Tuesday, October 16, 2012

The Broncos Don't Need "Plan B" - We Better Pray Bernanke Has A "Plan B" That Works

Plan B?  No we don't have Plan B.  We're goin' Plan A! -  John Elway in response to a reporter's qustion about what the Broncos would do if Peyton Manning couldn't play because of his neck injuries - LINK (worth the 12 seconds to see Elway's grin)
Anyone who watched last night's Monday Night Football game knows that Elway took a big risk and it's paying off.  He doesn't need "Plan B."

But anyone paying attention to the smoke signals coming from the Too Big To Fail Banks understands that, so far, Bernanke's Plan A isn't working and he better have Plan B lined up and ready or our entire system could collapse.

Originally I was going to write more about how Citibank's earnings report yesterday was comprised largely of fictitious accounting gains and was total b.s.  But you can read the details here:  LINK If you don't want to read the details, suffice it to say that Citi fraudulently took a big gain from reducing its loan loss reserve at the same time that the default rate in its large home equity loan holdings spiked a lot higher.

Furthermore, despite the view being propped in the media about U.S. household debt levels declining, the truth is that the middle class in this country isn't deleveraging.  The average household is defaulting away its obligations, leaving systemic losses that are either being absorbed by accounting chicanery, per Citi's and JPM's earnings reports, or are being papered over by the Fed.

But the truthful bottom line is that the systemic problems that existed when our financial system basically collapsed in 2008 have never been fixed.  The reason I bring this up is because something very ominous is going on beneath the surface.  A good friend of mine in NYC called this morning and told me that he had heard that insiders at JP Morgan are basically terrified by the problems mounting there.  Without going into specific details, suffice it to say that the London Whale situation is the tip of the iceberg.

My friend pointed out that there's a lot more than meets the eye with the recent departure of JPM's CFO.  The London Whale situation, while appropriately knocking out JPM's Chief Investment Officer, should not have been enough to knock out the CFO.  He was clearly thrown under the bus by Dimon.  Furthermore, less noticed, was the departure of Barry Zubrow, previously the head of JPM's risk management and the person who was in charge of that area when the London Whale loss hit.  He was described as being one of Jamie Dimon's "trusted lieutenants."  Both of these "assassinations" are indicative of much bigger problems than just the supposed $2 billion Whale loss.

Same deal with the unexpected and abrupt resignation of Citibank's CEO, Vik Pandit.  Citi reports "fabulous" earnings yesterday and the Government claims that Citibank is completely turned around and the CEO leaves the next day?  That does not pass the smell test. It reeks like Pandit is walking away from a ticking time bomb just when it most appears like he's "successfully" navigated the bank back to health.

The Government/Taxpayers wrote a multi-trillion dollar check in 2008/2009 to save the banking system but nothing was ever really fixed.  The banks are not really deleveraging and have been substantially masking bad assets still on the balance with phony "mark to market" accounting gimmicks.  Moreover, the derivatives positions - those insidious weapons of mass financial destruction - are now substantially larger than they were in 2008 right before the financial crisis.  In other words, the banks not only never changed their business model, they've essentially re-upped the catastrophic bets that took them down in 2008.  Sounds a lot like gambling, doesn't it.

In fact, it looks a lot like Bernanke's "Plan A" was nothing more than a multi-trillion dollar hail mary predicated on false economic assumptions and fraudulent monetary theories that have never been tested but, to be sure, run egregiously contrary to all known laws of economics.  My friend worked at Lehman before it blew up in 2008.  He commented this morning that the situation on Wall Street feels a lot like it did in the months preceding the Lehman blow-up.  I wonder if Bernanke has Plan B...


  1. Thanks Dave. In part because of your work, I opened a new account. Getting ready. I think the big meltdown is close. http://thecivillibertarian.blogspot.com/2012/10/gold-silver-and-last-battleground.html

  2. Max Keiser talks to a former fraud squad detective, Rowan Bosworth-Davies of Rowans-blog.blogspot.co.uk, about the organized criminal conspiracy and racket happening right now in the City of London and why the police are not allowed to investigate without approval from politicians.


  3. Inflation is already here. Whenever the monetary unit grows faster than the goods/services unit there is inflation. If the monetary unit delta is greater than the product delta, there is inflation.

    What you are seeing is Enron style accounting FRAUD! to keep you in line. These so called economists are well versed in the game of Propaganda. Sadly, most are still fast asleep. I say Fuk'em.

  4. A lot of errors http://www.pimco.com/EN/Video/Pages/VideoChannel.aspx?El-Erian-Secular-Outlook-2012.aspx

    Il Folletto

  5. Amazing and inspiring comeback last night! Watched the whole thing.

  6. Most pawn brokers do not entertain post-sale complaints, or requests for refunds.

  7. That the global economy is tap dancing on the edge of a razor blade, and has been for some time, would be putting things lightly. Charlie Foxtrot, indeed. Thank you, Dave, for the time and effort you put into this blog in keeping we your readers informed. It is appreciated. And thanks to the anonymous poster who provided the link the the keiser report (max is a bit of a nut-job, but he's spot on). I had no idea until now that the City of London was just as big a cesspool as is Wall Street. Sodom, meet Gomorrah.

