Saturday, September 17, 2011

Jon Stewart Rips The Obama Jobs Bill - 'The Remember Me, I Killed Bin Laden Employment Act Of 2011'

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Daily Show Video - Jon Stewart on the Obama Jobs Speech - Sep. 12, 2011
Pretty decent clip from earlier this week.  Both sides get torched.
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Greenspan states "cannot guarantee purchasing power" Senate Banking Comm...

Flashback - Alan Greenspan on the USS Government Ponzi - Runs 1 minute

Recently discovered clip from Congressional testimony in 2005. Hyperinflation Nation.

“I believe that we should maintain the principles of Social Security, but I think the existing structure is not working. Until we construct a system that creates the savings that are required to build the REAL assets, so that the retirees have REAL goods and services. We don’t have a system that is working. We have one that basically moves cash around and we can guarantee cash benefits as far out and whatever size you like, but we cannot guarantee their purchasing power. Do we have the material goods and services that people will need to consume, not whether or not we pass some hurdle with respect to how legal financing occurs. Financing is a secondary issue and it is a means to create the REAL wealth, not an end into itself.”

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Payrolls decreased in 30 U.S. states in August

Payrolls fell in 30 U.S. states in August, led by New York and Georgia, while the jobless rate increased in 26, showing the slump in hiring is broad-based.

Employers cut staff by 22,700 workers in New York last month, and by 18,200 in Georgia, figures from the Labor Department showed today in Washington. Nevada continued to lead the nation in unemployment with a rate of 13.4, up from 12.9 percent in July.

The economy needs to generate more jobs to spur income growth after consumer spending stagnated in the second quarter, raising concerns of another recession. A Labor Department report on Sept. 2 showed employers added no workers to payrolls last month, the weakest reading since September 2010, and the jobless rate held at 9.1 percent. Bloomberg


Event Risk Remains Huge Despite Central Banks' Intervention

There was talk of an event risk going into Thursday’s market open, and the speculation proved correct.

After UBS announced it had lost $2 billion due to an alleged rogue trader, the world's major central banks stepped into the void created by the euro zone debt crisis.
The Federal Reserve and the European Central Bank, in co-ordination with the Bank of England, Swiss National Bank and Bank of Japan announced a plan to offer three-month dollar loans to commercial banks in order to avoid a liquidity crisis in the euro zone banking system.
The intervention, 24 hours before euro zone finance ministers met in Poland to discuss their next response to the Greek problem, boosted the euro and saw stocks in the euro zone’s troubled banks rise sharply, with the exception of UBS [UBS  11.88    0.47  (+4.12%)   ].
The intervention brought much-needed relief to the market, according to John Higgins, a senior market economist at Capital Economics, but is no “silver bullet.”
“Of course, the demand for dollar funding in the euro zone is symptomatic of a broader liquidity squeeze,” Higgins wrote in a research note.

The problem for Higgins is that while liquidity is not as big a problem as it was in late 2008 following the collapse of Lehman Brothers, solvency is.
“Even if banks in the euro-zone have less of a liquidity problem on their hands today than they did in late 2008, they have a greater solvency problem. This is reflected in the fact that the cost of insuring against a default by the banks is much higher,” Higgins explained.
“Policymakers’ response to the financial crisis was to recapitalize the banks and transfer risk to the public sector,” he said.
Escalation of Crisis?
This is now coming back to haunt the banks, according to Higgins, as they hold so much government debt and the governments themselves are in no position to offer renewed support.
“We expect a further near- to medium-term escalation of the euro zone crisis involving the default of a sovereign in, and the possible departure from monetary union of, at least one country,” said Higgins.
The move by the central banks has been welcomed by Carl Weinberg, the chief economist at High Frequency Economics but he thinks more action is needed.
“While liquidity provision by the ECB is an important short-term solution to the logjam, the ultimate longer-term restoration of confidence in the market can only come when solvency is assured for all financial institutions,” said Weinberg.
Weinberg believes the only game in town is saving the banks. “As we see it, the time frame required to rehabilitate Greece’s public finances now exceeds the patience of its creditors and donors.”
The start of trade on Monday is now a huge risk, according to Weinberg, if Friday's meeting in Poland fails to end with concrete action.
“The most important thing right now, in our view, is to save the banks regardless of what happens to Greece. If we lose the euro land banking system because governments did not bother to think ahead about what a Greek default might mean, then we will get a depression in euro land,” said Weinberg.
© 2011

Unemployed, he's selling everything to follow in steps of Dust Bowl migrants

Bill Reiser
Billy Reiser and his dog Fergie will be hitting the road soon, looking for work.
During the depths of the Great Depression in the 1930s, Dust Bowl migrants from the Great Plains loaded all their belongings into their cars and jammed Route 66 in hope of finding a better life in California.
Nearly 80 years later, Billy Reiser, an unemployed 50-year-old Pennsylvanian, plans to follow their path.
Reiser lost his job managing the engineering department at an eastern Pennsylvania medical device manufacturing company in 2009, and he's hit nothing but roadblocks since. With his unemployment running out and his retirement funds raided to pay his mortgage, he's decided to take a radical step: He's selling everything he owns, including the house, and plans to load his two dogs in a used RV and drive west looking for work.
"I know there are jobs elsewhere as I look on and every day," he said.
Reiser's plight is nowhere near as bad as those of the starving farmers who were forced west by drought and economic calamity. Still, compared to his increasingly depressing situation at home, the chance to take up the spirit of a character in a John Steinbeck novel has obvious appeal.
"I have come to feel as though I'm just sitting around looking for things to do while waiting to die.  So change is a necessity," he said.
Last month, as part of our coverage of America’s economic malaise, we chronicled the story of a young father who took a job as a firefighter in Iraq after he couldn’t find work in Miami. Then we asked readers: What crazy things are you doing to make ends meet? This is the third of three reader stories we’ll share. Last week, we wrote about a man who has turned to dumpster diving to keep food on the table for his three children.  Earlier this week, we wrote about a 30-something unemployed lawyer who's now working as a stripper to make ends meet. Now, we tell Reiser's story.
Reiser has decades of experience in what was once the high-flying field of bioengineering.  Ten years ago, he even went back to school and earned an MBA so he could step forward in his field.  He switched firms in 2003 to take a management job, and was part of several successful product launches. But when sales slipped after the 2008 recession, his job was eliminated.
Now, his lengthy resume works against him.  Reiser says his age -- too young to retire, but too old for entry level jobs -- has played a big part in his persistent unemployment.
"I have come to the realization that I am unemployable," he said. "I would take a job that pays $60,000 less than I was making, but I get no response when I apply.  I think ageism has something to do with it. … There are many of us out there like me, unemployable for what we used to do. But when we try to get jobs at less than what we used to make, no one will take us because they figure we will bolt as soon as the economy turns around."

