Look ma, I got me a link too

http://www.ntu.org/governmentbytes/the-myth-of-tarps-profit.html

12/2/2010 6:19:54 PM

It's not really a myth, he admitted that TARP made a profit, as far as FNMA and FDMC, the fed's ownership is currently falling, things are looking up, despite the best hopes of others.

the Fed's ownership of mortgage bonds guaranteed by Fannie Mae , Freddie Mac and the Government National Mortgage Association (Ginnie Mae) fell to $1.023 trillion from $1.038 trillion a week ago.
http://abcnews.go.com/Business/wireStory?id=12298353 (that was this week BTW)

12/2/2010 7:08:42 PM

Quote :

"Allow me to burst your bubble. That $25 billion profit is a myth, a fiction of Washington accounting (like so many other numbers we hear), and here's why: because the banks that got bailed out through TARP shuffled all of their bad assets over to Fannie Mae and Freddie Mac, which got their own separate bailout. So, really, it should be no surprise that they're relatively healthy. They cut out the cancer and passed it right along to Fannie and Freddie. The banks have issues with the current foreclosure mess, but the worst loans are no longer their problem, they're taxpayers' problem. So, just how big is that problem? Well, big. Really big. Their regulator is reporting that they could need another $215 billion worth of cash infusions over the next three years alone just to stay afloat. That's on top of the $148 billion we've already shelled out for them. That means that the top-line cost could rise as high as $363 billion. When you subtract the $25 billion profit from TARP from that number, our bailout of Wall Street from their mortgage mess through Fannie/Freddie could cost $338 billion."

^ and wow, it dropped a little over 1%. LET'S CELEBRATE!!!

[Edited on December 2, 2010 at 7:12 PM. Reason : ]

12/2/2010 7:11:36 PM

Quote :

"and wow, it dropped a little over 1%"

That was only in ONE WEEK. It's a pretty substantial amount for a single week.

12/2/2010 7:24:33 PM

no, it's really not. and the fact that they still have so fucking much is pretty terrible.

12/2/2010 7:36:03 PM

Ok, let's assume that was average growth, in less than 2 years we would be completely out of the mortgage game. That's not bad.

Quote :

"the fact that they still have so fucking much is pretty terrible"

It's not that much if we were able to get rid of 1% in a week.

12/2/2010 7:53:38 PM

At the current rate, it will take 5.5 yrs to get rid of all the MBSs.

12/2/2010 8:51:14 PM

I posted the current rate as of this week, what rate are you using?

12/2/2010 9:25:20 PM

past six months

12/2/2010 9:36:24 PM

That's not really taking into consideration recent trends.

12/2/2010 10:01:40 PM

Sure it is. As recently as the week of Aug 11 the Fed ADDED to it's balance sheet with MBSs. There have been three weeks since Sept 8 that there was no change. The only way your position is considered favorable if you only consider the past 3 weeks of data...which would be fine if the rest of the data set allowed you to only look at the most recent 3 weeks and call a trend. A 4 week moving average would require 158 weeks including this week, but just to show how noisy the data set is if you go back just one week we're at 195 weeks.

Too soon to call a trend.

12/2/2010 10:31:01 PM

Suppose we do use your average, is five years that bad? The arguments against it when we were still under the fog of economic uncertainty was that it would be worthless and the money would be wasted, that doesn't seem to be a threat anymore.

12/2/2010 11:05:52 PM

Kris gets called out ITT

12/3/2010 12:19:46 AM

^^ No, that would not be taking into account recent trends. Using the figures from the week of Aug 11, the Fed will double its holdings of MBSs in X Years!!!

12/3/2010 12:28:38 AM

Quote :

"Kris gets called out ITT"

On what? Three weeks is a reasonable amount of time to start calling a trend on something like this, especially if you consider the percentage change from month to month. And still, we're talking about 3 years, really not that big of a distance considering the level of accuracy we would predict on something like that. The point is that they are going down.

Quote :

"No, that would not be taking into account recent trends. Using the figures from the week of Aug 11, the Fed will double its holdings of MBSs in X Years!!!"

And if you take what GOOG traded at from 2-2:15pm one day their stock will be down to zero!

August is not that recent. Picking a random week is irrelevant. Do you want me to use this past month's trend?

