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In my neck of the woods, I am seeing more and more people engaged in bartering. I think the average citizen is getting fed up with the way Washington is abusing our tax dollars. More and more people will be going underground as much as possible to avoid the taxman. I wonder what kind of public outcry will surface when Bush and Paulson come to congress for more money. 700 billion will not come close to doing much good in a quadrillion derivatives mess. I enjoyed your post on Peter Schiff. He was probably right on.
.......al
Real products, a major showing at THE convention of the year for the funeral industry, it's my guess that this company may be going somewhere. A couple of years ago I found this company and decided from my investigation that this would be a long term hold for success and not a typical pinkie to swing trade. Over many years of trading I've made a lot of mistakes as have many others. It's all a gamble anyway. This one could very well prove to be the ultimate success story. Any anxieties in the past are now replaced with patience. Best of luck to all.
.........al
Orlando Sentinal:
http://www.orlandosentinel.com/business/orl-coffins1508oct15,0,278218.story
Fan spirit is grave matter at funeral directors expo
Jerry W. Jackson | Sentinel Staff Writer
October 15, 2008
For die-hard Tampa Bay Rays fan Dale Gunter, there could hardly be a better way to spend eternity than in a comfy, custom-designed coffin with the Rays logo and colors.
"That's my team," said Gunter, who was at the National Funeral Directors Association Expo on Tuesday in Orlando, checking out the baseball-themed and other latest casket offerings from Eternal Image, a Michigan outfit that offers licensed brand-image caskets, urns, monuments and vaults.
Gunter, owner of Gunter Funeral Home and Cremation Services in St. Petersburg, said that while custom coffins are a small slice of the multimillion-dollar burial business, more families these days look for a way to honor their dearly departed in a personal way.
That might mean a scarlet and gray Ohio State Buckeyes casket, a snazzy blue and gray Star Trek coffin, or maybe a nice New York Yankees urn sitting atop a home-plate base.
Related links
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National Funeral Directors Association Expo National Funeral Directors Association Expo Photos
Nick Popravsky, vice president of sales for Eternal Image, said the Farmington Hills, Mich.-based company gets "a lot of requests for SEC schools" and right now is working on agreements with Florida colleges, including the University of Florida and Florida State.
For fans who would like a Gator or Seminole casket, Popravsky advised them to be patient and careful.
"Hang in there, and look both ways," before crossing a street, he quipped.
Actress Barbara Eden of I Dream of Jeannie fame was at the booth at the Orange County Convention Center, pitching the custom coffins. She said she was assured the company could make her a casket modeled after the genie's bottle she spent so much time in during the 1960s sitcom.
"Not for a while, though," Eden said.
The custom coffins typically cost about $1,000 more than regular ones, Popravsky said, but for many families it's a small price to pay for a special send-off.
Kurt Soffe, owner of Jenkins-Soffe Funeral Chapels & Cremation Center in Murray, Utah, said his family has been in the funeral business for four generations. The folks who run funeral homes now are as serious as they ever were in respecting a family's loss, he said, but they do tend to be less stodgy than in his great-grandfather's day.
"Most are still small, family-owned businesses," he said, trying to make a living as traditions change and profits are pinched. Cremation costs less than a burial and more families are opting for that, he said, while burials are changing in other ways. More funeral homes, for example, are using the Internet so families can see the service on live webcasts from home.
But tradition still means a lot to many families -- and especially for those who may have Celtic blood in their veins.
Official Irish Dirt is now available, for people anywhere in the world who need a little earth from the old country, to ensure their eternal rest.
Three Irish entrepreneurs, Pat Burke, Tim Macdougald and Sean Carty, partners in The Auld Sod Export Co. Ltd., have a booth at the funeral expo, pitching their product -- black, peat-like soil packed in little green containers embossed with gold letters. Prices start at about $10.
"It comes from four [Irish] provinces -- fields, mountains and bogs," Burke said.
Many people are ordering it online at officialirishdirt.com, he said, to mix with the ashes of a loved one, to sprinkle on or around coffins and even for family members who may be long-gone but not forgotten. A trip to the cemetery with a handful of the old country, he said, can bring tears of joy and a flood of memories.
"Some people will say, 'You know, my mother was Irish -- and she never got to go home.' "
well, I guess those "facts" are no longer up to date. It's only just begun. Info not put out by company. It's being put out by shareholders on the scene. It doesn't get much better.
"Never buy stock in a company that if the share price goes down by half you wouldn't be willing to buy more."
Peter Lynch
another little blurb:
..........al
http://tristatehomepage.com/content/fulltext/?cid=32591
U.S. Funeral Business Untouched By Economy
Reported by: Web Producer
Tuesday, Oct 14, 2008 @07:26am CST
U.S. Funeral Business Untouched By Economy, Brits Can't Bury Poor
(Orlando, FL) -- The credit crunch may mean Americans aren't living it up as much, but they're still dying expensively.
Business is booming for funeral industry execs who gathered for their annual convention in Orlando, Florida this week.
The National Funeral Directors Association says people are still willing to tap into retirement plans or cash in a life insurance policy to bid a costly farewell to loved ones.
The trade group says Americans spend 11-billion dollars a year on funeral services.
That's likely to grow as baby boomers reach their peak dying years between 2020 and 2040.
Convention attendees said people will still pay top dollar for a great send-off.
One mausoleum reported its top-of-the-line cast-stone tomb-for-two is still a bestseller at 15-grand.
When casket maker Eternal Image began offering sports insignias last year, business took off.
Now the company also offers other logos, including the Star Trek insignia.
The largesse of grieving Americans contrasts sharply with Britain's response to the credit crunch.
English undertakers are now refusing to bury the poor without a guarantee from their government that it'll foot the bill, reports London's "Daily Mail" tabloid.
The British government pays about 12-hundred dollars to cover a no-frills burial for the poor.
Funeral homes often front the money to hard-up families and then collect the money from the state.
The credit crunch has made that impossible, and poor families report having to wait two months or more before receiving their government check.