His prospects and bank account both dwindling, Reiser was forced to take a step that's devastating for investors in their 50s.
"I had to pull money out of my IRA to subsidize my mortgage. It was really gut wrenching, because you are taxed and penalized for that," he said.
That's when Reiser started to think more drastic steps were necessary.  He'd gotten 
divorced in 2006, but stayed in his home because of an emotional attachment."I felt tied to it due to all the work my dad, a retired carpenter, and I had put into it. (We) installed all new windows and doors, installed new kitchen and bath, built a second floor deck," he said.
But now, it was time to question that attachment, and all his attachments.  With nothing tying him to his home, he’s decided roam America, looking for a new beginning.
Reiser has already begun selling all his personal belongings -- he netted $510 in a garage sale last weekend -- and has put his home on the market.  In a way, it's as if he's presiding over his own post-mortem estate sale.
"It's harder than you think. It's easy to get very philosophical," he said.  "You realize that everything you have has a story." Like the wood carvings he purchased from poor kids at the end of a hike in Zimbabwe.  Or the signed painting he purchased from an artist in the Southwest for $250 several years ago. It went for $30.
"You realize many of the things you have aren't worth what you thought they were,' he said.  "But it is just stuff.  It has been a cathartic process.  It's a unique mental process. ... It has made me realize how shackled I have become to comfort of my home and belongings."
When the house is sold, he plans to buy a cheap RV and head south before winter. His first stop will be at a friend's place in Richmond, Va. Then he's on to North Carolina and Florida, and will turn west and head for Texas and the southwest by spring -- ending up perhaps in California, where Dust Bowl migrants looked for their Promised Land. He hopes to pick up odd jobs along the way, spending perhaps one or two months in each place.
"I know a lot of RV camps need help around the place, and I'm pretty handy," he said.  "Maybe when I head out west I'll work in a dude ranch or something."
The trip represents a huge mental shift for Reiser, who felt himself slipping deeper and deeper into depression with nothing to do during the day, and began to feel his advancing age.  Now, he sees his unemployment as an opportunity, and the timing as surprisingly good.
"When in my life would I be able to just take off and do this and be young enough to handle the rigors of this kind of travel?” he said. “Many people say they are going to travel the country like this when they retire, but they never get there. Since this is happening it has given me the opportunity to do things I always wanted to do. ... In fact, many family members, when they hear my plan, say, 'Can I go with you?’ jokingly, I think. They plan to live vicariously through me."

Meanwhile, the trip won't impact his continuing job search, he figures.
"I'm just sitting on the computer and looking for jobs all day. I can do that on road just as easily," he said.
The plan does hinge on sale of his home, but he believes he has enough equity in it to fund at least the start of his trip.  Still, losing most of his possessions, his home and his community has risks.
"But I cannot just sit here in Pennsylvania and wallow in misery,” Reiser said. “So off I go, to wander the country in hopes that, through serendipity or maybe just the kindness of a stranger, I will find meaningful employment. At this point, it has the potential to be an epic journey with a joyful end, or a demoralizing trip with results that could suck the soul right out of me."

'God particle' goes missing: Higgs boson 'may not exist' say Hadron Collider scientists

Signals reported in July seemed to indicate that the Higgs boson - a long-theorised particle seen as a missing link in our current understanding of physics - might have been detected among data the Large Hadron Collider at CERN in Geneva.
But since then, those signals - hinting that the theoretical 'God' particle might have a mass between 120 and 140GeV - looked much less conclusive among new statistics received from the experiment.
Guido Tonelli, spokesman for the Compact Muon Solenoid Detector, a huge particle detector at CERN employing 3,600 scientists, told the BBC's Today programme this week, 'If we exclude the existence of the Higgs this will be a major discovery - it would completely review our vision of nature.'
The ATLAS particle beam detector, whose director said that the 'range' of masses where the elusive Higgs particle might be found was diminishing
The ATLAS particle beam detector, whose director said that the 'range' of masses where the elusive Higgs particle might be found was diminishing
Tonelli said, 'We should be patient in this search,' he said, 'This machine is so powerful we will be able to explore completely new territory.'
'The standard model of particle physics has lasted for forty years,' CERN spokesman James Gillies told Mail Online today, 'But it's a flawed theory. Something within it has got to give. At the kind of energies the LHC is probing, we are investigating what generates the mass of particles. Higgs is just one theory.
'Higgs is the most popular because it's mathematically appealing,' says Gillies. 'If we don't find the Higgs, we will go on to find whatever else it is that is generating mass.'

The Large Hadron Collider is now yielding twice the amount of data it was at this time last year, using experiments which use huge magnets to accelerate particles to nearly the speed of light.
These recreate conditions around the moment of the Big Bang - a time when the Higgs boson is theorised by British physicist Peter Higgs to have endowed particles with mass.

Several teams are working together using different particle detectors to scan for the short-lived and elusive Higgs particle
Several teams are working together using different particle detectors to scan for the short-lived and elusive Higgs particle
Initial signals seemed to indicate that the Higgs could be within a range of 120 and 140GeV, 'detectable' by looking for 'events' created by the short-lived particle's decay into pairs of other subatomic particles - but these were later dismissed as probable statistical fluctuation.
CERN1’s research director, Sergio Bertolucci said this summer, 'Discoveries are almost assured within the next twelve months. If the Higgs exists, the LHC experiments will soon find it. If it does not, its absence will point the way to new physics.'
Vivek Sharma, a physics professor searching for the Higgs with the CMS particle detector at the facility told science site RDMag this week, 'The Higgs, if it exists, is now 'trapped' between 114 and 145 GeV. If it exists, it has to be there. If it's not there, it will be known to be science fiction by December, 2011.'
Other physicists with the project suspect an answer may not be found until the end of next year.
But even if the elusive particle is not found, the experiments, which use the 'ring' to smash streams of protons together at nearly the speed of light, creating billions of 'miniature Big Bangs', will still expand human knowledge - even if it is simply by exposing flaws in the Standard Model of physics, accepted since the Seventies as a system to 'explain' matter.
Speaking earlier this year, Tonelli said, 'We've reached the edge of the unknown. It's all new physics from now.'
One of the huge superconducting magnets used to accelerate particles at Switzerland's CERN facility, where streams of protons impact at nearly the speed of light
One of the huge superconducting magnets used to accelerate particles at Switzerland's CERN facility, where streams of protons impact at nearly the speed of light
'The Higgs boson has been rather elusive so far and no one really knows what it will look like. But if the Higgs boson exists, then we know how to set traps to catch some,' wrote Pauline Gagnon, a CERN physicist on the facility's official blog this month.
'The difficulty is to catch as many events corresponding to the decay of a Higgs boson while rejecting the what we call the background. It is as if we want to take a photo of a small flash of light in bright daylight.'

A scientist reacts at the Compact Muon Solenoid (CMS) analyses results at the particle detector. Its director said this week that if the Higgs boson does not exist, it would open up a 'new physics'
A scientist reacts at the Compact Muon Solenoid (CMS) analyses results at the particle detector. Its director said this week that if the Higgs boson does not exist, it would open up a 'new physics'

'We need to set special filters to minimize the amount of background light coming through, while still allowing the tiny flash to be seen. Fortunately, we know quite well what the Standard Model predicts.

'So in the end, all we do is count the number of selected events to see if we find more than what is expected solely from the background.'
So far, though, after months of experiments, nothing has leapt out of the background so far.
'No Higgs is good Higgs,' wrote Gagnon, 'Much has been said about the Higgs boson, mostly how great it would be to find it. But what about if we do not? Could that be useful? In fact, yes, that’d be a great discovery.'

