U G L Y... You ain't got no alibi....

Whew...-- Is it New Years Eve at about 1:44am?  The only people left at the bar are the real ugly mofo's that are hoping for some action. U G L Y looking out there on the dance floor!  Nasty! 

Nope... it's only about 10:00pm.. the ball hasn't dropped yet-- it is about to get uglier.

Yep... 2008 ugly closer than you think

Pretty soon you will hear the 'we didn't see it coming' speech from XYZ financial advisor on CNBC (who has secretly been in cash and buying scratch tickets since March).

Watching this recession part deux unfold has been like a crowd watching a B-52 bomber full of babies, old people and a nuclear warhead (odd combination I know) come in without landing gear.  You see it coming from a mile away and the approach is slow.  As soon as you notice the plane has no landing gear you point and shout.  Everyone points and shouts.  Old people, young people, teenagers, stoners, sign spinners in cow suits selling Chick-Fil-A, dogs bark, people scream... NO ONE wants the plane to crash, but all the screaming and all the sign-spinning is worthless.  Nothing you do in the crowd can stop the impending crash landing. 

Don't look now-- this will not be a 'soft landing.'

Narnia is in Jepordy

We all know that the master wizard of Fed Narnia, Ben Wizzie is going to do another QE program, QeTHRee.  He will probably announce this at the next wizard conference at Jackson Hole.  The Feds have to buy bonds to keep bond prices stable.  With no QE, T-bills will yield zero in no time.  I expect this next QE to have temporary muted upside effects on the markets, opposed to the last two QE 'attempts' that have done nothing but stroke Wall Street's woody.  Too bad QeTHRee will collapse the (global) economy that already can't afford increases in food and energy...

QeTWoo was a complete failure.  QeTHee may create a buzz, but any strain on the consumer at this point will kill any short term rallies in the market.  The consumer (yes, that is a generic term for you and I when we are shopping) was destroyed at $100 oil... WHY does anyone think another round of QE would help if/ when it raises oil to $130.

Brush off dem' shoulders

As for great buys of 2011-- here is a shout out to the post earlier this year where we PIMPED TLT @ $89 a share.  Patting my back on this one (traded over $105 today).  A good buddy who is a financial advisor at a monster bank and I traded some dialogue today about the markets and he said that bond yields are to low.  Funny how I see them being too high.  A 2.50%  yield on a 10-year T-bill sounds much better than a negative return on SPY.  I will never see eye-to-eye with the big bank FA's however, but I told him that if he wanted yield he could buy some Italian, Greek or Spanish bonds, all of which will give you a much greater yield... That is if you are the kind of person who will put their hand in a running blender if someone drops a quarter into a batch of margaritas.

Sadly, it is probably too late to move into TLT, however if you bank at NY Mellon you should avoid making deposits-- It will cost you!.  Good thing mattresses are always on sale (wait a few months for better deals!)

Get out of Europe

I'm just saying-- no need to even comment on the disaster that is happening over there... If you see a lot of Swiss, wearing mink and strait blinging in 1980's style rapper gold chains at the local Ikea this weekend, here is the reason. 

Terminal Debt Cancer

If Grandma has cancer and she makes it 6 months on a 90 day diagnosis, that is great, but it doesn't mean she is not going to die of cancer.

The world is currently washed up in terminal debt cancer.  It is a terrible diagnosis, but Europe is very sick, the US is showing horrible symptoms, Japan is (and has been on and off) life support, and Canada, Australia, India, and China are getting sicker by the second (first sign is a real estate collapse...). 

The world is not going to end, but the next few years are going to be rough...

Short term rallies at this point will be muted, but the big scare in the markets will come soon when the 'HOW WILL WE SAVE CHRISTMAS' question comes into play.  If consumers (again, you and I shopping) don't buy buy buy at Christmas all bets are off for 2012-- store closures will be more common that baseball steroid allegations in 2006.

Tell Little Timmy to save his money-- Christmas this year is going to be CHEAP!

And all the financial porn gurus said it was different this time-- we could handle $100 oil and wage losses.  The consumer was resilient because they had pent up demand.  Demand shemand... mirage recoveries are not real.   