12/3/2010 12:43:10 AM

Anybody know much about this JP Morgan/silver business?

12/8/2010 1:16:35 PM

Basically, JP Morgan has been short selling silver that only existed on paper, which is price manipulation as well as flat out fraud. Hard to say if justice will be served, but I do think we are seeing a massive squeeze on physical silver, not COMEX. Glad I got on that train before it rolled out of the station.

12/8/2010 2:44:31 PM

dont worry the fed will print them the money they dont have so everyone will be happy

12/8/2010 2:57:37 PM

Allow me to explain a basic reality for the United States. What is happening in Ireland now is very similar to what will happen here.

Ireland bailed out their banks and now their govt is stuck with an enormous tab that they are unable to pay themselves. Ireland isn't able to debase their currency so their only option is default or accepting a bailout from the soon to be defunct EU and giving their citizens the middle finger by forcing them to accept lower living standards (austerity measures).

In America (as referenced above in aaronburro's post) we bailed out our banks and now our govt is stuck with an enormous tab that they are unable to pay in earnest. Our option is to default or to print money since we control our own currency. That is the route we are taking to debase our currency and give our citizens the middle finger by forcing them to accept lower living standards (via inflation).

These are simple statements of fact and inflation is already here despite governments terrific efforts at masking it by continuing to meddle with the CPI calculation. High inflation is on its way as you see the bond bubble has already started to burst as investors in the bond market have come to the realization that we cant pay our national debt back in earnest.

Our government has made a fool hardy mistake by creating an ARM reset option loan by financing our debt in short term notes and rolling them over. If they had taken out loans in the 30 year market instead they could have fleeced the bond investors, instead they have pinned themselves into a corner and have no way out of the coming nightmare.

These are statements of facts, denial of these facts will leave you in an unenviable position when the dust settles. If you care about your family's predicament you'll start protecting yourself now, I got an early start on many of you by heeding the warnings in late 2008, but there is still time to take the measures needed.

[Edited on December 8, 2010 at 11:36 PM. Reason : add]

12/8/2010 11:35:27 PM

Quote :

"we bailed out our banks and now our govt is stuck with an enormous tab"

Where is that tab?

Quote :

"inflation is already here"

Where?

Quote :

"the bond bubble has already started to burst"

That hasn't happened.

What world are you living in and how do you post onto our world's internet?

12/9/2010 12:08:28 AM

^ It is you who lives in an alternate reality.

The tab is on the books of Fannie Mae and Freddie Mac which have been sucking up 100's of millions of dollars and threaten to destroy the country. Do you follow this stuff at all?

Inflation is here right now have you not seen commodities skyrocket? Shadowstats has inflation at 8% this year if you use the old CPI formula, that's significant don't you think?

Bonds are getting punched in the fucking mouth right now, again do you pay any attention to this stuff? Municipals are getting crushed and long dated treasuries are getting crushed, people don't stay dumb forever. Well, not rich people anyway...

12/9/2010 12:35:05 AM

please embed http://www.youtube.com/watch?v=PTUY16CkS-k&feature=player_embedded

12/9/2010 4:11:02 AM

One correction to my late night post I meant to say hundreds of BILLIONS not millions.

Also, I can't believe you are questioning the bond statement the ten year treasury is down 12.5% in the past ten weeks. If you annualize that its 80%!!!

That means if they were to continue down at their current rate (obv not going to happen, this is just for illustration) interest rates would go from 2.38 to 24pct in one year!

Again, that's not going to continue at that rate but it does illustrate what a shock to the system these past ten weeks have been.

Imagine a beach ball being held under water. That is what bernanke is trying to do with QE, however... You can't supress the long end forever it will eventually rocket to the top when you take your hands off the ball.

The distortion in the bond market is going to bring us to our knees with massive inflation. Bernanke is powerless to fight it much longer. He says they can withdraw the stimulus when they want but that is a fucking lie if he were to sell the bonds the fed would suffer huge capital losses on their stupid investments. Don't you understand that everyone has been frontrunning the fed? It was the riskfree trade of the century and now they are dumping their worthless bonds back to uncle ben.

When the tide goes out you see who has been swimming naked. Hint: its the fed and the govt. They can't continue putting everything off the balance sheet (fannie mae, social security, medicare, etc) eventually it is time to pay the piper.

