05.16.08
Posted in Old Posts at 10:41 am by Administrator
Prepetorial #16:
The Jury is Out
By John Galt
May 16, 2008
As Mike stewed in the holding cell, he wondered what the future had in store for him. For over a year now he had heard rumors about the “Reform Act” but since he had never been in trouble in his life, this one incident where he bounced a check and the department store pressed charges was so embarrassing he just wanted to pay the fine and go home. The thing that bothered Mike was they were not calling people out of the cell as a group but individually which he figured was standard procedure, then again there were women and children in the cell also, which sort of freaked him out. After what seemed like days, but as it turns out it was only about seven hours Mike’s name was called out and with a parched voice he yelled out “here.” The guards had instructed everyone to stand behind a line four feet from the cell door when their names were called and after two women ignored that order and were tasered multiple times for that violation, everyone obeyed. The door opened and two guards escorted Mike out of the cell and put him up against the wall barking the instructions “nose into the painted circle” for which he obeyed. They finally cut off the plastic handcuffs and put some metal shackles on him then escorted him into another dimly lit room that was about eight by eight and had a microphone hanging form the ceiling. The guard said “sit here” and dutifully Mike did. Suddenly a four foot wide video screen came to life and the words “ALL RISE” appeared along with the voice of a stern sounding woman saying the same thing. Mike stood up and noticed the camera in the upper left hand corner with a red light blinking indicating he was on camera. “This is strange, I thought there would be a court room like traffic court” Mike thought to himself. The judge’s face appeared on the split screen along with the county prosecutor who immediately spelled out the charges against Mike for violation of the state’s banking act and willful submission of an invalid check. The judge peered into the camera and after reading the various codes and statutes that Mike was being charged with on a state and federal level, he said “How do you plead? Guilty or not guilty?” Mike, who never got a phone call or any instructions stammered out “I would like a public defender your honor, I have not had a chance to talk to anyone about my case.” The judge looked at a terminal on his bench and snapped back “Denied. This case does not have budgetary nor legal justification for the defender, as such it is only a Class 3 felony. How do you plead and do not make me ask again.” Mike was stunned and fell back into his chair to sit down when the guard grabbed the neck of his jumpsuit and forced him to stand back up at the X on the floor of the room. He did not know what to say so he thought about the old days when he was in court for a DUI case fifteen years ago and said “Not guilty and I request a jury trial.” The judge looked at him into the camera and replied “Guilty. The jury is out today and this case does not warrant the budgetary expenditure. This check is yours, correct?” The judge pressed a button and there was the copy of the cancelled check, with his signature on it displayed on the screen. Mike replied “yes your honor but we made good on it as soon as we…” and before he could finish he was cut off by the judge. The judge then asked “Your choices are one year probation or sixty days hard labor. How do you plead?” Mike was stunned. He did not know what to say at that point as he thought he had rights, but so much for that. Mike had heard about the ‘hard labor’ option and knew what he had to say so in a now throat dried from lack of water scratchy voice said “probation, sir.” The judge said “So be it. You will have one year of probation with five random visits to your home by the enforcement division. The penalty for expenses of this crime will be twelve point five percent of your pre-tax payroll for the next eighteen weeks. Case closed. Next.”
With that the screen went dark. The guard took Mike out of the darkened room and took him to a line where the sign “Room 218-Processing” and left him there. After another hour in line, Mike was shuffled into the room where his shackles were removed and he asked the nurse “can I have some water please?” She just glared back at him and said put your left hand on the table in the outline there.” Mike, learning the lesson watching those who did not cooperate dutifully obeyed and put his hand flat on the table where she swabbed it with alcohol. “According to your medical records you have no known allergies, correct?” she uttered. Mike nodded to say no then noticed she was swabbing his upper arm also. “This will pinch, keep your eyes forward as we finish processing” and she proceeded to take a DNA sample out of his upper arm and then injected something into his hand which made Mike flinch in pain. “What the hell was that for?” he screamed in pain. The nurse started a long tirade: “That is your probationary activity chip. You are banned from removing that by law. Any questions are answered on the probation instruction form 91995 to be issued at the end of processing. If you have any objections to being chipped that should have been discussed during the trial. Removal of this chip can result in severe penalties up to and including ten years in prison. Any further questions can be directed to your probation officer.” With that being said and Mike wishing to leave, he stood up and was ushered towards the door after being handed the form. He was instructed by the guard to read it and at to proceed to window 102 to receive his personal belongings back and sign all receipts. Mike read the form and read the most stunning sentence he had ever seen:
“Probationary enforcement officers are licensed medical professionals. They will inspect your person and home environment to insure you, the guilty, are obeying all aspects of County, State and Federal health and financial regulations. Failure to obey all laws and instructions presented on this form and instructions from the visiting officer will result in the immediate imprisonment for no less than thirty days. The EO (enforcement officer) has the right to arrive without a warrant twenty four hours a day, seven days per week to process the guilty and insure compliance.”
Mike was stunned. He knew some laws had changed but he had no idea that the court system was so streamlined and unfair. As he signed for his clothes and wallet the clerk said “I took the liberty of removing the fifty dollar processing fee for your departure and the chip injection from your wallet. The receipt is the second page of your discharge document.” Now Mike was getting angry. That was about all the cash he had in his wallet that day and his cell phone was mysteriously dead so now he had to walk home or beg a taxi driver to give him a ride to an ATM. He took his belongings and walked up to the officer standing outside the locker room to be unshackled. The officer removed the shackles and ushered him into the crowded room of men, women and children getting dressed and tossing their jumpsuits into a barrel. “What in the world has happened to my country” Mike thought to himself. And with that, he rushed to get the heck out of there. Unknown to Mike, the bureaucratic nightmare of the chip in his hand and the trial he endured was just beginning……..
I know what you are saying right about now; “it can’t happen here.” Really? I was told as I grew up that fraud would not happen on the grand scale that it has, but it does. I was told that a fair, free trial yet if you look at cases like the two border patrol officers, Campeon and Ramos, you have to start to think twice. In this era of budget minded political correctness along with the technological monster being created for our future with cameras on every street corner and devices enabling law enforcement officials the ability to look inside homes without a warrant, just how much longer until this future that “Mike” endured becomes reality? I do not see it happening in the very near future but step by step our rights and freedoms are being eroded on the edges and the system outlined in the fictional portion above is not that far fetched. All of the technology is in place to initiate such a system of jurisprudence and unfortunately, the government bureaucracy is moving rapidly to modify their view of the U.S. Constitution and insure that everyone believes the “living document” theory of law. This dangerous ideal should be a major concern in everyone’s lives but alas, we vote for the very morons who could care less about the implications of this train of thought and the results from our decades of blindness is about to come home to roost.
