Should I Buy Citibank Stock?

While switching between the NBA and NHL playoff games yesterday a friend of mine asked "Should I buy Citibank?"

Apparently he was under the impression that Citibank still existed as a marketable security. My reply was to tell him that the publicly traded banks had been nationalized and that they were not in the realm of the free market anymore. He looked at me like I was speaking Martian.

I told him that since the Feds were not taking payments on their TARP, they therefore owned the banks now. Since the government has an equity position in a highly complex out of control entity what do you think is going to happen? Think Michael Dukakis as CEO of Amtrak and the billion dollar deficit that ensued.

I told him not to buy treasuries since the Chinese weren't buying them anymore. They have called our credit card limit. It's cash only baby from now on with them. And printing another trillion dollars worth of paper ain't gonna make them too happy when we pay them back in inflated dolares. Speaking of which when was the last time you got a raise? Just curious.

I also told him to put his money into mining stocks and gold funds.

Don't know if he will or not.

How to Escape a Sinking Ship

We have an 8000 Dow and we ain't seen no bottom baby! The Ship of the Global State of Economic Affairs is a still a goin' on down to Davy Jones Locker.

In light of our plummet to the bottom of the economic ocean I thought this article to be apropos of the current non-state of economic affairs we are currently experiencing.

I discovered two years ago that there was a trillion dollars of bad debt that had infected every investment vehicle from money market funds,to bonds, to long/short hedge funds to commodities. I realized then that when this battleship of non existing assets sank it would sink like a cruise liner causing everything within its purview to be sucked down with it.

Here is something we all should read:


How to Escape a Sinking Ship

By eHow Travel Editor

Rate: (2 Ratings)

Hopefully, you'll never be faced with the need to escape a sinking cruise ship. Although today's ships have plenty of lifeboats for everyone on board, it helps to be prepared in the case of an emergency situation. Above all, listen to instructions from the ship's officers, and remain calm.

Things You’ll Need:

* Flashlight
* Sunscreen
* Water bottle

Before the Ship Departs
Step1
Make sure your cabin has it's own personal flotation device (PFD). Practice putting it on correctly. Check for the expiration date and have the PFD replaced if it has expired.
Step2
Locate the two nearest lifeboats from your room.
Step3
Store your emergency survival gear in the open with your PFD for easy access. Survival gear should include a flashlight, sunscreen and water bottle.
If the Ship Starts Sinking
Step1
Go to your cabin and get your PFD. If you have time, grab your survival gear.
Step2
Move calmly to your lifeboat and follow orders from the crew members in charge. Look for lights marking exits to the lifeboats.
Step3
Remain calm and do not jump into the water or onto the lower deck unless you have no other choice. Most ships sink slowly, so you should have lots of time to board a lifeboat.
If You have to Jump
Step1
Look before you leap. Do not jump onto other people, into a lifeboat, or onto a lower deck. Jump feet first as far from the boat as possible.
Step2
Swim away from the boat as soon as you hit water. The vacuum effect created as the ship goes down can suck you under. Get away from the ship quickly.
Step3
Improve your chances of survival by finding a lifeboat or something to float on as soon as possible.
Step4
Float with a group of other survivors for warmth and encouragement if no lifeboat is reachable.
Step5
Kick and punch anything that brushes you from below. If sharks come feeding, most will back off after being punched in the eyes or gills.

I Will Gladly Pay You Tuesday For A Hamburger Today

One has to give Senator Chris Dodd, (D) Connecticut, a lot of credit for what he did today. He refused to just hand over a blank check for a trillion dollars to a Secretary of the Treasury, and not a very good one apparently, in the executive branch. Yes, Paulson has initially asked for “only” three quarters of a TRILLION DOLLARS. But believe you me he is going to moving to the trillion dollar mark very shortly.

Chris Dodd is asking “What’s the rush? I don’t get it. Who again is getting the treasure of the United States for what?”

