Stress Test Mess; Hard Assets Conference

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

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Over the weekend, the Wall Street Journal reported that banks were given major concessions on the Stress Test and their needs for capital were reduced considerably from first estimates. This blog already reported last week that you couldn't believe the stress test numbers. We are glad the mainstream media is trying to keep up with our reporting only days later, instead of the usual weeks or months later as has been the case in the past. Reports were also out this weekend that bankruptcy for GM is inevitable. Surveys show people became more reluctant to buy GM cars once president Obama, in a kick them while their down moment, said the government would force them into bankruptcy unless a number of concessions from bondholders, unions and management were made. Great way to handle the problem of a declining U.S. manufacturing base and make the current deep recession even worse. GM should just convert itself to a bank (its credit arm GM capital already did) and then it would be permitted to lie about its financials and receive unlimited government handouts - it's the American way (unfortunately).

The New York Hard Assets Conference is today and tomorrow and I will be covering it in the blog.

NEXT: Hard Assets - the Good, the Bad and the Sleazy


Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

U.S. Unemployment 15.8%; Grade Inflation on Bank Stress Test

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

While the headline number for the Employment Report this morning said that there was an unemployment rate of 8.9%, a more realistic number is 15.8%. The latter number includes discouraged workers and workers who can only find part-time work. Since the recession began in December 2007, the U.S. government admits to losses of 5.7 million jobs or 4.7% of the work force. This is the largest decline since the 1957-58 recession (please note that 1958 was one of the top 10 best years for the U.S. stock market in the 20th century and that the unemployment rate almost always peaks after a recession has ended). Yesterday, the long awaited and heavily leaked government stress test for banks was finally released. As one expert said the "apparent frankness" of the report should be a relief to the markets. 'Apparent' was the operative word in his remark, since this report has little to do with reality and is merely a feel good public relations ploy.

There was nothing good in today's unemployment report. There were 539,000 job losses overall and 611,000 losses in the private sector (the more important number that is never put in the headline). Lot's of part-time hiring of U.S. census workers (for 2010) by the federal government helped make the number look better. Even though there have been many recent announcements of state governments laying off workers because of budget difficulties, the report said state and local governments increased employment by 6,000. Other than government, only the health care sector added jobs (as is has every month since the recession began). There were massive job losses everywhere else. Job losses for February and March were increased by 66,000. Expect today's 539,000 number to be higher in the future as well, but no one will be paying attention when the worse number comes out - and the government is well aware of that.

To no one's surprise the Stress Test for U.S. banks showed they needed more capital, but not too much more capital that anyone should worry about it. The total given was $75 billion, not really that much considering these are the biggest financial institutions in the country. Bank America accounted for the largest chunk of this, with a need to raise $34 billion. Its government forced takeover of Merrill Lynch is what pushed it into a big capital deficit. Wells Fargo and GMAC were next on the list, with a need to raise $13.7 billion and $11.5 billion respectively. Citigroup only needs $5.5 billion. What happens if the banks can't raise the capital in the open markets? The U.S. government will provide it to them through TARP. All in all, you shouldn't pay much attention to this report . It was meant to be reassure the public and investing community that everything was actually fine with the financial system. And as long as the government is willing to continue to keep an unlimited supply of bailout money available, things with the banks will indeed be OK.

The stock market had a rather sharp sell off yesterday because it was too overextended on the upside. Some more selling will be needed to help relieve the pressure. This should be taking place in the near future. There is money to be made by buying into stocks which have had big gains followed by sharp drops and then trading out shortly thereafter. Watch for these opportunities. While a bigger sell off seems to be awaiting us in the summer, 2009 might turn out to be a decent year in the market. The best year for U.S. stocks in the last 100 was 1933, just off the bottom of the Great Depression. Other than a glimmer of hope that things would get better, the economic state of the U.S. was disastrous. Almost everyone avoided the stock market and missed the best money making opportunity of a life time.

NEXT:

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

Banks Get Swine Flu; William Cohan at New York Investing

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. In addition to the term helicopter economics, we have also coined the term, helicopternomics, to describe the current monetary and fiscal policies of the U.S. government and to update the old-fashioned term wheelbarrow economics.

Our Video Related to this Blog:

The long awaited bank stress test is scheduled to be out this Thursday. There have already been more leaks in this government PR gambit than in a sinking ship. Meanwhile, the Swine Flu panic is winding down, with an article by TIME magazine this morning questioning whether all the hoopla was justified (see the Sunday and Saturday entries for this blog for a detailed analysis for why it wasn't). And finally, I will be interviewing best-selling author William Cohan at the New York Investing meetup tomorrow. Whether or not you saw him on the Daily Show with John Stuart or elsewhere on TV, this is your chance to see him in person.

In the news out today, Citigroup and Bank of America are stating that they are going to be raising $10 billion more in capital to shore up their reserves. Didn't both of these banks say they were profitable in the first quarter and planning on returning TARP funds? Something seems to be inconsistent with this story. Wells Fargo and PNC Financial also need more capital. The U.S. banking system is by no means stable yet and if the Fed withdraw all the funding it is providing from its half dozen or so programs, almost every major U.S. bank would collapse immediately.

While it is difficult for the average person to understand how poorly the government has handled the Credit Crisis, it is much easier to see how badly they have handled the current outbreak of swine flu (the 1976 outbreak was bungled as well and had tragic consequences for hundreds of people who participated in the government's vaccination program - there was only one supposed swine flu death). A number of the top government medical authorities made dire warnings of impending tragedy and sounded the alarm bells at top volume in the last two weeks. Not only is there no rising death toll as they warned us about, but there are no deaths at all outside of Mexico. Even the supposed deaths that have taken place in Mexico are questionable. Over a week ago, Mexico claimed 160 deaths from swine flu had taken place, the current claim is 20. Mexico's health care statistics seem to be about as reliable as most U.S. banks financial statements (see the previous blog entry for more about this).

If you are in the New York metro area, you should be coming to the May 5th meeting of the New York Investing meetup tomorrow (PS 41, 116 West 11th Street at 6th Avenue, starting at 6:45PM, for more details see: http://investing.meetup.com/21). I will be interviewing William Cohan about his latest book, "House of Cards", which is about the demise of Bear Stearns (New York Investing was the first major group to predict that this would happen in August 2007). Cohan doesn't make a lot of personal appearances, so this is your opportunity to not only hear what he has to say about the Credit Crisis, but get him to sign of copy of his book for you.

NEXT: Market Getting Frothy; Meeting tonight for New York Investing

Daryl Montgomery
Organizer,New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.