Larry Kudlow is an Idiot

Just click the link...the title is "The Housing Bears Are Wrong Again."

It's from 2005.

He's still wrong.

Rudy Guliani's Terrorist Ties

Here are some verifiable facts about the clown running for President who's sole platform is any noun, a verb, and "9/11"...

Giuliani's business contracts tie him to the man who let 9/11's mastermind escape the FBI

Three weeks after 9/11, when the roar of fighter jets still haunted the city's skyline, the emir of gas-rich Qatar, Sheikh Hamad bin Khalifah al-Thani, toured Ground Zero. Although a member of the emir's own royal family had harbored the man who would later be identified as the mastermind of the attack—a man named Khalid Sheikh Muhammad, often referred to in intelligence circles by his initials, KSM—al-Thani rushed to New York in its aftermath, offering to make a $3 million donation, principally to the families of its victims. Rudy Giuliani, apparently unaware of what the FBI and CIA had long known about Qatari links to Al Qaeda, appeared on CNN with al-Thani that night and vouched for the emir when Larry King asked the mayor: "You are a friend of his, are you not?"

"We had a very good meeting yesterday. Very good," said Giuliani, adding that he was "very, very grateful" for al-Thani's generosity. It was no cinch, of course, that Giuliani would take the money: A week later, he famously rejected a $10 million donation from a Saudi prince who advised America that it should "adopt a more balanced stand toward the Palestinian cause." (Giuliani continues to congratulate himself for that snub on the campaign trail.) Al-Thani waited a month before expressing essentially the same feelings when he returned to New York for a meeting of the U.N. General Assembly and stressed how important it was to "distinguish" between the "phenomenon" of 9/11 and "the legitimate struggles" of the Palestinians "to get rid of the yoke of illegitimate occupation and subjugation." Al-Thani then accused Israel of "state terrorism" against the Palestinians.

But there was another reason to think twice about accepting al-Thani's generosity that Giuliani had to have been aware of, even as he heaped praise on the emir. Al Jazeera, the Arabic news network based in Qatar (pronounced "Cutter"), had been all but created by al-Thani, who was its largest shareholder. The Bush administration was so upset with the coverage of Osama bin Laden's pronouncements and the U.S. threats to bomb Afghanistan that Secretary of State Colin Powell met the emir just hours before Giuliani's on-air endorsement and asked him to tone down the state-subsidized channel's Islamist footage and rhetoric. The six-foot-eight, 350-pound al-Thani, who was pumping about $30 million a year into Al Jazeera at the time, refused Powell's request, citing the need for "a free and credible media." The administration's burgeoning distaste for what it would later brand "Terror TV" was already so palpable that King—hardly a newsman—asked the emir if he would help "spread the word" that the U.S. was "not targeting the average Afghan citizen." Al-Thani ignored the question—right before Giuliani rushed in to praise him again.

In retrospect, Giuliani's embrace of the emir appears peculiar. But it was only a sign of bigger things to come: the launching of a cozy business relationship with terrorist-tolerant Qatar that is inconsistent with the core message of Giuliani's current presidential campaign, namely that his experience and toughness uniquely equip him to protect America from what he tauntingly calls "Islamic terrorists"—an enemy that he always portrays himself as ready to confront, and the Democrats as ready to accommodate.

The contradictory and stunning reality is that Giuliani Partners, the consulting company that has made Giuliani rich, feasts at the Qatar trough, doing business with the ministry run by the very member of the royal family identified in news and government reports as having concealed KSM—the terrorist mastermind who wired funds from Qatar to his nephew Ramzi Yousef prior to the 1993 bombing of the World Trade Center, and who also sold the idea of a plane attack on the towers to Osama bin Laden—on his Qatar farm in the mid-1990s.

SOTD: Snow Patrol - Somewhere A Clock is Ticking

SOTD: Smashing Pumpkins - The Aeroplane Flies High (Turns Left, Looks Right)

SOTD: Roxy Music - Jealous Guy

SOTD: Texas - Insane (live)

SOTD: Sex Pistols - Pretty Vacant

SOTD: 1990's - You Made Me Like It

SOTD: The Egg - Venice Beach

Larry Kudlow Syndrome (LKS)

It should by now be obvious to all that to still be a Republican like CNBC's Larry Kudlow, you have to, consciously or unconsciously, believe in things that aren't true, or at least pretend to. You have to suspend disbelief (and ignore facts). It's very in vogue among "conservative Republicans" nowadays.

I went to lunch with my insurance agent the other day - a very right-wing, Republican guy.

I mentioned Barack Obama and he told me that Obama doesn't put his hand over his heart during the pledge of allegiance.

I said "huh"? I can't believe that. Did you see him do that?

No, he didn't.

Did you read it or see it on O'Reilly or something?

