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Investment Advice

Posted on March 16, 2008 by Neil Garfield

Several people have emailed me regarding what to do with their investments. I am not Warren Buffett and I don’t have a crystal ball so what I say here should be checked against other knowledgeable analyses. Keep in mind that most people are full of s–t. Everyone thinks they are a genius in an up market. In a down market, everyone still thinks they are a genius, like gamblers because they count their successes and don’t count their losses. Most economists, securities analysts (I used to be one), institutional traders (I used to be one), fund managers (I used to be one) etc are ill-trained, poorly educated, not well-rounded, and basically go with the herd. They sound good but they don’t know a thing about real economic behavior. Account representatives are even worse. Their job is to get you to do something without concern to wether you make or lose money (if you find one that doesn’t fit the mold, hold onto him or her for dear life).
First any investment in money market, CD, US Treasury, or other strictly dollar denominated assets including actual cash or deposits on hand should be converted to non-cash assets or non-dollar denominated assets. There are several internet banks and other companies that will allow you to keep accounts in dual currencies or more. My assumption is that the dollar is in for a crash. My theory is that if I am right, then you will make a lot of money. If I am wrong, there is little to suppose that the Euro or Canadian dollar or the Yen or Yuan will do badly. Either way you are probably pretty well protected.
Precious metals are always an inflation hedge but you are depending, again, on perception of value as opposed to real value. It is not likely that Gold ever again be “money.” hence it will always be a commodity and thus subject to the rules and trends of the commodity trading marketplace. The same holds true for corn, oil, and other commodities. yes they are likely to increase in value (and they present an inflation hedge as well) but you probably should not venture into commodities now unless you are already a successful commodity trader. Pick an ETF or other fund and let someone else make the trading decisions.
Stocks are not necessarily bad particularly if the company does not depend upon US consumer spending, and if the company does not hold or depend upon receiving US dollars. If it is getting Euros in payment for goods and services or other currencies around the world that are not pegged (i.e. a currency whose value is derived from whatever the value of the U.S. dollar is — BE CAREFUL), then if it is a good company it will do well in the intermediate term even if it gets hit with the usual over-selling that occurs when an economy fails.
Don’t stop looking at fundamentals just because it is in another currency. It is true that you “make money” if the dollar dives and the foreign stock dives less, but that is not a very safe strategy. Find even financial institutions that are oversold because of the general fear of bank failures. Avoid Citi, BOA, Lehman, and all of the other major national banking groups. They are all at risk. Think about the firms that figured out the crash months or years ago, like Goldman Sachs and see how they are doing now.
Bonds are not necessarily bad either for the same reason, and the same with CD equivalents etc. As long as principal interest, dividends etc are paid in Euros or some other currency not tied to the dollar, you should do OK, if you pick right on the company or mutual fund.
Keep in mind that most people are unwilling to accept the coming crash and that they may be right and that I may be wrong.
Why Euros? Because it is the ONLY currency of consensus. 2 dozen countries are involved in the Euro, thus giving you immediate diversification of risk.
Real estate: Avoid bargain locations — they might never come back, avoid locations that might be affected by flooding from rising sea levels, use leverage if you can afford the staying power, and stay in for the long haul (3-5 years minimum). This is a non-cash asset whose value will rise proportionately to the decline in the value of the dollar. If the dollar does not decline, and you have avoided problematic locations, you will still be OK.
Jewelry: For short term trading and turnovers in the marketplace there are probably some profits to be made. I don’t recommend it. There are a lot of people who know more at a glance than you would with an electron microscope and a handbook.
Lending Money: Tie the interest payments and the principal to the real rate of inflation and use an index like oil rather than the CPI which at this point has been rearranged so many times the tires are worn out.
Borrowing Money: Avoid borrowing at ridiculously high rates (in case I am wrong) and avoid if possible, the imposition of indexing on inflation. If indexing is going to occur, argue for the CPI, which the government will keep at the lowest possible levels in order to keep social security and other payment increases to a minimum. A reasonable loan will put you in the position of tremendous leverage and profit if I am right and still give you ordinary returns on investment if I am wrong.

Filed under: ATM, bubble, CDO, community banks, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, Mortgage, Obama, Uncategorized | Tagged: commodities, currency, euro, gold, hedge, inflation, investments, loans, stocks | 2 Comments »

Mortgage Meltdown: Consensus versus Intervention

Posted on March 16, 2008 by Neil Garfield

I’ve been working on this problem for over a year.
No act of prescience or brilliance was required to know that if you pour water from a pitcher, eventually it will be empty even if you splash some more in from time to time. There isn’t enough money in the world to save us from a crash.
The ONLY thing that save our economy and the many other economies of the world that are tied to our fortunes is by consensus:
Stop the foreclosures and evictions,
redo the mortgages with incentives for people to stay in their houses,
create a payment pattern that is possible even if it is not ideologically congruent with your philosophy,
restore CDO values as close as possible to par,
enlist the culprits who created this mess because they are the ones with the open channels to get this done,
add to the recent moves to accept CDOs at or near par for valuation purposes (thus increasing capital reserves and allowing the release of billions in loans that are waiting to be made),
change the rules of civil procedures in each of the states on foreclosure to stop or slow them down,
change the rules of civil procedure on pleading to force the foreclosing party to state its case more clearly — especially as to ownership of the loan,
change the rules of civil procedure to stop or slow evictions, and
change the rules of civil procedure to require mediation after the issues are joined, thus providing some breathing room for this all to get worked out.
Legislation can’t do it, executive leadership won’t do it. That leaves the rest of us and hopefully the judiciary, without sacrificing due process and protection of property rights.
It can ONLY happen with consensus. Without agreement, this will crash, inflation will destroy what is left of the middle class and a good part of the upper class and drive the U.S. into third world status before you can say “$30 per gallon.”

Filed under: bubble, CDO, community banks, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Mortgage, Obama, securities fraud, Uncategorized | Tagged: credit crisis, Federal reserve, fraud, housing, inflation, neighborhoods, stock market | 1 Comment »

Mortgage Meltdown: You Must Act to Protect Yourself from the Coming HYPER-INFLATION

Posted on March 15, 2008 by Neil Garfield

Fall of the Dollar + HYPER Inflation

The fix is out. The Fed’s last ditch effort using depression era authority to hold off Bear Stearns failure is all we need to know. Officials at the Fed admit publicly that what they are doing is not fixing anything. Economists have taken off their rose colored glasses and see a bleak landscape. The disaster is coming and there are things that can be done to soften or hedge the blows that are coming down the pike.

Whatever part of society you are in, whatever your job or occupation or status, it is wise to study up on this, but even wiser to act now. The dollar is in free fall, “bank failures” are not being used except in code, but will soon become unencrypted. Inflation is about to take a toll unlike anything in our personal memory. Society is about to change. It’s not happening for the next generation either. It is here and now, a clear and present danger. The risk we are talking about is a likelihood that inflation will rise to not less than 2-3% per month, most likely peak at 15%-25% per month and could spin out of control equalling historic highs of 2500% per month or more.

This is information for individuals, banks, non-institutional lenders, electronic fund transfer networks, gateways, intercept processors, card issuers, lenders, private companies and investors can either adapt or “die.” The concept of immediate settlement, electronic payments (and ATM) settlement overnight (or even within hours), check payments and cash payments must be re-examined from the perspective of hyper inflation — where the value of the U.S. dollar changes (downward, for the most part) by the hour.

CHANGES IN BANKING: Only Point of Banking ATM (and to a much lesser degree) Point of Sale (POS) terminals that allow the merchant to issue currency from the merchant cash drawer can possibly adapt quickly to this very likely development. These terminals are very inexpensive, easy and inexpensive to operate and maintain, and perform all the same functions as their larger version bank ATMs.

It might be possible that different currencies might be preferred in different parts of the country. On the East Coast it might be the Euro, on the West Coast it might be the Yen or Yuan, in the Southeast United States it might be the Brazilian Real or even the Mexican Peso, and in middle America it could be the Canadian dollar. These terminals exist in relatively small numbers throughout the United States, and are expanding rapidly in emerging nations all over the world for precisely this reason. The same patterns could emerge in other parts of the world. The existing electronic funds infrastructure is ill-suited to timely adapt to current developments.

As an example, take the worst hyper inflation in recent history where the German currency in the 1930’s was inflating at the rate of 2500% per month. It is possible the fall of the dollar could be worse because the inherent weakness of the dollar combined with the inherent absence of productive assets, combined with outright anger and resentment against the U.S. could and probably will be worsened by the usual “overselling” panic that always attends a crashing marketplace. This is not a prediction of 3000% per month or any other percentage. It could be as low as 1-2% per month.

