Calm before the storm?

My early evening walks around the ‘hood this weekend have a new, strange element. Fewer cars driving (and speeding) about, less people in the local merchants- and this is a pretty lively area, located just eight miles from downtown Los Angeles.

Now, I am aware this could just be down to most people having left town for the holiday week.  Perhaps too, folks have modified their drving habits to try and offset that $5 per gallon price of petrol- which would explain the empty parking lot at Vons and Pavilions.

In light of the financial crisis confronting this nation, it seems to me a bit, well, odd. Can this be ignored? Am I alone here? Hello? Hello?!

Now it is not like there is a thing one person can do to alter the situation. Steward your ship to the best of your ability, and brace for the worst they can throw at you, is about all an individual can do to cope.

Personally, I’m voting with my feet (and in protest), and moving nearly all my funds from BofA, where I’ve banked for over thirty years, into a couple of local credit unions that appear to be well managed. Certainly BofA, with their ill-advised purchase of those Cunts at Cuntrywide(tm), as well as their failing foray into investment banking, is looking like a pail imitation of their once formidable self.

Ever since this takeunder of Tangelo Orangezillo’s personal piggy bank was announced, I’ve been scratching my head asking Why? Why? Does Kenny-boy (Lewis) even begin to realize what ha has gotten himself and his shareholders into, by bailing out this big bowl of wrong?

So few of the everyday people I encounter seem to have any idea that things are melting down in financial markets, and that we could actually experience something only every third generation gets to encounter- a big time event like a Great Depression, or a World War.

It has always seemed to that everyone born after World War II has been coddled in a way, that they would always have the gummint as a backstop to just such a massive life altering event and so don’t worry, be happy, live your dreams.

I must be weird because that has always made me suspicious. I was indocrinated in this life by survivors of the Great Depression- my gandparents- from whom I learned to value prudence, thrift, and self-reliance. If you count on the government to do the right thing, or do right by you, you are better off making a deal with the devil because at least he has a retirement plan for you.

So, in other words, don’t. Be self reliant.

Certainly Indy Mac, Wachovia, WaMu could, based on their crashing share prices, be close to closing their doors. With BofA and Citi right behind them in the queue.

But the take I get that most people seem to have is they expect a bailout. And that that is okay.

Yet, only a few seem to ask the question, what if that’s not feasible? Why not? Maybe the numbers don’t work. Aw hell, the Fed can always call up the Treasury and tell them to fire up those presses and print more money. Job done. Hmmm, maybe you are right.

So far I have not heard of one run on any bank.

The cable business channels pump “this is the time to buy” like excited monkeys, in a fruit-bearing attempt to steer the herd to stocks they need to unload. Fast.

That seems to working. For now.

But out on my walk, in fabulous summer SoCal weather with nary a cloud in the sky, I had this eerie feeling one gets in the calm before a storm.

Is it due some misplaced sense of complacency?

Is it because folks are simply too busy with work and famliy to stay abreast of current events? (Certainly the teevee news does nobody any favors.)

Or am I simply overfed on Crisis, Panics, and Crashes and under-informed about the realities of high finance which might, unbeknownst to me, be beyond my comrehension?

Everyone else must be feeling confident since they feel free to vacation, sit back in their hammock or Lazee Boy, and with the fullness of faith rely on Big Brother (i.e the Fed and the gummint) to step in and save us from ruin bail everyone out.

Even though all that the gummint can do is rob from Peter to pay Paul.

So somebody is bound to be short changed in that transaction.

That pesky problem persists

[Hat tip]

That’s sickening

I fucking cannot believe this is about to happen:

Bank of America’s Countrywide Tab Signed by Taxpayers [Bloomie]

“Bank of America Corp.’s $3 billion takeover of Countrywide Financial Corp. will be financed by 138 million tax-paying Americans.

“Bank of America, led by Chief Executive Officer Kenneth Lewis, can use tax write-offs to pay for Countrywide, the country’s biggest mortgage lender, said Robert Willens, a former managing director at Lehman Brothers Holdings Inc. who now runs his own accounting firm. Taxpayers may pick up about $5 billion of Countrywide’s losses over 20 years, he said. Countrywide shareholders approved the sale today.”

I thought sure Ken Lewis would come to his senses once he got a gander at Orangezillo’s toxic sludge machine. Apprently not- he must be raving mad to pursue this.

I urge Kenny-boy to just walk away from this triple debacle (now for taxpayers, soon for Tangelo and then you, BofA). I promise you if you don’t you will be losing deposits from long time customers- like me. You don’t know what you are getting into, Kenny-boy, with this oozing toxic orange waste.

You don’t want to be sharing a cell with Tangelo Orangezillo, do you?

