THE PRAGMATIC CAPITALIST Wed 2010-02-10 11:22 EST

AN INSIDER'S VIEW OF THE REAL ESTATE TRAIN WRECK

TPC

The first time I spoke with real estate entrepreneur Andy Miller was in late 2007, when I asked him to serve on the faculty of a Casey Research Summit...what most intrigued me about Andy was that he had been almost alone among his peer group in foreseeing the coming end of the real estate bubble, and in liquidating essentially all of his considerable portfolio of projects near the top...he remains deeply concerned about the outlook for real estate...the United States home mortgage market has been nationalized without anybody noticing...If government support goes away, and it will go away, where will that leave the home market? It leaves you with a catastrophe...eventually the bond market is going to gag on the government-sponsored paper...commercial properties are not performing and that values have gone down, although I've got to tell you, the denial is still widespread, particularly in the United States and on the part of lenders sitting on and servicing all these real estate portfolios...The current volume of defaults is already alarming. And the volume of commercial real estate defaults is growing every month...When you hit that breaking point, unless there's some alternative in place, it's going to be a very hideous picture for the bond market and the banking system...second quarter 2010 is a guess...the FDIC and the Treasury Department have decided that rather than see 1,000 or 2,000 banks go under and then create another RTC to sift through all the bad assets, they'll let the banking system warehouse the bad assets. Their plan is to leave the assets in place, and then, when the market changes, let the banks deal with them. Now, that's horribly destructive...it's exactly a Japanese-style solution...The entire U.S. residential mortgage market has in effect been nationalized, but there wasn't any act of Congress, no screaming and shouting, no headlines in the Wall Street Journal or the New York Times...That's a template for what they could do with the commercial loan market.

insider's view; pragmatic capitalists; Real Estate Train Wreck.

Mish's Global Economic Trend Analysis Sun 2010-02-07 18:15 EST

Nonperforming Loans in China Rise to "Trillions of Renminbi"

Michael Shedlock

Inquiring minds are questioning the solvency of the Chinese banking system. Please consider China Defaulting Loans Soar, Insolvency Lawyer Says. Non-performing loans in China have risen into the ``trillions of renminbi'' because of poor lending practices, an insolvency lawyer said...The US, led by Hillary Clinton and president Obama, is putting enormous pressure on China to float the RMB, in expectation that it would rise and US exports would soar. I believe that if China floated the RMB on the Forex markets, it might crash.

China rises; Mish's Global Economic Trend Analysis; nonperforming loans; renminbi; trillion.

Sun 2010-02-07 10:10 EST

Web of Debt - THE BATTLE OF THE TITANS: JPMORGAN VS. GOLDMAN SACHS

Ellen Brown

The late Libertarian economist Murray Rothbard wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players...In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s...Goldman's superpower status comes from something more than just access to the money spigots of the banking system. It actually has the ability to manipulate markets...But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough.

battle; debt; Goldman Sachs; JPMorgan; titans; Web.

Fri 2010-02-05 11:29 EST

Michael Hudson: Myths of Recovery

...Obama's most dangerous belief is in the myth that the economy needs the financial sector to lead its recovery by providing credit. Every economy needs a means of payment, which is why Wall Street has been able to threaten to wreck the economy if the government does not give in to its demands. But the monetary function should not be confused with predatory lending and casino gambling, not to mention Wall Street's use of bailout funds on lobbying efforts to spread its gospel...The pro-financial mass media reiterate that deficits are inflationary and bankrupt economies. The reality is that Keynesian-style deficits raise wage levels relative to the price of property (the cost of obtaining housing, and of buying stocks and bonds to yield a retirement income). The aim of running a ``Wall Street deficit'' is just the reverse: It is to re-inflate property prices relative to wages. A generation of financial ``ideological engineering'' has told people to welcome asset-price inflation (the Bubble Economy). People became accustomed to imagine that they were getting richer when the price of their homes rose. The problem is that real estate is worth what banks will lend -- and mortgage loans are a form of debt, which needs to be repaid.

Michael Hudson; myth; recovery.

