Curried Wealth Building
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April 11, 2009
Issue 41  -  Transformation Ahead

The recent stock market rally, which I’m convinced is merely a bear market rally, should be no cause of joy as some talking heads have intoned. The underlying fundamentals are just too weak in a number of areas for the U.S. to be out of the woods. In fact, after careful consideration I have come to the conclusion that things are very likely to completely or nearly completely collapse. This would include the dollar becoming virtually worthless. This is not pleasant to discuss or consider but one must prepare for the worst and hope for the best.

Why do I feel this way? There are a number of disturbing facts emerging which, despite the know nothing CNBC talking head "the bottom is in" talk, depict a very bleak picture. This is a big one from GATA:

"Credit card companies shut down 8 million credit card accounts in February while accepting more Bailout Credit Cards from the U.S. Treasury.

Credit card companies shut down 8 million credit card accounts in February while accepting more Bailout Credit Cards from the U.S. Treasury.

Bill: I guess we need to give these guys another $10 trillion dollars worth of grants and guarantees. The first $11 trillion of guarantees resulted in the banks closing 80 million credit cards. Didn’t these guys tell us we had to give them all this money so they could extend loans to hard working honest Americans?? "

This guy has it right on the money. Why, if the TARP money was for EXTENDING credit, is credit being pulled? I would say they know what’s coming and want to eliminate as much risk as possible. I recently had a non-active credit card closed by Chase Bank with no chance to save it.

There is also trouble brewing in the retail area:

 
"Vacancies at U.S. Retail Centers Hit 10-Year High, Reis Says

April 8 (Bloomberg) -- Vacancies at U.S.
malls and shopping centers rose to their highest in more than 10 years as consumer spending fell and stores closed in the recession, according to first-quarter data released today by Reis Inc.

More empty stores and lower rents are ahead "unless conditions change dramatically," said
Victor Calanog, director of research at the New York-based real estate research firm. He forecast the declines would last through next year.

"This outlook assumes positive job growth and an increase in consumer spending beginning in early 2010," Calanog said in a statement.

More than a dozen retailers, including Circuit City Stores Inc., Linens ‘n Things Inc. and Sharper Image Corp., filed for bankruptcy protection in 2008 as the credit squeeze and recession hurt sales. Confidence among U.S. consumers stayed near a record low last month and a survey of purchasing managers showed business deteriorated further.

Retail vacancies at shopping centers were the highest since Reis began publishing quarterly data in 1999 and reflected a net decrease in occupied space of 8.7 million square feet, the biggest drop for a single quarter and more than the 8.65 million square feet given back during all of 2008…

Rents paid by tenants fell 1.8 percent from the previous quarter and 2.9 percent from a year ago, while
landlords’ asking rents fell 0.6 percent from the prior quarter, the most on record."

 

There are numerous strip malls in Prince William County that are being built right now and they are less than half occupied. If a bounce was coming, you would begin to see these stores starting to fill. The opposite is happening. Stores are closing. The only restaurants that are doing good business are the low cost options like Subway, McDonalds and Panera Bread. People are still eating out but staying away from the sit down establishments. If I’m right the low cost options will start to have their business eroded. This will signal the start of the next down leg.

We will have a respite this Summer and then come Fall, the down trend will resume. There is just too much crap floating around the system to cover up and hide. Now there is a term being thrown around, "mark to market". This means taking an asset and seeing what it will sell for and then marking it in your books appropriately. So if I have a building and it is priced at $200,000 but I could only sell it for $150,000, I would have to put $150,000 in my balance sheet. The latest decision to suspend mark to market allows businesses to still list the building at $200,000. This is a fraud. This is why Wells Fargo showed a profit last week. Eventually, this charade will end.

The companies have been complaining that mark to market is unfair and unrealistic but a new study says the exact opposite. From Gata:

 
"Low values on Toxic Assets established by actual trades are correct says a new study by Harvard and Princeton finance professors. "The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals, rather than being driven by an illiquidity discount." This means that the argument made by Wall Street CEO's, Tim Geithner and Barney Frank that prices are irrational right now is dead wrong, if not outright fraudulent.

