2009 another challenge?

Well dear reader I hope you started well into the new year. Enjoy everything you can!

To start the new year I’d like to quote the following quote, which I found recently on the net

Human intention is a powerful energy - as powerful as an electric current - and our thoughts and intentions can influence our world.

Well dear reader in that sense, let’s think positive and thus influence our world in a positive way. It is needed indeed!

Looking back at last year, we certainly can say without doubt, that the year 2008 was a very difficult one. Just to reflect how difficult it was following a piece of information I received from a reader:

SOMETING TO THINK ABOUT...

This is a great analogy of how bad the current financial crisis is and
how overvalued it was a year ago.

1 year ago RBS paid $100bill. for ABN Amro.

For this amount it could now buy:
Citibank $22.5bn
Morgan Stanley $10.5bn
Goldman Sachs $21bn
Merrill Lynch $12.3bn
Deutsche Bank $13bn
Barclays $12.7bn
And still have $8bn change......

With which you would be able to pick up GM, Ford, Chrysler and the Honda F1
Team!


Yes dear reader 2008 was indeed a challenging year. As mentioned in my last post in 2008, I expect 2009 to be even more challenging than 2008. So, as mentioned at the beginning, let’s keep up the positive attitude.

Well let’s start the first musings of this year with the market overview from www.prudentbear.com

For the week, the S&P500 dropped 4.4% (down 1.4% y-t-d), and the Dow fell 4.8% (down 2.0%). The Transport declined 5.2% (down 2.2%), and the Utilities fell 2.8% (down 0.7%). The Morgan Stanley Cyclicals slipped 0.2% (up 4.7%), and the Morgan Stanley Consumer index sank 4.4% (down 1.9%). The small cap Russell 2000 dropped 4.9% (down 3.6%), and the S&P400 Mid-Caps fell 3.8% (down 1.4%). The Nasdaq100 dipped 3.2% (up 0.9%), and the Morgan Stanley High Tech index slipped 0.8% (up 3.8%). The Semiconductors declined 3.0% (up 1.5%),the Interactive Week Internet index declined 1.0% (up 3.2%), and the Nasdaq Telecommunications index dipped 0.2% (up 3.7%). The Biotechs were hit for 3.2% (down 1.5%). The Broker/Dealers fell 1.8% (up 1.5%), and the Banks sank 11.8% (down 10.1%). With Bullion sinking $21, the HUI Gold index dropped 7.3% (down 8.2%).

And




Well dear reader after the overview let’s go to the investment I believe to be one of the few positive investments this year. Guess what I am talking about. Yes your are right, it’s gold. Well, although 2008 was not really a great year for Gold, at least Gold closed the year with a profit, although with a small one of 5.11% only.

Apart from some Government bonds and a handful of other investments, gold was one of the very few investments that closed positive last year. Due to the high physical demand, the worsening of the crisis ahead, lower gold production, canceling of new mining projects and so on, I do expect to see much higher gold prices. We possibly will get in 2009 close to having the price of one once of gold being equal to 1 DJI.


Following the gold closings of the past years:
2000 -- $273.60

2001 -- $279.00

2002 -- $348.20

2003 -- $416.10

2004 -- $438.40

2005 -- $518.90

2006 -- $638.00

2007 -- $838.00

2008 -- $880.80

Gold

Well dear reader the savvy people at www.lemetropolecafe.com and www.gata.org have mentioned since 2000 that the gold price is kept down or controlled via the use of a gold suppression scheme. These scheme has worked for decades but it will fail because people want physical gold. In fact, because it has worked so well for the manipulators for such a long time, I think it is safe to say that we are much closure to its failure. In December 2008 we saw clearly that manipulation schemes or fraudulent schemes, although they work for quite a long time, will fail over time. Madoff’s Ponzi scheme worked until people wanted their money back. As mentioned, the gold suppression scheme will stop because people want physical gold.

Well dear reader the gold price manipulation by the “Gold Cartel” goes on. They really try everything to bring the gold price down. Guess what is their latest trick. Well they change the Gold weighting on the Commodity Index. Gold will weight in the new index only 7.9% (down from 10.8). That means that all funds linked to the index will have to sell gold. That of course will mean in the short time pressure on the gold price. Well it is no surprise that those who make the changes are short gold in huge amounts. They have billions of losses on their books. Rumors are that JPM for example is in deep troubles due to their derivative book. JPM has a huge short gold position. Of course the change in the index helps these bullion banks being short, nicely. What a coincidence indeed. Please read the report on the following link. Please take note that in 2006 the same rebalancing of the indexes was done in order to bring the oil price down. Well dear reader we are in a managed or in better words in a manipulated world. The positive side is that we get another chance to buy gold at lower prices. As with all manipulations (like with oil at that time) the outcome might be managed but only on the short term. Such manipulations however cannot change the long term trend which is positive for Gold, period.
http://www.ritholtz.com/blog/2009/01/here-comes-the-commodity-index-rebalancing/



These manipulations in fact are incredible, especially if one takes into account that the whole FIAT currency scheme is another kind of Ponzi scheme (more on the FIAT currencies and especially the USD later). Furthermore what the US government is perpetrating and has been doing so for years, is some kind of a Ponzi scheme too, giving people benefits now and promising future benefits, even thought the benefits are mathematically impossible to pay, by using new cash flows from today’s taxpayers.

