SOTD: The Primitives - Crash

Seems appropriate today.

Dow[n]

So how does the most liquid stock market in the world drop 200 points in less than one minute? Either they had a technical screwup [*apparently the case] or somebody big wanted out fast. I don't know which is scarier for the market.

With few exceptions, CNBC bubble-heads are currently assuring everyone that this is a good thing, sure to be over in a couple days at worst, a great buying opportunity. The normally semi-sober David Faber just opined that people are "...not panicking, not concerned in any real way." We'll see.

Oh, and is there a bigger idiot on TV than Larry Kudlow?

From Marketwatch

*if you blinked at around 3 p.m. Eastern, you would have missed the knockout punch, as the blue-chip barometer plunged nearly 200 points in an instant. The move was so severe that many believed it was just a computer glitch. "It happened, but it didn't really happen," said Steve Goldman, chief market strategist at Weeden & Co. He said the move was "right" in the fact that the market was down about 500 points, but it was wrong in the size of the index's move at that moment.

A look at an intraday chart of the Dow shows a sudden move from around 12,343-- a 289-point loss on the day -- at 2:58 p.m. Eastern to about 12,165 -- a 467-point loss -- within the next minute. "I believe that stock data was just not being updated in a timely fashion," Goldman said. "When it was, right around 3 p.m., the index just fell."

Joke of the Day

Q. Why are there no Republicans on Star Trek?

A. Because it's set in the future.

— Will Durst

Getting Bin Laden "Not Important" To Bush Administration

Just when you think this administration has sunk to the lowest possible level of deception, incompetence and utter contempt for the American people, they continue to surprise you.

The Army's highest-ranking officer and the former leader of the secretive world of Special Operations offered his thoughts on the importance of capturing or killing Osama bin Laden during a luncheon Friday.

They're probably not what anyone expected.

"I don't know whether we'll find him," said Gen. Peter Schoomaker, the Army chief of staff. "I don't know that it's all that important, frankly."

The Army Chief of Staff, after 2973 Americans were slaughtered on 9/11, and after 370 (and counting) American deaths in Operation Enduring Freedom in Afghanistan, says that finding the guy who ordered the attacks is not important?? This follows Bush's repulsive March 2002 comments:

Q Mr. President, in your speeches now you rarely talk or mention Osama bin Laden. Why is that? Also, can you tell the American people if you have any more information, if you know if he is dead or alive? Final part -- deep in your heart, don't you truly believe that until you find out if he is dead or alive, you won't really eliminate the threat of --

THE PRESIDENT: Deep in my heart I know the man is on the run, if he's alive at all. Who knows if he's hiding in some cave or not; we haven't heard from him in a long time. And the idea of focusing on one person is -- really indicates to me people don't understand the scope of the mission. Terror is bigger than one person. And he's just -- he's a person who's now been marginalized. His network, his host government has been destroyed. He's the ultimate parasite who found weakness, exploited it, and met his match. He is -- as I mentioned in my speech, I do mention the fact that this is a fellow who is willing to commit youngsters to their death and he, himself, tries to hide -- if, in fact, he's hiding at all.

So I don't know where he is. You know, I just don't spend that much time on him, Kelly, to be honest with you. I'm more worried about making sure that our soldiers are well-supplied; that the strategy is clear; that the coalition is strong; that when we find enemy bunched up like we did in Shahikot Mountains, that the military has all the support it needs to go in and do the job, which they did.

Good Lord, where to begin?

"Making sure that our soldiers are well-supplied"? This from a January 25, 2007 Department of Defense report (courtesy of this site):

“…. Based on responses from approximately 1,100 Service members, they experienced shortages of force-protection equipment, such as up-armored vehicles, electronic countermeasure devices, crew-served weapons, and communications equipment. As a result, Service members were not always equipped to effectively complete their missions….

The Request for Forces process did not always ensure that Service members who performed missions that they do not traditionally perform – such as training, provincial reconstruction, detainee operations, and explosive ordinance disposal – received the equipment necessary to perform their wartime mission. As a result, Service members performed missions without the proper equipment, used informal procedures to obtain equipment and sustainment support, and canceled or postponed missions while waiting to receive equipment….