He couldn't remember, but was comfortable passing it off as fact to whomever he met.

I looked up the rumor on the internet and it is of course false, due to one misleading picture of Obama without his hand over his heart during the national anthem. There are plenty of pictures of Obama on the net having his hand over his heart pledging allegiance. It's a non-issue.

For millions of Americans, though, Obama is a commie who won't pledge allegiance to our flag!

When I emailed him the truth he said "I cannot remember where I read it. In any case, he has enough stuff against him for me to not want anything to do with him." He didn't say what the "stuff" was, but if his "facts" there are as good as the pledge-smear he is delusional.

Same thing when I mentioned Ron Paul.

He's a kook (this is the response I get from all Republicans I mention Ron Paul to).

Kook? Why? Which of his policies do you disagree with?

Um, he's a Nazi.

Huh?

Yeah, he's a Nazi. It's on the internet.

Huh?

Yep.

So I checked that out too. Started when some neo-Nazi donated $500 to Ron Paul's campaign. Obviously Ron Paul is not a Nazi - in fact, he is the most anti-authoritarian, anti-statist, pro-freedom candidate of them all. I sent the facts on this to the guy. No response.

Many Americans want so bad to believe that America never makes mistakes, that we're in Iraq to spread Democracy, that this economy is the "greatest story never told", that the rich pay too much in taxes, that global warming is a myth, that George W. Bush is a great leader, and that all our problems are due to Mexicans and George Soros. We call these people "Republicans".

Sadly, to be a Republican now, after the last six years, is really akin to having a contagious delusional mental illness. I propose we name it after Larry, but Bill O'Reilly Palsy or Rush Limbaugh Disease work too.

Money Market Madness

Lots in the news lately about money-market funds "breaking the buck". GE just hosed holders of an "enhanced" cash fund, offering them out for 96 cents on the dollar. It is stunning that GE didn't just cover the losses themselves to avoid the terrible publicity. Bank of America, Credit Suisse, Wachovia, Legg Mason & SEI Investments are among the firms who have recently coughed up money to prop up their supposedly safe funds!

Could GE know that worse things are coming and are they afraid of setting a precedent?

To help out a friend, I spot checked a major Wall Street firm's "Prime Portfolio" money-market fund's holdings as of their latest semi-annual April 30, 2007 report.

Admittedly this was before the stuff hit the fan, and for all I know this firm has moved all their money out of such risky investments and into gold bars or something. Still, the results should be shocking to anyone who thinks the $1-per-share price is safe.

Here's just a sampling of holdings in this $28.1 billion money-market fund along with comments where I found out information on the debt issuer.


Barton Capital LLC, 52.153 million
one of the conduits run by the French bank [Societe Generale], holds 185 million euros of subprime mortgages in its 10 billion euros of assets. Hey, it's only $185 million euros.

Gemini Capitalization, $104.75 million
Gemini is a multiseller, partially enhanced, asset-backed commercial paper conduit administered by Deutsche Bank AG. Bet that looks good on someone's business card. You think this is the same Deutsche Bank that had 36 foreclosures in a 2-week period in July in Riverside County alone?

Sheffield Receivables, $77.2 million
A Barclay's conduit, Sheffield has 21 per cent of its assets invested in mortgage securities - the single biggest asset class in which it invests. The conduit has halved its exposure to MBS in the past two months. In July it was 44 per cent invested in mortgage backed paper. They're shrinking in the right direction!

Three Rivers Funding,$262.776 million
Backed by Mellon Bank. Need I say more?

Atlantis One Funding, $344.252 Million
a Dutch "Rabobank" conduit...I think they loan money to create "Robocops".

Buckingham CDO, $275.577 million
40% subprime collateral?? No Enron stock to pledge instead?

Citius Funding (I and II), $418.936 million
CDO's; "Moody's…s Takes Neg Action on Citius II Funding, Ltd. New York" 11-7-07...way to close the barn door after the horse left, Moody's.

Davis Square Funding, $871.5 million
CDO funding structure. The funding vehicles issued notes and commercial paper secured on a portfolio of commercial mortgage backed securities, residential mortgage backed securities, CDO securities, insured securities, asset backed securities, REIT debt securities, interest only securities and synthetic securities. Somebody make a boatload of fees setting this thing up.

Kaiserplatz Funding, $1.389 BILLION
European ABCP conduit from Commerzbank. Apparently can't spell.

Klio Funding Corp, $157.997 million
Nonpublic trustee reports reviewed by BusinessWeek for two Citi-backed CDOs also offer a rare glimpse into the underlying assets of such portfolios. A close look at the holdings for KLIO II Funding and KLIO III—two CDOs that were run by Bear Stearns—shows that about 40% of their portfolios were invested in securities backed by subprime mortgages. These assets, and KLIO stakes in other CDOs such as Knollwood, Porter Square I, and Commodore II, could be ripe for downgrades in the future. Complicating matters, the two Bear Stearn hedge funds traded securities with at least one of the KLIO CDOs. Now, Citi may have to fight with creditors of the bankrupt Bear hedge funds over the CDOs' assets—just one more cloud over Citi's holdings. Nothing says safety like "run by Bear Stearns".

