Archive for November, 2008

“Negative Redlining” – marketing disproportionately to minorities – is the accusation being made against two of three leading Wall Street “ratings agencies”.  Ratings agencies, like Moody’s, S&P, and Fitch, are hired by bond issuers to rate a bond, i.e. to quantify the likelihood of the bond not being repaid, and thus give it a letter grade.  Because ratings agencies are paid by the issuers to do the rating, they are absolutely not independent of the process.  They obtain the information they use from the issuer and the higher the rating, the greater the profit to all Wall Street parties involved in the issuance.

The National Community Reinvestment Coalition in their legal complaint alleges that Moody’s and Fitch knew that the mortgages were designed to fail, though the rating issued did not reflect this.  The complaint indicates that Moody’s and Fitch knew that the payment terms were unfair and that the borrowers’ income levels were too low to support the expected future payments.

In my humble opinion, there are many parties to blame.  The ratings agencies have the deepest pockets, so the attorneys have started there.  If my memory serves, mortgage brokers and their agencies are regulated at the respective state level.  Mortgage products, thus, are also regulated at the state level, either directly or indirectly.  Thus, where were the government agencies with the responsibility?   Those issuing the mortgages should have been at risk too, with their own capital on the line.  The underwriters, in agreeing to represent the sale of the securitizations, should have a legal responsibility also.  The list is a lot longer than this one paragraph……

Who is ultimately responsible in the world of Sir Paulson, Sagely Bernacke, and Mz Nancy Pelosi?  The American Citizens!!!!!!!!!!!!!!  You and me and my mother and our cousins, our elementary school teacher and our doctors, etc.  are responsible.  It is now our problem.  I forget if this is the definition of democracy???? It is definitely not the definition of capitalism………………………

Share your thoughts…. What happens tomorrow is always dependent on what happens today…

Share the word, share your knowledge.  Help save America for its citizens.

It is a certaintly that as the economy settles lower and lower and the Red Plague spreads, the crime rates and rates of thefts and scams will skyrocket further!  Unfortunately, it is only human nature based on Maslow’s documented Hierarchy of Needs.

We all must be judicious for ourselves, our neighbors and our families.  Many scams will look and smell sweet, seem innocent and be presented by apparently trustworthy souls.  Caution is the watchword.

The tales of woe I hear generated from folks in the jaws of foreclosure and bankruptcy are heartwrenching.  Tales generally go something like this: Scammer will buy your house and then promise to payoff the mortgages.  Sounds great.  Unfortunately, they do take title to the victim’s house but they do not pay off the outstanding mortgages.  Thus, the poor victim has gone from a bad situation to a worse situation!

Other similar scams have to do with putting money up first, for the “lender” to assist!

I have heard that no, I repeat NO real foreclosure counselors (if they are real) will take money upfront.  (Take a look at the resources pages on    )

Also scams are becoming common place with annuities being sold door to door, by unprofessional scammers.  They can have the victim complete paperwork to make an investment or move an existing annuity investment, and the scammer can then change paperwork to benefit themselves or another party, rather than the investor.

Simple steps to take to help guard against getting ripped off include:

  • Do not make investments into annuities or stocks, etc. with a cash payment.  Always make the payment with a check and be sure to receive a detailed receipt.
  • Only deal with an advisor who works out of an established office.  It is too easy to rent an office for a day or to no have an office at all, to make fake cards, and to scram with the money….
  • Ensure you receive a copy of your annuity contract, statements, confirmations, etc. on a timely manner, direct from the insurance company or main office of the investment company.  (We have all heard too many stories of advisors printing statements on their PCs and printers!)
  • Always read statements and notices received.  Follow up immediately if it seems a payment has not been received or something is not clear.   Make sure you get good answers for your questions.
  • Keep copies of all paperwork.
  • Do not sign blank forms.
  • All insurance companies and investment companies have compliance offices and fraud offices.  If you suspect anything, call immediately.

Be judicious and cautious.  You have worked too hard for your money to give it away to a stranger, against your will.

Feel free to share your stories or comments!!!

This past short week was remarkable. The Government, lead by General Paulson, promised to cover more than $300 billion of liabilities of Citigroup. Thus, once again, demonstrating that those controlling America’s money, are protected from their own stupidity and risky behavior. Those who had bought C stock last Friday almost doubled their money by betting on Paulson. After he screwed Lehman bondholders and the buyers of the Fannie and Freddie preferred shares, this guru is being smart by not trusting in the benevolence of irrational leadership!!!

