America's Financial Apocalypse 2009 Update
Stock-Markets / Financial Markets 2009 Feb 16, 2009 - 12:06 PM GMTBy: Mike_Stathis
Posting When It Matters - I want to thank those of you who've patiently waited during my apparent hiatus. I certainly wasn't on vacation. I don't take vacations. As I've said in the past, I'm not one to make daily or weekly posts for the sake of marketing. Guys who spend much of their time marketing are anything but leaders in their field, unless their field happens to be marketing.
By no means am I a good writer. And I don't use a staff of editors. What you read comes directly from me. Take it or leave it. So when I write an article there's a good reason for it. I try to provide unique insight and analysis rather than rehashing the same song and dance. And I'm certainly not going to reword the daily news in order to jump on the drama bandwagon. I'm way too busy for that nonsense. That's why I didn't bother to write anything about Madoff. There are many more Ponzi schemes out there similar to Madoff's. But there's also more sophisticated Ponzi schemes, like Social Security. One could reasonably argue that the stock market is also a Ponzi scheme. I guess it's okay to run a Ponzi scheme as long as the government is behind it.
The Madoff Distraction
What Madoff did was nowhere near as fraudulent as what the banking and mortgage executives did. Yet, he has become the latest scapegoat in this cycling pattern of booms and busts orchestrated by the Federal Reserve, Washington and Wall Street. Hopefully by now you're starting to figure out how the media is using every chance they get to deflect blame from the real villains; their Wall Street sponsors. But remember, Madoff's charade had absolutely nothing to do with this crisis.
So the question begs to be answered…when will we see Fuld (Lehman Brothers), Thain (Merrill Lynch), Killinger (Washington Mutual), O'Neal (Merrill Lynch), Prince (Citigroup), Cayne (Bear Stearns), Schwartz (Bear Stearns), Dimon (JP Morgan), Blankfein (Goldman Sachs), Thompson (Wachovia), Raines (Fannie Mae), Paulson (former U.S. Treasury), Greenspan (former Fed Chairman), Cox (former SEC Chairman), and hundreds if not thousands of others responsible for this mess in handcuffs?
Don't hold your breath. It didn't happen after the S&L Crisis or the dotcom meltdown. And it's not going to happen now. Hopefully, you know how the game is played. They'll pick out a few scapegoats; minor players, as a way to appease naïve Americans. This is the way it works. This is the sad reality of America . It's the American Dream for the rich and powerful, and the American Nightmare for everyone else. If you're a true American, you'll contact your congressmen and demand they be brought to justice. If they get enough calls, they'll feel the pressure to file charges. That's how it works. The media knows this. That's why they've done everything but stir the pot.
Tigers Never Change Their Stripes
Don't forget, these men cleared billions of dollars in bonuses by fudging financial statements while packaging trillions of dollars of fraudulent loans into securities. This was money taken from shareholders who were lied to, and investors who bought these toxic securities. It was a twist on the classic pump-and-dump scheme. In this case, CEOs pumped up revenues using outrageous assumptions, while hiding liabilities. Then they collected their bonuses – millions of shares of company stock at inflated prices; prices they inflated. Then they dumped these shares in the open market; to you and to your retirement plan. They did this for several years. Over the past four years alone, the financial industry paid out over $100 billion in bonuses to executives. Despite record losses of over $1.5 trillion from the banks alone (with at least another $2 trillion to go), most executives and all of the grunts that serve them have walked away with every penny. It was theft, plain and simple. Yet, there have been no claw backs. Where do you figure that money came from? It came from your pockets. It was the biggest heist in world history. These guys are directly responsible for destroying the world economy. Not only will they walk away unscathed, they'll walk away wealthier than before, strengthening the precedent that white collar crime pays in America, as long as you work for big corporations; corporations with cozy relationships with Washington. Without the fear of prosecution, CEOs will continue these scams over and over.
Even if you don't have any money in the stock market (no 401k, IRA, pension or any other retirement plan, and 529 plan), these ridiculous payouts still came from you because this crisis caused the Fed to smash rates to record lows. And this will eventually destroy the buying power of the dollar. In the meantime, banks are paying practically no interest on your savings.
Still, they aren't finished with you. They've taken your tax dollars and made sure to collect more bonuses while raising fees for bank accounts and credit cards. The banks are screwing you every way possible; you, the innocent victim. You should expect them to devise new ways to screw you. Tigers never change their stripes.
My advice is to put your money in a credit union. That's what I plan to do. Most credit unions are in good shape because they don't get involved in the same types of risky lending practices. That will send a strong message to these banks that you don't need them. They need you. Don't reward their crooked tactics, ridiculous bonuses and lavish spending sprees by keeping your money there. It's already bad enough they're siphoning off tax payer dollars for blatant mistakes.
Do your part and end all business relations with these banks forever. Do it now. Without your money they won't be in business for long. Besides, the banking system is insolvent. That's right. They don't have enough money to meet debt obligations. They're relying on the FDIC and backup from the U.S. Treasury. Together, if we pull our money from the banks, they will be finished. Then we can demand from Washington an entirely new banking system that will be devoid of these exploitative business practices and fraud. Ultimately, the people, once united are stronger than America 's organized crime syndicate; you know, Washington and corporate America .
