Keep Your Eye On The Ball

Before I get started on my pontifiicating, I wanted to post what I believe could be a quote of the year candidtate from Don Coxe, the well-know Strategy Advisor to BMO's financial group (Bank Montreal):

"The only gold bubble likely to burst is the bubbling ridicule of gold."

I think that statement speaks for itself...

On to keeping your eye on the ball.  I was chatting with a long-time colleague this morning who made the comment that "the situation in Greece is getting ugly."  I agree that it is, but I remarked, "who cares about Greece?"  Greece is small change compared to the brewiing crisis with our banking and financial system.  Seriously.  I described the Greece/Europe situation to someone this weekend as pure "chaff" being used to deflect our attention from much bigger problems brewing in the U.S. financial/economic system.  "Chaff" is metallic material used by jet fighers to redirect radar-seeking missiles, giving the pilot time to maneuver out of harm's way.

The Greece problem is around $400 billion dollars. I'm sure quite a bit of that could be monetized if the country wanted to sell off a few national assets, like a couple of its awesome Aegean Sea islands.  I would sell Ios and Mykonos, which have already been ruined by tourism...But lets take a look at just a few of the Too Big To Fail (TBTF) banks in the U.S.

Per yesterday's commentary, the market is signalling enormous problems via the huge negative performance of the stocks of several TBTFs since mid-January.  Combined, BAC + WFC + JPM + GS + C + AIG have a total balance sheet of nearly $9 trillion.  Let's assume for the sake of a "handgrenade and horseshoe" argument that the combined net worth (assets minus liabilities) is around $900 billion.  That could be pretty close because BAC's book value is about 10% of its balance sheet size.  Now let's assume that the assets on this beast is only 10% over-priced (and I can guarantee you THAT is generous).  That means that just these banks alone have an insolvency issue TWICE the size of Greece. 

And the fact of the matter is that I'm only looking at the "on-balance-sheet" GAAP numbers.  We have no clue whatsoever what the off-balance-sheet liabilities look like, especially the massive derivatives positions.  What we do know is that took over $2 trillion in stimulus and money-printing by the Fed and U.S. Taxpayer to keep the TBTF's from collapsing.  A lot of that was related to AIG, which at the time had around a $1.4 trillion balance sheet.

The point is that, if I'm right, and I'm not the only one who is looking at this with a critical eye, then what the hell are we doing worrying about Greece and why is Greece dominating the daily conversations in the financial media?  This is what I mean when I say that the Greece situation is being used to deflect attention from the ticking financial nuclear bomb in this country.  And I have not even introduced the concept of the U.S. Government's looming insolvency, the several trillion in underfunded retirement funds (those numbers are widely available if you want to google them), or the dire financial condition of several large States....Greece?  You have to be kidding me...