Cara's Commentary & Community Chat, Fri., Dec. 12, 2008

thanks for the points to reflect upon, both long and short.

Let's see how today goes.

LE.s

SWK - Downgraded to Neutral @ Robert W. Baird. Price Target $35

ORCL - Coverage Initiated @ Stanford Research with a Hold. Price Target $18

ECA - Price Target Lowered from $70 to $63 @ Credit Suisse

It really sucks, after this recent rally, watching things slowly come back (gaining a little hope and optimism) only to now watch them give it up. Like everyone else, lost patience looking for bottoms. If the market's broke, it's broke - nothing left to do.

Sold some positions into strength on Wednesday and thankful for that.
Went long some summertime calls on SLW and AUY on Thursday.
Mostly on the sidelines - 80% cash.
Holding TSO at avg $8+.
Holding PXP (which I interpreted as a bargain at $17 last week).
Holding TRA at avg of $15+.

There is a rupture in the fabric of the formerly United States.

For those GOP senators pinning the bail out failure on the UAW seem intent on pushing the "people" into a corner.

No, I am not pro bail out. But don't hide under the skirts of unabashed union bashing.

George Bush should be taxing the heck out of oil now that it has collapsed to start paying for the trillions going elsewhere, but he has no political courage. We know that.

The Senate all know that the post World War II U S economic model is long broken. The U.S. can no longer afford the suburban 3 car lifestyle. It has become a vicious treadmill for its denizens who fear life in the city, the horror of rubbing shoulders with the their fellow citizens.

But don't say it's the UAW's greed that doomed this nightmare.

I think an investment in a flag manufacturer might pay off big.

It's all a PONZI scheme. Has been for years now!
How many will come clean is the million dollar question.
The PONZI scheme with Gov Blagojevich isn't over yet.
The problem is they will impeach the Gov and put him in jail before he has a chance to expose the corruption of the election process that takes place with every election in the US. Don't you think boy Jackson is squirming trying to disassociate from Blagojevich? Didn't take Obama long to distance himself away from this political brother.
The Ponzi schemes keep going on and on and on.
Paulson's AIG/FANNIE/FREDDIE ponzi scheme is ancient history at this stage of the game. What the working people don't know won't hurt them is Paulson's middle name.
Corruption/power/greed is worse then any cancer!
Ponzi to Goldman also.....this will end the US economy.
Thanks for your perspective Bill.

Take your medicine shark, it's interfering with your thought process today.
Or is it?

No man, I'm just bored realizing that I probably don't have the skills to trade today's market. I will probably sit on the sidelines with my knee in a bucket of ice and a big bottle of Gatorade.

I'm seriously wondering about that firefighter thing btw...

Hey Sharky
my SIL is holding its own
will take shower with FAS at22 and OEX call i don't want to think I have it
Thanks god rest is in cash

Well the White House may throw TARP money at the Big 3....let's come to grips with the fact that when Obama gets in office the TARP money will be gone and the country will be essentially bankrupt....that's just a shame

the headlines are not helping; i don't see the futures being taken down as much as they would lead one to believe...lining up OEX calls...(anyone recall when to use leaning towards versus when to use leaning toward?)...

"The automaker issue is to me what will be done with the retired worker who put in a lifetime of service, paying in advance for pension services to be rendered when they would no longer be in a position to earn an income. Will America just walk away on its obligations?"

The safest pensions are US government worker pensions. When was the last time cutbacks affected these negatively? Our next headline: "Congress gets self-appointed raise"

Futures indicate we're going to open at about 8300 and change. That's a minor support level by my reading. If that gives way, the next stop is 8157, the level we hit last Friday prior to that strong rally.

If that doesn't hold, hello 7 handle.

I suppose the action will be driven by events or non-events in Washington.

I know I'm not alone is expressing disgust at the incompetence of our elected and appointed officials. But geez, it's as if they go out of their way to make things worse and worse. In CA, I am seeing the same thing on a state level.

Update: Just noticed that BGU is trading around its 50% fib retracement as market is about to open. Hmmmm.....

If these markets are a PONZI scheme, why not invent something like a Plunge Protection Team or something similar to "fix" the numbers so people keep gambling their money away?
One more question....Has there ever been a full audit of the markets?

4 minutes before the PONZI game. F and GM are crashing in premarket.

USD falling, Y/USD getting perilously close to 90, Treasury rates falling, PM bouncing. Looks too much like previous down days, my hunch is no worse than sideways or an HB&B sponsored positive close.

market gets dumb in December, right? Light vol, big swings.

Is it true that people just out of high school can get jobs on the US auto lines with avg salaries of $75 hr?

Nice work if you can get it.

I went into last night very long both. Bought more SLW yesterday afternoon at $4.16.

SLW seems to attract large bids at low $4.00 range.

Holding.

Is it true that people just out of high school can get jobs on the US auto lines with avg salaries of $75 hr?

No, it isn't true. It's one of the myths you hear regularly, however.

Man that's deep CP - lol.

Pleasantly suprised that the 2 positions I took in TNA and QLD at the close yesterday are holding up so well.

Meyer Amschel Rothschild stated in the late 18th century; “GIVE ME CONTROL OF A NATIONS CURRENCY, AND I CARE NOT, WHO MAKES THE LAWS".

I'll take number 5 for 200 thanks Ynot.

Full disclosure: I am an Australian citizen

:)

It really does just have me shaking my head. With all the trillions (literally) thrown at the banks and financials, they can't find $14 billion for businesses that, if they failed, would affect 2,500,000 jobs (and actually produce 'stuff'). Is this for real? Kind of feel like I'm in some kind of bad dream. America just seems to have lost the plot, in a way that I never thought would occur without some kind of outrage. Its almost like its so blatant that it has blinded the general populace or stuned them into inaction. Or is it just indoctrinated apathy.

Bill your like a lighthouse in VERY rough seas. Thanks for taking the time

perhaps what I should have asked is what is the average per-hour cost to the employer for employees in the US auto trades.

average hourly cost is from 70-75 per hour, depends on which of the BIG THREE you work for...

http://bigthreeauto.procon.org/

Good day all,

I have been too busy to read the blog for the past few weeks. The economic conditions are putting great straing on EVERY miner on the entire globe. You have no idea the kind work each mine management group is going through right now (maybe with the rare exception of the well managed PM miners - eg Goldcorp).

During this turmoil, I have discovered a huge problem with my foray into options with a solid risk mitigation intent. Living in the Northwest Territories, I cannot get an account for IB or etrade - they do not service the north for some reason. I'm dealing with RBC Investments - those crooks charge 45 bucks per options contract!!!! I need something different.

One alternate avenue I can perceive is opening up a PO Box in a province that IB operates in and use that as my address, but that seems somehow dishonest (illegal?) to me. I will try to speak to a tax specialist about this but thought someone in this trusted community may have had prior experience.

Bill, I do hope you are correct about the intent of Madoff. We need a paradigm shift which needs to start with someone throwing the curtain open so the entire world can see the wizard of oz for what it is.

Thanks in advance!

Shannon

Great comments today Bill. The Madoff situation is just one more chapter in unraveling the Ponzi-scheme that was created on Wall Street. Its just unfortunate that our regulators have allowed these schemes to build to epic proportions before they are uncovered. I struggle with whether to be optimistic that this fraud is finally coming to light or afraid that there is much more fraud that has yet to be uncovered. Apparently the markets feel the same way.

--------------------------------------------------

Regarding the S&P data I posted yesterday.

Looks like we came close this morning to the S&P 850.75 level (38.2% fib retrace of the 740-920 move) but only hitting 853.41. I would be more comfortable about looking for a subsequent up move if we had come a little closer to 850.75 or dipped very slightly below and seen good volume kick in to the upside. This could still happen later today but if 850 goes down it looks like 830 (50% fib retrace) is on the itinerary. While the auto bailout has stalled at the moment, I think there is a possibility that something can be hammered out over the weekend so I am skeptical that traders will want to be holding short positions into the weekend.

Regarding the conversation on Ultra ETFs that was going on yesterday, the more I think about it the structure of these leveraged products is a reflection of the immorality that has infested markets. After some thought I have concluded that these products actually help issuers/market makers to take fairly liquid indexes and package them into less liquid securities for their own benefit in creating not only fees but arbitrage profits. I wouldn't be surprised if the illiquidity in the markets has actually been a great positive for the creators of these products as it would seem logically to increase arbitrage opportunities.

Mack - Ok, I won't post my trades...

Hourly wages do not include "legacy" costs.
Since when do the obligations of business become the wage of the employee?
They both reside on seperate lines of a ledger, not the same line.

This is "Corker Economics", which should sadden and enrage Tenneseeans concurrently, but should be roundly slammed here at the *smarter than that* Cara Community.

The man is without conscience and unwittingly starting a civil war pitting the Walmart South against the Unionized North and holding the country over a barrel in doing so.

Might I remind Mr. Corker that he is a temporary annoyance and the last election thinned his herd so that he will be increasingly irrelevant after 1/20/09, except for the noise.

"Big Thunder, no Rain", as they used to say.

Sharkie, Fire fighters are like airline pilots, they work so many hours then get so many hours off. Their off time is enough to have a second business which most do. Therefore, they don't want the gov in their pockets either.

Incidently, while they don't get rich they have all benefits and the ability to retire relatively young with a nice pension.

A thought to ponder: Which is best? Chose a fireman type career or strike out as a small business man creating wealth with the stress that goes with it, only to have the money masters do their thing and cause you to be broke in upper middle age when the fireman is retiring with heath care and pension.

The money masters seem have the rise and repeat gig down pat on the 5-7 year plan.

I recall comments that you'll set up a defensive portfolio in the near term. I assume the idea was related to the overall market dysfunction and economic tidings that continue to hammer the headlines. Any notion that this carcass will be split wide open for the world to see the rot definitely creates a sense of urgency for me to clean up the few laggards in my account ASAP.

I don't even wanna be near the market if that were to get out.

At least until we find new lows, that is :)

in 2020

LE.s

Can someone elaborate on were I can find a TICK charting tool to learn more about what Bill referenced in this morning's MU?

Kind regards.

Regarding the big 3 auto makers, the question that keeps coming back to my mind is; "What's the plan after March/09?"

Clearly, they are going to have to adjust to a market of 10 million cars, not 14 or 16 million. This is going to require massive re-org and their competitors are not going to stand still.

Even if they get the initial 14B payment, we will be re-visiting this in three months and nothing will have changed. Unions will hold firm, management will want a cram-down and the US government will be trhowing more more money at the problem.

I expect it's all going to end badly. Puts on GM?

BTW where is Cerberus on this? Why don't THEY step up and re-fi Chrysler?
What a train wreck. The new Challenger is nice looking, though.

Shark is right. His point answers the old 60's question:
"what would happen if there was a war and no one showed up?"

The answer is, they kill your unions, steal and devalue your money, steal your pension funds and move all your industry to where ever labor is cheapest.

Let me know when the work-a-day American finally wakes up and realizes his pants actually don't go on the same as Hank and his banker friends....his are on backwards and the Unions were helping him put his pants on right (and thus protecting his backside) since the founding of the AFL/CIO and the Robber Barrons.

Samuel Gompers must be turning in his grave at our ignorance.

Mack - Effective communication is the one of the most difficult tasks modern humans face. Throughout the ages our challenge was finding food, let's not go back there.

Maybe Mr. Market actually likes the idea of the an end to moral hazard and handouts (except to HB&B, of course). There certainly have been a lot of persuasive arguments about how the auto bailout would only impede a serious long term recovery in the economy.

A quick scan of the Cerberus website shows three of their fine investments; Chrysler, GMAC, and .... wait for it... Air Canada! Canadians rejoice.

Smartest guys in the room. Last year.

Craig,

I see both sides. I am sure you would not have approved of my previous post in which I described destroying the auto union in order to sav e the auto industry, so I'm like a stopped clock. Right at least twice a day. Am I wrong also? By definition, of course. Right and wrong are SOMETIMES relative issues, dependent on one's circumstances.

What's new with you anyway?

C'mon Bill,

You wrote "The automaker issue is to me what will be done with the retired worker who put in a lifetime of service, paying in advance for pension services to be rendered when they would no longer be in a position to earn an income. Will America just walk away on its obligations?"

How can you define the retirement deal that the UAW struck with GM as an American obligation? The smart companies, like IBM, went to a defined contribution plan years ago when they too were heading to the garbage dump. How am I, the taxpayer, obliged to make the GM retiree whole?

"Benefit/government required programs in 2006 added an additional $33.58 for each active hour worked."

Wonder just how many of the "government required" benefits were enacted as a result of UAW lobbying??? UAW simply cannot deny their hand in tipping the scale, employment wages and benefits must be a dynamic with the free market, not chiseled in stone.

number2son
Me thinks the answer is a resounding 'YES'

The Madoff Hummungous Wall Street Scandal of the Century is unraveling before our eyes.

Many more people involved.

1. Who did the audits
2. Who had access to the bank records
3. Who had access to the special floor
4. Who conducted due diligences
5. Where was the SEC
6. Who received political contributions, gifts and payoffs

It is massive fraud and yes, I know there are others on Wall Street doing the same thing. I saw it years ago with my own eyes. Financial analysts not doing their due diligence but plugging in numbers ect.... I was shocked, disheartened and disgusted with Wall Street. I hope they all come tumbling down and burn And that the politicians and government are held accountable.

Madoff is just the fall guy.

The 10 Worst Predictions for 2008
http://tinyurl.com/5rzab8

Was it Simon Properties (SPG)? It took a nose dive yesterday in the afternoon on huge volume.

This morning it has stabilized.

A really tough stock to trade, btw.

Update: a quick search indicates it was GGP. SPG fell on anticipation GGP failure would hurt others.

the next huge bubble could be emerging markets... (outside of the usa)

emerging market (and developed) currencies are down 10-40%, they took out massive amounts of leverage during "fantasy land".

they are the tail of the dog and they need the dog to eat/consumer/spend in order to thrive. Or in anotherwords, they make the stuff that the g-8 buys, they produce the basic materials and commodities that the g-8 consumers.

