Spain and its laments

If capitalism has a poster child a black sheep and lots of problems is in Spain, full of easy to corrupt local caciques, governments after government that fail to govern, and an elite that is as much arrogant and the rest of citizens, harsh words, you bet, there is so much talent in this country of 44 million that is sickening what is happening to its government.
If today August 1rst of 2012, will be the first day of a rude awakening to the process of capitalism as interpreted today. It should be not surprise that as it stands today it is a failing system, for most but a very rewarding system for those who control corporations.
The European community is collapsing, it is difficult to pinpoint if it will be Spain local governments who will be the responsible to undo the currency treaty or it will be a massive popular movement.
As we stand today, the ECB, the Bank of Spain and the Federal Reserve have focused in bailing out the banks at the cost of tax payers.
The banks in Spain are starting to feel the injection of the ECB and Bank of Spain and the preferential treatment laws that gives them. The advantageous position of banks to be first in line to collect taxpayers receipts might turn to be the unwinding of the whole enchilada. In the next twelve month we are going to see the euro leaders behave as Sangria drunkards.
They sold the idea to the masses that save the banks and you will be saved. B.S, as most of such statements.
There is not problem that will not correlate to other in this complex pyramidal capitalist program.
Using new debt to pay old debt.....there are thing that make you go hummmmmm.
Spain regional governments are going to be confronted with a situation in which banks are first in line to collect their debts and people are going to be left behind. Taxes are controlled by the central government, but debt can be incurred by local governments at the rate that they demand and the central government rubber stamps it.
Well, the day of reckoning has arrived.
Local governments have more debt coming due and not a single one has near enough revenue to cover the interests, so a massive default is looming under their heads.
Many municipalities had fail to pay employees for a year, and still they cannot pay their interest or due principals of the past borrowing spree.
I predict that by next year around this time Spain will dealing its way out of the euro currency, at least temporarily if not definitively, most local governments will goo into default and banks will have to claim loses in their CDS's, and guess who holds most of those collateral debt obligations.......    
   

Risk Premium

As the markets continue to trade risk premium derivatives, here is Gary Shilling giving you and edge with his four part series on Bloomberg.com

http://www.bloomberg.com/news/2012-04-18/will-u-s-avoid-2012-recession-a-postscript.html

One can agree or disagree with Gary’s age and interested view of what envelops him, one thing is laudable, he is sharing a point of view that directs you to search for facts and establishes the risks that people are confronting today, nothing less than a big thank you and a candle in the altar for Mr. Schilling for caring to warm all of what he thinks is coming, again, you might agree or disagree but the risk premium is there priced in the markets.

As of 4/19/2012 the risk premium of countries stood at the following prices.

Country s	Price	Variation	%
Spain	423,23	+13,02	+3,17%
France	142,00	+9,88	+10,17%
Italy	392,00	+4,13	+4,15%
Greece	1.937,00	-71,00	-1,18%
Portugal	1.068,00	+0,00	+0,03%
Ireland	641,00	+-10,00	+0,43%
Risk premium

What does it means?

Everything needs a little context, France risk premium in a week went up 40%; Greece is trading at default rates, after all those bail-outs and piles of cow manure printed about Greece, the Greeks are suffering at levels never seen before, even more than when the fascist ruled the country, I am sure Greeks are getting a new meaning to Democracy after creating it; Portugal is getting a shocking awakening about what capitalism means, Portuguese people are getting where no one wants to be, a population losing its patience;  Ireland, can’t do much after it guaranteed all bank debts with taxpayers money, people in Ireland now have to live with a debt rope on their neck rope at risk rates that no country is capable of surviving; Italy is having its “Coming to Jesus” moment with rates that might prove unsustainable if they continue to increase,  the 450 level risk rate might put Italy a full risk; and last but not least Spain.
Well, well, Spain is different, still has its sun and gorgeous Swedish, Norwegians and other northern Europeans are buying real estate in the country like never before (no kidding), the sun still shines in Spain even if the banks go bust. Did I say bust and Spain in the same line? Yes, Spain is getting to the finish line of the nation busted contest.      

Europe has a tool they do not want to use for fear of the US, it is its single currency.
What Europe does not have is a single economic policy.
The Europeans step number one for its solution is to trash (devaluation is a solution to dissolution) their cherished Euro, if they can bring the price down around 30% to 50% int eh next 12 months, their internal growth will accelerate around 7% to 9 % annually in the first two years and have a chance to fix their underlining deficits, if they keep the Euro trading at a 40% premium, they are kidding themselves and they will bring 500 million people to the streets.
Read Schilling piece, and where it lies the real risks.

If you thought throwing out of power Saddam, Qaddafi and others in the Middle East was an act of liberation, for many in Europe their leaders are starting to look like those tyrants.

Never underestimate the power of the yayoflautas.
(a new word I learnt in the Spanish the social lexicom) 

When one must stop trusting what leaders say

We are at a point in the global economic supremacy game that all (good, less good, bad and really bad news) news are turned into a sociopathic make it positive spew.

The sad part is when the folks delivering the spew are those elected and appointed to tell at least the truth.

We can walk thru examples every single day, super Mario (Draghi) at the EU economic helm, as made a fool of himself by contradicting words against his actions. While saying Greece is OK, two weeks later the EU echelon where getting panicky calls from the US Fed and China’s central bank, and forced to tell the truth to them but the rest of the people, the ECB had to inject untold amounts of capital to the lenders of Greece, that continues to be rule by the same incompetents that worked the deal with Goldman Sachs, that cost them to tell the half truth about lying in the financial condition (and one has to correlate documentation) to join the EU.

Today, April 17 the headlines at some major online publications did not say a single word about the problem that a 6% interest rates in the 12 largest economy will affect the top 10 largest economy.

Not only the pernicious 6% debt service will destroy a generation of Spaniards, it will eventually cripple its neighbors and exporters. How big is the Spainish to matter to the rest of the economic world, a simple way to put in GDP terms it will be:

Spain=Belgium+Greece+Portugal+Ireland+Poland

in numbers looks like this:

1.5 trillion(S)= 0.469(B)+0.308(G)+0.228(P)+0.211(I)+0.470

1/10 of the US GDP.

Reality check, Spain matters and Spain is not alone in its troubles. What is unique is the cause of its troubles, if derivatives where the culprit in the US , Greece was falsifying numbers, Ireland lack of controls, Portugal slow growth due to structural autocracy, Iceland banks ran amock, Italy a submerged economy, England covered with financial instruments to provide impossible pensions, France with a debt service that continues to be hedged , Belgium with a internal political fracturing and large debt services, Germany a too lenient government towards financial institutions that have burdened tax payers for generations, the problems are unique and each country. Each country has a different degree of causation, rationalization and all have a serious economic problem that will last for generations.

All countries are privatizing their economies at rates larger than they have lost capacity to control it.

How do you translate Spain 6% interest rates into real and tangible socio-economic-impact, not in a pleasant way, it is going to get rough and rougher as months forces more and new fiscal restrains to trickle down to the people.

A quick review of present government policies to adjust to a 7.5-6% deficit or GDP or around $120 billion that Spain is looking to borrow this year.

20% cuts in education in one year. Try that at home.

50% cut in all government contracts (tell that to the tea party goers).

A 10 % reduction in all defense expending to less than 8% of GDP (The US has a carry-over of 48% across all departments involved).

The individual cuts are all over to list them in detail, but you get a gist of the quantification.

You might think this Spaniards do not pay taxes, wrong, if you think the IRS is intrusive try to escape taxes in Spain, if you belong to the taxed people (aka the 99%ers) you will place your butt every year for 30 minutes in front of an tax officer, and they check your taxes, and you will file what they tell you to file or else. Add to personal income taxes, as a cherry in the cake, a 18.5% flat tax in most consumer discretionary items a.k.a. VAT. So they do pay taxes and compliance is above 95% The other 5% represents a large amount of the 1 per centers using a the US like laws passed in Spain that allows large wealth to escape taxation.