Hundreds of bodies remain in cold storage in the meantime.
I do believe we all owe a debt of gratitude to our fellow shareholders that have attended the convention. They are there on their own time and at their own expense doing real DD for all of us. And if that isn't real DD I don't know what is. So as not to slight anyone I am not going to mention names lest I leave anyone out. So I am just going to pass on a big THANK YOU to all of you for what you have unselfishly done for the rest of us. Pillar #1 is completed successfully.
........al
4Godnwv- excellent post. Anyone worried about their own financial future would do well to read it.
..........al
From Dancy's neighborhood:
..........al
http://www.news.com.au/story/0,23599,24495946-23109,00.html
Funeral industry bucks economic downturn
By Barbara Liston in Orlando
October 14, 2008 04:28pm
Article from: Reuters
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BUSINESS is holding steady for the US funeral industry as consumers shrug off worries about the economy to give their loved ones a costly send-off.
"Everybody's affected by the economy. But people die. They all go to room temperature," said Bob Hanson, who sells pre-paid funeral insurance for an Idaho company and spoke on the sidelines of a National Funeral Directors Association meeting in Orlando.
According to the association, funeral services are an $US11 billion ($15.8 billion) industry in the United States. And business, actuarially at least, is on track for an upswing.
The association projects the US death rate will increase from eight people per thousand in 2007 to 9.3 people per thousand in 2020 and 10.9 per thousand in 2040, as baby boomers die off in growing numbers.
Underpinning future growth, spokeswoman Jessica Koth said the industry doesn't follow typical consumer spending patterns.
"People don't borrow from the 401k to buy groceries or gas," Koth said, referring to retirement savings accounts.
"This is a major life event, like a wedding, so people are willing to borrow from their 401k or cash in that life insurance."
In more cases than not, funeral directors and suppliers at this week's meeting said that business is holding steady, and even growing for some niche products.
Fortress Mausoleums' cast-stone, above-ground tombs range in price from $US5000 to $US15,000, but the $US15,000, two-person model is the most popular and still selling well.
"Our business is booming better than ever. It's a true story," said Fortress co-owner Don Magallanes.
Andy Lopez of Affinity Caskets sells caskets for military veterans, and he said his company has kept busy meeting the needs of World War Two veterans.
"When it comes to the military service, if the family understands the legacy that is there, the pride, the sacrifice, cost is almost never an issue," Mr Lopez said.
Traditional suppliers like Dick Stein, national sales director for Newman Bros, maker of bronze markers, urns and other grave monuments, and Larry Stuart, owner of Advanced Crematory Technology, both said business is on par with last year.
Filling the void for branded funeral merchandise, Eternal Image last year began selling the official caskets and urns of Major League Baseball teams.
They also offer caskets and urns with the insignia of several universities, including Purdue, Texas Tech and the US Military Academy at West Point.
Products branded with the stamp of the Vatican library, the American Kennel Association, the Cat Fancier's Association and the Star Trek television and movie series are also on offer.
"Because of our niche, we're growing. We have not been impacted (by the economy). We've even made a decision to roll out new products," said Nick Popravsky, Eternal Image's vice president of sales and marketing.
Not every funeral-related business has been untouched by the economic downturn, however.
Sales dropped 50 per cent in the past two months at Accubilt. The company makes three brands of hearses and had been gaining market share earlier this year thanks to a new hatchback model with an innovative pop-up urn carrier, according to Nathan Hurst, vice president for sales and marketing.
At McWhite's Funeral Home of Fort Lauderdale, the largest black-owned funeral home in Broward County, Florida, Albert McWhite said his customers had started cutting back on expenses so they can bank more of the life insurance payout.
"I think they're more alarmed by the (economic) news than anything else," Mr McWhite said.
It seems now almost the whole world is throwing money at the banking problem. It will recover eventually as will the stock market. The problem is even if the stock market hits it's old high, what will be the purchasing power of the dollar? The dow could hit 20,000 but if what costs today $1 then will cost $5 what has been gained? The tax man loves it but the serious inflation coming out of this mess will hurt just about everyone. Get ready for gold $2000 and silver $65. And those may be quite conservative.
............al
On the lighter side-
Back in 1990, the Government seized the
Mustang Ranch brothel in Nevada for tax evasion and, as required by
law, tried to run it. They failed and it closed. Now we are
trusting the economy of our country to a pack of nit-wits who couldn't make
money running a whorehouse and selling booze?
I hate to read anything into this Orlando news, but this sounded interesting;
More colleges, as well as NFL and NBA teams to choose from are on the way.
..........al
Orlando news:-
http://www.wesh.com/news/17705695/detail.html
Funeral Caskets Get Major League Makeover
Sports Teams, Other Personalization Offered
POSTED: 4:56 pm EDT October 13, 2008
UPDATED: 5:22 pm EDT October 13, 2008
[NEWSVINE: Funeral Caskets Get Major League Makeover] [DELICIOUS: Funeral Caskets Get Major League Makeover] [DIGG: Funeral Caskets Get Major League Makeover] [FACEBOOK: Funeral Caskets Get Major League Makeover] [REDDIT: Funeral Caskets Get Major League Makeover] [RSS] [PRINT: Funeral Caskets Get Major League Makeover] [EMAIL: Funeral Caskets Get Major League Makeover]
ORLANDO, Fla. -- The funeral industry is seeing a change. Caskets are going major league.
Caskets can be donned with images of the New York Yankees, the St. Louis Cardinals and the Boston Red Sox -- just to name a few.
Video: Personalization Offered For Caskets
"As baby boomer are making the decisions, we came out with the baseball urns last year and that was huge, and so this year here in Orlando we thought we’d roll out the caskets. The reception has been overwhelming," Nick Popravsky of Eternal Image said.
Olympic gold medalist Jason Lezak was on hand for the unveiling at the national funeral directors trade show at the orange county convention center.
"For me this is a pretty special thing," Lezak said of his gold medal. "So I could see myself having this on there."