For educational and analytical purposes, let’s look at a hyper inflation rate of 3,000% per month. What does this mean? Basically 10% per day. If you buy a newspaper for $1 today, the merchant is losing value at the rate of 1/24th of 10% per hour, assuming straight line depreciation of the dollar. The merchant must pay for something or convert the currency immediately. If he makes 5 cents on the newspaper, and he waits one day before he spends the dollar or converts it to another currency, he makes no revenue.

In fact, the value of the dollar you gave him has declined by 10% and is now worth only $0.90. If he promised to pay the newspaper publisher $0.95, the $0.05 he thought he was making is gone and now he has a $0.05 in negative revenue, let alone profit. If he is on a 35% profit margin, he makes no profit. His opportunity to make any money at all passed him by a few hours after he sold the newspaper to you.

This requires fast action on his part. Even if he is successful at getting rid of the dollar you gave him within 24 hours, he is losing substantial money selling newspapers. So he raises his price each day by $0.10 per day, and the newspaper is similarly raising prices, by the end of the month he is charging $30 for that newspaper and praying for $1.50 revenue. Since all prices are going up, the increase to $1.50 represents not an increase in the value of his revenues or profits but only break-even, along with the insecurity of not knowing if he is raising prices enough to overcome the effects of inflation.

In the banking world this is called a credit component. It is one which the current players ignore because it doesn’t produce any real effect in an environment where inflation is not a significant factor in commerce, loans, or payments. But in a hyper-inflation environment, the merchant is not actually doing a cash transaction with you; in fact, he is giving you credit for the the value of the cash you give him and delivering merchandise or services based upon that credit.

That is what is meant in public trust or faith in currency, something which is rapidly disappearing from the current landscape as it pertains to the U.S. dollar. If he is unable to to achieve full value for the cash you give him, then he will charge you to compensate him for the known prospective loss, plus an amount to compensate him for the risk that the mutual projectors (buyers and sellers) might be wrong.

The meaning for every individual is that every effort should be made to move toward a job or negotiation in your current job in which your compensation is tied to inflation. If you make $3,000 per month and your rent is $1,000, that is fine. But if the rent is tied to inflation, which it will be, and you get only $3,000 because your income is not tied to inflation, then in our model above, your rent could have increased to $30,000. Sounds ridiculous! But it has happened many times in history and several times in American history.

Another meaning for individuals who own homes is that they are sitting on a veritable gold mine, particularly if they have a mortgage. First, even if your income does not go up with inflation, you will still be able to pay your mortgage payment. Here the bank takes the full loss from inflation, getting pennies in value on the dollar they bargained for when they set the terms of your mortgage. So stay in that house if you possibly can.

Second, the value in dollars of the house is going to go up even if there is a decline in demand. So if the demand goes down 20% and inflation is up by 3000% (in our exaggerated —we hope — example), then your $400,000 house is now priced at $12,000,000 less 20%. Real estate brokers who receive their compensation as a percentage of sales price will see the dollars go up but they too will be stuck in the same cycle of the newspaper seller — what to do with the money when they get it and how fast can they do it? And by the way, if you sell that house, you are also in that same position as the newspaper seller and if you want some place to live you will be paying the same inflated prices.

The message here for banks who give loans, issue credit cards, or even prepaid debit cards is clear. They must develop a mechanism acceptable to consumers that will protect the issuer of credit from losing money and in fact going out of business by lending $1.00 and getting back $0.03 WITHOUT A DEFAULT. It therefore behooves all issuers of credits to re-negotiate their loans with incentives to borrowers to accept an index to inflation, which we have been proposing for months.

By reducing the principal that is amortized on the loan and cutting the payments so that it is irresistible for the borrower to stay in the house, the bank’s loan can be saved, the capital reserves can be preserved, and the financial markets stabilized. It is even possible that the dollar will stabilize or find some equilibrium. Most likely though, the Euro will become the dominant currency. This is a message for investors. Get out of U.S. dollar denominated “safe’ investments and convert to equivalent Euro and Asian investments whose currencies are NOT tied or pegged tot he dollar.

For the companies that process or handle payments, ATM transactions and credit transactions, they too must adapt to the new environment and possibly hedge with Euro or other currency accounts. Ironically payday loan companies might be the least susceptible to losses and might be the beneficiaries of outside investments since their loan cycles are so short. Hence their risk of loss is minimized by time and their ability to change loan terms to index on inflation is much easier.

For the rest of the electronic data processors and networks, the problem is severe. Nearly all transactions are primarily based upon upon fixed charges (with some exceptions in credit and foreign exchange fees) per transactions rather than a percentage figure. Hyperinflation will put these companies out of business as their cost of business goes up with inflation and their revenues remain flat. Further, the settlement lag, while shorter than any other time in history could still negatively impact several of the players.

A $100 purchase might be credited to a merchant within a few days. By then the value of the credit to his account is less than the value of the transaction performed. Unless intercept processors, gateway processors, networks (VISA, MasterCard, STAR, NYCE, COOP, CU24, Pulse etc) can provide some protection to themselves, their settlement banks, their sponsor banks, the merchant or ATM operator for inflation, we might travel backwards from an electronic payment society to a cash society. This will increase the demand for printed currency which the Bureau of Engraving and Printing is ill suited to satisfy. Increased demand for scarce dollars that are barely worth anything to begin with might ameliorate or aggravate inflation depending upon how it actually plays out.

Most likely, as in New York, the Euro or some other currencies will be the currencies of choice which will pull down the value of the dollar further. ATM’s will have to issue Euro and/or other currencies.

Only Point of Banking ATM (and to a much lesser degree) Point of Sale (POS) terminals that allow the merchant to issue currency from the merchant cash drawer can possibly adapt quickly to this very likely development. It might be possible that different currencies might be preferred in different parts of the countries. On the East Coast it might be the Euro, on the West Coast it might be the Yen or Yuan, in the Southeast United States it might be the Brazilian Real or even the Mexican Peso, and in middle America it could be the Canadian dollar. These terminals exist in relatively small numbers throughout the United States, and are expanding rapidly in emerging nations all over the world for precisely this reason.

Dollar denominated accounts are going to be hit with Foreign exchange (Forex) fees while double denominated accounts (two or more currencies) will avoid the problem. A proliferation of a basket of currencies supporting a single depository or investment account is likely to occur to assist people in coping with the changed landscape of American society and economics.

Government money managers, notoriously risk averse, as they should be, a slow to react, are like to get hit hard. If they do not hedge their agency or government or pension funds, the losses to fixed income individuals, the loss of services in local, state and federal government circles will be staggering and life-altering.

Filed under: bubble, Bush, community banks, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: ATM, BEAR STEARNS, credit, euro, POB, Point of Banking, Point of Sale, POS | 9 Comments »

Euro Dominance And American Policy

Posted on March 14, 2008 by Neil Garfield

Get with the Program: Challenge for the Obama Presidency. Fundamentals vs. Brute Force

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro as the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” Rather than the old methods of brute force, Obama’s message of consensus will do more to stabilize our economy and foreign affairs than any of the proposals of his opponents or prospective opponents. Far from being in the clouds, Barack Obama, reflecting his experience at ground level on the streets of Chicago, understands the true dynamics of achievement, especially when it comes to peace and prosperity.

The European Union and the creation and adoption of the Euro as a competitive currency to the U.S. dollar was an inevitable bi-product of the Bretton Woods agreement and an American policy that pursued brute force and meddling in the affairs of other nations rather than the rather simple logic employed by such countries as Ireland, Brazil and Venezuela who have all achieved status by investing in their greatest resource — their own people. As nations join the European Union and the Euro gains increasing market share, the perceived safety of the judgment of a council of nations rather than dominance of a single nation is becoming apparent.

Things change. While the definition of “money” has not generically changed, the character of money has fundamentally shifted in every conceivable way. Agreement, acceptance and faith are elements of human interaction and society. They are also the cornerstone of “money,” by which we measure the value of things, store value and exchange goods.

It is common theme that the perceived dominant world player has had its currency adopted by most of the commercial world and the governments of other sovereign nations.

Prior to the dollar, it was the pound sterling. Over centuries the main currency of world commerce has shifted from the fiat money of one country to another depending upon world perception of the strength of their economy and their political and military strength to maintain their position.

