Archive for November, 2010

Trouble in Euroland

Friday, November 26th, 2010

Though we have often looked at the economic crisis in the U.S., Europe has it own challenges as well:


Man’s attempt at a one world government is not working well.  Our Heavenly Father has a better answer!

Humpty Dumpty Banks

Friday, November 26th, 2010

Year to date:  The FDIC has closed 146 banks.

2007 to date:  311 banks.

Latest Details

August 6, 2010 to November 12, 2010:  38 Banks

Stated Assets:  $13.78 billion

Deposits:  $11.97 billion

FDIC’s estimated cost of closing all 38 banks:  $2.72 billion  (23% of deposits)

FDIC Year to date total estimated losses:   $21.6 billion.

Loss Share Agreements

Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption transactions in 1991. Under loss sharing, the FDIC absorbs a portion of the loss on a specified pool of assets which maximizes asset recoveries and minimizes FDIC losses through least-cost approaches. Loss sharing also reduces the FDIC’s immediate cash needs, is operationally simpler and more seamless to failed bank customers and moves assets quickly into the private sector.  Simply put, the FDIC may suffer more losses if the underlying assets degrade further.

In the most of closures (30 closings out of 38), the FDIC entering into loss share agreements covering a high percentage of the assets taken over by the successor banks. In connection with these 30 closings, the FDIC entered into new loss-share agreements covering an additional $8.2 billion in assets.

That brings the total face value of assets covered by FDIC loss share agreements up to about $189 billion. Loss share agreements typically guarantee at least 80% of the value of assets over a period of eight to ten years.

This is “quantitative easing” being practiced by the federal government. This defers the day of reckoning when banks are forced to reconcile the inflated condition of their balance sheets.

Some Simple Math

Declared assets: $13.78 billion

Deposits of $11.97 billion

FDIC estimated closings cost:  $2.72 billion

True value of Declared Assets: $9.25 billion

Overstated value of Assets:  $4.53 billion (49% of Declared value)

Neither you nor I could get away with overstating our assets in order to get a mortgage (unlike 3 to 7 years ago).  Any overstatement would be classified as fraud, especially doubling the value.

Specific examples:

Maritime Savings Bank of West Allis, Wisconsin: stated assets of $350.5 million and deposits of $248.1 million. The FDIC estimated its closing cost $83.6 million. Overvalued by 113%.

ShoreBank of Chicago, Illinois: stated assets of $2.16 billion and deposits of $1.54 billion. The FDIC estimated its closing cost about $370 million. Overvalued by 84%.

Pace of Bank Closings Artificially Slow

The FDIC’s closure of 38 banks over three months is by no means an insignificant number. However, in the context of the FDIC’s overhang of troubled banks, it suggests the pace of bank closings is being kept artificially low.

As of April 2010, there were about 425 banks operating under serious FDIC enforcement orders that called into question the banks’ solvency. Since then, upwards of 25 new banks have come under such orders each month.

Therefore, closing 13 banks a month has done nothing to reduce the backlog of troubled banks operating in the Country. That backlog could only have grown.

Most likely, the pace of bank closings had been held back artificially by the need to keep up appearances for the benefit of the mid-term elections. With those now behind us, I would expect the pace of bank closings to accelerate considerably.

265- A subtle mystery

Wednesday, November 24th, 2010

In the world of mathematics, there are many relationships that can be presented in a mathematical fashion that reveal our Creator’s hand.  For instance, Bonnie Gaunt has written on the number 3168 (the numerical value of Lord Jesus Christ) being the primary constant of the distances in our universe.  The values of Pi and Phi, the golden ratio, and other mathematical expressions intrigue those who are acquainted with their use.  I would submit another number that might prove to be of interest: 265.

