Why There's No Value

I had an interesting conversation with my mutual fund adviser this morning, on the matter of why the current economy is in such a funk. In a time when most baby boomer retirees are looking to collect on their hefty funds, they stare dividend declines in the face, and there's not a damn thing we can do. Yet, there is a large contingency, including myself, that has been brought up by these baby boomers, who taught us to save, save, save, and I do, among many others that I know who are trying to commit as much of our paycheck to our retirement plan as possible, among the overwhelming amount of other outrageous expenses we all have nowadays.

When I asked my adviser if he thinks that the lack of efficiency in out financial system is the root cause of why the markets are crumbling, he said "Yeah that's a very large factor!" There was a certain confidence in his voice, that made me absolutely believe him. He went on to mention that when the "big boys" want to invest, they can do it, without delay, and that their money is immediately passed into the investments without processing, and stocks and the market can both be monitored and traded in almost real-time. Unlike, us, retail investors, who are forced to operate through corporate brokers, in order to invest, and often times these investments spend days if not weeks being processed, and there is no way for the average investor to analyze or monitor the market, and compete at all with said "big boys".

Confidence in investing means that the avenue that an investor uses to access investment must be a level playing field. Consider for example the old school marketplace. Trades were handled face-to-face, in person, and in real-time, thus allowing any buyer to see, feel, and have 100% confidence in that the investment would be put into action right at that moment. Now, in today's markets there are so many different market approaches, and 9 times out of 10 those markets are unseen, because they are operated by middle men (large corporate financial investment firms), and the markets are only available to them, and not the actual investor. Now because an individual is forced to use this system, he has to await processing of his money, in order for the firm to implement his investment. Processing takes time, and as they say time is money. If an investor knows about a good stock today, by tomorrow that stock may be a completely different story. And, that is where the confidence in the markets fails the economy.

Why is the individual investor's money processed? Why isn't the investment firm's assets placed in check like that of the individual? There is no confidence in the economy because the economic institutions don't have confidence in the buyers or the face-to-face consumers. Everything is kept in check, as if even hard assets are considered credit, until it is processed by a higher entity in the financial system. Not a single person wants to have confidence in something they cannot buy or sell on site. If it is not available at that time of value, what will its value be a few days later? Should he preserve their confidence in that product if they don't yet own it? Of course not.

In conclusion, it should be noted that in this day and age where our credit can be monitored faster then our ability to own stock, why can't the process of investments be improved. There is no excuse for our technologies to enhance this system, and make it safer, easier, and more substantial of a market for consumers and investors to invest in.

The Great Money Experiment

The reason why corporate CEO's make so much money is because they hold the most power and with that comes great responsibility, and with that responsibility comes the automatic absorption of any blame when something goes wrong. Consider this, and look at the current financial dilemma, and how much it seems to be blunder in the media that no one knows who is to blame.

It's really not a matter of who to blame, but rather blaming those who had there hands on the money most of the time. Those who managed, manipulated or exchanged money, in order to move loans into the housing market had their hands on the cash at all times, not to mention the commission that came as reward for successfully locking in a loan for a lender. Steve Heideman, a mortgage broker said back in April 2007 that the brokers are to blame, because there are "problems and abuses [that] are happening because brokers see it as their right to make as much money as they can on a loan" (Subprime crisis shines light on mortgage brokers). The higher dollar value of the loan, the higher the commission on it's signing. This could have been a main contributor to bloating the value of the loans, to the point that the values of the homes would plummet below the debt of the loan. As of August 2008, "one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth" (Debt outpaces home value for one-third of new owners!).

So how do you blame homeowners, or those individuals who had inherited debt at a point far beyond the signing of their loan. The homeowners were losing cash. They lost cash simply because financial firms closely tied to investments of mortgage packages were absorbing all the cash through their sale. Cash is gone. The average consumer does not have the buying power or the financial sway to grab more money from a larger financial institution. What the consumer has is what they deposit in the bank, and what the banks will lend directly. But it has not been that simple over the past decade, because loans for the most part were and are ghost cash. It simply never existed.