The U.S. Central Command’s and the Army’s internal controls were not adequate….”

Seeing to it that the "strategy is clear"? Yes, it's so clear about 70% of Americans disapprove of the way Bush is handling the Iraq war, which has now lasted longer than World War II with no end in sight.

Making sure "the coalition is strong"? Here's some recent developments involving the "coalition of the willing":

• Lithuania was reported to be considering withdrawing its troop contingent of 53 troops from Iraq.
• On February 21, 2007, Denmark announced that it would withdraw its 460-strong contingent of troops from southern Iraq by August 2007
• On February 21, 2007, British Prime Minister Tony Blair announced that 600 British troops would return home within the next few months, with another 500 to follow by the end of 2007, leaving approximately 5,000 troops on the ground; from a high of approximately 40,000 troops during the major combat operations phase.
  
  

Not to worry, though, as we still have 34 Estonians there (no offense to Estonia).

Sickening.

The Housing Bubble Blog

Great site. This is one of the earliest (and least shrill) chroniclers of the housing-related insanity of the past few years. Tons of great comments and links to relevant housing info from across the nation. Lots of good comments too.

Siome quotes from today...

“Of the first 10 properties on the auction block, Westfall said his two properties drew the highest bids - $215,000 for a 3,000-square-foot home in the golf course community of Heritage Isles; another $215,000 for 56 acres in Riverview.”

“‘That doesn’t make us feel any better,’ he said. Not when the mortgage on the Heritage Isles place is $150,000 more than that. Not when he was looking for $2.5 million on the parcel in Riverview. Westfall, like many other hopeful sellers at the mass auction, didn’t accept the offers.’

...

“‘Buyers are sitting on their hands, and sellers are saying they’re not going to change the price,’ JP King Auction Co. spokesman Carl Carter said. ‘What an auction does is establish a market price.’

Amazing.

SOTD: The Dandy Warhols - We Used To Be Friends

Place Your Bets

A few ways to speculate (i.e., gamble) on the markets from PowerShares . Buying the SKF around 68.75 and SRS around 69.5 (in effect shorting 2x the financial and REIT stocks in the $DJUSFN and $DJUSRE indices) seems like not the worst idea ever.


UPW-Long Utilities 2X
SDP- Short Utilities 2X
REW-Short Tech 2X
ROM-Long Tech 2X
USD-Long Semi 2X
SSG-Short Semi 2X
DIG-Long Oil and Gas industry 2X
DUG-Short Oil and Gas industry 2X
SRS-Short Real Estate 2X
URE-Long Real Estate 2X
SIJ-Short Industrials 2X
UXI-Long Industrials 2X
RXD-Short healthcare 2X
RXL- Long Healthcare 2X
SKF-Short Financial 2X
UYG-Long Financial 2X
SCC-Short Consumer Service 2X
UCC-Long Consumer Service 2X
SZK-Short Consumer Goods 2X
UGE-Long Consumer Goods 2X
SMN-Short Basic Material 2X
UYM-Long Basic Material 2X

$150 Down?

How do you get away with putting $150 down on a $1,064,500 house?



I guess you don't.

There's a lot of people, banks, hedge funds, pension funds, little old ladies etc. holding mortgage-backed securities who simply are never going to be repaid. The money is gone.

SOTD: Shania Twain - Ka-Ching! [Red Main Version]

Great lyrics.

American Idull

Why drag this out? They should just kick off tonight anyone who isn't a black female, because all the dudes and most of the girls are terrible. These are the best? Ugh. These guys make Taylor Hicks almost not look like a total joke (his album is #87 and falling fast, Daughtry is #3).

And Sundance Head? Good grief. Make it stop.

Here's a prediction site.

Go Lakisha!

After looking at the Billboard site, here are some albums worth picking up that are actually popular too....