I was led to go to Genesis Chapter 5 to find the inferred use of 265:

Patriarch                           Age                      Offspring                                                   Year

Adam was          130  when       Seth was born in the year           130

Seth was            105  when      Enos was born in the year           235

Enos was            90  when       Cainan was born in the year         325

Cainan was         70  when       Mahalaleel was born in the year   395

Notice the time period from Seth’s birth to Mahalaleel’s birth was 265 years.  What happened during this period of time?  Genesis 4:26 reveals an interesting fact:  And to Seth, to him also there was born a son; and he called his name Enos: then began men to call upon the name of the LORD.

Seth’s son began the time when man called upon the name of Jehovah (the proper name of the one true God).

Who in the New Testament does this group reflect?  The Sons of GOD, with a numerical value of 153.  Those 153 fish mentioned at the end of the Book of John that filled the net responding to the command of Jesus were motivated by Love.  How are these two groups connected?  \scriptstyle \sqrt {3}  The square root of 3.  The square root of 3 is the positive real number that, when multiplied by itself, gives the number 3.

The GODHEAD (Father, Son, Holy Spirit); spirit, soul, body;  Holy of Holies, Holy Place, Outer Court

The square root of three  \tfrac{1351}{780} > \sqrt{3} > \tfrac{265}{153}\,.  It is contained between these two fractions (or divisions).

The first sixty significant digits of its decimal expansion are: 1.73205 08075 68877 29352 74463 41505 87236 69428 05253 81038 06280 5580…  towards infinity.

The Sons of GOD are just a little less than the square root of 3 but cannot be differentiated from this number representing the Trinity.  It is no wonder that these two groups could be mathematically coupled together to represent the infinite aspects of Our Heavenly Father.  Yes, even the numbers point to the mysteries of The Scripture.

By the way, the Feast of Tabernacles began at sundown on the 265th day this year.

The Broken Business Model

Saturday, November 13th, 2010

The last five decades converted Ford from a manufacturing company who dabbled in credit to a bank who built cars.  The F.I.R.E. economy (Finance, Insurance, Real Estate) resulted from the move away from the gold standard.  Unrestricted money creation attracted the corporate treasurers to the profits of financial engineering.  GM made more money in it GMAC lending unit than it did building cars.

The housing bubble was a debt based bubble.  When the housing prices fell, the debt level did not and the banks do not want to book the loss.  They want the consumers to absorb the loss instead, equal to about $1 Trillion per year.  We need a banking system but the banks moved away from their original mandate and became aggressive investors.  Their aggressive behavior created huge losses and they don’t want to be held accountable.  High unemployment hinders the ability of borrowers to pay back the inflated loans and most are now considering default.  That is the dilemma.

The Federal Reserve is trying to resurrect the broken FIRE economy but should be focused on creating new jobs by building a new energy-efficient infrastructure.  The FIRE economy is history.  The Transportation, Energy, Communications, Infrastructure (TECI) economy should now be the focus.

$300 Fluctuations?

Gold lost $40 on Friday and silver lost $1.64, about 5%.  But silver is up 54% for the year.  This metals bull market will try to buck timid investors off its back.  Was anything solved at the G20 summit?  No.  QE2 (Quantitative Easing #2) will push the dollar lower but there will be rallies on the way.  The Fed will use foreign intervention to keep the dollar from tanking immediately.  They want the dollar to decline, but in an orderly fashion.  The dollar rally this week needed to happen as the President participated in talks at the G20 summit to project “confidence” in U.S. policy.

The Banking System Flush

For those unfamiliar with how regulators process insolvent banks, it would be helpful provide a little discussion.  Regulators audit banks on an annual basis.  They track performance ratios on a continual basis.  When banks become weak, the regulators start looking for suitors to take over the bank.  This may take many months to solve the problem.  The regulators closely monitor the bank and keep it afloat while attempting to find another bank or a qualified group of investor to acquire the bank.  This allows regulators to “manage” bank closures so that it does alert the public to the seriousness of the insolvency in the system.  Thus a systematic approach to bank closure that manages perception is used.  Three banks were closed this week and more will be closed in coming weeks.