So how much is that 6% not much, today, but you add it to the present debt service in monthly interest will add $1.2 billion for 2012, but $4.5 Billion 2013, and it explodes to $6.5 billion in 2014. All those interest need to come from raising taxes and more cuts. Considering the last employment legislation enacted in Spain, the central bank (Bank of Spain) is forecasting incomes to stay flat or be reduced for a core 68% of the population and for 21% to grow less than 2%, and for the rest 1% to grow 5%. Spain working force cannot sustain this interest rates growth without the rest of Europe feeling it.

Bottom line, Spain cannot grow or tax itself fast enough to get out of their rat hole. Spain has the potential to join and drag Italy and France into a “real” problem. In the mean time the IMF, the ECB chiefs all are in unison saying "the worse is over" once again and we are going to grow a whopping 3%. Where ?

Solutions are available, are all painful, none provides comfort to the 99% of the population. Will civil unrest be next in the agenda, if past economic extremes are any indication, the probability is low today, and increases every month that a new cut takes place and starts to affect more working people.

We are all Greeks

Black swans are flying, the big question is where they will land.

We know all about the optimistic talks taking place about the Greek debt negotiations.

To me, the present ¨all is good¨attitude is a sign to seriously worry.

SERIOUSLY.

Greece, as many small countries under the supervision of big countries, got out of hand and now needs a big spanking.

The problem is how hard this spanking needs to be to correct its bad behavior.

Today, I heard a father, until two years ago,employed in a large govermental entity, crying for food to feed his five kids.

Under fascist and later pseudo elected governments, the greek law makers and central bank machinists provided superior advantages to many citizens in Greece to live far beyong their means, and to a narrow band of its citizens incredible benefits for no work. In the process a few in the elite accumulated inimaginable personal wealth, a copy cat of the government induced class warfare American style. To top the ouzo cake they cooked the books like any well respected crook with power (not all cooks are crooks, nor all crooks are cooks).

This pernicious influence of malversing funds for self enrichement has created a social acceptance that percolates as easy thru Greek society as water does thru a tea filter.

Evading many of the basic social responsibilities of any civil society, are laking in Greece today. Paying taxes and fair minded pay for work rewards, are NOT accepted practices. Today Greece, Italy, Spain, Portugal, France, are not normal societies as a civil person imagines.

For many governments not paing its bills in a fair period say 90 days, has become normal practice, for local governments to keep employes working for months with no pay is normal. Thus young adults that are learning this behavior consider normal not to pay their bill for years, as I learned when I asked around. As an anecdote, I asked a small business person who continues to do work for a local government even if he does not get pay in twelve months, if he considers this payent delay a normal and healthy way of doing business, he answer was interesting, he thought it advantegeous for him becuase it makes it very diffult for others to compete in governments contracts, and he can do the work, also he does not fully pay his employees until the town pays him. As he said the employees come to work becuase eventually we all get paid. A very pernicious way to operate in society. He found this as normal as drinking water.

Many of present Greek social pratices have become laughing currency for comedians. In y opinion, for a good reason. Like, if you have enough money, your governement tax man will work for you, they will help you do not pay taxes, legally!!!

Who tells the truth!

Time as the truth teller!

Now that the truth about Greek book cooking its national debt is out, calculators cannot keep up running with the massive financial discrepancies encountered.

Here we have a country that was granted more than six billions euros in credit, and open more than 8 billion dollar of credit lines to build stadiums for the Olympic games, with full knowledge the Greek economy could not collect enough taxes to pay a third of the interest need it to cover the going forward costs of those bonds, let alone the principal amounts.

Who needs to pay, the borrower or the lender!

The borrower who does it with the understanding. I believe all those Harvard educated Greeks, must retain some knowledge from their days on elite schools, must have know that as borrowers they will have a difficult time to pay for the fun Olimpic party.

Or the lender who knows, if things get sour, eventually it will force the governement to fund any discrepancy with the borrower.

As the sour mash continued to ferment in Greece, money kept pouring into Greece as Ouzo in a weeding. The country continued expending and expanding, corruption keep growing, politicians and friends became very rich and people did see it.

To spalsh a little of hope to the populace, accounting practices advised by the best and brightest, gave a rosy picure of Greece, among those brilliant minds were global economic and investment policy consultants from Goldman Sachs, always magnificent and brilliant creators of cover ups for financial irregularities. Goldman did its deed for the Greeks and worked until the day of recokning arrived.

We should be glad Greece is a country with good mediterranean weather and many months of warmth, you will not need more than a tunic most of the year, so the emperor´s clothes if lost, should not be a big problem.

To spruce the good looks of the truth telling God´s who created such mess, beards and tunics can get a quick trim, we can give a power wash to Zeus and he will look like brand new, ready to toil for its 18 months of pay during a 12 month calendar year. Allt his without financial engineering, and no Gold man left behind.

Real bad numbers!

The financial numbers for Greece are real bad. Really.

Greece balance sheet cannot cope in any shape or form withe present paymentes. Even if the troika (German, French, FMI) forgave the present debt service, greece old debt service was already so large, still it would not be possible for greece to pay it back. Such immense mess was the reason why Greek central bank officials called upon Goldman Sacks to do the cover up job elegantly. Thus Greece could enter the EU and Goldman become the new Greek Central Bank.

For the past 30 years, Greece was barely covering up its debt service, for the past ten years the debt service is 25 times larger than 10 years ago.

All parties in present debt negotiations, have a strong self interest to get it right first, their banks hold most of the debt and the bail ot will go directly to them, and not the Greek governement.

At best, Greece will need to take 10 years of massive social distress, transfer the little they have to private banks, and suffer thru massive unployement until the national income is in line with countries of its caliber, in comparison to its neighbors Greece needs at least a 70% reduction in minimum wage pay.

Top that with the present revenue debacle, less than 20% of businesses are in compliance with their taxes, and most small businesses do not pay taxes, anthey prefer to bribe the local tax man than to pay taxes.

The pain is going to be similar to a hundred nail cruxifixion for most Greeks.

The next Greek governemet, the present impossed government by Germany France and the US will not do much to help most greeks, the next government should follow the play book of Iceland, let the bonds default.For Greece the pill also need to have a ¨get out of the eurozone¨ ingredient at least for next fiive years, inmediately devaluate their currency 80% and implement a massive tax collection reform.

The saddest story of the deficits and the real debt of Greece is that will have to put the country under massive social adjustments, that based on the nationalistic tones of the protests, a civil war should not be discounted.

Do Governments create jobs

In a single word, the answer is: yes.

In fact, good governments create good jobs.

The US with a superior educational system until the 80's hired very smart and able people to run tasks in its government that are complex and necessary for any society to function, in addition to operate at a global leadership level.

Still, today, the US government creates jobs, good jobs, but at a much smaller rate and in smaller fields of reach, like National Institute of Health or the National Science laboratories, and many other worthy entities, not yet destroyed.

When people get ticked-off about government overruns and other mismanagement blunders, what is left of the story is that those projects are outsourced to private companies, and politicians who scream the loudest about the blunder are the ones who allow those corporations to run amok and cover-up for them when the corporations rob the public treasure. Funny how hollow we are in reporting.

The National Institute of Heath, is a great example of government excellence. The VA Hospital system, maybe the best government run health system in the world, until politicians started to eliminate benefits for bounded veterans and its families, by under funding the VA system. So much for pandering to soldiers, chant them as heroes in all campaign speeches and forget about them when they wounded or in need help.

As politicians legislated and destroyed -by outsourcing government functions- jobs, the quality and decline of the educational system followed step by step.

You can thank for the destruction of social quality, now claimed to be some kind of worthy philosophy, Reaganomics. What this philosophy is, it is a bunch of propagated social fallacies, accepted in the politicians -democrats and republicans- corporatocracy rules of politics, that they claim to create healthy economics by each president since Ronald Reagan; nothing is more of lie. None of the two parties escape the big lies, democrats and republicans are as false as their ideas. Today, more radicalized advocates for smaller role of government are louder and more efficient. The problem with the idea is that it misses some components, that is, smaller is OK but it should also include smarter and competitive and well remunerated.

The advocates of the Reaganomics philosophy think that by eliminating government, the interstate highway system will be pay by Nebraskans or Okies, who received from the central government -they want to eliminate more than 20% of their unfair share of taxes- so they can have highways worth of riding, maybe they prefer to go back to dirt roads and schools with no heat, and educate kids only until 11 grade. One has to wonder what kind of screamers are those!

