Someone PLEASE tell me how, in just FOUR SHORT MONTHS, Obama has managed to take over the banks, kick out the CEO of a private company, hand over a private company, financed with OUR money, to a union? Oh, and let’s not forget his handing over CA to another union, SEIU? How?? How has this happened???

Oh, wait – and how about those of us who pay back our credit card bills regularly now being saddled with having to support the losers who act in bad faith? Why do we have to constantly bail out, and ENABLE, those people who go over their means, be it credit cards or mortgages or car loans? And the Senate can stop acting like they give a crap about this issue – Obama VOTED to enable the credit card companies while a senator, along with many other Democrats. So just stop the charade – and stop laying the burden of irresponsible behavior on those of us who have good credit, or else WE might not have that any longer, either.

If you have not already read it, I recommend to you the following post by my good friend, SusanUnPC, “A Personal Note Only For Those Who Voted For Obama.” And I would add, not only “ditto,” but in the most pastoral way possible to those who did vote for Obama, you can just bite me for what you have unleashed on this country. If only there was a way to make only those people support the UAW/GM, pay the ne’er-do-wells’ credit card bills, etc.

Hmm – that’s a thought – let’s figure out how to do just that – let them pay for Obama’s taking over private companies, banks, and kowtowing to the unions (again – I am not anti-union in general, just when they try to take over states or private companies). A pipe dream, I know, but for this moment, it helps to keep my head from exploding…

Still, this is a mere drop in the budget bucket, all things considered. Maybe instead of us/US buying up banks and failed car companies, we could cut back the budget some, and I don’t mean cutting services to the People. Just a thought…

So, as a way to ease my aching head, I have a very funny video for you. It goes hand in hand with the beginning of our Live Chat discussion on May 6th of “Hacking Democracy” and voting machine fraud (which continues next Weds., May 13, at 9:00pm):

Ah, yes – our “shadowy overlords” – that sounds just about right!

And, for those of you who were kind enough to inquire, and ask to see him again, I have two photos of Jordan for you, taken on Weds. I just found out that instead of him being 22, he is actually 26 (he is in the Witness Protection Program, having been rescued from a crazy person threatening to shoot him). He is a 16.2 hh Thoroughbred retired Hunter/Jumper. Here he is in all his glory, with one of his stablemates in the background:

And for a bonus, there was this backyard visitor:

Doesn’t that just make your head feel better?

Oh, and I saw Leila’s new owner. She said she and her family are DELIGHTED with Leila, that she is a wonderful addition to the family. Even more, the puffball miniature puppy she had already rescued and Leila are thick as thieves, even sleeping in the same crate together. They have already become inseparable (and she is bigger than the photo below, but just to remind you!).

What’s going on with you?

The main point I tried to highlight in that piece was the need for true price discovery for these toxic assets. A loyal reader provided tremendous insight in highlighting that the PPIP needs to assure that sellers are truly at arm’s length from buyers to insure that the price discovery process is real and fair.

There are potential concerns with this price discovery process highlighted in my piece Send in the Clown. Are the bank portfolios, located within the largest banks needing to sell toxic assets, attempting to prop the market higher?

I received some real time market color from KD at 12th Street Capital as to initial responses from customers, both buyers and sellers, who may participate in this PPIP. What have I learned?

If buyers and sellers previously had a wide gap in the perceived value of these toxic securities, then it appears as if that gap may have widened. While cheap government financing and loss mitigation allow buyers to pay higher levels, their bids are only higher by a few points. Meanwhile sellers, instead of working toward a middle ground in the price discovery process, have actually raised their prices.

How might this get rectified? Uncle Sam, in the persons of Tim Geithner and Sheila Bair, will strong arm parties on both sides to engage and transact.

What may expedite this process? Little publicity has been given to the fact that the two largest corporate credit unions in the country, U.S. Central Credit Union and West Corp Credit Union, failed last week. What do these credit unions own in their portfolios? Lots of toxic assets. Who will handle the liquidations? The FDIC.

Buyers know that forced liquidations by failed institutions will establish price levels. If I am a buyer, why should I be in a hurry to purchase assets, knowing that there are plenty of assets for sale.

Why is the administration making the case for new and unprecedented powers at potentially Treasury, Fed, and FDIC to overtake non-financial institutions?