His point was that Henry Paulson would get it. Who the hell is this Henry Paulson anyway? Who the bleep does he think he is that he wants the people of the United States to grant him 700 billion dollars and turn it over to him right now? Why do you need it right now Henry? Let’s have us a little discussion first. Is that too much to ask?

So who is this Henry Paulson character that we’re going to hand over all this money to?
Why he’s a former partner at Goldman Sachs, a competitor of Lehman Brothers. So a guy who is savvy enough to run a premiere investment bank did not see the smoldering caldera of a trillion dollars in bad debt that was simmering inches under his wing tipped feet?

The problem was so obvious that it had been blatantly discussed in financial circles and even by not for profit endowment managers for at least 18 months before this happened. One would think that the Treasury Secretary of these here United States would know where all this pressurized magma had ended up.

He might get a clue in attending one of Barney Frank’s Banking Committee hearings about how not giving mortgages to people with no possible hope of ever repaying them was a form of “redlining”. Frank defended to the bitter end Fannie Mae and Freddie Mac the private “government backed” agencies that bought up all the bad loans the banks had been forced to originate according to Barney Frank’s federal banking laws.

So we’re going to hand over to the former head of Goldman Sachs a trillion dollars after his buddies at Lehman Brothers and Fannie Mae and Freddie Mac trotted off with tens of millions of dollars right before their assets were found to be, err, “compromised’? Or maybe these masters of the universe were just using intricate accounting rules to overstate the market value of their assets. In other words maybe they were just plain lying to everybody.

I don’t think we are going to give Paulson all his money right now. If we do then one can only imagine who it is going to. It isn’t going back to the taxpayer that much is certain.

Pay No Attention to The Man Behind the Curtain

Like the new geysers appearing in Yellowstone due to forty square miles of magma starting to poke through the Earth’s crust the great caldera of a trillion dollars in bad debt is starting to make itself felt in the sudden demise of former Wall Street giants such as Lehman Brothers.

Twenty something employees in t-shirts and shorts stormed their offices last night afraid that their personal effects would be locked within by federal regulators causing security guards to call for police back up. Meanwhile Lehman Brothers CEO Dick Fuld contentedly counted his money, $22 million in bonuses he was paid last March, within his 14 million dollar Florida vacation home, which he paid for in cash. Meanwhile the State of Florida’s pension system lost $322 million in Lehman holdings.

Like the caldera under Yellowstone the trillion dollar time bomb is threatening to blow away the entire financial planet. There I said it. It’s not like this hasn’t been patently obvious to anybody with half a brain and an associates in economics from a community college for over a year now. This has been discussed in the financial community, in banking circles and at university investment committee meetings for months and months.

So what does this all mean? It means what small and medium sized businesses with good financials and owner credit ratings have been puzzling over lately. Names, “Why does the bank not like me anymore?” They have seen perfectly good collateralized loans with no late payments suddenly capped at what is owed. They have seen bankers explicitly referring them to “alternative financing options”. They have seen any and all expansion plans that don’t involve internal funding thrown on the proverbial scrap heap. And with the inelasticity of prices out there in the market they are asking “What expansion plans?” How can you expand when all your customers are debating your price structure like Berbers dickering over rugs in a Moroccan bazaar?

Are we going to have a recession? Are we going to have a depression? What do you think it means when presidential candidates start complaining that significant regulations have not been enacted since 1939? Does this give you a clue?

Without Memory You Cannot Promise

That old saw we all learned about supply and demand in Econ 101 continues to hold true. Commodities prices go up. Commodities prices go down. The Morgan Stanley Commodity index is at the same place it was in April with a big hump peaking in July http://www.tradesignals.com/charts/CRX.X/ Think anybody was taking profits? Hmmmm…. Those who were long energy futures had to have pretty good timing to survive the plummet in demand and prices, or they probably got killed. Short sellers 1 long people 0.

