With a Pocket Calculator Can Figure Out We are Screwed" he points out that:
If we just add up the total interest payments the government made from 1986 to 2006, it amounts to $6,141.1 billion. Now let's do simple math:
2006...$8,507.0
1986...$2,125.3
_______________
Total: $6,381.7
Interest: - $6,141.1
Rise in Debt: $240.6 billion
Has anyone noticed that the increase in national debt from 1986 has been in fact caused by interest rates and that the interest was in fact 96.2% of the total national debt rise in the 20 year period? Am I the only person that even sees this as a huge problem? We are spinning our wheels and we are going down with the ship faster than anyone seems to notice."
With the exponential increase in the national debt, the interest payments will become unsustainable in the next several years and we will face the very real possibility of default on debt and devaluation if not all out currency collapse.
What is your gameplan? How are you going to make it through food shortages, fuel shortages and pharmaceutical shortages? Bank closures...purchasing power collapses?
These are not pleasant thoughts but ones we need to consider and quickly. Hopefully none of this comes to pass. Don't be caught without a plan.
If we just add up the total interest payments the government made from 1986 to 2006, it amounts to $6,141.1 billion. Now let's do simple math:
2006...$8,507.0
1986...$2,125.3
_______________
Total: $6,381.7
Interest: - $6,141.1
Rise in Debt: $240.6 billion
Has anyone noticed that the increase in national debt from 1986 has been in fact caused by interest rates and that the interest was in fact 96.2% of the total national debt rise in the 20 year period? Am I the only person that even sees this as a huge problem? We are spinning our wheels and we are going down with the ship faster than anyone seems to notice."
With the exponential increase in the national debt, the interest payments will become unsustainable in the next several years and we will face the very real possibility of default on debt and devaluation if not all out currency collapse.
What is your gameplan? How are you going to make it through food shortages, fuel shortages and pharmaceutical shortages? Bank closures...purchasing power collapses?
These are not pleasant thoughts but ones we need to consider and quickly. Hopefully none of this comes to pass. Don't be caught without a plan.
Back to the Future with Jim Rogers
Nothing new here but reinforcement to our strategies. Ignore this advice at your own risk. Those not invested in gold and silver or related assets may run the risk of losing a substantial part of their wealth in the future.
Jim Rogers on the Next 10 Years
By Heather Bell
I’m moving to China … possibly to live in a bunker. At least that was my inclination after listening to a presentation by Jim Rogers Thursday.
Now don’t get me wrong―Mr. Commodities wasn’t all doom and gloom. In fact, his talk was both informative and highly entertaining. But Rogers doesn’t sugarcoat things―he’s very matter-of-fact about his concerns and projections for the future. And most of them don’t bode well for the U.S.
I’ll be posting an interview with Jim Rogers on the site in the coming week, but for now, I just wanted to offer some highlights from his speech at ETF Securities' mini-conference and the Q&A that followed.
1. The 21st century belongs to China
According to Rogers, the 19th century was the era of the British Empire and the 20th century was the U.S.’ heyday. But the 21st century is China’s (though the rest of Asia is definitely going to get a boost too).
The reasons for this are many, but some points brought up by Rogers include the following:
1. The Chinese want to live like we do;
2. They are more eager to work;
3. They are better at saving;
4. There are 1.5 billion Chinese citizens (and 3 billion people in all of Asia), and we owe them money. They are, according to Rogers, “among the best capitalists in the world.”
There will be some setbacks, of course, Rogers says, but these are opportunities. “If you see setbacks in China, you should pick up the phone and get more involved,” he advised, before adding his favorite refrain, “The best advice of any kind that I can give you is to teach your children and grandchildren Chinese.”
China’s path to world domination started with Deng Xiaoping’s capitalist programs in 1978, and there hasn’t been any looking back since. Rogers views China’s dominance as nigh-on unstoppable except for one little thing: its water problem. There are parts of the country that are running out of water, and when the water disappears, Rogers points out, so does civilization. However, the country is acting aggressively to combat the problem, and he doesn’t view it as that much of a threat.
2a. Jim Rogers is not a Ben Bernanke fan
Yep, it’s a fact. No “Team Bernanke” shirts for Jim Rogers (who said to scattered applause during the Q&A session that if he was in charge of the U.S. economy he would “abolish the Fed and resign.”).
Rogers is appalled by the government’s actions—Bernanke’s in particular. The U.S. government’s strategy calls for the debasement of the dollar, he says, calling it a “horrible policy.” While he concedes it can work in the short term, it NEVER works in the mid- or long term.
“He’s going to run those printing presses until we run out of trees, because that’s the only thing he knows,” Rogers said of Bernanke.
Add that on top of the country’s rapidly growing astronomical debt, and Rogers believes you’ve got a recipe for disaster.
2b. The U.S. dollar is screwed
Consider this a corollary to point 2a. Its status as a reserve currency is teetering on a precipice, in Rogers’ opinion, and he’s not alone. In fact, so many people are selling dollars right now that he’s sitting tight, waiting for a possible—and ultimately unsustainable—rally in order to exit the market. Of course, if it fails to rally and just drops again …
“I’ll just have to panic and sell like everyone else,” Rogers said.
3. Commodities, commodities, commodities
OK, as mentioned before, there are 3 billion people in Asia, most of whom are aspiring to play the home version of the American Dream game show. And let’s face it: American society is largely about consumption. We like stuff―we buy it, we wear it, we eat it, we flaunt it, we sometimes even bedazzle it (yeah, Google that). So that’s a lot more consumption on the global level. Rogers notes that while consumption is expected to increase exponentially, not a lot of capacity has been added in the last few decades for a lot of commodities. Meaning, not a lot of new refineries have been built, and not a lot of new resources have been discovered or excavated for a variety of commodities.
In terms of oil, Rogers cites the fact that Saudi Arabia has not seen any new oil discoveries but has consistently said for the past two decades that its reserves are at 260 billion barrels (in which time it has sold 60 billion barrels). He also points out that farmers are a rapidly disappearing species. So to sum up―that’s a lot more people competing for diminishing resources (including the all-important energy and food). Basic supply and demand theory pretty much takes it from there.
