Don't believe in those liars. There shall be blood on the street

An little excerpt from Naked Capitalism

We're not quite as healthy as we thought we were. Oops. (WSJ)

J.P. Morgan Chase Chief Executive James Dimon said...that March was a little tougher than the first two months of the year....Bank of America...CEO Kenneth Lewis also said that March had been a tougher month for his bank. [Convenient that they decided to dump this information on Friday afternoon, and at the close of a very good week].

Readers may recall that a few weeks ago, those two CEOs---along with Citi's Vikram Pandit---said the first two months of the year had been very good:

Pandit, March 10th: “We are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007.”

Dimon, March 11th: "Jamie Dimon, the chief executive of JPMorgan Chase, said Wednesday that the bank was profitable in January and February..."

Lewis, March 12th: "We have been profitable for the first two months of the year,” Lewis told reporters after a speech in Boston today.

This was possibly the most nakedly self-serving bullshit the big bank CEOs have offered to date. ("bullshit" being a technical term of course, see Harry Frankfurt)

So what's next?

The master plan to privatize profits and socialize losses is now stall. This $700 billion dollar plan is massive. Can you imagine how much that is?

Say you have lots of $100 dollar bills, stack it up in front of you. 

It would be 3.9 inches high to be $1 million dollars. 

It would be 327 feets high to be $1 billion dollars.

It would be 43.4 miles high to be $700 billion dollars

That is about 3/4 of the Washington DC beltway loop or a bit longer than the distance between DC and Baltimore

This will cost every American family $10,000 

WaMu is seized by FDIC and sold off to JP Morgan for $1.9 billions. But the major cost would be the $30-54 billion dollars of write down on toxic loans

What happen to capitalism?

Today Commisioner Cox, who was afraid of being fired by John McCain, quickly drafted an ingenious plan to ban short selling out right for 799 financial companies.

Now for those companies that weren't invited to such exclusive party start knocking on the door wondering if they just missed the memo. Well the party has just started, let's see how the host are going to handle that. 

Below is a very nicely put statement from Reggie Middleton's Blog 

Note to Commissioner Cox: You have doomed the last two independent investment banks. Congratulations. By actually trying to directly manipulate the US capital markets by literally banning the short selling of a certain cadre of stocks (while allowing the long buying of those same stocks) you have upset the natural equilibrium of our capitalistic environ. You must learn to wrap you mind around, and grasp the difference between, price and value. The short sellers were driving the prices of these investment banks down to match their value. Now, with your short sighted intereference, you have allowed - no, let's be more accurate, you have overtly facilitated the divergence between price and value. 

For one, you cannot prevent astute investors from taking bearish positions on a company. You preside over the most advanced, and complex financial markets in the history of the world, not some third world nation that is just opening its first exchange as an extension of the town food market!

Word has it that the clients of Morgan Stanley are fleeing, despite (or maybe even because - due to the drastic socialist nature of) your actions. Because you have allowed longs to bid prices up way above their intrinsic economic value, you have injected an unprecendented amount of volatility into the system. This increases the cost of capital, my friend, not decrease it. When the truth meets reality, what do you think will happen to share prices? That's right, they will fall that much more. A market needs two sides to a trade, not just one. I hear you plan on preventing investors from selling stocks at a loss next, which will be music to the ears of those at the IRS!

The point of no return

Another historical day on wall street. After Monday drop of 500+ points, the DOW lost another 450 points today. While the Russian market had to be forced closed 2 days in a row after dropping more than 17% each day. A quarter of the Russian market value vanished in thin air within 48 hours. 

However, we still see some "level headed" financial analyst spoke out about the matter regarding the lost of confident of Morgan Stanley and Goldman 

Quote: "Glenn Schorr, an analyst at UBS AG, said today in a note to investors that the market reaction was ``insanity.'' Goldman and Morgan Stanley aren't at risk of running out of money because they keep plenty of cash on hand and can borrow from the Federal Reserve and a consortium of banks set up over the weekend, he said, noting that both have enough capital to absorb any losses."

So the market is insane. Goldman and Morgan Stanley have plenty of cash. If they do, why are they considering merger with other banks. Why did Morgan ran out to the Federal Reserve for loan immediately when it was available back in Feburary? Why does credit-default swap on Morgan Stanley debt cost so much? 

We will always have those outspoken champion calming down the market. The so call "insane" market is indeed very emotional. It is better to join them than fight them. In the long run the truth will review itself if not sooner. 

The so call unemployment rate

The unemployment rate is expressed as a percentage, and is calculated as follows:



As defined by the International Labour Organization, "unemployed workers" are those who are currently not working but are willing and able to work for pay, currently available to work, and have actively searched for work.

So what does that definition imply? If a bunch of people decide to give up the search then guess what! The number of "unemployed workers" decreases hence the "unemployment rate" drops. How wonderful! Now we can cure all unemployment by giving all those who are seeking for a job a nice share of welfare so they would stop seeking. Eureka

The bottom line is that many formulas like these are very misleading and do not reflect the actual condition of the economy. Critical decisions are made by government officials and top executives basing on these misleading numbers. Resulting only to cascade and magnify the incorrect information.

A few alarming things

Congress held a secret session back in March 2008, only the fourth time in the 176 years of American History. So enjoy watching it. Just don't panic or dismiss the whole thing. There are much more info on the web about this secret session.

Summarized here

Part 1


Part 2



Indeed it is time to wake up from the American Dream.