Monday, October 24, 2011

Morning Update/ Market Thread 10/24 - Wild World Edition…

Good Morning,

Equity futures are higher still, even after last Friday’s head shaking whatever you call it 267 point HFT casino madness rally. Whatever, the “markets” are not free and they are not real, they are certainly NOT a safe place for your retirement money. The dollar and bonds are higher, not what you would expect with higher equities, oil is higher, gold & silver are higher, and food commodities continue to strangle real living beings due to a false monetary construct.

The article I just wrote describing Debt Saturation and Diminishing Returns is probably the most important concept I’ve worked to disseminate, I just added the following to it this morning in case you read it last night:
When examining debt, it is wise to always consider the income that is there to support that debt. Unfortunately, debt has been allowed to far outstrip income. An important concept is that Debt Saturation actual works to cap income - this is because the weight of carrying more and more principal and interest stifles real economic activity! And this is why increasing debt into a debt saturated condition actually causes unemployment to worsen. Note in the chart below how Federal Receipts have stagnated in relation to Federal Debt, that is a debt saturated condition:

Index of Federal Receipts Vs. Federal Debt:

Note in the chart above that these values have been indexed in order to get them on the same scale - in reality income is much smaller as a percentage of debt with Federal Receipts only $2.5 Trillion.

Please help disseminate that article, it is a very important one: Monetary Madness Part II – Diminishing Returns…

This morning the Chicago “Fed” National Activity Index for September came in negative for the sixth month in a row at -.22, an improvement from the prior -.44. Here’s Econodoesn’tgetit:
The national activity index improved to minus 0.22 in September from a revised minus 0.59 in August, still below zero to indicate below trend growth for the sixth straight month. The three-month average improved to minus 0.21 from an unrevised minus 0.28.

Employment-related indicators moved to slightly positive ground as did production-related indicators. Sales, orders & inventories also moved to the positive side. Consumption & housing improved slightly but remains deeply negative.

The rest of this week will bring a lot of housing data, the first look at Q3 GDP with a consensus of 2.5% trumped up “growth,” and on Friday we’ll see Consumer Sentiment, not that historically low readings mean anything to the narcissists running the production of money.

The Euroclowns continue to generate laughs in the face of their impossible math. I will guarantee you the current arrangement is coming to an end… soon. One way or the other, so don’t get used to the fantasy that there’s some kind of “fix” coming – sorry, but no real fix until the private individuals in charge of money production are removed.

Just to let the criminals know that someone is paying attention, I want to point out the following:
PMI Group Mortgage Insurance Unit Is Seized by Arizona; Payouts Cut to 50%

PMI Group Inc. (PMI), the mortgage insurer that was ordered in August to stop writing policies, said a unit that sells such coverage was seized by Arizona authorities and will pay out claims at 50 percent starting tomorrow.

The Arizona insurance regulator has full possession, management and control of the unit, PMI Group said in a statement on its website. Bill Horning, a spokesman for PMI, didn’t respond to a message seeking comment.

In August, the Arizona Department of Insurance told PMI that the unit, PMI Mortgage Insurance Co., was to halt sales of new policies and stop making interest payments on $285 million in surplus notes. PMI, which is based in Walnut Creek, California, said it needed to provide the regulator with a plan to improve its ability to meet policyholder obligations.

“The department may take appropriate action, including commencing conservatorship proceedings” if PMI fails to satisfy regulators’ demands, the company said on Aug. 19.

That same month, PMI Group posted its 16th straight quarterly loss.

The worst U.S. housing crash in seven decades has pressured mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs. Home prices fell 3.3 percent in the 12 months through July as a U.S. unemployment rate of more than 9 percent sapped the confidence of potential home buyers.

That action is going to hurt the banks, but mainly it will force losses from Freddie and Fannie onto the taxpayer. How did that happen? Let’s recap…

PMI is one of the largest mortgage insurers in the country. When a conventional buyer puts down less than 20% of their home’s value they are then required to buy mortgage insurance – yet another scam that fed the credit bubble and caused home prices to rise. The rating agencies are complicit in allowing this mortgage insurance, but even they would not give the mortgage insurance that coveted triple-A rating unless they had diverse income streams. That is why PMI, and other mortgage insurers, began also insuring municipal bonds – a much less risky business (previously anyway), and that enabled the complicit rating agencies to issue Triple-A’s, which they did.

But then the housing bubble collapsed and very quickly it was obvious that the mortgage insurers were all bankrupt – a fact the banks worked hard to conceal because without the insurance their own loan portfolios would have imploded (immediately). So PMI was allowed to languish and eventually they played the illegal shell game of splitting their company into two parts – the good assets into one company, and the bad insurance portfolio in the other. Again, this is ILLEGAL, always has been, but is being allowed to occur since this crisis began – this is fraud, it is criminal conduct.

So now the state regulators FINALLY make a move on the bad company, but the good assets are already long gone, get it? That’s how you play the shell game, and that’s why it’s illegal, it leaves those who were defrauded unable to attach assets that they otherwise would have had a claim against. The banks are also now playing the shell game, and our government and “regulators” are allowing this illegal activity to occur!

Why should you care? Because you probably have retirement money in funds that own these bad companies, and everyone has been put on the hook for losses in Freddie and Fannie as the banks and mortgage insurers shirk their crap onto all of us!

This is exactly why I say that the very first step in restoring a functional economy is restoring the rule-of-law. That means that the FRAUD must be prosecuted!

Arnie Gunderson does a great job calling the NRC out on their failures – he understand how that “regulator” has been corrupted by special interests – they do not regulate to protect the people, they are more of an industry marketing consortium – sad, but thankfully we have bulldogs like Arnie:

Post Fukushima: All the King's Horses and All the King's Men...