In case you were getting too optimistic. . .

The weather is beautiful, I'm playing more music with more people and learning more tunes than ever, I'm preparing to do some paintings, and everything seems quite superb.

...but wait... what's this...?

Mike Morgan Behind Enemy Lines:

Thursday, February 26, 2009

Chaos, Catastrophe, Crime and Consequences

Last week and early this week we took trading profits on our short positions. I thought we would see a move higher over the next week or two, but with what has unraveled during the past 48 hours, I now believe we are headed lower before any rally can take place. I don’t know when the rally starts, but right now the news is grim and getting much darker.

My biggest warning to everyone has been the destruction of fiduciary money – pension funds, endowments, trusts, charities, etc. The boys on Wall Street have raped these funds and filled them with junk. Junk in the form of bogus joint ventures, overpriced assets and derivatives that generated huge commissions. As this unfolds, we will enter something akin to anarchy. In fact, we are at the precipice of anarchy right now. Our politicians have joined the Economic Royalists in providing them with the means to rob us blind and leave the world in financial collapse. Moreover, since we are allowing them to keep the money, the same criminals will be the ones to profit from the global financial collapse.

With that said, we reversed course yesterday and today, and put on additional shorts in banking, builders, REITs, restaurants and even oil. I know my oil call was totally against the grain, but despite what the experts say about a technical bottom in oil and upcoming cuts by Opec . . . we are driving less, trucking less and the ships at sea are the lightest they have been in decades. In fact, we have more ships sitting at anchor than ever before. Moreover, Opec is NOT going to cut. They may say they are going to cut, but the next Opec conference will leave a bunch of greedy pikers pumping more oil to make up for the fall in prices.

For clients, we will expand on these issues on the Friday morning call.

We are seeing a meltdown on a global scale. There are seven “C” words that deserve attention.

1 – Catastrophe – Obama uses this word on a regular basis to describe what is going to happen if we don’t keep throwing more money at the problem. Little does he realize the word is reality.

2 – Confidence – Obama had the confidence of the US and the world. In Europe he had a 77% - 90% approval rating last month. That has dropped, but we have not seen a new poll. In the US, just talk to your neighbors and you will see that very few people have confidence in Obama. In fact, he loses more of our confidence every time he talks . . . and that’s a lot. His daily ObamaRamaLamas on TV have become painful. Newsweek ran a cover – The Confidence Game – How Obama Can TALK Us Out of a Depression.

I have news for you, you can’t talk your way out of this. This is not Hollywood where they can write the ending. Obama has great speech writers and he is smooth on his feet, but he lack any substance. And I will repeat . . . he has surrounded himself with huge egos that don’t play well with others . . . and they are running around the White House with scissors.

3 – Consequences – This is the key word to solving the global financial crisis. Go after the crooks like Hank Paulson that stole billions. Make them pay the consequences. I suggest we line up Paulson, Thain, Mozilla, Lewis, Sandler, Dodd, Frank and a few others. We ask them to return the money and to create laws that will be enforced. If they so no, we shoot one. I can guarantee the rest of them will run to return what these guys stole, and Dodd and Frank will crap in their pants. That’s another favorite “C” word. I know this sounds off the wall and harsh, but what thousands of men like this did is to destroy the lives of millions of people. Obama likes to compare himself to Lincoln. Well, Lincoln called men like this traitors. We shot traitors in Lincoln’s day.

4 – Crapola – This one has double significance. First, the only thing we are hearing from the talking heads on TV and the baboons in charge in Washington is . . . crapola. Second, that is what we are going to be eating while guys like Paulson will be dining on the other “Cs” . . . caviar, cake, croissants, crawfish, cheese and cognac.

5 – Collusion: secret agreement or cooperation especially for an illegal or deceitful purpose. That, my friends, sums up what we have just witnessed over the past 10 years between guys like Chris Dodd, Barney Frank, Chris Cox, Angelo Mozilla, Dick Cheney, Robert Rubin, Hank Paulson and hundreds of others. I did not include George Bush, because he was simply so out of touch with reality, that he had no clue what was going on, and he left it all to Cheney and his Buddies.