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Bloomberg warns high unemployment rate could lead to widespread rioting

Mayor Bloomberg
Mayor Bloomberg

Soon many could be feeling the physical pain of the bad economy.
Sounding alarm bells about the nation's high unemployment rate, Mayor Bloomberg warned this morning that there could be widespread mayhem in the streets if Washington lawmakers don't start creating jobs for millions of Americans who are out of work.
"We have a lot of kids graduating college, can't find jobs," Bloomberg said on his weekly WOR radio show. "That's what happened in Cairo. That's what happened in Madrid. You don't want those kinds of riots here."
Bloomberg also said the damage may be done -- especially to recent college grads -- as the nation's unemployment rate hovers around 9 percent.
"The damage to a generation that can't find jobs will go on for many, many years," Bloomberg said.
Despite that, the mayor gave Obama praise for coming up with a jobs bill.
"At least he's got some ideas on the table, whether you like those or not," he said.
The $447 billion jobs plan is crucial if Obama wants to revive his sagging poll numbers as he sets off on his 2012 reelection bid.
Obama had hoped his massive $800 billion stimulus plan -- aimed at creating jobs -- would help unemployment fall below 8 percent.
A poll out earlier this week showed that Americans are skeptical of Obama's latest efforts.
The poll showed a majority of Americans don’t believe Obama’s jobs plan will make a dent in the unemployment rate. Overall, 51 percent of respondents don’t think the plan will reduce the rate, while only 40 percent thought it would.
Voters overall disapprove of Obama’s handling of the economy by 62-33.
Individual elements of Obama’s jobs plan get big majorities of support -- indicating the flaw might be in Obama and the way he’s trying to sell the plan.
According to another poll by CNN/ORC, the payroll-tax cut the president proposed gets 65 percent support, aid to states gets 74 percent and funds for school construction get 64 percent.

Fascinating 1936 Footage of Car Assembly Line

Unelected, Unaccountable, Unrepentant: The Federal Reserve Is Using Your Money To Bail Out European Commercial Banks Once Again

For a moment, imagine that there is a privately-owned organization in the United States that can create U.S. dollars out of thin air whenever it wants and can loan that money to whoever it wants to.  Imagine that this organization is able to act with the full power of the U.S. government behind it, but that nobody in the organization is ever elected by the American people, and that for all practical purposes the organization is not accountable to the president or to Congress.  Imagine that the organization is able to make trillions of dollars of secret loans to banks, to foreign governments and even to their close friends without ever having to face a comprehensive audit.  Does that sound preposterous?  Well, such an organization actually exists.  It is called the Federal Reserve, and today we found out that once again the Fed is going to be taking huge piles of your money and loaning it to commercial banks in Europe.  The Congress cannot overrule this decision.  Neither can Barack Obama.  Because it has so much power, many refer to the Federal Reserve as "the fourth branch of government", but unlike the other three branches of government, there are basically no significant "checks and balances" on the Federal Reserve.  If you don't like the fact that the Federal Reserve is racing in to help big foreign banks survive the European debt crisis that is just too bad.  The Federal Reserve pretty much gets to do whatever it wants to do, and the folks over at the Fed simply do not care whether you like that or not.
So what in the world just happened today?  The following is how an article on CNBC explained it....
Just ahead of the Wall Street open Thursday, the European Central Bank, along with the U.S. Federal Reserve, Bank of England, Bank of Japan and Swiss National Bank announced they would offer three-month dollar loans to Europe's commercial banks, easing dollar funding constraints.
It must be nice to do whatever you want without having to get the approval of anyone else.
What do you think Barack Obama would give for such power right about now?
The Federal Reserve and other major central banks around the world decided that lending big European banks gigantic piles of dollars would be a good idea, so they are just doing it.
No debate, no votes and no democracy - they just tell us how things are going to be and that is that.
It is a bit ironic that all of this happened on the third anniversary of the collapse of Lehman Brothers.  It is almost as if the central bankers of the world are trying to send some sort of a message.
So how much money is going to be loaned out?
Well, according to an article in The Daily Mail, big European banks are going to be able to borrow an "unlimited" amount of money....
The deal announced yesterday means banks will be able to borrow ‘any amount’ of money in three separate auctions in October, November and December. Banks will have to put up collateral, or security, to tap the emergency funds.
Wow - I wish someone would offer to lend me an "unlimited" amount of money.
But of course this really is not going to solve anything in the long run.  You can't solve a raging debt problem with more debt.
Yes, it will help the big European banks with their short-term liquidity problems, but it will do nothing to fix the long-term structural problems that are tearing Europe to pieces.
Win Thin, a senior currency strategist at Brown Brothers Harriman, said essentially the same thing to CNBC today....
"They're taking care of the symptoms, but the underlying illness is still out there. On the margin, it's positive. Until Greece defaults and we clear this whole thing up, they're still treading water"
So, no, the financial problems of Europe have not been solved.
Just think of this latest move as a temporary band-aid.
So why get upset about it?
Well, what all of this shows is just how arrogant the Federal Reserve is.
The Federal Reserve gets to throw around trillions of dollars without any accountability to the American people.
As I have written about previously, the Federal Reserve made $16.1 trillion in secret loans to their friends during the last financial crisis.
This was revealed in a GAO report, and members of Congress such as Ron Paul and Bernie Sanders tried to get people to pay attention to this.  The following is a statement about this report that was taken from the official website of Senator Sanders....
"As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world"
So how much of that money went overseas?  Well, it turns out that approximately $3.08 trillion of that money was loaned to big banks and major financial institutions in Europe and Asia.
Barack Obama can't lend trillions of dollars to foreign banks.
So why does the Federal Reserve get to do it?
Sadly, most Americans know very little about the Federal Reserve.  In the United States today, most Americans graduate from high school without ever learning much of anything about the Fed.
But if you really want to understand what is going on with our economy, it is absolutely critical that you understand the Federal Reserve.
The following are some more reasons why you should be upset about what the Federal Reserve has been doing....
*The Federal Reserve is a perpetual debt machine.  Today, the U.S. national debt is 4700 times larger than it was when the Federal Reserve was created back in 1913.
*The Federal Reserve has recently been actually paying banks not to make loans.  Right now banks can park money at the Federal Reserve and make risk-free income without having to make loans to the American people.
*Current Federal Reserve Chairman Ben Bernanke has a track record of failure that is legendary, and yet George W. Bush and Barack Obama both backed him 100%.
*The Federal Reserve system is designed to create inflation.  The truth is that the United States has only had a persistent, ongoing problem with inflation since the Federal Reserve was created back in 1913.
*Since 2008, what the Federal Reserve has been doing to our money supply has been absolutely insane.  Eventually this is going to have very serious consequences for us.
*The U.S. government has handed over the task of "centrally planning" our economy to the Federal Reserve.  The Fed decides what the target rate of inflation should be, what the target rate of unemployment should be, what interest rates are going to be and what the size of the money supply is going to be.  This is quite similar to the "central planning" that goes on in communist nations, but very few people in our government seem upset by this.
*The Federal Reserve picks "winners" and "losers" in the financial system.  For example, when the last financial crisis hit, the Fed bent over backwards to help out the big Wall Street banks, but hordes of small banks were left out in the cold.
*As mentioned above, the Federal Reserve has become way, way too powerful.  The Fed is able to do a lot of things that the three branches of government are simply not able to do.  Fortunately, there are a few of our leaders that are alarmed by this.  For example, Ron Paul once told MSNBC that he believes that the Federal Reserve is now more powerful than Congress.....
"The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don’t even have any transparency of this. They’re more powerful than the Congress."
As long as we continue to use a debt-based currency that is controlled by a privately-owned central bank, we are going to continue to have permanent inflation and government debt that expands at an exponential pace.
The "central planning" done by the Federal Reserve has created bubble after bubble after bubble.  Our dollars is on the verge of dying and our financial system is about to collapse.
The Federal Reserve system simply does not work.
Hopefully we can start sending more politicians to Washington D.C. that will be willing to stand up to the Federal Reserve.
But for now, the Federal Reserve is going to keep running around doing whatever it wants to do whether we like it or not.