"If you went to a funeral home and you wanted the Mets. It's about $4,500. Authentic Mets casket," Popravsky said.
"This is a neat idea. I come from very traditional but this something, it's interesting," Pennsylvania funeral director Vince Fuleno said.
The appeal is to the younger generation to provide a more personal funeral for sports fans.
More colleges, as well as NFL and NBA teams to choose from are on the way.
Meanwhile, Lew Hall, the President Of Florida Funeral Directors Association said the national average for a funeral is $6,000, but he said his industry is not seeing the layoffs and closures that others have in flailing economic times.
"At this time what we're seeing a lot of people coming to us for employment from other careers for some stability," Hall said.
The face of funeral service is also changing -- currently 60 percent of morturary science students are women. That's a 71 percent increase from 12 years ago.
Those involved in the industry are bracing for the worst, but, in the meatime, Hall said they are working on legislation to help the jobless make the transition into the funeral industry.
Heppie- it seems just a simple thank you is not adequate for your time and troubles. I'm just not eloquent enough to find better words. You have done us all a great service. Thank you.
........al
Hi dancy- we're having the first pillar this week and I understand out 4th pillar (heppie) might be there. Looking forward to updates from people that attend. I would hope funeralguy will give us an opinion post also. Haven't heard from him in a while. So we now look forward to pillers 2 and 3. Uplist and national distributor.
......al
Looking forward to your next newsletter. You have great insight on what's going on around us.
Thank you
.........al
JMHO, but I honestly don't think the financial system will crash and burn. I don't discount the possibility though. I think the crash will take place, in fact as we speak it is happenning. The burn? I just don't think the powers holding an economic groip on the world will let it happen. I think they will inflate their way out of this mess and we'll be left with dollars worth less than the old Hong Kong dollar. The economy will eventually adapt and the business cycle will proceed. I'm thinking they should have left the business cycle go without any interventions. It seems the more they mess with it the worse the end consequences will become. That's not to say I'm not unaware of a crash and burn. We can and dehydrate our own grown foods. I heat with plentiful wood. May have to get a good horse for transportation but am not going that far for now. I can hand pump my well and good clean water is plentiful. I wouldn't want to do it, but I could live without energy if I had to. I am also prepared to defend with whatever means necessary my little corner of the world. That would be a biggie in an energyless collapsed society.
..........al
I think most likely is they are waiting to make a report to investors on the convention. It makes sense.
.........al
It's because anyone with any insight into what has been happenning the past few decades can see what Ron Paul is saying is true. Every session of congress he introduces a bill to abolish the federal reserve bank. It is jokingly said that if it ever gets any serious attention that Dr Paul would end up dead in a "freak" accident. I don't think it's a stretch. Myself, I'm writing in Ron Paul for president this election. Neither of the candidates are offering me any hope. There are millions out here doing the same. The hope is to send a message to the run of the mill politicos that business as usual is no longer tolerable. I think the only thing that will save the US is a hugh dose of fiscal discipline. It will certainly hurt almost everyone and as such is politically unpopular. Meanwhile the empire continues to crumble.
.........al
Amen Rick, we are in total agreement there. GL2U
............al
Short Ron Paul interview:
http://news.goldseek.com/RonPaul/1223841654.php
.....al
The share structure as of 8/20/2008 is:
Total Authorized (Number from Transfer Agent) - 750,000,000
Preferred - 220,000,000
Common Available (Total Authorized MINUS Preferred) - 530,000,000
Common Outstanding - 378,244,044
Restricted Common Shares - 184,919,925
Float - 195,324,119
Treasury - 267,571,988
Rick, fair enough response. Based on our experiences trading penny stocks we have a difference of opinions. Good healthy debate is always good and we can agree to disagree on this. For my part, I sincerely hope that you are right and I am wrong. I have serious doubts but for my investment here I'm rooting for your camp. I've already sent in my 1040ES for this quarter but by the end of the year I'll be looking for some offsetting losses. I think that is plenty of time for Clayton and company to prove me wrong. And again I hope they do. I'd rather pay more taxes on the gains. What I am not going to do is keep posting my suspicions and point of view. I've said it once or twice and to keep on saying it is counterproductive. I'm in a wait and see mode. Again, I hope I'm wrong.
...........al
I see a share price heading slowly but steadily south. I see enough volume in a week to more than cover the supposed float. Yet there are enough shares accounted for right here to cover the float. I'd say dilution. As I haven't sold my shares as of yet I am certainly willing to listen to counter arguements. But please don't give me "Clayton said". His credibility is suspect at the least. I want to be convinced to change my opinion, but kindly give facts. All I've seen is PRs that seem to have no merit as nothing has come to fruition and the share price is declining. Please, convince me.
..........al
Think and say what you want, but I'll take the word of a TA before a CEO. A TA gives false info and the SEC is all over them if a complaint is filed. A CEO or IR can tell you anything over the phone. So you have to spend thousands to hire a lawyer to get back some part of your investment because you've been lied to by a pink sheet stock CEO from a company that has few if any assets to settle a judgement. Good luck. And lastly back to the TA, they can do nothing on their own. Whatever is done to the share structure MUST come from the company. We have dilution and I've neither seen nor heard anything that makes a convincing arguement otherwise.
.......al
Agreed, why increase the authorized if you have no plans to issue shares. We can only hope that they don't start dumping them anytime soon. Have faith in the company but keep close contact with the TA.
........al
A transfer agent that engages in fraud would not be a transfer agent for long. License would be pulled in a heartbeat. Trust the TA as they have no reason to lie and a lot of pain to go thru if they do and are reported to the SEC. I'll take the words of a TA over any CEO, IR or anyone else involved with any company. Believe the company rather than the TA at your own peril.
