DEPRESSION, DISSOLUTION AND DERIVATIVES

by

Pat Schaniel

Intro:  Pat’s really got something to say—the truth is out there—but no one wants to explain it; this helps…

Now Pat…

I'm not sending my lovely and long-winded opinion piece to everyone. Only three people.  People I hope will understand.

Don't you just love how the markets are going? how nicely firms like AIG, Shearson Lehman Brothers, etc. have been doing?

Oh, and don't you just with the stupid press would tell the true story, instead of still talking about subprimes? Wouldn't you really love to hear about derivatives and CDO's?   Hedge funds.  Private equity funds. Yadda yadda.  Nahh...let's blame it on people with nothing who took out mortgages they could not afford. (Does anyone ever ask why?...or how those mortgages got pushed?)  

I was looking for financing to build in Colorado. I have VA mortgage benefits. You know...low rate VA fixed rate. You know what? Not a single mortgage broker or mortgage banker would return my calls once I insisted I was not interested in their variable rate "products." Not one.  Not in MN or CO. No real estate agent, nobody would even entertain the idea of doing a fixed rate VA Mortgage. (And I didn't give them any info...they had no idea what my income/job/profession was.) they only knew they weren't writing any VA/FHA mortgages. Too much money on these "subprime" things.

There's a whole side to this story that isn't being told. And it's malfeasance in the mortgage markets from the top to the bottom. Some totally illegal paper switching too. And try reading those documents. At least in California, you get to read and sign all the docs before the closing. I got to spend the 8-10 hours in just reading that was required.  At a closing here...does anyone actually have or take the time to read every paper going around the table?  They'd be so angry with you if you did! But people were signing things and then they were getting switched. and those "mortgages", some of them, are every bit as complicated as the text in those annuities that mom had (and they were a NIGHTMARE). They were written by teams of very smart lawyers with the idea of being completely opaque.  They weren't meant to be understood. Conversely, they were specifically meant to NOT be understood (IMO).

President Bush wanted to issue those to everyone instead of Social Security.  But guess what? You die after a year of retirement, there's not any residual value to pass on to your heirs. You pay in for 30 years to this annuity and it pays out to you for 1 year and vanishes if you die. Hmm...wonder who makes a killing on that one?  Some insurance company?

So back to the markets...I just hate hearing "financial advisers" saying that "look at the last 100 years...and every ten year period in the last 100 years"... and they've mostly all been profitable. But you have to compare apples to apples.

What they DON'T say, is that 100 years ago, fifty years ago, twenty years ago, even ten years ago, derivatives were pretty much either non-existent or a secret. Nobody knows exactly what they are or how they operate. They're completely unregulated.

CDO's...even worse. These people have something to sell...or they have their heads in the ground...or they're just too stupid to
know what's happening.  Even the big institutions that bought those didn't know what they were; and Private Equity funds? Hah! Don't get me started.

 

You find the name of one and try to get more info. Minimum investment $500,000 (and you'd better be willing to take risks with it.) Unless you have the money, you won't get more info.

The people who invented these new "instruments" are the "rocket scientists" of the investment industry.  There won't even be much of an investigation until after the damage is done. Those investment firms were hoping for big returns and they were counting on the ignorance of the average investing public (but someone in the government knew about it...they were pushing for 'privatization' of retirement funds...to get people to pour their money into the markets...see the above comment about those annuities Bush was trying to push)...so they could use if for things like this.

The truth still has only barely been told, and that mostly on places like Public Radio and FSTV. Read your annual reports about what they do with their liquid assets. They used to invest in money market funds (short term).  Then it was commercial paper. Now it's derivatives.  Maybe hedge funds.  All the annual reports I got last year mentioned it.  So every major corporation (or at least a vast majority) of them are investing their spare cash in these derivatives. What are they?  They're the step beyond the step beyond
puts and calls.  They are basically betting on the direction of the market, totally hedged (financed.)  CDO's. Yikes. If we only knew. Heck, most people don't even know what's going on across the street.

Wow. We now know which corporations were caught without chairs when the music stopped.  But the chairs are still being pulled and there are more rounds coming. This ain't over.  I only hope that we don't outdo 1929 by a far stretch. I just wish the idiots at the top and the idiots in the press would tell the truth. (if they can understand it, that is.)  I guess maybe they don't.