On the following link, dear reader, you get access to a video interview with a Swiss money manager from Singapore. The video and especially the arguments of Kiener are excellent. Please have a look at the video.
http://www.cnbc.com/id/15840232?video=986190031


As mentioned a couple of times in my posts, the physical gold market is on fire. More and more news come across confirming that fact. Following a piece of information about the high physical demand.

Swiss gold refineries pushed to the limit by demand
By Gerhard Lob
SwissInfo, Bern, Switzerland
Sunday, December 14, 2008
Gold refineries in Switzerland are working at their limit to cope with demand for the precious metal from investors seeking ways to shield their wealth.
The staff at the Argor-Heraeus company in the southern town of Mendrisio are putting in overtime to produce gold bars for people turning their backs on the financial markets.
"I've never experienced anything like this in my whole career," Erhard Oberle, chief executive of the firm for the past 20 years, told SwissInfo.
He said the demand was so heavy that it could hardly be satisfied.
The reason for the gold -- and silver -- rush is that at a time of financial crisis many investors want real assets.
The general rule of the market is that gold is always attractive when everything else is unattractive….
http://www.swissinfo.ch/eng/front/Financial_crisis_boosts_
Swiss_gold_production.html?siteSect=105&sid=10089914&

Well dear reader, I came across many information pieces about the problem to buy physical gold. London and Switzerland seemed to be the only places where purchases of physical gold was still possible. However even in these two places it has become more difficult to do so. Following a comment found on the net.
Quote
"Just for your information I have until now been able to buy 100 gram bars through my Swiss Banks.
Today the major Swiss Banks are also out of stock of the 100 gram bar. I can still buy 1 kg and 12 kg bars, but for how long?
As you have read the Swiss mints are working around the clock and seeing unprecedented demand.
With dwindling supply and very strong demand combined with the very favourable economic fundamentals for gold, it can only be a matter of time before the gold price explodes.
Also, the current move in gold is only against weak currencies such as the pound and the dollar. When the real move starts, gold will move up also against the Euro and Swiss Franc and this will be due to gold strength not just dollar weakness."
Unquote

Well dear reader over the past years I was told several times that gold is not a good investment because it does not pay interests. Well first of all an investment that gave me an average return of 20% since 2001 (only exception is 2008) is in my opinion certainly a nice investment indeed. With a average performance of 20% I did not mind the missing income at all. Well now, guess what. Yes gold as an investment still does not pay any income but how about top quality short term investments? Do the short treasuries pay any interest? Well yes they do, they pay a meagre 0,015%. Wow, that certainly is a reason not to be invested in Gold because Gold does not pay interests, isn’t it?


Economy

First I’d like to start with an information from www.shadowstats.com
Quote
Bulk of M3 Components Surge an Annualized 63.4% in Latest Week. The seasonally adjusted data on M2, institutional money funds and large time deposits at commercial banks (M3 components that account for roughly 90% of the total measure) have shown a pattern of accelerating growth for the last three weeks (see the Fed’s H.6 and H.8 reports). In the three weeks ended December 8th/10th, annualized growth was 39.3%, the annualized growth for the last two weeks was 49.8%, and the annualized growth in the most recent week was 63.4%.
The growth here reflects a surge in demand deposits (checking accounts), savings accounts, institutional money funds and resumed growth in large time deposits. While these measures may reflect some impact from movement of personal funds out of Treasury bills back into the money supply accounts, greater impact is likely from some flow-through of the extreme systemic liquefaction launched by the Federal Reserve, and of increased bank lending, into the normal stream of commerce. Loans and leases in commercial bank credit have grown at an annualized 14.6% in the last three weeks, 9.3% in the last two weeks, and by 28.0% in the most recent week.
The good news is that the system may be starting to return to more-normal functioning. The bad news is that the cost of systemic salvation remains higher inflation, irrespective of the sharp, short-term impact of collapsing oil prices on consumer prices.

And
Monetary Base and Reserves Continue to Explode. The St. Louis Fed’s Adjusted Monetary Base in the two weeks ended December 17th was up 97.5% from the year before, versus a 74.9% annual increase in the prior two-week period. Those numbers were up from less than 3% annual growth in August, before the Fed began its latest panicked operations. When cutting the targeted fed funds to a range of 0.00% to 0.25%, Fed Chairman Bernanke and the FOMC continued to indicate they would do whatever it took to stimulate systemic liquidity — broad money supply.
Unquote

Well dear reader as mentioned a few times in my musings, I truly recommend the service of www.shadowstats.com



Following an opinion found on the net. Please take note that this opinion reflects my opinion completely. Sorry folks, I would like to let you know that everything is fine and will be rosy but, unfortunately it does not look like that.