Matthew Richardson and Nouriel Roubini write on the predicament facing certain banks (thank you, Andy):

Finally, we have to anticipate the likelihood that some banks will resist selling their loans and securities. Why? Currently, the government has been giving them the option to keep holding them with the hope that market conditions will improve.

Going forward, the government must insist on the banks’ involvement in the new program. The reason that financial institutions must be pressured is that they are the cause of the financial crisis. They took advantage of loopholes to avoid regulatory requirements, taking a huge bet on securities they were never meant to hold in the first place.

What happens if removing toxic assets from a bank’s balance sheet at near-market prices shows it is effectively insolvent? Then we will have to face the elephant in the room. We may then have to start asking, “Why keep insolvent banks afloat?” And having asked that, we will have to search for ways to manage the ensuing systemic risk.

Either way, once the plan is fully implemented, we will be entering a new phase of the financial crisis.

The powers that be in Washington know that the liquidation process of these toxic assets will inevitably cause the failure of even more entities, both financial and non-financial. To that end, they are making the case now for new powers to step in, take over certain institutions that may pose real systemic risk, and methodically liquidate them. If that is the case, as a potential investor I am behooved to wait and be patient.

Moody’s Cuts Wells, BofA Ratings. What prompted these cuts? Exposure to commercial real estate. Exposure to option-ARM mortgages. Exposure to California and southwestern U.S. market that has extraordinary high levels of delinquencies and defaults.

The waves are high and getting higher. The cross currents are vicious. The undertow is strong.

LD

Part 1
In this clip, Geithner wears both the political and policy hats. While promoting the Obama agenda initially (housing, education, healthcare, energy), he then turns toward the specifics of unlocking the consumer credit securitization markets via the TALF (Term Asset Backed Securities Loan Facility). This facility attempts to restart the securitization market and model which I wrote was broken back on November 12th (The Wall Street Model Is Broken…and Won’t Soon be Fixed). That market provides approximately 40% of the financing to a wide array of consumer finance markets. Geithner attempts to portray a measure of confidence and aggressiveness. The market has currently responded with a vote of no confidence.

Part 2
Geithner addresses further specifics about the TALF and the public/private partnership that would be connected to the effort. The specifics of this public/private partnership are not addressed but, in essence, the government would provide financing (loans) for private entities to purchase asset-backed securities currently clogging bank balance sheets. Geithner does not provide specifics on the terms of the loans and MORE IMPORTANTLY does not address the fact that the government will likely share in the losses on these securities going forward. I believe many private investors are salivating at the potential for this program. Our Economic All Star John Mauldin commented that this partnership is the equivalent of government money coming in the front door and going to hedge funds out the back door. Mauldin proposes a suspension of the “mark to market” accounting rule that forces banks to mark these securities to depressed levels in the presence of no buyers.

Geithner defends his aborted initial delivery on his grand plan as “mismanaged expectations.” He also inaccurately describes mortgage rates as being close to 5%. The “mortgage mirage,” in which many people can not get a mortgage, has 30 year conventional mortgage rates closer to 5.5% and Jumbo rates in the 7% range, but virtually inaccessible.

Part 3
Geithner is forceful in this clip in stating that the government will stand behind the 20 largest banking institutions. These banks represent approximately 70% of the banking industry and – without using the phrase – Geithner is saying they’re “too big to fail.” He defends the capital injected as ultimately being in the best interests of the economy and taxpayers. He rails on the mismanagement and gross compensation practices at many of these institutions. He appreciates the anger and outrage of responsible people who are sufferring from the damage caused by those who have been irresponsible. All good.

When addressing the need for global regulatory changes as well as domestic regulatory changes, I suggest Secretary Geithner listen to former Australian Prime Minister and Treasurer Paul Keating who undressed him this past weekend. Keating opines that the IMF and World Bank will see a massive shift in power to the surplus economies of the East from the debtor economies of the West. Here at home, when Geithner talks about focused accountability, let’s see if he and the Obama administration effect the necessary changes in the corrosive influence of lobbyists as well as addressing the incompetence displayed at the SEC and FINRA.

Part 4
Geithner attempts to make the case that investors, both foreign and domestic, will continue to invest in our country and our U.S. government debt if they have confidence. The administration has the obligation to maintain that confidence. The first step in maintaining the confidence is displayed in the budget proposed by President Obama. Geithner puts his political hat back on in promoting the Obama agenda as being economically sound, laced with fiscal discipline, and promoting their moral obligation.