America , Home of Bizzaro?
There hasn't even been the faintest mention by the White House, Department of Justice or the SEC of criminal, civil or securities fraud for the greedy crooks who orchestrated this heist. Millions lost their retirement savings, homes, and jobs. Sadly, some of these victims have already committed suicide. With regret, I estimate there will be many more. Millions of innocent Americans have suffered while the criminals stole enough money to ensure dynasties. I'd wager that most Americans would like to see these criminals commit suicide. But why would they? They are the winners of this charade. The media hasn't even made them feel shame because they are all partners in crime. It looks as if America has become the Bizarro world. At the very least, America has become the laughing stock of the world. And you can bet these crooks are laughing as they count their money, knowing they are untouchable. This is beyond outrageous.
Apparently, the lesson Washington wants to provide you with is that crime pays as long as you are rich and powerful, even if it affects millions of innocent people. As long as our leaders allow these crimes to go unpunished, they are just as guilty. That includes all of Congress and the White House. President Obama, what happened to change? The only change Obama has brought is a change in colors. He is now a puppet for the wealthy elite; the guys who really run America . But I'm not surprised. That's why I never bothered to vote. I already knew the deal. But I won't be able to convince you. You'll need to figure things out for yourself. The only thing that's surprised me is the lack of mass riots. But the plot still has a long way to go.
I won't ever forget the details of this nightmare. Not in twenty, thirty or even forty years. As long as I am alive I will never forget. I hope you never forget as well. Unfortunately, most of you will, just as you forgot about the dotcom charade in a very short time. In part, that's why these events are repeating cycles. In part, you are to blame for your short memory and complacency. Okay, enough of that. I need move on. Otherwise I might go on for days.
As I was saying, I only write when I have the time and when there's a good reason to write about something. Since my last post in early December, neither criterion has been filled as you shall see.
Where Have I Been?
For starters, I've been tied up with a book project which I began several years ago. I feel relieved that it's now complete. Incidentally, the book is so long I had to split it up into two 500-page volumes. And no, it's not one of those useless “how the crisis came to be” books. No, it's not some investment book offering you false hopes like so many out on the market. My new book was written for serious investors. Hopefully it will be considered a valuable resource. And of course, I've also been working; guiding my clients through this mess.
Finally, I've been working on a new website that will be available soon. I have no need for a website from a business standpoint. But I decided to launch one so I could write without the possibility of censorship. I've been censored many times in the past for accurate yet benign phrases like “Wall Street crooks” and for criticizing CNBC (this is entirely different story that's going to be addressed in my next book). I have since discontinued submitting articles to these websites. It's clear where their agendas lay.
As for my second criterion for posting new articles (i.e. having a good reason to write about something), you may recall from my November 24, 2008 posting, I concluded the following:
Market Guidance: Past, Present and Future
“On the bright side of things, I am becoming increasingly optimistic of short-term upside of around 15-20% through the end of January. If this rally does materialize, you should expect it to be erased shortly thereafter once Christmas earnings are reported. One thing is for certain. The stock market will be filled with tremendous volatility throughout 2009. And the economy is only going to get worse. There will be periods of optimism followed by deepening realities. As a result, this will continue to be a market only for the best of the best traders. All others should consider staying out, select only safe-dividend stocks or start building positions in Chinese stocks like an ETF index (FXI). Remember, there are going to be hundreds of hedge fund blowups and corporate bankruptcies. Many companies will slash or eliminate dividends so you need to stick with only the stocks with the best financial and business strength to ensure dividend payout.
Soon I'll be looking to enter gold and maybe silver. For those of you who missed the previous bull run in these metals, you'll have another opportunity to catch a ride back to the top. However, I wouldn't jump aboard until I see a strong surge, as there's still another potential 10-15% downside. Anything more would be reason for concern and could cause a major trend reversal. If this market rally does occur, it is likely to take gold up with it. And when the next market correction occurs, this time gold might not sell off. It could soar.” I highly advise you to read the article in its entirety. In fact, I highly advise you to read all my archives. http://www.marketoracle.co.uk/Article7474.html
Thus far, this call has been spot-on. Since that time I've been waiting for a retesting of the 7400 lows made a few months ago. And I expect new lows to be made. I still believe the Dow will ultimately head below 7000. This is the main reason I haven't made any posts since then. After the stimulus package goes through, don't be fooled by any possible rally. I expect any upside in the market to be short-lived, resembling a bear trap. While short-term traders might choose to ride the momentum, be careful.
You might also recall my warnings of an earnings meltdown in an August 4, 2008 article. At the time, the Dow was around 11,600. I trust you know what happens after earnings collapse; the stock market collapses and lay-offs soar. Consequently, less than three months after my warnings, the Dow collapsed by over 30%. The problem is that this is only the beginning of downward revisions, so look out below. http://www.marketoracle.co.uk/Article5751.html
By Mike Stathis
mike@apexva.com
Copyright © 2009. All Rights Reserved. Mike Stathis.
Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.
The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.
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