US real unemployment rises to 22.8%

great depression apple cart workers
Ben Bernanke admits the last Great Depression was engineered by the Federal Reserve.

It can also be caused by the monetary system. In a modern capitalist economy, the creation of abundance of money that accrues very unevenly in the hands of individuals can aggravate poverty. Milton Friedman, a well-known monetary economist, says that inflation is predominantly a monetary phenomenon. If this is the case, the worsening of the global poverty problem can be significantly pointed at the institutions that are responsible for the creation of fiat money.

According to the Census Bureau, nearly 1 out of 6 Americans now live in poverty. From the Associated Press today:
The Census Bureau’s annual report released Tuesday offers a snapshot of the economic well-being of U.S. households for 2010, when joblessness hovered above 9 percent for a second year. It comes at a politically sensitive time for President Barack Obama, who has acknowledged in the midst of a re-election fight that the unemployment rate could persist at high levels through next year….
Measured by total numbers, the 46 million now living in poverty is the largest on record dating back to when the census began tracking poverty in 1959. Based on percentages, it tied the poverty level in 1993 and was the highest since 1983.
In fact, the real unemployment figure is 22.8%, according to John Williams’ Shadow Stats. During the last Great Depression, the unemployment rate peaked at 25 percent in 1933.
The current boss of the Federal Reserve, Ben Bernanke, has admitted that the Federal Reserve engineered the Great Depression (and future Federal Reserve chairmans – if we don’t get rid of them – will probably admit the current Greatest Depression was created by the banksters).
Both unemployment and poverty are created by the fractional reserve system and its expansion of the money supply.
“Poverty can be caused by real economy, that is to say, by the lack of supply of real things,” writes economics professor Ahamed Kameel Mydin Meera.
It can also be caused by the monetary system. In a modern capitalist economy, the creation of abundance of money that accrues very unevenly in the hands of individuals can aggravate poverty. Milton Friedman, a well-known monetary economist, says that inflation is predominantly a monetary phenomenon. If this is the case, the worsening of the global poverty problem can be significantly pointed at the institutions that are responsible for the creation of fiat money.
In the United States, that institution – not federal, as claimed, but owned by a cartel of bankers – is the Federal Reserve.

Bank Of America's Backdoor Bailout - Dumping Mortgage Trash Onto Taxpayers Via Fannie Mae

Before we get to the story from the WSJ and The, a few BofA links from today:
Despite the wishes of Sheila Bair and Chris Whalen, I don't see BAC being nationalized and restructured.  They have too much political power behind their godforsaken franchise of usury.  This deal with Fannie is an outrage.  Now taxpayers are on the hook for any and all lawsuits associated with the fraud.  This was a transfer of liability more than anything else. Details on today's taxpayer pillaging are below.
NEW YORK (TheStreet) -- The official bailout of the financial system may be over, but the government is apparently far from finished propping up big banks, as evidenced by the news that Bank of America has struck a deal to dump a bunch of near-worthless home loans on U.S. taxpayers.
According to a report in The Wall Street Journal Bank of America has sold the rights to process and collect payments on 400,000 home loans to Fannie Mae, the government-controlled mortgage giant. The loans have an unpaid principal balance of $73 billion, but are being sold for $500 million, according to the report.
Doesn't sound like a bad deal for the government, unless that $500 million price tag will soon be too steep, which is what "a person familiar with the deal," told the Journal.
FORTUNE -- Taxpayers may not realize it, but they just bailed out Bank of America again, this time to the tune of more than a half billion dollars.
The Charlotte, NC-based bank was one of the biggest recipients of bailout funds during the financial crisis. But Bank of America continues to face deep problems related to its troubled mortgage portfolio and investors have battered the stock, which has plunged over 40% so far this year. That's escalated concerns that the bank may need to raise more capital. Yves Smith at Naked Capitalism has even started a BofA death watch.
But apparently the federal government is determined to resurrect BofA: the Wall Street Journalreports the feds have just used Fannie Mae, which is controlled by the U.S. government, to infuse BofA with $500 million and ease one of the bank's biggest headaches.
Yesterday afternoon on CNBC, Bank of America CEO Brian Moynihan mentioned that five of BofA's six businesses were making money. The one black spot was its massive portfolio of problematic mortgages and the liabilities flowing from it. Moynihan also mentioned that BofA had just sold some "mortgage servicing rights" as part of its balance sheet strengthening efforts, but he didn't elaborate.
According to the WSJ, Fannie Mae spent $500 million to buy the servicing rights to a big chunk of the "seven million loans still causing the most problems." Although the $500 million is a paper loss to BofA, in that the rights were "originally worth more," it looks like BofA is still getting a good deal because the portfolio's "value is expected to deteriorate further."
In fact, the deal is worth much more than $500 million to BofA, because getting rid of those servicing rights lifts a huge cost burden off BofA's shoulders. And if securitized loans are involved, which they most likely are, the sale also limits the BofA's potential liability to investors for its current servicing violations. Finally, the $500 million is surely more than the servicing rights are worth in an arms-length transaction. How do we know? Beyond the comment that the loans are expected to "deteriorate further," the goal of the intervention can only be to fix Bank of America's capital structure, which is easier for the government to do if it overpays for the rights.
In short, purchasing these servicing rights was another Troubled Asset Relief Program.
Continue reading...

Obama Preparing for Martial Law During Hyperinflation

Dees Illustration
National Inflation Association

In August of 2009, the city of Paterson, New Jersey, proposed the implementation of martial law by imposing an adult curfew at night in an attempt to curb violence. This unprecedented proposed ordinance would have made it illegal for adults to leave their homes and be out in the public in Paterson between the hours of 12AM and 7AM, with a penalty of up to a $2,000 fine and 90 days in jail. This ordinance would have been completely unconstitutional, especially being that it was a non-emergency situation.

NIA actually determined that violence in the city was down that year and trending downward over the previous few years. We thought for sure that there was more to the story than what was being reported by the mainstream media, so we traveled to Paterson City Hall and attempted to interview then-Mayor Joey Torres on camera. The mayor turned down the interview and refused to answer our questions even off camera.

As we left the mayor's office, we met a city employee who overheard our conversation and introduced us to then-City Council President Jeffery Jones, who agreed to an interview and invited us into his office. Jones explained to us that he is the City Council President and the first time he ever heard of this proposal was from the Associated Press, after Torres already announced it on the steps of the police department saying, "we're trying to think outside the box" in regards to solving crime issues.

Jones expressed disbelief that the mayor would want to lock down an entire city including the people who aren't committing crimes. He was also surprised that the AP already had a list of the 30 shootings that occurred in the city during the previous year, when this was undisclosed information that even he didn't have at the time.