Well, the financial elite have been playing their shell game behind closed doors, counting on the uninformed and uneducated status of the public (and they sure got that…taking advantage of the fact that most people had no idea what has been going on in brokerage firms and banks for the last 15 years. The thing is...you cannot compare what happened in 1929 or any other time to now, unless you find a way to compare the current breed of "financial investment obligations" to the things they had back then....plain
old stock.

There's simply no way now compares to any time before now, financially. It's like looking at wild rice and comparing it to some genetically modified, non-reproducing, mutant, hybrid rice (or rather, a product developed from the by-products of producing that mutant hybrid thing).  They just aren't the same.  But that's what's really going on out there.  Just wonder how much worse this can get?  Heck...my gas guzzling vehicle isn't dropping in value as fast as my stocks are. *Sigh* that's a bad sign.

Just remember I said all this when the game is up next year or the year after that.  When the word Depression is common and recession is considered an understatement.

And politics won't help us. They're all the same, just wearing different shades of blue suits.

God help us.  I sure hope there's cosmic justice. (I know there is, but I never thought I'd want it this bad.)

Enough. I had to vent. I was listening to nightline and sorely wanted the guy who was talking (some investment advisor or something) to shut it. He was a liar. They're trying to tell us not to panic. Everything will be okay. Yeah? Who's going to make it so? Who can fix the holes in our financial system the last decade or two worth of unmitigated greed will cost us? Who is going to lose? Not the ones with $billions. Only the ones who just had enough to retire comfortably who have watched nearly half of it go away in the last 8 months because of some Wall Street shysters.  Oh, maybe we can borrow it from:  Bahrain? China has already got more dollars than it wants—and their stock market in one year has lost 60%!

Okay. You get the picture. This makes me angry. The people who did this to the economy won't pay. Not like the people at the middle and the bottom.

They're getting crushed. What's the difference between the USA and Mexico anymore? If they declare martial law in Galveston, that'll be the last straw. We'll have become a banana republic, and the precedent for the government to lock down your community and keep you out of your home by armed force will be achieved. Once that cat is out of the bag, it's going to be another landslide like the markets/financial institutions problems are now. What will be the point of stockpiling food, or having emergency provisions or an emergency generator when they can declare martial law and kick you out of your home for weeks or longer until they can get the grid back up?

Even if you took all the precautions and were prepared? The people of Galveston aren't getting a choice. Even if they have everything they need.  So a tornado [or name your disaster type here] comes through [your community here] and they declare martial law. Forget running your generator and surviving on what you've put up....the army comes along (or maybe someone
like Blackwater Corp) and points their AK 47's at you and tells you to get out and head to the nearest "camp."  Wonderbar!

But then, you could be like McCain's campaign advisor and say that the hysteria about the economy is some kind of dream. (He got sacked for the comment...but there are certainly enough people who think that the people at the bottom are just the victims of some kind of mass delusion...that there are no economic issues.) Of course, the people who think that don't remember how to put gas in their car...their drivers do it when they're not needed.  Or they travel by private jet or helicopter. Heck...they can relate to us,
right?

Remember Marie Antoinette's famous "Let them eat cake?" Sounds familiar. A rather deadly sentiment (at least to her anyway). We're headed that way. But then...they didn't have Blackwater and AK47's back then.

I do not like the look of the clouds on the horizon. It may smooth out and look a bit better for a short while...just long enough for everyone to go back to sleep again... but there's something rotten at the core of all this.  The ultra rich with their golden parachutes don't look a whole lot different than the wealthy warlords or the drug kingpins in their Columbian compounds.  I don't see much of a difference.

I hope it [xyz company--whatever is in your retirement/401k/college fund/IRA] doesn't melt down too. But Ford did. The banks did (I dumped those in 2005 thank God.)  Only the oil companies, drug companies and bomb makers (weapons manufacturers) seem to be doing well. Hmm....

Telling the truth again, still wondering if a tree falls in the forest, and nobody is there, does it really make a sound? (Don't bother.  I know the answer. It's the idea of the question...is there anybody out there? Does anybody really care?)