Archive for February, 2009

Where the cheats have no shame

Friday, February 27th, 2009

A little off my usual base, but having fun with tax-dodgers Bono and U2, courtesy of, here and here.

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“…so we just had to read more when we saw this news intro on page-one of today’s Irish Times: “U2 singer Bono says he was ’stung’ and ‘hurt’ by criticism of the band moving part of its business to the Netherlands to lessen its tax burden.

Oh, Bono, dear Bono. Is that a tear I see in your eye, behind the wraparound shades? No, maybe not. As the interview with Bono in the newspaper demonstrates yet again, this is indeed a man entirely without shame. And also not too well endowed in the smarts department. His main excuse — all the other corporate entities were doing it — is a childish abdication of moral responsibility. And as another excuse he adds, “I can’t speak up without betraying my relationship with the band — i.e. maybe this wasn’t really my idea but I’ve got to stick with my greedy pals. Well, that’s just low.

But let’s allow Bono to speak for himself. Tax avoidance, he says, is how Ireland got rich:

I can understand how people outside the country wouldn’t understand how Ireland got to its prosperity, but everybody in Ireland knows that there are some very clever people in the Government and in the Revenue who created a financial architecture that prospered the entire nation — it was a way of attracting people to this country who wouldn’t normally do business here. And the financial services brought billions of dollars every year directly to the exchequer.

There’s at least half-truth in what he’s saying: helping rich foreign companies avoid taxes was indeed part of the story of the Celtic Tiger. But Bono is leaving out the moral of the story, something else that “everybody in Ireland knows”: now that this get-rich-quick scheme has collapsed, Ireland is getting poor as precipitously quickly as any country in the developed world. So Bono is justifying U2’s tax-avoidance by comparing it to the Irish ‘financial architecture’ that is now justly regarded as a national scandal, part of what brought more than 100,000 people on to Dublin’s streets to protest last weekend. Oops.”

Oh my, terms like “limousine liberal” do come to mind. It’s easy to call for backing of the struggling poor, until one is asked to pay for it. Apparently it’s easier to pitch pennies to your hobby-horse charities and steal dollars (or in this case Irish punts), all the while calling other folks shameless tightwads for not contributing a school in Africa [maybe 'cos this one in Dublin still needs a bit of work?].

Let’s end off with a joke: Why is the Irish unit of currency called a punt? Because it rhymes with “bank manager”.

Postscript 3/19/09: read here about Bono’s many corporate and (bloodthirsty) political ties.

A secret oil gusher inside Citigroup

Friday, February 27th, 2009

Full story here at This is from June 2008, but is still relevant today. Pam Martens (via does a great job pulling strings on this octopus. If you’re wondering why Citi keeps getting propped up like “Weekend at Bernie’s”, this might help.

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“If you want to flush out market manipulation, don’t turn to the sleuths in Congress.  They’ve been probing trading of the oil markets for two years and completely missed a company at the center of the action.  During that period, a barrel of crude oil has risen from $50 to $140, leaving a wide swatch of Americans facing a choice this coming winter of buying food or paying their heating bill.

The company that Congress overlooked should have been an easy suspect. It launched the oil trading career of the infamous fugitive, Marc Rich, pardoned by President Clinton in the final hours of his presidency. It was at one time the largest oil and metals trader in the world. In the late 90s it bought up 129 million ounces of silver for legendary investor Warren Buffet’s company, Berkshire Hathaway, in London’s unregulated over-the-counter market. In 1990, it was one of the first entrants into an ill-fated Russian oil venture called White Nights.  In 2005, while part of Citigroup, the largest U.S. banking conglomerate perpetually scolded for obscene executive pay, it handed its chief and top oil trader, Andrew J. Hall, $125 Million for one year’s work. According to the Wall Street Journal, that was five times the pay package for Chuck Prince, CEO of the entire Citigroup conglomerate that year and $55 Million more than the CEO of Exxon-Mobil.  (more…)

Surprise university study on foreclosures

Thursday, February 26th, 2009

Full story here. Set your faces to “stun”…

“…Potential losses in housing values from 2008 foreclosures in all 50 states — if values decline to 2000 levels– were less than one-third of the $350 billion provided to banks and insurance companies to cope with losses in mortgage-backed securities, Lucy and Herlitz estimated.

“Damage to the balance sheets of large banks and AIG occurred not mainly from losses on foreclosed residential mortgages, but because of borrowing short-range to buy long-range derivatives and from selling credit default swaps insuring derivatives backed by mortgage payments,” Lucy and Herlitz said.