With those comodity prices down over 50-70%, which they took out leverage during those times, now since their currencies are down over 10-40% that debt is way more expensive to pay down and revenues are in the basement.

Oh... just for a hint, it wasn't USA or Japanese banks that funded those emerging markets...

If you believe the USD is going to crash, you will be in for a surprise.

A a comment I couldn't get out of my head I read the other day in Roubini's blog. Just consider how intelligent and well-spoken everyone on this blog is, and yet how we have absolutely no influence on those that govern us.

"Will we ever grow bold and brave and just plain damn SENSIBLE enough to go beyond eternally begging wealthpower giants for a scrap from the pie we all baked together and get our heads rid of the stooopid idea to ALLOW wealthpower giants to have to beg from?!? IT IS OUR PIE! Why do we beg for a bit of it?? What IS it people think these few add to the good of society that should and must be compensated for at billions of times what most of the planet gets paid?!?

The whole freakin world is utterly convinced that commerce won't work if we don't continue to give our money away to overpay the overpaid. It's ridiculous - completely BONKERS I say! - to think the village can't function without a person or two being allowed to wheel up to the edge of the pool and suck up 99% of the wealth with a fleet of siphon trucks – the wealth of those who sacrificed time and energy to the only thing that CREATES wealth in the first place. Say it with me: only WORK creates wealth.

I mean it: if we could just burn that into our chimpy brains and stop all the pays for things that are NOT the sacrifice of time and energy – we’d BE there!

There are thousands of legal thefts in our systems, but none dare call them LEGAL THEFTS. Why are they legal? Because we gave some people the power to be above us, to be above the law. (Somebody remind me again of where on this planet the poor make the laws??) Because we gave some people the overfortunes it takes to gain the power to create more and more legal thefts. If you’re mega-rich, what asset you gonna buy soon as you can, eh? The government, of ocurse. (oh! I’ll leave that typo! How very Joycean of me!)...

No one can sacrifice enough more times the time and energy than average people working average hard do, to justify the kind of personal overfortunes we allow...

Hide replies Reply to this comment By Mother of God on 2008-12-09 14:53:15"

Looks like 28ish is resistance for GG.

That's pretty amazing. Although if they hadn't spent the $100 Bn I'm pretty sure they would have lost it in some other manner prior to these valuations in the above companies.

Bill - great lesson on TICK in the wrapup. Out of curiosity, where can the average trader like us find information on what the current TICK is?

I have pulled together some stats using a few Ultra ProShares matching long and short (seeking 2 x respective daily indexes).

Note; I had these in nice columns, but when they get posted, the spaces get squeezed out.

First the longs:

Symbol 12/11/08 12/31/07 percent loss/gain
Oil & gas DIG 30.22 109.60 -72
$DJUSEN 434.91 679.31 -36

MidCap400 MVV 21.36 77.78 -73
$MID.X 493.03 858.20 -43

NASDAQ-100 QLD 25.98 99.22 -74
$COMPX 1507.88 2652.28 -43

Russell2000 UWM 16.80 60.54 -72
$RUT.X 451.21 766.03 -41

DJ Financials UYG 5.27 41.55 -87
$DJUSFN 208.93 474.23 -56

DJ Basic Mat. UYM 14.06 95.00 -85
$DJUSBM 144.85 307.92 -53

Russ.2000 growth UKK 16.40 65.36 -75
$RUO.X 235.86 379.42 -38

Same indexes Ultra short:

Symbol 12/11/08 12/31/07 percent loss/gain
Oil & gas DUG 30.15 35.98 -16
$DJUSEN 434.91 679.31 +36

MidCap400 MZZ 96.62 54.84 +76
$MID.X 493.03 858.20 +43

NASDAQ-100 QID 70.93 37.98 +87
$COMPX 1507.88 2652.28 +43

Russell2000 TWM 107.87 70.33 +53
$RUT.X 451.21 766.03 +41

DJ Financials SKF 128.88 99.88 +29
$DJUSFN 208.93 474.23 +56

DJ Basic Mat. SMN 67.92 40.65 +67
$DJUSBM 144.85 307.92 +53

Russ.2000 growth SKK 120.16 66.44 +81
$RUO.X 235.86 379.42 +38

While the longs show close to a double loss, several shorts did not acheive a double gain. With DUG, you would have lost 16% while the index had a 36% gain.

So in conclusion, SiO2 and Billy Sundance are correct. If and when the longs go back up, they could perform like the shorts did on the way down. There is no guarantee of a double investment return, long term.

Also eyeballing TDW here.

Benjamin Graham Small Cap fund had a nice pop today - BSC. I bet there's some deep value in that one! Too bad it's untradeable, I guess.

tanglewood
You can send the stats in .doc or .xls format using the file attachment functionality. That way the columns will remain.

ALOHA !!

YEAH ... start by getting rid of the US FED and all its member banks!

Tanglewood, I agree with yvrapx, the only way here is to use the attach file function, just attach your excel file.

Problem with Websites is they are created with HTML coding which does not recognize tabs or multiple spaces (they are compressed to one space). There are ways to create tables in HTML but they are not as simple as cut and paste and are not available to us here.

The other simple workaround is to use dashes or underscores to spread out the data. Its not perfect and it will look better in draft, then a little off when posted, due to the fact that the draft text is linear and the webpage text is proportional, ie an "ll" takes up less space than a "OO".

Date ___________ Col 1 ________ Col 2

Dec _8, 2008 ____ 234 _________ 456
Dec _9, 2008 ____ 789 _________ 678
Dec 10, 2008 ____ 567 _________ 123

ALOHA !!

"they make the stuff that the g-8 buys ..." You need a couple KLUES!

Who is China's next biggest export nation after the USA?

Here is your klue: Its not the G8 ... not even close!

Which countries comprise most of China's imports?

Here is your second klue: Its not the G8 ... not even close!

There is a huge imbalance in trade and here is the truth ... AMERICA is the the largest DEBTOR NATION the World has ever seen in the entire global history of EMPIRES! The USA and the G8 need emerging market nations like China and India to keep funding our ever growing DEBT at sub zero returns! No ... "sub zero" has nothing to do with refrigerators!

Have you learned nothing about money and debt? Who is the tail again?

What surprise are you in for?

There was a comment yesterday from shark about Apex Silver (SIL).

Here is a video from an 'expert', funny now in hindsight. I could not find a date but it looks like around May 21, 2008. If he followed his own advice, he would have lost the proverbial shirt.
Apex Silver (SIL) is 8.73 (today .67), Hecla (HL) is 10.06 (today 1.85) and Coeur D'Alene (CDE) is 3.19 (today .67).

Scroll down to the video, you will have to sit thru a brief ad.
http://moneycentral.msn.com/detail/stock_quote?Sym...

If you get rid of the Fed and it's member banks all you have left is a soon to be revealed ROGUE trader by the name of Sach Goldman!

It's not rocket science

Did any of you have the stugots to play Ford or GM early this morning? I should have...I would have...I didn't.

CP

IMO - nearterm the dollar will continue to weaken (next year, look out for a suprise).

The trailor has not yet been unhitched for the next phase of deleveraging and global currency devlauation. This could take a while.

The ECB is going to be making a grave mistake, by not proving enough liquidity for nations in need.

This market has rallied in the face of doom, "dust off your shoulders".
She wants to go higher as it should. Even Faber is looking for a heck of a rally towards early next year.

sidelines is a very safe place to watch the game, the air (credit) is to dirty play.

kaimu is right - we need to eliminate the fed.

Eliminate the fed and then what? Want to see a real liquidity crisis? Get rid of the fed and we go back to the stone age bro.

norm - "sidelines is a very safe place to watch the game, the air (credit) is to dirty play."

Through selling rally's and buying pullbacks, I've nearly recovered my losses for the year. I'm expecting this action will continue for some time to come. As traders get used to the idea of a declining economy, they begin buying (I'm selling) until the nest wave of disappointment arrives, then they sell (I'm buying). IMO the only reason the USD has been strong is due to fear, not greed. My prediction is that when greed regains momentum (Market rally), the USD will fall (with an assist on the behalf of governmental deficit spending).

You may find the capital gains distributions on these type of funds surprising. Here is a great explanation on how ETFs manage their capital gains.

Treasury rates are down slightly, USD is shakey but also down, JPY:USD 91.

I think it may be a white unicorn? Beware if he offers to play leapfrog!!!

CP
that is good and it is working for you! It please me to see WINS in this enviroment. Don't forget the stops.

We all have different opinions which is what makes this place great. mine is different from others and others are different than mine. I used to be on the other side but since the expidition of information, my mood has changed.

I agree with you about the market rally and the USD, the global coal mine isn't all clear, meltdown in the USA isn't the only meltdown. The pundits will tell us things will be better by 2009, it won't be. The EU nations are going to feel pain that makes ours seem like a vacation.

Russians exchanging their rubles for USD in fear or greed? I would say both, because they are buying everything from the sun thinking that their currency won't make it (greed/fear) their other fear is putting USD under that mattress.
Do you believe that they will change their mindset anytime soon and rush to the bank to deposit their dollars for rubles?

There are other countries going throught he same thing. I am cautious that is all. very cautious. Foolish in the past not believing there was risk out there. Shame on me for those thoughts. Maybe to cautious now, but I can live with that.

Caution is good! Putin is embarking down the path of limiting imports to Russia, and this another sign to Russians their economy is in for further trouble. With low oil prices he cannot make good on his promises of prosperity in trade for absolute power. IMO if Russians are buying USD it is in fear of Ruble crash.

15 min to go

Now that the White House has committed to bailing out the auto industry, I decided to place the buy limit orders on SWC: 500 shares at $3.25 and 500 at $2.8, to replace the 1000 shares I sold today at $3.66.

Amen craig

You work 35 years for a company and they say see ya....what a shame.
It's all about the bond debt that is coming due. People in high places are using their mooch to play card. Although I don't agree with a bailout that sends billions of taxpayers dollars to the holders of the bonds that are unwilling to negotiate until this economy turns around or implodes. Cerberus can't afford to pony up the money for the GMAC debt that is coming due so they do the next best thing, mooch it. Cerberus has been on a relentless corporate acquisition spree since 1995, let them borrow more dollars from Citi and Goldman to keep their empire from crashing and burning.

Couldn't keep out of the day trade euphoria today, bought GM before the close. I'll sell the crap monday. Still long yhoo, m&a inevitable now.

Good week for slw.....gg....tck.b...nice gains

Hope New Year brings bigger gains and some stability.

We need the big guys with all that cash sitting around to come and play in the NEW YEAR

I'm sure as this story unfolds it will make for better-than-fiction reading or big screen viewing. Until some more details come out though, it's hard to speculate too much about what really happened there. Regardless, I do see the following:

1. The fund of funds model will likely be destroyed by this. Madoff was a favorite of the FOFs, although his firm had a reputation for being very difficult to do any due diligence on. With big, long-standing firms like Fairfield Greenwich having 25% exposure to Madoff, I suspect that even after all of the panic-reaction redemptions, investors, big and small, will wonder why they are paying fees to FOFs if they are not catching stuff like this (see article below). They will likely go back to making their own decisions or pulling out of hedge funds altogether. (BTW, I don't want to imply that there was fraud or other wrongdoing - maybe there was maybe there wasn't, it's still early days in this. And maybe the due diligence was thorough - competently orchestrated fraud is much more difficult to detect than honest incompetence. Regardless, the market will still slam FOFs and HFs)

2. This has the potential to lead toward a broader move to investigate Wall St. I don't know whether or not this kind of behavior is rampant, but friends of mine who work on Wall St. all seem to know of some firms that, at the least, operate in the gray area - and that they are profitably supported in this by HB&B. I like the theory that Madoff orchestrated this in a way that (hopefully) ensures a wide and deep investigation. It looks to me like he just found out he is terminally ill (I have no actual knowledge of this), took steps to protect his family and then offered himself up for sacrifice.

3. I think this will give regulators the ammo they need to regulate hedge funds, which may have happened anyways under the new admin. (Don't know whether I think this is good or bad.) Additionally, regulation aside, there will be increased transparency requirements on all investment advisors by institutional and other qualified investors (good).

Finally, I thought this was an interesting quote from
Bloomberg about the accountant for Madoff's fund. How did this fund ever pass due diligence?

"Friehling & Horowitz operates from a storefront office in the Georgetown
Office Plaza in New City, sandwiched between a pediatrician's office and
another medical office. An office for the Rockland County Bar Association is
also in the building.

A woman who works in a nearby office, who didn't want to be identified, said
Friehling doesn't come to the office regularly.

When he does, he is the only person there. Another woman in a nearby office,
Leslie Cousar, said the man who comes to the office does so for 10-to-15
minute periods, and wears tight pants and tie-dyed shirts. Cousar said she
never saw anyone else going to the office during the day, but at about 5:30
p.m. another man would use the office.

The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the
Southern District of New York (Manhattan)."

I am the lead plaintiff for a wage class action lawsuit. I gleaned the following from some of my testimony to clarify the above concerning unions.

The original Congressional intent of the Fair Labor Standards Act("FLSA") was to correct deplorable workplace conditions, spur employment by creating an overtime premium, thereby forcing employers to hire more people who worked less hours, to create a level competitive environment for employers, and to provide for a means with which workers could protect their substantive rights.

In the mid to late 1930’s, America was still in the clutches of the Great Depression. At times, more than 25% of the country’s available workforce was unemployed. Those fortunate enough to have a job at all often worked in deplorable conditions.[1]In addition to the problem of child labor, long hours and substandard wages were common for many Americans.[2]It was against this background that President Franklin D. Roosevelt submitted his proposal for change.