General Paulson on Tuesday announced an $800 Billion plan to add capital to the consumer finance markets, student loans, auto loans and small businesses. Once again, it only benefits those finance companies that took risk during the economic expansion, who are looking for someone to buy assets they no longer wish to own!! Sir Paulson’s rational was that by selling these assets, these financiers will begin to lend again. Most others, including this humble writer, believe that they will behave like the banks under TARP. They will take the money, and not take any risks with it. They will hold it, or use it for bonuses, or to buy companies of friends, or buy Treasury bills and bonds, or FDIC guaranteed issuances from other financial institutions.

To assume they would use this money for lending, would be like the Sir Paulson’s team buying a home on the verge of foreclosure, and assuming that the seller would take the proceeds and use it to buy a new real estate investment.

President Elect Obama has promised new spending and infrastructure projects to jump start the economy. I do not know any bridge builders, airport construction workers , or road builders, so I do not know anyone who will benefit directly. Hopefully , those wearing ties to work, and those in the manufacturing sector will benefit as well.

In these times, with all the volatility, risks, threats and uncertainty, we must all stop and say THANKS for all the good we have, for our families and friends, for health and our prosperity, irregardless of how limited it may seem at the moment!!!!

Give Thanks, have faith, and strive to make the world better, without taking unneeded risks.

Have a great day!!!!

Excluding the rally in the last hour on Friday that drove the markets up by 4-5%, the past week was dismal and full of horrific news, statistics and activity.

We saw that the beautiful morphing of Sir Paulson’s plan into a help any entity that could form a nationally chartered bank or buy an existing bank.  He has protected large conglomerates, GE, Goldman Sachs, Insurance Companies, and numerous others, but he let Congress send Detroit pied pipers home (via individual private jets) with responses that absolutely did not sound like yes.  If American cars were made in California, I bet the response would have been different.  (But don’t get me started on Mz. Nancy….)

While Detroit burned, folks at Citi started jumping from the roof and windows, those that still had jobs and company stock.  As the price per share stumbled to $3.10, it looked like the world was going to end.  Did it?  Will it? We will find out soon, or not so soon……

The government closed and took over more banks this past week than they have any other week!!!!

Based on a very informal survey of professional New Yorkers, it seems that unemployment in the Big Apple will be skyrocketing, if the unemployed actually go and claim unemployment compensation.  How much do you get if you are laid off from a $300,000 job????   Somebody let me know….

Folks in our town started to celebrate when they started to be able to buy gas at less than $2 per gallon.  They got more excited when food prices started to fall and when turkey went on sale for less than $1 per pound.  They then realized that unemployment is at 16 year highs and only beginning to move higher.  That labor prices also follow the basics of economics pricing, based on supply and demand.  They heard about the government workers in some towns and cities taking a 15% pay cut to help balance the budget and looked at their friends who are paid not based on hours worked but on values of production or levels of sales, etc.   They then realized that incomes in general have started to go down.  They realized that if their income does not go down, likely their neighbors’ will, or their spouse or brother of cousin, etc….

People are beginning to realize (if they have not already) that the economic future of tomorrow is highly uncertain.  This is a mindset we have not seen in the US since the 30’s.

Let me tell you the story of a society without any hope for economic future…..  In the mid 1990’s I was blessed to have the opportunity to work in the countries of the former Yugoslavia’s.  This was a region going through war, economic upheaval, hyper inflation, supply shortages, complete non-existence of credit, and barriers to trade and travel.  It was amazing how families, with no incomes, and needs of food, drugs, etc. would “find” money.  The economy went from controlled behind the cash registers and through the payment systems, to cash, to barter, to personal exchanges.  People congregated on corners, not to socialize in the sense that we know, but to problem solve for themselves and their families.

Between the hyper inflation, which caused each unit of curreny they had saved to become worthless, and the bankruptcy of their banks, people literally and figuarively had nothing but a pot or ceramic basin to piss in….  College students went to school, because it was free and they could get financial support from the government, but they had not hope for the future.  They did not understand what it meant to work hard, get promoted, accomplish something, get financially rewarded and “move forward”.

Our children can face this risk of the lack of motivation.  They can get stymied by the layoffs and economic losses of those around them.  They can get stuck and just live for the day…. and not save and build for tomorrow…    This is a major risk.

What will happen to our childrens’ vision of tomorrow if our confidence in the economic system becomes trashed?????????? Share your thoughts……

Thankfully loan modifications are up!! Unfortunately there are no golden standards.  Luck and who the servicing agent is plays a tremendous role in how the modifications are made and what they are based on.

