One of the things I want to do to help you understand the quagmire we've gotten into, is expose the lies we are told every day... in the Mainstream Media, quoted by government officials, actually ISSUED from government offices. I'm not going to tell you anything you couldn't find out for yourselves with a little "Google work", but I point these things out so you can take time to think about them for yourselves, and form your own opinion. I do this because I feel some insane need to justify my thinking, and I'd like you to have as much background as possible before you dismiss me as completely batshit.
The Bureau of Labor Statistics (bls.gov) publishes our weekly, monthly, annual employment report. Never mind that a number that still kisses the ear of HALF A MILLION people per week filing new unemployment claims now seems like good news; their numbers are suspect, fraudulent, and skewed to make the horror seem somehow PG-13. Due to changes in the formulas used to calculate unemployment - enacted by the Clinton administration... go figure!... the rate of unemployment as of the end of September, 2010 was 9.6%. Okay, not good news anyway, right? Now go check out Shadowstats.com... this site was founded by John Williams, former chief economist for BLS - under Clinton - and tracks not just employment, but many other government-issued stats, BEFORE they were tweaked into fantasy-land.
His undiluted unemployment numbers are more like a bit over 20%. Just to hammer your head with it, that's the difference between 1 in 10 out of work or underemployed and 1 in FIVE. They say the difference between a recession and a depression is thus: If someone you know loses their job, it's a recession. If YOU lose your job, it's a depression. It's a DEPRESSION, folks. Simple.
The stock market, as of late, has completely de-coupled from the actual status of the economy. If you split the difference between bls and shadowstats, you get 1 in 15 people out of work or under-employed. Yet the stock market has surged to pre-crisis levels. How does that work? Those who study finance know the not so glorious nickname: "Quants". The other name for these schmucks is "Algos". Physics/computer geeks not making better bombs, or solving the mysteries of the universe... they create programs to essentially "run" the stock markets. A Quant is a quantitative trader, and he or she uses Algos - as in algorithms - to do very small things in a very large way:
If I buy 100 shares of a stock at $10.00 a share, and want to make $500.00 off that stock's movement, I need it to go up $5.00 a share. As a day trader, it's a bad bet. As a swing - i.e., overnight, over-week, over-quarter trader - depends on what I know about the company. Maybe yes, maybe no.
If I'm a Quant, I can buy 1,000,000 shares. If the stock moves by a penny or two per share (partially because I've just purchased a boat-ton of them, and shown the market demand), I can make my masters a boat-ton of money... I program the computer to buy at X, sell at Y, set the volume at Z, and I can go have a smoke or a drink; my work is done.
Welcome to the remaining volume on the NYSE. Welcome to a market that nears 11k on the DJIA when the outflows of retail and retiring investors is at a 6 month high (76 Billion dollars - see ZeroHedge.com).
The point? To quote Ellen DeGeneris, "and I do have one": you are being lied to, at many, many levels. It's time you saw it, and thought about it. Thinking is the only currency that can't be manipulated, and it's the ONLY thing that's going to lead you to action. What level that action takes is up to you; some are stock-piling guns and gold, some are simply getting "off the grid"... more about that in another post. Some are watching American Idol, some are doing research on their own without the help of the almighty television. The choice is yours.
Stay tuned, Smart Slackers... a little more background, and we're off to the races of how we get through this, and keep our sanity - and maybe a tolerable standard of living - through all this.
Stand, and be true.
Brutal Truth
Wednesday, October 6, 2010
Tuesday, October 5, 2010
The title insurance stops here
Okay, even if you don't glue your eyeballs to all the geek/nerd sites like I do, you know that housing started to go to hell in 2007... and went really bad in 2008... and you know about Lehman Brothers, and the actual "ohnosecond" our Federal Reserve, Treasury, and overall administration had when it looked like our TBTF's (too big to fail's) looked to "sneeze, and give the world a cold". More like pneumonia, or MRSA, but either way, the PTB (powers that be) got mighty cold feet.
There are many, many programs in place at this point to "help" Americans stay in their homes... HAMP comes to mind, though it is plagued with problems. What it boils down to is this: the big banks were up to their ears in leverage. When some of that leverage - NINE PERCENT of subprime loans, to be exact, at the start of this mess - started to go bad, a lot of dominos started to fall:
Consider this scenario: you own a Cadillac Seville. It's in great shape; it's a honey. You decide you will sell it to your friend, Joe. Joe's a nice enough guy, and you're pretty sure Joe can make the payments and make it all work. You give Joe a two year note on the car; you give him the keys. He drives off, and you won't hear from him for 30 days, when you expect a payment.