Political demagogues have grown their radicalism to extremes that are unhealthy, to have a healthy country. If a new debate and some strong positions are not taken, been ranked 29 in education worldwide will be an achievement and the ride towards lower quality so far is guaranteed.

The US started to destroy its educational system with President Reagan, today we have politicians with ridiculous demagoguery, the include statements such as the elimination of the US Department of Education. I assume its substitute will the department of idiots. Those screaming the elimination of central agencies, what they are saying is something much different. What they cry is about is simple, get rid of the people who do not look like me, if what it takes is falling behind as a country, who cares we are still "number one", the question is at what "we are number one"?

Bomb throwing and war mongering for sure.

One More Year, Lower Illusions

Since my last post, politicians keep doing their damage and keep fighting to the podium that awards the price of who is more conservative and destructive to America.

Bankers keep their robbers inside their combination safe and those who do not fit inside where sent to be employed in government posts.

Working people have lost another 3.5% of income, but the top 1% has gained 4.7%.

The level of employment has been nil, mostly the statistical reporting continues to "cook and bake" the data to make it look "decent", albeit its indecency.

Elected officials continue to borrow like drunk sailors, and the tea party goers seem to have stop drinking tea but keep enjoying their fallacies and delusions.

Obama has proven to himself a failure, he now admits he could become a one-termer president. He understands his lauded promises turned out so far to be nothing, empty rhetoric like his predecessor, proven to be "same old, same old", in fact it seems many now think president Obama has managed to improve his predecessor incompetence.

Two books appeared this year with the same title "Aftershock" one from former secretary of labor Mr. Reich and the other by economists Wiedemer's brothers, both worth reading.

Overall nothing has change.

If there is one book for your 2012 list consider Prof. Jeffrey Sachs latest "The Price of Civilization" he does not take a political stance, the book is a wake-up call via in-depth analysis of the state of the country, offering solutions to complex problems.

The Creation of Lawless People

Every time a law takes effect a behavior or action becomes forbidden and penalized.

We have forgotten that laws are not the solution to bad behaviors or bad actors.

Good education and direct responsibility are components of a respectful and evolving society, that intents to be better tomorrow that it is today.

Among the many human deficiencies is the deviation of greed one of the most dangerous character flaw.

It does seem greed it is one deficiency in character that it has become impossible to teach, or we have become callous about the need to be corrected.

It is interesting that most religions have some form of fix for character flaws.

One fix for this fault in most religions is a form of the following core statement:

"don't do unto others what you don't want do to you"

The amazing part about religions forming such thought, as a core thought, is the important part that takes place as an allegiance to the group.

If the religious groups will concentrate in following that simple idea and act upon it, greed will be eliminated.

Thus, due to the society present situation it will be fair to say that religions have fail most people. The consequences of covering-up and clouding arguments around the core, justifying what is convenient to justify, does not comply with such core believe. It is understood in all religions that it is the spirit of the letter what matters not the letter itself.

Today, it has become the most common approach to justify why is difficult to accomplish religious core believes.

The fact is that it is not easy to be a good faithful believer; the disturbing part is that no effort is been put in getting near the thought or the education that takes to be a believer of core believes.

More effort is put in justifying why "Thou should not kill" is better to be debated with its present caveats than its initial intent of respect for all life.

When money enters the process it seems that believers lose sight and money surpass all core believes, bulk majority set aside the core ideas of their believe in favor of greed for money. Money and its justifications has corrupted their religious believe system.

At present time, we are incapable of handling money without corrupting their own believe thought process.

Thus let's the conversation be not about convenient caveats but about the spirit of the letter.

Here We Go!

Up, down and here we go again.

The financial system is proven to be corrupted at its core, anywhere you look there is deception and government intervention to support with tax payers money institutions that are unwilling to confront their own inefficacies and misplaced purpose.

It is not that we do not know how to fix it. It is the greed of policy makers that is not allowing laws and decisions to correct the deficiencies of the financial system to be put in place.

Here the danger is the continues build up of wealth inequality. While tax payers get stripped of the assets to be directed to those int eh financial industry, the industry leaders continue to collect obscene amount of money for false and poor performance. Here is were the board of directors have proven to be allies of the problem, all regulatory entities have failed to take steps to put investors as owners with direct or indirect power to control corporate leaders abuses and deceptive practices driven (now clear) to self enrichment and failing their corporate duties.

As of late we have learn that Mr. Bernanke is an expert at tracking equities, and he values equities values as meter of his performance. See ABC interview last week.

Thanks to free cash provided to financial institutions, institutions that should be allowed to fail, the carry trade allowed by the fed and the treasury department is creating a monster of leverage.

If the Lehman and Bear Hedge funds collapse were the trigger of the past round of financial ineptitude, the present carry trade and governments push to create inflation has the potential to create the mother of all financial disasters. As they continue to deceit the rest of us, their assymetric knowledge is not as superior as they think.

What it came is not gone!!!!

Seven months since last post, no reason for such long leap.
After the economic debacle I continue to wonder why there is not will to tackle the obvious systemic problems build in the system and reduce risk of next economic failure.
The economic policies are broken and there is more will to pilfering than to fixing it by politicos, who dip in the cookie jar as soon as they can, and still they will get reelected at a ratio of 95%.
I might take another seven months to wonder....

Money sinners in 2008, same old, same old and two good advices

If hell exists and if some are fearful of going to be dammed in eternity, it seems that it misses the point with some of the “experts” that distribute ideas via the talking tube.
Let’s start by the outright liars of 2008, who happen to be the same of 2007 and I am confident they will be the same of 2009.
First the officials, those who are running the show:
The grand prize of misrepresentation and outright lies goes to Fed Chief Greenspan. It took a Congressional hearing for him to accept error. His following act Chief Bernanke is not doing better.
Chief Bernanke blunders with the economic status of the country and continued assertions of "everything is fine" until he got tomatoes thrown at him and had Cramer –also a sinner- screaming like a maniac, it was too late for the economic meltdown and actions to be put in place.
The Secretaries of the Treasury in unison were also big time sinners. The prize has to go back to the pernicious views of Robert Rubin who castrated any regulation with the help of the Senators from New York Schumer and Clinton. This triumvirate set the political doing for the present fiasco.
Secretary Paulson needs to get the prize for "idiocy in economics and purposeful erroneous public statements". The Secretary got caught in so many blunders that had to beg the Chinese and the Saudi clan every other week for a bail-out of the treasury debt, while telling everybody and Congress that he did not see any sign of distress in the economy. While the Secretary had his counter part saying the opposite! Bloomberg news found Mr. Paulson irrational talks funny; to the extent of creating headlines that were incomprehensible.

To the guy with the sign “the buck stops here”, well, no comment, I leave that one to your own assessment.

Big air heads with fancy titles in the talking tube:

Again the “you better ignore him or else” prize, for the past decade and for the next decade goes to the king of misinformation and intention to misrepresent the reality goes to: Lawrence Kudlow of MSNBC.
I am really sad for Kudlow and for having to live a life so full of air and deception to accumulate personal wealth at the expense of the less powerful.
Kudlow is the ultimate insider, whom benefits from others misinformation, he shows it every night. The power of deception in Kudlow’s TV show has no parallel.
Be careful about following Kudlow’s or his buddies forecasts, the probability of been is wrong is almost assured, not because they are not trained or uneducated, but because they are demagogues above anything else.

Cramer is the next in winning the “be careful how you interpret me” prize.
I like Cramer rants, he is sometimes too darn right that one has to wonder if it is his sanity or insanity talking.
The danger with listening to Cramer is that he needs to run a TV show and telling the truth will not gain him access to the people ne needs to get his business going. Cramer has the problem of "the happy herd" mentality, if Kudlow is goldilocks economy, Cramer is "there is bull market somewhere" . Cramer is is afraid the herd will disband if he cries wolf. If things are bad Cramer has the tendency to say is ok to keep saying something even if he is wrong. Think of the show as entertainment with the same purpose of any other TV show, that is to get you watching not matter the content.

