Bearish News

Early on, I believed in Barack Obama’s campaign for change. I donated to his campaign multiple times. Since then, his continued support for bailouts, and his appointment of banking insiders to key political positions has turned me off to the Democratic Party forever. Republicans are no better, and I question whether I will ever again vote for a non-third-party Candidate again.

Word tonight that Obama will reappoint Ben Bernanke to a second term was disheartening, to say the least. Bernanke proudly claimed that he would “not let a depression happen on his watch”. Is that meaningful, if his actions only delayed and worsened the inevitable? Reflating the bubble is not a sustainable proposition. I thought Obama would be tough on banks, institute clawbacks, let defunct banks fail, etc.

If Bernanke’s thesis that disaster has been averted turn out to be false, where will that leave Mr. Obama? I can’t help but think of Bush’s endorsement of Brown as head of FEMA. Especially after seeing this quote from the NYT:

The president thinks that Ben’s done a great job as Fed chairman, that he has helped the economy through one of the worst experiences since the Great Depression and that he has essentially been pulling the economy back from the brink of what would have been the second Great Depression

Obama’s legacy rests on the validity Bernanke, Summers, Geithner, and others now. I sincerely hope I’m wrong, and that Bernanke did save us all. But skepticism runs deep deep in me, and for good reason. Bernanke’s predictions have been near-awful so far:

Best of luck to you Mr. Obama, sincerely. But I fear have offered your ear to the wrong crowd. Mr Volcker was the last decent Fed Chairman we had, and you essentially cast him out, favoring Larry Summers, Tim Geithner, and Ben Bernanke. History, a subject you know well, will be your judge. Heck of a job, Bernanke.

Risk of Double-Dip Recession Rising – (FT, Roubini) Why rising now? The liquidity can’t last, so another dip or other serious consequence is inevitable. Nonetheless, a good piece and one of the more bearish ones that will get any media coverage. Roubini makes good points, as always, but his solution is still flawed IMO (more cash injections, more stimulus). When it comes to solutions, I’m more with Taleb. Let the market work, don’t reward the bad actors.

Analyst Bove sees 150-200 more U.S. bank failures – (Reuters) “A prominent banking analyst said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010″

Saving the big banks is not necessary to prevent depression – (Examiner) “The Fed,” she argues, “has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible.”

The Banking Crisis Cometh – (DailyReckoning.com) – “There’s a backlog of at least a few hundred insolvent banks that need to be shut down and sold into stronger hands. Bank stock bulls are ignoring the credit losses yet to be recognized, so there are lots of shorting opportunities in the sector. Many banks will not be able to “earn their way out” of their credit losses.”

Reluctant Shoppers Hold Back Recovery – (WSJ) – Yes. It’s the consumers’ fault. Forget the fact that consumers cannot spend beyond their means forever. No need to worry about that. If only we could engineer a way for them to spend more. Oh wait, we are in countless ways. TALF provides consumers with 20-30% credit card loans, and bails out shopping malls who have been paying too much dividends and borrowing too much. Fabulous way to spend my taxes.

Ron Paul’s new book End The Fed is due out soon. Lew Rockwell is organizing a bookbomb to make it #1 on Amazon.com. It’s already #36. I just pre-ordered my copy.

Amazon.com book rankings are kinda like the new NYT bestseller list. The #1 book gets that much more coverage and attention. So if you wanna send a message to policy makers about the mad bailouts and corruption occurring, order yourself one too. Heck, order one for your Senator or Congressmen. It’d be pretty funny if Barney Frank got 200 copies of End the Fed delivered to him.

Crash Proof 2.0, Peter Schiff’s updated version of his best-seller, should be out soon too. Went ahead and pre-ordered that one too, should be an interesting read.

I finally got around to watching Jon Stewart’s interview with Peter Schiff (from June 09). Most visitors are probably familiar with Schiff’s case, but this interview is especially good. Also very digestable by the masses. Good stuff to forward to in-laws or O’Reilly-quoting associates.