Jones was flabbergasted that this ordinance was even being considered since it completely lacked logic. He said that in the past before any other ordinances were publicly announced by the mayor, there would always be a comprehensive discussion about it between local government officials. Not only was there no discussion about it, but Torres hastily added it to the City Council's agenda for a vote at their very next meeting. Jones was perplexed not just by the total lack of discussion and rush to get it passed, but by the total lack of details in the ordinance regarding the roles of departments, agencies, and the police department's capacity to do the work. Using common sense, Jones said that if the police department had the capacity to enforce the ordinance, we wouldn't even be discussing it.

NIA agreed with Jones that if the police department couldn't prevent the 30 shootings from taking place in the city, there is no way on earth that it will have the ability to enforce an ordinance keeping 146,199 residents in their homes at night. Torres must have known that and must have also known that proposing this ordinance would be career suicide. Therefore, we see no logical explanation as to why Torres would propose this during a time when crime in the city was declining and he was up for reelection the very next year. Even a preschool child with no political experience would focus on taking credit for the reduction in crime, instead of giving the impression that the city has no protection or safety for its residents by proclaiming they must all be locked down.

Paterson is one of the largest recipients of federal funding per capita in the U.S. It makes total sense to NIA if the Federal Government was forcing Torres to propose this ordinance. The government most likely wanted to gauge the public's reaction and see what type of outrage there would be in response to this proposal. The government wanted to see just how many residents would be willing to so easily give up their freedom and liberty in the name of safety by supporting the ordinance. The government wanted to know how difficult it would be to get the ordinance passed and if it was passed, they wanted to see what it would take to enforce it. A real life trial of martial law in one of the largest cities in the New York metropolitan area would allow the military to be better equipped to handle all types of situations when martial law takes place on a nationwide basis during hyperinflation.

The reason why we believe the ordinance was so vague with no details about enforcement is simple, the police department was never intended to enforce the ordinance. In the event that the ordinance was passed, there would immediately be thousands of brand new criminals breaking the law in Paterson and Torres would have a need to ask the Federal Government to bring in the U.S. military to detain the thousands of criminals who were disobeying the law. The Federal Government would in effect be creating a phony conflict in a city with a high crime rate so that they can justify using the U.S. military at home.

Last year, President Obama signed an Executive Order "Establishment of the Council of Governors", which Obama claims is an order to strengthen further the "partnership" between the Federal Government and State governments to "protect" our Nation and its people and property. It orders that a council be created of 10 State Governors appointed by the President who will meet to exchange information with the Secretary of Defense, Secretary of Homeland Security, and many other government officials related to the military. Their meetings will concern matters involving the National Guard of the various States, homeland defense, civil support, synchronization and integration of State and Federal military activities in the United States; and other matters of mutual interest pertaining to National Guard, homeland defense, and civil support activities.

From our experience, we know that the words "partnership" and "protect" are being used in this order to deceive the public into believing the Executive Order serves some kind of a noble purpose, which to us shows malicious intent behind the creation of the order. "Civil support" in this Executive Order can't possibly mean anything other than martial law when civil unrest takes place inside of a city. This Executive Order is an attempt to invalidate the Posse Comitatus Act of 1878 and make it legal for the military to enforce civilian laws inside of a city like Paterson. You would think that an Executive Order this outrageous and disturbing would have all Americans up in arms, but the mainstream media completely ignored this latest attempt by Obama to transfer power from state and local governments to the Federal Government, and didn't have one single report about it.

Interestingly, Obama was just in Paterson this past Sunday touring parts of the city damaged by Hurricane Irene with New Jersey Governor Chris Christie and newly elected Paterson Mayor Jeffery Jones. (Jones in late-September 2009 rejected the adult curfew ordinance of former-Paterson Mayor Joey Torres and in 2010 ran against him for mayor, defeating him despite being outspent 17 to 1.) Hurricane Irene caused the worst flooding crisis in city history. Mandatory evacuations were ordered for parts of the city, forcing thousands of people out of their homes and hundreds of businesses to close. All across Paterson, store shelves were empty with no food, water, batteries, or flashlights available to purchase anywhere. With most of the main streets and bridges into the city flooded, trucks weren't able to enter the city to replenish stores with supplies.

As bad as the flooding from Hurricane Irene was for Paterson residents, it is nothing compared to the devastation and destruction that will be caused by a different kind of flooding from Obama and Federal Reserve Chairman Ben Bernanke. Obama and Bernanke have been flooding the world with trillions of U.S. dollars with the false belief that because Treasury yields have been falling to record lows, Obama can run trillion dollar budget deficits with Bernanke leaving the Federal Funds Rate near zero forever. Their actions are setting up the next major U.S. financial crisis, which will be massive price inflation that eventually results in hyperinflation and leads to government price controls. The empty store shelves in Paterson from Hurricane Irene are finally being replenished now that flood waters are subsiding. Unfortunately, the empty store shelves that will arise from hyperinflation and government price controls, will be permanent.

The 77-foot high Great Falls and river that was responsible for most of the flooding in Paterson, was previously used for centuries to power dozens of surrounding mills that produced textiles, firearms, and railroad locomotive products. Paterson eventually became one of the world's largest producing cities of silk, with 50% of U.S. silk production coming from Paterson, and was later named the "Silk City". Immigrants from all around the world who moved to the U.S., came to Paterson from Ellis Island to get their first job in America at one of Paterson's many factories.

Today, there are no more silk mills left in Paterson and unemployment in the city is nearly double the national average. With 30% of Paterson residents living below poverty, Paterson is one of the U.S. cities that will be hurt most by the massive monetary inflation of the Federal Reserve. The majority of people in Paterson are relying on government entitlement programs just to survive and don't have the financial resources to accumulate physical gold and silver.

While in Paterson, Obama pledged Federal Government funding to residents who were devastated by the hurricane. The White House has estimated that the U.S. government's cost for Hurricane Irene relief will be around $1.5 billion, but the Federal Emergency Management Agency (FEMA) only has $800 million in funds left. FEMA will soon be asking Congress for billions of dollars that our government doesn't have and the Federal Reserve will be forced to print. By printing the FEMA funds to be provided to people in Paterson, the food stamps, unemployment checks, welfare checks, and other government entitlements that Paterson residents depend on to survive, will all lose their purchasing power, making residents more dependent on government than ever. This is Obama's strategy to get reelected, promise people more government handouts that instead of helping them, cause the U.S. dollar to lose its purchasing power and make the people as dependent on government as possible.

NIA believes the main reason Obama went to Paterson was to see exactly how residents responded to mandatory evacuations and empty store shelves. He knows that Paterson is a microcosm of what the whole entire U.S. will soon look like during hyperinflation. That is why the Federal Government was so eager to run martial law tests and trials in Paterson. They know that the city is practically on the verge already of having rioting, looting, and civil unrest, before hyperinflation arrives. By providing Paterson with more federal funds, we are sure a secret deal will be worked out that will allow the Federal Government to push through their plans for a martial law trial in Paterson without any resistance from local government officials

NIA believes that the Federal Government has no business providing funds to victims of hurricanes and other natural disasters. There is absolutely nothing in the U.S. Constitution that authorizes it. Most Americans are afraid to speak out against helping victims of natural disasters, but FEMA is a bureaucratic waste that needs to be eliminated in favor of free market solutions. During Hurricane Katrina, thousands of Americans volunteered to help out in disaster relief, but instead of being put straight to work they were told to sit around for hours, which turned into days, and many of them decided to just go home. FEMA spent an outrageous $416,000 per person to provide temporary housing for several hundred Hurricane Katrina evacuees in Alabama. FEMA even paid $800 million to manufacture 11,000 mobile homes to be used as shelter for Hurricane Katrina victims, but they were never used and were left to waste away in Arkansas.