Jesse's Café Américain Wed 2010-02-03 20:13 EST

Italy Seizes Bank of America Assets In Derivatives Fraud Probe

Jesse

"more than 519 municipalities that face 990 million euros in derivatives losses"...Globalization is used as a rationale for stripping nations of their sovereign rights, and the people from their ability to rule and protect themselves in accord with their own beliefs and preferences...The US is a relative safe haven for multinational corporations that engage in various forms of fraud and market manipulation around the world, like modern day privateers. It appears unable to regulate them because of widespread political corruption and the self interest of its monied elite.

America assets; Derivatives Fraud Probe; Italy Seizes Bank; Jesse's Café Américain.

Jesse's Café Américain Wed 2010-02-03 20:10 EST

Official World Gold Holdings

Jesse

...Is gold a bubble? As someone who has been a close observer of bubbles for the past ten years the data does not recommend that conclusion. And what makes me even more curious about this point of view is that the very people who for the most part denied the existence of the obvious bubbles in tech, housing, risk, banking and credit, even to the point of absurdity, who could not or would not see a bubble if it perched on the end of their nose, who are card carrying members of the international monied fraternity, are the most vocal in calling gold a bubble with emotional arguments lacking any fundamental data. What's up with that?

Jesse's Café Américain; Official World Gold Holdings.

zero hedge Wed 2010-02-03 20:00 EST

AIG: Collusion Of Epic Proportions Between Goldman's US Treasury Branch And Goldman Sachs Proper

David Fiderer

Must read piece from David Fiderer, first published on Huffington Post How Paulson's People Colluded With Goldman To Destroy AIG And Get A Backdoor Bailout

AIG; collusion; epic proportions; Goldman Sachs Proper; Goldman's; Treasury Branch; Zero Hedge.

Jesse's Café Américain Wed 2010-02-03 16:09 EST

On Monetary Inflation and M3

Jesse

...Within a relatively pure fiat currency system the conditions of inflation and deflation, and the broad range in between, are largely the result policy and fiscal decisions, constrained for the most part only by the acceptability of the bond and the dollar and the tolerance of the people...The acceptability of the dollar and the bond by the world is the limiting factor on the ability of the Fed and Treasury to create money, managing its supply, by whatever means direct and indirect, by action or allowance, in a fiat currency.

Jesse's Café Américain; M3; monetary inflation.

zero hedge Wed 2010-02-03 16:00 EST

Russia Urged China To Dump Its Fannie, Freddie Holdings Before GSE Bailout

This is how the cold war will look like in the post-Lehman era (when all the debt risk is held on the public balance sheet): one country urging another to sell a third's bonds. According to Hank Paulson's soon to be released memoir, Russia had urged China to sell its GSE holdings in August 2008 "in a bid to force a bailout of the largest U.S. mortgage-finance companies." China refused... That time. Of course, what has transpired since is that China, through the Fed custodial account, has rotated a vast majority of its GSE holdings into Treasuries, in essence doing just what Pimco's Bill Gross has been doing since the beginning of 2009: offloading hundreds of billions of Fannie and Freddie bonds straight to the Federal Reserve.

Dump; Fannie; Freddie Holdings; GSE bailout; Russia Urged China; Zero Hedge.

Mon 2010-02-01 17:19 EST

Did Larry Langford bet Birmingham's future on Wall Street scheme? / The Christian Science Monitor - CSMonitor.com

The Christian Science Monitor

Now on trial in US District Court in Tuscaloosa, Ala., on 60 counts of money laundering and bribery charges, Mr. Langford is at the center of a spectacular scandal where, prosecutors say, a popular mayor whose motto is ``Do something!'' gambled a city's future on a risky Wall Street scheme, all while taking bribes in the form of cash, Rolex watches, and designer clothes.

Christian science Monitor; com; CSMonitor; Larry Langford bet Birmingham's future; Wall Street schemes.

zero hedge Sun 2010-01-31 23:09 EST

Scandal: Albert Edwards Alleges Central Banks Were Complicit In Robbing The Middle Classes

Did the US and UK central banks collude with the politicians to `steal' their nations' income growth from the middle classes and hand it to the very rich?... the US and UK central banks were actively complicit in an aggressive re-distributive policy benefiting the very rich. Indeed, it has been amazing how little political backlash there has been against the stagnation of ordinary people?s earnings in the US and UK. Did central banks, in creating housing bubbles, help distract middle class attention from this re-distributive policy by allowing them to keep consuming via equity extraction? The emergence of extreme inequality might never otherwise have been tolerated by the electorate...

