Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
Comfortably Numb: Surviving the Assault on Silver - 17th Oct 17
Are Amey Street Tree Felling's Devaluing Sheffield House Prices? - 17th Oct 17
12 Real-Life Techniques That Will Make You a Better Trader Now - 17th Oct 17
Warren Buffett Predicting Dow One Million - Being Bold Or Overly Cautious? - 17th Oct 17
Globalization is Poverty - 17th Oct 17
Boomers Are Not Saving Enough for Retirement, Neither Is the Government - 16th Oct 17
Stock Market Trading Dow Theory - 16th Oct 17
Stocks Slightly Higher as They Set New Record Highs - 16th Oct 17
Why is Big Data is so Important for Casino Player Acquisition and Retention - 16th Oct 17
How Investors Can Play The Bitcoin Boom - 16th Oct 17
Who Will Be the Next Fed Chief - And Why It Matters  - 16th Oct 17
Stock Market Only Minor Top Ahead - 16th Oct 17
Precious Metals Sector is on Major Buy Signal - 16th Oct 17
Really Bad Ideas - The Fed Should Have And Defend An Inflation Target - 16th Oct 17
The Bullish Chartology for Gold - 15th Oct 17
Wikileaks Mocking US Government Over Bitcoin Shows Why There Is No Stopping Bitcoin - 15th Oct 17
How to Wipe Out Puerto Rico's Debt Without Hurting Bondholders - 15th Oct 17
Gold And Silver – Think Prices Are Manipulated? Look In The Mirror! - 15th Oct 17
Q4 Pivot View for Stocks and Gold - 14th Oct 17
Gold Mining Stocks Q3’17 Preview - 14th Oct 17
U.S. Mint Gold Coin Sales and VIX Point To Increased Market Volatility and Higher Gold - 14th Oct 17
Yuan and Gold - 14th Oct 17
Tips for Avoiding a Debt Meltdown - 14th Oct 17
Bitcoin Hits New All-Time High Above $5,000 As Lagarde Concedes Defeat and Jamie Demon Shuts Up - 13th Oct 17
Golden Age for GOLD, Dark Age for the Stock Market - 13th Oct 17
The Struggle for Bolivia Is About to Begin - 13th Oct 17
3 Reasons to Take Your Invoicing Process Mobile - 13th Oct 17
What Happens When Amey Fells All of a Streets Trees (Sheffield Tree Fellings) - Video - 13th Oct 17
Stock Market Charts Show Smart Money And Dumb Money Are Moving In Opposite Directions—Here’s Why - 12th Oct 17
Your Pension Is a Lie: There’s $210 Trillion of Liabilities Our Government Can’t Fulfill - 12th Oct 17
Two Highly Recommended Books from Bob Prechter - 12th Oct 17
Turning Point Nations On The Stage - 11th Oct 17
The Profoundly Personal Impact Of The National Debt On Our Retirements - 11th Oct 17
Gold and Silver Report – Several Interesting Charts - 10th Oct 17
London House Prices Are Falling – Time to Buckle Up - 10th Oct 17
The S&P Is A Bloated Corpse - 10th Oct 17
Are Gold and the US Dollar Rallying Together? - 10th Oct 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

You Own Junk Bonds, Like it or Not

Interest-Rates / US Debt Sep 19, 2008 - 08:32 AM GMT

By: Mike_Stathis

Interest-Rates Best Financial Markets Analysis ArticleFor many years now we've all seen the reckless use of taxpayer funds by Washington . This irresponsible and unaccountable waste of tax dollars has been particularly prominent during President Bush's tenure - from billions going to blow up bridges, roads and buildings in Iraq , only to rebuild them - to the Department of Homeland Security, which is no more than a joke. Meanwhile, America 's own infrastructure is in badly need of repair, with current estimates anywhere between $1.5 to $3 trillion and growing each day.


Has anyone asked where this money is going to come from? I guess it seems like a trivial issue given the current problems. But it's going to be a huge problem in the not-so-distant future. My guess is that Washington 's inability to pay for these repairs will ultimately lead to the privatization of the transportation department, prison system and many more services expected by taxpayers. Of course Washington will spread the myth that “we will have much better roads and bridges and a more efficient prison system when they are under the control of the free markets.” Sure we will, just like what the “free markets” have done to the energy, healthcare and financial industries. It's going to represent another gravy train for those involved.