Norah Jones, Not Too Late (#2)
Robin Thicke, The Evolution of Robin Thicke (#6) [very good soul - kinda like Prince]
Corinne Bailey Rae, ST (#9)

Mortgage Fraud

From OC FlipTrack.

Check out this thread from a mortgage broker message board. Prosecuting these loan officers is going to be too easy.

Q: I need to up this guys assets to fund. Is there any hard money lenders that can lend $50k for 2 months?

A: So what you are saying is you want to commit mortgage fraud?

Is Gold An Inflation Hedge?

Another excellent post from Mish's Global Economic Trend Analysis.


Final Thoughts

Gold in many timeframes is not much of an inflation hedge.
In terms of real price, gold is a better deflation hedge than an inflation hedge. The reasons...

1. Gold is money. Proof of that statement can be found in the market behavior of gold. The markets treat gold as if it was money (not only now but on a historical basis). On that basis gold must be considered money regardless what the central banks say.
2. Money is worth more in terms of other goods and services during periods of deflation. During periods of disinflation "cash is trash" and that helps explain why gold dropped from over 800 to 250 even though we had a positive (although falling) rate of inflation for much of that timeframe.
   
3. Gold is stateless and has no liabilities attached to it. It is the only money that won't be touched by whatever measures the authorities decide to take to combat deflation.

In addition to being a deflation hedge, gold may also play a role in a panic flight to safety scenario. For example: If the US dollar were to suddenly collapse and/or if fiat currencies were totally repudiated in general, gold would be a huge beneficiary.

Given the current underlying conditions, with increasing chances of a deflationary credit implosion related to housing, along with some chances of a collapse in the dollar, Yen, or fiat currencies in general, the incentive to store wealth in the form of gold is massive.

Neighboroo

Cool stuff integrating Google maps with various demographic data.

Turbo Tax Rap

If you want to see Vanilla Ice and other losers rap about tax software, this is the place.

I'm glad to see Intuit is spending their shareholders' money wisely.

SOTD: Lunascape - Your Shadow

SOTD: Drive By Truckers - Feb 14

Used-Home Salesmen

Some very interesting quotes today in an LA Times piece on Inland Empire realtors trying to survive the housing bust (by preying on the same people they got into crazy loans), and insight into how the bust came about. Realtors over the past 5 years have made used-car salesmen look like saints. Here's just a couple of gems...

During the four-year boom that ended last summer, Home Center expanded from 15 agents to 80 in three offices. The roster of agents has since sunk to 52, only about half of whom are active."The rest are looking for side jobs at McDonald's," said Home Center President Jason Bosch. "It happened overnight."

"To make a living, you had to push a product you didn't believe in," said Aimee Quigley, a Home Center mortgage broker. "It was like being a defense attorney where you know your client did it, but you have to say he didn't."

SOTD: Lauren Hoffman - Broken

The Funniest Show On TV

Extras.

SOTD: Zero 7 - Distractions (live)

"Embarrassing", "Catastrophic" and "Disastrous"

From The Independent, big banks always find a way to lose money in a big way, and this time it'll be their mortgage lending (and eventually derivatives) businesses. (Of course, the top executives responsible will still cash out with millions in severance when they leave, and US taxpayers will pay the eventual bill).

"Embarrassing", "catastrophic" and "disastrous" as not words one usually associates with HSBC. But they were being thrown around with wild abandon yesterday as the market woke up to the first profits warning in the 167-year history of Britain's biggest and most prestigious banking group.

The first came from the mouth of an HSBC spokesman; the latter two were used by analysts to describe a truly horrific trading statement in which the company was forced to admit it had got its figures on non-performing loans - bad debts - badly wrong.

While the market had expected provisions of about $8.8bn (£4.5bn) to cover these, the bank was forced to admit it will need to set aside nearer $10.6bn. The reason? The US sub-prime lender, Household.

Everyone knew there was a problem with the business, which offers mortgages and other loans to people whose poor credit histories mean they are shunned by mainstream lenders. The company was forced to admit in December that it was grappling with difficulties at the operation, bought for $15bn in 2003. Some clients were defaulting on second mortgages within just six months of taking them out.

