Gee, you think "its all priced in" eh?

"The S&P 500 is valued at 13.7 times estimated earnings, the least compared with reported profits since 1990, according to Bloomberg and S&P data. The ratio is based on analysts' forecasts that show companies in the S&P 500 will earn a total of $99.67 a share in 2008, brokerage data compiled by Bloomberg show. That's more than the $87.72 a share S&P 500 companies earned in 2006 and would be the highest profit on record, data from S&P showed.

.....

Even with the decline, analysts' recommendations to 'buy' or 'hold' U.S. shares climbed to 94.5 percent, the highest rate in more than five years.

.....

The last time analysts lost this much credibility with investors was in 2002. That's when Wall Street agreed to pay $1.4 billion in fines and restitution after investigators found that analysts were distorting research during the dotcom bubble in the late 1990s to gain investment-banking business from companies."

Into a recession. Yeah, ok.

You want to know why the market indices are levitating, you need only look to those statistics.

We see some discussion of it, such as in that Bloomberg article (and my blog for oh, the last two quarters) but the estimates don't seem to change and neither do people's expectations.

The better question is why we keep having this happen when the economy turns down, and whether we should have some sort of regulatory response.

Its difficult to argue for regulation here, as you immediately run into the problem of free speech and the right to one's opinion, but its also difficult to sit here and listen to people shoot off their mouth like this without any sort of foundation in reality, and yet without any sort of accountability being applied.

Perhaps, however, there is a means to separate out the First Amendment concerns from these "opinions." See, these "opinions" come from analysts that work for investment and commercial banks with brokerage components - pieces of their business who are hellbent for leather on you purchasing shares in these firms.

There may lie the necessary lever to force reality into the marketplace and these so-called "estimates", as it appears to this blogger to be trivially easy to show that these "estimates" are in fact intentionally misleading, and once you cross the Rubicon into the category of "fraud" all bets and so-called "protections" disappear.

Of course we have orgasmic responses from CNBS "news anchors". Wait - news anchors having orgasms on the trading floor? I thought the purpose of reporting was to, well, report in a dispassionate fashion. Guess not when it comes to these folks.

So if this is not entertainment TV, and not News TV, what is it? Hmmmm... and is that fairly represented? One wonders whether we need a regulatory reponse there too!

In company-specific news Washington Mutual (NYSE: WM) is negotiating for a $5 billion investment from a private equity group TPG Inc. This of course was good for a premarket pop of 16%, even though such an investment, if it were to take place, would result in an insane amount of dilution to existing shareholders - perhaps as much as 50%! This is cause for celebration? On what planet are these people living?

One also has to ask - did (or can) TPG get a fair look at WaMu's books and determine their exposure? I've been ranting about these clowns since last spring when it first became apparent that they were paying dividends that totalled more than their cash income, pumping their results with capitalized interest from negative-amortization loans! Concentrated in California. In a declining housing market with home values falling. Yeah.

Then there's Institutional Risk Analytics - an actual news article! And what's the topic? "A Global House Of Cards"?! What's the concept being put forth? What I've been talking about for quite some time - the fact that all these OTC derivative contracts are insanely unstable and threatening to blow the lid off our entire financial industry, while Rome (Washington) Fiddles away. Specifically, they blow the lid off what Fannie is doing with their OFHEO "loosening of standards" - that is, entering the unsecured consumer loan market!

"Rosner: FNM has announced that they will give a $15,000 loan to borrowers with negative equity so that they can pay down some of their principal balance and therefore refinance into a new mortgage. First of all, this loan is not secured by the property but rather by the personal guarantee of the borrower."

Yep. There you have it, risk layered upon risk layered upon risk. Cute.

It is absolutely asinine to add additional risk exposure into an economic downturn.

Yet this is the prescription that Congress ALWAYS writes and fills as people holler louder and louder for more bailouts and more largesse off the public tit.

In the short term, of course, the stock market rallies on these events.

Why?

ALL of the losses from contraction in home prices will be forced onto the back of the American Taxpayer, certainly extending to the $2 trillion in economic losses and perhaps extending as far as the $10 Trillion in home value contraction that is certain to come over the next few years.

CONGRESS HAS THUS FAR ALLOWED THIS FOOLISHNESS, HOLDING A SHAM HEARING IN WHICH THEY EFFECTIVELY RATIFIED THESE ACTS!

Let me be clear - if you listened to Bernanke and Kennedy's exchange what is going on here should be clear - The Fed Chair is not going to offer an opinion on Congressional action, because if he does he will get blamed WHEN, not IF, it turns on him.

Consider this folks - Kennedy is arguably the most powerful Senator on The Hill. What Kennedy wants, he gets - period.

Now consider how you would comport yourself during that line of questioning if your intention was to goad Kennedy into taking the as much as possible of the $10 trillion in lost home values onto the public balance sheet, but you absolutely must not be able to be blamed for the act when - not if - it happens and the inevitable consequences come.

Tell me you'd handle yourself any differently than what Bernanke did.

Good luck.

Bernanke played Kennedy like a Stradavarius!

And make no mistake folks - Bernanke knows what Congress will do, because Congress learns NOTHING from their past mistakes. The 1991 document submitted into testimony when they were debating the dismantling of Glass-Steagall makes this clear.

The Fed sat through the actions of Congress in the 1930s when we had the last Depression and they will sit through this one too.

Bernanke will nod and say nothing while Congress causes, through malfeasance and misfeasance, a bond market collapse!