Everyone has their “fifteen minutes” and then it is up — but nobody gives up their position without a fight. Sometimes the fight is world war, extended regional wars or other military confrontations. Other times it is a diplomatic and commercial battle in the marketplace of ideas and the relative strength and weakness of competing treasuries.

In the end, for better or worse, a new consensus arises and the currency of the dominant country shifts along with the enormous economic, political and social power and influence that commercial dominance endows the creator of the most favored currency.

In 1944, world leaders, prompted by “economists” and pure commercial interests came up with the forerunner of the new world order emerging today. It was the Bretton Woods conference. It was a formal meeting of sovereign nations and a negotiated agreement as opposed to “market forces” or competing unilateral sovereign agendas coming into balance. It was consensus of the kind that Barack Obama proposes and which even our enemies embraced as they have ever since scurried to enhance their holdings of U.S. dollars.

This event marked the beginning of a process that would pacify the U.S. and its ever-expanding ambitions, but ultimately end up with a shared unity that was NOT tied to whims of a single government. It was a relinquishment of sovereignty that could not and would not become undone. It would grow and evolve causing pervasive changes in business, banking and relations between countries.

The Bretton Woods Agreement did two things — set a gold standard, which was a temporary measure that only the the most forward thinkers understood, and set the currency for international (world) commerce as the U.S. dollar which was tied to Gold at $35.00 per ounce.

Using gold is a standard that was hardly new. Yet the process of formal agreement was new and that process would emerge as the only lasting impact impact of the conference.

Gold was valued because of its scarcity, its beauty and mythic reverence that was in the minds of believers from the dawn of commerce. It worked because of two factors — on the one hand a subjective set of factors including agreement, acceptance and faith and on the other, a scarcity that was somewhat controllable by additional mining. Periodically, gold strikes wreaked havoc with the price of gold but on the average it has been a relatively stable influence on commerce.

The weakness of Gold was in its relative scarcity to population growth and related growth of commercial activity on the one hand and in the meteoric changes in the nature of money which has become increasingly symbolic tot he point where now most of it merely exists in electronic data files that nobody can touch, feel or roll around in their hand. There is no slight of hand coin trick to display for amusement because there is no coin.

Putting these factors together brings us to the inescapable conclusion that the supply of gold could not possibly keep up with the growth of human society. Indeed that was the precisely the issue when Nixon and Volcker, in 1971 decided to withdraw from the Bretton Woods agreement, and NOT promise to back every dollar with gold valued at $35 per ounce.

While viewers of the popular show Bonanza were doubly disturbed that their favorite program was interrupted by the President on a lazy Sunday evening and that their currency was suddenly in free fall, the Nixon-Volcker decision was merely a statement of the obvious — the U.S. already was out of balance three to one (gold on hand versus dollars issued) and the situation was clearly permanent and getting worse. We had in fact passed the point of no return very soon after the Bretton Woods agreement was signed.

This decision eventually brought the U.S. back to dominance of the the perceived leader on world affairs. But lurking underneath was the positive knowledge of other world leaders and people who would become world leaders that an agreement was not only possible but inevitable. As long as the dollar was useful it would remain the currency of choice. Now the dollar’s usefulness is in doubt — the result of “creative schemes” from wall Street, overspending, failures to invest in itself and the inevitable downfall of the two engines of any economy — production of goods and services that people want, and the ability of people to pay for them.

This represents a fundamental but entirely logical shift. It is a change from the acceptance of brute strength to consensus — a somewhat democratic consensus that captures the spirit of the American experiment if not its announced policies and secret agendas.

It logically follows that the tide is changing with such force that it is unlikely that any one nation, no matter how strong, will gain world acceptance of its currency as the currency of choice for world commerce regardless of its military or political power. In the end it is people who determine agreement, acceptance and faith in the marketplace.

When people start making distinctions of their own as to which “band” of dollar has greater value (recently issued or older) and discounting the dollar based upon their own individual perceptions the currency is in trouble. There are places where the signature of one U.S. Treasury secretary over another results in a discount of 10% or more.

Thus it is the either the Euro that will eventually overtake the dollar or some other emerging union that will find acceptance. The dollar is in free fall and no amount of bailouts, regulation or creative solutions will suffice. The goal post has been moved.

American policy should be changed to reflect the paradigm shift — to determine ways in which we would be an acceptable member of the European Union and gradually shift to the Euro has the currency of choice. In order to accomplish this, U.S. leaders must guide the country back on track toward production, rather than perceived “productivity” and purchasing power rather than perceived “corporate earnings.” There are plenty of examples around the world as to how to do this — they all amount to the same thing — education of every man, woman and child, in skills, culture, knowledge and analytical ability. The words are very simple and have already been written: “The pursuit of happiness.”

Filed under: bubble, Bush, CDO, community banks, credit unions, currency, education, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: Barack, Brazil and Venezuela, Bretton Woods, dollar, euro, Ireland, Nixon, Obama, Obamanomics, Volcker | 2 Comments »

Mortgage Meltdown Tragedy: No Checks, No Balances, No Honesty

Posted on March 10, 2008 by Neil Garfield

Reality Check

Before we go forward with who called who a monster, or Ken Starr, bringing back memories of deceit, sex, lies and and videotape, let’s do a reality check. People are hurting and the candidates are getting information from advisors who simply don’t get it: the monster here is the economy, reflecting society decisions that are having screamingly negative consequences in people’s daily lives.

Whether some adviser made an off the cuff remark does not address the real issues. We are bleeding all over the place — housing, jobs, the dollar, earnings, wages, purchasing power, and of course the Iraq war which represents an expense that cannot be covered and will drive up inflation to incomparable levels.

But more than anything, it is the story of people, one at a time who are trying to make it. The stories are heart wrenching as the American Dream fades away from them while the Judiciary, the legislatures, the congress and the President do nothing but argue over ideology. While I don’t agree with everything this reader says, I agree with 99% of it. As we do pause for our fallen heroes in Iraq, take a moment and read this, a story of the fallen heroes who fought for, achieved and lost the American Dream.

Neil,

I had drafted a reply to your message many days ago. In it I had waxed so eloquently in regards to our situation, the same or similar, as that so many others are finding themselves in.

It being that which may well prove to be our ultimate destruction…

…Despite our unwavering decision to fight the good fight for all that we’re worth!

It is an overwhelming and discouraging thing, to find one and ones family the target of such an attack by predatory lucre loving vermin, disguised as lawyers, bankers and “real” human beings!

Vermin who have made it their goal to rob millions of people of billions of dollars and property, by manipulating and coercing the uninitiated public into forfeiting, not only their wealth and the fruits of their toil and tears, but also their very homes, and sense of sanctity, safety and security…

…All in the name of “business” and “making a profit”!

It behooves us to comprehend how “making a profit” can be considered “profit”, when the “rewards” come from theft and deception?

In our obviously defective perception and understanding of the term “profit”, it has always meant the reward of gain that was received through the investment of something that one had right to, or had earned, and which had yielded fruit from being so invested.

Profit cannot, by our understanding, come from theft or guile, only the exact opposite can be claimed as being the reward for such negative and patently evil acts!

Thus, the manner in which these evil beings has contived and conspired to strip, not only us, but everyone who lives, as we all have need of shelter and sanctuary, as is offered by a “home”, and a “dwelling”, of every bit of the fruits of our labors, is completely and unspeakably reprehensible and unconscionable!

This is especially compounded when the thefts are then converted into “legal” business transactions, through the deft manipulation of the so-called judicial system by these vermin!

There once was a time when the term “legal” was synonymous with “right” and “just”.

But that comparison is more of an exact antonym now. And it has become completely unsettling and deeply disturbing to see how wrong has become right, and that right no longer exists…

…Outside of some imaginary quality of character. and illusionary precept for a standard of personal conduct that is but a fading memory of another era, and which has died, or become extinct through lack of use, or belief.

To have watched, over the years, as the sole motivation for the peoples of a society, of which one is a member, has become the pursuit of personal enrichment for oneself, and damn the cost or expense that ones own gain of lucre may cost another, is like watching one’s own death while millions stand by, able to intercede and to stop the untimely demise, but whom remain unwilling to do so, without being compensated for doing so.

The fact of the matter is that we’ve become so acutely aware that the rampant greed which is consuming the people that were once considered fellow countrymen and women of ours, that it has resulted in our own awareness of being as aliens in a strange land!

