Take your money and run

What fool would willingly stay in the game when moral hazard becomes the modus operandi of the nation? If you are a saver, you are punished with zero interest rate. If you have reliably paid down your debt, your tax dollars now go to bailout those who could not or did not choose to do the same.

If you didn’t get your $40 coupon from the government to buy a TV converter, we will delay the digital conversion at the expense of local stations across the country because television is your right (and you need to keep watching those very important advertisements.) The government will bailout weak companies and individuals who made bad choices while taxing everyone who played by the old rules.

Our children go to schools supported only by those that pay their taxes, not by those who default and now qualify for a bailout from the government. These schools now face years of dire underfunding.

Why stay in this game?

Repeat after me...

Repeat this three times daily until it becomes easy:

“Most major U.S. Banks are insolvent.”

This fact is as plain as the notes in the annual reports if not the balance sheets. Why then do we continue the charade of treating the problem as one of liquidity? Billions, maybe trillions of dollars of our kids future earnings will go to pay for this game. Republicans and Democrats in Congress are fond of playing the “sound and fury” game when they drag bankers and corporate leaders before them. Yet we don’t see a leader stepping up to call the problem what it truly is. We have noted economists and editors of credible publications like the Financial Times and The Economist stating things clearly, but the masquerade continues over here.

Bring your pitchfork, I’ll supply the torches.

http://www.economist.com/finance/displaystory.cfm?story_id=13110352

My warning June 2008

Seven months ago today, I poured my concerns into an email and sent it on to a number of friends and family. Much has happened since then and we are not through this storm yet.

Sent: Tuesday, June 17, 2008 10:26:16 PM
Subject: Sound and sobering guidance from the Royal Bank of Scotland

The credit strategist for the Royal Bank of Scotland, Mr. Bob Janjuah is quoted in the linked article:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

"A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.

When you consider how the British are given to understatement, reading the article might just cause you worry for the global financial system. I suspect things will get rather interesting in the next few months. Hundreds of bank failures are anticipated in the U.S. alone. Germany, Spain and England all have their share of woes coming. I guess nobody really knows what the experience will be like as trillions of dollars, euros and pounds of excess leverage are unwound globally.

We are likely entering a period where your focus for investing is not to lose money as is mentioned by Mr.Janjuah. I am past the point where I can offer much advice beyond that given in the linked article. Scrutinize the condition of the bank(s) where you have your money. Consider having accounts with more than one bank, just in case.

If you have a mortgage and your insurance and taxes are paid into escrow each month, consider this - thousands of people over the past year have had their mortgage service company go bankrupt. A few months later, they discover a lien has been placed on their house for non-payment of taxes and their home owners insurance policy is canceled for non-payment because their mortgage company has failed to make payment. You can eliminate this risk by contacting your mortgage company and arranging to take responsibility for payment of taxes and insurance. Do this now.


For those of us not familiar with Hobson's choice: http://www.phrases.org.uk/meanings/183300.html

For a gross check on your bank's condition, you can estimate the "Texas Ratio" fairly easily: http://en.wikipedia.org/wiki/Texas_ratio

Don’t whine of portfolio,
that’s just so last year.
Swap butter for oleo,
and be of good cheer.
Be gone – buy and hold,
(it’s worse than you think)
The future is gold,
silver, and lots of red ink.

"Fillet-o-foot" (Warning: anatomically correct view from surgery)

You were warned! This may be considered gruesome to some viewers. Don't click before eating spaghetti.

Back to the Future - Japan circa 1990-ish

While our ownership mechanisms may not be identical to those of Japan, it certainly seems that both Enron and now the monolines effectively established keiretsu and, one could argue, the monolines behave and are treated by the banking industry much the same as keiretsu.

Jubak paints a summary of the conditions that the Japanese markets transitioned through and the points of similarity are remarkable and frightening.

Seems that ol' Doc Bernanke fired up the De Lorean, punched through 88 miles an hour and landed us in Japan, circa 1990-ish.

私達は深いたわごとに今ある!

(That's supposed to say - "We are in deep shit now!)

http://articles.moneycentral.msn.com/Investing/JubaksJournal/IsUSEnteringJapansNightmare.aspx

Subprime Wonderland

Markets drop, are you thinking,

For us all, net worth sinking,

A freak-i-full sight,

There’s no sleeping tonight.

Walking in a subprime wonderland.

Gone away is my savings,

I’m just left with my ravings,

Should’ve bought yen,

My one hundred’s a ten,

Trudging in a subprime wonderland

In the meadow we can build a snowman,

Then pretend the Tan Man’s* on our side

He’ll say: Are you leveraged?

We’ll say no man,

But you can default

‘Cause you’re Countrywide

Later on, in deep depression,

We’ll complain about recession,

To face with great dread,

Hillary and Fred,

Slogging through a subprime wonderland

In the meadow we can build a snowman,

And pretend that he is Chairman Ben**,

We’ll have lots of fun with Mr. Chairman,

Until the other bankers knock him down.

When dollars drop, ain’t it thrilling,

Though your credit gets a chilling,

We’ll extend not pay, the consumer way,

Sinking in a subprime wonderland

*aka Angelo Mozilo

**aka Ben Bernanke

Undesired Contact

On February 9, had a brush with a car while crossing Park Ave.

Initial Post

In all of two minutes, Mitchopolis has found a home on blogspot.