In the story, Mike was about to tell the judge that his wife and he had made good on the check the minute the bank notified them of the problem. What I did not say in the story was that it was irrelevant as the judge pretty much indicated. The idea I fear we will adopt in our money starved state and local governments is that jurisprudence will soon be seen as a for profit operation, where individual freedoms are trampled for the littlest infractions and the willingness of the legally blind and ignorant shall enable this to expand in scope. Imagine a world where you could have a probation officer knocking on your door at 2 a.m. demanding to review your personal computer’s contents, your check book, your credit card expenditures and conduct a blood test to insure compliance with a judge’s orders. Crazy? Today it is. Two, five or ten years from now, not so much. Twenty years ago the Patriot Act would have seemed an impossibility and the idea of a computer program sweeping the internet scooping up all emails, postings and messages an absurd idea. The crisis soon to envelope our governments at every level where their financial wells dry up will cause a search for “creative” solutions and the traditional taxation methods will not work. As our dependency on hard currency lessens with the technological advancements and control mechanisms expanding, the ability to manage personal behavior and activity from an outside source becomes easier. The most dangerous part is that the potential for abuse to create “violations” also becomes easier as well.
So how does one prepare for such a future? First and foremost, become as invisible as possible. The fewer records you have on computer disks worldwide about yourself, the better off you will be. Get out of debt. Do not apply for a gazillion credit cards, special offers, or enter every contest in the known universe. Start reading books like How to be Invisible: The Essential Guide to Protecting Your Personal Privacy, Your Assets, and Your Life by J.J. Luna so you get some idea of just how invasive the world is, and why maintaining a lower profile in an authoritarian environment is important. All it will take for our world to change again is the eventual terrorist attack which is so dramatic and damaging that we have an over reaction from whatever political party is in power. You must have the ability to be self-sufficient for a prolonged period of time and the network of friends who are like-minded souls to work with you. The internet will become the newest mouse trap to entrap the unaware and laws will be passed with such rapidity that most individuals will not be able to keep up with them. That is where the danger really lies so you , for your family’s sake, must stay on top of the changes at the Federal and local levels. I think the biggest changes we will see in the next decade will be the re-introduction of sedition legislation, censorship of media outlets and restrictions on the use of certain financial transactions. All of these acts will be passed in the name of “self defense of our shores” or some other such insanity and will be enforced with a vigor unseen since the days of Woodrow Wilson. Thus the personal responsibility of the individual is to keep your nose clean, a low profile and observe the laws without creating a “footprint” that attracts attention.
There’s my .02 basics on how to prepare and I know that I could write another ten to twenty pages on the subject. I fear that with the complacency of our population and their unwillingness to realize that both political parties are willing and able to sacrifice our Constitution for their political power, the events in the fictional portion of this prepetorial may come true sooner, rather than later. With that in mind, just hum the “Digital Angel” song and remember that ever famous phrase used repeatedly throughout history:
“It can’t happen here.”
Well, it is. Prep accordingly.
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05.14.08
Posted in Old Posts at 1:13 am by Administrator
“Mommy, Mommy I Went
Wee-Wee in the Ocean!”
By John Galt
May 14, 2008
“Mommy, mommy I went wee-wee and added water to the ocean! The fishies should be happy now!”
Ah yes. The screams of joyous Congresscritters and refined Senators as they have solved America’s energy crisis by stopping the flow of oil purchases for the Strategic Petroleum Reserve. It’s tantamount to the little four year old boy proudly proclaiming he stopped the ‘fishies’ from dying as the tide went out because he went “wee-wee” into the ocean for the first time in his life. These arrogant fools who have set this nation on a course for total economic disaster by first ignoring the threats warned about during the first energy crisis in the 1970’s are at it again. President Appeasement, er, Carter, basically had his EPA shut down the modernization and expansion of refinery capacity along with finding any and all reasons to stifle clean coal development, oil exploration off of our coastlines, and of course allowing free market innovations to re-engineer the auto industry instead of forced mandates. Anyone with two working brain cells would realize that free market innovation always works better and the proof is in the Toyota Prius and the fact that it did not require a government regulation, mandate or law to require it’s manufacture.
Thus with thunderous self-congratulatory applause and numerous arm fractures from patting themselves on the back, the U.S. legislative bodies have now mandated that we are going to dump about 19,000 barrels(per day) of oil on to the markets to help “ease” the energy crisis. That would be all fine and dandy if we could build new refineries to process this oil, so at first glance everyone should contact their local nimrod and ask them if the oil tanker can park off the coast of their district (ok, so that’s sort of hard for a Kansas or Iowa nimrod; but you get my drift) and wait to be unloaded just so these freaking idiots can go home and say proudly to their constituents “see we did something; your gas price went from $3.89 per gallon for unleaded down to $3.88 for unleaded! Now send us some campaign contributions so we can return to screwing you over in the fall!”
Needless to say this development is about as relevant as my proclaiming that I’ve had a conversation with the mosquitoes hanging around my porch and they promise to tell their relatives not to bite me this summer. While we are whistling past the graveyard the rest of the “second world” has been busily moving assets and resources into their nation’s realms by doing what we did in our past:
What is in the best interest of their population and not caring about the rest of the world.
Unfortunately, our politicians feel there is a new “one world” obligation and could care less about people who can not afford this sudden concern for the speckled hump back farting green flea indigenous to only the fourth drill bit of any oil rig located in the Gulf of Mexico. And those people, the seventy plus million baby boomers and those already retired, along with those who are younger than twenty years old are about to enter a world of financial hardship unseen since the 1830’s. The Chinese communists could not give a rats you know what about fleas, grubs, grouses or penguins as they buy more oil than ever to fill their new strategic reserve yet we’re all supposed to sing John Lennon songs around the campfire while watching the Olympics from Beijing on our solar powered television sets. In reality the market can and will be more than happy worldwide to absorb the stupidity of our leaders once again and the oil we’re leaving on the table.
So as the innocent child proudly proclaims he saved some fish by urinating in the ocean our government repeats the same act on a grander scale. Just like the “rebate” checks which will offer temporary stimulus because they are counting on us acting like ignorant sheep spending the money on booze, lotto or amusement parks instead of saving the money or investing it in things we might actually need in the near future; like precious metals, ammunition, food, seeds or tangible goods, this recent vote indicates a willful ignorance of the new reality and the dangerous world we live in.
Prepare accordingly.
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05.12.08
Posted in Old Posts at 2:17 am by Administrator
J.I.I.T.