Investors are less sure about Geithner’s feelings and have voiced their indecision by exiting the markets since this budget was proposed.

Geithner further addresses the necessity for individuals, corporations, and governments to live within their means. Investors have roundly responded that they believe this administration and Congress are doing anything but living within their means given the undisciplined spending in the Stimulus plan, the budget, and the Omnibus Bill.

Geithner uses the lessons of the ’90s as justification for raising taxes going forward. He prefaces his remarks that taxes will only be raised “when the economy recovers.” Charlie Rose appropriately challeneges him on the overly optimistic economic assumptions utilized in the budget. I would ask why the base case GDP in the Bank Stress Test of 2% growth in 2010 is not the same level of GDP used in Obama’s budget. The budget assumes 3.2% !!

Part 5
In this clip, Geithner is largely wearing his political hat. He defends the Administration’s vetting process as he staffs Treasury. He further pushes the Obama agenda. In regards to criticism he has experienced, he responds that it is purely part of the job.

On the auto front, he dodges the question of bankruptcy.

Charlie Rose then questions him on what he has learned so far in his role as Treasury Secretary. Geithner responds that many may not know that he spent a large part of his career at Treasury serving under Robert Rubin and Larry Summers. He holds them in very high regard and seems to promote that respect for them is universal. He does not address that Rubin was at the core of the lack of regulatory oversight that we have had for the last decade, as well as being the prime architect of the massive systemic risk that Citibank has developed.

When asked if he could see the problems developing that now envelop our economy, Geithner ducks in stating that most people missed it.

Part 6
Geithner remarks that both capitalism and our financial system have already changed and will continue to change as the necessary regulatory systems are put in place.

Geithner further adds that he is confident America will respond to this crisis because it is not a question of ability but a question of will. He believes this Administration possesses the will to make every necessary move to restore our economy.

In my personal opinion, it is also most definitely about ability as well. Do we have the measure of integrity and quality in our elected officials? Chuck Hagel, Leon Panetta and others have railed on the corrupt system of lobbying, campaign contributions, and persistent fundraising that has polluted our country and the process of government. While the Obama Administration has spoken about addressing parts of these issues, their actions and policy proposals to date indicate otherwise.

I found the Geithner interview to be interesting, while not exactly enlightening.

He is both politician and policy maven. To this point, the markets have graded him as decidedly mediocre. Although, to be fair, Washington as a whole is graded no better.

LD

Video provided by CheneyWatch.org for NoQuarterUsa.net YouTube channel

Along with the aformentioned, I have also previously remarked on my high regard for John Mauldin, one of our Economic All-Stars. John himself possesses an insightful global perspective and has a circle of friends and confidantes that are simply off the charts.

In John’s weekly Outside the Box, he shares with us the perceptions of Michael E. Lewitt. Mr. Lewitt writes at length on topics we have covered here previously, but his level of detail and thoughtful analysis are well worth the read.

Topics covered include:
1. economic policies proposed by Obama administration are not promoting long term growth.

2. market outlook . . . sell rallies as earnings and prices are projected lower by 10-25%.

3. R (ecession) vs D (epression) . . . whatever you want to call it, our economy is going to have low growth at best when growth does return . . . time, time, time . . .

4. changing dynamics in the world of investing mandate that people get further up the learning curve . . . . Come to Sense on Cents!!!

5. bank nationalization, in perception or actuality, is a drag on the economy as a whole and specifically for well managed banking institutions

6. holds particular scorn for the “bank robbery” that occurred at Merrill Lynch during the bonus payouts in late 2008.

7. GM is bankrupt in all but name, so now it is time to deal with the truth and go through the bankruptcy process..

8. Obama’s budget utilizes wildly optimistic economic projections and is set up to fail. Government waste MUST be eliminated.

9. the coming meltdown in eastern Europe “will have major negative consequences for world financial markets.”

As I read Lewitt’s piece, Reality Bites, I kept nodding my head and whispering to myself, ‘that’s right,” “yep, I agree,” and “why doesn’t the media cover this?”

This piece may take two sittings to read, but as you look to navigate your own economic landscape it is a must read. Please share it with friends and colleagues as well.

LD

What did we learn in the markets over the last week and month and what do they mean for the weeks and months ahead?