“Commodities are the second-largest asset class in the world,” Rogers noted. And they are “the best anchor” for your portfolio, he adds.
Rogers says the typical life span of a commodities bull market is 18-20 years. We’re currently in year 11 right now. Yeah, it could end tomorrow, but that whole supply and demand imperative could also extend this bull beyond its typical time frame.
During the Q&A session, though, the conversation took a darker turn. One questioner asked if the increased competition for resources might lead to war, and Rogers allowed it was a possibility, though he hoped it would not come to that. He pointed out that when a rising power clashes with an established power, the result is usually war, and said that research consistently shows that resource shortages lead to war.
So, sure, commodities shortages might start World War III, but if you invest in the commodities themselves, you might at least be in decent financial shape when the shelling stops—and I’m not being flippant at all. War drives up the costs of commodities.
4. U.S. government bonds are the next big bubble
Well, would you lend money to us? Rogers says short-term bonds are probably OK, but he advises getting out of anything with a longer maturity. He calls it “inconceivable” that anyone would lend money to the U.S. for 30 years at the going rate, and notes that the U.S. was a creditor nation as recently as 1987.
“Now the U.S. is the largest debtor nation in the history of the world,” he said.
And for bond portfolio managers, he had some very pointed advice: “Get a new job.”
5. Protect yourself
The underlying theme of Rogers’ entire speech was that the world is changing, and here are some things you should know if you want to come out the better for it (and for your family members, clients, etc., to also come out the better for it) financially. Based on Rogers’ observations, it seems recognizing that change is a key step, but so is adapting to it (see advice regarding learning Mandarin, for example).
And in Rogers’ eyes, commodities are a good way to achieve this protection. No investment is certain of course, but right now, he thinks commodities look pretty darn good.
Best Comment Of The Night
Addressing one audience member’s question, Rogers asked if the young man were an MBA. The questioner admitted to holding an MBA and was promptly told he should swap his MBA for an agriculture degree from Texas A&M.
“You should become a farmer,” Rogers said.
That’s an old line for Rogers, but he added a new wrinkle. If you’re not going to become a farmer, you should open the first Lamborghini dealership in Iowa. Because with farmers closing in on extinction just as the world needs more food, that’s probably what they’ll be driving in a few years.
Jim Rogers on the Next 10 Years
By Heather Bell
I’m moving to China … possibly to live in a bunker. At least that was my inclination after listening to a presentation by Jim Rogers Thursday.
Now don’t get me wrong―Mr. Commodities wasn’t all doom and gloom. In fact, his talk was both informative and highly entertaining. But Rogers doesn’t sugarcoat things―he’s very matter-of-fact about his concerns and projections for the future. And most of them don’t bode well for the U.S.
I’ll be posting an interview with Jim Rogers on the site in the coming week, but for now, I just wanted to offer some highlights from his speech at ETF Securities' mini-conference and the Q&A that followed.
1. The 21st century belongs to China
According to Rogers, the 19th century was the era of the British Empire and the 20th century was the U.S.’ heyday. But the 21st century is China’s (though the rest of Asia is definitely going to get a boost too).
The reasons for this are many, but some points brought up by Rogers include the following:
1. The Chinese want to live like we do;
2. They are more eager to work;
3. They are better at saving;
4. There are 1.5 billion Chinese citizens (and 3 billion people in all of Asia), and we owe them money. They are, according to Rogers, “among the best capitalists in the world.”
There will be some setbacks, of course, Rogers says, but these are opportunities. “If you see setbacks in China, you should pick up the phone and get more involved,” he advised, before adding his favorite refrain, “The best advice of any kind that I can give you is to teach your children and grandchildren Chinese.”
China’s path to world domination started with Deng Xiaoping’s capitalist programs in 1978, and there hasn’t been any looking back since. Rogers views China’s dominance as nigh-on unstoppable except for one little thing: its water problem. There are parts of the country that are running out of water, and when the water disappears, Rogers points out, so does civilization. However, the country is acting aggressively to combat the problem, and he doesn’t view it as that much of a threat.
2a. Jim Rogers is not a Ben Bernanke fan
Yep, it’s a fact. No “Team Bernanke” shirts for Jim Rogers (who said to scattered applause during the Q&A session that if he was in charge of the U.S. economy he would “abolish the Fed and resign.”).
Rogers is appalled by the government’s actions—Bernanke’s in particular. The U.S. government’s strategy calls for the debasement of the dollar, he says, calling it a “horrible policy.” While he concedes it can work in the short term, it NEVER works in the mid- or long term.
“He’s going to run those printing presses until we run out of trees, because that’s the only thing he knows,” Rogers said of Bernanke.
Add that on top of the country’s rapidly growing astronomical debt, and Rogers believes you’ve got a recipe for disaster.
2b. The U.S. dollar is screwed
Consider this a corollary to point 2a. Its status as a reserve currency is teetering on a precipice, in Rogers’ opinion, and he’s not alone. In fact, so many people are selling dollars right now that he’s sitting tight, waiting for a possible—and ultimately unsustainable—rally in order to exit the market. Of course, if it fails to rally and just drops again …
“I’ll just have to panic and sell like everyone else,” Rogers said.
3. Commodities, commodities, commodities
OK, as mentioned before, there are 3 billion people in Asia, most of whom are aspiring to play the home version of the American Dream game show. And let’s face it: American society is largely about consumption. We like stuff―we buy it, we wear it, we eat it, we flaunt it, we sometimes even bedazzle it (yeah, Google that). So that’s a lot more consumption on the global level. Rogers notes that while consumption is expected to increase exponentially, not a lot of capacity has been added in the last few decades for a lot of commodities. Meaning, not a lot of new refineries have been built, and not a lot of new resources have been discovered or excavated for a variety of commodities.