(Just In Island Time)
By John Galt
May 12, 2008
For those of you who have had the pleasure of visiting many of the fine Caribbean islands to the south of my location, you discovered a paradise, generally speaking, of laid back people working hard to get by on low income, beautiful scenery and the pressures of our major cities and industries only a distant memory. Even on the island that should sink from all it’s hedge funds based there, Grand Cayman, the laid back atmosphere can be savored and enjoyed without the modern day rush and torture of schedules and bosses who demand deadlines or have variable goals much like your wages, salaries or bonus program. In those islands there are generally time zones which we have here in the states; there are some islands in the Central Time Zone, some in the Eastern Time Zone, some further east in the Atlantic Standard Time Zone, and of course all of them located in the “Island Time Zone.” What is ITZ you ask and why should you care? “Island Time” is a local anomaly which can best be characterized not by what time zone it relates to, but when a certain event, production quota, or goal is met. Basically it can be summed up like this:
If it’s 8 a.m. in Miami, it’s “whatever” in the islands.
While some people think it’s funny, especially when you are on vacation and have those adult beverages with the funny umbrellas in them, it’s not so funny when you are attempting to conduct business. And America, that’s right the good old U.S. of A. is about to adopt “Island Time” as it’s standard of delivery and not by the choice of the consumer or business community. It’s the result though of the consumer and business community imitating an ostrich attempting to kiss subterranean earthworms and praying this problem would never come home to roost. It’s here. It’s now. It’s ugly. And “IT” is going to change our way of life for at least ten to fifteen years hence.
J.I.T. (Just-In-Time) Theory
For the sake of brevity, I will not go into a prolonged explanation of J.I.T. theory or the concepts that have been preached for decades now inside the United States that allowed our cost structure in the manufacturing sector to remain low and industries still based here to attain some degree of competitiveness. There are numerous books on the subject and if you wish to really dig into it, I highly recommend the book JIT Is Flow by Hiroyuki Hirano. The basics of J.I.T. theory were developed to eliminate a problem which has haunted the industrial revolution since day one and that is an over supply of materials required for the productions of goods. Many industries faced the problem of developing new products or lines for market, then spending excessive percentages of their finances to acquire the raw materials and store them, then implementing the production only to see the new product or line fail, causing the company in some cases to go out of business. The lack of flexibility in the storage and production process lead many corporations to stock gazillions (that’s a fancy financial word for wasted dollars) of dollars worth of raw materials that may or may not be usable in other production facilities and if the new line failed, ending up as a warehousing store until those materials can be liquidated. The cost of storing raw materials, not just in physical space and manpower but the tax obligations that came along with it also introduced a new pricing issue which kept some manufactured goods higher than need be until the J.I.T. concept was perfected in the late 1980’s. Even though Henry Ford introduced it, it took the introduction of low cost, high speed truck transportation to allow the concept to really take off. As a participant in the ramping up of J.I.T. from the transportation industry side of things in the late 1980’s it was obvious that the key factor for heavy manufacturing (defense industry, automotive, home appliance, heavy equipment, etc.) and consumer goods to attain the low cost advantage to maximize profits, it required a relatively cheap supply of energy. This required efficient transportation, usually truckload or expedited LTL (Less-than-Truckload) and some cooperation with the railroads in the intermodal arena. Visually speaking, this graph illustrates the implementation where J.I.T. efficiency is maximized relative to inventory cost for manufacturing and should give everyone some idea where the problems will start to occur.
The no-brainer observation of the century is that when peak efficiency in a J.I.T. system is achieved, inventory costs are at their lowest. The problems that could interrupt this concept though are numerous and the U.S.A. is just now beginning to see what happens when the key ingredient, low transportation cost, is destroyed by inflation and the associated impact in the ultimate cost of finished goods. This impact though can be translated to other raw materials which require little processing for the market and have an ultimate destination of our consumer markets. The introduction of the J.I.T. system for the growing, processing, importation and/or distribution of foodstuffs was considered a revolution in the 1990’s and enabled restaurants in Miami to serve salads with produce from Salinas, CA year round as teams of drivers moved the product cross country in three to four days, something the rails only dreamed of doing for over a century. The movement of foodstuffs via the truckload transportation system allowed many grocery stores to eliminate not just the need for intermediate storage facilities that were expensive to keep under contract, but allowed the consolidation of internal warehousing facilities to cut costs and enable expansion (in some cases ‘over-expansion’) into new markets. The inventory control and supply system allowed Detroit to briefly experience a Renaissance in the 1990’s after the 1991-92 recession which lasted until early into this century as the issue of inventory cost control appeared to be well managed and the idea that raw material costs never entered into long term strategic planning; especially since the implementation of NAFTA and other trade agreements gave manufacturers an out for modernizing aging facilities by shifting sub-assembly to other nations. Since we are now entering into uncharted territory, the model as somewhat over-simplified above, is now entering into not just uncharted territory, but a minefield.
The Inventory Minefield Explodes
Boom. Oil prices appear to have found a new floor. And it’s about ten floors higher than housewares and men’s apparel so this department store is teetering on disaster; especially since it’s only fifteen floors high and housewares was on the 8th Floor! As the chart below so subtly illustrates, theoretically, transportation costs always follow oil prices, no matter what the bobbling boondoggleheads of Bubblevision tell you.
(Chart does not reflect real prices/theory only)
If you do not believe this statement or “theory” then call and try to book an airline ticket at the same price you did one year ago. As I’ve discovered (but not shocked) the charges added on to the ticket fees are stunning. Since they want to continue to advertise “low, low airfares” they have to find other fees like a “fuel surcharge” or “if you have size 13 feet or larger charge” on to each fare. Needless to say, the uninitiated are shocked and stunned to discover there is a “fuel surcharge” no just on airline tickets but on the cost of goods delivered to grocery stores, factories, etc. Most people accept the other fees but fail to grasp the real reason behind them because those people with size 13 feet are freaks anyways and should pay more (And I did, but that charge was called a “luggage fee” on my ticket-the airline let my feet slide). Since the 1990’s Gulf War One situation caused a “surprise” oil price shock, fuel surcharges have been a staple of the transportation industry and never have been repealed except for brief durations. The average consumer who has not dealt with Fed Ex, UPS, or any transportation outfit has no clue that one, two or now thirty percent charges are being added for “fuel surcharges” to the bill and that is where we enter into the proverbial uncharted territory for the J.I.T. methodology and the American way of life. The price of energy does have an eventual and stunning impact on demand but unfortunately, it’s not the “demand” for goods one has to be concerned about; it is the demand for transportation services and the woefully unprepared infrastructure America is awakening to in the year 2008.