What is happening overseas and how does that impact us here at home? What is happening in the municipal sector and how will that impact the markets and our personal finances?

Ultimately this show is less about the markets and the economy and more about you! Please join us and share your questions, thoughts, concerns, and opinions. A well diversified portfolio is the best form of risk management and in a similar vein we look for a diversified audience so we can all truly all from a wide array of opinions and perspectives as we try to most effectively navigate the economic landscape.

What is on your mind? What would you like to address? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins!

Before we get to the market reactions, allow me to share insights from a highly regarded bank analyst and then comment myself.

Most analysts and economists view the government’s worst case scenarios under the bank test as not much more severe than what many already expect. I’m an optimist by nature but live by the mantra of “hope for the best, prepare for the worst.” The market will discount the government’s worst case.

In today’s New York Times, Chris Whalen, highly regarded bank analyst at Institutional Risk Analytics, offers that Citigroup and other major banks will almost certainly become insolvent in the midst of absorbing expected losses from this recession.

He adds, “the stress test is about politics. The O.C.C (Office of the Comptroller of the Currency) and the Fed already know the answer. The answer is that we’re going to have to come to a decision: are we going to put in more equity or are we going to resolve the banks through bankruptcy?”

While Geithner and Bernanke have not categorically stated exactly what they will do, they have stated what they will not do and that is the immediate takeover of a bank, the transferral of toxic assets, and the unwind or sale of remaining assets/divisions. The stress test outlines that if a bank is not deemed to have sufficient capital, then that institution must raise sufficient private capital within 6 months prior to further government intervention. What does this mean? The government just bought 8 months (2 months to undergo the test, 6 months to raise private capital) prior to doing anything. The market now expects that common shareholders in the major banks will not soon be diluted or wiped out and thus these banks’ stocks have bounced 10-15% in the last two trading days. (A 15% bounce on a $2 stock is hard to swallow after that stock has traded down 95%!!).

Fast forward 8 months and I would expect certain of these banks will be back at the government trough. In fact, it is expected to be announced today that the government will convert its preferred stock position in Citigroup to common stock and will thus have approximately a 40% ownership stake in the company. The banks will have the option of indicating their intention of taking government capital even after the test is completed and pricing that capital at a 10% discount to the closing equity price on February 9th. What does that mean? The taxpayer is committed to buying equity at prices higher than current market!!

My gut tells me this scenario plays out with a number of other institutions as well. In fact, it already has with AIG (80% stake and likely growing), Freddie, and Fannie. I expect a similar scenario with the auto companies.

What are the government’s commitments to date? Approaching $12 trillion, although to be fair we do not have that amount of total equity risk at stake as certain programs are short term in nature and provide backstops. Even though we may not have $12 trillion at risk, we still need to raise those funds. Where do we get that kind of money?

1. Taxes: We are seeing this right now and if anybody thinks for a second that the top 2% of taxpayers are going to finance the entire tab, think again. I would expect tax rates to move higher for more and more of our populace as we go forward.

2. Reduced Spending: We’ll see, but despite the rhetoric my confidence level, along with the markets’, is low that a Democratic led Congress will display the necessary discipline here.

3. Issue More Debt: It’s already coming. Who will purchase this debt? Great question. Regardless of who purchases it, rates are headed higher. We’re seeing it happen right now.

Given all of this information, I project that the equity market may move sideways for a while simply because the government has the checkbook open, but I am now even more concerned that interest rates for government debt will move higher. Given the tremendous amount of government financing, this will only increase the “crowding out” effect (government borrowing soaks up capital that may otherwise have gone to the private sector) and make private borrowing more expensive. We have seen this in the last ten days. In fact, this week government rates are up 20 basis points (1 basis point is .01%) with the equity markets unchanged albeit in a volatile fashion.

I wish I were more sanguine, but this is how I see it.

Also, virtually every economic historian views increased taxes and increased protectionism as the factors that deepened our economic malaise in the 1930s.

LD

So, tune in at any time between 10 and 11:30 p.m. ET tonight to share your thoughts, your opinions — on both Obama and how the media are covering his address. LIVE CHAT WILL START at 9:50 p.m. ET.

Before the show, you can send your questions or comments to nocturnalwarriorshow@gmail.com. During the show, call in at (347) 677-0792 to speak up on The One and his big speech.

