Neocon French President and Zionist Mossad operative Nicolas Sarkozy is a master of disinformation. During the EU meetings on the proposed EU constitution/treaty amendment, Sarkozy made several self-serving statements meant for the ears of the French public, which he knew were non-starters as far as the EU elitist denizens were concerned. He tries to give the appearance that he is a people's man, when he is just another Illuminist lapdog who barks and does tricks at the prompting of the sociopaths who give him his orders. He never misses an opportunity to make political points with jawboning about things that are never going to happen anyway, like trying to allow for government intervention in business instead of having free trade and globalization by sneaking in an amendment that might have allowed for that and which he knew would be rejected. And now he is up to his old tricks. He says that the dollar should not be made into everyone else's problem and that its fall will touch off trade wars and could cause a sudden unwinding of the carry trade when the yen appreciates due to the dollar's decline. He is making these statements to make it look like he is trying to support French business interests and to protect French workers and their jobs by trying to keep the euro as weak as possible, when he knows full well that a weak euro is not a part of the Illuminati's plans. And never mind that the euro has been far too weak against the dollar for quite some time already, and that his masters are the ones who created the yen carry trade so that they could manipulate stocks, bonds, commodities and currencies, with the latest permutation being yen-hits on gold and silver. As we have mentioned previously, the G-7 meeting has already decided the fate of the dollar, abandoning it so Wall Street can be bailed out, and we are already seeing signs of a yen rampage which is currently being used to hit gold, and which will be used at a later date to kill off the stock and bond markets, finish off the dollar and send precious metals skyrocketing as a safe-haven and store of value for the depression that will follow, all as the Illuminati have planned. These events are already in his masters' plans, and Sarkozy knows it. So now when the dollar tanks, the yen goes wild, the various Illuminist factions start warring with one another and the carnage and trade wars begin, Sarkozy will look like a genius to the French people, having warned them that this is what would happen in the event that his demands were ignored. He will say to everyone: "See, I told you so!"
Remember, the elitists would like to push the stock markets up to a blow-off top so they can bail just ahead of the peak using Project Turquoise, buy precious metals with their filthy lucre, and then tank the markets with a giant, carry-trade-killing yen-hit that will send precious metals and their stocks to the moon and that will cause cataclysmic devastation to countless banks and corporations so that the cartel, stuffed to the gills with illicit profits from stocks and precious metals, can scoop everything up for pennies on the dollar. At the same time as the stock and bond markets crash, the dollar will be allowed to crash along with them, thereby sending gold, which they plan to own by the truckload, into the five figure category. We might also add that they will secretly be short on everything but precious metals when the axe finally comes down.
In addition, the sudden destruction of the dollar will not only send precious metals into outer space, but will also yield gargantuan profits for the evil Illuminists who are now setting themselves up to profit from a dollar carry trade and from shorting the dollar based on inside information of when and how far it will fall at various points in time. They will set up the dollar carry trade and dollar shorts in secret using foreign banking subsidiaries and off-shore accounts, and attempt, albeit in vain, to use these profits, and the stock and precious metals profits, to bail themselves out of the graves they have dug for themselves in the cemetery for weapons of mass financial destruction, a/k/a derivatives.
At least this is what they have planned and would like to see happen, but gold and silver are now putting them into an unprecedented "hissey fit" and have sent their collective blood pressure into four figures, which by the way, is also where gold will be shortly. This is because they can not move the stock markets up without a weak yen, and a weak yen means $1,000+ gold and $20+ silver, along with a public stampede into precious metals and their stocks that could push gold and silver to their true values in very short order. So the plans of the Illuminati which we have described above are not likely to happen until after the cartel has lost the precious metals battle, and we believe they will have to settle for much higher gold and silver prices than they had wanted because they can not push stocks up without pushing precious metals up also. They cannot have their cake and eat it too, as the old expression goes, by suppressing precious metals while they simultaneously push the stock markets ever higher. They must be rabid and frothing at the mouth on account of the fact that their own greed and avarice in the derivatives markets have made it impossible for them to do this. Everything was going as planned until August, when the adjustable rate resets, mortgage defaults, subprime debacle, derivatives implosion, credit crunch, risk reassessment and lost market confidence, the end products of Greenspan's Folly, started their long march to destroy everything in their path like General Sherman's march through the South during the Civil War. On July 19, the cartel had the Dow at 14,000.91, spot gold at 675.50 and spot silver at 13.24. This past Friday, November 9, we had a tanking Dow at 13,042.74, spot gold at 832.10 and spot silver at 15.48! OOPS!!!
