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Jim Cook

 

RUNAWAY SOCIAL SYMPATHY

Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

 
Best of Aubie Baltin
October 21, 2009
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Here We Go Again:

Banks, encouraged by the FED, are dumping Fannie and Freddie-backed securities to the FED and replacing them with FHA-insured loans packaged into government-insured securities issued by Ginnie Mae. WHY?  Because Ginnie Mae’s are 100% guaranteed, considered “risk free,” and therefore there are no reserve requirements. Banks can then use the money they otherwise would have to set aside, based on the already ridiculously low and arbitrary 20% risk-weighting on their junk, to leverage-up their books and create the illusion that banks have healthier balance sheets than they actually do. This New Deal is so good for the banks, that they are using (TARP) money to buy Ginnie Mae’s.  But it’s all a Giant Fraud. The FED is allowing the banks to trade worthless JUNK, that pays no interest into Ginnies that not only pay interest, but are 100% backed by the Government. What a Deal!  The result is capital ratios are being manipulated and insolvent banks are being propped up as more worthless JUNK is being stockpiled on the Federal Reserve balance sheet.   Eventually, mortgage defaults will overwhelm the FHA just as they did FNM & FRE. The hoped-for floor in residential real estate will suddenly disappear and expose Bank and FED balance sheets for what they really are.

I guess the $13 trillion was not enough, so the Government is throwing even more money at the banks and brokers and still there is no money for Main Street. But wait, there is more: There do not seem to be any provisions being made for the coming Commercial Real Estate defaults and/or their inability to refinance. The same holds true for Prime Real Estate mortgages that are coming up for refinancing on homes that are now underwater. Well, if changing the mark-to-market rules wasn’t enough, this scam will help them out, but for how long?  Can you believe how they can just change the rules as they please? Are we not still living in a Democracy? 

The risk now is if faith (belief) in a recovery starts to wane, investors will decide to flee from the very same assets all at the same time. Everything from commodities to stocks and high-yield bonds and finally treasuries could all drop in tandem.
What do U.S. stocks, Asian stocks, Brazilian stocks, and high-yield bonds all have in common? They are all risky assets, driven higher in an attempt by the Federal Reserve and Central Banks worldwide to entice investors’ last bit of savings away from safe havens and back into unperceived RISKS.
In all social democracies with a fiat currency, all roads eventually lead to hyperinflation.

The Fed’s Timely Reversal of Policy?
There have been nine official recessions since 1955. In every case, the Fed’s recognition of the situation and efforts to stimulate the economy were thought to be too little, too late and too slow to be effective. What is much more likely is that one cannot fix an over stimulated economy with even more stimulation.

On the other hand, the FED has never been able to recognize a Bubble in the making or the onset of inflation. Their perennial FEAR especially today, is if in acting too soon, they would risk sending the economy back down into a double-dip recession. Yet, leaving the massive stimulus conditions in place will surely result in runaway inflation, which always ends up in DEPRESSION. Stimulations from the Central Government in the form of Zero Interest Rates and Easy Credit to the Banks have NEVER WORKED. Japan tried the zero interest stimulation trick starting in 1990 and here we are in 2009 (19 years later) and Japan is still mired in Recession/Depression.  Yet everybody is still pinning all their hopes on a global, stimulation-and-recovery trick to work just this one time. The basic Laws of Economics are God’s Laws, not just a bunch of suggestions that you follow when it is convenient.