The G Manifesto

Peter Schiff: Let’s Play Pretend!

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All kinds of bonds (corporate, government and municipal, etc.) that are not in default frequently trade at discounts. In fact, the reason that agencies such as Moody’s and Standard and Poor’s rate bonds is to assess the probability of default. The higher that probability, the lower the value placed on the bonds, regardless of their current cash flow.

For example, GM bonds that mature 10 years from now currently trade for only 8 to 10 cents on the dollar, despite the fact that GM is current on all interest payments. The 90% discount reflects investor awareness that GM will likely default long before the bonds mature. By the new logic, financial institutions with GM bonds on their balance sheets should be able to ignore the market and value these bonds at par.

Some argue that the comparison is invalid because GM’s bonds are liquid while mortgage-backed securities are not. However, if sellers of GM bonds were holding out for 70 or 80 cents on the dollar, those bonds would be illiquid too. The reason GM bonds are trading is that sellers are realistic.

The same should apply to bonds backed by mortgages. To assume that a 30-year, $500,000 mortgage on a house that has declined in value to $300,000 has a high probability of remaining current to maturity is ridiculous. The borrower could lose his job, his ARM might reset higher, or he may simply tire of paying an expensive mortgage for a house that is unlikely to be sold at a profit. Any bond investor with half a brain will factor in these probabilities and look for deep discounts. The only way to accurately assess a real present value is to let the market discover the price.

Despite the pleas from bankers and politicians, mortgages are not plagued by a lack of liquidity but a lack of value. If sellers would be more negotiable, there would be plenty of liquidity. Who knows, at the right price I might even buy a few. The problem is that putting a market price on these assets would render most financial institutions insolvent, which is precisely why they do not want to let that happen.

Simply pretending that all these mortgages will be repaid does not solve the underlying problems. It may keep some banks alive longer, but when they ultimately do fail, the losses will be that much greater. In the meantime, solvent institutions are deprived of capital as more funds are funneled into insolvent “too big to fail” institutions – hiding their toxic assets behind rosy assumptions and phony marks.

Going from the sublime to the completely ridiculous, in a speech at the just-concluded G20 summit in London, President Obama urged Americans not to let their fears crimp their spending. It would be unwise, he argued, for Americans to let the fear of job loss, lack of savings, unpaid bills, credit card debt or student loans deter them from making major purchases. According to the president, “we must spend now as an investment for the future.” So in this land of imagination (where subprime mortgages are valued at par), instead of saving for the future, we must spend for the future.

I guess Ben Franklin had it wrong too – apparently a penny spent is a penny earned.

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Buy Crash Proof: How to Profit From the Coming Economic Collapse by Peter Schiff

Click Here to Buy Emergency: This Book Will Save Your Life By Neil Strauss

The Rest is Up to You…

Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
AKA The Sly, Slick and the Wicked
AKA The Voodoo Child
The Guide to Getting More out of Life
http://www.thegmanifesto.com

Clipse – Nightmares

Commodity Trading: It’s All About Confidence

For March 30th– April 3rd 2009
By: Matthew Bradbard
http://www.mbwealth.com

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Have things gotten better? I don’t know, but investor’s confidence has returned. It’s not so much that things have improved dramatically, but rather that investors are willing to take some risks now that we have gotten more clarification from Bernanke, Geithner and Co. After weeks of waiting, we finally received more details on the programs that the government is trying to institute in order to remedy the problems at hand. The chatter has been on the recent rally in stocks but low and behold look at the recent uptick in a range of commodities. Looking at the CRB Index ytd, it has out performed stocks moving 8.5% lower when the S&P is off 10%. Bottom line, money managers and investors alike are looking at commodities as a way to hedge against the coming inflation in addition to diversifying their portfolios.

Livestock

After the close Friday, the USDA estimated the week’s beef production at 474.2 million pounds, down 0.5% from a year ago. June live cattle were lower all 5 session last week closing down by 1.925 cents. Support is seen between 80.40 and 80.80 with resistance at 82.50. May feeder cattle were lower by 1.20 cents last week. Resistance is seen at 96.00 with support at 93.80 followed by 92.90. We are advising clients to re-enter the cattle spread from previous weeks that we traded. Long August live cattle and short April feeder cattle; enter the spread between -1100/1075 and look for the spread to narrow exiting near -800.