The Warrior has rallied some of No Quarter’s experts, including LD, himself “the only and only” on economics. LD will be calling in to the show shortly after 10:00 p.m. Tune in early so you won’t miss LD.

In a communication with a European derivatives expert this morning, I received some truly enlightening color on this fine print. From what is being shared with me, the contractual agreement embodied in standard CDS transactions addresses the nationalization topic. What occurs?

Nationalization of an institution serves as a “trigger” event for detonating the CDS counterparty market. Cross default provisions in the holding company indentures would likely bring about the bankruptcy of hundreds of billions of dollars of holding company debt which in and of itself would probably have a a systemic impact on the global finance market. (Cross default provisions mean that a holding company of a bank is responsible for the obligations of its’ subsidiaries.)

What does that mean? Effectively, the formal full blown nationalization of a banking institution would serve as a trigger to cause a domino effect throughout the global markets. As one bank holding company defaults on its debt obligations it will cause its’ counterparties to default as well and right on down the line. I am not a derivatives expert, but if in fact this is the case then we will likely see prolonged government intervention into distressed banks in the form of public-private partnerships.

I do not think that is a healthy arrangement nor one that promotes long term growth. That said, the global markets may not have any other alternatives.

I will be watching and writing.

LD

Please join us this evening from 8:00 to 9:00 p.m. ET on No Quarter Radio for LD’s Dollars and Sense. These are truly historic times in the global economy. Let’s “navigate the economic landscape” without the pandering or nonsense found elsewhere!

We have two very interesting guests joining us. Lynn Marshall has one of the most unique backgrounds in the world of finance today. How does one develop a background that includes senior level experience in investment banking, agriculture, and community banking? Think Lynn has some amazing perspectives on the economy and markets? Don’t miss him.

Additionally, in light of the developments at Stanford Financial, we are very happy to have John Moynihan return to our show to discuss the dynamics in the world of offshore banking. Find out more than you could ever imagine by talking to these enlightened experts on LD’s Dollars and Sense, starting at 8 p.m. ET.

What are your questions and comments for me? Please share your questions and thoughts by calling in to (347) 677-0792, and also join our live chat room, which I’ll start up about 10 minutes before the show begins!

Let’s not forget that we live in a global economy. What developed overseas this week and how does it impact us here in the United States?

What is on your mind? What would you like to address? So much to talk about as we “navigate the economic landscape!!”

LD’s Dollars and Sense on NQ Radio at 8:00 p.m. ET. This show, as well as all prior shows and every show on NQ radio, is archived and can be downloaded on iTunes (see our instructions in the right column).

Look forward to hearing from you!!

LD

We’ll be departing from “LD’s Central Station” on Saturday at 9:00 am EST until 12 noon to attempt to put some clarity into this madness!!

We thought the month of January was challenging but it seems we were just getting going. With the turns on the track getting ever more challenging, we will do our best to keep you informed and ahead of the curve.

Our train was packed last week so we will make sure to keep those extra cars. Make sure you board promptly, get settled, grab a coffee, and settle down for an engaging online Q/A chat as we “navigate the economic landscape.” Bring a friend along as well.

For our newer riders, your conductor is not a professional financial planner but merely a Wall Street veteran who welcomes sharing his instincts and experience.

While we board, let me preannounce that we will have a very special show Sunday evening on LD’s Dollars and Sense on No Quarter Radio from 8-9pm.

We have two very interesting guests joining us. Lynn Marshall has one of the most unique backgrounds in the world of finance today. How does one develop a background that includes senior level experience in investment banking, agriculture, and community banking? Think Lynn has some amazing perspectives on the economy and markets? Don’t miss him.

Additionally in light of the developments at Stanford Financial, we are very happy to have John Moynihan return to our show to discuss the dynamics in the world of offshore banking. Find out more than you could ever imagine by talking to these enlightened experts on LD’s Dollars and Sense on No Quarter Radio this Sunday evening from 8-9pm.

Aaaaaaaaaaaall Aboard!!

While there is tremendous volatility in the markets and commensurate anxiety as a result, there were some major stories and developments that got less play but deserved more.

Allow me to expound. Robert Shiller, a highly distinguished Economics Professor at Yale Univeristy and co-designer of the Case-Shiller Home Price Index spoke this morning on Bloomberg News. Shiller is the preeminent expert on trends and developments in housing. He made the following assessments:

1. Glad to see that Obama is making an effort to support housing but has serious concerns about the effort.

2. $75 billion allocated for loan modification is not nearly enough to make a truly meaningful impact. (remember there is another $200 billion allocated for Freddie and Fannie to refinance mortgages).