In terms of oil, Rogers cites the fact that Saudi Arabia has not seen any new oil discoveries but has consistently said for the past two decades that its reserves are at 260 billion barrels (in which time it has sold 60 billion barrels). He also points out that farmers are a rapidly disappearing species. So to sum up―that’s a lot more people competing for diminishing resources (including the all-important energy and food). Basic supply and demand theory pretty much takes it from there.
“Commodities are the second-largest asset class in the world,” Rogers noted. And they are “the best anchor” for your portfolio, he adds.
Rogers says the typical life span of a commodities bull market is 18-20 years. We’re currently in year 11 right now. Yeah, it could end tomorrow, but that whole supply and demand imperative could also extend this bull beyond its typical time frame.
During the Q&A session, though, the conversation took a darker turn. One questioner asked if the increased competition for resources might lead to war, and Rogers allowed it was a possibility, though he hoped it would not come to that. He pointed out that when a rising power clashes with an established power, the result is usually war, and said that research consistently shows that resource shortages lead to war.
So, sure, commodities shortages might start World War III, but if you invest in the commodities themselves, you might at least be in decent financial shape when the shelling stops—and I’m not being flippant at all. War drives up the costs of commodities.
4. U.S. government bonds are the next big bubble
Well, would you lend money to us? Rogers says short-term bonds are probably OK, but he advises getting out of anything with a longer maturity. He calls it “inconceivable” that anyone would lend money to the U.S. for 30 years at the going rate, and notes that the U.S. was a creditor nation as recently as 1987.
“Now the U.S. is the largest debtor nation in the history of the world,” he said.
And for bond portfolio managers, he had some very pointed advice: “Get a new job.”
5. Protect yourself
The underlying theme of Rogers’ entire speech was that the world is changing, and here are some things you should know if you want to come out the better for it (and for your family members, clients, etc., to also come out the better for it) financially. Based on Rogers’ observations, it seems recognizing that change is a key step, but so is adapting to it (see advice regarding learning Mandarin, for example).
And in Rogers’ eyes, commodities are a good way to achieve this protection. No investment is certain of course, but right now, he thinks commodities look pretty darn good.
Best Comment Of The Night
Addressing one audience member’s question, Rogers asked if the young man were an MBA. The questioner admitted to holding an MBA and was promptly told he should swap his MBA for an agriculture degree from Texas A&M.
“You should become a farmer,” Rogers said.
That’s an old line for Rogers, but he added a new wrinkle. If you’re not going to become a farmer, you should open the first Lamborghini dealership in Iowa. Because with farmers closing in on extinction just as the world needs more food, that’s probably what they’ll be driving in a few years.
Sunday, October 11, 2009
Thursday, October 8, 2009
Rate Increase in California Prelude to more?
This is a big deal a prelude to national interest rate increases which will be fought tooth and nail by the financial industry. Keep rates low to keep the zombie industry alive and suffer the consequences of carry trade, precious metal stampedes and price/supply shocks. Raise the rate and send the economy into a potential deflationary spiral and potential collapse as paying back the debt becomes impossible.
Very tough situation indeed for the US Economy and the world.
California Raises Yield, Cuts Amount to Draw Bond Buyers
State paid more than a company to sell taxable portion
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- California on Thursday increased the yield offered to investors on its tax-exempt and taxable bonds and had to reduce the amount of taxable debt to entice enough investors to buy the securities, a multibillion-dollar debt sale that analysts had expected to go smoothly.
Bond traders said the state offered tax-exempt 20-year general-obligation bonds at 5%, up from 4.63% on Tuesday.
On Thursday, the amount of tax-exempt debt remained at $1.3 billion, while the amount of taxable debt was cut to $2.825 billion, down from its original plan to sell $3.2 billion.
Even with a higher yield, investors know that the Golden State's budget problems probably mean more debt issuance in the near future, potentially on better terms.
"This was not good enough to make us jump up and down," said Matt Buscone, a portfolio manager at Breckinridge Capital Advisors, which manages more than $10 billion. The yield levels are "fair," he said, adding: "We'll be able to do it again so we'll take a pass at this sale."
He said the firm bought California general-obligation bonds at its last sale in the spring, when long-term yields stood around 6%.
After two days of orders from retail buyers, the office of California Treasurer Bill Lockyer said it took orders from retail buyers for 33% of the tax-exempt portion and 31% of the taxable debt offered to individual investors, less than half the proportion taken at the state's short-term note sale last month.
At California's sale last month of revenue-anticipation notes, which mature in less than a year, the state said that it received orders for more debt than was sold and that about 75% of the issue went to retail buyers.
California has the lowest credit ratings in the U.S. on its long-term debt, with its $75 billion in tax-supported debt rated Baa1 by Moody's Investors Service, BBB by Fitch Ratings and A by Standard & Poor's.
With lingering concerns about the state's budget and with other opportunities available in municipal bonds, "I don't know if institutional buyers will be willing to pay up at these levels," said Domenic Vonella, a municipal-bond analyst at Thomson Reuters.
Taxable bonds
At the same time, the state sold taxable bonds in the form of federally-subsidized Build America Bonds that have been extremely popular for both issuers and investors since the program was created in February.
The $1.75 billion in 30-year bonds were offered at a yield that is 3.25 percentage points over comparable Treasurys /quotes/comstock/31*!ust30y (UST30Y 4.08, +0.07, +1.85%) , the higher end of what was anticipated, according to Informa Global Markets. That put the yield around 7.23%.
Last week, the state's Build America Bonds were trading at a spread of 2.65 points. A bigger gap indicates investors are demanding a better yield in return for taking on the risk of holding the debt.
That compares to the average spread for comparable corporate debt of 2.31 percentage points, according to an index compiled by Bank of America's Merrill Lynch unit.
Still, the spread the state had to pay is an improvement from when the state sold the Build America Bonds, for about 3.65 points above comparable Treasurys.
California also declined to issue 15-year debt as part of the deal, and cut in half the amount of 4-year notes to $125 million, according to Informa, which indicates less demand for those maturities.
The rest of the taxable sale was comprised of $250 million in 5-year debt at 4.635% and $700 million in 10-year securities with a yield of about 6.057%
Very tough situation indeed for the US Economy and the world.