Just as our Founding Fathers foresaw, gold and silver, which are the only legal money authorized by the US Constitution, are the instruments of financial truth, which have now foiled the international bankers once again. Our forebears were absolute geniuses. Oh, and incidentally, we take great pleasure in being able to inform the cartel that even the profits from all these future machinations will not put a dent in their black hole of derivatives losses, which will be in the hundreds of trillions! This black hole of imploded derivatives, most of which are naked and leveraged to the hilt and which have been caused by the gravitational collapse of a myriad of subprime real estate mortgages and various alphabet follies like CDO's and SIV's, will suck in and devour any and all of their ill-gotten gains without so much as a burp! The cartel, as usual, has completely miscalculated their position, and we just cannot wait for the trials and recriminations to start when Ron Paul becomes the next President of the United States.
This is a requiem for the greatest country in history. The game and being at the top of the heap is history. If we are fortunate we will survive as a second-class power. The world has lost confidence and trust with American leadership. Our central bank, our bankers and Wall Street have screwed central banks, banks and professional investors worldwide with the fraud of bonds consisting of CDOs, collateralized debt obligations, and ABSs, asset backed securities. As a result, foreigners are selling dollar denominated assets including the dollar, Treasuries and Agencies. Foreigners have had it up to the eyeballs.
As a result the dollar is at the lowest level in over 26 years, having dropped to almost 75 last Friday. We had predicted the first stage fall would be to 72 to 75. The dollar also has had to contend with higher gold and silver prices in a manipulated market and higher overall commodity prices for six years. The credit crisis is sending banks, investment banks, mortgage companies and all those who bought CDOs and ABSs into severe losses. There isn’t any good news and worse we see no good news ahead either economically, financially or pertaining to our occupation of Iraq and Afghanistan. On the latter, our government and Congress have sold us out. Incidentally, remember that in the primaries when you vote these incumbents out of office. We are a shadow of our former selves in manufacturing as free trade globalization, offshoring and outsourcing rip our economy to shreds. We have already lost more than 5 million jobs under the reign of George II and transnational elitist conglomerates plan to ship out another 40 million jobs over the next 10 years rendering our citizens to a nation of hamburger flippers and 2nd world status. The Fed, our President, our Congress, corporate America and our labor unions have sold us out to internationalist, new world order Illuminists. We are in debt up to our eyeballs, personally, corporate and governmentally. We have allowed unfair free trade, similar to the period between 1790 and 1800, which almost destroyed our young nation, and today again it is economically and financially destroying our nation.
As the dollar falls we have a slowing economy, a real estate collapse, the worst credit crisis since 1930 and the Great Depression, still mounting debt and another in process stock market collapse. If you are in the stock market get out. We’ve been telling you that for months. Put your 401(k)’s, IRA’s and Roth’s, etc. into gold and silver coins, shares, funds or at worst money market funds.
Inflation is 11.3% and wage increases over the past 7 years are up in total only 5%. That means you have lost more than 5% of your purchasing power annually. The main reason for this is the unbridled invasion of illegal aliens, which our President and Congress refuse to do anything about. Most of them want to reward these lawbreakers and give them amnesty and eventually citizenship, so they can acquire their votes and profit from their slave labor.
There are tens of thousands empty homes across our nation and homebuilders keep building, because our government lies and tells them everything is going to be all right. They tell them CPI and PPI are under 3% and unemployment is 4.6%, simply ludicrous, and their corporate chieftains believe it. They will catch on eventually. Adjustable rate mortgage owners cannot get new loans. That is more than 60% of them, because lenders have changed the rules and 70% of new buyers are being turned down. Few jumbo loans are being made as credit comes to a virtual standstill. Twenty-five percent of jobs are in construction or related to building and real estate. Close to 500,000 people have already lost their jobs, including more than 300,000 illegal aliens. Most of the illegals are out of work and the rest are in service jobs paying $10.00 an hour or less.