6 – Crime – With what I see and hear, I believe we will see unbelievable spikes in crime throughout the world. For the US and beyond, as the weather warms into Spring and Summer, the masses will not sit back and do nothing. To the contrary, as we are seeing in warmer climates like Madagascar, Guadalupe and Martinique, the masses are already rioting. If you think the 1969 riots were horrible, I believe this year will make that look like a kiddie parade. We now have organized gangs on top of millions of angry people. We now have millions of unemployed that have no jobs and their 401k plans have been destroyed. We now have millions of people that don’t know if they can put food on the table much longer. If Obama wants to talk about Lincoln, let him go back and consider what happened during the Civil War. And if you think we cannot fall into anarchy like that again, you are only fooling yourself.

7 – Chaos: a state of utter confusion. I think that sums up where we are at today.

Unless we go after the economic terrorist and claw the money back, we will see violence on an unprecedented scale this year. We didn’t have huge shopping malls in 1969, but the downtown shops were all looted and burned. I saw it first hand in Asbury Park, New Jersey. That was 40 years ago . . . one Biblical generation. The malls will be looted and destroyed. Grocery stores the same. I do not see anyway to avoid this . . . IF we stay on the same course we are on.

Dillon Radigan on Fast Money this evening was bold enough to say we need to go after the crooks like Paulson, Mozilla, etc. He didn’t mention them by name, but he analogized them to terrorists.

I leave you with the only “C” word we should be concentrating on . . . Consequences. If we fail to force the thieves to pay the consequences for creating a world of financial crisis, we must pay the horrible consequences of financial ruin and chaos.

And if we don’t take control of our destiny, in the end, guys like Paulson, Mozilla, Dodd and Frank still have to report to the Boss.

Romans 14:11-12 It is written: " 'As surely as I live,' says the Lord, 'every knee will bow before me; every tongue will confess to God.' So then, each of us will give an account of himself to God.

Posted by Mike Morgan, J.D., RIA at 8:12 PM

Mike Morgan is Not Pleased with Obama and Biden So Far

Mike is a little shrill.

Mike Morgan: Behind Enemy Lines:

Where Did The Bailout Money Go? - The first installment of $350B went directly to the economic royalists. We gave $250B to banks in exchange for stock worth less than $200B. And we gave $40B to AIG for what will become a total zero. And there is $60B is some kind of limbo fund. By the way, even the media keeps talking about the lack of transparency for the money we have spent . . . that is hogwash. If Obama wanted to “do the right thing” he could re-write the terms of the first installment of TARP money and demand the recipients either return the money or give us full transparency. In fact, Obama can re-write ALL of the terms of the first installment. He can demand more stock. He can limit bonuses, compensation, perks and anything else he wants.

Why? How? Well there is one thing King Henry did right. The terms of the TARP provide that the next administration can re-write anything and everything.

So what is Obama waiting for?

Why is Obama ranting about the first installment, but not doing anything?

And why doesn’t the media bring this to light?

Easy answer. The economic royalists would not like that. The media is also owned and run by the economic royalists. So once again, here is a fact that support my position that Obama is either a hypocrite or a pathological liar. There is a third option.

“If stupidity got us into this mess, then why can’t it get us out?” - Will Rogers

In all due respect to Will, I want to put a spin on this one . . .

“If stupid, lying, cheating bankers got us into this mess then why can’t stupid, lying cheating bankers get us out of this mess?” - Mike Morgan

Bailout II - I can’t simply leave it at that, because we have Tim “the tax cheat” Geithner getting ready for Bailout II, the sequel. Before he puts his tax cheating feet in his mouth, maybe he should unravel Bailout I. He could start with the missing $78B representing the disparity the Congressional Oversight Panel came up with between what we got for what we gave. Hey, that $78B represents more than 20% of what he’s going to spend this week. Why not clean up Bailout I before screwing up Bailout II?

Where Is the Bailout and StimUseless Money Coming From? - I’m glad you asked that question. It’s a complicated answer. You see the Tooth Fairy (hereinafter TF) hooked up with the Easter Bunny (hereinafter EB). TF and EB came up with a plan to monetize the faith millions of kids have in them. To do this they created nothing out of thin air and sold it to Goldman Sachs. Goldman Sachs then went to the pension fund managers, that wanted to make new, creative, innovative and hard to understand deals, so they could continue to suck up their bonuses. Voila, so now you know the secret.

Hypocrites or Pathological Liars - Obama has referred to Wall Street bonuses as “shameful” and “the height of irresponsibility.” Biden joins the fray with “I’d like to throw these guys in the brig..” Go ahead. But start with Chris Dodd and Tim Geithner . . . and half the US Senate and Congress.

