Today there will finally be some justice for the investors of this epic fraud. Even though he will probably only get 20 or 30 years, may be the full 150, it is still a life sentence which is good. Anything less than 30 years would be uncivilized. However, since we are a bailout nation shouldn’t the government bailout those investors?
Seriously, at the end of the day it was way less than the banks needed and the DEC clearly failed investors. They need to be held accountable as well. What is amusing is the fact that he is going to jail, but no one from the securitization department or the ratings agencies are even charged with fraud. Those crooks lost trillions, yet here we are concentrating on Madoff, Wako “The Molester” Jacko’s death- who really cares?, While California was downgraded with negative outlook and they began issuing IOU’s to their counterparties all of which are more important, in my opinion, than Madoff. It is not that I do not want to see him in prison, simply he admitted it, but everyone else is free as a bird.
Thank you to ZeroHedge.blogspot.com for bringing this issue up. Below you will see Freddie and Fannie’s assessment of the housing market, none of it good. First, bond dealers are forced to buy this crap debt instead of corporate bonds. Second it shows increased housing inventory and that they are underwater.
The bottom line is this, housing is still a mess and Cramer was dead wrong in his assessment of the market. Frankly, aren’t you wondering why banks are tearing down foreclosed houses? They are trying to eliminate inventory, but it is not working. Oh, well lets keep the blinders on and bid up stocks!
Why is it that people trust the media so much? While I admit that I am an avid CNBC watcher I simply do not understand why everyone trusts what they have to say. They initially came out blasting Obama, but then all of a sudden they embrace his policies, no matter how destructive they are. I was never a believer in media bias until after the election and the bailouts, which GE Capital subsidiary of GE the parent of CNBC received part of, where handed out.
Political bias aside, the real damage the network does is through its pitch men, Jim Cramer, Larry Kudlow and super dip shit Dennis Kneale. Frankly, they are totally clueless about everything that is going on. Cramer calls the bottom of the housing market, a few days before an announcement of further declines and horrible housing data, he used new permit data and saw what he wanted. Kudlow has continually called a rebound in the economy in the face of continuing horrible data. Finally Kneale called the end of the recession as of Thursday based on two data points.
The truth of the matter is that none of these people understood the real problem which was a credit problem, not a liquidity problem. Credit has not really improved and the consumer is in worse shape than ever. Unemployment is not a lagging indicator for this problem, it is a leading indicator and is going to get much worse. The higher the unemployment rate climbs the greater the credit card, foreclosures and auto loan defaults there will be. That is where the problem lies, not with liquidity.
The Fed is not helping matters by not allowing institutions to fail. While no one wants banks to go under and people to lose their jobs it is imperative for the markets, not government to sort things out. Now we have zombie banks that are still under capitalized and not lending money to consumers. Not to mention, which I find embarrassing, is that 45 banks have failed this year, 45 with a trillion in bailouts! Seriously, how can that happen?
We cannot have a consumer based economy that is massively in debt, both consumers and the government, and expect to be the powerhouse we once were. We need manufacturing to succeed which is exactly why China is such a powerhouse, they produce things while we do not. It is a matter of time, as recent news stories have indicated, before the world will seek a new reserve currency. I am not saying the dollar will be dumped overnight, it could happen, but it won’t, rather we will see foreign banks buy short end treasuries and just let them mature, which is what is happening now.
The massive, inflationary, stimulus package has done nothing to create jobs and will fail to put a dent in the unemployment problem. The Fed’s own whisper number is 11-14% for unemployment by next year and the real irony is that the Obama budget was based off of BS numbers of 3.8% GDP growth and unemployment of 9% or so which means much more deficit spending to come.
The Fed is in a pickle, they need long-term rates lower, but they are at zero now and have spent a ton of money buying government debt in the market already. In other words, the only way that long-term rates can decline is through quantitative easing which is monetizing our debt and devaluing the dollar. They know not what they are doing, but Cramer and Co. embrace Bernanke as a hero, seriously? He got us here and did not see the writing on the walls then, but now he’s a hero?
Regardless, the media has been spinning a recovery for months now, why? Clearly no one wants this thing to get worse, however the markets have gone up which means we are all set and things are fine. That is what Cramer and Co. all say at least. What we are seeing here is not a recovery, but a factor of two things.
1. The market had to go up because it was massively oversold, in the short-term.
2. The dollar weakened significantly which is really, really bad, but a boost to equity prices.
This is merely a dead cat bounce, period and to deny it will prove devastating to your portfolio, in our opinion. It is important for you to realize that we are bullish on the US, but we are disciples of the Mises Austrian School of Economics. Based on the teachings that we embrace we see more trouble with the debt being issued, dollar weakness and governments policies. We do believe that the free markets, which don’t really exist anymore, can correct itself, but cannot be left all on their own and needs regulations.
Now, all of the Cramer and Co. will preach a bull market to make us feel better and deny all that has gone wrong and misdirect you into believing what is false. They parade all bulls and few bears on the air to cheerlead, and that is what they are doing, stocks. They pat themselves on the back for writing books that are after the fact and late to the punch. They chastised Peter Schiff and Roubini on the air before the crisis happened, and they predicted it, and now only give them limited air time because they are telling you the truth – things are not good.
Harry Dent is even predicting another leg down, to 5,500 on the Dow, but he is not given any air time. Now, I can understand why as Dow 30,000 never happened, but in his recent book which was written in March of 2008 he predicted exactly what we have seen. Based on what he said and what we know the Dow and markets will sell off starting in July. We say that you should move into protectionist mode again and dump equities and dollar cost average into the market.
Buy ETF’s and annuities. ETF’s give you liquidity to dump the holdings in the middle of the day or whenever, versus mutual funds which make you hold losses through the day. Annuities give you guarantees which you will find useful in the long-term. Hedge dollars with either foreign currency or precious metals, physical metals are always better than buying tracking ETF’s.
Bottom line, this thing is just getting started so get ready for a hell of a ride. We acknowledge we may be wrong, but we have not been so far.
It has been awhile since there has been a post, sorry. Things have been complex in the annuity and financial services industry as a whole. Not only that, but how many times need you read Annuity posts. Therefore, we are changing our format and moving to a more general blog about the markets, financial services and annuities.
We also wanted to comment on some comments about why we dislike index annuities. Many have said that you cannot hate a product based on higher commissions alone. You are correct. Our point about higher commissions is just on aspect of why we dislike these products. The simple fact is that if the company can afford to pay the agent 8%+ in commissions and then pay a “bonus” to contract holders, a potential outlay of between 16 to 20% of capital by the insurer upfront, it is unreasonable to assume that the product is in the best interest of the consumer. Debate that fact all you want, but that tyope of capital outlay comes with strings, period.
This is why we support Rule 151A which requires index annuities to be regulated by the SEC. Sure the SEC has messed up, but that is with hedge funds and not annuity products, where they have done a decent job of regulating the products. Unfortunately, some greedy congressmen are fighting the new rule citing states rights, etc. However, I am sure they are merely receiving campaign contributions to fight the rule rather than actually trying to understand what and why the SEC wants this power.
Blast away, but the fact is that it is the best possibility for insurers to be honest and the product to actually benefit all parties involved instead of the traditional method of only being really good for the agent and the company. Everyone needs to make a living, but stop screwing the little guy and we will be OK. Here is a hint, take care of your clients and they will take care of you.
Be the First to Comment 
Subscribe to Annuity IQ's Feed