“These financial manipulations had high-speed forward gears, but when the housing bubble burst, the banks and AIG discovered they had neglected to create a reverse gear with which they could separate foreclosed properties from some forms of mortgage-backed securities.”

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Well here’s a nice dose of truth. Honestly, Tony Soprano couldn’t have dreamed up a racket like this. The spotlights are on the crooks. Are they going to admit it and walk away or stuff their pockets faster?

Keeping tabs on the 401(k) plotters

Wednesday, February 25th, 2009

Get the full scoop here at Not content to simply have our houses and equities on fire, the Congressional fire brigade feels it is of vital importance to set alight any hope of pensions as well…

“[Rep. George] Miller held another hand-wringing hearing yesterday on how American 401(k) plans have turned into 201(k)s since the stock market fell from its (nominal) record heights in October 2007.  Reading between the lines of reporters’ accounts of the hearing, it appears the most loopy and frightening proposals trotted out in similar hearings last fall have been shelved.  For now.

There was no talk this time about eliminating the tax deferral that was the whole raison d’etre for 401(k)s to begin with, on the theory that it’s mostly “the wealthy” who take advantage of it. Nor was there further discussion of â??Guaranteed Retirement Accounts [.pdf] in which everyone would have 5% of his or her paycheck withheld for investment in government bonds that would (in theory) return an inflation-adjusted 3% a year.

But lefty economist Dean Baker threw out a variation of it, a government-managed system that would provide a modest rate of return for employees, according to Bloomberg. He said it would build on Social Security and allow workers a voluntary default contribution of at least 3 percent of their salaries.[ed. - um, build on social security? Can we just stop stealing from it?]

Baker’s proposal would be voluntary, but not that of former Clinton aide Alicia Munnell, which Reuters describes as a new tier of retirement income set up with the goal of paying out about 20 percent of pre-retirement income to retirees.

Participation should be mandatory, participants should have no access to money before retirement, and benefits should be paid as annuities, said Munnell. The system should be funded and reside as much as possible in the private sector.

Emphasis is mine in that last paragraph. Mandatory anything to the government makes me itchy. Then getting all that confiscated money pumped back into the coffers of the very thieves that stole it to begin with!!

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Mortgage workarounds

Wednesday, February 25th, 2009

I found this blog today. A Florida lawyer who’s spied some rather large holes in the knickers of mortgage servicers and is pointing it out to all who’ll listen. God might have created trust, but the Devil created admin to keep track of it. Unfortunately, mortgage servicers and the banks themselves have been extremely sloppy with admin– no wonder, with all the checks they were cashing for a while.

“We are all familiar with the securitization process. The steps, if not the process, is simple. A borrower goes to a mortgage lender. The lender finances the purchase of real estate. The borrower signs a note and mortgage or deed of trust. The original lender sells the note and assigns the mortgage to an entity that securitizes the note by combining the note with hundreds or thousands of similar obligation to create a package of mortgage backed securities, which are then sold to investors.

“Unfortunately, unless you represent borrowers, the vast flow of notes into the maw of the securitization industry meant that a lot of mistakes were made. When the borrower defaults, the party seeking to enforce the obligation and foreclose on the underlying collateral sometimes cannot find the note … a person seeking to enforce a missing instrument must be a person entitled to enforce the instrument, and that person must prove the instrument’s terms and that person’s right to enforce the instrument … Enforcement of a note always requires that the person seeking to collect show that it is the holder.”

There were a number of lenders who have simply gone under. Another lender or servicer may have bought the mortgages, but might not actually have any paperwork to back it up. Mortgages/deeds/encumbrances are public record. Without document verification, I could claim I own your mortgage now and have your payments sent to me. Even bigger hole: if I’m a sleazy servicer or lender, I may have told my MBS holders, perhaps some town’s pension fund in Norway, that their investment is kaput, here’s 20 cents on the dollar, have a nice day. Mortgage package owners don’t know the exact house addresses they held a claim to, and they wouldn’t have the deeds. Borrower has no idea who the underlying holder(s) of the mortgage are. They are only in communication with the servicer. Servicer continues to collect mortgage and try to repo if it comes to that. But the point is that the two parties who really have the interest in this are completely in the dark, both relying on the servicer.