Funny how it's different this time never ends up being different at all.

How to Raise Some Money after Default: QeTHRee getting closer

It just keeps getting better!
This just released from the White House: 

The White House understands that not raising the debt limit will mean many American's will not be paid.  We are having trouble with a real 'BONER!'  We think this is a real bummer, but there are two plans that the administration is ready to institute immediately if there is a default. 

I was just as excited as you!  Here are the ideas.

Hillary Clinton's Budget Buster Bikini Car Wash. 

White House Bake Sale

It looks like Topless Hillary Clinton is the only answer out there!  I knew it! 

QeTHRee gaining some traction?

There are many stories swirling about needing QeTHRee.  Here is just one example:  QeTHRee Needed!

From this article:

If the Fed were to engage in a new round of bond buying — call it QE3 — it could push long rates lower as it did under QE2 and provide needed assistance. Besides the immediate past, there is ample precedent for such a gambit.

Huh?  QE2 actually CREAMED long term rates.  Even Captain Obvious knows this.

QeTHRee is gaining traction and is a sure thing at this point.  Will it work?  If you like high food and gas prices then YES!  I anticipate that the equity markets will not react the same-- higher inflation will zap any recovery fast!  Uh oh... what if this happens around Christmas?  QE2 saved Christmas 2010... QeTHRee will be the Grinch in 2011.  $175 to fill the Escalade = less presents under the tree!

Could the US 10 Year Treasury trade in the low 2's or high 1's in the not so far of future?

Hell yea!... if (when) we throw QeTHRee on this fire. 

Rueter's explains the PAIN that will come from QeTHRee here:  QeTHRee more harm than good.

It is just starting to get interesting... Smells like someone is brewing up a recession to me!  This one is home brewed too!  Compliments of your Master (wizard) Brewer Ben Wizzie! 

Collateral Damage. History of Debt Ceiling. Sprinkler heads.

I'm with Stupid... I think? Or are you with Stupid?  Am I stupid? 

"We can't allow the American people to become collateral damage to Washington's political warfare," Obama said.

Moments later, Boehner responded that the president "wants a blank check" to continue government spending that is "sapping the drive of our people."

Obama is definitely trying to figure out something—I will give him that, but he looks pathetic in doing so.  If the republican’s goal is to destroy Obama’s image until the last second, they seem to be doing a great job.  I highly doubt that these two clowns will fail to figure some way to keep the circus going, but I am sure it will be a band-aid fix and nothing else.  The debt ceiling debate will be in full swing again when the real dog-and-pony show, the presidential elections, start for 2012. 

As for collateral damage, I disagree with Obama’s statements.  Yes, there will be some pain if the US credit rating is downgraded, but it doesn’t mean it is time to buy guns and ammo.  Japan lost their AAA rating 10 years ago and they have very low rates and the Yen is a very strong currency.  At this point it is all politics… tick tock, tick tock politick, tock.  The clock may be ticking but this is all a charade to make Obama look worse.  Nothing else.

Maybe these guys need to do this deal the old fashioned way:  A bottle of Whiskey, a pen, a paper and a hand-gun.   

History of the Debt Ceiling…        

Here is an interesting story on Wallstreetcheatsheet.com about history of the debt ceiling.  The debt ceiling has been raised 77 times since it was put into place.  This story puts some perspective on how much of a puppet show this really is.

In fact, the debt ceiling has already been increase three times during Obama’s presidency, twice in 2009 and once in 2010 when both the House and Senate were led by Democrats.

During President George W. Bush’s two terms in office, the debt ceiling was raised 7 times, the first time by a Republican-led House and a Democrat-led Senate in June 2002, the second with a Republican majority in both houses less than a year later, and the final time by a Democratic majority in both houses in November 2008. During Bush’s tenure, the debt ceiling was increased from $5.95 trillion to $11.315 trillion.

Bush’s 8 years doubled the debt ceiling and Obama has already maxed out the $14.3 trillion line. 

The real question that needs asked is, ‘Why is there a debt ceiling if there is no intention to EVER pay it back?”

