May 4 2009

S&P 500 up 34 Percent in Less Than 2 Months: S&P 500 went down 38 Percent for all of 2008. So why are we Still Down 42 Percent from the 2007 Peak?

We are witnessing one of the strongest bear market rallies in history.  This kind of market volatility only rears its head during extreme environments.  One quick fact many market watchers will realize is that if you lose 50 percent of your portfolio, you will need to have a 100 percent gain to break even.  How so?  Look at it this way.  Say you have $100 which falls to $50, a 50 percent decline.  A 50 percent increase will only put you up to $75, $25 short of the original $100.  That is why even though the market has rallied a stunning 34 percent in 7 weeks, we are still down 42 percent from the peak reached in August of 2007.

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May 2 2009

FDIC Insures $4.7 Trillion in Deposits with a $13.6 Billion Deposit Insurance Fund. This is Like Going into a Hurricane with a 99 Cent Store Umbrella.

On Friday, three banks failed and the FDIC took them over.  Now this isn’t the big news necessarily.  What it significant is that one of the banks taken over was Silverton Bank of Atlanta, Georgia.  Silverton bank has $4.1 billion in assets and will cost the FDIC $1.3 billion from their dwindling insurance fund.  This will be the costliest bank takeover since U.S. Bank took over Downey Savings and Loan in November of 2008 for a cost of $1.4 billion to the FDIC Insurance Fund.  So how much is left in the fund?  Not much.  In fact, if we throw in Citigroup and Bank of America, two banks that have failed without government support and massive intervention, the fund would be broke.  But let us set those two banks aside and start running the numbers.

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Apr 28 2009

California Loan Modification Scams: Kicking the Financial Can Down the Road. SB 1137 and SBX2 7. Mortgage Cram-Downs Stripped from Rescue Bill. Loan Mods that make your Payment go up.

In another chess move to reward banks and fleece the American public, cram-down legislation was stripped out of the new rescue bill.  This is significant since this was one of the keystones in the new housing agenda.  Yet the banking oligarchy wasn’t pleased with this legislation and applied pressure via lobbying to get this piece out.  This isn’t the first time cram-down legislation has failed.  Remember the Troubled Asset Relief Program?  After the 3 page Paulson memo was voted down in epic fashion, the new legislation actually provided for cram-downs.  However, the final version of the bill once again had cram-downs ripped out.

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Apr 26 2009

20,000 Americans Lose Their Job Each day but we Still Bailout Wall Street and Banks: 4 Charts Highlighting this Historical Financial Crisis. GDP, Inflation, Industrial Production, and Excess Reserves.

Four banks and one credit institution failed on Friday.  This is now becoming a common Friday ritual.  On February 13 four banks were also taken over by the FDIC.  Multiple bank failures on one day are now growing in size.  Yet the FDIC is quickly blazing through their insurance fund and soon, the taxpayer is going to be paying the bill.  The American taxpayer is already bailing out many of the larger financial institutions.  These are the 19 banks included in the smoke and mirrors government stress test.  What a surprise that all banks looked fine especially since the U.S. Treasury allowed banks to self report on many items.  150 people were involved in examining trillions and trillions of dollars in assets.  It was the ultimate bread and circus event for the masses.

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Apr 22 2009

10 Charts Showing a Prolonged Global Recession: Credit Markets, Housing, and Equity Markets point to Lengthy Economic Contraction.

The IMF came out with a global report on the economy in October of 2008.  Since that time, the global economy has deteriorated even further and the IMF has issued another report.  I went ahead and looked at both documents and from what is presented, there is very little reason to believe we will see any stabilization in 2009.  All the talk of a second half recovery would mean that things would need to start picking up on July 1st which doesn’t seem likely with news showing more hits to employment.  Currently, we have 24 million Americans that are unemployed or underemployed and with news that GM won’t be able to make its June 1st payment and plant closures, we have to wonder what is going to happen to their 230,000+ worker force?

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Apr 19 2009

Credit Cards and Auto Loans: $2.5 Trillion Outstanding Consumer Debt. If you can’t find a Qualified Borrower or Buyer still lend the Money.

One of the many problems that led up to the economic crisis was easy access to debt.  This included easy access to home loans, auto loans, and credit cards.  You would have a hard time finding a reputable source that would argue otherwise.  Yet in the latest release of consumer credit data from the Federal Reserve, we see lax lending entering the market once again.  Some of this is being funneled to automotive loans while credit card debt is contracting at a steady pace.  Recent reports show that credit card companies have yanked 8 million credit cards off the market and they are not slowing down.

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Apr 16 2009

Why There will be no other Bubble to Save us from this 40 Year Financial Bubble: From Manufacturing, Technology, and Financial Services. Real Estate Bubble. Drop in Corporate Tax Receipts.

This recession is already the longest since the Great Depression.  Now merely saying that this recession is the longest does not expose the magnitude and depth of the economic damage inflicted on the market.  $11.2 trillion has been wiped off the balance sheet of American households.   In this article I want to examine a few different economic indicators that go beyond the mainstream data points.  It is important to put this recession in context because it will also guide our progress moving forward.

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