I am speculating here, but I think it’s a good one. In my experience, processes tend to get “complicated” when something’s trying to be hidden. I am suggesting that either the underlying owners of a mortgage package might be being told it’s worth 20 cents on the dollar–take the settlement now because we [the servicer] foreclosed and resold on your behalf [but we're still making deals with the borrower or snarfing TARP funds to keep the party going]. Or that the package of mortgages could’ve been sold more than once, which I’d be willing to bet happened in some cases. Either way, it’s fraud. Doing things like asking for the actual documentation may be striking at the heart of some seriously criminal activity.

One more thing: the Devil, being a thorough sort, also created insurance for defaults. Now the servicer can tell the MBS holder to go bug their insurance company for some coverage for their losses. Then the insurance company soils itself when it finds they are a wee bit overextended on all those policies they wrote (expecting that 98% of them wouldn’t be called in). I can imagine the talk with the insurance company sounding something like this.

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Chocolate covered cotton

Sunday, February 22nd, 2009

Full story here from billmon at For those of you who read Catch-22, there is a bit about eating cotton. Take a gander:

“To understand the dilemma facing Mr. Geithner and the Obama Administration, you could do a lot worse than read Catch-22 (something I have also found to be true of life in general.) Because unfortunately, Heller’s chocolate-covered cotton metaphor rather precisely describes the estimated $2 or $3 trillion in “legacy” assets to use the administration’s preferred euphemism clogging the arteries of the global financial system.

Except that while chocolate-covered cotton at least has some novelty value, most — if not all — of Big Shitpile (to use Atrios’s favorite euphemism, and mine) has none.

This, in turn, means it would literally be easier to square a circle, or maybe invent a perpetual motion machine, than to devise a plan that a.) lifts Big Shitpile off the balance sheets of the banks, while at the same time leaving them b.) solvent and c.) in the hands of private investors, without d.) constituting a flat-out transfer of wealth from taxpayers to bank shareholders.

These are simply not realistic policy objectives– in fact, they are mutually exclusive, as even Alan Greenspan now seems prepared to admit.

So when Geithner talks about harnessing the power of private capital to “start” a market for Big Shitpile– by coaxing hedge funds and other bottom feeders into offering bids that banks teetering on the edge of insolvency just might be willing to accept– he’s not fooling himself, although he may be trying to fool us…”  (more…)

Weekly Commentary 23 February thru 27 February

Saturday, February 21st, 2009

Let’s talk turkey…things look pretty bad now. The DOW and S&P broke through November lows. We have no support at this point. And we are getting closer to 6000 than 8000.

What was a SuperBowl Indicator joke before is not so funny now. When the AFC wins the SuperBowl, the Market goes down. The Super Bowl indicator has been right 32 out of 40 years. This year looks to be very right, unfortunately. We were all hoping for an Arizona win. We didn’t get it.

This is the first quarter where the S&P 500 is experiencing negative growth. If you combine all the comapnies and how they reported, the majority are reporting losses. Heavily laden with financials, the S&P 500 can no longer accurately reflect current business mix.

GM has fallen so far that it is now trading less than $2/share. Now its Market Cap has dropped below $1 billion. GM has not experienced this kind of plunge in 71 years. What was that saying, too big to fail? Not now. What’s the point of giving them more money than the company is worth. They announced that even if they get bailout money, they are still going to lay off 47,000 workers. They have already announced the car lines they will no longer be making in their restructuring period. There just is no purpose any longer in giving them more money.

This past week we saw the monthly TIC report that measures net foreign purchases of long-term securities. If we compare to this time last year, foreign purchases of US equities went from 180 billion to 17. Municipal bond purchases went from 99 billion to minus 6 billion. Corporate bond purchases went from 342 billion to 58 billion. The only area that appreciated was Treasury Bonds, going from 195 billion to 239 billion. You can see the flight to safety. Investors are now sitting on $4 trillion in money markets, not willing to invest in the Market any longer. Until and unless investors investors come back into the Market, the economy cannot recover. Unless investors start investing in Corporate and Municipal Bonds, there just isn’t enough money for the companies or the cities to operate.

Unfortunately, the consumer is hurting. He simply cannot be investing in the stock market today. According to Howard Davidowitz,chairman of Davidowitz & Associates, “the worst is yet to come.” He believes the lowered American living standard is a “permanent change”. “The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz said. “A lot of that is gone.” With $8 trillion lost in home values, $10 trillion lost in the market itself, and a $14 trillion consumer debt load, not surprising the American living standard has plunged.