After the close Friday, the USDA said that there were 65.389 million head of hogs on March 1st, down 2.7% from a year ago. The December to February pig crop was down 0.6% from a year ago, slightly more than expected. Pork production was estimated at 451.8 million pounds, down 1.9% from a year ago. June lean hogs lost 2.60 cents setting up a better long entry which we have suggested starting this week. We have multiple ideas in both futures and options but the bottom line is we are expecting higher prices.

Support is seen at 70.40 followed by the contract low near 69.50 with resistance at 72.50. We are expecting to see a trade up to 78.00 in the coming 30-45 days. See lean hog report from the previous week: The other white meat.

Continue Reading about Financials and Grains

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To find out exactly how we are positioning our clients in commodity futures and options,
Contact us today at 1-888-920-9997. Don’t forget to tell them The G Manifesto sent you.

To view our full commentary which includes the sectors of energies, livestock, currencies, financials, grains, softs, and metals, subscribe to our 4 week free trial by visiting this link: http://mbwealth.com/subscribe.html. Don’t forget to tell them The G Manifesto sent you.

_____________________________________________________________________________________Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions. Calculations of profit and loss have not factored in commissions and fees.

Joseph Cassano: The Big Takeover by Matt Taibbi

Click Here for The Great Derangement: A Terrifying True Story of War, Politics, and Religion by Matt Taibbi

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I just finished this article by Matt Taibbi, its long, but worth reading on the real. There are very few writers on the internet that write long articles that are worth reading. Joshua Davis who wrote Leonardo Notarbartolo: The World’s Biggest Diamond Heist Matt Taibbi, and myself.

Here is The Big Takeover:

It’s over — we’re officially, royally fucked. No empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country’s heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

Clipse – Big Dreams

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That’s $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG’s 2008 losses).

Click Here for The Great Derangement: A Terrifying True Story of War, Politics, and Religion by Matt Taibbi

So it’s time to admit it: We’re fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we’re still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company’s CEO, actually compared it to catching a cold: “The marketplace is a pretty crummy place to be right now,” he said. “When the world catches pneumonia, we get it too.” In a pathetic attempt at name-dropping, he even whined that AIG was being “consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet’s investment portfolio down.”

I. PATIENT ZERO

The best way to understand the financial crisis is to understand the meltdown at AIG. AIG is what happens when short, bald managers of otherwise boring financial bureaucracies start seeing Brad Pitt in the mirror. This is a company that built a giant fortune across more than a century by betting on safety-conscious policyholders — people who wear seat belts and build houses on high ground — and then blew it all in a year or two by turning their entire balance sheet over to a guy who acted like making huge bets with other people’s money would make his dick bigger.

Click Here for The Great Derangement: A Terrifying True Story of War, Politics, and Religion by Matt Taibbi

That guy — the Patient Zero of the global economic meltdown — was one Joseph Cassano, the head of a tiny, 400-person unit within the company called AIG Financial Products, or AIGFP. Cassano, a pudgy, balding Brooklyn College grad with beady eyes and way too much forehead, cut his teeth in the Eighties working for Mike Milken, the granddaddy of modern Wall Street debt alchemists. Milken, who pioneered the creative use of junk bonds, relied on messianic genius and a whole array of insider schemes to evade detection while wreaking financial disaster. Cassano, by contrast, was just a greedy little turd with a knack for selective accounting who ran his scam right out in the open, thanks to Washington’s deregulation of the Wall Street casino. “It’s all about the regulatory environment,” says a government source involved with the AIG bailout. “These guys look for holes in the system, for ways they can do trades without government interference. Whatever is unregulated, all the action is going to pile into that.”

Click Here to continue reading The Big Takeover by Matt Taibbi

Click Here for The Great Derangement: A Terrifying True Story of War, Politics, and Religion by Matt Taibbi

Click Here for Top Ten ways to Make Money in a Down Economy

The Rest is Up to You…

Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
The Guide to Getting More out of Life
http://www.thegmanifesto.com

Skull splitting rhymes:

The Clipse – “Numb It Down” [Road To Till The Casket Drops]

Peter Schiff: The Fault Lines Emerge

Buy Crash Proof: How to Profit From the Coming Economic Collapse by Peter Schiff

Click Here to Buy Emergency: This Book Will Save Your Life By Neil Strauss

For a few fleeting, horrifying moments this past week the fault lines that underlie the global economic crisis erupted into plain view. With deft and quick effort leaders in Washington, Europe and Asia papered over the fissures and fears largely subsided. But the shock of plain truths which resulted in violent currency movements are the latest reminder that the 21st century economic order will bear little resemblance to the world we now know.