We've also seen the absence of any accountability whatsoever from Halliburton's fraudulent activities in Iraq , www.halliburtonwatch.org not to mention hundreds of government contracts automatically awarded to Halliburton uncontested. Perhaps, it is only a mere coincidence that Vice President Dick Cheney was the former CEO of the company. Of course, this is old news but it is a reminder that these issues remain unchallenged. And we should not forget. We should demand an immediate resolution and prosecution of all who have defrauded taxpayers.

http://www.commondreams.org/archive/2008/05/31/9330/

to FEMA http://www.fbi.gov/katrina.htm

http://www.msnbc.msn.com/id/11278238/ and the Department of Defense, which cannot account for over $3.3 trillion taxpayer dollars. http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2003/05/18/MN251738.DTL

http://www.cbsnews.com/stories/2002/01/29/eveningnews/main325985.shtml

It's easy to forget so many of the devious and fraudulent activities of Washington , corporate America and Wall Street. When the media isn't distracting you with Britney Spears, Paris Hilton, Hannah Montana and O.J. Simpson, they are broadcasting shills and morons who lie about the real situation in the economy. Combine these smoke signals with the fact that Americans are struggling more than any time in at least the past three decades, and it's easy for people to forget the source of the abuse. I'm here to remind you.

Still, the abuse continues, from virtually every major drug company defrauding Medicare and Medicaid of billions, HMOs gauging prices and refusing coverage while employers shift higher costs to employees, CEOs destroying companies and leaving with dynasties, while the most fortunate segment of the working class continues the Bush-era trend of benefit cuts and no wage growth, while struggling to pay for food, gas and healthcare. Others have lost their jobs as corporations dump them for the cheap labor created by unfair free trade policies endorsed by Washington .

But taxpayers have even more pain to endure. It's now official. If you are a taxpayer, you are now an investor in the insurance, banking and mortgage industries. But you don't own profitable businesses. You own their worst debt – junk bonds. Washington has engaged in the biggest bailout of private industry in history and you can bet it's not over yet. Do you really think taxpayers are on the hook for only $25 billion for the Fannie-Freddie bailout and $85 billion for AIG? Multiply that times 4 or 5 and you get a more realistic number, although conservative number.

And for all of those “buyouts” you are hearing about, they aren't really buyouts. As I mentioned in a previous article, they are really bailouts disguised as buyouts. Why do I say this? Well, consider that the Fed is providing the banking cartel (not the mid or small banks, just the big guys who own them) with $200 billion each month from America 's best Treasury securities in exchange for “investment-grade” debt, including mortgage debt. However, ask yourself who was responsible for rating this debt investment grade. Might it be the same credit agencies that once placed AAA ratings on mortgage debt that are now junk bonds? Of course.

Instead of shuttling your tax dollars into solid investments, they have been handed out to companies on the verge of collapse. In exchange for your tax dollars, you get bonds that are likely to turn into junk. But Washington is not finished. The U.S. Treasury is now proposing a complete bailout of the entire financial system by creating the Resolution Trust Corporation as it did in the 1980s as a result of the Savings and Loan crisis. This will be an official exchange of taxpayer dollars for the entire pool of junk bonds held by the financial and mortgage industries. While the official approval has not yet come, I am certain it's on the way. You can easily count on another $500 billion of junk being exchanged for taxpayer Treasuries.

As well, understand that corporate defaults will soar even further, creating a huge junk bond market. And much of that junk is likely to be held by the U.S. Treasury. Once again, as I have been saying for months now, I can guarantee you corporate earnings are going to meltdown and corporate defaults are going to soar, causing a massive junk bond market, so get ready. But that's only the tip of the iceberg. Once defaults spiral out of control we are likely to see the implosion of the $65 trillion Credit Default Swaps market.

What kind of bozos are running this country? America can't even manage it's huge annual deficits. The national debt is already $10 trillion. The entitlements programs over the next few decades is in deficit by up to $71 trillion (in present day dollars), the Iraq War is expected to cost taxpayers a total of over $3 trillion, $3.3 trillion is missing and another $3 trillion is needed to repair the nation's infrastructure. And now taxpayers are on the hook for the mistakes of the world's largest insurance and mortgage companies and the worst junk held by the financial industry? The Fed has already loaned the banks over $1 trillion! Good God. This is indeed America 's Financial Apocalypse unfolding before your very eyes.

We are seeing the beginnings of America 's permanent collapse. There is no way America will ever rebound from the reckless actions of the Fed, the U.S. Treasury and Washington. That I will guarantee. You might not feel the full effects now or even next year. But I can guarantee you this is going to go down in history as the straw that broke America 's back. These clowns in Washington don't care about tomorrow. All they're concerned with is today. That same mentality is precisely the reason why America has been on a collision course with disaster for many years.

Even if these investments pan out do you really think you will benefit? Even if these companies made a turnaround in a few years, if you are expecting some type of tax rebate as a return on this investment you are dreaming. Sure, Washington will tell you that these companies will turn around. They will tell you that this will be a great investment and you will be rewarded with tax cuts. Think again. The only winners in this massive socialistic bailout will be the banks and the CEOs who will escape criminal prosecution.