In a message to Congress, President Roosevelt stated: “[o]ur nation so richly endowed with natural resources and with a capable and industrious population should be able to devise ways and means of insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.”[3]

Accordingly, the Fair Labor Standards Act (“FLSA”) begins with the words: “The Congress hereby finds… the existence… of labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers….” 29 USC § 202(a). This is how, the basic American belief: “An honest day’s pay for an honest day’s work” is at the very core of the FLSA’s overtime pay provisions. This principle is so engrained in the American consciousness and so fundamental to the American way of life that it cuts across all ideologies.
------------------------------------------------------------------------------

[1] See T.H. WATKINS, THE GREAT DEPRESSION: AMERICA IN THE 1930S 167 (Blackside, Inc. 1993) (noting that “[e]ven in the best of times, wages had never managed to rise proportionately to the cost of living, hours remained long and hard, working conditions were typically abysmal, and in many industries factory work was only a little above the level of peonage”).

[2] Monohan v. County of Chesterfield, 95 F.3d 1263, 1267 (4th Cir. 1996) (explaining that “[t]he FLSA was originally enacted in 1938 as the result of Depression era high unemployment and abusive working conditions,” and that “[t]he FLSA is clearly structured to provide workers with specific minimum protections against excessive work hours and substandard wages”).

[3] H.R. REP. NO. 101-260, at 8–9 (1989), reprinted in 1989 U.S.C.C.A.N. 696, 696–97.

Congress also intended for the FLSA to protect employers who comply with its terms.[1]Without such protections, reputable employers would continue to suffer at the hands of unscrupulous “wage chiselers” whose products and services, produced in substandard conditions, could be offered at an unfair discount. Therefore, it is clear that Congress sought to deny any competitive advantage to employers who would not adhere to the minimum standards of decency.
------------------------------------------------------------------------------

[1] See Int’l Ladies’ Garment Workers’ Union v. Donovan, 722 F.2d 795, 807–08(D.C. Cir. 1983) (discussing that “[t]he language and history unmistakably evidence an intent to protect all covered employees and employers from the economic consequences of subminimum wages paid to a small sector of the labor force”); see also H.R. REP. NO. 75-2182, at 6–7 (1938). Legislators argued that under the new law:

No employer in any part of the United States in any industry affecting
interstate commerce need fear that he will be required by law to observe
wage and hour standards higher than those applicable to his
competitors. No employee . . . need fear that the fair labor standards
maintained by his employer will be jeopardized by oppressive labor
standards maintained by those with whom his employer competes.

Recognizing that there are often great inequalities in bargaining power between employers and employees, Congress made the FLSA's provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees. The United States Supreme Court has held that an employee may not waive his or her rights to compensation due under the FLSA. Brooklyn Savings Bank v. O’Neil, 328 U.S. 697 (1945). Similarly, in Barrentine v. Arkansas-Best Freight System, 450 U.S. 728 (1981), the Supreme Court held that a labor organization may not negotiate a provision that waives employees’ statutory rights under the FLSA. Consequently, the return from the employee to the employer of compensation due an employee pursuant to the FLSA minimum wage and/or overtime requirements would violate the statute.

My, how CONgress has changed......
Ron

I have to chime in...

Unions are near and dear to my heart. This link is one of the holidays that my home town celebrates: http://en.wikipedia.org/wiki/Davis_Day

I strongly belive that unions have largely outlived their usefulness for the working man and woman. In the early years, they would fight for worker's rights which was absolutely needed but now I see them as being an insidious drain on the pocketbook of the working man and woman (not to mention the company). For the vast majority of union shops, the service the union provides is not worth the cost they charge each member.

JMO

now are we blaming creation of jobs in the south?

just explain to me how are Toyota, Honda, Hyndia, BMW, VW are profitable?

We know that GM/FORD management has been failing but why else?

Thanks, 2nd_ave. While the "visible" margin at my broker is closed, there is still the "invisible" margin -- $35K from my 401K that I have invested in the stock market. So I still need my positions to rise a lot before I'll be able to sell $35K worth of stocks at a profit (relative to the prices at which I was scaling in on the way down).

Here's a Stockcharts Chart that I posted here last weekend, and got some discussion going on everything from the fate of the U.S. to Veterans' Affairs...

To return to the topic, the dollar is starting to show some real weakness after the bearish RSI divergence annotated on this chart. I'm a newbie at trading, but so far in my brief experience the bearish RSI divergence after a strong advance--on most any type of contract--has been a great indicator for considering short positions.

http://tinyurl.com/6cjta3

Risky but reward will be hugh AXI/TRW/LEA

So lets just wipe out the unions and start all over again, do you for one minute think that conditions wont go back to the dirty thirties and the fight wont start all over again ? Do you and countless of others, especially management take lunch breaks, sometimes well over another, we dont, now we have a company, USX, that believes we should eat on the job, a sandwich sure does taste good with some graphite sprinkled on it.

Agree on the dollar. Chart looks like a head and shoulders with level neckline while MACD has had negative divergence since late October. As a foreigner I had always thought the US FED was an instrument of government but can now see that is not the case. I find it amazing that this has been allowed to go on so long and can now understand and agree with Kaimu's angst. To get the US populace on side you need a simple analogy that parallels the situation as the financial markets are far too complex for the general population to understand. To much detail and the eyes glaze over.

ouch. Trying not to remember NOT.

Broke the fundamental rules with stop loss tool on that thing and now have it as a real live Berenstain Bears "how not to do" example. Come to think of it, there are lots of examples so need get more disciplined with doing a plan.

There's a fairly cynical guy -- aka "otto rock" who does the primarily latin american mining focused inca kola news blog. Somebody here, think it was jock, put me on to in the summer. One of his posts back around Remembrance Day when the Noront non-brokered placement financing was announced caught my eye.
http://tinyurl.com/6n29pe

There was also a link over to the agoracom board to a letter that Richard Nemis's daughter Jennifer posted shortly after the "vote white proxy" vs "vote yellow proxy" stuff played out.
http://tinyurl.com/6bapha

Personally a bumbler with the spec. mining stuff but want to believe the Ring of Fire property(s) will eventually result in a mine. Whether or NOT remains to be seen i guess.

Does anyone think the banks are not lending (or stalling) because they know the risk of inflation? By lending their out their newly funded tax payer bailout dollars they meeded to re-capitalize, they are more aware or fully aware that they will just lose even more if inflation does kick in, seeing that the money repaid on the debt could potentially be worth so much less then when originally lent out?

So why not take out a loan and get an income generating rental property (if you can get it) and essentally steel that value back from the banks? Or buy more physical PMs?

Yes, I read an article on wealth distribution through inflation. It seems to make sense.

Bill, if you could comment here, should one want physical assets, in this economy, what % of their preceived wealth might be good to just hold for safe keeping, for that rainy day?

I can't day trade, or trade well at that, but I understand their is a bull somewhere to protect my wealth and there are defensive things I can do to protect my family. I would love to just give Bill's team 50k but I am afraid if I lose my job, I will need that money. So, though I do lose, not always, I am trying, and by trying learning every day.

You don't have to outrun the Bear, just outrun the guy next to you.

NEW YORK – In another sign of the grim holiday season, KB Toys filed for bankruptcy protection for the second time in four years on Thursday and plans to begin going-out-of business sales at its stores immediately.

The 86-year-old company said in a filing that its debt is "directly attributable to a sudden and sharp decline in consumer sales" because of the poor economy
Santa must be in the unemployment line?

Otis, given your level of experience and the state of the current market I would humbly suggest you get Bill to manage your funds. If you need those funds at some stage there should be no problem drawing down as I think Bill's 'system' allows you to get out whenever required.

In regard to your job, do as you say, ie "just outrun (add more value vs) the guy next to you". Good luck mostly comes from good preparation.

I may be very naive, but it seems to me that Corker is doing the job that he's supposed to do, which is represent the interests of his state. His state has foreign car manufacturers who will be relatively disadvantaged if the US government subsidizes their competition, so potentially threatening employment in his state.
Along those lines, its relevant to remember that the USA is a Federation of states, and many states were reluctant to grant powers to the federal government, to the point that the constitution states that powers not specifically granted to the federal government remain with the states (note - not the people, but the state!).
There appears to be a reluctance once again to learn from history. The UK once had a vibrant domestic automobile industry (I'm sure most of you remember MG, Austin Healy, the original mini) and it degenerated into a morass called British Leyland and as a result of incompetent management and short sighted unions, was bailed out with government money that ws never recovered and finally shut down - sold recently for peanuts to a Chinese company. Does that mean there's no car manufacturing in the UK. To the contrary, Ford and GM still build cars there, as do Toyota, Honda, Nissan, and BMW (the new mini).
I wonder if we might use the ratio of CEO salary/janitor salary as an investment criterion - the lower the ratio, the less likely the company is to require a bailout.

ALOHA !!

US GDP is deeply dependent on "consumers"(70% is quoted) ... I find this and the DEBT that begets consumerism in the USA an UNGODLY PLAGUE on the lower class, the middle class and the upper class ...

Does the 70% of GDP translate that every American is 70% shopper and 30% debtor? No I believe it is the other way around ... 70% debtor and 30% shopper!

So once again that dirty little four letter word that the US BANKS and the US FED depend upon for their very existence is DEBT! DEBT and more DEBT! DEBT is the basis of the AMERICA DREAM. Without our perverse ability to go into DEBT for 30 or 50 years at a time America would not be America! What allows this is our World Reserve Currency status ... That is our CAESAR!!!

ALL EMPIRES FALL!! They fall internally and they fall on DEBT!

MORE ON DEBT:
"A Point Of Resistance"
Sharon Astyk (via Rod Dreher):

The economy is a game of music chairs, and the chairs are disappearing. When the music stops for each of us, and our chair is gone, for a time we will rely primarily on the resources we've built up now. Those of us left holding the big screen tvs and the designer handbags will have them - or whatever their resale value is. And those who have ties - biological or chosen - will have those. The truth is that our consumer culture needs us to be isolated, fragmented, alone, empty - or advertising wouldn't work, the nonsensical reasoning that we have to have this year's big thing wouldn't work. The primary project of consumer culture is to drive us apart, to make sure we do not share, we do not combine resources, or even consult on how ridiculous the things we are being told are. And it has worked magnificently.

The music is hectic, the chairs are disappearing, we're going faster and faster. And pretty soon it stops. What will you have when it just...STOPS?

Rod adds:

John Taylor Gatto, a lapsed Catholic and education reformer, wrote that one good thing religion has going for it is that it gives you a point of resistance against the manipulators. A spiritually content person, he said, is a lot harder to manipulate.

If spiritual contentedness and strong family ties are threats to the culture of consumerism -- and I think they are -- what does that say about the basic nature of institutions like the Federal Reserve and about broader economic policy during the past eight years? Robert McTeer, then head of the Dallas Fed, said in 2001, "If we all join hands and go buy a new SUV, everything will be all right...Just go out and buy something - maybe a Navigator." Richard Fisher, his successor, said in 2005:

"Where would the world be if Americans did not live out their proclivity to consume everything that looks good, feels good, sounds good, tastes good? We provide a service for the rest of the world. If we were running a current account surplus or trade surplus, what would happen to economic growth worldwide and what would be the economic consequences? So I think we are doing our duty there."

And of course Bush's various exhortations to "go shopping" are well-known.

I wonder how many on the Religious Right understand the irony in supporting an administration that unabashedly promotes an almost demonic obsession with the material world on display in incidents like this. Or is it really all about "the fags"?

posted by The Cunning Realist, Tuesday Dec 2, 2008
END

While I welcome such articles that expose DEBT for what it really is I would disregard the comments about blaming the RELIGIOUS RIGHT because when it comes to DEBT in AMERICA there is NO RELIGION, NO RIGHT , NO LEFT, NO MIDDLE ... NO NOTHING ... just DEBT! And the DEBT is the DRUG OF CHOICE of all who dwell here and it is the opiate of the masses that amasses the opiate.

There is plenty of blame and guilt for both of the two party aristocracy for both parties have squandered our future and above all squandered the responsibility and the PRIVILEGE of World Reserve Currency. The squandering can be seen every hour of the day and night on national TV! Today America imports the savings and slavery that begets WALMART SPECIALS and we export DEBT and FRAUD ... All the while we BAILOUT the FIAT MASTERS so that they would take our squandered "wealth" and enslave us and our children with even more DEBT ... and more DEBT! How ironic is it that we "voluntarily" bind our own arms and legs in virtual shackles of a modern day Debtor's Prison and then hand the keys over to our FIAT MASTERS with a stuppered half smile that any fully baked junkie would recognize instantly as totally lost nirvana.

From the multitude of AA(Alcoholics Anonymous)meetings held every day in America and around the World comes this simple reality, this simple Gospel:

ALL OUR BEST THINKING GOT US HERE ...

I add to that ... WHAT IN GOD'S NAME WERE WE THINKING?

AMERICANS need to RETHINK what it means to be an AMERICAN in this global community. Is an AMERICAN a HUMAN BEING or just DEBT? Do we really want to have a legacy of KING DEBTOR? Do we? Do we?

THE US FED MUST GO!!

THE US FED MUST GO!!

ALOHA !!

If anyone here has ever been in the construction industry in America then you are intimate with this "RULE OF LAW" known as the DAVIS BACON ACT ...

Look at this link for Davis Bacon: http://tinyurl.com/66wbl3

This act came from the combined political UNION of the US CONgress and AMERICAN UNIONS. The purpose of this RULES OF LAW is to bilk the US TAXPAYER by the simple act of ENFORCED PRICE FIXING!

If you have ever been a union or non-union contractor on a public works project any where in America then you know that if you do not include the UNION FIXED price of labor to your bid you will most certainly soon fail as a going concern.

Simply put the UNIONS OF AMERICA put it to any politician running for office that if they did not enact and support these laws then there was little chance of ever being elected. If that is not out and out BLACKMAIL then I do not what is? Sadly American politicians are in the business of GETTING ELECTED! That is the only expertise they bring to the table now days! Most of their time and energy, once in office, is spent to achieve "re-election"!

This RULE OF LAW has devastated the US TAXPAYER and brought upon AMERICA financial ruin just so the members of the US CONgress and the AMERICAN UNIONS can benefit from this SOCIAL INEQUITY.

I ask anyone here "WHAT DOES PRICE FIXING HAVE TO DO WITH FREE MARKETS?"

