Tuesday, September 30, 2008

The Fix Is In

In case you didn't know....

Let's review some of the events from the past week:

WaMu and Wachovia went under. "A Durham, North Carolina native, (new CEO) Steel told analysts on Sept. 9 that Wachovia had cash to meet more than three and a half years of maturing debt. During his mid-September meeting with Woodard in Charlotte, Steel expressed optimism that Wachovia could battle through investor unease caused by its option ARMs. ``I have absolutely no idea how Bob Steel defined liquidity,'' said Gary Austin, a former Wachovia bond trader who now heads PDR Advisors LLC in Charlotte. ``When you run out of assets to pledge at the window, you've got nothing left.'' But statements like this, combined with no-shorting rules, had catapulted Wachovia to $24/share just last month.

Freddie Mac gained almost 200% in one day. Why?

Citi and JPM were awarded banks with little risk attached. Unless all of the MBS blow up, in which case the whole country goes bankrupt anyway.

Bush prodded not only Congress, but all Americans today that failure to push through a bailout cost us a trillion dollars yesterday, more than the cost of the bailout. As if the 2 were apples to apples. Never mind the over $4 trillion that had been lost by the markets since its highs in October due to the criminality of the banks.

Buffett was given the best terms of all-time by GS on a $5 billion investment.

That's why, as tempting as the last 2 days were in a day-trading kinda way, I stepped back and just added to my list of terrible companies and those that might gain from this dictatorship-like intervention. We've glossed over the slowing economy and yet another disappointing home sales figure because we were too busy celebrating this no-short bounce.

Not everyone drank the kool-aid. "Rick Dillon, fund manager and chief executive of Diamond Hill Investment Group, demanded that his firm be removed from the SEC's "no-short" list. "It's better for shareholders to have [shorts] as participants," said Dillon. "Short sellers provide a valuable service in two ways: price discovery—their information content is valuable; and they provide liquidity." Really, it's true Congress. Prices can also go down. Which brings us to our next point, redemptions.

See, when hedge funds can't short stocks, they can't go long either. Why? Because you've taken away their hedge, Mr. Cox. So, in the short-term you managed to pump up a few bank stocks and started a chain of events that will lead to massive selling by the $2 trillion dollar industry. As their returns have suffered, they've been asked for redemptions by their clients. How will they pay for those redemptions? By selling stock. "Many hedge fund investors can withdraw money on Dec. 31. Some funds require that redemption requests be submitted 90 days ahead of time. That means requests have to be in by Tuesday. Other funds require 45 days notice, so there may be another round of withdrawal requests toward the middle of November.
Some managers have already been selling positions to raise cash to return money to investors. However, if redemption requests come in higher than expected, there could be another wave of selling and market disruption during the fourth quarter."

Aha! You thought that I forgot. No way.

Where to begin? With his infamous rant a mere month after he said cutting rates would be disastrous? Good start. Let's go back to some of his predictions for this year first.

Goldman Sachs (GS) makes more money than every other brokerage firm in New York combined and finishes the year at $300 a share. Not a prediction—an inevitability. In fact, it’s only January, and I think it’s already come true.

Google stock reaches $1,000. The company becomes one of the top three companies in the U.S. in market capitalization... and successfully challenges Microsoft (MSFT) for operating-system dominance.

Apple (AAPL), he predicts, will reach $300.

9/30/08-"Jim Cramer Admits: "I Screwed Up" In Recommending Wachovia Stock Two Weeks Ago Because I Liked The CEO"

8/1/08-""I am indeed sticking my neck out right here, right now, declaring emphatically that I believe the market will not revisit the panicked lows it hit on July 15. and I think anyone out there who’s waiting for that low to be breached is in for a big disappointment and [they’re] missing a great deal of upside."

6/5/08-"At an investment symposium I attended last night, someone asked me whether I thought Lehman Brothers (NYSE: LEH) (Cramer's Take) was going under. I said, no, no I didn't think so. It's got a great franchise with a good cash position, reduced leverage, much better management than Bear and a buyback that's kicking in that wouldn't if things were as bad as the bears make it out to be."

3/21/08-"I call it a bottom."

3/11/01-"Bear Stearns is fine!"

10/1/07-"I'm now confident that what would've been a given in 2008, a brutal recession..will now be avoided and prosperity assured."

1/21/01: "This is the lowest-risk, highest-reward environment possible." And from 3/24/03: "...the risks of owning stocks are as high as I have ever seen them, and the rewards the least certain." Right before the Nasdaq crash and 4-year bull run respectively.