Quote
Our 2009 Predictions
Roger Wiegand
Dec 22, 2008
"We think we now have enough data from both the fundamentals and technicals to make some serious forecasts and predictions for 2009. While 2008 was a nasty year when lots of things imploded, they are far from being repaired. Treasury Secretary Paulson told us this week there are no more surprises, which tells me we haven't even discovered but a small portion of this monster derivative mess. His ripping-off of the taxpayers to the tune of $700 billion is only a warm-up. However, the larger question for traders and investors is what could happen next and when.
In the following report we take the key global economic points and suggest the outcome for 2009."
-Traderrog
The most important news for 2008 was the destruction of the big global banks' net worth and their badly wounded ability to conduct normal business and make market-moving loans. Ben & Hank's bailout only helped the bad-boy banks reliquify themselves to remain somewhat solvent and stay in business. They are doing nothing to extend credit to any business enhancing western or global economies. The 2009 result will be no significant banker lending, taking more bailout money and sweeping additional bad loans of all stripes under the banker's rug and hiding the rest in back rooms.
The largest surprise in our view was the massive disaster at insurance giant AIG. Despite numerous injections of bailout billions, AIG remains in very serious trouble hanging on by their proverbial fingernails. The 2009 result will be a surprise crash and failure of AIG frightening the world at large causing ripples of failures throughout western and Asian nations unable to conduct business without mandatory insurance policies. Most folks have no comprehension as to the monster fallout this will create. It is in our view literally immeasurable, and this is why Paulson handed them so much money.
Our new president is determined to hand out $860 Billion to One Trillion dollars in a Herculean effort to literally buy a new economic recovery. While some of his ideas are noble indeed the overall plan
will have little effect and Great Depression II shall take hold in 2009 with crashing stock markets in May and September-October 2009. We think the worst of the worst hits in later September 2009.
During the spring of next year we see:
(1) A second larger wave of residential housing mortgage failures;
(2) The first big wave of auto loan failures and repossessions;
(3) Over $40 billion in credit card defaults, smashing the bank lenders;
(4) The first wave of commercial mortgage failures and foreclosures on shopping malls, office buildings and other commercials;
(5) And finally, the grand smashing finale of CDS Credit Default Swaps originated with No margin money or down payments! We heard today the total is 500 trillion! I cannot even fathom that number. These five converging train wrecks could take the Dow from a dead cat bounce of 10400-10800 back to 7250, or even 6600, or 5600.



Shares traders and investors have one more solid quarter, in our view to regain some stock market losses on the forthcoming Obama Trillion Dollar handouts. We think the rising share markets will help most all sectors gain some recovery and provide the illusion the bottoms are in and new bases found. The stark reality hits home after shares peak in April or early May taking an unprecedented selling high dive scaring the wits out of Americans and the watching world.

Even with these events and rising unemployment and social problems, economic observers and analysts could continue to plead the worst is over, the bottoms are in and a fine, new, shiny world of trading and investing in our bright economy lies just ahead for the fall of 2009. Then, in later September and early October, the New York, London, Tokyo and Asian markets take a monster crash. How low is low and how bad can it get? We think the Dow could end-up on November 1st, 2009 anywhere from 5,600 to a low of 3,000 or even 1,500. One guideline will be a falling overshoot of PE's on our largest, so-called international corporations posting lows of 4 to7. Today, many of them are near 18. What does this tell us about the severity of our projections?

Unemployment nationally in the USA is now touching 16%. The officially posted number is somewhere near half of that. By the fall of 2009, American REAL UNEMPLOYMENT WILL BE NEAR THE ALLTIME 1930'S DEPRESSION HIGH OF 25% UNEMPLOYED. SADLY, THAT IS NOT THE WORST AS IT GETS MORE DIRE. WE PREDICT REAL, USA UNEMPLOYMENT REACHES 30-40%. IN THE RUST BELT STATES OF MICHIGAN AND OHIO, WHILE 40% IS NOT UNREALISTIC.

Several European nations have larger, more established social safety nets for the unemployed. In the USA, local, regional and national authorities are not nearly as prepared. The American federal government departments for food stamps and the job of providing welfare provisions will be overwhelmed. This will be a Katrina event for the hungry citizens of the United States. Urban areas will see skyrocketing crime and in parts of some cities, life could become totally uninhabitable.

The last report we've seen on those receiving food handouts and related welfare amounted to 11 million USA citizens with 700,000 children going hungry each day. We suspect the true amount of those needing food help will rise to 35,000,000 with an untold tragic number of them being little, defenseless children. Governments remain in denial and are not prepared for this national emergency whatsoever. As things worsen, food riots and others with violence aimed at the "haves' are common.

The number of bank failures over the next three years will be in the thousands. In addition, the US Dollar's valuation could break recent lows near 70.00 on the index, dropping to 46.00 by 2011 or 2012.
Inflation or potentially hyperinflation is quite real as the Federal Reserve and US Treasury strain to print and circulate cash to prod our stalled economy. It is simply not working even with the dramatically lower interest rates of late. Benny Bernanke is out of rate cut running room.

Consumers are broke and going broker. Households of interrelated families are doubling and tripling up even with several employed members being under one roof. Basic costs of rent, mortgage payments, health care, food, utilities and taxes are too much to bear on stagnant and in some cases falling wages. In some areas of America, there are entire subdivisions of homes totally abandoned or existing with only a hand full of occupants. The millions thrown at lenders for new mortgages are not getting through to buyers, as there are fewer of them. We are witnessing system breakdown.