Not one of the multitudes of persons and businesses that we have paid out thousands to, for aid and assistance in our attempts to turn the tide of the onslaught against ourselves, and that against multitudes of others, also, has served to buy us one bit of genuine and effective help, or provided the least amount of effect in stemming or diminishing the effect or result of this attack.

On the contrary, the greed has so overcome this society and it’s more`s and morals so completely compromised, that no one seems to feel compelled to even try to live up to their promises of providing the services and/or results, for which they all demand to be paid so handsomely for, in advance!

One becomes painfully aware that the entire society, as a whole, has become nothing more than a pack of predators. All of whom, seek to devour the individual and consume all of their resources, with as much compassion and finesse as that exhibited by a feeding school of piranha’s!

We’re fought the good fight, so hard and for so long, that we’ve now been completely drained of resources, and our very spirit’s have become consumed and are nearly extinguished by the multiple manifestations of oppression and evil that have engulfed us and our lives!

It becomes easily understandable what should so motivate those poor deranged individuals, whom one hears about on the evening news, with increasing frequency, whom go into some public place, somewhere, pull out their arsenal of armament, and begin mowing down “innocent” victims, in droves!

One can easily imagine that these poor deranged individuals were once normal and compassionate person’s, also…

…And, in fact, the true “innocent” “victims” of that self-same society, which they seek to lash out at…

… In a futile and self-destructive last dying act of self- defense!

For so long, now, we have held the belief that we would be able to overcome this onslaught against good, right and decency.

And that, in so doing, we would be able to become members of a vanguard wave of change.

Whereby, we could assist others in winning their own battles in this cause. Helping to guide them through the mine field, obstacle course, pitfalls, snares and booby-traps that await them, and, thereby enable many to reach that same elusive (and apparently imaginary) goal that we have fought so diligently and faithfully to attain.

Unfortunately, those opposed to us have been doing what they do for so long, that they have become far too efficient and proficient, from experience and practice, for the efforts of those like ourselves, taken in response to their greed and aggression, to be of any genuine use, or effect.

It has become impossible to continue to resist any longer and still retain sufficient strength, and barely adequate resources, to even move one’s physical presence and property to some other location…

…Though God, alone, knows where that might possibly be, and He seems to have no concern, regarding us in this matter, any more…

We’ve exhausted far more money, and all of our time, spirit and attention, in fighting these thieves and crooks, than ever would have been required, had they not taken the initial illegal steps of wrongly declaring us in default, and then manipulating the payment history and records, thereby making it impossible to determine even who had actual possession of the note and right to initiate the foreclosure proceeding, or who, in fact, actually had begun it?

Through deception, sleight of hand, and hiding behind so many facades and fronts, the bankers have perfected the mechanism by which they do steal all of the wealth of the people, and once they have wrongfully taken that, then they take the people’s homes, also!

This country is being destroyed, even as I write this, by these evil people…

…And, all of the wealth and fruits of our labors were, so long ago, traded off by traitors to our country…

… Those who were elected to serve and protect, and now we have all become serfs to the elite, the European banking cartel, which owns and controls the entire wealth and governments of the world, and especially America!

For three years we have fought valiantly to make our stand for what is right…

But, when faced with the unlimited resources at the disposal of our enemy, it finally becomes a matter of nothing more than defeat by attrition, in the end.

Even our faith in the Omnipotence and Omnipresence of God, has served to provide no reconciliation nor reprieve in the matter, and we feel that we are merely living out then last dying nervous twitches of a corpse that has already had it’s head detached and it’s heart removed from within it’s chest.

It is easy for one, whom has not been subjected to such evil and oppression, to encourage those whom are, to hold on and continue to fight.

But you have no idea the toll that it takes upon one, when one’s entire life becomes focused on defending oneself, and ones family, from such a relentless, heartless and continual onslaught and never ending attack, being made by far too many persons, on far too many fronts…

… Nor the depth of despair that engulfs one, when they realize that they’ve effectively wasted the last years of their life, in futile resistance to a lost cause, and an impossible to win, in their own strength, against such organized and specialized forces, battle for their rights and property, not to mention morals and ethics!

At this point in time, we’ve been reduced to having to declare an emergency bankruptcy, in order to temporarily stay the enforcement of a Writ of Restitution, and of having only approximately $3,000 worth of the Federal Reserve debt notes in our possession, which we can either exhaust by throwing them in with all of the others we’ve given in vain to save ourselves from this grievous wrong.

Or, to finally admit defeat, and drag ourselves off into some dark corner, to hide and lick our wounds, hopefully to survive to fight another day.

Our lives have been irreparably damaged, our peace of mind destroyed, and our personal resolve and resources bankrupted.

The only thing good that has come of this, is that those behind the banking cartel that controls this country, and the entire world, for that matter, have earned themselves one more dedicated enemy, whom shall expend every possible avenue available to them to disrupt, harm, hinder or destroy anything and everything that those evil and demon controlled and inspired excuses for humans ever say, attempt to do, claim to possess, or stand for, and to encourage anyone who will listen to do the same.

Alone, we may not have been able to stop them from destroying our lives and stealing our home…

But, thanks to the power of the internet we’ll be able to multiply the effectiveness of our responses to their thefts and attacks, and we are certain that we shall cause them far more harm, damage and expense than they could have incurred, if they’d not sought to steal our home by fraud and deception.

We possess one thing that they can never steal, nor rob from us….

…The absolute knowledge that ours was, and is, a noble and righteous cause, and that, in the end, we win!

Despite any appearances to the contrary in this material world, here and now.

Thank you, kind sir, for your encouragement and attempt to solicit some assistance for us. We’re afraid that it’s far too little, and far too late, to be of any good or effect.

I never thought that I’d say this….

..But, we give up!

It’s become the only choice left..

… If we are to even survive at all!

And I won’t subject my wife to the humility of being forcefully ejected by the sheriff’s from what is rightfully our home….

I’ll put the match to it as we walk out the door, before I’ll let those bastards steal it, though!

The shame of it all is that we have a winning case, but no longer possess the outrageous retainer fee that any competent counsel demands before accepting our case…

…And our window of opportunity to defend ourselves in the matter closes on April 20th of this year!

Goddamn it, all to hell!

With that, I close.

Good day, Neil,

Filed under: bubble, Bush, CDO, CORRUPTION, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Obama, politics, securities fraud, Uncategorized | Tagged: American Dream, dollar, housing, Iraq, jobs, Ken Starr, monster, wages | 2 Comments »

MORTGAGE MELTDOWN REMEDY: SEND THIS NOW TO YOUR STATE SUPREME COURT AND LOCAL COURT SYSTEM

Posted on March 8, 2008 by Neil Garfield

The problem for homeowners is that however many ideas are put forward they won’t be effective in time to save most people, they won’t be in time to save the economy, and they won’t be in time to save our currency from further wrenching devaluation. It is the fierce urgency of now that cannot even wait to the election or January 20, 2009. There is only one place where immediate relief can be achieved — the Court System. There are constitutional impediments to interference with the mortgage foreclosure process. Yet there is authority in the judicial system to change the rules as long as it does not significantly impede or in this case, it should enhance access to the courts and the ability to mount a credible defense to foreclosures on predatory or fraudulent loans.

These are the rules that could be enacted by each court in the land that would [a] slow down the process and [b] protect borrowers from the steamroller of lender foreclosures and [c] protect lenders, investment bankers and investors from themselves. These rules preserve and enhance due process so that the unsophisticated borrower is not wiped out again by his or her lack of knowledge.

Emergency Provisional Rules

Mortgage Foreclosures

These emergency rules of civil procedure apply to all foreclosures on all property, real or personal, initiated on or before January 1, 2007. No Judgment shall be executed, or if already executed, enforced, and no order of removal or eviction or seizure related to foreclosure shall be executed, or if already executed, enforced unless a Court of competent jurisdiction shall have executed an order finding as a matter of law and fact that the foreclosing party(ies) have complied with each and every provision contained herein.

1. Every Petition for Foreclosure and/or every action undertaken by a foreclosing party prior to seeking recovery or seizure, or occupancy of property, shall require the foreclosing party(ies) to file a verified complaint or affidavit alleging the facts supporting the claim for relief, executed by a person with actual knowledge of all facts alleged. The executing party on said verified Petition or affidavit shall affirmatively allege and actually be available for the taking of testimony by deposition or at an evidentiary hearing in the jurisdiction in which the property is located.

2. Each such Petition or Affidavit shall state the names and addresses of all parties involved in the loan transaction and shall be served under the rules governing service of process upon each of said parties as third party non-party litigants, if such parties were not the lender or borrower.