When I was an electrical contractor operating on public works projects in the Great State Of California I was FORCED to pay a LOCAL302 JOURNEYMAN $53.00 per hour(2002) with benefits that took his annual salary over $125,000 a year! It did not matter if I was a union contractor or a non-union contractor. If I was a non-union contractor then union reps were allowed to roam the entire job site spying on my business and my labor and seeking internal payroll documents to hopefully entrap my company so that my contract could be nullified and taken over by a union contractor!

COME ON PEOPLE? WHAT THE HELL IS THAT? ITS NAZI UNION GESTAPO TACTICS!!

When I have 40 journeymen on a job that's a $4.3mil annual payroll. That's around an $84,000 a week payroll! Not only do I as a small businessman have the IRS breathing down my neck to get their CUT every week but then I have to have the IBEW UNION GOONS harassing me every day to get their CUT!

It is quite literally RUNNING A GAUNTLET OF CORRUPTION AND GREED!!

And you wonder what is wrong with America and what is wrong with unions?

No amount of bleeding heart clap trap will ever convince me that UNIONS are essential or that they are without fault for the current economic crisis. NONE!

WALK A MILE IN MY SHOES!!! If you have never been on the receiving end of the UNIONS in AMERICA then you are NOT QUALIFIED to speak!

You don't want me to speak to the quality of UNION LABOR ... That would be a HUGE BOOK labeled "PRIMADONNA COMPLEX-THE IMPOTENCE AND FAILURE OF UNION LABOR IN AMERICA"!

AMERICAN UNIONS are a mirror of AMERICAN GOVERNMENT and the story is all about "lost potential"! Lost to the ENTITLEMENT MENTALITY and the GET MINE FIRST THEOLOGY!

There is a lot more to "contracts" than honoring them. First you have to an honest one ... a contract that is fair to both parties and above all fair to US TAXPAYERS who end up paying the bill!

I have never seen a fair UNION in all my life as a contractor doing business in America, so how can there ever be a fair contract?

As usual the US TAXPAYER is drawn and quartered and most taxpayers have not one clue as to what is going on! If they could see the huge fiscal waste that I have witnessed in my two decade long contracting career they would be astounded and very angry!!

There is much that is wrong with UNIONS in AMERICA ... Question is how long can the US TAXPAYER keep taking these endless fiscal abuses? My data shows NOT LONG!

It all ties back to ...

GOVERNMENT IS ONLY AS HONEST AS ITS MONEY !!!

Amen brother kaimu. You're preaching to the choir here.

I may have commented on this before but back in the late 60's early 70's one of the industries I followed as a junior analyst was trucking. Before deregulation, trucking was an ICC teamsters conspiracy. I once asked a senior VP of Yellow Freight why they were so eager to end strikes and cave in to 12 to 14% annual wage increases. In a fit of honest candor, he explained that management got the same % increases.

As we have seen, management interests are not always aligned with share owners. I wonder how much cash has been squandered with share buybacks over the last 10 years. Shameful.

Regards

Bill suggested that I put the following full article in the Discourse.

What Auto CEOs Should Have Said

Posted Dec 1st 2008 at 12:01PM by Gary Witzenburg
Award-winning automotive writer Gary Witzenburg has been writing about automobiles, auto people and the auto industry for 21 years. A former auto engineer, race driver and advanced technology vehicle development manager, his work has appeared in a wide variety of national magazines including The Robb Report, Playboy, Popular Mechanics, Car and Driver, Road & Track, Motor Trend, Autoweek and Automobile Quarterly and has authored eight automotive books. He is currently contributing regularly to Kelley Blue Book (www.kbb.com), AutoMedia.com, Ward’s Auto World and Motor Trend’s Truck Trend and is a North American Car and Truck of the Year juror.

Shouldn’t those auto/government hearings have been reversed?

Did it occur to anyone else that those oh-so-painful auto CEO/government hearings should have been the other way around?
Instead of the heads of America’s three remaining automakers groveling, begging and enduring live public floggings trying to sell their case for government loans to get them past the global economic crisis and credit freeze that government greed, corruption and incompetence has created, shouldn’t they have been vein-popping outraged and angry? Shouldn’t they have pointed accusatory fingers at that sorry collection of arrogant, auto-ignorant Senators and Congressmen who got them into this mess and demanded their assistance?
Shouldn’t they have looked those pompous public-trough pinheads straight in the face and demanded to know why investment firms, banks and big insurance get hundreds of billions of taxpayer bailout dollars no questions asked while what’s left of America’s once-mighty manufacturing muscle begs for loans totaling 1/28 of that initial $700 billion Wall Street bailout? Where were the public humiliation hearings and newly viable business plans for those guys?
Here is what I’ll bet those long-suffering auto CEOs wanted to say, but couldn’t:
“You ignorant morons! How dare you accuse us of building cars nobody wants? We sold 8.5 million vehicles in the US last year and millions more around the world. GM still handily outsells Toyota here, Ford outsells Honda and Nissan, and Chrysler sells more than Nissan and Hyundai combined.
How many of our new cars have you driven lately? How many quality surveys and plant productivity reports have you reviewed? Have you bothered to check your own EPA’s fuel economy ratings?

“Have you paid any attention in the last several years as we’ve turned our companies upside down, closed dozens of plants, shed hundreds of thousands of hard-working people who did nothing to deserve it, canceled slow-selling models and spent billions of hard-earned dollars redesigning the rest? Are you idiots even aware that we renegotiated our union contracts last year to make our US labor and health-care costs fully competitive by 2010?
“Would you recognize a good business plan if one smacked you upside the head? Have any of you ever run a business, made a business decision or even held a real job? Is there any more dysfunctional organization on the planet, any that more desperately needs a new business plan, than the US Congress? Let’s compare our public approval ratings to yours.
“You scold us for using private aircraft? We run global companies flying people, parts and equipment all over the world every day. We use private planes for security and productivity and cost savings over commercial alternatives. If it were not cost effective, we would not do it, and we’ve been doing a lot less of it lately. Tell us, Ms. Pelosi, how much does that big private 757-200 of yours cost taxpayers to fly you home and back between your tough 3-day weeks?
“For decades, your national energy policy has been summed up by two words: ‘cheap gas.’ Now you want to punish us for building the big, capable, comfortable vehicles Americans wanted to take advantage of that policy...and for not building millions more smaller, more fuel-efficient cars that, until recently, almost no one wanted, and that we can’t make a buck on if we build them here thanks to the high business costs you’ve imposed upon us through the years.
“You have blocked every avenue of domestic exploration and construction that could lead to eventual energy independence, preferring instead to pump hundreds of billions of dollars overseas to purchase the energy Americans need, much of it from countries that are not our friends. You have piled billions of dollars of unrecoverable costs on us with excessive taxation, overkill regulation and relentless litigation that our off-shore competitors do not have to bear. Then you have rolled out the red carpet to predatory, low-cost foreign competitors who come here to take our market and pump hundreds of millions more dollars out of this country.

“Is there any other country fortunate enough to have an automotive industry that does not support, protect and nourish it in every possible way? We are the only nation on earth too blind and stupid to recognize and treasure the enormous economic and national security advantages of having its own healthy, prosperous auto industry and manufacturing base.
“Now you have passed an enormously expensive new regulation requiring 40 percent higher corporate average fuel economy in hopes of someday reducing the less than 0.2 percent of global human-sourced CO2 attributable to US light vehicles. That will cost us an estimated $100 billion, and even if you believe that is really worth doing at such a cost, where are we going to get that kind of money? Talk about unfunded mandates!
“With recent resizing and restructurings and our new labor contracts, we were well on our ways to full financial competitiveness and profitability. We could have survived and the sudden $4 gas explosion – not our fault – that shifted buyer demand overnight from larger, more profitable vehicles to small unprofitable ones. We have millions of highly desirable, much more fuel-efficient small cars and engines in the pipeline for 2010 and beyond.
“Then came your mortgage meltdown and fast-frozen credit crisis, which no one in this credit-driven business can survive unaided for long: not us, not our suppliers, not our many thousands of independent dealers, not even our most cash-rich foreign competitors. They, too, are asking their governments for assistance. Will they get it? Of course! No other nation will stand idly by and watch its auto industry die.
“There was no end of election rhetoric about creating new jobs. How about saving several million of the ones we have? Can any of you begin to understand how this industry is a huge, fragile, interdependent house of cards? If GM should fail, or declare Chapter 11, so will most of its 3,690 suppliers, beginning with the 2,000 in the US that operate 4,550 facilities in 46 states. Since most also supply key components to everyone else, that will bring down all of us, including US transplant production. Don’t believe us? Ask Toyota.
“Vehicle assembly, engine, transmission and parts plants nationwide will shut down. Have you seen a plant town whose plant has died? It’s a jobless ghost town whose out-of-work residents, including owners and employees of the small businesses that depended on plant workers’ incomes, can’t afford to move because their homes – like their hopes and dreams – are worthless. How many of those communities will be in your states and districts? US dealers of all brands, with no new cars, credit or credit-worthy customers, will drop like flies. Without once lucrative auto advertising, many media will shrink and some will die? The predicted initial loss of 3 million jobs will be just the beginning. Can you spell depression?
“Yes, we have lost a lot of market share. Where did you think all those millions of cars and trucks our foreign competitors import and assemble here in taxpayer-subsidized plants in cheap-labor states would be sold, and out of whose hides did you think they would come?
“Yes, we have made mistakes, some bad products and bad business decisions in the past. And so has every one of our competitors. We are entirely different companies today with new leadership and new priorities. We have wide varieties of high quality, high fuel efficiency, highly desirable new products that Americans, as they get to know them, absolutely do want to buy. Why continue to punish us, and the millions of incredibly dedicated, hard-working people at all levels who still depend on us to feed their families, for the sins of our predecessors?
“Why punish the entire country and millions in other countries as well? If you can think of any good reason, we would like to hear it. And don’t come back at us with your usual name-calling, finger-pointing, blame-shifting, uninformed opinions, decades-old perceptions and self-serving, grandstanding rhetoric. We have offered our business plans and all the facts behind how we got here and why we need and deserve to survive and prosper for the good of this country and every citizen in it.
“You know full well that this life-threatening position you have put us into is entirely your fault, not ours, and that our future viability depends completely on you. We’re anxiously awaiting your business plan for guiding this country out of the economic morass you have created, beginning with the bridge loans we desperately need.”

Nemo,

Interestingly enough, to increase taxation or reduce taxation is the crux of the dispute between the German finance minister Peer Steinbrueck and the British prime minister (and former finance minister) Gordon Brown.

Germany raised their level of VAT, Britain lowered theirs (to stimulate consumer sales) and the British public overwhelmingly side with the German in his undiplomatic criticism of the British government!

Now the German owned DB wants to buy out the British share in Eurostar, the woefully underperforming channel tunnel passenger service; once again the British public are signalling their approval. Maybe someday the Americans will take some advice from the Russians!

Fran6, my favourite gold bug, might be interested in this email from Jason Hommel, my favourite silver bug.

The Invisible Grind
(Faith is the substance of things hoped for, the evidence of things not seen)
Silver Stock Report
by Jason Hommel, December 11th, 2008

In my last article, What if They Returned to the Gold Standard? December 10, 2008 I noted that gold should go to $40,750/oz. if the $10.5 trillion of U.S. Bonds were to be backed by gold. For those who noticed, that was an understatement.

That figure, of course, would not include the following, which would all, also, need to be backed by U.S. gold:

1. M3, money in the US banks. Add $15 trillion.
2. Unfunded liabilities, such as social security obligations. Add $75 trillion.
3. Corporate bonds and Mortgages. Add $25 trillion.
4. New government bail out give-a-way obligations. Add $8.5 or 10 trillion.

Total: $110 trillion.

This, of course, would not include all derivative bets, which are like bonds. These would include futures on bonds, options on bonds, leveraged currency bets, etc. That would include another $1000 trillion or so, but let's not include that.

So, gold could go well beyond $440,000/oz., or $4 million/oz. if you include all derivatives.

But let's be conservative, and assume that society is not ready for such a drastic change, and let's be optimistic for our oppressors who print paper dollars, and assume that the current system will die a slow death that lasts 20 years as it takes a whole new generation to adapt to change. After all, the gold bear market lasted 21-28 years, and the new bull market may well last another 20-30.

Most people don't understand how compounding works.

Let's assume that it takes 20 years for gold to reach $40,000/oz. from $800. How much of an increase per year would it take, on average, to get there? The compound interest calculators answer.

http://www.smartmoney.com/compoundcalc/

All we need to do, is input the three figures.

Starting amount: $800
Ending amount: $40,000
Duration: 20 years

Out pops the compounded gains, or interest rate: 21.6%

So, as you can see, this is not unrealistic.

After all, gold already rose from $250 in 2001 to $1000 by 2008, over 7 years, which is an annual increase of 21.9%.

The other problem would be:

Start with $800
End with $440,000
Duration: 30 years

Annual gain: 23.41%

But here's why I call this the "invisible grind". Most people assume I'm talking about a parabolic spike in the price. Yes, on a regular chart, it looks like that; unless you are looking at a log chart, in which case, it's a straight line.

But on a daily basis, you can also break that down, to determine the daily compounded gains!

Note, with gold trading 5 days/week, there are 261 trading days in a year.

(365 x 5/7 = 260)

So, to determine the daily gains, again, you only need input 3 numbers:

Initial investment: 1
Final investment: 1.23 (representing the annual interest rate of 23%)
Duration: 260 years (but in this case, the years, stand for days)

The annualized rate (which is the DAILY GAIN) 0.08%!

So, look. I will always say, if you ask me, "Jason, which direction will gold (or silver) go?", I'll guess one way: UP! And the answer for how much is "A LOT". And the answer for when is "now".

But the real story is that the daily gains are almost infinitesimal, unnoticeable, or invisible.

What is a 0.08% gain, on a daily basis?

$800 x 1.00.08 = $800.64

Do you understand a bit more now? There is no need to watch the daily price of gold. You will not see it move from $800 to $440,000, over a period of 30 years, on a daily basis.

The gold price could gain less than 1/10 of 1% per day, and take us there quite easily.