Who will bail the USA out? Its not china its not aliens its not the IMF. Who will bail us out when we pledge aid to california that leaves us swimming in more bad debt? How can you not see through this charade?

When flies reproduce in a jar do they feel trapped when the jar is half full? How about after the next reproduction cycle?

You are underestimating how bad our debt service will jump at even 1 or 2 percent jumps in the interest rate. At 7pct we become immediately insolvent. We aren't japan we can't force our citizens to buy our debt to keep us afloat for 20 years on a sinking ship. Rates go up, everyone panics for the lifeboats, do you have yours yet?

12/9/2010 10:32:47 AM

Quote :

"The tab is on the books of Fannie Mae and Freddie Mac which have been sucking up 100's of millions of dollars and threaten to destroy the country."

At the current rate of reduction, government ownership of MBS's will be gone by 2-5 years.

Quote :

"Inflation is here right now have you not seen commodities skyrocket?"

You're affirming the consequent.

Quote :

"Shadowstats has inflation at 8% this year if you use the old CPI formula, that's significant don't you think? "

Not at all. What would be relevant is if it were significantly higher than it has been previously, which it isn't no matter how you calculate it.

Quote :

"Also, I can't believe you are questioning the bond statement the ten year treasury is down 12.5% in the past ten weeks."

Are you talking about some kind of index? Yields haven't been doing anything crazy:
http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Datasets/yield_historical_2010.xml

Quote :

"Who will bail the USA out?"

From what? Please, explain to me what you are afraid of. You're saying the sky is falling, but you're not saying why it would fall, or even what the "sky" is.

12/9/2010 12:55:04 PM

Are you nuts or something? Yields are skyrocketing in the treasury as we speak,this is a pure freefall right now.

What are you talking about?

Do you realize we are experiencing fairly significant inflation despite the fact home prices are still falling? That's really bad news that such a huge component of our cpi is deflating and we don't even have deflation!

Our deficit is now spiraling out of control, and look what at the braindeads are excited about. Retail numbers are strong! Could there be anything worse for our economy right now than more retail spending?!?! We need consumer and govt deleveraging yet we are cheering dvd players, phony housing prices, and govt and consumer spending. God save us!

12/9/2010 1:26:14 PM

He's pretty deep in denial, and has been for a while. It's true that you can't eat gold and silver, but you also can't eat paper, and I have a feeling his wealth is...well, all in paper. He's afraid of the truth, or more specifically, the real world implications of the truth.

12/9/2010 1:33:13 PM

Quote :

"Yields are skyrocketing in the treasury as we speak"

I just linked to the data for the entire year. What are you talking about?

Quote :

"Do you realize we are experiencing fairly significant inflation"

Compared to what? We have less inflation now than we did 10 years ago by any measurement of CPI you want to choose.

Quote :

"We need consumer and govt deleveraging yet we are cheering dvd players, phony housing prices, and govt and consumer spending."

We've been doing that for 10 years, what's so different now?

Quote :

"He's pretty deep in denial, and has been for a while."

I live in the real world, you're afraid of some boogeyman you can't even describe.

[Edited on December 9, 2010 at 1:46 PM. Reason : ]

12/9/2010 1:43:42 PM

Dude listen to yourself.

The treasury has been in freefall for 10 weeks. The dollar will not be the "safehaven" for much longer, europe is propping up the dollar for right now but that is temporary.

Measuring gdp by consumption rather than production has always been the incorrec measure and look at what the last ten years has taught us, its all a shell game. Consumption would be an okay substitute for production as a measure of economic strength if it weren't for credit, but due to credit being issued that will never be paid back it is a lousy measure.

Housing makes up a huge component of cpi, that alone should be generating DEFLATION but it isn't! We need deflation to take hold to save the average american, the fed keeps creating lies to feed to the american public so they can get away with their inflationary conquest. Yes ben we would hate to pay less for houses, less for clothes, less for food and energy, we want to pay more you must be correct! Please save us from ourselves, force us to spend our money before it becomes worthless we can't be trusted to save it for a rainy day! Punish the savers, punish the producers, punish the ones who work!

They are trying to re-inflate the bubble just look at housing still 20pct over its average, push the rates down further!

