More Clunker Cash?

Looks like Congress will provide billions more free money so people can turn in good cars to get new ones that get as little as 1 mile/gallon better milage. What a waste of taxpayer money. How can dealers make deals this weekend without knowing if the Senate will approve the extension? If this is the way government runs this program how can we have any confidence in them running healthcare?-Lou

House Votes to Extend 'Clunkers' Program

The House voted Friday to transfer $2 billion in emergency funding from the economic stimulus plan to the "cash for clunkers" program, ensuring it has sufficient funds to continue.

The move follows a scramble Thursday after it emerged that the initial $1 billion allocated to the clunkers program may have been close to exhausted after just one week. The legislation would shift $2 billion from the $787 billion stimulus plan to the program.

The House voted 316 to 109 to approve the extension. Because the measure was placed on the suspension calendar, it required two-thirds of lawmakers' support to carry it.
The clunkers program, which began last week, offers consumers vouchers for as much as $4,500 to trade in their gas guzzlers for new, more fuel-efficient models.

As of Friday morning, the National Highway Traffic Safety Administration, which is handling the clunker rebates, has processed $250 million in vouchers, the Transportation Department told auto makers and industry lobbying groups, a person said. NHTSA is doubling the number of people it has reviewing voucher applications to speed up the process, this person said.

The National Auto Dealers Association said it has been given "specific assurances" by the Obama administration that all clunkers deals closed on Friday will be honored. Despite the assurances, however, the organization's chairman reiterated concerns that the clunkers program could run out of funding and that some dealers might not be reimbursed for rebates extended to customer.

"Until further definitive guidance on the availability of funding is provided by the Administration, dealers who accept additional 'clunkers' deals may face a risk that they will not be reimbursed," John McEleney said.

House Speaker Nancy Pelosi (D., Calif.) voiced support for efforts to add funding to the program.
"Both sides of the aisle, people acknowledge the effectiveness of this initiative," Ms. Pelosi said on the House floor, adding that early evidence showed that the program was exceeding its environmental targets. But she added that she had a "concern" about the source of funding for restoring clunkers monies -- an energy program in the economic stimulus package.

Ms. Pelosi said she hoped that any funds taken from the energy program would eventually be restored.

The Senate won't consider an extension until next week, according to Sens. Carl Levin (D., Mich.) and Debbie Stabenow (D., Mich.). Even then, it is not certain the measure will be approved in the Senate without extensive debate.

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Gold Takes Off

Here is a chart of the gold market. The green line represents today's action. Look how gold took off from 940 to 956 in minutes. Gold took off when the dollar index broke through important downside technical level of 78.40. Something big is coming in the currency and gold market, stay tuned.-Lou

Recession Two Times Worse

Todays GDP revisions for first quarter reveal that the recession was twice as worse than originally reported. Todays 2nd quarter GDP news showed the economy shrinking only 1%. Perhaps we are seeing a bit of stabilization in the economy as the trillions of stimulus money takes hold. Let's see what the econmic reports show between now and October. After a bit of stabilization, I think we will see the next and most likely painful decline in both the stock market and the economy.-Lou

Recession Worse Than Prior Estimates, Revisions Show

By Bob Willis

July 31 (Bloomberg) -- The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.

The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said today in Washington.

“The current downturn beginning in 2008 is more pronounced,” Steven Landefeld, director of the Commerce Department’s Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said.

The updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated.

Spending Slumps

Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last year’s fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.

Treasuries headed higher after the report, while stock- index futures declined. Benchmark 10-year note yields were at 3.58 percent at 8:51 a.m. in New York, from 3.61 percent late yesterday. Contracts on the Standard & Poor’s 500 Stock Index were down 0.3 percent at 979.
Residential construction fell 21 percent during the period, almost 2 percentage points more than previously reported, aggravating what was already the worst slump since the Great Depression.

The Commerce Department also reported today that the economy contracted at a 1 percent annual rate from April through June after shrinking at a 6.4 percent pace in the first quarter, the most since 1982. The decline in the first three months of the year was previously reported as 5.5 percent.