To further the point, the financial sector has been playing a dirty game of where's the cash. Homeowners simply cannot make good on their debt because the monetary values are hidden behind an imaginary wall of infinite lending. Credit has become money, and seems to mask any true measure of cash value. Mike Shedlock, an investment advisor, has a great and informative blog, that discusses the question, "Where's the cash?". At one point he looks further into Alan Greenspan's implementation of the Sweep Account Program (Federal Reserve Board Data on OCD Sweep Account Programs). Shedlock explains here that, due to advances in financial analysis software, banks have the ability to monitor customer's usage of their checking accounts, and based on that information, can "sweep" or "relabeling transaction deposits as savings deposits." This is done for the purpose of the bank not having to hold a larger reserve requirement, basically a statute put in place by the lending Federal Reserve, that makes it mandatory for banks to hold a percentage of their deposits in reserve to secure the value of what's been lent to them. Now with less money actually in the bank required to be on hand, having been moved from checking (on demand deposits) to savings accounts, the bank is free to lend out more and more of its money, with no limitation. One hundred percent of your money has been lent out, and money you think is sitting in your comfy-cozy checking account is simply, not there (Where's the Cash?).

So, the financial fog is beginning to clear a bit, but who do these banks give money to? Well more times than none they are lending to people via mortgage brokers, and the mortgage brokers not only take the commission, but also bundle up all their loans, and sell them off to investors. So the cash is being dumped into the mortgage broker's laps en mass. Brokers were stealing twice from the consumer, and the banks were enabling this practice, by eliminating value in the consumer's cash, and turning the value back on when it was put back into the financial system.

You've Been Had

Obama said something that made a huge amount of sense, today, "the American people have been suffering long before Wall Street has." This couldn't be made clearer to the current leadership, who has devastatingly ignored the real problem that the U.S. was and is currently facing. All of this could have been avoided, but when the wealthy in this country are not effected, and the wealthy are so closely tied in with the political elite it is no wonder no one in the U.S. congress, the presidential administration, or the treasury couldn't accept or acknowledge the looming financial crisis that has slammed us hard.
It is worth noting that the current Bush administration has, since 9/11/2001, has governed with the drive of its own interests, committing it's political maneuvers to high level secrecy, without an ounce of regard for the American people and its well being. Now in an attempt to secure our financial crisis, Congress has made an attempt to shore up this crisis, by obliterating party lines, and seriously taking care of this matter once and for all. But, yet again, the Bush administration has not offered up any information regarding its approach to salvaging flailing Wall Street firms, and members of Congress are still in the dark, on both side of the aisle, to boot.
So, the U.S. Treasury is planning to buy up bad mortgages with a estimated value of 2 trillion dollars, and will implement a ban on short selling of financial stocks. The ban is a great idea, because it is definitely a Wall Street trait of abusing financial security and is representative of its ability to abuse the markets. This may work or it may not, but the point is that this was an administrative decision to put a proxy in place to shore up the crumbling walls of big financial firms on Wall Street, at the cost of the American taxpayer. Congress (in other words your voices in government), had no say in the matter.
With all the sympathy from Obama and McCain (not both Congressional members) about how much middle America is suffering and is in financial dire, yet the government insists on shoveling more money into failed business ventures, not because the failure was circumstantial, but because that failure was a product of cheating the American people out of their hard earned money, and the government blatantly wants to foster that with financial rescue.
It's not the smaller number of investment firms with larger amounts of financial debt, but the folks at the bottom end of the market, the taxpayer, the individual investor, the homeowner, who need the bailouts, and may make up a smaller dollar amount of the nation's debt. Yet the government wants to shove 2 trillion dollars into bad mortgages, that will undeniably force a raise in taxes for the individual American.
America's outstanding credit in 2006 reports by the U.S. Census shows that American consumers owe $2,405,000,000,000.00. The financial market's outstanding credit comes in at a whopping $14,129,000,000,000.00. Now I'm willing to bet that those numbers have since increased, and the ratio of difference has, if not remained the same, has also increased. And one could only assume that the best way to approach fixing the market is putting cash into the lower of the two, since it would be a more feasible strategy toward economic stabilization, and let the money trickle up.
There is no financial backbone in America. The value at the top is so ridiculously inflated, that Americans are not capable of reaching for a balance that isn't justifiably within reach. It is so inflated that practically is fictional and non-existent. Those who owe will owe forever because the final balance keeps moving upwards, and continues to be pushed away by the actions of the Federal government. Those who owe are losing jobs, losing investments, face mediocre salaries, and higher costs, and will await an increase in taxes. With that we are expected to pay back on ever-inflating balance sheets. How much more can we possibly endure?
How's this? Why don't all Americans withdraw all of their investments, and use the tax from that to dump back into Wall Street? There's really no difference between that and having to pay more taxes further down the road, which is money that could be placed into a thriving market's investments. This way we could benefit from a thriving market, and not continue to lose our money to bad decisions, and a corrupt corporate America, and government.