Another example of the fix being in. Cramer effectively influences 2 of the top financials shows and websites (CNBC and TheStreet.com) that Americans turn to (unfortunately) for their picks and info. After touting the overblown selling of this market and twice calling a bottom, he now has instructed America not to buy stocks until the Dow hits 8,200. This is the noise that Taleb talks about. Hopefully, you'll find my writing a note of truth amongst that noise. I recommended shorting Lehman, Wachovia, and WaMu this year, not to mention Synovus and GNW, both of which went under $4 in the last week. Keep alert over the next few days. Continue being skeptical of this market and our government. And we'll look for the advantages that our leaders thought they could keep just for themselves.




Sunday, September 28, 2008

Good As Gold

This bailout is good as gold. Goldman Sachs, that is, or golden parachute, or gold, Dodd and Frank, gold! as Seinfeld might say. I'm going to get pissed now, just watch me.

Let's start with GS and former golden boy, Paulson, who made a mere $500 million for his seven years with the company. Is this really the man we want making decisions effecting most Americans for years to come? As John Markman wrote recently about Paulson's testimony before Congress, "In his close-up this week, Paulson appeared uncomfortable, unknowledgeable, uncaring and often unintelligible, as if notes he had scrawled on a cocktail napkin on the way in were just out of reach." How the hell are we letting an unelected official with half a billion dollars in private wealth determine, with a 3-page outline and an agenda to save the wealth of his former colleagues, our fiscal future? GS has contributed over $43 million dollars to lobbying and financial campaigns over the last 20 years, including over $264K to Dodd. No surprise that he and Frank, heads of the Senate banking committee, were willing to rubber stamp a proposal that made the treasuries decisions "permanent" and not reviewable by any court. In a word, criminal.

Gold. Golden parachute. As pointed out by James B. Stewart in his excellent account of the S&L scandal Den of Thieves, the golden parachute was invented by Martin Siegel. Siegel was working for a smaller I-bank at the time, Kidder Peabody, and sold this idea to clients ostensibly as a deterrent to corporate raiders. In practice, as we know, these buyout clauses have been so lucrative that CEOs such as orange man Mozillo can't wait to dump and burn their own companies to collect a huge paycheck and hopefully stay one step away from prosecution. We'll say if the bailout proposal addresses this in any meaningful way, but I doubt it.

I've read from several columnists about the impending disparity of Buffett's deal with our own. If he can earn 10% on $5 billion, shouldn't we demand a little more with $700 billion? It looks like investors aren't fully convinced this morning with futures down 200 points and banks and insurers following our healthy example of failure across the Atlantic.

I'd like to depart directly from analysis to address those congressmen voting for this scam. I've heard back from Mel Martinez and Robert Wexler, 2 of my own, who simply say the housing mess is too big in Florida to not give the appearance of doing something. Obama and McCain will both vote for this. So what are we to do?

Vote, of course. But not for anyone who supports this. If what Pelosi says is true, details about the bailout will be fully evident on the net within 48 hours of it passing. We should also have a list of who voted for it. If this potentially $700 billion albatross is pushed through, then what is our recourse? Reject anyone who put your money on the line. Vote for the independent, for the libertarian, for the green party, but don't vote these incumbent criminals back in. Sure, you might think that 1 vote won't matter. But take it from someone living in the epicenter of voting disasters, Palm Beach County, that lost votes for a candidate do matter. If we put people like Dodd and Frank back in office, we are admitting that we are sheep, willing to accept our billionaire masters as keepers of our country and financial futures. At least by casting a vote in the opposite direction, we make a stand as is our right.

I would also like to finish by adding that Cramer now predicts the Dow will hit 8K. My next post will cover how he should go to jail sooner than later.