To start the New Year after all the bail-outs etc., if you think this is not going to affect you, just wait and see.
So worry a lot about your own comfort level, and start to question how much you have been put to task with your future, and ask of your elected official’s questions, you might find the answers beneficial to have a better plan in 2010.

Now my personal and two best wealth building ideas of the next years:

First listen to a few honest people like Profesor Nouriel Roubini, economist Peter Shiff’s, and the foudner of Vanguard funds John C. Bogel forecasts and opinions. Over the years this trio are shown to be honest and truthful.

Second, be aware of all you buy, put your money to work with america. STrategy is to buy only if it is all “Made in the US” and your all staples should come from less than 100 miles radius from where you live.

If by the end of 2009 you have not save money versus 2008 and help your fellow citizens, throw me a note and tell me why you think it did not work.

Prosperous 2009 !!!!

Ponzi Schemes and Other Dreams of Fortune

Mr. Madoff has brought to the forefront, again, the sad reality on which the present regulatory and investment ethics are grounded, and teh sad acceptance by all.
If you think nothing can be done, I suggest you write a note with your feelings to the Senate Banking Committee.

Express to your elected officials a yawn, yeah or nay, for tough regulatory environment. Either way, let regulators know what you think of the present situation, at this point your opinion counts, amid the flagrant set of scandals they want to hear do people care or it is just another short memory whiohc people will forget.

Let’s give credit to Mr. Madoff.

It was himself who tipped his family and senior employee of the charade. No a single regulatory agency got even a whim of what was cooking, they were to busy covering up the “real” banks schemes.
Do not forget to send a kick in the butt to the SEC for failing to recognize most of the investment and bank practices are no dissimilar to Mr. Madoff scheme. Intentionally, I used the word scheme with pure intent as way to deceive others.
If Mr. Madoff is going to go to jail, thus, the same should occur to the rest of schemers in the banking industry. Those banks receiving billions of dollars in tax payers money are much not different, they too would have collapsed as Mr. Madoff scheme.
Government has failed to investors, citizens and the country. Elected officials continue to fail to stop tax payer’s money use in the cover-ups, from the bank industry too many obscure financial industry pyramid schemes.

The big difference here is that one is operating under the umbrella of regulation and this is only 20% as recognized by the SEC, and 80% is unregulated in many forms of schemes.

Mr. Madoff major case against him is that he ran and unregulated operations, the same were SWAP and many CDOS and off the books operations in most banks and investment houses around the country.

We only have a solution that is to replace in mass all head regulators for failing at their jobs. That must include the Federal Reserve chairman whom was a proponent of such unregulated instruments.
When you fail to discipline you end up with self-destruction and that is not a good path to follow.

We all have dreams of fortune.
It has become so prevalent to scam around investments that it is an ethical stand that is perceived as acceptable and to some extend considered as part of the “process” to the leaders of the country.
The latest research conducted at major universities from where the next generation of leaders will come such as Harvard, Yale and other Ivy League schools shows that we are in ethical trouble.
The latest study shows that most MBA graduates are willing to comprise their ethics for money. When money is so easy to take from others in a questionable and illegal way and the penalty is so lame, the risk-reward ratio is tilted towards the unethical. Who is going to take the task of reeducating and creating tough white collar penalties for people who affect social well been.

How Much Golden Garbage Do We Have?

So far bank and governments have bail out executive bonuses, golden parachutes, end of the year bonuses, but hey have left holding the bag to around 6,000,000 families.

The problem with the present situation and all the talk about recession and probably depression is that a massive amount of money has been redistributed from most people to a few using a system of wealth transfer that is based in ideological falsehoods.

How much financial garbage needs to be dumped to the always trusting and always unsuspecting citizen.
The math is quiet simple the governments around the planet allowed financial institutions to move out of their books trillions of dollar financial garbage in the form of products that were called investment s to a rate of 32 times the actual asset value of the investment.
So far we have siphoned around $6 trillion to $10 Trillion into banks and other institutions and the stock markets around the planet have eliminated around $32 Trillion of wealth. So how much more is left?
The answer common answer these days is: unknown the amount of leverage left in the system.
I think I have an answer based in the amount of financial garbage “exports” generated as part of the profits reported by Wall Street firms.
The magic number lay between $210 trillion to $250 trillion, so far of that amount 35% is consider to be “toxic” in other words worthless no even to profit as garbage dump, the rest has three components, and have been performing so far. First, is considered prime government debt obligations –here is where you are expected to pay your taxes to pay the bondholders-. Second, corporate operating debt –here is where workers are expected to work for less to pay bondholders. Third, is your mortgage and other consumer debt – here is where you are expected to pay your mortgage and credit cards as you have been doing all you life.
The scary Halloween components of such debt are the toxic part, so far we have only clean up around 20% of the considered toxic. We have around $22 to $25 trillion of garbage to clean up, basically the wealth accumulation of the country for the next 50 years or so as long as we do not get more in debt, in that case the USA will have to default on its debt obligations and more serious global disaster will occur. No a likely event in the next 20 years but a very probable event after that, unless a massive program of government intervention takes place around the planet.
Who in heavens would have ever thought that the right wing of the conservative party under Bush Jr. will make the global economic situation evolve into a massive interventionism that will create the largest socialization of the economy?

It started by the federal government under the auspices of the financial lending lobby, and continue with banking lobby to permit leverage of those assets more than the 12 times that the law had on the books and allowed to increased to 32 times leverage. Today there is not a single government in the planet who is not in the brink of disaster thanks to the control by lobby and the elected official’s lack of independence.

Selling Golden Garbage

How so many smart Ph.D.s MBAs and government institutions failed to control the amount of financial garbage sold to the public., destroying people's futures and pensions.
The answer is no simple, but the intentions are, the main intention was to create something that will generate commission thus bottom line profits from which those paid for running those outfits will get billions of dollars in pay.
Thus the answer is greed. Because greed is good for those who can have access to the money of people’s pensions assets, offered by the managers of those pensions, who usually are golf buddies of the sellers of financial garbage.
Here where is lies the problem to the potpourri of obsolete controls. When humans are left to run amok the results are obvious, they can range from plain thievery to noble laureates creating untested theories that can be catastrophic for the rest of society.

When Milton Freedman the economist Nobel Laureate in the 1950’s from the school of Chicago economics, started to launch his theories it took its laureate status for schools to start to teach the premises of government regulation was bad, and the market will be self-regulation mechanism will correct themselves. The problem is that both premises cannot work without allowing destruction and there is not will to allow destruction of capital when affect those who are the wealthiest and control 80% of the national assets of a country. Much less when there is no economic security for very large part of the population. Specially, for those who are over their productive life, most people after age above 65 to 70 is a very difficult endeavor to earn a decent living. When the Freidman theories are apply to society at large they fail to account for very large part of the population as variables. Politically they are theories that are easy to manipulate and create thriving fallacies that seem to be of pleasant tone fueling the need for greed.

Today, we are confronted with a massive privatization of risk driven under the Friedman economic theories, has made the speculative market a large part of the economic global structure, this risk pervasiveness is proving toe be pernicious to human lives and pursue of a society well-being at large and individual’s social development.

The solution is quiet simple, as Freidman pointed out let the consequences of greed be dire and stop the government intervention. Politics of convenience have allow Freidman be use when usurpation of wealth participation is convenient but stop the full application of the theory when is not.

It begs the question, why in heavens you want to elect politicians who are constantly working against your economic interests?

Where are we going

Without speculating much and looking at the sequence of present events, surrounding America’s foreign policy and its stand in the global market of power, one has to worry, seriously, worry about the present and future.

Most western countries have develop a culture that has eliminated ingredients to foster debate and dissent, to support a social format that support a class system that is probing to have more cracks than the present obvious crisis.

America has lost its capacity to foster varied views and debates and has entrenched itself in a very narrow set of views, this views are becoming every passing day more evident out of synch with the needs of most Americans.