California Raises Yield, Cuts Amount to Draw Bond Buyers
State paid more than a company to sell taxable portion
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- California on Thursday increased the yield offered to investors on its tax-exempt and taxable bonds and had to reduce the amount of taxable debt to entice enough investors to buy the securities, a multibillion-dollar debt sale that analysts had expected to go smoothly.
Bond traders said the state offered tax-exempt 20-year general-obligation bonds at 5%, up from 4.63% on Tuesday.
On Thursday, the amount of tax-exempt debt remained at $1.3 billion, while the amount of taxable debt was cut to $2.825 billion, down from its original plan to sell $3.2 billion.
Even with a higher yield, investors know that the Golden State's budget problems probably mean more debt issuance in the near future, potentially on better terms.
"This was not good enough to make us jump up and down," said Matt Buscone, a portfolio manager at Breckinridge Capital Advisors, which manages more than $10 billion. The yield levels are "fair," he said, adding: "We'll be able to do it again so we'll take a pass at this sale."
He said the firm bought California general-obligation bonds at its last sale in the spring, when long-term yields stood around 6%.
After two days of orders from retail buyers, the office of California Treasurer Bill Lockyer said it took orders from retail buyers for 33% of the tax-exempt portion and 31% of the taxable debt offered to individual investors, less than half the proportion taken at the state's short-term note sale last month.
At California's sale last month of revenue-anticipation notes, which mature in less than a year, the state said that it received orders for more debt than was sold and that about 75% of the issue went to retail buyers.
California has the lowest credit ratings in the U.S. on its long-term debt, with its $75 billion in tax-supported debt rated Baa1 by Moody's Investors Service, BBB by Fitch Ratings and A by Standard & Poor's.
With lingering concerns about the state's budget and with other opportunities available in municipal bonds, "I don't know if institutional buyers will be willing to pay up at these levels," said Domenic Vonella, a municipal-bond analyst at Thomson Reuters.
Taxable bonds
At the same time, the state sold taxable bonds in the form of federally-subsidized Build America Bonds that have been extremely popular for both issuers and investors since the program was created in February.
The $1.75 billion in 30-year bonds were offered at a yield that is 3.25 percentage points over comparable Treasurys /quotes/comstock/31*!ust30y (UST30Y 4.08, +0.07, +1.85%) , the higher end of what was anticipated, according to Informa Global Markets. That put the yield around 7.23%.
Last week, the state's Build America Bonds were trading at a spread of 2.65 points. A bigger gap indicates investors are demanding a better yield in return for taking on the risk of holding the debt.
That compares to the average spread for comparable corporate debt of 2.31 percentage points, according to an index compiled by Bank of America's Merrill Lynch unit.
Still, the spread the state had to pay is an improvement from when the state sold the Build America Bonds, for about 3.65 points above comparable Treasurys.
California also declined to issue 15-year debt as part of the deal, and cut in half the amount of 4-year notes to $125 million, according to Informa, which indicates less demand for those maturities.
The rest of the taxable sale was comprised of $250 million in 5-year debt at 4.635% and $700 million in 10-year securities with a yield of about 6.057%
Gold Still Long Way From Highs
The myopic, brain washed and brain dead understanding of currency and inflation prevents the media from understanding that gold is nowhere NEAR record highs in real terms. Taking inflationary forces into account, gold is less than 50% of it's real high of $2,358.04 Gold (Inflation Adjusted)is one of the better charts we have seen.
TRANSLATION: Get it while it lasts because $2,300 is for starters if there is a currency devaluation or collapse.
NOTE: Don't waste your time if you are trying to make a quick buck. There will be volatility. Gold is a play for insurance, stability and maintaining your wealth. There are no get rich quick schemes and wealth is only created through hard work.
When we say gold, also consider silver and to a lesser extent platinum and palladium.
Gold Taps Fresh Record Above $1,050
Copper contract scores major percentage gain
By Moming Zhou & Myra P. Saefong, MarketWatch
NEW YORK (MarketWatch) -- Gold futures climbed above $1,050 an ounce Thursday, marking a fresh record high for the third session in a row, as investment demand continued to rise and as the dollar weakened once more.
The gains come on the heels of what's been a four-session winning streak for the precious metal.
Holdings in SPDR Gold Trust /quotes/comstock/13*!gld/quotes/nls/gld (GLD 103.18, +0.82, +0.80%) , the biggest exchange-traded fund backed by physical gold, also rose for a fourth session, reaching the highest level in three months.
The dollar slipped against major counterparts after the European Central Bank and the Bank of England made no changes in their respective interest-rate policies.
Gold for October delivery rose to $1,057.10 an ounce, the highest level ever for a front-month contract. It was last up $1.10, or 0.1%, to stand at $1,044.40 on the Comex division of the New York Mercantile Exchange.
Gold for December delivery, the most actively traded contract, was up $3.40, or 0.3%, at $1,047.80 an ounce, retracing some of the earlier gains that had pushed it to an intraday high at $1,059.60.
"Given inflationary concerns and dollar weakness, the metal could look to test above $1,120 during the quarter as investors continue to diversify their portfolios," said James Moore, analyst at TheBullionDesk.com.
"However, the short-term outlook is again beginning to look top-heavy with gold vulnerable to a correction should the dollar recover," he added in a note to clients.
Gold's performance in the euro, British pound and other currencies has been lackluster compared to its rise in U.S. dollars, a trend suggesting investors are more interested in bullion as a hedge against the greenback than global inflation. See full story.
Holdings in SPDR Gold Trust reached 1,109.31 metric tons Wednesday, up 8.8 metric tons from a day earlier. That's the highest level since July 13.
"The fact that the gold price broke through the old high of March 2008 is obviously attracting financial investors to the gold market," said analysts at Commerzbank in a note.
If demand for gold ETFs continues to rise, "a further gold-price increase has to be expected, especially as short-term oriented market participants are likely to be jumping on the bandwagon."
Some analysts questioned whether the rally in gold prices could continue, however.