However, it appears that the bank underestimated the scale of the difficulties faced by Household. The biggest problem lies with mortgage books bought from other banks. There is a plethora of small banks in the US and their financing costs are much higher than HSBC's. So, the reasoning went, if HSBC were to buy up these books it would produce a good return because it could finance the acquisitions relatively cheaply.

What it didn't take into account was a fundamental problem with the US housing market. There has been an unprecedented construction boom in the US over the past 15 years. So much so that the Goldman Sachs economist, Jan Hatzius, estimates there are about 1.5 million excess homes in the US.

More good stuff on this from Nouriel Roubini's blog.

SOTD: Filter - One (3 Dog Night)

SOTD: Johnny Cash - Hurt

Is this Treason?

The President of the United States and the Vice President of the United States conspire to leak classified intelligence to reporters, solely to counter the criticism of those questioning any urgent need to invade Iraq. Then they leak the name of an undercover CIA operative in an attempt to discredit her husband who had exposed a few of their lies.

Former White House official I. Lewis "Scooter" Libby told a grand jury in 2004 that Vice President Dick Cheney was upset by an ambassador's public questioning of the Iraq war and that President Bush, Cheney and Libby were involved in a plan — kept secret from other senior White House officials — to leak previously classified intelligence to reporters to counter the criticism.

Libby's audiotape testimony, played for jurors in federal court here, offered new details about how the White House orchestrated a campaign to discredit the Iraq war critic, former envoy Joseph C. Wilson IV. Wilson's wife, undercover CIA operative Valerie Plame, was subsequently exposed in the media, triggering a criminal investigation.

...The tapes offer an intriguing window into the reaction within the White House to mounting criticism of its crumbling case for war with Iraq, as well as a chance to witness Fitzgerald's method as he sparred with Libby during eight hours of grand jury testimony. Libby can be heard describing in a low voice how Cheney was "upset" when Wilson went public with allegations that the White House had twisted intelligence to make the case for war.

In an op-ed article, Wilson said he had been sent to investigate a key claim — that Iraq was seeking uranium from the African nation of Niger — and found it untrue months before Bush included the assertion in his 2003 State of the Union speech.

"It was a serious accusation," Libby said. "It was a very serious attack." It also quickly became a "topic that was discussed on a daily basis" in the White House.

Can you imagine what the Limbaugh's and Hannity's and O'Reilly's of the world would call it if Clinton and Gore had done the same thing? "Treason" comes to mind.

So This Is How Mortgage Fraud Works

From Bubble Markets Inventory Tracking

5 properties, each discovered and purchased by an associate to "The Family." Each then deeded to a member of "The Family." Each of the 5 properties are then sold to another member of "The Family" via non-MLS transactions. Following the "sales," the properties then go through first payment defaults and revert to the lenders as REO's. Along the way, the properties are rented to unsuspecting renters for some rent-skimming. Grand total profit for "The Family" with the 5 properties: $578,200.

The full story is here.

An Exercise in Make-Believe

From the LA Times, Shrub's $2.9 Trillion budget proposes trimming Medicare by $66 billion.

...Bush also called for almost $26 billion in cuts for Medicaid, which provides healthcare for the poor, over the same period.

...Separately, Bush's proposed tax deduction of up to $15,000 for health insurance ran into more problems after an independent analysis concluded that most of the tax break would go to higher-income households that already have private insurance.

Most of the tax break going to higher-income households? What a shock. That's so unlike the Bush administration. Meanwhile....

On the spending side, the administration proposed defense outlays of historic proportions, asking for more than $623 billion for the Pentagon in the budget for the 2008 fiscal year, which runs from October 2007 to the end of September 2008. And for the first time since fighting in Afghanistan and Iraq began, the administration's request included an estimate for the cost of the wars, which totaled $142 billion on top of the Defense Department's normal budget of $481 billion.In addition, the Pentagon asked for $93 billion in war funding this year, which would bring the total war costs for 2007 to more than $163 billion. If both requests were approved, the cumulative cost of both wars would top $687 billion, according to the Pentagon's budget documents — more than the entire cost of the Vietnam War, even adjusted for inflation.