3. Each such Petition or Affidavit shall account for all funds that were passed through or to each party named in the action, the disposition thereof, and the manner and time in which the passage of said funds were dispersed, together with a citation to the mortgage documentation, including a quote of the relevant passages in the body of the Petition or Affidavit wherein said funds are disclosed and wherein said funds are authorized.

4. Each such Petition or Affidavit shall state with particularity whether any changes occurred after the closing of the subject loan transaction in which parties or persons were changed including the names and addresses of all parties and persons related to the transactions subject to the mortgage.

5. With respect to sale or assignment or any joint or sharing arrangements concerning ownership, distribution of risk, or securitization in which the subject loan was referenced as collateral or otherwise, each such Petition shall state with particularity the details of each such transaction, the distribution or re-distribution of funds, and the documents employed by said parties after said closing.

6. Each and every such Petition or Affidavit shall affirmatively state that the foreclosing party(ies) have standing and authority to bring the action, defend counterclaims and answer affirmative defenses. The signature of the attorney on said pleading shall be mandatory and shall constitute a representation to the COURT that the filing attorney has performed proper due diligence to ascertain the truth of the allegations of legal standing and all other allegations.

7. Each such Petitioner or Affidavit shall be accompanied by attachments of the referenced documents to be included with the first service of such Petition or Affidavit.

8. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which supports said disclosure.

9. Each such Petition or Affidavit shall state with particularity and specificity each disclosure made to the borrower and any third parties involved in the transaction under the Truth in Lending Act and the corresponding provision of the mortgage documents executed by the borrower which does not support said disclosure. If any allegation other than “none” is made under this paragraph, the foreclosing party(ies) shall state with specificity the law or fact upon which they should be excused from compliance.

10. Each such Petition or Affidavit shall attach a full and complete accounting of all money, value or funds transmitted, paid or or promised between all parties involved in the loan transaction before or after the loan transaction. In the event the borrower has been overcharged, undercharged, or charged correctly, the Petition or Affidavit shall so state affirmatively, providing a full accounting of said funds.

11. No answer or response from the borrower shall be due unless and until the foreclosing party(ies) are in complete and full compliance with the provisions of these rules. Any prior answer or response may be amended by the borrower after a determination is made that the foreclosing party(ies) are in full compliance. No prior Judgement, order or other document or rule shall prevent the borrower from filing a response or answer after the foreclosing party(ies) are found to be in compliance with these rules.

12. In the event that the foreclosing party(ies) fails or refuses to comply with these rules, the foreclosure shall be barred with prejudice and until the terms of the mortgage are determined with certainty by the Court by clear and convincing evidence, no payments to the mortgagee shall be due. This provision that not apply to payment to taxing authorities. In such event of delay caused by the the foreclosing party(ies) the court may fashion such equitable remedies as the Court deems fit in its discretion. for example, the Court could apply delinquent payments to the end of the mortgage, thus extending the terms.

13. In the event of non-compliance with these rules wherein the foreclosing party(ies) demonstrate to the Court the probability that they could amend their filing to conform to the requirements herein, the foreclosing party(ies) shall file an amended Petition or Affidavit on or before thirty (30) days from the date of the order of the Court allowing the amendment. Failure to file within said thirty period shall be grounds for a mandatory immediate dismissal with prejudice.

14. In the event of the filing of a verified amended Petition or Affidavit, Borrower shall have sixty (60) days in which to answer or respond. Failure to answer or respond shall not relieve the burden of proof of the foreclosing party(ies) in compliance with state, local and Federal law, and in compliance with these rules.

15. The Court may grant attorney fees and costs to the prevailing party in each case where a motion or other filing occurs, wherein a determination is made in an adversary proceeding that the filing is in or out of compliance.

16. In the event a foreclosure has already been completed and all subsequent and customary actions have occurred and no bona fide third party has taken control or occupancy of the property, these rules may applied retroactively.

17. Once compliance has been established and the issues are joined, the Court shall enter an order requiring the parties to enter into a process of mediation. The purpose of the mediation shall be to fashion a settlement which provides relief and incentives to all affected parties, including non-party litigants. Mediation shall take place no earlier than thirty (30) days after the entry of the mediation order, and not later than is reasonably possibly given the volume of cases and the availability of competent mediators.

These rules are subject to review by the Court but are effective immediately. Comments and applications to be heard shall be available in keeping with the usual and customary methods of proposed rule changes. Said rules shall be effective unless and until stated otherwise by the Court.

Filed under: bubble, CDO, community banks, credit unions, currency, Eviction, foreclosure, foreign relations, GTC | Honor, inflation, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: Clinton, depression, Eleanor Roosevelt, jobs, judiciary, McCain, Obama, Pelosi, recession, State Courts, Supreme Court | 2 Comments »

Mortgage Meltdown: NAFTA-Gate

Posted on March 7, 2008 by Neil Garfield

NAFTA-GATE

The mortgage meltdown is a by product of many different unsavory things. One of them is the effect of NAFTA and our complete lack of control over our borders which has suddenly sliced into the ability of middle-class to keep their job, get a job or earn enough to pay the mortgage and other expenses, even with multiple incomes.

NAFTA-GATE is a good thing. It focuses attention on a central problem. When President Clinton signed it, congress loved it, Hillary praised it right up until 2 years ago despite the obvious loss of jobs, and the American public didn’t understand it. Now that we are starting to understand it, and we don’t like it. The more we learn about how it is being executed, the less we like it. Executive ability again comes front and center.

Canada has its own problems with lower wages and loss of economic power. They have their own interest in seeing changes in NAFTA. It is quite likely that they reached out to find out what specifically the candidates had in mind.

Obama’s people, according to the latest reports simply repeated what he had said in public.

Clinton’s people apparently did two things according to the very latest information — [a] reassured Canadian officials that campaign rhetoric is not policy and [b] got someone in Canada to leak an anti-Obama memo that would give Clinton an advantage in Ohio and Texas. Clinton admits that the untruthful NAFTA leak gave her an advantage. This eliminates Obama as a likely player in the creation of this script.

With investigations started in Canada, demands for resignations, accusations of meddling in American politics, apologies and finger-pointing we are once again left with dishonesty on the part of SOMEONE in the Canadian government, SOMEONE in the CLINTON campaign, and at least confusion in the Obama Campaign. It seems obvious that the one with the most likely access to Canadian officials would be Bill Clinton as former President since Obama had very little to do with Canada until now.

Once again we are dealing with a failure of executive leadership on the part of the Prime MInister, who should have had a handle on this if neutrality was the objective and a failure of executive leadership and judgment on the part of Hillary Clinton who was either dishonest or didn’t know what was going on).

Once again we are diverted from the real issues of renegotiating or opting out of NAFTA. In theory it was a great idea. In practice it is killing us. Canada could start with publicly stating its position on NAFTA, what it likes and what it doesn’t like.

The Candidates have started that discourse, but whether Clinton means what she says now or intends to return to her consistent praise of NAFTA and pride in her husband’s achievement in signing NAFTA is anyone’s guess.

Filed under: bubble, CDO, community banks, CORRUPTION, credit unions, currency, foreclosure, foreign relations, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, politics, securities fraud, Uncategorized | Tagged: Barack Obama, Canada, dishonesty, Hillary Clinton, jobs, NAFTA, NAFTA-Gate | 2 Comments »

Mortgage Meltdown: Investor Alert: Fasten Your Seatbelt

Posted on February 15, 2008 by Neil Garfield

Events today lead me to say that the risk in holding “safe” AAA government or corporate bonds is far higher than they are priced. This does not mean that there will actually be defaults. But my analysis indicates that, at a minimum, several municipalities and corporations will default on their bonds this year and next year. How bad the situation will actually get is really anyone’s guess, but the comments released today from Dodd, Paulson and Bernanke are blunt admissions of the risk of something much worse than anyone is actually saying out loud.

Even if the situation does not get as bad as it looks to me now, it is going to at least look far worse and that will have its own repercussions. Times like these are not necessarily buying opportunities.

The bottom line is that the dollar continues to be at risk, corporate earnings are at far greater risk than one might suppose, price-earnings ratios are almost certainly going to decline on average on U.S. based companies and probably all companies, and bond and loan defaults of all types and sizes are going to rise for sure. The outlook, in terms of risk, is basically red alert for any U.S. Security or any account held in U.S. dollars. I would say that at a minimum this outlook cannot change for at least 2 years. I am suggesting that you consider this in making your investment decisions.

