Saturday, February 27, 2010

It All Comes Out in the Wash...

It all comes out in the wash... at least that is how it is supposed to be. We put it all in the machine, allow water to scald the fabrics, specially designed detergents to penetrate the dirt and stains on our fabrics, grinding and twisting of machines, and most importantly the rinse cycle to wash away all the filthy water...

I believe that our economy is stuck somewhere in the wash cycle, and has yet to rinse itself clean. Several troubling reports seem to reitterate this issue: 

For instance the New York Times ran a story (on the Eve of over 1.1 million Americans losing their unemployment benefits) and slowly ebbing from middle class to wokring class poor. In this story, anecdotal evidence was provided about those who have lost jobs, exhausted savings, and are behind in their mortgages. Compounding this dilema was the duration of this recession, and general lack of belief in relief.

As President Obama rolled out his latest version of a mortgage relief plan, it seemed to concentrate the bulk of its efforts on states that have seen a 20% or more decline in property values. Of course, Florida, Texas, California, Nevada, and Arizona headed the list for relief. However, it is safe to say that this plan, at the very least is short-sighted in that it only addresses states which seemed to have benefitted from the largest run-up in property values, while neglecting states in the heartland like Pennsylvania, Ohio, and Ilinois which are suffering from an abnormaly high rate of foreclosures. Citing that negative equity is the greatest drag on our economy, CNN reported most homeowners are not at risf of bankruptcy if they are 1.  Not planning on selling their house.  2.  Can currently afford their bills. 

Couple these stories with some of the latest revelations on a Goldman Sachs' Greek Toga Party, AIG counter-party bailouts for banks, and Tim Geithner's thinning smoke screen that is rising to show a new degree of ugliness, and it makes Robert Prechter of Elliott Wave International appear to be a prophet.

To readers, Pretcher alludes to a simple remedy... a Federal Reserve that prints so much money that inflation sets in... or a prolonged time period where the Federal Reserve will work feverishly to repair its balance sheet, and tighten monetary policy. Prechter makes the case that the U.S. dollar will strengthen in value, at the expense of credit... metal stocks, and the economy. And if Prechter's threory on a rinse cycle comes to fruition, then it is time to batten down the hatches.  Let me know what you think!  


Friday, February 12, 2010

"Greece" your Surfboard?

Greece appears to be on the brink of receiving another bailout for a failed financial system. Socialism failed Greece... plain and simple. Sure Greece calls itself a democracy, but in reality socialism dominates their poiltical and economic landscape. Maybe an over-reliance on government help... maybe an under-reliance on self-sufficieny. Whatever it is, the Greeks are going hat-in-hand to the European Central Bank for bailout funds. Greece, while a minor player in total economic output (approximately 2-3% of entire EU), there is a reason to quell rising fears of political and social unrest.

This familiar theme will soon echo through California. According to a Nouriel Roubini interview this morning, there is little to no doubt that Treasury and Federal Reserve will come to their aid. Make no doubt about it, when Arnold Schwarzenager comes to D.C. looking for help, he will get whatever he needs. After all, unlike Greece's anemic contribution to the EU, California represents 15% of U.S. GDP. And that figure is nothing to sneeze at!!! This brings us back to a familiar theme. The U.S. government has benefitted from being a reserve currency. It can print money at will, and will more than likely print its way out of this situation as well. Bernanke, Geithner, and friends will assure everyone that everything is o.k..

According to R Seetharaman of Doha Bank, a more sinister force is at work. He believes the massive amount of de-leveraging that has taken place, specifically in various debt vehicles has done nothing more that transfer wealth from Main Street to Wall Street. Toxic assets infected everyone throughout the world. Mr. Seetharaman suggested that the only way to fix this mess is to build an economic system where everyone plays by the same rules. He believes the crisis is much more that a economic crisis, it is a crisis in human nature. Seetharaman believes the United Nations must be empowered to solve the crisis. Interestingly enough, he also believes in the massive power of the United States as a world leader underscoring its $13 trillion dollar economy!

Click Here for the Link

Wednesday, February 10, 2010

Taxpayer Taken... Ode on a Grecian...

Taxpayer Taken for $2.3 Billion...
The U.S. Treasury (funded by U.S. taxpayers) was on the receving end of worthless warrants as CIT failed to meet"contingent rights" listed in its reorganization plan. There is little to no coincidence that former Merrill Lynch CEO John Thain's appointment riled up moralists who remember shadowy deals that went down on the eve before Bank of America took them over. But hey, if you have a funding source like TARP available, it is much easier to forgive and forget... Afterall, who is going fess up for TARP? I wonder if these loan deals would have been so easily forgiven if the mafia was breaking bones over late payments?

Ode on a Grecian Urn
English poet John Keats did recognize the timeless beauty of a Grecian Urn. But, it was a universal truth of that Grecian Urn that brought it's true beauty. The European Union's Central Bank is facing a truth that is not beautiful. Iceland, Irealnd, Spain, Portugal, and now Greece are bankrupt. Just when it appeared that European markets were on the mend, Greece's soverign debt became the latest story on a continent that continues to deteriorate. One analyst commented along the lines that this debt is now confined to Lower Europe. However, it is becoming more apparant that soverign debt problems are actually spreading. The question is how much longer can the ECB continue to bailout countires that are unable to service runaway spending and debt? This too should serve as a stinging reminder to the liberals who often confuse liabilities with assets. Programs that do not generate wealth will in the end, destroy good economies along with the bad one. That is one reason the Europeans should re-evaluate those nations who are part of the EU.

'Beauty is truth, truth beauty,—that is all
Ye know on earth, and all ye need to know.' John Keats

Stock Watch
Last year, this investor parked a lion's share of one retirement account in Treasury Bills. Sure, I missed the "big rally" from March 09 lows to January 2010 highs. But, I have learned that Vangaurd's Precious Metals and Mining would have actually lost me money had I ventured to re-enter that VGPMX position. As for now, I will keep those monies parked in Treasury Bills.

D or Dominion Natural Resources has been an interesting story. I hold a strong position and have played the dividend game here. Oil and gas interests, while out of favor with the current administration, will remain a significant part of the energy for years to come. There has even been talk that the "over-drilling" which took place during the last oil boom has in-fact created significant natural gas supplies and cheap prices. This will be a simple relation of expediency as opposed to desire.

NEOP still remains on the move. Reviews at a NYC Investors Conference gave NEOP high ratings, particularly on Lymphoseek and Rigs. Either one of these breakouts could push this little dandy into the ozone layer.

I do like SLV at some time int he future... I will look to re-enter this position in the 14.00 range.