I encouragage readers to comment or link to relevant blogs addressing ways to modify loans and helpful hints, etc….

Popular modification options include:

  • Lower rates
  • Reduction in principal amounts
  • Models to reduce payments to 28% of total annual income
  • Reducing principal payments but maintaining the total amount owed so banks do not need to take losses on a temporary decline in the house value now.

Remember, the government and the banks want you to stay in your home.  In foreclosure they lose a lot more money.  Thus, now, they are trying to avoid foreclosure.  They want the houses lived in, maintained, and ideally sold at a later date when values have recovered (which they will, it is just a question of when.)

If you are facing a modification or foreclosure situation, let us know.  Share your experiences.  We will also share with you our latest news and findings.  I encourage you to use local resources, like your Legal Aid office, Chamber of Commerce, and any of the hundreds of task forces which have emerged around the country.

Investor groups are forming to assist homeowners and relieve the banks of assets they do not want.  The potential returns are modelled to be 8-10% per year plus significant potential profits on the monetizing of the interest in the property five years out. Reach out to me at if you have an interest in learning more.

As always, share your ideas, thoughts and experiences.

The WSJ yesterday highlighted changes in credit card terms that I have been speaking of for weeks.  Terms are getting very difficult for the typical user of credit.

The following summarizes some of the changes highlighted.

American Express: Raising rates and fees for advances, purchases, late payments and defaults.

Bank of America: Lowing credit lines and closing accounts with $0 balances.  Repricing individual accounts.

Capital One: Changing its minimum payment calculations, resulting in increased minimum payments required.  Raising rates.

Chase: Raising rates and fees.  Raising minimum payments from 2% to 5% on some customers, adding a $10 monthly service fee on some accounts.

Citi: Raising rates on select customers.

Discover: Removing the cap on balance transfer fees.

Bottom line:  Credit is getting more expensive, more restrictive, and more punitive for usage!

Buyer and friends beware!

If you know of any good alternatives, please share them as a comment!!!! Thanks.

Today, while Paulson and Bernacke were defending themselves and their actions, while Congress dickered about with leaders of the Detroit Three, Wall Street continues its persuit of gravity as the primary driver!!!!!!

Even with the billions being pumped into America’s banks, the 2 trillion dollars of injected liquidity, the stock and bond markets are telling us that these efforts will fail!  Citi Group and Bank of America led the decline.  Why?  Because investors believe that they can and will go lower.  That their problems are beginning, rather than ending.  That things will only get worse!!!!!!!!!! Wow, worse?

Defaults on consumer credit are just beginning.  Credit balancing (moving $ from one source to another) is now exhausted. No new credit is being issued. Existing credit is being reduced.  Interest rates charged are jumping to the hi 20’s to 30’s, with limited notice to the borrowers!!! Thus, unless they pay off the balances, the interest charges will continue to grow exponentially!!!!   If new cash flow, profits, etc. can not pay down the balances, and the balances grow exponentially (which we are already seeing), the only outcome will be massive defaults.

With structural changes being implemented by the banking system.  With credit in full crises, mass defaults and bankruptcies is the only out come.

I hope I am wrong.   Please tell me what I am missing….. Leave a comment.

Currently, mortgages are traded between banks and financial institutions like (as) securities, generally in large bundles, but still traded.  The current market prices that these trades are taking place at is currently between $0.18 per $1.00 of face loan amount and $0.28 per $1.00.  But yet, if I or you wanted to pay off the mortgage, we would have to pay the face loan amount plus interest.

Here is the BETTER IDEA.  Let the mortgagees (the homeowners) buy back the mortgage at the current market price of the mortgage. Let them buy the mortgage at 18 to 28 cents per dollar of loan amount.  They can thus cancel the loan that the now owe to themselves and they can then refinance that amount with a full recourse loan, rather than a non-recourse loan, or maybe even a loan guaranteed by Uncle Sam.  This would keep people in their homes, allow a fair playing field, and help the banks monetize their balance sheets.

There are several countries that have programs like this (no I am not a genius) and none of them are facing the situation like the great US of A is facing today.  We must use the markets to solve the problem and this does exactly that!

Spread the word!!!  Let me know what you think….

Six months ago the world was facing a tremndous threat of global inflation.  So much so, the EU Central Bank, in their wisdom, raised their Interest Rate for all of Europe!  This, at the same time, was when the US had already cut rates substantially to abate the market’s collapse.