By the way, the $142 billion on top of the $481 billion doesn't include the cost of Bush's planned Iraq troop buildup of 21,500 extra troops. This spending is the result of the attack in 2001 that cost about a half-million dollars to execute. We must be doing something wrong.

Who attacked us on 9/11 again? Was it Saddam? Oh yeah, it wasn't. It was the Saudi-sponsored Al Qaeda. Of course, the Bush family ties to the Saudis (and the Bin Ladens) are extensive and, of course, lucrative. He even holds hands with their princes. Maybe that's why the Saudis have gotten a free pass despite being responsible for the loss of thousands of American lives.

With the Iraqi fiasco, we've spent more than we did on the Vietnam War, taken longer than it took to defeat the Nazis and Japanese, and cost more American lives than the 9/11 attacks. Meanwhile, Saudis are still funding Sunni Al-Qaeda jihadists around the world, the Pakistanis are still sheltering the Taliban and running Madrasas that teach hatred, the Taliban is far from defeated, and Bin Laden is still alive, but hey, we did get the one dictator in the region who didn't support Al Qaeda! Heckuva job Shrub !.

Good thing the Republicans are so strong on "defense". How much longer do we have to endure this?

VOTD: Prince in Super Bowl XLI Half time

Awesome.

SOTD: Handsome Boy Modeling School - Sunshine

SOTD: 3-11 Porter - Surround Me

SOTD: Sukpatch - Out the Window

It will be like the TV show ‘24’

Robert Parry broke many of the Iran-Contra stories in the ’80s for the Associated Press and Newsweek.

Looks like we're going to war with Iran soon.

While congressional Democrats test how far they should go in challenging George W. Bush’s war powers, the time may be running out to stop Bush from ordering a major escalation of the Middle East conflict by attacking Iran.

Military and intelligence sources continue to tell me that preparations are advancing for a war with Iran starting possibly as early as mid-to-late February. The sources offer some differences of opinion over whether Bush might cite a provocation from Iran or whether Israel will take the lead in launching air strikes against Iran’s nuclear facilities.

But there is growing alarm among military and intelligence experts that Bush already has decided to attack and simply is waiting for a second aircraft carrier strike force to arrive in the region – and for a propaganda blitz to stir up some pro-war sentiment at home.

One well-informed U.S. military source called me in a fury after consulting with Pentagon associates and discovering how far along the war preparations are. He said the plans call for extensive aerial attacks on Iran, including use of powerful bunker-busting ordnance.

Another source with a pipeline into Israeli thinking said the Iran war plan has expanded over the past several weeks. Earlier thinking had been that Israeli warplanes would hit Iranian nuclear targets with U.S. forces in reserve in case of Iranian retaliation, but now the strategy anticipates a major U.S. military follow-up to an Israeli attack, the source said.

Both sources used the same word “crazy” in describing the plan to expand the war to Iran. The two sources, like others I have interviewed, said that attacking Iran could touch off a regional – and possibly global – conflagration.

“It will be like the TV show ‘24’,” the American military source said, citing the likelihood of Islamic retaliation reaching directly into the United States.
Though Bush insists that no decision has been made on attacking Iran, he offered similar assurances of his commitment to peace in the months before invading Iraq in 2003. Yet leaked documents from London made clear that he had set a course for war nine months to a year before the Iraq invasion.

In other words, Bush’s statements that he has no plans to "invade" Iran and that he’s still committed to settle differences with Iran over its nuclear program diplomatically should be taken with a grain of salt.

There is, of course, the possibility that the war preparations are a game of chicken to pressure Iran to accept outside controls on its nuclear program and to trim back its regional ambitions. But sometimes such high-stakes gambles lead to miscalculations or set in motion dynamics that can't be controlled.