Does anyone ever see us paying this back?  I suppose in 30 years when all the baby boomers finally die after receiving Social Security for 3 decades we may have a chance, but in reality there is no feasible way we can pay back this debt.

Default or Pay it down.

If you or I was to get into a situation where we had borrowed too much money we would have to come to some conclusions about how we planned on structuring our current finances.  Do you Default (personal bankruptcy) or do you pay it down (sacrifices to your current life style)? 

This is really an easy situation when presented this way.  If America has raised the debt limit from $5.95 Trillion to over $14.3 Trillion in the last 10 years, there is NO WAY they can change the way they are spending… the obvious answer would be default, or bankruptcy, for a consumer.  Somehow, in some way, you have to get spending in control.

The answer cannot always be to print more money (sorry Ben Wizzie).

Sprinkler Heads. 

I moved into a house in 2009 (foreclosure that sold for a 27% discount from the previous sale 2 years prior) and had a big problem with the sprinkler system. 

I had one guy that recommended replacing the whole sprinkler system—tearing out all the lines and rerunning the system so it was more efficient and effective.  All this for a cool $4000. 

I suppose this was an option, but the thing about options is that you have a few to choose from.  We concluded that it wasn’t the sprinkler system that was broken, but the sprinkler heads that needed updated and replaced.  The Home Depot carries these for about $4 each.  At 10 heads, the cost to replace the heads is a 90% discount to replacing the entire sprinkler system.
What did I learn from this? 

A system is not always broken, even though it seems to be working improperly.  Sometimes all you need to do is change out the heads.

Going Back in Time...

- Sen. Barack Obama (D-IL), March 20, 2006

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”

I think the government could learn a lot from my sprinker story…  

BONUS MATERIAL!!! For your visual enjoyment-- $15 trillion in pictures!  Great site! http://www.wtfnoway.com/

Real Life Narnia, NFL can figure it out...Kinda

Are we living in Narnia?

I have to say that the latest week in the sure made me feel like I was living in Narnia, a children's book mythical land of make believe with talking ferrets, dragons, witches and make believe problems that could be solved by magic... and that was just the NFL labor disputes.  I don't even know if a schizophreniac with 44 personalities on PCP could not make up the Willy Wonka insanity that hit the markets this week...

If someone understands anything about this last week, fill me in. 

I saw a crappy debt plan in Europe that is doomed to fail, existing and new built housing numbers that were as bad, if not worse, that the depths of the recession, shrinking manufacturing numbers in China, flat manufacturing in the US and Europe, ever rising unemployment numbers, $100 oil that will CRUSH the consumer (again), a war in congress over fiat monies in the trillions, a bond market that gave the bird to everyone, earnings that would make you think unemployment was at 1%, Apple making so much money that it should be in some way criminal, equity markets that couldn’t stop screaming higher and a president that looked more confused than a father who is asked by his 7 year-old daughter ‘where do babies come from?’

It has to be Narnia… 

 The NFL can figure it out… Kinda… Maybe???

Meanwhile, the Gridiron Gurus are close, but not 100% there yet… maybe… kinda??? NFL Dog and Pony Saga continues... 

Here are a bunch of guys that all WANT to see something done, but can’t get the final numbers to match up, and this is only $150 billion dollars.  It has taken 4 months to come to an agreement …

And the Gov’t is trying to figure out how to extend the imaginary USA debt credit card of $14.3 Trillion.  I sure hope the 4 months/ $15 billion isn’t a benchmark for time.

The Wizard of Narnia.

All I can see is a repeat of 2008 in the near future.  I’m pretty sure that is on the way—debt deal or not, Dow 12,000 or Dow 15,000... there is no way the economy can sustain even this weak level of growth without housing, jobs or any confidence in the government.  $100 oil can easily become $120 oil and that is the magic $4/ gallon mark that takes money from Build-a-Bear and sends it to Conoco.  Apple is not a Bellwether, and many of these AmAzInG earrings were coupled with planned lay-offs attached. 

There is a disconnect between the markets and reality-- In essence, Narnia.   

Ultimately, that means one thing… QeTHRee… Commencing in Q3/2011. 

