November 3rd, not November 2nd

The most important upcoming day is not Election Day November 2nd, but rather, the day after, November 3rd. Why? That is the day the Federal Reserve is expected to announce QE2 (Quantitative Easing #2 – more money for the system.) However, there is currently an internal civil war occurring at the Fed since some believe that QE2 will do more harm than good. Those in opposition argue the banks will simply hold onto the money and not loan it out, choosing to build up their cash reserves as the foreclosure fiasco continues to develop. (This foreclosure fiasco will be worse than the Lehman affair.) The stock market has built QE2 into its expectations. What happens if it doesn’t take place?

November 2nd? Just a sideshow for November 3rd.

Till next time,

Bill

P.S. – In Europe, anarchy can be defined by angry participants taking to the streets. In the United States, anarchy can be defined by not paying your mortgage because it’s a “broken chain of title.” More on this next time.


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Foreclosure Fiasco

One year ago, I started talking about Greece (Grease). Most people thought I meant the low fat vs. high fat controversy. That’s an understandable mistake; however, I was referring to the one punctuated with high-fat bloating of governmental budgets and unsustainable indebtedness. It was obvious to me that a crisis was lurking right around the corner, and that crisis quickly unfolded.

Now, an even higher event has raised its ugly head: foreclosures. For years, various institutions created mortgages and held the deeds of trust in their vaults. However, the promissory notes were sold-off in a systematic method known as securitization, a process in which a single promissory note was sliced and diced, resulting in multiple owners. As a result, it’s almost impossible to know the identity of the actual owner. That is where the problem arises. To legally foreclose, both the deed of trust and the promissory note must be in hand by the foreclosing party. This is not a question of whether owners should be foreclosed; it’s a question of the legal right to do so. Bank of America has suspended foreclosures in all fifty states. Forty attorney generals have recommended (here come the lawsuits) a total moratorium on foreclosures. The White House has taken a position that it is only a paper snafu, a reminder of when Ben Bernanke said that subprime mortgages were contained.

This problem will bring any housing recovery to a dead halt. It will create such a firestorm that even I can’t imagine, and it will make us all long for the days of Greece.

Till next time,

Bill


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

It's Been a While

The month of September represented a period of time to truly sit back and become awestruck. Not because of the so-called good things that happened, which were implied by the rising stock market, but rather because of all the bad things that were suggested by a rising bond market and the dramatic decline in interest rates. The free-fall of the ten-year treasury to levels not seen since the Dow Jones was in 6,000 territory tells the story of increasing unemployment, rising foreclosures, escalating bankruptcies, significantly more food stamp participants, and a currency war that is just beginning to heat up.

If the Dow is right, and the level of 11,000 is accurate, then all the prior economic problems are simply an illusion that will drift away like a dream. However, if the bond market is right, then that dream suddenly becomes an unbearable nightmare, making 1929, 1987, 1999, and 2008 seem downright mild. Unemployment, foreclosures, bankruptcies, and food stamps are no dream, and the currency war will become a veritable nightmare.

Preservation, protection, and a keen-eye are the watchwords.

Till next time,

Bill


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A disclaimer: None of the content published on billtatro.com constitutes a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. None of the information providers or their affiliates will advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the content published as part of BillTatro.com may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.