patrick.net

I was wondering if Citi would be there tonight. Ah well, guess it's wait til next bank failure Friday for that.

StuckInBA, thanks for the analysis. Good points.

http://tinyurl.com/5g9j55

The money at the banks is gone and now so is the gold!

Here's my take on Geithner as Treasury Secretary:

Obama wants better control of the (NY) Fed, hence kick Geithner upstairs, get rid of Bernanke, make Volcker the Fed chairman, and place a puppet at the NY Fed. Play ball.

Could be wrong, just a thought that popped into my head.

Oh, and it may also defuse the big Fed we-should-be-the regulator-of-everything power grab, once Bernanke is also gone.

Can someone enlighten me on how our new President changes the FRB Chairman?

"Appointments to the Board
The seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms."

I have not found where the 14 year term or 4 years as Chairman can be cut short.

http://www.federalreserve.gov/pubs/frseries/frseri.htm

http://www.federalreserve.gov/aboutthefed/default.htm

I've been building physical bullion position in 1K+ purchases (sales tax threshold) one month at a time, for several years. Only sold once, ironically at a price of $911 to pay for plane tickets for the family. Never been skunked, been able to trade every time, about once a month, on slightly random dates.

The premiums have gone up since I started buying in 2003, but they seem to be competitive based on what I read in the business section.

So I keep reading the mania articles on financialsense.com and other web sites but it's not what I've been seeing.

Will it continue to do so ? Who knows. But if a doomsday scenario really comes true, GLD is no match for physical gold.

Um, except that the largest holder of physical gold in the world is the United States Government. Ever heard of Fort Knox?

What doomsday scenario are you exactly thinking of? If the world goes back to a gold standard we already have more of the stuff than anyone else.

The only larger store of gold is at the Federal Reserve in NYC. Which we can take by force if push comes to shove.

I think your tinfoil hat is on too tight.

Paul,

That is an interesting question.

If Geithner becomes S of TT, then he will resign from the Fed,and Obama gets to appoint a replacement. Check.

As of 2009/01/13, Bernanke has 1 year left in his appointment. Perhaps he can be talked into resigning, too. Or he just might not be re-appointed in 2010.
Even Greenspan did not serve an integer number of 4-year terms. Half-a-check.

I dunno, my thought is perhaps a bit far-fetched, but it could be that Obama is trying to reign in the Fed. It is pretty crazy that members of the most powerful board in the nation serves 14-year terms. It is almost like having the supreme monetary court.

Time will tell. I think it will become interesting.

Stuck,

you are Indian, Indians know gold, and Indians like physical, same as Chinese.

If you really want to guard against TSHF situation, get some physical, ETF is not the real thing, it is great for building a position or trading, but when SHTF, it is still paper.

Justme,

stop dreaming, Volcker is 81, and this Fed Chairman job is HARD WORK (in Bush's voice), he won't last more than a couple of years even IF Obama appoints him. Spare that old man please.

The Occam's Razor answer of this all is, we are going to reflate, everyone on board is ready to reflate, and Ben has till 2010 to raw print in big scale. The fact that they place a long-time Fed/banker/IMF Geithner to the position means we want more coordination and integration between the Fed and the Treasury to pursue the current path, which is to reflate.

I just hope that there will be an orderly revaluation of USD in the next year or so, no more these violent yoyos, or I will need a defibrillator soon.

>>stop dreaming, Volcker is 81, and this Fed Chairman job is HARD WORK (in Bush’s voice),

You're doing one heck of a job, Benny!

My best performance this year is shorting BIDU.

That mofo was so anti-gravity for most of the year that I almost lost hope but I knew all along it was a POS, so I just persisted for it to break down. With China in implosion, that POS is a $30 stock, so I am going to wait for that beautiful $30 moment.

I actually like the Hillary appointment. She has too much attitude to be the President, but she is way more qualified than Rice, who is probably the sharpest knife in the current Bush's rotten drawer (which doesn't say much). Clinton has a very esteemed reputation globally because the world was booming under his watch, so people around the world have a very favorable opinion of him and his wife.

Hillary will do quite well as the ambassador to the world.

HAIKU: ECONOMIC REALITY SETS IN FOR THE BUSTED BOOMER

Hope is a good com-
panion, but a bad guide. Please
pass the Viagra.

Obama and the Fed, take two:

Looks like certain news outlets are thinking along the same lines I mentioned above, but with Summers and not Volcker being the person groomed for Fed chairmanship vacancy in 2010.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a6UEGcgjYF.c&refer=home

I still think Geithner is going to the Treasury Department to take him out of the running for the Fed chairmanship, and that he is smart enough to realize it himself.

Summers is a printer. I listened to two public speeches by him recently, he is definitely a printer.

OO,

Could be, but I also think Summers is a strong and fair regulator, which the part of the job that the FED has not been doing well at all in the last 25 years.

The game is rigged...

http://www.bloomberg.com/apps/news?pid=20601039&sid=at5FqZ7Gr0nw&refer=home

www.punkeconomics.com ?