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Cash For Clunkers Hit Roadblock

This program was so successful the billion dollars allocated was used up in 4 days. I guess everyone likes free money from the government. This should help the car dealers July sales numbers.-Lou

Cash for Clunkers suspension? White House scrambles

This much seems certain about the Cash for Clunkers program: Consumers are happy to take government rebates to buy new cars.

Other than that, confusion reigned Friday morning.

The fate of the $1 billion trade-in program was up in the air over concerns that it may have already burned through its funds less than a week after it was officially launched.
And it was unclear how much longer car buyers would be able to trade in clunkers after reports surfaced on Thursday night that the program would be suspended.

On Friday, the Obama administration said it was working with Congress to try to get more money and that Clunkers deal certificates would be honored through the weekend.
"The program will be in place" for anyone who had been planning to make a car purchase this weekend, White House spokesman Robert Gibbs told CNN. "This program appears to be a success for car buyers, car dealers, car companies and taxpayers."

One of the program's main champions in Congress, Sen. Debbie Stabenow, D-Mich., told CNN that the Michigan, Ohio and Indiana congressional delegations are working on a $2 billion extension of Clunkers program.

Stabenow had said the effort has provided an important boost to the economy and resulted in 200,000 car sales.

"I am delighted to hear dealers say that all of their salespeople are busy and they are selling more cars in a day than they had been selling in a month," Stabenow said.

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Obamacare: "Medical Homes" A Dumping Ground For The Elderly

Seniors better wake up and fight this healthcare bill with everything they got. Healthcare cost savings will be entirely borne by the elderly in this country. The earlier the elderly die the better for the program. Hopefully this bill will be disected and truthfully reported before it's voted on in September. If I was older than 60 I would be terribly frightened.-Lou

House Health-Care Bill Would Establish 'Medical Homes' for the Elderly and Disabled

(CNSNews.com) - The House health-care reform bill proposes to decrease hospital visits by establishing a “medical home pilot program” for elderly and disabled Americans. Such a medical home would not require a physician to be on the staff, and therefore could be run solely by nurse practitioners and physician assistants.

Medical homes also would practice “evidence-based” medicine, which advocates only the use of medical treatments that are supported by effectiveness research. But physicians’ groups say the legislation could lead to restrictions on which treatments may be used for certain conditions, despite the fact that some patients might require a unique or unconventional approach.

It also may lead to dumping Medicare/Medicaid patients in facilities that are not required to have physicians on staff.

The Center for Medicine in the Public Interest (CMPI) expressed its concerns in a report that explains why statistical evidence does not always reflect reality of effective medicine. “‘One size fits all’ rarely does,” the report said. “From clothes to shoes to hats, few people find that items carrying that label work with their individual bodies. So why do we entrust the health of our bodies -- one of the most important assets we have -- to a one-size-fits-all mentality?” According to CMPI and individual physicians, however, this one-size-fits-all mentality is just what congressional health-care reform suggests.

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Chart Of The Day

Foreigners have virtually stopped buying long-term US Bonds. This is why the Fed has been forced to monetize the debt with printed funny money. Either interest rates will have to rise substantially (causing a deeper depression) or the Fed will continue to run the electronic printing press resulting in rising inflation, not a good choice for Benny & The Fed.-Lou

Foreign Investment in the U.S. – Going Down, Down, Down - The Casey Files - by David Galland & Bud ConradManaging Editor, BIG GOLD from Casey ResearchJuly 28, 2009

Here at Casey Research, we’ve been watching the actions of foreign holders of U.S. dollars as closely as a Las Vegas pit boss watches a card player on a $1 million winning streak. Many of those in the deflation camp largely, or entirely, ignore the potential role these foreign holders may play in the drama now unfolding.

But in fact, foreigners have, over the last decade, been by far the single most important source of buying for U.S. Treasuries.Given the Treasury’s need to flog on the order of $3 trillion worth of its unbacked paper this year just to keep the government’s doors open – and that is a four- or fivefold increase over 2008 – the foreign buyers not only have to show up for the Treasury auctions, they have to show up in droves.In mid-July, the Associated Press reported that “Foreign demand for long-term U.S. financial assets dropped by the largest amount in four months in May, as Japan and Russia trimmed their holdings of Treasury securities . . . foreigners actually sold $19.8 billion more long-term U.S. securities than they purchased in May.