Ben Wizzie, Master Wizard of Fed Narnia,

Make it Rain!

 

Should be fun! 

Enjoy that $3.73 CHEAP gas this weekend!   

House Trap and Women's Soccer has their 15 minutes.

It ended in a shoot-out?  What is this, the Wild Wild West???

A big shout out to the women’s U.S. Soccer team for making it to the finals of the World Cup.  You sure let down quite a few Type II diabetics at the local pub that called you a ‘sure thing.’  Don’t worry—they still drank as much PBR as they would have even if you had not made it to the finals (I’m sure bowling was on).  We were all Soccer fans for about 12 minutes and it sure was awesome... until you lost in a lame shoot-out.  American’s are so patriotic about sports until we lose.  Then it’s back to Nascar and bitchin’ about NFL labor disputes.

  Housing Up… but still in the gutter

Another day in the world of make believe and another hope and prayer for some kind of stop to the train wreck that is the housing market.  Housing up but still in the gutter.  Wozers!  Housing starts ROSE by 14.6%.  Yea dogg, pull down the Alize and let’s PAR-tay like it’s 2005! 

Oh 2005.  The beginning of the end of the bubble.  June 2005 housing starts were a lofty 2,004,000.  That is a 69% drop since 2005.  All of a sudden those numbers don’t looks so good.  In addition to this, last month’s data was revised down and the majority of the increases this month were in multi-family starts.  I would say that this was actually a really crappy housing report—not worthy of Alize, but most definitely worthy of double Jim Beam shots for homeowners!  Prices... look out below (again).  And while I can’t take away all the thunder from this less bad report, I worry that this less bad report is coming way too late in the year to make any impact on 2011 being a horrid year for housing.  Even if the momentum is up slightly, fall follows summer and winter follows fall.  Winter is not going to help and we did not get any 'seasonal' help in spring, the season that usually has the most robust housing starts. 

Remember too that starts say nothing about price.  If builders push out 625,000 homes for $250,000 that would have sold for $335,000 in 2005, this is NOT going to help the market, but instead is going to only increase the chances of someone walking away (or walking down the street and getting the same home from the same builder for 30% less than their current balance).

Scraping bottom:  Housing starts follow the exact same trend as losing your sex life to weight gain (note:  weight gain chart has not relevance to this story, nor is it accurate).

 Housing is getting killed by 3 things:

1)      Mortgage credit is only as easy to get as cocaine at a Mormon picnic.  Approval rates are way down, down payments are up and products are getting taken away faster than Bernanke can print money.  Big thing to watch going forward:  Funding from the big 4 monster banks:  Wells, BAC, Chase and GMAC.  BAC should be the one to watch.  I would guess that BAC will be almost completely out of correspondent lending in the next 12 months.  Countrywide is just too much for BAC to swallow and they will have to sell their servicing and wind down lending if they ever want to pay a dividend again.

 

The bottom 5 lenders do not lend as much combined as Wells Fargo.  If BAC falls, Wells Fargo gets to make the lending rules (hint hint:  they already do)… and the rule today is: protect thee servicing portfolio of mortgages by not allowing people to pay off current loans.  If there is no competition to buy mortgages, rates could drop to 3%, which would be just under the underwriting approval rates.

2)      (F)Unemployment.  This one is pretty straight-forward.   Unlike 2005 you have to have a job to buy a home.  You also have to have a job to come up with a down payment if you are buying your first home, and you have to have a really good job if you are going to pay off the negative equity on your current home AND buy new home.  Don’t expect any magic to happen in housing until jobs come back.  There are no magic loans and there are no magic jobs in today’s market.  Even if jobs return, many people will be SELLING at any chance of recovery (see next point). 

3)      Baby Boomers.  I still think it is asinine to think housing can recover with baby boomers retiring.  It would be great if that happened, but the boomers are NOT going to participate in the real estate market again.  Why:

a.       They got burned hard by the last bubble

b.      They are going through declining income through retirement

c.       Boomers will be SELLING and not BUYING if the market turns ever so slightly and this will only delay the recovery.