......al
As far as an investment, I think silver will do much better percentage wise over gold. It is a store of value just like gold and has been used as real money for thousands of years. I don't think the store of value label will ever go away. It is also being consumed industrially in many ways, negating the above ground supply. In fact there are some knowledgeable people that are claiming there is more above ground gold available than there is silver. If and when the fiat systems go into total failure worldwide I would think silver would have it's place in a barter type exchange society. Gold is great but what about for smaller items. I would not want to trade a k- rand for a loaf of bread unless it's a final act of desparation. It's a stretch I know. But I think those old 90% silver US coins would be a hit.
.......al
from John Mauldin- interesting take on the effects on international trade
............al
Posted Oct 10 2008, 10:20 PM
by John Mauldin
Construction Lending: The Next Shoe to Drop
Lehman at the Center
Iceland Guarantees What?
Letters of Credit: Going, Going Gone?
What to Do and Where Do We Go from Here?
I have been writing for almost a year that the next shoe to drop on US banks would be commercial construction lending. Today we look at some hard numbers. We look across the pond to sort out the problems in Europe. We look at the consequences of the losses stemming from Lehman. Then we look at one of the more serious consequences of the banking crisis, one that will bring the crisis home to you. Finally, we look at what the various governments of the world must do in response. It may not be fun, but it should be interesting. And it is important. Feel free to forward this letter to anyone who asks why we not only need the bailout but will need even more coordinated government action.
But first, let me offer a note of optimism before I serve up the not so good news. This is not the end of the world. There are a lot of very positive things happening in the US and the world. Companies are creating new inventions. Much of the economy, including health care, is moving along fine. I have lived through two serious recessions (1973-74 and 1980-82), and the point is that a free-market economy will find a way to eventually get back to solid growth. Recessions are simply part of the business cycle. Congress cannot repeal the business cycle. This will not be the last recession of my life. I hope to live long enough to go through 4 or 5 more.
Depressions are caused by governments making major policy mistakes. And we have made some in the areas of not regulating mortgage lending, allowing the five large investment banks to increase their leverage to 30 or 40 to one in 2004 (what was the SEC thinking?), and failing to oversee the rating agencies. That is behind us. It will make a normal recession deeper and the recovery longer, as I have been forecasting for some time.
But as I argue below, immediate actions must be taken by the government to avoid a much deeper problem. To not take actions to stem the credit crisis would be that major policy mistake which would compound all the other mistakes. I think everyone knows the seriousness of the problem and will act. Let's pray they do.
But whatever happens, there will be plenty of opportunity for investors and entrepreneurs to exploit. The world is on the cusp of a remarkable explosion of new technology of all sorts that will transform our lives. This march of progress went on unchecked last century, through two world wars, major depressions, numerous smaller wars, recessions, financial crises all over the world, famines and natural disasters, not to mention a lot of man-made ones.
The current crisis will pass. None of us will want to go back to the "good old days" in 20 years, for we will be living in the best of times. Just make sure you keep your powder dry so that you can enjoy it. And now, let's look at some less than uplifting news.
Construction Lending: The Next Shoe to Drop
The Bank Credit Analyst is one of the more reliable sources I know for information. They estimate that total losses from the current debt crisis could be anywhere from $1.1 trillion to $1.7 trillion. They estimate roughly half to be in the banking sector, or around $750 billion, and almost $590 billion of that has already been written off. That means that the $700 billion from the TARP (government bailout) program may actually be enough to handle the losses and inject some actual capital into the banks. Maybe.
The losses from subprime and other mortgage-related loans are well known. Most of those losses are in the larger banks, as smaller banks simply could not participate to any great extent. What is less well understood are the potential losses which smaller banks are in fact exposed to in the area of construction lending. Lisa Marquis Jackson, now writing for John Burns Real Estate Consulting (one of the best sources for hard real estate data), gives us some answers to the question of "how much?"
Outside of the large home builders and developers, most of the lending for construction of homes and commercial property comes from regional and local banks. A local home builder may finance 5-10 homes, or a developer a small strip mall or apartment complex, from their local bank. Look at the graph below. Since 2001, delinquencies had been rather small and well-contained. Then starting 18 months ago, the delinquency rates started rising.
Again, note that these are delinquency rates for business loans from banks and not for individual mortgages.
Construction Loan Delinquency by Sector
Over 16% of loans made for condominium construction are now delinquent. Loans made for single-family home construction are only slightly more than 12% overdue. But that masks a much bigger problem. Single-family loans account for 86% of all for-sale residential construction loans outstanding.
The good news is that for the top 100 banks by size, single-family loans make up only 2% of the total. But that small portion totals $245 billion. And condos add another $41 billion. That puts almost $40 billion at risk of default at today's delinquency levels.
For-Sale Residential Construction Loans Outstanding
It will be worse for many smaller banks, as they have larger commercial construction loan portfolios. As noted below, this may require some proactive action on the part of regulators.
Lehman at the Center
Now we know the consequences of allowing Lehman to fail. The severity of the credit crisis was deeply, severely worsened by the failure of Lehman. Based on the results of the credit auction today, sellers of protection will need to make cash payments of more than $270 billion, BNP Paribas SA strategist Andrea Cicione said in London. Some funds may be forced to dump assets to meet the payment demands if they haven't hedged.
How much of that debt will eventually have to be absorbed by various government programs or direct capital infusions? It is too soon to say, but you can bet it will be a lot.
If there is any good news to this, it is that much of the write-downs have already been made. It now looks like the Lehman CDS market sorted itself out with no failures, according to the International Swaps and Derivatives Association.
We have dodged a huge bullet. But the anguish this has put the credit markets through the past month was avoidable. The CDS markets MUST be made to migrate to a regulated clearing entity like the Chicago Mercantile Exchange. Next week would be a good time. While there have been serious losses by various players in other exchange-traded markets, there was no systemic risk, as everyone knew the value of their various securities, whether futures or options or other derivatives, and knew they would get their full value when sold.
With Lehman, no one really knew until late today. Thus banks and hedge funds had to sell anything they could in order to meet possible payments or losses, which caused wildly swinging prices in every market.