My advice to those of you with children is to start looking to move to Asia, Latin America or Europe because America 's future doesn't look good. Unless you are wealthy, your children don't stand much of a chance to live the American Dream. Even I never would have predicted things to turn out this bad, and everyone was calling me a doom and gloomer and a nut two years ago when I predicted the collapse of Fannie, Freddie, the banks housing prices to decline by 30%, and the stock market to collapse.

More Soft Talk

The reality is even if these risky investments pan out, you can be assured the money will be squandered by Washington . I'm still waiting to see what happened to that $3.3 trillion the Department of Defense can't find and the billions missing in Iraq . If I was president of the United States you had better believe heads would roll. I wouldn't propose some preposterous firing of SEC Chairman Cox, as McCain has. Cox should be sent to prison, as should many CEOs and other principals in this catastrophe. White collar crime in is by far the most under-prosecuted crime in America, especially when it involves Wall Street, big shots, CEOs, and other wealthy businessmen.

Despite the fraud, Washington puppets and CEOs remain above the law, which very rarely leads to real penalties for those most responsible for the destruction. McCain latest attempts to show he means business give you an idea what he plans. “Honest people on Wall Street, and there are many, will have a friend in the White House when I am president.” Yea, okay…like a secret fraternity handshake, what he means is….“Guys I'm on your side; don't worry, it'll be business as usual if you elect me.” There are “many honest people on Wall Street”? How would he know? Has McCain worked on Wall Street? Maybe McCain is defining honest using his own standards, which appear to be quite low. I worked on Wall Street, and I'll tell you right now - they're all crooks; well 99% of them anyway. That's precisely why I left. As a former Wall Street colleague once told me, “If you have a brain and a conscious you don't stay in this business (Wall Street).”

Why can't Obama be a man and just say it – America 's free market economy is broken and badly need of repair. Instead, he points out the problem but stays clear of any solutions. "Let's be clear," he said, "what we've seen the last few days is nothing less than the final verdict on an economic philosophy that has completely failed."

http://www.miamiherald.com/news/politics/AP/story/688947.html

As far as I'm concerned, anyone who doesn't conduct a full investigation of this charade leading to several CEOs and other executives in prison with all of their assets being shuttled into America's bailout fund doesn't have what it takes to lead America anywhere except on its current course – downward. But it doesn't really matter at this point anyway. Washington and the greedy bankers have ensured the end of what was once a great and proud nation filled with hope and opportunity.

An Offer from Me

I've had several requests for a newsletter. I wrote what I felt was a really great newsletter a few years ago. It was geared for investment professionals so you can imagine it wasn't the typical newsletter. Regrettably, I simply lack the time in my schedule to bring this newsletter back. However, I am prepared to offer a service to those who have an interest. It will be a teleconference held once each week, for 1 to 2 hours. I will cover things most important to investors, from investment guidance, stock analysis, market forecasting, real estate, foreign markets, and investment tricks and tips. However, I will not provide individualized investment advice. If you are interested email me for more details including the subscription fee, mike@apexva.com .

By Mike Stathis
mike@apexva.com

Copyright © 2008. All Rights Reserved. Mike Stathis.

Mike Stathis is the Managing Principal of Apex Venture Advisors , a business and investment intelligence firm serving the needs of venture firms, corporations and hedge funds on a variety of projects. Mike's work in the private markets includes valuation analysis, deal structuring, and business strategy. In the public markets he has assisted hedge funds with investment strategy, valuation analysis, market forecasting, risk management, and distressed securities analysis. Prior to Apex Advisors, Mike worked at UBS and Bear Stearns, focusing on asset management and merchant banking.

The accuracy of his predictions and insights detailed in the 2006 release of America's Financial Apocalypse and Cashing in on the Real Estate Bubble have positioned him as one of America's most insightful and creative financial minds. These books serve as proof that he remains well ahead of the curve, as he continues to position his clients with a unique competitive advantage. His first book, The Startup Company Bible for Entrepreneurs has become required reading for high-tech entrepreneurs, and is used in several business schools as a required text for completion of the MBA program.

Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher. These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.

Requests to the Publisher for permission or further information should be sent to info@apexva.com

Books Published
"America's Financial Apocalypse" (Condensed Version)  http://www.amazon.com/...

"Cashing in on the Real Estate Bubble"  http://www.amazon.com/...

"The Startup Company Bible for Entrepreneurs"   http://www.amazon.com...

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Mike Stathis Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Steve Hara
22 Oct 08, 09:39
bonds

Are you aware of any service (free or otherwise) which will interprete three bond positions that I own and give me an unbiased and professional opinion as to what I should do with them?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife