Hindenburg Omen Confirmed On December 15

The last time that Hindenburg Omen was confirmed was back in August. Back then, Hindenburg Omen happened not once, not twice (confirming the omen), but 4 times. Traders and analysts were being fixated on the big "head and shoulders" pattern on the major stock index, which was about to break down from the neckline.

And what happened in September? The stock market rallied. So much for the Omen as a harbinger of a stock market crash, thought many people.

But Karl Denninger at Market Ticker warns us things may not be the same this time around:

- Bernanke has given no indication he cares about rising bond yields;
- Political risk is extremely high with regard to government overspending and The Fed;
- The speculative indices are at 20+ year highs;
- Low TICK alarms have been much more prevalent than high TICK alarms;
- Several momentum stocks are breaking down severely;
- The Corporate Leverage Index, after, what appeared to be a retracement move, took off bigtime in the third quarter and now stands at a ridiculous 12.

For detailed explanation for each point, follow the link.

I am paying attention, because (1) this time around hardly anyone has mentioned Hindenburg Omen; (2) the stock market indices are near the top, instead of near the breakdown point in August.

But then we have Ben "Bernank". As one of Bernank's justifications for QE2 was the ever-rising stock market to give us the sense of well being. We may find out soon enough which is bigger - Ben's Fed or the market. (I have this feeling that it's the latter, but don't underestimate Ben.)

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Denninger: You're Paying Your Mortgage - WHY?

so Karl Denninger at Market Ticker, who has been on top of the "foreclosuregate", asks, as he describes a lawsuit in Texas in which Bank of America is accused of trying to collect on the fully-paid mortgage.

I fully agree with his shouting and screaming in bold letters and capital letters. But alas, none of that matters in non-judicial states where even the real estate attorneys tell you to forget it (unless you are financially able to retain them), and it is unlikely to change any time soon. And the big national banks like Bank of America and J.P.Morgan Chase, acting as the loan servicer or the trustee of the mortgage trust, keep pocketing the houses that they have no title to, as government regulators look the other way.

Now, Denninger's shouting and screaming:

Now comes this lawsuit out of Texas alleging that Bank of America not only tried to collect on a PAID IN FULL mortgage but refused to listen to the fact that it had been paid in full and in fact threatened that the owners were "going to lose their home."

These banks all claim there is no "real problem" with securitization, there are no pernicious issues with paperwork not being in order, it's all on the up and up, yet we continue to see filings like this, and these filings - extreme measures, lawsuits even - come only after reasonable attempts to communicate with these institutions and resolve problems are met with STONEWALLING and games - even when, as is alleged here, there is evidence that the loan in question was paid in full and discharged!

Had enough yet?

This is all "minor paperwork errors" and "nobody has lost their home" (or been unjustly harassed, dunned and threatened for money they do not owe, right?)

AGAIN:

WHY ARE ANY OF YOU PAYING ANY OF THESE BANKS ANYTHING?

WHY ARE STATE REGULATORS AND ATTORNEYS GENERAL NOT FORCING ALL OF THESE LOANS THROUGH THE COURT SYSTEM AND MAKING THESE SO-CALLED ALLEGED "CREDITORS" COME TO COURT AND PROVE THE PROVENANCE OF THEIR CLAIMED "DEBTS" WITH A FULL AND UNBROKEN CHAIN OF ASSIGNMENTS?

HOW MANY MORE TIMES DO WE NEED TO SEE THIS BEFORE IT IS STOPPED?

THE ONLY WAY WE ARE GOING TO GET THESE INSTITUTIONS' ATTENTION, AND THAT OF THE LAWMAKERS AND LAW ENFORCEMENT BODIES IN THIS NATION, IS WHEN THE PEOPLE OF THIS COUNTRY REFUSE TO PAY ANY OF THESE BANKS ONE SINGLE DIME - OWED OR NOT - UNTIL ALL OF THIS CRAP STOPS AND EVERY ONE OF THESE "DEBTS" HAS ITS PROVENANCE PROVED UP IN A COURT OF LAW.

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Two Different Takes on 'Foreclosuregate'

John Mauldin says "Fix the @#$% thing quick by any means available and move on. Otherwise the whole financial system will be brought down by this silly stuff! We can punish the bad guys later."

