Abet Chichi2

[stockmen]

The best article I have ever seen .
I have tried to post it, however I am not able . Here is the web page , try and get to it, its the best I have ever read about what is going on NOW
When you find lies lies lies , you are there . I have tried to post it , if there are any mistakes sorry .


http://www.moneyandmarkets.com/

Here is part of it
Lies, lies, lies!
We’ve just
seen the biggest
bogus stock market
rally in our
lifetime, built on
the most blatant
pack of lies we’ve
ever heard:
■ Wall Street and Washington
say the financial crisis is
behind us. But the International
Monetary Fund (IMF) has just
trashed that theory faster than
a high-speed paper shredder.
■ They say big banks can’t
fail. But behind the headlines,
key Fed officials are now admitting
that the “too big to fail”
doctrine is, itself, failing.
■ They say your insurance
company is safe; and that even
if it fails, it’s guaranteed by
the state guaranty funds. The
truth: According to a leaked
official memorandum from
America’s largest insurance
company, many insurers could
fail and the state guaranty associations
could be quickly
wiped out.
■ They say the economy is
showing signs of recovery. But
both the IMF and the World
Bank have declared that the
global economic decline is actually
spreading, gaining
momentum, and setting off a
chain reaction of deeper declines
And they say that if you
just hold onto your stocks, they
will bounce back. But history
demonstrates that, even if you
could wait a quarter century
for that to happen, you could
be sorely disappointed.
All these official and unofficial
pronouncements are
directly and broadly refuted
with the evidence we provide
in this issue ...
No B.S., No Punches Pulled
Safe Money has never been
shy about challenging conventional
wisdom.
We bucked the real estate
lobby in 2005, warning you,
in no uncertain terms, that the
housing market was going to
collapse.
We told you to expect a
collapse in the derivatives
market way back in 2006, long
before mainstream analysts
even heard of the high-risk
Credit Default Swaps.
And we predicted the failure
or bailout of major
institutions — Bear Stearns,
Lehman Brothers, Citigroup,
General Motors, Fannie Mae,
and others — long before they
occurred.
Now, we’re warning you
again — in no uncertain terms
— that the financial crisis is
NOT over. Far from it!
Yes, there are tentative
signs of improvement in the
housing market, the original
source of this crisis (more on
that on page 3). But those improvements
are overwhelmed
by the fact that the debt virus
has spread to many other
credit markets.
Remember: When the crisis
began, it was confined
mostly to a few U.S. subprime
mortgage brokers. Now ...
It is wreaking havoc on insurers,
pension funds,
megabanks, and non-bank
lenders. Even with the latest
rally,
■ shares of insurers like
MetLife (MET) and Hartford
(HIG) are down 55 percent and
86 percent, respectively;
■ Citigroup (C) and Bank of
America (BAC) have plunged
88 percent and 79 percent, respectively;
and
■ leading non-bank lender
CIT Group (CIT) has tanked
83 percent.
It is jumping borders, infecting
Latin America, Eastern
Europe, Southeast Asia, and
nearly everywhere in between.
Iceland, Latvia, and the
Ukraine have all needed massive,
multi-billion dollar
bailouts, while even more developed
economies like the
U.K., Spain, and Ireland are
teetering on the brink of financial
ruin.
It is now hammering consumers
and corporations alike,
as losses spiral higher with
each passing day.
This leaves investors like
you with two choices:
1) You can listen to Wall
Street’s siren song ... believe
all the so-called “experts” who
have been wrong at every step
of the way during this credit
crisis ... and buy into their sales
pitches. Or ...
2) You can continue to take
the prudent approach we’ve
correctly advocated here in
Safe Money.
We’ll give you explicit instructions
on pages 6 and 7.
First, though, we debunk the
lies ...
Lie #1. “The Financial
Crisis Is Behind Us.”
When we told you 16
months ago that losses from
mortgage-related investments
would hit
$1 trillion, most
pundits chuckled and thought
we were nuts.
Now, they’re not laughing
any more. In its just-released
Global Financial Stability
Report,1 the IMF estimates that
already-written-down losses
are precisely the same as our
future estimate was back then:
$1 trillion.
But those are just the losses
banks have admitted so far.
Looking to the future, the
IMF just raised its estimate of
losses on U.S.-originated loans
to a stunning $2.7 trillion.
