The Numbers Game

It’s all about the numbers. Yesterday President Obama’s Pay Czar Kenneth Feinberg (don’t get me started on the use of the word “czar”) told us that the top 25 executives at the seven huge U.S. corporations that are hanging on by their TARP bailouts, will receive 90% pay cuts....And 175 top executives at these same corporations will be hit with 50% pay cuts.

But wait....Twenty-five executives at 7 corporations? Let me do the math: 25x7=175. Hello? So the Czar has told us that his victims will be hit by 90% cuts and/or 50% cuts. Is it 50% or 90%?

If I ask, the Czar will laugh and tell me....”It’s the perks and bonuses you idiot”. Sorry Mr. Czar – in truth it’s just more disrespectful disinformation coming from a hack who has probably never been an executive, and has slithered into our lives without Congressional vetting or sanction. (The real Obama meaning of the word “Czar”).

But there’s more. What would you do if your pay was cut by 50 percent (let alone 90%)? Sell your house and your car? What would you do? Of course, you would be looking for another job, and you would leave your loser job as soon as you could. It’s not much different than firing the top 175 executives in the U.S. all in one day. One hundred and seventy-five Americans pay the price for the $575 trillion subprime heist.

And who will take on the enormous responsibilities at the loser TARP behemoth corporations for the pay packages now on offer? The average pay on Wall Street today - $300,000. So we’re looking for someone who is willing to take $200,000 with no prospect of anything more.

To run America’s seven heavy-weight corporations, a $200,000 pay package will attract a swarm from the lower 33 percent quartile on Wall Street. Mail clerks will apply. I was worried about a financial failure precipitating another crash. I could not have imagined that Obama’s “Pay Czar” would get the ball rolling.

Sad that responsibility for what happens next now rests squarely on the narrow shoulders of Mr. Obama’s Pay Czar. The President need not have shoved himself into this enormous mess. Former President Clinton will eventually get the credit he deserves for raping the regulatory safety net on Wall Street. The coming market collapse would have arrived without any help from today’s White House.

I believe it was Lenin who said something to the effect that the best way to destroy a nation is to decimate its currency. Mission accomplished.

Today we learn that the CFO of GM has quit....only 174 more trampled TARP executives to go!

The Second Leg

What will it take to launch a second spectacular market downleg in the new millennium?

Another major U.S. bank (financial) collapse? Yup. That would do it. U.S. banks (and banks elsewhere) are hiding behind monumental legally sanctioned “Off Balance Sheet” liabilities, while they once again mercilessly rack up stratospheric profits at the hands of their clients – just as if the subprime crisis had never seen the light of day.

The subprime crisis was nurtured by a system-wide collapse of integrity on Wall Street that spread throughout the western world. Nothing has changed since the market melt-down. Today we are right back into the fantasy earnings game of musical chairs on Wall Street. All pyramid schemes collapse upon running their course. It’s easy to predict.

The sharp market recovery that began in the first quarter of 2009 would not have come to pass if it had been possible to miraculously fix the industry-wide integrity haemorrhage in the financial community. The recovery has occurred out of the ongoing absence of integrity rather than because of a return to ethical practices.

The ship continues to sink with no one at the helm.

Markets - The Sling Shot Recovery

As we passed the huge market low in March 2009, I described what I expected to see next.

Market indexes had fallen so far so fast that I said it was like a sling shot pulled all the way back. The underlying trend was still heading lower, but we had fallen so far below the trend that a quick and sizable recovery was probable.

The sling shot recovery that I looked for in March is now history, and huge surges in any direction often lead to big reactionary moves. Hold onto your hats!

S&P 500 close 1029.85
Oct 1, 2009

The Triple Fraud

Sad to realize that the final years of the U.S. economic recovery were propelled entirely by subprime mortgages fraudulently issued to the unemployed; the reverse mortgage scam that robbed seniors; and by phony derivative-driven inflated interest rates that called upon those living on their savings to go out and spend money they didn’t really have.

Take away the subprime mortgages, reverse mortgages, and inflated interest rates and you come to what would have been “normal” without the triple fraud. Normal would have been a recession that began a decade ago – a recession without end.

The U.S. (the greatest country of the age now past) was bankrupt as we entered the twenty-first century, and by then it had been robbed and raped by a handful of home-grown carpetbaggers. Now President Obama actually believes that he can pull one more rabid (deliberate spelling) out of a beat up old decrepit hat. As I see it, he is not to blame. You cannot blame one who truly does not know that he does not know. Obama is simply another victim no different than the rest of us.

It is unfortunate but true that on our small planet a Five Trillion Dollar Wall Street Fraud has stripped the cadaver (our entire planet) to its skeleton, and devoured the bones as well. There is nothing left to steal. Even the carpetbaggers lose. Lights out in Chicago.

Not to worry though. Markets will tumble, but the awesome magnitude of this planetary tragedy will not reveal itself overnight. If this “age” takes 2000 years to come full circle from the recent market peak, we may be facing a thousand years on the downside. Puts things into perspective.

The Greenspan Legacy

The greatest country of the age now past, the United States, was bankrupt as we entered the new millennium. It is not surprising that Greenspan finally folded under the pressure. He was between a rock and an impossible place.

The Greenspan era may be the story of Job all over again. Unlimited escalation applied to defeat defiant integrity. This time it took the collapse of the entire free world to get Job to throw in his cards.

I was initially saddened and disappointed to see Mr. Greenspan (my hero) at the head of the boardroom table as our world-shaking Wall Street mega tragedy came to light. I had no appreciation of the magnitude of the disparate forces aligned against him. Today, we all know more about what was happening back then and it is evident that the urgency of the problem is still escalating with every passing day. A geometric progression rising toward the vertical.

I thank Mr. Greenspan for responsibly guiding the ship for as long as he could. I forgive him for what has transpired since, even though I realize that he should have stepped away much earlier when it became clear that he was powerless to even impede the groundswell of criminality that has now engulfed us.

And what of the future in a world gone completely mad? There is an old axiom in physics: “Every action has an equal and opposite reaction”.