Nom de plume: Rivrdog

Waiting on the Street

I've become quite the observer of Wall Street in the past week or so, primarily because they've become the premier newsmaker in the nation, but partly because I've been in the recovery mode for the 'ol bod after my recent surgeries, etc, and have a lot of sit-around time, as opposed to boat-maintenance time, for example.

So I've been watching mostly CNBC on the telly. I don't get Fox Financial or I would watch that. CNBC is OK, since what you want is the tickers, not the blather, anyway.

So, the nation has entered an economic meltdown and I watched the process. Here's why yours truly thinks that the meltdown is happening.

1. Overpriced real estate. Due primarily to demand, but also to greed, the price of real estate managed to get at least 30% too high in the past decade or so. There are a few places where that didn't happen, mostly in the South.
2. Failure of the Street to police itself. The "derivatives" (stock and commodity derivatives) market, which is a pure gambling empire, took over the Street as surely as Al Capone took over the crime empire in Chicago back in the 1920's. Actually, the Street takeover could have been engineered by Capone. Aside from bodies floating in the East River, things were done about the same in both takeovers. Derivatives, of course, like criminal instruments of investment (crack cocaine, prostitution), are glamorous and took money from actual equity investment in business ventures.
3. Overextension of credit availability. I'm an average Joe, but if I applied for every credit card I was offered, I could have leveraged maybe $200,000 in short-term credit before I would have been cut off. Thirty years ago I couldn't have gotten more than $5,000. I KNOW (wife is a retired credit collections agent) that folks of far LESS creditworthiness were offered almost equal amounts in the hundreds of thousands. The mortgage banks USED to apply a general 25% rule to mortgages: your mortgage payments couldn't exceed 25% of your take-home pay. While that rule was applied, the mortgage industry was safe (I know this because my first wife's father was a mortgage banker).
4. Government hands-off policy. Government, of both flavors, has kept a blind eye to the Street, contenting itself with only figuring out how to tax the trillions in paper profits made on derivatives trading. It hasn't tried (before the current crisis) to regulate derivatives trading itself.
5. Bond rating agency malfeasance. If an "ugly" mortgage contract is drawn up (ugly meaning too much money granted to too poor a credit risk), the resale or assignment of that mortgage paper should be of GREAT interest to Moody's or whichever other bond-rating agency surveys the quality of investments for financial houses. The rule which SHOULD have been applied is the "one bad apple CAN spoil the whole bunch" rule, because if just one of these "toxic" mortgages exists in a package of say, ten others, that package itself becomes "toxic", and a poor investment. Moody's allowed itself to be fooled (or worse, might have been PAID to issue phony high ratings) on the investment quality of these mortgage bundles. Instead of rating them as to their potential for total write-down, a factor which could be accurately derived, they rated them on their earning capability. Since the "toxic" mortgages carry higher interest, Moody's and other rated them higher, not lower as they should have been.

So, add it all up and you have the current meltdown. Now, 3 of 4 of MY children, when presented with this fact set at age 10, could have presented the case for re-regulation and the cleansing of the money-changers from the temple. With decades to see the problem unfolding, neither political party, or any of the minor ones, either, came to the conclusion we were all just lemmings headed for the cliff. Even conservative investors, such as pension funds, etc, sucked up to the derivatives gamblers, because making and collecting on the bets was SO easy.

So now we're all in the same bucket of shit and brother, we AREN'T coming out of this smelling like a rose. If the Street breaks it's fall, and it might, because the Asian and European markets just slowed THEIR precipitous declines, we will all breathe sighs of relief. That's too bad, because a true crash to the bottom, probably a loss of at least 20% more of the inflated value of equities, would have been the correct starting place for a recovery.

Look around you, people: there are exactly 5 banks left standing, and two of those (Wells Fargo and Citigroup) aren't standing too tall, and there are TWO investment houses left (none, if you consider the "magic" conversion of both to "bank holding companies"), Goldman Sachs and Morgan Stanley. Two weeks ago there were twice as many major banks, and three times as many investment banks. The hedge fund bankers (primary derivatives traders) haven't been touched.

The Street won't learn a thing from this "correction" as of today. Congress will AGAIN shirk it's duty to save true banking and finance from the crooks in the derivatives houses, and we are all still at risk.

The smart players have prepared for, and embrace the cleansing of the Temple, but from here, it looks like it ain't gonna happen.

Debate blarney

My gudwife made me sit through one of the three times she watched the dee-bate last night. It's rolling off of me like a rainshower off a swimming duck. I just don't care. Then Obama was trying to hammer McCain about meeting with enemy leaders, and he said something about Henry Kissinger as if the old Nixonian was his good buddy. I chuckled, but relapsed into semi-conciousness as I continued to cook dinner. Political stupor.