That compared with net purchases of $11.5 billion in April.”Below you see the big picture of all cross-border flows in May as published by the U.S. Treasury. It shows both foreign investment in the U.S. and U.S. investment abroad. It includes Treasuries, agencies, corporate bonds, equities, and short-term instruments like T-bills. Foreigners bought a lot of T-bills when the credit crisis became acute.

LINK

US Mail Bankrupt?

Do we really still need a bloated postal service? Between e-mail and electronic bill paying (and E-Birthday Cards) there is little need for traditional mail. the postal service should downsize delivering snail mail 4 days a week.-Lou

USPS May Be Unable to Make Payroll in October and Retiree Health Plan Costs!

On July 14, unions representing United States Postal Service (USPS) workers wrote the White House with “extreme urgency” asking for a meeting to address lack of funding for both employee payroll in October and health benefits for retired employees.

The letter, which the FederalTimes.com blog provided a scanned copy late last week, says:
“[USPS] top executives are now saying that the USPS will default on a $5.4 billion payment to prefund future retiree health benefits on September 30, 2009. And its government affairs representative are now telling Congressional staff that the Postal Service may not be able to make payroll in October and will be forced to issue IOUs instead.”

The letter was co-signed by the presidents of the American Postal Workers Union, National Rural Letter Carriers’ Association, National Association of Letter Carriers and National Postal Mailhandlers Union, and sent to White House Deputy Chief of Staff, Jim Messina.

Fed buys $2.99 billion in Treasurys

In an effort to keep interest rates low the Fed has continued to create money and buy US bonds in the open market . We are seeing foreigners become net sellers of US debt recently and if the Fed does not step in with a bid interest rates will move significantly higher. The increasingly record amounts of Treasury debt being issued is finding fewer buyers and the Fed is forced to buy that debt as well. Can inflation and a currency crisis be avoided? I don't see how, history shows us that deficit spending and massive money creation almost always leads to inflation, hyper-inflation, currency collapse, shortages of basic goods and civil unrest. The best protection is monetary metals, gold and silver.-Lou

Fed buys $2.99 billion in Treasurys

NEW YORK (MarketWatch) -- The Federal Reserve Bank of New York bought $2.999 billion in Treasurys maturing between 2021 and 2026 on Wednesday, its latest operation in a program intended to keep a lid on borrowing costs. Dealers submitted $11.707 billion to the central bank to buy. The amount purchased was the same as at the Fed's last buyback in the same maturity range. Treasury yields remained lower on the day, pushing prices up. Benchmark 10-year note yields /quotes/comstock/31*!ust10y (UST10Y 3.66, -0.02, -0.65%) fell 6 basis points to 3.63%.

5 Year Treasury Auction A Dog

Todays 5 year auction saw few buyers as foreigners shun US Treasurys. Interest rates are going up folks, not good for housing or the economy.-Lou

Debtor Nation

When Debtors Decide to Default
By DAVID STREITFELD
Published: July 25, 2009

NYT-Melissa Birks is being stalked. Her cellphone keeps ringing, always from a caller marked “unknown.” She says she knows it is her credit card company wondering why she stopped making payments. Ms. Birks, who owes $28,830, has nothing to say.

Those on the front lines of the debt industry say there is a small but increasingly noticeable group of strapped consumers who, like Ms. Birks, are deciding they will simply stop paying. After loading up on debt eagerly provided by the card companies during the boom times, these people now find themselves trapped in an endless cycle where they are charged interest on interest and fees upon fees while the lenders get government bailouts.

They are upset — at the unyielding banks and often at their free-spending selves — and are pre-emptively defaulting. They could continue to pay for a while longer but instead are walking away. “You reach a point where you embrace the darkness of default,” said Adam Levin, chairman of the financial products Web site Credit.com.

The lending industry term for these people is “ruthless defaulters.” In a miserable economy where paychecks, savings and expectations are all diminished, their numbers will surely grow.

“They’ve done the math on their account and they’re very angry,” said Corey Calabrese, a Fordham Law student who is an administrator of the school’s walk-in clinic for debtors at Manhattan Civil Court. Public sentiment is on their side, she added: “For the first time, Americans are no longer blaming the borrower but are looking at the credit card companies.”