"The analysis of this paper suggests that recent credit market prices are actually highly consistent with fundamentals

. A structural framework confirms that bonds and credit derivatives should have experienced a significant repricing in 2008 as the economic outlook darkened and volatility increased. The analysis also confirms that severe mispricing existed in the structured credit tranches prior to the crisis and that a large part of the dramatic rise in spreads has been the elimination of this mispricing."

This study thus suggests that the market for toxic assets as represented by the 12 cent bid, 13 cent offer for billions of Lehman's toxic paper would be the pricing to use on bank balance sheets. Many banks are marked in the 90's. The paper also concludes that:

- Many banks are now insolvent

- Supporting markets in toxic assets has no purpose other than transfering money from

taxpayers to banks

- We're making it worse

"Many prominent economists--including such diverse types as Anna Schwartz and Paul Krugman--have taken with this official view, saying the government was mistaking a solvency crisis for a liquidity crisis. This latest paper effectively demolishes the "fire sale" view."

The bottom line here is that, even if banks fraudulently refuse to mark their toxic assets to market, and there are trillions of dollars worth of them, they will still be bleeding 100's of billions of cash flow. THAT is where your Taxpayer TARP money is going, I might add.

Anyone who is not dumping what they have left in the stock market into this brief bear market rally and moving that cash into gold, silver and mining stocks will regret holding on, as the stock market will soon begin to price in the continued free fall in economic fundamentals."

The way I see it, the elite are looting this country prior to letting it collapse. There is just no other sensible explanation for what is being ALLOWED to happen as these banks steal billions of dollars while Congress and the new president say and do nothing. Often, the simplest explanation is correct and I can come up with no simpler explanation of the current actions then theft. After the collapse, an even more socialist and perhaps even fascist solution will be offered. There was a poll this week that showed Americans are pretty divided on whether capitalism or socialism is better. This is frightening. Just a decade ago, this would have been impossible. Clearly the ground work has been laid for this in the main stream media and school indoctrination curriculum. Dumb down the populace while you steal from them in broad daylight.

Think about that. They are stealing from the taxpayer and there is barely a peep of protest. With the rare exception of the tax protesters, Americans are sheeple being led around to where ever elites want them. News coverage is now completely dominated by inconsequential items about celebrity or missing attractive people. The true problems are given short shrift. Tent cities in America, FEMA detention camps, and a secret meeting of the elite (which was attended by our President and Secretary of State) aren’t even mentioned on the news. Why? The main stream media is controlled by the super rich and they don’t want these things covered.  It's as simple as that.
 

Within a year or two, this entire country will change.

The dollar will be toast and no longer the reserve currency of the world.

Unemployment will be over 12%.  (but over 20% when calculated using "discouraged workers" and part timers who can't find full time employ)

The stock market will be much lower.
 
Food prices will be higher with shortages common.
 
Disillusion amongst the population will have settled in as the "last hope" fails to bring us out of the malaise (I would argue, based on who he appointed, that he never had an intention to "save" us, just his handlers.)

These are just the highlights. Obviously, I’m very pessimistic. If you do the necessary things, you’ll be ok. If you don’t, you’ll be in the leaky boat with the majority. Relying on that pension fund? You might want to look at this:

"16:48 FT discusses underfunding of US public sector pension plans
Citing data from Northern Trust, the FT reports that the largest state and municipal pension plans in the US lost 9% of their value of more than $2 trillion in the first two months of the year. That followed losses of 30% in 2008, which equaled roughly $900B. According to the article, the losses have left these retirement plans about 50% funded, while state governments typically put the funding figures closer to 60-70%. The FT goes on to point out that unlike corporate pension plans, state and municipal retirement funds have no federal safety net."

Now these are retirement funds run by professionals.  How do you think self run funds are doing?  Now the last month has been good, but that’s only because a bear market likes to maul as many as possible.  Nothing goes straight down and this market is no exception.  Use this strength to exit in a controlled manner. I will be highlighting when I start to move out.

What’s going on now is a show. A show that says "everything is ok". This is false. This country is in dire straights and needs much more than a "glimmer of hope" to dig herself out. The elite are preparing for a much worse condition. Please do the same.  Over the next month or so I will be outlining the steps that I am taking to build my life boat. Some of these steps will seem extreme but I will prepare for the worst and hope for the best.
 
Since this wasn't the most upbeat post ever, I thought I'd include a little humor with a classic prank video.