We have a $6 trillion CDO and MBS overhang worth $0.30 on the dollar. We have $2.6 trillion in CDOs and MBS that are ALT-A and subprime. In the latter group 50% plus will go into foreclosure. Some big banks and Wall Street firms are going under unless the Fed props them up, which if they do is very inflationary. Without that we see 15% inflation next year. These CDOs, MBSs and ABSs are rampant throughout the US and world financial system. There are going to be trillions of dollars in losses everywhere, most of which will be in the US. There is no way this catastrophe can be stopped. It can be delayed, but not stopped. The “Debt Bomb” is unraveling. Citigroup and Merrill Lynch are broke and many others will join them. This is going to be a financial bloodbath as inflation goes ballistic and the economy goes into deep recession.
This week FAS157 begins and all securities have to be marked to the market. No more marking to make believe. Recognized losses are already at $50 billion and that is just the beginning. By the next presidential election the Dow will have fallen from 14,000 to 7,268. Contagion will rage in credit and financial markets worldwide, nothing financial will be spared save gold and silver as stagflation reigns. We have prepared you with the truth. Use it to protect yourselves. Get out of debt, prepare for social chaos and have gold and silver related assets. Systemic risk heightens each and every day. This is the big one, much bigger than the 1930s. We are faced with major structural issues plaguing credit and financial markets. The securitization process is dead if for no other reason that banks no longer trust each other and won’t lend to each other for more than a week. It is no wonder the elitists have suppressed gold prices since 1988 and for 1-3/4 years the Fed has refused to publish M3, they knew exactly what was coming. Inflation will spiral out of control in 2008 and that spiral will last for 2 to 4 years and then completely collapse. We know this is not a happy story, but we only deal in truth and reality. You should do everything in your power to make sure Ron Paul is elected president and that we can clear all the incumbents in Congress out of office. If we can do that we can survive. If we cannot, it will be chaos.
This is a worldwide problem and inflation is booming worldwide. In the US 11.3%. The following are official figures: Vietnam 14%, Latvia 13%, UAE 9.3%, Russia 9%, Kazakhstan 8.6%, Chile 6.5%, China 6.2%, Romania 6%, Saudi Arabia 4.9% and the Eurozone 2.6%.
Betrayal best describes what US Illuminists have done to other Illuminists worldwide. We do not believe laying off the CDO and ABS problems to their comrades was part of the deal. That was in part why French President Nicolas Sarkozy, who is controlled by the Rothschilds, attacked what US Illuminist interests had done and warned Bush and Congress not to enact tariffs on foreign goods and services. The real estate CDO and ABS fraud was probably the biggest financial scam in history. Now we are seeing a backlash of those deceived are dumping the dollar and in part buying gold and silver. This means banking distress is only beginning and will last for sometime to come. We are about to enter the same trap Japan entered in 1992, and has ever since been in depression. If for no other reason then that they won’t purge the system. Japan had the US to help them; the US has nobody – not after what they’ve done.
If you want a strong signal that recession is upon us consider that truck sales have fallen 30% to 45% each month since March compared to a year earlier. Another signal is that the production index has fallen from 58.3 to 46.9 and new orders fell from 56.2 to 53.9. Recession is in full flower. What else can be expected when we have a net external debt position of between $5.6 and $7 trillion? The reason for the range is that the Treasury and the Commerce Department figures are bogus.
The world should have never allowed the US to pile up the colossal debt that it has. Out of balance are the trade balance, the current account balance and a monstrous fiscal deficit. For 15 years corporations and government have been rolling short term paper. Now consumers are borrowing on credit cards to pay their mortgages and maintain their living standards. American Illuminists refuse to put their financial house in order. They have absolutely no intention of doing so. How could American banks be so dumb as to commit 59% of their capital to real estate loans? Those average houses have fallen from a peak of $262,000 in March to $211,700 in September. This is a 20% drop and we still have 15% to 20% to go. Many of these loans are in negative equity already and hundreds of thousands have been foreclosed. That means when they are sold the banks lose money, which comes directly out of bank capital. Banks can go bankrupt. That is $2.6 trillion in mortgages. If only half go under that is $1.3 trillion or half of the entire capital in the commercial banking system. You probably were unaware of it, but in August and September companies like Washington Mutual and Countrywide borrowed $163 billion from the Fed. Plus $1.2 trillion in commercial paper is frozen. The banks are lending companies that money as well. The reason is lenders won’t lend on commercial paper that is collateralized by CDOs and ABSs. Put the two together and you have a mega liquidity problem. We believe Citicorp and Merrill Lynch have already reached that stage and the Fed is propping them up.