Friday, September 26, 2008

Armageddon, Again

Emperor Paulsontine
The analogy is pretty good. Create a false sense of panic that allows unelected officials "broad powers" to fix the crisis. When things calm down, we'll re-evaluate but for now, just push through $700 billion in blank check funds. Ironic that the Republicans are showing great resistance to this, but at least somebody is taking a stand.
WaMu imploded last night, as I told you it would in January (sorry Kass, beat you again to that call). Wachovia may very well be next. But between bailouts and no-short rules, we need to think beyond financials to collateral damage. S&P came out yesterday and said this is just the beginning for poorly rated companies. "More than 23% of non-financial companies with speculative-grade debt may default on their debt between 2008 and 2010, with consumer products, entertainment and retail companies among the sectors hit the worst." The trouble may be in shorting companies that have already taken major hits. I began researching these sectors a few months ago and am compiling a list of future failures. I took a close look at Decker Outdoor yesterday due to their $110 price tag for a company that sells expensive sandals. But unlike most retailers, these guys are sitting on $6/share in cash, a nice cushion for a company that has only 13 million shares outstanding. I correctly predicted a slide in Darden restaurants and Whole Foods, and will return to casino and other entertainment related products as well. Main street is next, and I don't know if we'll fund a JCrew bailout.
I have written both of my state senators as I've implored all of you to do. Mel Martinez replied with a canned response, but did include his floor speech bashing CEOs and golden parachutes, even pushing for prosecution. And he should. Here's how these guys have made out over the last 5 years..."Wall Street's five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system." A Bloomberg article yesterday detailed how S&P sold out 7 years ago. "Frank Raiter says his former employer, Standard & Poor's, placed a ``For Sale'' sign on its reputation on March 20, 2001. That day, a member of an S&P executive committee ordered him, the company's top mortgage official, to grade a real estate investment he'd never reviewed." And there you have it, the end of AAA as a meaningful designation. Of course, Moody's and Fitch followed suit competing for huge dollars and began down the road of "rating cow manure if they were asked to."
I've heard from a few of you about taking positions. As I've asserted many times, we'll keep playing for homeruns here. But there's no need to panic. Let the markets do that. The rules are changing every day and we can't risk another ex post facto hit to our positions. I'm informed that E-Trade simply forced investors to close their positions if they held no-short stocks that expired during the ban, effectively reducing their investment to 0. There will be an overshoot on the bailout announcement and the subsequent devastation of the market on the way down, allowing for bargains on both ends. Be patient.

Wednesday, September 24, 2008

Three Days

One of my favorite movies, Three Days of the Condor, finished with the following sequence which I think is eerily relevant to the type of criminal destruction we're witnessing right before our eyes. Take 5 or 10 minutes to watch Bernanke over these days, and reflect on the 3 day period of Wed.-Fri. of last week, which may have signaled the end of capitalism and American prosperity as we know it.

"Not with the heat on the company. TURNER:What if there hadn't been any heat; supposing I hadn't stumbled on a plan; say nobody had? HIGGINS:Different ballgame! Fact is there was nothing wrong with the plan. No, the plan was allright, the plan would have worked. TURNER:Boy, what is it with you people? Do you think not getting caught in a lie is the same thing as telling the truth? HIGGINS:No, it's simple economics. Today, it's oil, right? In ten or fifteen years, food, plutonium, maybe even sooner. Now what do you think the people are going to want us to do then? TURNER:Ask them HIGGINS:Not now; then! Ask em when theyr'e running out! Ask em when there's no heat in their homes and theyr'e cold. Ask em when their engines stop. Ask em when people who've never known hunger start going hungry. Want to know something? They won't want us to ask em! They'll just want us to get it for em . TURNER:Boy, have you found a home! 7 people killed, Higgins! HIGGINS:The company didn't order it, ATWOOD did! TURNER:Atwood did! And who the hell is Atwood, he's you, he's all you guys. 7 people killed and you played fucking games. HIGGINS:Right, and the other side does too! That's why we can't let you stay outside"

Oh the plan would've worked. MBS and CDOs, free reign of market terror, that worked great. And when leveraging 30-1 didn't work, they didn't ask us. They just changed the rules so that they could start over again from zero and will inflate us into not a recession, but a depression the likes of which we have never seen. And today it is oil. And when the Saudis wake up one day and realize the dollar is a dinosaur currency, we're finished....

I just had the surprising and pleasant experience of watching R Doggett from Texas not only take a rhino sized dump on Bush, but make Bernanke pee his pants only a little bit. He said, "let me get this straight. These assets which you describe as toxic, aka, no value, are the ones you propose we buy at above fire sale prices to clear out debt for the banks and burden the taxpayer with. No way." Bernanke asked him to address Paulson with these questions as he squirmed away. On the other end, reps Sanchez and Cummings were totally unimpressive with questions that had been answered a thousand times already, and both showing a complete lack of understanding of basic economic principles.