I DEMAND My Tomatoes Tomorrow
|
Year
|
TOTAL
(Billions$)
|
Truck%
|
Rail%
|
Water%
|
Oil Pipe%
|
Air%
|
|
1960
|
47.8
|
68
|
19
|
7
|
2
|
1
|
|
1970
|
84.0
|
74
|
14
|
6
|
2
|
1
|
|
1980
|
213.7
|
73
|
13
|
7
|
4
|
2
|
|
1990
|
351.9
|
77
|
9
|
6
|
2
|
4
|
|
1999
|
561.8
|
81
|
6
|
4
|
2
|
5
|
Source: Transportation in America 2000, page 4-7, Eno Foundation
The American people are spoiled rotten brats. My being one of them can attest to this as an undeniable fact and the proof is that my family does not have to butcher a chicken at night for dinner, grow my own produce unless I want to, nor cut my own firewood for warmth in the winter unless I elect to (getting a fireplace would be the first prerequisite for that to occur of course). I can get fresh tomatoes year round be they grown twenty miles east of me in Central Sarasota County or all the way from California if need be. If you look at the table above, courtesy of the Eno Foundation with the latest data I could obtain via the U.S. Department of transportation, you could easily see that as oil prices fell dramatically, the reliance on the trucking industry for America’s transportation of goods across this nation grew steadily. This trend appears to have continued un-interrupted through 2006 (Source: US DOT/RITA ):
Then again, we did not have oil futures at $126 per barrel in 2006, much less the concept of $100 oil was foreign and thought to be impossible (BOOYAH!). The chart above should be considerably revised by 2010 if oil continues at it’s current pace as the affordability of air and truck transport, be it for non-essential or essential goods and service, will impair the ability of the companies to maintain a reasonable cost structure. The theory that the “Mexican drivers will fill the void” is so laughable at this point in time is not even funny. And for some reason I do not see Federal Express or UPS outsourcing it’s overnight packages to Aero Mexico to absolutely positively get that box from Miami to Los Angeles. Thus the dilemma. With the increasing societal problems due to a massive increase in transportation costs, you can see where this will end. The trans-national nature of goods for production or consumer consumption will eventually cease or be so greatly reduced that that transportation system, as constructed now, will start to disintegrate. I do not mean a “physical” destruction, but the carriers which currently have been moving fresh foodstuff and materials for JIT production schedules will be fiscally incapable of operating. The chart below is my crude attempt to point out what will happen as we plummet towards that dangerous intersection where demand decreases to a point of no return.
At some point, which is a moving target as of now, the intersection displayed above will put the transportation industry on a point of no return. I could add a third line to that chart to illustrate energy costs but that’s not the point. Demand will rebound for goods but the transportation services will be incapable of meeting those demands due to the reduced number of companies available. While many people think that there will be no rash of bankruptcies and liquidation of our transportation assets, I simply remind everyone to review the news stories this year and the rapidity of the collapse of several minor players in the airline industry, the troubles of the majors, oh, and the daily stories of Mom and Pop trucking companies and owner operators going out of business. While that seems like a reach and just the pontifications of a “doomer” like myself, what was on the “mainstream” media last week (well, as “mainstream” as Glenn Beck can get) during the Glenn Beck Program and his interview with Byron King of Outstanding Investments where the premise of $200 per barrel oil freaked Mr. Beck out because Alaskan King Crab Legs would be a distant memory for Mr. and Mrs. Main Street America as the price became prohibitive and the delicacy a treat for the super rich only (you can watch the interview here ). And if that’s not enough misery for only May of 2008, as of the quarterly reports through May 9th, the Trucking industry’s earnings are down 34% (From WSJ, Earnings by Industry Q1 2008 ). As oil prices stabilize then accelerate with the next down leg of the dollar, the American people are going to experience the opposite of “JIT” and that would be what I am attempting to outline here and what Byron King was stating on Mr. Beck’s program:
Welcome to “Island Time” or whenever it gets to you or your market.
J.I.I.T. and You
Source: www.bizchartweb.com and the NY Times
The little snippet from above starts to paint a mosaic for you just like I attempt to do when I broadcast my show or post articles from east Bumblesville, IA about a local company having financial problems or a large corporation dumping those problems on the American public. If you start to take those small stories, reflect on them week after week as I do, you suddenly realize the “big picture” and it’s not so pretty. Harper’s magazine did a May cover story about the bogus economic data promulgated from our various Federal agencies that are supposed to report data for the nation’s people to make financial decisions. Yet time and time again, the data has been politicized much like our economy, and that’s the danger of the new JIIT system we are about to stumble into. Look at that slice of heaven from above and think; non-essentials are declining in demand, prices are skyrocketing in reality if you follow John William’s CPI calculations at www.shadowstats.com, and the supply of domestic transport is starting to decline as freight rates plummet while costs explode. This will not end well and here’s another theoretical chart for you to ponder:
(FEN= “food, energy, necessities” for this chart)
Once again, this is just a chart to illustrate what will happen as oil prices continue to increase and the demand for “Food, Energy, and Necessities” (FEN) stabilizes with the higher oil prices. The chart does not reflect real data but the theoretical curve where it breaks and the domestic capacity eventually breaks down, creating a void which has only one solution and it’s the path we are on as a nation unless the dollar is stabilized and commodity prices brought under control now.
The recession we are in according to Warren Buffett, Milton Friedman and others is not encountering the usual build up of inventory in the retail sector thanks to the JIT philosophy but that double edge sword could cut both ways in the near future. The “efficiencies” introduced over the last two decades has given the management teams of various corporations that feeling of invulnerability if the markets suddenly turn around and demand for their products increase. That theory is wonderful if, once again, we are dealing with $50 or $75 oil; but that theory has been shot out of the saddle along with Mr. Bucky and “if” we have the turnaround being pronounced by the talking bubbleheads in the second half of this year, the lack of capacity and inventory will hit home and cause shortages in certain goods furthering price increases based on the olden ideas of supply and demand, even without our dollar being revived.
So what is this solution and how does it impact you as the time to market for all goods extends outward and perceived shortages become reality in some regions of the nation?
Hi, I’m from the government and I’m here to help you.
That’s right. In other nations when a dislocation occurs within a capitalist system, of which ours has been dying for years thanks to the introduction of quasi-socialist policies, the government intervenes and assigns transportation resources based on a bureaucratically designed strategic allocation tables. This would mean, for example, gasoline being rationed in regions where the supply/demand balance is out of kilter. A better example would be the assignment of transportation resources, a de facto re-regulation via Executive Order where trucks that were hauling plastic widgets from Long Beach to Bentonville, AR are ordered to handle canned foodstuffs from California to Newark, NJ instead and the widgets put on the backburner. If you do not think this is possible, study world economic history; it has happened before and will again unless the situation is brought under control. The rationing of transportation resources would be a huge wake up call for America, but by the time that happens it will be too little, too late. The railroad industry is furiously attempting to rebuild neglected infrastructure in anticipation of future events but the work could take up to a decade to complete; and that’s barring no interference from the environmental whackjobs suing to block every new project.
The impact was brought home by the perceived rice crisis created by the mainstream media, exacerbated by an easy to panic public and demonstrated annually in Florida, Texas, Louisiana and Alabama with each hurricane that threatens our coastlines. During the pre-storm approach period, it is not uncommon to see panic stricken people lined up in grocery stores buying anything canned in sight, plywood to build three new homes and enough generators to power Bells Run, KY for a year. Amazingly, most of these people who “prepare” for the storm return most of these goods at the alleged end of the season in October only to come back and buy the same stuff at a higher price (usually) the next storm season. This is the mentality we are up against in America. There is no perceived crisis because there have been no actual shortages or supply interruptions so panic is either created by media hysteria or regional problems. Unfortunately for these souls, the problem has already occurred, the storm has already hit and they are just standing on a slab and do not realize they have been wiped out yet. The inflationary storm is ongoing and destroying their savings, retirement and ability to deal with the new economic reality we are living in. When I proclaimed earlier this year “buy stuff now” I meant it. And now meant ‘NOW’ and not on Island Time (whenever). The American people will have to soon accept a new reality, probably within twenty four months, that the cost of energy will outstrip the ability for new transportation resources to come online. This void will further inflate prices for all goods and services but worse, it will create an inherent instability in the JIT system causing the prices of foodstuffs and necessities to outstrip any wage gains or inflation adjustments to fixed income accounts. This is where the government will step in and begin to allocate not just welfare checks, supplemental emergency energy income grants and expanded medical care (Universal Health); it will cause the government under the guise of “emergency powers” to re-regulate the airline and ground transportation industries to allocate resources to insure food supplies into the major cities. This is a situation where there are no winners except for my readers and listeners who wish to survive the coming Econoggedon by purchasing products for the future that retain value (precious metals come to mind) and are functional necessities that have no expiration (Clothes, farm implements, etc.). Meanwhile the sheeple will continue to line up at Costco to beg for that extra 50 lb. bag of rice they will never consume because following the heard is their way of life. After they get it, go home and switch on Bubblevision they can all relax and feel reassured that their investments are “safe” and the world will be wonderful according to the experts on Island Time:
“Whenever. Tomorrow. Eventually. But it will get here. Or you’ll get there.”
I’ll take my preparations now thank you. Because “whenever” tomorrow gets here, I may not like the look of the new reality these clowns have designed for the rest of us.
I wonder if that taxi I called for in St. Thomas ever arrived at the restaurant..……
Permalink
05.09.08
Posted in Old Posts at 9:41 am by Administrator
Just a heads up gang:
AIG
Citi
Lebanon
Oil
Inflation
Food
IF that doesn’t keep your mind occupied, trust me, the markets and big money will be paying attention. Don’t go into your summer slumber yet. More this weekend….
Permalink
05.05.08
Posted in Old Posts at 12:14 am by Administrator
SELL ALL YOUR PRECIOUS
METALS NOW!
(So my friends and I can hoard them at a cheaper price)
By John Galt
May 5, 2008
I mean it. Sell every holding you have. Mail your coins to me. Mail your silver bars to me. Heck, gold, platinum, palladium, I won’t cry. Liquidate all of your holdings now, please.
So I can look back and laugh at those of you who do not understand the difference between “real money” or insurance, and those who follow the sheeple bleating herd that goes “Baaaa, Baaaa, Baaabooyah!” To say that yours truly has not enjoyed the circus like atmosphere created by low volume rallies in the equity markets coinciding with the futures in the commodities getting a much needed major correction, would be an understatement. Yet there are people who are swayed by panics in all directions so human nature being what it is, I would not expect anything less. So why am I telling you to SELL ALL YOUR PRECIOUS METALS NOW!?!???
Because my friends and I want to buy them during this correction at much lower prices.
That’s right, I’m one of those evil, anti-PC, anti-“Can’t we all get along,” anti-“please hug the trees for freedom,” Y2K survivalist-get-me-a-missile-silo-to-live-in, anti-CNBC, bitter gun totin’ Bible clinging capitalist pigs. And as our society accelerates towards the inevitable correction for paper excess in a fiat fantasy land I want to hold as much real money as I can get my insurance grubbing little paws on. That’s right boys and girls, I am a (gasp) “HOARDER!!!!!!!!!”
I know, that shocks all of my readers and listeners, but it shouldn’t. I believe that in the times we are about to embark on , that would be the bottom of the second inning of this absolute decimation of a fiat currency right about now, and the implications not just for capital markets but for American society as a whole are terrifying at best, horrific when thought about. As most of my readers and listeners “get it” this next section is to address those that ask “get what?” Because what we are about to witness will keep your head spinning for decades, and your wallets either super fat or super thin, depending on your desire to accept what is ahead or if you like the government issued FEMA Visa card or the wheelbarrow currency of the day issued to your family.
An Un-BEARingly Stearn Hint
As anyone can see(well, maybe not a bubblevisionista) on March 16, 2008 gold took a rather drastic turn to the upside, topping $1030 in overnight trading in Asia. This was obviously due to the crisis where the American banksters on Wall Street decided to devour one of their own with the full faith and backing of the American taxpayer. The trashing, allegedly deliberate and obviously overt, of Bear Stearns was designed to send the Godfather like message of an “offer they couldn’t refuse” and how our capitalist system has devolved into a Mafia like movie event with Jamie Dimon playing the role Al Pacino lusts for. While the great con was being perpetuated on America and the world that Benron and the Boys were doing a great thing by bailing out the bankster system and preventing a complete meltdown, what few seem to want to acknowledge or accept is that they people who initiated the problem all profited from it. The SEC will never investigate what happened, nor will CONgress, nor will the FBI. It’s like Don Corleone who always had all those judges, Senators and law enforcement officers in his back pocket except this group of thugs has the financial “press” (it’s hard to type that one with a straight face) as part of their collection also. So with all that background noise, those of you may be asking, so what does this have to do with the ever increasing price of tea in China or gold for that matter? Everything. What it indicated was the ultimate vote in the confidence of the American financial system. Which was “none” to “very little” depending on what corner of the world you were in or if you were a broker hiding under your bed on Wall Street that night. Gold did not skyrocket because it suddenly became the fashionable investment of the day. Google’s stock wasn’t purchased and hidden in back yards or safes. Microsoft stock issues and options were not purchased as a “hedge” against further instability. Goldman Sach’s corporate bond issues were not the “hot commodity” that night either. That’s right, it was gold and other precious metals. Real money which is the ultimate backstop or insurance against a systemic or societal collapse. Yet so few remember that month, that evening, nor the impact that day on the world. We came close, once again to a meltdown. And this one was self-inflicted; what happens when the “Black Swan” flies in and creates the validation of the law of unintended consequences being implemented upon unsuspecting traders? That’s right, there’s not enough gold nor limits upon it to stop the price from shooting up. And that’s where the “insurance” issue comes into my thinking.
Don Bernanke Says INFLATE or Die
It’s an amazing sight to watch this entire story unfold. In the movies a Godfather or crime family head (the ‘don’) issues an edict and the family snaps to into action. With the crime family running our central banking system, it’s little wonder we don’t see guys in nice Italian suits kneecapping taxpayers to steal their retirements to cover their blundering decisions. Wait a minute; they are kneecapping the schmucks; with an aluminum baseball bat called “inflation” which few understand nor desire to learn about. Alas, this is not a lesson on macroeconomics, but of insurance, safety and a desire to put a little bit away for a rainy, er, hurricane type day.