Living Beyond Our Means

Cut spending for others, but not for me.  The U.S. is spending beyond its ability to pay back the money it borrows to satisfy the accustomed lifestyle.  Americans are unwilling to choose austerity as a solution to the problem.  The only other solution is to inflate our way out of debt.  That is Ben Bernanke’s job.  Obama knows it, the Chinese know it, the Fed knows it, and now you know it.  What can we do as individuals?  Shift some of our assets into precious metals, store food for future consumption, pay off debt, reduce our monthly bills, and simplify.

$100 Silver?

Tuesday, November 9th, 2010

The manipulation of the silver market has long been a frustrating drama for those of us who watch the metals prices on a daily basis.  Over the last several years, there have been many interviews and articles about the observed manipulation but it fell on legislative deaf ears.  It would appear that the time has finally arrived for the perpetrators to be brought to justice.  See:

The problem is one of complexity and jurisdiction.  When traders are in the New York and London, it is not easy to follow the money trail.  The brightest financial engineers are not working for the regulatory agencies since they can make more money working in private industry.  Add a whistleblower to the mix, and you have some real potential.  The whistleblower can lead the regulators right to the detailed records that prove the crime.  Most likely the whistleblower was complicit in the crime but was shafted by the employer.

When gold & silver were used as currency, a 15 to 1 ratio was the standard valuation between the two metals.  Once we went off the gold standard, this ratio averaged 55:1.  That may change soon.  If we allow for a 30 to 1 ratio. silver should move to $50 per ounce soon.  However, if gold moves to $3,000 as many predict, $100 silver is not unrealistic.  Related silver stocks stand to gain rather nicely from this move.

The 40 Day Cycle

Thursday, November 4th, 2010

The Day of Atonement was on the 260th day of this year and is the day Jesus was baptized and marked the trip to the wilderness.  On the 300th day of the year which marked the ending to the time of testing, the CFTC announced the investigation to the manipulation of silver (to the downside).  Silver represents redemption in Scripture.  The Ark was 300 cubits in length, another number of redemption of mankind.  Selah.

What a good looking chart below:


It seems that nobody has preached on this forty day cycle yet.  Jesus was in the wilderness during the Feast of Tabernacles takin’ care of business.  It wasn’t until His time of testing as a mature man (30 years old) could He celebrate that feast day.

18,000,000 Cars

Tuesday, November 2nd, 2010

The Chinese people are expected to buy 18 million new cars next year whereas the demand in the U.S. will be about 11.5 million.  Other developing countries are also on the upswing of energy consumption.  We are currently in the shoulder months for gasoline and natural gas but the oil prices have remained firm.  It appears that the market understands the increasing demand of the Far East and the inability to substantially increase global production of oil.

I expect an oil shock of some point within the next 48 months.  Suddenly the market will wake up to the fact that demand continues to outstrip supply.  As the price of oil rises, other energy prices will rise as well.  Energy supports growth, lack of energy resource restricts it.  The price of oil relative to other commodities has shown a strong correlation to U.S. economic cycles as being a primary reason for the rise and fall of the economy.

It took 24 months for the electorate to determine if Obama could turn this economy around.  All indications are that the time is up and tonight will tell the story.  Economies do not “turn on a dime” but sustained unemployment and fear of recession cause society to demand change.  The problem is that neither Democrats nor Republicans have the answer.  The mindset of the American people must change.

The Far East wants a standard of living similar to the rest of the world.  The problem is that the rest of the world attained the current standard with cheap energy and cheap food.  These commodities are no longer cheap.  The current infrastructure will no longer support the ways of the past.  Mankind must change.  Our Heavenly Father has all the answers and His Love will release those answers for the good off men whether they are His friends or enemies.  Our focus and direction should be toward His Heart.  His elect will have the answers as they mature into their calling.