How do we stop the vertical nose dive? Congress is looking at nationalizing major banks, as they have been doing in Europe. At this point, what’s to nationalize. Bank of America is trading at $3.79/share and Citi bank is trading at $1.95. These are 18 year lows. We could be just days away from both of these being “restructured”. Nationalizing the banks is a catch 22. If private investors think that the bank is going to be nationalized, they won’t buy the stock. If you don’t nationalize the bank and take the toxic assets off the books, private investors won’t buy the stock.

Next week isn’t going to be a picnic either. We’ll see existing home and new home sales reports, durables goods orders, and GDP preliminary. If the banks get nationalized, we’re probably in for some more down. Let’s just say this is not the time to buy stocks.

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Schoon: Davos, Debt and Denial

Friday, February 20th, 2009

Article here and Darryl Schoon’s site is here.

“The gathering of the world’s economic elites in Davos, Switzerland is a reflection of the reigning power dynamic of the modern world. Officially titled, the World Economic Forum, Davos is sponsored by the world’s most powerful and wealthy corporations and presents itself as a “not-for-profit” entity.

However, if you believe the annual gathering in Davos is not-for-profit, you probably also believe that JFK died of natural causes while sightseeing in Dallas. Those who attend Davos–the Davo-tees of Mammon–are the winners in the game of capitalism, a game based on debt controlled by bankers through their issuance of credit…

Capitalism is not ending because those enslaved by bankers revolted. Capitalism is ending because the bankers’ insatiable greed destroyed the mechanism by which bankers indebt others. The sad truth is that those enslaved by debt still wish to remain the slaves of bankers and pay the cost of [their] own slavery [and] let them [the bankers] continue to create money…”

This is merely a snippet from the full article. I always like Darryl’s writing style since it is not fussy or obfuscating, rather it is illuminating. Things are definitely changing. Your viewpoint and your actions will ultimately determine how well you do in life, certainly not from the dictates of these caricatures pretending knowledge and power in Davos. Go watch Kung Fu Panda, walk your dogs, get in 2-4 ticks a day trading. Breathe. Join Shadowtraders and learn to trade the Futures Market.

Billionaire death watch, part 2

Thursday, February 19th, 2009

Yes, this is totally tasteless. No argument. But in the spirit of schadenfreude and general disdain for the strained times, I submit the next installment of well-heeled individuals who decided to head for the exits:

And what else do I hear? That Trump has filed for bankruptcy again. What is this, 4 times now? Yes, it’s for one of the many subsidiaries of The Donald, but still…apparently you can fail with regularity as long as you steal enough to pay for your gold-plated toilet and a cadre of lawyers.

And just to add icing on the cake of weirdness, here’s a link to what happens to crooked– er, overly ambitious– billionaires. Let’s be clear, I do not condone “kill the rich” or killing anybody, but the illustration is that the chinese gov’t is recognizing the danger in businessmen gone wild and are getting them out of the environment and not allowing them to bilk at will for months or years more *cough* Madoff! *cough* cough*

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Update 8/31/2009 – Billionaire co-founder of EMC data storage:

A former ambassador to Ireland as well. Supposedly shot himself in the head with a shotgun. Gawd, doesn’t anyone do the Judy Garland pills ‘n’ booze route anymore?

And let’s add a “close but no cigar entry”

If we’re all broke, who’s got the money?

Wednesday, February 18th, 2009

Looking at this from a global perspective, all of the money in the world stays in this world, it doesn’t disappear to another planet or dimension, nor do we owe it to another planet. We haven’t burned it or written it off either. So why does it appear that everyone’s broke? Of course, it’s a little complicated when we have things like fiat currency which, with the touch of a printing press, increases without anything other than consideration (and a promise of further slavery to the central bank). It’s even more complicated when we have floating currencies, whose value can rise and crash with some speculator’s help. So I’m asking myself the question, if there are all these debtors, then who are the creditors? And before you all shout “It’s the Chinese”, that may be an answer to who owns US T-bills, but not everything else. Besides, they are relatively new to the scene– and we are talking about pieces of paper that would devalue rapidly if they were to dump them en masse. I want to find out who owns the concrete, tangible valuables as well as the promises to pay? This means I must answer:

  • Who are the major bondholders of private and public corporations?
  • Who possesses all the precious metals?
  • What really composes the central banks of the world?
  • What are the entities of control for the super-rich on the planet?

This is a big assignment. I will keep you informed on my results.