After Joe's gone, you get cold feet. What if he doesn't pay? You call up your friendly OTC (over-the-counter) CDS broker (that's Credit Default Swap) and you say, I'm not sure about Joe... my car's worth... say, $25,000.00 - even though you just sold it to Joe for $15,000.00 - can you get me a policy just in case Joe gets hit by a truck or something?
Sure he can... and for a small premium, you're now insured in case... whatever. You sleep easy. Life is good. Meanwhile, Joe's been on the phone to his auto insurance agency... he calls in, says, "I just bought this Caddy, for $15,000.00; I'm gonna need comprehensive for a couple years till I pay it off, can you help me?" Sure, for a premium. Done and done, and that Caddy is now insured for $40,000.00, depending on outcome. That's a lot, but let's put another wrinkle into the plan:
You buy a house for $100k. So do 10 other folks, we'll assume the same lender for ease of math. There's a hunger out there for debt instruments; I'll get to that in another post. Assuming that, you, the broker, have $1Million in loans you can easily offload, but how? Why, what safer investment than loan service on a house? Nobody ever defaults on a house! Jeez! So, I, the broker, bundle up these 10 loans, and I've created the first ever MBS (Mortgage Backed Security), and off I go... oh, I get a little cream off the top, but basically, it's "Guaranteed" income for the investor! What could be easier?
Except, as the investor, I'm not so sure that Moody's, Fitch, Standard & Poor's have read all the documents... so I call up my friendly OTC dealer, and I buy a Credit Default Swap as insurance... so now that $1 Million is insured, cuz I might have exaggerated a "leetle bit", for maybe $1.5 million... and on, and on, and on...
So, now you can see how an asset might become over-invested enough to cause a mere 9% default rate to create pure havoc in the money markets. Back in 2007, the first court case of its kind, originating in Baltimore, gave birth to the "show me the note" defense. When you've sliced and diced a thousand mortgages, in progressive tranches, to a hundred different investor groups, who actually HOLDS the note on your house?
So, "show me the note" becomes a more resounding refrain in the states that (there are 23 - sound familiar, Ally (GMAC), BOA, JPM?) require an actual court proceeding to foreclose. The three above-mentioned companies have instituted self-prescribed moratoria on foreclosures, for the nonce. Unfortunately for every OTHER servicing agency seeking foreclosure, two states have already BANNED foreclosures outright (Connecticut and Texas as of this morning, with many others soon to follow, according to my geek sources). California's on this train, as well, with Jerry Brown leading the way...
As of today, the rumors have started about a Federal Moratorium on foreclosures... here's why this is important, and there are two outcomes that I can see...
1. IF the Federal government institutes a ban on foreclosures for the short-term future - which will have to be extended and renewed lest the TBTF's actually have to use MTM - that's Mark to Market, which was suspended during the 2008 crisis - you may very well be looking at the mother of all class wars in America's future... think of it this way: you pay your mortgage, taxes, insurance, the whole bit. They guy next door has a brand new H3 in the driveway, and hasn't made a mortgage payment in 2 years, and no one is coming after him... would that make you a leeeeeetle mad?
2. The "Law of Diminishing Returns" takes hold, and there's no profit in it for the banks or servicers (a major one of which is the Federal Government) of the loans to come get the house... what does that do for Mark to Market? It trashes it, that's what! Now that asset, marked at $250k, that's really worth $100k, has come to light, and you - the bank - are stuck with capitalizing the difference for the sake of safety, and instead of flushing a bunch of bad debt out of the system, it bites you in your "I was gonna get a $25 million bonus this year, now I'm f###ed" rear end. Bank failures abound, and we're back to the TBTF's threatening to collapse. Welcome back to 2008, everyone.
Well, around my ass to get to my elbow: yesterday, Huffington Post posted an article about title insurance - you'll need it to get a mortgage, you'll want it if you're a cash buyer - and the big players: Old Republic, National, Stuart, et. al., are opting out, especially on foreclosed or short-sold properties. The only other option, prior to closing, is to go to court, file for what's called "quiet title", and wait (and pay; it's your dime, and it's expensive). Hope for the best. Never mind that this action is KILLING the title insurance companies' business model, they're not stupid... if they're already exposed in the area, and underwriting is down, why in the world would they up their exposure?