Deflationary credit collapses are how all the real assets are transferred from you, the people - rich, poor or middle-class - to the bankers and their buddies, because YOU WILL BE UNABLE TO MEET YOUR DEBT SERVICE while the value of the currency will actually RISE.

While The Fed will not "cause" this they will also not caution Congress against the actions that will lead to it, including allowing them to transfer liabilities to the public balance sheet "for systemic stability."

WHEN, not if, this results in a bond market dislocation the result will be economic chaos just as it was in the 1930s.

Folks, you need to pay attention to this and get off your duffs. The danger here is far more acute and serious than you think in that we are at grave risk. The danger lies in the below graph that illustrates what our national debt will look like if YOU do not IMMEDIATELY act to stop it:



You think this won't produce a bond-market dislocation eh?

IT DID THE LAST TIME AND IT WILL AGAIN.

Let me remind people that the '29 stock market crash didn't cause The Depression.

The Depression, contrary to popular belief, was caused by a collapse in the bond market, which resulted when The Government attempted to step in and prevent the correction in asset prices that was taking place as the speculative air came out of the bubbles blown in the '20s. The bond market collapse caused an instantaneous ramp in borrowing costs which shut off the flow of capital at the precise time that market participants NEEDED access.

The Fed does not set interest rates and those who claim that The Fed "erred" in '29 are either lying or simply wrong.

The Federal Reserve existed in the 1930s and it sat back on its hands, after "pointing the way" and silently allowed Congress to engineer The Depression - an economic dislocation they wanted to happen as it allowed the bankers to steal the wealth and property of Americans for themselves!

America was set up in the 1930s and now it is happening again because all of the people who were involved in it the last time are DEAD.

Dead men tell no tales!

Contrary to Bernanke's public statements of his intent to counteract a "deflation" The Fed is actually on-balance draining dollars out of the system through outright sales of treasuries in its portfolio. This is all available from public data posted on The NY Fed's web page.

Bernanke said The Fed will "print" to avoid a deflation but in fact The Fed cannot "print" - Treasury has to print, and so far, Treasury hasn't, refunding but not materially changing the total debt outstanding (and by the way its smart for them to re-fund when you've got nice low rates too, especially if you don't think they'll be low for long!)

Notice that while Ben published his "research papers" you have not heard him say in a Congressional hearing that he will "print" his way out of a deflation, because were he to lie under oath in such a fashion he would be hung out to dry when the truth becomes apparent.

Instead he will say "I didn't know it would happen" after the fact just like he did about the housing mess in the first place (along with Greenspan) even though it is a documented FACT that all were WARNED in 1991 - ten years before the bubble happened.

Your standard of living is under attack and irrespective of whether you are rich or poor, you cannot afford to ignore this.

THERE IS NO ECONOMIC STRATA THAT WILL ESCAPE WHAT IS TO COME.

Einstein once said that "One definition of insanity is repeating the same actions over and over again yet expecting a different result."

Either Americans speak up right here and now and tell their Congressfolk that we will not tolerate the attempt to place ANY of these losses on the public balance sheet OR we are at a real risk of a re-run of the 1930s.

As the pigs of both Wall and Main Streets line up at the trough and demand their slop while the farmer walks out with the buckets full to the brim of public money, time is running out.

Once the dislocation occurs in the bond market there is no longer an opportunity to stop what will be served up upon us. That dislocation could come at any time, it will come without warning, and it WILL occur when the bond market discerns that Congress is going to monetize the losses.

We cannot listen to election-year promises that will simply turn into more public spending - we need solid action - right now - from our lawmakers to stop this crap.

These Senators have received millions in campaign contributions from the fine folks on Wall Street and they are following their "playbook" to a "T". Yet none of these firms can vote.

THE SENATE IS WORKING FOR THEM, NOT YOU, AND WILL CONTINUE TO DO SO UNTIL AND UNLESS YOU FLOOD THE CAPITOL HILL SWITCHBOARD AND TELL THEM YOU ARE ON TO THEIR GAME AND WILL NOT PERMIT IT TO CONTINUE, AND WILL EXERCISE YOUR AUTHORITY TO REMOVE THEM AT THE BALLOT BOX COME NOVEMBER UNLESS THEY STOP IT NOW.

You have been warned repeatedly and if you choose not to listen I do not want to hear "we never saw it coming" when the expected result occurs. This is PRECISELY the same load of crap and the same line of action that Congress took following the 1929 market crash and following '29 The Fed sat back and watched with smug smiles while Congress set in motion their plan to literally rob the public blind!

Congress and Bernanke said the same thing in those hearings about the housing bubble and the credit market dislocation being "unforseen", yet as I documented in this video presentation they were explicitly warned in 1991 that this mess would - not might - would - occur. That warning came from two people who were involved in the forensic evaluation of the S&L collapse!

Both Bernanke and Congress have repeatedly lied to you about "not knowing" this would happen - they were in fact warned in bold black print and I believe they wanted it to happen.

Wake up America - YOU ARE BEING LIED TO (AGAIN) AND THE ENTIRETY OF YOUR WEALTH IS ABOUT TO BE STOLEN WITH YOUR EXPLICIT CONSENT AND IN FACT AT YOUR DEMAND!

If you prefer to watch some of this in video (I know America is a "TV" generation), here 'ya go!



Before you say "oh they won't do that", here's the first $300 billion to tack on the debt:

"AUTHORITY- The Corporation may issue bonds in an aggregate amount not to exceed $300,000,000,000, which may be sold by the Corporation to obtain funds for carrying out the purposes of this Act, or exchanged as hereinafter provided."

I hate it when I'm right.