Christopher Ecclestone, mining strategist at Global Hunter Securities, said gold's strength was "like a feather being pushed up by the lightest of breezes. There is no substance to the rise."
In foreign-exchange trading, the dollar fell against most of its major rivals, with the dollar index /quotes/comstock/11j!i:dxy0 (DXY 76.13, -0.37, -0.48%) down 0.4% to 76.191, just slightly higher than the one-year low hit about two weeks ago. See Currencies.
A weaker dollar typically pushes up dollar-denominated commodities prices.
The European Central Bank, which sets monetary policy for the 16 nations that use the euro, left its key lending rate unchanged at a record low of 1%. The Bank of England did likewise, its key lending rate unchanged at a record-low 0.5%. See full story.
For now, "gold prices continue to trend higher, driven by the same factors as in previous days -- a weaker [U.S. dollar] and still-low bond yields," analysts at Credit Suisse wrote in a note to clients issued Thursday.
Also in metals trading Thursday, December silver futures rose 17 cents, or 1%, to $17.67 an ounce.
October platinum gained $8.80, or 0.7%, to $1,329.30 an ounce, and December palladium rose $4.95, or 1.6%, to $319 an ounce.
December copper added 8.85 cents to $2.868 a pound, a 3.2% advance.
Wednesday, October 7, 2009
Entertainment/Theme Park Extinction
Big news today in the theme park world as A-B InBev's theme parks for $2.7 billion.
On the heels of the Six Flags bankruptcy it's hard to see the wisdom in this. Of late many entertainment and theme parks have been blighted, including the recent closure of Kiddieland in the Chicago area.
While trolling for retail closures, I came across this video of Santa's Village & Racing Rapids, a concept I remember well growing up in the Chicago area. It is a scary, but true picture of the industry today. Dozens of similar operations have gone out of business.
On the heels of the Six Flags bankruptcy it's hard to see the wisdom in this. Of late many entertainment and theme parks have been blighted, including the recent closure of Kiddieland in the Chicago area.
While trolling for retail closures, I came across this video of Santa's Village & Racing Rapids, a concept I remember well growing up in the Chicago area. It is a scary, but true picture of the industry today. Dozens of similar operations have gone out of business.
Tuesday, October 6, 2009
America: Then and Now
Replace Detroit with America...then and NOW. This type of blight is not limited to the state of Michigan but has festered in states like Ohio, Pennsylvania, West Virginia, Alabama, Mississippi, Kentucky, South Dakota, North Dakota and Montana to name a few.
Confluence of Forces Creating Price Explosions
As the deflationary and inflationary forces meet, we have begun to see violent convulsions both upwards and downwards in the price of both the equities markets and commodities like the teeth of a saw. In the past two days (to this point 11:10 EST) we have seen a 250 point surge in the DOW and $30+ surge in the price of gold. Both are blaring alarms that the integrity of the dollar is falling apart.
The dollar is taking it from all sides - the printing press, dumping by other nations, over leverage through derivatives.
It really doesn't matter if deflation continues because it will be swallowed up in a sea of paper and loss of confidence.
Prices may fall again in the near future but the long term trend is explosive and will end in a currency collapse. Avoid short term games in favor of long term stability when possible.
The dollar is taking it from all sides - the printing press, dumping by other nations, over leverage through derivatives.
It really doesn't matter if deflation continues because it will be swallowed up in a sea of paper and loss of confidence.
Prices may fall again in the near future but the long term trend is explosive and will end in a currency collapse. Avoid short term games in favor of long term stability when possible.
Monday, October 5, 2009
End of Dollar Denominated Oil?
This is unraveling much faster than anybody thought.
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
The demise of the dollar
In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
READ ENTIRE ARTICLE
Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.
The demise of the dollar
In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.
READ ENTIRE ARTICLE
Retail Roundup
Macy's is listed as one of the most likely to declare bankruptcy of ANY RETAILER in the United States by a third party auditor. Closures of any number, let alone half - all of their stores would cause a chain reaction of store closures in other categories through hundreds of malls across the country. When the anchors leave, other tenants have escape clauses built into their leases.
Ink Stop/Movie Gallery - expect other "destination" and "specialty" retailers to be turning out the lights very soon.
Rite Aid going under is no surprise and will simply be absorbed by both Walgreens and CVS.
If other industries are going through a deep recession or depression, retail is going through an extinction.
CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS
Movie Gallery Closing 200 Game Crazy Stores
The country's second largest movie rental retailer, Movie Gallery, is closing 200 of its 680 Game Crazy stores. The stores, which sell new and used video games and accessories, are located adjacent to Hollywood Video locations across the country. The inventory liquidation process at the 200 stores has already begun and the locations will shutter by the end of this month -- their adjacent Hollywood Video stores are expected to remain open.
In a statement, Movie Gallery described the affected stores as "underperforming" and said the "unprecedented consumer/retail environment" has been challenging.
While the company is not sharing an official list of stores being closed, an unofficial list can be found here. According to CoStar Tenant, the typical Game Crazy store is 500 square feet, but select locations run as large as 7,000 square feet.
This closure announcement follows Blockbuster's recent plan to close 960 stores through 2010. Meanwhile, the world's largest video game retailer, GameStop, has opened at least 776 net new stores over the past year, to now operate 6,333 stores in 17 countries.
InkStop Abruptly Closes All 152 Stores
Warrensville Heights, OH-based printer ink and toner chain, InkStop, sent a letter to its employees last week that read, "The company has elected to temporarily close all stores at the close of business today, October 1, to focus on a restructuring plan... All employees are laid off until further notice." The company cited cash flow problem among its key issues.
After closing six stores early this year, the chain reported in an April Crain's article that it had 155 stores in 14 states from Ohio to Texas, which according to various reports, was down to 152 stores by the time the Oct. 1 closure letter was issued.