I see this as a shot across the bow of the TBTF's... I'll keep you posted as to how they respond to this action, and the consequences for you, the homeowner/homebuyer.
Brutal Truth
There are many, many programs in place at this point to "help" Americans stay in their homes... HAMP comes to mind, though it is plagued with problems. What it boils down to is this: the big banks were up to their ears in leverage. When some of that leverage - NINE PERCENT of subprime loans, to be exact, at the start of this mess - started to go bad, a lot of dominos started to fall:
Consider this scenario: you own a Cadillac Seville. It's in great shape; it's a honey. You decide you will sell it to your friend, Joe. Joe's a nice enough guy, and you're pretty sure Joe can make the payments and make it all work. You give Joe a two year note on the car; you give him the keys. He drives off, and you won't hear from him for 30 days, when you expect a payment.
After Joe's gone, you get cold feet. What if he doesn't pay? You call up your friendly OTC (over-the-counter) CDS broker (that's Credit Default Swap) and you say, I'm not sure about Joe... my car's worth... say, $25,000.00 - even though you just sold it to Joe for $15,000.00 - can you get me a policy just in case Joe gets hit by a truck or something?
Sure he can... and for a small premium, you're now insured in case... whatever. You sleep easy. Life is good. Meanwhile, Joe's been on the phone to his auto insurance agency... he calls in, says, "I just bought this Caddy, for $15,000.00; I'm gonna need comprehensive for a couple years till I pay it off, can you help me?" Sure, for a premium. Done and done, and that Caddy is now insured for $40,000.00, depending on outcome. That's a lot, but let's put another wrinkle into the plan:
You buy a house for $100k. So do 10 other folks, we'll assume the same lender for ease of math. There's a hunger out there for debt instruments; I'll get to that in another post. Assuming that, you, the broker, have $1Million in loans you can easily offload, but how? Why, what safer investment than loan service on a house? Nobody ever defaults on a house! Jeez! So, I, the broker, bundle up these 10 loans, and I've created the first ever MBS (Mortgage Backed Security), and off I go... oh, I get a little cream off the top, but basically, it's "Guaranteed" income for the investor! What could be easier?
Except, as the investor, I'm not so sure that Moody's, Fitch, Standard & Poor's have read all the documents... so I call up my friendly OTC dealer, and I buy a Credit Default Swap as insurance... so now that $1 Million is insured, cuz I might have exaggerated a "leetle bit", for maybe $1.5 million... and on, and on, and on...
So, now you can see how an asset might become over-invested enough to cause a mere 9% default rate to create pure havoc in the money markets. Back in 2007, the first court case of its kind, originating in Baltimore, gave birth to the "show me the note" defense. When you've sliced and diced a thousand mortgages, in progressive tranches, to a hundred different investor groups, who actually HOLDS the note on your house?
So, "show me the note" becomes a more resounding refrain in the states that (there are 23 - sound familiar, Ally (GMAC), BOA, JPM?) require an actual court proceeding to foreclose. The three above-mentioned companies have instituted self-prescribed moratoria on foreclosures, for the nonce. Unfortunately for every OTHER servicing agency seeking foreclosure, two states have already BANNED foreclosures outright (Connecticut and Texas as of this morning, with many others soon to follow, according to my geek sources). California's on this train, as well, with Jerry Brown leading the way...
As of today, the rumors have started about a Federal Moratorium on foreclosures... here's why this is important, and there are two outcomes that I can see...
1. IF the Federal government institutes a ban on foreclosures for the short-term future - which will have to be extended and renewed lest the TBTF's actually have to use MTM - that's Mark to Market, which was suspended during the 2008 crisis - you may very well be looking at the mother of all class wars in America's future... think of it this way: you pay your mortgage, taxes, insurance, the whole bit. They guy next door has a brand new H3 in the driveway, and hasn't made a mortgage payment in 2 years, and no one is coming after him... would that make you a leeeeeetle mad?
