CIGA Rusty Bayonet correctly points out the following:
This right now is phase two in the largest transfer of wealth in world economic history.
When it’s all done banking interests will own trillions in real estate and taxpayers will have compensated them for most of their losses on defaulted mortgages.
It makes you wonder if this ongoing crisis was by design or accident.
Citi to let distressed homeowners stay for 6 mos.
Citigroup plan lets homeowners avoid foreclosure, stay for 6 months if they turn over deed
By Alan Zibel, AP Real Estate Writer , On Thursday February 11, 2010, 12:27 am EST
WASHINGTON (AP) — Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months — if they turn over the deed to their property.
Citi said Thursday it is launching the pilot program, dubbed "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. Initially, about 1,000 homeowners are expected to participate. Citi may expand the program nationwide.
In a normal foreclosure, a lender assumes legal control of the property and evicts the homeowner. But Citi’s program, like other "deed in lieu of foreclosure" efforts, allows the homeowner to avoid a completed foreclosure. While the owner must still leave the home after six months, the program results in a less severe hit to the borrower’s credit score.
Dear Jim,
I got a call this morning from a bank bond trader who alerted me to the following story in Bloomberg, telling us that Fannie and Freddie are buying up all mortgages currently in their pools 120 or more days past-due. The process and the math involved will probably bore the general public and so they will probably never get the true story, but here is the bottom line…
–The government’s balance sheet (through these two GSEs) is about to balloon even more, and my trader friend tells me the number of mortgages is significantly higher than most observers thought.
–If it is true that the Chinese are dumping their MBS, they just saw the bid drop another point or more.
–Fannie and Freddie will tout this as a way to not have to tap into the Treasury, but these loans were and still are headed for foreclosure.
The only advantage here is that they are more efficiently calling these in, eliminating the extra interest rate expense they had (which was guaranteed to the now-in-even-more-pain securities holders) on these non-performing loans. The result? They will now be financing a much, much larger inventory of delinquent mortgages at sub 1% rates.
And the MOPE is: Don’t worry be happy. All is well. Don’t you know? That’s why we pay those Fannie and Freddie executives the BIG bucks! 
The Bloomberg article title gives a hint at more MOPE: "Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’," suggesting that the money taken from these pools will go back into the market and off-set the Feds end of MBS purchases. Uh humm. So I called a few portfolio managers. No, they are not planning on reinvesting into the mortgage market. As I suspected, they’re pissed off at just another erratic act of the government and its bankster henchmen.
CIGA Nick
Fannie, Freddie Loan Purchases May Spur ‘Wad of Cash’ (Update2)
By Jody Shenn
Feb. 11 (Bloomberg) — Fannie Mae and Freddie Mac’s plan to step up purchases of delinquent loans may boost prepayments on their securities to rates that in some cases would erase all of the debt within a year. Yields over government notes on some of their bonds fell to 17-year lows on speculation the move would lead to reinvestments in the mortgage market.
The constant prepayment rate, or CPR, for Freddie Mac’s 30- year fixed-rate securities with 6.5 percent coupons will likely surge by 70 this month under the plan released yesterday by the McLean, Virginia-based company, based on Bloomberg calculations. The measure, which was 17.2 last month, represents the share of the debt that would be retired in a year at the current pace.
Freddie Mac said yesterday that it would buy “substantially all” loans with payments late by 120 days or more from its securities in the next month. Fannie Mae said later that it will “increase significantly” its buyouts, setting a less aggressive timeline. The value of Freddie Mac’s delinquent loans is $70 billion, while Fannie Mae has $130 billion of the debt, according to Citigroup Inc. data.
Long Bonds Midday Action
CIGA Eric
Today’s midday action warrants a brief comment.
This leveraged ETF is starting show aggressive buying or selling of the long end of the yield curve. A real effort was made to reverse the neckline the past few trading weeks, but it has held.
That which cannot break support with force, will reverse and attempt to break resistance with force. A short-term swing high and overhead gap have already been attacked on very good midday volume. We’ll have to wait and see how this close, but strong tape indicates force behind the move. The tape could be providing a preview of the action yet to come when more significant resistance is tested in the not too distant future.
Long Bonds Double Inverse ETF (TBT) 
S&P 500 Will Finish 2010 Poll Results
CIGA Eric
I would like to thank all (301) that participated in the poll.
- Higher: 3 out of 4, 75%, responded that S&P 500 will be lower in 2010
- Lower: Nearly 1 out 5, 18%, responded that it will be lower.
- Unchanged: The rest said it will end exactly where it started.
My Comments
The high frequency of bearish votes was understandable. The market has gone up a lot since March 2009 and voting took place during definable weakness in equities. Traders/investors tend to talk or vote their book (positions).
How would I have voted?
For this poll it would have been higher. My actual, historically-consistent vote would have been Higher* (with an asterisk). What this means is that I expect higher nominal equity prices – us dollar denominated from weaker dollar, but I do not expect higher real price – gold denominated . In other words, gold will continue to significantly outperform equities for a large portion of the depressionary trading box.
Why?
As I have written many times before,
Gold is the tool used to combat the effect of debt implosion to maintain the economic status quo. Those that suggest that stocks and gold are nearing an imminent decline ignore historical cycles/patterns.
A study of the Weimar Republic illustrates a classic example of how devaluation pushes up equities but not as fast as gold. The rise in equities occurred under dire economic circumstances. When the illusion broken, nearly all were wiped out and great social unrest ensued.
While the Weimar Republic may be an extreme devaluation case that pushed the limits of fiat money, it is unwise to assume that it cannot happen again. If fact, what happened in Germany has already taken and is taking place in the U.S.