Late last night, as the spin machines spun up, the depth of that lie grew on several people, even on the MSM, represented here by ABC News:

During the debate, McCain said that Kissinger would not endorse Obama's position that he would meet on a presidential level with leaders of enemy countries. "I guarantee you he would not say that," McCain said of Kissinger.

Obama took issue with McCain's characterization of the former top diplomat's position, but just last week Kissinger said that, while he broadly agrees on the need to negotiate with Iran, he "preferred doing it at the secretary of state level."

...and the blarney goes on, and on, and on....

BTW, did anyone else notice that Obama CONSTANTLY butted in on McCain when he was speaking, and that Leherer NEVER called him on it? I was on a famous debate squad, second team on the Portland State College team of '64 (members of which also won the GE College Bowl that year). If I had butted in as much as Obama, I would have lost enough points to sink the entire squad for the entire year. If it's actually going to be called a debate, use the common rules of debate, the commonest of which is that the moderator actually RUNS the debate, and has a duty of at least reminding participants to remain silent until it's their turn to speak.

A pox on BOTH their houses. May the worst man lose.

Take care what you wish for

I don't know about the youngsters, but at almost 65, I am old enough to have sat at my parent's knees and listened to their personal, first-hand tales of the Great Depression. Those were scary times, when a LOT of folks actually had to worry when their next meal would be and if it would keep them alive.

Now we add in history. The fact is that the Great Depression, as bad as it was, did NOT have a disastrous money-value crash along with it, because the US Dollar was backed by gold in those days, making a nickel always worth a nickel, regardless of what Wall Street or the banks did. What crashed in the Great Depression was lending, speculative investments, and corporate finance systems. The Dollar did not crash.

If we were to have Great Depression 2 in these times, the Dollar would crash along with all of the above. Even if you've been careful and have saved dollars in several forms as I have, you WILL be wiped out because those dollars will shrink drastically in value. Imagine paying $10 for a loaf of bread, and $25 for a gallon of gas, and you would be lucky if inflation got no worse than that. Sure, the gummint would try to make those price rises illegal, but the result of those actions would only be shortages, as bakers of bread and refiners of gasoline couldn't produce their products for the government-mandated price and they would simply shut down production, for if they continued very long, they would be totally out of business quickly.

So, for all of you out there (and until a little while ago I was one of you) who say "let it all crash, not one dime to bail out anyone", remember that it is your life and your family's lives you are willing to degrade or waste by doing nothing.

As I pointed out here, the entire world's economy is not even a house of cards, it is a house of tissue paper, just waiting to collapse, with all the world's major currencies backed by nothing of substance for the most part. If the world figures that out, and panic sets in as everyone tries to gain a survivable position at the expense of everyone else, the entire world's financial systems will fail, all at once or in a cascade. That Depression will not only be Great, it will be unsurvivable for a significant percentage of the world's population. Advanced societies like ours will NOT be immune to starvation, war and disease, we may just last a bit longer than the third-world.

So, when you declare "not one penny for Wall Street or the Banks", you certainly have my sympathy, but barring a WORKABLE government-mandated and regulated solution to this impending disaster, we are doomed to be severely tested, in a situation that not all of you reading this screed will survive.

Pelosi busting...

...is EASY when you have a fine fisk like this one to show folks.

The story of a wild ride...

It's been a long ride out and back from the normal to the paranormal and back to normal.

It started a week ago last Thursday, as I struggled in the tight engine spaces under the Crusader 270 engines in my yacht to install new alternators. In REAL boat engines, this auxiliary equipment is always mounted where it can be serviced from above, but the Crusaders, are, after all, just a Jimmie mouseblock with a different label on it. It WAS a struggle, and it required moving this stiff skeleton into some unusual positions and turning wrenches while bent like that.

The next day, Friday, I put in some similar time under my truck, doing an extensive Fall PM (gofaf). Saturday was supposed to be a day of rest. But I woke up with moderate pain from my recurring lumbar strain. I spend most of the morning moping around on heating pads and my massager, but still felt lousy by game time  (Oregon Vs. Purdue). I made myself watch the awful first half, but then I got that HINT. You don't know why, you just follow the HINT.

I took my temperature and it was almost 103! The lumbar pain had translated all the way out front to my belly, which was now HARD. Call the manager-daughter and we go directly to the ER. They take one look and I am in line for the next ultrasound slot, which confirms I have a large stone somewhere near the the pancreas. It's in a bad area. The AR admits me to a general medical ward, but I'm only there a couple of hours before my blood pressure begins to fall steadily.

