Sobering facts

The older you get the poorer you get…

Nikkei hit 1982 low today.

Meaning someone who had bought a low MER Index fund would have seen his purchasing power eroded by 90% today with any appreciation of the last 25 years pretty much wiped out! On the other hand with a 25% rise in the Yen, you can probably afford to go 25% further to nowhere!

An interesting note would show that the older the population gets the worst the stock does over time…

QUEBEC, CANADA Socialism, debt and health care …

This would make for very interesting coverage for socialized medicine and welfare over all. As Quebec has the largest per capita aging population and the unions calling for a bigger piece of the pie next year…With a $110BB debt, this place is starting to scream get the F)()(&)& out!

Canada is not much better with a loss of 350K manufacturing jobs in the last 6 years…

Canadians might have voted a Conservative government but it is not morally, ethically or strategically equipped to deal with the Tsunami coming.

Condensed History… 1830-2007

There was:

The industrial revolution

Exploitation of the masses

Union Labor

The car revolution

Sundays off

Development to Suburbia

Speculation

Great depression

Soup kitchens

Election by the masses

The New Deal

The introduction of the weekend

Fascism

WWII

The GI Bill (Education and mortgages)

the introduction of statistical issuance of Consumer credit

Pursuit of the American Dream with imported credit

Leverage finance

Carry trade hedge funds

Failure to create value

After WWII, you might still have had gender and race movements but pretty much all of Middle America was defined by a credit score, Chevy vs. Caddy, jeans vs. plaid, College tuition and your type of holiday plans. All of this availability to 80% of the population with the ability to consume now what you would agree to settle over the next 30 days to 30 years.

Now nobody wants or can pay what is owed let alone buy for tomorrow. Politicians think that by printing more paper the problem will go away. THEY ARE JUST PROLONGING AGONY!

WHAT YOUR FUTURE HOLDS

2008-2010

Now

There is no more credit of any kind:

Business loans, Credit cards, mortgages, car loans, store cards.

So you are asked to live within your means! What a novel idea…

If we think that 63 years of social and economic fabric can all of a sudden reversed, you have something else coming.

Imagine a world where credit is granted to corporations, governments and individuals who can actually pay back their loans.

A yearly house rate of appreciation of is less than then interest rate of the mortgage on it.

Car sales will have to be profitable to the remaining manufacturers

Wall Street will go back to clipping coupons

Hedge fund managers will go back to flipping burgers, cleaning stables and shinning OP boat decks

DE-LEVERAGING IS ENDING SOON

Just a salmon hurling itself to its spawning grounds, The USD is having its last hurrah until Xmas and then it will be bringing with it 20% stagflation!

Are all fiat currencies about to get their place besides the throne of a port-a- potty?

WHAT TO DO?

Hold on to gold bars as the Bond market is next and then the state of Champlain bridge will be the least of your worries!

On this cheerful note, have a good one!

The latest

McCain Sounded tired... you can't run this kind of schedule and hope to come out strong!

Anyway both candidates missed the point in this final debate. They were trying to tell voters that things will be better and tried to appeal to Nostalgia. A friend of mine said Nostalgia is a terrible driving tool. It's like using your rear view mirror to figure out where you're going. The last time I checked, this only works if you are going backwards or trying to park on a road to nowhere.

I found this troubling 2007 4 part report from Fox news ( not that I usually would call their reporting very useful) that investigated a failed 1997- 2001 multi-layered LA/Miami/Las Vegas/ Canada/ Egypt/ Israel drug ring investigation. It seemed that the criminals using inside info from two compromised Israeli firms were able to wiretap authorities and knew what the Secret Service, CIA, DEA, FBI, LA Police and a whole series of GVMT agencies were up to and used that info to send them on wild goose chases probably on a fleet of well stacked G IVs . How easy was it? Scary! One firm (Am-Docs) had the phone data of every member of every agency, cells, home , office, cottage, kids etc. The other firm (Comverse) had all the wiretap info with back doors that anybody could access and listen to all the recordings. How perfect is that for a criminal? You know when , where and who is wiretapping you. You can listen to what the cops heard and you can plant anything you want or erase compromising info held on the data banks.

So much for solving inter-agencies turf wars with Homeland Security! It seems the turf wars made sure that no one except the crooks had a complete picture. Many agencies complained but because the firm was heavily lobbied in Washington, Congress continued funding and forcing agencies to used the compromised equipment. It took FIVE years for the process to STOP. The scariest part of the video is it keeps getting jewish anti-defamation leagues constantly telling Google to remove it from Youtube and others. I read the letter that Fox News got as JADL tried to make its case.

Trying to suppress the story because Jewish based companies were involved rather than to air the stories so that more people demand that the problems get fixed is like a car manufacturer suppressing crash information from the NHTSA to prevent car sales decline in order to save jobs.

You do learn that the US system is all about turf wars between 2 dozen agencies, thousand of field offices,and a bunch of fat civil servants waiting for a pension while not risking thier necks on much.

The US, once a world standard for the concept of economic unions, is now spending way too much money ( it doesn’t have) on services it can’t afford, making most Americans poorer with a worse quality of life to show for it. Now mind you, American Baby Boomers have been living high on the hog since the GI bill and moved into the 1960s with Other people’s money with the repeal of the Gold standard. General de Gaulle, that shrewd Frenchman, always wanted to convert his Yankee dollars back to nice shiny gold bars. Nixon had to put a stop to that!