Throw in losses from Asia,
Europe, and elsewhere, and it
predicts a staggering $4.1 trillion
flood of red ink.
With only $1 trillion written
down so far, that means this
global debt crisis is still likely
to get FOUR times worse!
Why are credit losses
climbing inexorably higher?
Simple. As we’ve warned from
the outset, the debt collapse
is not containable:
■ In commercial real estate,
the apartment vacancy rate just
jumped to 7.2 percent, the
highest level in five years.
Office tenants vacated the most
space since just after the 9/11
terrorist attacks, while retail
property rents dropped by the
biggest margin in a decade.
■ This is pressuring landlords,
driving more into default
on their loans: Delinquency
rates on commercial mortgage-
Martin and I
take great pride
in our real estate
track record. We
warned you well
in advance that
the housing market
would implode ... that the
mortgage industry would collapse
... and that virtually any
stock exposed to building, construction,
banking, or finance
would suffer immense collateral
damage. You could have
made — or saved — a fortune
by targeting or avoiding those
vulnerable sectors.
Now, though, we see a
change: Put simply, the nexus
of America’s Second Great Depression
is shifting. The
housing industry is no longer
the primary driver of this
downturn. To the contrary,
home prices have fallen so far,
so fast ... and sellers have gotten
so desperate ... sales
volumes are beginning to pick
up in select markets.
Home prices should continue
to fall because of approximately
1 million excess housing units
for sale in this country. But we
believe the sharpest declines in
residential real estate are, for
now, mostly behind us. So for
those playing the downside in the
housing market by shorting residential
real estate-related stocks,
we would recommend moving to
the sidelines.
And if you’re fed up with
renting, waiting anxiously to
buy a home, shop around. You
may find some compelling values
that are just too good to pass
up. However, be sure you’re
confident of your income and
purchase strictly what you can
afford. (See Amber Dakar’s column
on page 9.)
Warning: Commercial real
estate is still in an earlier stage
of its collapse. In this sector, we
expect sharply lower prices,
much higher vacancy rates, and
more big declines in rents. So be
sure to avoid REITs and other
stocks exposed to commercial
real estate.
Housing: A Light at the
End of the Tunnel?
By Mike Larson
backed securities (CMBS)
tracked by S&P continue to
rise, hitting 1.85 percent in
March with no end in sight.
■ In home equity lending,
more than 3 percent of all U.S.
borrowers are now late on their
payments, the highest delinquency
rate the American
Bankers Association has ever
found.
■ Credit card charge-off rates
have gone through the roof.
At lenders like Capital One
Financial (COF) and American
Express (AXP), they’re 1 http://www.imf.org/external/pubs/ft/
gfsr/2009/01/pdf/text.pdf
nearing unheard-of doubledigit
levels — 9.3 percent and
8.8 percent, respectively.
■ In the derivatives market,
the total held by U.S. banks
has climbed to a whopping
$200.4 trillion — and losses
on those bets continue to rise:
Banks lost $9.2 billion on their
derivatives plays in the fourth
quarter, the second-biggest
quarterly loss on record.
■ And in other parts of the
globe, the crisis is far worse!
As a result, behind their bogus
profit reports, big banks
are taking some of the biggest
hits ever:
�� Citigroup (C) used three
“perfectly legal” — but highly
questionable — tactics to make
its numbers look better:
■ The bank inflated the value
of bad assets on its books,
beefing up after-tax profits by
$413 million;
■ toyed with loss reserves to
boost profits by at least $1 billion;
■ and marked down its own
debt to create $2.7 billion in
extra profits.
When you cut through the
flim-flam figures, instead of
a $1.6 billion profit, you come
up with a $2.5 billion loss. And
you still have a company that
has needed tens of billions of
dollars in government aid to
stay afloat. No wonder its main
banking unit merits a high-risk
D+ grade from TheStreet.com
Ratings2!
�� Bank of America’s (BAC)
provision for credit losses
more than doubled to $13.4
billion in the first quarter from
$6 billion a year earlier, while
net charge-offs of bad debt
soared to $6.9 billion from
$2.7 billion.
�� Super-regional bank Zions
Bancorporation (ZION)
swung to a loss of $832.2 million
in the latest quarter from
a year-ago profit of $104.3 million.
It blamed big losses on
holdings in Texas and commercial
real estate loans in
Nevada and Arizona.
�� Another super-regional,
Huntington Bancshares
(HBAN), lost a whopping $2.4
billion in the latest quarter,
compared with a $127 million
profit a year earlier.