  8. Corruption Continues Virtually Unchecked in Greece

    While Athens waits for more aid from the European Union, the country continues to be administered in the same old careless manner. Corrupt politicians and the rich continue to help themselves to Greece's funds, and little is being done about it.

    How can someone who has declared an annual income of €25,000 ($32,400) transfer €52 million abroad? What kind of supplementary income must an individual have who, according to his tax returns, earned €5,588 in 2010, yet still managed to move €19.8 million abroad? And how can it be that a Greek citizen sequesters €9.7 million abroad although he supposedly earned exactly zero euros?
    These are the questions that tax fraud investigators will have to ask of a number of individuals whose identity has so far only been made public in the form of initials. For instance, a "G. D." stands at the top of a list with the names of 54,000 Greek citizens who relocated major assets abroad between 2009 and 2011. The list stems from the Greek central bank and is now in the hands of the Finance Ministry.

    It is the longest of four lists that are currently circulating in Athens. Each contains the names of people whose financial circumstances -- bank balances and real estate holdings -- do not correspond at all with what they claimed on their tax returns. But hardly anything is being done about it. The Greek reality is sometimes paradoxical: While the governing coalition was busy squabbling with international creditors over how many hundreds of euros can still be trimmed from teachers' and nurses' paychecks, and Athens continued slashing employee pensions, wealthy Greeks moved billions abroad with relative impunity.
    The odyssey of the "Lagarde list," as it's known, exemplifies the typically lax attitude toward tax criminals. For many months, it was thought to be lost, but then it resurfaced in early October. Now, the public prosecutor for financial crimes has a copy. It lists 1,991 Greek owners of Swiss bank accounts, and reportedly includes many prominent individuals from the realms of politics, business and culture.
    Allegations Ignored

    There is yet another, shorter list, which despite its diminutive size is even more politically charged. Greek tax authorities are currently investigating the assets of some 60 politicians, and the probe apparently extends beyond suspicions of tax evasion alone.


  9. Phoenix Picked Clean, Private Equity Descends on Atlanta

    Peter Horbulewicz started noticing investors from New York and California at Atlanta-area foreclosure auctions about four months ago. Working for private equity firms such as Colony Capital LLC and Blackstone Group LP (BX), they’d clutch plastic folders crammed with cashiers’ checks and astonish locals with how much they were willing to pay.

    “If you go head to head with them, they always win, because they always overbid,” Horbulewicz, a Polish immigrant turned American house flipper, said during a foreclosure auction outside the Gwinnett County courthouse, northeast of Atlanta.

    Their arrival may set the stage for a real estate rebound in the Georgia state capital, where banks seized more homes in the last 12 months than any other U.S. metro area, according to CoreLogic Inc. Atlanta prices have risen 6.5 percent on a seasonally-adjusted basis since March, when they dipped to levels last seen in 1997, the S&P/Case-Shiller Index shows.

    Trustee Sales

    Private equity firms have raised as much as $8 billion to buy as many as 80,000 single-family homes to manage as rentals, according to a Sept. 21 report by Keefe Bruyette & Woods Inc. They’re seeking to buy properties before the recovery is in full swing. While housing starts in the U.S. surged 15 percent in September to the highest levels in four years, that remains below the pre-recession peak.

    The company projects an average net yield, or cash flow after all expenses and management costs, of about 8.5 percent for purchases this month, Fuhrman said. It can finish renovations in an average of 15 days for about $15,000 per house and get a tenant in a property in at most 21 days after it’s available for lease, he said.

    Heavy Competition

    Hanson and Levy fell short of their goal for their $5 million Atlanta fund this month, picking up just 17 properties because of heavy competition from large investors. Colony, in particular, “ruined everybody’s day,” Hanson said.

    Their reason for entering the Atlanta market has nothing to do with local demographics or the job market.

    “All of that is irrelevant,” said Hanson, who owns investAZhouses.com, which bids in Arizona and Atlanta on behalf of investors.

    “Wall Street has got billions and billions of dollars they need to place and it has been determined they want to come into this segment. There are only handful of markets that that’s going to go into. This is one of them that has not seen the appreciation. If I had another chance to go back to Phoenix and wind the clock back 12 months, that’s what I think this is.”


  10. Keep that insider information from JPM coming, Dave!

    May the fraudster house of cards completely collapse this time!

  11. Again a lot of errors http://media.pimco.com/ITDocuments/12-0868-IT%20Viewpoint%20A4.pdf

    Il Folletto