The fed has to be shittting itself right now seeing its house of cards crumbling further this week, but ben is ONE HUNDRED PERCENT confident he can pull the stimulus when the time is right hahaha. He can't do shit, ship is sinking, its lifeboat time.

12/9/2010 2:37:29 PM

Hey, just like he was 100% sure we'd see a "nice slowdown" in home appreciation. He lost credibility a long time ago, and I can't for the life of me understand why some still think of him as some sort of monetary policy guru.

12/9/2010 3:13:42 PM

Quote :

"The treasury has been in freefall for 10 weeks."

It was also in freefall from March 09 to June 09, and I also seem to recall the same kind of hysterics then as well as now. There is a ton of support at a 4% yield that will serve as a real indicator of whether The Bernank has overstepped on the policies and some real nasty inflation is headed this way or if this is nothing more than the market punishing the herd that got spooked by all the deflation talk beginning around April.

Quote :

"he dollar will not be the "safehaven" for much longer, europe is propping up the dollar for right now but that is temporary."

Huh? Of Ireland succeeds in warding off the IMF, the euro will get PUNISHED and where do you think those that flee the euro will wind up (hint - it isn't fully into PMs)?

Haven't you done this several times in the past year or two? You disappear from the section for a few months and then pop in with a new round of the sky is falling?



[Edited on December 9, 2010 at 3:28 PM. Reason : .]

12/9/2010 3:25:52 PM

^First off thank you for calling attention to the fact I have been correctly asserting this collapse for the past two years.

Second off, there is a 3 page article in the wall street journal today entitled "is the bond bubble bursting" that you guys should read so you realize I'm not exactly coming out of left field here.

This is happening, you won't accomplish anything by burying your head in the sand. Quite the contrary actually.

12/10/2010 10:46:43 AM

The only one with the head in the sand here is you. I'm trying to have a dialog and you've effectively turned your brain off to questions of the position, the best way to lose money. People were claiming the bond bubble was ready to burst at the beginning of this year

http://www.businessweek.com/news/2010-02-04/taleb-says-every-human-should-short-u-s-treasuries-update1-.html

If you attempted shorting then you got skewered. Pummeled. NC Stated. Why is this time any different? With inflation still subdued (for now), where are these people fleeing treasuries going to put their assets? What's most likely to happen is guys like you will herd the sheeple out of bonds (to be bought back lower by the smart money) and into risk assets (equities, and commodities to some extent) at which point they'll begin to manufacture the next "crisis" to get them out and back in treasuries.

This game can and will go on for a long time.

[Edited on December 10, 2010 at 11:30 AM. Reason : .]

12/10/2010 11:29:01 AM

You're right that the game can continue for a while, but you don't know that it will, and you must know that it can't go on forever. I'm not a financial analyst, and I'm not in the business of trying to pinpoint exactly when the dips and peaks will arrive, but you seem to understand that this system is inherently unsustainable. What makes you so sure that TPTB will be able to keep this going for the next two years, five years, ten years?

The question, to me, is not if there will be a collapse. It's a matter of when, and how much worse we can make it with present day policy.

12/10/2010 12:47:41 PM

Quote :

"You're right that the game can continue for a while, but you don't know that it will, and you must know that it can't go on forever."

"The game" that I was referring to was the herding of people back and forth across asset classes by the force of the herd itself. Look, in April, for whatever reason deflation talk gained a tiny little foothold, and for reasons that only a master of chaos would ever know, the talk grew and grew to the point that it became "the thing". This had people fleeing equities with the S&P dropping over 10% in the matter of a couple of months. That's a HUGE move. And yet, we didn't double dip then. This gave the Fed the cover it needed to push through QE2.0. The question is, did the Fed just seize on the opportunity or did it play a more sinister role? If it played a sinister role then you should respect the Feds ability to really move the market around. If you think it just seized the opportunity then you should respect that it at least knows it can fiddle the monetary lever and get a response - the extension being that perhaps they can in fact remove liquidity when they need to.

I'm not convinced this will end in fire. It could very well end in ice, like Japan. Who has spent vast sums of money and all they have to show for it is low unemployment and low growth.

12/10/2010 8:06:09 PM

I'm not sure you can take Japan comparisons far. They had a bubble and they tried to Keynes themselves out of it. But Japan also has negative population growth and a shrinking work force. They shouldn't be growing. We are also different from japan in a lot of other respects such as savings rate.