Anyone who is not embittered by our government's actions during this time is a fool, waiting on price increases, future job loss, and a higher tax bill. Neither Obama with his Milton Friedman efficient market theory background, or McCain with his I'm not so strong on economics will have a clue as to what to do. I wrote both of my senators yesterday, one republican and one democrat, with the same message. A vote for a bailout is a lost vote from me. Today mortgages, tomorrow auto and credit card loans for the septic tank we call the Treasury. Wake up. We're not Socialist, we're Capitalists. Businesses fail. Banks fail.

Buffett has become comical. $5 billion of GS. At guaranteed 10% returns. Like that's an investment any of us could ever make. With warrants at $115. Buoyed by his own purchase. Ridiculous.

I'm not ready to move to Canada yet, but I wonder what recourse we have in this mess. Wall St. will not fail. The lessons of the S&L crisis and LTM have never been learned and will be repeated in 5-7 years while we watch our real earnings get destroyed. I am bitter about rule changes that have cost me thousands of dollars in the middle of a game I predicted correctly. It's shocking to see even those like Kass rail against these measures as the shorts/hedge funds have been handcuffed by these changes, basically placing an ex post facto failure on those of us who correctly foresaw this swoon.

Forever optimistic however, I almost root for a small rally. That way, we can short companies like GGP again, who have $5 billion in debt due next year and not a prayer of raising that kind of money. If they hit $20, let's get back in. WSM is still on my list, and I like to hate large retailers as well. VNO has come into play, but a $12 beating on Monday will make us wait.

My picks stunk last week, a Cowboys win my only good call. The Bills played like crap, won, but didn't cover, and the Steelers couldn't get off a play and fell short. I will be up and running on Friday with my weekend picks and hope for better matchups this week.

Be safe out there with your money. This economy will get very rough. Our new horizon will take us out to 2010 or 2011 if LEAPS are available. Follow me through as we are still beating the market by well over 30% personally and much more if you had courage in LEH, WM, and EWBC that extended beyond my own.

Friday, September 19, 2008

Teaser or Parlay?

It doesn't matter which, because it's all gambling. Our government has decided this week to put our world renowned financial markets on par with those of Pakistan and Russia, where stocks were either prohibited from trading down or markets were not allowed to trade all-together. This is why I sold last week. Yes, I lost potential gains. Yes, I flinched. But what happened over the last 2 days is what I feared might be announced on Sunday and that would've erased completely a very nice year for me. Case in point is GNW. Shorted the stock around $16, sold at around $13, went down to $4 yesterday (owee) and back to $16 today (when it was put on the no-short list). Pure madness. As my brother pointed out to me, when we have a bunch of non-elected officials making financial policy decisions, we've lost the game. And to answer my boss, who asked me what the difference between the stock market and gambling is, there is none. Place your bets.

As Nassim Taleb points out, the banks have managed to lose more in 1 year than they've ever made in the history of the wolrd. Ironic that the SEC has allowed for the very thing they claim to rail against, market manipulation. Ironic too, I think, for companies like GE to beg onto the no-short list as a financial company when Immelt has screamed for years that they deserve a higher non-financial like PE. My favorite stock to short, COF, was conspicuously left off of the list and they too, are trying to get on before the 10/2 expiration. Let's hope it goes to $70 so we can get back on board.

The market is now a sham. The wealth of Wall St. has been temporarily buoyed by extraordinary and criminal measures. Even Larry Kudlow insists short-selling is a perfectly healthy check against runaway stocks and that a new stock bubble will emerge from this. Hedge funds are considering suing the SEC as their business has been reduced to nothing. Two days ago we were talking about the end of investment banking, now Morgan can make it. Two days ago we were purging the excess, today we created a toilet for America's future. Our financial strength should be that of junk, no better.

On to games that hopefully aren't fixed. My lack of football discussion is embarrassing, and I apologize. There's much to celebrate in the AFC as the Colts and Pats now both stink, but for different reasons. The Giants still look damn good, and Boys do too. Still not sold on Rodgers, but I guess we'll find out a lot more this weekend. My Browns stink, and Braylon Edwards hasn't seen a pass he'd like to catch all year. This week's games look horrible, but I think we can round up some winners. College is going to be the appetizer this year, as I think there will be a lot of weekly churn at the top thanks to the SEC and at the bottom, thanks to the pitiful Big 10.

Oakland is gross. The Bills are very good at home and will stomp Jamarcus Russell into a 2 for 18 performance. Give the points. All of them.

Dallas is better than GB. I think at least 3 points better.