The tremors began in Beijing, where a essay from the governor of the People’s Bank of China seemed to favor the creation of an IMF currency to replace the U.S. dollar as the world’s reserve. In Europe, the rotating president of the European Union, outgoing Czech Prime Minister Mirek Topolanek, characterized America’s plan to combat the widening global recession as the “road to hell.” At same time, British Member of the European Parliament Daniel Hannan made headlines the world over with his stinging rebuke of the inflationary and debt-focused policies of the current UK government.

As a result of these clearly voiced frustrations, the U.S. dollar suffered a drubbing. However, Treasury secretary Geithner and his ministerial counterparts in Berlin, Paris and London did their best to convince everyone that the world is pulling together as one to combat the economic crisis. The charm offensive was effective in restoring calm.

Given the size and scope of the remedies that the Obama Administration is cajoling the world to adopt, it is likely that the unease will grow until many countries emerge in open revolt to America’s plans.

President Obama and the majority of our leadership on both sides of the aisle are confident that the right mix of monetary and fiscal policy can restart the spending party that defined America for a generation. And as the bleary-eyed revelers wisely reach for a cup of black coffee or stumble into a rehab center, Obama is pouring grain alcohol into the punch bowl hoping to lure the walking zombies back onto the dance floor. Europe and Asia fully understand that Obama will ask them to lend the booze.

Washington is telling us that our problems result from a lack of consumer spending. Therefore, the solution is for government spending to pick up the slack. However, if Americans are too broke to spend, then how can our government spend for us? The only money they have is taken from us through taxation. To postpone immediate tax hikes (adding interest for good measure), Washington plans to borrow more from abroad. However, if our foreign creditors refuse to pony up, much of the money will simply be printed instead.

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Make Money in this Down Economy. Stack chips. You will need it.

Buy Crash Proof: How to Profit From the Coming Economic Collapse by Peter Schiff

Click Here to Buy Emergency: This Book Will Save Your Life By Neil Strauss

The Rest is Up to You…

Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
The Guide to Getting More out of Life
http://www.thegmanifesto.com

Main Ingredient–Spinning Around (1971)

Peter Schiff: The Crisis Just Begun

Buy Crash Proof: How to Profit From the Coming Economic Collapse by Peter Schiff

BuyThe Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down by Peter Schiff

Good video on by Peter Schiff and Aaron Task:

The Mother of All Bells

There is an old adage on Wall Street that no one rings a bell at major market tops or bottoms. That may be true in normal times, but as many have noticed, we are now completely through the looking glass. In this parallel reality, Ben Bernanke has just rung the loudest bell ever heard in the foreign exchange and government debt markets. Investors who ignore the clanging do so at their own peril. The bell’s reverberations will be felt by everyday Americans, whose lives are about to change in ways few can imagine. While nearly every facet of America’s economy has been devastated over the past six months, our national currency has thus far skipped through the carnage with nary a scratch. Ironically, the U.S dollar has been the beneficiary of the global economic crises which the United States set in motion. As a result, our economy has thus far been spared the full force of the storm.

This week the Federal Reserve finally made clear what should have been obvious for some time – the only weapon that the Fed is willing to use to fight the economic downturn is a continuing torrent of pure, undiluted, inflation. The announcement should be seen as a game changer that redirects the fury of the financial storm directly onto our shores.

In its statement, the Fed announced its intention to purchase an additional $1 trillion worth of U.S. treasury and agency debt. The purchases, of course, will be made with money created out of thin air through the Fed’s printing presses. Few can doubt that they will persist with these operations until the economy returns to its former health. Whether or not this can ever be accomplished with a printing press alone has never been seriously considered. Bernanke himself admits that we are in uncharted waters, with no map or compass, just simply a hope that more dollars are the answer.

Rather than solving our problems, more inflation will only add to the crisis. Falling asset prices, the credit crunch, declining consumer spending, bankruptcies, foreclosures, and layoffs are all part of the necessary rebalancing of our economy. These wrenching movements, however painful, are the market’s attempts to resolve the serious problems at the root of our bubble economy. Attempts to literally paper-over these problems will lead to disaster.

Continue Reading

Buy Crash Proof: How to Profit From the Coming Economic Collapse by Peter Schiff

BuyThe Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down by Peter Schiff

The Rest is Up to You…

Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
The Guide to Getting More out of Life
http://www.thegmanifesto.com

Blahzay Blahzay – Danger