The most shocking FEMA debacle is when they decided to give out thousands of debit cards with $2,000 on them to Hurricane Katrina victims. Many people ended up using these debit cards at strip clubs. A jail escapee convicted of murder was even able to say he was a Hurricane Katrina victim and get a free $2,000 FEMA debit card, which he used to buy beer and drugs, before paying a limo driver to transport him far out of the area. A Red Cross volunteer was convicted and jailed for stealing $250,000 worth of these debit cards and we are sure that others got away with stealing millions of dollars worth of them.

If Americans didn't have the mindset that FEMA will always be there to rescue them, more Americans would have full insurance coverage on their homes. One Paterson resident who we saw on the nightly news crying about his home being flooded and how he didn't have money for flood insurance, had an iPhone in his hand. The average annual flood insurance policy costs less than the average annual mobile phone bill. If the cost of insurance to cover flood damages is extraordinarily high in certain areas because the locations are prone to flood, then Americans shouldn't be living there. Americans who are smart enough not to build a home on the edge of a cliff or next to a river, shouldn't be forced to pay for incompetent Americans who did. It is the existence of FEMA that encourages Americans to build in risky locations without thinking of the consequences.

Ever since Christie was elected Governor of New Jersey, he has surpassed the expectations we had for him, taking dramatic steps to cut wasteful spending in the state. Unfortunately, he appears to have changed his beliefs due to a Category 1 hurricane. He now doesn't even think it is necessary for the Federal Government to cut enough spending in parts of the budget to cover its spending on hurricane relief. The fact is, if Christie wants to help residents of New Jersey, he should have reserves set aside to do so on his own. If anybody in government is responsible for helping New Jersey residents hurt by Hurricane Irene, it is Christie himself. Instead of state and local elected representatives putting funds aside for a rainy day, it seems as though their entire purpose is to beg the Federal Government for relief.

NIA expects Sarah Palin to announce her candidacy for the Republican Nomination for President of the United States this month. It was a prediction that NIA originally made in its top 10 predictions for 2011 back in January. We give her credit for helping build $14 billion in state reserves while she was Governor of Alaska, before quitting the job that she was nominated for. If a natural disaster strikes Alaska, they will be able to take care of themselves. Unfortunately, these Alaskans would in effect be punished for their good decisions by being forced to pay for the reckless decisions of other states. Many other states would also have large reserves for a rainy day if it wasn't for the Federal Government creating a moral hazard by providing funding to state and local governments for disaster relief.

If Alaska was smart they would secede from the union and become their own country. Alaska currently has no state income tax or sales tax, and if Alaskans no longer had to pay federal income tax to support the reckless wasteful spending of U.S. politicians, millions of people from across the U.S. and all around the world would want to move to Alaska. As the U.S. dollar continues to rapidly lose its purchasing power, the likelihood of Alaska and other states moving towards secession will greatly increase. In 2006, an organization collected the required signatures to place on Alaska's fall ballot an initiative to have Alaska secede from the union, but the State Supreme Court ruled any attempt at secession to be illegal and unconstitutional.

NIA believes that U.S. states have the legal right to secede from the union. U.S. courts have proven time and time again that they will incorrectly interpret the U.S. Constitution in order to protect the government's destructive illegal actions while selectively ignoring provisions that protect American's rights. The U.S. is addicted to waging illegal wars against countries like Iraq, Afghanistan, Libya, and soon to be Syria. The U.S. is also addicted to money printing, in large part to pay for its illegal wars. These dangerous addictions are unconstitutional, because the U.S. Constitution said wars must be approved by Congress and only gold and silver shall be used as legal tender. The act of secession is a very powerful tool that should only be used during times in which the Federal Government's actions threaten the freedom and liberty of the citizens they swore to protect. Secession is legal and constitutional because without it there is nothing to keep the Federal Government in check and force them to rein in out of control deficit spending that threatens our very existence as a sovereign nation.

Chris Whalen: Is Social Security A Ponzi Scheme?

Watch Video

Source - Yahoo Tech Ticker
Reprinted with permission.
The eyes of (not just) Texas were on Governor Rick Perry during Wednesday's GOP debate at the Ronald Reagan Museum and Library.
Much of the questioning was directed to or about Perry, who was on stage with his rivals for the first time. And most of the headlines Thursday morning were about the GOP front-runner, who reiterated prior comments about Social Security being a "fraud" a "Ponzi scheme" and a "monstrous lie."
Perry was pilloried in the press. Polls show most Americans have favorable views of Social Security, most notably seniors who tend to vote in bigger numbers than other demographic groups. MSNBC contributor Al Sharpton said Perry had handed the DNC it's campaign slogan for 2012: "It's not about Obama, it's about your momma."
Whether Perry's comments prove to be good politics remains to be seen. The bigger question is whether he's right.
The answer: It depends on your definition of "Ponzi scheme."
If you define Ponzi scheme as a Bernie Madoff-like scam designed to intentionally defraud investors, then Rick Perry is wrong about Social Security.
But if you define Ponzi scheme as a system built on unsustainable promises and accounting slight of hand, Perry's onto something.
"I salute Perry for raising the issue," says Christopher Whalen, co-founder of Institutional Risk Analytics and author of Inflated: How Money and Debt Built the American Dream. "This is a real fundamental financial issue we have to talk about."
No Trust in the 'Trust Fund'
Fundamentally, the big problem is "Treasury has to run a surplus of $1 for every $1 of payment that goes out," Whalen says. "That's the basic problem with Social Security; it's intertwined with the Treasury."
Social Security "is not like an insurance company or pension fund putting away money…that can pay these claims," he explains. "These claims are paid by the U.S. Treasury. That's the problem. There is no savings account."
With the number of retirees rapidly approaching the number of workers paying into the fund, the reality is today's workers aren't paying for their own retirement; they're paying for the benefits of current retirees.
"We all have parents who probably need Social Security and the kids are going to end up taking care of their parents," Whalen says.
Sounding more like Mitt Romney than Rick Perry, Whalen says the most likely outcome is some change to the Social Security system such as raising the retirement age or means testing.
"We're going to readjust eligibility, participation and look more like Europe," he says. "But if your government is destroying the value of money, it doesn't matter. Until we get the Fed and our fiscal situation under control, issues like Social Security, savings and investing aren't going to matter."
Today's workers will most likely get a Social Security check. "The question is: "What will it buy at the grocery store?," Whalen quips, paraphrasing Alan Greenspan. "The government is defaulting [on its debts] via inflation and also via the way they calculate inflation," which is constantly changing.
In the end, Whalen says Americans need to give up "this understandable illusion they could retire with large percentage of their pre-retirement income."
Whether Americans are indeed ready to give up that dream could determine the outcome of the 2012 election and, as Whalen notes in the accompanying video, the really scary thing is Social Security is "not in that bad of shape" compared with Medicare.
Clip of Greenspan discussing inflation and Social Security referenced by Whalen above:
Flashback - Alan Greenspan on the USS Government Ponzi - Runs 1 minute
Recently discovered clip from Congressional testimony in 2005.  Hyperinflation Nation.
“I believe that we should maintain the principles of Social Security, but I think the existing structure is not working. Until we construct a system that creates the savings that are required to build the REAL assets, so that the retirees have REAL goods and services. We don’t have a system that is working. We have one that basically moves cash around and we can guarantee cash benefits as far out and whatever size you like, but we cannot guarantee their purchasing power. Do we have the material goods and services that people will need to consume, not whether or not we pass some hurdle with respect to how legal financing occurs. Financing is a secondary issue and it is a means to create the REAL wealth, not an end into itself.”
Read more here...