On that basis, manipulators can move the gold price down on 2/3 of the days, and let it spike up on 1/3 of the days, and convince most people who have an attention span of 15 minutes that gold was in a bear market during the entire bull market!

So, the common question of the day is, "Jason, if you know gold is headed to $40,000 and beyond, and silver is headed to $8000 and beyond, then why are you selling out?"

These people have no comprehension or understanding of compounding gains.

There are two ways to make it.

A. Hold silver.
B. Deal silver.

If I deal silver, I can make more than holding silver, but I need to make more than 0.08% per day, and I need to avoid default risk.

What if it takes me a week to replace my silver? Easy problem. Again, 3 numbers on the compound interest calculator:

Initial investment: $1000
Rate of return: 0.08%
Years invested (standing for days) = 7
Final amount: 1006.

So, at $10.00/oz., if it takes me a week to turn my silver, I need to make $.06 per oz., after all costs, shipping, minting, packaging, labor, taxes, etc. just to break even with holding silver, but that still does not compensate for the default risk, which is an unknown quantity!

And if it takes me 14 days, I need to make $.11/oz. (after all costs), minimum, to break even.

If if the turn around time is 28 days, I need to make $.23/oz.! (after all costs), minimum, to break even.

And if the turn around time is 60 days, I need to make $.49/oz.! (after all costs), minimum, to break even.

And if the mint tells me it's a 5 month manufacturing time, I need to make $1.27/oz! (after all costs), minimum, to break even.

(All of that, is with an assumption of silver at $10/oz. Costs double if silver doubles, naturally.)

And none of that is enough compensation for the default risk. Mints with a 5 month delay should not be trusted.

And again, for people who noticed, there will be a LOT more inflation over the next 20-30 years, so, again, those are all understatements.

But some people understand, that a fast turn around time, in a bull market for metals, is worth quite a lot.

This is why I believe it is an advantage to you, for me to pre-package, and ship SAME DAY as your wire comes in, at my silver auctions at www.seekbullion.com. I hope to encourage you to buy silver from me, and to encourage you to become silver dealers yourselves.

So many people in other nations ask me where they can get silver. I usually suggest a jeweler, who may know some bulk suppliers. But more often, they don't seem to recognize that the lack of dealers is the gift of a monopoly on a territory, in a sea of people with no comprehension of money.

My current plan is to be able to offer silver on an increasingly regular basis, daily, in size, so that I can become a regular supplier for dealers.

I'm still working on speeding up my own turn around time, and processing ability, to facilitate your success in acquiring silver on a timely basis.

After all, time is money.

FYI

I am reading a little book called "An Illustrated Short History of Progress" by Ronald Wright, a Canuck with some credentials. His main thesis is that growth and progress eventually leads us into a trap (example - arrows mutate over time into hydrogen bombs).

But with respect to the enormous inflation Hommel talks about, Wright points out that in AD 150, one Denarius was equal to 1/2 measure of wheat. By AD 338, it took 10,000 Denarius to buy that same 1/2 measure of wheat. Similarly, in AD 300, a Solidus of Julian II was worth 4,000 silver coins. 100 years later, it was worth 180 million silver coins.

That is fair.

Started a thought and ended it personally. My bad, will not happen again. Sorry, it was late.

"are natural components"

Bill, for one who is so market savvy I am amazed at how naive you seem when it comes to this issue. Corker represents his state first, but in this case Corker's push for a defined set of conditions is reasonable and good for taxpayers.

The alternative is: Congress gives the auto companies a check for $15B and says tell us what you plan to do with by next March. The Czar idea s simply another case of congress dodging responsibilty by passing it off to a non-elected party. (like the FEd, SEC, Fannie and Freddie...)

As for honoring contracts: The U.S. taxpayer was not a signer of these contracts — I for one want no part of paying for them. They are between the companies and the workers.

Millions of other workers have lost jobs, benefits, pensions in the rush to globalization without a whimper from congress or unions. Let these poorly managed companies with unworkable business models declare bankruptcy and regroup in a workable manner.

We are rapidly becoming the USSA (United Socialist States of America. When a company can no longer compete or provide a salable product or service, it must fail. I know because it happened to me in 2006.

Craig,
Isn't the Obama revolution a means of getting rid of unions through the back door? If we get universal health care as a talking point, why would one pay union dues to get health benefits. Were socializing the USA as we speak so why do we need unions?

Amen, Kaimu. Couldn't agree with you more!

As a retired ex-manufacturing (not the construction industry) exec I have experienced pain similar to yours.

With a congress whose majority is so heavily influenced by unions, what more can one expect than a bailout package that allows the UAW to refuse to agree to a timetable for implementing reductions. That appears to be a significant factor in the failure of the proposed bailout legislation.

I suppose what more can you expect than the additional proposed legislation that would make it illegal to have secret ballots in union affairs.

If one has never been in a situation where unionization is being proposed, one simply doesn't understand the pressure that is brought upon by union reps to have everyone approve it. Just imagine what it would be like if those who opposed unionization were to be identified via non-secret ballot! How much more un-Democratic is that?

Reluctantly I agree a bailout package is required, but not the one on the table. Certain management should be replaced. Costs need to be reduced. The UAW contracts need to be changed to improve costs. Timetables need to be agreed to by all.

Now I don’t have current data, but in my prior life it was typical that, on average, wages and benefits amounted to approximately 70% of a business’s expenses. While the number may or may not be current, I suspect labor costs are still the highest cost factor in most businesses. This is why layoffs are usually the first and most effective means of reducing costs when a company has trouble staying profitable. The UAW needs to step up to the plate if for no other reason than to preserve their jobs (some income being preferred to no income).

And I'm really not anti-union because I believe there are times when good unions are necessary - when management is truly unfair to workers. And I've seen bad management!

But as a retiree myself I live the difficulties of fixed income. And I don't want to see other retirees hurt. So I'm for legislation that honors existing contract benefits for retirees. Bail out the union retirees, but mandate renegotiation of current contracts to be fair. And mandate a timetable for implementation of the necessary reductions.

I agree, if you haven't ever walked the walk, don't presume you know how to talk the talk.

This arguement probably goes back a few thousand years in one form or another. Seems to me that the labor/capital question is also cyclical.

Union hubris peaked in the 70's. Capital's hubris just a year or so ago. If I were beginning a career, I think labor law would be at the top of my list.

Greg: If I'm not mistaken the proposal is to use current insurance delivery, so unionized and company programs would get tax breaks and stay in place while adding pools and mandates for the lower end.

Wouldn't it be great if we had real representation that looked after our interests and we didn't need to organize to make sure business saw us as partners and not chattel?

“Before Ronald Reagan took it upon himself to champion the wealthy over all else and decided to bust the Air Traffic controllers Union”.

PATCO v. FAA is a classic case study of an overzealous and increasingly militant union pitted against the quintessential theory X manager that was bound to implode at some point.

To further their cause, Air Traffic Controllers repeatedly used slowdowns and sickouts in 1968, 1969, 1970, 1974, 1975, 1978 and finally in 1981. The FAA, fearing loss of control over the workplace, was an enabler to the final outcome. Both sides were relying on economic fallout as leverage.

Anybody know if there is much of a difference between older copyright issues (such as 1985) and the most recent (2002)? Or, do you pretty much get the same information?

4thefuture

is this the comment U R looking for??

[Bill Cara note:11/7/08 Bull Markets during the Great Depression

Back to the market --

You’ve all heard how bad the Great Depression was from a macro-economic perspective. But how many people have told you that after the 1928 crash through October 1939 there were six legitimate Bull markets where prices boomed?

How about from 11/13/29 until 4/10/30 (148 days) where the S&P 500 gained +46.8%. Then there was the time from 6/1/32 until 9/7/32 (98 days) where the S&P 500 gained +111.6%. After that came 2/27/33 through 2/6/34 (344 days) where the S&P 500 climbed +113.7%. That led to 3/14/35 through 3/6/37 (723 days) where the S&P 500 added +106.9%. Later, from 3/31/38 through 11/9/38 (223 days) there was a gain of +62.2% in the S&P 500. Finally, from 4/8/39 through 10/25/39 200 days) the S&P 500 gained +29.8%.

So that is six complete Bull market cycles during a time of economic trepidation. The average Bull lasted 289 days and the average gain was +78.5%. That’s six times during the worst ten-year period in 150 years.

During those times, the Bear market that followed took an average of 274.1 days and the average loss was -45.7%.

Now for the coup de gras! The 2007-2008 Bear Market lasted 365 days from Oct 11 2007 through October 10 2008 (about when I was telling you I had turned bullish) and the loss was -46.7%.]

A week or two ago I posted a comment about the debt situations of state and local government debt, warning it was one of the next debt bombs to go off.

This morning I heard a news report which said 41 states have had recent discussions with the federal government over looming budget deficits to the tune of One Trillion Dollars!! It is rather amusing to see Congress engaged in their petty political games over $15 billion of aid to the Big Three when the state and local debt monster is approaching.

Currently the muni bond markets are still functioning but prices are starting to reflect the coming crisis. liquidity is not easy and there's lots of stink bids. I encourage owners of these credit instruments to review their holdings before this market gets demolished. Every state is different and there's lots of different types of bonds.

It is difficult to get thorough information... even brokers usually don't have the answers and have to call their bond departments to answer questions. There is a website www.investinginbondscom.com which is free and has excellent info including 2 days worth of trading info,prices bid/ask,cusips, dates, etc. You can sort by a variety of classifications including issuer, maturity dates, etc.

Again, most states have constitutional requirements for balanced budgets. A liberal dose of credit has ballooned
state and local governments and most of them have had an attitude to just issue bonds to paper over bulging budgets. Well, the chickens are coming home to roost when new credit is not available or too expensive. Unless constitutional law is overridden.... it will be time to pay the piper.

Will the Fed come to the rescue? It seems we are now building the final bubble with the Fed and Treasury about to embark on a creation of money beyond our wildest imaginations. When this one blows, end of game.

Since it's the weekend, thought I'd post Bob Chapman's latest from his International Speculator

Hyperinflation and the Great Depression II
by Bob Chapman

A future out of control, bankrupt financial institutions trying to hold on, limitation on credit severely limits ability of the economy to start up again, debt totally embraces our lives, handouts a state secret, soon cash infusions wont work for banks anymore, banks hold too much toxic garbage to even know if they are solvent We are now 17 months into a credit crisis that continues to expose the corruption and incompetence of government, banking, Wall Street and transnational corporations. The situation has not stabilized and it won’t anytime soon. All we see are sweetheart deals for elitist corporations for which American taxpayers will pay for years to come. The future of our nation is totally out of control. For the last eight years our economy has been running on something for nothing, lies and deceit. The result will be hyperinflation and then the Second Great Depression.

As we predicted long ago the only avenue open to the elitists that control our country is to hyper-inflate to avoid collapse as long as possible. In this process financial institutions, most of whom are bankrupt, are trying with the help of the American taxpayer, to hold on. In that process they are severely limiting credit, which restricts business and growth and has caused crippling de-leveraging in our economy, particularly among hedge funds. Debt totally embraces our lives and finally we see de-leveraging among individuals as all debtors and borrowers come under pressured from the lenders. While this transpires relentlessly, unemployment grows stamping out the buying power of the masses many of whom already are on the edge of bankruptcy. We have this great mass of disintegration on the bottom and massive amounts of money and credit on the top. The money and credit is not reaching consumers who have been forced to stop buying. It is staying on the balance sheets of banks, brokerage houses, insurance companies and transnational conglomerates, such as G.E.
As you can tell from our publication and its growing size there is so much negative news we cannot publish it all. The response of government has been a massive distribution of taxpayer funds and if you can believe this they refuse to tell us who are the recipients of this public largess. In spite of repeated requests they refuse to name the borrowers, so that corruption and fraud can thrive. In such an environment of aggregate creation and corruption the only investments that shine are gold and silver. The cracks are appearing in this edifice of greed and the only place to flee to is those historical stand buys.
The first $125 billion lent by TARP went to banks in the Fed system of which 90% was used to award bonuses. This is to make sure that the Illuminists continue to receive the riches of the system. Funds are being lent, but the system is being strangled. Funds lie on bank balance sheets to keep them solvent and to be available for dividends and the purchase of other non-elitist banks. This is why more and more funds are needed for the system. This is what we realized very early on, some three months ago and that is how we were able to predict that more than $10 trillion would be needed to keep the system afloat. In time these infusions won’t work any more. This is why the Fed and the Treasury won’t tell you who is receiving the handouts. It is a state secret. Such arrogance is unprecedented in the history of America.

Banks do not really know if they are solvent because they are holding so much toxic garbage. On top of that they have to contend with losses on credit cards, commercial mortgages, vehicle loans and derivatives. As this game goes on unemployment is 6.7%, U6 13.5% and long-term joblessness is 15.4%. That means a further hit on bank earnings, balance sheets and solvency. What has also gone almost totally unnoticed is the $700 billion drain from the economy via cash management bill. This holds down inflation and those funds end up in Treasuries that end up in elitist banks in exchange for toxic CODs, SIVs, and allows banks to handle their naked derivative problems. These tactics by the Fed and Treasury puts more downward pressure on the economy causing more unemployment and less consumer spending. This deepens the recession. Saving AIG, as we predicted, will cost $500 billion and Citigroup $1 trillion. JP Morgan Chase has unlimited funds to cover its derivative losses, control the bond market and to depress gold prices. That is why what Morgan does is classified as a national security issue.

It has been just three weeks since the Fed flooded the books of the 16 major banks that run Libor, the London Interbank Offered Rate, which is used worldwide to calculate interest rates. That rate was 4.8% for 3-month paper. A couple of days ago it was 2.16%. This forced the lenders to loosen up on lending and bring interest rates down. This needless to say is highly inflationary. Among other reasons for the manipulation is that this rate is used to set mortgage rates worldwide. The funds used to accomplish this were lent by the Treasury to US banks, which in turn lent to London banks. That step was followed by the Treasury and the Fed, via Morgan, Goldman and Citi, to drive down rates on US Treasuries. The long term rate on the US Ten-year Treasury note was then driven down from 4% to 2.55%. 30-year fixed rate mortgages usually sell for 1% to 1-1/4% higher than the 10s, so rates should be 3.80%. The lenders, banks, held rates at 6% to 6.5%. After such an onslaught they have dropped rates to 5.5%. That isn’t good enough for the Fed and the Treasury, they want rates at 4.5% for FHA loans, so that is where that mortgage rate is headed. If you were waiting to reset your mortgage wait until rates go below 5%. That should happen soon. This shows you how extensive government and Fed manipulation is.