With the global economy collapsing, demand for raw materials to finished goods has fallen flat.  The basic equation of price being set at the intersection of the supply curve and the demand curve has produced current prices. Demand dropped, supply increased and prices generally have plummeted.  Risk aversion in the markets (whether currency, commodities, securities, energy or eggs) has increased drastically.  Values per unit can change by 2-10% in any given day, either following the direction from the prior trading session or setting a new direction.  Thus, the number of players in these markets have declined.  Too much inventory is spead throughout the supply chain, with each sector of the chain trying to push it off to the next.

Prices have dropped and now the greatest threat is global deflation!  Deflation could spiral as less capital is available, values of assets held declines, and the buyers patiently wait for values to fall further.

The demand for stocks has dried up , as investors fear that valuations will be forever changed (to the downside.)  Retail sales are down as people wait until they truly need something before they buy it.  Unemployement numbers are skyrocketing and with that average labor costs will come down, as people price themselves competitively to enter back into the work place.  And last, and most important, housing values will continue to fall, as credit becomes scarcer, incomes lower, and supply of available units increase.


What do you think?  Share it here.

It is a wonderful thing when America’s largest bank gets free money from Uncle Sam so they can increase lending in America, and instead take $7 billion in cash and put that money in China!!!!!!!!!!       What are they thinking!!! Why is the US government and Congress letting US businesss leaders make a joke of the government’s attempt to help Main Street.

Somebody please explain this to me…………………

Three interesting articles worth looking at regarding the Red Plague and its impact on your neighbors and cousins.
Downturn Drags More Consumers Into Bankruptcy
By TARA SIEGEL BERNARD and JENNY ANDERSON Published: November 16, 2008
With their credit cards drained, the latest bankruptcy filers are deeper in debt than those in previous downturns.


Here Comes a Bankruptcy Boom

November 11, 2008 10:26 AM ET | Rick Newman



Daniel McGinn

Focusing On Foreclosures

Now that the election’s over, is relief in sight?

For Small Businesses and Political Operatives, Please Check Out this Article:

Dear Obama: Send loans fast

The government can spark spending and preserve jobs by getting small businesses the financing they need to survive.

Great article at:

When I close my eyes and try to envision where our economy is going, not based on the “Morons in the Morning” but based on what is happening on Main Street, Wall Street, and every other commercial avenue, business park, etc. in America, I AM VERY AFRAID!

There are layoffs in all areas of our economy, all sectors, industries, professional levels, etc.  Manufacturing, marketing, banking, sales, retail, health services, insurance, real estate, construction, and more are all under pressure.  The only “safe” jobs today are undertakers, auditors, CIA Clandestine Services (which is advertising on our local radio station extensively for help wanted, believe it!), and litigation attorneys.  I do not think anything else is even remotely stable.

If we think back to the medieval times, the Black Plague spread violently and killed more than half the people in Western Europe.  I liken this economic crisis to the Red Plague, based on the financial losses most people are suffering around the world.  It is absolutely an epidemic!!! The Financial Times this week used the term “epic proportions”.  EITHER WAY, THIS IS VERY SCARY!

An excerpt of President Bush’s speak from Wednesday was included as a guest column in the WSJ today.  He noted that the only way for the world to get through this is to adhere to the capitalistic system.  (I would not want to be him at the meeting this weekend of the global economic leaders.  They will all laugh at him, or at least smirk and chuckle into their palms.)

We are on a cyle that may be extremely difficult to break.  But then again, when we think of the rampant inflation of just 6-9 months ago, and how it just collapsed, maybe there is hope????  What do you think?

To use an analogy, it takes energy and effort to push things up (i.e., inflation) and only  natural forces (i.e., gravity) to have them fall.  Trees do not grow to the sky, but a leaf can fall a long, long, long way from the top of a tree, until it lands.  An even after hitting the ground, can be impacted and moved by wind, rain, fire, snow, insects, decay………………..

Can someone help me to be a bit more optimistic??????????????

Please leave me a comment.  Let me know what you are thinking.

Is this unbelievable or what?  Those financial institutions not eligible for a part of the free government giveaway of America’s future have devised ways to get in through the back door.  And the government and regulators are welcoming them through the back door!!!!!!!!

Check this out from

NEW YORK ( — Four insurance companies applied Friday to become thrift holding companies and acquire savings and loans, which opens the door for them to seek bailout funds.

Friday was the deadline to apply for funding from the Treasury’s Troubled Asset Relief Program.

Any bank, savings association, bank holding company or savings and loan holding company established and operating in the United States was eligible to apply for some amount of capital from the bailout plan. Insurers and foreign-controlled entities were not included.

