Geldpress

Here is a quotation that is working its way around the world, on the Internet, in and in mass e-mail distributions.

Owners of capital will stimulate the working class to buy more and more expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable.  The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will take the road which will eventually lead to communism.

The quote above is often being cited to Karl Marx, in his book Das Kapital from 1867.  At first read, it looks eerily similar to the writings of Karl Marx. And it certainly strikes an incredible similarity to the world financial crisis that continues to unfold and consume its share of the worlds news.  But upon further research, it has been determined that the words above were not fram Karl Marx.

Regardless of who wrote the above words, there is no doubt that much of it rings true, and the final thoughts on “leading to communism” are not beyond the realm of possibilities.  And who better to advise you on communism than the master himself, Karl Marx.  For a glimpse of what may be to come, check out the following.

Marx’s Das Kapital: A Biography (Books That Changed the World) by Francis Wheen

The December Case Shiller data was released today.  Unlike the NWMLS and NAR fraudulent “eternal real estate cheerleader” numbers, the Case Shiller values are based on ACTUAL RESALE VALUES and OBJECTIVE MEASURES.  Lets first recap the phony numbers as reported by the Northwest Multiple Listing Service (NWMLS) for the December period. 

When the NWMLS reported the Seattle area December data, they said:

The median price for a Seattle area house that sold in December was $436,750, up just over 5 percent from November…The median house price in King county was $403,500, up just over 2 percent from November…The median condo price in Seattle was $321,500, the highest since March, up 6 percent from November.

Now lets look at the ACTUAL DATA from the Case Shiller report, as shown in the graph below.

Results:

• Seattle home prices DOWN 13.4% year over year and DOWN 3.6% month over month.
• NWMLS wrongly reported that Seattle home prices were UP in December month over month.
• Regarding the rest of the nation, not one city in the Case Shiller index reported a halt in home price declines.

Also from Geldpress:

• Seattle Housing Declines, NWMLS In Denial
• Requirements For Buying A House – Don’t Lose Money
• Not Time To Buy According To This Unique Rent vs Buy Calculator
• Portfolio protection – hedging todays roller coaster market ride
• Iceland Crisis – Failed Banks, Currency Collapse, Food Shortages

Bloomberg reported today that president Obama has a goal of cutting the nations deficit in half to $533 billion within 4 years.

President Barack Obama plans to increase taxes on the wealthy and cut spending for the war in Iraq as part of a plan to slash the U.S. budget deficit to $533 billion by the end of his first term, according to an administration official.

Obama wants to reduce the deficit because he’s concerned that over time, federal borrowing will make it harder for the economy to grow and create jobs, said the official, speaking on the condition of anonymity.

The deficit Obama inherited on taking office last month was $1.3 trillion. The administration is scheduled to hold a so- called fiscal-responsibility summit at the White House tomorrow, with about 130 people invited, including about 50 members of the House and Senate from both parties.

Geldpress comment: Any talk of REDUCING the DEFICIT is STUPID.   Talks of “reducing deficits” implies that the speaker has no concept of the fundamental difference between debt and deficit.  Did we really elect a new president that doesn’t even understand the difference between deficits and debts?!?!?!  Here you go, Obama.  A deficit implies an annual shortfall in revenue that does not cover the annual spending.  You should really know this one given that you are on track to set 4 new records (one for the next 4 years) on deficit spending for this country.  The debt is the cumulative total of all past deficits and surplus (not since 1957 have we had one!).  Further, the goal of “cutting the deficit” is no more admirable than a serial killers goal to kill half the people he killed last year!  You want an honorable goal, Obama-san?  How about a goal of producing a REAL BALANCED BUDGET, and a goal that includes REDUCING the NATIONAL DEBT.  And when we talk about reducing the national debt, we are talking about the REAL NATIONAL DEBT – PUBLIC + INTRAGOVERNMENTAL.

Is Obama the only economic illiterate?  No sir.  Check out this video of congressman Pete Stark from California who actually says that “The larger the national debt, the richer we are”.  He then goes on to tell his interviewer that he should go to a real school for even questioning the rationale of increasing the debt.  When pressed further, he tells the interviewer to “get the fuck out of here”.  Pete Stark is the epitome of everything wrong in this country – stupid people in government.

Getting Wealthier – The new secretary of state  Hilary Clinton apparently took a cue from Pete Stark and his comment of “getting wealthier through larger debts”.   With Obama busy handing out trillions of borrowed money to corrumpt financial institutions and irresponsible mortgage borrowers, Clinton was in China begging them to buy more treasuries to fund the increased debt.

Also check out:

• Obama Ethnicity Certified – He Is Japanese
• California’s Exploding Debt Problem
• Washington state debt history – does Dino Rossi understand it?
• Summary of Stupid States Crumbling Under Debt Burdens

Rick Santelli is one of the only regular commentators on CNBC that understands what is REALLY going on with this economy.  Herb Greenberg was once on that list, but he unfortunately left CNBC a while back to pursue other interests.  And then there was one.

Back to Rick.  Here is the rant that was heard around the world today on CNBC, and Rick is dead on right about this one.

Rick does not play favoritism with his criticisms.  Here is an older video showing Santelli blasting the CHIEF IDIOT of CNBC, Jim Cramer.  Thanks to Don Harrold for putting this piece together.  In the video, Santelli blasts Cramer for his blatant stupidity of calling a bull market the entire way down.

Criticalmas also gives an excellent summary of Cramer’s stupidity in this post.

There’s a great economic truth summary from iStockanalyst, with excerpts below:

The entire last two decades of so-called “Economic Growth” has been fueled by one fraud after another, starting with the Internet Bubble.

This fraud has been systematic and the mainstream media has been both an implicit and explicit enabler of these frauds, instead of doing its job, which is to root them out.  The looks on the faces of the other CNBC “anchors” was one of abject fear – perhaps parts of ”The Fourth Estate” is coming to realize that when the pitchforks and torches come out – and they certainly will if we hold the course we’re on – they might have some trouble explaining why they shouldn’t be near the head of the list of those being “sought”?

Back to the Santelli Tea Party.  It may have just been a metaphor, but his talk of a TEA PARTY has gotten the world riled up.  People have had enough of the socialism of losses from STUPID CEO BANKERS.  The world is now putting pressure on Rick Santelli to come through and organize a massive tea party in Chicago this summer.  Perhaps we can have a “Cramer Roast” in Grant Park to celebrate.  Thanks to ticker-forum for the picture below.  Stay tuned, but make mine a jasmine pearl oolong tea, please.

With the passage of the new $787 economic stimulus bill comes the side effect of a substantial amount of stimulus scams.  A google search for “government grants” will bring up dozens of sponsored links stating some of the following:

• Let us show you which government grants will pay…
• Receive your $10,000 government stimulus grant in 7 days…
• For just $5.99, let us show you how to claim your free government grant…

Some of the ads even go so far as to warn you against visiting other government grant scam sites.

Do you want to know the truth behind these sites? Pay attention.  There are in fact thousands of government grants and aid packages available.  Some of them you are probably already aware of, such as financial aid packages (loans and grants) for higher education, retirement income (social security), and employment insurance. If you use tax accounting software such as Turbo Tax or Tax Cut, then you have probably been exposed to interview questions that help you file for and receive the earned income tax credit and the child care tax credit.  These are the exact “government grants” and “stimulus checks” that those sites are going to give you information on for a small fee.  But you do not need to pay for such information, because it is available for free on government websites.

Here are just a few government websites (.gov addresses) that offer FREE INFORMATION on all the available government loans, grants, and tax credits available:

• Government Grants, Benefits, and Financial Aid – High level summary of grant and tax credit information by category.
• Grants.gov – Search for specific grants, or browse by category

Any other site that promises information is just after your money!  You will get the same information on the same two websites above in exchange for your money.  Just click on either link above to get the information for FREE.

But if you still INSIST on PAYING for FREE INFORMATION, then just click on and BUY the following book.

Uncertainty remains, the markets are lower and volatility is increasing with this week’s options expiration approaching.  There are several interesting option terms that are often discussed during options expiration week.

Maximum Pain – This is the theory that secuirities will close on expiration day at the strike price that causes the most amount of pain to both call buyers and put buyers.  Surprisingly enough, the point of maximum pain for options buyers is often correlated to the point at which an underlying security will close the option expiration trading day.  For this reason, some traders specifically analyze and set up new option trades around that magical point called maximum pain.  There are several algorithms for computing the maximum pain strike price, but the general idea is to find the highest open interest among the various strikes of calls and puts.  Here is today’s view of the SPY ETF (Models S&P 500) option chain for February.

From the image above, the CALL strike with the highest open interest is at 83.  The PUT strike with the highest open interest is 80.  The highest combined total open interest for both CALL’s and PUT’s is at the 80 strike. (154,591 + 43,277).  By some maximum pain algorithms, the S&P is likely to close on Friday at 800.

Pin Risk – This is the theory that says securities will sometimes close option expiration days very close to an available strike price rather than at some point in between.  On options expiration days, many option traders must face the decision on whether to ROLL their options to subsequent months.  Option sellers (i.e. covered call writers or calendar spread players) face the decision of whether to let out of the money options expire worthless, or buy them back or roll them if they risk closing in the money.    As an example, consider Apple (symbol AAPL) which exhibited an intraday trading range today from 94.28 to 97.04, and closed at 94.53.  The 95 Strike CALL options went from being out of the money to $2.04 in the money, and closed out of the money.  If this were expiration Friday, many option players would have to decide whether to roll options or take a chance that they may close unexpectedly in the money, or even pin near or exactly to a specific strike price.

Dubai was once thought to be an economic miracle.   Dubai is the most populous city of the United Arab Emirates.   Dubai is home to massive construction projects such as The World Islands, The Palm Islands, the indoor ski park Ski Dubai, and the Burj-Al-Arab hotel.  According to Wikipedia, Dubai’s revenue comes from tourism, real estate and financial services. With the global economic crisis comes a triple wammy of a defeat to Dubai from those three suffering revenue sources.

From this recent New York Times article:

Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.   Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.

Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.

And from the thisismoney.co.uk article:

Is Dubai poised to become the Iceland of the Middle East? The news dripping out of the most populous city of the United Arab Emirates has been bad for months and worse is coming.

All of the factors that have so blighted Western economies are high on the Dubai checklist: rapid growth on the back of a property boom – tick, rampant lending to speculative borrowers – tick, takeovers built on debt – tick, blind optimism that the good times would never end – tick.

From the Financial Times:

Dubai’s recent surging population growth will reverse over the next two years as the troubled, but important, real estate and construction sectors cause the number of immigrants to slow and many expatriates to leave…

Over half of Dubai’s population is employed in the the real estate and construction industries, which are suffering from oversupply and a dearth of financing. Property prices fell 8 per cent in the fourth quarter…

Dubai’s entire population of approximately 1.2 million is almost exclusively expatriates (90%).  With property values plummeting, and expatriates leaving en masse, Dubai will soon learn the hard lesson of leverage.  Leverage is great on the way up, but it can cripple and destroy an economy overnight on the way down.  Iceland has already learned this painful lesson, and Dubai is next in line.

There have been many revisions to the 2009 Stimulus Plan.  Today’s vote on the 2009 Stimulus Plan was for the compromised version.  It has already passed the House of Representatives with overwhelming democratic support, and the Senate vote is expected to occur this evening.

Here is a video of House member John Boehner and his comments about voting on the 1,100 page stimulus plan that nobody read.

If you decide to read the full text of the 2009 Stimulus Plan, you will have done what no member of congress has done prior to voting. The full text is available at these links:

• Full Text of 2009 Stimulus Plan, Division A
• Full Text of 2009 Stimulus Plan, Division B

Also check out these House of Representatives home page links for any updated documents on the 2009 Stimulus Plan.

• United States House of Representatives
• House of Representatives Committee on Appropriations
  
• House of Representatives Committee on Rules
• House of Representatives Committee Offices

For a more digestable view on the 2009 Stimulus plan, check out the following documents:

• House Appropriations Committee American Recovery and Reinvestment Detailed Summary
• House Appropriations Committee Summary  Overview

The CNBC House of Cards 2 hour documentary is airing all week.  Set up your TIVO to record one of them, and watch it at your leisure for an informative and highly entertaining view of stupidity in action.  Or, check this link to watch some of the segments directly on the CNBC website.

Here’s what looks like a CNBC produced 8 minute trailer of House of Cards on youtube.

For first time home buyers, or for anyone considering the purchase of a new home, the list of requirements below may just save you from what could be a very costly mistake.   The list below is quite different than one from the perspective of the realtors or bankers, but rest assured it is the right list to follow if you don’t want to lose money!

1. There are no current national or large bank mortgage foreclosure moratoriums in place.  These temporary measures do nothing but skew the statistics in a futile attempt to artificially raise the market prices of homes.
2. The total monthly cost of ownership must be a maximum of 5% larger than the cost of renting a near equivalent place.  Regardless of what financing and down payment is actually used, the monthly cost of ownership should be calculated separately assuming a ZERO DOWN loan, with a 30 year fixed MARKET interest rate (NOT TEASER).  Include principal and interest payments, real estate taxes, insurance, association dues, and special charges (i.e. flood insurance) in the monthly cost of ownership.  Also see the Geldpress Rent vs Buy calculator.
3. The Case Shiller index in your area must show a flat or positive trend from the latest available data point to that of 3 months prior.  Case Shiller housing price data are the only ones worth viewing, because it is OBJECTIVE. Any data coming from the MLS or NAR is subjective and biased!  As of today, Case Shiller data is available through November 2008.  To consider buying a home in the Seattle area, compare the November data point for Seattle (166.23) with that of the August data point for Seattle (175.24).  The trend is still negative, so it is not the time to buy in Seattle (or most parts of the country).

Not in the Requirements to Buy a Home:

• Inventory numbers showing a flat or negative trend.  While it is interesting to look at the trend in “months of supply” data, there is to much manipulation to trust the data.  Developers are intentionally de-listing properties to keep the supply numbers low.  Banks are intentionally holding back REO properties so as not to flood the market.  Delinquent home “owners” are not being foreclosed on in a timely fashion.  Stick with the 3 requirements above and you will be fine when purchasing a home under these conditions.  Note, however, that MAS and I disagree on using inventories when trying to pick a bottom in real estate.