In my opinion, any (and all) investment in a dollar denominated account holding any security or “money” should be migrated to a non-dollar denominated account (even if the investment vehicle remains the same), and any “safe” (almost cash) investment vehicle should be closely examined even if maintained in another currency. Any reliable insurance or hedge vehicles that are available should be considered as options as well. Buffet’s offer to provide insurance on municipal bonds is expensive, but worth it.

I am deeply concerned for family and friends, that their “nest eggs” might be more at risk than they know. Risk is a relative term. But when it is on the rise, you have to be able to say to yourself, as my wife says, “what is the worst thing that could happen?” and if you can’t deal with that, then do something else.

If you choose not to migrate and you are depending upon your investments to cover your debt (mortgage, car etc), then I suggest you hedge the problem by liquidating investments to pay off debt. If you are going to migrate, then you should not pay down debt, as you might be able to do so later with much cheaper dollars arising from a gain in foreign exchange.

Filed under: bubble, Bush, CDO, community banks, credit unions, currency, Eviction, foreclosure, GTC | Honor, inflation, interest rates, Investor, Mortgage, Obama, securities fraud, Uncategorized | Tagged: Buffet, hedge, municipal bonds, security | 1 Comment »

Mortgage Foreclosure Defense: Careful Who You Hire

Posted on February 6, 2008 by Neil Garfield

While we are completing publication of our series of Handbooks for borrowers, lenders and lawyers, we are receiving many emails from people who are in the midst of complicated litigation or threat of litigation from their lenders. Just remember the 80-20 rule: 80% of the people out there who offer you help at any price (including free consumer advocate groups) can’t or won’t do a thing for you. Your objective is to stop the foeclosure, keep your house and get stabilized in your house situation and your overall finances. An agressive stance using existing laws and procedures is your ONLY hope and it DOES hold out considerable hope. Buried in the laws designed to “protect” borrowers from predatory practices are some REAL provisions with REAL TEETH.

The fact that someone has been through law school and has passed a bar exam does not qualify him or her to represent you . “Loss mitigators” are largely unregulated and 95% of them are scam artists just looking for a retainer. The same holds true unfotunately for attorneys, accountants and financial advisers offering these services. We are compiling lists of people whom we are carefully qualifying as competent to provide assistance. Their resumes are being sent to 772-594-6244 (an eFAX number). At present, while still inthe first stages of formation the GTC Honor System has already established informal relationships with several attorneys in the major states affected, and apparently one competent loss mitigator who employs expert mortgage auditors who examine the mortgage application and closing documents to reveal violations of truth in lending (see our blog on this).

I am careful about the structure of this venture to assist beleagured borrowers. Each person — auditor, loss mitigator, attorney, expert witness, etc., receives compensation in conformance with the laws of each state and in most cases will be paid by the lender, if the borrorwer is successful in negotiating or litigating their way out of foreclosure.

The message is do not surrender, be careful who you hire, and be as aggressive as possible in putting lenders on the defensive. They already know that that what they need is a good loan rather than an empty house. A good loan will reverse the losses they have taken on their accounting statements. An excellent article on this can be found on the opinion page of www.nytimes.com by Howard F. Millstein, entitled “Give the Banks Some credit.” He seems to be the only one who gets it: there isn’t enough money in the world to cure this mortgage meltdown. The ONLY thing that can save our economy and our homemowners in particular is to agree on putting most of these bad loans back on the books as good loans. His solution is legislative. Ours recognizes what Obama calls the fierce urgency of NOW. Both are valid.

Filed under: Uncategorized | Leave a comment »

Our Decaying Educational SYstem: An Answer from Cyberspace

Posted on February 1, 2008 by Neil Garfield

Several pilots around the country involving tens of thousands of students point strongly to a solution for education that is fiscally possible and could catapult this nation back into the forefront of innovation and education. It also presents a major opportunity for local American businesses to get involved in their communities, expand their revenues, increase their profits and boost employee productivity.

On-line education is being tested in several states with some interesting and very positive results. Criticism seems to come mostly on ideological grounds. But the home-schoolers already know that our education system as it stands is broken. Now comes a high tech solution to a low tech problem — parent – child involvement and bonding.

This is a possible way of sidestepping the high cost of renewing parts of our infrastructure while at the same time leaping ahead of where we currently stand in education, relative to our own past and relative to other countries. U.S. HIstory points to several seminal turns like this and I suspect that this is going to catch on BIG time.

Older facilities can be retrofitted cheaply to accommodate occasional classes and extracurricular activities, sports and social events while most of the schooling is done on line. Under the right direction, if the child is doing well, then the system is working. If the child is not doing well, tutoring can be offered at some local facility.

This leads to an interesting phenomenon. Only parents whose children are NOT doing well will suffer the inconvenience of taking their child for tutoring.

For the first time, parents whose approach is based upon their own satisfaction and convenience and laziness, would have an active reason to make certain that the child is learning their lessons well at home. This in turn could lead to more parent-child interaction and thus the ultimate high tech solution to a low-tech problem — parent-child involvement and bonding.

The financial savings would easily cover the re-introduction of arts, physical fitness, and all the things we were accustomed to seeing at school a few decades ago.

It could also lead to high productivity of students, enhanced by greater knowledge, more highly developed analytical skills, more nourished creative impulses, and more rounded and complete understanding of world history, geography, culture, arts, sciences and of course the basics of science, math and communication.

In turn, this means that baby boomers, like myself, would have a better chance of getting treated by a physician who is better trained and educated when we really need it, if we are still around, in 20-30 years. And it means that our children and grandchildren stand a much better chance in a highly competitive world to create entrepreneurial opportunities for themselves and get jobs that offer better lives than the generation before them.

And here is a tip for the marketing savvy geniuses. If you assume that this IS going to catch on, you have a huge marketing channel for many services and products. So for example, community banks and credit unions who offer on-line banking could include tutorials on basic personal finance and let students manage virtual bank accounts. Hardware and software providers would have easy access into each of the homes of the students if they offered basic systems to the schools for nothing or next to nothing. Companies wishing to make a name for themselves and ingratiate themselves with a community could make donations that they know will result in better candidates for employment.

Filed under: bubble, Bush, community banks, credit unions, education, inflation, Investor, marketing, Obama, politics, Uncategorized | Tagged: bank, credit union, education, marketing, online, public finance, schools, social benefits, teaching | Leave a comment »

Mortgage Meltdown from Overexuberant Wall Street Creativity

Posted on November 20, 2007 by Neil Garfield

We keep seeing bits and pieces in the media instead of the entire picture. Let’s trace the average mortgage meltdown event:

It is 2003. Builder Stan Plans Construction project, goes to 1st National Lender and is surprised to learn that the lender is very flexible. It turns out that the bigger the loan, the more the Lender makes and the lower the risk to the builder who is table to take down money from the loans that largely replenish his investment in the property. This is because Wall Street in its ever increasing creativity is experimenting with moving risk now and not just money through the use of derivatives.
Builder submits projections that are very rosy. In many cases, he gets the message to make the picture rosier. This by the way is called fraud and collusion. The Lender tells him to beef up his projections because the Lender wants to increase the loan to include operating expenses and any other expenses that could reasonably pass the giggle test as being associated with building a project.
The Lender, knowing that it has pre-sold the loan risk or has a ready buyer for the loan risk, doesn’t care anymore about the success of the project. This is the overall dangerous movement away from J Pierpont Morgan’s admonition that risk is a matter of character. Risk has now been converted to abstract numbers unrelated to any particular project and based upon averages that include figures from other real estate projects that bear little similarity to the one at hand.
The Lender is the intermediator between the ultimate source of the amount loaned and the borrower. The Lender is in substance a fee-based operation in which lenders while appearing to loan their own money are in fact merely acting as a conduit.
This is very much like the traditional role of banks — taking deposits from those who want their money protected in a bank and then lending it out in some proportion that allows the bank to keep enough money on hand to meet expected demands for cash. Except that here the Lender is not taking any deposits. But then again it isn’t left with the risk of the loan either so its depositors or capital holders are not at risk, at least for very long — unless it is found that the Lender was a willing, knowing participant, in the creation of fraudulent data for the express purposes of making the figures look appealing (i.e., less appearance of risk than actual risk) to prospective buyers.
The reason for this little conspiracy is a conspiracy not unlike the junk bond scandal, but at least they were then called junk bonds which more or less put everyone on notice that they could be worthless or at the very least were risky.
Investment Banking arms of major brokerage and depository financial institutions put together packages of derivatives called collateralized debt obligations (CDOs) which is an obscure way of saying you are purchasing a note or a bond that is “backed” by a mortgage on land and improved property. Sounds fairly secure, until you go back to the beginning of the story where the value of the land, the projected income, the value of the end product were all grossly overstated with the complete knowledge of everyone but you.
Then the Investment Banking houses obtained ratings for these obligations and even had a class of CDOs that were rated Aaa. Partly in order to convince other institutions to buy these high-rated debt securities with a risk assessment of practically zero, and partly because they were sucking on their own own exhaust, the investment banking houses actually retained portions of these “investments” in their portfolios giving the appearance of a growing amount of portfolio investments that the investment banking house had itself created. This is sort of like printing your own currency. IN fact it IS the creation of money, free money, that made everyone crazy.
Despite the actual high risk of the investment which is known to al everyone, and because they were able to buy investment ratings on these CDOs the managers of mutual funds, pension funds, retail brokerage and other financial institutions around the world were convinced to take on these “investments” to make their portfolios (and thus the manager’s performance rating) LOOK good, even though the disparity between the high rate of return and the “low” risk was apparent and put it simple terms, didn’t make sense — like the adage, if it looks to good to be true, it is.
The average Joe Investor who has money in mutual funds, pension funds, retirements accounts, and other holdings, is for the most part not even dimly aware that these transactions have taken place. He has only to look at the newspaper and glowing reports from his fund managers to “know” that his money is safe and growing, just the way it was supposed to be.
Joe Investor is driving along the road, and as it happens, he sees a sign for anew development of residential and commercial buildings exactly where his wife said she wanted to live. It turns out that the builder is none other than the builder who started this ball rolling, and who is in debt up to his eye-balls despite the appearance of being a solid long standing member of the development community and having his shares traded on a national stock exchange.
Joe and his wife find just the right house and then are presented with the final price of the house with all the extra’s, options, non-standard options, and custom features they have ordered. What started out as a $275,000 house is not $575,000, when you include the Lot premium for the fantastic view of hawks flying over manmade waters with mountains in the background.
Joe knows he can’t afford the house just like the builder knows that if the project doesn’t sell out quickly, he and any buyer who gave him a deposit will be screwed. Of course the builder won’t be completely screwed because even without the first sale, he will have taken down loan money for general and administrative overhead including his own salary.
The salesman refers Joe and his Wife to either an on-site mortgage broker or someone else with whom the builder has a “relationship.” Joe is assured that through flexible financing, if he qualifies, he will be able to afford the house.
Joe and his wife are presented by the mortgage broker with a variety of alternatives and they choose the easiest one that will enable them to buy this house. They put no money down or a very small down payment, get a monthly payment that is even lower than what they are now paying on a house that has apparently increased in value (because of “market” conditions), and they figure they are actually coming out ahead because they are getting more equity out of their old house than anything they thought they could get, and they get a brand new house just where they want it.
Because Joe’s actual income is lower than what is needed to justify the loan, the wife is told to say she in self-employed and making enough money to pick up the difference. This is also fraud, but since everyone knows about it doesn’t really seem like fraud. The lender and builder claim plausible deniability, knowing full well that Joe might very well not pay his mortgage payment a few months or years down the line because the mortgage terms will change in ways that were explained but not understood by Joe and his wife.
17. It turns out, in this case, that Joe and Mary, his wife have signed papers for a $575,000 mortgage, when you include the home equity second mortgage, and that the terms are very easy on Joe and Mary — at first. They start out with only a $1450 monthly payment which is accomplished by starting the loans out at a very low mortgage rate, partial payment of the interest which is added to the mortgage loan, and an increase in the rate and the payment starting in 2 years. And it increases quickly after that because first, the interest rate must come up to what is normal and second, the “lender” is not going to lend them money to pay the interest forever.
Joe and Mary move in and using their savings and credit cards and the equity of their prior home, they manage to complete the house which came with bare bones fixtures, no window treatments, no landscaping etc. They are now maxed out on credit card debt, acquiring more credit cards, and their savings are depleted to zero.
They don’t have to worry though because prices are going up so fast that they have $300,000 in equity in the new house, or so it appears. They know they can get a larger home equity line if they need it or sell the house at a tidy profit.
Suddenly 2 years have passed and the payment starts rising sharply, particularly on the home equity line of credit that was essential for closing. They are now being presented with a payment of $4,000 per month, which exceeds the actual income of Joe and Mary.
Joe and Mary default on mortgage and the house is sold to the Lender at auction. All the investment they made in additions to the house after closing are lost.
The Lender has assigned the servicing of the mortgage to another company and is now completely out of the picture for intents and purposes. The house sits there unoccupied, perhaps vandalized and declining in value to a point far below the total mortgage. The home equity line was wiped out by the foreclosure of the first mortgage. The actual loss of that goes back through the pipeline to the investment banks, retail brokerage, managed funds and direct investments by individuals. As it turns out Joe’s retirement account was invested heavily in CDOs and is now virtually worthless — zero as to the mortgages that were home equity lines that have now been wiped out and down some 30% on the first mortgage line that was granted.
At the moment, Joe has not fully absorbed the fact that his retirement is in jeopardy but he is getting an uneasy feeling.
What has happened is that that all of Joe’s hard earned savings, investment and retirement accounts have been wiped out by converting them from investments to fees to middlemen. Joe has lent money to himself without knowing it and crated a feeding frenzy where his safety and well-being were dead last on everyone’s list.

Filed under: Uncategorized | Tagged: foreclosure, fraud, investment banking, lender, Mortgage, pension | 3 Comments »

Borrowers/Investors Fight Back!—SubPrime Bailout Blowout

Posted on October 17, 2007 by Neil Garfield

The big boys were all about stepping up to the plate to hand back some of their hard-earned (make that unearned) profits with a bailout fund. First it was $75 billion, then it was $100 billion, today it is $80 billion and going down because in the final analysis it is once again about smoke and mirrors. They wanted to create the appearance of reassurance rather than the actuality. Front page of Wall Street Journal today gives a sketch of one of the feeding frenzies and that ensuing crashes that are happening all over the place. It isn’t pretty and it will get a lot worse. In the end, the people who made all the money are going to be looking for the tax papers to bail them out of a liability that is really all theirs. Donald Trump said it right on Larry King two nights ago. People should start kicking ass — the borrowers who stand the lsoe their homes and everything in it, the banks that cannot survive the massive write-downs that will restate huge earnings into huge losses, and the investors and fund managers who have watched their wealth spiral up and then spiral down (all on paper, nothing real) as the world turns upside down and sideways.Borrowers: Stop playing the game. Renegotiate your loans.Banks: Be creative. Let the talks begin with your borrowers and be ready to fight with the people who got you into this mess. Your borrowers and their good faith are the only hope for many banks to survive this mess. Take your head out of the sand. Investors: Stop playing the game: Demand compensation for being mislead. No surprise here. Concentrations are in Black and Hispanic communities where it was all the more likely they wouldn’t know, understand or absorb the details they were signing away their lives on. The FUND that was being negotiated between the Treasury department of a lame duck unpopular president and a greedy bunch of predatory bastards who after 10 years of doing this crap think they can get away with anything — it just might fall apart. Some players are back-pedaling. The vacuum in leadership is going to magnify the effects of black October, 2007. There are only two people in the right position to force a massive change in business methods and a bailout in proportion to the requirements of this disaster — GW and Bernanke. Neither one has the muscle or credibility to do it. The only other two people who could do it are Bill Clinton and Alan Greenspan — and neither of them has been or will be invited to try. This is going to be very messy.