Vast amounts of funds are being funneled in the finance sector where half the corporations are bankrupt, without any questions or announcements as to who’s getting the funds. We are talking about over $10 trillion yet the UAW and the officials of GM, Ford and Chrysler have to beg on their knees for $15 billion to tide them over for 3 to 6 months. This shows you how unfair the entire process is and how the Illuminists are trying to bury the American and Canadian vehicle manufacturers as soon as possible. The Democrats see political advantage here and will get a bailout done. They should be carried for 6 months and that is it. We believe they will not make it. We see absolutely no recovery for years to come. In June they’ll all file for bankruptcy. What you are seeing is a sideshow. Our vehicle business will not survive unless Congress implements trade tariffs on goods and services. Remember whether companies live or die is decided by the Illuminists not by a free marketplace. Most of the money lent out is going to bankrupt loser banks and brokerage houses, which caused all these problems in the first place; Labor elitists have exacerbated the problem over the years as well. It is still not too late to drop labor rates from $31 to $15 an hour and make other major concessions as well, in the absence of trade tariffs in order to survive.

How would you like to have several billion dollars without any restrictions on how it’s spent? That is the kind of deal Citigroup, AIG, JP Morgan Chase and many other institutions have regarding money from the Treasury and the Fed. These are the Illuminist corporations that are deemed too big to fail. When they are to be bailed out Congress has very little to say, but when the big 3 automakers need help congress puts them through the hoops. This capitalism is survival of the fittest and the richest. There is no fairness or even handedness. It is the worst looting of the American people in history. Automakers must have a plan, but Citigroup doesn’t need one. As it was said in Animal Farm, “some are more equal than others.” Bear Stearns was financially assassinated. Fannie Mae, Freddie Mac and AIG were rescued to cover up their frauds. The corrupt Lehman Brothers was simply beyond saving. It would most certainly have been saved if it had been possible. The only way Fannie and Freddie were saved was by guaranteeing their bonds. That job was left to the American taxpayer. Such bailouts and free trade, globalization, offshoring and outsourcing have destroyed our economy. These actions began in full force under Clinton and Rubin, and were strongly carried on under the Bushes. The strong dollar-anti-gold policies in the 1990s laid the groundwork for the boom and bust of the dotcom era. It also allowed conglomerates to offshore production and workers, which destroyed our industrial base. These US transnationals control 60% of Chinese exports to the US. As a result the American consumer economy is now collapsing.

In June subprime and ALT-A resets should be mostly over, but the Option-ARMs-Pick-and-Pay loans are coming into view. The later are ten times larger than the former held by banks. A 10% write off would wipe out many American banks. Just recently ALT-A and Option ARMs delinquencies were averaging 20 plus percent for 2006 loans, and 17% plus for 2007, up from 16.9% and 12.2% six months ago. As this next nightmare unfolds over the next four years, it will be joined by the FHA bubble that will begin two years from now. This is more serious than the subprime/ALT-A fiasco could have dreamed of being. This will be a wipeout and all treasury’s Paulson and the Fed’s Bernanke can think of doing is to bail out Illuminist Wall Street and banking. They want to make sure shareholders get their dividends and corporate officers get their mega salaries and bonuses. Wait until the other loans go bust – the credit card and vehicle loans. As we explained previously the commercial real estate market is frozen because banks won’t lend and that crisis is unfolding as we speak. The people who destroyed our financial system are being allowed to repair it. The problem is they are not repairing it – they are looting it further. The fraud is blatant and Americans are too dumb to understand what is being done to them.

As a result of the Fed draining liquidity out of the system and giving it to the banks to keep them solvent via cash management bill sales, there is little left in the economy and the people to borrow. These actions should be looked at for what they are – a further bailout of the financial industry. This in part is a reason why credit default swaps on US Treasuries are at 50 bps not at 1 or 2 bps. This figure is rising because professionals think there is a growing possibility of the US government defaulting on its debt. This premium is double what it was just two months ago. In case it interests you, states such as California, Michigan, Nevada, Ohio and New Jersey vary from 192 bps to 164 bps. Can you see the great risk in buying or owning municipal bonds issued by these states? If you own them dump them. You cannot be blind to the facts - take action emotionlessly and sell them if you own them. Whatever, you do not buy them. This is why we stopped recommending US Treasuries a year ago and switched to Swiss franc Treasuries.

Investors are running headlong to liquidity, bypassing quality and safety. After they realize they’ve only solved part of the problem they will head for gold. The supply of US Treasuries grows exponentially every day. The dollar is strong and it shouldn’t be. The demand for physical gold cannot be filled so obviously some people realize what is going on. That is why Comex December futures’ physical delivery is at all-time highs. There are even rumors that the Bank of England has shipped gold to Comex to meet deliveries.

Values in residential and commercial real estate continue to fall. Residential is off 17.4% and foreclosures are continuing at record rates. Millions of homes are in negative equity and are subject to walk-a-ways. This is the monstrosity the banks and brokerage houses created. First by issuing credit to people they knew could never pay and then securitizing mortgages as AAA’s that were BBB’s. Nothing but out and out criminal fraud. Government wants lenders to reduce loan balances to meet equity. They refuse to do so. Worse yet, most of the American public is broke. The only thing left for government to do is to nationalize all mortgages, which we predicted they would do 4-1/2 years ago. Get it straight your government is bankrupt. That will add $2 to $3 trillion on to the $10 plus trillion they are already under water for. Incidentally, Congress in which American voters returned 94% of incumbents to office, does exactly what the elitist bankers and Wall Street tells it to do.

Put this all together and you have massive inflation on the way. This means gold is bottoming out again over the next two weeks. When that’s completed you can expect a major upward move in gold and silver. The conference Board says its Employment Trends Index fell to 102.9 in November from 104.5 in October.
The Fed now has no choice but to purchase all Treasury paper the Treasury cannot sell. They have no other choice. This perceived flight to quality by investors is a suicide mission as it is for the Fed. Later whom will they sell too? The Fed is the buyer of last resort. Sony will cut 8,000 jobs to reduce $1.1 billion in costs.
Wyndham worldwide will cut 4,000 jobs and cut back on timeshares.

Three-months ago 29 states faced a $48 billion shortfall. In 2009, 41 states face a projected $71.9 billion budget shortfall. California and Florida lead the pack with $31.7 billion and $5.1 billion. Projections are for a shortage of $200 billion by 2010. Across the country services are being cut for the elderly, disabled, the poor and the unemployed. Tuitions rise as teachers are cut. Some states have “rainy day funds” and many have dipped into them already, and some are already depleted. This means no social safety net because it has been ripped to shreds over the past twenty years. In addition, fiscal debt is massive. We see a $1.3 trillion shortfall for September 30, 2009’s fiscal year. Spending will be cut and taxes will be raised.

Thus far $32 trillion has been lost in world equity markets, which is more than double US GDP. Then there is $6 trillion lost in US real estate alone. Then there is commercial real estate and in commodities. Those losses are probably near $75 trillion to $100 trillion worldwide.
Governments worldwide are increasing money and credit, lowering interest rates and raising deficit spending to unheard of levels. Our $1.3 trillion deficit could range as high as $2.5 trillion dependent on what the president-elect decides to do and he’s going to spend money with wild abandon on domestic problems. The problem is not the presence of liquidity; it is debt. That is solved by cutting expenses faster than you cut taxes. This allows funds to flow into consumer hands and not widen government debt. Consumers can spend more if their debt is low and reduce debt if necessary. Interest rates should rise so Americans can save. As you well know just the opposite is happening. The question is will treasury and the Fed be able to keep deflation’s head down by pouring massive amounts of liquidity into the system? We believe it will work for 2 to 3 more years and when the system is sodden in debt and inflation it won’t work anymore, deflation will move into control. The power behind government is in a precarious position. Either this works or they go down with the economy and they are well aware of it. They are on a voyage of no return.

We reflect on Japan since 1991. If zero interest rates and a permissive money and credit policy worked, plus the generous help from the US, Japan would have been out of the woods years ago. It hasn’t worked, yet the major government’s of the world are repeating the same mistakes.
Government has no intention of cutting spending, nor heading anywhere near a balanced budget. That reflects to no savings and having to continue to depend on foreigners to fund our debts. Sound money is something that never enters the mid of elitists behind the scenes, nor politicians either. In time we imagine foreigners will demand bonds in local currencies like the yen as the Japanese have – eventually maybe even gold.
The December IBD/TIPP Economic Optimism was 450 down from 50.8 in November. The Economic Optimism Index fell 5.8 points, or 11.4% to reach 45 in December. The index is 2.5 points above its 12-month average 42.5 and just 6.5 points below its all-time average of 51.5.
Restructuring mortgages does not work. 58% return to default in just eight months. After three months 36% default and after six months 56%.
Obviously these results tell us that government and the lenders are far from solving the foreclosure crisis. That is because they are not trying to solve the crisis. Lenders are failing to give troubled homeowners affordable long-term fixed rate mortgages. They more likely were offering modified loans that resulted in a higher – not lower – monthly payment. The National Association of Home Builders wants homebuyers to get a free tax credit, and for government to buy down mortgage interest rates. They also want continuing government breaks to keep people who would go into foreclosure in their homes. Even with this stimulus the industry won’t be doing much building soon due to the huge inventory of homes in the pipeline. The new problem for the past year has been, how can you think of buying a home when you may not have a job next week? They complain of higher lending standards and what they consider high interest rates at 5-1/2% for a 30-year fixed rate mortgage. They want 4-1/2% rates. That is why the Treasury and the Fed are forcing interest rates lower. Then the FHA can justify cheaper rates. The Treasury is also buying bonds from FHA, Fannie Mae and Freddie Mac to force rates down.
In addition the incoming administration expects to pass bankruptcy reform, which would allow courts to modify an individuals mortgage payments and to provide a universal mortgage credit, for homeowners that do not itemize their taxes.

Housing starts fell 4.5% in October, the slowest pace since the 1940s. New home sales fell 5.3%. Builders want a non-repayable tax credit of 10% of the home price. They want 2.99% rates for contracts to June 2009 and 3.99% after that. What they should be is allowed to go bankrupt.

Unemployment has fallen far heavier on men than women. In the last 12 months more than 8 of 10 pink slips have fallen on men who are paid more than women. This is as gender-lopsided as it gets. In November male unemployment was 7.2% and female 6%.

For the first time since 1940, and briefly during the Great Depression, US T-Bills went negative. Yesterday, three-month T-Bills traded at a negative yield…The US sold $30B of 3-month T-Bills for 0%, another first! U.S. companies are headed for their first three-year decline in profits since at least the 1980s, according to David J. Kostin, a strategist at Goldman Sachs Group Inc. Operating earnings per share for companies in the Standard & Poor's 500 Index will drop 5 percent next year after tumbling an estimated 33 percent this year, Kostin wrote in a report today. They fell 6 percent in 2007. JP Morgan Chase & Co., the largest U.S. bank, owns 40 percent of the shut-down Chicago factory whose workers are blaming Bank of America Corp. for causing the company’s demise.
Fannie Mae and Freddie Mac engaged in “an orgy of junk mortgage development” that turned the two mortgage-finance giants into vast repositories of subprime and similarly risky loans, a former Fannie executive testified on Tuesday… Edward J. Pinto, a former chief credit officer at Fannie Mae, told the House Oversight and Government Reform Committee that the mortgage giants, which have been taken over by the government, now guarantee or hold 10.5 million nonprime loans worth $1.6 trillion — one in three of all subprime loans, and nearly two in three of all so-called Alt-A loans, often called “liar loans.” Arnold Kling, an economist and former Freddie Mac officer, testified that a high-risk loan could be “laundered,” as he put it, by Wall Street and come back into the banking system as a triple-A rated security for sale to investors, obscuring its true risks. Charles Calomiris, a finance professor at
Columbia, testified that nobody saw the crisis coming because the two mortgage giants “adopted accounting practices that masked their subprime and Alt-A lending,” but did not elaborate.Another lever was what Representative Christopher Shays, Republican of Connecticut, said was more than $175 million in lobbying fees spent by the mortgage giants over 10 years, in part to counter attempts at stronger oversight. The developer of the stalled Centerpoint condominium towers in downtown Tempe filed for bankruptcy on the project Friday after months of legal wrangling with its construction lender, Mortgages Ltd.
With its Chapter 11 petition for reorganization, Avenue Communities LLC said it also planned to file a lawsuit against Mortgages Ltd. and the lender's investors for failing to fund loans to build the high-rise project.

November rain poured down on hedge-fund managers as market turmoil and increased demands from investors wanting their money back deepened problems for funds already facing their worst year on record.The largest hedge funds run by Toscafund Asset Management LLP and Kingdon Capital were among many funds with heavy losses in November, according to investors. Satellite Asset Management, founded by former Soros Fund Management traders, saw double-digit losses during the month and is reportedly among a handful of funds that have tried to stem investors' redemptions.

The story of Charles Ponzi is fascinating. http://en.wikipedia.org/wiki/Ponzi Even more fascinating are the parallels of the original ponzi scheme to nearly every aspect of our society today (Insurance, Social Security, Banking, Government, Inflation, FDIC, SPIC, etc . . ). Charles Ponzi could almost be considered the father of modern economics as well as Keynes.

The crux of it all is the reality of the system and our willing participation in it. Perhaps the evil is not the ponzi scheme itself but the actions by the authorities. I would submit that the problem with a ponzi scheme lies not in the fact it exists, but in its lack of transparency.