Municipalities and states are sinking into a spending, debt-ridden morass. It was reported today that 22 of 50 USA states are in serious budgetary trouble. California is one of those in terrible condition and Michigan is already technically broke as are many of her cities. Detroit will file bankruptcy in 2009 and there will many other surprises as well. There will be a cascade of bond defaults and the outcome will cap the ability of these cities, states and counties to borrow ever more.

The shining light through all of this is the faster we find the bottom the faster we can recover. Sadly, the recovery process will take years. Futures and commodities traders should continue to earn steady profits as the stock markets slide into oblivion for years. We see no recovery until 2015.
Trader Rog - Roger Wiegand
Editor, Trader Tracks
email: traderrog@comcast.net
Trader Tracks from www.miningstocks.com
Unquote



Well it really seems like we are heading into a depression bigger than the last Depression that lasted over 10 years. Of course we do not know how long this coming depression will last, but my guess is that it will be much worse than the one in 1930. Why? Well it seems that we will have a kind of depression in extremis because we still have to unwind the trillions of speculative non performing derivative structures and at the same time we most probably will have a world wide FIAT currency (http://en.wikipedia.org/wiki/Fiat_currancy) collapse.

The USD and other currencies are paper coupons issued by the governments stating that it is legal tender. Without the ink however it is still paper and nothing else. In one of my past posts I mentioned that somehow we should feel lucky that nowadays new USD or other currencies do not have to be printed anymore because new USD can be created by adding some zeros on a computer. Why did I say that? Well if they still would need to have to print these coupons, the US would already be without any trees. Imagine the environmental damage that would cause.

Well in any case, the USD and other currencies are FIAT currencies and nothing else. Most FIAT currencies, according to history, have failed because those that were able to decide how much can or should be printed almost always could not resist and printed more and more which finally lead into hyperinflation. Well does that look like today?

In fact, dear reader, some believe that the US will default on its debts this year. Such a default may or may not happen soon, but it seems to be a fair guess to say that it will happen some day. In fact the death warrant for the US Dollar was signed already back in 1913, when the US, via the FED, allowed private bankers to issue the USD, thus changing the dollar from a savings based currency to a debt based currency. It was only a matter of time until this act resulted in the problems we are facing now.
Only approximately 100 years ago, some businessmen conspired to create the FED in order to control the finances of the US and to profit from the economic expansion of the once great economic power.
As mentioned before, the consequences are now upon us and it seems that we are in the front seat to see the collapse of the dollar, the economy and the US as a nation.

Some people say that Thomas Jefferson (http://en.wikipedia.org/wiki/Thomas_Jefferson)

warned about what would happen if private bankers controlled the American currency. Jefferson’s warning were ignored, forgotten and buried by the press, academics and politicians who were paid to promulgate the false promises of bankers.
If you want to read about the creation of the FED I can recommend the following book
http://www.amazon.com/Creature-Jekyll-Island-Edward-Griffin/dp/0912986409

Before going to links with information from Roubini, let’s see what Marc Faber has to say
Bloomberg: Marc Faber predicts 2009 going to be “a catastrophe”
“Marc Faber, publisher of the Gloom, Boom & Doom
Report, talks with Bloomberg about the outlook for the global economy in 2009 and his investment strategy.”




http://www.bi-me.com/main.php?c=3&cg=4&t=1&id=29043

and following the video link
http://www.youtube.com/watch?v=0pBxe7bSbWw



Following dear reader, 3 video interviews with the always brilliant Roubini
However, although I know that Roubini is savvy and brilliant, I do not completely agree with what he says. I do not agree with his opinion that injecting money into bankrupt companies has been the only option. It has maybe been the one that for the moment being has hurt least. But there might have been solutions with more positive long-term impact. The rescue of LTCM, as we now know, had only a positive impact on a short term basis but unfortunately was very negative long term. Furthermore all these deficits that are growing like a monster can in my humble opinion not be positive at all, at least not for future generations. Furthermore I do not believe, as Roubini does, that the recession will end in 2010. I fear that we will go through a depression from which we will not recover fast. Why do I believe that? Well there is still much speculation or exaggeration to be eliminated in order to come back to a normal sustainable growth. Please take note that history show us that normally the pendulum does not just go back to normal. Before going back to normal the pendulum most probably first moves to the other side of the scale.
Finally I do definitely not agree with Roubini when he opines that governments did well and did the supposed help is in an honest and selfless way. There is simply too much conflict of interest involved with the people in power or those that decided upon the packages. My guess is that there is rampant corruption going on and that there was NO (yes it has to be written in capital letters) and I repeat, NO honest work done at all.


Well following the link where you can find the interviews
http://www.ft.com/cms/893ac9c8-757e-11dc-b7cb-0000779fd2ac.html?_i_referralObject=972170812&fromSearch=n


Well if things get worse some kind of preparation is needed. Following how some entities plan the preparation:
Ariz. police say they are prepared as War College warns military must prep for unrest; IMF warns of economic riots
http://phoenix.bizjournals.com/phoenix/stories/2008/12/15/daily34.html

With 11 million people on the street, The U.S. Army War College is testing scenarios for “use of American troops to quell civil unrest brought about by a worsening economic crisis.” The Army believes “economic collapse, terrorism and loss of legal order,” says the Phoenix Business Journal, citing the USAWC, “are among possible domestic shocks that might require military action within the U.S.