Off to the ICU. After the two hours necessary to hook me up to many sensors, I am soon being clucked over by all these grave-looking people in long white coats. The BP still falls. I get prepped for direct infusion (into the lungs) of some "pressor" or other, the ultra-stimulants they give to people whose hearts are shutting down. They decide I'm getting the super-juice when I fall below 80/50, but by then, 12 hours into admission, the tide starts to turn as all the fluids they are infusing begin to swell up the cells, which puts more inter cellular pressure up. I get to soak up all that delightful ambiance of a busy ICU for another day, then I go down to a G.I. room and have this delightful little procedure called ERCP.

And delightful it was, getting a .40 roundball out of my ductwork.

Time to go home?

Of course not! I still have a gall bladder full of stones, and with the bile duct shredded for the previous removal procedure.

I go down to a medical ward to recover, build strength for a REAL gall bladder removal, and get rid of this pesky fever which seems to have developed a mind of it's own. While down there, a Surgeon stops by. Wotta coincidence! It's the same  sawbones who had to dive into my blown-out entrails not once, but TWICE just four years ago. All these good cutters are scheduled out at least two weeks in advance, so I am REAL lucky to get an OR slot the next day (Thursday).

When he gets in with the first laparascope, he sees tissue where there should be voids between the structures. These are "adhesions" or unintended additional attachments of tissue. These are from my two prior belly surgeries. His partner looks at him and suggest that my surgeon finish up by converting to an "open", or traditional operation (another 7" gash in my side to add to the collective prior total of 20". My surgeon  says, "no,  I've slowed this guy down enough, I'm going to finish on the scope". And so he did, and while he was at it, cleared out all of the adhesions from all the previous surgeries,

I go back to the ward, where they discover I'm STILL feverish.

This is getting annoying. It's getting VERY annoying to the hospital staff. I get to visit with all three docs in the Epidemiology Department. The fever stumps them all. It finally goes away last night during the football game, and I got out this morning.

Consider yourselves briefed.

Pray for Galveston, TX

If you have ANY feelings of connection to your God, please pray for the good folks on Galveston Island, TX. The island is facing total annihilation from Hurricane Ike. It has been annihilated before, in the hurricane of 1900, and was rebuilt with a stout seawall, but stout though it may be, it's only 17 feet high, and the storm surge may hit 25 feet, with 30-foot waves overtopping that monster flood.

It doesn't look good, and the minions of government there have said that the evacuation is far from complete. A lot of people could die there tonight and tomorrow. While you're at it, pray for Houston also. The land between Galveston and Houston has a lot of places well under 20 feet elevation, and the Houston Ship Channel (no floodgates on it) will funnel all that storm surge right into the Port of Houston.

The flood event now looks to be potentially worse than Katrina's damage, mainly because there's so much more valuable infrastructure there to be damaged or destroyed.

Who's upside-down now?

OK, you are a yuppie who recently bought a swank condo in the "renewal area" of your city. You're feeling good about yourself, but soon enough, your ARM mortgage topped out, and you can hardly make the payments on it and your Nissan ZX350 each month. You go to your friendly banker for help, completely unaware that his bank is ALSO upside-down.

Don't believe me? How about some stats from an insider. In the best tradition of Jeff Foxworthy, he writes "You know your banking system is unsound when:" and then lists 25 reasons.

It's a fine paper world out there, but there are damn few hard assets to back up all that paper. It now depends COMPLETELY on the "full faith and credit of the United States Treasury."

YOU may have "full faith and credit", but I don't. That's why I have gold as my ONLY investment.

H/T to Concerned American at Western Rifle Shooters

PeeCee turd of the day - 9-11-08

...is unanimously awarded to: (hold your applause, please)

The Mainstream Media and various Muslim leaders in the US.

Facts: it is AT LEAST the second anniversary of the 9-11 attack in a row that the MSM have prominently featured whining Muslims anguishing over how they feel terribly abused with all the focus on remembering the dastardly attacks.

(Loads the Turd Gun and takes careful aim).

BLOOOOOSH. Direct hit.

How DARE these people try to play a "victim card" on this day of remembrance?

For every Muslim who feels abused by our remembrance, allow me to point out the REAL victims of 9-11, not to mention those brave soldiers, sailors and airmen who have since died trying to remove the disease that is radical Muslim extremism from the planet.

I've had my moment of silent contemplation, so now it's time to curse.

F**k you, you spineless ragheads, the whole billion-plus of you who REFUSE to cleanse your ranks of these foul jihadis.

And, F**k you, MSM, for trying to make these spineless ragheads out to be victims.

You want victims? I could show you victims, but I'd better stop here before I say what's REALLY on my mind on 9-11-08.

When the Final Accounting comes, those of the MSM will be counted within the ranks of the enemy, and they will be treated accordingly.