BTW, Kenny-boy, how did that venture into investing go for you? Not so well, huh? You should have learned a lesson from that, grasshopper: don’t stray from what you do best, and never go out of your depth to chase profits. You just might be chasing them as they spital down the bowl.. you with it.

Yet another example of why we need to have Glass-Steagal reinstated.

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“The only thing Ben Bukkake has got left to inflate is the dollar.” -Paco Bell

Grim days for capitalism as winds of change sweep Wall Street

In case you missed this- Tom Wolfe did a piece on hedgies for the issue of Portfolio, which debuted April 2007. Here is a kind of update. [International Herald Tribune]

Excerpt:
“Of course, Wolfe’s 1980s Wall Street – of privileged WASPs (and Jewish Anglophiles), the sons of Harvard and Stanford and Princeton braying for money on the bond market – is pretty much gone now. It was replaced, in part, by the world of private equity and hedge funds, by bankers who think proprietary trading is more important than servicing clients.

“And now that world is crumbling, too.”

Interesting to consider those old warhorses Wilbur Ross, Carl Icahn, Kirk Krikorian, Boone Pickens as knife catchers; that BSC is no more; IMB is in a coma (closed @ 1.23 today); MBIA and ABK are on life support; Blackstone’s ego resembles a big, flat tire; WaMu, Citi, Lehman, are all overexposed to deriviatives that have declined in value significantly (“pennies on the dollar”); it was rumored today a hedgie might have blown up after a bunch of gold was dumped on the market- enough to lower the price; housing sales continue to decline to the tune of double digits, inventory is still growing- and this is the high season; DOW Chemical has raised prices 50% (Dupont will no doubt follow); counterparty risk is making the knees of bean counters knock louder and louder every day; oil; airlines; Iowa; auto sales; food; stagflation; and of course the ongoing contraction of credit; is there anything I missed?

The lemon is out of juice.

Actually, this is all part of the market cycle- the rumors of the death of capitalism are exaggerated. We just had the longest bull market ever- it began in the 80’s, and we’ve only witnessed a few brief recessions/corrections. We just happened to get stuck with the check now. And our wallet is missing…

“The only thing Ben Bukkake has got left to inflate is the dollar.” -Paco Bell

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Some other interesting new finds:

• Afraid to Trade
• Simply Option Trading
• Money: what it is, how it works
• Barry’s most recent Linkfest
• News Aggregator du jour

I’m going out to the store for more popcorn. Man this is a looooong movie!

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“It sounds like even the firms that aren’t in trouble are in trouble.” -Tom Wolfe

Don’t spend it all in one place

If you listened to Jim Cramer of Cramerica Industries(tm) you no doubt made out like a bandit this past week.

Comment on well you did listening to Jims advice.

Fliptard rage

[Hat tip]

#We gotta get out of this place#

Don’t you just love how the bankruptcy reform act of 2005 is blowing up in the faces of the bill’s authors- the credit card companies? I just love it when a plan (doesn’t) come together. [Mish]

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These pix of the flooding in Iowa are certain to conjure questions in the minds of those wondering about a Black Swan event occurring. If not, it probably will. [Boston Globe][Hat tip]

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Firefox 3.0 is out, and they fixed the most serious problem- memory leaks, and the most annoying- the download manager that functioned at a blistering 200 baud (seemingly). I installed it and like it’s just like says on the (virtual) tin. I’d already migrated over to Opera long ago, so prefer to stick with it for now, but I still prefer to use Firefox over IE. [Firefox 3.0]

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Does the ”full faith and credit of the United States Government” mean anything when the subject is effectively bankrupt?

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“99% of everything done in the world, good or bad, is done to pay a mortgage. Perhaps the world would be a better place if everyone rented.” -Nick Naylor, in Thank You For Smoking

¡Ay caramba!

Is the Florida bank BankUnited (BKUNA) typical of the where most regionals might find themselves in today’s financial markets? Maybe not-it’s in Florida, after all.

But if it is, ladies and germs, we’re in for a helluva big CRASH.

I’ve read two accounts this morning that peruse BKUNA’s siuation and ’tain’t pretty.

The lowlights:

“The bank is looking to raise $400 million of capital, which at the current stock price would translate into an additional 170m shares.”

“As of March 31st, the company had only 35 million shares outstanding. I’m no expert on secondary stock offerings, but seems to me that issuing another 170 million will effectively wipe out existing shareholders.”

“And yet they conveniently forget to mention that 60% of their loans outstanding are option ARMs.”

“This hasn’t hurt the company’s “profits” however. Each month the bank is recognizing accounting profits on “payments” that borrowers aren’t actually making in cash. It’s as if your credit card company recognized a full $1000 of income even though you only paid ‘em $10.”