It is my bet that future memoirs of the various main actors and books on the credit crisis will look back at the failure of Lehman as the proverbial "last straw" for the unregulated CDS markets.
Iceland Guarantees What?
Let's get this straight. Iceland is a country of 300,000 people. I've never met an Icelander I didn't like. They are an extraordinary people. A few decades ago, they made their money on fishing, farming, and trading. Then they discovered banking and started to take deposits from anywhere and everywhere and make loans outside the country. Soon, the various banks' assets were over $140 billion, about 10 times the total GDP of the country, and they had far more foreign depositors than citizens. With foreign reserves of just 2 billion euros, what could the government do if there was a crisis?
Now Iceland has had to take over the banks and guarantee deposits. They also had to turn to Russia for a loan. Does anyone think Putin would hand out a no-strings-attached loan? Russia needs a refueling station for its Navy and will likely get it.
Note that Iceland gave its citizens the ability to withdraw money but did not extend that same privilege to the citizens of other countries. England and the Netherlands have already gone to court.
As noted by good friend Dennis Gartman this morning, "Since then, things have only gotten worse, with the UK government moving to freeze the assets of Icelandic companies in the UK, and Her Majesty's government has said that it will take whatever further actions it deems necessary to protect the assets of British companies and citizens currently held in Iceland, doing 'whatever is necessary to recover [our] money.'
"Thus, not only are banks fearful of lending money to banks; and not only are banks fearful of lending money to individuals and/or companies; and not only are individuals and/or companies fearful of lending money to the banks, but now nations are fearful of lending to other nations. This is Smoot-Hawley writ large, and of all of the circumstances that have prevailed in the course of the past several days, this is the worst; this is the most difficult to deal with. This is madness."
As noted last week, Ireland set off a feeding frenzy when it guaranteed all deposits in its banking institutions. Five billion euros poured in over the last week. One by one, European governments are having to guarantee their loans to keep money from leaving their institutions.
Let's look at the Irish guarantee on the face of it. There are six Irish banks, holding assets of $576 billion. That works out to three times Ireland's gross domestic product, or about $200,000 for every working person in the country. (Bedlam Asset Management) Yet depositors flooded them with money in just a few days.
This is a sign of panic. One goes where one can, trying to protect what one has. On the face of it, how could Ireland really guarantee all the deposits? Yes, there are real assets against the loans, but at what price? Could Ireland borrow enough to make good on even a portion of those assets, should they decide to walk? This is sheer panic.
Letters of Credit: Going, Going Gone?
Just as the business world is dependent upon commercial paper as its life blood, the world of global trade depends on letters of credit (LOC). Without LOCs, the world of trade quickly freezes up.
If you are a manufacturer of a product and want to sell to someone outside your borders, you typically require a letter of credit from the buyer before you load any cargo at a port. A letter of credit from a prime bank is considered to be proof of your ability to pay. It not only can be a source of ultimate payment, it can be a source of inventory financing while goods are in transit.
And if you are a business which is buying a product, you do not want to release money until you know the product is on the way. There are buyer's and seller's agents who make sure these things happen seamlessly, and world commerce had grown because of it.
Now we are starting to get anecdotal evidence that this extremely vital market is also freezing up. If you think the problems stemming from a meltdown with the commercial paper markets are threatening to the world economy, they are small potatoes when compared to a seizure in the letter of credit markets.
I had been thinking about this for a few weeks. Then an article posted on Naked Capitalist caught my eye. Quoting:
"At the end of the day, if every counterparty is bad then you don't have a market and you don't have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begin to show up. THE CENTRAL BANKS CAN'T LET THAT HAPPEN OR WE HAVE NO ECONOMY, LET ALONE A CREDIT SYSTEM."
And they quote the following story from The Financial Post of Canada:
"The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
"Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said.
"'There are all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit,' said Bill Gary, president of Commodity Information Systems in Oklahoma City. 'The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy.'
"So far the problem is mostly being felt in U.S. and South American ports, but observers say it is only a matter of time before it hits Canada. 'We've got a nightmare in front of us and a lot of people are concerned it's going to get a lot worse,' said Anthony Temple, a grain marketing expert based in Vancouver.
"Access to credit is key to the survival of maritime trade and insiders now say the supply is being severely restricted. More than 90% of the world's trade by volume goes by ship. 'The credit crisis has made banks nervous and the last thing on their minds is making fresh loans,' Omar Nokta, an analyst at investment bank Dahlman Rose, said in an interview with Reuters.
"While shipping has always been a cyclical industry whose fortunes rise and fall with the global economy, analysts said the current crisis over the drying up of credit is something they have never seen before."
If banks are refusing to go into the LIBOR market and lend to each other, then why would they want to take a letter of credit either? At first, it will be a small trickle, which is how the commercial paper meltdown started. Then it will be a flood.
The one good sector in the US is its export sector. Start slowing that down due to a lack of ability to ship or receive payments and see what happens to an already shrinking economy. If anyone wants to see how the credit crisis can affect Main Street, look no further.
It is hard to overstate the problem and the potential for it to create a true economic meltdown. It must be dealt with, and soon. See more below.
What to Do and Where Do We Go from Here?
The credit markets are frozen. Period. The chart below shows one week LIBOR going back for four years. Notice the gradual rise into 2005? It was a lock-step move with the Fed funds rate. And the less smooth drop was also in concert with the Fed funds rate. The recent spike is not responding to this week's Fed funds cut. The spreads are wider than ever. The problem is not just the price of LIBOR. There is no trading at any price. The LIBOR market is a fiction today. And left unchecked, this lack of dealing with other banks will spread to letters of credit and the international trade markets.
One-Week LIBOR: Daliy Close Since 2004
The G-7 group of nations is holding an emergency meeting this weekend. As I write this, reports are coming in that there are serious disagreements as to what to do. They cannot even agree on a press release.
Former Federal Reserve Chairman Paul Volcker urged that "all of them [the G-7 nations] now admit or all of them own up to the fact their own banks are going to need support," in an interview on PBS Television's Charlie Rose Show yesterday.