3. No plan or proposal for those holding Jumbo mortgages leaves a large part of the market without benefits. Those homes will likely hang over the market.

4. Shiller believes we may very well see a second wave of speculation in housing. He has this opinion because he thinks some buyers will try to “bottom fish” the market. He believes our view of housing as an investment vehicle as opposed to a means of shelter and comfort needs to change!

5. He finds it impossible to make a forecast on the housing market given the great uncertainties about the impact of the stimulus proposal and banking plans.

6. While he welcomes the Obama adminsitration’s efforts, he cautioned that this economic downturn led by housing will not be over quickly.

7. Confidence is badly needed and will only return when our government and global governments are able to develop strategic and robust long term planning.

What do I think of Shiller’s comments? I think he is stating that Obama’s housing plan is well intended but given that we can not distinctly segment the housing market by sectors that it will have a marginal impact. Additionally I think he is being cautious in stating that Americans need to change their mindset about homes being piggy banks. I measure his comments next to former Australian Treasury Secretary Keating and I see the same message; this downturn will take considerable time to turn around!

I also listened to the cult-like NYU Professor Nouriel Roubini today as well.
He offered the following:

1. Strong possibility of a sovereign default in the Euro zone. He singled out Ireland, Greece, Iceland, Spain, Italy and Belgium as countries with the most issues within their banking sectors. He does believe that if only one or two countries expose their problems that the balance of the European Union will support them. He did not offer an opinion if the contagion is so massive and spreads. He did highlight the fact that Western European banks have outsized exposures to emerging Europe and the emerging markets elsewhere in the world. He singled out Estonia, Latvia, Lithuania, Belarus, and Ukraine as the countries with the greatest issues.

2. In the United States he thinks the prospects of a temporary nationalization of a major bank or banks may happen very soon. He does think the Obama administration’s moves so far (bank plan, housing) are in the right direction but do not go far enough.

3. Roubini does believe that the United States has moved quicker to address our issues than either Europe or Japan.

4. On the housing front he thinks that we will eventually have to move to a “principal reduction” program in order for it to be effective.

5. How will we pay for all this? Everybody’s taxes will be going up although not right away. We will also have to deal with increasing inflation.

Away from these two titans, there was a lot of rumbling in the markets and from Washington about bank nationalization. While Ken Lewis, CEO of Bank of America was all over the news defending BofA and how nationalization should not be a topic of conversation, I saw and heard nothing from anybody at Citibank. The market believes that Secretary Geithner will be out next week with more details about his Financial Stability Plan (hopefully it goes better this time) and there is an outside chance he releases something over the weekend.

From Washington I heard conflicting viewpoints on nationalization from Senator Dodd. Dodd was panned on Bloomberg at one point. I will admit he makes for a very easy target.

LD

DJIA: -9%
S&P 500: -5.7%
Nasdaq: -2.3%
Bonds: flat to -10% depending on sector
$/Yen: 94.14 versus 89.81
$/Euro: 1.262 vs 1.280
Oil: 38.78 vs 41.60
Gold: 975 vs 929

There really has been no place to hide. Why? Very simply because in a “massive margin call” (selling assets purchased with borrowed money) when debt cannot be refinanced, all assets are “on sale” in order to pay down debts!!

We have achieved the objective we were looking for in the DJIA and are about 5% away from the objective on the S&P. If there are people who were outright short the market “nobody ever went broke taking a profit.” The question is where do we go from here? In order to address that question, we need to break it down into its component parts.

Will we see more forced selling and by whom?
Yes . . . hedge funds, private equity, insurance companies and others all will be sellers. Wall Street banks will NOT allocate balance sheet to take on assets. As painful as this is, I personally do not think we have seen a capitulation. While there will be some pools of private capital to provide liquidity as need be, they will be patient. As bad as the market feels, it does not strike me as oversold or overly cheap based upon expected earnings and the degree of uncertainty/risk.

Interest Rates
While we saw healthy activity in various sectors of the bond market in the first 6 weeks of the year, many sectors have given back a lot of ground this week. Credit risks, default risks, and foreclosure risks are keeping investors away. With a whiff of inflation today in the Producer Price Index and the Federal Reserve minutes focusing on inflation more than deflation, I do think we can see a serious move higher in government rates.