Is this a picture we will see soon somewhere else than in Tiananmen? We will see.

SafeHaven: Ron Paul – government and fraud
“The government itself runs a fraud much bigger than Madoff’s. Our Social Security system is the very definition of a Ponzi, or pyramid scheme. If the government truly had an interest in protecting people’s savings, they would allow people to opt out of Social Security altogether. We would cut wasteful spending, such as our overseas empire, to honor current obligations to seniors, and eventually phase the program out. Instead, as with Enron and Sarbanes Oxley, I expect new, unrelated legislation to be proposed that further damages freedom in the name of protecting us, amidst loud proclamations that they have made the world safe.”
http://www.safehaven.com/article-12153.htm


FED
Found on the net:
The Federal Reserve officially kicked off its mortgage-manipulation campaign last week. For the first time, the creature from Jekyll Island purchased Fannie Mae- and Freddie Mac-issued mortgage-backed securities. In other words, the very same toxic assets that cut the market in half and brought the U.S. economy to its knees… are now being amassed by the central bank.
No word yet how much the Fed purchased yesterday, but we know they’ve allocated $500 billion for the cause. Should they spend it all, the Fed would have piled 11% of the $4.5 trillion MBS market onto their bloated balance sheet .


Quantitative Easing



Well dear reader I wrote already a bit about quantitive easing. You certainly will hear more about it in the coming months. Following a video explaining QE
Quantitative easing
“Now the Federal Reserve has effectively cut the target lending rate to zero, it only has one more weapon in its arsenal. Quantitative easing. Senior Editor Paddy Hirsch explains what this ‘nuclear option’ is, and what the Fed hopes it’ll do.”



To see the video please click on the following link
http://marketplace.publicradio.org/videos/whiteboard/quantitative_easing.shtml


Treasury

U.S. Treasury bought another $15 billion in banking stocks last week. Uncle Sam picked up shares of PNC, Fifth Third and SunTrust, among others. The U.S. government has now purchased over $187 billion worth of financial stocks through the TARP program.

And the story goes on
the FDIC helped GE Capital unload $10 billion worth of corporate debt yesterday. The government arm backed every penny of the GE debt sale, the biggest guarantee through its “Temporary Liquidity Guarantee Program” since inception in November.
Well dear reader as we can see, the money is flowing as freely as in the past months. My guess is that this injections will not have the intended impact but rather a deterioration of the situation. I do not see how throwing money at badly managed companies which is nothing else than bailing out those who speculated and made mistakes before, will show positive results.


Banks and Banksters



Well dear reader, you might have wondered why I wrote in my last 2008 post that some institutions that so far did look quite well might not do so soon. For the new readers a quick remark, I mentioned several times in my past musings that in fact most (even those that so far did look well) are in a much worse shape that their balance sheets would make us believe. If one looks at the assets booked in Level III and most of the Level II assets, one can see clearly that most banks will have to face huge challenges and huge losses, which for many will mean going out of business. By the way if one looks at these Level III and II assets, one can imagine already what’s going to happen but we should not forget that there are possibly a lot more assets booked off balance in the SIV’s. Although these assets are off balance for the time being, that does not mean that these assets will not come back onto the balance sheets at some point. Therefore, as mentioned, there is a lot more to be written off and most people will be surprised by the news.

Following dear reader an information confirming my warnings regarding accounting and the respective gimmicks used

Quote
More Than Eighty Percent Employ Aggressive Accounting and Likely Will Experience 
Restatements and Other Adverse Events
LOS ANGELES--(Business Wire)-- 
The vast majority of financial services companies being bailed out under the Federal Troubled Assets Relief Program (TARP) are likely in worse condition than publicly disclosed, according to an analysis announced today by Audit Integrity, an independent research firm that measures corporate integrity risk. 

More than 80 percent of TARP financial services companies have a "Very Aggressive" or "Aggressive" Accounting and Governance Risk (AGR) rating based on their most recent regulatory filings. As a result, these companies have a high statistical likelihood they will restate their earnings and suffer from other adverse events, including regulatory actions, shareholder litigation and bankruptcy. By comparison, two-thirds of the more than 7,000 publicly-traded North American companies rated by Audit Integrity have "Average" or "Conservative" ratings. 

The AGR rating is a forensic indicator of the transparency and reliability of a corporation's financial reporting and identifies metrics most highly associated with financial statement fraud, as measured by SEC enforcement actions. 

"As a group, these are very risky companies. The use of federal money to bail them out should be pause for concern on several levels," said Jack Zwingli, CEO of Audit Integrity. "Unfortunately, the odds are that a number of these companies will fail at some level in the future, which raises the concern that the Federal Government is throwing good money after bad. At a minimum, before we hand over government funds to these firms, we should demand a thorough review of their accounting and corporate governance practices. The recipients of the bailout money should be required to run their business with integrity." 