How Money Flows

If you ever feel like you have no control over your money, then you're certainly not alone, and you're definitely not imagining things. After the Fed's decision today to bailout A.I.G., it is apparent to me that the U.S. government has an agenda to save it's own interests, or should I say corporate America is pulling the strings of our government. $85 billion dollars of your hard-earned tax dollars is now in the hands of a company who was not responsible with doing its job. These companies could not manage their finances, and the best we can do is cut them a loan, at the cost of the American taxpayer. This is an absolute outrage, and those in government should now be held accountable. Selective bailouts, and bailouts that come with a hefty price tag, supporting an institution that failed not only its customers, but also the American taxpayer.
Some may argue, that if these bailouts are not given, that the economy would fail. But what you don't understand is that A.I.G., and such corporations are not the economy, they are a small part of it. With that in mind, when the true economy, the American people, are having there tax dollars withdrawn and poured into the private sector, these bailouts are in fact draining the all encompassing U.S. economy.
You know, that no one bails you out when you lose your job. No one bails you out when you fail to effectively do what you're expected with your job. If your credit is bad, and it's on record, you don't get loans. If your business fails, there's no one standing by to bail you out. And all the while, all you here nowadays is how people in America, are struggling, outright struggling to out food on their tables, and are fighting to keep their homes. Yet, the U.S. government decides to funnel money to the top, keeping the financial expectations at the same high market value for the average consumer, instead of letting the recession follow through, and bring the economy down to a fair rate. Not just fair but intrinsically what it is really worth, and not this facade of value produced by corrupt corporate America. Our government, by providing bailouts to these companies, is simply putting the lipstick on the bear.

Stop This Train

I have come to the final conclusion, that the past eight years have been an outright lie. The Bush Administration, has undermined the American public for the purposes of financially furthering their political bedfellows, and all the while unregulated big business has swept this nation into a financial abyss, and now after it being too late, the Bush administration has decided to focus on helping big business survive.
Why is this the wrong approach? Why does this further the explanation for why the Bush administration is servicing the corporate elite, and his wealthy minions? It is because it serves the rich. It is basically a system of giving more money to the rich, and putting more value in the dollar at a point in the economic equation that doesn't foster the value of it. It is an outrage that Congress, and the Bush administration have come to the conclusion that handing financial support to a system that purposefully drove the U.S. dollar off the charts, by implementing high risk loans to customers they knew could not support it. These were people who innocently wanted to live out the American dream of owning a home, and got that promise with a loan that ended up cheating them out of it, and all of their money. And for all you altruists out there, who say, "If you can't afford the loan, then don't take one out!", well I all I have to say is you're ignorant, and you should know that these poor people were intentionally sold out, so that the loan companies could make more money, by raping the interest system. Basically there were no statutes for loan practices, so these companies had a nice big legal team to inundate consumers with page after page of lingo that even the smartest home buyer wouldn't understand, but they would take the loan anyway, because it "sounded so good", and that American dream was waiting on the other side of that loan.
Now the government, the same government that turned a blind eye to these loan companies when it came to their dirty practices, are now funneling financial rescue to them. Does this make sense at all to you? Of course it does at first. But, no it's the most insensible thing I've heard of. Wouldn't it make more sense to bail out the loan consumer. It would only help the economy more to aid those who owe money, and filter it back into the economy, rather than give it to a corporation that vacuums it up, and only serves itself (and of course in whatever politicians' pockets they reside).
The Bush administration is made up of a bunch of elitist hacks, who only are in power because of political favors, and the status of having gone to an Ivy League school. You're a bunch of spoiled rotten mishaps. In all reality, you're a bunch of liars, and failures, and it is shocking that you haven't completely destroyed our nation already. I look forward to this administration as being marked in history as the worst political leadership ever. Serve the people, and not yourselves. That's what republican means. It's a simple equation of success.

