Bear Wisdom

He’s been wrong and lying since 2005.  Back then he was looking and sounding very confident, as the truth was still concealed.

The lies are now falling apart.  Now he’s looking like crap, worn out, dark bags under his eyes, stuttering, and not sounding confident anymore.  And, he’s even lost his memory as he has forgotten several very important conversations that he had with a lot of important people, as he says “I’m sure I can’t remember.”  I can’t wait till he gets the boot.

Bernanke in hot water

Top Republican, Darrell Issa from the Oversight and Government Reform Committee said today, said that the Federal Reserve wanted to hide its involvement in Bank of America’s acquisition of Merrill Lynch as Merrill Lynch’s financial condition deteriorated.

The Fed “engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies,” Representative Darrell Issa said in a statement released to Reuters.

President Obama recently (yesterday) stated in his speech that Bernanke was doing a fine job.  If breaking the law in order to get what you want is his definition of doing a fine job, then there is no wonder why people have stopped trusting politicians.

Buffett admits that the US economy is in shambles

“But in terms of the economy coming back, it takes a while.  There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while.  In the (Berkshire Hathaway) annual report I said the economy would be in a shambles this year and probably well beyond.  I’m afraid that’s true” Buffet stated.

New home sales drop 33%

May’s new home sales dropped 33% from a year ago, and dropped below April’s numbers.  With the recent spike in interest rates, home sales are looking even bleaker.

California ready to blow up

Last month, the Governator said that California would fix the budget by the end of June, however it is not looking like he is going to keep his word as lawmakers are still fighting over spending cuts and tax increases, even though Californians voted down the tax increase propositions last month.

Controller John Chiang said that he would have to start issuing IOUs instead of checks on July 2 to pay the state’s bills if the deficit tug-of-war isn’t concluded. Chiang described the state’s cash-flow troubles as unlike anything “since the Great Depression,” with an expected $2.8-billion shortfall in July that could grow to $6.5 billion by September.

California voters are stupid according to pollsters:

Mark Baldassare, pollster for the Public Policy Institute of California, disputes the thesis that it was an anti-tax message, calling the notion “really a stretch.” Voters were mostly confused, he says. (Translation = California voters are basically stupid.)

Moreover, he asserts, the outcome “doesn’t reflect the will of the people” because only a puny 28% of registered voters cast ballots.  (Translation = the voice of the voters who go out and vote don’t matter.)

Earlier in the year, the Obama administration forecasted that the unemployment rate would peak at 8% before beginning to fall toward the end of 2009.

And Now……. yesterday, the president stated that the US unemployment rate is likely to rise to 10% in the next couple of months.

“I think the president has said this, and I would certainly say this, I think you’re likely to see unemployment at 10 percent within the next couple of months,” White House spokesman Robert Gibbs told reporters.

US defaults rose to record highs in May, with a sharp deterioration from Bank of America, as defaults rose to 12.5% from 10.47% in April.  Credit card defaults tend to follow the unemployment rate, so this rise in defaults should continue throughout the rest of this year.

Insider Trading:

I guess our politicians really do have some major benefits that the rest of us only wished we had.  The day after meeting with Paulson and Bernanke, the Senate’s number 2 Democrat, Dick Durbin, sold more than $115k worth of stocks and mutual funds.  This was after the closed door meeting that Bernanke and Paulson held, informing Washington that the world was going to end, and the financial system was on the verge of collapse, unless they passed their $700 billion scam package.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQyYKbwMItyc

Ben Bernanke fired his last bullet in March by monetizing America’s debt.  Following Japan, and the UK’s example, Bernanke thought it would be a good idea to print $300 billion dollars and purchase our own debt.  He did this in an effort to keep mortgage rates low, around the 4% level.  However, this strategy is backfiring on him big time.

It seems like on the days when the Fed buys its debt, sellers are selling to them in hordes, and why not, the Fed is paying top dollar for their debt so why wouldn’t the sellers sell to them?  All the while Bernanke is blaming rising rates on the budget deficit, and the Fed Reserve bank of San Francisco, Janet Yellen is blaming it on inflation fears…  They should just stop and look in the mirror, and admit that they’ve made a big mistake or many big mistakes in the last few years.

Rates on the ten-yr Treasuries have dramatically increased since Bernanke started Quantitative easing.

Another 345,000 jobs were shed in the US during the month of May.  Although the number was well below the expected 525,000 expected, unemployment still rose to 9.4%, and the U6 rate is at 16.4%!