U.S. Census Reports Reveals One in Six Americans Are Poor, One in Five Children Live in Poverty

A new U.S. Census Bureau report reveals the number of people living in poverty last year surged to 46.2 million—one in six Americans—the highest number since the Bureau began tracking such data more than 50 years ago. According to the report, blacks and Hispanics together accounted for 54 percent of the poor, with whites at 9.9 percent and Asians at 12.1 percent. Children under 18 suffered the highest poverty rate. Meanwhile, the number of Americans with employer-provided health insurance has also continued to decline, and the ranks of the uninsured now hovers just below the 50 million mark, the most in more than two decades. Analysts say the numbers would have been worse if not for government assistance programs, including extended unemployment compensation, stimulus spending, Obama’s health reforms, and Social Security. We speak with Heidi Shierholz, labor economist at the Economic Policy Institute. [includes rush transcript]

10 USA Housing Markets That Will Collapse This Year

Some things are inevitable
collapse of the housing marketThe United States real estate market collapse is not over by a long shot.  We are experiencing the most unusual financial times in modern US history.  If you think it can’t get worse…keep reading.
The statistics in this article was derived for accuracy purposes from Real Estate on in an article written by Michael B. Scuter and Douglas A. McIntyre.
I’ve thrown in my own two cents and my practical approach for assimilating information and then creating an action plan.
The best guestimate is that real estate values will drop significantly in ten specific markets over the next year and I think a few other areas of the country are extremely vulnerable.  This doesn’t mean the entire USA is in the toilet, but if you’re not careful, your investment dollars could be.
With all the information available with a click of a mouse, it is imperative that you interpret the information and look at it through your common sense filter.  Never accept someone else’s opinion as a fact, including mine.  I read and review a lot of information and assimilate all that I see and read and then make decisions to move forward.
More importantly, I am in the streets talking and walking with other landlords, property managers, tenants, wholesalers, attorneys, bankers and others.  By observing different perspectives and actually discussing topics that affect the people around me, am I able to derive m own conclusions.
So, let’s start with the cities that are supposed to drop significantly in value and sum up my personal conclusions at the end of this article.
The following cities were identified by Wall Street to drop ten percent or more by 2012.  Now, we know Wall Street is always right – NOT… but they have some statistics to back this up and I believe there is something to their analysis, especially in the areas with which I am most familiar.
Methodology: They used data from the Fiserv-Case-Shiller Indexes which tracks real estate activity in 380 cities.  They selected those that are forecast to have the largest percent price drop between the first quarter of 2011 through the first quarter of 2012.  Adding unemployment information, household median income and other pieces of information gives a complete picture.
There is a direct correlation to home prices, unemployment and household median income.  The unemployment rate in some of these cities was over 18%.  By the way, that unemployment level is similar to Spain, Greece, Portugal and Italy.  Would you buy houses there in that kind of market?  The inventory in these cities is large and the demand is low because the unemployed cannot be buyers.  The fear of further price drops has paralyzed buyers, which further exacerbates the problems in these cities.
All the efforts of the Federal Government to prop up house values have failed in these markets.
For your Investment Success… Click Here to learn more and to get a free copy of our book: Buy Right, Retire Rich!
Here are the markets as depicted by Wall Street starting with the worst:
Expected price drop: – 16.6 percent
  1. Naples, Florida
floridaExpected price drop: – 16.6 percent
Median family income: $62,800 (137th highest)
Unemployment rate: 10.5 percent
Median home price: $225,000 (40th highest)
Projected to hit lowest level: Q4 2012
“Like much of southwest Florida, Naples was one of the fastest-growing communities in the country as it prepared for the millions of baby boomers on the cusp of retirement. When the housing bubble burst, however, the thousands of construction projects for condominiums and retirement communities were halted or lost money, and home values plummeted. From peak home value in 2006, prices dropped by 55 percent. They are expected to keep falling through next year more than any major city in the country. By Q1 2012, home values will drop an additional 16.6 percent, or nearly $40,000.”
As a resident of Tampa, Florida, I have a true perspective of Florida real estate’s high property taxes and high insurance rates which destroy cash flow from rental houses and further erode house values.  We stopped buying cash flow houses in Florida three years ago.
  1. Riverside-San Bernardino, California
Expected price drop: -15.6 percent
Median family income: $59,700 (190th highest)
Unemployment rate: 13.7 percent
Median home price: $181,000 (70th highest)
Projected to hit lowest level: Q1 2012
“Like so many industrial cities in California, Riverside-San Bernadino is being affected by the recession and housing crisis more than most other parts of the U.S. Unemployment has hit 13.7 percent, home vacancy and rental vacancy rates are high, and home values are plummeting. Median home prices are down more than 55 percent from their peak in 2006. By the beginning of next year, prices are expected to drop an additional 15.6 percent, or nearly $30,000.”
The biggest problem with California is that it is California.  With a state deficit of 28 billion this year, they will continue to cut services and raise every kind of tax imaginable.  They already have a state income tax that peaks at 10% which will hurt cash flow rental houses.
Las Vegas – Expected price drop – 13.9 percent
  1. Las Vegas, Nevada
las vegasExpected price drop: -13.9 percent
Median family income: $58,900 (196th lowest)
Unemployment rate: 12.4 percent
Median home price: $140,000 (90th lowest)
Projected to hit lowest level: Q4 2012
“Las Vegas was one of the center points of the meteoric growth in the first half of the 2000s, only to be followed by a catastrophic fall in the second half. Between 2008 and 2011, home prices in the city dropped by 42.3 percent, the second greatest decline in the country. Although home values in the city are already more than 58 percent off their peak, they are projected by Case-Shiller to drop an additional 13.9 percent by Q1 2012, and then 6.3 percent more by Q1 2013.”
Las Vegas’ problems are just beginning.  People go to “sin city” with disposable income to gamble or go to conventions.  Conventions are way down.  Disposable income is way down.  Worse… is the train no one seems to see.  It’s online gambling!  Casinos are actually lobbying to get their piece of “online” gambling so people can stay right at home, hundreds and thousands of miles away and they can lose their money in the comfort of their living room.  Vegas will not come back in my lifetime and I’m in my mid-fifties.  If you buy cash flow houses here, who would you ever sell them to?  There is no exit plan.
Detroit, Michigan – Expected price drop – 13.4 percent
4. Detroit, Michigan,
detroitExpected price drop: -13.4 percent
Median family income: $49,000 (47th lowest)
Unemployment rate: 12.7 percent
Median home price: $42,000 (the lowest median home price)
Projected to hit lowest level: Q2 2012
“Since the recession began, Detroit has been the horror story for plummeting home values, foreclosures, vacancies, and unemployment. To date, Detroit’s median home price of $42,000 is the lowest among all 385 major metropolitan areas. While the motor city has been languishing for some time before the recession, the drop in home value has been steadier, as opposed to the rapid drop-offs seen in cities in Florida, Nevada, and California. Detroit’s already record-low values are expected to drop an additional 13.4 percent by the first quarter of 2012.”
Heck, I thought Detroit would be first.  I regret to write that we acquired a few dozen houses here a few years ago.  What a mistake!  Liberal eviction courts favor the tenant.  High real estate taxes destroy rental cash flow.  High homeowner’s insurance destroys cash flow even more because if they can’t steal the furnace, they will burn the house down.
I’ve walked the streets (actually stayed in the car) where 8 out of 10 houses were burned out shells.  It looked like a scene out of World War II – and who wants to rent the others?
This is a welfare city and state and my advice to all readers is to avoid it like the bubonic plague.  It will suck your wallet dry.  And don’t listen to anybody that talks about guaranteed rent by the Feds, from Section 8 or the country with welfare.  Once you make the Feds your partner with their rent subsidies they are like the Mafia – you can’t get them out and you’ll be lucky to dump the house for a fraction of what you paid for it.  Hey, if you like this area, call me – I’ve got a few dozen rented out in good condition.  I simply want to re-allocate my assets to better areas.
5. Merced, California
Expected price drop: -13.2 percent
Median family income: $42,900 (8th lowest)
Unemployment rate: 18.6 percent
Median home price: $112,000 (38th lowest)
Projected to hit lowest level: Q2 2012
“Merced has a median family income of just $42,900, placing it among the ten poorest major cities in the country. In 2008, the city’s property lost 46.1 percent of its value. This was the second-greatest depreciation in home value for a city since at least 1980. The city’s median home prices are expected to drop an additional 13.2 percent by the beginning of next year.”
Miami, Florida – Expected price drop – 13 percent
6. Miami, Florida
miamiExpected price drop: -13 percent
Median family income: $47,800 (32nd lowest)
Unemployment rate: 13.4 percent
Median home price: $175,000 (76th highest)
Projected to hit lowest level: Q2 2013
“At 13.4 percent, Miami has one of the highest unemployment rates of any major American city. Home values are above average, but are down by more than 50 percent since 2006. Partially as a result of the staggering unemployment rate, the value of the city’s homes is projected to decrease by another 13 percent by the first quarter of 2013. What is even more disturbing, prices will then likely fall an additional 10.1 percent. If this second drop occurs, it will be by far the greatest depreciation of property values in the country in an area already decimated by current low prices.”
The best thing Miami has going for it is South America.  Ask a person in Bogata, Columbia what the most northern city of Columbia is and they will tell you – Miami.  With the influx of South American money, Miami will have some areas that will rebound quicker than most.  The problem is the high cost of real estate taxes and homeowner’s insurance.
El Centro, California – Expected price drop – 12.1 percent
7. El Centro, California
californiaExpected price drop: – 12.1 percent
Median family income: $43,300 (10th lowest)
Unemployment rate: 28.6 percent
Median home price: $130,000 (70th lowest)
Projected to hit lowest level: Q1 2012
“El Centro is located five miles from the Mexican border, and is one of the poorest cities in the country. Median income is just $43,300 per family, the tenth-lowest in the U.S. Unemployment is at a staggering 28.6 percent. Between 2006 and 2011, home prices decreased by more than 50 percent. According to a report in the Imperial Valley press, one home was sold in the El Centro area before the recession for $390,000. In 2009, that home was listed at $200,000. Prices are expected to drop an additional 12.1 percent by the first quarter of 2012.”
Five miles from the Mexican border?  Think about it and forgetaboutit.
8. Salinas, California