Anyways, rally is echoing a lot of what Peter Schiff says. The main point is that deflation is good and we should let it happen to let the economy right itself. That's a major idea you have to warm up to in order to see things the same way Schiff does.

Let deflation happen, prices go down, savings rates goes up, allow people/banks with bad debts to fail, return to responsible lending to qualified borrowers for economically productive purposes.

12/11/2010 10:56:38 AM

Quote :

"The main point is that deflation is good"

Are you sure you don't mean disinflation?

Quote :

"savings rates goes up"

Why would savings go up during deflation? People would be less likely to give loans and less likely to take them.

12/11/2010 11:23:03 AM

Quote :

"They had a bubble and they tried to Keynes themselves out of it."

Sounds familiar, eh?

Quote :

"But Japan also has negative population growth and a shrinking work force. They shouldn't be growing."

Japan didn't meaningfully go negative until 2007. The US (and world, really) population growth has been on a downward trajectory since 1992.

http://tinyurl.com/2bao4pv

What conclusion are you attempting to draw from that point?

Quote :

"That's a major idea you have to warm up to in order to see things the same way Schiff does"

I'm only playing devils advocate to the people that are speaking in absolutes as if they have a crystal ball. I actually tend to side more with rally and destroyer in I'm not so sure massive money printing is the correct policy, but I'm balanced enough to not think (yet) that the policy will end with the US economy in shambles. I'm pretty sure since the earlier part of the year I've been somewhat convinced that extremely slow growth with bouts of stagflation are in our next several years and so far that is what the data is telling us.

[Edited on December 11, 2010 at 11:52 AM. Reason : l]

12/11/2010 11:52:13 AM

^Their workforce was shrinking before the population as a whole was shrinking. The point remains the same -- shrinking workforce is a pretty strong reason for their stagnation.

It's not intelligent to pick and choose similarities without also considering other factors that explain their situation.

[Edited on December 11, 2010 at 12:07 PM. Reason : And no shit it sounds familiar, durr. I wrote that for a reason.]

12/11/2010 12:06:53 PM

So far, all you've done is point out differences in their economy, not how they prove that things will be different in the United States.

12/11/2010 1:56:18 PM

I think we've talked about the U.S. vs Japan before. The Japan economy is pretty bizarre right now, but what they're doing may be continuable. They might be in debt, but most of their debt is owned internally. Our debt is funded by treasury bonds. Foreign investors and governments buy many, with the Federal Reserve buying an ever-increasing percentage of the bonds, and if anyone is actually purchasing bonds outside of speculators looking to short sell, I don't know what they're smoking.

In our situation, there is a rug beneath us, that can get pulled at the whim of foreigners, shifting the burden of buying debt to the Fed. I don't know how that's going to play out, but Japan has no such rug. They could probably be at 3000% debt GDP ratio and it wouldn't matter.

12/11/2010 2:36:35 PM

Sorry chance sometimes it is difficult for me to address specific points when i type on my phone because i cant read your post anymore after i hit the reply button, and i also cant cut and paste to respond to specific points.

Here are a few things to point out since we are talking about Japan. Japan goes insolvent somewhere around 3 - 3.5% interest rates. They have convinced their citizens that it is their duty to keep Japan solvent and that is why the Japanese citizens buy their bonds at 1% even though there have been higher ratest to select from abroad. This has kept Japan solvent for a decade or two longer than they would have otherwise. No one else on the planet owns Japanese debt but Japanese citizens who feel it's their patriotic duty to buy them.

In the US I don't forsee people choosing loyalty to their government over potential profits in other markets. If the treasury were a business and they had a credit rating like other businesses, they'd be the lowest of the low junk bonds out there. Yet they offer the lowest yields around almost... interesting, to say the least... How long can that last? We've seen Walmart issue mountains of debt in the past few weeks at rates that are actually lower than what the US treasury is trading at right now. That should tell you something, Walmart's credit is airtight while people are beginning to question the integrity of the US debt.

Its impossible to predict exactly when this will happen because there are a lot of things that can stall the movements out of the treasury and there are a lot of catalysts that can speed it up. If I bought a 5 yr treasury I'd feel fairly confident that I could hold it to maturity without worrying about my principal, though I'd certainly have great concerns about its yield relative to other safer investments. However, a 30 year treasury? I'd have great concern about receiving my principal back because its a near certainty that I will be paid back in greatly devalued dollars.

