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.

Michael Jackson and the Federal Government... Coming to a Town Near You...

Michael Jackson and the Federal Government
O.K., I'll admit it. I grew up in the 80's and listened to some of Michael Jackson's music... How couldn't you? Michael Jackson in the 80's was like Elvis in the 50s, The Beatles in the 60s, and The Rolling Stone in the 70s. But enough of the stardom talk. After all singers come and singers go... and while each have entertained us in a unique and revolutionary way, there is always another star waiting to take the spotlight.

We can make several observations about Michael Jackson:

1. MJ had a name the preceded him; and a brand name has a value unto itself.
2. MJ owned a considerable amount of property rights from artistic property (see Jackson Five, Beatles, and Michael Jackson)... and a ton of other collectibles.
3. MJ was on the verge of bankruptcy because his liabilities far exceeded his assets... Most reasonable assets list his debt at $500,000,000.

To be sure, there is a long list of creditors that will be left holding the bag once Michael Jackson's estate is settled. Undoubtedly, someone will own the Neverland Ranch, someone else will own the property rights to Billy Jean, and who knows what will happen to the Beatles music. But that is part of the problem when you are in debt... your creditors are not necessarily your friends... and in the end, their need to collect on a debt will supersede any final wishes Jackson had for his estate. One of his creditors went as far as to book a 50 date tour for Jackson that was to start in the near future... Only having insurance on 10 of the 50 dates as no shows, these speculators will be at the bottom of a very long list.

The Office of Accounting released a statistic today that the United States will exceed 100% of GDP by 2023. That means that our country will be officially broke by that date. Some of the more hawkish figures have the date moved up approximately three years to 2020. During WWII, we sold War Bonds to help raise money to pay for the war. This time around, we are in way over our heads, as governments like China, Russia, and Saudi Arabia are holding our debt. And just like Michael Jackson found out, your creditors are not always your friends... and in the end, they own you!!!

I do however, believe that there are workable solutions to our problems... tough decisions, no doubt. Hard decisions, absolutely. Painful choices, for sure. And to be quite frank, I am not so certain that Congress nor the American people will have the stomach to make the necessary changes until a crisis actually hits... By then, a lot of the difficult decisions will be made out of pure necessity. Hopefully, we can all learn a lesson from Michael Jackson.

Coming to a Town Near You...
According to the National Coalition Against Legalized Gambling, the United States is experiencing its third great gambling wave. The first wave took place during the 1840s to 60 with the opening of the Wild West, and riverboat runs up and down the Mississippi. The second great wave took place from 1910 to approximately 1929 where mafia families pushed numbers rackets in factories, and gambling halls in speak easies. Now the 1990's to 2010s marks the third great gambling wave in the United States.

I write this from the view point of an Ohioan who has voted against legalized gambling on three separate ballot issues. It is not that I do not like gambling, it is more that I do not like gambling in my back yard. Look at the states that have legalized casino gambling, and at the root of every casino you will find rich and opportunistic millionaires trying to become billionaires on someone else's dime.

In Ohio, Governor Stickland who was once a minister, social worker, Congressman, and now governor is trying to pass legislation that will have the state legislature create a slots in race track bill and simply sing it into law. This is the equivalent of political suicide. The governor recognizes that casinos are not good for the state, but he is desperate to find money... any money to keep Ohio away from the time of fiscal meltdown that is taking place in California.

Fellow blogger Ax (www.bigbigbet.blogspot.com) observed the impact a casino in Philadelphia will have on Atlantic City. The impact will be devastating. Yet, I will also remind readers that any government that is reliant on seeing its citizens lose money in casinos, is a government that is doomed to fail. Call me a conservative... call me a do-gooder... and yes, call me a guy who does not mind a game of chance... But a casino on every street corner is not the American Dream.

WYNN and MCRI still very much remain on my short list. MCRI in particular lost approximately 9% of its value today. EFU, SRS, and TM still remain on the short list.

SLV and D are long. Possibly FAZ when it breeches 4.5.

The Enemy Within... The Case for Gold, Silver, and a Short positions for T-Bills... And the Great Flood...