Last week the leading crime family met, the Federal Reserve, and elected to lower the Fed Funds target rate to 2%. Big whoop. The statement paid lip service to all of the usual suspects, inflation, gas prices, politicians, green ducks in a pond and the economy that they endorse providing fraudulent data to investors to provide cover for their operation. In reality, Don Bernanke and the boys are ready, willing and able to continue to flood the system with as much cash as necessary to keep the perception that things are in control alive and well. Who cares if 80 year olds have to eat Alpo dog food, at least they are eating so let’s destroy the dollar and get this meeting over with because the Hamptons are calling and summer is here. Of course this chart of the dollar tells the tail and if you’ll note, we still have yet to touch, kiss, hug or get a whiff of the 200 day moving average:
Keeping that in mind, you now begin to realize that the sell off in gold would be just as easy to manipulate and create as the market can be controlled quite easily by any one of the New York families like Morgan or Sachs. Because that chart should indicate gold priced at almost double it’s current levels. But with the organized crime family running our banking system it’s just a matter of selling enough futures or buying enough puts on GLD to trigger computerized sell programs. And since the average American sheeple only pays attention to what the mainstream media or Bubblevision tells them about prices, they have no clue as to the reality or depths of the crisis we are still in. That all being said (did I rant enough for ya?) I sincerely hope that you plan to sell me and my friends all of your precious metals. We don’t want futures. We don’t want paper. We don’t want promises. We want the real deal. The metals you can have and hold as opposed to the paper promises. Why is that so important and what’s the difference? Glad you’re asking….
Mafia Insurance Policy
With all of the stories since February of 2007, the fraud, the deceit, the bald face lies presented to the American public (you know, like 0.0% CPI in February), wouldn’t it seem prudent to maybe, just maybe put a little insurance out there to protect your assets, your family and your future? Think about it. If you lived in a crime infested neighborhood like the USA, you have three realistic options:
- Pay the crime family their protection money and believe everything you see or hear on CNBC.
- Buy some insurance to protect your family and pay the crime family off while you get ready to make your move.
- Get the heck out of there.
Since most of us do not have option 3 as a realistic possibility, I highly advise option number 2. You see, we have to pay our taxes, that’s one of the realities of life we have to deal with. And those taxes are And those taxes are further penalized via inflation by the banksters, aka. “the syndicate,” who have elected to gamble at the casino with your money, your nation and your future and they rolled snake eyes over and over again. Here we, the public, sit exposed to not just a historic collapse of an economic system, but the potential collapse of our nation, planned or unplanned, all in our life time. Wouldn’t you want a little peace of mind and insurance against that? But all you hear on Bubblevision is the “relic” argument against precious metals because their time frame is minutes, not years, and yours needs to be for the long term also. You need insurance against these Mafia like clowns who are gambling with your children’s future. I will not go into another rant to teach you that in times of trouble, people flock to precious metals, gold primarily, to hedge against the destruction of a fiat currency. If the economic matters which triggered the crisis in Bear Stearns and the entire world credit market regime was truly “contained” would it not be logical to assume that the traditional safe haven investment of gold would be well back into the five hundred dollar price range where it traded when this latest move began two years ago? Look at the chart below and think; who knew what was coming and what hedge did they pile into?
Now you get the idea. A lot of the smart money knew what was going to happen. Heck, I’m just average schmuck money and I figured it out. Then again, I felt that since the year 2000, something was wrong and the speculative bubble in the dot.cons would create the nightmare we are living through now. I never imagined that those investments eight years ago would give my family long term security should this fiasco continue. And as the prices decline to what I deem are intermediate and short term levels of tolerance, I will buy again. And again. And again. Since we are kissing the 200 day moving average on gold all those screaming “sold to you” please form a line to the left.
I’m buying and it’s that “again” time.
Because this time, when the black limo pulls up and the two nasty looking guys come to kneecap me, I want to have a golden shield to protect my family and I from the inflation loaded baseball bat and the idiots behind it.
And if you’re wondering, Greenspan is the real ‘Don Corleone’ should we be casting the movie parts. Bernanke is Fredo.
God help us all.
Permalink
05.02.08
Posted in Old Posts at 1:55 am by Administrator
Today’s headlines about the renewed optimism on Wall Street brought back some memories….
From the AP today (May 1, 2008)….
By MADLEN READ – 5 hours ago
NEW YORK (AP) — Wall Street has enjoyed a big rally, with investors sending the Dow Jones industrials up nearly 190 points in response to a stronger dollar and falling energy prices.
————————–
And from yesteryear….
Editor Marcus A. Rose of The Business Week: “Business will be good in 1930 for the lean, hard firms. It will not be good for the fat, soft outfits.”
————————–
And back to today’s NY Times….
Published: May 2, 2008
Main Street may be struggling, but Wall Street is on a bit of a roll.
Despite a drumbeat of bad economic news, the stock market is up — almost 11 percent in the last few weeks. Junk bonds, those risky corporate I.O.U.’s, are rallying. The value of financial shares, bank loans, tricky credit derivatives — up, up, up.
Many on Wall Street, the epicenter of the credit mess, seem to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in the second half of this year, a prediction some market strategists call hopeful at best.
For now, policy makers are echoing the mood on Wall Street. Treasury Secretary Henry M. Paulson Jr. said in an interview with Bloomberg Television on Thursday that “we are closer to the end of this problem than we are to the beginning.”
A report from the Bank of England, meantime, concluded that mortgage securities, which have been at the heart of the financial troubles, probably have fallen too far. The central bank said prices of such securities should “improve gradually in the coming months.”
——————————
And from yesteryear again…..
Editor Ralph C. Busby of India Rubber & Tire Review: “Distributors everywhere in looking to 1930 have legitimate reason to be conservatively optimistic.”
——————————-
And back to the present from Michigan Live today…
by Carol Marshall | Oakland Business Review
Thursday May 01, 2008, 3:00 PM
The state economy could stabilize and begin producing jobs in the next two years, but that’s only if the state legislature addresses the newly enacted Michigan Business Tax and if domestic automotive manufacturers stay on the course to sustainability.
That’s the message from a panel of local Plante & Moran experts when the accounting firm released the results of its survey on middle market companies in the Midwest.
What the survey revealed is a high amount of optimism among those who responded to the survey - 344 respondents in all, with 145 located in Michigan. Half were CEOs, 25 percent are CFOs, and the rest are a mix of COOs, vice presidents and directors and company owners.
With 67 percent reporting optimism, that’s a gain from two years ago, when 56 percent reported they were optimistic or very optimistic, said Susan Telang, Plante & Moran partner.
