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EDITOR’S NOTE: We have all seen this before. As the bad guys start getting hurt they double down on their illegal practices and even get worse. The banks continue and even escalate their ruthless tactics of banks in foreclosing on properties in which they have no interest, evicting homeowners who were defrauded in the first instance by the securitization structure in which people were able to lie about home values, terms of loan and other material facts.

The fact remains that the market is ruthless in its own right and eventually everything comes out in the wash. We either face the truth and correct the problem now or we kick the can down the road and face a larger problem later. I’m not ordinarily given to predicting market moves. I varied from that in 2007 when I predicted the market lows would go to between 5,000-6,000 in the Dow Jones average.I was ridiculed but still right. Now I am saying that I can’t see a higher  “bottom” than between 7,000-8,000.

So here it is again. I didn’t make it up — just look at the last 100 years of what economists use as their main benchmark for the economy: HOUSING. If the foreclosures were real, it would be bad. But they are not real and the allowance and permission of government to continue with the foreclosures is eating away at the fabric of our society, our economy, our status in the world economy, and our prospects.

All of this is happening to keep the mega banks alive when in fact they are already dead — it’s just that everyone is afraid to say so. I’m not afraid. The banks are dead. The megabanks are carrying assets on their balance sheet that are pure fiction and they mostly relate to mortgage “assets” that don’t exist. These banks should be resolved and the housing market will rebound along with the rest of the economy as consumers start to get their fair share of restitution from this crisis.

We have a choice: save the banks or save ourselves. Since the banks created this mess on purpose, it is an easy choice for me. Save the country, save the people and to hell with the megabanks. With 7,000 more community, regional and other banks plus credit unions around in our country, there is no reason why we can’t resolve the megabanks and continue business as usual. Our credit rating will zoom back to the top as soon as the world sees we are serious about justice and truth.

If you want to see your 401K improve then you need to be concerned about housing.

By Jonathan Cheng, Wall Street Journal

Stocks tumbled amid growing fears of a global recession, as investors confronted a grim mix of U.S. economic data and fresh concerns about Europe’s banks.

The Dow Jones Industrial Average fell 435 points, or 3.8%, to 10974. The Standard & Poor’s 500-stock index dropped 53 points, or 4.5%, to 1141, while the Nasdaq Composite lost 124 points, or 4.9%, to 2387.

In the flight to safety, investors piled into gold, which jumped to a new record above $1,820 a troy ounce. In the Treasurys market, the yield on the benchmark 10-year note briefly dipped below 2% in intraday trading for the first time since at least 1954, as investors sought refuge in U.S. debt.

“If it’s not a recession, it sure feels like one. And if it feels like one, it doesn’t matter if you can prove it with statistics or not,” said John Hailer, president and CEO of Natixis Global Asset Management in the U.S. and Asia. “We have some real tough problems in front of us, and we really need some leadership in corporate America and Washington…. There’s a lot of nervousness in the market.”

The heaviest selling came in energy and materials stocks. Among Dow components, United Technologies fell 5.3%, Alcoa lost 5.8%, and Caterpillar tumbled 4.5%. Among big oil firms, Chevron lost 4.8%, and Exxon Mobil was off 4.4%.

Bank stocks were also under significant pressure. Bank of America was the biggest decliner among the Dow components, tumbling 6.2%, while J.P. Morgan Chase lost 4.5%.

Hewlett-Packard, one of the biggest stock laggards on the day, briefly reversed its morning slump after reports that the world’s biggest computer maker will spin off its personal-computer business and is close to a $10 billion deal to acquire U.K. software firm Autonomy. H-P, which reports quarterly earnings after the closing bell, was down 3.9% in recent trading.

All 10 sectors of the S&P 500 were lower, with all but three of the 500 stocks falling. The CBOE Market Volatility Index, the “fear gauge” known as the VIX, surged 35%. The Dow hit an intraday low just after 10 a.m. Eastern time, falling 529 points.

Relatively stronger were safe-haven stock sectors, with utilities, consumer-staples, telecommunications and health-care stocks the best performers of the day.

Sandy Villere, portfolio manager of the Villere Balanced Fund in New Orleans, says he’s worried that the economy doesn’t have a lot of help on the way. “I don’t see much help from Washington,” he said. “If the wheels come off, there’s always more quantitative easing, but you don’t want to see that unless things continue to erode.”

Mr. Villere said investors were eyeing the low Treasury yield and buying the relative safety of utilities and telecommunications stocks, which pay strong dividends.

The U.S. declines came after sharp losses in European and Asian markets. The Stoxx Europe 600 slumped 4.8% in afternoon trade, and Germany’s DAX index plunged 5.8%. Asian bourses also fell; Japan’s Nikkei Stock Index ended down 1.3%, to a five-month low, while China’s Shanghai Composite declined 1.6%.