“We see this in action on the annual cash flow statement, see page F-6 of the company’s proxy filing. The company’s TOTAL net profit in 2007 was $81.4 million. But that included over $181m of “negative amortization,” the accountants’ fancy word for “income” that wasn’t actually received in cash.”

“It’s amazing that CEO Alfred Camner hasn’t been fired. Or not, considering he owns 93% of the Class B voting shares, which have 10 times the voting power of the Class A shares available to individual investors.”

“‘Give me money to save my bank, and I’ll give you the voting power you need to fire me!’ No doubt with a comfortable retirement package.”

“(Cammer) is the Senior Managing Partner of law firm Camner, Lipsitz and Poller. Just in the last three years, CLP has billed BKUNA $12.0 million for legal fees related to ‘loan closings, foreclosures, litigation, corporate and other matters.’”

“As CEO of the bank, he pays himself to make bad loans. Then as Senior MP of his law firm, he pays himself again to clean up the mess his loans leave behind.”

“Camner’s daughter Errin is the Managing Director of that law firm.”

“And oh yeah, Camner’s other daughter Lauren sits on BKUNA’s board of directors and owns another small chunk of super-voting Class B shares.”
[BankUnited imploding by Option Armageddon]

As usual, Mish looks at the nitty gritty of the 10Q, and again, tells it like it is:

“It’s market cap today is $68 million. Now it wants to raise $400 million which is 588% of what the market says it’s worth. If that dilution comes on top of the declines we have already seen, its share price will be something like 32 cents.”

“I see $748 million in mortgage backed securities at ‘fair value.’ Anyone want to hazard a guess as to how ‘fair’ that value is?”

“What about a total loan portfolio of $12.3 billion? Isn’t that a little excessive for a bank with a market cap of $68 million.”

“I also see $73.4 million in REOs – real estate owned.”

“Bank United, a bank worth $68 million, is in hoc to the Federal Home Loan Bank for $5.86 billion.” [Mish]

Your tax dollars hard at work, enriching the lives of the few.

It’s Camner time!

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Got Ammo?

Don’t be fuelish

I know, the phrase above is a bit of a trite 70’s concotion which, like WIN and disco, is just as meaningless today as it was then. But since I’m long bell-bottom futures, you gotta know I’m dusting off the boxes of clothing and accessories (“Pet Rock“) and preparing for a return to my fave decade. I knew they would come back around!

What’s this, a 28″ waist? Nostalgia: it ain’t what it used to be.

Crap.

You know, I’m starting to notice things we “of a certain age,” once upon a time used to disdain.

For example…

I go out to the store for my twice weekly shopping round (Ralph’s, .99 Only, Target, Costco, Petco, Albertsons, all or any combination) and there each and every time, in the parking lot or on a side street -often times more than one vehicle – is someone sitting in their car,  parked, idling their engine.

What are they doing?

• Talking on cell phone
• Putting on makeup
• Waiting for passenger to return
• Passenger(s) waiting for driver to return
• Listening to radio
• Getting blow job
• All the above

I know, it’s hot (this is SoCal we’re talkng about, 25 miles from the ocean). Wah. I see this occur on milder, 70-degree days as well. Such wimps.

I understand that what we are experiencing this time out is not a shortage of gas and oil, that the price, which has quadrupled since 2001, has more to do with speculation by hedge funds, IB’s borrowing from the Fed against toilet paper holdings to try and offset some of their (seemingly endless these days) losses, and the catalyst, a 16:1 ratio that encourages rampant speculation on the commodity futures market:

“A conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today’s price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population.” [Mike Whitney quoting William Engdahl]

But c’mon, people, don’t keep giving these mother fuckers your hard-earned, still-worth-something-but-not-as-much-as-it-used-to-be dollars. As Karl Denninger so elegantly puts it:

“One final thought – you can’t rape the willing. If you consent, whether by overt act or silence, then the financial boning you’re taking isn’t rape – its consensual sex.” [Market-ticker]

Park in the shade and roll down a window, fer cryin’ out loud!

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“Chance favors the prepared mind.” -Louis Pasteur

Required reading

For every American:

“I always wondered why the tallest buildings in every city I have ever visited are banks. What do these people do? They don’t actually add anything to society. They don’t produce food or widgets. They simply transfer wealth from one class to another. The more I studied finance the more I realized it was simply the mother of all multi-level-marketing pyramid schemes. The central bank creates wealth out of thin air, or more accurately, robs it from the lower classes through inflation and then charges people down the line in order to use it. Talk about adding insult to injury. It lends it to other banks at interest who then lend it to consumers at an even greater interest rate.” [Jonathon]

A valuable outsiders perspective.