The latest action by this ink retailer is in stark contrast to the April Crain's article. At that time, company co-founder, Dirk Kettlewell said that InkStop was benefiting from "not being involved in the banking thing," as its growth was fueled by more than $80 million in private equity funding from 150 investors worldwide that expected InkStop to grow into a large chain of 2,000 to 3,000 stores. According to Crain's, Kettlewell said he expected InkStop to become profitable later in 2009 for the first time ever.
According to CoStar Tenant, the average InkStop is about 1,500 square feet.
Audit Integrity Identifies Five Retail Companies with High Probability for Bankruptcy
Los Angeles-based Audit Integrity, an independent research firm that rates more than 12,000 public companies based on their "corporate integrity", recently released the results of a corporation bankruptcy study designed to identify the companies (with a market capitalization of $1 billion or more) most likely to declare bankruptcy.
Of the 20 companies Audit Integrity identified as having the "highest probably of declaring bankruptcy", five firms with a significant amount of retail stores were listed: Macy's, Oshkosh, Rite Aid, Sprint Nextel and Goodyear Tire & Rubber.
"According to the U.S. Bankruptcy Courts, the number of business bankruptcy filings during the first six months of the year rose 64 percent over the first half results in 2008," said Audit Integrity in its report, warning that "bankruptcy filings tend to lag after an economic downturn."
Ink Stop/Movie Gallery - expect other "destination" and "specialty" retailers to be turning out the lights very soon.
Rite Aid going under is no surprise and will simply be absorbed by both Walgreens and CVS.
If other industries are going through a deep recession or depression, retail is going through an extinction.
CLOSINGS/CUTBACKS/BANKRUPTCIES/DEFAULTS
Movie Gallery Closing 200 Game Crazy Stores
The country's second largest movie rental retailer, Movie Gallery, is closing 200 of its 680 Game Crazy stores. The stores, which sell new and used video games and accessories, are located adjacent to Hollywood Video locations across the country. The inventory liquidation process at the 200 stores has already begun and the locations will shutter by the end of this month -- their adjacent Hollywood Video stores are expected to remain open.
In a statement, Movie Gallery described the affected stores as "underperforming" and said the "unprecedented consumer/retail environment" has been challenging.
While the company is not sharing an official list of stores being closed, an unofficial list can be found here. According to CoStar Tenant, the typical Game Crazy store is 500 square feet, but select locations run as large as 7,000 square feet.
This closure announcement follows Blockbuster's recent plan to close 960 stores through 2010. Meanwhile, the world's largest video game retailer, GameStop, has opened at least 776 net new stores over the past year, to now operate 6,333 stores in 17 countries.
InkStop Abruptly Closes All 152 Stores
Warrensville Heights, OH-based printer ink and toner chain, InkStop, sent a letter to its employees last week that read, "The company has elected to temporarily close all stores at the close of business today, October 1, to focus on a restructuring plan... All employees are laid off until further notice." The company cited cash flow problem among its key issues.
After closing six stores early this year, the chain reported in an April Crain's article that it had 155 stores in 14 states from Ohio to Texas, which according to various reports, was down to 152 stores by the time the Oct. 1 closure letter was issued.
The latest action by this ink retailer is in stark contrast to the April Crain's article. At that time, company co-founder, Dirk Kettlewell said that InkStop was benefiting from "not being involved in the banking thing," as its growth was fueled by more than $80 million in private equity funding from 150 investors worldwide that expected InkStop to grow into a large chain of 2,000 to 3,000 stores. According to Crain's, Kettlewell said he expected InkStop to become profitable later in 2009 for the first time ever.
According to CoStar Tenant, the average InkStop is about 1,500 square feet.
Audit Integrity Identifies Five Retail Companies with High Probability for Bankruptcy
Los Angeles-based Audit Integrity, an independent research firm that rates more than 12,000 public companies based on their "corporate integrity", recently released the results of a corporation bankruptcy study designed to identify the companies (with a market capitalization of $1 billion or more) most likely to declare bankruptcy.
Of the 20 companies Audit Integrity identified as having the "highest probably of declaring bankruptcy", five firms with a significant amount of retail stores were listed: Macy's, Oshkosh, Rite Aid, Sprint Nextel and Goodyear Tire & Rubber.
"According to the U.S. Bankruptcy Courts, the number of business bankruptcy filings during the first six months of the year rose 64 percent over the first half results in 2008," said Audit Integrity in its report, warning that "bankruptcy filings tend to lag after an economic downturn."
The Writing on The Wall
A must read that reveals serious breakdowns in the United States economy that simply cannot be repaired. Brace for impact.
Three Government Reports Point to Fiscal Doomsday
by Martin D. Weiss, Ph.D. 10-05-09
When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action.
Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty.
But when they have full knowledge of an impending disaster … they have proof of its inevitability in ANY scenario … and they so declare in their official reports … but STILL don’t lift a finger to change course … then they have only one remaining claim:
INSANITY!
And, unfortunately, that’s precisely the situation we’re in today: Three recently released government reports now point to fiscal doomsday for America; and one of the reports, issued by the Congressional Budget Office (CBO), says so explicitly:
* The CBO paints two future scenarios for the U.S. budget deficit and the national debt. But it plainly declares that fiscal disaster will strike in EITHER scenario. Furthermore …
* The CBO states that its fiscal disaster scenarios could cause severe economic declines for decades to come, including hyperinflation and destruction of retirement savings.
* The CBO then proceeds to admit that even its worse-case scenario could be understated by a wide margin due to panic in the financial markets or vicious cycles that are beyond control.
* Separately, in its Flow of Funds Report for the second quarter, the Federal Reserve provides irrefutable data that we are already beginning to witness the first of these consequences in the United States: an unprecedented cut-off of credit to businesses and consumers.
* Meanwhile, the Treasury Department shows that America’s fate remains, as before, in the hands of foreigners, with the U.S. still owing them $7.9 trillion!
* And despite all this, neither Congress nor the Obama Administration have proposed a plan or a timetable for averting these doomsday scenarios. Their sole solution is to issue more bonds, borrow more, and print more without restraint.
That is the epitome of insanity.
Yes, the great government bailouts of 2008 and 2009 have bought us some time … but they have promptly proceeded to sell us into bondage.
