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Wednesday, December 15, 2010

wednesday brainstorming

1. Obama throws another tril in the black hole ( I know its only 850 bil- but finally it will not matter anyway since much more to come) and sells out his snake oil salesman ship. Where are the tough choices which needed to be made and why does the IMF demand that taxes are raised in all countries it gives bailout funds to and USA just does the opposite - handing money out it does not have. Especially after Buffet2S one few right statements that the rich pay less taxes than their cleaning woman in relative terms. The point is not that America keeps up consumption it can not afford but that it is robbed during daylight by banksters with the full support of DC. The zero interest rates have only financed the bubble building free profit ride of banks. Mainstreet is still in depression with real jobless rate above 20% and real estate prices still not finished with the down cycle and pending foreclosures bank only hold back in order to keep prices on a phony high level. Nothing has been fixed actually to the contrary banks keep on doing what the did and added even new features as foreclosure fraud while generating profits driven from insane actions of the FED which accumulates huge losses at the same time by generating bubble bond markets which are poised to crash now.


Must Watch: Stockman Explains To Ratigan How In Thirty Years America Spent Enough Debt To LBO Itself, And Ended Up Bankrupt

Tyler Durden's picture

After recently debunking the economic "recovery's" flagrantly misrepresented employment data, the OMB's David Stockman makes a third appearance in as many months (previously here and here), this time on Dylan Ratigan. And as always, it is a must see: key soundbite: "We have had a Fed engineered serial bubble, that has created the appearance of wealth, that has caused people to consume beyond their means through borrowing, and that has flushed the income and wealth of our society up to the top, as a result of the Fed turning the financial markets into a casino. These are pure casinos, they are not capital markets, they are not adding to the productive capacity of our economy, they simply are a bunch of robots trading with each other by the millisecond as a result of the Fed giving them zero cost overnight money, and giving them all kinds of hand signals on what to front-run." It is almost as if Stockman reads Zero Hedge... And he continues: "The Fed is destroying prosperity by funding demand that we can't support with earnings and productions, causing massive current accounts deficits and the flow of funds overseas and the build up in China, OPEC and Korea of massive dollar reserves which is a totally unsustainable, unsupportable system, and we are coming near the edge of where that can continue to remain stable." Ironically, Stockman is spot one when he notes that America incurred enough debt to have effectively LBOed itself. The net result, as every PE principal knows all too well, is a husk of an entity, whose most valuable assets have been bled dry. At this point, the last straw for America will be the inevitable rise in interest rates (at some point over the next five years, the Fed and Treasury will have to sell a combined $5 trillion in debt - that alone will destroy the supply/demand equilibrium and send rates surging) which will result in either debt repudiation or outright bankruptcy. The only good outcome is that the great experiment of LBOing America by the kleptocratic elite is coming to its sad conclusion.

Some other facts:

  • In 2000, there were 72 million middle-class jobs: manufacturing, construction, FIRE, transportation, etc; today, there are 65 million jobs, we have lost 10% of our middle class supporting jobs. We have replaced these with part-time jobs.
  • In 1981 the national debt was $1 trillion. Today, it is $14 trillion. The economy in the same period is 3.5-4 times bigger, the national debt is 14 times bigger.
  • Booby-trapping the 2012 election with a the latest set of tax-cuts that expire just days ahead, will panic the White House into doing the wrong decision for the economy once again in another political trade off that delays the inevitable collapse.

Full clip:

2. The mini correction in stocks has started and might carry into the expiration or even Monday next week as the Senate vote delayed the process to arrive at the House ( mercury retrogade) as soon as the congress approves it which it will the final leg up will start into early Jan. where we will have a perfect opportunity to short this market and to sell longs out at least.

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