Lets Party Like its 1985!

Good Evening Folks

I will get to my headline after an after hours update: The hits just keep on coming. Freddie Mac dropped a bomb after hours:

"March 11 (Bloomberg) -- Freddie Mac, the mortgage-finance company thrust into a leading role in President Barack Obama’s homeowner rescue plans, said it will tap $30.8 billion in federal aid as its loan holdings and other assets deteriorated.

The company, which owns or guarantees more than 20 percent of U.S. home loans, today posted a wider fourth-quarter net loss of $23.9 billion, or $7.37 a share. The results pushed the value of Freddie’s assets below its liabilities, the McLean, Virginia- based company said in a statement, and come as Chief Executive Officer David Moffett leaves after six months on the job.

“These numbers are so mind-boggling,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, who stopped giving estimates for Freddie after the company was seized by regulators on Sept. 6. “You can’t even begin to analyze it.”

Freddie’s ability to return to profitability depends on how long the government keeps using the company to push its housing agendas, Miller said. Freddie and larger competitor Fannie Mae have been pressured to carry out policy initiatives, including offering low-cost mortgage refinancings, since the government takeover. The often conflicting demands of appeasing regulators and pursuing profit may have led Moffett to resign, Miller said.

“They want these guys to refi mortgages without new appraisals and to keep mortgage rates very low; those are not sound business decisions,” Miller said. “They are being used as a public policy tool to save the housing market. That is just going to make it more difficult for them to be floated out as public companies down the road.”

My Take:

The last paragraph of this is the most important piece of the article. This "rescue plan" via cheap lending is doing nothing but digging a deeper hole for ourselves in the long run.

Everyone take out their wallets because as a taxpayer, you will be paying for this housing mess until the day you die.

$30 billion Folks! These numbers are simply staggering and they are going to get worse if we continue to try and reflate the housing bubble via cheap lending and more bad loans. That's all this housing recovery plan is. We are repeating the exact same mistakes that we made as we blew up this housing bubble! The only difference this time is the losses are taken by the taxpayer instead of private capital.

How can they call this housing plan a solution? Making loans with low interest rates without new appraisals is just asking for trouble! Why do they think repeating the same bad behaviour will result in a different outcome?

The bottom line here folks is a $250,000 house is worth $250,000. The fact that you were able to dress it up all pretty as a $500,000 house via fraudulent lending practices for a few years back in 2004 is irrelevant because it was a mirage. Trying to recreate this scheme all over again via a government housing recovery plan makes no sense!

The public policy fix to this problem is doomed folks: Trying to throw some lipstick on a $250,000 pig by refinancing it for $500,000 via bad lending is a band aid not a solution..

Who do they think they are going to fool here? EVERYONE knows that the house is worth $250,000. Why can't we just face the reality of this and reset the loan down to the real value of the house. This is the REAL fix to the problem. The government's solution is to try and recreate the bubblemania of 2003-2004 all over again. Guess what guys? Its not gonna happen.

Obama, please drink a big tall glass of reality juice and scrap this pathetic plan. Look at the losses that we are taking as a result of this mess. As Americans, we cannot afford to have government entities lose $30 billion a quarter. These losses at Freddie will only get worse as long as we continue with your cheap lending recovery plan.

We now have several black holes that are bleeding this country dry: AIG, Citi, BofA, GM, Fannie, Freddie.....Where does it all end Mr. President? As a nation, we can't fiscally afford to continue to follow down this dangerous path.

The taxpayers do not deserve to be forced to continually pay for this fiasco. I am willing to pay my share for the sake of the financial survival of this country, but I am outraged that you and the government continue to keep spending money that we don't have. I am even more outraged that you are actually enabling the fraudsters to continue their games instead of throwing them all in jail where they belong!

Is the music about to stop?

I am beginning to think so after reading this piece from Marketwatch:

"WASHINGTON (MarketWatch) - The U.S. federal government budget widened to $192.8 billion in February as tax receipts plunged to the lowest level in 14 years, the Treasury Department reported Wednesday. It's the second largest monthly deficit on record, exceeded only by $237.2 billion gap in October. For the first five months of the fiscal year, the deficit has increased by a half trillion dollars to a record $764.5 billion. Outlays were flat compared with a year earlier at $280.1 billion, while receipts dropped 17% to $87.3 billion, the lowest since February 1995. In February, individual income taxes fell 64% to just $8.7 billion. That's the lowest monthly total for individual income taxes since May 1985."

Final Take:

Its hard to keep spending money when you don't have money coming in! I am not surprised that tax revenues are dwindling as the economy sinks into a deep recession. The fact that we are hitting 14 year lows this quickly is a surprise to me. The fact that February individual income taxes shrunk by 64% to 1985 levels is flat out shocking.

We are sinking fast folks. The math is quite frightening here. As you all know, things are much more expensive today than they were in 1985. Fiscally, it won't take long for us to bankrupt ourselves as we use 1985 level tax income to finance our bloated, Ponzi style 2009 budgets.

Again, let me ask the same question: Where in the hell is the money going to come from? We now have 1985 tax revenues to pay our 2009 bills. How in the hell can we afford to pay for trillions of dollars in bailouts on top of this? I about fell over when I read this Marketwatch piece. Here we are facing our deepest financial crisis with tax revenues that date back to when Boy George was churning out #1 hits. God help us!

We can't keep selling treasuries folks. There is going to a point in which the world realizes we don't have the money to pay it back. Its starting to happen already in other parts of the world. Parts of Europe have had failed bond auctions. Why can't it happen here?

I've said it before and I'll say it again: Raise cash and raise it as fast as you can.