The deification of various hot-shot financial wizards is now coming to an end.  The very last ones, the Perot clan, Warren Buffett, the Donald Trumps of the high-flying super-rich are all going into the dustbin of history.  It was very easy to be fooled by these con men.  Buffett, for example, made a huge show of PRETENDING to be against the madcap derivatives market only to see his own ship begin to sink due to this exact same market.  And Perot, the guy with the charts and graphs who seemed to know what was going on, went piratical and ended up leveraging itself straight to the doors of bankruptcy.  And Trump is going bankrupt, yet again.

This is why we must take all these guys with an entire salt mine of salt when they tell us stuff. They are all born liars and huskers:


Berkshire’s 31% Decline Spurred by Derivatives Buffett Derided – Bloomberg.com


Berkshire Hathaway Inc. shareholders have a chance this year to do something that’s rare among the Sage of Omaha’s followers: count their losses.

Despite Berkshire’s reputation as a bear market bulwark, its stock has been walloped. The Class A shares are down 31 percent since September, to $90,000 as of yesterday, exceeding the 26 percent drop in the Standard & Poor’s 500 Index.

One reason: Chief Executive Officer Warren Buffett’s increasing use of derivatives — contracts whose value is based on the performance of stocks or bonds or the outcome of a specific event. That Buffett once called derivatives “time bombs” doesn’t calm investors.


Below is a story from the UK that has a young writer who still believes Buffett’s blather:


Wall Street crisis: Is this the death knell for derivatives? | Business | guardian.co.uk


Here is Buffett on General Re Securities, a derivatives dealer that Berkshire inherited with its purchase of insurer General Re. “At year-end (after ten months of winding down its operation) it had 14,384 contracts outstanding, involving 672 counterparties around the world. Each contract has a plus or minus value derived from one or more reference items, including some of mind-boggling complexity. Valuing a portfolio like that, expert auditors could easily and honestly have widely varying opinions.”

Instead of being horrified, alas, Buffett was a classic gnome: he saw opportunity knocking!  So while he whined about how horrible this new way of making lots of money appear out of thin air, he grasped at the tools and tried desperately to do it for himself!

Now consider Lehman Brothers balance sheet. On page 62 of last year’s accounts, under the heading “off balance sheet arrangements” you will find a staggering figure. Lehman had derivative contracts with a face value of $738bn.

Which is significantly less than JP Morgan or Citigroup’s exposure.

The notes, fairly, make the point that the fair value is smaller than the notional amount – Lehman believed the figure was $36.8bn. Even so, “mind-boggling complexity” perfectly describes Lehman’s business…

They all say this over and over again: the derivatives exposure we see in the OCC reports are not real!  No, no, no….the real exposure is less than 1% of these official figures.   Meanwhile, if any of these exposed idiots dare go under, the whole system erupts into chaos and destruction!

Complexity breeds other faults, as Buffett described. Derivatives, because they are so hard to value, make it easier for traders and chief executives to inflate earnings.  —HAHAHA—the #1 reason Buffett decided to play this scam!—They exacerbate problems if a company, for unrelated reasons, suffers a credit downgrade that requires it to post collateral with counterparties – “a spiral that can lead to a corporate meltdown,” he wrote. They create a “daisy chain” of risk as the troubles of one company infect another….

Where do we put, in hell, people like Buffett?  He is obviously a two-timing bitch and I hope his defrauded clients will recognize that this champion’s great returns in good and bad times are…identical to Madoff’s business?  I have a strong suspicion that Buffett will turn out to be another con game.

Buffett made a gloomy prediction half a decade ago. “The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear,” he said. “Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.”


The OCC did monitor this business.  And was ignored.  If anyone read the OCC reports, they were most likely con artists like the people in this story today, looking for new ways to fleece people.   I know what goes through the brains of these gnomes: ‘I am making my shareholders much richer.  So what, if the business is fake?  They won’t know and it will never show up because the DERIVATIVES deals will protect all of us con artists from being exposed.’


Now, everyone is relentlessly being exposed.  So, Hathaway lost only 30% of its share value?  What if it goes Madoff, to 100% losses?  Impossible?  Hardly.


Treasury Announces New Plan to Aid Mortgage Holders (Update1) – Bloomberg.com


 The Obama administration unveiled a new program to help holders of second mortgages avoid foreclosure, offering cash to services, investors and borrowers who modify loan terms.

The goal is to help homeowners gain aid with second liens such as home-equity loans, the Treasury Department said in a statement today from Washington. The administration also announced a plan to revive the Hope for Homeowners program, a mortgage-modification effort that has attracted little interest from lenders and borrowers.


You can’t catch a falling knife with your tongue.  The government should know, at this point, there is no way to revive the value of shanties used for credit access to the tune of half a million dollars.  Many houses that were sold at $350 per square foot two years ago are now going for $35 a square foot or less. This was due to too much funny money pouring into banks who lent it at a much higher rate to fools bidding up the value of shanties and crummy, poorly built housing.


Interactive Map: U.S. Lags Behind Rest of World in Responding to the Growing Crisis


The US cannot spend its way out of this depression.  We have to face reality and figure out how to create capital and then use it for PRODUCTIVE value-added-labor systems.  We can send people to China to figure out how this works.  Maybe, have them memorize ‘Das Kapital’ by Karl Marx.  In that fascinating book, he talks about labor and modern factory production systems.  Lots of laughs.  Much more useful than reading Friedman’s books or listening to Bernanke.