Every individual before making a choice has to consider risk versus reward. In order to accurately assess risk/reward we have to do our due diligence. And in order to do our due diligence there must be transparency and access to data/information.

However, the authorities today seem to think they are better positioned to do that due diligence and make risk/reward decisions for us. Hence the propaganda to restore the con (or confidence) and overall lack of transparency.

4thefuture, re: why is market bottoming before the economy?

Actually, market tends to make most of its movements before the real underlying condition for those movements becomes the reality and obvious for everyone. Market acts as a future-discounting machine. In short, those who are astute enough to foresee the development of events start positioning themselves for those events and the market reaction in advance. When the development becomes obvious, crowd piles up pushing price in the direction expected by those few; they dump their position in the laps of late arrivals; game of musical chairs is on and soon the music stops.

If you want a very short version, the popular on this blog sentence pretty much sums it up: What everyone knows isn't worth knowing.
If you want to understand deeper how and why this works, these two links will help:
http://www.realitytrader.com/blog/2008/03/history-...
http://www.realitytrader.com/blog/2008/04/traders-...

I agree the USA economy is in big trouble and not because of the car industry or the UAW. Having been a UAW, GM worker for 35 years all I can say is; Bill has it right. Management doesn't deserve a bail out but what are you going to do with 4 million people at least that become unemployed under bankruptcy. I ran one of largest Industrial Wastwater plants on the west coast (GM). I could of made a lot more money if I would of gone to work with another company without the pension benefits of GM but I wanted the security.
If you believe Senator Corker about the Gm and Toyota please do some more research. With the bonus that Toyota employees get at the end of the year they make more than a GM employee. Gm 28/hour, Toyota with bonus 30/hour. GM was suppose to put money in the pension fund every year, it is not like a 401k in a lot of respects because the pension benefits are suppose to be put in yearly and are suppose to be guarantted. The government, under president Bush told Gm not to worry about the pension because we have a PBGC and made the rules more lax. People that are new hires for GM now hire in at 14.00/hour with no medical benefits after retirement, my medical benefits have been cut back a lot already. After age 65 Gm pays you 96 dollars a month for your medical and you go on Medicare. Unions increase the stantard of living for everybody even the people not in the union. Do the unions make it possible for some people to get paid for doing nothing? I don't care where you work their are always a few people that never carry their load and the union protects those people too, the majority of people are hard working. The basic problem with the USA today are jobs. Without a strong middle class the nation is doomed in my opinion. The houses here in California have dropped about 30%, that gets you down to a price of about 400,000 for a house in a nice neighorhood you can live in. Needless to say most people won't be buying a house soon in California. Please do some research about the UAW-GM bailouts. The UAW is not demanding anything now and we already have given up alot, just the vemp (medical) has all but been dissolved by the UAW and GM for retirees, GM will give equity instead of the cash payment of 13 billion dollars as contracted by the UAW and GM. How much money is GM stock going to be worth in 2010? If you study this Corker and UAW fight the only conclussion you can come to is Corker is another cheap politician trying to break the unions and help out foregin auto plants in his state. In my opinion if we don't have a middle class in this country we have nothing, we will soon become Mexico.

Km,

I am sorry that you FEEL stepped on by unions and just about everyone else in USA. Your feelings show loud and clear in your emotional rants. Personally I don't agree with a lot of what you SHOUT about but I respect your right to say it. I will be tuning out more though. I don't like repetitive songs. I make exceptions for Gregorian Chant but not for your style of Hawaiian Hoopla.

Having not been in the trenches, dealing with unions, I didn't realize what goes on.

As I've posted before, bailing out the car companies strengthens the hand of 2 ossified entities (unions and big3 management).

Amory Lovins identified ways of increasing fuel-efficiency of cars in the 60's and 70's, and detroit wasn't interested.

Innovation is now coming from Silicon Valley and startups - who will NOT be able to raise money if Detroit gets billions to waste in their lethargic ways on promised (but never delivered) innovation.

If a big dumb guy and a small agile guy compete for a market, guess who wins - especially if the big dumb guy has access to unlimited gov't funds.

Hey, if Congress won't fund it, let's get TARP to do it ...

Toyota and Honda and Hyundai must be delighted! They're big SMART guys, and they can buy up the would-be Silicon Valley startups to win the race to the future of the car industry.

Its not a matter of Union or any other politician.

Using the reasoning, in California, home prices have dropped by 30 %. In some cases by 40 %.

Should the government give 40 % to the home owners ?

If the answer is no, the GM should not be given a loan as well.

The future for GM seems to be so murky. Why throw good money after bad ?
Its not the union. The model is broken. And the tax payers should not be the ones bailing out.

How about the folks impacted most coming out with a solution. Share holders, bond holders, creditors and employees. Yes, I do agree that the the employees who have retired should be the last ones to be impacted. But not at the cost of the tax payers. My 2 cents.

What about the various companies that are filing for chapter 11 ? Should they also not been given bridge finance as well ?

Are we a capitalist society or a

http://tinyurl.com/5ho3ak

Sunday Morning Coffee: Finding the Touch

Bert,

I couldn't agree more. Just about every business today operates as a "Ponzi scheme", Paying old obligations from new receipts, with an underlying function that is secondary. It's a near-meaningless concept. The classic Ponzi occurs without an underlying business concept, no product or service, so maybe hedge funds really are the classic ponzi writ large.

I genuinely would be a heck of a lot better off if I'd inherited a few sheckles. I was truly meant to be born into a family with money. Then I could just hit the beach permanent and not worry about any of this ****.

Has fallen from 1.986 to 1.911

http://www.bloomberg.com/apps/cbuilder?ticker1=.TE...

The timing issues comes into play in the following manner. Wall Street won't hire you past the age of about 25 unless it's not your first job. I hit a brick Wall of "ageism" if you will looking for jobs after college. I spent my 20's having fun, not killing my dreams under the flourescents. I played rock and roll, I partied (hell yeah) I had a good old time. I consorted with many of the wives of Fairfield County while 'ol Bob or whomever was off at work making the big bucks. I don't regret the way I spent my time though some of that stuff I would not do again. Married ladies for example. So when I went to college I was already really "smart" and got an AWESOME GPA from UConn. I got out and the economy was already going down. I got a lot of wise-ass comments from interviewers about my spotty work history and the way I accounted for my time. IT'S NONE OF YOUR BUSINESS WHAT I WAS DOING IN 1987 OR 1996!!! If you didn't fritter away your entire youth slaving away for THEM under the flourescents they are suspicious of you and probably won't hire you. If you want to switch careers, forget about it. And then you're supposed to asume the moral highground when the only people who will hire you are mobsters and criminals, because your SKILLS are excellent and they appreciate your ability to get a job done (no, not that kind of job 2nd)?

So what was the problem on Kaimu's job?

There are many ways to play this game, and I've played many of them over the years. I spent a good part of my life on construction projects and I've seen both sides. Friends of my family all were in the trades, contractors, foremen, inspectors.

My Dad was praised by every employer he ever had. He essentially did Kaimu's job, running electrical contracting businesses/projects for the owners. He was paid bonuses for coming in under budget and ahead of schedule. His last employer paid him 2% of what he saved and he was so good at it that he was able to save enough to retire early. He was praised by the owner of Hollywood Park and they treated the crew to an all expense paid trip to Vegas (including cash for gambling). He got big color TV's, trips all over the place, the latest VHS cameras and recorders of the day (not much to look at these days), tools and all kinds of perks. These were not exceptions but more the rule.

He could fire anyone in his employ on the spot. The union didn't have anything to say about that.

So what happened?
My guess is one employer accepted the union wage (it's included in the bid for crying out loud, Kaimu or his counterpart doesn't pay it), handed out incentives, and kicked ass by dangling carrots. It's called positive reinforcement and is 60% more powerful than ANY other incentive or punishment.

The other employer was already non-union, and judging by how worked up he is on a blog some years later, he *may* have had an attitude that was counter-productive because he thought he should get it for less, was maybe a bit contestive and argumentative and reluctantly accepted the union, and the union simply answered the call. There was a pre-existing friction.

Revealing part of the problem is this question in Kaimu's post:
"Why should UNIONS be allowed to DICTATE what those hourly wages should be?"

This reveals his preconceived attitude and a fundamental misunderstanding of unions.
The answer of course is because they have *organized* to get better representation and bargaining power with the contractors, and to keep the employer from turning one employee against the other and taking advantage of unrepresented workers. I saw WAY more of workers getting screwed by contractors than contractors screwed by workers. I saw union losers get fired.
BUT, the question begs the union response. Of course he wants a better deal and rather than include it in his bid and risk not getting the job), he claims it comes from his pocket. My answer is he under-bid the job.
Maybe incentivizing and hiring better electricians would have allowed the same or lower bid where the money was?

Yes, there are two sides. It's entirely possible that Kaimu made low bids to get jobs and wanted labor to make it up by working for less rather than placing a higher bid. I think I saw that on EVERY job. Of course his side is they were lazy or poor workers, but HE was running the contracting firm! Who hired these guys? What were the conditions? Did they already show up with a chip on their shoulder from previous experiences?

The choices are mind boggling.

As a rough guideline of union attention, I worked as a grunt on union jobs under the table (a kid working for his dad) for YEARS and was told to make myself scarce if a union rep showed up.

In YEARS of working like that I NEVER saw or met a union rep. ever.
If YOU had multiple reps then I suspect there was probably a reason.
That's just my guess.

I totally agree with this from Kaimu though: "The US GOVERNMENT inflates prices by spending and the unions demand higher wages due to inflation!"

We need to get to the root of the matter, THIS is it.

I wouldn't be so militant about this topic if we weren't back in the roaring twenties again and workers weren't taking it in the shorts. The unions aren't to blame, they only react to the conditions as they exist. Then conditions change and we blame them instead of those who agreed to the terms.
Politicians that spend like broken water mains? There's the problem.
I think we totally agree on that.
Aloha my friend.

Bill - Thought I would share this link with you in case living on the Gulf Sream and working the non-free-Markets gets tiresome.

http://www.moneyweek.com/spending-it/travel.aspx

:)

Don't get me wrong, I don't believe in bailouts, if the UAW had got there money they had contracted with GM for health benefets we probably won't be having this discussion. First, the only skin I have in this game is $96 a month. I'm 65 years old and the PBGC fund will give me a 100% of my pension/ because they calulate on the day of the bankruptcy not the day of retirement.
When and if this happens, you the tax payer will be paying for my pension. It is not fair and I don't agree with it and it should not be this way. It was the government that told GM they did not have to fund their pension fund, the government told all employers they were putting them on a lower rate for pension funding. I think GM had the actual rate of interest on pension funds at 5% interest and the government put it at 8% interest. When your money is only getting 4% and the government says put its at 8% your contribution goes down.
The government is not responsible nor the company for health care, this is why the union and GM negotiate for 13 billion dollars to be turned over to vemp, a union fund for retirees medical, now instead of cash we have stock. Retirees medical is doomed. New hires are getting 14/hour now, no medical afer retirement.
I think we have to look at the big picture, the foregin car makers for the most part have been subsidize all there life thru medical cost (government paid Health benefits), America has not. This is not a level playing.
The most important part of this discussion is what will happen if the big three go bankupt? We will be in a depression for years. The tax payer will be paying for about 4 million people a week on unemployement. The housing market will really collapse. Oh yes, we have the posssbility of millions of families out on the street. Unfortunately this is not a me problem any longer, this is a we problem. We can not let 4 million people live on the streets of America! We need some good paiding jobs in this country.
We can not and should not let our government divide us so sociaty can be brought down section by section. It will be just a matter of time before your section comes under the thumb of government destruction.
Our government is corrupt and that is the bottom line, if you think Corker is looking after you; where was he on the financial bail-outs, where was he when the feds gave away two trillion of our dollars and now won't tell what they did with the money? What happen to 350 billion to financial system?
In my opinion while we are discussing 14 billion the government has already stole 8.5 Trillion, who is the real enemy?

Vinod,

The issue boils down to an essential sociological imperative. It isn't what you know, it's who, and more importantly, who the people you know know:)

The social order WILL be preserved.

PS: I like the way you put things.

Simple union story:

We live in a top university town in an upper middle class 'hood.

My 1st grader's union teacher stopped showing to class early in her 2008 academic year. Principal makes a big deal about teacher's privacy when the parents aren't asking. We just want a replacement. End of year and temps have covered the class for 2/3rds of classroom time. No report cards and the kids fall behind.

Academic year over and a medical doctor friend with a child that was removed from same public school confides in me that the union teacher was determined give birth and that it was threatening her life due to other health complications. Union elected to avoid permanent leave for medical reasons in the interest of the teacher.

The state teachers' union knowingly harm innocent children to protect member benefits. Pathetic.

Life is full of twists and turns that can be seen as black or white depending on the vantage point:

My dad was a freshman at Qing Hua when his dad was executed by the KMT...he escaped to the US (via HK) with his mother with a suitcase...and ended up at Cornell and MIT...I think he often wonders how life would have been different had he stayed in China...

Dad lost his job in 1970 after a year as VP of a start-up in Menlo Park...he ended up teaching (at a greatly reduced salary) for the next 25 years, but retired emeritus, still able to consult part-time, and both he and his wife have lifetime medical benefits...

One younger brother took a vow of poverty right out of college (with a degree in history and Far Eastern Languages and Literature)...in his thirties, he decided it wasn't for him, went to law school, and visited me in SF in 1990 for a few days, a little depressed and unsure of his future...15 years later, he's a partner and VP for a major law firm overseeing mergers and acquisitions in the Far East...he has a 7 figure income, able to vacation in Spain or fly to concerts in NYC on a whim, but also on call 24/7 with frequent flights to different parts of Asia and the Middle East; he has never married, flies home each Christmas with a different girlfriend, and spends more money on restaurants that I do on my son's tuition...