There is not debate about the present standing of a America. It is an important piece of conversation to have a national level, for all Americans. Out the radical view it is America’s way or the highway, that was true ten years ago. Now it is no more a feasible and true view of acting, the marines cannot bring more contract to Boeing as they used to, of to Chiquita Banana a new banana republic with a corrupt dictator in charge to exploit the local assets to be brought back to America‘s shareholders and corporate bosses. The Chinese, The Russian, most of the European Union and in some cases the African union, are acting that indicates America power is not absolute anymore and needs to be share in all aspects. So far they have chosen to use the power of capitalism to put the brake on the United States, as the Chinese did with the bond market of the European Union with they currency policy, or Latin America asserting equal trade conditions and renegotiating past (most Latin American leaders agree to qualify those contracts as abusive) corporate contracts to exploit their natural resources.

In the eyes of citizens of the rest of the planet, there is a consistent view of disapproval of America.
It used to be that the populist line was “everybody complaints about America, but all want to come to America” that was true until ten years ago, now what we are seen is a major shift, mostly due to economic equality. As an example, the minimum wage in Portugal is 30% higher than in the US, and in Portugal with the minimum wage a family of two can be above poverty level, and afford a decent way of live, in the US with minimum wage you will need both members of the family to work and still be under pauper conditions. Those are hard facts and the adjustment is spreading to most Americans, and it is not been accepted as a new way of life.
Among leaders of the same people who disapprove of America present standards, there is consensus of approval, but it is for a very different reason.
Each country has a reason to go against the will of their own citizens, the most interesting is the present position of England. The English government continues to be label by Britons as a lap dog of the Americans, but there is more behind scenes that the eye can see.
British ruling class by aligning themselves, what it seems to many blindly, with America, they are actually doing something much more important. British rules are asserting their economic power in the form of a new renaissance of English colonialism, by accumulating political favors. Those favors are getting cash-out in the form of corporate favoritism and American military support to expand corporate penetration in countries in which England can exert very little influence by themselves, but they can assert and obtain trade preferences by using America’s military and in many cases dictator rules under the control of America’s protection. The list of those countries is large but the most important are those that separated from the former Soviet Union.
Other countries like China are using their fast gained economic power to assert preferential market access.

There must be a national debate about how to confront the next years in a world that is changing their economic structures from energy to currency formations and technological development. America’s ruling class is failing to bring American citizens to a higher level of competitive advantage and the price to pay is going to be dear and painful.

Liars, their lies and those who help them propagate

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080602&id=8712024

I open my news service I was confronted by headline that strikes “again” as the mulling of reality.
The head line read: “Paulson committed to dollar as reserve currency.”
It is true that the American Secretary of the Treasury is committed to have the dollar as reserve currency. I do not think that if the American Secretary was not committed to our dollar he might be suggesting switching to a stronger currency. This headline is the natural and poor reporting that the Reuters has to offer, but it has a deeper meaning, that is Reuters has choose to be a propaganda outlet to distribute so called news. No one with a straight face will put his or her name in such headline.
Any person will immediately recognize Paulson as the Secretary of the US Treasury and Ex-CEO of Goldman Sachs, also known for missing the mark and outright lying in a consistent basis and misinforming the people that granted his job.
The intent here of the editor clearly was to minimize the meaning of Paulson as Secretary of the Treasury and make the name to be some kind of abstract entity that chooses to make statements of profound meaning and solid.
By now, we know that Paulson is a crony elitist CEO for whom American citizens and well been is a peripheral thought part of the benign neo-fascist movement, that has arose in the past 30 years in the USA. Strong statements but the facts and situations we are living totally fit the definition.
Paulson and the media which provides the propaganda is very similar to any other benign fascist process in history. This is a natural evolution in America, by a large majority more American are more comfortable with pseudo-fascism that they are with a working Democracy. You can call any political ruling system anything you please and loudly defined, but the real measure is the inner workings of the system and how it affects the citizens under the system. Paulson like others whom are promoters of benign fascism are comfortable lying and manipulating the facts.

If you have not heard

*-If you have not heard we are in a recession.
*-If you have not heard 84% of Americans believe fairy tales are facts.
*-If you have not heard the cost of the cheapest 4 year college degree with room at board and related expenses is at $80K and climbing.
*-If you have not heard we do not have poor in America we have “Low Food Intake Families” in other words families in famine.
*-If you have not heard we have more than 10 million families in low food intake category.
*-If you have not heard the president’s approval ratings is at the lowest ever record.
*-If you have not heard 1 in every 32 Americans will file for bankruptcy in the period 2007-2010.
*-If you have not heard America is the only developed country that does not provide alternatives for Universal medical coverage.
*-If you have not heard the average savings rate is a negative 5%.
*-If you have not heard the Defense Department failed again to pass the most basic auditing of its accounts.
*-If you have not heard the war in Iraq costs $750 Billion and by some accounts can reach up to $2 Trillion by 2010, that is $61,500 per citizen.
*-If you have not heard Communist China owns more US debt than any other country in the planet.
*-If you have not heard Communist China has a total of $1.2 Trillion in US Treasury Debt and they receive $3.000 in interest per American citizen per year.
*-If you have not heard The US is the second to last of developed countries in Health Care development.
*-If you have not heard college graduates will have to pay debt for their schooling for more than 15 years.
*-If you have not heard minimum wage in America now is earned by more workers than ever in history, said, the working poor are the largest growing group.
*-If you have not heard 62% of all tax received by the IRS is spent by the federal government in military or pseudo military expenditures.
*-If you have not heard the federal government has cut spending in research and consumer protection by 92% in the last 15 years.
*-If you have not heard has failed to comply with 67% of its international agreements signed in the past 20 years.
*-If you have not heard, you better start pay to pay real attention.

Professor Elizabeth Warren

The Author of "The Income Trap" was the Jefferson Lecture in 2007.
The research presents what many knew already, we are in going in the wrong direction, it is something that has occurred in the past 30 years and we hare choosing to ignore at our own peril.
This lecture is a must share item with friends family and no politico should scape from the facts presented.

Here We Are! Now, What?

If you had read my posts in the past, I had postulated a view stating the present disaster was coming.
The labor department and the USDA, stated that more than 23 Million Americans are in need of Food stamps to be able to have a poor meal.
If you think that famine is not possible in America, you are not seen what is happening around you. It is not OK to be blind for political or philosophical reasons.
When people in Argentina started to die of famine was a disgrace for the country that was in 2003.Here we are 6 years later in America we are setting the seeds of famine. You might negated but you will read, that is not an arrogant forecast it is a reality that is happening around you.

The present government has brought down America supremacy in many areas. The most important one is the economic supremacy, today the financial system is been saved by foreign debt, that is floated in open markets, those markets want their coupons, so this time is different. The lenders will do two things: one ask for the interest the other is to demand the few assets left and a currency that at the present cannot compete globally.

It is sad but it is true.

Liars and the Liars Den

As I watched Secretary Paulson today describe the present economic crisis, I said to myself, he is not only full of it, but he was lying beyond the acceptable level for the last six months.
What is the difference today versus six months ago.
Simple, six months ago it was a sotto vocce agreement among big bankers that all involved will find ways to pump and dump their mess into the global markets.
What they -by they I meand The Fed, banks and politicos- have encounter is a disproportionate abuse of trust and greed that goes beyong any one acceptable actitude. This is the result of a corrupt set of values that assume that you can foul the people all the time. They might be right but th truth is catching up with them, but most people are not swilling to hold them accountable for thir lack of values.
This recession now is starting to evolve, some think we might find a worse situation going forward.
The facts all indicate that the US has lost its economic supremacy, and its social supremacy, and the only supremacy left is the military supremacy, and to conitunue this supremacy, it must generate enough business, as of today is not generating enough business to sustain the large expenditures to mantain such large amount of dollars need it to keep going in debt to levels that taxes cannot mantain.

Unless policy makers decide tocome up with a major shift in the economic paradigm. For example a shift in energy generation, we are so far behind in the solar and wind generation technology, that by implementing a national R&D ten year plan, to regaign leadeship in technology and energy it will be extremely difficult to compete in standard industry development with China, India and in the twenty years with Africa.

Report: Americans getting poorer

Report: Americans getting poorer
In a new analysis of after-tax income, the United States ranks 15th among the world's richest countries. But wage comparisons for 'average workers' are tricky.

By Christian Science Monitor
"Comparisons are odious," that is, hateful, according to a popular phrase about seven centuries old. Comparison, however, is one of the tasks assigned to the Organization for Economic Cooperation and Development, an international body of 30 of the richest countries. It tries to compare its members' economic and social data, a difficult, perhaps even odious, job.

Sometime back it broadened statistically (for comparison purposes) the definition of the average workers in its member nations while trying to examine relative tax burdens. The result was "monumental," reckons Jacob Kirkegaard, an economist at the Peterson Institute for International Economics.

The OECD ranked the after-tax income of the average worker in the United States as 15th among its member nations. The richest middle class, if measured in terms of the purchasing power of its income, was in Britain.

Video: Do Americans work hard enough?

That ranking would surprise most Americans, who likely consider their nation the most prosperous in the world.

In one fell swoop, OECD statisticians lowered the estimated income of the average American worker by more than 10% and raised average incomes of other rich nations by as much as 30%, notes Kirkegaard.

It may well be that the comparative U.S. standard of living is slipping. The price of oil has risen more dramatically in the United States than in other nations because of the dollar's large devaluation. The reason for the drop is also statistical. In the past, the OECD had been using a proxy for the middle class based on the "average production worker." This concept focused on full-time workers in the relatively declining manufacturing sector, which tends to be unionized in the United States and better paid on average. The OECD's new measure is based on the "average worker," which captures all sorts of private-sector jobs in mining, utilities, construction, retail, hotels, restaurants, financial services, real estate and other areas.

So this new system ought to provide a fairer comparison.

But 15th place?

Not likely, figures David Grubb, an OECD economist in Paris. He points out that the United States and Canada included in their statistics sent to Paris the wages of nonsupervisory workers -- and not those of higher paid supervisory workers and salaried professionals. When that statistical difference is corrected, the rank of the American middle class would move up from 15th. How far is uncertain.

Continued: Wages vs. income

In the newest OECD Economic Outlook, the average annual wage in the total economy of the United States was $45,563 for 2005. That's exceeded only by Luxembourg, a wealthy banking duchy, with $50,634. Britain, Ireland and Australia are not far behind the United States with incomes above $40,000.

The problem is that this is a measure of total wages, not just the middle class, and it includes the richest Americans whose incomes have risen enormously in recent years. Outside of Hungary, the United States has the most extreme income inequality in the OECD.

Video: Does money buy happiness?
Kirkegaard figures middle- and lower-income Americans are being squeezed by the flood of money going to the superwealthy. Democrats in Congress have the same view, and their tax proposals would shift the tax burden up the income ladder.

Wages vs. income
After the early 1990s, the incomes of "very well-off Americans increased much faster than those of both the middle class and the poor," figures Gary Burtless, an expert at the Brookings Institution in Washington.

For example, top corporate officers got pay increases of 9.5% a year in the 1990s, on top of high levels to start with.

This doesn't mean that Middle America incomes have been entirely flat. An analysis by Terry Fitzgerald, an economist at the Federal Reserve Bank of Minneapolis, concludes that a "broad swath of Middle America experienced notable hourly wage gains" since 1975. In other words, children can still assume they have a better living standard, on average, than their parents did. To reach that conclusion, Fitzger­ald had to disentangle a "confusing web of data." Two data series on individual hourly wage rates showed little, or even negative, growth over the past 30 years. But labor income for the entire national economy was shown to have grown 39% in that time span.

To square this apparent contradiction, Fitzgerald applied to the two wage series a broader price index (personal-consumption expenditures), which covers the basket of final goods and services that people consume each year.

The new result: Average hourly earnings rose 10%, rather than declining 4%, from 1975 to 2005. Median hourly wages also rose 20% rather than 12%. Then he factored fringe benefits into the wage calculation, since they have become increasingly expensive and "contribute to workers' well-being."

That combination accounted for 28% of the 39% growth of total labor income.

"This does not contradict the claim that wage inequality increased over this period -- it did," writes Fitzgerald in a bank publication. In other words, the rich are still getting proportionately richer.

This article was reported and written by David R. Francis for The Christian Science Monitor.

The Surprising Ignorant Class

As of January of 2007, it was obvious for most people who pay a little attention, the stock markets and debt market had something amiss. When bonds fund specializing in collateral debt packages with 6% to 8% yields are paying 30% to its investors, something does not add up, the math does not add up, the risk taken does not add up, and the ratings companies overrated the products in purpose, as we know today.
There is no need of a Ph.D. in economics to realize something is not straight.
To obtain those results superfluous risks were taking and all CEO’s and top management at major leading financial institutions were accomplices and enablers of the big con on the people. To add INRI at this problem the so call self-regulators justified the creation of so called “hybrid investments” for decades every single time we create the golden goose is all the old con of the pyramid and when the pyramid it falls, poor Ponzy schemers look like saints.
After their con gets discovered we realized who was on it, lets start by the Chairman of the federal reserve whom “we have no signs of the housing market affecting the financial markets’ or “our banking institutions are strong” that what they say in June thru August, Now in September after it was clear they could not hide behind their false statements and Congress decided to have hearings int eh subject – can you imagine for congress to arrive to have hearings and the fed is deaf- the federal reserve and the Secretary of the Treasury –ex-Ceo of Goldman Sachs, and part of the big con- continued to deny any contagion from the housing debacle to the financial markets, in the mean time, behind the scenes the Treasury was having frantic meetings with major banks trying to figure out how to resolve this debacle.
If you had picked Trades magazine in April/ May 2007 edition, the front page was about the bonanza that these hedge funds and other hybrid investments did for 25 year olds, show them making hundreds of millions of dollars using “unregulated techniques”. Well, those hundreds of millions have to come from somewhere they do not get made out of thin air.
The sad part of the history is that as any other abusive operation it came from the most vulnerable, mostly from pension funds of municipal workers, teachers, basically anyone with a pension public or private. That is the sad part. In this story there is not much good to tell.

As long as most people pay taxes the government decides so create a supra welfare package to bail out all those heroes of the financial markets. Remember while these shenanigans are going on, kids are going to schools with not heat and bridges are failing in major cities and more than 90 millions Americans are under covered for medical ailments.
One has to wonder if the loss of people’s will to protest has created a new submissive slave society that refuses to evolve.

Who Are The Stock Market Manipulators

As I wrote in the past, the bias is to keep the wheel of fortune spinning, it does not matter where it falls, the manipulator does not care, the idea is to keep it "all pink all the time."
Pink benefits them and makes those holding stocks feel pink. Their happiness it exposes them to a meager return of annualized 7% including dividends - as reported by Standard and Poor.
All is done using substantial amount of risk. Those risks shifts depending when you have to buy and sell stocks, and how much leverage those pools of pension money need to re float with extra leverage -thus increased risk.
The market operators have become extraordinary good at controlling public opinion and governments around the globe. Manipulators are confident -some say arrogant- to keep demanding the elimination of government guaranteed pensions, thus the risk is shifted to the individuals via “privatized pensions funds”, in other words they get people’s money to buy baseless assets. Thus a de facto transfer wealth towards those who control the access to debt and again sell back their liabilities to the pension pools.

The list of manipulators is short enough that can be compiled in one page.
To have an example how a market can be moved here is a press release on April 4 2007, that might offer some light.

“The indices are trading slightly higher midday as investors weigh more relief in the Middle East, a subsequent decline in oil prices, and upbeat analyst commentary against weak economic data.
The biggest headline today has been Iranian President Ahmadinejad announcing the release of the 15 British naval personnel captured nearly two weeks ago. The news has improved overall sentiment and pushed oil prices lower. However, given yesterday's sizable gains amid a lack of overwhelming news to support such a rally, it hasn't been overly surprising to see some hesitation on the part of buyers.
In fact, if it weren't for a 2.0% surge on the Nasdaq's most influential constituent and the third most heavily-weighted stock on the S&P 500 -- Microsoft (MSFT 28.43 +0.56), the indices would be exhibiting more noticeable consolidation. The Dow component is getting a boost after a Citigroup analyst raised his Q3 earnings estimates.”
In this case a major bank as Citigroup also one of the largest pools of pensions, issues a comments, that can be or not, but because it has under management and receives every day enough pension money to move the stock with a comments, not a fact.
As simplistic as it might sound there are some important mechanics behind issuing opinions with baseless facts.
If Citigroup knows that Microsoft is going to increase earnings, why do they need to tell the planet? Self interest? It can be broken down in two: one is sending a message to all other pension funds saying, we are not selling, for now; second to its fund mangers: reduce your selling of the stock. You might wonder why they do not send an email to all their fund managers, and keep it quiet having asymmetric advantage.
Well, that will have cross some many countries and at least thousands of fund managers that it will be a de facto stock manipulation. Because Microsoft float of share is so large it is easier to send the message in the open saying we are not selling, what about you?
Still this is an opinion that affects millions of people and around five trillion dollars worth of market capitalization.
That how big a comment like this is.