Consumer credit down by $15.7 Billion

Borrowing by US consumers fell by $15.7 Billion dollars, the second biggest drop following March’s adjusted numbers of $16.6 Billion!    Personal savings rose to 5.7% in April, the highest level since February of 1995.  Banks and credit card companies are lowering spending limits, and closing credit card accounts, shrinking the available debt to Americans.  Many other Americans are simply choosing not to spend frivolously and save money.

With millions of Americans taking pay cuts, hundred of thousands of workers taking work furloughs, and millions more losing their jobs, its hard to see a near term recovery taking place.  And with 70% of the United State’s GDP coming from consumer spending, it appears that there is going to be much more contraction in the economy in the future.

NOW Bernanke is saying that the US has to reduce the nearly $2 Trillion dollar deficit… hmmm, first he and Paulson, and now Geihtner spend Trillions of dollars on their various bailouts, lower interest rates to nearly 0%, and spend Billions of dollars on their stimulus package, then Bernanke starts quantitative easing in order to keep mortgage rates near 4% and save the real estate market…  And now that quantitative easing appears to be failing as rates on bonds and mortgage rates are now rising, Bernanke is now saying that the US needs to reduce their deficit… Unbelievable.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer run, we will have neither financial stability nor healthy economic growth,” Bernanke said in prepared testimony to the House Budget Committee.

Bernanke repeated his confidence that the recession will end this year, and that the economy will start growing again later this year.  Suuuure, you made some great calls in the past few years didn’t you?  If Bernanke was a baseball player, he would have set the world record for most consecutive strike outs, as he consistently makes bad forecasts.  I hope he finally gets this one right, but based upon his past record I really doubt it.

Jobs:

ADP reported that in May, US private sector jobs fell by 532,000.  Bureau of Labor is expected to report their statistics this Friday, and unemployment is expected to rise above 9%.  The US has already lost 5.7 million jobs since this recession began.

Last February after he got his new job as Treasury Secretary, Geitnher attempted to sell his New York house for $1.635 million, as he was heading to Washington.  After a few unsuccessful weeks on the market he lowered the asking price to $1.575 million, which was less than what he paid for it.

He eventually rented the home out for $7,500.00/month, which sounds like a lot, but he has to make payments on 2 loans, worth $1.25 million, and pay $27,000.00/year on property taxes (California should be thankful for prop 13!)

Even with his buddy, Bernanke trying his hardest to keep rates low, rates have been steadily rising, thus making the prospects of Geithner selling his house very unlikely, unless he is willing to lower his price drastically…

Despite all of the attempts by the government to rescue the real estate market, it is continuing to fall apart, as rising unemployment is leading the way to more mortgage defaults.

Approximately 12% of first-lien home mortgages in the US were overdue or in the process of foreclosure at the end of March. That’s a jump of 8.1% from a year ago according to the Mortgage Bankers Association.  And around 8.2% of loans were at leas 30 days overdue, and 3.9% were in the foreclosure process.  (And things were supposedly getting better… yeah right!)

Rates are starting to rise as well, which would kill the refinance market, and that’s not good news especially with the next huge wave of interest rate resets in the mortgage market.  If rates rise, this would force prices to drop.  An interest rate jump of 1% would drop the price of a home by about 10%.  So a $400k house at 5% would have similar payments (about $2550, including tax/insurance) as a $360k house at 6%.  What more can Bernanke do, as his “quantitative easing” is already backfiring on him as he is seeing interest rates rise, as US debt is flooding the market.  And this week, Geitnher is headed to China… probably to beg for more money, or to apologize for the statements (that China manipulated it’s currency) that he said about them in January.

More than 90% of economists believe that the US recession will end this year, however they believe that the recovery will be bumpy.

74% of forecasters believe that the recession will end in the third quarter of this year, 19% think it will end in the 4^th quarter, and the remaining 7% believe it will end in the 1^st quarter of 2010.

“While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president Chris Varvares, head of Macroeconomic Advisers. “The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines.”

Last March, the smart folks at UCLA said that the US would avoid a recession, and many others especially the Fed believed that the economy and home prices was on the verge of recovering… and now we are here, and all of the experts are saying the same thing.

http://finance.yahoo.com/news/Survey-most-economists-see-apf-15353502.html?sec=topStories&pos=2&asset=&ccode=