You're with us or you're against us, AND THERE IS NO F**KING MIDDLE GROUND in this war of Islam vs. Civilization.

Yahoo! news blog says election is GOP's to lose

Read this article to get the idea of just how bad it is within the Democratic Party right now. Bear in mind that Politico is a liberal newsblog known for slanting the news to the left. If THEY admit that it's bad, it must REALLY be bad.

"A Washington Post-ABC News poll released this week showed white women swinging hard against the Democratic ticket."

Wow! Just Wow!

If they haven't done so already, the DNC will now pull out all the stops, and turn the campaign over to the Dirty Tricks Dept. I heard on Fox News last night that may already be a possibility, since about 30 DNC operatives, including political-process lawyers, have gotten off of planes in AK in the last two days.

Those operatives will be digging primarily for major dirt on Palin, so we will see in the near-term lots of "breaking news" flashes about things she is supposed to have done to folks up there. Of course, the folks telling those tales to the DNC dirt-diggers won't be interviewed in depth, so we'll never really know just what shade of shady they really are.

I refuse to read the Daily Kos, but count on the DNC to continue prodding that slime-barrel of a news blog to release ALL the unsubstantiated rumor that the DNC folks feed them, and encourage them to make up some. At least Fox will usually name that source, if that is where slime originated from.

The election IS the GOP's to lose now, and if McCain-Palin get by the debates, they have a lock on it.

The debates, if what I've seen so far holds true, will have to feature softball questions for Obama leading directly into his talking points. McCain will have to actually play the moderator and dig at the weak spots in those talking points, he can't count on the debate moderator to ding Obama for weaseling like he's done so far on the Fox interview. As for the Biden-Palin debate, all she needs to do is shut up and let Biden lose it, and lose it he will, because the man simply can NOT stop talking, and he will get very annoyed and blow up when the moderator has to cut him off. Biden has the pedantic style of Ted Kennedy, and just keeps rolling along. I haven't seen much of Palin's style, but she seems to be able to make short statements. The debates are a sound-bite arena, and Biden will lose in that arena simply because he can't so sound bites. Look back, just how many of his sound bites have you seen on TeeVee? Right. Damn few.

The end is in sight, folks, if the RNC keeps it together and doesn't make major gaffes, like Obama just did with the "lipstick on a pig" thing.

What will be fixed?

...with the Government bailout of Freddie Mac and Fannie Mae?

Let's look at the egregious faults of the present mortgage industry, and whether this "fix" will include any of them.

1. Loaning more than the actual market value of the residence. Probably will be fixed. The Feds have never done that, although they do accept some fairly inflated appraisals, and THAT has to stop. The housing market itself will have to be allowed to fully adjust downward to actual value for this to be fully effective, though.

2. Loaning to anyone who walks through the door. Won't be fixed, because it's oh so politically incorrect to refuse EVEN ONE person of color or tranny or whatever a loan. The dot.gov doesn't understand that work ethic, credit and employment history are the ONLY things to base the granting of a mortgage on, but they'd never write THAT in a contract.

3. Adjustable-rate loans. Will probably disappear. The Feds have always loaned fixed-rate, to my knowledge anyway.

4. "Locks". This feature of all new loans in the past 20 years or so gets the banks in trouble. A customer comes in, requests a loan, fills out a pre-application and gets "locked in" on a rate. This discourages the bank from looking critically at the application, since they've sort of agreed to grant it by extending the "lock" privilege. I think it will stay, but be modified into something that doesn't attach any grant privilege. It isn't really necessary for the Feds to have it, since their rates change much less often than does the commercial market.

5. Cash-out. Will probably disappear. The Feds haven't done that before, and shouldn't this time, although if Biden gets his fingers in this pie, being a shill for the "plastic" banks, he will try to put it in.

6. Automatic HELOCs. Homeowner lines of credit will end, at least as an automatic feature of new loans. The commercial banks have already closed most of the HELOCs to new drafts anyway.

Over-all, this picture looks good, if it all shakes out the way I've predicted. It should cure about 60-70 percent of what caused all the previous bad loans. If they fixed #2 above, they could cure it all, but that's not going to be fixed.

Then there's the pork factor. Since the dot.gov just wrote itself and the mortgage banking industry a blank check, there is no reason to expect that the Congress should behave any differently than in the past, and they'll load the program down with pork, not-so-little gifties to various folks who have or will make claim that the end of business for Mac and Mae has hurt them. The pork factor is unknown, and shouldn't hurt the operational fixes that the new program will bring about in the home loan industry, but it WILL cost a bunch, could easily add 30% to the cost of the program, which is already slated to cost $200BN and up.