Yes, they have given us safe passage over tough seas … but only to throw our assets onto the global auction block for the highest bidders.
The one bright spot: Unlike some governments, ours does not conceal the evidence of its folly. Quite the contrary, the proof pours forth from these three government reports in relatively blunt language and unmistakably blatant numbers.
READ ENTIRE ARTICLE HERE
Three Government Reports Point to Fiscal Doomsday
by Martin D. Weiss, Ph.D. 10-05-09
When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action.
Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty.
But when they have full knowledge of an impending disaster … they have proof of its inevitability in ANY scenario … and they so declare in their official reports … but STILL don’t lift a finger to change course … then they have only one remaining claim:
INSANITY!
And, unfortunately, that’s precisely the situation we’re in today: Three recently released government reports now point to fiscal doomsday for America; and one of the reports, issued by the Congressional Budget Office (CBO), says so explicitly:
* The CBO paints two future scenarios for the U.S. budget deficit and the national debt. But it plainly declares that fiscal disaster will strike in EITHER scenario. Furthermore …
* The CBO states that its fiscal disaster scenarios could cause severe economic declines for decades to come, including hyperinflation and destruction of retirement savings.
* The CBO then proceeds to admit that even its worse-case scenario could be understated by a wide margin due to panic in the financial markets or vicious cycles that are beyond control.
* Separately, in its Flow of Funds Report for the second quarter, the Federal Reserve provides irrefutable data that we are already beginning to witness the first of these consequences in the United States: an unprecedented cut-off of credit to businesses and consumers.
* Meanwhile, the Treasury Department shows that America’s fate remains, as before, in the hands of foreigners, with the U.S. still owing them $7.9 trillion!
* And despite all this, neither Congress nor the Obama Administration have proposed a plan or a timetable for averting these doomsday scenarios. Their sole solution is to issue more bonds, borrow more, and print more without restraint.
That is the epitome of insanity.
Yes, the great government bailouts of 2008 and 2009 have bought us some time … but they have promptly proceeded to sell us into bondage.
Yes, they have given us safe passage over tough seas … but only to throw our assets onto the global auction block for the highest bidders.
The one bright spot: Unlike some governments, ours does not conceal the evidence of its folly. Quite the contrary, the proof pours forth from these three government reports in relatively blunt language and unmistakably blatant numbers.
READ ENTIRE ARTICLE HERE
The End of Too Big to Fail?
Who will be the first casualty? The next "Lehman" will have far more serious consequences. The global financial system has become a game of musical chairs. There are more than a quadrillion dollars in derivatives and merely 4.25 billion ounces of gold on earth. This means there are more than 235,000 dollars in derivatives (not including other garbage) for every "chair" out there. Kind of like trying to avoid the bulls in Pampalona...235,000 of them.
"Too big to fail" Must End for All: FDIC Chief
By David Lawder
ISTANBUL (Reuters) - The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators.
FDIC Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds.
"We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said.
Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.
"I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine.
Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers.
And by applying the resolution authority more broadly outside of normal regulated bank holding companies, it would help shrink the shadow banking system by discouraging regulatory arbitrage under which financial firms shop for the most lenient supervisors.
"If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.
Bair added that reducing the shadow banking system and regulatory arbitrage is her top priority for the U.S. Congress as it works on legislation to revamp U.S. financial oversight this fall.
She said there were some problems in extending resolution authority beyond banks to insurers and hedge funds, which she called a "sea change" in their oversight. But these could be overcome and it was appropriate to consider including them in the systemic risk resolution authority regulation.
"If the entity is systemic, that means if the entity gets in trouble it could create problems for the rest of us," she said.
Bair added that the FDIC is talking with the American Securitization Forum, a financial trade group, and others regarding the agency securitizing some of the assets that it has taken over from failed banks in order to help jumpstart U.S. securitization markets.
"Too big to fail" Must End for All: FDIC Chief
By David Lawder
ISTANBUL (Reuters) - The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators.
FDIC Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds.
"We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said.
Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process.
"I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine.
Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers.
And by applying the resolution authority more broadly outside of normal regulated bank holding companies, it would help shrink the shadow banking system by discouraging regulatory arbitrage under which financial firms shop for the most lenient supervisors.
"If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.
Bair added that reducing the shadow banking system and regulatory arbitrage is her top priority for the U.S. Congress as it works on legislation to revamp U.S. financial oversight this fall.
She said there were some problems in extending resolution authority beyond banks to insurers and hedge funds, which she called a "sea change" in their oversight. But these could be overcome and it was appropriate to consider including them in the systemic risk resolution authority regulation.
"If the entity is systemic, that means if the entity gets in trouble it could create problems for the rest of us," she said.
Bair added that the FDIC is talking with the American Securitization Forum, a financial trade group, and others regarding the agency securitizing some of the assets that it has taken over from failed banks in order to help jumpstart U.S. securitization markets.
Thursday, October 1, 2009
Boycott Bank of America
Ken Lewis is a greedy pig and should pay ever dollar in his name back to the shareholders who have suffered his incompetence in the past two years.
BofA CEO: $53 Million Retirement Score
Ken Lewis is on track to collect big on a pension plan the bank froze years ago in a push to link pay and performance.
NEW YORK (Fortune) -- Ken Lewis doesn't have a golden parachute, but he's all set for a comfortable landing -- unlike his long-suffering shareholders.
The Bank of America (BAC, Fortune 500) chief executive officer said Wednesday he'll step aside at year-end after eight years at the helm. Based on the company's most recent proxy statement, he will have $53 million in pension benefits waiting for him when he leaves.
That should give him about $3.5 million a year in pension payouts for the rest of his life -- at a time when people who bought the stock when he took the reins in 2001 are underwater on their investments.
Although the bank swore off employment contracts and eliminated golden parachutes seven years ago, Lewis can thank a pension plan that dates back decades for his rich retirement rewards.
While this plan was open, certain top executives were eligible to accrue benefits they would receive following retirement in the form of annuity payments.