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The Next Shoe To Drop

I have been warning for months that the coming commercial real estate collapse will dwarf that of residential housing. Already we are seein half empty office buildings, strip malls strippped of stores and mega malls with vacancies. The banks will buckle under when they have to write off the debt coming due that cannot be repaid.-Lou

Commercial Real Estate Crash Looming, Says Fed’s Yellen
By AUSTIN KILGORE July 29, 2009

As the industry looks for signs the housing sector is beginning to stabilize, the threat of a crash in the commercial mortgage market grows, according to San Francisco Federal Reserve president Janet Yellen.

Speaking this week at a bankers convention in Idaho, Yellen said while there are signs that the economic growth is beginning to return — house price declines are abating, consumer spending is stabilizing and new unemployment is lessening — the recovery will be painfully slow and the Fed believes commercial real estate is the economy’s next vulnerable spot.

The problem, Yellen said, is maturing loans for commercial properties that lost significant value.
“Borrowers seeking to refinance will be expected to provide additional equity and to have underwriting and pricing adjusted to reflect current market conditions,” Yellen said. “In some cases, borrowers won’t have the resources to refinance loans.”

Yellen urged the community bankers at the conference to be proactive in preparing for a potential downturn, which could include, she said, property value drops as high as 30% to 40%. Namely, she told the audience to address emerging credit problems and commission new appraisals, but also encouraged them to continue lending to creditworthy borrowers.
The remarks fall in line with a number of credit ratings reports that warn commercial real estate is set to take a tumble.

GOLDman Sachs

MSNBC Says Fed is Fraudulant

MSNBC's explanatory take on how the Federal Reserve "bailed" the system out and why the Fed is so keen on perpetuating the secrecy.

Eliot Spitzer: "The Fed is a Ponzi scheme, an inside job, it is outrageous, it is time for congress to say enough of this"

Bernanke: This may be worse than Great Depression

What happened to the "green shoots" Mr Bernanke?-Lou

WASHINGTON (MarketWatch) -- Federal Reserve Board Chairman Ben Bernanke discussed the economy with average Americans on Sunday, saying the current financial crisis could be even more virulent than the Great Depression.

"A lot of things happened, a lot came together, [and] created probably the worst financial crisis, certainly since the Great Depression and possibly even including the Great Depression," Bernanke said at the start of a town-hall meeting in Kansas City.

Bernanke defended the Fed's extraordinary moves, which have included slashing interest rates to zero, pumping billions of dollars to keep credit markets open, and buying Treasurys and mortgage debt to keep long-term interest rates low.

"I was not going to be the Federal Reserve chairman who presided over the second Great Depression," he said.

The event is being televised over three nights, beginning Monday, by U.S. public television network PBS. Members of the public, screened by PBS, were able to ask questions.

Many questioners expressed unhappiness with the "too big to fail" doctrine. One asked when Bernanke would get around to firing the leadership of banks that had to accept government assistance.

Another participant said the only thing that was clear to him in the whole crisis was that his small business was "too small to save."

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Listen to This Week's Radio Show

Listen to this week's "The Financial Physician" radio show. Even though I was out of town on Sunday I pre-recorded a fresh showed that aired yesterday.

Listen all week here

On My Way Back Home

Great To Be Heading Back Home

After a great 15 days in Europe on vacation I fly back from Venice tomorrow and will resume my usual pace of posting on Wednesday.

Wish I could have posted more but between poor internet service on the cruise ship (and expensive) and enjoying my vacation it was difficult.

Anyway I'm feeling well rested (actually exhausted from touring 5 countries in 15 days) and look forward to being back at work on Wednesday.-Lou

Encourage the elderly to commit suicide..!!!

Health Care Bill Requires Medicare Beneficiaries To Get Suicide Advice

Listen to this interview with Fred Thompson someone who actually read the healthcare bill says that every five years people will have a required consultation where you are advised how to end their lives.