European banks led the declines, in part after The Wall Street Journal reported that U.S. federal and state regulators were intensifying their scrutiny of the U.S. arms of Europe’s biggest banks, worrying about spillover from Europe’s debt crisis into the U.S. banking system. Societe Generale fell 12% in Paris, Intesa Sanpaolo dropped 9.3% in Milan, and Barclays was off 11% in London.

Others pointed to Morgan Stanley, which late Wednesday cut its 2011 euro-area gross-domestic-product growth forecast to 1.7% from 2%, and its 2012 GDP growth forecast to 0.5%, from a previous estimate of 1.2%.

Adding to the gloom were discouraging economic reports that showed rising inflation and little traction on hiring. A reading of Philadelphia-area manufacturing plunged to negative-30.7 from 3.2 in July, the lowest reading in two years. Economists had been expecting a gain. Existing-home sales also tumbled 3.5% in July, defying hopes for a gain.

“If we had a strong economy, we could probably shrug off some of these Europe concerns, but the numbers are just showing complete stagnation — we’ve leveled off, and there doesn’t seem to be continual improvement,” said Randy Frederick, director of trading and derivatives for Charles Schwab. “As long as these problems continue to rumble around, whenever there are headlines suggesting more severity or even just bringing it back to top of mind, that’s negative for markets.”

Following a week that saw European stocks rally on the heels of short-selling bans on the continent, investors took a more cautious view after German and French leaders failed earlier this week to come up with concrete proposals to more meaningfully address sovereign-debt problems.

Thursday’s stock declines puts the major indexes into the red for the week, a day after the Dow had battled to a stalemate on Wednesday, edging up four points. The Dow is now off about 9.6% for the month.

Gold futures benefited from safe-haven flows amid the uncertainty, while crude-oil futures tumbled amid the economic concerns, to about $82 a barrel. The euro slumped against the dollar, which slipped against the yen.

On the economic front, new jobless claims rose above 400,000 last week, the latest sign of a persistently weak U.S. labor market. Initial jobless claims rose by 9,000, to a seasonally adjusted 408,000, in the week ended Aug. 13.

Meanwhile, consumer inflation resumed its climb in July, as gasoline prices rebounded and food costs continued to rise. Consumer prices rose 0.5% from June, the largest monthly increase since March. Underlying inflation, which excludes volatile energy and food costs, rose by a monthly 0.2% in July, in line with expectations. On an annualized basis, consumer prices were up by 3.6% in July, above the Federal Reserve’s target.

Mid-Atlantic manufacturing activity, meanwhile, contracted at a sharp pace in August, and expectations plummeted. The Philadelphia Fed said its index of general business activity within the factory sector fell to -30.7 this month, from 3.2 in July and -7.7 in June. Economists had expected a reading of 1.5 in August.

In corporate news, NetApp plunged 17% to lead the S&P 500 decliners after fiscal first-quarter profit fell short of forecasts.

JDS Uniphase shed 12% after issuing a lower-than-expected outlook for revenues.

Sears Holdings fell 6.5% after the retailer’s fiscal second-quarter loss widened amid added markdowns to clear seasonal inventory, which hurt sales and margins.

Ross Stores dropped 1% after the discount retailer projected per-share earnings below analysts’ estimates and spoke cautiously about the second half of the year, citing uncertainty about how consumers will be affected by stock-market volatility and increased economic uncertainty.

Food company J.M. Smucker fell 6.6% after fiscal first-quarter earnings rose 8.4% but revenues fell short of analyst expectations.

30 Responses

  1. It’s truly CRAZY.

    “What a f*cked up financial world we live in when banks can’t profitably take your deposits at ZERO percent interest.”

  2. The Importance of saving money with your bank (Wall Street):

    Watch the clip

  3. The US Congress is RUN by Wall St, Banks, Federal Reserve:

  4. The US Congress is RUN BY WALL STREET—————

    “Exclusive: Goldman Sachs VP Changed His Name, Now Advances Goldman Lobbying Interests As Top Staffer To Darrell Issa”

  5. I liked the “put” on BofA @ $4.00. If I had dough I’d “put” Wells Fargo at $15.00. I don’t think it will go to $7.00 again, but if it does, we will know we are winning.
    On another note, my case was transferred back to the original foreclosure judge who handled our foreclosure the first time around. Word has it that this particular judge is now “looking at the evidence” without the jaundiced eye towards the homeowner. The judge in the second case recused himself, and sent it to the original judge.
    Harry, is that customary for the judge to refer a new case back to the judge that heard the original foreclosure case? I want to think this is a “positive”. Thoughts?