Karl Denninger says "Fraud is fraud, and unless the perpetrators [the whole financial system, actually] are brought to justice, this lawlessness will spread."

Mauldin's view is pretty much that of CNBC until a few days ago. (CNBC seems to have become more apprehensive.)

Denninger's view is also shared by Paul Krugman. There are many bloggers who are as outraged as Denninger (ex. Naked Capitalism, 4closurefraud.org).

Mauldin is a NYTimes bestselling author, recognized financial expert who makes regular appearances at big financial news media outlets.

Denninger? He was a tech guy, a system engineer.

Here's from Mauldin's latest on 'Foreclosuregate':

We CANNOT allow this debacle to continue. It will bring the system down. Who will want to buy a mortgage that is in a securitized package with no clear title? Who will get title insurance? Some judge somewhere is going to make a ruling that is going to petrify every title company, and the whole thing grinds to a halt.

Let's be very clear. If we cannot securitize mortgages, there is no mortgage market. We cannot go back to where lenders warehoused the notes. It would take a decade to build that infrastructure. In the meantime, housing prices are devastated. Whatever wealth effect remains from housing gets worse, and the economy rolls over.

This is beyond my pay grade, but there have to be some adults who can make everyone play nice in the sandbox. Ideally, someone in authority at the Treasury, with bipartisan support steps in and says everyone follow these rules, whatever these rules need to be.

...Now, that is not to say the people who did this stuff did not commit felonies and such. We can sort that out over time. The longer we wait the worse it will get. Fix the problem and then go round up the bad guys. There are bigger issues in play here.

I don't think so, Mr. Mauldin. We've done that in 2008. Are any of the "bad guys" behind bars? (Answer: No.) Has so-called "confidence" return to the stock market? (Answer: No.) Bigger issues like saving the nation's large financial institutions so that the whole financial system doesn't come tumbling down? We've done that in 2008 by extending over $10 trillion worth of support for them at the expense of small people aka taxpayers.

If we gloss over the frauds in foreclosures and securitization by "fixing it", will that revive the housing market? I'm afraid it may do the total opposite.

Here are the snippets from Denninger on the CA family who repossessed their home that was foreclosed:

...How do we wind up with someone who purchased a home for $500,000 then pulling another $500,000 in what amounts to phantom equity out?

Well, that's simple: We had Wall Street banks that were more than happy to trade on this phantom, false, and maliciously-inflated "equity", driven by a central bank and cronies in Washington DC that were all too happy to look the other way at rampant lawlessness for nearly a decade.

...This mess begins with the securitization and sale of these mortgages in the first instance. It begins with whether or not the original banks actually transferred the notes at all (there's plenty of evidence they did not) and whether the representations and warranties were complied with when these securities were sold to investors (we know in many cases - if not all - they were not, from FCIC sworn testimony.)

...We have turned a blind eye to these lawless acts for the better part of a decade - not one indictment has issued for securities fraud over these matters. And it's not just mortgages - we know banks were involved in ripping off communities such as Jefferson County, we know they are alleged to have been involved in rigging municipal debt offerings (which raised the cost of living for everyone through higher taxes) and yet not one bank officer or bank itself has been placed under indictment for any of it. Further, the FBI warned in 2004 of an "epidemic" (their words) of mortgage fraud, and instead of it being prosecuted the agents were pulled and reassigned.

We have had two sequential administrations - Bush and now Obama - that have intentionally refused to prosecute any of this lawless behavior. This refusal continues to this very day with admissions in depositions under oath of the commission of literal tens of thousands of felonies per month (each instance of falsely swearing before a court is a separate count of fraud upon the court and, in the case of "robosigning", forgery - affixing a notary's signature by other than the actual notary.) Yet despite this having been confirmed in multiple depositions going back several months not one indictment has issued thus far and Attorneys General talk about not wanting to "upset" the banks or the "economy."

...The media and others wish to spin this as "technical errors." Nonsense. These are serious crimes. They do not become "technical errors" because some large financial institution committed them. Breaking and entering is a felony irrespective of who does it - the offense does not suddenly disappear if a monster bank is the perpetrator who directs an agent of theirs to commit the offense.

The Obama administration, Timmy's Treasury and Ben's Fed are very quiet on the issue. When they say anything, it has been to discourage full discovery (Axelrod here, Timmy here). State AGs don't want to upset the big banks (see my post from Friday, toward the end).

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Karl Denninger On Credit-Driven Ressession (and Swipe at Dennis Kneale)

On his Market Ticker on Tuesday, Karl Denninger took a swipe at CNBC's Dennis Kneale, whose harangue against bloggers has been widely disseminated over the Internet (like my post below). But his ticker also has a very good explanation of why the current resession may be very different from the previous recessions in the U.S., except for the Big One in 1930s.

Here is his take on "inventory-driven ressession" and "credit-driven recession". We are in the latter, credit-driven recession.

To Dennis Kneale: You're An Idiot (6/30/09 Market Ticker)
[emphasis is mine]

"Inventory-driven recessions are primarily about excessive industrial capacity for demand. That is, manufacturers and suppliers of services get too bullish about prospects, build too much capacity and inventory, and wind up engaging in a destructive price war in an attempt to "win". This drives down profits and ultimately forces the weaker firms out of business, ergo, recession - GDP and employment decline. Having cleansed itself of the excess, the economy recovers. The trigger for these recessions is often (but not always) an external shock such as the oil embargo in the 1970s or the collapse of the Internet fraud-and-circuses games in 2000.

"The second sort of recession is a credit-driven recession. Excessive credit creation - that is, loans going too far toward "fog a mirror" qualifications (and in some cases, such as the most recent event, actually reaching "fog a mirror") drives one or more asset bubbles. These pop when effective interest rates in the economy reach an effective level of zero, usually because the amount of leverage available becomes for all intents and purposes infinite (Bear and Lehman at 30:1, Fannie/Freddie at 80:1, AIG at god-knows-what, and duped "home buyers" buying with zero down for a true infinite leverage ratio.) This excessive credit creation drives a speculative asset bidding war which in turn causes prices to go sky-high for one or more types of asset."

"Recessions cannot end until the conditions that caused the recession are removed from the economy. This is elementary logic and obvious to anyone with an IQ larger than their shoe size.

"For an inventory recession growth returns when enough capacity is destroyed through layoffs and inventory selloffs to bring capacity and demand back into balance. Employers then hire new workers and the economy recovers.

"For a credit recession, however, there is a much larger problem: The reason real interest rates went negative is that debt has a carrying cost and consumes free cash flow; so long as the debt taken on in the credit binge remains the cash flow impact also remains.

"Default and bankruptcy clears excessive credit (debt) from the system - if it is allowed to occur. But if it is not, then the bad debt remains on the balance sheets somewhere and the cash flow impact remains in the economy. Employment remains weak, capital spending restart attempts falter as demand fails to return and credit quality continues to remain insufficient to support new credit demand."

So, when we see the inventory number reduced and unemployment number stop going down further, and we say "Look, the economy bottomed!", we are looking at TOTALLY WRONG PARAMETERS to assess our CREDIT-DRIVEN RECESSION.

Almost all economists being paraded on TV, or writing for big newspapers and magazines, take it for granted that the recession we are in is INVENTORY-DRIVEN recession, the one most of them are familiar with. If Denninger is right (I think he is), it doesn't matter if the inventory level is reduced to zero or the unemployment number stops going down. Until the bad debt is purged from the system somehow, there will be no recovery. As Denninger says, at best we'll be turning Japanese. At worst, worse than the Great Depression.

In addition, Denninger has this to say about U.S. consumers "saving": [emphasis is his]

"Consumers are not saving, they are paying down debt in a furious attempt to avoid defaulting on nearly $1 trillion in outstanding credit card balances that have gone from 11% interest to 29.6% along with OptionARMs that are experiencing a tripling of payments while the home's value is underwater and precludes refinance, all while consumers are being laid off by the hundreds of thousands monthly."

In other words, consumers are barely treading water. And the likes of Dennis Kneale are wondering why consumers are not spending, so that we can get out of this inconvenient pesky little recession. Hope and fortitude. LOL.

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