On a non economic note Atlantic Monthly’s July/August 2008 issue had a feature called “Is Google Making Us Stupid?”http://www.theatlantic.com/doc/200807.

In the near post Gutenberg era the article may have been titled “Is Writing Making Us Stupid?” The college curriculum of the day was two years of the “trivium” or three rivers or “ways” in Latin from which the word “trivia” is derived. The next three years was the” quadrivium”, which brought the elements of math and science into the curriculum. Sound familiar?

Only you couldn’t take notes like you can in the college of the present day. The only writing at the time consisted of documents like the “Book of Kells”, an original copy of which would today be worth conservatively a billion dollars on the open market. Writing was just too expensive. Why pay a scribe to write a textbook when you could pay him the same to write a codex?

That meant that a student had to memorize his entire college curriculum. The system prescribed for this was to imagine that your brain is a cathedral. Then one would place everything one learned in one of literally a million places in the cathedral. It sounds like the file system everyone has on their personal computer only a lot more work.

As Nietzsche once said, “Without memory you cannot promise”. Without memory you also will not prosper in today’s economy.

US Middle Class 1 Speculators 0

The energy bubble for both petroleum and natural gas showed signs of weakness this week as.Nymex intermediate oil futures declined 5% and Nymex natural gas September futures contracts prices fell 12.4%.

As always Joe Six Pack shows he can "make do" and do without that extra trip in his car and shut off his pool heater. When there's no money, well, there's no money. That means nobody has the means or willingness to pay skyrocketing prices for costs that CAN be controlled. Nobody's boss is resisting workable work at home propositions from their employees, and there is technology out there that can cut down substantially on trips to the office.

With all this in mind the scarcity in energy supply is in the final determination all of our own doing or Nancy Pelosi's doing. But who elected Nancy Pelosi? People who are given money stolen from the taxpayer that's who. You don't think Nancy Pelosi gives a flying bleep about Joe Six Pack do you? Joe has to actually get his money the old fashioned way. He has to EARN it.

Again the speculators and the Nancy Pelosi's of the world get outsmarted. Remember, necessity is the mother of invention or something like that.

Double the Pleasure Double the Fun

The ol’ one-two punch of a doubling of inflation from June last year to this June along with skyrocketing commodities futures prices has hit the nail into the forehead of poor ol’ Joe Six Pack. He’s stayin’ home and workin’ three jobs.

A person resembling an evil chipmunk that you and I may personally know has made over 20% a year for several years now in commodities returns because of a simple tried and true correlation between commodity and equity prices. It doesn’t hurt that this geek Ron Jaworski is best buddies with the guys who drive the commodity prices, e.g. those rough and tumble white people in southern Africa that know which mines will “hit”. Hedge the Tsx Venture Exchange penny stocks with convertible warrants on those self same companies, whose owners you get shattered with when you’re in Toronto and voila! It’s rainin’ money, honey! By the way Harvard has to list the evil chipmunk’s little basket of assets as a “speculative investments.”

So what does this mean to poor ol’ Joe Six Pack, e.g. you and me who make over $50,000 and not much more after taxes if you manage to hit the magical $110,000 in personal income mark, which includes everyone that owns a house on the East or West Coast. It means that we all pay ALL of the taxes for the other half of the country, who are basically supported by government transfer programs of some type such as government pensions, social security, SSI, SSDI, the earned income credit, and government health care, food , and Section 8 and other housing and energy assistance.

Poor ol’ Joe Six Pack’s paycheck is now worth another 2.5% less than it was last June. Joe Six Pack’s bank doesn’t wanna lend to him even for new business ventures because the inflation rate went from 2.6% to 5.2% in one year. Joe Six Pack’s bank wants Joe Six Pack’s money now! They want to buy commodities, and they have a lot of bad loans. Joe Six Pack has to help them get cash flow to make up for bad loans, so they squeeze Joe for payment and up his interest rate.

So Joe Six Pack has no money to spend. China is in trouble. Harvard’s doing just fine thank you.