————————
And one more from 1930……
Editor A. C. Saunders of Furniture Manufacturer: “. . . the business, valley will not be deep and will be crossed during the first quarter of 1930.”
————————
OH what the heck, let’s pick on the real estate fans and builders who know no downturns…from Globe St.com today…..
Last updated: May 1, 2008 12:50pm
Land: Now’s the Time to Go Back to Market
By Mark Cooney
Land has normally been the key to gauging whether the current economy is still in a trough or taking an upward climb toward normalcy. Well, if the past two months are an indication, land is back in play and the months ahead should bode well for all other commercial sectors.
We are finding a significant increase in owners wanting to list their acreage. More flexibility regarding valuations and lower interest rates are making it easier for additional players to obtain financing for new acquisitions.
There remains a large number of single-family lots and homes yet to be absorbed surrounding Tampa Bay. However, the entitlement process for some tracts takes months, if not years, and now is the time for owners to put their acreage back in play.
————————
And back to the future, 1930…..
Editor Peter A. Stone of American Contractor: “During the year 1930 the volume of building construction work materializing will be greater than in 1929. . . .”
And my favorite quote from the TIME magazine article, Dole or Revolution on Monday, April 14, 1930…..
Meanwhile Secretary of Labor James John Davis, than whom none has been more officially cheery in the present labor crisis, explained himself in the April issue of the Financial Diary: “I’m no believer in empty optimism. At the same time one doesn’t improve the condition of a sick man by constantly telling him how ill he is. On the contrary we do our best to fill him with courage and confidence. . . . Business is staging a record recovery.”
——————————-
Need I say more? It’s beginning to sound like an echo in here. A somewhat historical echo……stand by as the next shoes hit this fall.
Permalink
Posted in Old Posts at 12:59 am by Administrator
During last week’s show, I got a confidential email from one of my listeners discussing a letter the family received from the Teamster’s pension plan. At this listener’s request I mentioned it briefly on the air with few details to preserve confidentiality. Today, that news is no longer secret. Both of these stories are from www.tdu.org (Teamster’s for a Democratic Union) and were issued today regarding these letters.
New England Pension Fund in
the Red Zone
May 1, 2008: The New England Teamsters and Trucking Industry Pension Fund has put members on notice that the fund will be in critical status (the “Red Zone”) when its funding classification is officially certified later this year.
The fund also announced strict new rules that will make it tougher for local unions in contract negotiations.
The new rules are part of the fund’s Rehabilitation Plan—a plan required by the Pension Protection Act for improving its funding within a 10-year period.
The New England Fund has until Dec. 29 to officially certify its status under the Pension Protection Act—and a year after that to formally adopt a Rehabilitation Plan. But in a March 27 notice to members, the fund announced it is taking action now.
No Cuts—For Now
The good news is no pension cuts are being implemented—at least for now. Instead of reducing benefits, the fund is focusing on increasing revenue by requiring all new contracts that are negotiated to include a 10 percent increase in hourly pension contributions each year.
The 10 percent rule applies to all contracts negotiated after March 4. If a local union is unable to bargain a 10 percent annual increase in pension contributions, then Teamsters covered under the contract will suffer pension cuts.
The 10 percent Maintenance of Benefits (MOB) requirement is the highest in the Teamsters. It doubles the five percent MOB that the New England Fund implemented in 2005. The Central States Fund requires an eight percent increase in pension contributions each year.
The new requirement is so steep that the recently completed UPS and Freight contracts don’t meet the 10 percent standard—despite record pension contribution increases of 65 cents a year.
The New England Fund took this into account and allows any new contracts that include increases of 65¢ an hour over and above a current pension rate of $5.26 an hour to meet the new requirements.
Challenges in Bargaining
The new rules will create serious challenges for Teamsters in contract talks.
Healthcare costs are on the rise, and fuel prices are skyrocketing. At the bargaining table, we will face the triple challenge of negotiating record pension contributions, higher health and welfare contributions and wage increases to keep up with the rising cost of living.
All this, in the context of a recession.
Teamsters in New England need to get ready for tough bargaining and be prepared to get involved in contract campaigns if we’re going to protect our pensions and healthcare and win the wage increases we need to keep up with the cost of living.
And from the “Central” region…
Central States Fund’s Letters
Stir Concerns
May 1, 2008: Hundreds of thousands of working Teamsters and retirees received a startling letter from the Central States Pension Fund in early April saying that the fund is in critical status.
That’s also called the Red Zone. The notice is written in legalese and discusses a potential reduction in benefits.
Given the history of benefit cuts in Central States, it’s no wonder that thousands of Teamsters are calling the fund, their local unions, and Teamsters for a Democratic Union (TDU) for info.
Even UPS Teamsters, who exited the fund at the beginning of the year, got the letter because their retirement after age 65 will in part come from Central States.
The letter—or funding certification notice—was required by the Pension Protection Act, and the wording about “possible benefit reductions” was required by the law. But the Fund could have done a better job of explaining it so that so many Teamsters didn’t assume the worst.
No New Cuts
The good news is that Central States Teamsters and retirees will not face any new benefit cuts.
Those cuts were made four years ago. As a result, the fund has lowered its future benefit obligations. The cuts have driven the average retirement age up from 59 to 61. The fund has increased future income by requiring all new Teamster contracts to increase employer pension contributions by at least eight percent a year.
These measures mean more money will be coming in and less flowing out, so the fund’s balance sheet is expected to improve in the coming years, moving gradually toward being fully funded.
Small Pension Increases
Pension benefits will actually increase over the next several years—even with the fund in the Red Zone. That’s because the amount of retirement benefits that Teamsters earn each year (called “pension accrual”) is tied to employer contributions, which go up each year.
By August 2012, a freight Teamster will accrue nearly $200 a month in pension for a year of work.
Unfortunately being in the Red Zone means that this is the only pension improvement on the horizon in the Central States.
The April letter explains that if a company busts the union, or refuses to sign a contract with the eight percent increases, then cuts will be made in the affected members early-retirement (25- and 30-and-out) benefits.
Our union needs do whatever it takes to ensure that doesn’t happen to any Teamster. Most Central States Teamsters are already under contracts that include the eight percent pension contribution improvement.
The Long Run
No letter from the fund or anyone else can guarantee our pension fund will be secure for decades to come. Our only guarantee is a strong Teamsters Union and labor movement that can stand up to corporations who try to weaken or cut our pensions.
That’s what TDU stands for. We work to inform and unite Teamsters to defend and strengthen our benefit funds.
That’s why we opposed the International Union allowing UPS to buy their way out of the Central States Fund. In that case, corporate greed got its way, and our union leaders didn’t even put up a fight.
Elsewhere, TDU members have successfully mobilized Teamsters to defeat benefit cuts and win improvements.
We need to build our pension fund on the strongest and broadest base. We intend to make that happen.