The real leadership and innovation in the banking crisis seems to be coming from London. UK Chancellor of the Exchequer Alistair Darling told Bloomberg Television that "It is absolutely essential that the world's largest economies act together, and act together now." Darling wants countries to guarantee lending between banks, either by turning central banks into clearing houses for the loans or having governments back them. (Bloomberg)
Sadly, he is right. It has come to that. We are close to the point of no return. Now, we are not talking about bailing out financial institutions. We are literally talking about saving the world economic system. Failed bank lending and a large decrease in letters of credit would guarantee a deep world recession. The last depression produced severe political backlash and a world war.
Frankly, it is simply not worth the risk to say that we should sit back and let the markets work. They are not working, and there are no signs they will. As with a patient whose heart has stopped, it is time to apply the shock treatment.
What should we do? We must simply guarantee LIBOR (interbank) lending worldwide for some period of time (say 3-6 months) or until banks can trust each other's balance sheets. With the Lehman crisis going on, with more mortgage credit problems being revealed, no one knows what their own exposure is, let alone what the exposures of other banks are. Until that dust settles, the LIBOR market will remain frozen. The longer this is allowed to continue, the worse the problems will be. And it needs to be handled on a coordinated basis.
Banking is truly global. The system cannot just be guaranteed by England or the US. It must be done in concert with all major nations contributing their share. Businesses must be able to trade across borders through banks that will accept one another's letters of credit.
Second, we must consider direct investment in some banks. This should be done as preferred shares, with the view to eventually selling the paper back into the market. To make sure that money is not invested poorly or on bad terms, the various governments should invest alongside private investors, on the same terms. If a bank cannot find private investors willing to invest alongside the government, then they should be quietly assisted into the arms of stronger banks. Banks that are too big to fail must be taken over.
Businesses must have access to credit as well. They cannot get it from banks with impaired balance sheets. This is critical to world trade as well as local commerce.
Third, for a short period of time, all bank deposits in the US must be guaranteed. Weak banks must be absorbed into stronger banks as soon as possible. There are banks with large construction loan books in the hardest-hit parts of the US housing crisis, and they need to be put down as quickly as possible. We are already seeing deposits leave banks, many of them small, due to depositor concerns that small banks will not be seen as too big to fail. This must stop. A blanket guarantee will help.
Fourth, mark-to-market rules must be reconsidered. A blanket one-size-fits-all rule clearly does not work and is part of the problem. As I have documented for the last month, there are numerous assets that have a market price far below their intrinsic value. That is because there are simply no buyers. If everyone is selling in order to raise capital, then that will drive down prices to bargain levels below intrinsic value. That does not mean the asset in question would not have a higher value in a market not in crisis.
These are extraordinary times. I know there will be those who believe the markets should be allowed to work or simply want those who created the crisis to pay. I do understand the anger. I too am angry, and have been for a long time. Those of us who saw this crisis coming are frustrated that no one bothered to pay attention.
But now that we are in it the midst of the crisis, there is no going back. We must look forward and do what we can to avoid an even worse crisis and potential depression. I believe we can do so if governments act promptly.
We are already in what will prove to be one of the longer recessions on record. If we look at the Leading Economic Indicators, which have about a 9-month forward-looking view, it will be late next year before we start to grow once again. Given that everything peaked last October through January (sales, employment, etc.), it is likely that the recession will be dated from the beginning of this year.
Long-time readers know I have been wary of the stock market for several years, suggesting that investors either avoid stocks or have close stop losses. No one taking my advice is long-only this market. Not that I have been perfect, but as it turns out, I was right on this one.
I have been fielding calls all week asking me if I think we are close to a bottom in the stock market. And my answer is, we are close to a short-term bottom, but I think we will trade lower over time due to what I think are going to be poor earnings for the next few quarters. If you are a trader (and that means you have been doing it for some time - not the time to get on the job training!), then maybe you can catch a rebound, which is overdue. But (and here is the big caveat) if there is no global coordination on some or all of the recommendations I made above, this is not going to be pretty. It will end in tears. Let's hope the authorities can get their collective act together.
The next two weeks I'll send a two-part letter on the longer-term investment view and how you should position your portfolios. Stay tuned.
Share structures come from the transfer agent. They are agents of the company that take care of issuance of shares among other duties.
The only dumb question is the one you don't ask.
.......al
Completly egnoring what the company has done to past shareholders is something that future shareholders or investors need to know.
I couldn't agree with you more. It's all part of due diligence. I'm sure all long term holders already know these things. Has it been a deterance? For some, maybe. For the short term swing trader I'm sure it is. While the company has done some things in the past which in no one's opinion has been shareholder friendly, they have been moving forward. I really don't think they are sitting around doing nothing while the uplisting process is ongoing. I can't speak for anyone else but my vision on the future of this company is long term and very positive. I would also hope that anyone coming to this board would not buy stock in this company based on what I may post. I would hope that they check around first and make their own decision based on what they find. The info is out there, both bad and good, for anyone willing to look.
Gators still looking good-
.........al
Joe, great advice. Gov't printing presses are working full blast on overtime. PPT is working hard. They can't seem to prop up the stock market, so they are sneaking in the back door suppressing the gold price and trying to strengthen the dollar. It will fail and gold will skyrocket. Turning incresingly useless dollars into hard assets is the only way to protect yourself from what is coming, and it ain't pretty. There are still hundreds of $trillions in derivatives that have to unwind.
......al
It is a sad thing to behold. In the world of securities trading it basically comes down to us vs. them. Us being investors trying to make a few bucks and them being dealers, hedge funds, brokers, market makers, and sometimes even company managements(read diluting into BS PRs) trying to separate investors from what they have. Why would anyone want ETNL or any other company for that matter to fail and see all investors lose money? To deliberately take yourself out of the "us" category and join "them" just doesn't make sense. Them have worlds of info flows that us can't access to stack the odds against the individual investor. Them don't need help. Us can usually use all the help we can get. Facts are neutral and are always subject to the interpretation of the reader. Twisting facts out of context suggests an agenda be it positive or negative. Trying to warn new potential investors of the bad is as laudable as accentuating the positives. Wishing and hoping a public company will fail and investors lose their investment? A very sad thing indeed. It becomes very difficult to then respect someone's views. Just MHO
........al
Financial Crisis: Who is going to bail out the euro?