This is outrageous. The assault on the elderly is disgraceful. I have been telling you for weeks that this bill will ration health care for the elderly.-Lou

Listen Here

"Cheers" From Europe

Here is Sue and I with our new friend John Ratzenberg aka Cliff Claven from "Cheers" We met him last night on the Crystal Serenity. He is a really nice guy

Bank Failure Friday Part II

Busy Friday night for the FDIC-Lou

Friday, July 24, 2009

First NY Bank Failure Announced Since 200

The Empire State's first bank failure since 2004 was announced late Friday afternoon.  Waterford Village Bank in Clarence, N.Y., was closed by the Banking Department of the Superintendent of Banks for the state of New York for insufficient capital.  

The bank is a single-branch bank which held $62 million in total assets and $58 million in deposits, as of May 31 of this year.

According to a release issued by the New York Superintendent of Banks a "purchase and assumption agreement" has been struck between the Federal Deposit Insurance Corporation, which was named receiver of the bank, and with Evans Bank, N.A., in Angola, New York, which will take on all of Waterford's deposits.  Depositors will automatically become depositors of Evans Bank, N.A.

“It is a top priority of the New York State Banking Department to protect the deposits of customers of New York State banks and ensure the safety and soundness of the banking system in the state,” said Richard H. Neiman, Superintendent of Banks for New York State, in a press release. “We determined that the management team’s inability to adequately and timely address problems outlined in a Feb. 12 Cease and Desist Order led to the bank being critically undercapitalized.”

Customers of Waterford Village Bank can contact the FDIC with questions at 1-800-323-6111, or visit the FDIC's Web site about the failure. 

New Yorkers can contact the Banking Department of the New York Superintendent of Banks by calling 1-877-BANK-NYS or visiting its Web site.

Waterford Village Bank is the 58th U.S. bank to fail this year.

Bank Failure Friday

Bank failure Friday was a big one this week with the  FDIC announcing 6 bank failures in Georgia. What's going on in Georgia? A quarter of all bank failures this year happened in Georgia. Only another $807 burned by the FDIC trust fund, they should be broke by early fall and have to get a bailout from the taxpayers. Don't  be fooled by optimistic commentary or the stock market rally, there are big problems with the banks and the economy. The recession has a long way to go in my opinion. -Lou

Friday, July 24, 2009

Six Bank Failures Reported in Georgia

 

Kathryn Glass

FOXBusiness

 

The Federal Deposit Insurance Corporation announced the failure of 6 Georgia banks, with 20 bank branches on Friday, bringing the total number of U.S. bank failures this year to 64.

All six banks were subsidiaries of Macon, Ga.-based Security Bank Corporation, and the banks held a total of $2.8 billion in assets and $2.4 billion in total deposits, as of March 31, 2009.

The FDIC is acting as receiver of the banks and a purchase and assumption agreement has been arranged with Pinehurst, Ga.-based State Bank and Trust Company, which will take over all deposits at Security Bank Corporation subsidiaries. State Bank and Trust Company will share the $1.7 billion in losses on the bank’s assets with the FDIC.

The six banks that have been closed include:
-- Security Bank of Bibb County, Macon, Ga.
-- Security Bank of Houston County, Perry, Ga.
-- Security Bank of Jones County, Gray, Ga.
-- Security Bank of Gwinnett County, Suwanee, Ga.
-- Security Bank of North Metro, Woodstock, Ga.
- Security Bank of North Fulton, Alpharetta, Ga.

The FDIC estimates that the failure of these six banks will cost $807 million. Bank customers should visit the FDIC’s Web site if they have questions or need additional information.

Sixteen bank failures have now been reported in the state of Georgia -- that accounts for one-quarter of all bank failures in the U.S. so far this year.

No Healthcare For Grandpa

The only way Obama will be able to get health care costs down is to refuse treatment to the elderly. Most of our lifetime health care costs comes at the end of our life as costly procedures and surgery are performed to extend our lives. The only way to cut costs is to refuse these services to the elderly. Where is AARP on this issue? They are with Obama because it serves their business interests.-Lou

Obamacare: Seniors will get mugged

A health economist warns that President Obama's government-run healthcare plan may result in denying care to a significant number of Americans, especially senior citizens.

 

Conservative opponents of President Obama's healthcare plan have been arguing that a government takeover of healthcare will allow Washington bureaucrats to use "comparative effectiveness research" to dictate to doctors which treatments they should prescribe and how much those treatments should cost. Critics say this will lead to rationing of care.
 