  6. There are a lot of scams out there because of the economic problems in this nation. One is rent to own. I personally heard of someone who lost $17,000.00 when she bought a rent to own home. Many foreclosed properties are fraudulently foreclosed and previous owners could claim them back.

    This foreclosure is a total mess. Banks must be forced to modify mortgages banning foreclosure altogether. Home ownership and a place to stay are fundamental right of any human being in a country with a bitter life threatening cold weather.

  7. Before investing in Gold I would make sure they even have the Gold….could be another scam.

  8. The A Man ,

    Heres a far better chart on BAC ,, without volume you don’t have even half the story ,, please note the volume on down weeks vs. up weeks… BAC is toast , everyone on the street knows their capital is worthless and they’re shorting it … it’s a very safe short ,, you may be wrong for a few days or a week but in a timespan measured in months a short position in BAC will make you plenty of money.

  9. […] SEE ALSO stocks-resume-downward-spiral-as-experts-ignore-housing-crisis […]

  10. Dylan Ratigan was pretty good today. Here it is:

    Dylan mentions how Wall St gets to use OPM and get’s paid no matter what. There you have it. Wall St sucks big time. It’s the grand illusion that has everybody suckered into it, sucked into it.

  11. Pat, What is the name of that attorney? now that I found out the TRUTH of what was done to me I am ready to get represented!
    Lawyer wanted!

    Must be Sharp!

    Here is my TAC I am filing tommorrow!

  12. Thank you leapfrog for the advise

  13. Thank you Anonymous.

    Be Strong and Courageous.

  14. tnharry,

    What is your economic background?? US economy in dire shape. Artificially orchestrated stock market rise can only cover for so long.

    The fact remains — investments will not survive without the people — in what we now know as a consumption driven economy. You cannot bleed blood from empty consumers — you already did that.

    THE A MAN — glad to see you back!!!

  15. Great article, E. Tolle. Thanks.

  16. Chris Whalen is counting on the demise of BAC, stating very matter of factly that they’re already on death’s doorstep, and haven’t even taken the majority of hits yet. As to the rest of the economy:

    But it certainly looks like the Rubin political organization that has guided US economic policy for the past two decades is getting ready to double down on inflation and debt yet again to protect the major Wall Street houses from further harm. The major banks and their allies in Washington cannot imagine a true restructuring, because all their positions and privileged would be exposed to the public and result in their personal as well as professional demise.

    I for one will march on DC before I’ll et them spend another taxpayer dollar on these morons. Enough is enough.

  17. A Man: Sorry, I don’t really know of any in SoCal other than Vondran and McCandless. I have no first-hand experience there – have just read their blogs, I’m in NorCal. Did you ever check out Max Gardner’s BK Bootcamp grads? They have listings by state – don’t know how good they are – but they have attended the securitization courses. Also, check with Martin at Mandelman Matters. He’s in SoCal and loves to hear from his readers, so write him. I think he also has a couple of attorneys in SoCal listed on his site.

  18. leapfrog can you recomend any attorneys in Southern California that get it and have some success?


  19. Oh and thank you for the article leapfrog.

  20. leapfrog By November they will be a penny stock. I dont think anybody but Neil Garfield understands how bad it really is.

    Long live Neil Garfield and may G-d give him health and strength.

  21. Pat: Coming from you, I’m not reassured at all.

  22. leapfrog,

    I know of this attorney and she is honest and truthful in what she writes. She is in the courts daily, and knows what goes on in CA.

    Of course, people may not want to hear reality.


    Why do you think Gold Silver is going up and Real Estate and stocks are going down?

    Anything that has to do with the Banksters is considered Toxic.


  24. Check out this nasty chart

    I just hope the Banksters dont take down this country with them.


  25. Interesting link – While there is some merit in some of what she says, based on arguing MERS alone, I wonder why she is so fatalistic about a homeowner having any chance at all in defending their property. I do know some BK attorneys run their operations like a mill and aren’t interested in foreclosure defense. Sure hope this one is not on Neil’s list of “lawyers who get it”. If so, he needs to boot her off. Thoughts, anyone?

  26. Keeping the zombie backs was a waste of trillions, thanks to LSummers, Geithner, Paulson and all the rest. They should have let them die on the spot, but they just sought an ever larger pool of suckers to burden with the debt and now the ponzi scheme is coming to an end.

  27. TNHarry ,,

    On a brighter note LPS is down over 5% , – $1.01

    It’s obvious that this bottomless pit of spending to keep the zombie banks alive (despite their worthless tier1 capial in the form of mbs paper) is the true reason behind the selloff. It’s putting pressure on EVERYTHING.

  28. no link between headline and story. could also have been “stocks resume downward cycle as experts ignore massive bedbug outbreak…”

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