Lewis was the biggest winner in these plans, but other BofA execs benefited as well. Vice Chairman James Hance, for instance, retired in 2005 with an indicated annual benefit of $2.7 million.
Ironically, BofA decided to freeze this so-called supplemental executive retirement plan at the same time it got rid of golden parachutes, citing the need to better align executive compensation with investor returns. By any measure, those have been poor at BofA of late.
The company's stock fetches less than half its year-ago price and remains below its level when Lewis took over in April 2001 -- even after a 563% jump off lows from this March.
But before BofA made its compensation switch, Lewis had participated for more than a decade in the supplemental pension plan -- racking up the more than $50 million supplemental plan account.
That's not all. Lewis also has $10 million in deferred compensation owed to him and another $8 million in restricted stock and stock options as of Dec. 31 that will continue to vest over coming years, according to the most recent proxy filing. BofA referred questions about Lewis' retirement plan to those filings.
Assessing a total value on Lewis' walking-away pay is an inexact science, given changes in BofA's stock price and other factors.
But Paul Hodgson, the research director at the Corporate Watchdog, an executive pay tracker, said his firm's most recent survey of retirement plans puts Lewis' take at $64 million.
That number is down by more than half from 2006, when BofA shares traded above $50, compared with a recent $16.21. But it still "puts him in the top 40" nationwide, Hodgson said.
Not that Lewis should need the money. Though his cash salary has been $1.5 million annually since he took the reins in 2001, he has managed to chalk up $63 million in pay and perks over the past three years, according to filings -- including almost $10 million last year, which ended with Lewis bickering with federal officials over the terms of its purchase of brokerage Merrill Lynch.
In the end, the U.S. backed BofA's purchase of Merrill -- but at a steep cost to Lewis' standing with shareholders, who stripped him in April of his chairmanship, prompting numerous critics to start the countdown to his departure.
"Ken Lewis's resignation as CEO is the overdue but inevitable result of the overwhelming shareholder opposition registered at Bank of America's 2009 annual meeting," the CtW Investment Group, long a vocal critic of Lewis' leadership, said in a statement Wednesday evening. "The onus is now on the board of directors to engage with shareholders to name a successor who can quickly restore the bank's credibility with investors, regulators and Congress."
Lewis' decision to throw tens of billions of shareholder dollars at Merrill when it was on the brink of collapse even drew chortles from the likes of Warren Buffett, the billionaire investor who last month dubbed Lewis the "ironic hero" of the meltdown.
But with BofA shares down two-thirds from their 2006 highs, Lewis will depart as no hero to investors -- ironic or otherwise.
BofA CEO: $53 Million Retirement Score
Ken Lewis is on track to collect big on a pension plan the bank froze years ago in a push to link pay and performance.
NEW YORK (Fortune) -- Ken Lewis doesn't have a golden parachute, but he's all set for a comfortable landing -- unlike his long-suffering shareholders.
The Bank of America (BAC, Fortune 500) chief executive officer said Wednesday he'll step aside at year-end after eight years at the helm. Based on the company's most recent proxy statement, he will have $53 million in pension benefits waiting for him when he leaves.
That should give him about $3.5 million a year in pension payouts for the rest of his life -- at a time when people who bought the stock when he took the reins in 2001 are underwater on their investments.
Although the bank swore off employment contracts and eliminated golden parachutes seven years ago, Lewis can thank a pension plan that dates back decades for his rich retirement rewards.
While this plan was open, certain top executives were eligible to accrue benefits they would receive following retirement in the form of annuity payments.
Lewis was the biggest winner in these plans, but other BofA execs benefited as well. Vice Chairman James Hance, for instance, retired in 2005 with an indicated annual benefit of $2.7 million.
Ironically, BofA decided to freeze this so-called supplemental executive retirement plan at the same time it got rid of golden parachutes, citing the need to better align executive compensation with investor returns. By any measure, those have been poor at BofA of late.
The company's stock fetches less than half its year-ago price and remains below its level when Lewis took over in April 2001 -- even after a 563% jump off lows from this March.
But before BofA made its compensation switch, Lewis had participated for more than a decade in the supplemental pension plan -- racking up the more than $50 million supplemental plan account.
That's not all. Lewis also has $10 million in deferred compensation owed to him and another $8 million in restricted stock and stock options as of Dec. 31 that will continue to vest over coming years, according to the most recent proxy filing. BofA referred questions about Lewis' retirement plan to those filings.
Assessing a total value on Lewis' walking-away pay is an inexact science, given changes in BofA's stock price and other factors.
But Paul Hodgson, the research director at the Corporate Watchdog, an executive pay tracker, said his firm's most recent survey of retirement plans puts Lewis' take at $64 million.
That number is down by more than half from 2006, when BofA shares traded above $50, compared with a recent $16.21. But it still "puts him in the top 40" nationwide, Hodgson said.
Not that Lewis should need the money. Though his cash salary has been $1.5 million annually since he took the reins in 2001, he has managed to chalk up $63 million in pay and perks over the past three years, according to filings -- including almost $10 million last year, which ended with Lewis bickering with federal officials over the terms of its purchase of brokerage Merrill Lynch.
In the end, the U.S. backed BofA's purchase of Merrill -- but at a steep cost to Lewis' standing with shareholders, who stripped him in April of his chairmanship, prompting numerous critics to start the countdown to his departure.
"Ken Lewis's resignation as CEO is the overdue but inevitable result of the overwhelming shareholder opposition registered at Bank of America's 2009 annual meeting," the CtW Investment Group, long a vocal critic of Lewis' leadership, said in a statement Wednesday evening. "The onus is now on the board of directors to engage with shareholders to name a successor who can quickly restore the bank's credibility with investors, regulators and Congress."
Lewis' decision to throw tens of billions of shareholder dollars at Merrill when it was on the brink of collapse even drew chortles from the likes of Warren Buffett, the billionaire investor who last month dubbed Lewis the "ironic hero" of the meltdown.
But with BofA shares down two-thirds from their 2006 highs, Lewis will depart as no hero to investors -- ironic or otherwise.
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