Europe must pull together if it is to avoid further financial disaster, argues Ambrose Evans- Pritchard.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3161588/Financial-Crisis-Who-is-going-to-bail-out-the-euro.html
By Ambrose Evans-Pritchard
Last Updated: 10:56PM BST 08 Oct 2008
Comments 11 | Comment on this article
Europe must pull together if it is to avoid further financial disaster
Frankfurt's Eurotower, home to the ECB Photo: AFP
Better late than never. A half-point cut in global interest rates may not halt the slide into a debt deflation, but at least we can hope to avoid the errors of the Great Depression. The slump – remember – had little to do with the 1929 crash. What turned the mild recession of 1930 into the sweeping devastation of the early 1930s was an entirely avoidable collapse of the banking system in both the US and Europe.
The culprit was tight money, made worse by beggar-thy-neighbour policies. The key levers of power in Western finance were held by the sorts of people who now think it is a good idea to drive our banks over a cliff.
Thankfully, wiser heads are in charge this time. Yesterday's move by the US Federal Reserve, the Bank of England, the European Central Bank (ECB), the Canadians, Swiss and Swedes – with Chinese help – is the first time in this sorry saga that the big guns have joined forces in monetary policy to arrest the disintegration of the credit system. The Fed and the ECB are no longer fighting. That alone is a massive change for the better.
However, the failure to offer a lifeline to distressed banks across the world earlier by cutting rates is unforgivable. The G7 bloc of economic powers is in recession or on the cusp, including Japan – where the Nikkei index fell by 10 per cent yesterday. American consumer credit is contracting at an annual rate of 7.9 per cent, the most violent squeeze on record.
The Baltic Dry Index measuring freight rates for shipping has fallen 70 per cent since May. The whole nexus of commodities except gold, now a super currency, is in freefall. Oil has fallen by 41 per cent from its peak, copper by 38 per cent, wheat by 50 per cent. Few with their finger on the pulse of global commerce now think the threat of inflation is remotely credible. Tesco's Sir Terry Leahy says food prices are now deflating at two per cent in his stores.
My view is that Washington has done what is needed to prevent the collapse of the US economy. It has taken over the entire credit system, after all, surpassing Roosevelt's New Deal.
The US has guaranteed the $3.5 trillion money market funds. It has nationalised the $5.3 trillion pillars of the mortgage market, Fannie and Freddie. The Fed is accepting any junk as collateral at its lending window. This week it went the whole hog after panic hit the $1.6 trillion market for commercial paper. It is now offering loans without any security at all. The US government has become a bank. Yes, this is US socialism. What is the alternative?
The $700 billion Paulson rescue plan should put a floor under the colossal dung heap known as "structured credit". It is a bad plan, since it does not target the money on the recapitalisation of the core banking system. But it will help refloat lenders by raising the price of beaten-down securities somewhere nearer their true "hold-to-maturity" worth.
An ugly recession is coming, as debt leverage kicks into reverse. The purge will be slow and punishing. Some 12 million Americans are already trapped in negative equity, but at least they can see where this might end. After much drama, the US institutions have risen to the challenge. The Fed, the Treasury, and Congress have managed to take some sort of coherent action. The jury is out on Europe, where the hurricane is now smashing the banking system.
Those such as German finance minister Peer Steinbruck – who thought the sub‑prime crisis was just an "American problem" – have had a rude shock. The collapse of Hypo Real with €400 billion of liabilities has made him face the unsettling truth that German banks have played a big part in this $10 trillion speculative venture undertaken by the whole global banking industry.
Europeans borrowed vast sums in dollars in the offshore money markets when dollar credit was cheap. This was leveraged by multiples of 50 or 60 to fund whatever craze was in fashion – Russia, Brazil, infrastructure. The credit crunch has left these banks floundering. They have to pay back a lot of dollars, yet the underlying assets are crumbling. They are caught in a self-feeding spiral of "deleveraging". Even those European banks that stuck to stodgy investments are caught in a vice, since many rely to some degree on three-month loans for funds. That market is jammed shut. They cannot roll-over their loan books. This way lies sudden death, as Hypo discovered.
Who in the eurozone can do what Alistair Darling has just done in extremis to save Britain's banks, as this $10 trillion house of cards falls down? There is no EU treasury or debt union to back up the single currency. The ECB is not allowed to launch bail-outs by EU law. Each country must save its own skin, yet none has full control of the policy instruments.
Germany has vetoed French and Italian ideas for an EU lifeboat fund. The former knows exactly where that leads. It is a Trojan horse that will be used one day to co-opt German taxpayers into rescues for less Teutonic EMU kin. One can sympathise with Berlin. But sharing debts with Italy and Spain was implicit when they agreed to launch the euro. A shared currency entails obligations. We have reached the watershed moment when Germany has to decide whether to put its full sovereign weight behind the EMU project or reveal that it is not prepared to do so in a crisis.
This is a very dangerous set of circumstances for monetary union. Will we still have a 15-member euro by
The paper markets for gold and silver have been skewed by intervention and manipulation. When the comex fails to deliver on the contracts they have sold, it will probably right itself. It is near impossible to buy the physical at spot prices. There are lots of buyers and few sellers.
........al
JMHO, but I think a better analogy is a coiled spring.
.......al
And the companies become thrifty and spend our money wisely-
AIG Draws Fire for Executives' $440,000 Post-Bailout Retreat at Posh California Resort
Tuesday, October 07, 2008
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WASHINGTON — Less than a week after the federal government had to bail out American International Group Inc., the company sent executives on a $440,000 retreat to a posh California resort, lawmakers investigating the company's meltdown said Tuesday.