Enemy Within
Things crawl in the darkness
That imagination spins
Needles at your nerve ends
Crawl like spiders on your skin

Pa pa pa pounding in your temples
And a surge of adrenaline
Every muscle tense to fence the enemy within

I'm not giving in to security under pressure
I'm not missing out on the promise of adventure
I'm not giving up on implausible dreams
Experience to extremes (1)

More and more people are concerned not so much of an enemy army invading the United States. Some suggest that the real enemy is within our own borders. Consider these points and the ramifications they "could" have on the United States' AAA bond rating, taxpayers, and anyone who holds dollar-based investments.

Obama's Plan...
According to one Bloomberg source, a cornerstone in Obama's bank bailout is a promise that banks must expand lending programs. "President Barack Obama will require banks to boost lending to consumers and companies in return for taxpayer aid from the $700 billion bailout fund, in a departure from Bush administration policy, a key lawmaker Barney Frank said." (2) The article goes on to state that this is a "lesson" learned from the first TARP program which has had little to no impact, save an increase in bank balance sheets. If the Federal government is looking for lessons learned, I can offer one other suggestion... Do not saddle our nation, taxpayers, and future generations with debts which equate to corporate welfare. Secondly, it is time to impeach any and all members of Congress who believe a quid pro quo plan where banks dump toxic assets for a promise to "loan" money is completely asinine. The only... only logical solution would be a capitalization program for good banks that would pick over the remains of bad banks, and allow the "investors" in bad bank assets to suffer the consequences of a failed capital adventure. Unfortunately, that scenario will never play out due to the trillions of dollars the Federal Reserve has already floated to these bad banks. (3) It is a systemic problem where the FED (whoever they really are) have dictated a policy that could well spell doom to the American taxpayer.

To further this point, it is helpful to consider a chart that demonstrates government spending that is, has, and will continue to spiral out-of-control. The first chart (courtesy of the St. Louis Federal Reserve)demonstrates Federal spending up to 2008.


The next chart compares current spending to all previous levels.


Money has been flowing into U.S. Treasury Bills due to a preconceived notion that the United States' government... its' debt... and the powers that be... are the most stable in the world. The flight to quality has in many ways demonstrated that as bad as the current perception of the U.S. economy is, there are plenty of governments throughout the world that are floundering. This is not to say the T-Bills are the best place to invest... The flight to quality has come at a price where the yield curve has become negative. This brings up a second case as what the little investor like us should do???

While gold has made a nice run, if could well be finding key support at the $900.00 support level. It that support is found, gold(GLD) could well move into the $1300-$1400.00 level out of speculation, fear, and a hedge against the dollar and yen currencies. Silver(SLV) is a poor man's gold, and could easily double in price from its current $11.50 price. Treasury Bills with a negative yield... and continued issuance face an over-supply for a product that has less world demand. Should this scenario play out, it means that the world will seek other places for money security. The flight to quality suggests that money is flying out of T-Bills to other investments. ETFs that short these thing -- TBT is 2x short 20yr treasuries, PST is 2x short 10yr treasuries... TIP may be another option.

The Great Flood
One of my favorite Old Testament stories is Noah's Ark. God saw Noah as a faithful servant, and righteous man. However, the world was filled with evil and idolatry. Once Noah's Ark was prepared, a Great Flood which whipped out life on the planet (save Noah's Ark) was God's way of cleansing the planet. When the waters subsided, it allowed man to rebuild and start over.

In some ways, the current financial crisis at the bare minimum reeks of inequity. Greed and the lust for things has driven this country into a dire situation. Without a cleansing of the bad executives, bad institutions, and business practices, the United States is setting itself up for a bigger problem later.


Sources Cited
1. http://www.elyrics.net/read/r/rush-lyrics/the-enemy-within-lyrics.html
2. http://bloomberg.com/apps/news?pid=20601068&sid=a8mVjojniVQk&refer=home
3. http://www.biztimes.com/daily/2008/11/10/bloomberg-files-lawsuit-to-disclose-terms-of-federal-bank-loans