Commercial paper is already down more than $360 billion. The Fed via the banks using fractional banking via the Fed discount window now supplies those funds. It is obvious that the financial system has serious problems and a giant salvage operation is in progress politically and financially. Needless to say, America’s problems affect the world. That is because of all the CDO, MBS and ABS’s that foreigners have bought and because the US dollar is the world’s reserve currency. Financial forces in the US have abandoned the dollar and thus a run is taking place against the dollar. We forecasted this when the dollar was 92 on the USDX. Today it is closing in on 75 with no end as yet in sight.
The bankers’ backup fund is on its way in an abbreviated form via Citigroup, P Morgan Chase and Bank of America. We do not at this writing have any details. The fund supposedly will be operating in January. These three banks are going to apparently invite 60 other banks to help cover up their massive losses. Needless to say, the credit will be supplied by the Fed. The banks will say it is their money and, of course, it isn’t. The fund would not rescue troubled SIVs, only lead to the more orderly demise. The big troubled banks will be bailed out by other banks as funded and proscribed by the Fed. Again the elitist banks are buying time and short circuiting bankruptcy. This move will create massive inflation. The fund’s organizers say it is intended to avoid a severe credit market disruption. We call it a collapse of the financial system. This will allow the SIV’s to be sold off piece-by-piece, allowing time for recovery of those assets. This is totally improbable. These assets will never recover. They were in part worthless to start with. The idea that this proposed fund could help thaw the frozen market for asset-backed securities by establishing a ready buyer, even if no SIV uses it, is ludicrous. Few investors will touch this toxic waste – ever. What we are going to see is acceleration in the pace of asset-backed defaults and troubles. This is because the contagion spreads through linked investments, such as CDO’s holding asset backed securities. When the structures start to fold, it accelerates very quickly. Banks will be forced to change business models. If people cannot securitize their loans they will stop writing them. That will freeze the entire real estate industry.
This past weekend almost 300 homes were auctioned off in Massachusetts. It was a Countrywide Financial auction. Most homes sold for about 40% off July 2004 prices and most need work.
Real Estate Disposition will sell 1,000 homes in Houston, Dallas, Phoenix and Las Vegas in December. Countrywide, Bear Stearns and Wells Fargo own the houses. Auctions are scenes you will see every month for the next few years.
Countrywide President, Angelo Mozilo, at a presentation at the Milken Institute a few weeks ago said, “He and his company were victims of financial forces beyond their control.” He explained that borrowers forced lenders like Countrywide to lower mortgage standards. The industry faced special pressure from minority advocates to help people buy homes.
This is the first admission by a mortgage lender that banks and perhaps the Treasury or the Fed had pressured lenders like Countrywide to relax standards. The minority demands were aided and abetted by politicians. Mozilo stated it is now time for the government to increase loan limits at Fannie Mae and Freddie Mac. Countrywide says it bent over backwards as the largest lender to Hispanics, African-Americans and Asians. As it turns out most of these borrowers should have never received loans. Mozilo decried the practices of competitors in 2005 and 2006, but emulated them to keep and expand market shares. These telltale signs also told Mozilo that all this would end up badly and that is why he ended up selling Countrywide stock. He was assisted in building this dream by Sir Alan Greenspan, then Chairman of the Fed, who extolled the virtues of the ARM, adjustable rate mortgage, and said everyone should have one. This madness was officially sanctioned by the Fed and they supplied a 1% prime rate and 3-1/4% ARM teaser mortgages to make it all happen. Mozilo took full advantage by getting bigger and using vertical integration. That is capturing ancillary business to further fatten profits. Mozilo played the political aspects to the hilt with many connected and well known people joining his board. Mozilo went to the edge and it looks like he may have fallen over.
