I Love Watching Bankers Get Grilled Over Bailouts

Congressman Alan Grayson tears up former Citigroup CEO Vikram Pandit over the bailout his company received last fall. Just watching these videos shows the shear fraud that has been perpetrated on the American people. We need more men like Mr. Grayson in Congress to ask the tough questions and get the to bottom of this mess. This entails Ending the Fed.

Portfolio Update - 11/13/2009 - Think Housing Has Bottomed? Guess Again!!

Portfolio Update: Sorry for the slow updates. However, nothing has changed. We are still in cash and awaiting a final bottom in the dollar and a final high in the stock market. In times of transition, like this. It is prudent to stay in cash and listen to what the market has to say, rather than making any rash decisions to "chase the market higher". No new positions will be taken today. Let's wait and see what comes our way next week.

Check out the graph and paragraph about the housing market at the bottom of this post.

Allocation: 100% Cash


Trades I'm pondering:

1) Long U.S. Dollar (UUP)

2) Short Gold (GLD)

3) Short Macy's (M)

4) Short Mylan (MYL)

5) Short Freeport McMoran (FCX)

Monthly Mortgage Rate Resets

The second wave of the housing crisis is upon us. Notice in the graph how the current stock market rally has taken place as monthly mortgage rate resets have been steadily falling. As of right now we have settled into a bottom in the reset market and mortgage resets will steadily start rising from here. Subprime is over. However the option adjustable rate and alt-a mortgages are going to start resetting to higher rates (reflecting the increased risk of default by most borrowers). This could send the housing market into another tailspin, much like 2007-2008. In my opinion this will be the catalyst for the coming start market crash I have been predicting.

Here is what James J. Saccacio, chief executive officer of RealtyTrac, had to say:

“Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation's foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave. While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A and Option ARMs are spreading the foreclosure flood to more metro areas in 2009”

This news of a shift in the character of foreclosure activity comes precisely in tandem with the beginning of the predictable second wave of the housing market decline. The pleasant lull in the reset schedule is decidedly behind us. As always do your own due diligence on any investment you may make.

Banks that went bust....

Ratigan's Four Simple, Yet Brilliant Proposals On How To Fix The System

Courtesy of Tyler Durden over at ZeroHedge

This must have been one of those "so simple it would never occur to any politician" epiphanies. Four great points by Dylan Ratigan that should immediately be taken up by pro-reform politicians. If Barney Frank deems these are unenforceable or not worthy of his attention, replace Barney Frank immediately.

Dylan's four (shockingly logical) proposals on how to fix the broken financial system:

• Inject transparency, primarily to bring almost $500 trillion in swaps to the forefront.

• Capital to back Wall Street's gambling. It is a guarantee that very few firms will have Goldman's trading pattern each and every quarter.

• Enact a tax-code to discourage short-term profits. "Fortunes should not be made in minutes but over years through the creation of value to society."

• Break up the Too Big To Fail banking institutions. Start with Goldman Sachs. Right Now. Christine Varney, we are still looking at you.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Barack Obama Campaign Contributions

I stumbled onto something today that I find very interesting. Take a look at Barack Obama's top campaign contributors. It just so happens that 6 of the top 20 are banks. 4 of those 6 received Federal bailouts and 3 of them (Citigroup, GE Capital, and UBS AG) are still clinging to life support. Not to mention that UBS AG isn't even an American company and they are using their money to influence American government. Goldman Sachs, Mr. Obama's 2nd place contributor, didn't even need a bailout. They easily could have survived the storm, however, they were the first to be paid when U.S. taxpayers saved AIG (American International Group).

Another part of this list I find interesting is the random law firms (Sidley Austin LLP, Wilmerhale LLP, and Skadden, Arps et al) that contributed to Barack Obama. What do these huge international law firms want to please our new president for? The only clue I have to answer this is what these law firms specialize in. Skadden is an expert in the Troubled Asset Releif Program (TARP), acquisition finance and corporate restructurings.

WilmerHale spells out their specialty right on their website, "Lawyers in WilmerHale’s Corporate Practice are renowned for their work in initial public offerings, venture capital, private equity, mergers and acquisitions, strategic alliances, corporate governance matters and the representation of start-up companies. Clients look to WilmerHale’s Financial Institutions Practice for assistance with complex, challenging federal regulatory and legislative, litigation, enforcement, and business transaction matters that impact them as banks, card issuers, insurance companies, broker dealers, mortgage lenders, database operators, on-line firms and other financial services providers." Their list of clients includes GE Finance, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and UBS. All of these companies have been subject to corporate restructuring, more regulatory reform, or have participated in a merger and acquisition backed by taxpayer money.

Sidley Austin LLP fits right in with the group. "Sidley has a major capital markets practice and a broad transactional practice. Major practice disciplines include corporate and securities, mergers and acquisitions, securitization, intellectual property, funds and other pooled investments, bankruptcy and corporate reorganization, bank and commercial lending, public finance, real estate, project finance, tax and employee benefits, as well as trusts and estates."

Is it a coincidence that the banks who contributed to Barack Obama were bailed out or were the beneficiaries of easy acquisitions? Is it a coincidence that the law firms who contributed to Barack Obama were hired to oversee these acquisitions, help with corporate reorganization, adhearance to TARP, and the implementation of new regulatory reforms? You be the judge!!

Are Our Banks Really Solvent?

"It Could Get Ugly Very Fast": Banking Crisis Grows, FDIC's Funds Shrink

Source: Yahoo! Finance

The failure of some of the nation's largest banks in 2008, including Washington Mutual, Wachovia and IndyMac, and scores of smaller banks this year came at a price. The Federal Deposit Insurance Corporation's fund that insures the country's deposits now stands at $10.4 billion, down from $45.2 billion the prior year.

Jim Bianco, president of Bianco Research in Chicago doesn't believe depositors need worry, because the government has the power of the printing press to make good on FDIC insurance. But he is troubled. "As a taxpayer you should be concerned because this could be another potential drag and possibly a significant drag on the U.S. Treasury and bloat the already record federal deficit," he says, echoing a Wall Street Journal editorial on Tuesday, suggesting the FDIC may be the next entity in need of a bailout.

84 banks have failed this year, and the problem list of banks continues to grow, 416 as of the end of June. "They've got a bunch of huge open ended liabilities should the banking system continue to deteriorate and it could get ugly very, very fast for them," Bianco worries. As we learned during this banking crisis, these things can pick up steam in a hurry.

With that in mind the FDIC is forced to raise their insurance fees, putting added pressure on already struggling smaller and regional banks. Community bankers Bianco speaks to, he claims are being punished twofold. "They're livid about it because a lot of these guys are just barely hanging on and their net incomes are pretty much equal to the fees they have to pay to the FDIC." Plus, the troubles facing the FDIC are a result of toxic assets, "that a lot of community banks never, not only trafficked in, but don't understand to this day."

The economic impact is significant: Without local banks lending, hopes of a V-shaped recovery are slim to none. Community banks are the ones "lending on Main Street USA" and Bianco says, if they're stressed the financial system won't return to full health "for the foreseeable future."