Welcome back to The Investor's Coroner, your weekly attempt to make both sense and fun of the current global markets and inform you of the happenings in the international marketplace while simultaneously inserting jokes with the intention of pulling out later.
It is a goal of The Investor's Coroner to help you understand just what's going on in this here economy. Or, barring that, maybe you'll learn the difference between preferred stock and livestock, Jethro Van Chubby Bubba.
Recession, Motherfuckers. The Word is Recession.
Okay, this is starting to border on the surreal. The dollar is at an all-time low against the Euro and at a long time low against every other currency in the global market, commodities were unaffected by the 200 billion that Bernanke pumped in to the market to ease the mortgage crunch, unemployment is up, inflation is a constant bitch and even the stock market's equivalent of a pre J-Lo Puff Daddy, Warren Buffet, said, “from a common-sense standpoint right now, we're in a recession.” So uh, from what standpoint then aren‘t we in a recession?
I've said it before and I'll say it again: we are in a recession.
Bernanke Gets Creative, Tries Women's Clothes
Ben Bernanke wasn‘t kidding when he said that he was gonna focus on growth. The fed's goofy chairman (along with a few other countries) offered to exchange useless mortgage backed securities for guaranteed treasury bills to the tune of several hundred billion dollars. Now, this basically means that you and I will be footing the bill, but let's ignore that for a moment as I tell you this story. This, as I understand it, is the story of the mortgage backed securities crisis. I call this story, “How we're all Fucked.”
Before we start, it is important that you understand what a bond is. A bond is basically a security instrument by which organizations (banks, municipalities, etc.) raise money. The borrower (or issuer) sells a bond and promises to pay a fixed amount of interest over a fixed period of time. Then, after said fixed period of time, the principal the lender (or purchaser) paid for the bond is repaid and everyone goes home with a slight profit, a little bit of happiness and maybe a playground or a jumbo jet or something.
Anyway, these companies named Moody's and AM Best are in charge of rating bonds and they rated most of these mortgage backed securities to be AAA, which is the best rating you can get. Which is to say that Moody's and AM Best (major rating institutions) said that the mortgage backed bonds were as safe as Treasury Bills, which are issued with the full authority and power of the US Government, which, incidentally, thinks you need a new car. But I digress.
In these mortgage backed bonds are (you guessed it) mortgages. As long as people pay their mortgages on time and/or the value of the land and homes behind the mortgages steadily increase, then everything will be fine. Well? uh, neither happened.
So when people talk about the mortgage crisis what they're really talking about is a bunch of securities that received the highest ratings from the most accredited rating companies in America. And, in these securities, on average, roughly thirty percent of the mortgages are not being paid and more than fifteen percent are in default. Plus, ten to twenty percent of the represented properties are already bank owned.
What does this mean?
Well, it means that as much as Bernanke would like you to believe that throwing a few hundred billion at the problem will make it go away, he's basically selling the proverbial magic beans.
So, in a nutshell, we're kind of fucked.
You see, these rating institutions (Moody's and AM Best) are losing credibility, and these mortgage backed bonds have to be re-rated. And those ratings won't be high. And there's still over a trillion dollars worth of them out there.
On the bright side though, it's a good time to be a first-time home buyer.
Because I'm a Big Fan of the Sidebar
Not for nothing, but here are some of my favorite words that market writers use to describe when a stock's price starts to suck: gapped down, dropped, skidded, plunged, lost, sunk, dove, suffered losses, and of course, bombed.
Yeah, the market really is doing great.
Market has Personality, Goes into a Life of Crime
You know life and the market emulate each other and I find it funny. Two examples here: First, after I heard that copper had hit another high, I found out that the office building down the road from me had been victim to the theft of all of its outside air-conditioning units. Police have seen a string of these robberies and all of them hinge around the price that thieves can get for copper from the copper wiring in the units. Fences and scumbags follow the market, too.
Second, a friend of mine asked for advice on debt consolidation. It turns out that for the fist time in her life, the folks at Target had decided to use actual human beings (instead of the automated threats she had been receiving) to call and collect money for her measly thousand bucks of outstanding Target charge card debt. The next day at work, I read on Bloomberg that Target was spinning off their debt division as a separate entity and thus doing their best to clean off bad debt from their books. My friend's bad debts were obviously a part of this. I emailed her the link to the story and she responded with, “Does that mean I don't have to pay them?”
Alternative Fuels have Alternative Uses Dammit
I hate the concept of alternative fuels especially when said fuels are made out of stuff that I can eat. You see, one of the cool things about using oil and gas for fuel is that there is no other use for oil and gas. I can't eat or drink them. I can eat corn, though. And thus begins my problem with the ethanol craze. Now, much like my following of Ron Paul, my belief that recycling is a scam, my feelings that climate change has little to do with my car or with Al Gore's house and my hatred for a fiat money based society, you are probably gonna think I'm wrong here. That, however, is because you probably don't think. You just believe the masses, kick back and call it a day.
So anyway, you may want to skip this little diatribe.
Ethanol is 20% to 30% less efficient than gasoline, it takes 450 pounds of corn to fill one tank with ethanol, it takes one gallon of oil to produce one gallon of ethanol (you gotta grow, fertilize, store and ship corn), it takes 1700 gallons of water to produce one gallon of ethanol, all of America's corn crops alone are only capable of replacing fifteen percent of the oil we use at the most, and ethanol is subsidized to the tune of a buck or more a gallon on top of the nine billion in corn subsidies farmers in America get anyway.
And, for those of you who say that we need ethanol to free us from the demand on foreign oil, I ask why we charge foreign countries a 54 cent a gallon tariff on their more efficient and cheaper sugar-based ethanol while we subsidize our corn to the tune of a buck or more.
Basically, ethanol is a big fucking lie.
Oh yeah, and if Marx and Lenin were alive today they'd be environmentalists. No one has us scared like the environmentalists.
Speaking of Communism
The EPA raised its O-zone standards again. The estimated cost annually to America to get the three hundred or so counties to comply would be around 8.8 billion dollars. All so a few cars and business will pump out 5 less ozone parts per billion into the atmosphere. Meanwhile, your milk costs five bucks a gallon, your gas costs four bucks a gallon, you're losing your job and your kid's education is a fucking joke. God I love this country.
New Innovations No More Valuable than Dry Underwear
In Switzerland they're developing a vaccine for high blood pressure. Finally, something to extend the lives of the fat people! Awesome.
Scientists say they've located the gene that triggers breast cancer. This is highly unlikely because no one gene controls one of anything because genes are insanely complex and all that but nevertheless, these dudes need funding. They may be able to cure cancer!
Your Motivational Investment Quote of the Week
Every winner has scars.