Filed under: Uncategorized | Tagged: bailout, bank, foreclosures, sub-prime | Leave a comment »

Bank Bailout $75 billion isn’t enough

Posted on October 14, 2007 by Neil Garfield

Well here it is. BOA, JPM et al are getting together a fund to “buy out (i.e.., bailout) the blood soaked securities they have been spewing out into the marketplace for years. They understand the likely response of the public. They understand disaster is just days away and they are actually trying to do something about it. While it is doubtful that the $75 billion bailout will itself stop the fall, it COULD spur others into action. The $75 billion is probably 1/10th of what is needed, and even if they get all the players in line, it will mean a series of write-offs over several years (permitted by current regulations and deals with Treasury allowing them to mis-report their earnings). The write-offs will depress earnings and the scare will decrease price earnings multiples and overvaluations of start-up companies. So the market is in for a long haul of bad returns, under the very best scenario. This is future shock and culture shock coming together in the perfect storm. Deferring the cost to future generations was the plan, a greater fool theory driving the Peter principle. Unfortunately, the excess of the last 7 years or so has drained the resources of the government, and the spending (and predatory) spree at the top echelons of corporations has sucked the life out of the purchasing power of the U.S. consumer. That leaves us with about a $2.5 trillion problem over and above the $750 billion created by the credit shock caused by free money. It looks like the piper has to be paid a little earlier than anyone had planned. Templeton, in his off-shore hideaway, is well protected from what will be one of the shakiest economies in history — not because it got into trouble, but because it got so good at getting into trouble and magnified its losses into numbers that are mind-numbing. Hopefully, real estate will not suffer nearly as much as those who are mostly invested in the securities markets. High inflation, high unemployment and high interest rates are likely. Plans like this might soften the landing or defer the crash for a few weeks at a time, but that is the best they can do.

Filed under: Uncategorized | Tagged: bailout, banks, crash, credit, economy | Leave a comment »

Deadly Dynamics

Posted on October 12, 2007 by Neil Garfield

This is why the FDA should be eliminated as an agency. As the public is slowly finding out, the FDA lacks authroity, resources and will to monitor, inspect or regulate anything on its own. It basically is composed of arrogant people who either did work for food and or drug companies, do work for them now, or will work for them as soon as they get out of the FDA. The so-called lab tests are all owned and controlled by the companies that the FDA is supposedly monitoring. The net result is that the food and drug companies do everything possible to keep the FDA in place because it gives the appearance and misleading impression that the FDA is protecting American consumers when in fact they are doing nothing of the kind. The FDA provides the shield that not only allows false and deceptive advertising but also allows wild barriers to entry and policies that prevent consumers or potential competitors from getting a fair shake. The simple fact is that if the FDA was disbanded tomorrow, nothing would change except the shield would be gone and the quality of our food and drugs would start to improve. And the appearance of competitiors in a highly centralized controlled marketplace would be refreshing. The Federal Commerce Commission possesses all the necessary authority and far more teeth to prevent the labeling problems, the inspection catastrophes and at least reduce the politicization of the food and drug marketpalce. Americans are being poisoned by nearly everything they eat, drink, use of play with, thanks to the false appearance of safety created by the FDA. People want to believe the FDA does some good and want to believe their government is not part of a business marketing plan that proceeds with complete disregard to the safety of Americans. But they are wrong to believe it and as citizens of a great nation, they should get “mad as hell and not take it anymore.”

Filed under: Uncategorized | Tagged: competition, drugs, FCC, FDA, food, free market | 1 Comment »

Stupinomics

Posted on October 10, 2007 by Neil Garfield

So here is the issue. The Dollar has lost 30% against the Euro. So Europe is grumbling that US Exports are getting too cheap and hurting their producers. Good for US producers and bad for Euro producers. The free trade people point to this to show how trade is to the comparative advantage of the US and the value of the dollar must find its own level. That is true . But what is also true is that the displacement of both capital and labor is now entering a domino phase across the world. We still have the problem that the European community is starting to feel — because of China, but we will never have the same advantage as China unless we are willing to drop all restriction and regulation on the quality of goods sold. So if we are prepared to export e-coli or lead, we’ll do just fine. In a theoretical sense free trade is unquestionably the best road, except for emerging industries that need help getting started. But free trade is neither right all the time nor is it the whole story. We always seek the simple answers. The whole story includes the fact that while the long-term view favors free trade, we might never get to the long-term goals without paying attention to short-term effects — like massive unemployment and underemployment, massive inequalities of wealth and income, and disproportionate burden of taxes of all types. The third leg of this stool is that free trade is not free if the government steps in and favors the companies that have a death grip on the throat of the politicians who make and enforce the laws. That is how we end up in a tacit tyrrany (see Benjamin Rush, circa 1845) in the medical-industrial-insurance complex with ever-increasing costs and fees while keeping the dirty little secrets away from the busy consumer who foots the bill but he is not quite sure how. It is also how the predatory credit industries with credit cards, payday loans and other devices have institutionalized enslavement of the middle class — by diverting purchasing power from goods and services into wealth accumulation for the few — using interest rates that were always known and generally accepted as being beyond reason.

Filed under: Uncategorized | Tagged: dollar, euro, free trade, unemployment | Leave a comment »

It’s Not Just Enron

Posted on October 9, 2007 by Neil Garfield

Enron is just one of a long series of scams starting back in the 1960’s with changes in the rules that prompted Abromoff to Write Unaccountable Accounting. The essence of the scam is simple: put the risk on some unsuspecting schmuck and take all the money. It is the middlemen — the accounting firms, the law firms, the rating agencies, the investment bankers, and yes, the banks that clean up. They never take the loss. It is the small investor and the fund manager desperate to show short-term performance that support the scam. There are several segments of the economy that are empty shells — business plans composed of smoke and mirrors. Whether it is Boston Market which gave the money to the franchisors to pay for the franchise, or Enron or WorldCom who posted huge profits in tight margin industries, or the late spate of derivative securities many of which by their very name imply high sophistication to mask their low-down fraudulent nature.Some Chinese workers get paid a total of ten bucks to make a stick of furniture. The Chinese company that employs them gets 50 bucks. The Chinese manufacturer, sells the furniture to a jobber for $75. The jobber sells the piece to an American Distributor for $100. The Distributor sells the piece to a retail furniture outlet for $150. The retail store sells the piece to a customer for $800 with no money down and no payments until 2012. The customer signs — and here is where the real fun begins — his signed document is sold by the retailer to XYZ factoring, Inc. for $425. The factoring company sells the debt to an investment banker for $500. The investment banker packages an income fund and sells it through retail brokerage to Joe Schmuck (investor) on the street for $600, as a derivative security (collateralized debt obligation, which sounds very safe), with a return of 12%. The truth is no money exchanged hands until Joe Schmuck ponied up the $600. Then it is sent down the line and everyone gets paid. But the companies are allowed under current accounting rules to report the “sale”, the income from the sale and later the write-down when some of the paper goes bad — and they do this without the first dollar put up by either the consumer who “purchased” the furniture or the investor who will purchase the CDO security. And then these “middleware” companies report higher earnings and more people buy their securities and on it goes. The frenzy continues and prices increase because nobody dares to get out, and people fool themselves into thinking they are rich from this paper trail — until it collapses, which is exactly what is about to happen in our boom and bust economy.Joe Schmuck is the one who actually bought the furniture and doesn’t even know it much less use it. Nobody cares whether the customer who received the furniture ever pays because they are not at risk (Joe Schmuck has all the risk), and nobody cares if Joe Schmuck loses all his money a couple of years later when the pyramid collapses, because he bought pursuant to an incomprehensible prospectus that is mind-numbing even to experienced securities attorneys. The disclosures are all in there, couched in language that probably nobody understands including the author who plagiarized it from another prospectus which itself was created from cutting and pasting the work of others who cared all about form and nothing about substance. Whether it is “mortgage-backed securities” or anything else if you create free money people are going to chase it and take it. Lots of people made a lot of money on this scheme and variations of it. They are all based on hiding risk, and skirting the intent of disclosure requirements. They all produce ridiculous sums of revenue and income for middlemen in exchange for merely showing up. None of the middlemen provide value added. That is the weakness of our economy and the culture behind it is what is pulling down our quality of goods and services, our expectations and even our hopes and dreams.The reason why costs have gone down and prices have gone up is not just that the companies we see and know are making more money, which they are, but because, we have institutionalized it into a feeding frenzy that invited more middlemen in to share in the bounty. The more people in the chain, the more complex it appears and the thus the more legitimate it appears (or at least, there is considerable doubt arising from the confusing array of transactions, that anyone can prove that anyone did anything wrong).The net result is that consumers and investors get screwed. Consumers are lured by “free stuff” (like houses) and investors are lured by too good to be true returns. Nobody else puts up any money. And if the Consumer actually pays part or all of the price of the furniture, then there is even more money to split up with transaction, handling and customers service fees attached. It all comes down to a simple code of marketing in the investment banking world. If you are selling, make it complicated — then you can call it whatever you want and price it anyway you sell it. If you are buying make it simple and pay only when you understand what you are paying for.

Filed under: Uncategorized | Tagged: economy, Enron, fraud, money, securities | Leave a comment »

Hello world!

Posted on October 9, 2007 by Neil Garfield

Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!

Filed under: Uncategorized | 1 Comment »

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