Liberty Harbor II CDO LLC, $130.797 million
It's a CDO, which is bad, but it has the name 'Liberty' in it, which is good.

Nieuw Amsterdam Receivables Corp. $369.238 million (Rabobank)
ABCP Conduit. A conduit is a new way for banks to lose money.

North Sea Funding, $13.151 million
ABN Ambro arbitrage conduit. Arbitrage is a way for the banks to lose more money.

Pasa Funding $290.905 million
Who knows..might have extensive beanie baby collection or something of value.

Simba Funding, $100 million
ING Bank Conduit. Invests in White Lions.

Variable Funding Co, $100 million
You're guess is as good as mine.

Atlantic Asset Securitization, $235.986 million
They must be in some sort of securitization of assets or something. Maybe near the Atlantic.

Falcon Asset Securitization, $249.872 million
I like falcons.

Jupiter Securitization, $83.469 million
$30 billion ABCP program sponsored by JPM. I wonder if that's like an AA sponsor?

Amstel Funding, $587.563 million
ABN Ambro's largest Multiseller USD ABCP program, rated by S&P (as of Q107) at $36bn of exposure. Exposure is the operative word here...$36bn is the operative abbreviation.

Beta Finance, $130 million
SIV, which I think is monkey AIDs.

This stuff is PRIME?

If your steak was the same "Prime" quality it'd be loaded with maggots.

There's no way that this sort of crap can be considered 100% safe. That's why they have the disclaimer, which no one reads, for money-market funds that says:

An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

I think anybody with a significant amount of money in a money-market fund that holds such junk is taking far too big a risk for some extra yield. These ain't US Treasury Bills folks.

Speaking of Treasuries, I compared this same firm's Treasury Money-Market Fund with Vanguard's. Vanguard's Treasury Fund was 99.9% invested in actual US Treasury Bills. The other firm's Treasury fund was .9% (yep, not a typo) invested in actual US Treasury Bills. The other 99.1%? In repurchase agreements with Wall Street firm's collateralized mostly by US Treasury NOTES. Now I'm not sure what the ramifications would be for the fund if one of those firms went belly up and they had to sell the Treasury notes...seems to be there could at least be a significant interest-rate risk there, but I'm not as smart as the guys who set up these deals. These are the same Wall Street firms that are taking $10 billion writeoffs like clockwork and letting their CEOs go with nice $300 million pay packages. You trust them? I don't.

In the end, a money-market fund is no safer than the assets it's invested in, and a lot of money-market funds are invested in mortgage and other garbage.

SOTD: Rocky Votolato - Portland is Leaving

Orange County, CA Trustee Sales

The Diamond Bar CA Real Estate Site has graciously made available foreclosure listings for Southern California counties.

For Orange County, the Foreclosure Detail Reports posted for the first two weeks of November (which actually deal with foreclosures recorded mostly in mid-July 2007) have 474 foreclosures listed.

Highlights broken down by beneficiary and number of foreclosures:

• Countrywide Home Loans 64 (13.5%)
• Washington Mutual 33 (7%)
• Chase Home Finance 30
• Deutsche Bank 25
• HSBC Bank 22
• US Bank 20
• EMC Mortgage (subsidiary of Bear Stearns) 19
• Saxon Mortgage 18
• Option One 13
• ...
• Wells Fargo 10
• Fremont 9
• Indymac 4
• Downey Savings 3
• GMAC 2
• Bank of America 2

Other bagholders were servicers such as Litton Loan Servicing (27) and Executive Trustee Services (26).

For Riverside County during the same short period back in July, here were the major "beneficiaries" of the Trustee Sales (804 total):

Countrywide 103 (12.8%)
WaMu 40
Option One 38
EMC 37
Deutsche Bank 36
Chase 29
HSBC 27
US Bank 20
Wells Fargo 14
Fremont 14
Downey Savings 6

Same group of smart lenders it seems. Option One apparently likes the inland empire more than the OC. As for EMC, no wonder Bear Stearns is in trouble. And with all that garbage in Chase's portfolio, maybe JPM is a good short sale.

Best Explanation of How Wall Street Works

And this explains the Iraq fiasco...

Bird and Fortune on Iraq and Oil

SOTD: Hound Dog Taylor - I Held My Baby

SOTD: The Jayhawks - Blue

The Pixies - Where Is My Mind?