The SEC is investigating Mozilo for selling his shares into a market where his own firm was the buyer. The company borrowed $1.5 billion in badly needed capital to purchase 38.6 million shares for $39 each. This has been a common practice among executives to enrich themselves at shareholder expense. If the SEC were to find this inappropriate, which it is, then Angelo would have to give the profits back to the company. That could happen, and should happen because he knew exactly what was going on. It will also affect thousands of other executives who did the same thing. There is no more blatant conflict of interest.
Record numbers of homeowners are defaulting on their mortgages and as they do so, questionable practices among lenders are coming to light in bankruptcy courts, leading lawyers to contend that companies instigating foreclosures may be taking advantage of the imperiled borrower, because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage services who collect loan payments are profiting from foreclosures.
Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount the borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.
Questionable fees have been added to almost 50% of loans in Chapter 13 bankruptcy. The adds were mostly less than $200 each, but collectively they raise millions of dollars for loan servicers at a time when the other side of the business, mortgage origination is in the tank.
One case showed the borrower owing $1 million when in fact he owed $60,000. A judge in Louisiana is considering an award for sanctions against Wells Fargo in a case in which the bank assessed improper fees and charges that added more than $24,000 to a borrower’s loan.
The Chapter 13 trustee in Pittsburg asked the court to sanction Countrywide because they lost or destroyed more than $500,000 in checks paid by homeowners. This was the basis for Countrywide to levy charges on the borrowers, including late fees and legal costs. Countrywide then lied in court. At Countrywide, $285 million came from late fees last year, up 20% from 2005. Late fees accounted for 7.5% of servicing revenue.
These servicers are also hitting borrowers after bankruptcy with fees never filed in court and never approved. The horror stories go on and on – what crooks.
The day of a house being an ATM machine or a piggybank is over. From 2004 through 2006, Americans pulled about $840 billion a year out of residential real estate, via sales, home equity lines of credit and refinanced mortgages. That financed $310 billion a year in personal consumption. In the first half of this year, equity withdrawals were down 15% versus the average for the last 3 years and consumption supported by such funds plunged nearly one-fourth. The size of withdrawals fell even more sharply to about 1/3 below the level of late last year.
Only a year ago, money taken out of houses was still more than 9% of the nation’s disposable income. By this fall, it had dropped to about 5%, a difference of about $350 billion a year. We are already in recession. Less equity to draw against and higher food and energy prices are already hurting retailers. A fall of 2% in consumption would be big enough to trigger further recession. Seventy percent to 72% of GDP is by consumers. During this recession we see that revisiting to the long-term norm of 64.5%.
Just as an example of how important consumer spending and equity withdrawals have been in Nevada and California home-equity finance was about 20% of all disposable income at the end of last year. Median prices are now down 15% from the peak and are headed for a 40% to 60% correction. Store sales in Nevada are off 10% to 35%.
We are short Washington Mutual (WAMU) albeit late in the game. We believe WAMU could go under. Their bad loan problems are spreading out of subprime mortgages and into other types of loans. If NY AG Cuomo’s allegations are true; WAMU could be holding mortgages on properties that are worth a lot less than its balance sheet says. Credit crunch fears are not going to go away soon, bad loans will keep coming for at least 2-1/2 more years and there are also credit card loans, quality mortgages under pressure and commercial real estate loans now under pressure. Issuers of credit are only beginning to talk about problems in these subprime areas. That puts WAMU and Countrywide both in the soup and that is why we are short.
Consumes borrowing increased in September at the smallest pace in 5 months, up 1.8%; April was 1.6%. Revolving credit, which includes credit cards rose 4.4%, also the slowest since April. Non-revolving such as auto loans, rose 0.3%. Total consumer debt rose by $3.75 billion to $2.48 trillion a sharp decrease from a gain of $15.4 billion in August. The experts were again far out of the money having projected a gain of $8.5 billion.
What the House has proved is that they are perfectly willing to be bought off to hell with their own rank-and-file. In terms of economic consequences the new trade pact with Peru is a non-event. The Democrats again joined the Republicans to defeat the will of their own caucus and their constituents. A House for sale. This is why every incumbent has to be defeated in the primaries. The leadership of Nancy Pelosi is a disgrace and it proves again that the Illuminist money behind the scenes still controls it all. As economic conditions continue to deteriorate the Democrats and Pelosi will have plenty to answer for.