Bottom line: No matter
where you look, the story remains
the same. Losses are
piling up like corpses on the
doorsteps of major financial
institutions.
Lie #2. “The Government
Is Fixing It!”
The government knows it
has a major problem on its
hands. That’s why we’ve seen
so many Treasury bailouts, Fed
buy-up programs, and other
initiatives over the past several
months.
But none have worked as
intended. All are backfiring.
In a desperate attempt to
find a solution, the latest whizbang
idea to come out of
Washington is the Supervisory
Capital Assistance Program
(SCAP) — “stress tests” on the
country’s 19 biggest banks.
But it’s a joke.
First, in theory, the tests
were supposed to identify
which banks have enough
capital to survive an economic
downturn and which will need
more capital to do so. But even
those that fail the test will get
a passing grade. Washington
will give the banks time to
raise private money. And if the
banks can’t, Washinton will
stick taxpayers with the bill.
What’s the point of having a
test if no one fails? It’s absurd.
Second, the latest figures
show the economy is ALREADY
performing worse
than the “baseline” scenario
of the tests:
■ The government assumes
that GDP will shrink just 2 percent
in 2009. But guess what?
The GDP already fell at an annual
rate of 6.3 percent in the
fourth quarter of 2008 — and
by 6.1 percent in the first quarter!
■ The government assumes
that the unemployment rate
will average just 8.4 percent
this year. But unemployment 2 http://www.thestreet.com/screener/
index.html?src=ratingsindex&tab=3
already surged to 8.5 percent
in March and is still rising rapidly.
Plus ...
■ The government assumes
house prices will drop 14 percent
this year. But they have
already plunged 18.6 percent
in February, according to S&P/
Case-Shiller.
The government is also testing
how banks would perform
under a “More Adverse” scenario.
But even those
assumptions are too generous
compared to what rating agencies
and regulators have
historically used. For example:
■ When Congress mandated
a stress test for governmentsponsored
enterprises in 1995,
it assumed a 10-year recession,
e.g., an economic
scenario equivalent to the
Great Depression. In contrast,
the assumption underlying the
bank “stress” tests is just a
two-year economic decline.
■ When Moody’s and Standard
& Poor’s sought to
determine the capital needs of
Ambac, MBIA, FGIC, and
other financial guaranty insurers,
their stress tests
assumed the peak municipal
bond default rates of the
1930s, as documented in a PhD
dissertation on the experience
of the Great Depression. In
contrast, the Fed report released
in April about the bank
“stress” tests makes no reference
whatsoever to a
depression.
■ When the New York State
Insurance Department issued
a circular to all New York authorized
insurers last year, it
told them to conduct stress
tests assuming extreme scenarios:
“Interest rate shocks,
equity market shocks, yield
curve shifts, changes in credit
quality and liquidity, rating
agency downgrades, collateral
calls, and large-scale catastrophes.”
The bank “stress”
tests do no such thing. They
rely exclusively on mild,
“slightly worse” scenarios.
In sum, we can’t know for
sure what the government’s
stress test results will show
when they’re released in early
May. But based on our own
analysis, we doubt Wall Street
will be comforted by the numbers.
Either they’ll show the
industry has a real capital
problem on its hands, or they’ll
paint a rosy scenario that no
one believes. The end result:
Investors will dump bank
stocks again.
Lie #3. “Big Banks
Are Too Big to Fail.”
Fed Chairman Ben
Bernanke and Treasury Secretary
Tim Geithner have been
operating under a simple, misguided
premise: that we can
get over this crisis just by letting
the government guarantee
ALL large banks.
We disagree. Our data and
analysis tell us that six of the
nation’s largest banks are currently
at risk of failure:
JPMorgan Chase, Goldman
Sachs, Citibank, Wells Fargo,
Sun Trust Bank, and HSBC
Bank USA.
These have total assets in
excess of $4 trillion. Meanwhile,
the $700 billion in TARP
funds granted by Congress last
year is almost gone, and there’s
tremendous political resistance
to granting more.
Even if Congress does fork
up more money, it will be impossible
for the government
to finance it all without severe
consequences, including
sharply higher interest rates
for everyone.
The IMF puts it this way:
“Fiscal burdens are growing
as a result of bank rescue plans
and macroeconomic stimulus
packages. Increased funding
needs and illiquid capital markets
have ... raised concerns
about the market’s ability to
absorb increased debt issuance
and about the crowding out
of other borrowers ...