The Steelers are getting 3.5 points. They will blitz McNabb to death or injury, whichever comes first.

Monday, September 15, 2008

Ax, What Is A Stop-Limit?

Hell if I know. Until recently, to be blunt, I thought stop-limits were for cowards (insert stronger word here). I based this on much reading of supposed expert limits of 10%, 20%, the "thus you can never lose more than x-percentage" theory that essentially guarantees losses. At one point in February, my financial and homebuilder puts were down 50%. Had I put stop-limits on, I would've been stopped and my choices going forward would've been limited.

As we know know, 6/7 of those puts did very well, posting a combined 20% return in a very bad market.

Let's move forward to July 15 with oil near $150 and financials fighting each other for biggest daily loser. Mindful, but not fearful enough of the insidious Fed and Paulson, a series of events including limits on short-selling of the very companies I shorted, and "great results" from Wells Fargo and JPM (who within 2 weeks announced equivalent 3rd quarter losses), wiped out 100% gains on 4 of my puts in about 3 days.

Like a blackjack player using house money, instead of employing stop-limits to secure at the time what would've been a yearly gain of 50%-60% and a market beating performance of almost 80%, I added positions in BAC, WB, and KMX. I sold everything on 9/10, and now stand at a yearly gain of over 12%. As I mentioned just last week, we were only 300 points from our July 15 lows, and yet some financials are up nearly 100% in that time. To further explain the madness of this market, had I sold the morning of 9/11, my yearly return would be closer to 17%. By that afternoon, my return would've been down to 10%.

I apologize for not pushing myself and my readers to sell some or all of their gains on 7/15. I no longer think stop-limits are evil but I do think belief in your calls and research take precedent. We only need to revisit my shorts in WM and LEH to see this. At one point, down in both, I made out for 40%-50% gains. A little more courage and well, we know now that they are both near 0. LEH 1/09 $22.50s would've produce over a 600% return. It's even easier to kick myself on a day like today where gains would've been substantial. But given the Fed's recent track record, it was hard to know Wed. that no bailout was coming.

So, I will continue to swing for the fences. I will continue to believe that a potential gain of over 100% is always greater than a 100% max loss. I will continue to ignore the bulls, who, like Bove and even short-seller by title only Kass, who recommended Lehman as strong buys at $15 and$12 respectively, have led their followers to their financial deaths, and hope to continue, even with admission of error, to beat the market by 30%.

Not posted but 2-2 so far with picks. Had USC andGB this weekend, Colts blew me up last week and NO blew a late 9 point lead to even me out. I promise more football from here on out.

Tuesday, September 9, 2008

Throwing It All Away

Special Late Edition of THE BBB....

Just when I pooped my pants a lot yesterday as my forecasted and never doubted Fannie and Freddie bailouts actually propped up world markets for a day (thanks for forcing our hand China, it was overdue), today gave us lots back and more as Lehman went into crisis mode on a Tuesday. Eerily similar to Bear, we've been leaked reports for weeks that Lehman has numerous bidders and has the crown jewel in Neuberger. Well, Bove and Kass, Fuld and his minions, no one was biting. S. Korea doesn't want your pile of junk and you're going to have to Merrill this one at 5 cents on the dollar.

With that said, it occurred to me at about 3:59 that Lehman can't lose from here on out. The stock is under $8. And despite being pumped all the way to $20 in recent weeks on relentless "client notes" from Bove and Kass, there may be a saving grace. Just using Bear as the precedent, which actually did collapse and receive a bailout, shares never hit 0 and eventually evened out at $10. If that's the worst case scenario (I'm pretty convinced the government is going to bail them out if necessary), then a pop to $10 gets you over 25% and if they stay afloat, Bove and Kass may be proven correct. Disgusting but true.

Also true, I've officially given up on this government. On Friday morning we were a mere 300 points from the July lows, yet some of my options had literally lost over 100% from their highs. On 300 points. We are witnessing some of the largest criminal acts in history with these bailouts. We have in one weekend added a minimum of 11% to our national debt and potentially created a $300 billion tax bill to save companies that even G.W. said needed more regulation 6 years ago. Bush said that. It's true.

So, what I'm saying is, I tried to get out today like I did on 3/17. I tried to secure what around 3:50 would've been an 11% profit on the year. Didn't happen. I'm not a day trader, I'm a PA with patients. None of my asks went through. Maybe it will be for the best. But after 7:30, when Lehman trots out their lies and CNBC has an 80-panel review of how the worst is behind us, we might see another 300 point gain tomorrow, and I'll be in trouble.

