The Idiot Parade Preview

I'd say that the futures market did a damn good job getting in front of Humphrey-Hawkins, wouldn't you?

Because all we have seen is more jawboning overnight. Ms. FDIC continues to chant "Banking deposits are overwhelmingly safe", instead of getting out in front of the actual issue and allowing us to see which banks hold crap (that is being intentionally mis-marked) and which are not.

"For the financial markets to stabilize, we believe banks need to swiftly address true asset values and adjust their books accordingly."

Better late than never. Now if we could only get a few regulators to agree with the only honest professional analyst in this sector.

The dollar has broken a consolidation pattern "the wrong way", that is, south, and if we do not get things under control fairly quickly there is the real possibility of a waterfall collapse. A quick look at that chart reveals that this is the second "bearish" flag, the first of which proved out, and this one potentially takes the dollar into the mid-60s. Such a collapse would result in an insane amount of price inflation being immediately reflected in all imports - another 11% could literally appear in everything you buy that is imported over the space of just a few months.

Now this is all "seasonally adjusted". The details inside the report are the important component here.

What does this tell me? It says that food and energy are screaming higher, but in the rest of the economy, as demand continues to soften and purchasing power goes in the toilet, we are seeing deflationary forces.

Furniture, autos and machinery are down. What's better in retail sales? Gasoline.

The Fed, unfortunately, probably sees this as validation of their policies and approach! Why? Because they are concerned about a wage-price spiral, and you can't get there so long as the labor market is not tight and your money is directed towards necessary purchases such as gasoline and heating oil!

So the perverse reality of what's going on right now in the world is that as your standard of living is shredded and your purchasing power destroyed, The Fed likes the outcome because their "liquidity games" allow their buddies to trade commodities and try to work their way out of the hole while you get the bill.

Because you can't work your way out of this hole; its too deep, too steep, and as you claw at the sides it collapses on top of you.

Ackman comes on CNBC this morning and starts running his book - a plan to "save" Freddie and Fannie. Of course he does this after he shorts their stock. Tee hee. While his plan isn't horrible, the fact that he went in and shorted them first is going to make this a non-starter in Congress. There's a "book-talking" component to everyone's point of view, including mine, but that sort of thing has gone beyond reasonable. Its also why when I put forward my view on Freddie and Fannie, I had no position on either firm; my intent, as I wrote that and as I write this today, is that if I'm going to play either name at all I will be daytrading them because the "tape bond" risk holding anything overnight on these names is just too high for my taste and I'd like some sort of shot at Congress - and the regulators - actually considering my point of view.

You can't get there when you put a trade on and then ask the government to make it pay.

The news has covered a few really, truly sad stories. People with $200,000, $300,000, $400,000 or more in there who have seen 50% of their balance over $100k disappear overnight.

Older people who literally have their life savings in these institutions. People who are relatively unsophisticated, but have been told through the years that the government will make it all ok, and who believed it.

It tugs at your heart to see a 70+ year old man pleading for them to let him have his money - money that he worked and saved a lifetime for.

You are lending your money to the bank so they can make money with it, and they pay your a coupon - interest, or the "safekeeping" in the case of a checking account that does not pay interest - in return!

We do such a horrible job of financial literacy in this nation that it truly makes me ill. There is no excuse for this lack of knowledge among our citizens, and yet people like Bernanke, Congress and more like it that you're ignorant, because without that ignorance they can't pull their crap and rip you off.

Neither can stock brokers, mortgage brokers, car dealers, credit card issues or payday loan shops.

If you're a parent, you need to get off your ass and get in front of the local School Board. You need to get your face in front of the Principal of your schools and raise hell.

Yes, you can teach your own kids about this stuff. But unless we make sure that all of the kids of America learn this stuff, which means changes in our educational system that must start with you as parents raising hell with the schools, we will never break the back of this cycle.

We have 20 and 30-somethings that got snared in this housing bubble and the credit-card mess because our parents did not do their job and beat on the schools regarding this issue.

And a follow-on from yesterday:

http://market-ticker.denninger.net/archives/515-FLASH-Paulson-Bernanke-YOU-WERE-WARNED.html

I told you so Hank, Ben, Congress, and the rest.

The entire credit system is all about confidence.

A year ago I started telling you, and everyone else via Market Ticker, they you had to cut the crap and stop allowing people to lie, or you risked confidence being destroyed.

Today, you're finding out what happens when you don't stop the lies on the balance sheets, don't stop the Level 3 crap, and don't stop lying to The American People. You can't say "I'm for a strong dollar" and then make $250 billion more of them available, the exact opposite of encouraging scarcity, which is how you get a strong dollar, and expect people to take you seriously.

You can't say "subprime is contained" and never apologize for being 100% wrong.

You can't say "the banking system is sound" and then have the second largest failure ever recorded in FDIC history happen a short while later, when the balance sheets of these firms were available to everyone - with their warts displayed - for more than a year prior.

You can't tell people "the economy is fundamentally strong" when unemployment rises and the price of oil doubles in the space of less than a year as a direct consequence of your monetary and fiscal policy.

Bluntly: You've now got a run on the equity (if not the deposits) of virtually every regional bank in the nation because nobody believes you any more.

Your attempt to stabilize confidence with Fannie and Freddie has failed because, in short, nobody believes you any more.

WaMu, National City, Wachovia, First Federal, Downey, Colonial. All down 7% or more, with some down twenty percent today, and with most of them down 90% or more in the last year.

Why?

Because nobody believes you, the FDIC, the OTS or OCC any more.

There is one - and only one - way you can stop this.

You must force every financial institution in America to tell the truth.

NOW.

If you do not stop this NOW it will spread like a cancer from firm to firm, from financial company to financial company, until it consumes all of those who do not voluntarily "come clean" before it gets to be their turn.

You have not lost control; you, along with Congress, have abdicated control. The Campaign Contributions and shell games have now reached critical mass with The American People, who are no longer willing to take the risk of their investments being destroyed without warning as a result of the lies. They can and are running for the exits first, following the time-honored principle that "he who panics first gets out with the most of his money intact."

Bernanke, Frank, Dodd, Paulson - we may be literally days - or hours - away from an all-on equity market implosion.

If it happens, it will be because you have consistently refused to listen to those of us who have been telling you that you must force these institutions to to cut this crap out and tell the truth.

You cannot stop this by talking.

You must stop it by doing.

You must issue a directive today that states quite clearly, here and now:

NO MORE OFF-BALANCE SHEET ANYTHING, NO MORE LEVEL 3 ANYTHING. YOU MUST DISCLOSE AND MARK TO THE MARKET EVERYTHING YOU HOLD, TODAY AND FOREVER MORE, AND IF THIS LEAVES YOU INADEQUATELY CAPITALIZED, YOU WILL BE FORCIBLY MERGED OR SEIZED HERE AND NOW.

Now.

Today.

Period.

Time's up.

This man is a true patriot. Grab the pitchforks and torches and get yourselves to DC to protest:

http://www.fedupusa.org/

We will once again be demonstrating in Washington DC on July 31st. We will be meeting at the NW corner of the Cannon Building.

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