I lead a relatively simple life...I work 8 hours a day, come home, help my youngest with his piano and Chinese, help my wife with the dishes...Saturdays there's Chinese school, shopping at Costco, and a stop at Hollywood for another DVD (btw, David, we enjoyed 'The Life Before Her Eyes')...not exactly the life I dreamt about when I was hitching around the country in my twenties, and maybe not even a life I will miss much when I'm in my sixties...but what about the memories my kids will have of their childhoods, with Mom and Dad at the dinner table every night, traditions to recall every holiday, and the self-confidence to excel at school and work-> how much is that worth?

Who knows what lessons we end up learning? There's a price to pay for having too much money, whereas having too little can help you see what's really important...maybe your Dad had more to teach you than you know...

"It will be just a matter of time before your section comes under the thumb of government destruction"

The fact of the matter is, most companies no longer offer retirement benefits of any consequence. So you're dealing with a very large percentage of the population that are basically having to save up for retirement themselves. These people are left wondering... why should the taxpayer pay for GM employees during retirement? I don't think anyone thinks it's good for people to be promised a pension and to have it yanked from beneath them, but on the other hand you have to deal with the reality I just stated (others are working for companies with no benefits). It's not fair for these people to pay for GM promises.

We must take responsibility for our choices. This is a fundamental truth of this life to which we must adhere if we are to avoid corruption and collapse.

At this point in time, our society does not force anyone to keep working at a job in which they are unsatisfied. If work conditions are so bad, an employee may make the choice to leave. They make their choice based on their assessment of risk vs. reward.

If a person is truly skilled, they are a marketable asset. They should be employable elsewhere or can start a new or competing business. Human beings are ingenious, creative and ambitious among other adjectives.

If a person is unskilled, there is a tremendous array of resources available to learn the skills. Many of these resources are free.

We are not helpless. Where there is a will there is a way. If you are an employee or a potential employee and you feel you are helpless, you are your own problem. Not the employer.

Why then would a union be necessary? It's interesting to read the perspectives about unions both pros and cons. Both perspectives present corruption and mob rule. It seems most unions start out with a noble cause (i.e. to prevent mistreatment or poor working conditions) but somewhere along the way they get corrupted.

Perhaps instead of bullying, bribing and playing politics, the most constructive use of a union would be empowerment of the individual to help them become less dependent on an employer. Or by helping make the financial activities of the employer more transparent to the employee in order to make more informed decisions.

Should the automakers be bailed out? Will the world collapse as we know it? Maybe - Maybe not. Perhaps we need to ask ourselves when we are going to start taking responsibility for our own choices and by extension requiring the same of others. That starts when we stop asking others to pay for our mistakes. The companies involved most likely have seen the writing on the wall long before now.

As traders, we know about risk management. We don't bail out other traders.

For several years now, I have read about unfunded pensions and the potential for people to lose their pension due to mismanagement or outright fraud. I have even counseled my own parents on this. Yet, like much of the rest of society, they choose to turn a blind eye. They choose not to do their due diligence. Choice has consequence.

As an employee advocate, where was the Union in looking out for the pensions and looking after the books of the automakers?

Risk management and taking responsibility. It's what we have to do.

2nd_Ave -

Thanks for adding the inspiring perspective from your family to what was becoming a too-downbeat discussion. We'll all need a measure of such resilience in coming years. Money and "winning" aren't as important as surviving and not letting adversity break your spirit!

I will say I dislike unions. They have served their purpose throughout history and the present. The problem for the US Auto North Industry is the unions and idiotic management. I blame the management for not standing up to the unions, they threaten to strike; so the management gives.

My concern is this, why are we considering towards bailing out failed companies (lets leave the banks alone for a minute)?

Somewhere in their "business plan" is a process(es) that are completely flawed! Enough said.

It isn't about who/what senator states or has vested interest here. For once, for once some internal lobbying is halting a bailout that 65% of the country does not support! We are paying our taxes but or official seem to vote the way they see fit.
Why did the house bill passed have pay raises for federal judges? (did we know that, why couldn't we just have one bill that was for or against raises for judges?) We can't blame congress for voting themselves a raise, we elected them and never questioned them.

One more point on the USA auto north,
Have a look at this video...
http://info.detnews.com/video/index.cfm?id=1189

Ford's highly advanced assembly line in Brazil.

Unions aside.... does anyone believe that if Ford/GM/Chrysler made an investment like this here in the states about a decade ago, we would be having this bailout conversation?

The world is changing, people must accept that. Cream rises to the top, spades should go away or comeback with a new angle.

Management Failed for USA auto north, the Unions didn't realize that yes you can be to greedy and we can't always live in "fantasy land".

As for bailing out on contractual obligations, if the contract is forcing nails into the coffin that results in bankruptcy. Yes, yes you file bankruptcy and start over, Everyone does. That is capitalism and that also sucks but it fair.

Fantasy Land is over.

The fed is printing, so is China, Japan, UK and the EU. A vast majority of the gold bug articles I read, similar to the one above seem to only focus on USA problems. The financial crisis is a global phenomenon. The process has just started as the underpinning and support of the system are the consumers. As you can't PUSH a string.

I believe that eventually the USA is going to have to take a serious gut check to cut spending or increase revenues before default. The USD will go down eventually as it will lose it luster but I wouldn't bet that moment will be visible in the current calendar that you might have got. Yes, we should see continued USD weakness over the near term as a retracement but this will be a process towards higher highs for the USD. De-leveraging is in phase one. Each phase will bring the USD towards higher highs. There will be re-leverage attempts or perceived attempts but they should work until they fail.

The whole globe is very complicated.

"Europe on the brink of currency crisis meltdown"
http://tinyurl.com/5btrw5

The article above is a great read of where more pain will be felt, and felt hard!

Emerging markets, producer nations took on vast sums of debt as the USD went down in value, their basic materials/commodities/producer based goods went up because of consumer credit demand. They grew their (one trick) industries to meet the demand. They took on debt, they received ridiculous sums of money for their "fantasy land" prices of their resources.
Their currencies have now devalued a bunch to major currencies, their revenues have been destroyed by lower demand for their goods and services.
Now they have less revenue and more expensive debt payments.

It wasn't USA banks that lend them the money, we now could have an international country bubble.

Yeah - scared about the USD going bad, but I wouldn't bet the farm that it would be before the Pound and EURO...

Zero yields and chronically firm bond prices. Attendant to this dynamic, you have a race to the bottom in currencies. This is probably the way things will go, since the collapse of the $US after the Nasdaq, which has been going on now for 8 years. That article was posted in October, so we check now to see how the XEU/XJY is doing.

The VERY important chart in all this is probably the XJY/USD chart.

Low rates or negative rates will invariably push the great mass of investment into lower yields. But currency risk will reduce those even further. Gold will be outside the standard deviation and reside as an outlier, and continue to move out of standard deviation.

I was hoping you guys would share personal stories, and you didn't let me down. Brown-cal...2nd_ave...I am honored to hear your stories and glad to call you friends. After a couple of rum an OJ's I am letting go of my previous resentments and concentrating on trying to find profitable trades for tomorrow.

Now that the oil price mania is a certain bust, we can take a look at the long term monthly chart to see where its been. With the RSI at 30 and climbing over the years to over 70 would be our indicator of just where the bubble started and where it climaxed. Likely the long term trendline will be tested again soon, and the RSI will have returned to 30. Even if the price remains firm here, the imminent U.S. dollar decline will worsen the oil price collapse.

According to the Swiss...

Gold refineries in Switzerland are working at their limit to cope with demand for the precious metal from investors seeking ways to shield their wealth.
The staff at the Argor-Heraeus company in the southern town of Mendrisio are putting in overtime to produce gold bars for people turning their backs on the financial markets.

"I've never experienced anything like this in my whole career," Erhard Oberle, chief executive of the firm for the past 20 years, told swissinfo.

He said the demand was so heavy that it could hardly be satisfied.

The reason for the gold – and silver - rush is that at a time of financial crisis many investors want real assets.

http://tinyurl.com/5ef9dn

I work in that industry and my company's order book is horrible and deteriorating. That being said, semiconductor industry usually picks up a good 6 months before the general economy picks up & the equipment industry is even 6 months ahead of the chip manufacturers. So, we could see the equipment mfrs turning around sometime in Q3/Q4 2009. Even though, semiconductor fabs may not invest in newer technology, there is the spares business (almost a 50%) that is a cash generator. Also AMAT has started foray into solar, that could work out good.

Re the "rate of technological change:"

I don't think this is a question one can (necessarily) answer from the perspective of the past, and if one were to turn to any particular discipline for a best guess, it would have to be (one of) the creative arts...how many analysts saw facsimile transmissions coming? the PC? the 'Net? emails? day trading? blogging? real-time downloads on cell phones? texting? youtube? facebook? we're always limited by artificial boundaries on our thinking...writers, filmmakers, philosophers, and researchers usually do a much better job at envisioning the future...there is more to the future of semi-conductor companies than Moore's Law, and there is more to Moore's Law than we are able to comprehend as non-scientists...

i'm moving away from individual companies when looking at the long-term; buying market sectors or the total market makes more sense when you're essentially betting on the ingenuity and resilience of mankind...whereas single companies are more suited to be trading vehicles...

Miadhach,

Thanks for stepping up and handling Skype while SiO2 is unavailable. I feel like I should have done it, but I simply couldn't manage to have it up by next week with my computer problems at home. I really appreciate it.

Jeff

The only way I can get my retirement is if I retire. Their rules not mine. I'm not ready yet, but I fear for the worst at this point. The company that handles our retirement has applied for the TARP welfare plan. I've called them, pressed more #'s on the phone then I normally do in a month to reach a human being. When I get a person on the phone, they act completely stupid, and say everything is A OK, just keep working and contributing, everything is fine.
Would this be one of those red flags in your opinion?
No need to answer, I already know they'll get their share one way or another, and the bad part is the working people don't have a chance to even put the money in a local bank and draw 1.16% interest!
Your doing a good job with your blog, hope you hang in there.

Treasuries
http://en.wikipedia.org/wiki/Treasuries

Bonds
http://en.wikipedia.org/wiki/Bond

The pension was not promised to the GM employees it was earned, the company and the government conspired to destroyed the pension years ago, when the government reduced the rate of funding for the pension. I'm not sure but from what the union told us that every hour worked 5 cents went to pension, 7.5 cents on overtime hours. That and a lower wage for workers made the pension earned not a free hand out. I agree that the management of these companies and the unions don't deserve a bailout, but technically this is a loan. There are somethings that you do for the people in your society, Social Security, or Medicare come to mind. Is this fair to tax people to take care of them in old age? It seems fair to me, I probably put in more money than most in these funds and I'm not mad; for the good of our society I don't mind. To take this money and spend it on corrupt wars is what gets me mad, and this is what the government and Gm did to its employees. The government let them cut down the size of the contribution to the pension fund. Now we are getting stock instead of money for medical. This is unfair for you and the GM employee. If we as a society don't stick up for our rights and the rights of others the game is over for us.
The politicians knew this was not just an accident, Greenspan and the congress were warn repeatedly about the mortgage crsis. Everybody was warn repeatly about these housing loans.
I also feel that the economy has done more damage to the big 3 than anything else, GM has been changing their business model, new hires 14/hour, no job bank, no medical retirement and the union to take over medical cost for retirees.
The banks caused their debacle by being greedy, they went for the short term big pay day. Now we have given the people that cause the problem 8.5 Trillion and still counting. This is a major turing point in our country, and not to see the real problems and who cause them is a real tragedy. I don't want to augue with anybody and after this weekend I will give it a rest, but try to do some reseach, this is a mess and nothing is how it seems.

For some years I have viewed chip companies as commodity producers. I see similarities between the chip business and the paper business - high cap ex/fixed costs, low margins - although not in the same commodity cycle time frame. It has been a long time since stock price growth has shown any relationship to technological change. The chip buyers, those creating new end-user products/technologies are getting the upside. Like paper, its not something I like as a growth investment, but I think it can provide shorter term cyclical opportunities and value plays.

(This refers to mainstream chip companies. As with many other "commodity sector" companies, there are specialty companies that do add value in a way that allows growth well beyond the pure commodity players.)

mntinhi"The pension was not promised to the GM employees it was earned"

I agree completely with your point of view. This is a total fleecing of the people by the banks, plain and simple.

Chips are cyclical, no doubt about it. Memory chips are a commodity, except that they are more complicated than pulp. Computing chips are a cut above in complexity. Gone are the days, however, when a consumer buying a personal computer wants to know the speed in Megahertz of the chip.

AMAT & INTC are two companies that I believe are on top in their fields and are priced quite low at present ( more so last week). Their returns on equity and assets are substantial though weakening as with most companies. Their balance sheets are top notch, just as XOM & CVX highlighted in Bill's WIR. Oil, now there is a commodity worth trading and owning.

My humble considered opinion.. subject to change any time. MHCO..SCAT.

This from Clusterstock:

Muni Bonds Riskier Than Corporate Bonds
John Carney | Dec 10, 08 3:14 PM

Ishmael quotes the credit analyst for Markit, which publishes the MCDX index that measure the perceived risk in muni bonds.

"The current widening of Markit MCDX spreads reflects the perceived increase in municipal credit risk. A confluence of events - an economy in recession, decreasing home values and increasing unemployment - has combined to reduce municipalities’ sources of income. Several municipalities have announced recently that they are experiencing financial difficulties. The likes of Michigan and New York City, exposed to the struggling auto and financial sectors respectively, demonstrate the importance of credit risk in the municipal market."

Does anyone recall WHOOPS about 30 years ago? That was big but isolated to Washington State's nuclear power program. Do we now have something much more widespread and diverse? Bill has mentioned the possibility.

I have traded a few Blackrock closed end and term limited muni funds in the past but am out in favor of stocks or cash.

Asia up big this morning.

"Even if the price remains firm here, the imminent U.S. dollar decline will worsen the oil price collapse."

With all due respect, every time the dollar drops oil goes up.

ALOHA !!

"Why would you trust information from a person who accepted a bribe from a union.....??"

What HONEST union would offer a bribe? What HONEST union would harass non-union contractors? What was the IBEW union afraid of? COMPETITION?

The IBEW did not call it a bribe I did, because that is essentially what it was! I am honest enough to call a spade a spade! What would you call it?