Peter P will enjoy this one...

http://sweetness-light.com/archive/fdrs-policies-prolonged-depression-by-7-years

Kewp :

You misunderstood my comment. I do not have any tinfoil hat. I am in GLD for a trade.

The doomsday scenario ? I have no clue what it would be. I was only comparing physical gold with the ETF. The point is, even thought the ETF has done well in tracking the value of gold bullion - it is not the same as physical gold. For some it is an important point.

I am far more optimistic about US economy that most here. I was extremely pessimistic till end of last year. Because everyone (outside housing blogs) refused to admit the severity of the problem. Now even CNBC gets it. Ok, maybe except Dennis Kneale.

We will muddle through a variety of bad solutions. But the new administration will at least try an economic policy solution than attempting to bomb another country. Some of the massive infrastructure spending might even have some positive impact. Eventually passage of a long time and slow rebuilding will clear the rampant overcapacity we have everywhere.

So no tin foil hat here. I just expect the result of all this to be devaluation of our paper currency. Against what ? I think other paper currencies are in a worse shape. Hence my bet is on the non-paper currency of gold and other hard assets. And we don't have to go back to gold standard to do that.

Bay Area prices have been insane for at least a decade. The area has a ton of money and could support the sky high prices while the internet boom kept Silicon Valley cranking at warp speed.

Then, the housing boom came along and kept it all up for a while longer.

It's hard to see what could possibly hold it up this time. Alt-A (Liar's Loans) defaults are accelerating now and will cause further major problems for lenders, the REIC and the overall economy next year (and beyond)..

http://www.moneymorning.com/2008/11/20/housing-outlook-2009/

As this all ripples thru the economy, the layoffs will mount and even prime mortgage borrowers will start to default, especially those who used home "equity" loans to buy every consumer item under the sun.

It seems very likely that we've got a long way to go before housing bottoms out.

Of course, "reversion to the mean" explains this all nicely. You just can't have the kind of wild excess we had during the stock and housing booms without an offsetting slide to even things out.

The System Implodes: The 10 Worst Corporations of 2008
by Robert Weissman

2008 marks the 20th anniversary of Multinational Monitor’s annual list of the 10 Worst Corporations of the year.

In the 20 years that we’ve published our annual list, we’ve covered corporate villains, scoundrels, criminals and miscreants. We’ve reported on some really bad stuff — from Exxon’s Valdez spill to Union Carbide and Dow’s effort to avoid responsibility for the Bhopal disaster; from oil companies coddling dictators (including Chevron and CNPC, both profiled this year) to a bank (Riggs) providing financial services for Chilean dictator Augusto Pinochet; from oil and auto companies threatening the future of the planet by blocking efforts to address climate change to duplicitous tobacco companies marketing cigarettes around the world by associating their product with images of freedom, sports, youthful energy and good health.

But we’ve never had a year like 2008.

1. AIG: Money for Nothing
2. Cargill: Food Profiteers
3. Chevron: “We can’t let little countries screw around with big companies”
4. Constellation Energy: Nuclear Operators
5. CNPC: Fueling Violence in Darfur
6. Dole: The Sour Taste of Pineapple
7. GE: Creative Accounting
8. Imperial Sugar: 13 Dead
9. Philip Morris International: Unshackled
10. Roche: Saving Lives is Not Our Business

http://www.multinationalmonitor.org/mm2008/112008/weissman.html

Triple-slaying suspect could face death penalty

.....

Wu and his wife own 19 houses and vacant lots around the country worth more than $2.4 million, according to public documents reviewed by The Chronicle. Asked why his client needed free representation by a public defender, Ogul said, "All we know is that right now he's been unable to retain counsel, so he has to have somebody for today. We'll see what develops over time."

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/19/MNIV147QN6.DTL

While speculation centers on Wu's employment problems at SiPort, property records show he also was facing significant financial woes due to the real estate downturn. While he looked prosperous on paper, with properties in California, Arkansas and Washington, several are worth less than he paid for them. And records also indicate that he also is tapping heavily into the equity in his Mountain View home.

It appears that Wu qualifies for a taxpayer-funded legal defense for several reasons. His investments are underwater; he is in jail without bail until the trial; and he is not earning a wage. A private attorney in a triple homicide would typically cost 500,000 to $750,000.

Wu invested in two houses in comfortable suburban neighborhoods of Vancouver, Wash., with good schools in 2005 and 2007 — near the top of the then-booming market, said Vancouver Realtor Lisa Costa. At the time, property in the city was appreciating rapidly, with equity in some locations ranging from 10 to 25 percent.

But when the bubble burst, Wu was caught holding the properties.

For instance, Wu bought one of the houses — on Northeast 145th Street — for $280,426 in May 2007. Its assessed value quickly shot up to $308,000, Costa said. But the latest assessment puts its value at only $276,000 — less than Wu paid 18 months ago.

"I'm sure when he bought it, he thought he was going to make money,'' Costa said, "but the market shifted virtually overnight.''

Wu also owes more than the current value of two houses he bought before the crash in an affluent gated retirement community in Hot Springs, Ark., according to Realtor Keitha Turner of Village Pro.