In the medical journal The Lancet (January 2009 [PDF]) Obama's special health policy advisor Ezekiel Emanuel wrote that if healthcare has to be rationed, he prefers the "complete lives system," which "discriminates against older people." 

Dr. Devon Herrick, a senior fellow at the National Center for Policy Analysis, says Emanuel believes young adults should be given preferential care over seniors because they have more years of their life ahead of them.
 
"I guess the implication of that is if you're older, you will be assumed to have lived a complete life; whereas if you're younger, you'd have yet to live a complete life," Herrick suggests. "So in a way I kind of see it as a method to ration care to the elderly, but trying to use an ethicist's view to justify it."
 
In an article written more than a decade ago [PDF] for the Hastings Center Report, Dr. Emanuel suggested that health services should not be guaranteed to "individuals who are irreversibly prevented from being or becoming participating citizens." He said "an obvious example is not guaranteeing health services to patients with dementia."

 

'Obamacare' targets young, healthy, wealthy

A Florida congresswoman says the healthcare legislation being pushed by President Obama sends a blunt message to senior citizens: "drop dead."
 
On Monday, President Obama said that "the single biggest threat to our fiscal stability" and "the single thing that could drive us into long-term staggering and difficult debt" is Medicare and Medicaid.

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Wall Street's Heist Continues

Over 15% of Americans are unemployed or under-employed and Wall Street pays itself billions. Time for the rest of Americans to stand up and stop this outrage.-Lou

Wall Street jacks up pay after bailouts

Washington Post  —  7/23/2009 6:54 am

Wall Street's biggest banks are setting aside billions of dollars more to pay their executives and other employees just months after these firms were rescued with a taxpayer bailout, renewing questions about compensation practices in the aftermath of the financial crisis.

The recent outcry over bonuses at bailed-out firms prompted public alarm and promises of reform from financial leaders, who acknowledged that pay and bonuses should not reward risky short-term business decisions -- such as those that contributed to the meltdown -- but instead longer-term financial performance.

But Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

The increase in set-asides for employee pay has raised the ire of Washington, where lawmakers denounced financial leaders for returning to old habits and vowed to enact measures governing executive compensation.

"It strengthens our commitment to getting legislation passed," Rep. Barney Frank (D-Mass.), the chairman of the House Financial Services Committee, said in an interview Wednesday, adding that a committee vote on a bill to increase oversight of Wall Street pay has been scheduled for Tuesday. "The amounts are troubling."

Goldman Sachs caused a stir last week when it disclosed it had set aside a record $6.6 billion for compensation expenses in the most recent quarter, bringing the total for the first six months of the year to $11.4 billion. If that pace continues for the rest of the year, Goldman's employees will earn an average of about $773,000, more than double the figure last year and even exceeding the $700,000 paid in 2007.

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Life Is Good!

As you all know I am on a European cruise with my wife Sue celebrating the completion of my book: "The Financial Physician" which will be in bookstores nationwide December 15th. Yesterday Sue and I rented a small speedboat and spent 8 hours cruising the Amalfi coast. We went to Capri for lunch then headed down the Amalfi coast to Positano and Amalfi. We found a small beach bar between Positano and Amalfi filled with Italians who spoke little english. They welcomed us and we sat by the seashore drinking wine and loving life. We all have some much to deal with in our lives and when we get the chance to just enjoy life and each other it is to be savored. Yesterday goes down as one of the top 5 days of my life.  Here I am driving the boat, off the coast of Positano, yes life is good!-Lou

Ron Paul Grills Bernanke

Ron Paul give Helicopter Ben a good grilling. At about 1:55 Bernanke states that interest rates will have to rise to combat inflation. Whatever the Fed does will not be enough to stop the hyper-inflation coming our way. Ron Paul is the only one in congress that knows anything about economics-Lou

Quote Of The Day

"You cannot help the poor by destroying the rich.  

You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift.  

You cannot lift the wage earner up by pulling the wage payer down.  

You cannot further the brotherhood of man by inciting class hatred.  

You cannot build character and courage by taking away people's initiative and independence.  

You cannot help people permanently by doing for the masses, what they could and should do for themselves.."