If these two hypocrites wanted to really do something, they can. As I noted above, they can re-write the rules governing the money they handed out. That would be a good start. If they don’t, they have nothing to complain about when more bonuses are handed out. But if either one of these pathological liars wants to demonstrate that I am wrong . . . do something about it, or shut your lying trap.

[. . .]

Anyway, back to the Treasury Avalanche. Plugging the budget deficit is not going to be easy. This fact has not gone unnoticed. How could it? The Treasury is bringing back the seven-year note after a 16 year hiatus. Not only that, but they are going to sell them every month. Not only that, but they are going to start selling the 30-year bond every month. And not only that, but China and Japan are not going to be buying like it’s 1999, because we’re not buying their chatchkas anymore.

So what? Well . . . I’m no economist, but this can’t be good. If we can’t borrow the money we are spending, are we really spending it? Yes, but that means we just have to print it. And isn’t that what happened in the Weimar Republic and what is going on in Zimbabwe?

Rates will go up to attract more money into Treasuries. That sucks more money out of the economy and private capital and liquidity. Why would people buy stocks or invest in unproven businesses, when they can buy US Government guaranteed debt? So until we accept the consequences of what we’ve done, there is no hope that continuing to borrow will get us out of this mess. As you can see, the folks we borrow from are not happy with us, and we’ve kinda, sorta destroyed our credit rating as a country by acting like an Orange County Housewife with a stash of credit cards in Saks.

[. . .]

Waiting for the Messiah - That is not my headline. It was a headline in The Economist last week. I wasn’t going to use it, but it is very fitting. 92% of French citizens polled think Obama will have a positive impact on international events. European governments are operating in an environment of fear. They don’t want to do anything remotely possible that would upset the Messiah, for fear of enraging their own citizens who are waiting for Obama’s every word. In fact, the lowest rating Obama received was 77% in Britain. I want to point out one thing. Can you imagine the displeasure these people will feel when Obama either lets the down outwardly or lets the world down . . . as he continues to push money to the economic royalists?

Mike Morgan analyzes Paulson's call to Buffett

Tuesday, September 23, 2008

Paulson Calls In Buffet

Very sad times. Remember the Maria Bartiromo interview with Buffet, when he slipped and said Paulson called him on the big Sunday a couple of weeks ago? Many people wondered why Paulson would call a private citizen to discuss Fed matters? Obviously, we now know.

Sham Deal - Buffet gets special stock with a 10% dividend and he gets the right to by another $5B at $115, when the stock was trading at $125 and the deal makers knew it would spike on this kind of news. So why didn't Goldman set a higher price on the stock? Buffet would have never done the deal. He probably cut this deal with Paulson himself when they spoke on that funky Sunday.

Conspiracy? - We have never witnessed anything like this, with rule changes and special deals and the biggest thief in the world, running the financial world. The Buffet deal could only have been done if Goldman had a new business model . . . because the old business model was busted. Voila, they have a new business model as of Sunday night courtesy of King Henry . . . and less than 48 hours later, Buffet come in with $5B.

Someone needs to question that Sunday conversation. Someone needs to question this Sunday's move to bring Goldman under the Fed's wings as a commercial bank. Someone needs to question the very deal struck with Buffet. But no one will.

Main Street or Wall Street? - The price of Buffet's stock is at $4,300 for Class B and $128,800 for Class A . . . because he doesn't want to deal with Main Street. And Warren Buffet stands to lose more in a market crash than any person on the planet. Warren Buffet's deal with Goldman is just another example of the power of Paulson and his Wall Street fraternity.

Free Markets Will Prevail - Eventually, the free market will prevail. Eventually, the markets will crash. But once again, the market will bubble up on the Buffet news. Paulson is truly brilliant. There could not have been a better moment than now to pull this card out of his sleeve. After today's Hearings, Paulson was cooked and he was going to be the focus of the media tonight. Not anymore. Now the focus will be on the household name of Warren Buffet and his purchase of stock. But . . . and this is a HUGE but . . . Even though the consumer and the PPT will be back in there buying tomorrow, nothing has changed. The toxic stuff is still there. We have not resolved anything. This just give Wall Street more time to suck up the dollars and more time to trade in and out of pension fund portfolios.