Now today as the world savers have lost several trillions of their savings, the lending to America is gone and no amount of government printing of fiat dollars will keep the whole pie from getting smaller. SO America, don't listen to those candidates, they won't give you back what was never yours in the first place. It was BORROWED time in the form of material possessions. Learn to eat frugal, drive down, eat less animal protein and learn to live responsibly not always wearing two baseball mits and always asking for stuff to fall into your open hands.

With either running candidate and a totally corrupt congress, millions of civil servants, government sub-contractors will continue to abuse the system because they first tell you they will give YOU stuff when in fact they will take for themselves 100x times more stuff.

NEVER seen a poor guy stay that way once elected and moving to Washington. If the Executive branch tries to change anything, the agenda grinds to a halt. Because once elected to Washington you are there for 4 or 6 years minimum. When your re-election come up a couple of pork barrels deal and there you go again... Very low turn-over there!

My four point solution:

1) US Tax code goes from 125,000 pages to 25

2) Tort Reform. Every person who plans on exercising as an injury lawyer has to serve 5 years in a combat unit just to get a limited license. Awards are limited to Quebec numbers. http://www.justicecontresaaq.com/ ( after you read this you gonna leave your practice all together)

3) US Defense is set at a % of 5 year trailing GDP

4) If you are a member of congress and the budget isn’t balanced over your first term, you cannot come back for another term to pork barrel your buddies!

Give that a spin Washington!

By the way WHEN you balance all of :

your balance of payment deficit

your trade deficit

your federal government deficit

WHEN HELL FREEZES OVER OR THE LEAFS WIN THE CUP,

You American crybabies , can then feel altruistic and go and ask if YOUR GOVERNMENT has the money and the Will to start offering coverage to your 38MM fellow Americans currently without any form of health insurance always at risk of total bankruptcy should an emergency arise.

FInally, $308BB have just been washed off Citi's books... nice jobs captains of Finance! we salute thee!

By my calculations, there were 106 trillion dollars of fake bets created with derivatives as nasty as my personal idea of Armageddon: the Credit Default Swap. It only takes ANOTHER 344 write-offs like this one and we will finally say goodbye to this nasty leverage of awful bad bets.

Well Until the new new finance guys come in with the proverbial: " well this time this is foolproof "!

Hopefully I will be in Curmudgeon heaven when that happens.

Cheers

P.

TED Spread at one year low... YET!

Amazing the equity market rebounded so high as Euro grids are showing the bank lending is still not functioning.

U.S. Treasury prices are off sharply. Note 2yr spread U.S-EZ has risen (less negative). A move closer to parity would be a positive for the USD, but not at the moment.

3M lbr 4.635 -11.8 -6.5
US-2Y 1.951 35.3 -109.9
US-5Y 3.072 31.0 -95.8
US-10Y 4.058 17.8 2.8
US-30Y 4.316 18.6 -14.5


Now governments on the HOOK for THREE years for inter-banking loans… Just in the middle of a ursidae family recession, it becomes interesting how governments might just have coerced investment banks to let program trading give the markets a shot of crack cocaine. I can imagine Paulson saying to Goldman CEO: “: Heck I got Bush to pony up another $250BB. Just go out there, get your program trading boys to run wild. Buy every equity index you can. Here is the list of banks to buy up and I guarantee you that if you were to lose money on these trades, I would buy equity in your bank without any significant dilution to your team…”

WHAT SCARES ME IS THAT THIS AGAIN WAS ALL DONE ON LEVERAGE!!!!!!!!!!!!!!!!!!!!!!!!!


Hubris or just great opportunity to make some quick coin and leave with your tail between your legs?
Alot of hedge funds will be dead this year so the pie of leverage plays dying
Who would have guessed the US government under Bush would socialize banking to Swedish standards?
I love history in the making!


Below 800 I am buying Gold bullion!


Cheers


P

Don't be Short

The mood is too dark…

Are those headlights in the tunnel?




Negatives:
- Hard Asset deflation is creating havoc for investors’ ability to survive leverage: if you can’t unload the buildings, the banker is forcing liquidation of your blue-chip portfolio stocks accelerating the fall for everybody including themselves!
- No liquidity at the individual banking level prevents anybody from picking up the pieces. Buffett won't take too many body blows before he moves aside.
- Banks still cannot get a hold on the market perception that they are increasingly becoming insolvent
- Currency runs are forcing the USD and the Yen as refuge currencies which are not useful as those economies are not motors of consumption right now!


Positives:
- Market might now finally be willing to discount the Obama administration program costs… Is there money for his programs in the first place?
- Oil looks like it wants to go to $60: somebody should win at this
- Rising USD gives Fed room to lower Fed rate. Squeeze the shorts!



Option:
-A coordinated rate cut is going to be tough to cover… If Feds lead the dance with 50 bps cut and the Germans put on a modicum of a thinking hat ( if that remains an option), it would not be a good time to be short indices…
- Central banks should also buy into good stocks and not only the sick banking stocks otherwise you cross contaminate

Let’ see what the week reserves.

Don’t be short, you are going to regret it before month is out!


My 2 cents