Practically speaking foreign governments can do little to protect their currencies and economies against the fall in the dollar. The dollars current slide as we forecast should base out between 72 and 75 and then face an even more violent correction over the next couple of years. Perhaps over the next year. This correction is reminiscent of 1971 when the dollar lost 40% of its value. This time since 2002 the dollar has already lost 40% against the Canadian dollar, 33% versus the euro and 24% versus the pound.
Donald Kerr, the principle deputy director of national intelligence says it is time Americans changed their definition of privacy. He believes that the rights of the federal government are far more important than those of the individual.
It’s no wonder the elitists tried to rally the market on Monday and attacked anything of real value. On Wednesday we get the PPI, and on Thursday the CPI and FAS157. The Illuminists have to be trembling. FAS157 forces all firms to mark their level 3 assets to the real market. No more assumptions and fantasy regarding values.
We have just updated our M3 figures, which shows annual growth up from our earlier estimate of 14.3% to 15.1%. That is the largest increase since 1971.
We see continued underreporting of oil import activity, which caused a more favorable statement of our September trade deficit. Our government reports as they wish whether it has any connection to reality or it doesn’t.
Barron’s referred to “rumors swirling of an informal huddling of Washington and Wall Street heavyweights dubbed the Plunge Protection Team, “that might swoop in with a proposal for pricing debt obligations on bank’s books if investors continue to flinch,” November 2, 2007, page M4.
The Heard on the Street column says HSBC 3rd quarter report on US business could provide an early insight of what may be in store for US mortgage lenders and banks with large holdings tied to subprime mortgages. They say $1 billion and reserves for another $4.5 billion wiping out 14% of the loan portfolio.
Lehman Bros. has downgraded Fannie Mae and Freddie Mac. Fannie’s delinquency trends are worsening in the Midwest, California, Arizona and Nevada.
The good news is that Goldman’s ratio of level 3 assets, at 6.9%, is higher than that of Merrill and Citigroup, both of which took writedowns. Some analysts see that 6.9% at 15%.
CIBC has downgraded its rating on big city banks to underweight.
ETrade has been downgraded to sell from hold at Citi. They see client attrition due to CDO exposure, an SEC inquiry and a deteriorating financial condition. If ETrade goes under it could be a month or two before you could access your account and you may not like your new firm. You can use Schwab or you can contact us for alternative brokers.
The issuance of mortgage-backed securities was off 84% in March to October yoy.
Hillary Clinton was recently asked about her attendance at the 2006 Bilderberger meeting. She laughed uncomfortable declaring that she had no idea what they were talking about at Bilderberger meetings since she wasn’t there.
However, she did acknowledge that Bill Clinton had attended in 1992, but maintained that she herself had never been.
Insiders at the Brookstreet Hotel in Ottawa claim she attended the 2006 meeting for 1 day.
Hillary had already attended the 1997 Bilderberger meeting in Lake Lanier, Georgia as First Lady.
One of her numerous endorsements is one from Lynn forester de Rothschild, wife of Sir Evelyn Rothschild, whose home in Malibu was a block away from ours.
A Hillary Clinton administration would be a clear continuation of the Bilderberg agenda. Bill Clinton was a member of the Trilateral Commission and the CFR and Bilderberg and both clearly are working towards some variant of world socialism. David Rockefeller endorsed Bill Clinton for president after the 1992 Bilderber meeting. They are both one-worlders and not the friends of Americans.
A year ago we projected that 200 major US lenders would have gone bankrupt or be bought out. For 2007 that figure is 182, so we will at least be close.
The latest 10 are Honor State Bank, Diablo Funding Group, Bank of America (wholesale), First Bank Mortgage, Exchange Financial (wholesale), Liberty American Mortgage (wholesale), South Star Mortgage (wholesale), AMC Lending, Citimortgage Correspondent (2nd), ResMae Mortgage and Edgewater Lending Group.
Wait until the SIV’s have to be brought onto balance sheets and FAS 157 and 159 go into affect on Thursday.
Prices for imported goods rose 1.8% in October, the biggest increase since May 2006. Imported petroleum prices rose 6.9%, but prices of other goods gained 0.5%. Export prices rose 0.9% in October, including a 3.9% rise in agricultural prices. Excluding petroleum import prices rose 3.2%. This is a combination of a lower dollar and higher inflation.