The tab included $23,380 worth of spa treatments for AIG employees at the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government it needed to stave off bankruptcy.
The retreat didn't include anyone from the financial products division that nearly drove AIG under, but lawmakers were still enraged over thousands of dollars spent on catered banquets, golf outings and visits to the resort's spa and salon for executives of AIG's main U.S. life insurance subsidiary.
"Average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," House Oversight Committee Chairman Henry Waxman, D-Calif., scolded the company during a lengthy opening statement. "Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."
The hearing disclosed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released Tuesday by a congressional panel examining the chain of events that forced the government to bail out the conglomerate.
The panel sharply criticized AIG's former top executives, who cast blame on each other for the company's financial woes.
"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn Maloney, D-N.Y. "You were just gambling billions, possibly trillions of dollars."
AIG, crippled by huge losses linked to mortgage defaults, was forced last month to accept the $85 billion government loan that gives the U.S. the right to an 80 percent stake in the company.
Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.
For instance, federal regulators at the Office of Thrift Supervision warned in March that "corporate oversight of AIG Financial Products ... lack critical elements of independence." At the same time, Pricewaterhouse Cooper confidentially warned the company that the "root cause" of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.
Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.
Three former AIG executives were summoned to appear before the hearing. One of them, Maurice "Hank" Greenberg — who ran AIG for 38 years until 2005 — canceled his appearance citing illness but submitted prepared testimony. In it, he blamed the company's financial woes on his successors, former CEOs Martin Sullivan and Robert Willumstad.
"When I left AIG, the company operated in 130 countries and employed approximately 92,000 people," Greenberg said. "Today, the company we built up over almost four decades has been virtually destroyed."
Sullivan and Willumstad, in turn, cast much of the blame on accounting rules that forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.
Lawmakers also upbraided Sullivan, who ran the firm from 2005 until June of this year, for urging AIG's board of directors to waive pay guidelines to win a $5 million bonus for 2007 — even as the company lost $5 billion in the 4th quarter of that year. Sullivan countered that he was mainly concerned with helping other senior executives.
Sullivan also came under fire for reassuring shareholders about the health of the company last December, just days after its auditor, Pricewaterhouse Cooper, warned of him that AIG was displaying "material weakness" in its huge exposure to potential losses from insuring mortgage-related securities.
AIG's problems did not come from its traditional insurance subsidiaries, which remain healthy, but instead from its financial services operations, primarily its insurance of mortgage-backed securities and other risky debt against default. Government officials feared a panic might occur if AIG couldn't make good on its promise to cover losses on the securities; investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.
AIG suffered huge losses when its credit rating was cut, thanks largely to complex financial transactions known as "credit default swaps." AIG was a major seller of the swaps, which are a form of insurance, though they are not regulated that way.
The swap contracts promise payment to investors in mortgage bonds in the event of a default. AIG has been forced to raise billions of dollars in collateral to back up those guarantees.
Sullivan said many of the firm's problems stemmed from "mark to market" accounting rules mandating that its positions guaranteeing troubled mortgage securities be carried as tens of billions of dollars in losses on its balance sheet.
This in turn, said former AIG chief executive Willumstad, who ran the company for just three months after Sullivan left, forced the firm to raise billions of dollars in capital. The federal rescue came after AIG suffered disastrous liquidity problems after its credit rating was lowered, forcing the company to come up with even more capital.
"AIG was caught in a vicious cycle," Willumstad said in the testimony.
Greenberg said that AIG "wrote as many credit default swaps ... in the nine months following my departure as it had written in the entire previous seven years combined. Moreover, "unlike what had been true during my tenure, the majority of the credit default swaps that AIGFP wrote in the nine months after I retired were reportedly exposed to subprime mortgages."
But Sullivan said the complex swaps had underlying value, even as the market for them froze, sending their book value plummeting and forcing AIG to scramble for collateral.
"When the credit markets seized up, like many other financial institutions, we were forced to mark our swap positions at fire-sale prices as if we owned the underlying bonds, even though we believed that our swap positions had value if held to maturity," Sullivan said.
The hearing is the second in two days into financial excesses and regulatory mistakes that have spooked stock and credit markets and heightened fears about a global recession.
TAKI- I've been advocating no margin for years to anyone willing to listen. It fell mostly on deaf ears. No margin, no debt, and holding gold and silver will help you survive if not beat the coming meltdown. And be prepared to defend it. All the dollars in the world being thrown at the "problem" will not help if there is no confidence in the dollar anymore. This is only the beginning. Over $500 trillion in derivatives to unwind.
........al
US Mint halts some American Eagle coin production
Tue 7 Oct 2008, 12:02 GMT
[-] Text [+]
NEW YORK, Oct 7 (Reuters) - Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.
"Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high," the U.S. Mint said in a Monday memorandum to its authorized coin dealers.
"The U.S. Mint has worked diligently to attempt to meet demand, however, blank supplies are very limited and it is necessary for the U.S. Mint to focus remaining bullion production primarily on American Eagle Gold One Ounce and Silver One Ounce Coins," the Mint said.
The Mint said it would continue to supply one-ounce American Eagle gold coins and one-ounce American Eagle silver coins on an allocation basis to coin dealers.
For half-ounce and quarter-ounce American Eagles, the Mint said that inventory was depleted last week and no more coins would be produced for 2008.
Produced from gold mined in the United States, the American Eagles have been novel items among collectors and investors since their introduction in 1986. Each coin has a face value of $50 but it is sold by authorized dealers at a premium to the price of gold.
Coin dealers from the United States to Canada have recently reported a surge in buying of bullion coins and other gold products as a worsening crisis in the financial markets prompted people to seek a safe haven in precious metals. (Reporting by Frank Tang; Editing by John Picinich)
http://africa.reuters.com/wire/news/usnN07435260.html
If you like monthly income, Canroyals are looking mighty good right now.
.......al
I think you're a lot safer in Canada than in the US.eom