Albert Edwards Alleges Central Banks; complicit; middle class; Rob; scandal; Zero Hedge.

Sun 2010-01-31 23:06 EST

The Formula for This Market Rally In Simple Terms

The first, most obvious trend is the Manic Mondays trend...for the 43 weeks ended Friday January 8, 2010, stocks have rallied on 30 out of the 43 Mondays...these Monday ramp jobs have contributed the bulk of the market rally's gains since March 2009...The second trend that has dominated this market since the March 2009 bottom is the Bernanke Options Expiration juicing. In simple terms Ben Bernanke has shown a REAL preference for pumping money into the financial system on the exact week when options are expiring...The final trend that has dominated this market is cousin to the Manic Monday Ramp Job. It is the Night Session Ramp Job...from September 13, 2009 until year-end, ALL of the stock market's gains occurred in the over-night futures session from 4:00 ET to 9:30 AM ET...So there you have it, the three most dominant trends of this market rally. None of them are pretty. None of them involve fundamentals. And ALL of them are directly related to the Fed's liquidity pump.

Formula; markets Rally; simple terms.

Sun 2010-01-31 12:00 EST

Does Economics Violate the Laws of Physics?: Scientific American

SYRACUSE, N.Y.--The financial crisis and subsequent global recession have led to much soul-searching among economists, the vast majority of whom never saw it coming. But were their assumptions and models wrong only because of minor errors or because today's dominant economic thinking violates the laws of physics? ... "Real economics is the study of how people transform nature to meet their needs," said Charles Hall, professor of systems ecology at SUNY-ESF and organizer of both gatherings in Syracuse. "Neoclassical economics is inconsistent with the laws of thermodynamics."

Economics Violate; Law; physical; Scientific American.

Sun 2010-01-31 11:43 EST

Hussman Funds - Weekly Market Comment: The Stock Market Has Never Been This (Intermediate-Term) Overbought - October 19, 2009

In reviewing the status of the market late last week, the condition of the data was something of an anomaly in that regard. On the valuation front, stocks are presently overvalued, but to levels that we've observed at least several times in history. The anomaly relates to market action, where we can no longer find a single historical instance where stocks were more overbought on the combination of short- and intermediate-term measures we respond to most strongly. Indeed, only one instance comes close, which is November 28, 1980...the peak of the furious advance in S&P 500 driven by enthusiasm over "less bad" economic news, though with little proven economic strength. It was the last day of the 1980 bull market. The economy later proved to have been in a short lull within a double-dip recession, taking stocks to their final lows in 1982...One of the notable features of extreme overbought conditions is that investors rarely have much opportunity to get out...

2009; Hussman Funds; intermediate term; October 19; Overbought; stock market; weekly market comments.

Jesse's Café Américain Fri 2010-01-29 16:27 EST

Morgan Paying Out 62% of Revenues in Bonuses and Pay While Average Families Face 'Years of Pain'

Jesse

One has to wonder how much of that 'revenue' is merely the result of artificial mark to market accounting and prop desk speculation, and not real cash flow from commercial banking operations.That is not the pay method for a bank. That's a hedge fund. And that would be all very well and good if they were a hedge fund and responsible for their own failures and successes, but they are obtaining the discount window and federal guarantees and subsidies from the taxpayers as though they were a commercial bank...if the bankers keep taking 50+% of all the cash that touches their hands from the public subsidy, then what trickles down to the people won't accomplish anything. Years of zombie-like stagflation look to be the prognosis...The economic hitmen and the corrupt politicians are taking their pay, and the people and their children and most likely grandchildren will be stuck with unpayable debts. Just like a third world nation, which is what the US will look like when they get done cutting health, infrastructure, education, and basic services to pay for this.

62; Average Families Face; bonus; Jesse's Café Américain; Morgan pay; pain; pay; Revenues; years.

zero hedge Fri 2010-01-29 16:23 EST

AIG Timeline Of Events

For all who want to get up to speed on next week's political theater involving AIG, Tim Geithner, Goldman Sachs' Stephen Friedman, Goldman Sachs' Bill Dudley, Goldman Sachs' Lloyd Blankfein, and the endless taxpayer bailouts, here is a terrific timeline for everything relevant to the AIG soap opera. Courtesy of Bloomberg.

AIG Timeline; events; Zero Hedge.