Countrywide Financial, one of our shorts, disclosed in a regulatory filing that if its credit ratings fall to junk status, its access to public corporate-debt markets would be severely limited. 4.9% of subprime mortgages are pending foreclosure up from 2.9% yoy.
Redbook retail sales rose 0.3% for the first week of November versus October.
Greg Peters, head of Credit Strategy, at Morgan Stanley says “There is a better than 50% chance that the credit system will come to a grinding halt, because of losses from mortgages.”
The world’s biggest banks and securities firms have written down at least $45 billion in the value of assets linked to subprime mortgages for the third quarter. SIV investment vehicles have defaulted on debt, forcing lenders including Legg Mason, Inc., and Sun Trust banks to prop up their money-market funds to cushion them from possible losses.
This is why the president’s “Working Group on Financial Markets,” and the Fed are running the stock market back up. The risk of systemic shock from the current subprime meltdown is quite large in the near term. Half of the commercial paper market is frozen and the banks are forced to lend directly to business. That credit is created out of thin air by the Fed and given to the banks to lend at 8 to 1.
Other factors alone with credit contraction should put fourth quarterly GDP growth at 1.5% and first quarter GDP at -1%. Do not forget anything under 2% for three quarters running is solid recession. These factors will probably force the Fed to further lower interest rates and send the dollar plunging further. This credit crisis is not going to go away anytime soon. The Fed’s easing and its 15.1% increase in M3, or money and credit, will guarantee 15% inflation in 2008 up from 11.3% in 2007.
Countrywide Financial’s loan fundings in October plunged 48% yoy to $22 billion and subprime loans were virtually nonexistent. Average daily mortgage loan application activity for the month was $1.8 billion, a 34% yoy decrease. The mortgage loan pipeline was $41 billion at October 31st, $20 billion below last year.
The mortgage loan-servicing portfolio continued to grow, reaching $1.47 trillion at the end of the month, up 16% yoy. Banking operations’ assets rose to $106 billion from $83 billion.
After rising for two years, the American Consumer Satisfaction index declined 0.1% to 75.2 from the previous quarter. This could bode ill for retail sales during Christmas.
The US mortgage crisis is deeper and scarier than anyone expected, Tony James, President of Blackstone said, as shares in his private equity group fell on news that its revenues had fallen sharply below expectations in the third quarter. They report a lose of $113 million. This is one of our shorts, down from $38.00 to $22.00, since we set the short.
Moody’s has put $500 million of complex investments based on credit derivatives for a downgrade. They focused on CPDO’s most of which are currently rated AAA, that had been put on review after their net asset values had been hurt by credit-market volatility.
CPDO’s are a leveraged bet on a portfolio of credit default swaps – the derivatives that provide a kind of insurance against non-payment of corporate debt. Two of the deals facing downgrades are from ABN, and the other six are from UBS.
Virtually the only economist that has agreed with us on real estate is Robert Shiller, a Yale University economist, and the co-developer of the S&P/Case Shiller Home Price Indices, who now again agrees with us that declines in home values in the most vulnerable markets will double from here. 2008 he says will be worse than 2007. California, Florida, Nevada and Arizona are the most vulnerable.
The ten-city composite index’s annual decline of 5% in August was the biggest monthly drop since April 1991. The 20-city index fell 4.4%. They expect 2008 to be down 5% again. He looks for a bottom in late 2008 – we see it in late 2009.
Another of our shorts, Home Depot, reported lower profit and cut its full year earnings forecast after the housing slump reduced sales and lumber and lighting products. They just did a $10.7 billion stock buyback as revenue and profits fell. These are real geniuses and with borrowed money to boot. The shares have fallen 29% this year. They plan a further buyback another $12 billion dollars worth. The home market is collapsing and they opened 25 new stores.
The UAE may drop the dirham’s dollar peg to the dollar after the country’s central bank governor indicated a weakening US currency was forcing him to rethink its currency policy. In the past three months the dollar has fallen 7.2% versus the euro and 7.4% versus the yen. In May 2007 Kuwait dropped their dollar peg citing dollar inflation.