Democratic Landslide Coming in 2008

Sample quote: "I used to consider myself a Republican, but now I consider myself an independent."

Accounting for Dummies

General Motors is taking is taking a $39 billion charge, even though that's about twice as much as GM's entire market capitalization, but it's ok because it's "non-cash".

In related news, what's the worst possible business to be in today? I mean besides "Bush-Administration apologist"? How about mortgage insurer?

Bob Pisani is an Idiot

I knew I saved this article from February 13 for a reason....

Here's CNBS Cheerleader Pisani, from a piece entitled "The Bears are wrong. Here's why":

"There is considerable anxiety about this brave new world. Traders, unused to such expansions, have been playing out "left-field disturbances" that might upset this apple cart. They include:

1) Some meltdown in an emerging markets that will create panic. The recent political debacle in Thailand was thought to be the perfect scenario by the bears; but something funny happened: it was contained, and no one panicked. A recent drop in commodities also caused a brief, 10% drop in the Russian stocks market, but again: no one panicked. Traders are exhibiting discipline and patience they never exhibited in international trading.

Why is this panic not happening? a) a tidal wave of liquidity means more money is invested in global markets than ever before; b) more sophisticated investors who see the global expansion as a long-term event and feel it would be foolish to quickly leave markets like Russia, Brazil, India and China.

The two other major bogeymen:

2) Anxiety about derivatives--the trillions of dollars in derivatives globally is a favorite bogeyman, but risk is spread out so widely that nothing close to a meltdown has occured.

3) The complete collapse of the "real estate bubble". Another favorite of the bears. Here's the problem: none of the "classic" elements of a real estate collapse are present. Historically, the real estate market falls apart when three things happen:

a) the economy weakens notably, b) liquidity is withdrawn, c) supply overwhelms the market.

None of this is happening. The economy has made a soft landing, there is no withdrawal of money to buy and sell commercial real estate ($40 billion from Blackstone to buy Equity Office? Please!), and supply of offices, malls and apartments are certainly not overwhelming the market.

As for the fluttering over the collapse of some subprime residential mortgage lenders - this is a natural result of too much liquidity, when brokers competing for business make loans to people they should not under terms they normally would never offer.

Welcome to the murky world of subprime lending. It is neither surprising nor unprecedented, and it has so far been completely contained. It has not spread to the prime mortgage business.

The bears claim that this is the "canary in the coalmine" that will bring down everything. They don't understand the conditions under which real estate markets collapse, and these conditions are not present.

Keep an eye on the big picture. If this continues, we are in an historic time. There will be books written about this period in the next decade."

Wow, if that isn't a bell ringing at the top I don't know what is. There'll probably also be books written about how the CNBC infomercial-hosts, I mean "reporters" (with a few exceptions like Rick Santelli) missed the forest for the trees.

Headlines

Median Los Angeles Housing Prices.
Washington Mutual circling the drain.
Worst ahead for subprime mess.
CitiEnronGroup's latest 10-Q.
The long bull market in Government Employment in California might be over.
US Dollar hits all-time low.
Another Credit Union fails.
Did Cleveland have a housing bubble too?
IndyMac cuts dividend, loses money...
Commercial real-estate is next. Really.
Inventions of the year.
Flip that house.
Is CitiEnronGroup solvent? Don't worry, the insiders unloaded their shares.
The French are at it again.
Five things you need to know today.
California real-estate never goes down, right?
Got gold? Oil?

CitiEnronGroup

Via Calculated Risk, Citigroup (which just fired, I mean let resign, their CEO) not only wrote off an additional $8-12 billion (what's a $4 billion range? a rounding error?), but have $134.8 Billion in "Level 3" assets, which are defined as:

Level 3—Model derived valuations in which one or more significant inputs or significant value drivers are unobservable.

In other words, Citibank has $134.8 billion in "assets" that are as easily valued as a collection of baseball cards.

SOTD: Reverend Horton Heat- One Time For Me

SOTD: Azure Ray - Rest Your Eyes

Miscellany

If you don't like the way profit is privatized and losses socialized in this country, sign this petition.

Goldman Sachs? Cheating?! Shocking.

Hey, a trendy shoe company stock down 30% today..feels like 2000.

10,000 more to be fired at Chrysler. I guess Nardelli needs more money.

Citibank getting a well-deserved tanking. Citibank just announced they will stop home mortgage lending in California! Foreclosures are soaring. Bookmark this site now for future use.

Thank God there's no inflation. (Seriously, "the government also reported that inflation for GDP purposes in the 3rd quarter was ... 0.77% annualized". Of course oil is up 50% this year with similar increases in food and tuition and taxes and utilities and insurance, but hey, housing prices are dropping!).

Another mortgage lender bites the dust.

Here's an educational five minutes.

Great band.

Good mashup links here.

Weird fascinating stuff.