The Hartford Financial Services Group, Lincoln National Corp., Genworth Financial Inc. and Aegon NV all submitted applications to become holding companies to the Office of Thrift Supervision (OTS) on Friday.

If we, you and I, can not walk in through the front door or sneak in through the back door, is there a window we can climb through or get in using a “Mission Impossible” break in move?  Please share your ideas through a comment!

Cities and states are asking for bailouts, the Auto Industry is asking to be saved, the Unemployment Funds in 4 states are seeking Fed support, millions of homeowners are behind and in default, credit card companies are raising their rates to force all but the strongest into a default situation.

The system is suddenly rewarding those that were weeek, foolhardy, or just caught in the chaos fostered by others, and then the system is pushing all the rest into the same abyss!!! Can this end well?  Let me know your thoughts.

Lots of bits of news today, most of which showing how weak the economy is, that it can get worse, and that our government is disfunctional.

Retail sales fell last month off the cliff.  If anyone owns or works in a typical store, sales volumes are horrible.  People are not spending.  Major stores are gearing up for Black Friday already. Some, like KMart, are even starting the Black Friday sales now!  With credit card usage restricted and new high, high rates in the high 20%s and 30%s, people will think twice about buying extra gifts and stocking stuffers.

This Holiday Season we will be thankful for the things we have and family and friends, rather than how big the boxes of gifts are.

The FDIC launched their mortgage foreclosure proposal, designed to save millions of homes from foreclosure.  Some are complaining the Mrs. Blair, the head of the FDIC, is making a play for a political appointment by President elect Obama.  I do not care if it is a political move.  She, thankfully, is trying to move things forward and help people, families, consumers, and many more.  Blair is playing unlike the political and football players we are seeing between Wall Street, Congress and Pennsylvania Avenue in DC.  If only they can say something and then do it, things could be better.

For the FDIC proposal, see

No one has confidence in DC, the Treasury, the SEC and the Fed at the moment.  Those who may have faith may rethink their bases for faith.  The rules from 6 months back are no longer valid.

Maybe with the FDIC leadership and impetus, we will see some positive moves from DC and help may be on its way.

Let me know your thoughts.

With the Dow up more than 500 points, after breaking through 8000 on the low at about mid day, we are seeing what will likely be the rythym we will experience over the next six to none months.

There should be much optimism regarding future legislation in the first quarter of the coming year, but at the same time, great fear as to the risks facing the US and global economy.  Thus, there is great opportunity for profit given the volatility and the ability to trade quickly.

For long term investors, there is great hope that the systems will be stronger after this chaos and that growth willbe more consistent moving forward.  Bond yields should be more normalized and defaults after 6-9 months should decline.

Be careful in the short term.  The rallies make for great trading opportunities.

We are seeing credit card rates sky rocket for those who are paying and have credit cards with a balance.  What is happening to those who are not paying?  Please leave a comment, as this is important to monitor and track!

New credit card issuance is at a screaching halt.  If you are seeing new credit issuance, please let me know.

Current mortgage rates here in Florida are as low as 3%, yes 3%, with 1% points, tied to the 30 day LIBOR plus a margin.  Thus money is cheap, if you can get it.  Loan to values on mortgages on these rates is 50% for a cash out refinance and 60% for a $ for $ rate refi.  Thus, if this kind of mortgage would serve you, let me know, but for 90% of those looking to refi or buy a home, the rate is great but the LTV is too low!

I understand that the SBA is beginning to issue loans for those stressed by the economic challenges.  Let me know if you have had success!

Speak with you tomorrow!

God Bless!

I am thrilled to be up and running with this blog. The US economy is shuddering to a trickle, the markets are continuing to fall, house values are moving lower still, and foreclosures and bankruptcies are skyrocketing. There are new and major layoffs announced each day. And, our government, including the Treasury, Federal Reserve and SEC, continue to make the situation worse rather than better.

The failure for the government to intervene consistently scares the hell out of me. I am not for intervention, but we are in such a bind, intervention is the only hope.

I will be blogging regularly on the tough financial situations so many are facing, sharing ideas and suggestions, and recommendations.

Our website,, is not fully operational, but will be within the next few days. It will be a resource for those facing challenges, including small businesses and families, and also be a place to find opportunity to find solutions. We will attract investors and lenders and others seeking solid profits on their investments.

The first iteration will be a work in progress. We ask for your patience, understanding and feedback.

Given the number of friends I have in dire situations, I am hoping that my comments and work is beneficial and helpful.

Good luck to us all!
God Bless.