The Investors Daily and Techno Metrica Market Intelligence said their IBD/TIPP economic optimism index dived to 43.8 from October’s 47.3.
The October budget deficit was $55.6 billion, a year ago it was $49.3.
September pending home sales were up 0.2%, the previous number was -6.5%.
Fitch has downgraded $37.3 billion in global CDOs.
The Commercial Mortgage Alert, a trade publication says that the issuance of commercial-mortgage-backed securities fell to $6.3 billion in October, down 84% from the peak record of $38.5 billion in March. The paper adds the sharp construction is particularly concerning when considering that these securities have provided an estimated 40-60 percent of funding for new commercial property purchases in recent years – prices leveled off or even fell in September, after rising 14% in the 12 months through August. We see commercial real estate prices falling 10% to 15% next year. The credit crisis is raising the cost of commercial mortgage borrowing, as the spread on AAA-rated CMBS has more than doubled since June, reaching its highest level since October 1998.
It is becoming very obvious to professionals that government-linked bodies are increasingly providing the funding for home loans and taking on the risk of default. As this trend accelerates the American public won’t know what is being done. The US taxpayer will be expected to pay the costs. This is a public funded bailout and the public knows nothing about it.
Contrary to the rumor of more oil production on Monday, the Saudi oil minister Ali Naimi said there will not be any discussion by OPEC officials on the short-term supply and demand dynamics in the oil market at this weekend’s Riyadh Summit. The previous announcement was totally bogus, which took oil down $5.00 a barrel and started a major slide.
The US Department of Energy expects the price of gasoline to rise $0.20 a gallon by Christmas If OPEC does not increase production, which they have just said they won’t do, then prices could climb higher. They expect December prices to hold through March.
The farm bill before the Senate authorizes about $10 billion in new subsidies, price guarantees and disaster aid in the next decade, as farmers report record profits. The bill is more lavish than the House version and a continuum of a policy to enrich the rich. This is pure socialism for mostly corporations, which is called corporatist fascism.
One new innovation would pay farmers $15 a year for each eligible acre, whether they plant anything or not, while guaranteeing them an additional payment if crop revenues in their state fall short of the norm. Another factor is the runaway growth in the food stamp program – another form of socialism, which is also funded by the bill. The number of recipients has jumped from 19 million in 2002 to 27 million, boosting 10-year cost estimates by $200 billion. These programs are highly wasteful. It is no wonder 1/3rd of American workers do not file with the IRS.
We see a stock market that over the next six to 12 months could easily trade in the Dow are of 9,000 to 10,400. If you are in the general market, not gold, silver and uranium shares, you should consider getting out. There has never been a market with more risk of which none of that risk is priced in. From here on out the affects of FAS 157 and 159 will have a devastating affect on corporate balance sheets. Even money market funds will not be spared. Legg Mason, the second largest publicly traded US mutual fund company has already injected $338 million into three funds to save them losses. They have $10.7 billion in SIVs, representing 6% of its $167 billion in money-market funds. That paper is worth $3.21 billion. Where is Legg Mason going to get $7.5 billion to cover those losses? Nowhere – it is impossible. Check your money market funds and if they have CDOs, MBSs, ABSs, or SIVs get out and go to Swiss franc government bonds. E-trade has a possible loss of $1.8 billion that cannot hope to produce – get out – go to another broker. Consumer confidence is at its lowest level in two years.
Boston Scientific has begun laying off 2,300 workers.
Stalking horse for the neocons Fed Thompson wants a 1 million-member military ground force and more funding to equip and care for service members and veterans.
HSBC will take a $3.4 billion charge from its US losses.
The Iraq-Afghanistan Wars will cost $1.6 trillion says a new report by Congress’ Joint Economic Committee. That is double what the Bush administration has requested.
Bank of America will spend $600 million to prop up their money market funds to prevent ratings agencies from downgrading the funds, as the credit crisis spreads through the financial system. They put toxic garbage into the funds to get a higher yield.
State-owned sovereign wealth funds are beginning to diversify their investments into commodities, gold and silver. They want to use commodities, and particularly gold, as a hedge against US dollar weakness.
Credit Suisse is writing off $125 million from CDOs and SIVs.
Bear Stearns will write down $1.2 billion in the fourth quarter due to CDO, ABS and SIV losses.