Abraham Lincoln

Some quotes stand the test of time and this one certainly does-Lou

Watch Rep Alan Grayson Take Down Bernanke

In this amazing video, Rep Alan Grayson calls Ben Bernanke on the carpet on the Fed's outrageous actions of the last year. Every American should watch this video. The Fed is steering us into the financial abyss.-Lou

When In Rome.......

Today my European Cruise takes us to the Eternal City, Rome. Yesterday Sue and I spent the day privately touring the beautiful Chianti wine country in Tuscany. We enjoyed a wonderful four course lunch prepared by an Italian grandmother in her 1,000 year old villa overlooking vineyards and rolling hills. We also enjoyed some wonderful wine and olive oil from this special region of Italy. The Italians sure know how to live!-Lou

Gold Is A Must In Every Portfolio

I bring this article to your attention to prepare you for what I (and others) believe will be a major inflation and currency problem i the United States. Seeking Alpha is a great website and I visit it often, you should as well-Lou

24 Trillion Reasons to Buy Gold

It is a worst case scenario, but Neil Barofsky, the inspector general for the Troubled Asset Relief Program, has said the bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23.7 Trillion. To put this number into perspective, it is nearly double the nation’s entire economic output for a year, more than the cost of all the wars the United States has ever fought combined and the most the federal government has spent on any single effort in American history. It is about $80,000 for every U.S. citizen.

Printing and borrowing $800 billion to hand over to the banks with no strings attached never seemed like a good idea. We wrote about it back in October of 2008 in this article. And despite some 80% of Americans being against the bailouts, our elected officials decided to hand over taxpayer money to their banker buddies anyway.

A soon-to-be released report by special inspector general Neil Barofsky finds:

Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks. It is not clear whether the report will also disclose the banks’ use of the bailout money to pay executives fat bonuses which they used to buy gold toilets and prostitutes, and to lobby Congress to stop any meaningful reform.”

It is infuriating and does not bode well for the U.S. dollar or our economic future. There is a point on the horizon when foreign governments and banks are going to stop buying our debt and holding our dollars. First we had news that the 2009 deficit had already topped $1 Trillion for the first time in history. As if that wasn’t bad enough, the sticker shock from this latest estimate is really going to upset some of our Eastern trading partners.

A figure like $24 Trillion just might be the breaking point for an already furious Chinese administration that has thus far been willing to support the dollar and our government’s spending binge for fear of losing American consumer demand. The tipping point comes when it is no longer worthwhile for China, Japan and others to continue financing America and propping up our sick economy. While I used to believe that point was still a few years away, it now seems to be rushing upon us full throttle.

This of course is going to lead to a massive sell off in the dollar and fireworks for precious metals. If you aren’t already invested in gold and silver, this is likely your last chance to buy gold for under $1,000 and trade in those paper promises for something of real tangible value that cannot be printed out of thin air. When the dollar collapse begins, I expect the drop to be fast and furious. Savvy investors will want to be positioned well before the bottom falls out.

LINK

More On Paulson and Goldman Sachs Grand Larceny

Henry Paulson is a crook and should go to jail in my opinion. He (as past head of Goldman Sachs) engineered the biggest heist in world history.  Congress needs to dig deeper into this story.-Lou

Barney Frank Lies Through His Teeth

We as a country are doomed. This is one of the most powerful men in government. Barney Frank was the leader in getting Fannie and Freddie to lend to sub prime borrowers. Now he lies through his teeth in an incoherent interview.  There is video I published on this blog of him in Congressional hearings berating Bush Administration officials for trying to limit loans to people who could not pay, now he mumbles about it being Bush's fault. We are in big trouble folks, there is no accountability just lies by those in charge. I'm on vacation in Europe but I will did up the video of him telling the Bush Administration that they have to lend more to lower income borrowers.-Lou

Barney Frank: Don't Blame Me for the Housing Bubble

Who’s to blame for the subprime housing bubble? A popular answer – especially on the right side of the aisle - is Massachusetts Democrat, Barney Frank. 

Why?