The Audit Integrity analysis focused on the 25 financial services companies that have received more than 90 percent of TARP funds to date. Of the 14 financial services companies that received "Very Aggressive" ratings, ten were among the recipients of the largest amounts of TARP money, including: 

* American International Group, Inc. 
* Bank of America Corporation 
* Citigroup, Inc. 
* Fifth Third Bancorp 
* Goldman Sachs Group, Inc. 
* J.P. Morgan Chase & Co. 
* Merrill Lynch & Co. Inc 
* Morgan Stanley 
* PNC Financial Services Group, Inc. 
* Wells Fargo & Company 

General Motors Corporation and Ford Motor Company, which have been mentioned for 
possible TARP bailouts, also have low Audit Integrity ratings. 

Audit Integrity`s analysis is available on auditintegrity.com or by calling 
877-44-AUDIT. 

unquote

Of course the important ones will be taken over by the government and will survive.

Well dear reader one of the banks that so far did look well is JPM. However JPM does hold such an enormous derivative book, that anything can happen at any moment.

JPMorgan Chase: Poisoned by Bear's 5,000 Counterparties
http://seekingalpha.com/article/110586-jpmorgan-chase-poisoned-by-bear-s-5-000-counterparties?source=email

Deutsche Bank, another institution that did look well so far might not be in such a good shape as it seems (although I would say that I trust the accuracy of the Deutsche Bank balance sheet more than the one of JPM)

Deutsche stuns market by delaying bond redemption
http://www.financialpost.com/news/story.html?id=1087820

Well dear reader let’s see what Jim Willie has to say about banks.
The first piece might come as surprise to many
Quote
The Lehman Brothers failure was probably more a stress test for the system, with a gigantic basement back window opened for JPMorgan to receive a $138 billion check during the confusion after a pre-dawn meeting on a Saturday with a bankruptcy court judge in Manhattan. The Lehman failure was probably necessary in order to reload JPMorgan, thus permitting it to better handle the vast Credit Default Swap losses, and to reload in the gold suppression game with the oodles of underwater gold contracts.
Unquote

Yes dear reader JPM received a nice and important amount. With the takeover of Bear Stearns they not only got the money to take over Bear Stearns but they were able to offset their gold derivative positions which resulted in big book losses by netting them out with the contrary position of Bear Stearns. Well dear reader, there are many people who believe that JPM is a bank that will not suffer. Well as long as they get monies in a way that almost nobody get aware and as long as they are allowed to avoid to put certain positions into their balance sheet, it certainly does look like they have no problem. However dear reader, a bank that needs money in such amounts is simply speaking not in that good shape as most believe. Period.

Following some more from Jim Willie
Quote
UNDERWATER BANKS 
Dead banks choose not to lend money, period. They are reluctant to lose more, scared to death, burned badly. They are unsure of how insolvent they are, since assets are not even remotely properly valued. Their asset backed bonds and credit portfolios have uncertain value, but certainly far less than is on their books. Bank executives will continue to choose not to lend in this environment, since they know clearly of their insolvent condition. Bank executives will continue to choose not to lend in this environment, since they know clearly of the weak condition for borrowers, harmed by job loss. After all, banks prefer to be repaid on loans, rather than to serve as either stooges in a national cause or sacrificial lambs at a Wall Street barbeque.
The big banks to date have cornered over 80% to 90% of the official rescues and bailouts. They have also been invited to engage in a Treasury Yield Curve carry trade, wherein they borrow money cheaply at the rate of short-term maturities, then invest for yields at the long-term maturities. Wall Street has managed to hog the rescue bailout trough, while disseminating false messages about how the US Federal Reserve has enabled broad liquidity programs to assist the people. They are doing precisely the opposite. Over $800 billion has been DRAINED from the private banking system via Cash Mgmt Bills by the USFed in order to feed the Wall Street banks responsible for most of the fraudulent bond packages, for coercion of debt ratings agencies, and for commandeered crony regulatory inaction. Foreign observers are appalled that the US is still run by the same Wall Street conmen, while the US public cannot seem to figure out what to do. The lawsuits against both the USFed and Citigroup will give strong signals on progress against the syndicates in charge, written on billboards.
Unquote



Well talking about companies following a comment from a savvy contributor to www.lemetropolecafe.com
quote
AIG pays out $400 million in bonuses with taxpayer money. The Company defends this as necessary to keep top talent? Top talent? What the hell are they talking about? This is the "top talent" that created the multi-hundred billion dollar catastrophe that Henry Paulson is using taxpayer money to monetize, fraudulently I would argue. And make no mistake about this, I have looked at the publicly available numbers for AIG and have concluded that AIG will require at least $1 trillion to keep it alive. Others are finally somewhat agreeing with my work as I've seen recent media published estimates of $400-500 billion. Eventually they'll come my way. AIG is being kept alive with taxpayer money in order to defend the massive counterparty derivatives risk exposure of Goldman Sachs, JP Morgan and Morgan Stanley, among others
unquote


Equity



Well dear reader 2008 has definitely not been a good year for equity investments. The following chart show that well




Fixed Income

Well dear reader, from an investment point of view, any prudent investor would dump US Treasuries because there is little upside on the bonds and gargantuan downside on both the currency and future interest rates. Of course I do understand that holding government bonds makes many people sleeping well at night but should they really be so sure about the quality of these bonds? Maybe not so.