That basic principle is why the Fed can keep short term interest rates at zero and still watch the 10 year treasury yields spike. Even though we know they will not raise short term rates significantly probably ever again (because it would make our government insolvent in the blink of an eye) the yields on the long end are going to spike because of currency devaluation.

Why is deflation bad? Why is it bad for things to cost LESS? Deflation is a symptom of a weak economy, it is not the cause of a weak economy. When you catch a cold and produce snot the snot is a SYMPTOM, it is not a cause of the cold.

In a normal economy there should usually be deflation. It should cost less to produce the same goods as technology develops. Of course it should cost less to produce a plasma TV today than it did 10 years ago, of course it should cost less to eat meat than it did 200 years ago when you had to hunt for it... They have created an economic bogeyman called deflation, but the deflation is only natural because we had a manipulated bubbling housing market, and those prices coming down makes housing MORE affordable. The only people who get screwed are the ones who own the mortgages and the houses, not the Americans who wish they could buy a house!

The reason Keynesian policy became Economic truth is because it said what the politicans wanted to hear. If you werent a Keynesian then no politician would listen to you. Over time the people who held these views became "successful" and held with more esteem therefore the professors of all these liberal whacko schools in the Ivy Leagues were Keynesian. Have you ever noticed that esteemed economists don't know dick? On average, the less economics classes you've taken in your life probably the better you understand economics.

Don't you think it's interesting that "esteemed" economists like Krugman and Bernanke are wrong everytime they open their mouth? What if our top doctors were bad at practicing medicine, what if Michael Jordan missed every shot he took, what if Nickleback didn't kick ass? (haha had to sneak that in there)


How would Bernanke stop inflation if he saw it? Would he sell these bonds he just purchased? Do you have any idea how much money the Fed would lose on that deal???? It's not going to happen. The Fed has overstepped its bounds, the treasury is broke, the losses in the private sector are beginning to be realized and guess who is on the hook? It's the US of A.

We have two choices, debase the currency or let our creditors take the hit and pay them 75 cents on the dollar on the debt. Which option do you think they will select???

12/11/2010 2:57:31 PM

Quote :

"Why is it bad for things to cost LESS?"

It's not about things costing less, it's about investments paying less and loans costing more. Those have a far larger impact than the price of consumer goods. You're looking at this like a 9 year old.

Quote :

"In the US I don't forsee people choosing loyalty to their government over potential profits in other markets."

Who cares? They buy so little.

Quote :

"It should cost less to produce the same goods as technology develops. Of course it should cost less to produce a plasma TV today than it did 10 years ago, of course it should cost less to eat meat than it did 200 years ago when you had to hunt for it..."

Dude, that's not what deflation is.

Quote :

"On average, the less economics classes you've taken in your life probably the better you understand economics."

Come on.

12/12/2010 3:34:37 AM

Quote :

"Who cares? They buy so little."

US citizens buy little US debt?

[Edited on December 12, 2010 at 9:39 AM. Reason : .]

12/12/2010 9:36:19 AM

You're doing it again, go back and read the post I quoted.

12/12/2010 11:19:06 AM

Rally just got finished talking about Japan and how it's citizens bought their government debt. The immediate point after that is the US isn't loyal to its government like the Japanese so we won't buy our government debt like the Japanese did.

Am I wrong?

[Edited on December 12, 2010 at 12:22 PM. Reason : .]

12/12/2010 12:21:35 PM

No, as usual Kris is wrong.

You understood my point clearly.

12/12/2010 12:43:37 PM

If only we had let the guys with PhDs in Economics handle this crisis.

12/12/2010 1:30:39 PM

We were talking about bonds. Private US citizens own a small, small percentage of us bonds.

12/12/2010 4:13:44 PM

^ So you are you agreeing with me that you don't forsee Americans willing to buy the bonds to suppress rates?


US institutions, mutual funds, banks, etc own a huge percentage of the bonds. Who is putting the money in those mutual funds and banks?

It's pretty likely that China isn't going to continue to scoop up our debt, who will?

12/12/2010 4:16:16 PM

Kris, you're wrong. Please look up who owns US government debt.

12/12/2010 4:40:01 PM