2. The "Law of Diminishing Returns" takes hold, and there's no profit in it for the banks or servicers (a major one of which is the Federal Government) of the loans to come get the house... what does that do for Mark to Market? It trashes it, that's what! Now that asset, marked at $250k, that's really worth $100k, has come to light, and you - the bank - are stuck with capitalizing the difference for the sake of safety, and instead of flushing a bunch of bad debt out of the system, it bites you in your "I was gonna get a $25 million bonus this year, now I'm f###ed" rear end. Bank failures abound, and we're back to the TBTF's threatening to collapse. Welcome back to 2008, everyone.
Well, around my ass to get to my elbow: yesterday, Huffington Post posted an article about title insurance - you'll need it to get a mortgage, you'll want it if you're a cash buyer - and the big players: Old Republic, National, Stuart, et. al., are opting out, especially on foreclosed or short-sold properties. The only other option, prior to closing, is to go to court, file for what's called "quiet title", and wait (and pay; it's your dime, and it's expensive). Hope for the best. Never mind that this action is KILLING the title insurance companies' business model, they're not stupid... if they're already exposed in the area, and underwriting is down, why in the world would they up their exposure?
I see this as a shot across the bow of the TBTF's... I'll keep you posted as to how they respond to this action, and the consequences for you, the homeowner/homebuyer.
Brutal Truth
The Purpose: I really DO have a point to make...
When does a hobby become a passion? Where's the line between "stuff I like" and "I gotta check on this; give me a couple hours, okay?" Somewhere around 2002, I realized that just about EVERYONE where I lived - at the time, Arizona - that had any business owning a home, had one. Sometimes two. It occurred to me that the situation was unsustainable. Turns out it was, but I didn't know that then. I sensed imminent doom and misery... I sensed a crash in the markets, but I was painfully ignorant of the markets.
I knew that our economy was over-heated... I knew the Baby Boomers were going to start retiring soon... I just didn't know when...I had heard of a little piece of legislation called ERISA, but didn't really understand it fully.
I started studying.
And studying.
What it all boiled down to... and it takes a LOT of boiling... is a slowly crystallizing vision of what's coming for us here in the USA, and what part you yourselves may have to play in our future. I created this blog as a warning bell. Here is what it is NOT:
I am also trying to help you develop, through my posts and your comments, a cogent sense of how we got to where we are, why your - and my - standard of living keeps going down, why you and I are going to need to be much more self-reliant than our parents, and what may lie ahead as we grind our way through this incredible, and scary, time.
The final "brick in the wall" that brought this blog about: Title insurance companies are refusing to insure titles in residential real estate. As of this date. Check for the article on zerohedge.com; they are also on my reading list daily. More on that in another post.
So, I've got a lot to get up here... and I'm looking forward to helping you protect yourselves and your loved ones. Above all, I want my friends and loved ones to be safe and happy. I wish the same for you and yours.
Brutal Truth
I knew that our economy was over-heated... I knew the Baby Boomers were going to start retiring soon... I just didn't know when...I had heard of a little piece of legislation called ERISA, but didn't really understand it fully.
I started studying.
And studying.
What it all boiled down to... and it takes a LOT of boiling... is a slowly crystallizing vision of what's coming for us here in the USA, and what part you yourselves may have to play in our future. I created this blog as a warning bell. Here is what it is NOT:
- I am not that smart; articulate, yes, but not that bright in the big scheme of things; everything I write here is a distillation - with credit to the truly smart people - of all the time I spend studying.
- I am NOT a fear-mongerer; although I AM afraid for our future, I don't write this so you will lose sleep. I want you to know how big the train is behind that "light at the end of the tunnel", and be as prepared as you, and your families, can be.
- I am NOT anti-goobermint, pro-Tea Party... ready to paint my face the colors of the flag while Sarah and her atavistic minions dance around piles of burning books. We NEED government; we NEED leadership; we NEED basic infrastructural services and maintenance. We pay taxes to make this happen. I am NOT anti-taxation.
I am also trying to help you develop, through my posts and your comments, a cogent sense of how we got to where we are, why your - and my - standard of living keeps going down, why you and I are going to need to be much more self-reliant than our parents, and what may lie ahead as we grind our way through this incredible, and scary, time.
The final "brick in the wall" that brought this blog about: Title insurance companies are refusing to insure titles in residential real estate. As of this date. Check for the article on zerohedge.com; they are also on my reading list daily. More on that in another post.
So, I've got a lot to get up here... and I'm looking forward to helping you protect yourselves and your loved ones. Above all, I want my friends and loved ones to be safe and happy. I wish the same for you and yours.
Brutal Truth
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