“The United States faces
some of the largest potential
costs of financial stabilization,
as do a number of countries
with large banking sectors.”
What will the government
do when it can’t fund its bailouts
anymore?
Thomas Hoenig, president
of the Kansas City Federal Re

Naturally, if you’re a
speculative investor, this environment
can offer up major
profit opportunities, and
you’ll find our continuing
favorites on the next page.
But if you’re more conservative,
we recommend staying
safely in port until the
weather clears.
Our vehicles of choice:
short-term Treasury bills or
Treasury-only money funds.
You can buy 13-week (3-
month) bills from Uncle Sam
via the Treasury Direct program
(www.treasurydirect.gov/
or 800-722-2678).
You can also buy them
through your broker. Or you can
purchase a fund that specializes
in short-term Treasuries.
Our favorites include:
■ American Century Capital
Preservation Fund
(CPFXX), 800-345-2021
■ Dreyfus 100% U.S. Treasury
Money Market Fund
(DUSXX), 800-645-6561
■ Gabelli U.S. Treasury
Money Market Fund
(GABXX), 800-422-3554
■ Or the Weiss Treasury
Only Money Market Fund
(WEOXX), 800-242-8092
Meanwhile, we’ve seen
other funds close to new investors.
They include Fidelity U.S.
Treasury Money Market Fund
(FDLXX) and Vanguard Treasury
Money Market Fund
(VMPXX).
Some funds report that
they have simply been overwhelmed
by demand, forcing
them to close, while others
say that they consider their
broader money market funds
to be safe enough.
Too bad. But you still have
many good choices, including
the Treasury Direct program.
The Investing Strategy Your Broker
Will Never Tell You About ...
Wall Street always wants
you in the market. That’s how
they keep customer accounts
and generate commissions.
They always want you to invest.
But when America’s largest
industries — housing,
autos, and banking — are
collapsing ... when America’s
federal deficit is nearing $2
trillion ... when the IMF is
warning of a massive global
disaster ... and when governments
everywhere are
covering it all up with a barrage
of financial propaganda
... there’s another very viable
alternative for conservative
investors that your broker
will probably never tell you
about: Not to invest.
Don’t buy and hold.
Don’t trade in and out. Just
do nothing.
serve, proposes handling giant
banks essentially with the
same approach as the FDIC
handles smaller banks: shut
them down, find buyers, or liquidate
their assets.
And although his voice is
now in the minority, more government
officials are privately
agreeing with his conclusions:
The doctrine of “too big to
fail” has, itself, failed; and
it’s only a matter of time before
we see a return of regulatory
tough love, much as
occurred in the 1930s.
When the government has
trouble borrowing to finance
its bailouts, it will have no
Don’t be fooled by bear market rallies!
Mr. Speculator
Bear market rallies are
sharp, short-lived and, in some
cases, extremely powerful.
They prompt short-sellers to
panic, bears to mellow, bulls
to come out of hiding, and
Washington to declare “the
worst is over.” That’s precisely
what’s happening today.
But don’t be fooled!
In the days after 9/11, the
S&P 500 rallied from a low
of 945 to a rally high of 1,177
... only to fall back to new
lows by October 2002. In
1929-32, stocks rallied 10.7
percent, 16.1 percent, 20.5,
26.6 percent, and 30.5 percent,
all very quickly and all in the
context of a massive, threeyear
decline ... only to plunge
anew to just 10 percent of their
peak value.
Moreover, since World War
II, bear markets have not
ended until, on average ...
■ investors can buy the S&P
500 stocks for less than 10 times
trailing earnings, and
■ they can count on a dividend
yield of at least 6 percent.
But that is definitely not
the case today. Due to big
losses, overall profits have
plunged, but the S&P 500 has
not fallen as sharply. Result:
Stocks are selling for 57.8
times earnings, or nearly SIX
times more than you’d expect
at a bear market bottom. Meanwhile,
instead of at least a 6
percent dividend yield, they’re
paying a meager 3.2 percent.
So our targets for this bear
market are unchanged: 5000 on
the Dow, 500 on the S&P 500,
and 850 on the Nasdaq. Here
are some of the best investments
for protection and profit as the
bear market resumes:
■ The Short Dow30
ProShares (DOG) — This inverse
ETF is designed to rise 1
percent for every 1 percent decline
in the Dow Jones Industrial
Average. Dow component Caterpillar
just lost $112 million,
its first quarterly loss in 16 years,
while Wal-Mart reported anemic
sales growth of a mere 1.4 percent
in March.