If you asked the average American boomer for one wish for their financial health over the last 10 years it would either have been to (a) go back in time in a time traveling Delorian and sell their house in 2005, or (b) go back in time in a time traveling Delorian and smack their younger selves at the closing table of their house from 1998-2005, steal the money and throw it in the stock market (or take it to the track!).

Unfortunately for this wish to be granted we would need a Flux-Capacitor, which is a make believe device that makes time travel possible.  The only person that has make believe items is Ben Bernanke (he is a master wizard).  It would also put a lot of strain on that clunky AMC Delorain to fix 77 million people’s real estate screw-ups.   While this is all crazy talk, the idea of going back in time in a make believe, time traveling Delorian, to fix the housing market is probably more realistic than seeing the housing market recover in the next 3-5 years due to ‘increased demand.’ 

Speaking of Baby Boomers and make believe:  R.I.P Hunter S. Thompson.  You would have been 74 this week had you not gone crazy and killed yourself.  You were a little before my time but I still have enjoyed your works.  You were also crazy, but the 5 gallon buckets of cocaine and LSD might explain a good portion of that.  I hope you got the afterlife with all the virgins!  That one sure sounds the best.

We Can’t Stop Here…. This is Bat Country.

All in all, housing sucks, but it is probably not a horrible investment at this time if you buy right.  If you can find a home you are going to stay in for while (18 months is not long enough) and you negotiate the price, have the cash to buy and understand that it will get worse before it gets better… maybe you should buy. 

Then again, if you can do all that you might as well buy 15 rental properties to house all the baby boomers.  They will have to live somewhere… 

Same Old (Magic?) Hat

Same Old Hat

Old Hat is a term given to someone who is a constant bull-shitter, usually based on unfulfilled promises, or someone that makes new, bigger, promises each time he can't fulfill the original BS promise.

 

Ben Wizzie, of course, being a master wizard capable of monetary magic, wears a wizard hat, but he still is guilty of the Same Old (Magic) Hat when it comes to his promises. 

Ben Wizzie 'spooks' market with NO QeTHRee talk.  Yesterday QeTHRee was a sure thing, but today it is off the table.

See this rabbit?  Watch it disappear! 

Markets deflated quick today with the idea of no more QE.  Sad really.  The true Old Hat in the market today is that QE will help the economy.  We have had two rounds of unprecedented money printing and the economy is still in the gutter.  It turns out that buying bonds does nothing to help pipe-fitters who's job was shipped to India or Homeowners that need a lil help holding onto the house. 

Old Hat rules the day!  The real question that lies ahead is the US debt limit.  When (not if-- maybe this August, maybe next April) the US bails on their debt payments we will have the greatest test of the American Dream.  Why?  Isn't the American Dream the Oldest Hat out there?  When did the American Dream become a debt laden nightmare? 

If the gov't stops paying social security and throws their hands up screaming uncle (Sam), can you really blame the little guy for letting the house go? 

But really the Oldest Hat of all is the idea that the US Gov't can keep printing money indefinitely and keep a perfect credit rating. 

If YOU go out and max out all YOUR credit cards, YOUR credit rating will drop... and YOU wouldn't get an advance on YOUR credit limits.

And the Gov't cries-- But it is ONLY $14.3 Trillion!!!

I'm sure next time it will ONLY be $17.2 Trillion... then $20.7 Trillion...

Old Hat for sure!

American Idiots and Fortune Cookies

Angel Dust Nonsense…

Another day in the world of make believe that even Willie Wonka would have thought was just plain silly.  Our American Idiots, self proclaimed market wizard-pimps, Ben Wizzie and Alan Greenspan are at it again—moving mountains with their words… or at least trying to.

  Ben Wizzie is out of bullets.  If he had a six-shooter he has shoot his entire round but he is still threatening with the same pistol.  If you didn’t know that he had already shot his bullets you could be afraid of being shot, but knowing he is out of ammo, the worst he could do was bludger you with the handle of the pistol.  If the QEII silver bullet did nothing but pimp the Russell 2000 higher, I doubt a bludgering of QeTHRee will do much to help the real economy. 