I have no faith in this market's ability to underperform. Paulson has put a floor on it that we've never seen in capitalism's history. I believe Jim Rodgers summed it up best. "America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich… it's just bailing out financial institutions."

While there are some sane minds left such as Fuchs, Fleckenstein, Jubak, and Forsythe, I don't believe we're dealing with reality anymore and that investors such as ourselves can catch a large break. Our confidence has seen us through a rough year to the upside and even though I've advised on trades that have produced up to 800%, I'm neither a trader nor a millionaire. I don't have the funds to invest in every idea I've suggested, but I think most of them this year have been good ones. I will look for an opportunity to take positive gains against the backdrop of a 20% market decline over the last 10 months, reload, and avoid professional opinion like the plague. I am encouraged by thoughts such as this. "The long-term ramification is we could possibly be in stagflation--rising inflation and the slow-growth economy," says Kathy Boyle, president of Chapin Hill Advisors in New York. "I don't think this is good news. I'm not sure why the market is reacting this way. If they're taking this as a sign that the government is going to step in and save other institutions, they're wrong." And further encouraged by the mass switch from equities to bonds by huge hedge fund managers like Falcone.

It would be sweet irony if the biggest bailout in history, underpinned by "welfare for the rich," would lead to the biggest bond run and bear market in recent memory. We can only hope and live to invest another day.

Wednesday, September 3, 2008

Oil Down, Market...Down?

First, oil went up, barely, on fears of a Cat 4 or 5 hurricane. Then, it dropped precipitously on a "non-event" Cat 2 hurricane that only left 1 million people without power and will cause a mere $4-$8 billion in damage to an economy already in the pooper. Not to mention the devastation of Louisiana's sugar cane crop. This was viewed as very good news and the market literally shot straight up 250 points. Then something happened.

Maybe oil didn't drop $8 on Gustav alleviation alone. As I've been saying for weeks, there is no demand because the global recession is here. But don't just ask me. Ask U.K. Chancellor of the Exchequer Darling. "[The times we're facing] are arguably the worst they've been in 60 years. And it's going to be more profound and long-lasting than people thought." 60 years. So while the media gets all giddy about the "strong dollar" (still incredibly weak by historic standards) and our export growth, let's just step back and think who's going to buy our goods as their economies erode and our stuff gets more expensive.

Ho hum. Another day, another hedge fund failure. "Ospraie Management LP is shutting its flagship commodity hedge fund after it lost almost 40% this year." Wow, good thing Lehman didn't own this loser. Oh wait, yes they did, 20%. Another solid investment from Fuld. They weren't alone. "U.S. activist hedge fund Atticus Capital has lost more than $5 billion this year, a source familiar with the matter told Reuters, after its funds were hit by heavy falls in financial stocks."

You know things are still rough when Wachovia is giving more downgrades. "Seasonal slow markets, reluctant investors, declining valuations in both fixed income and equity, and more marks will highlight a challenging third quarter for the industry," analyst Douglas Sipkin wrote in a note to clients." The fact that less capital has been raised will hurt companies further.

Morgan Stanley also piled on. The global economic downturn has only just begun, with the U.S. near a ``recession trajectory'' and the impact of the credit crunch still to be fully felt, said Stephen Roach, Morgan Stanley's Asia chairman." He went on to say that, ``Maybe two thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.'' Exactly. We're not just going to keep chugging along. People are broke and their houses are worth nothing or less than nothing. If consumer spending is 70% of GDP and only rose 0.2% in a quarter where a $100 billion free dollars were handed out, what's going to happen now?

The dreaded pullout has begun. No, not Iraq, but money from the U.S. and its treasuries. "European banks had cut dollar loans booked by their U.S. offices, resulting in a net outflow from those offices of $259 billion during the first quarter of year, following a net outflow of $238 billion during the second half of 2007." In a separate article from the Financial Times, they write that China has finally started to dump our debt. "Bank of China has cut its portfolio of securities issued or guaranteed by troubled US mortgage financiers Fannie Mae and Freddie Mac by a quarter since the end of June. The sale by China’s fourth largest commercial bank, which reduced its holdings of so-called agency debt by $4.6bn, is a sign of nervousness among foreign buyers of Fannie and Freddie’s bonds and guaranteed securities." Uh oh.