Global Markets
Europe is worse off than the United States. Asian markets had initially bounced but have since given back those gains. These export based economies have come to a screeching halt. Germany indicated it may take a stand, if need be, to support the Euro. Eastern European losses pose major concerns for Western European banks. I also read a startling stat today that Western European banks hold 75% of emerging market debt, while the U.S. and Asian banks hold less than 10% each. Sovereign credit risks are very high. Could a government default or devalue its currency to manage its debt? Most definitely!!

Economy
It is all focused on global government intervention. While the Obama Administration has only been in office for a month, the markets are not giving him, Secretary Geithner, and team a resounding welcome. The Administration has created measures of uncertainty while Congress was nothing short of pathetic in the process and execution of the stimulus plan. The housing plan and bank plans also present a wide array of “unintended consequences” which unsettle the market.

When can I get constructive?
I will go back to my piece entitled “Reason for Optimism” which I wrote on the heels of the Administration propping the “bad bank” (remember, I liked Bank Transition). For those who forget, the DJIA moved up toward 8600-8700 at that point and is down approximatley 13% since then. I do think the market is going to price certain banks to the point where the government will have little choice but to temporarily nationalize them. Where is Sheila Bair? We used to hear from her regularly. Has Secretary Geithner stifled her? The sooner the government makes this move, the sooner the markets may start to stabilize while not necessarily improve. Can you make investment decisions based on what wonks and policy mavens in Washington may do? We’ll keep our ear to the ground but don’t hold your breath because they have not given us a lot of confidence to this point.

I’ll keep writing. Please keep your cards and letters coming!!

LD

You know – we ragged on Bush constantly for his little jaunts and vacations. Funny, I don’t hear any of the Democrats talking smack about OBAMA already having taken TWO weekends away in less than a MONTH. Oh, right – Obama can do no wrong. I forgot. My bad. Ahem.

Getting back to the Porkulus Bill – once Obama signs it, the SECOND his hand finishes the signature, not only will we be in the hole for that $787 Billion, but we will have to borrow ONE TRILLION DOLLARS. Yes, I said one (1) TRILLION buckaroos. Yep! And where will we get that money? Who will lend it to us? Excellent question! Stu Barney said this morning that Japan is our biggest lender, but they are in the midst of a Depression, with a big “D.” So, don’t know how they will be able to pony up any more for our poor fiscal management.

And, the Stock Market has PLUNGED this morning as the Porkulus Bill is about to become law. Great. Way to stimulate the economy!

Oh, CRAP – maybe this IS their idea of “stimulus”!! To send it DOWN, not UP!! We are so screwed…

By the way, did you know that whole light rail thing in there is to have a high speed train go between Los Angeles and Las Vegas? Gee – I wonder who would have worked to get THAT in there. Hmm. Let me think. It couldn’t be the Mormon, Senate Majority Leader, REID who pushed for the Sin Express, could it?? Oh, no – I’m sure not.

While my senator, Lindsey Graham, is raising some eyebrows with his “Nationalize the Banks” cry, he gets it right in the following video when speaking back to Seantor Chuck “Chattering Class” Schumer:

Bottom line? We’re screwed. We’re screwed because the Party in Power is taking advantage of US because they can. We are going to be in debt for ages to come because of this Porkulus Bill, and the ADDITIONAL $1 Trillion we are going to have to borrow on top of that. The kicker is that this bill will do very little to actually stimulate the economy. That has nothing to do with Bipartisanship per se – it has to do with the Democrats taking advantage in a massive way, with little regard for restoring our economic security. That there was no bipartisanship of which to speak is unfortunate – yet another promise broken by The One. Not surprising though.

The bottom line is that this bill, soon to be a law, will do nothing to kick-start our economy, certainly not any time soon. Hey, I’m not the only one who thinks so. Go look at the freakin’ Dow – that tells the tale. And the tale it tells is a sad one – we’re screwed.

MORE VIDEOS related to today’s hearings and the stimulus package agreement are below, and from all points of view — grab some of Nocturnal Warrior’s “Wild Turkey” and join us:

UPDATE: OOPS!! I was going to add more videos but got wrapped up in Jay’s show. I’ll post some more shortly.