from Dan Norcini
The bond bubble continues expanding with no end in sight as traders are convinced that the Fed is going to be buying along the outer end of the curve. With support like that below the market, the path of least resistance is higher. Whether or not the Fed actually does such a thing is immaterial at this point – the very suggestion that they are going to do so is enough to actually accomplish their intentions. Doesn’t it amuse you how easily grown, “sophisticated” investors can be herded around by these pestilential central bankers? That crowd prides themselves on being able to decipher obtuse financial and economic signals unlike the rest of the ignorant peasants and dolts who constitute the mere working class. Yet it is this same smug and oftentimes arrogant crowd that are rounded up like witless sheep and sent off in the direction that their shepherd masters intend them to go. Oh well, it really doesn’t matter much as long as they can make money off of it so I suppose the image of being driven around like mindless idiots doesn’t particularly prove troublesome to them.


Well dear reader the recent price surge of the T bonds was, according to Steve Hochberg from Elliott wave, historic in that it is the first time ever that the Daily Sentiment Index of bond traders pushed to 99% bond bulls. Only 1% of bond traders think prices will come down,
which is simply extraordinary. When everyone is bullish, and in this particular case everyone really IS bullish, there is theoretically no one left
to buy in order to keep the trend intact, which will soon lead to a reversal.”





Currencies

Well dear reader I hope you followed my suggestion and diversified out of the US Dollar. Although the USD has almost fallen to the abyss and a technical move back up might be possible, my guess is that the USD will move a lot lower over the coming months.


Oil

Well dear reader we have seen lower oil prices lately. Make no mistake this will not mean that we will stay that low for ever. Higher prices have to be expected. Maybe not in the next months but my guess is that possibly towards the end of the year 2009 we start to move up again. Although demand has gone down somewhat there is still the need for more project to come online that is not happening and will not happen in many years. The credit crunch will stop many projects and many junior companies will disappear. So sooner or later we will be back at the basics, which means that demand will increase again but a substantial decrease in oil production. Although we are far away from USD 200 per barrel we will see this price before the next 5 years end. Following a presentation from Simmons:
http://www.simmonsco-intl.com/files/Houston%20Energy%20Institute.pdf

Some more information about oil:
IEA Study: Global Energy 
Supplies Remain a Concern
http://www.financialsense.com/fsu/editorials/dancy/2008/1222.html

some more information about oil with some remarks from Jesse at http://jessescrossroadscafe.blogspot.com



Reuters
NYMEX oil benchmark again in question
By John Kemp
December 23rd, 2008

The record differential between the front-month and more liquid second-month contracts at expiry last week once again raised pointed questions about whether the NYMEX light sweet contract is serving as a good benchmark for the global oil market, or sending misleading signals about the state of supply and demand.

The expiring January 2009 contract ended down $2.35 on Friday at $33.87, while the more liquid February contract actually rose 69 cents to settle at $42.36 - an unprecedented contango from one month to the next of $8.49.

Criticism of the contract is not new, and past calls for reform have been successfully sidelined. But with policymakers taking a keener interest as a result of wild gyrations in oil prices this year, and a continued focus on regulatory changes to improve market functioning in future, there is at least a chance changes will be adopted as part of a wider package of futures market adjustments.

AN UNREPRESENTATIVE PRICE

During the surge to $147 per barrel earlier this year, OPEC repeatedly criticized the NYMEX reference price for overstating the real degree of tightness in the physical market and causing prices to overshoot on the upside. (That was the point, see Enron for details - Jesse)

While rallying NYMEX prices seemed to point to an acute physical shortage and need for more oil, Saudi Arabia could not find buyers for the 200,000 barrels per day (bpd) of extra oil promised to U.N. Secretary-General Ban Ki-moon or the 300,000 bpd promised to U.S. President George Bush in June.

Bizarrely, rather than acknowledge there was something wrong with the reference price, some market participants suggested Saudi Arabia should increase the already large discounts for its physical crude to achieve sales in a market that clearly did not need the oil, and was not paying enough contango to make storing it economic (contango is where the futures price is above the spot market). (There is nothing bizarre about it. That is standard disinformation by the frauds and their mouthpieces - Jesse)

The NYMEX WTI price may have achieved unprecedented media fame as a result of the “super-spike”, but a futures price to which producers and consumers were paying ever larger discounts for actual barrels was clearly not a good indication of where the market as a whole was trading. (It was a fraud. Lots of people lost lots of money in it. It was a great excuse to build a Ponzi scheme in a market price, raise the price of gasoline to $4 gallon, and then take the market down. This is the 1929 model of market manipulation pure and simple - Jesse)

Now the market risks overshooting in the other direction. Intense pressure on the front month in recent weeks has more to do with the contract’s peculiarities (in particular storage restrictions at the delivery point) than a further deterioration in oil demand or a market vote of no-confidence in the 2.2 million barrels per day further cut in oil production announced by OPEC at the end of last week. (The beauty about price manipulation is that it works in both directions. Different damage, but the same jokers get to pocket their fraudulent gains - Jesse)

The collapse in NYMEX prices nearby risks exaggerating the real degree of oversupply and demand destruction, sending the wrong signal to producers and consumers about the wider availability of crude in the petroleum economy. (It may take a few countries along with it. But that may be by intent. Chavez and Putin are not on the Friends of W list - Jesse)

DOMESTIC PRICE, GLOBAL BENCHMARK

The NYMEX contract is for a very special type of crude oil (light sweet) delivered at a very special location (Cushing, Oklahoma) in the interior of the United States. It is not representative of the majority of crude oil traded internationally (most of which is heavier and sourer) and delivered by ocean-going tankers.