Stocks The Biggest Casino in Human History

As you hear the news and you might get the feeling that you are getting some part of the truth about the underlining rational why stocks go up or down.

The answer is not simple. It can be summarize in two parts one is the transfer of wealth from the poor towards those with the access to large sums of borrowing, this is a new and extremely sophisticated class warfare, that can be see as the super-wealth taking advantage of the rest of the population. Second, linked to the first is the shift of risk from government responsibilities to the unprepared workers. Pension allocations is the primary driver of stocks prices second is the speculators from hedge funds that work for all major banks.
If you pay attention fear is the number one driver of news. Second is the building on the sense of wealth by using the power of central banks to create interest rates that will re-allocate the value of assets, as the wealth effect create by home value increases, with no underlining reason other than cheap borrowing costs. The dichotomy of fear and wealth creates uncertainty and the need for personal assessment of savings and pension risks.
Imagine if two and half billion people will give you for the next thirty years the present average of $290 a year and you can keep at least .5% of that money as custodian. No a bad deal, and it gets better. It does not matter what happen to the actual returns and performance of that money your cut stays the same.

Clearly, this “all is good” creates a bias and that is to keep the money flowing and people believing the downside needs to keep growing like a pyramid scheme you need money flowing in to absorb the all those fees accumulated over the movement of the money from fund a to b and the rotation keeps the grease and those manager multimillion dollar salaries alive. If you wonder why all the financial news are biased in the optimistic the reason is simple they want your money.
If you think about why stocks should be sold above any other asset, well that is the dirty secret, they do not need, but the are enough suckers to keep the game alive, and the use of the free capital rhetoric is not other than taking the pension of other people and place it into stocks does not matter if those stocks any intrinsic worth.

I think that it will be interesting to address some of the fallacies and talking points that the talking heads use when they talk about stocks and other risk investments.

Part of the same process is the boom and boost process that occurs every four or five years in the prices of stocks and other assets as real estate. I leave that for a future commentary.

The big question is what one should do to have a more stable system. It is not hat easy anymore, but there are action that you can take and one is to find people in your community that care about their future and are concern about the risk that the present system represents.

Can the same Occur in Other Countries!

Calpers Pressed to Drop Iran `Terrorism' Investments
By Alison Fitzgerald
March 19 (Bloomberg) -- California lawmakers are considering legislation that would force state pension funds to sell billions of dollars of shares in companies doing business with Iran.
The California Public Employees' Retirement System, the largest U.S. pension fund, and the state teachers' fund would have to unload shares in companies including BNP Paribas of France, Siemens AG of Germany and Eni SpA of Italy.
``Who's funding terrorism? It sure as hell shouldn't be our public employees,'' said Joel Anderson, a Republican assemblyman from El Cajon who introduced the measure. ``When you're looking at the war on terrorists, this is one of the best weapons we have -- just defunding them.'' Anderson estimated his legislation would affect $24 billion worth of investments.
California, which last year directed state pension funds to drop investments in Sudan, is among a growing number of U.S. states, from Texas to Maryland to New Jersey, moving to embrace so-called ``terror-free'' investing.
The movement, which includes federal legislation, against nations the State Department says sponsor terrorism, may put public pension managers in a front-line role in a debate over international policy. Some critics say the effort is misguided and would hurt small investors.
Calpers and the California State Teachers' Retirement System control $388 billion in investments. The legislation would affect overseas-based companies, since U.S. businesses are already mostly barred from trading with the countries on the State Department list: Iran, Sudan, Cuba, North Korea and Syria.
Federal Action
U.S. Congresswoman Ileana Ros-Lehtinen of Florida, the senior Republican on the House Foreign Affairs Committee, introduced a measure last week that would require U.S. government pension funds to divest stocks of companies that invested more than $20 million in Iran's energy industry.
``This measure will serve as one more critical instrument to deny the Iranian regime the economic resources required to pursue its dangerous activities,'' she said in a statement.
William Reinsch, president of a trade group representing 300 multinational corporations, said the legislation would work against U.S. interests.
``We're going to destroy our relations with the very countries we need in a united front against Iran,'' said Reinsch of the Washington-based National Foreign Trade Council.
The council won a court challenge last month, overturning an Illinois law aimed at companies doing business in Sudan.
Heightening Tension
If public funds are forced to divest, he said, ``the real losers would be a bunch of retired policemen and firefighters.'' That's because pensions would have to sell international mutual funds, which have had high returns, he said.
The Bush administration has ratcheted up its criticism of Iran's government, accusing it of supplying insurgents in Iraq with weapons to kill U.S. troops.
Supporters of Israel, which has been the target of threats by Iranian President Mahmoud Ahmadinejad, are backing the move to pressure Iran.
The American Israel Public Affairs Committee, the main U.S. pro-Israel lobbying group, will support divestment efforts against Iran in 10 states this year, Howard Kohr, executive director of the Washington-based group, said in a March 12 speech. Divestment ``would have a crippling effect on Iran's economy,'' Kohr said.
Shareholder Activism
A campaign to force companies to divest may affect ``a significant number of the world's largest companies,'' said Roger Robinson, who heads a company that tracks investing in terrorist nations. Robinson, a National Security Council aide in the Reagan administration, said he has no position on the California bill.
Edwina Frawley, a spokeswoman for Paris-based BNP Paribas, declined to answer questions about Iran. She said the company complies with ``all current ethical standards and regulations.'' Munich-based Siemens didn't respond to an e-mail request for comment, and a spokeswoman for Rome-based Eni declined to comment.
The California legislation puts Calpers, a leading proponent of good corporate-governance practices, in the position of being criticized itself.
``They have historically prided themselves on being ahead of the curve on issues like this,'' said Reinsch of the foreign trade council. ``One would think they would be ahead on this one.''
No Direct Investment
Calpers spokesman Clark McKinley said the fund doesn't invest directly in Iran, and he couldn't verify how much of its holdings might be affected by Anderson's measure. The Calpers board hasn't yet reviewed the legislation, he said.
The teachers' fund, known as Calstrs, hasn't taken a position either, said spokeswoman Brenna Neuharth. Calstrs already screens investments for geopolitical risk, including human rights abuses and money laundering, Neuharth said.
When the California assembly approved divesting from Sudan last year, Calpers said it wouldn't invest in nine companies. Calstrs sold stock in a Russian and a Chinese oil company.
The U.S. Securities and Exchange Commission last year asked Ford Motor Co., Marathon Oil Corp. and six other companies to explain their activities in countries on the terrorism list.
The SEC asked Ford in a July 5 letter whether the company's ``reputation and share value'' were being compromised by its activities in Syria, Iran and Sudan. Ford said its business was limited and lawful.
Missouri, Georgia
Missouri has adopted a policy to require two state funds to divest from companies that do business with Iran, Sudan, North Korea and Syria. Georgia is also considering such legislation, and a bill will be introduced in Ohio next week.
Missouri State Treasurer Sarah Steelman said she made the decision after learning the state was using BNP Paribas, France's biggest bank, to place its overnight money. It had been named as one of several European banks that lent $1 billion to Iran.
``We kicked them off our broker-dealer list and put in place policies that said we won't do business with companies that do business in Iran,'' she said.
In January, Steelman sent a letter to every state treasurer urging them to consider similar policies. ``This investment strategy provides an opportunity for many of us far from the front lines of the war on terrorism to do our part,'' she wrote.
To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net

Risk and Standard Deviations of Risk

The latest home mortgage worries have a very dangerous component to the stability of debt markets, that is the underlining risk regrading also commonly known as CDO's.
The algorithms that take 70% of a bundle of junk bonds mixed with 20% of AAA bonds or debt and 10% of AA and wiht a few stirrings of magic the whole package turns into AAA.
That is how big is the mortgage problem. I has touched from good to bad and worse stopping over all over the derivatives of merges and adquisitions to car financing, but lucky for us, the Chiense and Japanese pension system are the ones holding the bag. So you will be able to laugh out loud while you life under a 110% financed home, a 100% finanaced luxury car and maybe if you are lucky enough like The Donald 400% finanaced live style while claiming billions in assets.
(I personally know it. I worked for the Donald).