■ The Short QQQ ProShares
(PSQ) — This inverse ETF gains
1 percent for every 1 percent
decline in the Nasdaq-100 Index,
packed with major
technology and biotech stocks
prone to plunge.
■ The Short Financials
ProShares (SEF) — This sector
inverse ETF targets the Dow
Jones U.S. Financials Index,
also designed to gain approximately
1 percent for every 1
percent decline in that index of
banks, brokers, and insurance
firms. We’ve already seen disappointing
news out of Bank of
America (huge loss reserve
builds) and Morgan Stanley
($177 million in Q1 losses). Expect
more in the months ahead.
■ The Short MSCI Emerging
Markets ProShares (EUM) —
(continued on page 12)
choice but to follow Mr.
Hoenig’s prescriptions: It will
have to pro-actively downsize
or shut down the weakest institutions
— no matter how
large they may be.
Hard to believe? Perhaps.
But that’s precisely the trend
we’ve seen with General Motors
and Chrysler. Last year,
Washington rushed to give
them all the money they
needed. This year, Washington
is pushing them, step by
step, toward Chapter 11. And
even in the absence of a formal
bankruptcy proceeding, the
two giant automakers are being
massively downsized — to a
shadow of their former selves.
Fed Money Creation Out of Control!
Use Gold as an Insurance Policy!
It’s official: Fed policymakers
have gone nuts! They’re creating
money out of thin air.
They’re monetizing the U.S.
debt. They’re buying or lending
against the most toxic crap
on the planet. And they’re exploding
the Fed’s balance sheet
to never-before-seen levels.
This chart provides the hard
evidence ...
As you can see, for many
years, the assets on the Fed’s
balance sheet grew slowly. But
now, in just a year’s time, they
have multiplied it by 2.5 times
— to a whopping $2.19 trillion
from just $884 billion.
Lie #4. “Your Insurance
Is Safe and Guaranteed.”
Many insurers are safe;
many, however, are not.
But don’t just take our word
for it. Take a look at the recently
leaked confidential
memorandum written by
America’s largest insurance
company, AIG. The company
warned that:
■ AIG is not the only one
at risk: “Systemic risk afflicts
all life insurance and investment
firms around the world.
Thus, what happens to AIG has
the potential to trigger a cascading
set of further failures
which cannot be stopped except
by extraordinary means.”
■ The big danger is not just
derivatives: “AIG’s business
model — a sprawl of $1 trillion
of insurance and financial
services businesses, whose
AAA credit was used to backstop
a $2 trillion financial
products trading business —
has many inherent risks that
are correlated with one another.
As the global economy
has experienced multi-sector
failures, AIG’s vast business
has been weakened by these
multi-sector failures.”
At the same time, the
money supply is ballooning
rapidly. Narrow M1 money
supply (currency in circulation,
demand deposits,
travelers’ checks, etc.) was
recently growing at a 13.6
percent year-over-year rate,
just shy of the fastest level
ever. Broader M2 money supply
(M1 plus eurodollar
deposits, savings, and money
market mutual funds) is rising
9.4 percent, a growth rate
we haven’t seen since right
after 9/11.
Fortunately, you’re not defenseless.
You can protect
yourself by allocating some of
your cash to gold, a classic
hedge against this monetary insanity.
We continue to
recommend 5 percent of a
model portfolio, split evenly
between gold bullion and the
SPDR Gold Trust (GLD).
Also consider: Fed assets
used to consist largely of U.S.
Treasuries, the highest quality
paper in the world. Not anymore!
The Fed now owns more
than $355 billion of mortgagebacked
securities and $61
billion in debt issued by Fannie
Mae, Freddie Mac, and Ginnie
Mae.
The Fed is also the not-soproud
new owner of $238
billion in commercial paper,
$456 billion in Term Auction
Facility loans outstanding, and
$45 billion in loans to AIG.
Plus, it has $72 billion in loans
to companies that acquired the
shaky portfolios of the Bear
Stearns and AIG.
Long story short: The quantity
of funny money on the
Fed’s balance sheet has shot up
the stratosphere, while the
quality has gone to hell in a
handbasket.