Come On Obama, Stick Them In The Slamma!

“Fight Against Stupidity And Bureaucracy”

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Around this time last month I wrote a post about the explosion of sub-prime credit for people seeking automobile loans they couldn’t afford. Here’s a link if you missed it – click here. 

They say that if you don’t learn from what happened in the past you are doomed to repeat it. And it is clear the banksters have learned nothing, mainly because the government was not man enough to teach them a lesson when they almost brought the country to its knees. Their greed was excused and rewarded, not punished in any meaningful and lasting way.

So now we have the auto loans credit explosion, which is another mini sub-prime disaster in the making. And again it is being egged on by the stupidity and greed of Wall Street who just can’t pass on the chance to reap big profits from those people silly enough to take their high interest loans.

This time, however, it turns out some of the people in positions of power are beginning to recognize that this is becoming a big problem.

The regulators and prosecutors are starting to worry about the level of lending abuses. Not only that but they are also recognizing the similarities with the home loans fiasco that eventually resulted in the financial crisis.

The Consumer Financial Protection Bureau has recently fined subprime auto lender First Investors Financial Services Group Inc. $2.75 million for knowingly providing inaccurate information to credit reporting agencies for at least three years. It was a “computer error” don’t you know, and, of course, they paid the fine but without admitting any liability – perish the thought!

It should come as no surprise that First Investors Financial Services Group is owned by a prominent New York private equity firm.

And like the mortgage sub-prime fraud, the banksters and other money men are not only screwing the people who take out the loans, but once again they are re-packaging them up as “good investments” for their richer clients too.

A United States attorney in Manhattan, has already begun an investigation into whether lenders have sold questionable auto-loan investments to investors, and has sent subpoenas to General Motors Financial and Santander Consumer USA, to try to find out whether the lenders fully disclosed to investors the creditworthiness of borrowers whose loans made up the complicated securities.

Last time they got away with it. Will this time be any different? You have a lot more faith in the system than me if you think it will. All that is happening so far is tokenism. They need a lot more than a slap on the wrist.

In China or Vietnam and some other locations banksters committing fraud are stood up against a wall a shot. That’s maybe a little harsh, but at the very least some serious jail time is in order.

The fact is the banksters are doing it again because they think that they can get away with it again. And if they get away with it this time, then they’ll do it yet again in the future. All the time racking up fortunes for themselves and leaving the other poor sods, who didn’t know any better than to take out their loans or buy their toxic investments, a lot poorer.

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The Sunday Sermon

“Fight Against Stupidity And Bureaucracy”

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Can’t let the month end without another Sunday Sermon.

This time a little bit of an update on the political and financial scene as I see it.

So far the Obama administration is doing great! (That was a little sarcasm in case anyone didn’t get it.)

Troops are being sent to Syria and soon we’ll get bogged down in another mess that’s none of our business and will probably take many years and many lives to get us disentangled from – leaving behind chaos and confusion and a worse situation than the one we tried to fix.

Meanwhile the economic crisis continues. Not that you’d notice. The sham recovery has meant that stocks have been on an upward trend, bonds have been doing well, and confidence is high.

And all because….

….well all because the Fed continues to print money and pour it into these markets.

Or at least it has been.

Then Bernanke made a statement a few days ago to “clarify” the government’s position.

Oh dear me!

He said that the government would… he thought… he hoped anyway…. assuming nothing unforeseen happened…. at least nothing major that they didn’t see coming… that they would ease off their money printing and bond buying… or at least they might… soon or maybe later… but sometime at least… well, it was being discussed…

Needless to say with that dithering statement confidence immediately melted away from the market and the DOW headed down by more than 500 points. In fact investors and brokers seemed to be selling everything, not just stocks and bonds but gold and other commodities too. Not quite panic but definite unease was clear to be seen.

The only reason it didn’t all collapse is that while the underlying message is clear, the Fed’s delay in implementing their tap turn off gives investors a little more time to make a little more money  –  they hope.

The problem with that is knowing when to sell. And that is the trick that has eluded investors from individuals to hedge fund managers since the markets began.

What Obama and Bernanke want is crystal clear. They see the folly in printing money and buying bonds at near $100 billion a month and they know they have to stop it eventually otherwise an even bigger financial catastrophe will result.

Their problem is they want to stop it without causing a massive market correction.

And that, as Samuel Goldwin used to say, can be summed up in two words – im possible!

It will be interesting and perhaps a bit painful to watch what happens next.

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Friday Wasn’t Quite Black, But It Did Lose A Bit Of Its Shine

“Fight Against Stupidity And Bureaucracy”

You couldn’t exactly call yesterday “Black Friday” the way financial pundits like to do, but that traditional “safe haven”, gold, certainly lost a lot of its shine.

In fact the price of gold went into freefall, plunging the best part of $100 an ounce in a massive selling spree and ending up below the magic $1500 mark for the first time in a while.

I don’t think anyone is sure yet just what triggered the almost panic sell off on the Comex, but my gut feeling is that, once started, the computer generated trading gizmos used by the big hedge funds etc., kicked in big time and made matters go from bad to worse.

These automatic trading monsters trigger sales when a pre-chosen stop loss figure is reached, one stop loss sell off triggers the next and so on until there is a massive market plunge, as happened yesterday. The same could just as easily happen on the stock market.   

What most ordinary folks don’t realize is that the majority of traders in the financial markets are idiots. They just hang around looking at their screens and then follow whatever they see happening. It’s the herd mentality syndrome. When the big boys start to sell then the little boys follow suit and the whole thing goes from bad to worse, often without anyone really knowing who started it or why it is happening.

That seems to have been the case yesterday as there were no catastrophic economic indicators, like major inflation fears, currency collapses, etc., to trigger a significant movement one way or the other.

Whatever caused it, it is a warning to investors to be cautious. It could be a blip or the harbinger of turbulent times ahead.

Although there are many doom-and-gloom merchants with their “the end is nigh” web sites urging their followers to dump paper money, fiat currencies they call them, and stock up on gold, the truth is that gold has not been a good investment in recent months and years.

By definition the very worst a good investment should do is hold its value in line with inflation – if it doesn’t you are losing value.

For almost two years now gold has been steadily falling in value. Anyone who bought, for example, in August or September 2011 has seen their investment fall significantly in value – down by more than twenty percent in fact. You put $10,000 in, you get less than $7,900 out, and the dealers take their cut both ways.

So will the bear market for gold continue or was Friday just a glitch? Well, if you could answer that one for certain you would be able to make a lot of money.

My feeling, for what it’s worth is that the price will probably fall further. Maybe not so dramatically as yesterday, but it could easily trickle downwards to the $1200 region.

That assumes no dramatic sell offs by bankrupt governments and banks, because that is definitely a last resort measure that they would be most reluctant to take. If or when it does happen it means BIG financial trouble for everyone.

So will gold ever be a good investment again?

Warren Buffet never thought so, but it could be. Possibly a very good investment. But probably not a long term hold. Many western economies are just hanging together at the moment. The amount of debt and insolvency has to mean that at some stage the normal investment vehicles like currencies, stocks, bonds etc., will start to suffer and people will turn back to “safe havens” like gold.

IF you buy at the right time, and remember that you need to get rid of it and fast when the cycle turns again, you could do very well. But I wouldn’t jump in and buy it just yet.

Take it away Shirley….

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