Citigroup, Bank of America Decline on Capital Report (Update3) – Bloomberg.com


 Citigroup Inc. andBank of America Corp. fell in New York trading on concern the companies may be forced by regulators to raise additional capital.

Bank of America declined 6.6 percent to $8.33 and Citigroup dropped 6.2 percent to $2.88 at 9:43 a.m. after the Wall Street Journal said early results of the government’s stress tests show the banks may need more capital. Company executives are meeting with regulators to dispute the findings, the Journal said, citing unidentified people with knowledge of the matter.


HAHAHA.  The Stress Test seems more geared to creating stress.  And then, the government relieves this stress by flying Air Force 1 around the Goldman Sachs tower in Jersey City!  I bet everyone is now thoroughly stressed out.  Maybe we can take their blood pressure to see if this worked.  I know people in Jersey City and they are still stressed out, today.  Thank you, Air Force!


Pundits Spin Today’s Stress Test Leak

It’s not good news that Bank of America (BAC) and Citigroup (C) have been told to raise more capital following the completion of the Fed’s stress tests.


The thing is, the stress test isn’t even that stressful, so if they’re being told to raise more cash under this scenario, how much more would they need under realistic worse-case conditions?


Obviously, the US/UK attempt at running a vast banking empire with NO CAPITAL and NO SOVEREIGN WEALTH is a total barking failure!  It is dead.  The banks are bankrupt.  The Federal Reserve has no more reserves and is a federal flop.  And the Treasury lost all its gold long ago to debts.


I suggest we send a team of top officials like the idiot, Giethner, to China and have them sit down and beg Hu, the dictator of China, the Communist Dragon, to teach them all about profits, wealth and gold.  I give Hu permission to whack each of these officials with a bag of gold coins.  Maybe then, they will figure out what is going on.


Guarding Stress Test Results


Late last week, the Treasury Department and the Federal Reserve released the preliminary results of the “stress tests” to representatives of our nation’s 19 largest financial institutions—information of incredible value to investors that will not be made public for another week. In the interim, financial regulators must ensure that those familiar with the results—and their friends and family—do not profit off that information.

We encourage the Securities and Exchange Commission, the Treasury Department, and the inspector general for the Troubled Asset Relief Program to take heightened measures to monitor the securities markets over the next week to ensure the integrity of our capital markets. As described in a press release by the Fed, the stress test results represent the findings of over 150 examiners and other staff who conducted a rigorous analysis of bank capital levels and potential losses. The general public won’t find out the results of the stress tests until May 4, as these financial institutions have reportedly been issued a “harsh gag order” to prevent them from leaking any information about the test results to the press in the interim.


Gnomes can’t resist cheating, scheming, lying, swindles and other joys.  It is better than sex.   Indeed, it is all tangled up with sex.  So the ‘cops’ have to keep a sharp eye on this gang of pirates, robbers, cheats, pick pockets and criminal minds in order to force them to be semi-honest!  HAHAHA.  Right.  This is why arresting these creeps is more useful.  This is normally what we do when we see criminals at work, right?


Speaking of thieves and pick pockets, our own government overseeing these looters is….one of them, of course!


Ideal U.S. Interest Rate Is Minus 5%? — Seeking Alpha


The more you look at monetary policy both in the U.S. and around the world, the more you get the feeling that we’re having a “Tacoma Narrows Bridge moment” where strong winds have been blowing for decades and the fundamentally flawed underlying design of the system is causing ever more severe oscillations.

From the Financial Times comes this report on a new Fed study about interest rates.

The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.

The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.

EMS News

Inflation confiscates savings, too. The ‘capitalist’ countries think that debt is wealth. Communist countries think gold and labor are wealth. Look at who is getting stronger and who is getting weaker!
The US system did away with the concept of ‘capital’. Instead, financiers from top to bottom all used ‘leverage’ which flowed directly out of the Bank of Japan via the ‘carry trade’. This business was extremely lucrative for the financiers who got obscenely wealthy moving debts from Japan into western markets.
The G7 tried to get rid of the gold standard and then they tried to get rid of the concept of ‘sovereign wealth’. The IMF’s leader, Rato, even went so far as to mock China for growing the world’s biggest FOREX holdings and one of the biggest sovereign wealth funds! The Chinese were not fooled. 
The ‘negative interest rates’ will simply turn a vast, black hole economic system into…a really vast, black hole economic system. Time to reinstate the gold standard for international trade resolution of contracts.


Sad, isn’t it?


G.M.’s Latest Plan Hinges on Debt Exchange – NYTimes.com


G.M. said it would eliminate another 21,000 factory jobs, close 13 plants, cut its vast network of 6,500 dealers almost in half and shutter its Pontiac division.

By the time it is finished, G.M. expects to have only 38,000 union workers and 34 factories left in the United States, compared with 395,000 workers in more than 150 plants at its peak employment in 1970.


Japan is scared to death.  Its own industry is in full collapse due to it focusing nearly entirely on invading and controlling the US markets.  They succeeded but they have to sell their stuff to someone and these someones will all be without any money, at this rate!  And the cars we can afford will have to be much, much cheaper than Japan can produce.  Eventually, the Chery and the other Chinese car companies will be better known than Toyota.  


The Chinese, at least, as they roamed the planet, trying to figure out modern capitalism, learned something.  Perhaps it is time for us to do the same.






P.O. BOX 483

BERLIN, NY 12022

Make checks out to ‘Elaine Supkis’




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