Confusion is Abuse in the U.S. Economy.

One Guy Who Has Seen It All Doesn't Like What He Sees Now - WSJ.com

(PDF)

In recent past articles, I've discussed deregulation, by our U.S. government, as the primary factor in the economic mess we're in now. In the article linked above, Mr. Bernstein has stated that the major contributing factor of our economic state, and the potential for this to turn into the next best thing to the 1939 Depression, is borrowing, and the investment rabbles that went unregulated by our government. In my opinion Bernstein is getting at a point in this article, that investors and the lending industry knew that if they could race to some undetermined finish line (the precursor to a market crash) with fattened funds, then they could sell off and come off the bull with a lot of money. This seems to be a fixed market in all senses. Take the risks up front, sell off the risk, and then walk away without worry of being anchored down by worthless stock.
Basically, the government was not watching the markets. The economy to me, represents pirates pillaging and looting large cruise ships of consumers. Bernstein even goes onto note that houses cost so much, that you can't buy anything in real estate with cash anymore. It all gets filtered down through the lending market, and this is where consumers represent the looted cruise ship, because a bulk of the real estate market are homeowners or buyers, who don't borrow, they are held under the pirate saber of loans. There are no other options. There's no protection for consumers in this current market, and this holds true in other realms of the market too, not just real estate. The Fed, now, is taking a top down approach, and funneling more money into a system that has way too much of it, and seeking more and more. Instead they should, what Bernstein states, "underpin the consumer". Start from the bottom, and in conjunction to this start sheparding big business lenders into fair loan practices.

I Know How It Feels

Wow! Who would've thought? And, here I am, thinking I am the only one in debt, continuously being taken advantage of financially. After reading this article, I've come to a conclusion that all lenders are scammers. I feel that in the past a lender allows people who don't have money to acquire a product, that is way out of their annual income (even over 5 years of income), and in turn pay a reasonable amount of interest on this money loan. Sounds normal right? But, there's a catch: adjustable interest rates, fees, and money sucking lawyers, who get paid by loan companies to find out how to get more money out of you.
Now I'm not against free enterprise, but what I am against is expecting more money from individuals, who cannot afford it in the first place. What I am saying here, big corporate bullies, is that you are drawing water from a well of mud. Basically you prey on people who don't have a lot of money in the first place, and then you continue to purge them of money, until they settle bankruptcy, or are sent to the credit agencies for delinquency. And then even though they are delinquent on their loans, you continue to offer more loans, and credit solutions, that simply are drawing more money out of a already dry well. What in the hell is going on here? You could argue that people need to be responsible with their finances, but this represents a failure of loaners to manage their business.
I'd have to say, that with our ailing economy, and the fact that housing foreclosures, and bad credit are mostly to blame, it's wholly evident that corporate lenders have raped the public of stable economy, and a blanket wealth. Instead, now we have the middle class and the poor getting poorer, and very few rich getting richer. Are the wealthy aware that they are nothing without well financed lower classes?

Just in case the link is broken: article