Expected price drop: – 11.8 percent
Median family income: $62,100 (145th highest)
Unemployment rate: 12.8 percent
Median home price: $240,000 (34th highest)
Projected to hit lowest level: Q2 2012
“Salinas is a small coastal city located 25 miles south of San Jose. Since 2006, the median value of the 125,000 houses there decreased in value by more than 61 percent. This is the fourth biggest decline from peak home value among all major American cities. More than 40 percent of this drop occurred in 2009, the year after the housing bubble burst. Unemployment in the city is at 12.8 percent, well above the national average of 9.2 percent. Several companies in the area, including food processing company Romco, expect to continue to lay off workers in the coming months, which should serve to further depress home values.”
Are you starting to see a pattern in California?  There are some great areas, but the debt of this state will impact even the good areas as they cut services and increase fees and taxes of all kinds.  Also, don’t lose sight of the fact the California is earthquake central and we all know it’s coming…you know… the big one.  When it comes, Nevada could be the western shoreline for the USA – which could be good for house values in Las Vegas!  There are better places to invest in cash flow houses.
9. Bethesda, Maryland
Expected price drop: – 11.5 percent
Median family income: $114,100 (the highest)
Unemployment rate: 5.1 percent
Median home price: $417,000 (5th highest)
Projected to hit lowest level: Q3 2012
“Bethesda, the extremely wealthy D.C. suburb, has the highest median family income in the country — $114,100. It also has the fifth highest median home price, at $417,000. That position may change, however, as Case-Shiller projects home values will drop by more than $60,000 by next year.”
I’ve been to Bethesda – it’s beautiful and prices will probably drop, BUT it doesn’t make any sense for cash flow houses as they are too expensive and the ROI would be very low.  Not as bad as Hong Kong where traditional real estate investors receive about 1% cash on cash return and hope for appreciation.  But you know what?  Hope is not a good strategy.
10. Fort Lauderdale, Florida
Expected price drop: -11.1 percent
Median family income: $58,800 (194th highest)
Unemployment rate: 11.8 percent
Median home price: $196,000 (55th highest)
Projected to hit lowest level: Q2 2013
“Since 2006, home prices in Fort Lauderdale have dropped by nearly 50 percent. A full 28 percent of that drop occurred in 2009 alone. As was the case throughout most of Florida, the collapse of the housing bubble decimated the construction-based economy. The unemployment rate of nearly 12 percent is evident of the construction sector’s disastrous decline. The value of the 686,000 homes in the Fort Lauderdale area is expected to get even worse through at least the second quarter of 2013. Between Q1 2011 and Q1 2012, the median home price is projected to decline an additional 11.1 percent. Between 2012 and 2013, that number will further decrease by 8.7 percent.”
Here we go again in Florida, but guess what?  The area north of Fort Lauderdale is doing well right now.  In fact, a property manager that I work with is seeing properties snapped up in Palm County and Martin County.  He tells me good properties don’t last and if someone is really desiring Florida properties, then Palm and Martin counties are your best bets for cash flow.  If this is you, contact me and I will put you in touch with one of the best property managers I know.
Now that Wall Street provided the statistical analysis for the above content of this article, here is my biased, personal perspective after buying houses in 12 states in 2009.
  1. Don’t invest in areas of declining population.
  2. Don’t invest in liberal states that favor tenants.
  3. Avoid frigid climates of the Northeast and Midwest.
  4. Buy where boomers are moving to.
  5. Buy in pro-business states.
  6. Buy where real estate taxes and homeowner’s insurance rates are low.
  7. Buy newer properties.
  8. Never get subsidized rents.  That means wrong house in wrong area.
All this doom and gloom information bodes well for real estate investors who can make the distinctions on which specific region, states, cities and neighborhoods to invest in.
Gloom and Doom – bring it on.  This is a reality check for global investors to do their due diligence and get the courage of their convictions and take action.
It doesn’t get any better than this in the USA to pick up great bargains for cash flow and capital gains – if you buy right.  Because, if you BUY RIGHT, YOU WILL RETIRE RICH.