————————————-
Needless to say, should anyone have any misconception, this is the beginning, not the end. The American people area about to discover that a “recession” does have an impact on their futures. The real discovery that the baby boomers are about to make is that when banksters run wild the investments they rate as “AAA” safe are in fact CCC- deadly and often will break some hearts and retirement dreams as the pension plan administrators thought they were investing in safe, sane instruments only to find out, like the taxpayer, they’ve been conned.
Permalink
05.01.08
Posted in Old Posts at 12:08 am by Administrator
Yes, the news tonight just broke 10 minutes ago and I would call it a nuke. But only the people who are in the know realize the pain this will spread. Just as I was getting ready to write another long treatise on the swirling sensation we’re all feeling (no sense clutching or scratching the porcelain bowl is pretty slippery) and where we’ll be when we are deposited into a new sewer system. Then this story breaks on Reuters at 1948 EDT:
Bond insurers face new payments on CDOs-report
Wed Apr 30, 2008 7:48pm EDT
NEW YORK, April 30 (Reuters) - U.S. bond insurers, including MBIA Inc (MBI.N: Quote, Profile, Research) and Ambac Financial Group (ABK.N: Quote, Profile, Research), will likely need to make new interest payments for structured deals backed by residential mortgage debt, as more homeowners default on their mortgages, Citigroup analysts said on Wednesday.
This could place an even greater strain on the companies’ cash flows at a time when they are already grappling to sustain capital levels adequate for their top ratings, the analysts said in a report.
Story continues here……
The bottom line? The sentence where it says “as more homeowners default” which of course is a given since the judicial system in Florida can not even keep up with the pace of foreclosure filings and word is (an unconfirmed rumor for now) that there are rumblings that creditors are fed up with the flippers are going to file bankruptcy against them to get some assets back. So this is about to take a seriously ugly turn gang with property tax payments way behind down here which means they are defaulting on that in California, Arizona and everywhere else the bubble is imploding at a record pace. So just when you thought the word “monoline” has departed our vocabulary, stay tuned. This story indicates we are about to witness Phase II where not only do we have Alt-A and Option Arm defaults accelerating; it means now the governments are going to start filing liens against properties to get their back taxes back.
I wonder what the U.S. will look like when 20% of all the real estate is owned by the Federal Reserve, various municipalities and the big banksters.
Never mind. I wrote about that already. It’s going to look like Pottersville.
Permalink
04.30.08
Posted in Old Posts at 10:13 am by Administrator
With all of the data today, I just advise everyone to not get trapped in the data dump. I will have a lot to say about what is announced today by the Fed, GDP data, etc. Just keep in mind that the initial reaction in the markets is usually wrong.
Permalink
04.29.08
Posted in Old Posts at 9:43 am by Administrator
By John Galt
April 29, 2008
This is the story
About Hammerin’ Joe,
Hittin’ everything
With his hammer you know,
Then one day,
He made a mighty hit,
And broke his hammer,
Into itty bitty bits.
Along came a bankster,
Who said “Hey Joe!”
Need some money or a
Hammerin’ Loan?
Joe said sure,
But I’m quite dead broke,
After all I’m just a
Hammerin’ bloke,
The bankster said fine,
Don’t even start to whine,
No money down is how
To start a gold mine
Joe said great,
Where do I sign?
And the bankster said
On the bottom line
Joe made payments
The first two years,
Then the loan reset,
Which was what Joe fears
He said “Hey bankster”
My business is down,
Can I refinance
As I train to become a clown?
The bankster said no,
Give my hammer back Joe
And foreclosed is
The way the hammer goes.
Joe learned a lesson,
It was real hard,
A hammer is a tool,
And an economic wild card.
This officially ends my songwriting career(maybe). But if you hum it at a bankster board meeting, it might just work.
The moral to the story?
A house is a tool. It is not an “investment” in the traditional sense of the word and it is not something “liquid” which can be rapidly converted into hard currency, also known as “cash.” Just now Americans are discovering, it is a place to live, not to flip, take equity out for stock speculation or to leverage out for purchases of “investment properties.” It is a place where a profit is possible provided insanity does not take hold. It is an opportunity to get a decent return on investment IF inflation is maintained at reasonable levels. Am I calling a house a “hammer” in that sense of the word? Yes. It is a tool. It is shelter. It is a place to sleep and eat in, bath and raise a family, but it is an “it” which means the ability of the object to rapidly increase and decrease in value is a specter hanging over the head of the ownership. If people wanted to “invest” they would have been better off buying good stocks and bonds than piling a fortune into a home and calling it their nest egg. As many are finding out, their nest egg is now worth 40% less than what they refinanced it for.
What triggered this horrid song in my head? While listening to the local news yesterday morning, I heard a talking head from Raymond James discussing the real estate markets and declaring that it could have another 10 to 15% to drop before the prices were stabilized. No big deal, right? Immediately after that part of the news a commercial comes on for “make money flipping real estate now!” I about wrecked my car. I’ve heard some really stupid and ironic comments over the last two years, but to have that ad on in this market is tantamount to advertising Easy-Off Oven Cleaner at Auschwitz on the prisoner’s uniforms. The insanity of some people just blows my mind. And the people who think that even in current market conditions with an unstable interest rate environment are viable for real estate flipping are not just irresponsible, but fools. The 30 year mortgage is now up again to 5.97% on average as of the market’s close yesterday. Regardless of the lip service we hear from the Fed tomorrow, we will see a major problem with the 30 year mortgage as the bond vigilantes are getting ready to punish the markets for the stupidity of our central bankster over the last year. This means that the bailout in the housing markets, long hoped for to ease the pain, is not coming. It means that the 5.1 years of supply of condos we have in the south Florida markets will become a six, seven or longer year supply as no one can obtain financing. And what it really means this is far from over, as I’ve been screaming about, and that we have about two more years of serious pain in front of us.
So old Joe’s hammer couldn’t refi and it got foreclosed on. Well, that’s the story of the homes. Many people fell for the “take the equity and play flipper” during this last speculative boom. The inability for people to pay attention to the history of not just the Florida market, but real estate speculative booms as a whole is about to punish the remainder of the nation. I know this might seem like blasphemy but the crazy people who purchased new homes in 2005 through 2007 are not the only problems we will have to deal with. People who purchased homes in the 1990’s are the next surprise awaiting our system and those that took out second mortgages will pay a brutal price. The banksters have to clean up their balance sheets and the day of reckoning is coming at them like that asteroid which zapped the dinosaurs. And people who do not understand the difference between long term investments and speculation are sitting where the crater is about to be formed. Be warned my friends. The foreclosure process will accelerate in the months to come no matter the pleadings of the politically putrid pundits of D.C. Jim Cramer might actually get one prediction right this time; we may actually see over seven million foreclosures before this is all said and done.
And it will change our political and economic landscape for decades as a result.
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