Both houses in Hot Springs Village are now worth less than when he bought them in 2000 and 2005, despite the considerable amenities of the gated community, including nine golf courses and 11 lakes in the heart of the scenic Ouachita Mountains.

He bought one house in 2000 for $198,000; the other in 2005 for $215,000. "If you could even find a buyer, with so many houses in the Village for sale,'' Turner said, "his would probably go for $10,000 to $20,000 less than he paid.''

The crimes Wu is accused of have reverberated there. One of Wu's renters demanded Saturday that Turner change the locks on Wu's property, she said, for fear the test engineer would show up and kill them.

Well, well, well. Another $20B and a big whopping $314B asset loss guarantee for Citigroup. And 8% interest on preferred shares, conversion rights and strike price unknown.

WSJ actually has the summary term sheet online, see

http://online.wsj.com/public/resources/documents/citi-term-sheet-1123.pdf

$20B preferred stock, $306B (my typo) asset loss guarantee

Only 10% warrants and with a $10.61 strike price, more than 2.5x the C market price on Friday.

A lousy deal for Joe Taxpayer, yet again. Send Paulson to Guantanamo before it is too late.

I'm going a little too fast here. There is actually 20+7B worth of preferred stock.
The 7B appears to be "payment" for the asset guarantee, and the 20B is for cash to the Bank.

Anyway, the term sheet is somewhat interesting reading. Has anyone seen a real term sheet for any of the other TARP deals? This is the first one I have seen, and these really all ought to be made public.

Stop Lying About FDR's Record:

http://economistsview.typepad.com/economistsview/2008/11/stop-lying-abou.html

When F.D.R. took office in 1933, one third of the nation was unemployed. Agriculture was destitute, factories were idle, businesses were closing their doors, and the banking system teetered on the brink of collapse. Violence lay just beneath the surface.

http://campaigningforhistory.blogs.nytimes.com/2007/05/21/when-government-was-the-solution/

Who said that the taxpayers are going to foot the bill?

Look at the extent of the bailout, so far the Fed has already given out over $2T, and pledged a further $5T in the guarantee.

You think the American taxpayers, less than 100M, can cough up a further $20K per head for the $2T already spent, and another $50K for the pledge? That's a total of $70K per taxpayer so far, forget it, paying an extra $70K per head on the existing tax burden is just not going to fly.

America is at the crossroad of raw print in big scale, or die.

OO,

The way I look at it the taxpayers will eventually foot the bill, one way or the other.

Do any of you know how i can invest/gamble in mbs/cdo's?

It appears we have a new Political Party, the National Social1st Debtmongers Party. Charter members are Bush/Paulson, with Obama soon to join.

Party Platform:
1. Privatize profits/Socialize losses for all "too big to fail" debt profiting institutions Emphasis on protection of senior management compensation. After all, senior management decides on campaign contributions.
2. For the general public, discourage savings, encourage debt. Use artificially low interest rates, tax code, and various down payment assistance programs to prop up house prices. Consider falling house prices as a dire national emergency. Get mainstram acceptence of households being perpetually in debt, with fully one half of take home pay used to service residence alone, plus more debt service for autos and consumer goods.
3. Redefine the term "debt." Consumer Debt should not be construed as a drain on future earings to fund present day consumption. Instead, "re-educate" the masses to see debt as "other people money," or "leverage." Refer to anything paid for as "dead equity" that a prudent soul would "liberate."
4. Government will lead. The USA will borrow trillions to fund the bill for socia1zed losses. Show that borrowing is always preferable to making hard (or not so hard) choices, both for gov and households. Example: Have the gov borrow money to fund a new round of stimulus checks. Encourage the recipients to spend these checks (preferably as a down payment) rather than save or pay off any debts.
5. The solution to all problems is to loosen credit.

HeadSet,

I have heard about that same party since, oh, 1980? or was it 1968? It is called the republican feudal warlord indentured servant party. Democrats so far have only gotten to do garbage time, as they call it in football: The democratic second string team only gets to come off the bench and on the field when the republicans have run up the debt so far that there is no danger that the democracts can bring it down again before the game is over.

Headset, go rent "Tropic Thunder" and laugh for a couple of hours. Here's a good article on seller psychology (or should we just call it price stickiness?)
Dan Ariely, a behavioral economics professor at Duke University's Fuqua School of Business and author of "Predictably Irrational," said the "better-than-average" effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.
"We feel that we're better than other people. We're unique. We're special," he said. "It stands to reason that our houses are also special."
The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.
"The moment we invest in something, we fall in love with it," Ariely said, which applies to something as sentimental as children or as trivial as origami.
That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low but realistic listing price is "like someone calling your kids ugly," Ariely said with a laugh.

Headset, go rent “Tropic Thunder” and laugh for a couple of hours.

Will do. Only I must show Party loyalty. Therefore I will buy instead of rent, while paying with a credit card. Then I will use the Obama stimulus check to make a down payment on a new Sony 60in flat panel so I can watch it in fitting style.

run up the debt so far that there is no danger that the democracts can bring it down again before the game is over.

It does appear that W (with LOTS of Democrat help) is running up the debt just before he leaves office.