Still, like I said, Wizzie is pointing the pistol:  Bernanke Speaks and the Market Shoots up.  Has it really been 2 weeks since QE2 ended?  Wow—time flies when there is no stimulus. 

The pimping parade of QeTHRee lasted about 7 hours today, but faded quickly at the end of the afternoon when people awoke from their pixie/angel-dusted voyage to Fed Narnia and were disappointed to learn that wizards, while funny and interesting to 9-year-olds, are not real.   Bernanke can keep pulling rabbits out of his hat, but pretty soon people are going to expect something more than running the printing press non-stop. 

Is QeTHRee coming tomorrow?  Nope… but it is coming.  Just be ready.

FOOT-IN-MOUTH Diseased Debt

A little story that slid under the cracks today was another from Ben Wizzie-- Cat is out of the bag.

Ahem, from the article:  Federal Reserve Chairman Ben Bernanke said if Washington failed to raise the U.S. borrowing limit in time, the United States would pay creditors first and stop benefits such as payments under the Social Security retirement program.

He might as well have said that he would kill the women and children first.  I take 4 things from this:

1)      I am now 100% sure I will not have social security by the time I retire, &

2)      Bernanke’s speech writer must have been smoking crack all night to give the master wizard the A-Ok on this one, &

3)      There is a better chance of winning Powerball 3 times in a single month than the U.S. getting the debt issues resolved by Aug. 2^nd, &

4)      QeTHRee is a sure thing—as sure as Monday following Sunday.

There is nothing more awesome that admitting you are not going to pay social security starting in August.  Nothing.  Nada.  That is freeking unbelievable.  Dude is a pimp for sure.  I bet all the residents of Arizona would be in uproars if they were not all napping before bingo and ‘tastes like chicken’ night! 

Here’s a fun one:  How does Obama get re-elected if he doesn’t pay people social security?  Sarah Palin could admit she was a hooker with AIDS who slept with Tiger Woods and get into office if the Social Security checks don’t go out—Even if Obama killed Bin Laden.  No pay = No Prez. 

Old Guys Rule 

It is hard to say whether Alan Greenspan or Ben Wizzie is more of an enabler in the demise of America, but Greenspan is starting to show his age:  Greenspan says young people are stupid.

"Baby boomers are being replaced by groups of young workers who have regrettably scored rather poorly in international educational match-ups over the last two decades. The average income of U.S. households headed by 25-year-olds and younger has been declining relative to the average income of the baby boomer population. This is a reasonably good indication that the productivity of the younger part of our workforce is declining relative to the level of productivity achieved by the retiring baby boomers. This raises some major concerns about the productive skills of our future U.S. labor force."

There is some truth to this, but Greenspan failed to speak up about this topic when he was pimping the housing market into the ultimate bubble.  My grandpa said the same thing about my parents and my parents will say the same thing about my generation.  Maybe one day down the road there will be emphasis on education instead of profits for fast food and oil companies, but there isn’t a chance in hell of this happening with the likes of Greenspan and Bernanke around—heck, Bernanke pimps the S&P. 

Touce Mr. Greenspan— someone change that man’s bedpan before bingo and ‘tastes like chicken’ night!

Fortune Cookies

We are in the middle of some interesting times with this economy.  Main Street is screaming for help in the housing and labor markets and the wizards are trying to figure out some way to keep oil above $100 while not killing profits at J.C. Penny.  Doesn’t really sound like the ‘Land of Opportunity’ to me. 

Ultimately though, magicians have to end their show and face their audience and bow for their performance.  That is all it is—an act.  How long can this act last?  Hard to call an end date, but it sure feels like we are closer to the end than the beginning.  Sure feels like nothing has changed—other than my house being worth less and my food costing a hell of a lot more—since 2008. 

So put your faith in the Feds, or the president, or the Wave theory, or by squeezing the magical goat’s balls to tell you the future of the markets.  Me—I now take my advice on the economy from Fortune Cookies.  They seem to be about as reliable as CNBC and Marketwatch and I get to eat sushi before a fortune cookie.  Funny though—they have all said the same thing lately…

Could be worse though—I could be ‘expecting’ my $763 Social Security check on August 4^th! 

Cheers!