The argument, best summed up in an Investor's Business Daily editorial published in March 2009, goes like this:  "Starting in the early 1990s," Rep. Barney Frank "(and other Democrats) stood athwart efforts by regulators, Congress and the White House to get the runaway housing market under control." It goes on to say in, "2002, Frank nixed reforms" of Fannie Mae and Freddie Mac and that in 2003, "led by Frank, Democrats stood as a bloc against any changes" that President Bush proposed making to Fannie and Freddie.

Is it true?  Frank doesn't think so.

Here are some of the main points the current Chairman of the House Financial Services Committee made to Tech Ticker's Aaron Task during their interview last week on Capitol Hill.

First, and it's a point Frank returned to several times, is he and the Democrats did not have the power to call the shots since they were in the minority during most of the Clinton and Bush years.  "Tom Delay was running the House of Representatives.  So I take responsibility for what I do but I don't take responsibility for Newt Gingrich and Tom Delay’s policies," he protests.  Making a broader point, he says, "if I really had the power to stop the Republicans from doing anything you know what I would have done first? 

 I would have stopped the war in Iraq.  I would have stopped the impeachment of Bill Clinton. I would have stopped tax breaks for people making millions of dollars a year."

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Listen to This Week's Radio Show

Listen To This Week's "The Financial Physician" Radio Show. 

I'm in Europe this week and next so this week's show was a pre-recorded show with my good friend and well known market guru, Peter Grandich. I have already received great feedback from yesterday's program. 

To all Peter Grandich followers welcome to The Financial Physician website, I hope you come back often. Peter and I are compatriots in regards to where we think the our great country and economy are headed. 

Peter told me today that he believes this was his best interview ever. 

I look forward to having Peter as my guest when "The Financial Physician" goes national on Sirius/XM satellite radio channel 165 Sundays 6-7pm ET following Glenn Beck late August. 

Stay tuned for exact date

Listen Here

Beautiful Portofino

Today Sue and I are in beautiful Portofino Italy as we continue our European cruise aboard the Crystal Serenity. What a lovely (and expensive) town.

Recession Not Over

I agree with Shilling, the recession is far from over and the worst is yet to come. The robust earnings of the nation's largest banks are smokescreen based on changes in accounting rules and gains in trading revenue. Loan portfolios are continuing to deteriorate with credit card defaults rising to record levels and commercial real estate loans about to blow up. The stock market rally looks similar to the bear market rally during the Great Depression only to be followed by the worst of the decline. Use this rally to lighten up equity positions, the rally is a gift to those who failed to sell before last years crash.-Lou

False Bottoms

A. Gary Shilling, 07.15.09

The recession is not over. Investors will soon return to worrying about deflation and weak share earnings

Despite a 31% gain in the S&P 500 since Mar. 9 reports of the bear market's demise are greatly exaggerated. There have been statistics that suggest otherwise--that the economic decline is tapering off or that green shoots are sprouting on the economic landscape--but before you kick your shoes off and frolic in the foliage, take a hard look at the stock rally and our economy.

The stock market is exhausted, and I think investors are again worrying about the reality of a deepening worldwide recession. They're beginning to shun stocks, sell commodities and buy the buck. And they're grasping Treasurys to their bosoms as they again fear deflation.

False signs of a recovery are common in recessions. Since World War II there have been 11 recessions, and in 8 of them real GDP rose in at least one quarter well before the recession was over. Recessions don't start at the top and go straight to the bottom. I see the current downturn as following a sawtooth pattern along a declining trend. It's quite normal to have upticks in an otherwise bad-news economy. A rebound from last fall's financial and consumer spending nosedives was likely. If things continued straight down, this recession wouldn't just be the worst one since the Depression, it would rival those dark days when unemployment rose to 25%. It's not that bad today.

The government has been pouring hundreds of billions into the economy, but so far most of its programs are off to slow starts. The Public-Private Investment Program, for example, may be mortally wounded by the emasculation of mark-to-market rules. Banks no longer have to mark their toxic assets down to the market prices where hedge funds and others will buy them. So they can sit on dead assets and pretend that nothing is wrong. The consequence is that our banks are at risk of becoming zombies like Japanese banks in the 1990s.

The folks in Washington are big fans of modifying mortgages to make them more affordable. Alas, this doesn't cure what ails homeowners. More than 50% are behind in payments only 60 days after modification.

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