Wednesday, March 9, 2011

Morning Update/ Market Thread 3/9 - Shell Game Edition

Good Morning,

Equity futures are lower this morning, the dollar is lower and back beneath what was support, bonds are higher, oil is higher and pressing $106 again, silver is close to a new record, while the hot money rotation momentarily avoids food commodities.

The completely worthless – well, except for a good laugh – Mortgage Bankers Association reported more wild and totally unbelievable numbers for the last week. They claim that in just one week their “Purchase Index” rose by 12.5%, and that Refinance activity increased by 17.2%, moving the composite up 15.5%! What a sad joke, and it proves once again that private organizations should not be allowed to publically report statistics on their own industry. Here’s Econoday, even they don’t seem to be buying it – even though we know these indices are near all-time record lows:

One week's data is only one week's data but the Mortgage Bankers Association believes improvement in the jobs market is "beginning to pave the way" for improvement in the housing market. MBA's purchase index, which measures volume of mortgage applications for home purchases, surged 12.5 percent in the March 4 week for its best reading of the year. Rates remain favorable, at 4.93 percent for 30-year loans. The refinancing index also revived in the week, up 17.2 percent for its best reading since mid-January.

We’ve actually seen worse from the MBA, what a circus act.

What really pushed my button yesterday was learning that Bank of America was going to create a “good bank/ bad bank” structure:
BofA Segregates Almost Half of its Mortgages Into ‘Bad Bank’

March 8 (Bloomberg) -- Bank of America Corp., the biggest U.S. lender by assets, is segregating almost half its 13.9 million mortgages into a “bad” bank comprised of its riskiest and worst-performing “legacy” loans, said Terry Laughlin, who is running the new unit.

“We are creating a classic good bank, bad bank structure,” Laughlin told investors at a meeting in New York today. He was promoted last month to manage the costs of resolving disputes stemming from the company’s 2008 purchase of Countrywide Financial Corp. “We’re going to get after this, we’re going to do it the right way and we’re going to put it to bed in the next 36 months,” he said.

The legacy portfolio will hold 6.7 million loans with outstanding principal balance of about $1 trillion, according to a presentation to investors today. The split leaves home loan President Barbara Desoer with about half her previous portfolio, as well as new lending going forward.

Laughlin’s portfolio will include loans that are currently 60 or more days delinquent as well as riskier types of loans the bank no longer originates, such as subprime, Alt-A, interest- only and option adjustable-rate mortgages, he said. He said the portfolios will be completely split by March 31 and that his will be liquidated over time. Of the 13.9 million loans Bank of America services, about 3.5 million are held by the company on its balance sheet. The rest are owned by other investors.

“It’s a way to get investors focus on the good,” said Paul Miller, a former examiner with the Federal Reserve Bank of Philadelphia and analyst at FBR Capital Markets in Arlington, Virginia. “It’s a way to talk about good things and ignore the bad.”

Yeah that’s a classic alright – a classic example of an illegal con job traditionally called The Shell Game.

In the shell game you move your assets into a new company and then offload your crap onto other hapless investors (like your retirement fund), or you then simply bankrupt the “bad company,” leaving original investors in the mud.

In this case, BOA is not actually forming a new company, they are separating their assets using accounting tools. LOL, and who, exactly, is going to sign off on this new accounting, I don’t know – but jail time seems apropos.

The scam, of course, is that they are trying to look more attractive so that they can scam new investors into their company. Also, by simply sidelining their trillion dollars in bad loans – their mistake, but not really a mistake when you can get away with illegal activity – they are then able to set about doing it all over again without using their “good investments” to pay off their creditors. The truth is that BOA is bankrupt and they absolutely should be forced to resolve their insolvency in front of a bankruptcy judge – that is the rule of law… that is being ignored and usurped.

This is NOT like a Resolution Trust! It is being done by a private corporation in order to benefit them, and it screws prior investors with no resolution whatsoever. This was also already done with Citi Bank, prolonging their life while regulators and law enforcement officials look the other way.

What I would do with the banks is I would force every single bank in this nation through a special bankruptcy, starting with the smallest banks and working my way up the chain. Any debts that are unserviceable would be defaulted, and it would be the banks that take the hit. Of course this would devastate derivatives, appropriately so – most should be illegal and would be if I were in charge.

Here’s the BOA propaganda for those who can see it for what it is – a marketing piece selling their illegal activity:


Zero Hedge this morning is reporting that “Bond King” Bill Gross has sold ALL his Treasury holdings! Oh, oh, does that mean no QE3 on the horizon? Could be. Either that or Bill is no longer an insider and is therefore selling his holdings. I’d bet he is still operating on inside knowledge (again illegal, but not if you’re a part of the club propping up the debt gangsters), and Bill knows that interest rates will rise and markets will tumble – thus he is long the dollar as it sits right on long term support.

Market? What market? All I see are a bunch of holographic manipulated images being fed to the masses in order to rob them of their earnings.

The DOW is still inside of its rising wedge, refusing to break down beneath 12,000. The rise in price yesterday was meaningless for the technicals as price is still inside of a potentially bearish flag:

Volume on the advance yesterday was once again lower than on the selling.

Interest rates are blowing out again on the PIIGS nation’s debts. The entire globe is saturated with debt and impossible math. It is truly a crying shame watching it affect real people’s lives around the globe, it certainly didn’t have to be this way. My hope is that the world moves forward and not backwards. That means that we need to change out our money system for one controlled by and to the benefit of everyone, not just a few individuals. It means not falling for the precious metals as money scam. It means not falling for any form of global money when that money is created by a few central bankers. And it means that any monetary system must have complete transparency, and that it must target ZERO percent price inflation while allowing the quantity of money to adjust beneath price stability.