The following chart illustrates how gold is used to minimize the negative effects of debt build ups after a long expansion. In order to reduce the burden of high debt levels and minimize the adverse economic effects of failing debt, the U.S. dollar has been devalued in large "devaluation steps". In the second great depression 1929-1951, the currency was fixed to gold, so the gold price adjustment was mandated by law. Once currencies began floating after 1973, the birth of fiat actually occurred in 1971, the devaluation steps became quasi market-directed. I say quasi, because gold is not freely traded. It is way too important for that. The U.S., currently within the third great depression, is undergoing or attempting a third devaluation step. That is, a the third gold revaluation since 1860.
Devaluation Steps: S&P 500 Total Market Return and Inverse price of Gold: 
The key to the success of these devaluation steps is confidence. As long as the public never questions the dollar as a storehouse of value, the controlled devaluation will continue. If confidence ever fades, then look no further than the Weimar Republic as an example of devaluation that reaches critical mass.
Jim,
The Fix:
There recently was an article in the St. Petersburg, Florida Times. The Business Section asked readers for ideas on: "How Would You Fix the Economy?"
I think this guy nailed it!
Dear Mr. President,
Please find below my suggestion for fixing America’s Economy. Instead of giving billions of dollars to companies that will squander the money on lavish parties and unearned bonuses, use the following plan. You can call it the "Patriotic Retirement Plan":
There are about 40 million people over 50 in the work force. Pay them $1 million apiece severance for early retirement with the following stipulations:
1) They MUST retire. Forty million job openings – Unemployment fixed.
2) They MUST buy a new American CAR. Forty million cars ordered – Auto Industry fixed.
3) They MUST either buy a house or pay off their mortgage – Housing Crisis fixed.
It can’t get any easier than that!!
P.S. – Mr. President, while you’re at it, make Congress retire on Social Security and Medicare. I’ll bet both programs would be fixed pronto!
Lew,
How about do not get in trouble in the first place by having seen that the OTC derivatives were fraudulent in that they had no chance of performance under any pressure whatsoever. My dog Mia figured that out in 1991.
Jim
30 Yr Auction Results
CIGA Eric
Over 15% of the competitive bids were direct bids. This is up from 6.9% in Feb. These percentages follow a similar trend revealed in yesterday’s 10-year auction results.
The reaction in the bond market and chatter around the trading desks hints of debt monetization. The lack of transparency with direct bids serves only to fuel the speculation.
Source: treasurydirect.gov
Jim,
You have said on JSMINESET that at $1650 we should "recover our initial investment." As prudent as that sounds, despite your predictions of 1650+++, where can we then put the proceeds, since banks are much less than safe nowadays. I realize that you mean the ride will be much bumpier as we reach up to unknown territory, but it may not be premature to proffer an endgame for the CIGAs, be it now or soon.
Thanks for all you and the boys do on our behalf.
Regards,
CIGA Lew
Lew,
We will take it one step at a time so we can see what the situation is out there. You may never sell your gold.
Jim
Jim,
It wasn’t supposed to be like this…
The Euro was supposed to recover on the EU/Greek deal, but instead, Gold soared on its own.
When will they learn? Gold is a barometer of confidence in Government and Brussels has just been handed a vote of "no confidence" by the Gold market.
There will be many more such plebiscites to come – across the world.
Respectfully,
CIGA Pedro
Dear Jim,
You take the top callers to task for taking out so many gold investors, changing them into gold traders, thereby costing them their positions on a constant basis.
I am going to take you to task about bottom calling.
Every time you open your trap about Angels, Goldman and the rest of the Crimex do everything possible to make you look stupid.
You are correct, take a few dollar here and there but who needs these attacks?
You tell people not to trade their insurance.
Now apply that reasoning in reverse.
Think about it.
CIGA Mad Mike
Jim,
Today you posted a snippet from a report by the Congressional Oversight Panel warning about the potential failure of many regional banks in the near future due to a pending "tidal wave of commercial loan failures." You advised people who have accounts with local banks to consider transferring their accounts to non-regional banks.
This is in direct contrast to the "Move Your Money" project started by Arianna Huffington of the Huffington Post who is encouraging account holders to move their money to smaller community banks and away from "big" banks in an effort to spur financial reform. The Huffington movement is starting to catch on around the country.
This week, partly due to Huffington’s influence, the New Mexico House of Representatives voted unanimously to pass a bill that allows the state to move between $2 billion and $5 billion of state funds to community banks and credit unions. New Mexico’s governor stated that he supports the legislation.
How can you reconcile the report you posted by the U.S. Congressional Oversight Panel with the actions of the New Mexico legislature and the Huffington "Move Your Money" project?
Best regards,
CIGA Black Swan
New Mexico House Votes 65-0 To Move State’s Money To Credit Unions, Community Banks
First Posted: 02- 9-10 07:45 PM | Updated: 02-10-10 01:00 AM
New Mexico’s House of Representatives voted Monday to pass a bill that allows the state to move $2 billion – $5 billion of state funds to credit unions and small banks.
Big Bank Customers Move Their Money And Explain Why
First Posted: 02-10-10 08:04 PM | Updated: 02-11-10 02:10 AM
Americans fed up with the lack of financial reform and the behavior of big Wall Street banks are moving their money to smaller community banks and credit unions. Many are doing so as part Move Your Money, a project that encourages account holders to contribute to financial reform by depositing their funds into better-managed institutions.
Dear Black Swan,
My note today to sit down with your local bank management and ask about their real estate loan position was not for the purpose of suggesting you jump out of the frying pan and back into the fire.
I have said repeatedly that all currencies are failed in the area of protection on buying power. The only insurance against the decimation of buying power is gold.
I further said today that I am open to the probability that we may simply not sell our gold for a long time and the price is going much higher than I anticipated in 2001.
Respectfully,
Jim