The dollar just hit and all time low against all major currencies, so here you haveit, a strong dollar policy, it means a real weak dollar, so every time you hear "we are commited to a strong dollar policy" it does not mean that "they" are doing anything to keep the dollar strong, is like been committed to rain in Las Vegas, it never rains. so spend five minutes and see what your dollar can buy around the planet, that might give you some food for thought why most people need to buy at Wal-Mart and not at Whole Foods or Carrefour.

Shameless Defiants

You might think the increase in news about ethics-related corporate wrongdoing will make some faces red -corporate leaders and politicos- hot. No luck.

Corporatists have found a new who-cares attitude, their shameless shenanigans can continue without much damage to their personal reputation or the corporate image. Sadly, they are right.
Most shareowners have decided irresponsibility is OK. Thus this new found arrogance is thriving in the corporate boards, and corporate directors find themselves better than ever in saint status.

But who actually support these un-ethical low-lifers.
The Answer can be found here:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070221&ID=6514348
These guys in teh article are only a couple of many hundreds that are supporting the whole mechanics of corrupting the savings of most citizens.
They follow a sacrosanct litany of “super-hero of the moneyed” to favor the pilfering of the average Joe savings thru abusive commissions on pensions and funds -money- management.
If you think that in a democracy you elect leaders to protect you from white glove robbers, tough luck, politicos have become part of the takers, you might call corrupted, and all this, is proven that system so much laud is becoming irreversely corrupted.
Lesson: Do not trust your shadows.

Your real tax rate: 40% or 46%

http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx
Income taxes, sales taxes, property taxes, Social Security and Medicare taxes, 'sin' taxes and the rest add up to a virtual flat tax nationwide.
By Scott Burns
We have a national flat tax, albeit one with bumps and potholes.
The fact that the political parties won't acknowledge this is one reason they are doing a disservice to the voting public.
Instead, both parties have a vested interest in the theatrical possibilities created by the idea of graduated tax rates. Notice that I said "the idea of" graduated tax rates. That should not be confused with reality.
Democrats argue that taxes on the rich should be raised because others need the money. This wins votes from the legions of voters who aren't rich.
Republicans argue, with great piety, that high taxes crush incentives and should be reduced, and that only then will the American way see a new dawn.
Politicians talk this way because they generally talk about only one tax: the federal income tax, which offers graduated rates from 10% to 35%.
Politicians rarely talk about what real people experience: the true maze of taxes and government benefits. If someone put them all together, we could see what our actual tax burden was. We could see who pays at the highest or lowest rates. Discussions of tax policy wouldn't be a waste of time.
Well, two researchers did it.
In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.
Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.
As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.
The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.
Video: Don't worry about an audit
That's not a big range, particularly when you notice that it covers an income rise of 2,500%.
So I have a modest proposal: Ask your senators or representative if they have a clue about this. If they don’t, regardless of party, they shouldn't be in office. Vote accordingly.

Best'O Greed Part 2

And a big "Boo-Yah" to you, too
Q: I'm trying to follow Jim Cramer and Mad Money to make big money in stocks. Will it work?
A: Fans of Jim Cramer and his Mad Money stock-picking television show on CNBC call in excited about stocks, usually starting their questions with Cramer's signature "boo-yah!" yell.

For an hour, Cramer plays up his hyperactive personality, barking out buy and sell recommendations on dozens of stocks. He is the evangelist of stock pickers and market timers. Fans see him as a fountainhead of information on gems other investors, traders, fund managers and analysts have somehow overlooked.

Is Cramer really a stock-picking genius?

When I asked Cramer for his picks, CNBC, after considerable prodding, provided a spreadsheet with Cramer's picks from two of the five segments of each show, excluding the lightning round, in which he answers questions from viewers.

Based on this incomplete list, Cramer's picks have gained 16.2%, on average, from the show's launch March 14, 2005, through March 27, 2006. That makes the Standard & Poor's 500 gain of 7.3% look pretty sad. Cramer says he's made his viewers lots of money. "I'm very proud of my record," he says.

I provided CNBC's list to third-party research firm Investars.com, which said, based on the incomplete list provided by CNBC, that the S&P 500 stocks picked by Cramer have performed much better than the S&P 500 at large and his picks of stocks in the small-cap Russell 2000 index have outperformed that index. Investars also found that small-cap stocks recommended by Cramer soar after being mentioned on Mad Money.

But before you get "Boo-Yah" tattooed on your forearm, let's take a closer look:

• Tracking the right benchmark. The median market value of the 606 stocks in the Cramer list was $6.8 billion, according to S&P's Capital IQ. Morningstar considers a portfolio with a median market value between $1.6 billion and $9.3 billion to be midcap. So it doesn't really make sense to compare Cramer's performance to the S&P 500, which is heavily weighted toward large-cap stocks.

What if we compare Cramer's results to a midcap index fund such as the iShares S&P MidCap 400 index exchange-traded fund (IJH)? Had you ignored Cramer and simply bought IJH on March 14, 2005 and held it until March 27, 2006, you would have been up 16.4%. That's dead even with Cramer's performance.

But it's not quite fair to compare Cramer to the IJH either. His picks include large- cap stocks and some foreign plays. So I asked IFA.com to calculate the return of the basket of index mutual funds it recommends for risk-tolerant, results hungry "mad money" type investors. The return of this portfolio, after fees, was 21.8%, trouncing Cramer's return. You can view the IFA portfolio here.

Cramer himself has described how hard it is to beat index funds. "After a lifetime of picking stocks, I have to admit that (Vanguard Group founder John) Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him," Cramer said on the dust jacket of Common Sense on Mutual Funds, Bogle's 1999 book.

• Time. Don't forget the cost of the time it take to follow Cramer. IFA.com's President Mark Hebner breaks it down this way: Imagine having $100,000 to invest in a ten-stock portfolio of Cramer's stock picks. Cramer recommends spending at least an hour a week researching each stock. That translates to more than 500 hours of homework a year. Even if all that work pays off and you beat the market by two percentage points, that's a return of $2,000 or $4 an hour. "Was it really worth it?" Hebner asks.

Time also tends to be cruel to stock pickers. The chances of a money manager outperforming the market in the long term, especially after fees and other costs, is small, says Bogle, whose Vanguard Group popularized index mutual funds and who is acquainted with Cramer. "I wish him well, but I'm not investing with him," Bogle says.

• Fees. Had you followed Cramer's advice, you would have had to buy more than 606 stocks, according to the CNBC data. Even if you use an online broker that charges just $5 a trade, you would have spent $3,030 in commissions.

In an e-mail, Cramer wrote: "Transaction costs are always a factor whether they are done within a mutual fund, a hedge fund or by an individual himself. I believe strongly that my figures clearly beat almost every relevant benchmark by a mile and that even if you put in transaction costs you would be well ahead of the game."

To be fair to Cramer, one year of performance is not adequate to judge a stock picker. And CNBC spokesman Kevin Goldman wrote in an e-mail to USA TODAY: "It is overly simplistic to measure year-to-year comparisons. Cramer can change his mind on a stock depending on a number of factors. He says each investor should do his or her own homework about a stock."

What's the lesson here? Be skeptical anytime someone claims to have the ability to predict short-term movements in stocks or the stock market and make them prove their returns to you. Almost always, the best thing to do is plug your ears and run away, fast.