These specifications made sense when the contract was introduced as a benchmark for the U.S. domestic market.

U.S. refiners have a strong preference for light oils, for which they were prepared to pay a premium, because of their much higher yield to gasoline. The inland delivery location, centrally located and near the main Texas oilfields, rather than one on the coast, made sense for a contract that tried to capture the “typical” base price for crude oil paid by refiners across the continental United States.

But these specifications make much less sense now the NYMEX price is increasingly used a benchmark for the global petroleum economy, in which light sweet crudes are only a small fraction of total output. Just as NYMEX prices sent the wrong signals about physical oil availability on the way up, distorting the market and triggering more demand destruction than was really necessary, they now risk sending the wrong ones on the way down.

Earlier this year, the problem was a relative shortage of light sweet crude oils at Cushing, while all the extra barrels being offered to the market by Saudi Arabia were heavier, sourer crudes that could not be delivered against the contract. Moreover, extra Saudi crudes would have arrived by ship, and the pipeline and storage configurations around Cushing would have made it difficult to deliver them quickly against the contract.

Financial speculators were able to push NYMEX higher safe in the knowledge Saudi Arabia could not take the other side and overwhelm them by delivering physical barrels to bring prices down. The resulting spike exhibited all the characteristics of a technical squeeze: tight contract specifications ensured there could be shortage of NYMEX light sweet inland oils even while the global market was oversupplied by heavier, sourer seaborne ones.

Now the opposite problem is occurring. Crude stocks at Cushing have doubled from 14.3 million barrels to 27.5 million since mid-October. Stocks around the delivery point are at a near-record levels and approaching the maximum capacity of local tank and pipeline facilities (https://customers.reuters.com/d/graphics/CUSHING.pdf).

As a result, the market has been forced into a huge contango as storage becomes increasingly expensive and difficult to obtain, ensuring the expiring futures trade at a substantial discount.

But Cushing inventories are not typical of the rest of the U.S. Midwest (https://customers.reuters.com/d/graphics/PADD2_EX_CUSHING.pdf) or along the U.S. Gulf Coast (https://customers.reuters.com/d/graphics/PADD3.pdf), where stock levels are high relative to demand but nowhere near as overfull as in Oklahoma.

Once again the problem is geography. Coastal refiners have responded to the downturn by cutting imports of seaborne crude, limiting the stock build. But the inland market is the destination for some Canadian crudes that have nowhere else to go, and the pipeline configuration means they cannot be trans-shipped to other locations readily.

Light sweet crude has been piling up in the region, with refiners choosing to deliver the unwanted excess to the market by delivering it into Cushing. 

NEW GRADES, NEW DELIVERY POINTS

The easiest way to make NYMEX more representative would be to widen the number of crude grades that can be delivered, and open a new delivery point along the U.S. Gulf Coast. Both reforms would link the contract more tightly into the global petroleum economy. (The easiest way would be to do exactly as I suggested above. It can be done with the stroke of a pen and the kick of a few asses - Jesse)

NYMEX already permits some flexibility in delivery grades. Sellers can deliver UK Brent and Norwegian Oseberg at small fixed discounts to the settlement price, and Nigerian Bonny Light and Qua Iboe, as well as Colombia’s Cusiana at small premiums.

In principle, there is no reason the contract cannot be modified further to allow a wider range of foreign oils to be delivered at larger discounts to the settlement price.

More importantly, NYMEX could open a second delivery location along the Gulf Coast, increasing the amount of storage capacity available, and linking it more closely into the tanker market.

If prices spiked again, a coastal delivery location would make it much easier for Saudi Arabia to short the market and deliver its own barrels into the rally. By widening the physical basis, it would also make it easier to support the market by cutting international production and avert a glut trapped around the delivery location.

So far, the market has continued to resist change. But there are signs policymakers might enforce one. (No one likes to give up a successful fraud voluntarily until the clock runs out - Jesse)

Earlier in the year, Saudi Arabia strongly hinted western governments should look at reforming their own futures markets rather than call for production of even more barrels of oil that could not be sold at the prevailing (unrealistic) price. (Saudi Arabia is the US's creature so any criticism is coming from a loyal source and credible - Jesse)

Naturally, some of the reform impetus has ebbed along with prices and demand. But policymakers continue to show interest in structural reforms, as was evident at last week’s London Energy Meeting, and there is an increased willingness to challenge unfettered market dynamics.

It is still possible the incoming Obama administration might force contract changes as part of a wider package of reforms designed to improve the functioning of commodity markets, reduce volatility and send clearer, more consistent price signals to the industry and consumers.