Ban On Short Sellers - Maybe we need to question why a sham deal like Buffet's should be allowed. It is the opposite of what we saw with short sellers, but at least the short sellers were all dealing on a level playing field. In fact, the deal would not have been done at all if Paulson did not instruct Cox to ban short selling.

Paulson Crossed the Line - Why has no one yet publicly questions why Buffet has a private call from the Secretary of the Treasury about a company the guy ran as COO and CEO . . . and government business with a private citizen involved in Wall Street so heavily. This was a private deal with our top government guy in the mix. If we thought we had stinky fish yesterday, we have super-stinky fish today.

I hope you will all take a moment to write your Senators and Congressmen again, because market manipulations like this will destroy everything we have ever dreamed of. Wall Street is pulling out all stops to make sure Main Street crashes . . . so Wall Street can come back in and pick up the pieces for next to nothing.

Tomorrow . . . The markets will probably rally on the Buffet Bail-Out, but eventually the stink will overcome even Warren Buffet. He had no choice. If no one stepped up to the plate tonight, it was all over tomorrow. And he would have suffered huge losses. We already saw that this afternoon. Obviously, Paulson still has weapons. We just never dreamed he had so many fraternity brothers. I think this deal will come back to haunt even Buffet, because there is so much more to be written . . . and even great men (or formerly great men) can't stop Mother Nature or the Free Markets.

Mike Morgan chronicles the end of the free market

The two most recent posts by f in full:

Saturday, September 6, 2008

Paulson's Grand Scheme

I've received hundreds of phone calls and emails since Friday afternoon. I was going to wait until after hearing what Paulson dumps on us before commenting, but I need to get a short piece out to try to stem the flow of emails and phone calls.

It is anyone's guess what he is going to do. I've heard from contacts around the globe, and everyone seems to be wondering . . . but for the most part, everyone agrees Paulson is going to reward his fraternity Pals from Goldman Sachs and provide guys like Bill Gross and Wilbur Ross with a huge bail out . . . and even bigger profits.

There appears to be two ways of looking at this.

1 - The Dark Side - Paulson is going to provide a bail out that will cost the taxpayers hundreds of billions, but he will do it in pieces and hide the real story until he is long gone. The scheme will be so enriching to his Pals, that the market will rally hundreds of points on Monday, as Paulson's Pals force the market higher to give the world a false sense of security. Paulson does not care about the public, the taxpayer or the how this effects the world. He is simply under too much pressure from his Pals, and guys like Bill Gross who have buried retirement accounts and pension funds in toxic waste. In the end, it will all blow up in our faces, but Paulson will be long gone and the traders reaping the profits on Monday will be selling to the unwitting masses that will be wiped out a year or two down the road. Think 1929 on steroids.

In fact, this group believes Paulson has already cut a deals with John Mack, Vikram Pandit, Bob Steel, Jamie Dimon, Lloyd Blanfein, Bill Gross, John Thain and their counterparts throughout the Goldman Sachs controlled financial world to invest in Fannie and Freddie alongside the Fed. What escapes the public eye, is that eventually these investments fail . . . and the only losers will be the public. Guys like Gross, Mack, Dimon and Paulson's Pals in high positions at the major financial institutions will be long gone when the fall out destroys the American dream, economy and the very fabric of who we are.

2 - The Lighter Side - The alternative thinkers believe the markets will come down hard on Paulson, beginning with the Asian markets and following through to Europe and America. In fact, they believe the markets have been waiting for this for moment. These folks note that Fannie and Freddie were up sharply when the bail out was first announced Friday, but they turned down and fell sharply. Unfortunately, we can't say the same for the financials and the builders, so I am thinking this group is going to come up short. After all, the two groups that should be 50-75% lower, rose sharply on the news. That's where these thinkers start to think twice. The Plunge Protection Team may have been juiced up over the weekend with some foreign thugs, and Paulson might just overwhelm this group as well.

In this group, about half think Paulson will prevail with his PPT on steroids, while the other half believe the markets will react violently on Monday and finish sharply lower . . . even if they don't start out that way. The hard core group that want to see Paulson pummeled, believe it will start ugly and end ugly. Some even believe the markets will be forced to close and Paulson will resign before finishing his term. Since my clients are on the short side of the market, I like this group . . . but I believe Paulson has already indicated he is going to pull a scheme to reward his Pals.

Criminal - That is the only way to describe what we are witnessing. And the criminals get bolder by the day. For Bill Gross to come out with the commentary he has injected this week, is simply outrageous when you consider what he has been saying and doing for years. And for Paulson to have gained so much power, while still making back room deals with his Pals, is sickening. Our politicians basically gave this one man control over the destiny of the United States of America . . . with no back stop to control his bazooka.

Not Just Fannie and Freddie - What the financial world seems to have forgotten, is the problems don't stop with Fannie and Freddie. First of all, this bail out only involves about half of the US mortgages, and it doesn't even come anywhere close to preventing it from happening again. Second, we are witnessing the demise of the free market system, where we are protecting the greedy bastards at the top, but throwing the system and the financial future of everyone else to the wolves. The right thing to do, would have been to follow the money and go after the thieves. Even Cuomo made it clear he was only in it to secure his spot as Governor of New York.
Doing the right thing was never an option. We saw that in July, when instead of locking up his buddies for violating the short selling rules, Paulson decided to test his control over the world's financial masrkets.

Since Paulson will not do the right thing, the next best thing to do would be to let Fannie and Freddie fail along with the banks. Yes, there would be global pain, but it would be a lot less than what we will experience by trying to protect a few thousand greedy bastards like Paulson and his Pals. I want to say something creative right now, but all I can think of is . . . God Save Us.

Thursday, September 4, 2008

Pasulson - Thief of the Century

History's Greatest Thief - In July when Hank Paulson decided to put an end to naked short selling, he could have simply enforced the rules and sent dozens of traders to jail. But that would have meant sending many of his frat boys to jail. Instead, he decided to give his boys a heads up, and then pull one of the financial world's most successful scams, simply to enrich his friends. He essentially killed the free markets.

End of the Free Market - His excuse was how he wanted to protect the banks being shorted. That's a free market decision. And if people are not following the rules, you throw them in jail. You don't change the rules. Changing the rules was the end of the free market as we know it.

Burning Out of Control - When the wild fires burn through forests, the forests that burn out of control, are the fires where we have not cleaned out the dead wood and brush. This is done in one of two ways. First, we can physically go in and remove it periodically. Second, we can let nature take its course and allow small fires to burn through the brush, doing no damage to the forest. In fact, this makes the forest healthier.

SAME THING FOR BANKS - Yes, absolutely. If we let the free market shut down bad banks, we get rid of the dead wood. If we try to save the bad banks . . . as Paulson and the Fed are doing, we eventually will face a wild fire that we cannot control. It is coming, and the more games Paulson plays, the worse the fire.

Fannie and Freddie are perfect examples. Wachovia, Washington Mutual, Corus, Downey, Vineyard, Regions and hundreds of other banks are also in the dead wood pile. Paulson has been very quiet now for a few weeks. Some say he is trying to hold things together until Election Day. Others say he is scheming with his frat boys to pull off yet another financial coup for his boys . . . at the expense of the American public.

The man is dangerous. He has already proven that, but he also has the magic ring . . . and Bush and the Congress and the Senate are all kissing it.

Bear Stearns - Why was there only one institution willing to step up to the plate? Why did Paulson offer $30B of our money? It wasn't because Bear was too big to fail. We must let the dead wood burn off, no matter how painful it is in the short term. What I am hearing now, is JP Morgan was the bank most exposed to the counter side of Bear Stearn AND many of Paulson's Pals would have been wiped out by letting Bear Stearns fail. Whatever the reason, we should have never bailed out Bear Stearns. That should have been the beginning of the burn off of the dead wood. That might have been the critical point to avoid a complete conflagration.

Markets Will Correct - Despite Paulson's manipulation tricks, the markets will correct. When the markets correct, it will be a violent correction, far worse than the mini-corrections we are seeing roll through the markets now. Paulson will win, because he will line the pockets of all of the big boys on Wall Street. Our pension funds and IRAs will be devastated. Our country will spend 15-25 years recovering. We will recover, but the damage Paulson is doing by allowing the prior corruption of Greenspan and his handlers to continue, will be devastating. In closing, I use the word handlers, because Greenspan was not stupid enough or devious enough to come with his mistakes on his own. And since he is not off in a private jet or lounging on his private island, he probably never realized what Paulson and guys like Paulson running the big institutions were puppeteering Greenspan to do . . . or not do.